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

"Y" TRANSIT CO, INC., petitioner,vs.THE NATIONAL LABOR RELATIONS COMMISSION AND YUJUICO TRANSIT EMPLOYEES UNION(ASSOCIATED LABOR UNION), MANUEL VILLARTA, respondents.

Cruz, Durian, Agabin, Atienza, Alday & Tuason for petitioner.

Evaristo S. Orosa for private respondents.

ROMERO, J.:

This is a special civil action for certiorari filed by "Y" Transit Co., Inc. for the annulment of the decision of theNational labor Relations Commission, the dispositive portion of which reads as follows:

WHEREFORE, the appealed Order should be as it is hereby REVERSED reinstatingthe levy made by the Sheriff on July 13 and 16, 1982. Accordingly, the sale of thelevied properties may proceed pursuant to existing laws.

SO ORDERED. 1

The antecedent facts of the case are as follows:

In March 1960 and sometime thereafter, Yujuico Transit Co., Inc., mortgaged ten (10) of its buses to theDevelopment Bank of the Philippines (DBP) to secure a loan in the amount of P2,795,129.36. Thereafter, theBoard of Directors of Yujuico Transit Co., Inc. passed a resolution authorizing its President, Jesus Yujuico toenter into a dacion en pago arrangement with the DBP, whereby Jesus Yujuico would transfer to the DBP theSaint Martin Technical Institute in consideration of the full settlement of the obligations of three companies,one of which was Yujuico Transit Co, Inc. Accordingly, on or about October 24, 1978, the transfer of theproperty was made and DBP released the mortgages constituted on the buses of Yujuico Transit Co., Inc.Consequently, the company transferred the ownership of its mortgaged properties, including the buses, toJesus Yujuico.

Meanwhile, sometime in June and July 1979, the Yujuico Transit Employees Union (Associated labor Union)filed two (2) consolidated complaints against Yujuico Transit Co., Inc. for Unfair Labor Practice and violationsof Presidential Decrees Nos. 525, 1123, 1614 and 851 (non-payment of living allowances).

On May 21, 1980, Jesus Yujuico sold the subject buses to herein petitioner "Y" Transit Co., Inc. for P3,485,400.00.

On July 23, 1981, the Labor Arbiter rendered a decision dismissing the complaint for unfair labor practice butholding Yujuico Transit Co., Inc. liable under the aforementioned Presidential Decrees in the amount of P142,790.49. On February 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.

Private respondents herein opposed the Third party claim on the ground that the transactions leading to thetransfer of the buses to "Y" Transit Co., Inc. were void because they lacked the approval of the BOT asrequired by the Public Service 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.

The Labor Arbiter found that "Y" Transit Co., Inc. had valid title to the buses and that the BOT, by itssubsequent acts had approved the transfer. The decision stated further, thus:

The fact that the registration certificates of most of the vehicles in question are still inthe name of Yujuico Transit Co., Inc. at the time of the levy on execution does notmilitate against the claimant. Registration of a motor vehicle is not the operative actthat transfers ownership, unlike in land registration cases. Furthermore, the evidenceshows that the claimant cannot be faulted for its 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 of mortgage and other fees required by theBLT. Moreover, the registration fees of the vehicles whose last digit of their platenumbers made the vehicles due for registration were already paid for by the claimant(Exhibits "N" to "N-7"). Therefore, there was already a constructive registration madeby the claimant (Mariano B. Arroyo vs. Maria Corazon Yu de Sane, et al., 54 Phil. 511,518), sufficient notice to affect the rights of third-parties. It is now ministerial on the partof the BLT to issue the Registration Certificates in the name of the claimant, but thesame was held in abeyance pending the computerization of the records of BOT onpublic utility vehicles. On all fours is the ruling of the Supreme Court in Mariano B .

Arroyo vs . Ma . Corazon Yu de Sane , 54 Phil. 511, which upheld the right of PNB asmortgagee over motorized water vessels as superior over the rights of a judgmentcreditor who had already secured a writ of attachment and execution over the vessels,it appearing that the delay was caused by the Collector of Custom's uncertainty as tothe necessity of the registration of the vessels. 2

Accordingly, the Third-Party Claim was granted and the release of all the buses levied for execution wasordered.

On appeal, the NLRC reversed the labor arbiter's decision on the ground that the transfer of the buses lackedthe BOT approval. It ordered the reinstatement of the levy and the auction of properties.

"Y" Transit Co., Inc. thereafter filed this special civil action for certiorari under Rule 65 of the Rules of Courtpraying for the issuance of a Restraining Order and/or a Writ of Preliminary Injunction and for the annulment of the NLRC decision as it was issued with grave abuse of discretion amounting to lack of jurisdiction.

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

I

The public respondent NLRC committed palpable legal error and grave abuse of discretion amounting to lack of jurisdiction when it held that there was no valid transfer of ownership in favor of the petitioner, completely disregarding the preponderance of evidence and existing jurisprudence which support the validity of the transfer of ownership to the petitioner. 3

On July 6, 1989, petitioner filed a motion to cite Labor Arbiter Benigno C. Villarente, Jr. for contempt of courtand for the issuance of an order for the immediate release of the property. Petitioner argues that the Labor Arbiter refused to release the vehicles levied on June 5, 1989 despite notice that a TRO has been issued bythe Supreme Court; that there was no reason to hold on to the levy as petitioner had already posted a bond toanswer for the damages and award in the above-entitled case; that the labor arbiter wrongly required thepayment of storage charges and sheriff's fees before releasing the levied buses.

Did public respondent commit grave abuse of discretion in reinstating the levy on the buses which have beenallegedly transferred to a third party, herein petitioner "Y" Transit Co., Inc.?

We rule in the negative.

The following facts have been established before the NLRC: that the transfer of ownership from YujuicoTransit Co., Inc. to Jesus Yujuico, and from Jesus Yujuico to "Y" Transit Co., Inc. lacked the prior approval of

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the BOT as required by Section 20 of the Public Service Act; 4 that the buses were transferred to "Y" TransitCo., Inc. during the pendency of the action; and that until the time of the execution, the buses were stillregistered in the name of Yujuico Transit Co., Inc.

In Montoya v . Ignacio , 5 we held:

. . . The law really requires the approval of the Public Service Commission in order thata franchise, or any privilege pertaining thereto, may be sold or leased without infringingthe certificate issued to the grantee. The reason is obvious. Since a franchise ispersonal in nature any transfer or lease thereof should be notified to the Public ServiceCommission so that the latter may take proper safeguards to protect the interest of thepublic. In fact, the law requires that, before approval is granted, there should be apublic hearing with notice to all interested parties in order that the commission maydetermine if there are good and reasonable grounds justifying the transfer or lease of the property covered by the franchise, or if the sale or lease is detrimental to publicinterest. Such being the reason and philosophy behind this requirement, it follows thatif the property covered by the franchise is transferred, or leased to another withoutobtaining the requisite approval, the transfer is not binding against Public ServiceCommission and in contemplation of law, the grantee continues to be responsibleunder the franchise in relation to the Commission and to the public. . . .

It may be argued that Section 16, paragraph (h) provides in its last part that "nothingherein contained shall be construed to prevent the sale, alienation, or lease by anypublic utility of any of its property in the ordinary course of business," which gives theimpression that the approval of Public Service Commission is but a mere formalitywhich does not affect the effectivity of the transfer or lease of the property belonging toa public utility. But such provision only means that even if the approval has not been

obtained the transfer or lease 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 public interest . (Emphasis ours)

There being no prior BOT approval in the transfer of property from Yujuico Transit Co., Inc. to Jesus Yujuico, itonly follows that as far as the BOT and third parties are concerned, Yujuico Transit Co., Inc. still owned theproperties. and Yujuico, and later, "Y" Transit Co., Inc. only held the same as agents of the former. In Tamayov . Aquino , 6 the Supreme Court stated, thus:

. . . In operating the truck without transfer thereof having been approved by the PublicService Commission, the transferee acted merely as agent of the registered owner andshould be responsible to him(the registered owner) for any damages that he may cause the latter by his negligence.

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 byasserting his ownership because as far as the law is concerned, the one in whose name the vehicle isregistered 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 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.

Regarding the Motion for Contempt filed by petitioner, we are constrained to deny the same since the Order tolevy upon petitioner's alleged properties was issued even before the issuance by the Court of a temporaryrestraining order. From the records, it appeared that Labor Arbiter Villarente ordered the public auction of thesubject properties on May 12, 1989. The sheriff levied on the properties on June 5, 1989. The Supreme Courtissued the Temporary Restraining Order on June 19, 1989 and this was received by the Labor Arbiter on June22, 1989. On June 28, 1989, the Labor Arbiter directed the sheriff to release the two buses already leviedupon by him.

