TRANSPORTATION CASES BATANGAS TRANSPORTATION CO., petitionerappellant, vs.CAYETANO ORLANES, respondentappellee.

In his application for a permit, the appellee Orlanes alleges that he is the holder of a certificate of public convenience issued by the Public Service Commission in case No. 7306, to operate an autobus line from Taal to Lucena, passing through Batangas, Bolbok and Bantilan, in the Province of Batangas, and Candelaria and Sariaya, in the Province of Tayabas, without any fixed schedule; that by reason of the requirements of public convenience, he has applied for a fixed schedule from Bantilan to Lucena and return; that in case No. 7306, he cannot accept passengers or cargo from Taal to any point before Balbok, and vice versa; that the public convenience requires that he be converted into what is known as a regular operator on a fixed schedule between Taal and Bantilan and intermediate points, and for that purpose, he has submitted to the Commission proposed schedule for a license to make trips between those and intermediate points. He then alleges that by reason of increase of traffic, the public convenience also requires that he be permitted to accept passengers and cargo at points between Taal and Bantilan, and he asked for authority to establish that schedule, and to accept passengers at all points between Taal and Bantilan. To this petition the Batangas Transportation Company appeared and filed an application for a permit, in which it alleged that it is operating a regular service of auto trucks between the principal municipalities of the Province of Batangas and some of those of the Province of Tayabas; that since 1918, it has been operating a regular service between Taal and Rosario, and that in 1920, its service was extended to the municipality of San Juan de Bolbok, with a certificate of public convenience issued by the Public Servise Commission; that in the year 1925 Orlanes obtained from the Commission a certificate of public convenience to operate an irregular service of auto trucks between Taal, Province of Batangas, and Lucena, Province of Tayabas, 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 points between Taal and Bolbok, except those which were going to points beyond San Juan de Bolbok or to the Province of Tayabas; that he inaugurated this irregular in March, 1926, but maintained it on that part of the line between Taal and Bantilan only for about three months, when he abandoned that portion of it in the month of June and did not renew it until five days before the hearing 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 and Bantilan; that in June, 1926, Orlanes sought to obtain a license as a regular operator on that portion of the line between Bantilan and Lucena without having asked for a 1 permit for tat portion of the line between Bantilan and Taal; that from June, 1926, Orlanes and the Batangas Transportation Company were jointly operating a regular service between Bantilan and Lucena, with trips every half an hour, and Orlanes not having asked for a regular service between Bantilan and Taal, the Batangas Transportation Company remedied this lack of service under the authority of the Commission, and increased its trips between Bantilan and Tayabas to make due and timely connections in Bantilan on a half-hour service between Bantilan and Batangas with connections there for Taal and all other points in the Province of Batangas. It is then alleged that the service maintained by the company is sufficient to satisfy the convenience of the public, and that the public convenience does not require the granting of the permit for the service which Orlanes petitions, and that to do so would result in ruinous competition and to the grave prejudice of the company and without any benefit to the public, and it prayed that the petition of Orlanes to operate a regular service be denied. After the evidence was taken upon such issues, the Public Service Commission granted the petition of Orlanes, as prayed for, and the company then filed a motion for a rehearing, which was denied, and the case is now before this court, in which the appellant assigns the following errors: The Commission erred in ordering that a certificate of public convenience be issued in favor of Cayetano Orlanes to operate the proposed service without finding and declaring that the public interest will be prompted in a proper and suitable by the operation of such service, or when the evidence does not show that the public interests will be so prompted. That the Commission erred in denying the motion for a rehearing. JOHNS, J.: The questions presented involve a legal construction of the powers and duties of the Public Service Commission, and the purpose and intent for which it was created, and the legal rights and privileges of a public utility operating under a prior license. It must be conceded that an autobus line is a public utility, and that in all things and respects, it is what is legally known as a common carrier, and that 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, a license or permit from the Public Service Commission, and comply with certain defined terms and conditions, and when license is once, granted, the operator must conform

TRANSPORTATION CASES to, and comply with all, reasonable rules and regulations 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 like manner that a railroad would be operated under like terms and conditions. To all intents and purposes, the operation of an autobus line is very similar to that of a railroad, and a license for its operation should be granted or refused on like terms and conditions. For many and different reasons, it has never been the policy of a public service commission to grant a license for the operation of a new line of railroad which parallels and covers the same field and territory of another old established line, for the simple reason that it would result in ruinous competition between the two lines, and would not be of any benefit or convenience to the public. The Public Service Commission has ample power and authority to make any and all reasonable rules and regulations for the operation of any public utility and to enforce complience with them, and for failure of such utility to comply with, or conform to, such reasonable rules and regulations, the Commission has power to revoke the license for its operation. It also has ample power to specify and define what is a reasonable compensation for the services rendered to the traveling public. That is to say, the Public Service Commission, as such has the power to specify and define the terms and conditions upon which the public utility shall be operated, and to make reasonable rules and regulations for its operation and the compensation which the utility shall receive for its services to the public, and for any failure to comply with such rules and regulations or the violation of any of the terms and conditions for which the license was granted the Commission has ample power to enforce the provisions of the license or even to revoke it, for any failure or neglect to comply with any of its terms and provisions. Hence, and for such reasons, the fact that the Commission has previously granted a license to any person to operate a bus line over a given highway and refuses to grant a similar license to another person over the same highway, does not in the least create a monopoly in the person of the licensee, for the reason that at all times the Public Service Commission has the power to say what is a reasonable compensation to the utility, and to make reasonable rules and regulations for the convenience of the traveling public and to enforce them. In the instant case, Orlanes seek to have a certificate of public convenience to operate a line of auto trucks with fixed times of departure between Taal and Bantilan, in the municipality of Bolbok, Province of Batangas, with the right to receive 2 passengers and freight from intermediate points. The evidence is conclusive that at the time of his application, Orlanes was what is known as an irregular operator between Bantilan and Taal, and that the Batangas operator between Batangas and Rosario. Orlanes now seeks to have his irregular changed into a regular one, fixed hours of departure and arrival between Bantilan and Taal, and to set aside and nullify the prohibition against him in his certificate of public convenience, in substance and to the effect that he shall not have or receive any passengers or freight at any of the points served by the Batangas Transportation Company for which that company holds a prior license from the Commission. His petition to become such a regular operator over such conflicting routes is largely based upon the fact that, to comply with the growing demands of the public, the Batangas Transportation Company, in case No. 10301, applied to the Commission for a permit to increase the number of trip hours at and between the same places from Batangas to Rosario, and or for an order that all irregular 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 to become 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 those points and bring him in direct conflict and competition over the same 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 a second operator to operate a public utility in a field where, and in competition with, a first operator who is already operating, adequate and satisfactory service? There is no claim or pretense that the Batangas Transportation Company has violated any of the terms and conditions of its license. Neiher does the Public Service Commission find as a fact that the grantring of a license to Orlanes as a regular operator between the points in question is required or necessary for the convenience of the traveling public, or that there is any complaint or criticism by the public of the services rendered by the Batangas Transportation Company over the route in question. The law creating the Public service Commission of the Philippine Islands is known as Act No. 3108, as

TRANSPORTATION CASES amended by Act No. 3316, and under it the supervision and control of public utilities is very broad and comprehensive. Section 15 of Act No. 3108 provides that the Commission shall have power, after hearing, upon notice, by order in writing to require every public 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 necessary material equipment, etc; (c) To establish, construct, maintain, and operate any reasonable extention of its existing facilities, where such extension is reasonable and practicable and will furnish sufficient business to justify the construction and 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 the Commission requires information, and to furnish annual reports of finance and operations; (f) To carry, whenever the Commission may require, a proper and adequate depreciation account; (g) To notify the Commission of all accidents; (h) That when any public utility purposes to increase or reduce any existing individual rates, it shall give the Commission written notice thirty days prior to the proposed change; and (i) "No public utility as herein defind shall operate in the Philippine Islands without having first secured from the Commission a certificate, which shall be known as Certificate of Public Convenience, to the effect that the operation of said public utility and the authorization to do busibness wikll promote the public interest in a proper and suitable maner." Section 16 specially prohibits any discrimination in the handling of freight charges. In construing a similar law of the State of Kansas, the United States Supreme Court, in an opinion written by Chief Justice Taft, in Wichita Railroad 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 describing the duty of the 3 Commission, vesting it with power to fix and order substituted new rates for existing rates. The power is expressly made to depend on the condition that, after full hearing and investigation, the Commission shall find existing rates to be unjust, unreasonable, unjustly discriminatory, or unduly preferential. We conclude that a valid order of the Commission under the act must contain a finding of fact after hearing and investigation, upon which the order is founded, and that, for lack of 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 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 constitutional government. The maxim that a legislature may not delegate legislative power has some qualifications, as in the creation of municipalities, and also in the creation of administrative boards to apply to the myriad details of rate schedule the regulatory police power of the state. The latter qualification is made necessary in order that the legislative power may be effectively exercised. In creating such an administrative agency, the legislature, to prevent its being a pure delegation of legislative power, must enjoin upon a certain course of procedure and certain rules of decision in the perfomance of its function. It is a wholesome and necessary principle that such an agency must pursue the procedure and rules enjoined, and show a substantial compliance therewith, to give validity to its action. When, therefore, such an administrative agency is required, as a condition precedent to an order, to make a finding of facts, the validity of the order rest upon the needed finding. It is lacking, the order is ineffective. It is pressed on us that the lack of an express finding may be supplied by implication and by reference to the averments of the petition invoking the action of the Commission. We cannot agree to this point. It is doubtful whether the facts averred in the petition were sufficient to justify a finding that the contract rates were unreasonably low; but we do not find it necessay to answer this question. We rest our decision on the principle that an express finding of unreasonableness by the Commission was indispensable under the statutes of the state. That is to say, in legal effect, that the power of the Commission to issue a certificate of public convenience depends on the condition precedent that, after a full hearing and investigation, the Commission shall have found as a fact that the operation of the proposed public service and its authority to do business must be based upon the finding that it is for the convenience of the public.

TRANSPORTATION CASES 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 and authority conferred upon it by subsection (i) of section 15 of Act No. 3108 of the Philippine Legislature, THE PUBLIC SERVICE COMMISSION OF THE PHILIPPINE ISLANDS, after having duly considered the application of ................. for a certificate of public convenience the operation of ........................ in connection with the evidence submitted in support thereof, has rendered its decision on................, 192...., in case No. ............, declaring that the operation by the applicant ...................... of the business above described will promote the public interests in a proper and suitable manner, and granting................. to this effect the corresponding authority, subject to the conditions prescribed in said decision. Given at Manila Philippine Islands, this ......... day of ....................., 192 ..... PUBLIC SERVICE COMMISSION PHILIPPINE ISLANDS By.................................. Commissioner Attested: ..................................... Secretary OF THE and preferential right over a person who seeks to acquire another and a later license over the same route. Otherwise, the first license would not have protection on his investment, and would be subject to ruinous competition and thus defeat the very purpose and intent for which the Public Service Commission was created. It does not appear that the public has ever made any complaint the Batangas Transportation Company, yet on its own volition and to meet the increase of its business, it has applied to the Public Service Commission for authority to increase the number of daily trips to nineteen, thus showing a spirit that ought to be commended. Such is the rule laid down in the case of Re B. F. Davis Motor Lines, cited by the Public Service Commission of Indiana (P. U. R., 1927-B, page 729), in which it was held: A motor vehicle operator having received a certificate with a voluntary stipulation not to make stops (that is not to carry passengers) on a part of a route served by other carriers, and having contracted with such carries not to make the stops, will not subsequently are able to carry all passengers who present theselves for transportation within the restricted district. And in Re Mount Baker Development Co., the Public Service Commission of Washington (P. U. R., 1925D, 705), held: A cerificate authorizing through motor carrier service should not authorize local service between points served by the holders of a certificate, without first giving the certificate holders an opportunity to render additional service desired. In the National Coal Company case (47 Phil., 356), this court said: That is to say, that the certificate of public convenince granted to Orlanes in the instant case expressly recites that it "will promote the public interests in a proper and suitable manner." Yet no such finding of fact was made by the Commission. In the instant case, the evidence is conclusive that the Batangas Transportation 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. That is not the law, and there is no legal principle upon which it can be sustained. So long as the first licensee keeps and performs the terms and conditions of its license and complies with the reasonable rules and regulations of the Commission and meets the reasonable demands of the public, it should have more or less of a vested 4 When there is no monopoly. There is no such thing as a monopoly where a property is operated as a public utility under the rules and regulations of the Public Utility Commission and the terms and provision of the Public Utility Act. Section 775 of Pond on Public Utilities, which is recognized as a standard authority, states the rule thus: The policy of regulation, upon which our present public utility commission plan is based and which tends to do away with competition among public utilities as they are natural monopolies, is at once 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 do so, is to be preferred to competition among several independent systems. While requiring a proper service from, a single system for a city or territory in consideration

TRANSPORTATION CASES for protecting it as a monopoly for all service required and in conserving its resources, no economic waste results and service may be furnished at the minimum cost. The prime object and real purpose of commission control is to secure adequate sustained service for the public at the least possible cost, and to protect and conserve investments already made for this purpose. Experience has demonstrated beyond any question that competition among natural monopolies is wasteful economically and results finally in insufficient and unsatisfactory service and extravagant rates. The rule has been laid down, without dissent in numerous decisions, that where an operator is rendering good, sufficient and adequate service to the public, that the convenince does not require and the public interests will not be promoted in a proper and suitable manner by giving another operator a certificate of public convenience to operate a competing line over the same ruote. In Re Haydis (Cal.), P. U. R., 1920A, 923: A certificate of convenience and necessity for the operation of an auto truck line in occupied territory will not be granted, where there is no complaint as to existing rates and the present company is rendering adequate service. In Re Chester Auto Bus Line (Pa.), P. U. R., 1923E, 384: A Commission should not approve an additional charter and grant an additional certificate to a second bus company to operate in territory covered by a certificate granted to another bus company as a subsidiary of a railway company for operation in conjunction with 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 unable or has refused to maintain adequate and satisfactory service, before a certificate of convenience and necessity will be granted for 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 when permision has been given to other parties to operate and, from the evidence, they are equipped adequately to accommodate the public in this respect, no complaints having been received in regard to service rendered. In Re White (Md.), P. U. R., 1924E, 316: A motor vehicle operator who has built up a business between specified points after years of effort should not be deprived of the fruits of his 5 labor and of the capital he has invested in his operation by a larger concern desiring to operate between the same points. In Re Kocin (Mont.), P. U. R., 1924C, 214: A certificate authorizing the operation of passenger motor service should be denied where the record shows that the admission of another operator into the territory served by present licensees is not necessary and would render their licensee oppressive and confiscatory because of further division and depletion of revenues and would defeat the purpose of the statue and disorganize the public 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 automobile passenger service in view of the fact that the service within the territory proposed to be served appeared to be adequate and it was the policy of the Commission to protect the established line in the enjoyment of business which it had built, and in view of the further fact that it was very uncertain whether the applicant could secure 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 competitive field can give such service as will be a positive advantage to the public, a certificate of convenience will be denied by the Idaho Commission, provided that the existing utility furnishing adequate service at reasonable rates at the time of the threatened competition. In Scott, vs. Latham (N. Y. 2d Dist), P. U. R., 1921C, 714: Competition between bus lines should be prohibited the same as competition between common carriers. In Re Portland Taxicab Co. (Me.), P. U. R., 1923E, 772: Certificates permitting the operation of motor vehicles for carrying passengers for hire over regular routes between points served by steam and electric railways should not be granted when the existing service is reasonable, safe, and adequate as required by statue. In Re Murphy (Minnesota), P.U.R., 1927C, 807: Authority to operate an auto transportation service over a route which is served by another auto transportation company should be denied if no necessity is shown for additional service.

TRANSPORTATION CASES In Re Hall, editorial notes, P. U. R., 1927E: A certificate of convenience and necessity for the operation of a motor carrier service has been denied by the Colorado Commission where the only ground adduced for the certificate was that competition thereby afforded to an existing utility would benefit the public by lowering rates. The Commission said: "Up to the present time the Commission has never issued a certificate authorizing a duplication of motor vehicle operation over a given route unless it appeared that the service already rendered was not adequate, that there was no ruinous competition or that the second applicant could, while operating on a sound businesslike basis, afford transportation at cheaper rates than those already in effect. There has been no complaint to date as to the rates now being charged on the routes over which the applicant desires to serve. Moreover, the Commission stand ready, at any time the unreasonable of the rates of any carrier are questioned, to determine their reasonableness and to order them reduced if they are shown to be unreasonable." In this case the Commission also expressed its disappoval of the practice of an applicant securing a 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 authorized over a route adequately served by a railroad and other bus line, although the proposed service would be an added convenience to the territory. In Bartonville Bus Line vs. Eagle Motor Coach Line (Ill. Sup. Court), 157 N. E., 175; P. U. R., 1927E, 333: The policy of the state is to compel an established public utility occupying a given filed to provide adequate service and at the same time protect it from ruinous competition, and to allow it an apportunity 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 utility commission plan is based and which tends to do away with competition 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 do so, is to be preferred to competition among several independent systems. While requiring a proper service from a single system for a city or territory in consideration for protecting it as a monopoly for all the service required and in conserving its resources, no 6 economic waste results and service may be furnished at the minimum cost. The prime object and real purpose of commission control is to secure adequate sustained service for the public at the least possible cost, and to protect and conserve investments already made for this purpose. Experience has demostrated beyond any question that competition among natural monopolies is wasteful economically and results finally in insufficient 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, but rather what the proper agency should be to furnish the best service to the public generally and continuously at the least cost. Anything which tends to cripple seriously or destroy an established system of transportation that is necessary to a community is not a convenience and necessity for the public and its introduction would be a handicap rather than a help ultimately in 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 granting the petition of Orlanes in question, for the reason therein stated, is null and void, and that it is in direct conflict with the underlying and fundamental priciples for which the Commission was created.1awphi1.net The question presented is very important and farreaching and one of first impression in this court, and for such reasons we have given this case the careful consideration which its importance deserves. The Government having taken over the control and supervision of all public utilities, so long as an operator under a prior license complies with the terms and conditions of his license and reasonable rules and regulation for its operation and meets the reasonable demands of the public, it is the duty of the Commission to protect rather than to destroy his investment by the granting of a subsequent license to another for the same thing over the same route of travel. The granting of such a license does not serve its convenience or promote the interests of the public. The decision of the Public Service Commission, granting to Orlanes the license in question, is revoked and set aside, and the case is remanded to the Commission for such other and further proceedings as are not inconsistent with this opinion. Neither party to recover costs on this appeal. So ordered. Johnson, Street, Malcolm and Ostrand, JJ., concur.

TRANSPORTATION CASES 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. 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). 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 7 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 8843616 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"). Meanwhile, the petitioner, Rodolfo A. Albano filed the present petition as citizen and taxpayer and as a member of the House of Representatives, assailing the award of the MICT contract to the ICTSI by the PPA. The petitioner claims that since the MICT is a public utility, it needs a legislative franchise before it can legally operate as a public utility, pursuant to Article 12, Section 11 of the 1987 Constitution. The petition is devoid of merit. 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

TRANSPORTATION CASES and such entity constituting substantial compliance with the law. 1. Executive Order No. 30, dated July 16, 1986, provides: WHEREFORE, I, CORAZON C. AQUINO, President of the Republic of the Philippines, by virtue of the powers vested in me by the Constitution and the law, do hereby order the immediate recall of the franchise granted to the Manila International Port Terminals, Inc. (MIPTI) and authorize the Philippine Ports Authority (PPA) to take over, manage and operate the Manila International Port Complex at North Harbor, Manila and undertake the provision of cargo handling and port related services thereat, in accordance with P.D. 857 and other applicable laws and regulations. Section 6 of Presidential Decree No. 857 (the Revised Charter of the Philippine Ports Authority) states: a) The corporate duties of the Authority shall be: (ii) To supervise, control, regulate, construct, maintain, operate, and provide such facilities or services as are necessary in the ports vested in, or belonging to the Authority. (v) To provide services (whether on its own, by contract, or otherwise) within the Port Districts and the approaches thereof, including but not limited to berthing, towing, mooring, moving, slipping, or docking of any vessel; loading or discharging any vessel; sorting, weighing, measuring, storing, warehousing, or otherwise handling goods. b) The corporate powers of the Authority shall be as follows: (vi) To make or enter into contracts of any kind or nature to enable it to discharge its functions under this Decree. [Emphasis supplied.] 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 8 management, operation and development of the MICP. 2. Even if the MICP be considered a public utility, 1 or a public service 2 on the theory that it is a "wharf' or a "dock" 3 as contemplated under the Public Service Act, its operation would not necessarily call for a franchise from the Legislative Branch. Franchises issued by Congress are not required before each and every public utility may operate. Thus, the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities. (See E.O. Nos. 172 and 202) That the Constitution provides in Art. XII, Sec. 11 that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility shall be subject to amendment, alteration or repeal by Congress does not necessarily, imply, as petitioner posits that only Congress has the power to grant such authorization. Our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such authorization for certain classes of public utilities. 4 As stated earlier, E.O. No. 30 has tasked the PPA with the operation and management of the MICP, in accordance with P.D. 857 and other applicable laws and regulations. However, P.D. 857 itself authorizes the PPA to perform the service by itself, by contracting it out, or through other means. Reading E.O. No. 30 and P.D. No. 857 together, the inescapable conclusion is that the lawmaker has empowered the PPA to undertake by itself the operation and management of the MICP or to authorize its operation and management by another by contract or other means, at its option. The latter power having been delegated to the PPA, a franchise from Congress to authorize an entity other than the PPA to operate and manage the MICP becomes unnecessary. In the instant case, the PPA, in the exercise of the option granted it by P.D. No. 857, chose to contract out the operation and management of the MICP to a private corporation. This is clearly within its power to do. Thus, PPA's acts of privatizing the MICT and awarding the MICT contract to ICTSI are wholly within the jurisdiction of the PPA under its Charter which empowers the PPA to "supervise, control, regulate, construct, maintain, operate and provide such facilities or services as are necessary in the ports vested in, or belonging to the PPA." (Section 6(a) ii, P.D. 857) The contract between the PPA and ICTSI, coupled with the President's written approval, constitute the necessary authorization for ICTSI's operation and management of the MICP. The award of the MICT contract approved by no less than the President of the Philippines herself enjoys the legal presumption of validity and regularity of official action. In the case at bar, there is no evidence which clearly

TRANSPORTATION CASES shows the constitutional infirmity of the questioned act of government. For these reasons the contention that the contract between the PPA and ICTSI is illegal in the absence of a franchise from Congress appears bereft of any legal basis. 3. On the peripheral issues raised by the party, the following observations may be made: A. That petitioner herein is suing as a citizen and taxpayer and as a Member of the House of Representatives, sufficiently clothes him with the standing to institute the instant suit questioning the validity of the assailed contract. While the expenditure of public funds may not be involved under the contract, public interest is definitely involved considering the important role of the MICP in the economic development of the country and the magnitude of the financial consideration involved. Consequently, the disclosure provision in the Constitution 5 would constitute sufficient authority for upholding petitioner's standing. [Cf. Taada v. Tuvera, G.R. No. 63915, April 24, 1985,136 SCRA 27, citing Severino v. Governor General, 16 Phil. 366 (1910), where the Court considered the petitioners with sufficient standing to institute an action where a public right is sought to be enforced.] B. That certain committees in the Senate and the House of Representatives have, in their respective reports, and the latter in a resolution as well, declared their opinion that a franchise from Congress is necessary for the operation of the MICP by a private individual or entity, does not necessarily create a conflict between the Executive and the Legislative Branches needing the intervention of the Judicial Branch. The court is not faced with a situation where the Executive Branch has contravened an enactment of Congress. As discussed earlier, neither is the Court confronted with a case of one branch usurping a power pertaining to another. C. Petitioner's contention that what was bid out, i.e., the development, management and operation of the MICP, was not what was subsequently contracted, considering the conditions imposed by the President in her letter of approval, thus rendering the bids and projections immaterial and the procedure taken ineffectual, is not supported by the established facts. The conditions imposed by the President did not materially alter the substance of the contract, but merely dealt on the details of its implementation. D. The determination of whether or not the winning bidder is qualified to undertake the contracted service should be left to the sound judgment of the PPA. The PPA, having been tasked with the formulation of a plan for the development of port facilities and its implementation [Sec. 6(a) (i)], is the 9 agency in the best position to evaluate the feasibility of the projections of the bidders and to decide which bid is compatible with the development plan. Neither the Court, nor Congress, has the time and the technical expertise to look into this matter. Thus, the Court in Manuel v. Villena (G.R. No. L28218, February 27, 1971, 37 SCRA 745] stated: [C]ourts, as a rule, refuse to interfere with proceedings undertaken by administrative bodies or officials in the exercise of administrative functions. This is so because such bodies are generally better equipped technically to decide administrative questions and that non-legal factors, such as government policy on the matter, are usually involved in the decisions. [at p. 750.] In conclusion, it is evident that petitioner has failed to show a clear case of grave abuse of discretion amounting to lack or excess of jurisdiction as to warrant the issuance of the writ of prohibition. WHEREFORE, the petition is hereby DISMISSED. SO ORDERED. CHAMBER OF FILIPINO RETAILERS, INC., NATIONAL MARKET VENDORS ASSOCIATION INC., AMBROSIO ILAO, CRISPIN DE GUZMAN, JOSE J. LAPID, and FELICISIMO LAS, petitioners, vs. HON. ANTONIO J. VILLEGAS as City Mayor of Manila, The CITY TREASURER and The CITY OF MANILA, respondents. Before Us is a motion for the reconsideration of our resolution of December 3, 1968 dismissing the present action for prohibition "for lack of merit; appeal in due time is the remedy". It appears that on August 14, 1968 petitioners filed Civil Case No. 73902 against Antonio J. Villegas, et al. in the Court of First Instance of Manila to question the validity of Ordinance No. 6696 later superseded by Ordinance No. 6767 increasing the rental fees of stalls in public markets in said city. A restraining order was issued by said court but the same was lifted on November 3, 1968 when, after hearing the parties, the court rendered judgement dismissing the case and declaring the questioned ordinance valid. On November 16, 1968 the therein petitioners perfected their appeal to this Court (G.R. No. L29819). Petitioners now allege that upon the lifting of the restraining order mentioned heretofore, the respondents in the case who are the same respondents in the present immediately sought to enforce the provisions of Ordinance No. 6767 by making demands for the payment of the back differentials in market rates together with the rentals at the new rates, with the threat that

TRANSPORTATION CASES petitioners would be ejected summarily from their respective stalls if they refused or failed to pay the rentals and back charges demanded. After receiving such demand petitioners filed the present action for prohibition to restrain collection of rentals and possible ejectment.lawphi1.nt Upon the above facts We reiterate our resolution dismissing the present action for prohibition and, as a consequence, We deny the motion for reconsideration mentioned heretofore, for the reason that the relief sought by herein petitioners could be properly secured from the lower court in accordance with the provisions of Rule 41 of the Rules of Court, or from this Court in the appealed case G. R. L-29864. As a matter of fact, petitioners' motion for reconsideration expressly states that on November 21, 1968 they filed in the latter case a motion to reinstate the restraining order herein before mentioned or to issue a writ of preliminary injunction pending appeal, which motion, however, was denied by this Court on the 26th of the same month and year. It would appear, therefore, that the present action was filed as an attempt to secure from this court the same relief that we had already denied to the same parties in G. R. No. L-29819. PREMISES CONSIDERED, the motion for reconsideration filed by petitioners on December 5, 1968 is hereby denied. from Caoayan to Manila and back as students, employees, merchants and professionals among others had to ride in calesas or jeeps up to Vigan from whence they could take the buses of petitioner Philippine Rabbit Bus Lines, Inc., which, however, were usually fully loaded. One of his witnesses, the then Municipal Mayor of Caoayan, asserted that its inhabitants engaged in weaving, farming and fishing had to take their products to Manila, Dagupan, San Fernando, La Union and other towns in the southern part of Ilocos Sur and that it was his personal experience that after taking a jeep from Caoayan to Vigan to be able to utilize the services of petitioner transportation line, he noted that their buses were quite full, a condition that similarly existed on his return trip from Manila. He likewise added that there was a resolution of the Municipal Council of Caoayan endorsing the application for a certificate of public convenience of respondent Gabatin. It was the contention of the oppositors on the other hand that there was no such "need for the proposed service; that on the line Vigan to Manila, there are sufficient buses of the Philippine Rabbit and other PUB operators who can take care of the need of the riding public; and that applicant is not financially capable to operate the proposed service. The other operators merely adopted the evidence presented by the Philippine Rabbit Bus Lines, Inc."1 Then, the decision sought to be reviewed, continued: "After weighing the evidence of both the applicant and the oppositors, the Commission found out that there is no PUB operator operating a direct service from Caoayan, Ilocos Sur to Manila; that by allowing applicant to operate a direct service from Caoayan, Ilocos Sur to Manila it would ease the transportation problem of the people of Caoayan, Ilocos Sur. Although, there are trips of the Philippine Rabbit Bus Lines, Inc. going to Manila, but most of these trips start from Laoag, Ilocos Norte, so that passengers from Caoayan, Ilocos Sur, have lesser or no chance at all to get accommodation on these buses. There are other PUB auto-truck operators whose trips pass Vigan coming from farther north as claimed by the oppositors, but these buses do not enter Vigan and usually these buses are also full with passengers coming from the north. After going over the entire evidence of record, the Commission believes that public convenience and interests will be best served if applicant would be allowed to operate SIX (6) units only instead of the twelve (12) units applied for."2 Respondent Public Service Commission, in its decision, further found "that applicant is a Filipino citizen, legally and financially capable to operate and maintain the proposed service, the Commission believes that the oppositions filed in this case may be, as they are hereby [overruled] and the certificate of public convenience applied for may be as it is hereby [granted] to the applicant, ... "3 The usual conditions were attached, which, for

PHILIPPINE RABBIT BUS LINES, INC., petitioner, vs.PROSPERO GABATIN, and PUBLIC SERVICE COMMISSION, respondents. What has to be passed upon in this petition for review is the correctness of a decision of respondent Public Service Commission of March 8, 1965, granting an application of respondent Prospero Gabatin for a certificate of public convenience to operate an auto-truck service on the line Caoayan (Ilocos Sur)- Grace Park (Caloocan City) with the use of six (6) units. Petitioner Philippine Rabbit Bus Lines, Inc. was one of the oppositors. According to the relevant facts, respondent Gabatin, as the applicant, presented himself together with two witnesses and testified to the effect that public convenience would be served by transportation facilities provided for passengers 10

