TRANSPORTATION NOTES 1 A PUBLIC UTILITY IS A PARTLY NATIONALIZED BUSINESS GENERAL CONSIDERATIONS ENDEAVOR • Public utilities may only be operated by Filipino citizens or PUBLIC UTILITIES corporations, associations, partnerships organized and constituted under the laws of the Philippines, and wherein at least 60% of the capital stock or paid-up capital is owned by Filipinos 1987 PHILIPPINE CONSTITUTION • Another aspect of this idea is that the participation of foreign investors shall be limited to their proportionate share, and all the Section 11. No franchise, certificate, or any other form of authorization for executive and managing officers of such corporation or association the operation of a public utility shall be granted except to citizens of the must be citizens of the Philippines Philippines or to corporations or associations organized under the laws of • The constitution reserves part of ownership of public utilities to the Philippines, at least sixty per centum of whose capital is owned by such Filipinos citizens; nor shall such franchise, certificate, or authorization be exclusive in • Fully-nationalized, as given by the Constitution: mass media, character or for a longer period than fifty years. Neither shall any such exercise of profession franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the A PUBLIC UTILITY IS A BUSINESS ENDEAVOR VIEWED WITH PUBLIC common good so requires. The State shall encourage equity participation in INTEREST public utilities by the general public. The participation of foreign investors in

• The issuance of a franchise, certificate or any other form of the governing body of any public utility enterprise shall be limited to their authorization is needed for the operation of a public utility proportionate share in its capital, and all the executive and managing officers • Franchise granted is subject to the condition that can be amended, of such corporation or association must be citizens of the Philippines. altered, or repealed by the Congress when common good so requires Section 17. In times of national emergency, when the public interest so • The State may temporarily take over requires, the State may, during the emergency and under reasonable terms • The State may permanently acquire vital industries and private prescribed by it, temporarily take over or direct the operation of any privately- enterprises owned public utility or business affected with public interest. • The State shall regulate or prohibit monopolies Section 18. The State may, in the interest of national welfare or defense, WHAT IS A PUBLIC UTILITY? establish and operate vital industries and, upon payment of just • May fall under those enumerated in Section 13 (b) in CA 146 compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government. 1 REPUBLIC V. MANILA ELECTRIC COMPANY 391 SCRA 700 Section 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair FACTS: competition shall be allowed. MERALCO filed an application with the ERB for the increase of its rate schedules, which included application for provisional increase pending TWO IDEAS CONVEYED BY THE PROVISIONS ON PUBLIC UTILITY

decision of the same agency. ERB allowed the provisional increase and 1. It is a partly nationalized business endeavor

referred the matter to the COA. The COA consequently made a 2. It is viewed with public interest

recommendation that income taxes should not be included by MERALCO in MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 2 its operating expenses. Likewise, the COA recommended that net average Clearly, by its nature, income tax payments of a public utility are not investment method should be used by the company in the valuation of its expenses which contribute to or are incurred in connection with the properties. The ERB adopted this recommendation, ordered MERALCO to a production of profit of a public utility. Income tax should be borne by the lower increase than applied for, and ordered as well for the company to taxpayer alone as they are payments made in exchange for benefits adopt the net average investment method. This was however overturned by received by the taxpayer from the State. No benefit is derived by the the CA. customers of a public utility for the taxes paid by such entity and no direct contribution is made by the payment of income tax to the operation of a HELD: public utility for purposes of generating revenue or profit. Accordingly, the The regulation of rates to be charged by public utilities is founded upon the burden of paying income tax should be Meralco's alone and should not be police powers of the State and statutes prescribing rules for the control and shifted to the consumers by including the same in the computation of its regulation of public utilities are a valid exercise thereof. When private operating expenses.

property is used for a public purpose and is affected with public interest, it ceases to be juris privati only and becomes subject to regulation. The The usage of net average investment method is not unreasonable regulation is to promote the common good. Submission to regulation may be withdrawn by the owner by discontinuing use; but as long as use of the The ERB did not abuse its discretion when it applied the net average property is continued, the same is subject to public regulation. investment method. The reasonableness of net average investment method is borne by the records of the case. In its report, the COA explained that the In regulating rates charged by public utilities, the State protects the public computation of the proportionate value of the property and equipment in against arbitrary and excessive rates while maintaining the efficiency and accordance with the actual number of months such property or equipment is quality of services rendered. However, the power to regulate rates does not in service for purposes of determining the rate base is favored, as against give the State the right to prescribe rates which are so low as to deprive the the trending method employed by MERALCO, "to reflect the real status of public utility of a reasonable return on investment. Thus, the rates prescribed the property."36 By using the net average investment method, the ERB and by the State must be one that yields a fair return on the public utility upon the the COA considered for determination of the rate base the value of value of the property performing the service and one that is reasonable to properties and equipment used by MERALCO in proportion to the period that the public for the services rendered. the same were actually used during the period in question. This treatment is consistent with the settled rule in rate regulation that the determination of the Income tax as operating expense cannot be allowed in rate-determination rate base of a public utility entitled to a return must be based on properties process and equipment actually being used or are useful to the operations of the public utility. The ERB correctly ruled that income tax should not be included in the computation of operating expenses of a public utility. Income tax paid by a 2 DAVID, ET. AL. V. GLORIA ARROYO, ET. AL. public utility is inconsistent with the nature of operating expenses. In general, GR 171396, 3 MAY 2006 operating expenses are those which are reasonably incurred in connection

with business operations to yield revenue or income. They are items of FACTS: expenses which contribute or are attributable to the production of income or The president issued PP1017, on the advent of the 20th EDSA People Power revenue. As correctly put by the ERB, operating expenses "should be a Anniversary. This was allegedly due to the incessant activities staged by the requisite of or necessary in the operation of a utility, recurring, and that it activists and opposition, who sought the downfall of the present redounds to the service or benefit of customers." administration. The president ordered in said proclamation the cancellation of all activities related to the celebration of the EDSA anniversary, as well as MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 3 rally permits. This notwithstanding, rallies were still staged. This led to the warrantless arrests of many as well as the take-over of two pro-opposition SECTION 13. newspaper companies—Daily Tribune and Malaya. Together with other petitions assailing the constitutionality of PP 1017 and GO5, it was averred xxx that the take-over the newspaper companies constituted censorship and prior restraint. (b) The term "public service" includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or HELD: compensation, with general or limited clientele, whether permanent, Generally, Congress is the repository of emergency powers, such as the occasional or accidental, and done for general business purposes, any

taking over of public utilities. This is evident in the tenor of Section 23 (2), common carrier, railroad, street railway, traction railway, sub-way motor Article VI authorizing it to delegate such powers to the President. Certainly, a vehicle, either for freight or passenger, or both with or without fixed route and body cannot delegate a power not reposed upon it. However, knowing that whether may be its classification, freight or carrier service of any class, during grave emergencies, it may not be possible or practicable for express service, steamboat or steamship line, pontines, ferries, and water Congress to meet and exercise its powers, the Framers of our Constitution craft, engaged in the transportation of passengers or freight or both, deemed it wise to allow Congress to grant emergency powers to the shipyard, marine railways, marine repair shop, [warehouse] wharf or dock, President, subject to certain conditions, thus: ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power water supply and power, petroleum, sewerage system, wire (1) There must be a war or other emergency. or wireless communications system, wire or wireless broadcasting stations and other similar public services: Provided, however, That a person engaged (2) The delegation must be for a limited period only. in agriculture, not otherwise a public service, who owns a motor vehicle and uses it personally and/or enters into a special contract whereby said motor (3) The delegation must be subject to such restrictions as the Congress may vehicle is offered for hire or compensation to a third party or third parties prescribe. engaged in agriculture, not itself or themselves a public service, for operation by the latter for a limited time and for a specific purpose directly connected (4) The emergency powers must be exercised to carry out a national policy with the cultivation of his or their farm, the transportation, processing, and declared by Congress. marketing of agricultural products of such third party or third parties shall not be considered as operating a public service for the purposes of this Act. Section 17, Article XII must be understood as an aspect of the emergency powers clause. The taking over of private business affected with public 3 ALBANO V. REYES interest is just another facet of the emergency powers generally reposed 175 SCRA 224 upon Congress. Thus, when Section 17 states that the "the State may,