Likewise, we find no error in requiring petitioner to pay the storage fees prior to the release of the properties.Storage costs are imposed in accordance with the provisions of Rule IX of the NLRC Manuel of Instructions for Sheriffs, to wit:

Sec. 3. Storing of Levied Property . To avoid pilferage of or damage to leviedproperty, 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 andconformity of the losing party or third party claimant. In case of disagreement, the sameshall be referred to the Labor Arbiter or proper officer who issued the writ of executionfor 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 asthe parties with a copy of the inventory. The storage fees shall be shouldered by thelosing party.

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

The Motion to Cite Labor Arbiter Benigno Villarente, Jr. is DENIED and petitioner is ordered to PAY storagecosts and sheriff's fees.

This decision is immediately executory.

SO ORDERED.

Feliciano, Bidin and Melo, Vitug, JJ., con cur.

#Footnotes1 Rollo, p. 36.2 Rollo, pp. 28-29.3 Ibid., p. 11.4 Section 20. Acts requiring the approval of the Commission . Subject to established limitations andexceptions and saving provisions to the contrary, it shall be unlawful for any public service or for the owner,lessee or operator thereof, without the ap proval and authorization of the Commission previouslyhad xxx xxx xxx(g) To sell, alienate, mortgage, encumber or lease its property, franchises, certificates,privileges, or rights or any part thereof; or merge or consolidate its property, franchises,privileges or rights, or any part thereof, with those of any other public service. The approvalherein required shall be given, after notice to the public and after hearing the persons interestedat a public hearing, if it be shown that there are just and reasonable grounds for making themortgage or encumbrance, for liabilities of more than one year maturity, or the sale, alienation,lease, merger, or consolidation to be approved, and that the same are not detrimental to the

public interest, and in case of a sale, the date on which the same is to be consummated shall befixed in the order of approval: Provided, however , that nothing herein contained shall beconstrued to prevent the transaction from being negotiated or completed before its approval orto prevent the sale, alienation, or lease by any public service of any of its property in theordinary course of its business.xxx xxx xxx5 94 Phil. 182 (1953).6 105 Phil. 949 (1959).7 Montoya v. Ignacio, supra .

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G.R. Nos. L-39902, L-39903 November 29, 1933

DOMINADOR RAYMUNDO, petitioner-appellant,vs.LUNETA MOTOR CO., ET AL., respondents-appellees.

A.M. Zarate for appellant.Jose Agbulos for appellee Luneta Motor Co.No appearance for the other appellee.

MALCOLM, J.:

The question squarely raised in these concerns the forced sales of certificates of public convinced held by public service operators and theliability to execution of such certificates.

Breaking into the narration of the facts at the proper point, we findNicanor de Guzman, signing as Guzco Transit, purchasing trucks fromthe Luneta Motor Co. and to pay for them executing a series of promissory notes guaranteed by a chattel mortgage on several trucks.On failure of De Guzman or Guzco Transit to pay the promissory notes,suit was brought in the Court of First Instance of Manila for the collectionof the amount outstanding and unpaid. When the complaint waspresented, a writ of attachment was obtained against the properties of the Guzco Transit, and as a consequence garnishment was served onthe Secretary of the Public Service Commission attacking the right, title,and participation of the Guzco Transit in the certificates of publicconvenience issued in cases Nos. 25635, 23914 and 24255 covering thebus transportation lines between Manila and Cardona, Rizal, andbetween Manila and Pililla, Rizal. These certificates were ordered sold bythe Court of First Instance of Manila, and in fact the certificates of publicconvenience Nos. 25635 and 23914 were sold to the Luneta Motor Co.as the highest bidder. The approval of the sheriff's sale was prayed for before the Public Service Commission, and is one of the cases under review.

Going back a moment, it is necessary to insert in the statement of facts that on July 16, 1932, or nine days after the certificates were

attached by the Luneta Motor Co., the same certificates, together withcertificate No. 25951 and several trucks, were sold by De Guzman for the

Guzco Transit to Dominador Raymundo. The approval of this sale wassought from the Public Service commission, and is the other case nowunder review. On the two cases being heard together, the commission inits decision approved the sale at public auction in favor of the LunetaMotor Co., and disapproved the sale made to Dominador Raymundo,reserving to Raymundo the right to present another petition for theapproval of the sale of certificate of public convenience No. 25951 whichwas not included in the sale in favor of the Luneta Motor Co.

Sweeping incidental matters to one side, the prime question neednot be complicated by determining if a sale of a certificate of publicconvenience without any equipment may be the object of execution andgarnishment sale, for this is matter of policy to be determined by thePublic Service Commission, and it appears that sale of certificates of public convenience without equipment have been approved by thecommission. Also it is evident that the articles of incorporation of theLuneta Motor Co. are broad enough in scope to authorize the company, if it so desires, to engage in the autotruck business, and if not, there wouldbe nothing to preclude the company from transferring the certificates to a

third party with the approval of the Public Service Commission. Further,the nature of the partnership which may have been entered into byNicanor de Guzman and Agapito C. Correa cannot now be discussed,considering that the promissory notes were signed Guzco Transit, byNicanor de Guzman, and considering that the judgment against GuzcoTransit in the Court of First Instance of Manila has become final. Finally,the dismissal in case No. 33033 pertaining to certificate No. 25951 waswithout prejudice, and the appellees disclaim any interest in thiscertificate. Therefore, the question to be decided on this appeal is, whichof the two sales, the one at public auction by virtue of an attachment, or two voluntary sale made after the property had been levied upon, shouldprevail, and a decision on this question is dependent on a decisionrelative to the liability to execution of certificates of public convenience.

The Public Service Law, Act No. 3108, as amended, authorizescertificates of public convenience to be secured by public serviceoperators from the Public Service Commission. (Sec. 15 [ i ].) A certificateof public convenience granted to the owner or operator of public servicemotor vehicles, it has been held, grants a right in the nature of a limitedfranchise. (Public Utilities Commission vs . Garviloch [191], 54 Utah, 406.)

The Code of Civil Procedure establishes the general rule that"property, both real and personal, or any interest therein of the judgment

debtor, not exempt by law, and all property and rights of property seizedand held under attachment in the action, shall be liable to execution."

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(Sec. 450.) The statutory exemptions do not include franchises or certificates of public convenience. (Sec. 452.) The word "property" asused in section 450 of the Code of Civil Procedure comprehends everyspecies of title, inchoate or complete, legal or equitable. The test bywhich to determine whether or not property can be attached and soldupon execution is whether the judgment debtor has such a beneficialinterest therein that he can sell or otherwise dispose of it for value.(Reyes vs . Grey [1911], 21 Phil., 73.)

It will be noted that the Public Service Law and the Code of CivilProcedure are silent on the question at issue, that is, silent in the senseof not containing specific provisions on the right to attach certificates of public convenience. The same attitude was not assumed in theenactment of Act No. 667, section 10, as amended, which gave authorityfor the mortgage and sale under foreclosure proceedings of franchisesgranted by Provincial and municipal governments. A similar tendencywas evident in the Corporation Law, for in section 56 and followingthereof express provisions were made for the sale on execution used inconnection with them. Should the legislative intention thus evidenced be

taken as meaning that the generality of the language used by the Code of Civil Procedure was too vague to permit of forced sales of franchises andcertificates of public convenience, or notwithstanding the provisions to befound in these special laws, is the language of the code of CivilProcedure broad enough to include certificates of public convenience?We lean to the latter proposition, and will now proceed to elucidate our viewpoint.

The test to be applied was announced by our Supreme Court inReyes vs. Grey, supra , and there is nothing in Tufexis vs . Olaguera andMunicipal Council of Guinobatan ( [1915], 32 Phil., 654), cited byappellant, which sanctions a contrary test. That rule it will be recalledtested 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 inany way. Now the Public Service Law permits the Public ServiceCommission to approved the sale, alienation, mortgaging, encumbering,or leasing of property, franchises, privileges, or rights or any part thereof (sec. 16 [ h]), and in practice the purchase and sale of certificates of public convenience has been permitted by the Public ServiceCommission. If the holder of a certificate of public convenience can sell itvoluntarily, there is no valid reason why the same certificate cannot betaken and sold involuntarily pursuant to process.

If this was all that there was to the case, we might hesitate toapprove attachments of certificates of public convenience. But there is

more. Certificates of public convenience have come to have considerablematerial value. They are valuable assets. In many cases the certificatesare the cornerstones on which are builded the business of bustransportation. The United States Supreme Court considers a franchisegranted in consideration of the performance of public service asconstituting property within the protection of the Fourteenth Amendmentto the United States Constitution. (Frost vs . Corporation Commission of Oklahoma [1929], 278 U.S., 515.) If the holder of the certificate of public

convenience can thus be protected in his constitutional rights, we see noreason why the certificate of public convenience should not assumecorresponding responsibilities and be susceptible as property or aninterest therein of being liable to execution. In at least one State, thecertificate of the railroad commission permitting the operation of a busline has been held to be included in the term "property" in the broadsense of the term. If thus is true, the certificate under our law, consideredas a species of property, would be liable to execution. (Willis vs . Buck[1928], 81 Mont., 472.)

