Concept of Utility and Public Service Use

1. REPUBLIC ACT No. 2677

AN ACT TO AMEND SECTIONS TWO, THREE, FOUR, TEN, THIRTEEN, AND FOURTEEN OF COMMONWEALTH ACT NUMBERED ONE HUNDRED FORTY-SIX, AS AMENDED, OTHERWISE KNOWN AS THE PUBLIC SERVICE ACT, AND FOR OTHER PURPOSES.

Section 1. Section   two,   three,   four,   ten,   thirteen,   and fourteen   of   Commonwealth   Act   Numbered   One   hundred forty-six, as amended, otherwise known as the Public Service Act, are hereby amended to read as follows:

"Sec. 2. There is created under the Department of Justice a commission   which   shall   be   designated   and   known   as   the Public Service Commission, composed of one Public Service Commissioner and five Associate Commissioners, and which shall   be   vested   with   the   powers   and   duties   hereafter specified.  Whenever   the word  'Commission'   is  used  in   this Act, it shall be held to mean the Public Service Commission, and whenever the word 'Commissioner' is used in this Act it shall  be  held   to  mean  the  Public  Service  Commissioner  or anyone of the Associate Commissioners.

"The Public  Service Commissioner  and the Associate Public Service   Commissioners   shall   be   natural   born   citizens   and residents  of   the Philippines,  not  under   thirty  years  of  age; members of the Bar of the Philippines, with at least five years of   law   practice   or   five   years   of   employment   in   the government service requiring a lawyer's diploma; and shall be appointed   by   the   President   of   the   Philippines,   with   the consent of the Commission on Appointments of the Congress of   the   Philippines: Provided, however,   That   the   present Commissioner   and   the   personnel   of   the   Commission   shall continue in office without the necessity of reappointment.

"The   Commissioners   shall   have   the   rank   and   privilege   of retirement of Judge of the Courts of First Instance."

"Sec. 3. The Commissioner and Associate Commissioners shall hold office until they reach the age of seventy years, or until removed   in   accordance   with   the   procedure   prescribed   in section   one   hundred   and   seventy-three   of   Act   Numbered Twenty-seven   hundred   and   eleven,   known   as   the   Revised Administrative   Code: Provided,however,   That   upon retirement,   any   Commissioner   or   Associate   Commissioner shall be entitled to all retirement benefits and privileges for Judges of the Courts of First Instance or under the retirement law   to   which   he   may   be   entitled   on   the   date   of   his retirement.   In  case  of   the  absence,   for  any   reason,  of   the Public   Service   Commissioner,   the   Associate   Commissioner with seniority of appointment shall act as Commissioner. If on account   of   absence,   illness,   or   incapacity   of   any   of   the Commissioners,   or   whenever   by   reason   of   temporary 

disability   of   any   Commissioner   or   of   a   vacancy   occurring therein, the requisite number of Commissioners necessary to render a decision or issue an order in any case is not present, or in the event of a tie vote among the Commissioners, the Secretary of Justice may designate such number of Judges of the Courts of First Instance, or such number of attorneys of the legal division of the Commission, as may be necessary, to sit   temporarily   as   Commissioners   in   the   Public   Service Commission.

"The Public Service Commission shall sit individually or as a body  en  banc  or   in   two  divisions  of   three  Commissioners each. The Public Service Commissioner shall preside when the Commission   sits   en   banc   and   one   division.   In   the   other division,   the   Associate   Commissioner   with   seniority   of appointment   in   that   division   shall   preside.   Five Commissioners shall constitute a quorum for sessions en banc and   two  Commissioners   shall   constitute  a  quorum  for   the sessions of a division. In the absence of a quorum, the session shall be adjourned until the requisite number is present.

"All the powers herein vested upon the Commission shall be considered   vested   upon   any  of   the  Commissioners,   acting either   individually   or   jointly   as   hereinafter   provided.   The Commissioners  shall  equitably  divide  among themselves  all pending cases and those that may hereafter be submitted to the   Commission,   in   such   manner   and   form   as   they   may determine, and shall proceed to hear and determine the case assigned to each or  to  their  respective divisions,  or   to the Commission en banc as   follows:  uncontested cases,  except those pertaining to the fixing of rates, shall be decided by one Commissioner;   contested   cases  and  all   cases   involving   the fixing of rates shall be decided by the Commission in division and the concurrence of  at   least   two Commissioners   in   the division shall be necessary for the promulgation of a decision or non-interlocutory order in these cases: Provided,however, That  any  motion  for   reconsideration of  a  decision  or  non-interlocutory order of any Commissioner or division shall be heard   directly   by   the   Commission   en   banc   and   the concurrence   of   at   least   four   Commissioners   shall   be necessary for the promulgation of a final decision or order resolving such motion for reconsideration."

"Sec.   4.   The   Public   Service   Commissioner   shall   receive   an annual compensation of thirteen thousand pesos; each of the Associate Commissioners an annual compensation of twelve thousand pesos. The Commissioners shall be assisted by one chief attorney,  one finance and rate regulation officer,  one chief   utilities   regulation   engineer,   one   transportation regulation   chief,   one   secretary,   and   two   public   utilities advisers, who shall receive an annual compensation of seven thousand   two hundred  pesos  each;  five  assistant  chiefs  of division   who   shall   receive   an   annual   compensation   of   six thousand pesos each, and eleven attorneys who shall receive an annual compensation of five thousand four hundred pesos each."

"Sec. 10. The Commission shall have its office in the City of Manila  at  such place as  may be designated,  and may hold hearings on any proceedings at such times and places, within the   Philippines,   as   it   may   provide   by   order   in writing: Provided, That during the months of April and May of each year, at least three Commissioners shall be on duty and the other Commissioners shall be on vacation in such manner that once every two years at least three of them shall be on duty  during  April   and  May: Provided, however,   That   in   the interest of public service, the Secretary of Justice may require any   or   all   of   the   Commissioners   not   on   duty   to   render services   and   perform   their   duties   during   the   vacation months."

"Sec.   13.   (a)   The   Commission   shall   have   jurisdiction, supervision   and   control   over   all   public   services   and   their franchises,   equipment,   and   other   properties,   and   in   the exercise of its authority, it shall have the necessary powers and   the   aid   of   public   force: Provided,   That   public   services owned or operated by government entities or government-owned or controlled corporations shall  be regulated by the Commission   in   the   same   way   as   privately-owned   public services, but certificates of public convenience or certificates of public convenience and necessity shall not be required of such entities or corporations: And provided, further, That it shall  have  no  authority   to   require   steamboats,  motorships and steamship lines, whether privately-owned, or owned or operated   any   government   controlled   corporation   or instrumentality to obtain certificate of public convenience or to prescribe their definite routes or lines of service.