during the emergency and under reasonable terms prescribed by it, FACTS: temporarily take over or direct the operation of any privately owned public A public bidding was conducted for the management and operation of the utility or business affected with public interest," it refers to Congress, not the Manila International Container Terminal. Seven consortia of companies President. Now, whether or not the President may exercise such power is submitted their respective bids and consequently, the bidding committee dependent on whether Congress may delegate it to him pursuant to a law recommended the award to be given to ICTSI. Subsequently, two petitions prescribing the reasonable terms thereof. were filed questioning the regularity of the bidding conducted. One of the allegations forwarded was that since MICT is a public utility, prior franchise PUBLIC SERVICE LAW (CA 146) from the legislature is needed. MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 4 In the instant case, the PPA, in the exercise of the option granted it by P.D. HELD: No. 857, chose to contract out the operation and management of the MICP A review of the applicable provisions of law indicates that a franchise to a private corporation. This is clearly within its power to do. Thus, PPA's specially granted by Congress is not necessary for the operation of the acts of privatizing the MICT and awarding the MICT contract to ICTSI are Manila International Container Port (MICP) by a private entity, a contract wholly within the jurisdiction of the PPA under its Charter which empowers entered into by the PPA and such entity constituting substantial compliance the PPA to "supervise, control, regulate, construct, maintain, operate and with the law. provide such facilities or services as are necessary in the ports vested in, or

belonging to the PPA." (Section 6(a) ii, P.D. 857) Thus, while the PPA has been tasked, under E.O. No. 30, with the management and operation of the Manila International Port Complex and to The contract between the PPA and ICTSI, coupled with the President's undertake the providing of cargo handling and port related services thereat, written approval, constitute the necessary authorization for ICTSI's operation the law provides that such shall be "in accordance with P.D. 857 and other and management of the MICP. The award of the MICT contract approved by applicable laws and regulations." On the other hand, P.D. No. 857 expressly no less than the President of the Philippines herself enjoys the legal empowers the PPA to provide services within Port Districts "whether on its presumption of validity and regularity of official action. In the case at bar, own, by contract, or otherwise" [See. 6(a) (v)]. Therefore, under the terms of there is no evidence which clearly shows the constitutional infirmity of the E.O. No. 30 and P.D. No. 857, the PPA may contract with the International questioned act of government. Container Terminal Services, Inc. (ICTSI) for the management, operation and development of the MICP. 4 TATAD V. GARCIA 243 SCRA 436 Even if the MICP be considered a public utility, or a public service on the theory that it is a "wharf' or a "dock" as contemplated under the Public FACTS: Service Act, its operation would not necessarily call for a franchise from the The DOTC planned to construct LRT 3. Special technical teams were Legislative Branch. Franchises issued by Congress are not required before formed to evaluate the project. Coincidentally, the BOT law was signed into each and every public utility may operate. Thus, the law has granted certain law, which provided for two arrangements, BOT and BT. Upon the passage administrative agencies the power to grant licenses for or to authorize the of the law, modifications were made to the prequalification proceedings. operation of certain public utilities. (See E.O. Nos. 172 and 202) Five groups forwarded their interests to undertake the project but it was only EDSA LRT consortium which was said to have complied with the As stated earlier, E.O. No. 30 has tasked the PPA with the operation and requirements. DOTC recommended the award to be made to the consortium management of the MICP, in accordance with P.D. 857 and other applicable but was informed that the prequalification procedure wasn't the bidding

laws and regulations. However, P.D. 857 itself authorizes the PPA to process contemplated by the BOT law. in light of this, amendments were perform the service by itself, by contracting it out, or through other means. made to the agreement with the consortium, which proposed a BLT Reading E.O. No. 30 and P.D. No. 857 together, the inescapable conclusion arrangement. Later on, amendments were made to the BOT law. is that the lawmaker has empowered the PPA to undertake by itself the operation and management of the MICP or to authorize its operation and The petition mainly rests on the question of whether a foreign corporation management by another by contract or other means, at its option. The latter can own a public utility. power having been delegated to the PPA, a franchise from Congress to authorize an entity other than the PPA to operate and manage the MICP HELD: becomes unnecessary. What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant, not a public utility. MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 5 While a franchise is needed to operate these facilities to serve the public, vehicles under simulated operating conditions, control of operations, dealing they do not by themselves constitute a public utility. What constitutes a with emergencies, collection, counting and securing cash from the fare public utility is not their ownership but their use to serve the public. collection system. Personnel of DOTC will work under the direction and control of private respondent only during training. The training objectives, The Constitution, in no uncertain terms, requires a franchise for the however, shall be such that upon completion of the EDSA LRT III and upon

operation of a public utility. However, it does not require a franchise before opening of normal revenue operation, DOTC shall have in their employ one can own the facilities needed to operate a public utility so long as it does personnel capable of undertaking training of all new and replacement not operate them to serve the public. personnel. In other words, by the end of the three-year construction period and upon commencement of normal revenue operation, DOTC shall be able The right to operate a public utility may exist independently and separately to operate the EDSA LRT III on its own and train all new personnel by itself. from the ownership of the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a Fees for private respondent' s services shall be included in the rent, which public utility without owning the facilities used to serve the public. The likewise includes the project cost, cost of replacement of plant equipment devotion of property to serve the public may be done by the owner or by the and spare parts, investment and financing cost, plus a reasonable rate of person in control thereof who may not necessarily be the owner thereof. return thereon. This dichotomy between the operation of a public utility and the ownership of Since DOTC shall operate the EDSA LRT III, it shall assume all the the facilities used to serve the public can be very well appreciated when we obligations and liabilities of a common carrier. For this purpose, DOTC shall consider the transportation industry. Enfranchised airline and shipping indemnify and hold harmless private respondent from any losses, damages, companies may lease their aircraft and vessels instead of owning them injuries or death which may be claimed in the operation or implementation of themselves. the system, except losses, damages, injury or death due to defects in the EDSA LRT III on account of the defective condition of equipment or facilities While private respondent is the owner of the facilities necessary to operate or the defective maintenance of such equipment facilities. the EDSA. LRT III, it admits that it is not enfranchised to operate a public utility. In view of this incapacity, private respondent and DOTC agreed that In sum, private respondent will not run the light rail vehicles and collect fees on completion date, private respondent will immediately deliver possession from the riding public. It will have no dealings with the public and the public of the LRT system by way of lease for 25 years, during which period DOTC will have no right to demand any services from it. shall operate the same as a common carrier and private respondent shall

provide technical maintenance and repair services to DOTC. Technical 5 PAL V. CAB maintenance consists of providing (1) repair and maintenance facilities for 270 SCRA 538 the depot and rail lines, services for routine clearing and security; and (2) producing and distributing maintenance manuals and drawings for the entire FACTS: system. Grand Air applied with the CAB for the issuance of a Certificate of Public Convenience and Necessity. Notice for hearing was issued by the agency. Private respondent shall also train DOTC personnel for familiarization with Here comes PAL, which alleges the lack of jurisdiction of CAB to entertain the operation, use, maintenance and repair of the rolling stock, power plant, the application or rule upon it. PAL further alleges that a legislative franchise substations, electrical, signaling, communications and all other equipment as is prior needed for the issuance of the CPCN. Private respondent on the supplied in the agreement. Training consists of theoretical and live training other hand, following pronouncements of earlier cases, allege that no of DOTC operational personnel which includes actual driving of light rail MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 6 legislative franchise is anymore needed with respect to air transportation before a CPCN be issued. Section 13. (a) The Commission shall have jurisdiction, supervision, and control over all public services and their franchises, equipment, and other HELD:

properties, and in the exercise of its authority, it shall have the necessary Many and varied are the definitions of certificates of public convenience powers and the aid of the public force: Provided, That public services owned which courts and legal writers have drafted. Some statutes use the terms or operated by government entities or government-owned or controlled "convenience and necessity" while others use only the words "public corporations shall be regulated by the Commission in the same way as convenience." The terms "convenience and necessity", if used together in a privately-owned public services, but certificates of public convenience or statute, are usually held not to be separable, but are construed together. certificates of public convenience and necessity shall not be required of such Both words modify each other and must be construed together. The word entities or corporations: And provided, further, That it shall have no authority 'necessity' is so connected, not as an additional requirement but to modify to require steamboats, motor ships and steamship lines, whether privately- and qualify what might otherwise be taken as the strict significance of the owned, or owned or operated by any Government controlled corporation or word necessity. Public convenience and necessity exists when the proposed instrumentality to obtain certificate of public convenience or to prescribe their facility will meet a reasonable want of the public and supply a need which the definite routes or lines of service. existing facilities do not adequately afford. It does not mean or require an actual physical necessity or an indispensable thing. (b) The term "public service" includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or The use of the word "necessity", in conjunction with "public convenience" in compensation, with general or limited clientele, whether permanent, a certificate of authorization to a public service entity to operate, does not in occasional or accidental, and done for general business purposes, any any way modify the nature of such certification, or the requirements for the common carrier, railroad, street railway, traction railway, sub-way motor issuance of the same. It is the law which determines the requisites for the vehicle, either for freight or passenger, or both with or without fixed route and issuance of such certification, and not the title indicating the certificate. whether may be its classification, freight or carrier service of any class, express service, steamboat or steamship line, pontines, ferries, and water Congress, by giving the respondent Board the power to issue permits for the craft, engaged in the transportation of passengers or freight or both, operation of domestic transport services, has delegated to the said body the shipyard, marine railways, marine repair shop, [warehouse] wharf or dock, authority to determine the capability and competence of a prospective ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, domestic air transport operator to engage in such venture. This is not an

