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2.
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PAL says: Board acted beyond its powers and jurisdiction: (1) in
taking cognizance of GrandAir's application for the issuance of a Certificate
of Public Convenience and Necessity, and (2) in issuing a temporary
operating permit in the meantime.
Reasoning of PAL: GrandAir has not been granted and does not possess a
legislative franchise to engage in scheduled domestic air transportation. A
legislative franchise is necessary before anyone may engage in air
transport services, and a franchise may only be granted by Congress.
This is the meaning given by the PALupon a reading of Section 11, Article
XII, and Section 1, Article VI, of the Constitution. In support of this, PAL
presents a 1994 DOJ opinion by Secretary Ordonez where a distinction was
made between the franchise to operate and a permit to commence
operation. According to the opinion, it is clear that a franchise is the
legislative authorization to engage in a business activity or enterprise of a
public nature, whereas a certificate of public convenience and necessity is
a regulatory measure which constitutes the franchise's authority to
commence operations. It is thus logical that the grant of the former should
precede the latter.
GrandAir argues: The Board has: (1) the authority to hear the
application and, (2)can grant temporary operating permits and
certificates of public convenience and necessity.
GrandAirs reasoning:
(1) Section 10 (specifically 10-C1) of RA 776 grants it such authority
to issue, deny, amend revise, alter, modify, cancel, suspend or revoke, in
whole or in part, upon petitioner-complaint, or upon its own initiative, any
temporary operating permit or Certificate of Public Convenience and
Necessity.
(2) Jurisprudence:
SC ruled in another PAL vs CAB case (1968) that CAB could, even
on its own initiative, grant a temporary operating permit (TOP)
even before the presentation of evidence.
CA cases which held that CAB can grant not only temporary
operating permit (TOP) but also a Certificate of Public Convenience
and Necessity (CPCN)
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NPC vs. CA
FACTS
Cagayan Electric and power Light Company (CEPALCO) was enfranchised
by Republic Act No. 3247 "to construct, maintain and operate an electric
light, heat and power system for the purpose of generating and/or
distributing electric light, heat and/or power for sale within the City of
Cagayan de Oro and its suburbs" for fifty (50) years.
Presidential Decree No. 243, issued on July 12, 1973, created a "body
corporate and politic" to be known as the Philippine Veterans Investment
Development Corporation (PHIVIDEC) vested with authority to engage in
"commercial, industrial, mining, agricultural and other enterprises" among
other powers and "to allow the full and continued employment of the
productive capabilities of and investment of the veterans and retirees of
the Armed Forces of the Philippines." On August 13, 1974, Presidential
Decree No. 538 was promulgated to create the PHIVIDEC Industrial
Authority (PIA), a subsidiary of PHIVIDEC, to carry out the government
policy "to encourage, promote and sustain the economic and social growth
of the country and that the establishment of professionalized management
of well-planned industrial areas shall further this objective." Under Sec. 3
of P.D. No. 538, the first area for development shall be located in the
municipalities of Tagoloan and Villanueva. This area forms part of the
PHIVIDEC Industrial Estate Misamis Oriental (PIE-MO).
As manager of PIE-MO, PIA granted the Ferrochrome Philippines, Inc. (FPI)
and Metal Alloys Corporation (MAC) authority to operate in its area of
development. On July 6, 1979, PIA granted CEPALCO a temporary
authority to retail electric power to the industries operating within the PIEMO. The Agreement executed by PIA and CEPALCO authorized CEPALCO
"to operate, administer, construct and distribute electric power within the
PHIVIDEC Industrial Estate, Misamis Oriental, such authority to be coextensive with the territorial jurisdiction of PHIVIDEC Industrial Estate, as
defined in Sec. 3 of P.D. No. 538 and shall be for a period of five (5) years,
renewable for another five (5) years at the option of CEPALCO." The
parties provided further that:
9. At the end of the fifth year, or at the end of the 10th year,
should this Agreement be thus renewed, PIA has the option to take
over the operation of the electric service and acquire by purchase
CEPALCO's assets within PIE-MO. This option shall be
communicated to CEPALCO in writing at least 24 months before
the date of acquisition of assets and takeover of operation by PIA.
