RIZAL LIGHT & ICE Co., INC., petitioner, vs.
THE Supreme Court is not required to examine the proof de novo
MUNICIPALITY OF MORONG, RlZAL, and THE PUBLIC
SERVICE COMMISSION, respondents.
No. L-21221. September 28, 1968.
RIZAL LIGHT & ICE Co., INC., petitioner, vs. THE PUBLIC
SERVICE COMMISSION and MORONG ELECTRIC Co.,
INC., respondents.
Public Service Commission; Hearing; Delegation of authority
to hear a, case; Who may be authorized to hear and investigate
a case filed before it; Effect of failure to interpose objection to
illegal delegation of authority to hear; Case at bar.—The
Public Service Commission can only authorize a division chief
to hear and investigate a case filed before it if he is a lawyer
(Sec. 32, par. 2, Commonwealth Act No. 146, as amended).
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. Since petitioner
in the case at bar has never raised any objection to the authority
of Mr. Pedro Talavera (a division chief—but not a lawyer) to
conduct the hearing before the Commission, it should be
deemed to have waived such procedural defect, and petitioner's
claim that the Commission acted without or in excess of
jurisdiction in so authorizing Mr. Talavera should be
dismissed.
Same; Review of decision of the Public Service Commission;
Function of Supreme Court in reviewing a decision of the
Public Service Commission.—Settled is the rule that in
reviewing the decision of the Public Service Commission the
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. The Supreme Court will not substitute its descretion for
that
286
286 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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 (citing cases). The evidence that should
be made the basis of the Supreme Court's determination should
be only those presented in the case before the Commission.
Same; "Protection-of-investment rule"; When not applicable;
Paramount consideration in the grant of certificate of public
convenience; To whom duty to protect investment of a public
utility operator refers.—The "protection-of-investment rule"
was enunciated in Batangas Transportation Co. v. Orlanes. 52
Phil. 455, 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, f or nobody
has exclusive right to secure a franchise or a certificate of
public convenience. Where 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 the 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 (Paredes v. Public Service Commission, et al., L-
7111, May 30, 1955).
Same; Cancellation and revocation of certificate of public
convenience; Circumstances that warranted the imposition of
both a fine and a revocation of certificate of public
convenience.—Section 16 (n) of Commonwealth Act No. 146,
as amended, confers upon the Commission ample power and
discretion to order
287
VOL. 25, SEPTEMBER 28, 1968 287
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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. Where the evidence shows: (a) a
contumacious refusal of the petitioner since 1954 to comply
with the directives, rules and regulations of the Commission;
(b) a violation of the conditions of the certificate of public
convenience; and (c) municipality to comply with commitment
as shown by inadequate service, such circumstances warranted
the action of the Commission in not merely imposing a fine but
in revoking altogether petitioner's certificate.
Same; Requisites for the grant of certificate of public
convenience.—Before any certificate of public convenience
may be granted, 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 jointstock 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; (2) the
applicant must be financially capable of undertaking the
proposed service and meeting the responsibilities incident to its
operation; and (3) the applicant must prove that the operation 288 SUPREME COURT REPORTS ANNOTATED
of the public service proposed and the authorization to do Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
business will promote the public interest in a proper and
suitable manner.
cancelling and revoking the certificate of public convenience
and necessity and forfeiting the franchise of said petitioner. In
Same; Efficacy of a franchise.—A franchise takes effect upon
the same petition, the petitioner prayed for the issuance of a
its approval by the Public Service Commission (Almendras v.
writ of preliminary injunction ex parte suspending the
Ramos, 90 Phil. 231).
effectivity of said orders and/or enjoining respondents
Commission and/or Municipality of Morong, Rizal, from
APPEAL from two decisions of the Public Service
enforcing in any way the cancellation and revocation of
Commission.
petitioner's franchise and certificate of public convenience
during the pendency of this appeal. By resolution of March 12,
The facts are stated in the opinion of the Court.
1963, this Court denied the petition for injunction, for lack of
merit.
Amado A. Amador, Jr. for petitioner.
Case G. R. L-21221 is likewise a petition of the Rizal Light &
Atilano C. Bautista and Pompeyo F. Olivas for respondents.