As has been intimated herein before, a practice has grown up in

the Public Service Commission of permitting the alienation of certificatesof public convenience and in so doing approval has been given to thesale through foreclosure proceedings of the certificates of publicconvenience to third parties. The very decision in the two cases before usis an illustration of this practice. The same tendency is to be noted in thelower courts. As an example in the instant record, there is a previousforeclosure of a mortgage apparently uncontested, Not only this, but tacitapproval to the attachment of certificates of public convenience either through chattel mortgages or court writs has been given by this court.(Orlanes & Banaag Transportation Co. vs . Public Service Commission[1932], 57 Phil., 634; Manila Electric Company vs . Orlanes & BanaagTransportation Co. [1933], 57 Phil., 805; Nos. 39525 and 39531, RedLine Transportation Co. vs . Rural Transit Co. and Bachrach Motor Co.,November 17, 1933. 1)

When the motion of the plaintiff praying that the certificates of public convenience granted by the Public Service Commission whichwere attached be sold at public auction and the answer opposing thegranting of the motion on the ground that franchises can not be thesubject of attachment and sale by garnishment came before the Court of First Instance of Manila, the presiding Judge Anacleto Diaz, promulgatedan order which sustained the right of the plaintiff to attachment andgarnishment. That order gains particular force because a later judgment

by consent was taken and no appeal was attempted to this court. It istrue that the sale further required the approval of the Public Service

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Commission, but the Public Service Commission respected the decisionof the court and so we have the concurrence of the court and thecommission on this question. In the order in first instance appears thefollowing well considered language:

It remains to be determined whether, under the law,certificates of public convenience are liable to attachment andseizure by legal process. The law is silent as to this matter. It cannot be denied that such franchises are valuable. They are subjectto being sold for a consideration as much as any other property.They are even more valuable than ordinary properties, taking intoconsideration than that they are not granted to every one whoapplies for them but only to those who undertake to furnishsatisfactory and convenient service to the public. It may also besaid that dealers in motor vehicles even extend credit to ownersof such certificates or franchises. The law permits the seizure bymeans of a writ of attachment not only of chattels but also for shares and credits. While these franchises may be said to beintangible character, they are however of value and are

considered properties which can be seized through legal process.

For all the foregoing, the court is of the opinion that theplaintiff is entitled to the remedy it prays for in its motion which ishereby granted. lawphil.net

The ruling of the Supreme Court on the question raised by therecord and the assignments of error is this: Certificates of publicconvenience secured by public service operators are liable to execution,and the Public Service Commission is authorized to approve the transfer of the certificates of public convenience to the execution creditor. As aconsequence, the decision brought on review will be affirmed, with costsagainst the appellant.

Avancea, C.J., Villa-Real, Hull, and Imperial, JJ., concur.

Footnotes

1 Page 976, post.

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.R. No. L-28865 December 19, 1928

BATANGAS TRANSPORTATION CO., petitioner-appellant,vs.CAYETANO ORLANES, respondent-appellee.

L. D. Lockwood and C. de G. Alvear for appellant.Paredes, Buencamino and Yulo and Menandro Quiogue for appellee.

STATEMENT

In his application for a permit, the appellee Orlanes alleges that he is theholder of a certificate of public convenience issued by the Public ServiceCommission in case No. 7306, to operate an autobus line from Taal toLucena, passing through Batangas, Bolbok and Bantilan, in the Provinceof Batangas, and Candelaria and Sariaya, in the Province of Tayabas,without any fixed schedule; that by reason of the requirements of publicconvenience, he has applied for a fixed schedule from Bantilan to Lucenaand return; that in case No. 7306, he cannot accept passengers or cargofrom Taal to any point before Balbok, and vice versa; that the publicconvenience requires that he be converted into what is known as aregular operator on a fixed schedule between Taal and Bantilan andintermediate points, and for that purpose, he has submitted to theCommission proposed schedule for a license to make trips betweenthose and intermediate points. He then alleges that by reason of increaseof traffic, the public convenience also requires that he be permitted toaccept passengers and cargo at points between Taal and Bantilan, andhe asked for authority to establish that schedule, and to acceptpassengers at all points between Taal and Bantilan.

To this petition the Batangas Transportation Company appeared and filedan application for a permit, in which it alleged that it is operating a regular service of auto trucks between the principal municipalities of the Provinceof Batangas and some of those of the Province of Tayabas; that since1918, it has been operating a regular service between Taal and Rosario,and that in 1920, its service was extended to the municipality of San Juande Bolbok, with a certificate of public convenience issued by the PublicServise Commission; that in the year 1925 Orlanes obtained from theCommission a certificate of public convenience to operate an irregular service of auto trucks between Taal, Province of Batangas, and Lucena,Province of Tayabas, passing through the municipalities of Bauan,Batangas, Ibaan, Rosario, and San Juan de Bolbok, with the express

limitation that he could not accept passengers from intermediate pointsbetween Taal and Bolbok, except those which were going to pointsbeyond San Juan de Bolbok or to the Province of Tayabas; that heinaugurated this irregular in March, 1926, but maintained it on that part of the line between Taal and Bantilan only for about three months, when heabandoned that portion of it in the month of June and did not renew ituntil five days before the hearing of case No. 10301, which was set for November 24, 1926, in which hearing the Batangas Transportation

Company asked for additional hours for its line between Batangas andBantilan; that in June, 1926, Orlanes sought to obtain a license as aregular operator on that portion of the line between Bantilan and Lucenawithout having asked for a permit for tat portion of the line betweenBantilan and Taal; that from June, 1926, Orlanes and the BatangasTransportation Company were jointly operating a regular service betweenBantilan and Lucena, with trips every half an hour, and Orlanes nothaving asked for a regular service between Bantilan and Taal, theBatangas Transportation Company remedied this lack of service under the authority of the Commission, and increased its trips between Bantilanand Tayabas to make due and timely connections in Bantilan on a half-hour service between Bantilan and Batangas with connections there for Taal and all other points in the Province of Batangas. It is then allegedthat the service maintained by the company is sufficient to satisafy theconvenience of the public, and that the public convenience does notrequire the granting of the permit for the service which Orlanes petitions,and that to do so would result in ruinous competition and to the graveprejudice of the company and without any benefit to the public, and itprayed that the petition of Orlanes to operate a regular service be denied.

After the evidence was taken upon such issues, the Public ServiceCommission granted the petition of Orlanes, as prayed for, and thecompany then filed a motion for a rehearing, which was denied, and thecase is now before this court, in which the appellant assigns the followingerrors:

The Commission erred in ordering that a certificate of publicconvenience be issued in favor of Cayetano Orlanes to operatethe proposed service without finding and declaring that the publicinterest will be prompted in a proper and suitable by the operationof such service, or when the evidence does not show that thepublic interests will be so prompted.

That the Commission erred in denying the motion for a rehearing.

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JOHNS, J.:

The questions presented involve a legal construction of the powers andduties of the Public Service Commission, and the purpose and intent for which it was created, and the legal rights and privileges of a public utilityoperating under a prior license.

It must be conceded that an autobus line is a public utility, and that in allthings and respects, it is what is legally known as a common carrier, andthat it is an important factor in the business conditions of the Islands,which is daily branching out and growing very fast.

Before such a business can be operated, it must apply for, and obtain, alicense or permit from the Public Service Commission, and comply withcertain defined terms and conditions, and when license is once, granted,the operator must conform to, and comply with all, reasonable rules andregulations of the Public Service Commission. The object and purpose of such a commission, among other things, is to look out for, and protect,the interests of the public, and, in the instant case, to provide it with safe

and suitable means of travel over the highways in question, in likemanner that a railroad would be operated under like terms andconditions. To all intents and purposes, the operation of an autobus lineis very similar to that of a railroad, and a license for its operation shouldbe granted or refused on like terms and conditions. For many anddifferent reasons, it has never been the policy of a public servicecommission to grant a license for the operation of a new line of railroadwhich parallels and covers the same field and territory of another oldestablished line, for the simple reason that it would result in ruinouscompetition between the two lines, and would not be of any benefit or convenience to the public.

The Public Service Commission has ample power and authority to makeany and all reasonable rules and regulations for the operation of anypublic utility and to enforce complience with them, and for failure of suchutility to comply with, or conform to, such reasonable rules andregulations, the Commission has power to revoke the license for itsoperation. It also has ample power to specify and define what is areasonable compensation for the services rendered to the travelingpublic.

That is to say, the Public Service Commission, as such has the power tospecify and define the terms and conditions upon which the public utilityshall be operated, and to make reasonable rules and regulations for its

operation and the compensation which the utility shall receive for itsservices to the public, and for any failure to comply with such rules andregulations or the violation of any of the terms and conditions for whichthe license was granted the Commission has ample power to enforce theprovisions of the license or even to revoke it, for any failure or neglect tocomply with any of its terms and provisions.