heat and power water supply and power, petroleum, sewerage system, wire instance of transforming the respondent Board into a mini-legislative body, or wireless communications system, wire or wireless broadcasting stations with unbridled authority to choose who should be given authority to operate and other similar public services: Provided, however, That a person engaged domestic air transport services. in agriculture, not otherwise a public service, who owns a motor vehicle and uses it personally and/or enters into a special contract whereby said motor vehicle is offered for hire or compensation to a third party or third parties TRANSPORTATION engaged in agriculture, not itself or themselves a public service, for operation by the latter for a limited time and for a specific purpose directly connected TRANSPORTATION, DEFINED. with the cultivation of his or their farm, the transportation, processing, and • One whereby a certain person or association of persons obligate marketing of agricultural products of such third party or third parties shall not themselves to transport persons, things, or news from one place to be considered as operating a public service for the purposes of this Act. another for a fixed price PUBLIC NATURE MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 7 (c) The word "person" includes every individual, co-partnership, joint-stock the immediate cancellation of the certificate without the necessity of any company or corporation, whether domestic or foreign, their lessees, trustees, express action on the part of the Commission. or receivers, as well as any municipality, province, city, government-owned

or controlled corporation, or agency of the Government of the Philippines, In estimating the depreciation, the effect of the use of the equipment, its and whatever other persons or entities that may own or possess or operate actual condition, the age of the model, or other circumstances affecting its public services. (As amended by Com. Act 454 and RA No. 2677) value in the market shall be taken into consideration. Section 14. The following are exempted from the provisions of the preceding The foregoing is likewise applicable to any extension or amendment of section: certificates actually in force and to those which may hereafter be issued, to permit to modify itineraries and time schedules of public services, and to (a) Warehouses; authorizations to renew and increase equipment and properties. (b) Vehicles drawn by animals and bancas moved by oar or sail, and Section 16. Proceedings of the Commission, upon notice and hearing. - The tugboats and lighters; Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations (c) Airships within the Philippines except as regards the fixing of their and exceptions mentioned and saving provisions to the contrary : maximum rates on freight and passengers; (a) To issue certificates which shall be known as certificates of public (d) Radio companies except with respect to the fixing of rates; convenience, authorizing the operation of public service within the Philippines whenever the Commission finds that the operation of the public (e) Public services owned or operated by any instrumentality of the National service proposed and the authorization to do business will promote the Government or by any government-owned or controlled corporation, except public interest in a proper and suitable manner. Provided, That thereafter, with respect to the fixing of rates. (As amended by Com. Act 454, RA No. certificates of public convenience and certificates of public convenience and 2031, and RA No. 2677 ) necessity will be granted only to citizens of the Philippines or of the United States or to corporations, co-partnerships, associations or joint-stock Section 15. With the exception of those enumerated in the preceding

companies constituted and organized under the laws of the Philippines; section, no public service shall operate in the Philippines without possessing Provided, That sixty per centum of the stock or paid-up capital of any such a valid and subsisting certificate from the Public Service Commission known corporations, co-partnership, association or joint-stock company must belong as "certificate of public convenience," or "certificate of public convenience entirely to citizens of the Philippines or of the United States: Provided, and necessity," as the case may be, to the effect that the operation of said further, That no such certificates shall be issued for a period of more than service and the authorization to do business will promote the public interests fifty years. in a proper and suitable manner. (b) To approve, subject to constitutional limitations any franchise or privilege The Commission may prescribe as a condition for the issuance of the granted under the provisions of Act No. Six Hundred and Sixty-seven, as certificate provided in the preceding paragraph that the service can be amended by Act No. One Thousand and twenty-two, by any political acquired by the Republic of the Philippines or any instrumentality thereof subdivision of the Philippines when, in the judgment of the Commission, upon payment of the cost price of its useful equipment, less reasonable such franchise or privilege will properly conserve the public interests, and the depreciation; and likewise, that the certificate shall be valid only for a definite Commission shall in so approving impose such conditions as to construction, period of time; and that the violation of any of these conditions shall produce equipment, maintenance, service, or operation as the public interests and MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 8 convenience may reasonably require, and to issue certificates of public maintenance of the same and when the financial condition of the said public convenience and necessity when such is required or provided by any law or

service reasonably warrants the original expenditure required in making and franchise. operating such extension. (c) To fix and determine individual or joint rates, tolls, charges, (i) To direct any railroad, street railway or traction company to establish and classifications, or schedules thereof, as well as commutation, mileage, maintain at any junction or point of connection or intersection with any other kilometrage, and other special rates which shall be imposed observed and line of said road or track, or with any other line of any other railroad, street followed thereafter by any public service: Provided, That the Commission railway or traction to promote, such just and reasonable connection as shall may, in its discretion, approve rates proposed by public services be necessary to promote the convenience of shippers of property, or of provisionally and without necessity of any hearing; but it shall call a hearing passengers, and in like manner direct any railroad, street railway, or traction thereon within thirty days, thereafter, upon publication and notice to the company engaged in carrying merchandise, to construct, maintain and concerns operating in the territory affected: Provided, further, That in case operate, upon reasonable terms, a switch connection with any private the public service equipment of an operator is used principally or secondarily sidetrack which may be constructed by any shipper to connect with the for the promotion of a private business, the net profits of said private railroad, street railway or traction company line where, in the judgment of the business shall be considered in relation with the public service of such Commission, such connection is reasonable and practicable and can be out operator for the purpose of fixing the rates. in with safety and will furnish sufficient business to justify the construction and maintenance of the same. (d) To fix just and reasonable standards, classifications, regulations, practices, measurement, or service to be furnished, imposed, observed, and (j) To authorize, in its discretion, any railroad, street railway or traction followed thereafter by any public service. company to lay its tracks across the tracks of any other railroad, street railway or traction company or across any public highway. (e) To ascertain and fix adequate and serviceable standards for the measurement of quantity, quality, pressure, initial voltage, or other condition (k) To direct any railroad or street railway company to install such safety pertaining to the supply of the product or service rendered by any public devices or about such other reasonable measures as may in the judgment of service, and to prescribe reasonable regulations for the examination and test

the Commission be necessary for the protection of the public are passing of such product or service and for the measurement thereof. grade crossing of (1) public highways and railroads, (2) public highways and streets railway, or (3) railways and street railways. (f) To establish reasonable rules, regulations, instructions, specifications, and standards, to secure the accuracy of all meters and appliances for (l) To fix and determine proper and adequate rates of depreciation of the measurements. property of any public service which will be observed in a proper and adequate depreciation account to be carried for the protection of (g) To compel any public service to furnish safe, adequate, and proper stockholders, bondholders or creditors in accordance with such rules, service as regards the manner of furnishing the same as well as the regulations, and form of account as the Commission may prescribe. Said maintenance of the necessary material and equipment. rates shall be sufficient to provide the amounts required over and above the expense of maintenance to keep such property in a state of efficiency (h) To require any public service to establish, construct, maintain, and corresponding to the progress of the industry. Each public service shall operate any reasonable extension of its existing facilities, where in the conform its depreciation accounts to the rates so determined and fixed, and judgment of said Commission, such extension is reasonable and practicable shall set aside the moneys so provided for out of its earnings and carry the and will furnish sufficient business to justify the construction and same in a depreciation fund. The income from investments of money in such MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 9 fund shall likewise be carried in such fund. This fund shall not be expended