"(b) The term 'public service' includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with   general   or   limited   clientele,   whether permanent,  occasional  or  accidental,  and done for general   business   purposes,   any   common   carrier, railroad,   street   railway,   traction   railway,   sub-way motor   vehicle,   either   for   freight   or   passenger,   or both with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines,   ferries,   and  water   craft,   engaged   in   the transportation   of   passengers   or   freight   or   both, shipyard, marine railway, marine repair shop, wharf or   dock,   ice   plant,   ice-refrigeration   plant,   canal, irrigation system, gas electric light, heat and power, water   supply   and   power,   petroleum,   sewerage system,   wire   or   wireless   communications   system, wire   or   wireless   broadcasting   stations   and   other similar   public   services: Provided, however,   That   a person   engaged   in   agriculture,   not   otherwise   a public service, who owns a motor vehicle and uses it personally   and/or   enters   into   a   special   contract whereby   said  motor   vehicle   is   offered   for  hire  or compensation to a  third  party  or  third  engaged  in agriculture, not itself or themselves a public service, for operation by the latter for a limited time and for 

a   specific   purpose   directly   connected   with   the cultivation of  his  or their   farm, the transportation, processing, and marketing of agricultural products of such   third   party   or   third   parties   shall   not   be considered   as   operating   a   public   service   for   the purposes of this Act.

"(c)   The   word   'person'   includes   every   individual, copartnership,   joint-stock  company or  corporation, whether domestic or foreign, their lessees, trustees or  receivers,  as  well  as  any municipality,  province, city,  government-owned  or  controlled  corporation, or agency of the Government of the Philippines, and whatever other persons or entities that may own or possess or operate public services."

"Sec. 14. The following are exempted from the provisions of the preceding section:

"(a) Warehouses;

"(b) Vehicles drawn by animals and bancas moved by oar or sail, and tugboats and lighters;

"(c) Airships within the Philippines except as regards the  fixing  of   their  maximum   rates   on   freight   and passengers;

"(d)   Radio   companies   except   with   respect   to   the fixing of rates;

"(e)   Public   services   owned   or   operated   by   any instrumentality  of   the  National  Government  or  by any   government-owned   or   controlled   corporation, except with respect to the fixing of rates."

2. RODOLFO B. ALBANO, petitioner, vs.  HON. RAINERIO O. REYES, PHILIPPINE PORTS AUTHORITY, INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., E. RAZON, INC., ANSCOR CONTAINER CORPORATION, and SEALAND SERVICES. LTD.,respondents.G.R. No. 83551 July 11, 1989

FACTS:On April 20, 1987, the PPA Board adopted its Resolution No. 850 directing PPA management to prepare the Invitation to Bid   and   all   relevant   bidding   documents   and   technical requirements   necessary   for   the   public   bidding   of   the development, management and operation of the MICT at the Port   of   Manila,   and   authorizing   the   Board   Chairman, Secretary  Rainerio  O.  Reyes,   to oversee the preparation of the  technical  and the documentation requirements   for   the MICT leasing as well as to implement this project.

Accordingly,   respondent   Secretary  Reyes,   by  DOTC   Special Order 87-346, created a seven (7) man "Special MICT Bidding Committee"   charged   with   evaluating   all   bid   proposals, recommending to the Board the best bid, and preparing the corresponding   contract  between   the  PPA  and   the  winning bidder   or   contractor.   The   Bidding  Committee   consisted  of three   (3)   PPA   representatives,   two   (2)   Department   of Transportation and Communications (DOTC) representatives, one   (1)   Department   of   Trade   and   Industry   (DTI) representative and one (1) private sector representative. The PPA   management   prepared   the   terms   of   reference,   bid documents and draft contract which materials were approved by the PPA Board.

The PPA published the   Invitation to  Bid  several  times  in  a newspaper of general circulation 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."

Seven   (7) consortia of   companies   actually   submitted   bids, which bids were opened on July 17, 1987 at the PPA Head Office.   After   evaluation   of   the   several   bids,   the   Bidding Committee   recommended   the   award   of   the   contract   to develop,   manage   and   operate   the   MICT   to   respondent International   Container   Terminal   Services,   Inc.   (ICTSI)   as having   offered   the   best   Technical   and   Financial   Proposal. Accordingly,   respondent   Secretary   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   MICT   bidding. The first was Special Civil Action 55489 for "Prohibition with Preliminary Injunction" filed with the RTC of Pasig by Basilio H. Alo, an alleged "concerned taxpayer", and, the second was Civil   Case   88-43616   for   "Prohibition   with   Prayer   for Temporary  Restraining  Order   (TRO)"  filed  with   the  RTC  of Manila by C.F. Sharp Co., Inc., a member of the nine (9) firm consortium — "Manila Container Terminals, Inc." which had actively participated in the MICT Bidding. 

Restraining  Orders  were   issued   in  Civil  Case  88-43616  but these were subsequently  lifted by this Court  in Resolutions dated March 17,  1988 (in  G.R.  No.  82218 captioned "Hon. Rainerio O. Reyes etc., et al. vs. Hon. Doroteo N. Caneba, etc., et al.) and April 14, 1988 (in G.R. No. 81947 captioned "Hon. Rainerio O. Reyes etc., et al. vs. Court of Appeals, et al.")

On May 18, 1988, the President of the Philippines approved the   proposed   MICT   Contract,   with   directives   that   "the responsibility   for   planning,   detailed   engineering, construction,  expansion,   rehabilitation and capital  dredging of the port, as well as the determination of how the revenues of the port system shall be allocated for future port works, shall remain with the PPA; and the contractor shall not collect taxes   and   duties   except   that   in   the   case   of   wharfage   or tonnage dues and harbor and berthing fees, payment to the Government may be made through the contractor who shall 

issue provisional receipts and turn over the payments to the Government  which  will   issue   the  official   receipts."   (Annex "I").The   next   day,   the   PPA   and   the   ICTSI   perfected   the   MICT Contract   (Annex  "3")   incorporating  therein  by "clarificatory guidelines"   the   aforementioned   presidential   directives. (Annex "4").

NATURE OF THE CASE:This is a Petition for Prohibition with prayer for Preliminary Injunction   or   Restraining   Order   seeking   to   restrain   the respondents   Philippine   Ports   Authority   (PPA)   and   the Secretary   of   the   Department   of   Transportation   and Communications   Rainerio   O.   Reyes   from   awarding   to   the International   Container   Terminal   Services,   Inc.   (ICTSI)   the contract for the development, management and operation of the Manila International Container Terminal (MICT).

ISSUE:WON   the   MICT,   being   a   public   utility   needs   a   second franchise to operate as such.

HELD:NO .A review of the applicable provisions of law indicates that a franchise specially granted by Congress is not necessary for the   operation   of   the   Manila   International   Container   Port (MICP) by a private entity, a contract entered into by the PPA and such entity constituting substantial compliance with the law.

Thus, while the PPA has been tasked, under E.O. No. 30, with the management and operation of the Manila International Port   Complex   and   to   undertake   the   providing   of   cargo handling and port related services thereat, 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.

3. THE UNITED STATES, plaintiff-appellee, vs.  TAN PIACO, VENTURA ESTUYA, PEDRO HOMERES, MAXIMINO GALSA and EMILIO LEOPANDO, defendants. TAN PIACO, appellant.G.R. No. L-15122 March 10, 1920

FACTS:The appellant rented two automobile trucks and was using them upon  the  highways  of   the  Province  of   Leyte   for   the purpose  of   carrying   some  passengers   and   freight;   that  he carried  passengers   and   freight  under   a   special   contract   in each   case;   that   he   had   not   held   himself   out   to   carry   all passengers  and  all   freight   for  all  persons  who  might  offer passengers and freight.