TRANSPORTATION CASES the purposes of this opinion, need not be touched upon. The last portion of the decision was that it could take effect immediately, to become final thirty (30) days upon notice to the parties.4 In assailing the above decision, petitioner contends that respondent Public Service Commission erred in issuing the above certificate of public convenience as the evidence presented by respondent Gabatin was "insubstantial, inadequate and spurious"; that moreover again on the records and evidence of the case, respondent Gabatin "is unquestionably financially incapable of operating the proposed service"; that his "irresponsibility" and his "incompetence to operate a safe, efficient and adequate bus service" is evident on the records of respondent Commission; and that it was denied the "protection of the prior operator rule."5 As will be evident, the above errors cannot be deemed persuasive, and the decision must be sustained. It is to be noted that the jurisdiction of this Court to set aside any order, ruling or decision of the respondent Commission is predicated on it clearly appearing that there was no evidence before it to support reasonably such order, ruling or decision or that the same is contrary to law or outside its jurisdiction.6 From the assignment of errors, the statutory ground relied upon is the alleged absence of evidence. What is the interpretation accorded to such a provision by this Court? From Philippine Shipowners' Association v. Public Utility 7 Commissioner, and Ynchausti Steamship Co. v. Public Utility Commissioner,8 to Robles v. Blaylock,9 a period of more than forty-five years, this Tribunal has invariably affixed the impress of finality on the findings of fact under the circumstances herein disclosed. For petitioner to allege the absence of evidence is to ignore what was testified to before the Public Utility Commission. As set forth in a unanimous decision in one of the later cases, Pangasinan Transportation Co. v. Feliciano,10 in an opinion by Justice Padilla: "It is a settled rule that the findings and conclusions of fact by the Public Service Commission after weighing the conflicting evidence adduced by the parties in public service cases are binding on the Supreme Court and will not be disturbed unless they appear not to be reasonably supported by evidence." In the Philippine Shipowners' Association opinion, this Court expressly affirmed the validity of that principle even if "it might be true that, under the facts presented, this court would reach another and different conclusion....11 In the Ynchausti decision, rendered the next year, this Court could speak of "the whole tenor and trend of modern legislation" as vesting the Public Utility Commission "with power to regulate and control the operation of public utilities" and conferring on such a body "a large, 11 discretionary, administrative power", the exercise of which would not be interfered with by this Tribunal. Subsequently, in a 1926 decision, Philippine Shipowners' Association v. The Public Utility Commission,12 this Court reaffirmed the principle that only where the record did not show the decision by the then Public Utility Commission as not sufficiently supported by the evidence could it alter, modify, or even annul the same. Then in San Miguel Brewery v. Lapid, 13 this Court held that it was not justified in substituting its judgment for that of the Public Service Commission, its power "being limited to reviewing its order and to see whether or not there is evidence in the case which reasonably supports the issuance of said order." Subsequently, in Calabia v. Orlanes, 14 a 1931 adjudication, this Court made it a condition sine qua non that an abuse of power be shown before the decision of the Public Service Commission could be reversed and modified. 1wph1.t In Manila Electric Co. v. Balagtas, 15 it was the view of Justice Malcolm, speaking for the Court, that there must be a showing that "there was no evidence before the Public Service Commission to support reasonably its orders" before it could be reversed. The next year, this Court, in Ampil v. Public Service Commission,16 restated the broad scope of the Commission's authority as to factual matters by holding that where in a given set of facts it is authorized to grant a certificate of public convenience, certain limitations imposed by it based on experience and not merely arbitrary, would not be interfered with by this Court, such exercise of discretion being respected. The same year, in Panay Autobus Co. v. Iloilo Transportation Co.,17 this Court, again through the then Justice Hull, sustained an order of the Public Service Commission even if it entertained "fears that the commission has acted too leniently" inasmuch as "there is evidence in the record" upon which it could "arrive at the conclusion it did, ... " Again the rule was non-interference. At the start of the Commonwealth period, therefore, when the present Constitution became effective, the principle adopted was still such well-nigh conclusiveness of the findings of facts of the Public Service Commission. In two 1936 decisions, Aleosan Transportation Co., Inc. v. Public Service Commission, 18 and Javellana v. La Paz Ice Plant, 19 the above doctrine was reaffirmed by this Court. Thus in the Aleosan Transportation Co. case, it refused to modify the conclusion reached by the Public Service Commission as to what public necessity and convenience required. In the Javellana decision, this Court announced that it is

TRANSPORTATION CASES not permitted "to substitute its own decision" for that of the Public Service Commission and "is, constrained by law to sustain the latter." In Gilles v. Halili,20 this Court was quite explicit in holding that it "is certainly not the duty of this court to sift the evidence anew to find out for itself whether or not the preponderance of said evidence is such as will justify the order issued by the Public Service Commission." In Cebu Autobus Co. v. Bisaya Land Transportation,21 after stating that in the final analysis the determination of the question as to the sufficiency of the evidence turned on the credibility of the witnesses testifying before it, there was an affirmance of the finding as this Court was unable to conclude that the decision should be set aside. Then in Manila Electric Co. v. De Vera, 22 this Court, through the late Justice Laurel, referring to a report, which was part of the record elevated to it, with implication of serious character but not referred to by the Commission in its decision, spoke of "prudence on [its] part and fairness to all concerned" as demanding that it should "make no other pronouncement at this time than to affirm" as it did affirm the decision of the Commission. In Sambrano v. Red Line Transportation,23 this Court stated that the Commission having held "that the public convenience demanded the establishment of said line" its order "appears to be justified," and concluded that it is not authorized to substitute its judgment for that of the Commission, by determining on its "own account, whether or not the public convenience demanded the establishment of said line or whether or not the same should be placed in the hands of the respondent Northern Luzon Transportation Co., Inc." The same pattern of undeviating adherence to the doctrine of conclusiveness and finality of the findings of the Public Service Commission is discernible from the cases decided after independence, starting in 1947 from Halili v. Ice & Cold Storage Industries of the Phil., Inc.,24 to the 1968 decision, Robles v. Blaylock, previously cited. In Ice & Cold Storage Industries of the Phil., Inc. v. Valera,25 this Court, through the then Justice Ozaeta stated categorically: "The Commission's findings of fact are conclusive upon this Court." In Espiritu v. Los Baos, 26 the same rule is expressed thus: "These findings of fact are conclusive upon this Court which cannot weigh the conflicting evidence and substitute its own conclusions in lieu of those made by the Commission." In Lopez v. Batangas Transportation Co.,27 there is a restatement of the above well-settled rule "that the Commission's findings as to facts are binding and conclusive upon us as long as they are reasonably supported by substantial evidence, ... " 12 The doctrine could be negatively phrased, as was done by former Chief Justice Bengzon with his preference for such phraseology as that the Commission's "stamp of approval is not without foundation"28 or "is not unsupported by the evidence."29 1wph1.t To the same effect is the following brief summary of some of the implications of this doctrine of finality. Where the petition for review disputes merely the sufficiency of the evidence, the finding cannot be disturbed.30 It is not for this Court to determine credibility and preponderance of proof nor to examine the proof de novo and determine for itself whether or not the preponderance of evidence really justifies the decision. 31 It is not to substitute its discretion for that of the Public Service Commission on questions of fact.32 The lack of wisdom of the conclusion reached by the Public Service Commission affects neither its authority to decide nor the validity of its decision.33 The undeniable force of the above doctrine so consistently followed suffices to dispose of the first assigned error, namely, the alleged insubstantial, inadequate and spurious character of the evidence of respondent Gabatin. For a mere assertion is not the equivalent of proof. Neither is the second error, dealing with the alleged financial incapability of respondent Gabatin to operate the proposed service, meritorious. As was held by this Court in Sorita v. Public Service Commission, 34 the opinion being penned by Justice Regala: "The attack on the respondent-applicant's financial capacity cannot be seriously entertained in this appeal. The finding of the Public Service Commission thereon is essentially a factual determination which, in a host of cases, this Court said it will not interfere unless patently unsupported by evidence. A review of the records of this case does not warrant such an interference." The third error imputed to respondent Commission to the effect that it ignored its own records, which, according to petitioner, "are replete with evidence of the applicant's irresponsibility and incompetence to operate a safe, efficient and adequate bus service," is not any more persuasive as essentially it is likewise grounded on factual considerations. Evidently respondent Commission which could not have been unaware of what its records contained reached a conclusion opposed to that of petitioner. Such a finding is binding upon us. That leaves the fourth assigned error, petitioner complaining that respondent Public Service Commission denied to it the protection of the prior operator rule. In support of the above alleged grievance, petitioner cited extensively from the opinion in the 1928 decision of Batangas Transportation Co. v. Orlanes, 35 decided on December 19, 1928. In addition, reference was made to Mejica v. Public Service Commission,36 where parenthetically, it may be observed Justice Malcolm cautioned against this Court interfering in the exercise of the power conferred on the Commission which "should not be hampered by

TRANSPORTATION CASES technical obstruction." Even then as already noted, the principle was for this Court not substituting its judgment for that of this administrative agency "if there be evidence before it supporting its order." The other case cited is Bohol Land Transportation v. Jureidini.37 It is to be admitted that the Batangas Transportation Co. decision was rather generous in its appraisal of the preferential right of the first operator and the need "to protect and preserve investments" already made for that purpose. However, desirable such an approach might have been 40 years ago in the light of the then environmental circumstances, petitioner should be aware that time and the changes brought by it have eroded the force of the above dictum. It would be too far-fetched to assert now that in each and every case the prior operator rule as thus understood automatically calls for application, the public interest as determined by the Public Service Commission to the contrary notwithstanding. Only recently, in Teresa Electric Power Co. v. Public Service Commission, 38 Justice Dizon succinctly restated the doctrine thus: "While it is true that operators of public convenience and service deserve some protection from unnecessary or unlawful competition, yet the rule is that nobody has any exclusive right to secure a franchise or a certificate of public convenience. Above any or all considerations, the grant of franchises and certificates of public convenience and service should be guided by public service and interest; the latter are the primordial considerations to be taken into account." clearly then, this last error assigned cannot be deemed meritorious. The correctness of the decision under review has not been successfully impugned. WHEREFORE, the decision of the Public Service Commission of March 8, 1965, granting respondent Prospero Gabatin a certificate of public convenience for the operation of six (6) auto-trucks on the line Caoayan (Ilocos Sur)-Grace Park (Caloocan City) via Vigan subject to the conditions imposed therein, is affirmed. With costs against petitioner Philippine Rabbit Bus Lines, Inc. REPUBLIC OF THE PHILIPPINES, plaintiffappellant, vs. PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, defendant-appellant. Direct appeals, upon a joint record on appeal, by both the plaintiff and the defendant from the dismissal, after hearing, by the Court of First Instance of Manila, in its Civil Case No. 35805, of their respective complaint and counterclaims, but making permanent a preliminary mandatory injunction theretofore issued against the defendant on the interconnection of telephone facilities owned and operated by said parties. The plaintiff, Republic of the Philippines, is a political entity exercising governmental powers 13 through its branches and instrumentalities, one of which is the Bureau of Telecommunications. That office was created on 1 July 1947, under Executive Order No. 94, with the following powers and duties, in addition to certain powers and duties formerly vested in the Director of Posts: 1awphil.t SEC. 79. The Bureau of Telecommunications shall exercise the following powers and duties: (a) To operate and maintain existing wire-telegraph and radio-telegraph offices, stations, and facilities, and those to be established to restore the pre-war telecommunication service under the Bureau of Posts, as well as such additional offices or stations as may hereafter be established to provide telecommunication service in places requiring such service; (b) To investigate, consolidate, negotiate for, operate and maintain wire-telephone or radio telephone communication service throughout the Philippines by utilizing such existing facilities in cities, towns, and provinces as may be found feasible and under such terms and conditions or arrangements with the present owners or operators thereof as may be agreed upon to the satisfaction of all concerned; (c) To prescribe, subject to approval by the Department Head, equitable rates of charges for messages handled by the system and/or for time calls and other services that may be rendered by said system; (d) To establish and maintain coastal stations to serve ships at sea or aircrafts and, when public interest so requires, to engage in the international telecommunication service in agreement with other countries desiring to establish such service with the Republic of the Philippines; and (e) To abide by all existing rules and regulations prescribed by the International Telecommunication Convention relative to the accounting, disposition and exchange of messages handled in the international service, and those that may hereafter be promulgated by said convention and adhered to by the Government of the Republic of the Philippines. 1 The defendant, Philippine Long Distance Telephone Company (PLDT for short), is a public service corporation holding a legislative franchise, Act 3426, as amended by Commonwealth Act 407, to install, operate and maintain a telephone system throughout the Philippines and to carry on the business of electrical transmission of messages within the Philippines and between the Philippines and the telephone systems of other countries. 2 The RCA Communications, Inc., (which is not a party to the present case but has contractual relations with the parties) is an American corporation authorized to transact business in the Philippines and is the

TRANSPORTATION CASES grantee, by assignment, of a legislative franchise to operate a domestic station for the reception and transmission of long distance wireless messages (Act 2178) and to operate broadcasting and radiotelephone and radio-telegraphic communications services (Act 3180). 3 Sometime in 1933, the defendant, PLDT, and the RCA Communications, Inc., entered into an agreement whereby telephone messages, coming from the United States and received by RCA's domestic station, could automatically be transferred to the lines of PLDT; and vice-versa, for calls collected by the PLDT for transmission from the Philippines to the United States. The contracting parties agreed to divide the tolls, as follows: 25% to PLDT and 75% to RCA. The sharing was amended in 1941 to 30% for PLDT and 70% for RCA, and again amended in 1947 to a 50-50 basis. The arrangement was later extended to radio-telephone messages to and from European and Asiatic countries. Their contract contained a stipulation that either party could terminate it on a 24-month notice to the other. 4 On 2 February 1956, PLDT gave notice to RCA to terminate their contract on 2 February 1958. 5 Soon after its creation in 1947, the Bureau of Telecommunications set up its own Government Telephone System by utilizing its own appropriation and equipment and by renting trunk lines of the PLDT to enable government offices to call private parties. 6 Its application for the use of these trunk lines was in the usual form of applications for telephone service, containing a statement, above the signature of the applicant, that the latter will abide by the rules and regulations of the PLDT which are on file with the Public Service Commission. 7 One of the many rules prohibits the public use of the service furnished the telephone subscriber for his private use. 8 The Bureau has extended its services to the general public since 1948, 9 using the same trunk lines owned by, and rented from, the PLDT, and prescribing its (the Bureau's) own schedule of rates. 10 Through these trunk lines, a Government Telephone System (GTS) subscriber could make a call to a PLDT subscriber in the same way that the latter could make a call to the former. On 5 March 1958, the plaintiff, through the Director of Telecommunications, entered into an agreement with RCA Communications, Inc., for a joint overseas telephone service whereby the Bureau would convey radio-telephone overseas calls received by RCA's station to and from local residents. 11 Actually, they inaugurated this joint operation on 2 February 1958, under a "provisional" agreement. 12 On 7 April 1958, the defendant Philippine Long Distance Telephone Company, complained to the Bureau of Telecommunications that said bureau was violating the conditions under which their 14 Private Branch Exchange (PBX) is inter-connected with the PLDT's facilities, referring to the rented trunk lines, for the Bureau had used the trunk lines not only for the use of government offices but even to serve private persons or the general public, in competition with the business of the PLDT; and gave notice that if said violations were not stopped by midnight of 12 April 1958, the PLDT would sever the telephone connections. 13 When the PLDT received no reply, it disconnected the trunk lines being rented by the Bureau at midnight on 12 April 1958. 14 The result was the isolation of the Philippines, on telephone services, from the rest of the world, except the United States. 15 At that time, the Bureau was maintaining 5,000 telephones and had 5,000 pending applications for telephone connection. 16 The PLDT was also maintaining 60,000 telephones and had also 20,000 pending applications. 17 Through the years, neither of them has been able to fill up the demand for telephone service. The Bureau of Telecommunications had proposed to the PLDT on 8 January 1958 that both enter into an interconnecting agreement, with the government paying (on a call basis) for all calls passing through the interconnecting facilities from the Government Telephone System to the PLDT. 18 The PLDT replied that it was willing to enter into an agreement on overseas telephone service to Europe and Asian countries provided that the Bureau would submit to the jurisdiction and regulations of the Public Service Commission and in consideration of 37 1/2% of the gross revenues. 19 In its memorandum in lieu of oral argument in this Court dated 9 February 1964, on page 8, the defendant reduced its offer to 33 1/3 % (1/3) as its share in the overseas telephone service. The proposals were not accepted by either party. On 12 April 1958, plaintiff Republic commenced suit against the defendant, Philippine Long Distance Telephone Company, in the Court of First Instance of Manila (Civil Case No. 35805), praying in its complaint for judgment commanding the PLDT to execute a contract with plaintiff, through the Bureau, for the use of the facilities of defendant's telephone system throughout the Philippines under such terms and conditions as the court might consider reasonable, and for a writ of preliminary injunction against the defendant company to restrain the severance of the existing telephone connections and/or restore those severed. Acting on the application of the plaintiff, and on the ground that the severance of telephone connections by the defendant company would isolate the Philippines from other countries, the court a quo, on 14 April 1958, issued an order for the defendant:

TRANSPORTATION CASES (1) to forthwith reconnect and restore the seventyeight (78) trunk lines that it has disconnected between the facilities of the Government Telephone System, including its overseas telephone services, and the facilities of defendant; (2) to refrain from carrying into effect its threat to sever the existing telephone communication between the Bureau of Telecommunications and defendant, and not to make connection over its telephone system of telephone calls coming to the Philippines from foreign countries through the said Bureau's telephone facilities and the radio facilities of RCA Communications, Inc.; and (3) to accept and connect through its telephone system all such telephone calls coming to the Philippines from foreign countries until further order of this Court. On 28 April 1958, the defendant company filed its answer, with counterclaims. It denied any obligation on its part to execute a contrary of services with the Bureau of Telecommunications; contested the jurisdiction of the Court of First Instance to compel it to enter into interconnecting agreements, and averred that it was justified to disconnect the trunk lines heretofore leased to the Bureau of Telecommunications under the existing agreement because its facilities were being used in fraud of its rights. PLDT further claimed that the Bureau was engaging in commercial telephone operations in excess of authority, in competition with, and to the prejudice of, the PLDT, using defendants own telephone poles, without proper accounting of revenues. After trial, the lower court rendered judgment that it could not compel the PLDT to enter into an agreement with the Bureau because the parties were not in agreement; that under Executive Order 94, establishing the Bureau of Telecommunications, said Bureau was not limited to servicing government offices alone, nor was there any in the contract of lease of the trunk lines, since the PLDT knew, or ought to have known, at the time that their use by the Bureau was to be public throughout the Islands, hence the Bureau was neither guilty of fraud, abuse, or misuse of the poles of the PLDT; and, in view of serious public prejudice that would result from the disconnection of the trunk lines, declared the preliminary injunction permanent, although it dismissed both the complaint and the counterclaims. Both parties appealed. Taking up first the appeal of the Republic, the latter complains of the action of the trial court in dismissing the part of its complaint seeking to compel the defendant to enter into an interconnecting contract with it, because the parties could not agree on the terms and conditions of the interconnection, and of its refusal to fix the terms and conditions therefor. 15 We agree with the court below that parties can not be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation, or undue influence (Articles 1306, 1336, 1337, Civil Code of the Philippines). But the court a quo has apparently overlooked that while the Republic may not compel the PLDT to celebrate a contract with it, the Republic may, in the exercise of the sovereign power of eminent domain, require the telephone company to permit interconnection of the government telephone system and that of the PLDT, as the needs of the government service may require, subject to the payment of just compensation to be determined by the court. Nominally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why the said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement of right of way. The use of the PLDT's lines and services to allow inter-service connection between both telephone systems is not much different. In either case private property is subjected to a burden for public use and benefit. If, under section 6, Article XIII, of the Constitution, the State may, in the interest of national welfare, transfer utilities to public ownership upon payment of just compensation, there is no reason why the State may not require a public utility to render services in the general interest, provided just compensation is paid therefor. Ultimately, the beneficiary of the interconnecting service would be the users of both telephone systems, so that the condemnation would be for public use. The Bureau of Telecommunications, under section 78 (b) of Executive Order No. 94, may operate and maintain wire telephone or radio telephone communications throughout the Philippines by utilizing existing facilities in cities, towns, and provinces under such terms and conditions or arrangement with present owners or operators as may be agreed upon to the satisfaction of all concerned; but there is nothing in this section that would exclude resort to condemnation proceedings where unreasonable or unjust terms and conditions are exacted, to the extent of crippling or seriously hampering the operations of said Bureau. A perusal of the complaint shows that the Republic's cause of action is predicated upon the radio telephonic isolation of the Bureau's facilities from the outside world if the severance of interconnection were to be carried out by the PLDT, thereby preventing the Bureau of Telecommunications from properly discharging its

TRANSPORTATION CASES functions, to the prejudice of the general public. Save for the prayer to compel the PLDT to enter into a contract (and the prayer is no essential part of the pleading), the averments make out a case for compulsory rendering of inter-connecting services by the telephone company upon such terms and conditions as the court may determine to be just. And since the lower court found that both parties "are practically at one that defendant (PLDT) is entitled to reasonable compensation from plaintiff for the reasonable use of the former's telephone facilities" (Decision, Record on Appeal, page 224), the lower court should have proceeded to treat the case as one of condemnation of such services independently of contract and proceeded to determine the just and reasonable compensation for the same, instead of dismissing the petition. This view we have taken of the true nature of the Republic's petition necessarily results in overruling the plea of defendant-appellant PLDT that the court of first instance had no jurisdiction to entertain the petition and that the proper forum for the action was the Public Service Commission. That body, under the law, has no authority to pass upon actions for the taking of private property under the sovereign right of eminent domain. Furthermore, while the defendant telephone company is a public utility corporation whose franchise, equipment and other properties are under the jurisdiction, supervision and control of the Public Service Commission (Sec. 13, Public Service Act), yet the plaintiff's telecommunications network is a public service owned by the Republic and operated by an instrumentality of the National Government, hence exempt, under Section 14 of the Public Service Act, from such jurisdiction, supervision and control. The Bureau of Telecommunications was created in pursuance of a state policy reorganizing the government offices to meet the exigencies attendant upon the establishment of the free and independent Government of the Republic of the Philippines, and for the purpose of promoting simplicity, economy and efficiency in its operation (Section 1, Republic Act No. 51) and the determination of state policy is not vested in the Commission (Utilities Com. vs. Bartonville Bus Line, 290 Ill. 574; 124 N.E. 373). Defendant PLDT, as appellant, contends that the court below was in error in not holding that the Bureau of Telecommunications was not empowered to engage in commercial telephone business, and in ruling that said defendant was not justified in disconnecting the telephone trunk lines it had previously leased to the Bureau. We find that the court a quo ruled correctly in rejecting both assertions. Executive Order No. 94, Series of 1947, reorganizing the Bureau of Telecommunications, 16 expressly empowered the latter in its Section 79, subsection (b), to "negotiate for, operate and maintain wire telephone or radio telephone communication service throughout the Philippines", and, in subsection (c), "to prescribe, subject to approval by the Department Head, equitable rates of charges for messages handled by the system and/or for time calls and other services that may be rendered by the system". Nothing in these provisions limits the Bureau to non-commercial activities or prevents it from serving the general public. It may be that in its original prospectuses the Bureau officials had stated that the service would be limited to government offices: but such limitations could not block future expansion of the system, as authorized by the terms of the Executive Order, nor could the officials of the Bureau bind the Government not to engage in services that are authorized by law. It is a well-known rule that erroneous application and enforcement of the law by public officers do not block subsequent correct application of the statute (PLDT vs. Collector of Internal Revenue, 90 Phil. 676), and that the Government is never estopped by mistake or error on the part of its agents (Pineda vs. Court of First Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. vs. Pineda, 98 Phil. 711, 724). The theses that the Bureau's commercial services constituted unfair competition, and that the Bureau was guilty of fraud and abuse under its contract, are, likewise, untenable. First, the competition is merely hypothetical, the demand for telephone service being very much more than the supposed competitors can supply. As previously noted, the PLDT had 20,000 pending applications at the time, and the Bureau had another 5,000. The telephone company's inability to meet the demands for service are notorious even now. Second, the charter of the defendant expressly provides: SEC. 14. The rights herein granted shall not be exclusive, and the rights and power to grant to any corporation, association or person other than the grantee franchise for the telephone or electrical transmission of message or signals shall not be impaired or affected by the granting of this franchise: (Act 3436) And third, as the trial court correctly stated, "when the Bureau of Telecommunications subscribed to the trunk lines, defendant knew or should have known that their use by the subscriber was more or less public and all embracing in nature, that is, throughout the Philippines, if not abroad" (Decision, Record on Appeal, page 216). The acceptance by the defendant of the payment of rentals, despite its knowledge that the plaintiff had extended the use of the trunk lines to commercial purposes, continuously since 1948,

TRANSPORTATION CASES implies assent by the defendant to such extended use. Since this relationship has been maintained for a long time and the public has patronized both telephone systems, and their interconnection is to the public convenience, it is too late for the defendant to claim misuse of its facilities, and it is not now at liberty to unilaterally sever the physical connection of the trunk lines. ..., but there is high authority for the position that, when such physical connection has been voluntarily made, under a fair and workable arrangement and guaranteed by contract and the continuous line has come to be patronized and established as a great public convenience, such connection shall not in breach of the agreement be severed by one of the parties. In that case, the public is held to have such an interest in the arrangement that its rights must receive due consideration. This position finds approval in State ex rel. vs. Cadwaller, 172 Ind. 619, 636, 87 N.E. 650, and is stated in the elaborate and learned opinion of Chief Justice Myers as follows: "Such physical connection cannot be required as of right, but if such connection is voluntarily made by contract, as is here alleged to be the case, so that the public acquires an interest in its continuance, the act of the parties in making such connection is equivalent to a declaration of a purpose to waive the primary right of independence, and it imposes upon the property such a public status that it may not be disregarded" citing Mahan v. Mich. Tel. Co., 132 Mich. 242, 93 N.W. 629, and the reasons upon which it is in part made to rest are referred to in the same opinion, as follows: "Where private property is by the consent of the owner invested with a public interest or privilege for the benefit of the public, the owner can no longer deal with it as private property only, but must hold it subject to the right of the public in the exercise of that public interest or privilege conferred for their benefit." Allnut v. Inglis (1810) 12 East, 527. The doctrine of this early case is the acknowledged law. (ClintonDunn Tel. Co. v. Carolina Tel. & Tel. Co., 74 S.E. 636, 638). It is clear that the main reason for the objection of the PLDT lies in the fact that said appellant did not expect that the Bureau's telephone system would expand with such rapidity as it has done; but this expansion is no ground for the discontinuance of the service agreed upon. The last issue urged by the PLDT as appellant is its right to compensation for the use of its poles for bearing telephone wires of the Bureau of Telecommunications. Admitting that section 19 of the PLDT charter reserves to the Government the privilege without compensation of using the poles of the grantee to attach one ten-pin crossarm, and to install, maintain and operate wires of its telegraph system thereon; Provided, however, That the Bureau of Posts shall have the right to place 17 additional cross-arms and wires on the poles of the grantee by paying a compensation, the rate of which is to be agreed upon by the Director of Posts and the grantee; the defendant counterclaimed for P8,772.00 for the use of its poles by the plaintiff, contending that what was allowed free use, under the aforequoted provision, was one ten-pin cross-arm attachment and only for plaintiff's telegraph system, not for its telephone system; that said section could not refer to the plaintiff's telephone system, because it did not have such telephone system when defendant acquired its franchise. The implication of the argument is that plaintiff has to pay for the use of defendant's poles if such use is for plaintiff's telephone system and has to pay also if it attaches more than one (1) ten-pin cross-arm for telegraphic purposes. As there is no proof that the telephone wires strain the poles of the PLDT more than the telegraph wires, nor that they cause more damage than the wires of the telegraph system, or that the Government has attached to the poles more than one ten-pin cross-arm as permitted by the PLDT charter, we see no point in this assignment of error. So long as the burden to be borne by the PLDT poles is not increased, we see no reason why the reservation in favor of the telegraph wires of the government should not be extended to its telephone lines, any time that the government decided to engage also in this kind of communication. In the ultimate analysis, the true objection of the PLDT to continue the link between its network and that of the Government is that the latter competes "parasitically" (sic) with its own telephone services. Considering, however, that the PLDT franchise is non-exclusive; that it is well-known that defendant PLDT is unable to adequately cope with the current demands for telephone service, as shown by the number of pending applications therefor; and that the PLDT's right to just compensation for the services rendered to the Government telephone system and its users is herein recognized and preserved, the objections of defendant-appellant are without merit. To uphold the PLDT's contention is to subordinate the needs of the general public to the right of the PLDT to derive profit from the future expansion of its services under its non-exclusive franchise. WHEREFORE, the decision of the Court of First Instance, now under appeal, is affirmed, except in so far as it dismisses the petition of the Republic of the Philippines to compel the Philippine Long Distance Telephone Company to continue servicing the Government telephone system upon such terms, and for a compensation, that the trial court may determine to be just, including the period elapsed from the filing of the original complaint or petition. And for this purpose, the records are

TRANSPORTATION CASES ordered returned to the court of origin for further hearings and other proceedings not inconsistent with this opinion. No costs. the same, the oppositions filed in this case are hereby overruled and the certificate of public convenience applied for, may be, as it is hereby GRANTED to the applicant .... It is mainly at the findings above-quoted that the petitioners, all bus operators, have aimed their present petition for review, following the rejection of their motion for reconsideration by the Commission en banc. The petitioners want to make capital of the declarations of their two witnesses, Federico Dantayana and Arturo Clemente. Let us appraise these declarations. Dantayana, an official inspector of the Commission, testified that he posted himself somewhere along the route covered by the respondent's application, and conducted a survey of the number of passenger vehicles availing themselves of the use of the Shaw Boulevard in going to and coming from Pasig, Rizal. The inspection sheets offered in evidence show that buses with a usual loading capacity of from 65 to 75 passengers each were barely half-filled on the whole, while "jitneys" with a usual loading capacity of 13 passengers each actually carried an average of only 6 passengers each for every trip. These facts, the petitioners argue, illustrate an excess of available passenger vehicles over the actual needs of the riding public. They negate the advisability of allowing the applicant's "jitneys" to serve the route between barrio Pinagbuhatan and the crossing of Highway 54 and Shaw Boulevard in Mandaluyong. Closely scrutinizing Dantayana's testimony, we cannot acquiesce in the petitioners' conclusions. The length of the route which the respondent applied for is divided into two parts. The first starts at barrio Pinagbuhatan and ends at the poblacion of the town of Pasig. The second begins at the poblacion and winds up at the crossing of Highway 54 and Shaw Boulevard in Mandaluyong. Dantayana's survey covered passenger vehicles passing through the second part of the route applied for. It appears, however, that the second part is actually only a converging point for passenger vehicles coming from towns east of Pasig, not to mention other passenger vehicles, equally numerous, destined for Manila coming from their terminals located in the Pasig poblacion itself. In short, Dantayana's survey does not at all indicate the volume of the traffic of passenger vehicles corning all the way from barrio Pinagbuhatan. After all, the primary objective of the grant of the certificate of public convenience in question was the welfare of the inhabitants of barrio Pinagbuhatan and other inhabitants along the first part of the route applied for. The petitioners' only other witness, Arturo Clemente, the president of both the Mandbusco, Inc. and of the Pasig-Manila Bus Operators