expressly exempted from the jurisdiction of the Commission, either totally or otherwise than for depreciation, improvements, new construction, extensions in part, by the provisions of section thirteen of this Act. or conditions to the properly of such public service. Section 19. Unlawful Acts. - It shall be unlawful for any public service: (m) To amend, modify or revoke at any time certificate issued under the provisions of this Act, whenever the facts and circumstances on the strength (a) To provide or maintain any service that is unsafe, improper, or of which said certificate was issued have been misrepresented or materially inadequate or withhold or refuse any service which can reasonably be changed. demanded and furnished, as found and determined by the Commission in a final order which shall be conclusive and shall take effect in accordance with (n) To suspend or revoke any certificate issued under the provisions of this this Act, upon appeal of otherwise. Act whenever the holder thereof has violated or willfully and contumaciously refused to comply with any order rule or regulation of the Commission or any (b) To make or give, directly or indirectly, by itself or through its agents, provision of this Act: Provided, That the Commission, for good cause, may attorneys or brokers, or any of them, discounts or rebates on authorized prior to the hearing suspend for a period not to exceed thirty days any rates, or grant credit for the payment of freight charges, or any undue or certificate or the exercise of any right or authority issued or granted under unreasonable preference or advantage to any person of corporation or to this Act by order of the Commission, whenever such step shall in the any locality or to any particular description of traffic or service, or subject any judgment of the Commission be necessary to avoid serious and irreparable particular person or corporation or locality or any particular description of damage or inconvenience to the public or to private interests. traffic to any prejudice or disadvantage in any respect whatsoever; to adopt, maintain, or enforce any regulation, practice or measurement which shall be (o) To fix, determine, and regulate, as the convenience of the state may found or determined by the Commission to be unjust, unreasonable, unduly require, a special type for auto-busses, trucks, and motor trucks to be preferential or unjustly discriminatory in a final order which shall be hereafter constructed, purchased, and operated by operators after the conclusive and shall take effect in accordance with the provisions of this Act, approval of this Act; to fix and determine a special registration fee for auto- upon repeal or otherwise. buses, trucks, and motor trucks so constructed, purchased and operated:

Provided, That said fees shall be smaller than more those charged for auto- (c) To refuse or neglect, when requested by the Director of Posts or his busses, trucks, and motor trucks of types not made regulation under the authorized representative, to carry public mail on the regular trips of any subsection. public land transportation service maintained or operated by any such public service; upon such terms and conditions and for a consideration in such xxx amount as may be agreed upon between the Director of Posts and the public service carrier of fixed by the Commission in the absence of an agreement Section 18. It shall be unlawful for any individual, co-partnership, between the Director of Posts and the carrier. In case the Director of Posts association, corporation or joint-stock company, their lessees, trustees or and public service carrier are unable to agree on the amount of the receivers appointed by any court whatsoever, or any municipality, province, compensation to be paid for the carriage of the mail, the Director of Posts or other department of the Government of the Philippines to engage in any shall forthwith request the Commission to fix a just and reasonable public service business without having first secured from the Commission a compensation for such carriage and the same shall be promptly fixed by the certificate of public convenience or certificate of public convenience and Commission in accordance with Section sixteen of this Act. necessity as provided for in this Act, except grantees of legislative franchises expressly exempting such grantees from the requirement of securing a Section 20. Acts requiring the approval of the Commission. - Subject to certificate from this Commission as well as concerns at present existing established limitations and exceptions and saving provisions to the contrary, MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 10

it shall be unlawful for any public service or for the owner, lessee or operator any other public service. The approval herein required shall be given, after thereof, without the approval and authorization of the Commission previously notice to the public and hearing the persons interested at a public hearing, if had - it be shown that there are just and reasonable grounds for making the mortgaged or encumbrance, for liabilities of more than one year maturity, or (a) To adopt, establish, fix, impose, maintain, collect or carry into effect any the sale, alienation, lease, merger, or consolidation to be approved, and that individual or joint rates, commutation, mileage or other special rate, toll, fare, the same are not detrimental to the public interest, and in case of a sale, the charge, classification or itinerary. The Commission shall approve only those date on which the same is to be consummated shall be fixed in the order of that are just and reasonable and not any that are unjustly discriminatory or approval: Provided, however, that nothing herein contained shall be unduly preferential, only upon reasonable notice to the public services and construed to prevent the transaction from being negotiated or completed other parties concerned, giving them a reasonable opportunity to be heard before its approval or to prevent the sale, alienation, or lease by any public and the burden of the proof to show that the proposed rates or regulations service of any of its property in the ordinary course of its business. are just and reasonable shall be upon the public service proposing the same. (h) To sell or register in its books the transfer or sale of shares of its capital (b) To establish, construct, maintain, or operate new units or extend existing stock, if the result of that sale in itself or in connection with another previous facilities or make any other addition to or general extension of the service. sale, shall be to vest in the transferee more than forty per centum of the subscribed capital of said public service. Any transfer made in violation of xxx this provision shall be void and of no effect and shall not be registered in the books of the public service corporation. Nothing herein contained shall be (e) Hereafter to issue any stock or stock certificates representing an increase construed to prevent the holding of shares lawfully acquired. (As amended of capital; or issue any share of stock without par value; or issue any bonds by Com. Act No. 454.) or other evidence of indebtedness payable in more than one year from the issuance thereof, provided that it shall be the duty of the Commission, after (i) To sell, alienate or in any manner transfer shares of its capital stock to hearing, to approve any such issue maturing in more than one year from the

any alien if the result of that sale, alienation, or transfer in itself or in date thereof, when satisfied that the same is to be made in accordance with connection with another previous sale shall be the reduction to less than law, and the purpose of such issue be approved by the Commission. (f) To sixty per centum of the capital stock belonging to Philippine citizens. Such capitalize any franchise in excess of the amount, inclusive of any tax or sale, alienation or transfer shall be void and of no effect and shall be annual charge, actually paid to the Government of the Philippines or any sufficient cause for ordering the cancellation of the certificate. political subdivision thereof as the consideration of said franchise; capitalize any contract for consolidation, merger or lease, or issue any bonds or other 6 Y TRANSIT V. NLRC evidence of indebtedness against or as a lien upon any contract for 226 SCRA 508 consolidation, merger, or lease: Provided, however, that the provisions of this section shall not prevent the issuance of stock, bonds, or other evidence FACTS: of indebtedness subject to the approval of the Commission by any lawfully Yujuico Transit mortgaged its 10 buses to DBP to be able to secure a loan merged or consolidated public services not in contravention of the provisions from the latter. With the authorization of the board, the company president of this section. entered into a dacion en pago to settle its obligations. After the buses were relieved of the mortgage, the same were sold to Y Transit. In the meantime, (g) To sell, alienate, mortgage, encumber or lease its property, franchises, Yujuico Transit was held liable in a labor case and levy was made to the certificates, privileges, or rights or any part thereof; or merge or consolidate buses. Y Transit opposed the same averring that it owned the buses its property, franchises privileges or rights, or any part thereof, with those of already. However, private respondents argue that the transfer was void as MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES

11 BOT approval was not sought. The private respondents were sustained. In • Authorization to operate a public service for which a franchise is the end, levy was reinstated over the buses. required by law HELD: REQUISITES FOR GRANT OF CERTIFICATE The law really requires the approval of the Public Service Commission in 1. Applicant must be a citizen of the Philippines, or a corporation, order that a franchise, or any privilege pertaining thereto, may be sold or association or partnership constituted and organized under the laws leased without infringing the certificate issued to the grantee. The reason is of the Philippines, 60% at least of the stock or paid-up capital is obvious. Since a franchise is personal in nature any transfer or lease thereof owned by Filipinos should be notified to the Public Service Commission so that the latter may 2. The applicant must prove that the operation of the public service take proper safeguards to protect the interest of the public. In fact, the law proposed and the authorization to do business will promote the requires that, before approval is granted, there should be a public hearing public interests in a proper and suitable manner with notice to all interested parties in order that the commission may 3. The applicant is financially capable of undertaking the proposed determine if there are good and reasonable grounds justifying the transfer or service and meeting the responsibilities incident to its operations lease of the property covered by the franchise, or if the sale or lease is ( otherwise he will not be allowed to operate since it is something he detrimental to public interest. Such being the reason and philosophy behind wouldnʼt be able to sustain) this requirement, it follows that if the property covered by the franchise is transferred, or leased to another without obtaining the requisite approval, the PRIOR OPERATOR RULE transfer is not binding against Public Service Commission and in • The first licensee will be protected in his investment and will not be contemplation of law, the grantee continues to be responsible under the subjected to a ruinous competition franchise in relation to the Commission and to the public.