Hence, and for such reasons, the fact that the Commission haspreviously granted a license to any person to operate a bus line over agiven highway and refuses to grant a similar license to another personover the same highway, does not in the least create a monopoly in theperson of the licensee, for the reason that at all times the Public ServiceCommission has the power to say what is a reasonable compensation tothe utility, and to make reasonable rules and regulations for theconvenience of the traveling public and to enforce them.

In the instant case, Orlanes seek to have a certificate of publicconvenience to operate a line of auto trucks with fixed times of departurebetween Taal and Bantilan, in the municipality of Bolbok, Province of

Batangas, with the right to receive passengers and freight fromintermediate points. The evidence is conclusive that at the time of hisapplication, Orlanes was what is known as an irregular operator betweenBantilan and Taal, and that the Batangas operator between Batangasand Rosario. Orlanes now seeks to have his irregular changed into aregular one, fixed hours of departure and arrival between Bantilan andTaal, and to set aside and nullify the prohibition against him in hiscertificate of public convenience, in substance and to the effect that heshall not have or receive any passengers or freight at any of the pointsserved by the Batangas Transportation Company for which that companyholds a prior license from the Commission. His petition to become such aregular operator over such conflicting routes is largely based upon thefact that, to comply with the growing demands of the public, the BatangasTransportation Company, in case No. 10301, applied to the Commissionfor a permit to increase the number of trip hours at and between thesame places from Batangas to Rosario, and or for an order that allirregular operators be prohibited from operating their respective licenses,unless they should observe the interval of two hours before, or one hour after, the regular hours of the Batangas Transportation Company.

In his petition Orlanes sought to be releived from his prohibition tobecome a regular operator, and for a license to become a regular operator with a permission to make three trips daily between Bantilan and

Taal, the granting of which make him a regular operator between thosepoints and bring him in direct conflict and competition over the same

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points with the Batangas Transportation Company under its prior license,and in legal effect that was the order which the Commission made, of which the Batangas Transportation Company now complains.

The appellant squarely plants its case on the proposition:

Is a certificate of public convenience going to be issued to asecond operator to operate a public utility in a field where, and incompetition with, a first operator who is already operating,adequate and satisfactory service?

There is no claim or pretense that the Batangas Transportation Companyhas violated any of the terms and conditions of its license. Neiher doesthe Public Service Commission find as a fact that the grantring of alicense to Orlanes as a regular operator between the points in question isrequired or necessary for the convenience of the traveling public, or thatthere is any complaint or criticism by the public of the services renderedby the Batangas Transportation Company over the route in question.

The law creating the Public service Commission of the Philippine Islandsis known as Act No. 3108, as amended by Act No. 3316, and under it thesupervision and control of public utilities is very broad andcomprehensive.

Section 15 of Act No. 3108 provides that the Commission shall havepower, after hearing, upon notice, by order in writing to require everypublic utility:

(a) To comply with the laws of the Philippine Islands;

(b) To furnish safe, adequate, and proper service as regards the manner of furnishing the same as well as the maintenance of the necessarymaterial equipment, etc;

(c) To establish, construct, maintain, and operate any reasonableextention of its existing facilities, where such extension is reasonable andpracticable and will furnish sufficient business to justify the constructionand maintenance of the same;

(d) To keep a uniform system of books, records and accounts;

(e) To make specific answer with regard to any point on which theCommission requires information, and to furnish annual reports of financeand operations;

(f) To carry, whenever the Commission may require, a proper andadequate depreciation account;

(g) To notify the Commission of all accidents;

(h) That when any public utility purposes to increase or reduce anyexisting individual rates, it shall give the Commission written notice thirtydays prior to the proposed change; and

(i) "No public utility as herein defind shall operate in the Philippine Islandswithout having first secured from the Commission a certificate, whichshall be known as Certificate of Public Convenience, to the effect that theoperation of said public utility and the authorization to do busibness wikllpromote the public interest in a proper and suitable maner."

Section 16 specially prohibits any discrimination in the handling of freightcharges.

In construing a similar law of the State of Kansas, the United StatesSupreme Court, in an opinion written by Chief Justice Taft, in WichitaRailroad and Light Co. vs. Public Utilities Commission of Kansas (260 U.S. 48; 67 Law. ed., 124), said:

The proceeding we are considering is governed by section 13.That is the general section of the act comprehensively describingthe duty of the Commission, vesting it with power to fix and order substituted new rates for existing rates. The power is expresslymade to depend on the condition that, after full hearing andinvestigation, the Commission shall find existing rates to beunjust, unreasonable, unjustly discriminatory, or undulypreferential. We conclude that a valid order of the Commissionunder the act must contain a finding of fact after hearing andinvestigation, upon which the order is founded, and that, for lackof such a finding, the order in this case was void.

This conclusion accords with the construction put upon similar statutes in other states. (State Public Utilities Commission ex rel.

Springfield vs. Springfield Gas and E. Co., 291 Ill., 209; P. U. R.,1920C, 640; 125 N. E. 891; State Public Utilities Co. vs. Baltimore

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and O. S. W. R. Co., 281 Ill; 405; P. U. R., 1918B, 655; 118 N. E.,81.) Moreover, it accords with general principles of constitutionalgovernment. The maxim that a legislature may not delegatelegislative power has some qualifications, as in the creation of municipalities, and also in the creation of administrative boards toapply to the myriad details of rate schedule the regulatory policepower of the state. The latter qualification is made necessary inorder that the legislative power may be effectively exercised. In

creating such an administrative agency, the legislature, to preventits being a pure delegation of legislative power, must enjoin upona certain course of procedure and certain rules of decision in theperfomance of its function. It is a wholesome and necessaryprinciple that such an agency must pursue the procedure andrules enjoined, and show a substantial compliance therewith, togive validity to its action. When, therefore, such an administrativeagency is required, as a condition precedent to an order, to makea finding of facts, the validity of the order rest upon the neededfinding. It is lacking, the order is ineffective.

It is pressed on us that the lack of an express finding may besupplied by implication and by reference to the averments of thepetition invoking the action of the Commission. We cannot agreeto this point. It is doubtful whether the facts averred in the petitionwere sufficient to justify a finding that the contract rates wereunreasonably low; but we do not find it necessay to answer thisquestion. We rest our decision on the principle that an expressfinding of unreasonableness by the Commission wasindispensable under the statutes of the state.

That is to say, in legal effect, that the power of the Commission to issue acertificate of public convenience depends on the condition precedentthat, after a full hearing and investigation, the Commission shall havefound as a fact that the operation of the proposed public service and itsauthority to do business must be based upon the finding that it is for theconvenience of the public.

In the Philippine Islands the cetificate of public convenience is as folows:

CERTIFICATE OF PUBLIC CONVENIENCE

To whom it may concern:

THIS IS TO CERTIFY, That in pursuance of the power andauthority conferred upon it by subsection (i) of section 15 of Act No. 3108 of the Philippine Legislature,

THE PUBLIC SERVICE COMMISSION OF THEPHILIPPINE ISLANDS, after having duly considered theapplication of ................. for a certificate of publicconvenience the operation of ........................ in connectionwith the evidence submitted in support thereof, hasrendered its decision on................, 192...., in caseNo. ............, declaring that the operation by theapplicant ...................... of the business above describedwill promote the public interests in a proper and suitablemanner, and granting................. to this effect thecorresponding authority, subject to the conditionsprescribed in said decision.

Given at Manila Philippine Islands, this ......... dayof ....................., 192 .....

PUBLIC SERVICE COMMISSION OF THE PHILIPPINEISLANDS

By..................................Commissioner

Attested:.....................................Secretary

That is to say, that the certificate of public convenince granted to Orlanesin the instant case expressly recites that it "will promote the publicinterests in a proper and suitable manner." Yet no such finding of factwas made by the Commission.

In the instant case, the evidence is conclusive that the BatangasTransportation Company operated its line five years before Orlanes ever turned a wheel, yet the legal effect of the decision of the Public Service

Commission is to give an irregular operator, who was the last in the field,a preferential right over a regular operator, who was the first in the field.

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territory covered by a certificate granted to another bus companyas a subsidiary of a railway company for operation in conjunctionwith the trolley system where one bus service would be ample for all requirements.

In Re Branham (Ariz.), P. U. R., 1924C, 500:

A showing must be clear and affirmative that an existing is unableor has refused to maintain adequate and satisfactory service,before a certificate of convenience and necessity will be grantedfor the operation of an additional service.

In Re Lambert (N. H.), P. U. R., 1923D, 572:

Authority to operate a jitney bus should be refused whenpermision has been given to other parties to operate and, fromthe evidence, they are equipped adequately to accommodate thepublic in this respect, no complaints having been received inregard to service rendered.