MANDBUSCO, INC., MANDALUYONG BUS CO., INC., PRESCILO CAMAGANACAN, BLAS REYES and ANASTACIO ESMAO, petitioners, vs.PABLO FRANSCISCO, respondent. The respondent Pablo Francisco applied for a certificate of public convenience covering the operation of five (5) PUJ jitneys from barrio Pinagbuhatan, Pasig, Rizal to the intersection of Highway 54 and Shaw Boulevard, Mandaluyong, Rizal (otherwise known as the "Crossing") and viceversa. Hearing was conducted, after due notice and publication, enabling both the respondent applicant and the oppositors Mandbusco, Inc., et al., to adduce their respective evidence. On June 15, 1964 a decision was rendered by the Public Service Commission granting the respondent's application, it appearing to a division of three commissioners that: After [a] careful study of the evidence presented by the parties, the Commission finds that the proposed service will benefit the people of Bo. Pinagbuhatan considering that there is no direct service from that place to the crossing of Highway 54 and Shaw Blvd. It can be noted also that the provincial capitol, provincial hospital and other big establishments are located past the Poblacion of Pasig and nearer to the other proposed terminal at Highway 54 and Shaw Blvd. and that residents from Pinagbuhatan have to take 2 rides to reach these places. The dispositive portion of the decision reads: Finding further from the evidence adduced by the applicant that he is [a] Filipino citizen, legally and financially capable [of operating and maintaining] 18

TRANSPORTATION CASES Association, testified that a total of 125 buses are operating between Pasig, Rizal and Quiapo, Manila, all taking the Shaw Boulevard, which thoroughfare is part of the route applied for by the respondent. Likewise, a total of 51 "jitneys" serve that same portion of Shaw Boulevard to and from the various points in Pasig. In addition, a total of 171 buses coming from towns east of Pasig pass daily through the latter town, proceed to Shaw Boulevard, and then to Manila. All these public conveyances, the witness pointed out, are more than adequate to meet the transportation needs of the riding public in the areas served. The petitioners, the witness added, have made substantial investments in their business and, therefore, the allowance of additional public transportation vehicles, clearly unneeded, would result in ruinous competition and threaten the stability of their financial positions. This argument suffers, however, from the same basic oversight afflicting the testimony of Dantayana. All the vehicles mentioned by Clemente, except possibly for two buses a matter which we will shortly discuss do not run the full course of the route applied for by the respondent. The overlapping of service exists only with regard to the second part of that route, and this is clearly unavoidable since the stretch of road from the Pasig poblacion to the crossing serves as a common access to Highway 54 whence passengers embark for separate destinations. In the course of the hearing the petitioners presented a certificate of public convenience allowing the Mandaluyong Bus Co., Inc. to utilize two of their buses, and a third as reserve, for the line from Pinagbuhatan (Pasig, Rizal) to Plaza Miranda (Quiapo, Manila) via Mandaluyong, Rizal. This, according to petitioners, should completely negate the finding of the Commission that there exists no direct service from barrio Pinagbuhatan to the crossing of Highway 54 and Shaw Boulevard. We disagree. The certificate of public convenience adverted to merely proves that authority has been given to the grantee to operate public utility vehicles in the designated territory. It cannot serve as proof that the grantee has made actual use of such authority. Lacking any positive proof that the petitioners (or any of them) adequately serve the transportation requirements of the inhabitants of barrio Pinagbuhatan and the adjacent places, we are not inclined to overturn the finding of fact of the Commission, realizing as we do, after the reading of the record, that the same is reasonably supported by evidence.1 The petitioners invoke the "old operator rule," which is to the effect that a public utility operator should be shielded from ruinous competition by affording him the opportunity to improve his equipment and service before allowing a new operator to serve in the same territory he covers. 2 This rule has no application in this case because the certificate of public convenience granted to the respondent is a 19 maiden franchise covering the particular line connecting barrio Pinagbuhatan and the crossing of Highway 54 and Shaw Boulevard. The certificate of public convenience authorizing the Mandaluyong Bus Co., Inc. to operate two buses, with one reserve, on the line extending from barrio Pinagbuhatan to Plaza Miranda in Quiapo, Manila, while in a sense overlapping with the authority given to the respondent, was essentially intended to cover the great distance run between barrio Pinagbuhatan and Quiapo, Manila, via Pasig Boulevard, P. Sanchez, V. Mapa, Valenzuela, Old Sta. Mesa, Sta. Mesa Boulevard, Legarda, Tanduay, P. Casal, Ayala Bridge, Concepcion, Arroceros, Quezon Bridge and Quezon Boulevard. Upon the other hand, the grant in favor of the respondent covers only a brief shuttle run of 8 kilometers linking barrio Pinagbuhatan directly with the Pasig poblacion and the crossing of Highway 54 and Shaw Boulevard. The Commission favored the respondent with the certificate of public convenience in question; we are not prepared to substitute our discretion with that of the Public Service Commission in the determination of what can best meet the requirements of public convenience. The ability of the respondent to finance the maintenance and operation of the service he applied for is likewise questioned by the petitioners. This issue is now academic for the reason that the respondent has, since his receipt of the franchise, actually registered the five units covered by the authority. He has, moreover, registered one reserve unit for the same line, with the approval of the Commission. These units, plus the assets he proved he owns, are sufficient guaranty that the respondent can sustain the service he applied for.3 The petitioners, in their brief, invoke the Public Service Commission Memorandum of May 15, 1963 and its Supplemental Memorandum of July 22, 1963, with a view to establishing that the certificate of public convenience in favor of respondent was issued in violation of these memoranda. The first memorandum comes as a suggestion to all Commissioners that action on all pending applications, for certificates of public convenience for the operation of passenger service in Manila, Quezon City, Pasay City, Caloocan, Mandaluyong, Paraaque, San Juan and Makati, be suspended until further studies could be made. The supplemental memorandum contains an order addressed to the Secretary of the Commission enjoining him from calendaring for hearing or for continuation of hearing any application for passenger service in Manila and suburbs; and any decision purporting to have been rendered prior to May 15, 1963 but had not been turned over to the Secretary and recorded prior to the date of the order, should be withheld until further orders. It is not difficult to see that the territory applied for is not among the one enumerated in the Memorandum of May 15, 1963. The respondent's service stretches mainly across the town of Pasig in Rizal, and if it

TRANSPORTATION CASES abuts into a tiny fraction of Mandaluyong, one of the areas covered by the enumeration, the incursion is incidental and does not necessarily render Mandaluyong the mainstream of the respondent's service. Moreover, even if the memorandum in question comprehend the present application, still public welfare and convenience, where positively found by the Commission to be subserved, should prevail.4 ACCORDINGLY, the decision appealed from is hereby affirmed. No pronouncement as to costs. TEODORO R. YANGCO, petitioner-appellant, vs.SIMPLICIO ESTEBAN, respondent-appellee. This is an appeal from orders of the Public Service Commission in which it finally permitted respondent-appellee to operate one Ford truck once a day between Subic and Olongapo, Philippine Islands. Both parties are operators of trucks under certificates of public convinience and necessity within the Province of Zambales. There is also another operators between the points in question. This question has been repeatedly before the Public Service Commission. On a complaint of petitioner-appellant, the Public Service Commission dismissed the complaint, in other words permitted the operation. Subsequently, the Public Service Commission ordered respondent-appellee to stop operating over these eleven kilometers, and that order became final. Subsequently, he asked permission to operate one truck one trip a day over this route, which was granted by the commission. On reconsideration, the Public Service Commission denied it, and on reconsideration, it regranted it. That the Public Service Commission should be confronted with the necessity of making six decisions on the question whether one Ford truck should be allowed to make one trip a day over eleven kilometers, shows a most peculiar and unjustified abuse of the privileges of litigation. The evidence clearly shows that the two operators now on this territory often operate their busses virtually empty. One of the operators, petitioner-appellant, stands ready to increase his service should the Public Service Commission decide that it is for the interest of the Public so to do. Where two operators are more than serving the public, there is no reason to permit a third operator to engage in competition with them. The fact that it is only one trip and of little consequence, is not a sufficient reason to grant it. There is a real public interest in this matter which seems to have been lost sight of. The Public Service Commission and the courts are maintained at considerable expenses to the public at large, Litigious and contentious applicants for the right of 20 using our highways for the purpose of carrying a few passengers should not be permitted so to monopolize the time of the Public Service Commission as to render it difficult for that body to attend to the many important and complicated questions involving real public interest presented to it for action. The last orders in this case are without real foundation in the evidence of record and are contrary to the principles this court has enunciated in Batangas Transportation Co. vs. Orlanes (52 Phil., 455), and Visayan Rapid Transit Company vs. Viajante Interino Co., G.R. No. 36262.1

MARIA CONCEPCION PAEZ VDA. DE CRUZ, in her capacity as Administratrix of the Intestate Estate of Don PEDRO B. CRUZ, petitioner, vs.TOBIAS P. MARCELO, respondent. The decision sought to be jointly reviewed under Rule 43 of the Rules of Court is the following:. (1) The grant to Tobias P. Marcelo of a certificate of public convenience to install, maintain and operate a 15 Ton Ice Plant in the City of Manila, under Public Service Commission Case No. 117717; and. (2) The denial of the application of Maria Concepcion Paez Vda. de Cruz (in her capacity as the Administratrix of the Intestate Estate of Don Pedro B. Cruz), for authority to install, maintain and operate a 15 Ton Ice Plant in the City of Manila, docketed as Public Service Commission Case No. 118477. These two cases are now before the Court and docketed G.R. Nos. L-15301 and L-15302. On 4 January 1951 in case No. 40233 the Public Service Commission granted to Pedro B. Cruz a certificate of public convenience to install, maintain and operate a 15-ton ice plant in Tondo, Manila, for a period of fifteen years from 5 December 1945. Sometime later, Pedro B. Cruz, the grantee, died and on 26 January 1956 his widow, Maria Concepcion Vda. de Cruz, was appointed administratrix of his intestate estate (Exhibit DCruz; case No. 118477). On 5 December 1957 Maria Concepcion Paez Vda. de Cruz in her capacity as Administratrix of the intestate estate of Pedro B. Cruz filed an application for authority to substitute worn out equipment of the above-mentioned 15-ton Ice Plant and to transfer its site from Tondo, Manila, to Del Pan Street, San Nicolas, Manila. This application

TRANSPORTATION CASES was docketed as Case No. 111380 in the Public Service Commission (Exhibit S-Cruz; case No. 118477). On 21 January 1958 an inspection was made by the engineer of the Public Service Commission on the site of the ice plant at Nepomuceno Street, Tondo, Manila, and he found that the site where the ice plant was formerly installed was being used as a pig pen and that there was no more ice plant machinery and equipment at the place. On 29 January 1958 and 10 February 1958 the Ice and Cold Storage Industries of the Philippines and Tobias P. Marcelo, respectively, each filed, before the Public Service Commission, a petition asking for the cancellation of the certificate of public convenience of the late Pedro B. Cruz, on the ground of abandonment on the part of the grantee, the deceased Pedro B. Cruz, while he was still living, and by his administratrix, Maria Concepcion Paez Cruz, after his (the grantee's) death. (See Exhibit I-1 Marcelo, p. 44, Record of Case No. 117717.). On 18 March 1958, at the hearing of the application for substitution of equipment and transfer of site filed by the Administratrix of Pedro B. Cruz, docketed as Case No. 111380, counsel for the Ice and Cold Storage Industries of the Philippines and Tobias P. Marcelo moved that the hearing of the case be suspended until after their petition for cancellation of the certificate in question had been resolved, claiming that if their petition for cancellation were granted there would be no basis for applicant's petition for substitution of equipment and change of site. Applicant claimed at the hearing that his plant is installed at Nepomuceno Street and to settle the matter the Commission suspended the hearing advising the parties that an engineer would be sent to inspect the plant to find out whether it is installed and in operation. The very same afternoon of 18 March 1958, the plant was inspected again bythe engineer of the Public Service Commission, who, in a memorandum submitted to the Commission on 19 March 1958, reported that the building wherein the ice plant used to be was used as pig pen as found by him in his previous inspection of 21 January 1958 although the principal ice making equipment and machinery were being delivered to the plant while he was doing his inspection on the afternoon of 18 March 1958. 1wph1.t On 31, March 1958, by a decision rendered in Case No. 40233, the Public Service Commission, finding Pedro B. Cruz to have failed to install the Ice Plant in accordance with the certificate of public convenience issued to him on 4 January 1951, cancelled and revoked the said certificate and in the same decision, the application for substitution and transfer of site filed by the administratrix of the 21 deceased Pedro B. Cruz, was dismissed (Exhibit I1 Marcelo, case No. 117717, p. 47). Sometime thereafter, the Ice and Cold Storage Industries of the Philippines and Tobias P. Marcelo, in separate cases filed as Cases Nos. 111580 and 115586, respectively, applied for authority to increase their respective ice plant production capacities with an additional amount of 55 tons in lieu of the 15-ton ice plant of Pedro B. Cruz, which had been cancelled and revoked, and of the 40-ton ice plant of a certain Vicente San Pedro. These petitions were dismissed by the Commission on the ground that the order for the cancellation of the certificates of both Pedro B. Cruz and Vicente San Pedro were not yet final as motions for reconsideration had been filed in both cases. On 1 July 1958 the motion for reconsideration of the order entered by the Public Service Commission on 31 March 1958 in case No. 40233, filed by Maria Concepcion Paez Vda. de Cruz as administratrix of the late Pedro B. Cruz, cancelling and revoking the certificate of Pedro B. Cruz, was denied. Subsequently, after the order for the cancellation and revocation of the certificate of public convenience of the deceased Pedro B. Cruz became final, four applications were filed before the Public Service Commission by different applicants, all of whom were authorized ice plant operators of Manila and suburbs, praying for authority to install, maintain and operate and/or increase their daily production capacities with an additional amount of 15 tons in the City of Manila, in lieu of the 15 Ton Ice Plant formerly granted to the late Pedro B. Cruz, whose certificate of public convenience had been cancelled and revoked. The applicants in the chronological order of their filing were-. Tobias P. Marcelo . . . . . . . . Case No. . . . . . . . . . . . . . . . . . . . . . . . 117717 ...... Date of filing: 25 July 1958. Ice and Cold Storage Case No. Industries of the Philippines, 118300 Inc. . . . . Date of filing: 22 August 1958 Nemesio Buenaventura . . . . Case No. . . . . . . . . . . . . . . . . . . . . . . . 11842 ..... Date of filing: 26 August 1958. Maria Concepcion Paez Vda. de Cruz. . . . . . . . . . . . . . . . . . . . Case No. 118477 Date of filing : 27 August 1958.

TRANSPORTATION CASES On 27 February 1959, in the four cases mentioned, the Public Service Commission finding all the applicants to be equally financially capable of putting up the 15-ton ice plant but considering not advisable nor practical to split the 15 tons among the applicants, decided to grant the certificate on the basis of priority of the date of filing of the applications and granted it to Tobias P. Marcelo who was the first of the applicants. Of the three other applicants whose applications were denied, only Maria Concepcion Paez Vda. de Cruz, the herein petitioner, appealed. The main issue involved in these cases is Whether an operator whose certificate of public convenience was cancelled and revoked because of his abandonment of the operation of the public service right formerly granted to him, can avail himself of the preferential rights of an old operator in the subsequent grant or re-issuance of the same particular line of public service (ice-plant); and/or. Whether the Public Service Commission, in the discharge of its discretion, was right, under the law, to apply the rule of priority of date of filing an application, in a case where all the applicants were financially capable of putting up the required public service after considering that it was not advisable and practical to split the said public service among the applicants. There is indeed a sound rule that old operators must be protected in their investments as long as they are willing and able to serve the public need in the proper and adequate manner. But this rule is not absolute, for this Court has time and again held that the grant of a certificate or preference to a new operator is in order where the old operators were given a chance to improve or complete their service but have failed to do so (Jose de la Rosa vs. Pedro V. Corpus, 66 Phil. 8 and G.R. No. L-3622, Interprovincial Autobus Company, Inc. vs. Lubanton, 26 July 1951). In the instant case, the petitioner has not only failed to improve nor complete the service, but has abandoned it. It is very clear that the herein petitioner, while acting as the administratrix of the late Pedro B. Cruz, and the latter while still living, had abandoned the operation of their 15-ton ice plant in such a manner that the ice plant was converted into a pig pen. Such abandonment is sufficient cause for the cancellation of a certificate of public convenience, for public necessity cannot be made to wait nor sacrifice for private convenience, as the Public Service Commission said, and it was fully quoted, in the case of G.R. No. L-7111, Paredes vs. Public Service Commission, 30 May 1955, which is again quoted:. ... an operator who unjustifiably abandons his service for two or three years by not registering the 22 necessary equipment forfeits his right ... the service authorized to him. ... Furthermore, an abandonment is a violation of the law, as public service may not be abandoned to the prejudice of the interest of the public. In the present case, it is not only the herein petitioner who, acting in her capacity as the administratrix of the late Pedro B. Cruz, abandoned the service, but also her predecessor. For that reason she should not be allowed to avail of any right of preference under the old operator rule. And a certificate of public convenience is denied to a successor, where the predecessor has violated the law (G.R. No. L14991-4, Buenaflor vs. Camarines Sur Industry Corp., 30 May 1960). On the second issue, there is no valid reason for the Court to disturb the discretion of the Public Service Commission in applying the rule on priority of application. In the case of De los Santos vs. Pasay Transportation Co., 54 Phil. 357, this Court held that ... Priority of application, while an element to be considered, is not ordinarily of sufficient importance to control the granting of a certificate of public convenience. ... The question to be determined under such circumstances is one calling for the sound judgment and discretion of the commission, and where at the time of the hearing it has before if the applications of various transportation companies covering the same routes, or routes traversing and serving the same territory, it is authorized to determine which of the applicants can best meet the requirements of the public convenience and necessity ..... But all other conditions being equal as in these cases priority in the filing of application for a certificate of public convenience becomes an important factor in the granting thereof (Batangas Transportation Co., et al. vs. Orlanes, et al., 55 Phil. 745; G.R. Nos. L-12911-12; Benitez vs. Santos and L-13073-74, Lopez vs. Santos, 29 February 1960; and G. R. No. L-13270-71, Pineda vs. Carandang, 24 March 1960.) The issuance of certificate of public convenience and necessity as between two applicants who are both qualified rests on the sound discretion of the Public Service Commission (G.R. No. L-12433, Papa vs. Santiago, 28 February 1959).. The decision under review in cases Nos. 117717 and 118477 (G.R. Nos. L-15302 and L-15302) is affirmed, with costs against the petitioner..

TRANSPORTATION CASES amendment to the application, the applicant included another route from Hagonoy to Quingua via Paombong and Malolos and vice versa. Cases Nos. 14467 and 16076 were heard first and decided in favor of Pasay Transportation Co. on June 13, 1928. Simplicio de los Santos presented a motion for reconsideration in regard to case No. 16076 which was denied on June 21, 1928. No exception was entered and no appeal taken, so that the decision in that case became final. SIMPLICIO DE LOS SANTOS, petitioner-appellant, vs.PASAY TRANSPORTATION CO, ET. AL., oppositors-appellees. PASAY TRANSPORTATION CO., petitioners-appellees, vs.SIMPLICIO SANTOS, oppositor-appellant. ET DE AL., LOS Case No. 14088 was decided on June 18, 1928, and the application of Simplicio de los Santos in that case denied. Thereafter the Pasay Transportation Co. filed a supplementary application in case No. 16076 for the extension of its operations from Bigaa to Malolos via Bulacan, and on motion of Santos, case No. 14088 was reopened for reception of additional evidence. The supplementary application in case No. 16076 was granted, and Santos' application in case No. 14088 was again denied on March 19, 1929. The usual motion for a new trial was filed, and upon its denial, Simplicio de los Santos appealed to this court through a petition for review. The appellant assigns as errors (1) that the commission erred in failing to give preference to his application for certificate of public convenience, inasmuch as that application was presented prior to the application of the Pasay Transportation Co.; (2) that the commission erred in denying the certificate of public convenience to Simplicio de los Santos for the operation of the line from Manila to Hagonoy via Caloocan, Malabon, etc., on the ground that the bridges connecting Malabon with Obando and Obando with Taliptip had not been constructed; and (3) that the commission erred in taking into consideration the fact that the appellant failed to operate ten auto-trucks under the special permit granted by the commission. In regard to the first assignment of error, it may be noted that the appellant endeavors to bring cases Nos. 14467 and 16076 into the appeal. These cases had become final before the appeal was taken and, strictly speaking, are not entitled to consideration here, but assuming, without conceding, that they were brought properly before us, we should still feel constrained to hold that the assignment in question is of no substantial merit. Priority of application, while an element to be considered, is not ordinarily of sufficient importance to control the granting of a certificate of public convenience. (Chicago Motor Bus Co. vs. Chicago Stage Co., 287 Ill. 320.) In the case of Sohngen vs. Public Utilities Commission (115 Ohio St., 449), the court says: It is contended that the commission should have granted the application of the Traction Company because it was filed some time prior to that of King

On January 6, 1928, Simplicio de los Santos applied to the Public Service Commission for a certificate of public convenience for the operation of auto-trucks along the line Manila-Hagonoy, via Caloocan, Malabon, Obando, Taliptip, Bulacan, Malolos and Paombong. The case was given the number 14088. Two weeks later, a special permit for a period of two months was issued to the applicant on the condition that he would put ten trucks in operation and that he would render reports to the commission concerning the revenue and expenses incurred in the operation of his autotrucks used under said special permit. The Pasay Transportation Co. filed an opposition to Santos' application on the ground that it already had a pending application for a certificate of public convenience to operate an auto-bus service similar to the system of the Manila Electric Co. on the same line over which the herein applicant proposed to operate. The opponent further called attention to the fact that De los Santos had violated the conditions of the aforesaid special permit by supplying only one auto-truck instead of ten and in failing to make report to the commission as provided for in said permit. In the meantime, the Pasay Transportation Co. applied for a certificate of public convenience for the operation of auto-busses between the Divisoria Market in Manila and the municipality of Calumpit, the intermediate points being Sangandaan, Caloocan, Polo, Meycawaya, Marilao, Bulacan, Bigaa, Guiguinto, Quingua and Pulilan, with branches to San Rafael and Baliuag, via Quingua, and to Obando via Polo. This case was given the number 14467. Later on, the Pasay Transportation Co. filed another application, case No. 16076, for a certificate of convenience for the operation of busses between Manila and Hagonoy, through Caloocan, Malabon, Obando, Taliptip, municipality of Bulacan, Malolos and Paombong. In an 23

TRANSPORTATION CASES Brothers. Such claim is not well founded. The mere filing of the application does not entitle the applicant to any pre-emption of the route or territory which it traverses. The question to be determined under such circumstances is one calling for the sound judgment and discretion of the commission, and where at the time of the hearing it has before it the applications of various transportation companies covering the same routes, or routes traversing and serving the same territory, it is authorized to determine which of the applicants can best meet the requirements of the public convenience and necessity, and where it does not affirmatively appear from the record that it has acted unreasonably or unlawfully, its order will be affirmed. As to the second assignment of error, it is sufficient to say that under the practise adopted by the Public Service Commission, a certificate of public convenience will generally not be issued until the road on which the applicant desires to operate is constructed. So far from being objectionable, that rule is, in our opinion, wholesome and may often obviate complications and interference with the road construction. The third assignment of error is also of no consequence. The appellant's failure to meet the conditions of the special permit indicates lack of reliability, an element of great importance in the public service. The orders appealed from are affirmed with the costs against the appellant. So ordered.

RIZAL LIGHT & ICE CO., INC., petitioner, vs.THE MUNICIPALITY OF MORONG, RIZAL and THE PUBLIC SERVICE COMMISSION, respondents. RIZAL LIGHT & ICE CO., INC., petitioner, vs.THE PUBLIC SERVICE COMMISSION and MORONG ELECTRIC CO., INC., respondents. These two cases, being interrelated, are decided together. Case G.R. No. L-20993 is a petition of the Rizal Light & Ice Co., Inc. to review and set aside the orders of respondent Public Service Commission, 1 dated August 20, 1962, and February 15, 1963, in PSC Case No. 39716, cancelling and revoking the certificate of public convenience and necessity and forfeiting the franchise of said petitioner. In the same petition, the petitioner prayed for the issuance of a writ of preliminary injunction ex parte suspending the effectivity of said orders and/or enjoining respondents Commission and/or Municipality of Morong, Rizal, from enforcing in any way the cancellation and revocation of petitioner's franchise and certificate of public convenience during the pendency of this appeal. By resolution of March 12, 1963, this Court denied the petition for injunction, for lack of merit. Case G. R. L-21221 is likewise a petition of the Rizal Light & Ice Co., Inc. to review and set aside the decision of the Commission dated March 13, 1963 in PSC Case No. 62-5143 granting a certificate of public convenience and necessity to respondent Morong Electric Co., Inc. 2 to operate an electric light, heat and power service in the municipality of Morong, Rizal. In the petition Rizal Light & Ice Co., Inc. also prayed for the issuance of a writ of preliminary injunction ex parte suspending the effectivity of said decision. Per resolution of this Court, dated May 6, 1963, said petition for injunction was denied. The facts, as they appear in the records of both cases, are as follows: Petitioner Rizal Light & Ice Co., Inc. is a domestic corporation with business address at Morong, Rizal. On August 15, 1949, it was granted by the Commission a certificate of public convenience and necessity for the installation, operation and maintenance of an electric light, heat and power service in the municipality of Morong, Rizal.

24

TRANSPORTATION CASES In an order dated December 19, 1956, the Commission required the petitioner to appear before it on February 18, 1957 to show cause why it should not be penalized for violation of the conditions of its certificate of public convenience and the regulations of the Commission, and for failure to comply with the directives to raise its service voltage and maintain them within the limits prescribed in the Revised Order No. 1 of the Commission, and to acquire and install a kilowattmeter to indcate the load in kilowatts at any particular time of the generating unit. 3 For failure of the petitioner to appear at the hearing on February 18, 1957, the Commission ordered the cancellation and revocation of petitioner's certificate of public convenience and necessity and the forfeiture of its franchise. Petitioner moved for reconsideration of said order on the ground that its manager, Juan D. Francisco, was not aware of said hearing. Respondent municipality opposed the motion alleging that petitioner has not rendered efficient and satisfactory service and has not complied with the requirements of the Commission for the improvement of its service. The motion was set for hearing and Mr. Pedro S. Talavera, Chief, Industrial Division of the Commission, was authorized to conduct the hearing for the reception of the evidence of the parties. 4 Finding that the failure of the petitioner to appear at the hearing set for February 18, 1957 the sole basis of the revocation of petitioner's certificate was really due to the illness of its manager, Juan D. Francisco, the Commission set aside its order of revocation. Respondent municipality moved for reconsideration of this order of reinstatement of the certificate, but the motion was denied. In a petition dated June 25, 1958, filed in the same case, respondent municipality formally asked the Commission to revoke petitioner's certificate of public convenience and to forfeit its franchise on the ground, among other things, that it failed to comply with the conditions of said certificate and franchise. Said petition was set for hearing jointly with the order to show cause. The hearings had been postponed several times. Meanwhile, inspections had been made of petitioner's electric plant and installations by the engineers of the Commission, as follows: April 15, 1958 by Engineer Antonio M. Alli; September 18, 1959, July 12-13, 1960, and June 21-24, 1961, by Engineer Meliton S. Martinez. The inspection on June 21-24, 1961 was made upon the request of the petitioner who manifested during the hearing on December 15, 1960 that improvements have been made on its service since the inspection on July 1213, 1960, and that, on the basis of the inspection report to be submitted, it would agree to the 25 submission of the case for decision without further hearing. When the case was called for hearing on July 5, 1961, petitioner failed to appear. Respondent municipality was then allowed to present its documentary evidence, and thereafter the case was submitted for decision. On July 7, 1961, petitioner filed a motion to reopen the case upon the ground that it had not been furnished with a copy of the report of the June 21-24, 1961 inspection for it to reply as previously agreed. In an order dated August 25, 1961, petitioner was granted a period of ten (10) days within which to submit its written reply to said inspection report, on condition that should it fail to do so within the said period the case would be considered submitted for decision. Petitioner failed to file the reply. In consonance with the order of August 25, 1961, therefore, the Commission proceeded to decide the case. On July 29, 1962 petitioner's electric plant was burned. In its decision, dated August 20, 1962, the Commission, on the basis of the inspection reports of its aforenamed engineers, found that the petitioner had failed to comply with the directives contained in its letters dated May 21, 1954 and September 4, 1954, and had violated the conditions of its certificate of public convenience as well as the rules and regulations of the Commission. The Commission concluded that the petitioner "cannot render the efficient, adequate and satisfactory electric service required by its certificate and that it is against public interest to allow it to continue its operation." Accordingly, it ordered the cancellation and revocation of petitioner's certificate of public convenience and the forfeiture of its franchise. On September 18, 1962, petitioner moved for reconsideration of the decision, alleging that before its electric plant was burned on July 29, 1962, its service was greatly improved and that it had still existing investment which the Commission should protect. But eight days before said motion for reconsideration was filed, or on September 10, 1962, Morong Electric, having been granted a municipal franchise on May 6, 1962 by respondent municipality to install, operate and maintain an electric heat, light and power service in said municipality approved by the Provincial Board of Rizal on August 31, 1962 filed with the Commission an application for a certificate of public convenience and necessity for said service. Said application was entitled "Morong Electric Co., Inc., Applicant", and docketed as Case No. 62-5143. Petitioner opposed in writing the application of Morong Electric, alleging among other things, that it is a holder of a certificate of public convenience to operate an electric light, heat and power service in the same municipality of Morong, Rizal, and that the approval of said application