• It is not the lawʼs policy for the PSC to issue a CPC to a second operator to cover the same field and in competition with a first There being no prior BOT approval in the transfer of property from Yujuico operator who is rendering sufficient, adequate, and satisfactory Transit Co., Inc. to Jesus Yujuico, it only follows that as far as the BOT and service, and who in all things and respects is complying with the third parties are concerned, Yujuico Transit Co., Inc. still owned the rules and regulations of the Commission properties. and Yujuico, and later, "Y" Transit Co., Inc. only held the same as • Criticized because it allegedly fosters monopolies: no, since this is agents of the former. made in pursuant to the power of the State to regulate CERTIFICATE OF PUBLIC CONVENIENCE 7 RAYMUNDO V. LUNETA MOTOR • Authorization to operate a public service issued by the Public 58 PHIL 389 Service Commission, for which no franchise is required by law • This is merely a license or privilege and this can be forfeited when FACTS: the grantee fails to comply with his commitments Guzco Transit purchased from Luneta Motors buses for its operations, for • May represent property rights to the extent that if the rights which which it promised to pay through promissory notes with chattel mortgage. any public utility is exercising pursuant to lawful orders of the Public Upon failure to pay, action was filed Guzco and attaching therein the buses Utility Commissioner has been invaded by another public utility, in in question. The notice of garnishment was served as well to the PSC. In appropriate cases actions may be maintained by the complainant the meantime, the certificates of public convenience and necessity were sold public utility by Guzco to Raymundo but still, the same were subject to attachment. CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY HELD:

MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 12 The Public Service Law, Act No. 3108, as amended, authorizes certificates In the instant case, the evidence is conclusive that the Batangas of public convenience to be secured by public service operators from the Transportation Company operated its line five years before Orlanes ever Public Service Commission. (Sec. 15 [i].) A certificate of public convenience turned a wheel, yet the legal effect of the decision of the Public Service granted to the owner or operator of public service motor vehicles, it has been Commission is to give an irregular operator, who was the last in the field, a held, grants a right in the nature of a limited franchise. preferential right over a regular operator, who was the first in the field. That is not the law, and there is no legal principle upon which it can be sustained. The rule tested the liability of property to execution by determining if the interest of the judgment debtor in the case can be sold or conveyed to So long as the first licensee keeps and performs the terms and conditions of another in any way. Now the Public Service Law permits the Public Service its license and complies with the reasonable rules and regulations of the Commission to approved the sale, alienation, mortgaging, encumbering, or Commission and meets the reasonable demands of the public, it should leasing of property, franchises, privileges, or rights or any part thereof (sec. have more or less of a vested and preferential right over a person who seeks 16 [h]), and in practice the purchase and sale of certificates of public to acquire another and a later license over the same route. Otherwise, the convenience has been permitted by the Public Service Commission. If the first license would not have protection on his investment, and would be holder of a certificate of public convenience can sell it voluntarily, there is no subject to ruinous competition and thus defeat the very purpose and intent valid reason why the same certificate cannot be taken and sold involuntarily for which the Public Service Commission was created.

pursuant to process. It does not appear that the public has ever made any complaint the Certificates of public convenience secured by public service operators are Batangas Transportation Company, yet on its own volition and to meet the liable to execution, and the Public Service Commission is authorized to increase of its business, it has applied to the Public Service Commission for approve the transfer of the certificates of public convenience to the execution authority to increase the number of daily trips to nineteen, thus showing a creditor. As a consequence, the decision brought on review will be affirmed, spirit that ought to be commended. with costs against the appellant. 9 SAN PABLO V. PANTRANCO 8 BATANGAS TRANSPORTATION V. ORLANES 153 SCRA 199 52 PHIL 455 FACTS: FACTS: PANTRANCO is a domestic corporation engaged in the land transportation Batangas Transportation has been for five years operating its bus line in the business with PUB service for passengers and freight and various province of Batangas as well as in the province of Tayabas, prior to Orlanes. certificates for public conveniences CPC to operate passenger buses from Orlanes filed an application for the issuance of the certificate of public Metro Manila to Bicol Region and Eastern Samar. On March 27,1980 convenience, and requested for the operation in a fixed schedule. The PANTRANCO through its counsel wrote to Maritime Industry Authority company filed an application to this petition by Orlanes, averring therein that (MARINA) requesting authority to lease/purchase a vessel named M/V it had been operating for five years in the Province of Batangas, and likewise "Black Double" "to be used for its project to operate a ferryboat service from alleged that its operations is sufficient to cater to public convenience. Matnog, Sorsogon and Allen, Samar that will provide service to company Nevertheless, the Commission issued the permit and certificate to Orlanes buses and freight trucks that have to cross San Bernardo Strait. In a reply of notwithstanding the existence of a prior operator. April 29,1981 PANTRANCO was informed by MARINA that it cannot give

due course to the request on the basis that the run was already adequately HELD: serviced and that additional tonnage cannot be accomodated. This notwithstanding, the company still pushed through with the purchase of the MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 13 vessel and wrote a letter to the BOT applying to approve its operations. Not Bernardino Strait which separates Matnog and Allen leads to the ocean it being able to wait however for BOT to reply, it started operations and was must at times be choppy and rough so that it will not be safe to navigate the reprimanded to stop until the scheduled hearing. San Pablo and Cardinal same by small boats or barges but only by such steamboats or vessels as Transportation entered their respective opposition, alleging that they have the MV "Black Double. adequately serviced PANTRANCO with the ferry off their buses. However, in the end, the Commission ruled that the operation o the ferry boat was part Considering the environmental circumstances of the case, the conveyance of the CPC of PANTRANCO. of passengers, trucks and cargo from Matnog to Allen is certainly not a ferry boat service but a coastwise or interisland shipping service. Under no HELD: circumstance can the sea between Matnog and Allen be considered a We are not unmindful of the reasons adduced by the Commission in continuation of the highway. While a ferry boat service has been considered considering the motorboat service between Calapan and Batangas as ferry; as a continuation of the highway when crossing rivers or even lakes, which but from our consideration of the law as it stands, particularly are small body of waters - separating the land, however, when as in this Commonwealth Act No. 146, known as the Public Service Act and the

case the two terminals, Matnog and Allen are separated by an open sea it provisions of the Revised Administrative Code regarding municipal ferries can not be considered as a continuation of the highway. Respondent and those regarding the jurisdiction of the Bureau of Customs over PANTRANCO should secure a separate CPC for the operation of an documentation, registration, licensing, inspection, etc. of steamboats, interisland or coastwise shipping service in accordance with the provisions of motorboats or motor vessels, and the definition of ferry as above quoted we law. Its CPC as a bus transportation cannot be merely amended to include have the impression and we are inclined to believe that the Legislature this water service under the guise that it is a mere private ferry service. intended ferry to mean the service either by barges or rafts, even by motor or steam vessels, between the banks of a river or stream to continue the The contention of private respondent PANTRANCO that its ferry service highway which is interrupted by the body of water, or in some cases to operation is as a private carrier, not as a common carrier for its exclusive connect two points on opposite shores of an arm of the sea such as bay or use in the ferrying of its passenger buses and cargo trucks is absurd. lake which does not involve too great a distance or too long a time to PANTRANCO does not deny that it charges its passengers separately from navigate But where the line or service involves crossing the open sea like the charges for the bus trips and issues separate tickets whenever they the body of water between the province of Batangas and the island of board the MV "Black Double" that crosses Matnog to Allen, PANTRANCO Mindoro which the oppositors describe thus "the intervening waters between cannot pretend that in issuing tickets to its passengers it did so as a private Calapan and Batangas are wide and dangerous with big waves where small carrier and not as a common carrier. The Court does not see any reason boat barge, or raft are not adapted to the service," then it is more reasonable why inspite of its amended franchise to operate a private ferry boat service it to regard said line or service as more properly belonging to interisland or cannot accept walk-in passengers just for the purpose of crossing the sea coastwise trade. between Matnog and Allen. Indeed evidence to this effect has been submitted. What is even more difficult to comprehend is that while in one This Court takes judicial notice of the fact, and as shown by an examination breath respondent PANTRANCO claims that it is a private carrier insofar as of the map of the Philippines, that Matnog which is on the southern tip of the the ferryboat service is concerned, in another breath it states that it does not island of Luzon and within the province of Sorsogon and Allen which is on thereby abdicate from its obligation as a common carrier to observe the northeastern tip of the island of Samar, is traversed by the San extraordinary diligence and vigilance in the transportation of its passengers Bernardino Strait which leads towards the Pacific Ocean. The parties admit

and goods. Nevertheless, considering that the authority granted to that the distance between Matnog and Allen is about 23 kilometers which PANTRANCO is to operate a private ferry, it can still assert that it cannot be maybe negotiated by motorboat or vessel in about 1-1/2 hours as claimed by held to account as a common carrier towards its passengers and cargo. respondent PANTRANCO to 2 hours according to petitioners. As the San MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 14 Such an anomalous situation that will jeopardize the safety and interests of and in existent under Article 1409 of the Civil Code. It is a fundamental its passengers and the cargo owners cannot be allowed. principle that the court will not aid either party to enforce an illegal contract, but will leave both where it finds then. Upon this premise it would be error to 10 PAL V. CAB accord the parties relief from their predicament Supra PRIVATE NATURE; RIGHTS AND OBLIGATIONS OF PARTIES INTER SE Caveat of the decision— this decision brings to a blur the question on when it ARISING FROM TRANSACTIONS RELATING TO TRANSPORTATION is needed to secure a franchise from Congress. Before, when it is a CPCN, a legislative franchise is a mandatory requirement. However, with this case, ABSENT A TRANSPORTATION CONTRACT it imports that no franchise is anymore needed. 12

