Requisites for the Issuance of a Certificate of Public Convenience vis-à-vis

Requisites for a Contract of Lease

The following are the requirements for the granting of a certificate of public
convenience, to wit:
(1) The applicant must be a citizen of the Philippines, or a corporation, co-
partnership or association organized under the laws of the Philippines and at
least 60% of the stock or paid-up capital of which must belong to citizens of the
Philippines.
(2) The applicant must prove public necessity.
(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.
(4) The applicant must be financially capable of undertaking the proposed service
and meeting the responsibilities incident to its operation.
(5) Proceedings for granting of certificate of public convenience must not only be
published in newspapers but also notice must be individually given to affected
parties.
On the other hand, no requirements are provided in the Civil Code of the
Philippines in order that a contract of lease may be entered into between the lessor and
the lessee. However, by express provision of the law, the following persons who are
disqualified to buy are also disqualified to become lessees of the things mentioned:
(1) The husband and the wife cannot sell property to each other, except when a
separation of property was agreed upon in the marriage settlements or when
there has been a judicial separation of property;
(2) The guardian, the property of the person or persons who may be under his
guardianship;
(3) Agents, the property whose administration or sale may have been intrusted to
them, unless the consent of the principal has been given;
(4) Executors and administrators, the property of the estate under administration;
(5) Public officers and employees, the property of the State or of any subdivision
thereof, or of any government-owned or controlled corporation, or institution,
the administration of which has been intrusted to them; this provision shall
apply to judges and government experts who, in any manner whatsoever, take
part in the sale;
(6) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts,
and other officers and employees connected with the administration of justice,
the property and rights in litigation or levied upon an execution before the court
within whose jurisdiction or territory they exercise their respective functions;
this prohibition includes the act of acquiring by assignment and shall apply to
lawyers, with respect to the property and rights which may be the object of any
litigation in which they may take part by virtue of their profession;
 (7) Any others specially disqualified by law.
The disqualifications imposed on the person enumerated is grounded on public
policy considerations which disallows the transactions entered into by them, whether
directly or indirectly, in view of the fiduciary relationship involved or the peculiar control
exercised by these individuals over the properties or rights covered. (Mananquil v.
Villegas, 189 SCRA 335)
The prohibitions seek to prevent frauds on the part of such persons and minimize
temptations to the exertion of undue and improper influence. The fear that greed might
get the better of the sentiments of loyalty and disinterestedness is the reason underlying
this prohibition. The law does not trust human nature to resist the temptations likely to
arise out of antagonism between the interest of the lessor and lessee.

Obligations of Operator vis-à-vis Obligations of Lessor

The revised terms and conditions of Certificate of Public Convenience (CPC) are
enumerated in Memorandum Circular Number 2011-004 issued by the Land
Transportation Franchising & Regulatory Board (LTFRB). Some of the comprehensive
terms and conditions which shall now form part of every decision/CPC to be issued by
LTFRB are the following:

(1) The PUV operator shall ensure that the commuting public has adequate, safe,
convenient, environment-friendly and dependable public land transportation
services at reasonable rates through the strict implementation of land-based
transportation policies, programs, and projects responsive to an investment-led
and demand-driven industry, and in adherence to the provisions of the Clean-Air
Act and other related environmental laws.

(2) The PUV operator shall charge the passenger and freight rates as authorized
by Board. In no case shall fares lower or higher than those authorized be changed
without previous authority from the Board. The PUV operator shall post a copy of
the fare Matrix in a conspicuous place at hi/her/its office terminal or waiting
stations, and in the interior of each motor vehicle which is in actual service.

(3) The PUV operator shall employ drivers, conductors, inspectors and other
personnel who are courteous and of good moral character. In no case shall the
PUV operator employ any person who has been convicted by a competent court
of homicide and/or serious physical injuries, theft, estafa, robbery and crimes
against chastity, unless with prior written approval by the Board.

(4) PUV operators are prohibited from employing drivers who do not have a valid
professional driver's license and appropriate restriction code.
 (5) The PUV operator and their drivers shall attend trainings/seminars on transport
management, road safety, and good driving habits to be conducted/accredited by
the Board.