TRANSPORTATION CASES would not promote public convenience, but would only cause ruinous and wasteful competition. Although the opposition is dated October 6, 1962, it was actually received by the Commission on November 8, 1962, or twenty four days after the order of general default was issued in open court when the application was first called for hearing on October 15, 1962. On November 12, 1962, however, the petitioner filed a motion to lift said order of default. But before said motion could be resolved, petitioner filed another motion, dated January 4, 1963, this time asking for the dismissal of the application upon the ground that applicant Morong Electric had no legal personality when it filed its application on September 10, 1962, because its certificate of incorporation was issued by the Securities and Exchange Commission only on October 17, 1962. This motion to dismiss was denied by the Commission in a formal order issued on January 17, 1963 on the premise that applicant Morong Electric was a de facto corporation. Consequently, the case was heard on the merits and both parties presented their respective evidence. On the basis of the evidence adduced, the Commission, in its decision dated March 13, 1963, found that there was an absence of electric service in the municipality of Morong and that applicant Morong Electric, a Filipino-owned corporation duly organized and existing under the laws of the Philippines, has the financial capacity to maintain said service. These circumstances, considered together with the denial of the motion for reconsideration filed by petitioner in Case No. 39715 on February, 15, 1963, such that as far as the Commission was concerned the certificate of the petitioner was already declared revoked and cancelled, the Commission approved the application of Morong Electric and ordered the issuance in its favor of the corresponding certificate of public convenience and necessity.1awphl.nt On March 8, 1963, petitioner filed with this Court a petition to review the decision in Case No. 39715 (now G. R. No. L-20993). Then on April 26, 1963, petitioner also filed a petition to review the decision in Case No. 62-5143 (now G. R. No. L21221). In questioning the decision of the Commission in Case No. 39715, petitioner contends: (1) that the Commission acted without or in excess of its jurisdiction when it delegated the hearing of the case and the reception of evidence to Mr. Pedro S. Talavera who is not allowed by law to hear the same; (2) that the cancellation of petitioner's certificate of public convenience was unwarranted because no sufficient evidence was adduced against the petitioner and that petitioner was not able to present evidence in its defense; (3) that the Commission failed to give protection to petitioner's investment; and (4) that the Commission erred in imposing the extreme penalty of revocation of the certificate. 26 In questioning the decision in Case No. 625143, petitioner contends: (1) that the Commission erred in denying petitioner's motion to dismiss and proceeding with the hearing of the application of the Morong Electric; (2) that the Commission erred in granting Morong Electric a certificate of public convenience and necessity since it is not financially capable to render the service; (3) that the Commission erred when it made findings of facts that are not supported by the evidence adduced by the parties at the trial; and (4) that the Commission erred when it did not give to petitioner protection to its investment a reiteration of the third assignment of error in the other case.1awphl.nt We shall now discuss the appeals in these two cases separately. G.R. No. L-20993 1. Under the first assignment of error, petitioner contends that while Mr. Pedro S. Talavera, who conducted the hearings of the case below, is a division chief, he is not a lawyer. As such, under Section 32 of Commonwealth Act No. 146, as amended, the Commission should not have delegated to him the authority to conduct the hearings for the reception of evidence of the parties. We find that, really, Mr. Talavera is not a lawyer. 5 Under the second paragraph of Section 32 of Commonwealth Act No. 146, as amended, 6 the Commission can only authorize a division chief to hear and investigate a case filed before it if he is a lawyer. However, the petitioner is raising this question for the first time in this appeal. The record discloses that petitioner never made any objection to the authority of Mr. Talavera to hear the case and to receive the evidence of the parties. On the contrary, we find that petitioner had appeared and submitted evidence at the hearings conducted by Mr. Talavera, particularly the hearings relative to the motion for reconsideration of the order of February 18, 1957 cancelling and revoking its certificate. We also find that, through counsel, petitioner had entered into agreements with Mr. Talavera, as hearing officer, and the counsel for respondent municipality, regarding procedure in order to abbreviate the proceedings. 7 It is only after the decision in the case turned out to be adverse to it that petitioner questioned the proceedings held before Mr. Talavera. This Court in several cases has ruled that objection to the delegation of authority to hear a case filed before the Commission and to receive the evidence in connection therewith is a procedural, not a jurisdictional point, and is waived by failure to interpose timely the objection and the case had been decided by the Commission. 8 Since petitioner has never raised any objection to the authority of Mr. Talavera before the Commission, it should be deemed to have waived such procedural

TRANSPORTATION CASES defect, and consonant with the precedents on the matter, petitioner's claim that the Commission acted without or in excess of jurisdiction in so authorizing Mr. Talavera should be dismissed. 9 2. Anent the second assigned error, the gist of petitioner's contention is that the evidence consisting of inspection reports upon which the Commission based its decision is insufficient and untrustworthy in that (1) the authors of said reports had not been put to test by way of crossexamination; (2) the reports constitute only one side of the picture as petitioner was not able to present evidence in its defense; (3) judicial notice was not taken of the testimony of Mr. Harry B. Bernardino, former mayor of respondent municipality, in PSC Case No. 625143 (the other case, G. R. No. L-21221) to the effect that the petitioner had improved its service before its electric power plant was burned on July 29, 1962 which testimony contradicts the inspection reports; and (4) the Commission acted both as prosecutor and judge passing judgment over the very same evidence presented by it as prosecutor a situation "not conducive to the arrival at just and equitable decisions." Settled is the rule that in reviewing the decision of the Public Service Commission this Court is not required to examine the proof de novo and determine for itself whether or not the preponderance of evidence really justifies the decision. The only function of this Court is to determine whether or not there is evidence before the Commission upon which its decision might reasonably be based. This Court will not substitute its discretion for that of the Commission on questions of fact and will not interfere in the latter's decision unless it clearly appears that there is no evidence to support it. 10 Inasmuch as the only function of this Court in reviewing the decision of the Commission is to determine whether there is sufficient evidence before the Commission upon which its decision can reasonably be based, as it is not required to examine the proof de novo, the evidence that should be made the basis of this Court's determination should be only those presented in this case before the Commission. What then was the evidence presented before the Commission and made the basis of its decision subject of the present appeal? As stated earlier, the Commission based its decision on the inspection reports submitted by its engineers who conducted the inspection of petitioner's electric service upon orders of the Commission. 11 Said inspection reports specify in detail the deficiencies incurred, and violations committed, by the petitioner resulting in the inadequacy of its service. We consider that said reports are sufficient to serve reasonably as bases of the decision in question. It should be emphasized, in this connection that said reports, are not mere documentary proofs presented for the consideration of the Commission, but are the results of the Commission's own observations and investigations which it can rightfully take into 27 consideration, 12 particularly in this case where the petitioner had not presented any evidence in its defense, and speaking of petitioner's failure to present evidence, as well as its failure to crossexamine the authors of the inspection reports, petitioner should not complain because it had waived not only its right to cross-examine but also its right to present evidence. Quoted hereunder are the pertinent portions of the transcripts of the proceedings where the petitioner, through counsel, manifested in clear language said waiver and its decision to abide by the last inspection report of Engineer Martinez: Proceedings of December 15, 1960 COMMISSION: It appears at the last hearing of this case on September 23, 1960, that an engineer of this Commission has been ordered to make an inspection of all electric services in the province of Rizal and on that date the engineer of this Commission is still undertaking that inspection and it appears that the said engineer had actually made that inspection on July 12 and 13, 1960. The engineer has submitted his report on November 18, 1960 which is attached to the records of this case. ATTY. LUQUE (Councel for Petitioner): ... (W)e respectfully state that while the report is, as I see it attached to the records, clear and very thorough, it was made sometime July of this year and I understand from the respondent that there is some improvement since this report was made ... we respectfully request that an up-to-date inspection be made ... . An inspector of this Commission can be sent to the plant and considering that the engineer of this Commission, Engineer Meliton Martinez, is very acquainted to the points involved we pray that his report will be used by us for the reason that he is a technical man and he knows well as he has done a good job and I think our proposition would expedite the matter. We sincerely believe that the inspection report will be the best evidence to decide this matter. ATTY. LUQUE: ... This is a very important matter and to show the good faith of respondent in this case we will not even cross-examine the engineer when he makes a new report. We will agree to the findings and, your honor please, considering as we have manifested before that Engineer Martinez is an experienced engineer of this Commission and the points reported by Engineer Martinez on the situation of the plant now will prevent the necessity of having a hearing, of us bringing new evidence and complainant bringing new evidence. ... . COMMISSION (to Atty. Luque):

TRANSPORTATION CASES Q Does the Commission understand from the counsel for applicant that if the motion is granted he will submit this order to show cause for decision without any further hearing and the decision will be based on the report of the engineer of this Commission? A We respectfully reply in this manner that we be allowed or be given an opportunity just to read the report and 99%, we will agree that the report will be the basis of that decision. We just want to find out the contents of the report, however, we request that we be furnished with a copy of the report before the hearing so that we will just make a manifestation that we will agree. COMMISSION (to Atty. Luque): Q In order to prevent the delay of the disposition of this case the Commission will allow counsel for the applicant to submit his written reply to the report that the engineer of this Commission. Will he submit this case without further hearing upon the receipt of that written reply? A Yes, your honor. To give applicant a chance to have a day in court the Commission grants the request of applicant that it be given 10 days within which to submit a written reply on the report of the engineer of the Commission who inspected the electric service, in the municipality of Morong, Rizal, and after the submission of the said written reply within 10 days from today this case will be considered submitted for decision. The above-quoted manifestation of counsel for the petitioner, specifically the statement referring to the inspection report of Engineer Martinez as the "best evidence to decide this matter," can serve as an argument against petitioner's claim that the Commision should have taken into consideration the testimony of Mr. Bernardino. But the primary reasons why the Commission could not have taken judicial cognizance of said testimony are: first, it is not a proper subject of judicial notice, as it is not a "known" fact that is, well established and authoritatively settled, without qualification and contention; 13 second, it was given in a subsequent and distinct case after the petitioner's motion for reconsideration was heard by the Commission en banc and submitted for decision, 14 and third, it was not brought to the attention of the Commission in this case through an appropriate pleading. 15 Regarding the contention of petitioner that the Commission had acted both as prosecutor and judge, it should be considered that there are two matters that had to be decided in this case, namely, the order to show cause dated December 19, 1956, and the petition or complaint by respondent municipality dated June 25, 1958. Both matters were heard jointly, and the record shows that respondent municipality had been allowed to present its evidence to substantiate its complaint. It can not be said, therefore, that in this case the Commission had acted as prosecutor and judge. But even assuming, for the sake of argument, that there was a commingling of the prosecuting and investigating functions, this exercise of dual function is authorized by Section 17(a) of Commonwealth Act No. 146, as amended, under which the Commission has power "to investigate, upon its own initiative or upon complaint in writing, any matter concerning any public service as regards matters under its jurisdiction; to, require any public service to furnish safe, adequate, and proper service as the public interest may require and warrant; to enforce compliance with any standard, rule, regulation, order or other requirement of this Act or of the Commission ... ." Thus, in the case of Collector of Internal Revenue vs. Estate of F. P. Buan, L-11438, July 31, 1958, this Court held that the power of the Commission to cancel and revoke a certificate of public convenience and necessity may be exercised by it even without a formal charge filed by any interested party, with the only limitation that the holder of the certificate should be given his day in court.

Proceedings of August 25, 1961 ATTY. LUQUE (Counsel for petitioner): In order to avoid any delay in the consideration of this case we are respectfully move (sic) that instead of our witnesses testifying under oath that we will submit a written reply under oath together with the memorandum within fifteen (15) days and we will furnish a copy and upon our submission of said written reply under oath and memorandum we consider this case submitted. This suggestion is to abbreviate the necessity of presenting witnesses here which may prolong the resolution of this case. ATTY. OLIVAS municipality): (Counsel for respondent

I object on the ground that there is no resolution by this Commission on the action to reopen the case and second this case has been closed. ATTY. LUQUE: With regard to the testimony on the ground for opposition we respectfully submit to this Commission our motion to submit a written reply together with a memorandum. Also as stated to expedite the case and to avoid further hearing we will just submit our written reply. According to our records we are furnished with a copy of the report of July 17, 1961. We submit your honor. COMMISSION: 28

TRANSPORTATION CASES It may not be amiss to add that when prosecuting and investigating duties are delegated by statute to an administrative body, as in the case of the Public Service Commission, said body may take steps it believes appropriate for the proper exercise of said duties, particularly in the manner of informing itself whether there is probable violation of the law and/or its rules and regulations. It may initiate an investigation, file a complaint, and then try the charge as preferred. So long as the respondent is given a day in court, there can be no denial of due process, and objections to said procedure cannot be sustained. 3. In its third assignment of error, petitioner invokes the "protection-of-investment rule" enunciated by this Court in Batangas Transportation Co. vs. Orlanes 16 in this wise: The Government having taken over the control and supervision of all public utilities, so long as an operator under a prior license complies with the terms and conditions of his license and reasonable rules and regulations for its operation and meets the reasonable demands of the public, it is the duty of the Commission to protect rather than to destroy his investment by the granting of the second license to another person for the same thing over the same route of travel. The granting of such a license does not serve its convenience or promote the interests of the public. The above-quoted rule, however, is not absolute, for nobody has exclusive right to secure a franchise or a certificate of public convenience. 17 Where, as in the present case, it has been shown by ample evidence that the petitioner, despite ample time and opportunity given to it by the Commission, had failed to render adequate, sufficient and satisfactory service and had violated the important conditions of its certificate as well as the directives and the rules and regulations of the Commission, the rule cannot apply. To apply that rule unqualifiedly is to encourage violation or disregard of the terms and conditions of the certificate and the Commission's directives and regulations, and would close the door to other applicants who could establish, operate and provide adequate, efficient and satisfactory service for the benefit and convenience of the inhabitants. It should be emphasized that the paramount consideration should always be the public interest and public convenience. The duty of the Commission to protect investment of a public utility operator refers only to operators of good standing those who comply with the laws, rules and regulations and not to operators who are unconcerned with the public interest and whose investments have failed or deteriorated because of their own fault. 18 4. The last assignment of error assails the propriety of the penalty imposed by the Commission on the petitioner that is, the 29 revocation of the certificate and the forfeiture of the franchise. Petitioner contends that the imposition of a fine would have been sufficient, as had been done by the Commission in cases of a similar nature. It should be observed that Section 16(n) of Commonwealth Act No. 146, as amended, confers upon the Commission ample power and discretion to order the cancellation and revocation of any certificate of public convenience issued to an operator who has violated, or has willfully and contumaciously refused to comply with, any order, rule or regulation of the Commission or any provision of law. What matters is that there is evidence to support the action of the Commission. In the instant case, as shown by the evidence, the contumacious refusal of the petitioner since 1954 to comply with the directives, rules and regulations of the Commission, its violation of the conditions of its certificate and its incapability to comply with its commitment as shown by its inadequate service, were the circumstances that warranted the action of the Commission in not merely imposing a fine but in revoking altogether petitioner's certificate. To allow petitioner to continue its operation would be to sacrifice public interest and convenience in favor of private interest. A grant of a certificate of public convenience confers no property rights but is a mere license or privilege, and such privilege is forfeited when the grantee fails to comply with his commitments behind which lies the paramount interest of the public, for public necessity cannot be made to wait, nor sacrificed for private convenience. (Collector of Internal Revenue v. Estate of F. P. Buan, et al., L11438 and Santiago Sambrano, et al. v. PSC, et al., L-11439 & L-11542-46, July 31, 1958) (T)he Public Service Commission, ... has the power to specify and define the terms and conditions upon which the public utility shall be operated, and to make reasonable rules and regulations for its operation and the compensation which the utility shall receive for its services to the public, and for any failure to comply with such rules and regulations or the violation of any of the terms and conditions for which the license was granted, the Commission has ample power to enforce the provisions of the license or even to revoke it, for any failure or neglect to comply with any of its terms and provisions. (Batangas Trans. Co. v. Orlanes, 52 Phil. 455, 460; emphasis supplied) Presumably, the petitioner has in mind Section 21 of Commonwealth Act No. 146, as amended, which provides that a public utility operator violating or failing to comply with the terms and conditions of any certificate, or any orders, decisions or regulations of the Commission, shall be subject to a fine and that the Commission is authorized and empowered to impose such fine, after due notice and hearing. It should be noted,

TRANSPORTATION CASES however, that the last sentence of said section states that the remedy provided therein "shall not be a bar to, or affect any other remedy provided in this Act but shall be cumulative and additional to such remedy or remedies." In other words, the imposition of a fine may only be one of the remedies which the Commission may resort to, in its discretion. But that remedy is not exclusive of, or has preference over, the other remedies. And this Court will not substitute its discretion for that of the Commission, as long as there is evidence to support the exercise of that discretion by the Commission. G. R. No. L-21221 Coming now to the other case, let it be stated at the outset that before any certificate may be granted, authorizing the operation of a public service, three requisites must be complied with, namely: (1) the applicant must be a citizen of the Philippines or of the United States, or a corporation or co-partnership, association or joint-stock company constituted and organized under the laws of the Philippines, sixty per centum at least of the stock or paid-up capital of which belongs entirely to citizens of the Philippines or of the United States; 19 (2) the applicant must be financially capable of undertaking the proposed service and meeting the responsibilities incident to its operation; 20 and (3) the applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. 21 As stated earlier, in the decision appealed from, the Commission found that Morong Electric is a corporation duly organized and existing under the laws of the Philippines, the stockholders of which are Filipino citizens, that it is financially capable of operating an electric light, heat and power service, and that at the time the decision was rendered there was absence of electric service in Morong, Rizal. While the petitioner does not dispute the need of an electric service in Morong, Rizal, 22 it claims, in effect, that Morong Electric should not have been granted the certificate of public convenience and necessity because (1) it did not have a corporate personality at the time it was granted a franchise and when it applied for said certificate; (2) it is not financially capable of undertaking an electric service, and (3) petitioner was rendering efficient service before its electric plant was burned, and therefore, being a prior operator its investment should be protected and no new party should be granted a franchise and certificate of public convenience and necessity to operate an electric service in the same locality. 1. The bulk of petitioner's arguments assailing the personality of Morong Electric dwells on the proposition that since a franchise is a contract, 23 at least two competent parties are necessary to the execution thereof, and parties are 30 not competent except when they are in being. Hence, it is contended that until a corporation has come into being, in this jurisdiction, by the issuance of a certificate of incorporation by the Securities and Exchange Commission (SEC) it cannot enter into any contract as a corporation. The certificate of incorporation of the Morong Electric was issued by the SEC on October 17, 1962, so only from that date, not before, did it acquire juridical personality and legal existence. Petitioner concludes that the franchise granted to Morong Electric on May 6, 1962 when it was not yet in esse is null and void and cannot be the subject of the Commission's consideration. On the other hand, Morong Electric argues, and to which argument the Commission agrees, that it was a de facto corporation at the time the franchise was granted and, as such, it was not incapacitated to enter into any contract or to apply for and accept a franchise. Not having been incapacitated, Morong Electric maintains that the franchise granted to it is valid and the approval or disapproval thereof can be properly determined by the Commission. Petitioner's contention that Morong Electric did not yet have a legal personality on May 6, 1962 when a municipal franchise was granted to it is correct. The juridical personality and legal existence of Morong Electric began only on October 17, 1962 when its certificate of incorporation was issued by the SEC. 24 Before that date, or pending the issuance of said certificate of incorporation, the incorporators cannot be considered as de facto corporation. 25 But the fact that Morong Electric had no corporate existence on the day the franchise was granted in its name does not render the franchise invalid, because later Morong Electric obtained its certificate of incorporation and then accepted the franchise in accordance with the terms and conditions thereof. This view is sustained by eminent American authorities. Thus, McQuiuin says: The fact that a company is not completely incorporated at the time the grant is made to it by a municipality to use the streets does not, in most jurisdictions, affect the validity of the grant. But such grant cannot take effect until the corporation is organized. And in Illinois it has been decided that the ordinance granting the franchise may be presented before the corporation grantee is fully organized, where the organization is completed before the passage and acceptance. (McQuillin, Municipal Corporations, 3rd Ed., Vol. 12, Chap. 34, Sec. 34.21) Fletcher says: While a franchise cannot take effect until the grantee corporation is organized, the franchise may, nevertheless, be applied for before the company is fully organized.

TRANSPORTATION CASES A grant of a street franchise is valid although the corporation is not created until afterwards. (Fletcher, Cyclopedia Corp. Permanent Edition, Rev. Vol. 6-A, Sec. 2881) And Thompson gives the reason for the rule: (I)n the matter of the secondary franchise the authorities are numerous in support of the proposition that an ordinance granting a privilege to a corporation is not void because the beneficiary of the ordinance is not fully organized at the time of the introduction of the ordinance. It is enough that organization is complete prior to the passage and acceptance of the ordinance. The reason is that a privilege of this character is a mere license to the corporation until it accepts the grant and complies with its terms and conditions. (Thompson on Corporations, Vol. 4, 3rd Ed., Sec. 2929) 26 The incorporation of Morong Electric on October 17, 1962 and its acceptance of the franchise as shown by its action in prosecuting the application filed with the Commission for the approval of said franchise, not only perfected a contract between the respondent municipality and Morong Electric but also cured the deficiency pointed out by the petitioner in the application of Morong EIectric. Thus, the Commission did not err in denying petitioner's motion to dismiss said application and in proceeding to hear the same. The efficacy of the franchise, however, arose only upon its approval by the Commission on March 13, 1963. The reason is that Under Act No. 667, as amended by Act No. 1022, a municipal council has the power to grant electric franchises, subject to the approval of the provincial board and the President. However, under Section 16(b) of Commonwealth Act No. 146, as amended, the Public Service Commission is empowered "to approve, subject to constitutional limitations any franchise or privilege granted under the provisions of Act No. 667, as amended by Act No. 1022, by any political subdivision of the Philippines when, in the judgment of the Commission, such franchise or privilege will properly conserve the public interests and the Commission shall in so approving impose such conditions as to construction, equipment, maintenance, service, or operation as the public interests and convenience may reasonably require, and to issue certificates of public convenience and necessity when such is required or provided by any law or franchise." Thus, the efficacy of a municipal electric franchise arises, therefore, only after the approval of the Public Service Commission. (Almendras vs. Ramos, 90 Phil. 231) . The conclusion herein reached regarding the validity of the franchise granted to Morong Electric is not incompatible with the holding of this Court in Cagayan Fishing Development Co., Inc. vs. Teodoro Sandiko 27 upon which the petitioner leans 31 heavily in support of its position. In said case this Court held that a corporation should have a full and complete organization and existence as an entity before it can enter into any kind of a contract or transact any business. It should be pointed out, however, that this Court did not say in that case that the rule is absolute or that under no circumstances may the acts of promoters of a corporation be ratified or accepted by the corporation if and when subsequently organized. Of course, there are exceptions. It will be noted that American courts generally hold that a contract made by the promoters of a corporation on its behalf may be adopted, accepted or ratified by the corporation when organized. 28 2. The validity of the franchise and the corporate personality of Morong Electric to accept the same having been shown, the next question to be resolved is whether said company has the financial qualification to operate an electric light, heat and power service. Petitioner challenges the financial capability of Morong Electric, by pointing out the inconsistencies in the testimony of Mr. Jose P. Ingal, president of said company, regarding its assets and the amount of its initial investment for the electric plant. In this connection it should be stated that on the basis of the evidence presented on the matter, the Commission has found the Morong Electric to be "financially qualified to install, maintain and operate the proposed electric light, heat and power service." This is essentially a factual determination which, in a number of cases, this Court has said it will not disturb unless patently unsupported by evidence. An examination of the record of this case readily shows that the testimony of Mr. Ingal and the documents he presented to establish the financial capability of Morong Electric provide reasonable grounds for the above finding of the Commission. It is now a very well-settled rule in this jurisdiction that the findings and conclusions of fact made by the Public Service Commission, after weighing the evidence adduced by the parties in a public service case, will not be disturbed by the Supreme Court unless those findings and conclusions appear not to be reasonably supported by evidence. (La Mallorca and Pampanga Bus Co. vs. Mercado, L-19120, November 29, 1965) For purposes of appeal, what is decisive is that said testimonial evidence provides reasonable support for the Public Service Commission's findings of financial capacity on the part of applicants, rendering such findings beyond our power to disturb. (Del Pilar Transit vs. Silva, L21547, July 15, 1966) It may be worthwhile to mention in this connection that per inspection report dated January 20, 1964 29 of Mr. Meliton Martinez of the Commission, who inspected the electric service of Morong on January 15-16, 1964, Morong Electric

TRANSPORTATION CASES "is serving electric service to the entire area covered by its approved plan and has constructed its line in accordance with the plans and specifications approved by the Commission." By reason thereof, it was recommended that the requests of Morong Electric (1) for the withdrawal of its deposit in the amount of P1,000.00 with the Treasurer of the Philippines, and (2) for the approval of Resolution No. 160 of the Municipal Council of Morong, Rizal, exempting the operator from making the additional P9,000.00 deposit mentioned in its petition, dated September 16, 1963, be granted. This report removes any doubt as to the financial capability of Morong Electric to operate and maintain an electric light, heat and power service. 3. With the financial qualification of Morong Electric beyond doubt, the remaining question to be resolved is whether, or not, the findings of fact of the Commission regarding petitioner's service are supported by evidence. It is the contention of the petitioner that the Commission made some findings of fact prejudicial to its position but which do not find support from the evidence presented in this case. Specifically, petitioner refers to the statements or findings that its service had "turned from bad to worse," that it miserably failed to comply with the oft-repeated promises to bring about the needed improvement, that its equipment is unserviceable, and that it has no longer any plant site and, therefore, has discredited itself. Petitioner further states that such statements are not only devoid of evidentiary support but contrary to the testimony of its witness, Mr. Harry Bernardino, who testified that petitioner was rendering efficient and satisfactory service before its electric plant was burned on July 29, 1962. On the face of the decision appealed from, it is obvious that the Commission in describing the kind of service petitioner was rendering before its certificate was ordered revoked and cancelled, took judicial notice of the records of the previous case (PSC Case No. 39715) where the quality of petitioner's service had been squarely put in issue. It will be noted that the findings of the Commission were made notwithstanding the fact that the aforementioned testimony of Mr. Bernardino had been emphasized and pointed out in petitioner's Memorandum to the Commission. 30 The implication is simple: that as between the testimony of Mr. Bernardino and the inspection reports of the engineers of the Commission, which served as the basis of the revocation order, the Commission gave credence to the latter. Naturally, whatever conclusion or finding of fact that the Commission arrived at regarding the quality of petitioner's service are not borne out by the evidence presented in this case but by evidence in the previous case. 31 In this connection, we repeat, the conclusion, arrived at by the Commission after weighing the conflicting evidence in the two related cases, is a conclusion of fact which this Court will not disturb. 32 And it has been held time and again that where the Commission has reached a conclusion of fact after weighing the conflicting evidence, that conclusion must be respected, and the Supreme Court will not interfere unless it clearly appears that there is no evidence to support the decision of the Commission. (La Mallorca and Pampanga Bus Co., Inc. vs. Mercado, L-19120, November 29, 1965 citing Pangasinan Trans. Co., Inc. vs. Dela Cruz, 96 Phil. 278) For that matter, petitioner's pretension that it has a prior right to the operation of an electric service in Morong, Rizal, is not tenable; and its plea for protection of its investment, as in the previous case, cannot be entertained. WHEREFORE, the two decisions of the Public Service Commission, appealed from, should be, as they are hereby affirmed, with costs in the two cases against petitioner Rizal Light & Ice Co., Inc. It is so ordered. FORTUNATO F. HALILI, solicitante, vs.ICE AND COLD STORAGE INDUSTRIES OF THE PHILIPPINES, INC., recurrida. ICE AND COLD STORAGE INDUSTRIES OF THE PHILIPPINES, INC., solicitante, vs.FORTUNATO F. HALILI, recurrido. Although as a general rule this Court will not disturb the decision of the Public Service Commission if reasonably supported by the evidence according to several decisions rendered (Manila Electric Co. vs. Balagtas, 58 Phil., 429; Ampil vs. Public Service Commission, 59 Phil., 556; Calabia vs. Orlanes & Banaag Transp. Co., 55 Phil., 659; Aleosan Transp. Co. vs. Public Service Commission, G. R. No. 44523; Mindanao Bus Co. vs. Maria Cristina Transp. Co., G. R. No. 43628; Espiritu vs. San Miguel Brewery, G. R. No. 45161; Gilles vs. Halili, 38 Off. Gaz., 1988; Manila Electric Co. vs. M. R. Mateo, 38 Off. Gaz., 1839; Bulacan Bus Co. vs. Enriquez, G. R. Nos. 4608586), this is a case where we think the petition for review should be granted and the decision of the Public Service Commission reversed. It is admitted that San Juan del Monte has no ice plant or refrigeration establishment; neither does Mandaluyong. San Juan del Monte has a population of around 31,000 inhabitants, whereas Mandaluyong has more than 18,000. The oppositors, Mariquina Ice Plant and the Pasig Ice Plant of Jose Flores, do not now sell or distribute ice in San Juan del Monte and Mandaluyong, although authorized to do so in their certificates of public convenience and necessity, and the ice service in these two localities is furnished solely by the oppositor San Miguel

TRANSPORTATION CASES Brewery whose plant is located in Manila, several kilometers away, and which merely maintains in the said localities a delivery truck service and ice boxes handled by independent dealers. We are of the opinion that the public demand for ice can be better met by the establishment of an ice plant in the same municipality where it is to be distributed. In San Miguel Brewery vs. Espiritu, 60 Phil., 745, 751, we said: It being of general knowledge, and therefore, of judicial knowledge, no evidence is necessary to show that an ice plant in the locality is much more advantageous to the general public as to facility in acquiring said article of commodity, not to say of domestic necessity, without loss in weight, than a plant some kilometers from said locality, which distributes ice to its customers by means of delivery trucks at certain hours of the day. Even in the case where an outside manufacturer has an ice depository in the locality, this Court has found and held that it is always more advantageous to have an ice plant in the same locality (San Miguel Brewery vs. Calumpit Ice Plant, G.R. No. 31550, promulgated Jan. 14, 1930, not reported; Cruz and Lapid vs. San Miguel Brewery [1933], 57 Phil., 1017; San Miguel Brewery vs. Lapid 53 Phil., 539). The mere fact that the San Miguel Brewery and the other oppositors have authority to sell ice in San Juan del Monte and Mandaluyong is not ground for denying the application of the appellant. This Court once observed that: . . . The mere fact that a holder of a certificate of public convenience and necessity is authorized to supply ice in a locality does not prevent the authorization of another holder of a certificate of public convenience and necessity to supply and sell ice in the same locality when the latter is in a better position to do so than the former, and when his service proves to be better and more beneficial to the inhabitants of said locality, taking into consideration the distance between the municipality where the plant is established and that in which the ice manufactured in said plant is to be sold. This is not a case of a land transportation company with a timetable, whose service may be increase or decreased according to the needs of the public but that of a company supplying ice manufactured by it, whose efficiency to satisfy the needs of the buying public depends upon its promptness and economy in so doing. (Limjoco vs. Public Service Commission and Cabrera, G. R. No. 32831, cited in San Miguel Brewery vs. Espiritu, supra.) The rule thus 33 enunciated should apply with more force in the present case where the applicant proposes not only to sell and distribute ice in the localities covered by his application but to establish an ice plant in one of them. Due to the great importance of ice as a prime necessity of life, the better policy is to facilitate the establishment of ice plants, unless such establishment is not justified or will lead to ruinous or wasteful competition. (Decision, Limjoco contra San Miguel Brewery, supra, Exhibit I, a folios 51, 52 y 53.).