LARA V. VALENCIA 11 TEJA V. IAC 104 PHIL 65 148 SCRA 347 FACTS: FACTS: Lara was an inspector of the Bureau of Forestry. The defendant is engaged Nale purchased from Teja Marketing a motorbike with a side car. He in the business of exporting logs from his lumber concession in Cotabato. accordingly gave a downpayment and promised to pay the balance in 60 Lara went to said concession upon instructions of his chief to classify the days. However, he failed to pay the balance and asked for an extension of logs of defendant which were about to be loaded on a ship anchored in the one year. Still, he was not able to pay. An action for sum of money and port of Parang. The work Lara of lasted for six days during which he damages was filed and though Nale didn't deny that he owed Teja Marketing contracted malaria fever. On a later date, Lara who then in a hurry to return money, he alleged that the latter failed to register the chattel mortgage and to Davao asked defendant if he could take him in his pick-up as there was motor vehicle yearly with the LTC. The trial courts sustained Teja Marketing then no other means of transportation, to which defendant agreed, and in and dismissed the counterclaim, ordering Nale top pay the balance of the that same morning the pick-up left Parang bound for Davao taking along six purchase price. However, this was reversed by the Court of Appeals on the passengers, including Lara. ground that there was a illegal transaction involved. The transaction that transpired was that of a kabit system, prohibited by law. The pick-up has a front seat where the driver and two passengers can be accommodated and the back has a steel flooring enclosed with a steel HELD: walling of 16 to 17 inches tall on the sides and with a 19 inches tall walling at Unquestionably, the parties herein operated under an arrangement, the back. In the middle Lara sat on a bag. Before leaving Parang, defendant commonly known as the "kabit system" whereby a person who has been invited Lara to sit with him on the front seat but Lara declined. It was their granted a certificate of public convenience allows another person who owns understanding that upon reaching barrio Samoay, Cotabato, the passengers motor vehicles to operate under such franchise for a fee. A certificate of were to alight and take a bus bound for Davao, but when they arrived at that

public convenience is a special privilege conferred by the government. place, only one alighted and the other passengers requested defendant to Abuse of this privilege by the grantees thereof cannot be countenanced. The allow them to ride with him up to Davao because there was then no available "kabit system" has been Identified as one of the root causes of the bus that they could take in going to that place. Defendant again prevalence of graft and corruption in the government transportation offices. accommodated the passengers. Although not outrightly penalized as a criminal offense, the kabit system is When they continued their trip, the sitting arrangement of the passengers invariably recognized as being contrary to public policy and, therefore, void remained the same, Lara being seated on a bag in the middle with his arms MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 15 on a suitcase and his head cove red by a jacket. Upon reaching Km. 96, administrative entity of the Executive Branch of the government in the barrio Catidtuan, Lara accidentally fell from the pick-up and as a result he promotion, development and regulation of dependable and coordinated suffered serious injuries. Valencia stopped the pick-up to see what networks of transportation and communication system, as well as in the fast, happened to Lara. He sought the help of the residents of that place and sale, efficient and reliable postal, transportation and communication applied water to Lara but to no avail. They brought Lara to the nearest place services. where they could find a doctor and not having found any they took him to St. Joseph's Clinic of Kidapawan. But when Lara arrived he was already dead. To accomplish such mandate, the Ministry shall have the following From there they proceeded to Davao City and immediately notified the local objectives:

authorities. 1. Promote the development of dependable and coordinated networks of transportation and communication systems; HELD: 2. Guide government and private investment in the development of the It therefore appears that the deceased, as well his companions who rode in country's inter- model transportation and communication systems in a the pick-up of defendant, were merely accommodation passengers who paid most practical, expeditious, and orderly fashion for maximum safety, nothing for the service and so they can be considered as invited guests service, and cost effectiveness; within the meaning of the law. As accommodation passengers or invited 3. Impose appropriate measure so that technical, economic and other guests, defendant as owner and driver of the pick-up owes to them merely condition for the continuing economic viability of the transportation and the duty to exercise reasonable care so that they may be transported safely communication entities are not jeopardized and do not encourage to their destination. Thus, "The rule is established by the weight of authority inefficiency and distortion of traffic patronage; that the owner or operator of an automobile owes the duty to an invited guest 4. Develop an integrated plan for a nationwide transmission system in to exercise reasonable care in its operation, and not unreasonably to expose accordance with the national and international telecommunication him to danger and injury by increasing the hazard of travel. This rule, as service requirement including, among others,radio and television frequently stated by the courts, is that an owner of an automobile owes a broadcast relaying, leased channel services and data transmission; guest the duty to exercise ordinary or reasonable care to avoid injuring him. 5. Guide government and private investment in the establishment, Since one riding in an automobile is no less a guest because he asked for operation and maintenance of an international switching system for the privilege of doing so, the same obligation of care is imposed upon the incoming and outgoing telecommunication services; driver as in the case of one expressly invited to ride" (5 Am. Jur., 626-627). 6. Encourage the development of a domestic telecommunication industry Defendant, therefore, is only required to observe ordinary care, and is not in in coordination with the concern entities particularly, the manufacture of duty bound to exercise extraordinary diligence as required of a common communications/ electronics equipment and components to complement carrier by our law (Articles 1755 and 1756, new Civil Code). and support as much as possible, the expansion, development, operation and maintenance of the nationwide telecommunications ARISING FROM A TRANSPORTATION CONTRACT network;

7. Provide for a safe, reliable and efficient postal system for the country. AIR REGULATION OF THE TRANSPORTATION INDUSTRY AIR TRANSPORTATION OFFICE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS EO 125. SECTION 12. Bureau of Air Transportation. The Bureau of Air EO 125. SECTION 4. Mandate. The Ministry shall be the primary policy, Transportation, as reorganized herein, shall have the function of developing, planning, programming, coordinating, implementing, regulating, and MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 16 formulating and recommending plans, policies, program, projects, standards, SECTION 10. Powers and duties of the Board. specification and guidelines related to Air Transportation including air space (A) Except as otherwise provided herein, the Board shall have the power to utilization, air traffic control and aeronautics communication and information regulate the economic aspect of air transportation, and shall have the services, aircraft and air navigational facilities, services, maintenance and general supervision and regulation of, the jurisdiction and control over, air operations. For such purposes, it shall, with the approval of the Minister: carriers, general sales agents, cargo sales agents, and airfreight forwarders 1. Establish and prescribe rules and regulations for the inspection and as well as their property, property rights, equipment, facilities, and franchise, registration of aircraft's; in so far as may be necessary for the purpose of carrying out the provisions

2. Establish and prescribe rules and regulations for the issuance of of this Act. licenses to qualified airmen; 3. Establish and prescribe rules and regulations for the enforcement of xxx laws governing air transportation, including the penalties for violations thereof, and for the deputization of appropriate law enforcement (C) The Board shall have the following specific powers and duties: agencies in pursuant thereof; (1) In accordance with the provisions of Chapter 4 of this Act, to issue, deny, 4. Determine, fix and/or prescribe charges and/or rates pertinent to the amend, revise, alter, modify, cancel, suspend, or revoke, in whole or in part, operation of public air utility facilities and services except in cases where upon petition or complaint, or upon its own initiative, any temporary charges or rates are established by international bodies or associations operating permit or Certificate of Public Convenience and Necessity; of which the Philippines is a participating member or by bodies or Provided, however, That in the case of foreign air carriers, the permit shall associations reorganized by the Philippine Government as the proper be issued with the approval of the President of the Republic of the arbiter of such charges or rates; Philippines. 5. Administer and operate the Civil Aeronautics Training Center; 6. Perform such other function as may be provided by law. (2) To fix and determine reasonable individual, joint or special rates, charges or fares, which an air carrier may demand, collect or receive for any service RA 776, Section 25. Organization of the Civil Aeronautics Administration. in connection with air commerce. The Board may adopt any original, The Civil Aeronautics Administration shall be under the Administrative amended, or new individual, joint or special rates, charges or fares proposed supervision and control of the Department of Commerce and Industry. The by an air carrier if the proposed individual, joint, or special rates, charges for Civil Aeronautics Administration shall have one Chief and one Deputy Chief fares are not unduly preferential or unduly discriminatory or unreasonable. who shall be known as "Administrator" and "Deputy Administrator", The burden of proof to show that the proposed individual, joint or special respectively. rates, charges or fares are just and reasonable shall be upon the air carrier proposing the same. CIVIL AERONAUTICS BOARD