Should PIA exercise its option to purchase the assets of CEPALCO
in PIE-MO, PIA shall respect the right of ownership of and
maintenance by CEPALCO of those assets inside PIE-MO not
covered by such purchase. . . .
According to PIA, CEPALCO proved no match to the power demands of the
industries in PIE-MO that most of these companies operating therein
closed shop. Impelled by a "desire to provide cheap power costs to powerintensive industries operating within the Estate," PIA applied with the
National Power Corporation (NPC) for direct power connection which the
latter in due course approved. One of the companies which entered into an
agreement with the NPC for a direct sale and supply of power was the
Ferrochrome Phils., Inc. (FPI).
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Contending that the said agreement violated its right as the authorized
operator of an electric light and power system in the area and the national
electrification policy, CEPALCO filed Civil Case No. Q-35945, a petition for
prohibition, mandamus and injunction before the Regional Trial Court of
Quezon City against the NPC. Notwithstanding NPC's claim that it was
authorized by its Charter to sell electric power "in bulk" to industrial
enterprises, the lower court rendered a decision on May 2, 1984,
restraining the NPC from supplying power directly to FPI upon the ground
that such direct sale, supply and delivery of electric power by the NPC to
FPI was violative of the rights of CEPALCO under its legislative franchise.
Hence, the lower court ordered the NPC to "permanently desist" from
effecting direct supply of power to the FPI and "from entering into and/or
implementing any agreement or arrangement for such direct power
connection, unless coursed through the power line" of CEPALCO.
ISSUE
Whether or not the NPC may supply power directly to PIA in the PIE-MO
area where CEPALCO has a directly franchise.
RULING
Petitioner PIA asserts that it may receive power directly from the NPC
because it is a public utility. It avers that P.D. No. 538, as amended,
empowers PIA "as and to be a public utility to operate and serve the power
needs within PIE-MO, i.e., a specific area constituting a small portion of
petitioner's franchise coverage," without, however, specifying the particular
provision which so empower PIA.
A "public utility" is a business or service engaged in regularly supplying the
public with some commodity or service of public consequence such as
electricity, gas, water, transportation, telephone or telegraph service. The
term implies public use and service.
Petitioner PIA is a subsidiary of the PHIVIDEC with "governmental and
proprietary functions." Sec. 4 of P.D. No. 538 specifically confers upon it
the following powers:
a. To operate, administer and manage the PHIVIDEC Industrial
Areas and other areas which shall hereafter be proclaimed,
designated and specified in subsequent Presidential Proclamation;
to construct acquire, own, lease, operate and maintain
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It should be noted that the Rules and Regulations took effect thirty (30)
days after its publication in the Official Gazette on September 24, 1979 or
more than three (3) months after the July 6, 1979 contract between PIA
and CEPALCO was entered into. As such, the Rules and Regulations itself
allowed the continuance of the supply of electric power to PIE-MO by
CEPALCO.
Clearly then, the PIA is authorized to render indirect service to the public
by its administration of the PHIVIDEC industrial areas like the PIE-MO and
may, therefore, be considered a public utility. As it is expressly authorized
by law to perform the functions of a public utility, a certificate of public
convenience, as suggested by the Court of Appeals, is not necessary for it
to avail of a direct power connection from the NPC. However, such
authority to be a public utility may not be exercised in such a manner as to
prejudice the rights of existing franchisees. In fact, by its actions, PIA
recognized the rights of the franchisees in the area.
That the contract of July 6, 1979 was not renewed by the parties after the
expiration of the five-year period stipulated therein did not change the fact
that within that five-year period, in violation of both the contract and its
Rules and Regulations, PIA applied with the NPC for direct power
connection. The matter was aggravated by NPC's favorable action on the
application, totally unmindful of the extent of its powers under the law
which, in National Power Corporation v. Court of Appeals, 49 the Court
delimits as follows:
. . . . It is immaterial whether the direct connection is merely an
improvement or an increase in existing voltage, as alleged by
petitioner, or a totally new and separate electric service as claimed
by private respondent. The law on the matter is clear. PD 40
promulgated on 7 November 1972 expressly provides that the
generation of electric power shall be undertaken solely by the NPC.