MANILA YELLOW TAXICAB, ET AL., petitioners, vs.THE PUBLIC SERVICE COMMISSION, ET AL., respondents. These 96 cases have been elevated to this Court through a petition for review as authorized by the Public Service Act. Sought to be reviewed is a decision of the Public Service Commission, common to all of the cases, granting regular certificates of public convenience to post-war taxicab operators and authorizing some of them as well as some of the pre-war operators to increase their equipment, or taxicab units. Petitioners are pre-war taxicab operators who object both to the issuance of new certificates and to the increase of equipment. For a better understanding of the issues involved, it should be stated that at the outbreak of the war in 1941 there were in the City of Manila 10 taxicab operators, each with an authorized quota of taxicab units. Total number of units authorized for all was 1,365; but of these only 1,200 were registered and actually operated. Four years of war left these operators with their equipment practically all gone so that when they resumed operation after liberation in 1945 they were able to put in commission only a few units. These were, of course, insufficient to meet the great need for taxicab service. As was proper, the Public Service Commission gave them a reasonable time within which to complete and register their pre-war authorized equipment. The time was extended several times so that in all the operators were given about three years. But despite these various extensions, the last of which expired on September 30, 1948, only six of the operators were able to complete their authorized equipment. They were Jose F. Zamora, Amador D. Santos, Malate Taxicab and Garage Company, Franciso Benitez, Jr., Mateo Boquiren, and Pedro Reyes, the last three being holders of certificates purchased after liberation from the pre-war operator Bachrach Motor Company. While the old operators were trying to acquire more vehicles to bring their equipment to pre-war level-a process which at best could only be gradual-the

TRANSPORTATION CASES Commission, in order to meet the urgent need for more taxicabs, resorted to the expedient of issuing, to post-war applicants, temporary certificates, good only until December 31, 1948, for the operation of taxicab service in the city of Manila and neighboring cities and municipalities. This practice was, however, discontinued in May, 1947, and thereafter aspirants to such certificates had to content themselves with having their applications docketed. This was the state of affairs when the Commission commenced to take action on the numerous applications which gave rise to the present proceedings. First of all, there were the applications of the pre-war operators (with the exception of Pedro Reyes) who were able to complete their equipment, for authority to increase their units, the total number asked by all being 565 additional taxicabs. Then there were the applications of the post-war operators who, as their temporary certificates were about to expire, asked for the conversion of those certificates into regular or permanent ones. Along with their applications for conversion, they also asked for increase of equipment by proposing an addition of 1,728 units to the 676 they were already operating. And lastly, there were the applications of the late comers or prospective operators, who were overtaken by the ban on the further issuance of temporary certificates. Only 8 of these late comers, however, cared to prosecute their applications, the others having apparently abandoned theirs by not appearing at the hearing. These 8 new applicants proposed to operate a total of 165 units. All of the applications were opposed by the pre-war operators who were not able to complete their prewar authorized equipment and did not ask for an increase of their authorized units. They were the Acro Taxicab Company, Antipolo Taxicab and Garage Company, Bachrach Motor Company, Nicolas F. Concepcion, Fortunato F. Halili, Manila Yellow Taxicab and Garage Company, Inc., and the Rex Taxicab Company. By agreement of the parties and at their instance all of the applications were heard together, after which the Commission rendered a decision covering all of them. Overruling the opposition, the decision (1) granted four pre-war operators, namely, Malate Taxicab and Garage Company, Jose F. Zamora, Amador D. Santos and Francisco Benitez, Jr., a total of 125 additional units, (2) granted 78 of the post-war operators regular certificates and a total of 399 additional units, and (3) granted three of the new applicants-Emiliano Acua, Alejandro Fernandez, and Hermogenes Jacinto-regular certificates with an authorized equipment of five units each. But the decision expressly states that the certificates of public convenience therein granted "shall be valid and subsisting only for a period of fifteen (15) years counted from January 1, 1949." This is the decision that is now before us for review. 34 The petition for review assails the decision below on four grounds, namely, (1) insufficiency of the evidence to justify the conversion of the post-war operators' temporary certificates into regular or permanent ones, (2) lack of authority to decree such conversion, (3) insufficiency of the evidence to justify the increase of equipment granted to both pre-war operators and (4) ruinous competition. As to the first ground, it should be noted that the Commission has made the following findings of fact: (a) That the population of the City of Manila and the adjoining cities and municipalities before the war has considerably increased. This is borne out by the following official data of the Bureau of Census and Statistics: 1939 Manila Quezon City Rizal City Caloocan Makati Mandaluyong San Juan del Monte Total 623,492 39,013 55,161 38,820 33,530 18,200 18,870 827,086 1948

983,906

107,977 88,728 55,208 41,335 26,309 31,493

1,337,95 6

(b) That the volume of business has also increased in great proportion, "con la probabilidad de que Manila se convierta en emporio comercial en el Extremo Oriente" (Halili vs. Ice and Cold Storage Industries of the Philippines, R.G. Nos. 336-343) (c) That the University of the Philippines has already transferred to its present site in Quezon City, which may be followed by other institutions of learning now in Manila; that Quezon City will also the seat of the National Government in the near future, and this will necessarily mean the expansion of the taxicab service and other means of transportation to said City; (d) That the taxicabs render a service different from that rendered by the auto buses, the former being for individual transportation, while the latter is for mass transportation in general. (e) That the lack of taxicabs is keenly felt in the City of Manila, especially on certain hours of the day, in spite of the fact that at present there are 1,759 taxicabs actually operating. This fact has been testified to also by the Chief, Motor Vehicles Office, Mr. Primo Villar, and by the Chief of the Traffic Division of the Manila Police Department, Major Frank C. Young.

TRANSPORTATION CASES And on the basis of these findings the Commission made the following conclusion: . Considering the above established facts and the investments made by the post-war operators who furnished the taxicab service which pre-war operators failed to render, the granting of regular or permanent certificates to the present holders of the so-called temporary certificates and to some of the new applicants or prospective operators justified. Section 35 of the Public Service Act provides that the Supreme Court may modify or set aside any order, ruling or decision. Following this legislative mandate this Court in reviewing an order or decision of the Commission unless it clearly appears that there is no evidence reasonably to support such order or decision. In the present case, respondents' evidence tends to show that there is real need for more taxicabs if public convenience in the city of Manila and suburbs is properly to be served. To a certain extent this is contradicted by petitioners' proof. But in our opinion the evidence preponderates in respondents' favor, and in any event we cannot say that there was no proof before the Commission reasonably to support the appealed decision. Starting with the assumption that the appealed decision grants permanent certificates to post-war operators, the petitioners question the jurisdiction or authority of the Commission to issue such certificates on the basis of what they call "emergency conditions." But the assumption is erroneous, for the decision expressly states that those certificates "shall be valid and subsisting only for a period of fifteen (15)years counted from January 1, 1949." In other words, though the operators have asked that their temporary certificates be converted into permanent ones, the Commission has merely extended the life of those certificates for a period of 15 years from the date of their expiration. Being for a limited period only, the certificates cannot be considered permanent. And as to the expediency and justice of prolonging the life of these certificates, there can hardly be any dispute, for aside from the fact that the Commission has found, on the basis of evidence presented, that there is further necessity for their continuance if public convenience is to be adequately served, there is the equal need of doing equity to those who have risked capital to render the service which those who were called upon to do so were not so disposed or were not in a position to supply. As was said by this Court in the case of Malate Taxicab and Garage Company vs. Public Service Commission, (88 Phil., 539), where this very question came up for determination: It would seem a matter of simple justice, in the light of their past performance, of the enormous increase of population of Manila and neighboring cities and municipalities, and for the encouragement given them by the Commission, 35 thank to the failure or inability of the pre-war operators to supply normal needs, that the post-war operators should not now be left in the lurch. They had "answered the call of service for the convenience of the public," at a time when, in the words of the appellant, "the supply (of cars and taxi meters) was very meager and limited," when "everything was priced at a premium," when "new cars could be obtained only in the so-called Black Market." Whatever the reasons for the pre-war operators" refusal or inablity to resume full operation during the acute shortage of transportation facilities, the investments of the postwar, small operators deserve protection, at least as much as those who claim to have lost heavily as a result of the war. At the most, the Commission does not appear to have acted arbitrary in issuing regular certificates of public convenience to these operators. Anent the third ground of attack, which refers to the increase of equipment for both pre-war and postwar operators, the Commission has also found from the evidence "that the number of taxicabs presently being operated in Manila is not sufficient to meet the needs of the traveling public," so that the increase of equipment is in order, the only point to be determined being the number of units that should be authorized in addition to those actually operated. There can of course be no fixed formula for determining with mathematical precision the number of additional taxicabs needed so that in the determination of that point a great deal must be necessarily be left to the judgment and experience of the Commission. Making use of that discretion the Commission has estimated the additional units needed as follows: The population of Manila and the adjoining cities and municipalities before the war was 827,086 while the number of taxicabs then in operation was approximately 1,200 out of the 1,356 units authorized the then existing ten operators. After the war, the population has increased to 1,337,956 with approximately 1,759 taxicabs in actual operation. In view of the great increase in population of Manila and the adjoining cities and municipalities, the established need for additional taxicabs and so as to provide for future expansion, the Commission is of the opinion that the number of taxicabs now operated may be raised to two thousand two hundred ninety-eight (2,298)or an increase of five hundred thirty-nine (539) over the present 1,759 units. We believe that this increase is a conservative estimate after having taken into consideration the financial capacity of each and every applicant, and the fact that the Commission is in duty bound to preserve and to protect the taxicab business against unnecessary and wasteful competition. If the increase in the number of units herein authorized proves to be insufficient, then applications for further increase may be entertained by the Commission.

TRANSPORTATION CASES We find nothing in this estimate that would justify us in substituting our judgment for that of the Commission. The claim of ruinous competition is not justified by the proof. There is no clear-cut evidence that these petitioners are losing because of the increase of equipment granted to the operators. And the mere fear that ruinous competition will follow such increase deserves scant notice when it is not justified by the evidence. There is indeed a rule, and a sound one too, that old operators must be protected in their investment so long as they are willing and able to serve the public need in a proper and adequate manner. But this rule is not absolute, for this Court has time and again held that the grant of a certificate or preference to a new operator is in order where the old operators were given a chance to improve or complete their service but have failed to do so. (Jose de la Rosa vs. Pedro V. Corpus, 66 Phil. 8; Inter-provincial Autobus Company, Inc. vs. Lubaton, 89 Phil., 516.) The record shows that it is not disputed that present petitioners have all been given ample opportunity to complete the equipment which they were authorized to operate. The original period of six months given to them for that purpose was extended several times, the last extension being until September 30, 1948. In all, the total period granted was about three years. They would make it appear that their failure to complete their equipment was due either to the difficulty of acquiring taxicabs or to the fact that they have not yet collected their damage claims. The first excuse is not convincing, considering that the pre-war operators as well as the post-war ones have been able to acquire plenty of taxicabs, and the second excuse is no valid ground for depriving the public of a necessary service. Public convenience is the paramount considerations in these matters, and public convenience would not be served if petitioners herein were allowed to play the role of dog in the manger and prevent others from rendering a service with they themselves cannot give. In view of the foregoing, the decision appealed from is affirmed, with costs against the petitioners. INTESTATE TESTATE OF TEOFILO M. TIONGSON, petitioner, vs.THE PUBLIC SERVICE COMMISSION and MARIO Z. LANUZA, respondents. On May 11, 1965 the Public Service Commission decided its Case No. 124626, approving the application of Mario Z. Lanuza for a certificate of public convenience to install and operate a 20-ton daily capacity ice-plant in Pagsanjan, Laguna, and to sell the ice to be produced in said municipality as well as in the municipalities of Longos, Paete, Pakil, Pangil, Siniloan, Famy, Sta. Maria, Cavinti, 36 Magdalena, Majayjay, Nagcarlan, Rizal, Lilio, Sta. Cruz, Lumban, Pila and Victoria, all in the province of Laguna. Three existing operators had opposed the application. One of them, Victorino de Pea, who has an ice-plant in Mauban, Quezon, withdrew his opposition after the applicant excluded the municipality of Luisiana from the territory originally applied for. Another oppositor, Emilio Gomez, did not appeal from the decision of the Public Service Commission. The petitioner here, the Estate of Teofilo M. Tiongson, remains the only oppositor in the present appeal. The petitioner is the grantee of a certificate of public convenience to maintain and operate a 30ton (increased to 40 tons in 1960 and then to 70 tons in 1964) ice plant in San Pablo City, with authority to sell ice therein as well as in the municipalities of Sta. Cruz, Rizal, Nagcarlan, Calauan, Victoria, Pila, Lumban, Paete, Pakil, Pangil, Cavinti, Siniloan and Alaminos. There is no question as to the applicant's financial capacity. The principal issue is whether there is sufficient need for ice in the places stated in the decision to justify the establishment of a plant in Pagsanjan with the daily capacity authorized by the Commission. This issue is essentially one of fact on which, as a rule, the findings of the Commission are binding on this Court unless it clearly appears that there is no evidence to reasonably support them. 1 Such findings in this case, and the conclusion derived therefrom, are as follows: At one of the hearings of this case, applicant, a businessman and Filipino citizen, manifested that at present there is no ice plant in Pagsanjan, Laguna; that there was formerly one in that municipality but it was transferred to San Pablo City; that the nearest ice plant is located in Kalayaan (Longos, Laguna) which is about 10 kilometers from Pagsanjan, Laguna; that there is a demand for ice by the people of Pagsanjan and of the towns proposed to be served by the applicant because the present supply of ice coming from ice plant operators and distributed by ice dealers is inadequate; that in the territory proposed to be served by applicant, ice is needed for "halo-halo," for cooling soft drinks and drinking water, and for the preservation of the fish caught by fishermen; that aside from these refreshment parlors, there are "sari-sari" stores selling soft drinks; that along Laguna de Bay from Lumban to Sta. Maria, Laguna, from 30% to 50% of the people are engaged in fishing throughout the year; that fishes caught consist of "dalag," "hito," "carpa", "banak," and "shrimps" and to preserve these fishes from the time they are caught until they are sold or disposed of, ice is needed; that ice is also needed in movie houses where soft drinks are sold, in homes, clinics and hospitals that in a small town where there are about 20 stores, about 6 blocks of

TRANSPORTATION CASES ice of 300 lbs. each are consumed during the day, and in a big town like Sta. Cruz, the consumption is about 20 blocks of ice of 300 lbs. each during the rainy season and the consumption is about double during the dry season; and that due to the inadequacy of ice supply in the towns proposed to be served by applicant, an ice block of ice of 300 lbs. costs from P5.00 to P8.00. Applicant presented the following witnesses: Manuel Zaide, a fish dealer of Paete, Laguna; Willie Limlengco, a businessman and sari-sari store owner of Pagsanjan Laguna; Conrado Almario, a refreshment parlor and sari-sari store owner of Lumban, Laguna; Alfonso Rebong, Municipal Mayor of Victoria, Laguna; and Ernesto Marina, business (sic) and sari-sari store owner of Pila, Laguna. All witnesses presented at the hearings of this case manifest that there is shortage of ice supply in the territory proposed to be served by the applicant, especially during summer months; that the fish dealers do not get their ice requirements so that most often fish are not preserved in ice when sent to other places to be sold like Sta. Maria, San Pablo City, or Manila; and that when the ice supply is inadequate, shrimps which are shipped to Manila are often cooked to minimize spoilage. The oppositors to this application have not established to the satisfaction of the Commission the adequacy of the service rendered by them in the eighteen (18) municipalities proposed to be served by the applicant, considering that most of these municipalities are far from the locations of their ice plants. After a thorough examination of the evidence submitted by the parties and after a careful consideration of our records on existing service in the territory applied for, and considering that an ice plant which manufactures its ice in the locality where it sells that commodity is more advantageous and convenient to the general public in that locality than ice plant located some kilometers away, and that applicant is financially capable of undertaking the installation, and maintaining the operation of the proposed service, the Commission believes that the oppositions filed by Emilio Gomez, operator of an ice plant in San Juan, Longos, Laguna, and Teofilo Tiongson, operator of an ice plant in San Pablo City, in this case should be, as these are hereby overruled and that the application herein filed may be, as it is hereby, APPROVED. The foregoing findings are assailed on two grounds: (1) that only eight witnesses were presented by the applicant, who individually testified as to the need for ice in each of only seven of the municipalities included in the application; and (2) that their testimony even as to those referred to by them is deficient. We have gone over the record 37 in this regard and found enough support therein for the decision appealed from. Manuel Zaide is a fish dealer in Paete, Willie Limlengco is a sari-sari and refreshment store-owner in Pagsanjan; Conrado Almario has a similar business in Lumban; Alfonso Rebong was the municipal mayor of Victoria since 1960; Ernesto Marina is a businessman in Pila; Jose Acuiza is a businessman and fisherman in Pakil; Jose Maceda was the municipal secretary of Pagsanjan; and Eligio Lorenzo is a grocery merchant in Sta. Cruz. They all affirmed the inadequacy and frequent lack of ice supply in their respective localities not only for home consumption but also for restaurants and refreshment parlors as well as for the fishing industry or occupation of the inhabitants, particularly in the regions bordering Laguna Bay. It is true their combined testimony did not cover all the municipalities applied for, but the applicant himself, respondent here, demonstrated sufficient familiarity with the entire area to be able to give evidence, as he did, on the ice-supply situation in everyone of them. He did a lot of traveling as owner of three movie houses in Pagsanjan, Sta. Cruz and Pila, and in connection with his application in this case personally conducted a thorough investigation of the local demands for ice in the municipalities covered by said application. That he is the applicant does not necessarily affect his credibility; on the contrary, such an investigation was necessary and called for by sound business policy, for no one would invest capital in the production and sale of any commodity without first ascertaining the needs of the prospective market. One significant fact may be noted insofar as the petitioner's existing ice plant in San Pablo is concerned. The petitioner formerly operated another plant in Pagsanjan, and in each of them it had one delivery truck to service the customers in different municipalities. The Pagsanjan plant, however, was closed in 1952 and transferred to San Pablo, and since then the petitioner has been maintaining only one delivery-truck service, with a single dealer-employee in charge. Under the circumstances the Public Service Commission correctly remarked that "the oppositors have not established ... the adequacy of the service rendered by them in the eighteen (18) municipalities proposed to be served by the applicant, considering that most of these municipalities are far from the locations of their iceplants. The "prior operator" and "protection of investment" rules cited by petitioner cannot take precedence over the convenience of the public. There is no ice plant at present in Pagsanjan; and from the testimony of the witnesses for the applicant there exists a great demand for ice not only there but also in certain neighboring municipalities. There is nothing in the record to show that the petitioner had exerted efforts to meet this demand before the respondent made his offer to service the areas where ice was needed. 2 Moreover the respondent

TRANSPORTATION CASES is authorized to produce only 20 tons of ice daily, whereas the petitioner has been allowed to increase its daily capacity from 30 to 40 tons in 1960, and recently, in 1964, to 70 tons. This only proves that there is indeed a great demand for ice in the area applied for by the respondent, and negates the probability of ruinous competition. On the contrary the resulting competition will undoubtedly benefit the public through improvement in the service and reduction in retail prices. On the whole, we find no reason to deviate from the rule heretofore consistently applied that findings and conclusions of fact made by the Public Service Commission, when supported by evidence, are binding upon this Court. WHEREFORE, the decision appealed is affirmed, with costs against the petitioner. The rather ramified circumstances of the instant case can best be understood by a chronological narration of the essential facts, to wit: Prior to 1959, Jose M. Villarama was an operator of a bus transportation, under the business name of Villa Rey Transit, pursuant to certificates of public convenience granted him by the Public Service Commission (PSC, for short) in Cases Nos. 44213 and 104651, which authorized him to operate a total of thirty-two (32) units on various routes or lines from Pangasinan to Manila, and vice-versa. On January 8, 1959, he sold the aforementioned two certificates of public convenience to the Pangasinan Transportation Company, Inc. (otherwise known as Pantranco), for P350,000.00 with the condition, among others, that the seller (Villarama) "shall not for a period of 10 years from the date of this sale, apply for any TPU service identical or competing with the buyer." Barely three months thereafter, or on March 6, 1959: a corporation called Villa Rey Transit, Inc. (which shall be referred to hereafter as the Corporation) was organized with a capital stock of P500,000.00 divided into 5,000 shares of the par value of P100.00 each; P200,000.00 was the subscribed stock; Natividad R. Villarama (wife of Jose M. Villarama) was one of the incorporators, and she subscribed for P1,000.00; the balance of P199,000.00 was subscribed by the brother and sister-in-law of Jose M. Villarama; of the subscribed capital stock, P105,000.00 was paid to the treasurer of the corporation, who was Natividad R. Villarama. VILLA REY TRANSIT, INC., plaintiff-appellant, vs.EUSEBIO E. FERRER, PANGASINAN TRANSPORTATION CO., INC. and PUBLIC SERVICE COMMISSION, defendants. EUSEBIO E. FERRER and PANGASINAN TRANSPORTATION CO., INC., defendantsappellants. PANGASINAN TRANSPORTATION CO., INC., third-party plaintiff-appellant, vs.JOSE M. VILLARAMA, thirdThis is a tri-party appeal from the decision of the Court of First Instance of Manila, Civil Case No. 41845, declaring null and void the sheriff's sale of two certificates of public convenience in favor of defendant Eusebio E. Ferrer and the subsequent sale thereof by the latter to defendant Pangasinan Transportation Co., Inc.; declaring the plaintiff Villa Rey Transit, Inc., to be the lawful owner of the said certificates of public convenience; and ordering the private defendants, jointly and severally, to pay to the plaintiff, the sum of P5,000.00 as and for attorney's fees. The case against the PSC was dismissed. In less than a month after its registration with the Securities and Exchange Commission (March 10, 1959), the Corporation, on April 7, 1959, bought five certificates of public convenience, forty-nine buses, tools and equipment from one Valentin Fernando, for the sum of P249,000.00, of which P100,000.00 was paid upon the signing of the contract; P50,000.00 was payable upon the final approval of the sale by the PSC; P49,500.00 one year after the final approval of the sale; and the balance of P50,000.00 "shall be paid by the BUYER to the different suppliers of the SELLER." The very same day that the aforementioned contract of sale was executed, the parties thereto immediately applied with the PSC for its approval, with a prayer for the issuance of a provisional authority in favor of the vendee Corporation to operate the service therein involved.1 On May 19, 1959, the PSC granted the provisional permit prayed for, upon the condition that "it may be modified or revoked by the Commission at any time, shall be subject to whatever action that may be taken on the basic application and shall be valid only during the pendency of said application." Before the PSC could take final action on said application for approval of sale, however, the Sheriff of Manila, on July 7, 1959, levied on two of

38

TRANSPORTATION CASES the five certificates of public convenience involved therein, namely, those issued under PSC cases Nos. 59494 and 63780, pursuant to a writ of execution issued by the Court of First Instance of Pangasinan in Civil Case No. 13798, in favor of Eusebio Ferrer, plaintiff, judgment creditor, against Valentin Fernando, defendant, judgment debtor. The Sheriff made and entered the levy in the records of the PSC. On July 16, 1959, a public sale was conducted by the Sheriff of the said two certificates of public convenience. Ferrer was the highest bidder, and a certificate of sale was issued in his name. Thereafter, Ferrer sold the two certificates of public convenience to Pantranco, and jointly submitted for approval their corresponding contract of sale to the PSC.2 Pantranco therein prayed that it be authorized provisionally to operate the service involved in the said two certificates. The applications for approval of sale, filed before the PSC, by Fernando and the Corporation, Case No. 124057, and that of Ferrer and Pantranco, Case No. 126278, were scheduled for a joint hearing. In the meantime, to wit, on July 22, 1959, the PSC issued an order disposing that during the pendency of the cases and before a final resolution on the aforesaid applications, the Pantranco shall be the one to operate provisionally the service under the two certificates embraced in the contract between Ferrer and Pantranco. The Corporation took issue with this particular ruling of the PSC and elevated the matter to the Supreme Court,3 which decreed, after deliberation, that until the issue on the ownership of the disputed certificates shall have been finally settled by the proper court, the Corporation should be the one to operate the lines provisionally. On November 4, 1959, the Corporation filed in the Court of First Instance of Manila, a complaint for the annulment of the sheriff's sale of the aforesaid two certificates of public convenience (PSC Cases Nos. 59494 and 63780) in favor of the defendant Ferrer, and the subsequent sale thereof by the latter to Pantranco, against Ferrer, Pantranco and the PSC. The plaintiff Corporation prayed therein that all the orders of the PSC relative to the parties' dispute over the said certificates be annulled. In separate answers, the defendants Ferrer and Pantranco averred that the plaintiff Corporation had no valid title to the certificates in question because the contract pursuant to which it acquired them from Fernando was subject to a suspensive condition the approval of the PSC which has not yet been fulfilled, and, therefore, the Sheriff's levy and the consequent sale at public auction of the certificates referred to, as well as the sale of the same by Ferrer to Pantranco, were valid and regular, and vested unto Pantranco, a superior right thereto. 39 Pantranco, on its part, filed a third-party complaint against Jose M. Villarama, alleging that Villarama and the Corporation, are one and the same; that Villarama and/or the Corporation was disqualified from operating the two certificates in question by virtue of the aforementioned agreement between said Villarama and Pantranco, which stipulated that Villarama "shall not for a period of 10 years from the date of this sale, apply for any TPU service identical or competing with the buyer." Upon the joinder of the issues in both the complaint and third-party complaint, the case was tried, and thereafter decision was rendered in the terms, as above stated. As stated at the beginning, all the parties involved have appealed from the decision. They submitted a joint record on appeal. Pantranco disputes the correctness of the decision insofar as it holds that Villa Rey Transit, Inc. (Corporation) is a distinct and separate entity from Jose M. Villarama; that the restriction clause in the contract of January 8, 1959 between Pantranco and Villarama is null and void; that the Sheriff's sale of July 16, 1959, is likewise null and void; and the failure to award damages in its favor and against Villarama. Ferrer, for his part, challenges the decision insofar as it holds that the sheriff's sale is null and void; and the sale of the two certificates in question by Valentin Fernando to the Corporation, is valid. He also assails the award of P5,000.00 as attorney's fees in favor of the Corporation, and the failure to award moral damages to him as prayed for in his counterclaim. The Corporation, on the other hand, prays for a review of that portion of the decision awarding only P5,000.00 as attorney's fees, and insisting that it is entitled to an award of P100,000.00 by way of exemplary damages. After a careful study of the facts obtaining in the case, the vital issues to be resolved are: (1) Does the stipulation between Villarama and Pantranco, as contained in the deed of sale, that the former "SHALL NOT FOR A PERIOD OF 10 YEARS FROM THE DATE OF THIS SALE, APPLY FOR ANY TPU SERVICE IDENTICAL OR COMPETING WITH THE BUYER," apply to new lines only or does it include existing lines?; (2) Assuming that said stipulation covers all kinds of lines, is such stipulation valid and enforceable?; (3) In the affirmative, that said stipulation is valid, did it bind the Corporation? For convenience, We propose to discuss the foregoing issues by starting with the last proposition.

TRANSPORTATION CASES The evidence has disclosed that Villarama, albeit was not an incorporator or stockholder of the Corporation, alleging that he did not become such, because he did not have sufficient funds to invest, his wife, however, was an incorporator with the least subscribed number of shares, and was elected treasurer of the Corporation. The finances of the Corporation which, under all concepts in the law, are supposed to be under the control and administration of the treasurer keeping them as trust fund for the Corporation, were, nonetheless, manipulated and disbursed as if they were the private funds of Villarama, in such a way and extent that Villarama appeared to be the actual ownertreasurer of the business without regard to the rights of the stockholders. The following testimony of Villarama,4 together with the other evidence on record, attests to that effect: Q. Doctor, I want to go back again to the incorporation of the Villa Rey Transit, Inc. You heard the testimony presented here by the bank regarding the initial opening deposit of ONE HUNDRED FIVE THOUSAND PESOS, of which amount Eighty-Five Thousand Pesos was a check drawn by yourself personally. In the direct examination you told the Court that the reason you drew a check for Eighty-Five Thousand Pesos was because you and your wife, or your wife, had spent the money of the stockholders given to her for incorporation. Will you please tell the Honorable Court if you knew at the time your wife was spending the money to pay debts, you personally knew she was spending the money of the incorporators? A. You know my money and my wife's money are one. We never talk about those things. Q. Doctor, your answer then is that since your money and your wife's money are one money and you did not know when your wife was paying debts with the incorporator's money? A. Because sometimes she uses my money, and sometimes the money given to her she gives to me and I deposit the money. Q. Actually, aside from your wife, you were also the custodian of some of the incorporators here, in the beginning? A. Not necessarily, they give to my wife and when my wife hands to me I did not know it belonged to the incorporators. Q. It supposes then your wife gives you some of the money received by her in her capacity as treasurer of the corporation? A. Maybe. A. Deposit in my account.

Q. Of all the money given to your wife, she did not receive any check? A. I do not remember.

Q. Is it usual for you, Doctor, to be given Fifty Thousand Pesos without even asking what is this? JUDGE: Reform the question.