In fixing rates, charges, fares under the provisions of this Act, the Board SECTION 5. Composition of the Board. - The Civil Aeronautics Board shall shall take into consideration, among other factors: be composed of the Secretary of Transportation and Communications or his (a) The effect of such rates upon the movement of traffic; designated representative as Chairman, the Assistant Secretary for Air (b) The need in the public interest of adequate and efficient Transportation of the Department of Transportation and Communications as transportation of persons and property by air carriers at the lowest Vice-Chairman, the Commanding General of the Philippine Air Force* and cost consistent with the furnishing of such service. two (2) members to be appointed by the President of the Philippines. They (c) Such standards respecting the character and quality of service shall hold office at the pleasure of the President. to be rendered by air carriers as may be prescribed by or pursuant to law; MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 17 (d) The inherent advantages of transportation by aircraft; and money, and the length of times such accounts, records and memoranda (e) The need of each air carrier for revenues sufficient to enable shall be preserved: Provided, that any air carrier may keep additional such air carrier, under honest, economical, and efficient accounts, records, or memoranda if they do not impair the integrity of the management, to provide adequate and efficient air carrier service. accounts, records, or memoranda prescribed or approved by the Board and do not constitute an undue financial burden on such air carrier. (3) To authorize any type of charters whether domestic or international and

special air services or flight under such terms and conditions as in its (8) To require each officer and director of any air carrier to transmit a report judgment public interest requires. Notwithstanding the existence of bilateral describing the shares of stock with any persons engaged in any phase or air agreement, the CAB is authorized to grant any foreign airline increase in other interest held by such air carrier of aeronautics, and the holding of the frequencies and/or capacities on international routes when in its judgment stock in and control of, other persons engaged in any phase of aeronautics. the national interest requires it, provided that the utilization of the increase frequencies and capacities is not more than thirty days. All grants of SECTION 11. Nature, terms and conditions. - Certificate of Public frequencies and/or capacities shall be subject to the approval of the Convenience and Necessity is a permit issued by the Board authorizing a President. person to engage in air commerce and/or transportation, foreign and/or domestic. No person shall engage in air commerce unless there is in force a (4) To approve or disapprove increase and/or decrease of capital, lease, permit issued by the Board. purchase, sales of aircraft of air carrier engaged in air commerce; consolidation, merger, purchase, lease and acquisition and control of No general sales agent, cargo sales agent or airfreight forwarder shall operating contracts between domestic foreign air carriers, or between engage in any of the activities mentioned in Section 3 paragraphs (jj), (kk) domestic air carriers or any person engaged in any phase of aeronautics. and (ll) respectively, unless there is in force a permit or any other form of authorization issued by the Board. (5) To inquire into the management of the business of any air carrier and, to the extent reasonably necessary for such inquiry, to obtain from such carrier, Any permit may be altered, amended, modified, suspended, canceled or and from any person controlling, or controlled by, or under common control revoked by the Board in whole or in part, upon complaints or petition or upon with, such air carrier, full and complete reports and othe informations. Such the Boardʼs initiative as hereinafter provided, whenever the Board finds such reports shall be under oath whenever the Board so requires. action to be in the public interest. (6) To require annual, monthly, periodical, and special reports from any air There shall be attached to the exercise of the privileges granted by the carrier, to prescribe the manner and form in which such reports shall be permit, or amendment thereto, such reasonable terms, conditions, or

made, and to require from any air carrier specific answers to all questions limitations as, in the judgment of the Board, the public interest may require. upon which the Board may deem information to be necessary. Such reports No permit shall confer any proprietary, property, or exclusive right in the use shall be under oath whenever the Board so requires. The Board may also of any air space, civil airway, landing area of government air navigation require any air carrier to file with it any contract, agreement, understanding facility. or arrangement, or a true copy thereof, between such air carrier and any other carrier or person, in relation to any traffic affected by the provisions of The permit shall, among others specify the terminal and intermediate points, this Act. if any, between which the air carrier is authorized to operate the service to be rendered, the time of arrival and departure at each point, and the (7) To prescribe the forms of any and all accounts, records, and memoranda frequency of flights. Provided, that no change in routes, rates, schedules or of the movement of traffic, as well as of the receipts and expenditures of frequency nor supplemental or additional flights to those covered by an air MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 18 commerce permit or franchise shall be affected without prior approval of the explicitly authorizes CAB to issue a "temporary operating permit," and Civil Aeronautics Board. In so far as the operation is to take place within the nothing contained, either in said section, or in Chapter IV of Republic Act No. Philippines, the permit shall designate the terminal and intermediate points 776, negates the power to issue said "permit", before the completion of the only insofar as the Board shall deem practicable, and otherwise shall applicant's evidence and that of the oppositor thereto on the main petition. designate only the general route or routes to be followed. Indeed, the CAB's authority to grant a temporary permit "upon its own

initiative," strongly suggests the power to exercise said authority, even No carrier shall abandon any route, or part thereof for which a permit has before the presentation of said evidence has begun. been issued, unless upon findings by the Civil Aeronautics Board that such Moreover, we perceive no cogent reason to depart, in connection with the an abandonment is uneconomical and is in the public interest. commercial air transport service, from the policy of our public service law, which sanctions the issuance of temporary or provisional permits or SECTION 12. Citizenship requirement. - Except as otherwise provided, in certificates of public convenience and necessity, before the submission of a the Constitution and existing treaty or treaties, permit authorizing a person to case for decision on the merits. The overriding considerations in both engage in domestic air commerce and/or transportation shall be issued only instances are the same, namely, that the service be required by public to citizens of the Philippines. convenience and necessity, and, that the applicant is fit, as well as willing and able to render such service properly, in conformity with law and the CIVIL AERONAUTICS AUTHORITY (RA9497) pertinent rules, regulations and requirements. 12 PAL V. CAB 13 PAL V. CAB 23 SCRA 992 270 SCRA 538 FACTS: FACTS: Fairways petitioned the CAB for authority to operate its scheduled and non- PAL sought the annulment of the issuance of a temporary operating permit scheduled domestic flights. Upon hearing, it was granted provisional to Grand Air by the CAB. Grand Air has filed a petition for the issuance of a authority to which PAL opposed. Fairways was sustained. Certificate of Public Convenience and Necessity and upon compliance prayed for the issuance of the temporary permit. Mainly it alleges that Grand HELD: Air shouldnʼt be granted any temporary operating permit absent any

The first ground is devoid of merit. Section 10-C(1) of Republic Act No. 776, legislative franchise to operate. PAL also alleged that the CBA had illegally reading: exercised jurisdiction over the matter due to the same reason. (C) The Board shall have the following specific powers and duties: HELD: (1) In accordance with the provisions of Chapter IV of this Act, to issue, There The Civil Aeronautics Board has jurisdiction over GrandAir's deny, amend, revise, alter, modify, cancel suspend or revoke, in whole or in Application for a Temporary Operating Permit. This rule has been part, upon petitioner complaint, or upon its own initiative, any temporary established in the case of Philippine Air Lines Inc., vs. Civil Aeronautics operating permit or Certificate of Public Convenience and Necessity; Board, promulgated on June 13, 1968.[12] The Board is expressly Provided, however, That in the case of foreign air carriers, the permit shall authorized by Republic Act 776 to issue a temporary operating permit or be issued with the approval of the President of the Republic of the Certificate of Public Convenience and Necessity, and nothing contained in Philippines.... the said law negates the power to issue said permit before the completion of the applicant's evidence and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary permit "upon its MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 19 own initiative" strongly suggests the power to exercise said authority, even Given the foregoing postulates, we find that the Civil Aeronautics Board has before the presentation of said evidence has begun. Assuming arguendo the authority to issue a Certificate of Public Convenience and Necessity, or that a legislative franchise is prerequisite to the issuance of a permit, the