However Section 3 of the same decree also provides that the
distribution of electric power shall be undertaken by cooperatives,
private utilities (such as the CEPALCO), local governments and
other entities duly authorized, subject to state regulation.
( Emphasis supplied.)
Accordingly, in pursuit of its powers "to grant such franchise for and to
operate and maintain within the Areas electric light, heat or power
systems," etc. under Sec. 4 (i) of P.D. No. 538 and its rule-making power
under Sec. 4 (1) of the same law, on July 20, 1979, the PIA Board of
Directors promulgated the "Rules and Regulations To Implement the Intent
and Provisions of Presidential Decree No. 538." 48 Rule XI thereof on
"Utilities and Services" provides as follows:
Sec. 1. Utilities It is the responsibility of the Authority to provide
all required utilities and services inside the Estate:
xxx xxx xxx
a) Contracts for the purchase of
public utilities and/or services shall
be subject to the prior approval of
the Authority; Provided, however,
that similar contract(s) existing
prior to the effectivity of this Rules
and Regulations shall continue to
be in full force and effect.
xxx xxx xxx
(Emphasis supplied.)
The same case ruled that "(i)t is only after a hearing (or an opportunity for
such a hearing) where it is established that the affected private franchise
holder is incapable or unwilling to match the reliability and rates of NPC
that a direct connection with NPC may be granted." As earlier stated, the
Court arrived at the same ruling in the later cases of G.R. Nos. 72085,
84695 and 87697.
Petitioner NPC attempted to abide by these rulings when it conducted a
hearing to determine whether it may supply power directly to PIA. While it
notified CEPALCO of the hearing, the NPC is not the proper authority
referred to by this Court in the aforementioned earlier decisions, not only
because the subject of the hearing is a matter involving the NPC itself, but
also because the law has created the proper administrative body vested
with authority to conduct a hearing.
CEPALCO shares the view of the Court of Appeals that the Energy
Regulatory Board (ERB) is the proper administrative body for such
hearings. However, a recent legislative development has overtaken said
view.
The ERB, which used to be the Board of Energy, by virtue of EO 172, whre
the ERB is basically a price or rate-fixing agency. Apparently recognizing
this basic function, Republic Act No. 7638 (An Act Creating the Department
of Energy, Rationalizing the Organization and Functions of Government
Agencies Related to Energy, and for Other Purposes) was promulgated.
The determination of which of two public utilities has the right to supply
electric power to an area which is within the coverage of both is certainly
not a rate-fixing function which should remain with the ERB. It deals with
the regulation of the distribution of energy resources which, under
Executive Order No. 172, was expressly a function of ERB. However, with
the enactment of Republic Act No. 7638, the Department of Energy took
over such function. Hence, it is this Department which shall then
determine whether CEPALCO or PIA should supply power to PIE-MO.
Clearly, petitioner NPC's assertion that its "authority to entertain and hear
direct connection applications is a necessary incident of its express
authority to sell electric power in bulk" is now baseless. Even without the
new legislation affecting its power to conduct hearings, it is certainly
irregular, if not downright anomalous for the NPC itself to determine
whether it should supply power directly to the PIA or the industries within
the PIE-MO. It simply cannot arrogate unto itself the authority to exercise
non-rate fixing powers which now devolves upon the Department of
Energy and to hear and eventually grant itself the right to supply power in
bulk.
QUISUMBING vs. MERALCO
FACTS
Inspectors from MERALCO went to the furniture shop of the Quisumbing
Spouses to conduct their routinary inspections with the permission of the
Spouses and witnessed by their secretary. The inspectors found the
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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.