Q. The subscription of your brother-in-law, Mr. Reyes, is Fifty-Two Thousand Pesos, did your wife give you Fifty-two Thousand Pesos? A. I have testified before that sometimes my wife gives me money and I do not know exactly for what. The evidence further shows that the initial cash capitalization of the corporation of P105,000.00 was mostly financed by Villarama. Of the P105,000.00 deposited in the First National City Bank of New York, representing the initial paid-up capital of the Corporation, P85,000.00 was covered by Villarama's personal check. The deposit slip for the said amount of P105,000.00 was admitted in evidence as Exh. 23, which shows on its face that P20,000.00 was paid in cash and P85,000.00 thereof was covered by Check No. F-50271 of the First National City Bank of New York. The testimonies of Alfonso Sancho5 and Joaquin Amansec,6 both employees of said bank, have proved that the drawer of the check was Jose Villarama himself. Another witness, Celso Rivera, accountant of the Corporation, testified that while in the books of the corporation there appears an entry that the treasurer received P95,000.00 as second installment of the paid-in subscriptions, and, subsequently, also P100,000.00 as the first installment of the offer for second subscriptions worth P200,000.00 from the original subscribers, yet Villarama directed him (Rivera) to make vouchers liquidating the sums. 7 Thus, it was made to appear that the P95,000.00 was delivered to Villarama in payment for equipment purchased from him, and the P100,000.00 was loaned as advances to the stockholders. The said accountant, however, testified that he was not aware of any amount of money that had actually passed hands among the parties involved,8 and actually the only money of the corporation was the P105,000.00 covered by the deposit slip Exh. 23, of which as mentioned above, P85,000.00 was paid by Villarama's personal check. Further, the evidence shows that when the Corporation was in its initial months of operation, Villarama purchased and paid with his personal checks Ford trucks for the Corporation. Exhibits 20 and 21 disclose that the said purchases were paid

Q. What did you do with the money, deposit in a regular account? 40

TRANSPORTATION CASES by Philippine Bank of Commerce Checks Nos. 992618-B and 993621-B, respectively. These checks have been sufficiently established by Fausto Abad, Assistant Accountant of Manila Trading & Supply Co., from which the trucks were purchased9 and Aristedes Solano, an employee of the Philippine Bank of Commerce,10 as having been drawn by Villarama. Exhibits 6 to 19 and Exh. 22, which are photostatic copies of ledger entries and vouchers showing that Villarama had co-mingled his personal funds and transactions with those made in the name of the Corporation, are very illuminating evidence. Villarama has assailed the admissibility of these exhibits, contending that no evidentiary value whatsoever should be given to them since "they were merely photostatic copies of the originals, the best evidence being the originals themselves." According to him, at the time Pantranco offered the said exhibits, it was the most likely possessor of the originals thereof because they were stolen from the files of the Corporation and only Pantranco was able to produce the alleged photostat copies thereof. Section 5 of Rule 130 of the Rules of Court provides for the requisites for the admissibility of secondary evidence when the original is in the custody of the adverse party, thus: (1) opponent's possession of the original; (2) reasonable notice to opponent to produce the original; (3) satisfactory proof of its existence; and (4) failure or refusal of opponent to produce the original in court.11 Villarama has practically admitted the second and fourth requisites.12 As to the third, he admitted their previous existence in the files of the Corporation and also that he had seen some of them. 13 Regarding the first element, Villarama's theory is that since even at the time of the issuance of the subpoena duces tecum, the originals were already missing, therefore, the Corporation was no longer in possession of the same. However, it is not necessary for a party seeking to introduce secondary evidence to show that the original is in the actual possession of his adversary. It is enough that the circumstances are such as to indicate that the writing is in his possession or under his control. Neither is it required that the party entitled to the custody of the instrument should, on being notified to produce it, admit having it in his possession.14 Hence, secondary evidence is admissible where he denies having it in his possession. The party calling for such evidence may introduce a copy thereof as in the case of loss. For, among the exceptions to the best evidence rule is "when the original has been lost, destroyed, or cannot be produced in court."15 The originals of the vouchers in question must be deemed to have been lost, as even the Corporation admits such loss. Viewed upon this light, there can be no doubt as to the admissibility in evidence of Exhibits 6 to 19 and 22. Taking account of the foregoing evidence, together with Celso Rivera's testimony,16 it would appear 41 that: Villarama supplied the organization expenses and the assets of the Corporation, such as trucks and equipment;17 there was no actual payment by the original subscribers of the amounts of P95,000.00 and P100,000.00 as appearing in the books;18 Villarama made use of the money of the Corporation and deposited them to his private accounts;19 and the Corporation paid his personal accounts.20 Villarama himself admitted that he mingled the corporate funds with his own money. 21 He also admitted that gasoline purchases of the Corporation were made in his name22 because "he had existing account with Stanvac which was properly secured and he wanted the Corporation to benefit from the rebates that he received."23 The foregoing circumstances are strong persuasive evidence showing that Villarama has been too much involved in the affairs of the Corporation to altogether negative the claim that he was only a part-time general manager. They show beyond doubt that the Corporation is his alter ego. It is significant that not a single one of the acts enumerated above as proof of Villarama's oneness with the Corporation has been denied by him. On the contrary, he has admitted them with offered excuses. Villarama has admitted, for instance, having paid P85,000.00 of the initial capital of the Corporation with the lame excuse that "his wife had requested him to reimburse the amount entrusted to her by the incorporators and which she had used to pay the obligations of Dr. Villarama (her husband) incurred while he was still the owner of Villa Rey Transit, a single proprietorship." But with his admission that he had received P350,000.00 from Pantranco for the sale of the two certificates and one unit,24 it becomes difficult to accept Villarama's explanation that he and his wife, after consultation,25 spent the money of their relatives (the stockholders) when they were supposed to have their own money. Even if Pantranco paid the P350,000.00 in check to him, as claimed, it could have been easy for Villarama to have deposited said check in his account and issued his own check to pay his obligations. And there is no evidence adduced that the said amount of P350,000.00 was all spent or was insufficient to settle his prior obligations in his business, and in the light of the stipulation in the deed of sale between Villarama and Pantranco that P50,000.00 of the selling price was earmarked for the payments of accounts due to his creditors, the excuse appears unbelievable. On his having paid for purchases by the Corporation of trucks from the Manila Trading & Supply Co. with his personal checks, his reason was that he was only sharing with the Corporation his credit with some companies. And his main reason for mingling his funds with that of the

TRANSPORTATION CASES Corporation and for the latter's paying his private bills is that it would be more convenient that he kept the money to be used in paying the registration fees on time, and since he had loaned money to the Corporation, this would be set off by the latter's paying his bills. Villarama admitted, however, that the corporate funds in his possession were not only for registration fees but for other important obligations which were not specified.26 Indeed, while Villarama was not the Treasurer of the Corporation but was, allegedly, only a part-time manager, 27 he admitted not only having held the corporate money but that he advanced and lent funds for the Corporation, and yet there was no Board Resolution allowing it.28 Villarama's explanation on the matter of his involvement with the corporate affairs of the Corporation only renders more credible Pantranco's claim that his control over the corporation, especially in the management and disposition of its funds, was so extensive and intimate that it is impossible to segregate and identify which money belonged to whom. The interference of Villarama in the complex affairs of the corporation, and particularly its finances, are much too inconsistent with the ends and purposes of the Corporation law, which, precisely, seeks to separate personal responsibilities from corporate undertakings. It is the very essence of incorporation that the acts and conduct of the corporation be carried out in its own corporate name because it has its own personality. The doctrine that a corporation is a legal entity distinct and separate from the members and stockholders who compose it is recognized and respected in all cases which are within reason and the law.29 When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or crime,30 the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals. Upon the foregoing considerations, We are of the opinion, and so hold, that the preponderance of evidence have shown that the Villa Rey Transit, Inc. is an alter ego of Jose M. Villarama, and that the restrictive clause in the contract entered into by the latter and Pantranco is also enforceable and binding against the said Corporation. For the rule is that a seller or promisor may not make use of a corporate entity as a means of evading the obligation of his covenant. 31 Where the Corporation is substantially the alter ego of the covenantor to the restrictive agreement, it can be enjoined from competing with the covenantee.32 The Corporation contends that even on the supposition that Villa Rey Transit, Inc. and Villarama are one and the same, the restrictive clause in the contract between Villarama and Pantranco does not include the purchase of existing lines but it only applies to application for the new lines. The clause in dispute reads thus: (4) The SELLER shall not, for a period of ten (10) years from the date of this sale apply for any TPU service identical or competing with the BUYER. (Emphasis supplied) As We read the disputed clause, it is evident from the context thereof that the intention of the parties was to eliminate the seller as a competitor of the buyer for ten years along the lines of operation covered by the certificates of public convenience subject of their transaction. The word "apply" as broadly used has for frame of reference, a service by the seller on lines or routes that would compete with the buyer along the routes acquired by the latter. In this jurisdiction, prior authorization is needed before anyone can operate a TPU service,33whether the service consists in a new line or an old one acquired from a previous operator. The clear intention of the parties was to prevent the seller from conducting any competitive line for 10 years since, anyway, he has bound himself not to apply for authorization to operate along such lines for the duration of such period.34 If the prohibition is to be applied only to the acquisition of new certificates of public convenience thru an application with the Public Service Commission, this would, in effect, allow the seller just the same to compete with the buyer as long as his authority to operate is only acquired thru transfer or sale from a previous operator, thus defeating the intention of the parties. For what would prevent the seller, under the circumstances, from having a representative or dummy apply in the latter's name and then later on transferring the same by sale to the seller? Since stipulations in a contract is the law between the contracting parties, Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. (Art. 19, New Civil Code.) We are not impressed of Villarama's contention that the re-wording of the two previous drafts of the contract of sale between Villarama and Pantranco is significant in that as it now appears, the parties intended to effect the least restriction. We are persuaded, after an examination of the supposed drafts, that the scope of the final stipulation, while not as long and prolix as those in the drafts, is just as broad and comprehensive. At most, it can be said that the re-wording was done merely for brevity and simplicity.

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TRANSPORTATION CASES The evident intention behind the restriction was to eliminate the sellers as a competitor, and this must be, considering such factors as the good will35 that the seller had already gained from the riding public and his adeptness and proficiency in the trade. On this matter, Corbin, an authority on Contracts has this to say.36 When one buys the business of another as a going concern, he usually wishes to keep it going; he wishes to get the location, the building, the stock in trade, and the customers. He wishes to step into the seller's shoes and to enjoy the same business relations with other men. He is willing to pay much more if he can get the "good will" of the business, meaning by this the good will of the customers, that they may continue to tread the old footpath to his door and maintain with him the business relations enjoyed by the seller. ... In order to be well assured of this, he obtains and pays for the seller's promise not to reopen business in competition with the business sold. As to whether or not such a stipulation in restraint of trade is valid, our jurisprudence on the matter37says: The law concerning contracts which tend to restrain business or trade has gone through a long series of changes from time to time with the changing condition of trade and commerce. With trifling exceptions, said changes have been a continuous development of a general rule. The early cases show plainly a disposition to avoid and annul all contract which prohibited or restrained any one from using a lawful trade "at any time or at any place," as being against the benefit of the state. Later, however, the rule became well established that if the restraint was limited to "a certain time" and within "a certain place," such contracts were valid and not "against the benefit of the state." Later cases, and we think the rule is now well established, have held that a contract in restraint of trade is valid providing there is a limitation upon either time or place. A contract, however, which restrains a man from entering into business or trade without either a limitation as to time or place, will be held invalid. The public welfare of course must always be considered and if it be not involved and the restraint upon one party is not greater than protection to the other requires, contracts like the one we are discussing will be sustained. The general tendency, we believe, of modern authority, is to make the test whether the restraint is reasonably necessary for the protection of the contracting parties. If the contract is reasonably necessary to protect the interest of the parties, it will be upheld. (Emphasis supplied.) Analyzing the characteristics of the questioned stipulation, We find that although it is in the nature 43 of an agreement suppressing competition, it is, however, merely ancillary or incidental to the main agreement which is that of sale. The suppression or restraint is only partial or limited: first, in scope, it refers only to application for TPU by the seller in competition with the lines sold to the buyer; second, in duration, it is only for ten (10) years; and third, with respect to situs or territory, the restraint is only along the lines covered by the certificates sold. In view of these limitations, coupled with the consideration of P350,000.00 for just two certificates of public convenience, and considering, furthermore, that the disputed stipulation is only incidental to a main agreement, the same is reasonable and it is not harmful nor obnoxious to public service.38 It does not appear that the ultimate result of the clause or stipulation would be to leave solely to Pantranco the right to operate along the lines in question, thereby establishing monopoly or predominance approximating thereto. We believe the main purpose of the restraint was to protect for a limited time the business of the buyer. Indeed, the evils of monopoly are farfetched here. There can be no danger of price controls or deterioration of the service because of the close supervision of the Public Service Commission.39 This Court had stated long ago,40 that "when one devotes his property to a use in which the public has an interest, he virtually grants to the public an interest in that use and submits it to such public use under reasonable rules and regulations to be fixed by the Public Utility Commission." Regarding that aspect of the clause that it is merely ancillary or incidental to a lawful agreement, the underlying reason sustaining its validity is well explained in 36 Am. Jur. 537-539, to wit: ... Numerous authorities hold that a covenant which is incidental to the sale and transfer of a trade or business, and which purports to bind the seller not to engage in the same business in competition with the purchaser, is lawful and enforceable. While such covenants are designed to prevent competition on the part of the seller, it is ordinarily neither their purpose nor effect to stifle competition generally in the locality, nor to prevent it at all in a way or to an extent injurious to the public. The business in the hands of the purchaser is carried on just as it was in the hands of the seller; the former merely takes the place of the latter; the commodities of the trade are as open to the public as they were before; the same competition exists as existed before; there is the same employment furnished to others after as before; the profits of the business go as they did before to swell the sum of public wealth; the public has the same opportunities of purchasing, if it is a mercantile business; and production is not lessened if it is a manufacturing plant. The reliance by the lower court on tile case of Red Line Transportation Co. v. Bachrach41 and finding

TRANSPORTATION CASES that the stipulation is illegal and void seems misplaced. In the said Red Line case, the agreement therein sought to be enforced was virtually a division of territory between two operators, each company imposing upon itself an obligation not to operate in any territory covered by the routes of the other. Restraints of this type, among common carriers have always been covered by the general rule invalidating agreements in restraint of trade. 42 Neither are the other cases relied upon by the plaintiff-appellee applicable to the instant case. In Pampanga Bus Co., Inc. v. Enriquez,43the undertaking of the applicant therein not to apply for the lifting of restrictions imposed on his certificates of public convenience was not an ancillary or incidental agreement. The restraint was the principal objective. On the other hand, in Red Line Transportation Co., Inc. v. Gonzaga,44 the restraint there in question not to ask for extension of the line, or trips, or increase of equipment was not an agreement between the parties but a condition imposed in the certificate of public convenience itself. Upon the foregoing considerations, Our conclusion is that the stipulation prohibiting Villarama for a period of 10 years to "apply" for TPU service along the lines covered by the certificates of public convenience sold by him to Pantranco is valid and reasonable. Having arrived at this conclusion, and considering that the preponderance of the evidence have shown that Villa Rey Transit, Inc. is itself the alter ego of Villarama, We hold, as prayed for in Pantranco's third party complaint, that the said Corporation should, until the expiration of the 1year period abovementioned, be enjoined from operating the line subject of the prohibition. To avoid any misunderstanding, it is here to be emphasized that the 10-year prohibition upon Villarama is not against his application for, or purchase of, certificates of public convenience, but merely the operation of TPU along the lines covered by the certificates sold by him to Pantranco. Consequently, the sale between Fernando and the Corporation is valid, such that the rightful ownership of the disputed certificates still belongs to the plaintiff being the prior purchaser in good faith and for value thereof. In view of the ancient rule of caveat emptor prevailing in this jurisdiction, what was acquired by Ferrer in the sheriff's sale was only the right which Fernando, judgment debtor, had in the certificates of public convenience on the day of the sale.45 Accordingly, by the "Notice of Levy Upon Personalty" the Commissioner of Public Service was notified that "by virtue of an Order of Execution issued by the Court of First Instance of Pangasinan, the rights, interests, or participation which the defendant, VALENTIN A. FERNANDO in the above entitled case may have in the following 44 realty/personalty is attached or levied upon, to wit: The rights, interests and participation on the Certificates of Public Convenience issued to Valentin A. Fernando, in Cases Nos. 59494, etc. ... Lines Manila to Lingayen, Dagupan, etc. vice versa." Such notice of levy only shows that Ferrer, the vendee at auction of said certificates, merely stepped into the shoes of the judgment debtor. Of the same principle is the provision of Article 1544 of the Civil Code, that "If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property." There is no merit in Pantranco and Ferrer's theory that the sale of the certificates of public convenience in question, between the Corporation and Fernando, was not consummated, it being only a conditional sale subject to the suspensive condition of its approval by the Public Service Commission. While section 20(g) of the Public Service Act provides that "subject to established limitation and exceptions and saving provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the Commission previously had ... to sell, alienate, mortgage, encumber or lease its property, franchise, certificates, privileges, or rights or any part thereof, ...," the same section also provides: ... Provided, however, That nothing herein contained shall be construed to prevent the transaction from being negotiated or completed before its approval or to prevent the sale, alienation, or lease by any public service of any of its property in the ordinary course of its business. It is clear, therefore, that the requisite approval of the PSC is not a condition precedent for the validity and consummation of the sale. Anent the question of damages allegedly suffered by the parties, each of the appellants has its or his own version to allege. Villa Rey Transit, Inc. claims that by virtue of the "tortious acts" of defendants (Pantranco and Ferrer) in acquiring the certificates of public convenience in question, despite constructive and actual knowledge on their part of a prior sale executed by Fernando in favor of the said corporation, which necessitated the latter to file the action to annul the sheriff's sale to Ferrer and the subsequent transfer to Pantranco, it is entitled to collect actual and compensatory damages, and attorney's fees in the amount of P25,000.00. The evidence on record, however, does not clearly show that said defendants acted in bad faith in their acquisition of the certificates in question. They believed that because the bill of sale has yet to be approved by the Public Service Commission, the transaction was not a consummated sale, and, therefore, the

TRANSPORTATION CASES title to or ownership of the certificates was still with the seller. The award by the lower court of attorney's fees of P5,000.00 in favor of Villa Rey Transit, Inc. is, therefore, without basis and should be set aside. Eusebio Ferrer's charge that by reason of the filing of the action to annul the sheriff's sale, he had suffered and should be awarded moral, exemplary damages and attorney's fees, cannot be entertained, in view of the conclusion herein reached that the sale by Fernando to the Corporation was valid. Pantranco, on the other hand, justifies its claim for damages with the allegation that when it purchased ViIlarama's business for P350,000.00, it intended to build up the traffic along the lines covered by the certificates but it was rot afforded an opportunity to do so since barely three months had elapsed when the contract was violated by Villarama operating along the same lines in the name of Villa Rey Transit, Inc. It is further claimed by Pantranco that the underhanded manner in which Villarama violated the contract is pertinent in establishing punitive or moral damages. Its contention as to the proper measure of damages is that it should be the purchase price of P350,000.00 that it paid to Villarama. While We are fully in accord with Pantranco's claim of entitlement to damages it suffered as a result of Villarama's breach of his contract with it, the record does not sufficiently supply the necessary evidentiary materials upon which to base the award and there is need for further proceedings in the lower court to ascertain the proper amount. PREMISES CONSIDERED, the judgment appealed from is hereby modified as follows: 1. The sale of the two certificates of public convenience in question by Valentin Fernando to Villa Rey Transit, Inc. is declared preferred over that made by the Sheriff at public auction of the aforesaid certificate of public convenience in favor of Eusebio Ferrer; 2. Reversed, insofar as it dismisses the third-party complaint filed by Pangasinan Transportation Co. against Jose M. Villarama, holding that Villa Rey Transit, Inc. is an entity distinct and separate from the personality of Jose M. Villarama, and insofar as it awards the sum of P5,000.00 as attorney's fees in favor of Villa Rey Transit, Inc.; 3. The case is remanded to the trial court for the reception of evidence in consonance with the above findings as regards the amount of damages suffered by Pantranco; and 4. On equitable considerations, without costs. So ordered.

EMILIANO U. ESCOTO, petitioner, vs.ANUNCIACION VDA. DE GRANADA and THE PUBLIC SERVICE, COMMISSION, respondents. Emiliano U. Escoto petitions for a review of the order of the Public Service Commission dated 7 December 1970 (Petition, Annex "H") revoking its decision of 5 August 1970 that approved the transfer of five (5) certificates of public convenience from Rosita H. Natividad to Emiliano U. Escoto, and cancelling the certificates issued in the name of the latter. The background facts, virtually conceded by petitioner Escoto, are the following: Private respondent Anunciacion Vda. de Granada had instituted an action in 31 March 1964 against Rosita Natividad, former holder of the certificates in question, and operator of several PUJ jitneys, to recover damages for the death of her husband, who was hit by one of said vehicles. The driver had been criminally convicted and in the civil suit Mrs. Granada was awarded an indemnity of P70,000, plus 10% attorney's fees, by the Court of First Instance of Iloilo on 11 September 1965, and execution pending appeal was ordered. The judgment was affirmed by the Court of Appeals (CA-G.R. No. 37340-R) and ultimately became final upon this Supreme Court denying review (G.R. No. L-32157) on 2 July 1970. Meanwhile, Rosita Natividad and Emiliano U. Escoto, on 27 April 1970, applied to the Public Service Commission for approval of the sale for P40,000 of the 77 jitneys and the public service certificates owned by the former to the latter, pursuant to a deed allegedly executed on 3 June 1964, almost six (6) years prior to the petition to the Public Service Commission (Case No. 70-2754). No objection having been filed, despite publication, the Public Service Commission approved the transfer, as aforesaid, on 5 August 1970.

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TRANSPORTATION CASES On 23 September 1970, Mrs. Granada petitioned the Public Service Commission for a reopening of the case and the setting aside of approval of the transfer of the equipment and certificates to Escoto, pleading the foregoing facts; that the sale by Natividad to Escoto was simulated and fictitious; and that Mrs. Granada had not discovered the transfer until 16 September 1970. Escoto opposed the reopening of the case on the grounds (a) that Mrs. Granada, not being a party in interest, had no personality to ask for the case's reopening; (b) that the decision sought to be reopened had already become final and inalterable; and (c) that the issues raised by Mrs. Granada were judicial issues not within the jurisdiction of the Public Service Commission. As noted at the beginning of this opinion, the Public Service Commission granted the petition to reopen and, after hearing both parties, found that the sale of the Natividad certificates to Escoto was presumptively in fraud of creditors under Article 1387 of the New Civil Code, providing that:. ART. 1387. All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation. Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the property alienated, and need not have been obtained by the party seeking the rescission. In addition to these presumptions, the design to defraud creditors may be proved in any other manner recognized by the law of evidence. (Emphasis supplied) The Public Service Commission likewise found that Mrs. Granada had no previous knowledge of the petition for the Public Service Commission to approve the transfer; and that she had sustained, or was in immediate danger of sustaining, injury as a result of the transfer, and, in view thereof, revoked its previous approval of the sale and ordered that Escoto's certificates be cancelled. Unable to secure reconsideration, Escoto came to this Court on appeal by certiorari, claiming lack of jurisdiction and or grave abuse of discretion. We find the petitioner's claim untenable. There is no denying that in petitioning the Commission for the approval of the transfer of Natividad's units and service certificates to Escoto, the applicants did not disclose to the Public Service Commission that a judgment had been previously obtained by Mrs. Granada against the transferor, nor that a writ of execution had been issued against her, thereby 46 rendering the transfer presumptively fraudulent as against the judgment creditor (see Petition, Annex "B"). Nor is it doubtful that had the foregoing circumstances been revealed, the Public Service Commission could very well have refused to approve the transfer, since the latter was subject to rescission by the regular courts, leading to a consequent disruption of the public services transferred, to the detriment of the general public. Moreover, the Commission could not but view with disfavor a petition for its approval of a transaction of doubtful correctness, for such approbation tended to place the Commission's acts and reputation in a derogatory light, making it appear as if it were cooperating to defraud a creditor. Under the circumstances, the Public Service Commission had authority to revoke its approval, because under the Public Service law (Section 16 [m], Commonwealth Act No. 146), it could cancel or revoke a certificate "whenever the facts and circumstances on the strength of which a certificate was issued have been misrepresented or materially changed", concealment of material facts being in effect a misrepresentation. The order complained of in the case before us is proof that the Public Service Commission regarded the facts concealed from it as material and that, if known, would have caused it to withhold or deny approval of the transfer in question. In Pecson vs. Pecson, 78 Phil. 522, this Court upheld the Commission's power to cancel a certificate of public convenience upon proof that the holder was a mere dummy of the transferor. The case at bar being very similar in nature, it should be governed by the same principle. The non-appearance of respondent Mrs. Granada in the initial case (PSC No. 70-2754) was due to the petitioner's concealment of the preceding judgment in her favor, for which she is not to blame. Likewise, the lapse of the period to appeal the Public Service Commission order approving a transfer of certificates can not bar its cancellation for misrepresentation of actual facts. WHEREFORE, the order appealed from is affirmed, with costs against petitioner.

TRANSPORTATION CASES Plaintiff Isaac Chaves became a customer of defendant MERALCO in the year 1953 when he and his family were residing at No. 211-D Rubi, Manila. In connection with the contract for electrical service, he deposited the sum of P5.00 (Exh. "A") with defendant MERALCO on February 12, 1953. This deposit in the name of plaintiff Isaac Chaves was retained by MERALCO and made to apply to subsequent contracts for electrical service entered into after subsequent transfers of the Chaves family to other residences and up to the time this family went to reside at the place aforementioned, at No. 2656 Mercedes Street, Singalong, Manila. ... At or about the end of March, 1965, defendant Pedro Yambao went to the residence of plaintiffs and presented two overdue bills, one for January 11 to February 9,1965, for the sum of P7.90 (Exhibit "C"), and the other for February 9 to March 10, 1965, for the amount of P7.20 (Exhibit "C"). Juana O. Chaves, however, informed Yambao that these bills would be paid at the MERALCO main office. Accordingly, on April 2, 1965, Isaac Chaves went to the defendant's main office at San Marcelino, Manila, but paid only the bill marked as Exhibit 'C" leaving the other bill Identified as Exhibit "C-l" unpaid. Past 2:30 o'clock in the afternoon of April 21,1965, MERALCO caused the electric service in plaintiff's residence to be discontinued and the power line cut off. The next day, April 22, 1965, at about 9:00 a.m., plaintiff Rosendo O. Chaves went to the MERALCO main office and paid the amount of P7.20 for the bill marked as Exhibit "C-l", and the sum of P7.00 for the subsequent bill corresponding to the period from March 10 up to April 8, 1965 (Exhibit "C-2") after his attention was called to the latter account. Rosendo O. Chaves then sought the help of Atty. Lourdy Torres, one of the defendants' counsel, and, thereafter, the power line was reconnected and electric service restored to the Chaves residence at about 7:00 p.m. of that same day. 1 Petitioners dispute the finding that there was no notice given to herein respondent. However, since only questions of law may be raised in a petition for certiorari under Rule 45 of the Revised Rules of Court, petitioners, 'for the sake of argument and for the purpose of giving focus on the legal issues', do not take issue with such finding. Petitioners contend that in the absence of bad faith, they could not be held liable for moral and exemplary damages as well as attorney's fees. The failure to give a notice of disconnection to private respondents might have been a breach of duty or breach of contract, but by itself does not constitute bad faith or fraud; it must be shown that such a failure was motivated by in or done with fraudulent

MANILA ELECTRIC COMPANY and PEDRO YAMBAO, petitioners-appellants, vs.THE HONORABLE COURT OF APPEALS and ISAAC CHAVEZ, SR., ISAAC O. CHAVEZ, JR., ROSENDO O. CHAVES, and JUAN O. CHAVES, respondents-appellees. In an action for recovery of damages for embarassment, humiliation, wounded feelings and hurt pride, caused to herein private respondents, by reason of the disconnection of their electrical service by the petitioners, the then Court of First Instance of Manila, Sixth Judicial District, Branch XXIV, rendered a decision dated December 13,1967, ordering herein petitioners jointly and severally to pay private respondents the sum of Ten Thousand (P10,000.00) Pesos as moral damages, Two Thousand (P2,000.00) Pesos as exemplary damages and, One Thousand (P1,000.00) Pesos as attorney's fees, and dismissing petitioners' counterclaim. On appeal, the Court of Appeals and in toto the trial court's decision. Their Motion for Reconsideration having been denied, petitioners filed the instant petition for certiorari. Petitioner Manila Electric Company (MERALCO) is a public utility corporation providing electric power for the consumption of the general public in Metro Manila. Petitioner Pedro Yambao is a bill collector of MERALCO. Private respondents Isaac Chaves and Juana O. Chaves, husband and wife, filed the complaint for damages, together with their children, Isaac O. Chaves, Jr. and Rosendo O. Chaves. Isaac Sr. and Isaac Jr. and Rosendo were members of the Philippine Bar; Isaac, Sr. and Isaac, Jr. were practicing lawyers and Rosendo was a Legal Officer at the Agricultural Productivity Commission. Juana O. Chaves was a public school teacher. The facts as found by the trial court and adopted by the Court of Appeals are as follows:

47

TRANSPORTATION CASES intent.Petitioners also maintain that ' private respondents were in arrears in the payment of their electricity bills when their electric service was connected, no moral damages may be recovered by them under the 'clean hands' doctrine enunciated in Mabutas vs. Calapan Electric Company, CA-G.R. No. L-9683-R, May 26, 1964. In its decision, the respondent Court of Appeals held that MERALCO's right to disconnect the electric service of a delinquent customer "is an absolute one, subject only to the requirement that defendant MERALCO should give the customer a written notice of disconnection 48 hours in advance." This requirement is embodied in Section 97 of the Revised Order No. 1 of the Public Service Commission which provides as follows: Section 97. Payment of bills. A public service, may require that bills for service be paid within a specified time after rendition. When the billing period covers a month or more, the minimum time allowed will be ten days and upon expiration of the specified time, service may be discontinued for the non-payment of bills, provided that a 48 hours' written notice of such disconnection has been given the customer: Provided, however, that disconnections of service shall not be made on Sundays and official holidays and never after 2 p.m. of any working day: Provided, further, that if at the moment the disconnection is to be made the customer tenders payment of the unpaid bill to the agent or employee of the operator who is to effect the disconnection, the said agent or employee shall be obliged to accept tender of payment and issue a temporary receipt for the amount and shall desist from disconnecting the service. 2 The respondent court stressed the importance and necessity of the 48-hour advance written notification before a disconnection of service may be effected. Said the court: ... It sets in motion the disconnection of an electrical service of the customer by giving the notice, determining the expiration date thereof, and executing the disconnection. It, therefore, behooves the defendant MERALCO that before it disconnects a customer's electrical service, there should be sufficient evidence that the requirements for the disconnection had been duly complied with, otherwise, the poor consumer can be subjected to the whims and caprices of the defendant, by the mere pretension that the written notice had been duly served upon the customer. 3 We find no reversible error in the decision appealed from. One can not deny the vital role which a public utility such as MERALCO, having a monopoly of the supply of electrical power in Metro Manila and some nearby municipalities, plays in the life of people living in such areas. Electricity has become a necessity to most people in these areas justifying the exercise by the State of its regulatory power 48 over the business of supplying electrical service to the public, in which petitioner MERALCO is engaged. Thus, the state may regulate, as it has done through Section 97 of the Revised Order No. 1 of the Public Service Commission, the conditions under which and the manner by which a public utility such as MERALCO may effect a disconnection of service to a delinquent customer. Among others, a prior written notice to the customer is required before disconnection of the service. Failure to give such prior notice amounts to a tort, as held by us in a similar case, 4 where we said: ... petitioner's act in 'disconnecting respondent Ongsip's gas service without prior notice constitutes breach of contract amounting to an independent tort. The prematurity of the action is indicative of an intent to cause additional mental and moral suffering to private respondent. This is a clear violation of Article 21 of the Civil Code which provides that any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for damages. This is reiterated by paragraph 10 of Article 2219 of the Code. Moreover, the award of moral damages is sanctioned by Article 2220 which provides that wilfull injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Likewise, we find no merit in petitioners' contention that being in arrears in the payment of their bills, the private respondents are not entitled to moral damages under the doctrine that "he who comes to court in demand of equity, must come with clean hands." We rejected this argument in the Manila Gas Corporation case, supra, wherein we held that respondents' default in the payment of his bills "cannot be utilized by petitioner to defeat or null the claim for damages. At most, this circumstance can be considered as a mitigating factor in ascertaining the amount of damages to which respondent ... is entitled." Accordingly, we find no grave abuse of discretion committed by respondent court in affirming the trial court's decision. The petition is hereby DISMISSED for lack of merit. SO ORDERED.