The Attorney-General, in a carefully prepared brief, says: "The question is whether the appellant, under the above facts, was a public   utility under   the   foregoing   definitions,"   and   was therefore subject to the control and regulation of the Public Utility   Commission.   "We   have   not   found   anything   in   the evidence showing that the appellant operated the trucks in question for public use. These trucks, so far as indicated by the   evidence   and   as   far   as   the   appellant   is concerned, furnished   service   under   special   agreements   to carry particular persons and property. . . . For all that we can deduce from the evidence, these passengers, or the owners of the freight, may have controlled the whole vehicles 'both as to content, direction, and time of use,' which facts, under all the circumstances of the case, would, in our opinion, take away   the  defendant's  business   from  the  provisions  of   the Public Utility Act."

In support of the conclusion of the Attorney-General, he cites the case of Terminal Taxicab Co. vs. Kutz (241 U. S.. 252). In that   case   the   Terminal   Taxicab   Co.   furnished   automobiles from  its  central  garage on special  orders and did not  hold itself out to accommodate any and all persons. The plaintiff reserve   to   itself   the   right   to   refuse   service.   The   Supreme Court   of   the   United   States,   speaking   through   Mr.   Justice Holmes,   said:   "The   bargains   made   by   the   plaintiff   are individual,   and   however   much   they   may   tend   towards uniformity in price, probably have not the mechanical fixity of charges that attend the use of taxicabs from the stations to the hotels. The court is of the opinion that that part of the business is not to be regarded as a public utility. It is true that all  business, and for the matter of that,  every  life  in all   its details, has a public aspect, some bearing upon the welfare of the  country   in  which   it   is  passed."  The  court  held   that  by virtue of the fact that said company did not hold itself out to serve any and all persons, it was not a public utility and was not subject to the jurisdiction of the public utility commission.

NATURE OF THE CASE:Said defendants were charged with a violation of the Public Utility Law (Act No. 2307 as amended by Acts Nos. 2362 and 2694),   in   that   they  were  operating a  public  utility  without permission from the Public Utility Commissioner.

Upon the complain presented each of said defendants were arrested and brought to trial. After hearing the evidence the Honorable Cayetano Lukban, judge, found that the evidence was   insufficient   to   support   the   charges   against   Ventura Estuya,   Pedro   Homeres,   Maximino   Galsa   and   Emilio Leopando,   and   absolved   them   from   all   liability   under   the complaint  and discharged them from all   liability  under   the complaint and discharged them from the custody of the law. The lower court found the defendant Tan Piaco guilty of the crime charged in the complaint and sentence him to pay a fine of P100, and, in case of insolvency, to suffer subsidiary imprisonment, and to pay one-fifth part of the costs.  From that sentence Tan Piaco appealed to this court.

ISSUE:

WON   the   appellant   was   operating   a   public   utility   hence subject to the jurisdiction of Public Utility Commission

HELD:NO. "Public use" means the same as "use by the public." The essential feature of the public use is that it is not confined to privilege individuals, but is open to the indefinite public. It is this  indefinite or unrestricted quality that gives  it  its public character. In determining whether a use is public, we must look not only the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional  with   the  owners,   or   the  public   benefit   is  merely incidental, it is not a public use, authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law compels the power to give to the general public. It is not enough that the general prosperity   of   the   public   is   promoted.   Public   use   is   not synonymous with public interest. The true criterion by which to judge of the character of the use is whether the public may enjoy it by rightor only by permission.

4. REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY BOARD, petitioner, vs.MANILA ELECTRIC COMPANY, respondent.[G.R. No. 141369. April 9, 2003]

FACTS:  MERALCO filed with the Energy Regulatory Board (ERB) an application   for   revised   rates,   with   an   average   increase of P0.21 per kwh in its distribution charge. 

the   ERB   granted   a provisional increase of P0.184   per kwh subject to the condition that   in   the   event   the   ERB determines that MERALCO is entitled to a lesser increase in rates,   all   excess   amounts   collected   by   MERALCO   shall   be refunded   to   its   customers   or   credited   in   their   favor.   The Commission on Audit (COA) conducted an examination of the books of accounts and records of MERALCO and thereafter recommended, among others, that: (1) income taxes paid by MERALCO   should   not   be   included   as   part   of   MERALCOs operating   expenses   and   (2)   the   net   average   investment method  or   the  number  of  months   use  method   should  be applied   in   determining   the   proportionate   value   of   the properties used by MERALCO during the test year.

ERB adopted the recommendations of the COA and authorized MERALCO to adopt a rate adjustment of P0.017 per kilowatthour (kwh) for its billing cycles beginning 1994. The   ERB   further   directed   MERALCO   to credit the excess average amount of P0.167 per kwh to its customers starting with MERALCOs billing cycles beginning February 1994. 

The said ruling of the ERB was affirmed by this Court in its decision dated November 15, 2002.

In   its   Motion   for   Reconsideration,   respondent   MERALCO contends that: (1) the deduction of income tax from revenues allowed for rate determination of public utilities is part of its constitutional   right   to   property;   (2)   it   correctly   used   the average   investment   method   or   the   simple   average   in computing   the  value  of   its  properties  entitled   to  a   return instead of the net average investment method or the number of   months   use   method;   and   (3)   the   decision   of   the   ERB ordering   the   refund   of P0.167   per   kwh   to   its   customers should not be given retroactive effect.

The Republic of the Philippines through the ERB, now Energy Regulatory Commission (ERC),   represented by the Office of the Solicitor General,  filed  its Comment on March 7,  2003. Surprisingly,  in  its Comment, the ERC proffered a divergent view from the Office of the Solicitor General. The ERC submits that   income   taxes   are   not   operating   expenses   but   are reasonable   costs   that   may   be   recoverable   from   the consuming public. While the ERC admits that there is still no categorical   determination   on   whether   income   tax   should indeed   be   deducted   from   revenues   of   a   public   utility,   it agrees with MERALCO that  to  disallow public  utilities from recovering its income tax payments will effectively lower the return on rate base enjoyed by a public utility to 8%. The ERC, however, agrees with this Courts ruling that the use of the net  average  investment  method or   the  number  of  months use method is not unreasonable.

NATURE OF THE CASE:For   resolution   is   the   Motion   for   Reconsideration   filed   by respondent   Manila   Electric   Company   (MERALCO)   on December   5,   2002   from   the   decision   of   this   Court   dated November 15, 2002 reducing MERALCOs rate adjustment in the amount of P0.017 per kilowatthour   (kwh) for   its  billing cycles   beginning   1994   and   further   directing   MERALCO   to credit   the excess average amount of P0.167 per kwh to  its customers   starting  with  MERALCOs  billing   cycles  beginning February 1994.

ISSUE:WON the jurisprudence cited by MERALCO is applicable in our jurisdiction

HELD:MERALCO   argues   that   deduction   of   all   kinds   of   taxes, including   income  tax,   from  the  gross   revenues  of  a  public utility   is   firmly   entrenched   in   American   jurisprudence.   It contends that the Public Service Act (Commonwealth Act No. 146)   was   patterned   after   Act   2306   of   the   Philippine Commission,  which,   in   turn,  was  borrowed  from American state public utility laws such as the New Jersey Public Utility Act. Hence, it maintains that American jurisprudence on the inclusion  of   income   taxes   as   a   lawful   charge   to   operating expenses should be controlling. It cites the rule on statutory construction that a statute adopted from a foreign country will be presumed to be adopted with the construction placed upon it by the courts of that country before its adoption.