Ice Co., Inc. to review and set aside the decision of the
Commission dated March 13, 1963 in PSC Case No. 62-5143
ZALDIVAR, J.:
granting a certificate of public convenience and necessity to
respondent Morong Electric Co., Inc.2 to operate an electric
These two cases, being interrelated, are decided together.
light, heat and power service in the municipality of Morong,
Rizal. In the petition Rizal Light & Ice Co., Inc. also prayed for
Case G.R. No. L-20993 is a petition of the Rizal Light & Ice
the issuance of a writ of preliminary injunction ex parte
Co., Inc. to review and set aside the orders of respondent
suspending the effectivity of said decision. Per resolution of
Public Service Commission1, dated August 20, 1962. and
this Court, dated May 6, 1963, said petition for injunction was
February 15, 1963, in PSC Case No. 39716,
denied.
_____________
The facts, as they appear in the records of both cases, are as
1 follows:
Hereinafter referred to as "Commission".
Petitioner Rizal Light & Ice Co., Inc. is a domestic corporation
288
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.
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
indicate the
_______________
2
Hereinafter referred to as "Morong Electric".
289
VOL. 25, SEPTEMBER 28, 1968 289
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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 parties4
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
______________
3
Hereinafter referred to as "Morong Electric".
4
Not "Pedro G. Talavera" as appearing in petitioner's Brief.
Mr. Pedro S. Talavera also conducted the hearings in the main
case.
290
290 SUPREME COURT REPORTS ANNO TATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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 12-13, 1960, and that, on
the basis of the inspection report to be submitted, it would
agree to the 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 f urnished 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 f or
reconsideration was f iled, or on September
291
VOL. 25, SEPTEMBER 28, 1968 291
Rizal Light & Ice Co.. Inc. vs. Mun. of Morong, Rizal
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 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 f or 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, con-
292
292 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
sidered 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.
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. L-
21221).
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.
In questioning the decision in Case No. 62-5143, 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.
We shall now discuss the appeals in these two cases separately.
293
VOL. 25, SEPTEMBER 28, 1968 293
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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 of 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
_______________
5
Law List 1961, First Edition, does not contain the name
"Pedro S. Talavera."
6
As amended by R.A. No. 723 which took effect on June 6,
1962, it reads: "The Commission may also, by proper order,
authorize any of the attorneys of the legal division or division
chiefs of the Commission, if they be lawyers, to bear and
investigate any case filed with the Commission and in
connection therewith to receive such evidence as may be
material thereto." (Italics supplied.)
7
Sessions of September 23, 1960, December 15, 1960,
February 24, 1961 and August 25, 1961.
294
294 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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 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 cross-examination;
(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
_______________
8
Everett Steamship Corp. vs. Chuahiong, L-2933, September
26, 1951; Raymundo Trans. vs. Cervo, L-3899, May 21, 1952;
Enriquez & Co. vs. Ortega, L-4865, December 22, 1952; and
Luzon Stevedoring Co. vs. PSC, L-5458, September 16, 1953.
9
In Raymundo Trans. vs. Cervo, supra, it was held: "As
provided for in Rule 43, section 2 of the Rules of Court an
appellant can only raise in a petition for review questions that
had been raised before the Public Service Commission."
295
VOL. 25, SEPTEMBER 28, 1968 295
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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
consideration,12 particularly in this case where the petitioner
had
_______________
10
A. L. Ammen Transportation Co. vs. Froilan Japa, L-19643,
July 26, 1966; Del Pilar Transit, Inc. vs. Jose M. Silva, L-
21547, July 15, 1966; Pineda vs. Carandang, L-13270-71,
March 24, 1960; and Ramos vs. Lat, et at., L-14476 & L-
15773, May 23, 1960.
11
Admitted by the petitioner in its Brief, pp. 3 & 11.