TRANSPORTATION CASES to compete with plaintiff-cooperative. It, however, admitted that it is not authorized to transport passengers . . . (pp. 15-16, Rollo) On July 31, 1989, the trial court rendered a decision in favor of respondent Lungsod Corp., the dispositive portion of which states: WHEREFORE FROM THE FOREGOING CONSIDERATION, the Court hereby renders judgment in favor of the plaintiff and against the defendants as follows: COGEO-CUBAO OPERATORS AND DRIVERS ASSOCIATION, petitioner, vs.THE COURT OF APPEALS, LUNGSOD SILANGAN TRANSPORT SERVICES, CORP., INC., respondents. 1. Ordering defendants to pay plaintiff the amount of P50,000.00 as actual damages; 2. Ordering the defendants to pay the plaintiffs the amount of P10,000.00 as attorney's fees. SO ORDERED. (P. 39, Rollo) Not satisfied with the decision, petitioner Association appealed with the Court of Appeals. On May 27, 1991, respondent appellate court rendered its decision affirming the findings of the trial court except with regard to the award of actual damages in the amount of P50,000.00 and attorney's fees in the amount of P10,000.00. The Court of Appeals however, awarded nominal damages to petitioner in the amount of P10,000.00. Hence, this petition was filed with the petitioner assigning the following errors of the appellate court: I. THE RESPONDENT COURT ERRED IN MERELY MODIFYING THE JUDGMENT OF THE TRIAL COURT. II. THE RESPONDENT COURT ERRED IN HOLDING THAT THE PETITIONER USURPED THE PROPERTY RIGHT OF THE PRIVATE RESPONDENT. III. AND THE RESPONDENT COURT ERRED IN DENYING THE MOTION FOR RECONSIDERATION. Since the assigned errors are interrelated, this Court shall discuss them jointly. The main issue raised by the petitioner is whether or not the petitioner usurped the property right of the respondent which shall entitle the latter to the award of nominal damages. Petitioner contends that the association was formed not to complete with the respondent corporation in the latter's operation as a common carrier; that the same was organized for the common protection of drivers from abusive traffic officers who extort money from them, and for the elimination of the practice of respondent corporation of requiring jeepney owners to execute deed of sale in favor of the corporation to show that the latter is the owner of the jeeps under its certificate of public convenience. Petitioner also argues that in

This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed with modification the decision of the Regional Trial Court awarding damages in favor of respondent Lungsod Silangan Transport Services Corp., Inc. (Lungsod Corp. for brevity). The antecedents facts of this case are as follows: It appears that a certificate of public convenience to operate a jeepney service was ordered to be issued in favor of Lungsod Silangan to ply the CogeoCubao route sometime in 1983 on the justification that public necessity and convenience will best be served, and in the absence of existing authorized operators on the lined apply for . . . On the other hand, defendant-Association was registered as a non-stock, non-profit organization with the Securities and Exchange Commission on October 30, 1985 . . . with the main purpose of representing plaintiff-appellee for whatever contract and/or agreement it will have regarding the ownership of units, and the like, of the members of the Association . . . Perturbed by plaintiffs' Board Resolution No. 9 . . . adopting a Bandera' System under which a member of the cooperative is permitted to queue for passenger at the disputed pathway in exchange for the ticket worth twenty pesos, the proceeds of which shall be utilized for Christmas programs of the drivers and other benefits, and on the strength of defendants' registration as a collective body with the Securities and Exchange Commission, defendants-appellants, led by Romeo Oliva decided to form a human barricade on November 11, 1985 and assumed the dispatching of passenger jeepneys . . . This development as initiated by defendants-appellants gave rise to the suit for damages. Defendant-Association's Answer contained vehement denials to the insinuation of take over and at the same time raised as a defense the circumstance that the organization was formed not 49

TRANSPORTATION CASES organizing the association, the members thereof are merely exercising their freedom or right to redress their grievances. We find the petition devoid of merit. Under the Public Service Law, a certificate of public convenience is an authorization issued by the Public Service Commission for the operation of public services for which no franchise is required by law. In the instant case, a certificate of public convenience was issued to respondent corporation on January 24, 1983 to operate a public utility jeepney service on the Cogeo-Cubao route. As found by the trial court, the certificate was issued pursuant to a decision passed by the Board of Transportation in BOT Case No. 82-565. A certification of public convenience is included in the term "property" in the broad sense of the term. Under the Public Service Law, a certificate of public convenience can be sold by the holder thereof because it has considerable material value and is considered as valuable asset (Raymundo v. Luneta Motor Co., et al., 58 Phil. 889). Although there is no doubt that it is private property, it is affected with a public interest and must be submitted to the control of the government for the common good (Pangasinan Transportation Co. v. PSC, 70 Phil 221). Hence, insofar as the interest of the State is involved, a certificate of public convenience does not confer upon the holder any proprietary right or interest or franchise in the route covered thereby and in the public highways (Lugue v. Villegas, L22545, Nov . 28, 1969, 30 SCRA 409). However, with respect to other persons and other public utilities, a certificate of public convenience as property, which represents the right and authority to operate its facilities for public service, cannot be taken or interfered with without due process of law. Appropriate actions may be maintained in courts by the holder of the certificate against those who have not been authorized to operate in competition with the former and those who invade the rights which the former has pursuant to the authority granted by the Public Service Commission (A.L. Ammen Transportation Co. v. Golingco. 43 Phil. 280). In the case at bar, the trial court found that petitioner association forcibly took over the operation of the jeepney service in the CogeoCubao route without any authorization from the Public Service Commission and in violation of the right of respondent corporation to operate its services in the said route under its certificate of public convenience. These were its findings which were affirmed by the appellate court: The Court from the testimony of plaintiff's witnesses as well as the documentary evidences presented is convinced that the actions taken by defendant herein though it admit that it did not have the authority to transport passenger did in fact assume the role as a common carrier engaged in the 50 transport of passengers within that span of ten days beginning November 11, 1985 when it unilaterally took upon itself the operation and dispatching of jeepneys at St. Mary's St. The president of the defendant corporation. Romeo Oliva himself in his testimony confirmed that there was indeed a takeover of the operations at St. Mary's St. . . . (p. 36, Rollo) The findings of the trial court especially if affirmed by the appellate court bear great weight and will not be disturbed on appeal before this Court. Although there is no question that petitioner can exercise their constitutional right to redress their grievances with respondent Lungsod Corp., the manner by which this constitutional right is to be, exercised should not undermine public peace and order nor should it violate the legal rights of other persons. Article 21 of the Civil Code provides that any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. The provision covers a situation where a person has a legal right which was violated by another in a manner contrary to morals, good customs or public policy. It presupposes loss or injury, material or otherwise, which one may suffer as a result of such violation. It is clear form the facts of this case that petitioner formed a barricade and forcibly took over the motor units and personnel of the respondent corporation. This paralyzed the usual activities and earnings of the latter during the period of ten days and violated the right of respondent Lungsod Corp. To conduct its operations thru its authorized officers. As to the propriety of damages in favor of respondent Lungsod Corp., the respondent appellate court stated: . . . it does not necessarily follow that plaintiffappellee is entitled to actual damages and attorney's fees. While there may have been allegations from plaintiff-cooperative showing that it did in fact suffer some from of injury . . . it is legally unprecise to order the payment of P50,000.00 as actual damages for lack of concrete proof therefor. There is, however, no denying of the act of usurpation by defendants-appellants which constituted an invasion of plaintiffs'-appellees' property right. For this, nominal damages in the amount of P10,000.00 may be granted. (Article 2221, Civil Code). (p. 18, Rollo) No compelling reason exists to justify the reversal of the ruling of the respondent appellate court in the case at bar. Article 2222 of the Civil Code states that the court may award nominal damages in every obligation arising from any source enumerated in Article 1157, or in every case where any property right has been invaded. Considering the circumstances of the case, the respondent corporation is entitled to the award of nominal damages .ACCORDINGLY, the petition is DENIED

TRANSPORTATION CASES and the assailed decision of the respondent appellate court dated May 27, 1991 is AFFIRMED. SO ORDERED. this findings, plaintiffs filed the present petition for review. In their first assignment of errors, petitioners claim that the lower court erred in ruling that to maintain an action for damages caused by the breach of a carrier's obligation to carry a passenger safely to his destination it is necessary to prove that the damages were caused by the negligence of the driver of said carrier in order that liability may attach which, they claim, is contrary to the ruling of this court in the case of Castro vs. Acro Taxicab Co., 46 Off. Gaz., pp. 2028-2029. But we notice that while such is the ruling entertained by the lower court it was not concurred in by the Court of Appeals so much so that it made an express manifestation that it fully agreed with the theory of petitioners. The ruling of the court below having been overruled, we see no reason why the same issue should now be reiterated in this instance. The second error refers to the person who was actually operating the jeepney at the time of collision. It is claimed that while Marcelino Ignacio, owner of the jeepney, has leased the same to one Leoncio Tahimik on June 8, 1948, and that at the time of collision it was the latter who was actually operating it, the contract of lease was null and void because it was not approved by the Public Service Commission as required by section 16, paragraph h, of the Public Service Law.1awphil.net There is merit in this contention. The law really requires the approval of the Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee. The reason is obvious. Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service Commission so that the latter may take proper safeguards to protect the interest of the public. In fact, the law requires that, before the approval is granted, there should be a public hearing, with notice to all interested parties, in order that the Commission may determine 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 public interest. Such being the reason and philosophy behind this requirement, it follows that if the property covered by the franchise is transferred, or leased to another without obtaining the requisite approval, the transfer is not binding against the Public Service Commission and in contemplation of law the grantee continues to be responsible under the franchise in relation to the Commission and to the public. Since the lease of the jeepney in question was made without such approval, the only conclusion that can be drawn is that Marcelino Ignacio still continues to be its operator in contemplation of law, and as such is responsible for the consequences incident to its operation, one of them being the collision under consideration.

MONTOYA V IGNACIO BAUTISTA, J.: In the afternoon of January 5, 1949, Tomasita Arca boarded the jeepney driven by Leonardo de Guzman at Tanza, Cavite in order to go to Cavite City. She paid the usual fare for the trip. While the jeepney was on its way to its destination, and at a point between Tanza and Cavite City, somewhere in barrio Ligton, municipality of Rosario, it collided with a bus of the Luzon Bus Line causing as a result the death of Tomasita. Tomasita was then a school teacher of Tanza Elementary School with an annual compensation of P1,320. Her death left a widower and four minor children. Because of the jeepney's failure to transport Tomasita safely to her destination and her resultant death, her widower and children instituted the present action praying that the defendants, owners of the jeepney, be ordered to pay them an indemnity in the amount of P31,000. Defendants, set up as a special defense that the collision between the jeepney and the bus was investigated by the Office of the Provincial Fiscal of Cavite and the result of the investigation was that the one at fault was the driver of the bus and, as a consequence, said driver was charged with triple homicide thru reckless imprudence in the Court of First Instance of Cavite (Criminal Case No. 10771). Defendants claim that inasmuch as the present case involves the same issues as those in the case filed against the driver of the bus, the same should be held in abeyance until after the final termination of the criminal case. Defendant Cayetano Tahimik further claims that he is not and has never been the owner of the jeepney and cannot therefore be held responsible for the damages cause by it. After the parties had presented their evidence, the lower court rendered decision dismissing the case holding that defendants are not liable because it was not proven that the collision which resulted in the death of Tomasita Arca was due to the negligence of the driver of the jeepney whose ownership is attributed to defendants. From this decision plaintiffs have appealed. The Court of Appeals affirmed the decision appealed from, but in so doing predicated its affirmance not on plaintiffs' failure to prove that the collision was due to the negligence of the driver but on the fact that Marcelino Ignacio was not the one operating the jeepney but one Leoncio Tahimik who had leased the jeepney by virtue of a document duly executed by the parties. And not agreeable to 51

TRANSPORTATION CASES It may be argued that section 16, paragraph (h) provides in its last part that "nothing herein contained shall be construed to prevent the sale, alienation, or lease by any public utility of any of its property in the ordinary course of business", which gives the impression that the approval of the Public Service Commission is but a mere formality which does not affect the effectivity of the transfer or lease of the property belonging to a 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 parties although not effective against the public and the Public Service Commission. The approval is only necessary to protect public interest. Wherefore, the decision appealed from is reversed. Judgment is hereby rendered ordering the defendant Marcelino Ignacio to pay the plaintiffs the sum of P31,000 as damages, with costs. DIWATA VARGAS, petitioner, vs.SALVADOR LANGCAY, CORAZON LANGCAY, HELEN LANGCAY and JOSE AGUAS, respondents. This is a petition for review of the decision of the Court of Appeals finding petitioner subsidiarily liable for damages under article 103 of the Revised Penal Code. At about 8:00 o'clock in the morning of June 5, 1955, at Rizal Avenue, Manila, Corazon and Helen Langcay, sisters, were hit and injured by a jeepney bearing plate No. AC-4859-Quezon City1955, then driven by Ramon B. Aguas. Criminally charged with physical injuries, the said Ramon B. Aguas was finally sentenced by the Court of Appeals, in CA-G.R. No. 17900-R, to 3 months and 6 days of arresto mayor for serious and slight physical injuries through reckless imprudence, caused to Corazon and Helen Langcay, "without pronouncement with respect to the indemnity due to the aggrieved parties, because the action therefor had been reserved." Since the records of the Public Service Commission and the Motor Vehicles Office showed that Diwata Vargas was, at the time of the accident, the owner and operator of the jeepney in question, the parents of Corazon and Helen sued Diwata Vargas and the driver for damages. In spite of the defense of appellant Diwata Vargas that prior to the accident, precisely on August 17, 1953, she had sold the vehicle to Jose B. Aguas (father of the driver), so that at the time of the accident she was no longer the owner of the jeepney, and that, further, Public Service Commission, on October 27, 1953, cancelled the certificate of public convenience issued in her name, the defendants Diwata Vargas and Ramon B. Aguas were jointly and severally sentenced to pay damages and attorneys fees by the Court of First Instance of Manila. Diwata Vargas appealed to the Court of 52 Appeals which affirmed, with modifications, the lower court's decision. Pertinent parts of the Appeals Court decision are hereby reproduced for a clearer understanding of the issue involved in this appeal: The order of cancellation and revocation of appellant certificate of public convenience, dated October 27, 1953 (Exh. 4-D) does not relieve her of the liability established by above quoted legal provisions as clearly and positively construed by the highest tribunal of the land. This order was issued motu propio by the Commission in view of appellant failure to pay the P15.00 supervision and regulation fee and its 50% surcharge, and not for the purpose of transferring the same certificate to Jose B. Aguas. A copy of the above mentioned order was furnished appellant, so that she cannot profess ignorance of what she termed the "anomalous operation" of the jeepney she sold to Jose B. Aguas without the required authorization or approval of the Public Service Commission. Appellant's failure to stop the operation of the vehicle in question and to surrender to the Motor Vehicles Office the corresponding plates, as ordered by exhibit 4-D, Vargas constitutes a violation of the Revised Motor Vehicle Law and Commonwealth No. 146, which violation makes her liability and responsibility clearer and more inescapable. . . . Appellant's liability stems from and is a form of punishment for her failure to comply with section 20 (g) of Commonwealth Act 146 and with 5 of Act 3992. . . . There is no question that appellees Corazon and Helen Langcay were not passengers of the jeepney, the reckless operation of which resulted in their injuries. Therefore, the direct and immediate liability of a common carrier as provided for by the Civil Code cannot be ascribed to appellant. Accordingly, her liability should be based on article 103 of the Revised Penal Code. . . . Therefore, appellant's responsibility is mere subsidiary, pursuant to the above cited article of the Revised Penal Code. . . . the judgment appealed from is hereby modified in the sense that should defendant Ramon B. Aguas be found insolvent, appellant should pay appellees the sum of P953.00 as compensatory damages, P4,000.00 and P500.00 as moral damages suffered by Corazon and Helen Langcay, respectively, and P2,000.00 for attorney's fees. It is also ordered that this case be returned to the court of origin not only for the execution of this decision once it becomes final, but also for further proceedings against Jose B. Aguas, after proper summons, in the third party complaint above mentioned. Without special pronouncement as to the payment of the costs.

TRANSPORTATION CASES Appellant-petitioner Diwata Vargas brought the case to this Court on a question of law, alleging that she cannot be held liable under Art. 103 of the Revised Penal Code for whatever violation or offense she may have committed under the Public Service Law and the Motor Vehicle Law and in the absence of a showing that she employed the person (driver) who caused the damage, and that she was engaged in an industry or a business, and where the evidence prove that the father (Jose B. Aguas ) of the person primarily liable (Ramon Aguas) is his actual employer. We hold that the Court of Appeals erred in considering appellant-petitioner Diwata Vargas only subsidiarily liable under Article 103 of the Revised Penal Code. This Court, in previous decisions, has always considered the registered owner/operator of a passenger vehicle, jointly and severally liable with the driver for damages incurred by passengers or third persons as a consequence of injuries (or death) sustained in the operation of said vehicles. (Montoya vs. Ignacio, G.R. No. L-5868, Dec. 29, 1953; Timbol vs. Osias, G.R. No. L-7547, April 30, 1955; Vda. de Medina vs. Cresencia, G.R. No. L8194, July 11, 1956; Necesito vs. Paras, G.R. No. L-10605, June 30, 1955; Erezo vs. Jepte, G.R. No. L-9605, Sept. 30, 1957; Tamayo vs. Aquino, G.R. No. L-12634, May 29, 1959; Rayos vs. Tamayo, G.R. No. L-12720, May 29, 1959.) In the case of Erezo vs. Jepte, supra We held: . . . In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damages caused . . . (Emphasis ours) In the case of Tamayo vs. Aquino, supra We said: . . . As Tamayo is the registered owner of the truck, his responsibility to the public or to any passenger riding in the vehicle or truck must be direct . . . (Emphasis ours)1awphl.nt Petitioner argues that there was no showing that she employed the person (the driver) who caused the injuries. On the contrary, she argues, the evidence show that J B. Aguas, the father of the driver, is his actual employer. We believe that it is immaterial whether or not the driver was actually employed by the operator of record. is even not necessary to prove who the actual owner of the vehicle and the employer of the driver is. Granting that, in this case, the father of the driver is the act owner and that he is the actual employer, following well-settled principle that the operator of record continues to be the operator of the vehicle in contemplation of law, as regards the public and third persons, and such is responsible for the consequences incident to its operation, we must hold and consider such owner-operation of record as the employer, in contemplation of law, the driver. And, to give effect to this policy of law enunciated in 53 the above-cited decisions of this Court, must now extend the same and consider the actual operation and employer as the agent of the operator of record. In the case of Tamayo vs. Aquino, supra, this Court said: . . . In operating the truck without transfer thereof having been approved by the Public Service Commission, the transferee acted merely as agent of the registered owner. . . (Emphasis our) The purpose of the principles evolved by the decision in these matters will be defeated and thwarted if we entertain the argument of petitioner that she is not liable because the actual owner and employer was establish by the evidence. In the case of Erezo vs. Jepte, supra, the Court said: . . . With the above policy in mind, the question that defendant-appellant poses is: Should not the registered owner allowed at the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee or owner is, it would be easy for him by collusion with others or otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the damage or injury done. A victim of recklessness on the public highways is without means to discover or identify the person actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the prejudice of the person injured; that is, to prove that a third person or another has become the owner, so that he may thereby be relieved of the responsibility to the injured person. For the foregoing considerations, we hold that Article 103 is not the law applicable in this case; the petitioner stands liable, however, on the basis of the settled principle that as the registered owner, she is directly and primarily responsible and liable for damages sustained by passengers or third persons as a consequence of the negligent or careless operation of the vehicle registered in her name. Petitioner does not question the amounts of damages granted to respondents by the Court of Appeals and the same not appearing to be

TRANSPORTATION CASES excessive or unconscionable, they should be maintained. WHEREFORE, the decision of the Court of Appeals is hereby modified, as above indicated. With costs. MA. LUISA BENEDICTO, petitioner, vs.HON. INTERMEDIATE APPELLATE COURT and GREENHILLS WOOD INDUSTRIES COMPANY, INC. respondents. This Petition for Review asks us to set aside the Decision of the then Intermediate Appellate Court dated 30 January 1985 in A.C.-G.R. CV No. 01454, which affirmed in toto the decision of the Regional Trial Court ("RTC") of Dagupan City in Civil Case No. 5206. There, the RTC held petitioner Ma. Luisa Benedicto liable to pay private respondent Greenhills Wood Industries Company, Inc. ("Greenhills") the amounts of P16,016.00 and P2,000.00 representing the cost of Greenhills' lost sawn lumber and attorney's fees, respectively. Private respondent Greenhills, a lumber manufacturing firm with business address at Dagupan City, operates sawmill in Maddela, Quirino. Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc., ("Blue Star") a company with business operations in Valenzuela, Bulacan 100,000 board feet of sawn lumber with the understanding that an initial delivery would be made on 15 May 1980. 1 To effect its first delivery, private respondent's resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck bearing Plate No. 225 GA TH to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. This cargo truck was registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise engaged in hauling freight, with main office in B.F. Homes, Paraaque. On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, supervised the loading of 7,690 board feet of sawn lumber with invoice value of P16,918.00 aboard the cargo truck. Before the cargo truck left Maddela for Valenzuela, Bulacan, Cruz issued to Licuden Charge Invoices Nos. 3259 and 3260 both of which were initialed by the latter at the bottom left corner. 2 The first invoice was for the amount of P11,822.80 representing the value of 5,374 board feet of sawn lumber, while the other set out the amount of P5,095.20 as the value of 2,316 board feet. Cruz instructed Licuden to give the original copies of the two (2) invoices to the consignee upon arrival in Valenzuela, Bulacan 3 and to retain the duplicate copies in order that he could afterwards claim the freightage from private respondent's Manila office. 4 54 On 16 May 1980, the Manager of Blue Star called up by long distance telephone Greenhills' president, Henry Lee Chuy, informing him that the sawn lumber on board the subject cargo truck had not yet arrived in Valenzuela, Bulacan. The latter in turn informed Greenhills' resident manager in its Maddela saw-mill of what had happened. In a letter 5 dated 18 May 1980, Blue Star's administrative and personnel manager, Manuel R. Bautista, formally informed Greenhills' president and general manager that Blue Star still had not received the sawn lumber which was supposed to arrive on 15 May 1980 and because of this delay, "they were constrained to look for other suppliers." On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to continue with their contract, private respondent Greenhill's filed Criminal Case No. 668 against driver Licuden for estafa. Greenhills also filed against petitioner Benedicto Civil Case No. D-5206 for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan City. In her answer, 6 petitioner Benedicto denied liability alleging that she was a complete stranger to the contract of carriage, the subject truck having been earlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a deed of sale. 7 She claimed that the truck had remained registered in her name notwithstanding its earlier sale to Tee because the latter had paid her only P50,000.00 out of the total agreed price of P68,000.00 However, she averred that Tee had been operating the said truck in Central Luzon from that date (28 February 1980) onwards, and that, therefore, Licuden was Tee's employee and not hers. On 20 June 1983, based on the finding that petitioner Benedicto was still the registered owner of the subject truck, and holding that Licuden was her employee, the trial court adjudged as follows: WHEREFORE, in the light of the foregoing considerations, this Court hereby renders judgment against defendant Maria Luisa Benedicto, ordering her to pay the Greenhills Wood Industries Co. Inc., thru its President and General Manager, the amount of P16,016 cost of the sawn lumber loaded on the cargo truck, with legal rate of interest from the filing of the complaint to pay attorney's fees in the amount of P2,000.00; and to pay the costs of this suit. SO ORDERED. 8 On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate Court affirmed 9 the decision of the trial court in toto. Like the trial court, the appellate court held that since petitioner was the registered owner of the subject vehicle, Licuden the driver of the truck, was her employee, and that accordingly petitioner should be responsible for the negligence of said driver and bear the loss of the sawn lumber plus damages. Petitioner moved for reconsideration, without success. 10

TRANSPORTATION CASES In the present Petition for Review, the sole issue raised is whether or not under the facts and applicable law, the appellate court was correct in finding that petitioner, being the registered owner of the carrier, should be held liable for the value of the undelivered or lost sawn lumber. Petitioner urges that she could not be held answerable for the loss of the cargo, because the doctrine which makes the registered owner of a common carrier vehicle answerable to the public for the negligence of the driver despite the sale of the vehicle to another person, applies only to cases involving death of or injury to passengers. What applies in the present case, according to petitioner, is the rule that a contract of carriage requires proper delivery of the goods to and acceptance by the carrier. Thus, petitioner contends that the delivery to a person falsely representing himself to be an agent of the carrier prevents liability from attaching to the registered owner. The Court considers that petitioner has failed to show that appellate court committed reversible error in affirming the trial court's holding that petitioner was liable for the cost of the sawn lumber plus damages. There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in the business of hauling or transporting goods for hire or compensation. Petitioner Benedicto is, in brief, a common carrier. The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the operations of the carrier, even though the specific vehicle involved may already have been transferred to another person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the right to assume that the registered owner is the actual or lawful owner thereof It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is. 11 The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's claim, private respondent is not required to go beyond the vehicle's certificate of registration to ascertain the owner of the carrier. In this regard, the letter presented by petitioner allegedly written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not presented in court to testify on this matter but also because of the aforementioned doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that doctrine. 55 In fact, private respondent had no reason at all to doubt the authority of Licuden to enter into a contract of carriage on behalf of the registered owner. It appears that, earlier, in the first week of May 1980, private respondent Greenhills had contracted Licuden who was then driving the same cargo truck to transport and carry a load of sawn lumber from the Maddela sawmill to Dagupan City. 12 No one came forward to question that contract or the authority of Licuden to represent the owner of the carrier truck. Moreover, assuming the truth of her story, petitioner Benedicto retained registered ownership of the freight truck for her own benefit and convenience, that is, to secure the payment of the balance of the selling price of the truck. She may have been unaware of the legal security device of chattel mortgage; or she, or her buyer, may have been unwilling to absorb the expenses of registering a chattel mortgage over the truck. In either case, considerations both of public policy and of equity require that she bear the consequences flowing from registered ownership of the subject vehicle. Petitioner Benedicto, however, insists that the said principle should apply only to cases involving negligence and resulting injury to or death of passengers, and not to cases involving merely carriage of goods. We believe otherwise. A common carrier, both from the nature of its business and for insistent reasons of public policy, is burdened by the law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers but also in caring for goods transported by it. 13 The loss or destruction or deterioration of goods turned over to the common carrier for conveyance to a designated destination, raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity or act of the public enemy in time of war, or from an act or omission of the shipper himself or from the character of the goods or their packaging or container. 14 This presumption may be overcome only by proof of extraordinary diligence on the part of the carrier. 15 Clearly, to permit a common carrier to escape its responsibility for the passengers or goods transported by it by proving a prior sale of the vehicle or means of transportation to an alleged vendee would be to attenuate drastically the carrier's duty of extraordinary diligence. It would also open wide the door to collusion between the carrier and the supposed vendee and to shifting liability from the carrier to one without financial capability to respond for the resulting damages. In other words, the thrust of the public policy here involved is as sharp and real in the case of carriage of goods as it is in the transporting of human

TRANSPORTATION CASES beings. Thus, to sustain petitioner Benedicto's contention, that is, to require the shipper to go behind a certificate of registration of a public utility vehicle, would be utterly subversive of the purpose of the law and doctrine. Petitioner further insists that there was no perfected contract of carriage for the reason that there was no proof that her consent or that of Tee had been obtained; no proof that the driver, Licuden was authorized to bind the registered owner; and no proof that the parties had agreed on the freightage to be paid. Once more, we are not persuaded by petitioner's arguments which appear to be a transparent attempt to evade statutory responsibilities. Driver Licuden was entrusted with possession and control of the freight truck by the registered owner (and by the alleged secret owner, for that matter).itc-asl Driver Licuden, under the circumstances, was clothed with at least implied authority to contract to carry goods and to accept delivery of such goods for carriage to a specified destination. That the freight to be paid may-not have been fixed before loading and carriage, did not prevent the contract of carriage from arising, since the freight was at least determinable if not fixed by the tariff schedules in petitioner's main business office. Put in somewhat different terms, driver Licuden is in law regarded as the employee and agent of the petitioner, for whose acts petitioner must respond. A contract of carriage of goods was shown; the sawn lumber was loaded on board the freight truck; loss or non-delivery of the lumber at Blue Star's premises in Valenzuela, Bulacan was also proven; and petitioner has not proven either that she had exercised extraordinary diligence to prevent such loss or non-delivery or that the loss or non-delivery was due to some casualty or force majeure inconsistent with her liability. 16 Petitioner's liability to private respondent Greenhills was thus fixed and complete, without prejudice to petitioner's right to proceed against her putative transferee Benjamin Tee and driver Licuden for reimbursement or contribution. 17 WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the former Intermediate Appellate Court dated 30 January 1985 is hereby AFFIRMED. Costs against petitioner. SO ORDERED. "Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts. The factual background of this case is undisputed. Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents, purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated and maintained the same under the name Acme Taxi, petitioner's trade name. About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin, collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained therefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for damages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First Instance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for attorney's fees. This decision having become final, a writ of execution was issued. One of the vehicles of respondent spouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one Sonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon and sold at public auction for P8,000.00 to a certain Mr. Lopez. Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of Manila. Trial on the merits ensued and on July 22, 1975, the said court

LITA ENTERPRISES, INC., petitioner, vs.SECOND CIVIL CASES DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P. GARCIA, respondents.

56

TRANSPORTATION CASES rendered a decision, the dispositive portion of which reads: t.hqw WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de Galvez, Visayan Surety & Insurance Company and the Sheriff of Manila are concerned. Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota cars not levied upon with Engine Nos. 2R230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by executing a deed of conveyance in favor of the plaintiff. Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate of convenience from March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars. (Annex A, Record on Appeal, p. 102-103, Rollo) Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by the court a quo on October 27, 1975. (p. 121, Ibid.) On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified the decision by including as part of its dispositive portion another paragraph, to wit: t.hqw In the event the condition of the three Toyota rears will no longer serve the purpose of the deed of conveyance because of their deterioration, or because they are no longer serviceable, or because they are no longer available, then Lita Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of July 22, 1975. (Annex "D", p. 167, Rollo.) Its first and second motions for reconsideration having been denied, petitioner came to Us, praying that: t.hqw 1. ...2. ... after legal proceedings, decision be rendered or resolution be issued, reversing, annulling or amending the decision of public respondent so that: (a) the additional paragraph added by the public respondent to the DECISION of the lower court (CFI) be deleted; (b) that private respondents be declared liable to petitioner for whatever amount the latter has paid or was declared liable (in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian Vda. de Galvez, as heir of the victim Florante Galvez, who died as a result ot the gross negligence of private respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.) 57 Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system", whereby a person who has been granted a certificate of convenience allows another person who owns motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this is a pernicious system that cannot be too severely condemned. It constitutes an imposition upon the goo faith of the government. Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides:t.hqw ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed; (1) when the fault, is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking. The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to contracts that are null void." The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or damages for its property agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laid down as though it was equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other." 3 Although certain exceptions to the rule are provided by law, We see no cogent reason why the full force of the rule should not be applied in the instant case.