RULING
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
ISSUE
1) Was there an undue delegation of legislative power because the
NTC is empowered to fix rates for public service communications
does not provide the necessary standards constitutionally
required? NO
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2) Does Executive Order No. 546, which provides for the creation of
respondent NTC, have provisions that grant its rate-fixing powers?
YES
3) Does Executive Order No. 196, placing petitioner under the
jurisdiction of respondent NTC, provide for any standard in the
exercise of its rate-fixing and adjudicatory powers? YES
4) Was there a violation of due process (Procedural and Substantive)?
YES
5) Is the Order on the reduction of rates invalid? YES
RULING
1) When the administrative agency concerned, respondent NTC in this
case, establishes a rate, its act must both be non- confiscatory and
must have been established in the manner prescribed by the
legislature; otherwise, in the absence of a fixed standard, the
delegation of power becomes unconstitutional. In case of a
delegation of rate-fixing power, the only standard which the
legislature is required to prescribe for the guidance of the
administrative authority is that the rate be reasonable and just.
However, it has been held that even in the absence of an express
requirement as to reasonableness, this standard may be implied.
2) And 3) Pursuant to Executive Orders Nos. 546 and 196,
respondent NTC is empowered, among others, to determine and
prescribe rates pertinent to the operation of public service
communications which necessarily include the power to
promulgate rules and regulations in connection therewith.
And, under Section 15(g) of Executive Order No. 546, respondent
NTC should be guided by the requirements of public safety, public
interest and reasonable feasibility of maintaining effective
competition of private entities in communications and broadcasting
facilities. Likewise, in Section 6(d) thereof, which provides for the
creation of the Ministry of Transportation and Communications with
control and supervision over respondent NTC, it is specifically
provided that the national economic viability of the entire network
or components of the communications systems contemplated
therein should be maintained at reasonable rates.
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There is no reason to assume that the aforesaid provision does not apply
to respondent NTC, there being no limiting, excepting, or saving provisions
to the contrary in Executive Orders Nos. 546 and 196.
It is thus clear that with regard to rate-fixing, respondent has no authority
to make such order without first giving petitioner a hearing, whether the
order be temporary or permanent, and it is immaterial whether the same
is made upon a complaint, a summary investigation, or upon the
commission's own motion as in the present case.
NTC should act solely on the basis of the evidence before it and not on
knowledge or information otherwise acquired by it but which is not offered
in evidence or, even if so adduced, petitioner was given no opportunity to
controvert.
SUBSTANTIVE DUE PROCESS: There is no question that petitioner is a
mere grantee of a legislative franchise which is subject to amendment,
alteration, or repeal by Congress when the common good so requires.
Apparently, therefore, such grant cannot be unilaterally revoked absent a
showing that the termination of the operation of said utility is required by
the common good.
The inherent power and authority of the State, or its authorized agent, to
regulate the rates charged by public utilities should be subject always to
the requirement that the rates so fixed shall be reasonable and just. A
commission has no power to fix rates which are unreasonable or to
regulate them arbitrarily. This basic requirement of reasonableness
comprehends such rates which must not be so low as to be confiscatory, or
too high as to be oppressive.
A cursory perusal of the assailed order reveals that the rate reduction is
solely and primarily based on the initial evaluation made on the financial
statements of petitioner, contrary to respondent NTC's allegation that it
has several other sources of information without, however, divulging such
sources. Furthermore, it did not as much as make an attempt to elaborate
on how it arrived at the prescribed rates. It just perfunctorily declared that
based on the financial statements, there is merit for a rate reduction
without any elucidation on what implications and conclusions were
necessarily inferred by it from said statements. Nor did it deign to explain
how the data reflected in the financial statements influenced its decision to
impose a rate reduction.
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PDSC filed an opposition to the application on the grounds that: 1.] there
are adequate service stations attending to the motorists requirements in
the trading area covered by the application; 2.] ruinous competition will
result from the establishment of the proposed new service station; and 3.]
there is a decline not an increase in the volume of sales in the area. Two
other companies, namely Petrophil and Caltex, also opposed the
application on the ground that Shell failed to comply with the jurisdictional
requirements.