12
"The Public Service Commission in the exercise of its quasi-
judicial and administrative functions has the power to take into
consideration the result of its own observation and
investigation of the matter submitted to it for consideration and
decision, in connection with other evidence presented at the
hearing of a case." (Cebu Transit Co. vs. PSC, 79 Phil. 386;
296
296 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
not presented any evidence in its defense, and speaking of
petitioner's failure to present evidence, as well as its failure to
cross-examine 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 (Counsel for Petitioner):
"x x x (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 x x x x we respectfully request that an up-todate
inspection be made x x x x. 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.
x x x x applicant that if the motion is granted he will submit this
_______________
Sambrano vs. Northern Luzon Trans. Co., 63 Phil. 554; Manila
Yellow Taxicab Co., Inc. vs. Araullo, et al., 60 Phil. 833; and
Manila Yellow Taxicab Co., Inc. vs. B. Stables Co., 60 Phil.
851.)
"The Commission can take cognizance of the facts diclosed
by its own records." (Dagupan Ice Plant Co., Inc. vs. Lucero, et
al., 66 Phil. 120, 123.)
297
VOL. 25, SEPTEMBER 28, 1968 297
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
"ATTY. LUQUE:
"x x x. This is a very important matter and to show the good
faith of respondent in this case we will not even crossexamine
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. x x x.
x x x x
"COMMISSION (to Atty. Luque) :
Q "Does the Commission understand from the counsel for
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
heari ng upon the receipt of that written reply?
A "Yes, your honor."
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: (Counsel for respondent municipality)
"I object on the ground that there is no resolution by this
298
298 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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.
x x x x
x x x x
"COMMISSION:
"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
Commission 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
_______________
13
"Matters of which the Court will take notice are necessarily
uniform or fixed, and do not depend upon uncertain testimony,
for as soon as a matter becomes disputable, it ceases to f all
under the head of common knowledge and will not be
judicially recognized." (29 Am Jur 2d 61-62)
14
Petitioner's motion for reconsideration was heard on Jan. 11,
1963 and on that date said motion was considered submitted
for decision, while the testimony of Bernardino was given on
January 24, 1963.
299
VOL. 25, SEPTEMBER 28, 1968 299
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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, x x x." 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.
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
_______________
15
"Judicial notice is not judicial knowledge; and one having
the burden of establishing a fact of which a court may take
judicial notice is not in consequence relieved of the necessity
of bringing the fact to the knowledge of the Court." (Francisco,
Evidence, pp. 51-52 citing Shapleigh, et al v. Mier, No. 125
[U.S.] Jan. 1937.)
300
300 SUPREME COURT REPORTS ANNOTATED
 Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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. Orlanes16 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
_______________
16
52 Phil. 455, 472; see also Javier v. Orlanes, 53 Phil. 468,
and Bohol Trans. Co. vs. Jureidini, 53 Phil. 560.
17
See Teresa Electric & Power Co., Inc. vs. PSC, L-21804,
Sept. 25, 1967; Manila Taxicab, et al vs. PSC, et al., 90 Phil.
301.
301
VOL. 25, SEPTEMBER 28, 1968 301
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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 the
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 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 sacri-
_______________
18
Paredes vs. PSC, et al., L-7111, May 30, 1955.
302
302 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
ficed for private convenience." (Collector of Internal Revenue
v. Estate of F. P. Buan. et al., L-11438 and Santiago Sambrano,
et al. v. PSC, et al., L-11439 & L-11542-46, July 31. 1958)
"(T)he Public Service Commission. x x x 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:
italics 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, 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 f ine 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 01 joint-stock company constituted and organized
under the laws of the Philippines, sixty per centum at least of
the stock or paid
303
VOL. 25, SEPTEMBER 28, 1968 303
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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 certif icate 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 f
ranchise 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 contract23, at least two competent parties are
necessary to the execution thereof, and parties
_______________
19
Ishi v. PSC, 63 Phil. 428.
20
Manila Yellow Taxicab v. Austin Taxicab Co., 59 Phil. 771.
21
Sec. 15, Com. Act No. 146; Batangas Trans. Co. v. Orlanes,
52 Phil 455. See also Martin, Phil. Commercial Laws, Vol. 3,
pp. 1195-1196; Almario, Transportation and Public Service
Law, pp. 300-301; Agbayani, Commercial Laws of the Phil.,
Vol 4 (1964 Ed.), pp. 2363-2364.
22
T.s.n., p. 89 (Session on January 11, 1963).
23
City of Manila vs. PSC, 52 Phil. 515.