We are not persuaded. American decisions and authorities are not per se controlling in this jurisdiction. At best, they are persuasive for no court holds a patent on correct decisions. Our   laws  must  be  construed   in  accordance  with the intention of our own lawmakers and such intent may be deduced from the language of each law and the context of other local legislation related thereto. More importantly, they must be construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be stressed that our public interest is distinct and different from others.

5. THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. WILLIAM H. QUASHA, defendant-appellant.G.R. No. L-6055 June 12, 1953

FACTS:The essential facts are not in dispute. On November 4,1946, the   Pacific   Airways   Corporation   registered   its   articles   of incorporation with the Securities and Exchanged Commission. The article were prepared and the registration was effected by   the   accused,   who   was   in   fact   the   organizer   of   the corporation. The article stated that the primary purpose of the corporation was to carry on the business of a common carrier   by   air,   land   or   water;   that   its   capital   stock   was P1,000,000,   represented   by   9,000   preferred   and   100,000 common shares, each preferred share being of the par value of p100 and entitled to 1/3 vote and each common share, of the par value of P1 and entitled to one vote; that the amount capital   stock   actually   subscribed   was   P200,000,   and   the names   of   the   subscribers   were   Arsenio   Baylon,   Eruin   E. Shannahan,  Albert  W.  Onstott,   James  O'Bannon,  Denzel   J. Cavin, and William H. Quasha, the first being a Filipino and the other five all  Americans; that Baylon's subscription was for 1,145 preferred shares, of the total value of P114,500, and for 6,500 common shares, of the total par value of P6,500, while   the   aggregate   subscriptions   of   the   American subscribers were for 200 preferred shares,  of  the total  par value of P20,000, and 59,000 common shares, of the total par value   of   P59,000;   and   that   Baylon   and   the   American subscribers had already paid 25 per cent of their respective subscriptions.   Ostensibly   the   owner   of,   or   subscriber   to, 60.005   per   cent   of   the   subscribed   capital   stock   of   the corporation, Baylon nevertheless did not have the controlling vote because of the difference in voting power between the preferred   shares   and   the   common   shares.   Still,   with   the capital structure as it was, the article of incorporation were accepted   for   registration  and  a  certificate  of   incorporation was issued by the Securities and Exchange Commission.

NATURE OF THE CASE:William   H.   Quasha,   a   member   of   the   Philippine   bar,   was charged   in   the  Court   of   First   Instance  of  Manila  with   the crime of falsification of a public and commercial document in that,   having   been   entrusted   with   the   preparation   and registration   of   the   article   of   incorporation   of   the   Pacific Airways  Corporation,  a  domestic  corporation  organized   for the purpose of engaging in business as a common carrier, he 

caused it to appear in said article of incorporation that one Arsenio Baylon, a Filipino citizen, had subscribed to and was the owner of 60.005 per cent of the subscribed capital stock of the corporation when in reality, as the accused well knew, such was not the case, the truth being that the owner of the portion of the capital stock subscribed to by Baylon and the money paid thereon were American citizen whose name did not   appear   in   the   article   of   incorporation,   and   that   the purpose for making this false statement was to circumvent the   constitutional   mandate   that   no   corporation   shall   be authorize   to   operate   as   a   public   utility   in   the   Philippines unless 60 per cent of its capital stock is owned by Filipinos.

Found   guilty   after   trial   and   sentenced   to   a   term   of imprisonment and a fine, the accused has appealed to this Court.

ISSUE:WON 60-40 requirement was needed to organize corporation in question.

HELD:NO.   It   is   urged,   however,   that   the   formation   of   the corporation with 60 per cent of  its subscribed capital stock appearing   in   the   name   of   Baylon   was   an   indispensable preparatory   step   to   the   subversion   of   the   constitutional prohibition and the laws implementing the policy expressed therein.   This   view   is   not   correct.   For   a   corporation   to   be entitled to operate a public utility it is not necessary that it be organized with 60 per cent of its capital owned by Filipinos from   the   start.   A   corporation   formed   with   capital   that   is entirely alien may subsequently change the nationality of its capital   through   transfer   of   shares   to   Filipino   citizens. conversely,   a   corporation   originally   formed   with   Filipino capital may subsequently change the national status of said capital through transfer of shares to foreigners. What need is there then for a corporation that intends to operate a public utility to have, at the time of its formation, 60 per cent of its capital owned by Filipinos alone? That condition may anytime be   attained   thru   the   necessary   transfer   of   stocks.   The moment for determining whether a corporation is entitled to operate as a public utility is when it applies for a franchise, certificate,   or   any   other   form   of   authorization   for   that purpose.  And   that   can  be  done  after   the   corporation  has already come into being and not while it is still being formed. And at that moment, the corporation must show that it has complied not only with the requirement of the Constitution as   to   the   nationality   of   its   capital,   but   also   with   the requirements   of   the   Civil   Aviation   Law   if   it   is   a   common carrier   by   air,   the   Revised   Administrative   Code   if   it   is   a common carrier by water, and the Public Service Law if it is a common carrier by land or other kind of public service.

6. PANGASINAN TRANSPORTATION CO., INC., petitioner, vs. THE PUBLIC SERVICE COMMISSION, respondent.

G.R. No. 47065 June 26, 1940

FACTS:The petitioner has been engaged for the past twenty years in the  business  of   transporting  passengers   in   the  Province  of Pangasinan   and   Tarlac   and,   to   a   certain   extent,   in   the Province of Nueva Ecija and Zambales,  by means of  motor vehicles commonly known as TPU buses, in accordance with the   terms   and   conditions   of   the   certificates   of   public convenience  issued  in  its   favor by the former Public  Utility Commission in cases Nos. 24948, 30973, 36830, 32014 and 53090.   On   August   26,   1939,   the   petitioner   filed   with   the Public Service Commission an application for authorization to operate   ten   additional   new   Brockway   trucks   (case   No. 56641), on the ground that they were needed to comply with the terms and conditions of its existing certificates and as a result of the application of the Eight Hour Labor Law.

Not   being   agreeable   to   the   two   new   conditions   thus incorporated in its existing certificates, the petitioner filed on October   9,   1939   a   motion   for   reconsideration   which   was denied by the Public Service Commission on November 14, 1939.   Whereupon,   on   November   20,   1939,   the   present petition   for   a  writ   of certiorari was   instituted   in   this   court praying that an order be issued directing the secretary of the Public Service Commission to certify forthwith to this court the records of all  proceedings  in case No.  56641;  that  this court, after hearing, render a decision declaring section 1 of Commonwealth Act No. 454 unconstitutional and void; that, if   this   court   should   be   of   the   opinion   that   section   1   of Commonwealth Act No. 454 is constitutional,  a decision be rendered   declaring   that   the   provisions   thereof   are   not applicable to valid and subsisting certificates issued prior to June 8, 1939.