BEU: denying Shells application on a finding that there was no necessity
for an additional petroleum products retail outlet in Imelda Marcos Avenue,
Paraaque. Thus, Shell appealed to the Office of Energy Affairs (OEA).
Meanwhile, on May 8, 1987, Executive Order No. 172 was issued
creating the Energy Regulatory Board (ERB) and transferring to it
the regulatory and adjudicatory functions of the BEU.
OEA: denied appeal
Thus, Shell moved for reconsideration and prayed for a new
hearing or the remand of the case for further proceedings. It also
submitted a new feasibility study to justify its application.--> OEA
remanded to ERB
ERB: decision allowing Shell to establish the service station in Benigno
Aquino, Jr. Avenue.
PDSC filed a MR of the foregoing Decisiondenied by ERB
Thus, PDSC elevated Order of denial to CA
CA: reversed
also denied ERB and Shells MR HENCE THIS PETITION
ISSUE
W/N CA erred? YES. Decision reversed.
RULING
1) The policy of the government in this regard has been to allow a free
interplay of market forces with minimal government supervision. The
purpose of governing legislation is to liberalize the downstream oil industry
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Time and again this Court has ruled that in reviewing administrative
decisions, the findings of fact made therein must be respected as long as
they are supported by substantial evidence, even if not overwhelming or
preponderant; that it is not for the reviewing court to weigh the conflicting
evidence, determine the credibility of the witnesses or otherwise substitute
its own judgment for that of the administrative agency on the sufficiency
of evidence; that the administrative decision in matters within the
executive jurisdiction can only be set aside on proof of grave abuse of
discretion, fraud or error of law.[26] Petitioner ERB is in a better position
to resolve petitioner Shells application, being primarily the agency
possessing the necessary expertise on the matter. The power to determine
whether the building of a gasoline retail outlet in a trading area would
benefit public interest and the oil industry lies with the ERB not the
appellate courts.
Finally, while it is probable that the operation of the proposed Shell outlet
may, to a certain extent, affect PDSCs business, private respondent
and only when public necessity requires, the Board may regulate the business of
importing, exporting, re-exporting, shipping, transporting, processing, refining,
marketing and distributing energy resources. The Board shall, upon prior notice and
hearing, exercise the following, among other powers and functions
(a) Fix
and regulate the prices of petroleum products
(b) Fix and regulate the rate schedule or prices
of piped gas to be charged by duly franchised gas companies which distribute gas
by means of underground pipe systems;
(c) Fix and regulate the rates of pipeline
concessionaires under the provisions of Republic Act No. 387, as amended,
otherwise know as the Petroleum Act of 1949, as amended by Presidential Decree
No. 1700;chanroblesvirtuallawlibrary
(d) Regulate the
capacities of new refineries or additional capacities of existing refineries and license
refineries that may be organized after the issuance of this Executive Order, under
such terms and conditions as are consistent with the national interest;
(e)
Whenever the Board has determined that there is a shortage of any petroleum
product, or when public interest so requires, it may take such steps as it may
consider necessary, including the temporary adjustment of the levels of prices of
petroleum products and the payment to the Oil Price Stabilization Fund created
under Presidential Decree No. 1956 by persons or entities engaged in the petroleum
industry of such amounts as may be determined by the Board, which will enable the
importer to recover its costs of importation.
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nevertheless failed to show that its business would not have sufficient
profit to have a fair return of its investment. The mere possibility of
reduction in the earnings of a business is not sufficient to prove ruinous
competition. a climate of fear and pessimism generated by
unsubstantiated claims of ruinous competition already rejected in the past
should not be made to retard free competition, consistently with legislative
policy of deregulating and liberalizing the oil industry to ensure a truly
competitive market under a regime of fair prices, adequate and continuous
supply, environmentally clean and high-quality petroleum products.