304
304 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
are not competent except 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 certif icate 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:
_______________
24
Hall vs. Judge Piccio, 86 Phil. 603, 605; See also Fisher, The
Phil. Law of Stock Corp., p. 36.
25
Tolentino Commercial Laws of the Philippines, Vol. II, 8th
Ed., p. 723; See also Guevara, The Phil. Corp. Law, New Ed.,
p. 18.
305
VOL. 25, SEPTEMBER 28, 1968 305
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
"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 maybe 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.
"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 Electric. 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
Commismission on March 13, 1963. The reason is that—
_______________
26
McQuillin, Fletcher and Thompson cite as authorities the
cases of Clarksburg Electric Light Co. vs. Clarksburg, 47 W.
Va. 739, 35 S. E. 994, 50 L.R.A. 142 and Chicago Telephone
Co. vs. Northwestern Tel. Co., 199 III. 884, 65 N. E. 329.
306
306 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
"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 Sandiko27 upon which the petitioner leans
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
_______________
27
65 Phil. 223.
28
Fletcher, Cyclopedia Corporation, Permanent Ed., Vol. I,
Chap. 9, Sec. 207, p. 681.
307
VOL. 25, SEPTEMBER 28, 1968 307
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
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, L-21547, July
15, 1966)
It may be worthwhile to mention in this connection that per
inspection report dated January 20, 196429 of Mr. Meliton
Martinez of the Commission, who inspected the electric service
of Morong on January 15-16, 1964, Morong Electric "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,
_______________
29
Marked Annex "A" of the memorandum of Morong Electric
in lieu of oral arguments.
308
308 SUPREME COURT REPORTS ANNOTATED
Rizal Light & lce Co., Inc. vs. Mun. of Morong, Rizal
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 in-
_______________
30
P. 16, Memorandum of Oppositor (herein petitioner).
309
VOL. 25, SEPTEMBER 28, 1968 309
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
spection 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.
"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. vs.
Mercado, L-19120, November 29, 1965 citing Pangasinan
Trans. Co., Inc. vs. Dela Cruz, 95 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.
Conception, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez,
Castro, Angeles and Fernando, JJ., concur.
Decisions affirmed.
ANNOTATION THE OLD
OPERATOR RULE
I. Statement of the Rule.
As first stated in Batangas Trans. Co. v. Orlanes, (1928)
_______________
31
The close connection of the matter in controversy in the two
cases warranted the Commission to take judicial notice of the
records of the previous case, the findings of fact therein and the
ruling of the Commission (See also 5 Moran, 1963 Ed., p. 42.)
310
310 SUPREME COURT REPORTS ANNOTATED
Rizal Light & lce Co., Inc. vs. Mun. of Morong, Rizal
52 Phil. 455, "a certificate of public convenience will not 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 a sufficient and satisfactory service.''
1. A. Requisites of the Rule.—
1. 1. Operator must be first in the line.—The operator
invoking- the rule must be the first operator granted a
certificate of public convenience to operate a public
utility in the line in question. The protection of or
preference for a prior operator over a newcomer cannot
be invoked by a petitioner where the respondent had
operated long before the petitioner a taxicab service in
the same field (Robles v. Blaylock, L-17629, March 31,
1964).
2. 2. Prior operator must be an established operator.—An
old operator invoking the rule must be an established
operator in the f ull sense of the word. Although the
prior operator had a certificate of public convenience
before the filing of the application of the newcomer, the
rule will not apply if the prior operator had secured its
certificate of convenience for barely two (2) months
prior to the application in question (Valdez v. Public
Service Commission, L-13837-38, May 30, 1960).
3. 3. Prior operator must be operating a sufficient and
satisfactory service.—A prior operator must be
operating a sufficient and satisfactory service to be
entitled to preferential right. Where it is in no condition
to supply the needs or services, such as when the old
operator supplying the power needs in a territory had
only a load capacity of 200 kilowatts while the power
need was 6,000 kilowatts, the old operator rule did not
apply (Teresa Electric & Power Co. v. Public Service
Commission, L-21804, Sept. 25, 1967, 21 SCRA 198,
202).
It had been held however that inadequate service, by itself, was
not sufficient to grant a certificate of public convenience to a
newcomer without first giving the old or prior operator an
opportunity to improve its service (Manila Electric Co. v.