HELD:Under the first paragraph of the aforequoted section 15 of Act   No.   146,   as   amended,   no   public   service   can   operate without a certificate of public convenience or certificate of convenience   and   public   necessity   to   the   effect   that   the operation of said service and the authorization to do business will "public interests in a proper and suitable manner." Under the second paragraph, one of the conditions which the Public Service   Commission   may   prescribed   the   issuance   of   the certificate  provided   for   in   the  first   paragraph   is   that   "the service   can   be   acquired   by   the   Commonwealth   of   the Philippines or by any instrumental thereof upon payment of the   cost   price   of   its   useful   equipment,   less   reasonable depreciation," a condition which is virtually a restatement of the principle already embodied in the Constitution, section 6 of   Article   XII,   which   provides   that   "the   State   may,   in   the interest   of   national   welfare   and   defense,   establish   and operate   industries   and   means   of   transportation   and communication,   and,  upon  payment  of   just   compensation, transfer   to   public   ownership   utilities   and   other   private enterprises   to   be   operated   by   the   Government.   "Another condition which the Commission may prescribed, and which is assailed by the petitioner, is that the certificate "shall be valid only for a definite period of time." As there is a relation 

between the first and second paragraphs of said section 15, the two provisions must be read and  interpreted together. That is to say, in issuing a certificate, the Commission must necessarily   be   satisfied   that   the   operation   of   the   service under   said   certificate during   a   definite   period   fixed therein "will   promote   the  public   interests   in   a  proper   and suitable  manner."  Under   section  16   (a)  of  Commonwealth Act.   No.   146   which   is   a   complement   of   section   15,   the Commission   is   empowered   to   issue   certificates   of   public convenience  whenever   it   "finds   that   the  operation  of   the public service proposed and the authorization to do business will  promote   the  public   interests   in  a  proper  and   suitable manner."   Inasmuch   as   the   period   to   be   fixed   by   the Commission   under   section   15   is   inseparable   from   the certificate   itself,   said  period  cannot  be  disregarded  by   the Commission   in   determining   the   question   whether   the issuance of the certificate will promote the public interests in a proper and suitable manner. Conversely, in determining "a definite period of time," the Commission will  be guided by "public interests," the only limitation to its power being that said   period   shall   not   exceed   fifty   years   (sec.   16   (a), Commonwealth Act No.  146;  Constitution,  Art.  XIII,  sec.  8.) We   have   already   ruled   that   "public   interest"   furnishes   a sufficient standard. (People vs. Fernandez and Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs. Rosenthal and Osmeña, G. R. Nos. 46076 and 46077, promulgated June 12,   1939,   citing   New   York   Central   Securities Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77 Law. ed. 138, 145, 146; Schenchter Poultry Corporation vs. I.S., 295, 540, 79 Law. ed. 1570, 1585; Ferrazzini vs. Gsell,  34 Phil.,  697, 711-712.)

The   petitioner   is   mistaken   in   the   suggestion   that,   simply because its existing certificates had been granted before June 8,   1939,   the   date   when   Commonwealth   Act   No.   454, amendatory  of   section 15  of  Commonwealth  Act  No.  146, was approved, it must be deemed to have the right of holding them in perpetuity. Section 74 of the Philippine Bill provided that "no franchise, privilege, or concession shall be granted to any corporation except under the conditions that it shall be subject to amendment, alteration, or repeal by the Congress of the United States." The Jones Law, incorporating a similar mandate, provided, in section 28, that "no franchise or right shall be granted to any individual, firm, or corporation except under the conditions that it shall be subject to amendment, alteration, or repeal by the Congress of the United States." Lastly, the Constitution of the Philippines provided, in section 8 of Article XIII, that "no franchise or right shall be granted to any   individual,   firm,   or   corporation,   except   under   the condition that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so requires."   The   National   Assembly,   by   virtue   of   the Constitution,   logically   succeeded   to   the   Congress   of   the United  States   in   the  power   to  amend,  alter  or   repeal  any franchise or right granted prior to or after the approval of the Constitution;  and when Commonwealth  Acts  Nos.  146  and 454   were   enacted,   the   National   Assembly,   to   the   extent therein provided, has declared its will and purpose to amend or alter existing certificates of public convenience.

7. Republic v. EXTELCOMG.R. No. 147096 January 15, 2002

FACTS:On   December   29,   1992,   International   Communications Corporation   (now   Bayan   Telecommunications,   Inc.   or Bayantel)   filed   an   application   with   the   National Telecommunications  Commission   (NTC)   for   a  Certificate  of Public  Convenience  or  Necessity   (CPCN)   to   install,   operate and   maintain   a   digital   Cellular   Mobile   Telephone System/Service (CMTS) with prayer for a Provisional Authority (PA). Prior to the issuance of any notice of hearing by the NTC with respect to Bayantel's original application, Bayantel filed an   urgent ex-parte motion   to   admit   an   amended application.The   notice   of   hearing   issued   by   the   NTC   with respect   to   this   amended  application  was  published   in   the Manila  Chronicle.  Copies  of   the  application  as  well   as   the notice   of   hearing   were   mailed   to   all   affected   parties. Subsequently,   hearings   were   conducted   on   the   amended application.   But   before   Bayantel   could   complete   the presentation   of   its   evidence,   the   NTC   issued   an   Order granting   Provisional   Authorities   in   favor   of   ISLACOM   and GMCR, Inc., which resulted in the closing out of all available frequencies for the service being applied for by Bayantel.

Respondent Express Telecommunication Co., Inc. (Extelcom) filed  an  Opposition  praying   for   the  dismissal   of  Bayantel's application.   On   May   3,   2000,   the   NTC   issued   an   Order granting   in   favor   of   Bayantel   a   provisional   authority   to operate   CMTS   service.   Extelcom   filed   with   the   Court   of Appeals a petition for certiorari and prohibition, seeking the annulment of the Order reviving the application of Bayantel, the   Order   granting   Bayantel   a   provisional   authority   to construct, install, operate and maintain a nationwide CMTS. The CA granted such petition and set aside the PA granted to Bayantel.

ISSUE:Whether the CA erred in granting the petition of Extelcom.

HELD:YES.   Extelcom   violated   the   rule   on   exhaustion   of administrative remedies when it went directly to the Court of Appeals on a petition for certiorari and prohibition from the Order of the NTC dated May 3,  2000,  without first  filing a motion for reconsideration. It is well-settled that the filing of a motion for reconsideration is a prerequisite to the filing of a special civil action for certiorari.

The general rule is that, in order to give the lower court the opportunity to correct itself, a motion for reconsideration is a prerequisite  to certiorari.   It  also basic  that  petitioner  must exhaust   all   other   available   remedies   before   resorting   to certiorari. This rule, however, is subject to certain exceptions such as any of the following: (1) the issues raised are purely legal   in  nature,   (2)  public   interest   is   involved,   (3)  extreme 

urgency   is   obvious   or   (4)   special   circumstances   warrant immediate or more direct action.

This case does not fall under any of the recognized exceptions to this rule. Although the Order of the NTC dated May 3, 2000 granting provisional  authority   to Bayantel  was  immediately executory,   it   did   not   preclude   the   filing   of   a   motion   for reconsideration.   Under   the   NTC   Rules,   a   party   adversely affected by a decision, order, ruling or resolution may within fifteen (15) days file a motion for reconsideration. That the Order of the NTC became  immediately  executory does not mean that the remedy of filing a motion for reconsideration is foreclosed to the petitioner.