PADUA vs. RANADA
FACTS
On February 27, 2001 the Citra Metro Manila Tollways Corporation (CITRA)
filed with the TRB an application for an interim adjustment of the toll rates
at the Metro Manila Skyway Project Stage 1CITRA moored its petition on
the provisions of the "Supplemental Toll Operation Agreement"
(STOAauthorizing it, to apply for, and if warranted be granted an interim
adjustment of toll rates in the event of a "significant currency
devaluation." Claiming that the peso exchange rate to a U.S. dollar had
devaluated from P26.1671 in 1995 to P48.00 in 2000, CITRA alleged that
there was a compelling need for the increase of the toll rates to meet the
loan obligations of the Project and the substantial increase in debt-service
burden.
Due to heavy opposition, CITRAs petition remained unresolved. This
prompted CITRA to file on October 9, 2001 an "Urgent Motion for
Provisional Approval," On October 30, 2001, CITRA moved to withdraw its
"Urgent Motion for Provisional Approval" without prejudice to its right to
seek or be granted provisional relief under the above-quoted provisions of
the TRB Rules of Procedure, obviously, referring to the power of the Board
to act on its own initiative.
On November 7, 2001, CITRA wrote a letter to TRB expressing its concern
over the undue delay in the proceeding, stressing that any further setback
would bring the Projects financial condition, as well as the Philippine
banking system, to a total collapse. CITRA recounted that out of the
US$354 million funding from creditors. Thus, CITRA requested TRB to find
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private respondent and the Republic of the Philippines would suffer more
irreparable damages than petitioner. The TRB, through the OSG, filed a
separate comment reiterating the same arguments raised by private
respondent CITRA. Thus, both petitions were consolidated.
ISSUE
1) Was the resolution void for being violative of due process?
2) Is hearing necessary to grant provisional toll rate adjustments?
3) Did CITRA have locus standing?
RULING
1) Records show that they were published on December 17, 24 and 31,
2001 in 3 newspapers of general circulation, particularly the Philippine
Star, Philippine Daily Inquirer and The Manila Bulletin. Surely, such
publications sufficiently complied with Section 5 of P.D. No. 1112 which
mandates that "no new rates shall be collected unless published in a
newspaper of general publication at least once a week for three
consecutive weeks." At any rate, it must be pointed out that under Letter
of Instruction No. 1334-A the TRB may grant and issue ex-parte to any
petitioner, without need of notice, publication or hearing, provisional
authority to collect, pending hearing and decision on the merits of the
petition, the increase in rates prayed for or such lesser amount as the TRB
may in its discretion provisionally grant. That LOI No. 1334-A has the force
and effect of law finds support in a catena of cases decreeing that "all
proclamations, orders, decrees, instructions, and acts promulgated,
issued, or done by the former President (Ferdinand E. Marcos) are part of
the law of the land, and shall remain valid, legal, binding, and effective,
unless modified, revoked or superseded by subsequent proclamations,
orders, decrees, instructions, or other acts of the President.
2) The SC stressed that the TRBs authority to grant provisional toll rate
adjustments does not require the conduct of a hearing. Pertinent laws and
jurisprudence support this conclusion. 2 From the foregoing, it is clear that
a hearing is not necessary for the grant of provisional toll rate adjustment.
2
To clarify the intent of P.D. No. 1112 as to the extent of the TRBs power,[35]
Former President Marcos further issued LOI No. 1334-A expressly allowing the TRB to
grant ex-parte provisional or temporary increase in toll rates, thus:
Thereafter, the TRB promulgated as part of its Rules of Procedure, the following
provision: "RULE 5: PROCEDURE FOR APPROVAL OF TOLL RATE
"Section 2. Provisional Relief Upon initial findings of the Board that the Petition for
the approval of initial toll rate or the petition for toll rate adjustment is in
accordance with Sections 1 and 2 of Rule 2, Section 2 of Rule 3 and Section 1 of
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South Luzon Expressway considering that under the same STOA the "Metro
Manila Skyway" includes: "(a) the South Metro Manila Skyway, coupled
with the rehabilitated at-grade portion of the South Luzon Expressway,
from Alabang to Quirino Avenue; (b) the Central Metro Manila Skyway,
from Quirino Avenue to A. Bonifacio Avenue.
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