Mateo, [1938] 66 Phil. 19, 22-23; Raymundo Trans. Co. v.
Laguna-Tayabas Bus Co., [1930]
311
VOL, 25, SEPTEMBER 28, 1968 311
Rizal Light & lce Co., Inc. vs. Mun. of Morong, Rizal
55 Phil. 404, 408; Bohol Land Trans. Co., Jureidini, [1929] 53
Phil. 560, 565-566; Javier v. Orlanes, [1929] 53 Phil. 468;
Batangas Trans. Co. v. Orlanes, supra). The remedy is not to
award a new service to another but for the Public Service
Commission to take administrative action against the old
operator requiring it to improve its service and to comply
strictly with the terms and conditions of its certificate (Manila
Electric Co. v. Mateo, supra at 22).
The fact that a prior operator, which is a common carrier, did
not bid for the mail contract of the place it serves is not
sufficient reason to issue in favor of the one who obtained the
contract a certificate of public necessity and convenience
without f irst giving an opportunity to the former to improve its
service, binding itself to carry the mails in accordance with law
(Bohol Land Trans. Co. v. Jureidini, supra at 569).
Failure of the old operator to improve its service after having
been required to do so will cause the grant of another certificate
of public convenience to a new applicant. Thus, where the prior
operator failed for about three (3) years to complete its
equipment to meet the traffic, the Public Service Commission
was justified in granting another authorization to a newcomer
for the establishment of another service in the same line
(Manila Yellow Taxicab v. Public Service Commission, [1051]
90 Phil. 301, 309; De la Rosa v. Corpus, [1938] 66 Phil. 8 [for
a period of four (4) years] citing Bohol Land Trans. Co. v.
Jureidini, supra and Raymundo Trans. Co. v. Perez, 56 Phil.
274).
A showing must be clear and affirmative that an existing utility
is unable or has refused to maintain adequate and satisfactory
service (Batangas Trans. Co. v. Orlanes, supra at 468). In a
case involving an application of a newcomer for another
certificate on the same line in competition with an old operator,
it was held that lack of means of transportation during the feast
days could not serve as the basis for determining the
sufficiency or insufficiency of the service. The testimony of
two ex-employees of the old operator that they used to leave
passengers behind for lack of room was not believed because
312
312 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
"they were duty bound to report that fact to the company and
should have done so, and since they failed to do so, it is
presumed that there was no such deficiency." (Bohol Land
Trans Co. v. Jureidini, supra at 564.)
1. B. Reason for the Rule.—"The policy of regulation,
upon which our present public utility commission 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 economic waste results and service
may be furnished at the minimum costs. 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 wastef ul economically
and results finally in insufficient and unsatisfactory
service and extravagant rates." (Batangas Trans. Co. v.
Orlanes, supra at 467.)
"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
and preferential right over a person who seeks to acquire
another and a later license over the same route. Otherwise, the
first licensee would not have any 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." (Batangas Trans. Co. v. Orlanes,
supra at 466.)
There is the equal need of doing equity to those who have
risked capital to render the service which those who
313
VOL. 25, SEPTEMBER 28, 1968 313
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
were called upon to do so were not disposed or were not in a
position to supply." (Manila Yellow Taxicab v. Public Service
Commission, supra at 307.)
Where the law granting franchise to an old operator expressly
provided that the rights thereunder conferred are not exclusive,
the old operator cannot invoke its "vested rights" as prior
operator against the entry of another in its area of operation
(Philippine Long Distance Telephone Co. v. City of Davao, L-
23080, Sept. 20, 1965.)
II. Exceptions to the Rule
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 public convenience and service should be
quided by public service and interest; the latter are the
primordial considerations to be taken into account." (Teresa
Electric Power Co. v. Public Service Commission, supra at 202
quoted with approval in Philippine Rabbit Bus Lines, Inc. v.
Gabatin, L-34472, July 31, 1968, 24 SCRA 411, 421-422.)