In Re White (Md.), P. U. R., 1924E, 316:

A motor vehicle operator who has built up a business betweenspecified points after years of effort should not be deprived of thefruits of his labor and of the capital he has invested in hisoperation by a larger concern desiring to operate between thesame points.

In Re Kocin (Mont.), P. U. R., 1924C, 214:

A certificate authorizing the operation of passenger motor serviceshould be denied where the record shows that the admission of another operator into the territory served by present licensees isnot necessary and would render their licensee oppressive andconfiscatory because of further division and depletion of revenuesand would defeat the purpose of the statue and disorganize thepublic service.

In Re Nevada California Stage Co., P. U. R., 1924A, 460:

The Nevada Commission denied an application for a certificate of

convenience and necessity for the operation of an automobilepassenger service in view of the fact that the service within the

territory proposed to be served appeared to be adequate and itwas the policy of the Commission to protect the established linein the enjoyment of business which it had built, and in view of thefurther fact that it was very uncertain whether the applicant couldsecure sufficient business to enable him to operate profitably.

In Re Idaho Light & P. Co. (Idaho), P. U. R., 1915A, 2:

Unless it is shown that the utility desiring to enter a competitivefield can give such service as will be a positive advantage to thepublic, a certificate of convenience will be denied by the IdahoCommission, provided that the existing utility furnishing adequateservice at reasonable rates at the time of the threatenedcompetition.

In Scott, vs. Latham (N. Y. 2d Dist), P. U. R., 1921C, 714:

Competition between bus lines should be prohibited the same ascompetition between common carriers.

In Re Portland Taxicab Co. (Me.), P. U. R., 1923E, 772:

Certificates permitting the operation of motor vehicles for carryingpassengers for hire over regular routes between points served bysteam and electric railways should not be granted when theexisting service is reasonable, safe, and adequate as required bystatue.

In Re Murphy (Minnesota), P.U.R., 1927C, 807:

Authority to operate an auto transportation service over a routewhich is served by another auto transportation company shouldbe denied if no necessity is shown for additional service.

In Re Hall, editorial notes, P. U. R., 1927E:

A certificate of convenience and necessity for the operation of amotor carrier service has been denied by the ColoradoCommission where the only ground adduced for the certificatewas that competition thereby afforded to an existing utility wouldbenefit the public by lowering rates. The Commission said: "Up to

the present time the Commission has never issued a certificateauthorizing a duplication of motor vehicle operation over a given

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route unless it appeared that the service already rendered wasnot adequate, that there was no ruinous competition or that thesecond applicant could, while operating on a sound businesslikebasis, afford transportation at cheaper rates than those already ineffect. There has been no complaint to date as to the rates nowbeing charged on the routes over which the applicant desires toserve. Moreover, the Commission stand ready, at any time theunreasonable of the rates of any carrier are questioned, to

determine their reasonableness and to order them reduced if theyare shown to be unreasonable." In this case the Commission alsoexpressed its disappoval of the practice of an applicant securinga certificate for the sole purpose of transferring it to another.

In Re Sumner (Utah), P. U. R., 1927D, 734:

The operation of an automobile stage line will not be authorizedover a route adequately served by a railroad and other bus line,although the proposed service would be an added convenience tothe territory.

In Bartonville Bus Line vs. Eagle Motor Coach Line (Ill. Sup. Court), 157N. E., 175; P. U. R., 1927E, 333:

The policy of the state is to compel an established public utilityoccupying a given filed to provide adequate service and at thesame time protect it from ruinous competition, and to allow it anapportunity to provide additional service when required instead of permitting such service by a newly established competitor.

Upon the question of "Reason and Rule for Regulation," in section 775,

Pond says:

The policy of regulation, upon which our present public utilitycommission plan is based and which tends to do away withcompetition among public utilities as they are natural monopolies,is at once the reason and the justification for the holding of our courts that the regulation of an existing system of transportation,which is properly serving a given field or may be required to doso, is to be preferred to competition among several independentsystems. While requiring a proper service from a single systemfor a city or territory in consideration for protecting it as amonopoly for all the service required and in conserving itsresources, no economic waste results and service may be

furnished at the minimum cost. The prime object and real purposeof commission control is to secure adequate sustained service for the public at the least possible cost, and to protect and conserveinvestments already made for this purpose. Experience hasdemostrated beyond any question that competition among naturalmonopolies is wasteful economically and results finally ininsufficient and unsatisfactory service and extravagant rates.Neither the number of the individuals demanding other service

nor the question of the fares constitutes the entire question, butrather what the proper agency should be to furnish the bestservice to the public generally and continuously at the least cost.Anything which tends to cripple seriously or destroy anestablished system of transportation that is necessary to acommunity is not a convenience and necessity for the public andits introduction would be a handicap rather than a help ultimatelyin such a field.

That is the legal construction which should be placed on paragraph (e) of section 14, and paragraph (b) and (c) of section 15 of the Public Service

Law.

We are clearly of the opinion that the order of the Commission grantingthe petition of Orlanes in question, for the reason therein stated, is nulland void, and that it is in direct conflict with the underlying andfundamental priciples for which the Commission was created. 1awphi1.net

The question presented is very important and far-reaching and one of first impression in this court, and for such reasons we have given thiscase the careful consideration which its importance deserves. TheGovernment having taken over the control and supervision of all publicutilities, so long as an operator under a prior license complies with theterms and conditions of his license and reasonable rules and regulationfor its operation and meets the reasonable demands of the public, it is theduty of the Commission to protect rather than to destroy his investmentby the granting of a subsequent license to another for the same thingover the same route of travel. The granting of such a license does notserve its convenience or promote the interests of the public.

The decision of the Public Service Commission, granting to Orlanes thelicense in question, is revoked and set aside, and the case is remandedto the Commission for such other and further proceedings as are notinconsistent with this opinion. Neither party to recover costs on thisappeal. So ordered.

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Johnson, Street, Malcolm and Ostrand, JJ., concur.

Separate Opinions

ROMUALDEZ, J., dissenting:

I believe the Public Service Commission had jurisdiction to try this caseand that there is sufficient evidence of record to sustain the appealed

judgment. However, I think there sould be no conflict between trip hours,and that the Commission could do away with it by making the necessaryarrangements.

Villa-Real, J., concur.

Footnotes

1 The same conclusions were reached in the case of Batangas

Transportation Co. vs. Ochoa, G. R. No. 29154, promulgatedDecember 20, 1928, not reported.

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G.R. No. L-61461 August 21, 1987

EPITACIO SAN PABLO, (Substituted by Heirs of E. San Pablo), petitioners,vs.PANTRANCO SOUTH EXPRESS, INC., respondent.

CARDINAL SHIPPING CORPORATION, petitioner,vs.HONORABLE BOARD OF TRANSPORTATION AND PANTRANCO SOUTHEXPRESS, INC., respondents.

GANCAYCO, J.:

The question that is posed in these petitions for review is whether the sea can beconsidered as a continuation of the highway. The corollary issue is whether a landtransportation company can be authorized to operate a ferry service or coastwise or interisland shipping service along its authorized route as an incident to its franchisewithout the need of filing a separate application for the same.

The Pantranco South Express, Inc., hereinafter referred to as PANTRANCO is adomestic corporation engaged in the land transportation business with PUB servicefor passengers and freight and various certificates for public conveniences CPC tooperate passenger buses from Metro Manila to Bicol Region and Eastern Samar. OnMarch 27,1980 PANTRANCO through its counsel wrote to Maritime Industry Authority(MARINA) requesting authority to lease/purchase a vessel named M/V "BlackDouble" "to be used for its project to operate a ferryboat service from Matnog,Sorsogon and Allen, Samar that will provide service to company buses and freighttrucks that have to cross San Bernardo Strait. 1 In a reply of April 29,1981PANTRANCO was informed by MARINA that it cannot give due course to the requeston the basis of the following observations:

1. The Matnog-Allen run is adequately serviced by CardinalShipping Corp. and Epitacio San Pablo; MARINA policies oninterisland shipping restrict the entry of new operators to Liner t raderoutes where these are adequately serviced by existing/authorizedoperators.