Furthermore,   Extelcom   does   not   enjoy   the   grant   of   any vested interest on the right to render a public service. The Constitution is quite emphatic that the operation of a public utility shall not be exclusive. Thus:

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted to citizens of the Philippines or to corporations 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 in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteraion, or repeal by the Congress when the common good so requires. Even in the provisional authority granted to Extelcom, it is expressly stated that such authority is  not  exclusive.  Thus,   the  Court  of  Appeals  erred when  it gave   due   course   to   Extelcom's   petition   and   ruled   that   it constitutes   an   exception   to   the   rule   on   exhaustion   of administrative remedies.

Also, the Court of Appeals erred in annulling the Order of the NTC   dated   May   3,   2000,   granting   Bayantel   a   provisional authority to install, operate and maintain CMTS. The general rule is that purely administrative and discretionary functions may not be interfered with by the courts. In the case at bar, we find no reason to disturb the factual findings of the NTC which formed the basis for awarding the provisional authority to Bayantel. As found by the NTC, Bayantel has been granted several   provisional   and   permanent   authorities   before   to operate various telecommunications services.51 Indeed, it was established that Bayantel  was the first  company to comply with its obligation to install local exchange lines pursuant to E.O.   109   and   R.A.   7925.   In   recognition   of   the   same,   the provisional authority awarded in favor of Bayantel to operate Local Exchange Services in Quezon City, Malabon, Valenzuela and the entire Bicol region was made permanent and a CPCN for   the   said   service   was   granted   in   its   favor.   Prima   facie evidence   was   likewise   found   showing   Bayantel's   legal, financial  and technical  capacity   to  undertake  the proposed cellular mobile telephone service.

8. Pilipino Telephone v NTCG.R. No. 138295

August 28, 2003

FACTS:The National Telecommunications Commission (NTC)  issued Pilipino   Telephone   Corporation   (PILTEL)   a   Provisional Authority   (PA)   to   install,   operate   and   maintain   telephone exchanges and public calling offices.  While PILTEL’s PA was still   valid  and subsisting,   the   International  Communications Corporation (ICC) applied with the NTC for a PA to construct, operate and maintain local exchange services in some of the areas covered by PILTEL’s PA.  PILTEL filed  an  Opposition to ICC’s PA application. NTC issued an Order grating ICC a PA to establish local exchange services in areas that included those covered by PILTEL’s PA.  PILTEL filed a petition for certiorari with prayer for the issuance of a temporary restraining order or writ  of  preliminary  injunction with the CA to nullify  the NTC Order. The CA denied the petition on the grounds that: (1) PILTEL has not shown that they have no plain, speedy, and adequate remedy; (2) PILTEL failed to file a MR of the NTC Order; (3) PILTEL failed to show grave abuse of discretion on the part of the NTC. Hence, this petition.

ISSUE:Whether NTC committed grave abuse of discretion.

HELD:NO. PILTEL contends that the NTC violated Section 23 of NTC Memorandum Circular No. 11-9-93, otherwise known as the "Implementing   Guidelines   on   the   Provisions   of   EO   109," which states:

Section 23. No other company or entity shall be authorized to provide   local   exchange   service   in   areas   where   the LECs comply with the relevant provisions of NTC MC No. 10-17-90 and NTC MC No. 10-16-90 and that the local exchange service area is not underserved. 

Section 23 of  EO 109 does not  categorically  state that  the issuance   of   a   PA   is   exclusive   to   any   telecommunications company.   Neither   Congress   nor   the   NTC   can   grant   an exclusive   "franchise,   certificate,   of   any   other   form   of authorization"   to   operate   a   public   utility.   In Republic v. Express Telecommunications Co.,  the  Court  held   that  "the Constitution is quite emphatic that the operation of a public utility  shall  not  be exclusive."  Section 11,  Article  XII  of   the Constitution provides:

Sec.   11.   No   franchise,   certificate,   or   any   other   form   of authorization   for   the  operation  of   a  public   utility   shall   be granted 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 in character or   for   a   longer  period   than  fifty years.  Neither  shall  any such  franchise or   right  be granted except   under   the   condition   that   it   shall   be   subject   to amendment, alteration, or repeal by the Congress when the common good so requires. xxx 

The   Court   ruled   that   the   "Constitution   mandates   that   a franchise   cannot   be   exclusive   in   nature."   Even   PILTEL’s franchise,   Republic   Act   No.   6030   ("RA   6030"),   expressly declares   that  PILTEL’s   right   to  provide   telecommunications services is not exclusive. 

Furthermore,   "free   competition   in   the   industry   may   also provide the answer to a much-desired  improvement  in the quality and delivery of this type of public utility, to improved technology,   fast   and   handy   mobil[e]   service,   and   reduced user dissatisfaction." 

9. NAPOCOR v. CAG.R. No. 112702 September 26, 1997

FACTS:The Cagayan Electric  and power  Light  Company (CEPALCO) was  enfranchised  by  Republic  Act  No.  3247   "to   construct, maintain   and   operate   an   electric   light,   heat   and   power system   for   the   purpose   of   generating   and/or   distributing electric  light, heat and/or power for sale within the City of Cagayan de Oro and its suburbs" for fifty (50) years. Republic Act No. 3570, approved on June 21, 1963, expanded the area of coverage of the franchise to include the municipalities of Tagoloan and Opol, both in the Province of Misamis Oriental. Presidential Decree No. 243, issued on July 12, 1973, created a "body corporate and politic" to be known as the Philippine Veterans   Investment   Development   Corporation   (PHIVIDEC) vested with authority  to  engage  in  "commercial,   industrial, mining,   agricultural   and   other   enterprises"   among   other powers and "to allow the full and continued employment of the productive capabilities of and investment of the veterans and   retirees   of   the   Armed   Forces   of   the   Philippines."   On August   13,   1974,   Presidential   Decree   No.   538   was promulgated   to   create   the   PHIVIDEC   Industrial   Authority (PIA), a subsidiary of PHIVIDEC, to carry out the government policy "to encourage, promote and sustain the economic and social  growth of the country and that the establishment of professionalized   management   of   well-planned   industrial areas shall   further this objective." Under Sec. 3 of P.D.  No. 538,  the first area for development shall  be  located  in the municipalities  of   Tagoloan  and  Villanueva.  This   area   forms part of the PHIVIDEC Industrial Estate Misamis Oriental (PIE-MO).