Violations of the terms and conditions of CPC shall be penalized as follows:

 1st Offense - fine of P2,000.00

 2nd Offense - fine of P3,000.00 with suspension of CPC for sixty (60) days and
confiscation of “for hire" plate/s
 3rd Offense - fine of P5,000.00 and cancellation of CPC

On the other hand, Article 1654 of the Civil Code of the Philippines provides that the
lessor is obliged:

(1) To deliver the thing which is the object of the contract in such a condition as to
render it fit for the use intended;

(2) To make on the same during the lease all the necessary repairs in order to
keep it suitable for the use to which it has been devoted, unless there is a
stipulation to the contrary;

(3) To maintain the lessee in the peaceful and adequate enjoyment of the lease
for the entire duration of the contract.

If the lessor should not comply with the obligations set forth in Articles 1654, the
lessee may ask for the rescission of the contract and indemnification for damages, or only
the latter, allowing the contract to remain in force.

Standard of Care Observed by Holders of Certificate of Public Convenience vis-à-

vis Standard of Care Observed by Lessee
Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them, according to all the circumstances
of each case.
With respect to extraordinary diligence in vigilance over the goods, common
carriers are responsible for the loss, destruction, or deterioration of the goods, unless the
same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
 (5) Order or act of competent public authority.
In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 above, if the goods
are lost, destroyed or deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed extraordinary diligence.
With respect to extraordinary diligence for the safety of the passengers, a common
carrier is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence.
This extraordinary diligence required of common carriers is calculated to protect
the passengers from the tragic mishaps that frequently occur in connection with rapid
modern transportation. This high standard of care is imperatively demanded by the
precariousness of human life and by the consideration that every person must in every
way be safeguarded against all injury.
On the other hand, the lessee is obliged to use the thing leased as a diligent father
of a family, devoting it to the use stipulated; and in the absence of stipulation, to that which
may be inferred from the nature of the thing leased, according to the custom of the place.
If the lessee should not comply with this obligation, the lessor may ask for the rescission
of the contract and indemnification for damages, or only the latter, allowing the contract
to remain in force.
The lessee is responsible for the deterioration or loss of the thing leased, unless
he proves that it took place without his fault. This burden of proof on the lessee does not
apply when the destruction is due to earthquake, flood, storm or other natural calamity.
The lessee is liable for any deterioration caused by members of his household and by
guests and visitors.
Taxes Related to Certificate of Public Convenience vis-à-vis Taxes Related to Lease
Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 70-
2015 to reiterate the tax treatment of certain persons engaged in the business of land
transportation. This Circular deals with the tax incidence of the business of land
transportation, particularly transport network companies (TNCs), such as but not limited
to the likes of UBER, GRAB TAXI, their Partners/suppliers and similar arrangements. A
TNC is a pool of land transportation vehicles whose accessibility to the riding public is
facilitated through the use of a common point of contact which maybe in the form of text,
telephone and/or cellular calls, email, mobile applications or by other means. The TNC
may or may not have been granted a Certificate of Public Convenience (CPC). If it is a
holder of a valid and current CPC, it is known as a common carrier and its gross receipts
are subject to the Three Percent (3%) common carriers tax under Section 117 of the
National Internal Revenue Code of 1997, as amended (NIRC). Otherwise, it is classified
as a land transportation service contractor and is subject to the Twelve Percent (12%)
Value Added Tax (VAT) under the NIRC.
The CPC referred to herein is the one issued by the Land Transportation
Franchising and Regulatory Board (LTFRB) granting land transportation vehicles for hire
a franchise to operate as such and shall be evidenced by the issuance of a certificate with
the same title. An Accreditation issued by the LTFRB is not in itself a CPC and will not
make said operation that of a common carrier.
On the other hands, all forms of lease of properties held primarily for lease to
customers in the ordinary course of trade or business, whether personal or real, shall be
subject to 12% Value Added Tax (VAT). However, if the annual receipts of the lessor do
not exceed P1,919,500 and is non- VAT registered, such lease shall be subject to 3%
percentage tax under Section 116 of the Tax Code.
Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the
sale, barter, exchange or lease of goods or properties and services in the Philippines and
on importation of goods into the Philippines. It is an indirect tax, which may be shifted or
passed on to the buyer, transferee or lessee of goods, properties or services.
Grounds for Revocation of Certificate of Public Convenience vis-à-vis Grounds for
Revocation of Lease

Under Section 16 (n) of the Public Service Act, the power of the Commission to
suspend or revoke any certificate received under the provisions of the Act may only be
exercised whenever the holder thereof has violated or willfully and contumaciously
refused to comply with any order, rule or regulation of the Commission or any provision
of the Act. In the absence of showing that there is willful and contumacious violation on
the part of the holder thereof, no certificate of public convenience may be validly revoked.