2. Market conditions in the proposed route cannot support t he entryof additional tonnage; vessel acquisitions intended for operationstherein are necessarily limited to those intended for replacementpurposes only. 2

PANTRANCO nevertheless acquired the vessel MV "Black Double" on May 27, 1981

for P3 Million pesos. 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 toTacloban City invoking the case of Javellana vs. Public Service Commission. 3

PANTRANCO claims that it can operate a ferry service in connection with itsfranchise for bus operation in the highway from Pasay City to Tacloban City "for thepurpose of continuing the highway, which is interrupted by a small body of water, t hesaid proposed ferry operation is merely a necessary and incidental service to its mainservice and obligation of transporting its passengers from Pasay City to TaclobanCity. 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 ferryservice. Acting Chairman Jose C. Campos, Jr. of BOT ordered PANTRANCO not tooperate its vessel until the application for hearing on Oct. 1, 1981 at 10:00 A.M. 5 Inanother order BOT enjoined PANTRANCO from operating the MV "Black Double"otherwise it will be cited to show cause why its CPC should not be suspended or thepending application denied. 6

Epitacio San Pablo (now represented by his heirs) and Cardinal Shipping Corporationwho are franchise holders of the ferry service in this area interposed their opposition.They claim they adequately service the PANTRANCO by ferrying its buses, trucksand 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 andTacloban City may still be required to secure another certificate in order to operate aferry service between two terminals of a small body of water . On October 20, 1981then Minister of Justice Ricardo Puno rendered an opinion to the effect that there isno need for bus operators to secure a separate CPC to operate a ferryboat serviceholding as follows:

Further, a common carrier which has been granted a certificate of public convenience is expected to provide efficient, convenient andadequate service to the riding public. (Hocking Valley Railroad Co.vs. Public Utilities Commission, 1 10 NE 521; Louiseville and NRCo. vs. Railroad Commissioners, 58 SO 543) It is the right of thepublic which has accepted the service of a public utility operator to

demand that the service should be conducted with reasonableefficiency. (Almario, supra, citing 73 C.J.S. 990-991) Thus, whenthe 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 itsduty under its current certificate of public convenience to provideadequate and convenient service to its riders. Requiring said buscompany to obtain another certificate to operate such ferry servicewhen it merely forms a part and constitutes an improvement of its existing transportation service would simply be duplicitous andsuperfluous. 7

Thus on October 23, 1981 the BOT rendered its decision holding that the ferry boatservice is part of its CPC to operate from Pasay to Samar/Leyte by amendingPANTRANCO's CPC so as to reflect the same in this wise:

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Let the original Certificate of public convenience granted toPantranco South Express Co., Inc. be amended to embody thegrant of authority to operate a private ferry boat service as one of the conditions for the grant of the certificate subject to the conditionthat the ferryboat shall be for the exclusive use of Pantranco buses,its passengers and freight trucks, and should it offer itself to thepublic for hire other than its own passengers, it must apply for aseparate certificate of public convenience as a public ferry boatservice, separate and distinct from its land transport systems. 8

Cardinal Shipping Corporation and the heirs of San Pablo filed separate motions for reconsideration of said decision and San Pablo filed a supplemental motion for reconsideration that were denied by the BOT on July 21, 1981. 9

Hence, San Pablo filed the herein petition for review on certiorari with prayer for preliminary injunction 10 seeking the revocation of said decision, and pendingconsideration of the petition, the issuance of a restraining order or preliminaryinjunction against the operation by PANTRANCO of said ferry service. San Pabloraised the following issues:

A. DID THE RESPONDENT BOARD VIOLATE PETITIONERS'RIGHT TO DUE PROCESS, THE RULES OF PROCEDURE AND

SECTION 16 (m) OF THE PUBLIC SERVICE ACT, WHEN ITISSUED IN A COMPLAINT CASE THE DECISION DATEDOCTOBER 23, 1981 WHICH MOTU PROPIO AMENDEDRESPONDENT PANTRANCO'S PUB CERTIFICATE TO INCLUDEAND AUTHORIZE OPERATION OF A SHIPPING SERVICE ONTHE ROUTE MATNOG, SORSOGON ALLEN, SAMAR EVEN AS THERE MUST BE A FORMAL APPLICATION FORAMENDMENT AND SEPARATE PROCEEDINGS HELDTHEREFORE, ASSUMING AMENDMENT IS PROPER?

B. DID THE RESPONDENT BOARD ERR IN FINDING IN ITSDECISION OF OCTOBER 23, 1981, THAT THE SEA FROM THEPORT OF MATNOG, SORSOGON, LUZON ISLAND TO THE

PORT OF ALLEN, SAMAR ISLAND, OR FROM LUZON ISLANDTO SAMAR ISLAND IS A MERE FERRY OR CONTINUATION OFTHE HIGHWAY IT BEING 23 KILOMETERS OF ROUGH ANDOPEN SEA AND ABOUT 2 HOURS TRAVEL TIME REQUIRINGBIG INTER-ISLAND VESSELS, NOT MERE BARGES, RAFTS ORSMALL BOATS UTILIZED IN FERRY SERVICE?

C. DID THE RESPONDENT BOARD ERR WHEN IT RULED THATRESPONDENT PANTRANCO'S VESSEL M/V BLACK DOUBLE ISMERELY A PRIVATE CARRIER, NOT A PUBLIC FERRYOPERATING FOR PUBLIC SERVICE (ASSUMING THAT THEMATNOG-ALLEN SEA ROUTE IS A MERE FERRY ORCONTINUATION OF HIGHWAY) EVEN IF SAID VESSEL IS FOR

HIRE AND COLLECTS SEPARATE FARES AND CATERS TOTHE PUBLIC EVEN FOR A LIMITED CLIENTELE?

D. DID THE RESPONDENT BOARD ERR WHEN IT GRANTEDRESPONDENT PANTRANCO AUTHORITY TO OPERATE ASHIPPING SERVICE IN THE FACE OF THE LATTER'SCONTENTION AS AN AFTER THOUGH THAT IT NEED NOTAPPLY THEREFOR, AND IN SPITE OF ITS FAILURE TOSECURE THE PRE-REQUISITE MARITIME INDUSTRYAUTHORITY (MARINA) APPROVAL TO ACQUIRE A VESSELUNDER ITS MEMORANDUM CIRCULAR NO. 8-A AS WELL ASITS PRIOR FAVORABLE ENDORSEMENT BEFORE ANYSHIPPING AUTHORIZATION MAY BE GRANTED UNDER BOT MARINA AGREEMENT OF AUGUST 10, 1976 AND FEBRUARY26, 1982?

E. DID RESPONDENT BOARD ERR WHEN IT GRANTEDRESPONDENT PANTRANCO AUTHORITY TO OPERATE ASHIPPING SERVICE ON A ROUTE ADEQUATELY SERVICED IFNOT ALREADY "SATURATED" WITH THE SERVICES OF TWO12) EXISTING OPERATORS PETITIONERS AND CARDINALSHIPPING CORP.) IN VIOLATION OF THE PRINCIPLE OFPRIOR OPERATOR RULE'? 11

By the same token Cardinal Shipping Corporation filed a separate petition raising

similar issues, namely:

a. the decision did not conform to the procedures laid down by lawfor an amendment of the original certificate of public convenience,and the authority to operate a private ferry boat service toPANTRANCO was issued without ascertaining the establishedessential requisites for such grant, hence, violative of due processrequirements;

b. the grant to PANTRANCO of authority to operate a ferryboatservice as a private carrier on said route contravenes existinggovernment policies relative to the rationalization of operations of all water transport utilities;

c. it contravenes the memorandum of agreement between MARINAand the Board of Transportation; d. the grant of authority to operatea ferry service as a private carrier is not feasible; it lessensPANTRANCO's liability to passengers and cargo to a degree lessthan extraordinary diligence?

e. PANTRANCO is not a private carrier when it operates its ferryservice;

f. it runs counter to the "old operator" doctrine; and

g. the operation by PANTRANCO of the ferry service c nstitutes undue competition.

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The foregoing considerations constitutes the substantial errorscommitted by the respondent Board which would more than amply

justify review of the questioned decision by this Honorable Court. 12

Both cases were consolidated and are now admitted for decision.

The resolution of all said issues raised revolves on the validity of the questioned BOTdecision.

The BOT resolved the issue of whether a ferry service is an extension of the highwayand thus is a part of the authority originally granted PANTRANCO in the followingmanner:

A ferry service, in law, is treated as a continuation of the highwayfrom one side of the water over which passes to the other side for transportation of passengers or of travellers with their teamsvehicles and such other property as, they may carry or have withthem. (U.S. vs. Pudget Sound Nev. Co. DC Washington, 24 F.Supp. 431). It maybe said to be a necessary service of a speciallyconstructed boat to carry passengers and property across rivers or bodies of water from a place in one shore to a point convenientlyopposite on the other shore and continuation of the highwaymaking a connection with the thoroughfare at each terminal (U.S.vs. Canadian Pac. N.Y. Co. 4 P. Supp, 85). It comprises not merelythe privilege of transportation but also the use for that purpose of the respective landings with outlets therefrom. (Nole vs. Record, 74OKL. 77; 176 Pac. 756). A ferry service maybe a public ferry or aprivate ferry. A public ferry service is one which all the public havethe right to resort to and for which a regular fare is established andthe ferryman is a common carrier be inbound to take an who applyand bound to keep his ferry in operation and good repair.(Hudspeth v. Hall, 11 Oa. 510; 36 SB 770). A ferry (private) serviceis mainly for the use of the owner and though he may take pay for ferriage, he does not follow it as a business. His ferry is not open tothe public at its demand and he may or may not keep it in operation

(Hudspeth vs. Hall, supra , St. Paul Fire and Marine Ins. 696),Harrison, 140 Ark 158; 215 S.W. 698).