According to PIA, the CEPALCO proved no match to the power demands of the industries in PIE-MO such that most of these companies   operating   therein   closed   shop.   Impelled   by   a "desire   to   provide   cheap   power   costs   to   power-intensive industries operating within the Estate," PIA applied with the 

National   Power   Corporation   (NPC)   for   direct   power connection which the latter in due course approved. One of the  companies  which  entered   into  an  agreement  with   the NPC   for   a   direct   sale   and   supply   of   power   was   the Ferrochrome   Phils.,   Inc.   (FPI).Contending   that   the   said agreement violated its right as the authorized operator of an electric light and power system in the area and the national electrification policy, CEPALCO filed a Civil Case, a petition for prohibition,  mandamus  and   injunction  before   the  Regional Trial Court of Quezon City against the NPC. Notwithstanding NPC's   claim   that   it   was   authorized   by   its   Charter   to   sell electric power "in bulk" to  industrial  enterprises,  the lower court rendered a decision, restraining the NPC from supplying power directly to FPI upon the ground that such direct sale, supply and delivery of electric power by the NPC to FPI was violative   of the   rights   of   CEPALCO   under   its   legislative franchise. Hence,   the lower   court   ordered   the   NPC   to "permanently desist" from effecting direct supply of power to the  FPI   and   "from  entering   into  and/or   implementing  any agreement or arrangement for such direct power connection, unless coursed through the power line" of CEPALCO. The SC affirmed,   and   FPI   persisted   with   its   application.   FPI   also contended   that  CEPALCO charged  higher   than   the  allowed rates   mandated   by   the   NPC.   NPC   ruled   for   FPI   to   the detriment   of   CEPALCO.   NPC   began   to   provide   direct power connection to FPI.  Petitioner PIA asserts  that   it  may receive power directly   from the NPC because  it   is  a  public utility. It avers that P.D. No. 538, as amended, empowers PIA "as and to be a public utility to operate and serve the power needs within PIE-MO.

ISSUE: Whether the NPC may supply power directly to PIA in the PIE-MO area where CEPALCO has a franchise. 

HELD: A "public  utility"   is  a business or service engaged  in regularly   supplying   the   public   with   some   commodity   or service of public consequence such as electricity, gas, water, transportation,   telephone   or   telegraph   service.   The   term implies public use and service. Petitioner PIA is a subsidiary of the PHIVIDEC with "governmental and proprietary functions Clearly then, the PIA is authorized to render indirect service to the public by its administration of the PHIVIDEC industrial areas  like the PIE-MO and may, therefore, be considered a public utility. As it is expressly authorized by law to perform the   functions   of   a   public   utility,   a   certificate   of   public convenience,  as  suggested  by   the  Court  of  Appeals,   is  not necessary for it to avail of a direct power connection from the NPC. However, such authority to be a public utility may not be exercised in such a manner as to prejudice the rights of existing   franchisees.   The   determination   of   which   of   two public  utilities has the right  to supply electric  power to an 

area which is within the coverage of both is certainly not a rate-fixing   function   which   should   remain   with   the   ERB.   It deals   with   the   regulation   of   the   distribution   of   energy resources   which,   under   Executive   Order   No.   172,   was expressly a function of ERB. However, with the enactment of Republic Act No. 7638, the Department of Energy took over such function. Hence, it is this Department which shall then determine whether CEPALCO or PIA should supply power to PIE-MO. Clearly, petitioner NPC's assertion that its "authority to   entertain   and   hear   direct   connection   applications   is   a necessary   incident   of   its   express   authority   to   sell   electric power in bulk" is now baseless.

10. Radio Communications v. NTCG.R. No. L-68729 May 29, 1987

Facts:RCPI  operated  a   radio   communications   system   since  1957 under legislative franchise granted by Republic Act No. 2036 (1957). The petitioner established a radio telegraph service in Sorsogon, Sorsogon (1968), in San Jose, Mindoro (1971), and Catarman,   Samar   (1983).   Kayumanggi   Radio,   on   the   other hand,   was   given   the   rights   by   the   NTC   to   operate   radio networks in the same areas.

RCPI   filed   a   complaint   in   the  NTC   and   sought   to   prohibit Kayumanggi Radio to operate in the same areas, alleging that the petitioner was operating in Catarman, Samar and in San Jose, Mindoro without a certificate of public covenience and necessity. The petitioner, on the other hand, counter-alleged that   its   telephone   services   in   the   places   subject   of   the complaint are covered by the legislative franchise recognized by both the public respondent and its predecessor, the Public Service Commission.  The NTC ruled against the RTC’s favor and   commanded   RCPI   to   desist   in   the   operation   of   radio telegraphs in the three areas. 

RTC filed MR in 1984 but was denied.  In the SC, Petitioner alleged that the Public Service Law had sections that was still in effect even if the Public Service Commission was abolished and the NTC was established.

The  provisions   of   the   Public   Service   Law  pertinent   to   the petitioner's allegation are as follows:

Section   13.   (a)   the   Commission   shall   have   jurisdiction, supervision,   and   control   over   all   public   services   and   their franchises,   equipment   and   other   properties,   and   in   the exercise of its authority, it shall have the necessary powers and the aid of public force: ...

Section 14. The following are exempted from the provisions of the preceding section:(d) Radio companies except with respect to the fixing of rates;

Section 15. With the exception of those enumerated in the preceding   section,   no   public   service   shall   operate   in   the Philippines   without   possessing   a   valid   and   subsisting certificate   from   the   Public   Service   Commission,   known   as "certificate   of   public   convenience,"   or   "certificate   of convenience and public necessity," as the case may be, to the effect that the operation of said service and the authorization to do business will promote the public interests in a proper and suitable manner. ...

Issue:   Whether   petitioner   RCPI,   a   grantee   of   a   legislative franchise to operate a radio company, is required to secure a certificate of public convenience and necessity before it can validly  operate   its   radio   stations   including   radio   telephone services in the aforementioned areas.

Held:   Yes.   Pursuant   to   Presidential   Decree   No.   1   dated September 23,1972, reorganizing the executive branch of the National   Government,   the   Public   Service   Commission   was abolished   and   its   functions   were   transferred   to   three specialized   regulatory  boards.  The   functions   so   transferred were still  subject to the limitations provided in sections 14 and   15   of   the   Public   Service   Law,   as   amended.   With   the enactment   of   Executive   Order   No.   546   on   July   23,   1979 implementing P.D. No.1, the Board of Communications and the Telecommunications Control Bureau were abolished and their   functions   were   transferred   to   the   National Telecommunications Commission the exemption enjoyed by radio companies  from the  jurisdiction of  the Public  Service Commission   and   the   Board   of   Communications   no   longer exists because of the changes effected by the Reorganization Law   and   implementing   executive   orders.   The   petitioner's claim that its franchise cannot be affected by Executive Order No.  546 on  the  ground that   it  has   long been  in  operation since 1957 cannot be sustained.

A franchise started out as a "royal privilege or (a) branch of the King's prerogative, subsisting in the hands of a subject." This  definition was given by  Finch,  adopted by  Blackstone, and accepted  by  every  authority  since.  Today,  a   franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to regulation  by   the   state   itself  by  virtue  of   its  police  power through its administrative agencies. The approval of the then Secretary   of   Public   Works   and   Communications   was   a precondition before the petitioner could put up radio stations in  areas where  it  desires  to  operate.   It  has been repeated time   and   again   that   where   the   statutory   norm   speaks unequivocally, there is nothing for the courts to do except to apply   it.  The   law,   leaving  no  doubt  as   to   the  scope  of   its operation, must be obeyed. 