The following are some instances where the cancellation of a certificate of public
convenience where held valid:

(1) where the holder is a mere dummy (Pecson vs. Pecson, 78 Phil. 522);

(2) where the operator ceased operation and placed his buses on storage
(Parades vs. Public Service Commission, L-7111, May 30, 1955); and

(3) where the operator abandons, totally the service (Collector vs. Buan, L-11438,
July 31, 1958; Regodon vs. Public Service Commission, L-11899, Sept. 23, 1958;
Paez vs. Marcelo, L-1530, March 30, 1962).

"A certificate of public convenience constitutes neither a franchise nor a contract,

confers no property right, and is a mere license or privilege." The holder of such certificate
does not acquire a property right in the route covered thereby. Nor does it confer upon
the holder any proprietary right or interest of franchise in the public highways. Revocation
of this certificate deprives him of no vested right. Little reflection is necessary to show that
the certificate of public convenience is granted with so many strings attached. New and
additional burdens, alteration of the certificate, and even revocation or annulment thereof
is reserved to the State.

The Public Service Commission, a government agency vested by law with

"jurisdiction, supervision, and control over all public services and their franchises,
equipment, and other properties" is empowered, upon proper notice and hearing,
amongst others: (1) "[t]o amend, modify or revoke at any time a certificate issued under
the provisions of this Act [Commonwealth Act 146, as amended], whenever the facts and
circumstances on the strength of which said certificate was issued have been
misrepresented or materially changed"; and (2) "[t]o suspend or revoke any certificate
issued under the provisions of this Act whenever the holder thereof has violated or wilfully
and contumaciously refused to comply with any order, rule or regulation of the
Commission or any provision of this Act: Provided, That the Commission, for good cause,
may prior to the hearing suspend for a period not to exceed thirty days any certificate or
the exercise of any right or authority issued or granted under this Act by order of the
Commission, whenever such step shall in the judgment of the Commission be necessary
to avoid serious and irreparable damage or inconvenience to the public or to private
interests." Jurisprudence echoes the rule that the Commission is authorized to make
reasonable rules and regulations for the operation of public services and to enforce them.
In reality, all certificates of public convenience issued are subject to the condition that all
public services "shall observe and comply [with] ... all the rules and regulations of the
Commission relative to" the service. To further emphasize the control imposed on public
services, before any public service can "adopt, maintain, or apply practices or measures,
rules, or regulations to which the public shall be subject in its relation with the public
service," the Commission's approval must first be had. (Luque v. Villegas, 30 SCRA 408)

On the other hand, Article 1673 of the Civil Code of the Philippines provides that
the lessor may judicially eject the lessee for any of the following causes:

(1) When the period agreed upon, or that which is fixed for the duration of leases
under articles 1682 and 1687, has expired;

(2) Lack of payment of the price stipulated;

(3) Violation of any of the conditions agreed upon in the contract;

(4) When the lessee devotes the thing leased to any use or service not stipulated
which causes the deterioration thereof; or if he does not observe the requirement
in No. 2 of article 1657, as regards the use thereof.

The above provision must be read in conjunction with Rule 70, Section 2 of the
Rules of Court, which provides that a demand to pay or to comply with the conditions of
the lease and to vacate the premises is a condition precedent for the institution of an
ejectment suit against the lessee.
 The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy. A violation of any such conditions, etc.
agreed upon would constitute breach of the lease contract. Thus, a violation by the lessee
of the prohibition against devoting the property to a use not stipulated in the contract, or
introducing improvements without the consent of the lessor, is enough ground to eject the
lessee.

A demand is a prerequisite in an action of unlawful detainer when it is for failure to

comply with any of the conditions of the lease, but not when that action is to terminate the
lease because of the expiration of the term. A lease contract may validly stipulate that the
lessor may take possession of the leased premises without resorting to judicial action,
upon failure of the lessee to comply with any of the terms and conditions of the contract.
(Consing v. Jamadre, 64 SCRA 1)

The salient similarity between certificate of public convenience and contract of

lease is that both of them may be revoked in case of failure on the part of the holder and
the lessee to comply with the conditions imposed by the State and the lessor respectively.