The ferry boat service of Pantranco is a continuation of the highwaytraversed by its buses from Pasay City to Samar, Leyte passingthrough Matnog (Sorsogon) through San Bernardino Strait to Alien(Samar). It is a private carrier because it will be used exclusively totransport its own buses, passengers and freight trucks traversingthe said route. It will cater exclusively to the needs of its ownclientele (passengers on board- Pantranco buses) and will not offer itself indiscriminately for hire or for compensation to the generalpublic. Legally therefore, Pantranco has the right to operate theferry boat M/V BLACK DOUBLE, along the route from Matnog

(Sorsogon) to Allen (Samar) and vice versa for 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 itsland transport system, its original certificate of public convenienceshould be amended to include the operation of such ferryboat for itsown exclusive use

In Javellana 14 this Court recited the following definition of ferry :

The term "ferry" implied the continuation by means of boats,barges, or rafts, of a highway or the connection of highwayslocated on the opposite banks of a stream or other body of water.The term necessarily implies transportation for a short distance,almost invariably between two points, which is unrelated to other transportation . (Emphasis supplied)

The term "ferry" is often employed to denote the right or franchisegranted by the state or its authorized mandatories to continue bymeans of boats, an interrupted land highway over the interruptingwaters and to charge toll for the use thereof by the public. In thissense it has also been defined as a privilege, a liberty, to take tollsfor transporting passengers and goods across a lake or stream or some other body of water, with no essential difference from a

bridge franchise except as to the mode of transportation , 22 Am.Jur. 553.

A "ferry" has been defined by many courts as "a public highway or thoroughfare across a stream of water or river by boat instead of abridge ." (St. Clare Country v. Interstate Car and Sand Transfer Co.,192 U.S. 454, 48 L. ed. 518; etc.)

The term ferry is often employed to denote the right or franchisegranted by the state or its authorized mandatories to continue bymeans of boats, an interrupted land highway over the interruptingwaters and to charge toll for the use thereof by the public. (VallejoFerry Co. vs. Solano Aquatic Club, 165 Cal. 255, 131 P. 864, Ann.Cas. 1914C 1179; etc.) (Emphasis supplied)

"Ferry" is service necessity for common good to reach point acrossa stream lagoon, lake, or bay. (U.S. vs. Canadian Pac. Ry. Co. DCWas., 4 Supp. 851,853)'

"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 theexclusive right to carry passengers across a river, or arm of thesea, from one vill to another, or to connect a continuous line of roadleading from township or vill to another. (Canadian Pac. Ry. Co. vs.C.C. A. Wash. 73 F. 2d. 831, 832)'

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Includes various waters: (1) But an arm of the sea may includevarious subordinate descriptions of waters, where the tide ebbs andflows. It may be a river, harbor, creek, basin, or bay; and it issometimes used to designate very extensive reaches of waterswithin the projecting capes or points or a country. (See Rex vs.Bruce, Deach C.C. 1093). (2) In an early case the court said: "Thedistinction between rivers navigable and not navigable, that is,where the sea does, or does not, ebb and flow, is very ancient. Rexvs. Smith, 2 Dougl. 441, 99 Reprint 283. The former are calledarms of the sea, while the latter pass under the denomination of private or inland rivers" Adams vs. Pease 2 Conn. 481, 484.(Emphasis supplied)

In the cases of Cababa vs. Public Service Commission , 16 Cababa vs. Remigio &Carillo and Municipality of Gattaran vs. Elizaga 17 this Court considered as ferryservice such water service that crosses rivers.

However, in Javellana We made clear distinction between a ferry service andcoastwise or interisland service by holding that:

We are not unmindful of the r easons adduced by the Commissionin considering the motorboat service between Calapan and

Batangas as ferry; but from our consideration of the law as itstands, particularly Commonwealth Act No. 146, known as thePublic Service Act and the provisions of the Revised AdministrativeCode regarding municipal ferries and those regarding the

jurisdiction of the Bureau of Customs over documentation,registration, licensing, inspection, etc. of steamboats, motorboats or motor vessels, and the definition of ferry as above quoted we havethe impression and we are inclined to believe that the Legislatureintended ferry to mean the service either by barges or rafts, evenby motor or steam vessels, between the banks of a river or streamto continue the highway which is interrupted by the body of water,or in some cases to connect two points on opposite shores of anarm 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 whichthe oppositors describe thus " the intervening waters betweenCalapan and Batangas are wide and dangerous with big waveswhere small boat barge, or raft are not adapted to the service ," thenit is more reasonable to regard said line or service as more

properly belonging to interisland or coastwise trade . According tothe finding of the Commission itself the distance between Calapanis about 24 nautical miles or about 44.5 kilometers. We do notbelieve that this is the short distance contemplated by theLegislature in referring to ferries whether within the jurisdiction of asingle municipality or ferries between two municipalities or provinces. If we are to grant that water transportation betweenCalapan and Batangas is ferry service, then there would be noreason for not considering the same service between the different

islands of the Philippines, such as Boac Marinduque and Batangas;Roxas City of Capiz and Romblon; Cebu City, Cebu and Ormoc,Leyte; Guian, Samar and Surigao, Surigao; and Dumaguete,Negros Oriental and Oroquieta or Cagayan de Oro.

The Commission makes the distinction between ferry service andmotorship in the coastwise trade, thus:

A ferry service is distinguished from a motorship or motorboatservice engaged in the coastwise trade in that the latter is intendedfor the transportation of passengers and/or freight for hire or compensation between ports or places in t he Philippines withoutdefinite routes or lines of service.

We cannot agree. The definiteness of the route of a boat is not thedeciding factor. A boat of say t he William Lines, Inc. goes fromManila to Davao City via Cebu, Tagbilaran, Dumaguete,Zamboanga, every week. It has a definite route, and yet it may notfor that reason be regarded as engaged in ferry service. Again, avessel of the Compania Maritima makes the trip from Manila toTacloban and back, twice a week. Certainly, it has a definite route.But that service is not f erry service, but rather interisland or

coastwise trade.

We believe that it will be more in consonance with the spirit of thelaw to consider steamboat or motorboat service between thedifferent islands, involving more or less great distance and over more or less turbulent and dangerous waters of the open sea, to becoastwise or inter-island service . Anyway, whether said servicebetween the different islands is regarded as ferry service or coastwise trade service, as long as the water craft used aresteamboats, motorboats or motor vessels, the result will be thesame as far as the Commission is concerned. " 18 (Emphasissupplied)

This Court takes judicial notice of the fact, and as shown by an examination of themap of the Philippines, that Matnog which is on the southern tip of the island of Luzonand within the province of Sorsogon and Allen which is on the northeastern tip of theisland of Samar, is traversed by the San Bernardino Strait which leads towards thePacific Ocean. The parties admit that the distance between Matnog and Allen is about23 kilometers which maybe negotiated by motorboat or vessel in about 1-1/2 hours asclaimed by respondent PANTRANCO to 2 hours according to petitioners. As the SanBernardino Strait which separates Matnog and Allen leads to the ocean it must attimes be choppy and rough so that it will not be safe to navigate the same by smallboats or barges but only by such steamboats or vessels as the MV "Black Double. 19

Considering the environmental circumstances of the case, the conveyance of passengers, trucks and cargo from Matnog to Allen is certainly not a ferry boatservice but a coastwise or interisland shipping service. Under no circumstance can

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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 highwaywhen crossing rivers or even lakes, which are small body of waters - separating theland, however, when as in this case the two terminals, Matnog and Allen areseparated by an open sea it can not be considered as a continuation of the highway.Respondent PANTRANCO should secure a separate CPC for the operation of aninterisland or coastwise shipping service in accordance with the provisions of law. ItsCPC as a bus transportation cannot be merely amended to include this water serviceunder the guise that it is a mere private ferry service.

The contention of private respondent PANTRANCO that its ferry service operation isas a private carrier, not as a common carrier for its exclusive use in t he ferrying of itspassenger buses and cargo trucks is absurd. PANTRANCO does not deny that itcharges its passengers separately from the charges for the bus trips and issuesseparate tickets whenever they board the MV "Black Double" that crosses Matnog toAllen, 20 PANTRANCO cannot pretend that in issuing tickets to its passengers it did soas a private carrier and not as a common carrier. The Court does not see any reasonwhy inspite of its amended franchise to operate a private f erry boat service it cannotaccept walk-in passengers just for the purpose of crossing the sea between Matnogand Allen. Indeed evidence to this effect has been submitted. 21 What is even moredifficult to comprehend is that while in one breath respondent PANTRANCO claimsthat 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 commoncarrier to observe extraordinary diligence and vigilance in the transportation of itspassengers and goods. Nevertheless, considering that the authority granted toPANTRANCO is to operate a private ferry, it can still assert that it cannot be held toaccount as a common carrier towards its passengers and cargo. Such an anomaloussituation that will jeopardize the safety and interests of its passengers and the cargoowners cannot be allowed.