The records of the case do not show any grant of authority from the then Secretary of Public Works and Communications before   the   petitioner   installed   the   questioned   radio telephone services in San Jose, Mindoro in 1971. The same is true   as   regards   the   radio   telephone   services   opened   in Sorsogon,   Sorsogon   and   Catarman,   Samar   in   1983.   No certificate  of   public   convenience  and  necessity   appears   to 

have   been   secured   by   the   petitioner   from   the   public respondent   when   such   certificate,was   required   by   the applicable   public   utility   regulations   It   was   well   within   the powers of the public respondent to authorize the installation by the private respondent network of radio communications systems in Catarman, Samar and San Jose, Mindoro. Under the   circumstances   of   this   case,   the   mere   fact   that   the petitioner possesses a franchise to put up and operate a radio communications system in certain areas is not an insuperable obstacle   to   the   public   respondent's   issuing   the   proper certificate   to   an   applicant   desiring   to   extend   the   same services   to   those  areas.   The  Constitution  mandates   that   a franchise cannot be exclusive in nature nor can a franchise be granted   except   that   it   must   be   subject   to   amendment, alteration,   or   even   repeal   by   the   legislature   when   the common   good   so   requires.   (Art.   XII,   sec.   11   of   the   1986 Constitution). There is an express provision in the petitioner's franchise which provides compliance with the above mandate R.A. 2036, sec. 15).

Concept of Franchise and Certificate of Public Convenience1. National Development Company v. CAAugust 19, 1998G.R. No. L-49407

Facts: In accordance with a memorandum agreement entered into between defendants NDC and MCP, defendant NDC as the first  preferred mortgagee of   three ocean going vessels including one with the name 'Dona Nati' appointed defendant MCP as its agent to manage and operate said vessel for and in its   behalf   and   account.   Several   companies   loaded   their cargoes   with   the   Dona   Nati.   However,   while   en   route   to Manila,   the   vessel   figured   in   a   collision   with   a   Japanese vessel.  As a result   thereof,  some of the cargoes were  lost, damaged   and   destroyed.   Thus,   respondent   Development Insurance  and  Surety  Corporation,  had  paid  as   insurer   the total   amount   of   P364,915.86   to   the   consignees   or   their successors-in-interest, for the said lost or damaged cargoes. Later   on,   respondent   filed   a   complaint   to   recover   said amount   from  the defendants-NDC and MCP as  owner  and ship   agent   respectively,   of   the   said   'DofiaNati'   vessel.   The lower court ruled in their favor, applying the Article 287 of the Code of Commerce.

On appeal, NDC argued that the Carriage of Goods by Sea Act should apply to the case at bar and not the Civil Code or the Code   of   Commerce.   Under   Section   4   (2)   of   said   Act,   the carrier   is  not   responsible   for   the   loss  or  damage   resulting from the "act, neglect or default of the master, mariner, pilot or   the   servants   of   the   carrier   in   the  navigation  or   in   the management of the ship." Thus, NDC insists that based on the findings of the trial court which were adopted by the Court of Appeals, both pilots of the colliding vessels were at fault and 

negligent, NDC would have been relieved of liability under the Carriage of Goods by Sea Act. 

Issue: Whether or not the contention of the petitioner should be upheld.

Held: No.   Under   Article   1733   of   the   Civil   Code,   common carriers from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the   vigilance   over   the   goods   and   for   the   safety   of   the passengers   transported   by   them   according   to   all circumstances of each case. Accordingly, under Article 1735 of the same Code, in all other than those mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negligently,  unless  it  proves that it has observed the extraordinary diligence required by law. It appears, however, that collision falls among matters not   specifically   regulated   by   the   Civil   Code,   so   that   no reversible   error   can   be   found   in   respondent   courses application to the case at bar of  Articles 826 to 839,  Book Three of the Code of Commerce, which deal exclusively with collision of vessels.

More   specifically,   Article   826   of   the   Code   of   Commerce provides that where collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages  incurred after an expert  appraisal.  But more in point to the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes.

Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or   constructive   control   over   the   conduct   of   the   voyage (Y'eung Sheng Exchange and Trading Co. v. Urrutia& Co., 12 Phil. 751 [1909]).

2. Tatad v. Sec. GarciaApril 16, 1995

Facts: EDSA   LRT   Consortium,   a   foreign   corporation,   was awarded with the construction of Light RailTransit III (LRT III) as the only bidder who has qualified with the requirements provided   by   the   PBAC.The   said   foreign   corporation   will 

construct   the  LRT   III   in  a   “Built-Lease-Transfer”  agreement that   suchpublic   utility   will   be   leased   by   the   government through   the   Department   of   Transportation andCommunication   (DOTC)   and   then   it   would   be subsequently sold by the corporation to the government. An objection   was   raised   by   the   petitioner,   alleging   that   the agreement   was   unconstitutional   since   it   grants   the consortium, which is a foreign corporation, the ownership of the EDSA LRT which is a public utility.

Issue: Whether or not the awarding of the bid to EDSA LRT Consortium is against the Constitution

Held: No.   The   Court   ruled   that  what   the   LRT  Consortium 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   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.   There   is   a distinction   between   ownership   and   operation.   The consortium 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. A franchise is only required for the “operation” and not the “ownership”. 

3. Radio Communications of the Phils v. NTC150 SCRA 450

Facts: Kayumanggi Radio Network Inc. filed a complaint with NTC alleging that petitioner RCPI was operating in Catarman without certificate of public convenience and necessity. RCPI counter-alleged that  its telephone services  in the areas are covered by the legislative franchise recognized by NTC and its predecessor Public Service Commission.

After conducting hearing, NTC ordered RCPI to immediately cease from operating in these areas, stating that under EO 546,   a   certificate   of   public   convenience   and   necessity   is mandatory for the operation of communication utilities and services including radio communications.

The petitioner contends that its franchise cannot be affected by Executive Order No. 546 on the ground that  it  has  long been in operation since 1957.

Issue:  Whether   or   not   petitioner   RCPI,   a   grantee   of   a legislative franchise to operate a radio company, is required to  secure a  certificate  of  public  convenience and necessity 

before it can validly operate its radio stations including radio telephone services

Held:  Yes.  A   franchise,  being  merely  a  privilege  emanating from the sovereign power of the state and owing its existence to a grant, is subject to regulation by the state itself by virtue of  its police power through its administrative agencies. We ruled in Pangasinan transportation Co., Inc. v. Public Service Commission (70 Phil. 221) that:

... statutes enacted for the regulation of public utilities, being a proper exercise by the State of its police power, are applicable not only to those public utilities coming into existence after its passage, but likewise to those already established and in operation ...

Executive Order No. 546, being an implementing measure of P.D. No. I insofar as it amends the Public Service Law (CA No. 146, as amended) is applicable to the petitioner who must be bound by   its  provisions.  The  mere   fact   that   the  petitioner possesses   a   franchise   to   put   up   and   operate   a   radio communications system in certain areas is not an insuperable obstacle   to   the   public   respondent's   issuing   the   proper certificate   to   an   applicant   desiring   to   extend   the   same services   to   those  areas.   The  Constitution  mandates   that   a franchise cannot be exclusive in nature nor can a franchise be granted   except   that   it   must   be   subject   to   amendment, alteration,   or   even   repeal   by   the   legislature   when   the common   good   so   requires.   (Art.   XII,   sec.   11   of   the   1986 Constitution).