TRANSPORTATION CASES WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P. Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, PlaintiffsAppellees, versus Lita Enterprises, Inc., DefendantAppellant," of the Intermediate Appellate Court, as well as the decisions rendered therein are hereby annuleled and set aside. No costs. SO ORDERED.1wph1.t TEJA MARKETING AND/OR ANGEL JAUCIAN, petitioner, vs. HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE, respondents. "'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim that must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129 SCRA 81.) The factual background of this case is undisputed. The same is narrated by the respondent court in its now assailed decision, as follows: On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a sidecar in the total consideration of P8,000.00 as shown by Invoice No. 144 (Exh. "A"). Out of the total purchase price the defendant gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the balance within sixty days. The defendant, however, failed to comply with his promise and so upon his own request, the period of paying the balance was extended to one year in monthly installments until January 1976 when he stopped paying anymore. The plaintiff made demands but just the same the defendant failed to comply with the same thus forcing the plaintiff to consult a lawyer and file this action for his damage in the amount of P546.21 for attorney's fees and P100.00 for expenses of litigation. The plaintiff also claims that as of February 20, 1978, the total account of the defendant 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 but an additional 12% interest per annum on the said balance from January 26, 1976 to February 27, 1978; a 2% service charge; and P 546.21 representing attorney's fees. In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a security for the payment of the balance of the purchase price. It has been the practice of financing firms that whenever there is a balance of the purchase price the registration papers of the motor vehicle subject of the sale are not given to the buyer. The records of the LTC show that the motorcycle sold to the 58 defendant was first mortgaged to the Teja Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it was made to appear that way only as the defendant had no franchise of his own and he attached the unit to the plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff to undertake the yearly registration of the motorcycle with the Land Transportation Commission. Pursuant to this agreement the defendant on February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for the mortgage fee and the P82.00 for the registration fee of the motorcycle. The plaintiff, however failed to register the motorcycle on that year on the ground that the defendant failed to comply with some requirements such as the payment of the insurance premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff saying that the defendant was hiding the motorcycle from him. Lastly, the plaintiff explained also that though the ownership of the motorcycle was already transferred to the defendant the vehicle was still mortgaged with the consent of the defendant to the Rural Bank of Camaligan for the reason that all motorcycle purchased from the plaintiff on credit was rediscounted with the bank. On his part the defendant did not dispute the sale and the outstanding balance of P1,700. 00 still payable to the plaintiff. The defendant was persuaded to buy from the plaintiff the motorcycle with the side car because of the condition that the plaintiff would be the one to register every year the motorcycle with the Land Transportation Commission. In 1976, however, the plaintfff failed to register both the chattel mortgage and the motorcycle with the LTC notwithstanding the fact that the defendant gave him P90.00 for mortgage fee and registration fee and had the motorcycle insured with La Perla 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 his obligation to register the motorcycle the defendant suffered damages when he failed to claim any insurance indemnity which would amount to no less than P15,000.00 for the more than two times that the motorcycle figured in accidents aside from the loss of the daily income of P15.00 as boundary fee beginning October 1976 when the motorcycle was impounded by the LTC for not being registered. The defendant disputed the claim of the plaintiff that he was hiding from the plaintiff the motorcycle resulting in its not being registered. The truth being that the motorcycle was being used for transporting passengers and it kept on travelling from one place to another. The motor vehicle sold to him was mortgaged by the plaintiff with the Rural Bank of Camaligan without his consent and knowledge and the defendant was not even given a copy of the mortgage deed. The defendant claims that it is not true that the motorcycle was mortgaged because of re-discounting for rediscounting is only true with

TRANSPORTATION CASES Rural Banks and the Central Bank. The defendant puts the blame on the plaintiff for not registering the motorcycle with the LTC and for not giving him the registration papers inspite of demands made. Finally, the evidence of the defendant shows that because of the filing of this case he was forced to retain the services of a lawyer for a fee on not less than P1,000.00. ... it also appears and the Court so finds that defendant purchased the motorcycle in question, particularly for the purpose of engaging and using the same in the transportation business and for this purpose said trimobile unit was attached to the plaintiffs transportation line who had the franchise, so much so that in the registration certificate, the plaintiff appears to be the owner of the unit. Furthermore, it appears to have been agreed, further between the plaintiff and the defendant, that plaintiff would undertake the yearly registration of the unit in question with the LTC. Thus, for the registration 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 the insurance coverage of the unit. Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with Damages" against private respondent Pedro N. Nale in the City Court of Naga City. The City Court rendered judgment in favor of petitioner, the dispositive portion of which reads: WHEREFORE, decision is hereby rendered dismissing the counterclaim and ordering the defendant to pay plaintiff the sum of P1,700.00 representing the unpaid balance of the purchase price with legal rate of interest from the date of the filing of the complaint until the same is fully paid; to pay plaintiff the sum of P546.21 as attorney's fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and to pay the costs. SO ORDERED. On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private respondent filed a petition for review with the Intermediate Appellate Court and on July 18, 1983 the said Court promulgated its decision, the pertinent portion of which reads However, as the purchase of the motorcycle for operation as a trimobile under the franchise of the private respondent Jaucian, pursuant to what is commonly known as the "kabit system", without the prior approval of the Board of Transportation (formerly the Public Service Commission) was an illegal transaction involving the fictitious registration of the motor vehicle in the name of the private respondent so that he may traffic with the privileges of his franchise, or certificate of public convenience, to operate a tricycle service, the parties being in pari delicto, neither of them may bring an action against the other to enforce their illegal contract [Art. 1412 (a), Civil Code]. 59 WHEREFORE, the decision under review is hereby set aside. The complaint of respondent Teja Marketing and/or Angel Jaucian, as well as the counterclaim of petitioner Pedro Nale in Civil Case No. 1153 of the Court of First Instance of Camarines Sur (formerly Civil Case No. 5856 of the City Court of Naga City) are dismissed. No pronouncement as to costs. SO ORDERED. The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel Jaucian presenting a lone assignment of error whether or not respondent court erred in applying the doctrine of "pari delicto." We find the petition devoid of merit. Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system" whereby a person who has been granted a certificate of public convenience allows another person who owns motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft and corruption in the government transportation offices. Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds then. Upon this premise it would be error to accord the parties relief from their predicament. Article 1412 of the Civil Code denies them such aid. It provides: Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: 1. When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of the contract, or demand, the performance of the other's undertaking. The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription. The mere lapse of time cannot give efficacy to contracts that are null and void. WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the Intermediate Appellate Court (now the Court of Appeals) is AFFIRMED. No costs. SO ORDERED.

TRANSPORTATION CASES ADOLFO L. SANTOS, petitioner, vs.ABRAHAM SIBUG and COURT OF APPEALS, respondents. The controversy in this case will be resolved on the basis of the following facts and expositions. Prior to April 26, 1963 (the ACCIDENT DATE), Vicente U. Vidad (VIDAD, for short) was a duly authorized passenger jeepney operator. Also prior to the ACCIDENT DATE, petitioner Adolfo L. Santos (SANTOS, for short) was the owner of a passenger jeep, but he had no certificate of public convenience for the operation of the vehicle as a public passenger jeep. SANTOS then transferred his jeep to the name of VIDAD so that it could be operated under the latter's certificate of public convenience. ln other words, SANTOS became what is known in ordinary parlance as a kabit operator. For the protection of SANTOS, VIDAD executed a re-transfer document to the former, which was to be a private document presumably to be registered if and where it was decided that the passenger jeep of SANTOS was to be withdrawn from the kabit arrangement. On the ACCIDENT DATE, private respondent Abraham Sibug (SIBUG for short) was bumped by a passenger jeepney operated by VIDAD and driven by Severe Gragas. As a result thereof, SIBUG filed a complaint for damages against VIDAD and Gragas with the Court of First Instance of Manila, Branch XVII, then presided by Hon. Arsenic Solidum. That Civil Case will hereinafter be referred to as the BRANCH XVII CASE. On December 5, 1963, a judgment was rendered by Branch XVII, sentencing VIDAD and Gragas, jointly and severally, to pay SIBUG the sums of P506.20 as actual damages; P3,000.00 as moral damages; P500.00 as attorney's fees, and costs. 1 On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, with Plate No. PUJ-343-64, registered in the name of VIDAD, and scheduled the public auction sale thereof on May 8,1964. On April 11, 1964, SANTOS presented a third-party claim with the Sheriff alleging actual ownership of the motor vehicle levied upon, and stating that registration thereof in the name of VIDAD was merely to enable SANTOS to make use of VIDAD'S Certificate of Public Convenience. After the thirdparty complaint was filed, SIBUG submitted to the Sheriff a bond issued by the Philippine Surety Insurance Company (THE BONDING COMPANY, for short), To save the Sheriff from liability if he were to proceed with the sale and if SANTOS' thirdparty claim should be ultimately upheld. On April 22, 1964, that is, before the scheduled sale of May 8, 1964, SANTOS instituted an action for Damages and injunction with a prayer for Preliminary Mandatory Injunction against SIBUG; VIDAD; and the Sheriff in Civil Case No. 56842 of Branch X, of the same Court of First Instance of 60 Manila (hereinafter referred to as the BRANCH X CASE). The complaint was later amended to include the BONDING COMPANY as a party defendant although its bond had not become effective. ln the Complaint, SANTOS alleged essentially that he was the actual owner of the motor vehicle subject of levy: that a fictitious Deed of Sale of said motor vehicle was executed by him in VIDAD'S favor for purposes of operating said vehicle as a passenger jeepney under the latter's franchise; that SANTOS did not receive any payment from VIDAD in consideration of said sale; that to protect SANTOS' proprietary interest over the vehicle in question, VIDAD in turn had executed a Deed of Sale in favor of SANTOS on June 27, 1962; that SANTOS was not a party in the BRANCH XVII CASE and was not in any manner liable to the registered owner VIDAD and the driver Gragas; that SANTOS derived a daily income of P30.00 from the operation of said motor vehicle as a passenger jeepney and stood to suffer irreparable damage will possession of said motor vehicle were not restored to him. SANTOS then prayed that 1,) pending trial, a Writ of Preliminary Mandatory injunction be issued ex-parte commanding the Sheriff of Manila to restore the motor vehicle to him and that the Sheriff be enjoined from proceeding with its sale; 2) that, after trial, the Deed of Sale in favor of VIDAD be declared absolutely fictitious and, therefore, null and void, and adjudging SANTOS to be the absolute owner of the vehicle in questioned and 3) that damages be awarded to SANTOS as proven during the trial plus attorney's fees in the amount of P450.00 and costs. 2 No public sale was conducted on May 8, 1964. On May 11, 1964, Branch X issued a Restraining Order enjoining the Sheriff from conducting the public auction sale of the motor vehicle levied upon. 3 The Restraining Order was issued wrongfully. Under the provisions of Section 17, Rule 39, the action taken by the Sheriff cannot be restrained by another Court or by another Branch of the same Court. The Sheriff has the right to continue with the public sale on his own responsibility, or he can desist from conducting the public sale unless the attaching creditor files a bond securing him against the thirdparty-claim. But the decision to proceed or not with the public sale lies with him. As said in Uy Piaoco vs. Osmea 9 Phil. 299, 307, "the powers of the Sheriff involve both discretional power and personal liability." The mentioned discretional power and personal liability have been further elucidated in Planes and Verdon vs. Madrigal & Co., et al., 94 Phil. 754, where it was held. 1wph1.t The duty of the sheriff in connection with the execution and satisfaction of judgment of the court is governed by Rule 39 of the Rules of Court. Section 15 thereof provides for the procedure to be. followed where the property levied on execution 'is claimed by a by person. lf the third-party claim is sufficient, the sheriff, upon receiving it, is not bound to proceed with the levy of the property, unless he is given by the judgment creditor an indemnity bond

TRANSPORTATION CASES against the claim (Mangaoang vs. Provincial Sheriff, 91 Phil., 368). Of course, the sheriff may proceed with the levy even without the Indemnity bond, but in such case he will answer for any damages with his own personal funds (Waits vs. Peterson, et al., S Phil. 419 Alzua et al. vs. Johnson, 21 Phil., 308; Consults No. 341 de los abogados de Smith, Bell & Co., 48 Phil., 565). And the rule also provides that nothing therein contained shall prevent a third person from vindicating his claim to the property by any proper action (Sec. 15 of Rule 39.). It appears from the above that if the attaching creditor should furnish an adequate bond. the Sheriff has to proceed with the public auction. When such bond is not filed, then the Sheriff shall decide whether to proceed. or to desist from proceeding, with the public auction. lf he decides to proceed, he will incur personal liability in favor of the successful third-party claimant. On October 14, 1965, Branch X affirmed SANTOS' ownership of the jeepney in question based on the evidence adduced, and decreed: 1wph1.t WHEREFORE, judgment is hereby rendered, enjoining the defendants from proceeding with the sale of the vehicle in question ordering its return to the plaintiff and furthermore sentencing the defendant Abraham Sibug to pay the plaintiff the sum of P15.00 a day from April 10, 1964 until the vehicle is returned to him, and P500.00 as attorney's fee's as well as the costs. 4 This was subsequently amended on December 5, 1965, upon motion for reconsideration filed by SANTOS, to include the BONDING COMPANY as jointly slid severally liable with SIBUG. 5 1wph1.t ... provided that the liability of the Philippine Surety & insurance Co., Inc. shall in no case exceed P6,500.00. Abraham Sibug is furthermore condemned to pay the Philippine Surety & Insurance Co., Inc. the same sums it is ordered to pay under this decision. The jugdment in the BRANCH X CASE appears to be quite legally unpalatable For instance, since the undertaking furnished to the Sheriff by the BONDING COMPANY did not become effective for the reason that the jeep was not sold, the public sale thereof having been restrained, there was no reason for promulgating judgment against the BONDING COMPANY. lt has also been noted that the Complaint against VIDAD was dismissed. Most important of all, the judgment against SIBUG was inequitable. ln asserting his rights of ownership to the vehicle in question, SANTOS candidly admitted his participation in the illegal and pernicious practice in the transportation business known as the kabit system. Sec.. 20 (g) of the 61 Public Service Act, then the applicable law, specifically provided: 1wph1.t ... it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the Commission previously had ... (g) to sell, alienate, mortgage, encumber or lease its property, franchise, certificates, privileges, or rights, or any part thereof. In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the registered owner and operator of record at the time of the accident. lt is true that VIDAD had executed a resale to SANTOS, but the document was not registered. Although SANTOS, as the kabit was the true owner as against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is directly and primarily responsible and liable for the damages caused to SIBUG, the injured party, as a consequence of the negligent or careless operation of the vehicle. 6 This ruling is based on the principle that the operator of record is considered the operator of the vehicle in contemplation of law as regards the public and third persons 7 even if the vehicle involved in the accident had been sold to another where such sale had not been approved by the then Public Service Commission. 8 For the same basic reason, as the vehicle here in question was registered in VIDAD'S name, the levy on execution against said vehicle should be enforced so that the judgment in the BRANCH XVII CASE may be satisfied, notwithstanding the fact that the secret ownership of the vehicle belonged to another. SANTOS, as the kabit should not be allowed to defeat the levy on his vehicle and to avoid his responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to VIDAD. This is one way of curbing the pernicious kabit system that facilitates the commission of fraud against the travelling public. As indicated in the Erezo case, supra, SANTOS' remedy. as the real owner of the vehicle, is to go against VIDAD, the actual operator who was responsible for the accident, for the recovery of whatever damages SANTOS may suffer by reason of the execution. In fact, if SANTOS, as the kabit had been impleaded as a party defendant in the BRANCH XVII CASE, he should be held jointly and severally liable with VIDAD and the driver for damages suffered by SIBUG, 9 as well as for exemplary damages. 10 From the judgment in the BRANCH X CASE SIBUG appealed. Meanwhile, SANTOS moved for immidiately execution. SIBUG opposed it on the ground that Branch X had no jurisdiction over the BRANCH XVII CASE, and that Branch X had no power to interfere by injunction with the judgment of Branch XVII a Court of concurrent or coordinate jurisdiction. 11

TRANSPORTATION CASES On November 13, 1965, Branch X released an order authorizing immediate execution on the theory that the BRANCH X CASE is "principally an action for the issuance of a writ of prohibition to forbid the Sheriff from selling at public auction property not belonging to the judgment creditor (sic) and there being no attempt in this case to interfere with the Judgment or decree of another court of concurrent jurisdiction." 12 Without waiting for the resolution of his Motion for Reconsideration, SIBUG sought relief from respondent Appellate Court in a Petition for certiorari with Preliminary injunction. On November 18, 1965, respondent Court of Appeals enjoined the enforcement of the Branch X Decision and the Order of execution issued by said Branch. 13 On September 28, 1966, respondent Count of Appeals rendered the herein challenged Decision nullifying the judgment renderred in the Branch X Case and permanently restraining V from taking cognizance of the BRANCH X CASE SANTOS. It ruled that: 1wph1.t ... the respondent Court Branch X, indeed, encroached and interfered with the judgment of Branch XVII when it issued a restraining order and finally a decision permanently enjoining the other court from excuting the decision rendered in Civil Case No. 54335. This to our mind constitutes an interference with the powers and authority of the other court having co-equal and coordinate jurisdiction. To rule otherwise, would indubitably lead to confusion which might hamper or hinder the proper administration of justice. ... 14 Respondent Court further held that SANTOS may not be permitted to prove his ownership over a particular vehicle being levied upon but registered in another's name in a separated action, observing that: 1wph1.t As the vehicle in question was registered in the name of Vicente U. Vidad, the government or any person affected by the representation that said vehicle is registered under the name of a particular person had the right to rely on his declaration of ownership and registration: and the registered owner or any other person for that matter cannot be permitted to repudiate said declaration with the objective of proving that said registered vehicle is owned by another person and not by the registered owner (sec. 68, (a), Rule 123, and art. 1431, New Civil Code) Were we to allow a third person to prove that he is the real owner of a particular vehicle and not the registered owner it would in effect be tantamount to sanctioning the attempt of the registered owner of the particular vehicle in evading responsibility for it cannot be dispelled that the door would be opened to collusion between a person and a registered owner for the latter to escape said responsibility to the public or to any person. ... 62 SANTOS now seeks a review of respondent Court's Decision contending that: 1wph1.t 1) The respondent Court of Appeals erred in holding that Branch X of the Court of First Instance of Manila has no jurisdiction to restrain by Writ of Injunction the auction sale of petitioner's motor vehicle to satisfy the judgment indebtedness of another person: 2) The respondent Court of Appeals erred in holding that petitioner as owner of a motor vehicle that was levied upon pursuant to a Writ of Execution issued by Branch XVII of the Court of i stance of Manila in Civil Case No. 54335 cannot be allowed to prove in a separate suit filed in Branch X of the same court (Civil Case No. 56842) that he is the true owner of the said motor vehicle and not its registered owner; 3) The respondent Court of Appeals erred in declaring null and void the decision of the Court of First Instance of Manila (Branch X ) in Civil Case No. 56482. We gave due course to the Petition for Review on certiorari on December 14, 1966 and considered the case submitted for decision on July 20, 1967. One of the issues ventilated for resolution is the general question of jurisdiction of a Court of First Instance to issue, at the instance of a third-party claimant, an Injunction restraining the execution sale of a passenger jeepney levied upon by a judgment creditor in another Court of First Instance. The corollary issue is whether or not the third-party claimant has a right to vindicate his claim to the vehicle levied upon through a separate action. Since this case was submitted for decision in July, 1967, this Court, in Arabay, lnc. vs. Hon. Serafin Salvador, 15 speaking through Mr. Justice Ramon Aquino, succinctly held: 1wph1.t It is noteworthy that, generally, the rule, that no court has authority to interfere by injunction with the judgments or decrees of a concurrent or coordinate jurisdiction having equal power to grant the injunctive relief, is applied in cases, where no thirdparty claimant is involved, in order to prevent one court from nullifying the judgment or process of another court of the same rank or category, a power which devolves upon the proper appellate court. When the sheriff, acting beyond the bounds of his authority, seizes a stranger's property, the writ of injunction, which is issued to stop the auction sale of that property, is not an interference with the writ of execution issued by another court because the writ of execution was improperly implemented by the sheriff. Under that writ, he could attach the property of the judgment debtor. He is not authorized to levy upon the property of the third-

TRANSPORTATION CASES party claimant (Polaris Marketing Corporation vs. Plan, L-40666, January 22, 1976, 69 SCRA 93, 97; Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94, 102). An earlier case, Abiera vs. Hon. Court of Appeals, et al., 16 explained the doctrine more extensively: 1wph1.t Courts; Jurisdiction Courts without power to interfere by injunction with judgments or decrees of a court of concurrent jurisdiction. No court has power to interfere by injunction with the judgments or decrees of a court of concurrent or coordinate jurisdiction having equal power to grant the relief sought by injunction. Same, Same; Same; When applicable. For this doctrine to apply, the injunction issued by one court must interfere with the judgment or decree issued by another court of equal or coordinate jurisdiction and the relief sought by such injunction must be one which could be granted by the court which rendered the judgment or issued the decree. Same, Same Same; Exception Judgment rendered by another court in favor of a third person who claims property levied upon on execution. Under section 17 of Rule 39 a third person who claims property levied upon on execution may vindicate such claim by action. A judgment rendered in his favor - declaring him to be the owner of the property - would not constitute interference with the powers or processes of the court which rendered the judgment to enforce which the execution was levied. lf that be so - and it is so because the property, being that of a stranger, is not subject to levy - then an interlocutory order, such as injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be considered as such interference either. Execution; Where property levied on claimed by third person; "Action" in section l7, Rule 39 of the Rules of Court, interpreted The right of a person who claims to be the owner of property levied upon on execution to file a third-party claim with the sheriff is not exclusive, and he may file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any damages that may be suffered by the third party claimant. By "action", as stated in the Rule, what is meant is a separate and independent action. Applied to the case at bar, it mill have to be held that, contrary to the rationale in the Decision of respondent Court, it was appropriate, as a matter of procedure, for SANTOS, as an ordinary third-party claimant, to vindicate his claim of ownership in a separate action under Section 17 of Rule 39. And the judgment rendered in his favor by Branch X, declaring him to be the owner of the property, did not as a basic proposition, constitute interference 63 with the powers or processes of Branch XVII which rendered the judgment, to enforce which the was levied upon. And this is so because property belonging to a stranger is not ordinarily subject to levy. While it is true that the vehicle in question was in custodia legis, and should not be interfered with without the permission of the proper Court, the property must be one in which the defendant has proprietary interest. Where the Sheriff seizes a stranger's property, the rule does not apply and interference with his custody is not interference with another Court's Order of attachment. 17 However, as a matter of substance and on the merits, the ultimate conclusion of respondent Court nullifying the Decision of Branch X permanently enjoining the auction sale, should be upheld. Legally speaking, it was not a "stranger's property" that was levied upon by the Sheriff pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact, registered in the name of VIDAD, one of the judgment debtors. And what is more, the aspect of public service, with its effects on the riding public, is involved. Whatever legal technicalities may be invoked, we find the judgment of respondent Court of Appeals to be in consonance with justice. WHEREFORE, as prayed for by private respondent Abraham Sibug, the petition for review on certiorari filed by Adolfo L. Santos is dismissed with costs against the petitioner. SO ORDERED.

BIENVENIDO GELISAN, petitioner, vs.BENITO ALDAY, respondent. Review on certiorari of the judgment * rendered by the Court of Appeals, dated 11 October 1968, as amended by its resolution, dated 11 February 1969, in CA-G.R. No. 32670-R, entitled: "Benito Alday, plaintiff-appellant, vs. Roberto Espiritu and Bienvenido Gelisan, defendants-appellees," which ordered the herein petitioner Bienvenido Gelisan to pay, jointly and severally, with Roberto Espiritu, the respondent Benito Alday the amount of P5,397.30, with. legal interest thereon from the filing of the complaint, and the costs of suit; and for the said Roberto Espiritu to pay or refund the petitioner Bienvenido Gelisan whatever amount the latter may have paid to the respondent Benito Alday by virtue of the judgment. The uncontroverted facts of the case are, as follows:

TRANSPORTATION CASES Defendant Bienvenido Gelisan is the owner of a freight truck bearing plate No. TH-2377. On January 31, 1962, defendant Bienvenido Gelisan and Roberto Espiritu entered into a contract marked Exhibit 3-Gelisan under which Espiritu hired the same freight truck of Gelisan for the purpose of hauling rice, sugar, flour and fertilizer at an agreed price of P18.00 per trip within the limits of the City of Manila provided the loads shall not exceed 200 sacks. It is also agreed that Espiritu shall bear and pay all losses and damages attending the carriage of the goods to be hauled by him. The truck was taken by a driver of Roberto Espiritu on February 1, 1962. Plaintiff Benito Alday, a trucking operator, and who owns about 15 freight trucks, had known the defendant Roberto Espiritu since 1948 as a truck operator. Plaintiff had a contract to haul the fertilizers of the Atlas Fertilizer Corporation from Pier 4, North Harbor, to its Warehouse in Mandaluyong. Alday met Espiritu at the gate of Pier 4 and the latter offered the use of his truck with the driver and helper at 9 centavos per bag of fertilizer. The offer was accepted by plaintiff Alday and he instructed his checker Celso Henson to let Roberto Espiritu haul the fertilizer. Espiritu made two hauls of 200 bags of fertilizer per trip. The fertilizer was delivered to the driver and helper of Espiritu with the necessary way bill receipts, Exhibits A and B. Espiritu, however, did not deliver the fertilizer to the Atlas Fertolizer bodega at Mandaluyong. The signatures appearing in the way bill receipts Exhibits A and B of the Alday Transportation admittedly not the signature of any representative or employee of the Atlas Fertilizer Corporation. Roberto Espiritu could not be found, and plaintiff reported the loss to the Manila Police Department. Roberto Espiritu was later arrested and booked for theft. ... Subsequently, plaintiff Aiday saw the truck in question on Sto. Cristo St. and he notified the Manila Police Department, and it was impounded by the police. It was claimed by Bienvenido Gelisan from the Police Department after he had been notified by his employees that the truck had been impounded by the police; but as he could not produce at the time the registration papers, the police would not release the truck to Gelisan. As a result of the impounding of the truck according to Gelisan, ... and that for the release of the truck he paid the premium of P300 to the surety company. 1 Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in the amount of P5,397.33, to Atlas Fertilizer Corporation so that, on 12 February 1962, he (Alday) filed a complaint against Roberto Espiritu and Bienvenido Gelisan with the Court of First Instance of Manila, docketed therein as Civil Case No. 49603, for the recovery of damages suffered by him thru the criminal acts committed by the defendants. The defendant, Roberto Espiritu failed to file an answer and was, accordingly, declared in default. 64 The defendant, Bienvenido Gelisan, upon the other hand, disowned responsibility. He claimed that he had no contractual relations with the plaintiff Benito Alday as regards the hauling and/or delivery of the 400 bags of fertilizer mentioned in the complaint; that the alleged misappropriation or nondelivery by defendant Roberto Espiritu of plaintiff's 400 bags of fertilizer, was entirely beyond his (Gelisan's) control and knowledge, and which fact became known to him, for the first time, on 8 February 1962 when his freight truck, with plate No. TH-2377, was impounded by the Manila Police Department, at the instance of the plaintiff; and that in his written contract of hire with Roberto Espiritu, it was expressly provided that the latter will bear and pay all loss and damages attending the carriage of goods to be hauled by said Roberto Espiritu. After trial, the Court of First Instance of Manila ruled that Roberto Espiritu alone was liable to Benito Alday, since Bienvenido Gelisan was not privy to the contract between Espiritu and Alday. The dispositive portion of the decision reads, as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Roberto Espiritu for the sum of P6,000 with interest at the legal rate from the time of the filing of the complaint, and the costs of the suit. Plantiff's complaint is dismissed with respect to defendant Bienvenido Gelisan, and judgment is rendered in favor of defendant Bienvenido Gelisan and against the plaintiff for the sum of P350. 2 On appeal, however, the Court of Appeals, citing the case of Montoya vs. Ignacio, 3 found that Bienvenido Gelisan is likewise liable for being the registered owner of the truck; and that the lease contract, executed by and between Bienvenido Gelisan and Roberto Espiritu, is not binding upon Benito Alday for not having been previously approved by the Public Service Commission. Accordingly, it sentenced Bienvenido Gelisan to pay, jointly and severally with Roberto Espiritu, Benito Alday the amount of P5,397.30, with legal interest thereon from the filing of the complaint; and to pay the costs. Roberto Espiritu, in turn, was ordered to pay or refund Bienvenido Gelisan whatever amount the latter may have paid to Benito Alday by virtue of the judgment. 4 Hence, the Gelisan. present recourse by Bienvenido

The petition is without merit. The judgment rendered by the Court of Appeals, which is sought to be reviewed, is in accord with the facts and the law on the case and we find no cogent reason to disturb the same. The Court has invariably held in several decisions that the registered owner of a public service vehicle is responsible for damages that may arise from consequences incident to its operation or that may be caused to any of the passengers therein. 5 The claim of the petitioner

TRANSPORTATION CASES that he is not hable in view of the lease contract executed by and between him and Roberto Espiritu which exempts him from liability to third persons, cannot be sustained because it appears that the lease contract, adverted to, had not been approved by the Public Service Commission. It is settled in our jurisprudence that if the property covered by a franchise is transferred or leased to another without obtaining the requisite approval, the transfer is not binding upon the public and third persons. 6 We also find no merit in the petitioner's argument that the rule requiring the previous approval by the Public Service Commission, of the transfer or lease of the motor vehicle, may be applied only in cases where there is no positive Identification of the owner or driver, or where there are very scant means of Identification, but not in those instances where the person responsible for damages has been fixed or determined beforehand, as in the case at bar. The reason for the rule we reiterate in the present case, was explained by the Court in Montoya vs. Ignacio, 7 thus: There is merit in this contention. The law really requires the approval of the Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee. The reason is obvious. Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service Commission so that the latter mav take proper safeguards to protect the interest of the public. In fact, the law requires that, before the approval is granted, there should be a public hearing, with notice to all interested parties, in order that the Commission may determine 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 public interest. Such being the reason and philosophy behind this requirement, it follows that if the property covered by the franchise is transferred, or leased to another without obtaining the requisite approval, the transfer is not binding against the Public Service Commission and in contemplation of law the grantee continues to be responsible under the franchise in relation to the Commission and to the Public. Since the lease of the jeepney in question was made without such approval the only conclusion that can be drawn is that Marcelino Ignacio still continues to be its operator in contemplation of law, and as such is responsible for the consequences incident to its operation, one of them being the collision under consideration. Bienvenido Gelisan, the registered owner, is not however without recourse. He has a right to be indemnified by Roberto Espiritu for the amount titat he may be required to pay as damages for the injury caused to Benito Alday, since the lease contract in question, although not effective against the public for not having been approved by the 65 Public Service Commission, is valid and binding between the contracting parties. 8 We also find no merit in the petitioner's contention that his liability is only subsidiary. The Court has consistently considered the registered owner/operator of a public service vehicle to be jointly and severally liable with the driver for damages incurred by passengers or third persons as a consequence of injuries sustained in the operation of said vehicles. Thus, in the case of Vargas vs. Langcay, 9 the Court said: We hold that the Court of Appeals erred in considering appellant-petitioner Diwata Vargas only subsidiarily liable under Article 103 of the Revised Penal Code. This court, in previous decisions, has always considered the registered owner/operator of a passenger vehicle, jointly and severally liable with the driver, for damages incurred by passengers or third persons as a consequence of injuries (or death) sustained in the operation of said vehicles. (Montoya vs. Ignacio, 94 Phil., 182; Timbol vs. Osias, G.R. No. L-7547, April 30, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506; Necesito vs. Paras, 104 Phil., 75; Erezo vs. Jepte, 102 Phil., 103; Tamayo vs. Aquino and Rayos vs Tamayo, 105 Phil., 949; 56 Off. Gaz. [36] 5617.) In the case of Erezo vs. Jepte, Supra, We held: * * * In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused * * * (Emphasis supplied) In the case of Tamayo vs. Aquino, supra, We said: * * * As Tamayo is the registered owner of the truck, his responsibffity to the public or to any passenger riding in the vehicle or truck must be direct * * * (Emphasis supplied) WHEREFORE, the petition is hereby DENIED. With costs against the petitioner. SO ORDERED.