A. Failure to Offer to Meet the Increase in the Demand.—The
prior operator rule does not apply where the old operator does
not offer to meet the increase in the demand the moment it
arises and does so only when another operator who is a new
one has made the offer to serve the public needs (Philippine
Long Distance Telephone Co. v. City of Davao, supra citing
Fernando v. Gallardo, L-4860, Sept. 8, 1953, Raymundo
Trans. Co. v. Cerda, L-7880, May 18. 1956; Saulog Transit,
Inc. v. Medina, L-7244. June 28, 1956: Estate of F. P, Buan v.
La Mallorca, L-8729. Feb. 28, 1957; Manila Yellow Taxicab
Co. v. Castelo, L-13910, May 30, 1960; Isidro v. Ocampo, L-
12331, May 29, 1959 citing Inter-Provincial Autobus Co. v.
Clarete, L-41000-02, May 15, 1952; Angat-Manila Trans. Co.
v. La, Mallorca, L-8729, Feb. 28, 1957; Dangwa Trans. Co. v.
Public Service Commission, supra; Valero v. Parpana, L-
15328-9, Oct. 31, 1960; Mandaluyong Bus Co. v. Enrique, L-
21964, Oct. 19, 1966, 18 SCRA 352, 355).
314
314 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
Where the old operator was authorized to operate 75 buses in
all its lines but its rights with respect to 30 had been leased, this
circumstance added to the fact that it had registered only 17
buses which were not even in continuous operation although it
was entitled to operate 45 units in its remaining lines, showed
that there was a shortage of transportation facilities in the lines
mentioned and that the old operator was unable to meet fully
the demands of public convenience (Zarate v. Rizal-Manila C. Where Destructive Monopoly Would Result From the
Transit, Inc., L-11300, May 29, 1959). Operation of the Rule.—The prior operator rule does

An old operator was likewise denied protection of the prior 315

operator rule because, of the more than 400 buses it was
authorized to operate, he was able only to register 315, not VOL. 25, SEPTEMBER 28, 1968 315
including the 35 units he also failed to register under another Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
certificate of public convenience (Halili v, Heras, L-18889-90,
April 30, 1964).
not apply where destructive monopoly would result from the
maintenance of a single operator in a given service. Reasonable
B. Failure to Comply with the Requirements of Franchise.—A
competition would have a salutary effect upon public interest
pioneer operator will not be given preference if he fails to
and public convenience. It should be favored in lieu of
comply with the requirements of his franchise to operate a
monopoly (Valdez v. Public Service Commission, supra.)
given number of units within a given period amounting to
abandonment of the unregistered units (Halili v. Heras, supra).
"If public need and convenience demand or require the service,
if the service to be rendered applied for would not result in or
Where an operator had an authority to make 24 hourly runs or
bring about ruinous competition, and if the ability of the
trips in one day but it could only run one or two buses a day,
applicant for service to satisfy public need and convenience is
which was an open violation of the terms of its certificate of
shown, a competition of two services and not a monopoly
public convenience and which had been the subject of several
would redound to the benefit of the community where the
complaints from different sources, the prior operator rule did
service is to be rendered." (Robles v. Blaylock, supra.)
not apply (Raymundo Trans. Co. v. Perez, supra at 275-276.)
But operators of public convenience and service "deserve some
Failure of a common carrier in its duty under the law to carry
protection from unnecessary or unlawful competition."
the mail for three (3) consecutive days in its territory without
(Philippine Rabbit Bus Lines, Inc. v. Gabatin, supra.)
suff icient excuse does not, by itself, warrant the issuance of
another certificate of public convenience to a new operator,
The violation should first be investigated by the Public Service Ruinous competition is to be avoided even in the Philippine
Commission with a hearing of the parties before the necessary system of free enterprise. But there must be concrete evidence
measures justified by the result are taken against the old that such ruinous competition would come about as a result of
operator. (Bohol Land Trans. Co. v. Jureidini, supra at 569.) the coming in of a competitor and not just the fear of it
(Dangwa Trans. Co. v. Public Service Commission, supra.)
D. Where Old Operator Denies the Need for Units on the
Line.—The prior operator rule does not apply to the benefit of
an old operator who denies the need for more units on the line
(La Mallorca v . Mendiola, L-19558, April 29, 1966, 16 SCRA
648, 651.)—ATTY. AMBROSIO R. BLANCO.