What appears clear from the record is that at the beginning PANTRANCO planned tooperate such ferry boat service between Matnog and Alien as a common carrier so itrequested authority from MARINA to purchase the vessel M/V "Black Double 22 inaccordance with the procedure provided for by law for such application for acertificate of public convenience. 23 However when its request was denied as the saidroutes "are adequately serviced by existing/authorized operators, 24 it neverthelesspurchased the vessel and started operating the same. Obviously to go about thisobstacle to its operation, it then contrived a novel theory that what it proposes tooperate is a private ferryboat service across a small body of water for the exclusiveuse of its buses, tr ucks and passengers as an incident to its franchise to conveypassengers and cargo on land from Pasay City to Tacloban so that it believes it neednot secure a separate certificate of public convenience. 25 Based on thisrepresentation, no less than the Secretary of Justice was led to render an affirmativeopinion on October 20, 1981, 26 followed a few days later by the questioned decisionof public respondent of October 23, 1981. 27 Certainly the Court cannot give itsimprimatur to such a situation.

Thus the Court holds that the water transport service between Matnog and Allen isnot a ferry boat service but a coastwise or interisland shipping service. Before privaterespondent may be issued a franchise or CPC for the operation of the said service asa common carrier, it must comply with the usual requirements of filing an application,

payment of the fees, publication, adducing evidence at a hearing and affording theoppositors the opportunity to be heard, among others, as provided by law. 28

WHEREFORE, the petitions are hereby GRANTED and the Decision of therespondent Board of Transportation (BOT) of October 23, 1981 in BOT Case No. 81-348-C and its Order of July 21, 1982 in the same case denying the motions for reconsideration filed by petitioners are hereby Reversed and set aside and declarednull and void. Respondent PANTRANCO is hereby permanently enjoined fromoperating the ferryboat service and/or coastwise/interisland services between Matnog

and Allen until it shall have secured the appropriate Certificate of Public Convenience(CPC) in accordance with the requirements of the law, with costs against respondentPANTRANCO.

SO ORDERED.

Teehankee, C.J., Narvasa, Cruz and Paras, JJ., concur.

Footnotes

1 Annex "C" to Petition of San Pablo, G.R. No. 61461.

2 Annex "E" to Petition, Supra .

3 98 Phils. 964 (1956).

4 Annex" H "to Petition, Supra.

5 Annex " I " to Petition, Supra.

6 Annex "1" to Comment of PANTRANCO.

7 P. 142, Rollo, Annex " 1 " to Comment of PANTRANCO.

8 Decision in BOT Case No. 81348C Annex "K" Petition, Supra.

9 Annex "O" Petition, San Pablo.

10 Petition, San Pablo, G.R. No. 61461.

11 Pp. 17-18, Rollo, Petition, San Pablo.

12 Pp-20-21,Rollo, Petition, Cardinal Shipping Corp.

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13 Decision, Pp. 85-86.

14 Supra , pp, 969-970.

15 102 Phil. 1013.

16 F 118 Phil. 56.

17 91 Phil. 440.

18 98 Phil pp. 970-972.

19 P. 22, San Pablo, Petition.

20 Annex "N" to the Petition, San Pablo.

21 Annex " M " to Cardinal Shipping Petition.

22 Annex " G ", San Pablo Petition.

23 Annex "F", Supra .

24 Annex "E", Supra .

25 Annex " H ", Supra .

26 P. 142, Rollo, San Pablo Petition, Annex "l" to PantrancoComment.

27 Annex "K", Supra.

28 Olongapo Jeepney Operators Association vs. PSC, 13 SCRA303

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G.R. No. L-65510 March 9, 1987

TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner,vs.HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents.

Cirilo A. Diaz, Jr. for petitioner.

Henry V. Briguera for private respondent.

PARAS, J.:

"'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honoredmaxim that must be applied to the parties in the case at bar. Having entered into an illegalcontract, neither can seek relief from the courts, and each must bear the consequences of hisacts." (Lita Enterprises vs. IAC, 129 SCRA 81.)

The factual background of this case is undisputed. The same is narrated by the respondentcourt in its now assailed decision, as follows:

On May 9, 1975, the defendant bought from the plaintiff a motorcycle withcomplete accessories and a sidecar in the total consideration of P8,000.00as shown by Invoice No. 144 (Exh. "A"). Out of the total purchase price thedefendant gave a downpayment of P1,700.00 with a promise that he wouldpay plaintiff the balance within sixty days. The defendant, however, failed tocomply with his promise and so upon his own request, the period of payingthe balance was extended to one year in monthly installments until January1976 when he stopped paying anymore. The plaintiff made demands but

just the same the defendant failed to comply with the same thus forcing theplaintiff to consult a lawyer and file this action for his damage in the amountof P546.21 for attorney's fees and P100.00 for expenses of litigation. Theplaintiff also claims that as of February 20, 1978, the total account of thedefendant was already P2,731.06 as shown in a statement of account(Exhibit. "B"). This amount includes not only the balance of P1,700.00 butan additional 12% interest per annum on the said balance from January 26,1976 to February 27, 1978; a 2% service charge; and P 546.21representing attorney's fees.

In this particular transaction a chattel mortgage (Exhibit 1) was constitutedas a security for the payment of the balance of the purchase price. It hasbeen the practice of financing firms that whenever there is a balance of thepurchase price the registration papers of the motor vehicle subject of thesale are not given to the buyer. The records of the LTC show that themotorcycle sold to the defendant was first mortgaged to the Teja Marketingby Angel Jaucian though the Teja Marketing and Angel Jaucian are one andthe same, because it was made to appear that way only as the defendanthad no franchise of his own and he attached the unit to the plaintiff's MCHLine. 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 on

February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for themortgage fee and the P82.00 for the registration fee of the motorcycle. Theplaintiff, however failed to register the motorcycle on that year on the groundthat the defendant failed to comply with some requirements such as thepayment of the insurance premiums and the bringing of the motorcycle tothe LTC for stenciling, the plaintiff saying that the defendant was hiding themotorcycle from him. Lastly, the plaintiff explained also that though theownership of the motorcycle was already transferred to the defendant thevehicle was still mortgaged with the consent of the defendant to the RuralBank of Camaligan for the reason that all motorcycle purchased from theplaintiff on credit was rediscounted with the bank.

On his part the defendant did not dispute the sale and the outstandingbalance of P1,700. 00 still payable to the plaintiff. The defendant waspersuaded to buy from the plaintiff the motorcycle with the side car becauseof the condition that the plaintiff would be the one to register every year themotorcycle with the Land Transportation Commission. In 1976, however, theplaintfff failed to register both the chattel mortgage and the motorcycle withthe LTC notwithstanding the fact that the defendant gave him P90.00 for mortgage fee and registration fee and had the motorcycle insured with LaPerla Compana de Seguros (Exhibit "6") as shown also by the Certificate of cover (Exhibit "3"). Because of this failure of the plaintiff to comply with hisobligation to register the motorcycle the defendant suffered damages whenhe failed to claim any insurance indemnity which would amount to no lessthan P15,000.00 for the more than two times that the motorcycle figured inaccidents aside from the loss of the daily income of P15.00 as boundary feebeginning October 1976 when the motorcycle was impounded by the LTCfor not being registered.

The defendant disputed the claim of the plaintiff that he was hiding from theplaintiff the motorcycle resulting in its not being registered. The truth beingthat the motorcycle was being used for transporting passengers and it kepton travelling from one place to another. The motor vehicle sold to him wasmortgaged by the plaintiff with the Rural Bank of Camaligan without hisconsent and knowledge and the defendant was not even given a copy of themortgage deed. The defendant claims that it is not true that the motorcyclewas mortgaged because of re-discounting for rediscounting is only true withRural Banks and the Central Bank. The defendant puts the blame on theplaintiff for not registering the motorcycle with the LTC and for not giving himthe registration papers inspite of demands made. Finally, the evidence of

the defendant shows that because of the filing of this case he was forced toretain the services of a lawyer for a fee on not less than P1,000.00.

xxx xxx xxx

... it also appears and the Court so finds that defendant purchased themotorcycle in question, particularly for the purpose of engaging and usingthe same in the transportation business and for this purpose said trimobileunit was attached to the plaintiffs transportation line who had the franchise,so much so that in the registration certificate, the plaintiff appears to be theowner of the unit. Furthermore, it appears to have been agreed, further between the plaintiff and the defendant, that plaintiff would undertake theyearly registration of the unit in question with the LTC. Thus, for theregistration of the unit for the year 1976, per agreement, the defendant gave

to the plaintiff the amount of P82.00 for its registration, as well as theinsurance coverage of the unit.

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Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Moneywith Damages" against private respondent Pedro N. Nale in the City