Temporary Operating Permit to a domestic air transport operator, who, absence of the same does not affect the jurisdiction of the Board to hear the though not possessing a legislative franchise, meets all the other application, but tolls only upon the ultimate issuance of the requested permit. requirements prescribed by the law. Such requirements were enumerated in Section 21 of R.A. 776. The power to authorize and control the operation of a public utility is admittedly a prerogative of the legislature, since Congress is that branch of There is nothing in the law nor in the Constitution, which indicates that a government vested with plenary powers of legislation. legislative franchise is an indispensable requirement for an entity to operate as a domestic air transport operator. Although Section 11 of Article XII Congress has granted certain administrative agencies the power to grant recognizes Congress' control over any franchise, certificate or authority to licenses for, or to authorize the operation of certain public utilities. With the operate a public utility, it does not mean Congress has exclusive authority to growing complexity of modern life, the multiplication of the subjects of issue the same. Franchises issued by Congress are not required before governmental regulation, and the increased difficulty of administering the each and every public utility may operate. In many instances, Congress has laws, there is a constantly growing tendency towards the delegation of seen it fit to delegate this function to government agencies, specialized greater powers by the legislature, and towards the approval of the practice particularly in their respective areas of public service. by the courts. It is generally recognized that a franchise may be derived indirectly from the state through a duly designated agency, and to this LAND extent, the power to grant franchises has frequently been delegated, even to agencies other than those of a legislative nature. In pursuance of this, it has LAND TRANSPORTATION OFFICE been held that privileges conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had SECTION 13. Bureau of Land Transportation. The Bureau of Land been made by an act of the Legislature. Transportation is hereby created and shall have the functions of developing, formulating and recommending plans, programs, policies, standards, The trend of modern legislation is to vest the Public Service Commissioner specifications and guidelines pertaining to land transportation. For such with the power to regulate and control the operation of public services under

purposes, it shall, with the approval of the Minister: reasonable rules and regulations, and as a general rule, courts will not 1. Establish a prescribe rules and regulations for routes, zones and/or interfere with the exercise of that discretion when it is just and reasonable areas of particular operators of public land services; and founded upon a legal right. 2. Establish and prescribe rules and regulations for the issuance of certificates of public convenience for the operation of public and land It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a transportation utilities and services such as motor vehicles, trimobiles, reading of the pertinent issuances governing the Philippine Ports Authority, and railroad lines; proves that the PPA is empowered to undertake by itself the operation and 3. Establish and prescribe rules and regulation for the inspection and management of the Manila International Container Terminal, or to authorize registration of public and land transportation facilities such as motor its operation and management by another by contract or other means, at its vehicles, trimobiles, and railroad lines; option. The latter power having been delegated to the PPA, a franchise from 4. Establish and prescribe rules and regulations for the issuance of Congress to authorize an entity other than the PPA to operate and manage licenses to qualified motor vehicle drivers, trimobile drivers, motor the MICP becomes unnecessary. vehicle conductors, train engineers and train conductors; MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 20 5. Establish and prescribe the corresponding rules and regulation for the The Board shall be supported by the Technical Evaluation Division, Legal enforcement of laws governing land transportation, including the Division, Management Information Division, Administrative Division and

penalties for violation thereof, and for the deputation of appropriate law Finance Division. enforcement agencies in pursuance thereof; 6. Determine, fix and/or prescribe charges and/or rates pertinent to the Sec. 5. Powers and Functions of the Land Transportation Franchising and operation of public and land utility facilities and services except in cases Regulatory Board. The Board shall have the following powers and functions: where charges or rates are established by international bodies or a. To prescribe and regulate routes of service, economically viable association of which the Philippines is a participating member or by capacities and zones or areas of operation of public land transportation bodies or association recognized by the Philippine Government as the services provided by motorized vehicles in accordance with the public land proper arbiter of such charges or rates; transportation development plans and programs approved by the 7. Establish and prescribe the rules, regulations, procedures and Department of Transportation and Communications; standards for the accreditation of driving schools; b. To issue, amend, revise, suspend or cancel Certificates of Public 8. Performs such other functions as may be provided by law. Convenience or permits authorizing the operation of public land transportation services provided by motorized vehicles, and to prescribe the LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD appropriate terms and conditions therefor; (LTFRB) c. To determine, prescribe and approve and periodically review and adjust, reasonable fares, rates and other related charges, relative to the operation of EO 202. Sec. 1. Creation of the Land Transportation Franchising and public land transportation services provided by motorized vehicles; Regulatory Board. There is hereby created in the Department of d. To issue preliminary or permanent injunction, whether prohibitory or Transportation and Communications, the Land Transportation Franchising mandatory, in all cases in which it has jurisdiction, and in which cases the and Regulatory Board hereinafter referred to as the "Board". pertinent provisions of the Rules of Court shall apply; e. To punish for contempt of the Board, both direct and indirect, in Sec. 2. Composition of the Board. The Board shall be composed of a accordance with the pertinent provisions of, and the penalties prescribed by, Chairman and two (2) members with the same rank, salary and privileges of the Rules of Court; an Assistant Secretary, all of whom shall be appointed by the President of f. To issue subpoena and subpoena duces tecum and summon witnesses to

the Philippines upon recommendation of the Secretary of Transportation and appear in any proceedings of the Board, to administer oaths and Communications. One (1) member of the Board shall be a member of the affirmations; Bar and shall have engaged in the practice of law in the Philippines for at g. To conduct investigations and hearings of complaints for violation of the least five (5) years, another a holder of a degree in civil engineering, and the public service laws on land transportation and of the Board's rules and other a holder of a degree in economics, finance or management both with regulations, orders, decisions and/or rulings and to impose fines and/or the same number of years of experience and practice. penalties for such violations; h. To review motu proprio the decisions/actions of the Regional Franchising Sec. 3. Executive Director and Support Staff of the Board. The Board shall and Regulatory Office herein created; have an Executive Director who shall also appointed by the President of the i. To promulgate rules and regulations governing proceedings before the Philippines upon the recommendation of the Secretary of Transportation and Board and the Regional Franchising and Regulatory Office: Provided, That Communications. He shall have the rank, salary and privileges of a except with respect to paragraphs d, e, f and g hereof, the rules of procedure Department Service Chief. He shall assist the Board in the performance of and evidence prevailing in the courts of laws should not be controlling and it its powers and functions. is the spirit and intention of said rules that the Board and the Regional Franchising and Regulatory Offices shall use every and all reasonable MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 21 means to ascertain facts in its case speedily and objectively and without applications/petitions for routes extending their respective territorial

regard to technicalities of law and procedures, all in the interest of due jurisdictions shall be heard and decided by the Board. process; j. To fix, impose and collect, and periodically review and adjust, reasonable 14 KMU LABOR CENTER V. GARCIA fees and other related charges for services rendered; 239 SCRA 386 k. To formulate, promulgate, administer, implement and enforce rules and regulations on land transportation public utilities, standards of measurements FACTS: and/or design, and rules and regulations requiring operators of any public Certain orders and circulars of the DOTC and LFTRB are being assailed for land transportation service to equip, install and provide in their utilities and in its unconstitutionality and illegality. These pertain to, but not limited to the their stations such devices, equipment facilities and operating procedures following-- (a) authorize provincial bus and jeepney operators to increase or and techniques as may promote safety, protection, comfort and convenience decrease the prescribed transportation fares without application therefor with to persons and property in their charges as well as the safety of persons and the LTFRB and without hearing and approval thereof by said agency in property within their areas of operations; violation of Sec. 16(c) of Commonwealth Act No. 146, as amended, l. To coordinate and cooperate with other government agencies and entities otherwise known as the Public Service Act, and in derogation of LTFRB's concerned with any aspect involving public land transportation services with duty to fix and determine just and reasonable fares by delegating that the end in view of effecting continuing improvement of such services; and function to bus operators, and (b) establish a presumption of public need in m. To perform such other functions and duties as may be provided by law, or favor of applicants for certificates of public convenience (CPC) and place on as may be necessary, or proper or incidental to the purposes and objectives the oppositor the burden of proving that there is no need for the proposed of this Executive Order. service, in patent violation not only of Sec. 16(c) of CA 146, as amended, but also of Sec. 20(a) of the same Act mandating that fares should be "just and Sec. 6. Decision of the Board; Appeals therefrom and/or Review thereof. reasonable." It is, likewise, violative of the Rules of Court which places upon The Board, in the exercise of its powers and functions, shall sit and render each party the burden to prove his own affirmative allegations. 3 The its decisions en banc. Every such decision, order, or resolution of the Board offending provisions contained in the questioned issuances pointed out by

must bear the concurrence and signature of at least two (2) members petitioner, have resulted in the introduction into our highways and thereof. thoroughfares thousands of old and smoke-belching buses, many of which are right-hand driven, and have exposed our consumers to the burden of The decision, order or resolution of the Board shall be appealable to the spiraling costs of public transportation without hearing and due process. Secretary within thirty (30) days from receipt of the decision: Provided, That the Secretary may motu proprio review any decision or action of the Board HELD: before the same becomes final. On the fare-ranging scheme… Sec. 7. Creation of Regional Franchising and Regulatory Offices. There shall Legislature delegated to the defunct Public Service Commission the power of be a Regional Franchising and Regulatory Office in each of the fixing the rates of public services. Respondent LTFRB, the existing administrative regions of the country which shall be headed by a Board regulatory body today, is likewise vested with the same under Executive Regional Manager having the rank, salary and privileges of a Department Order No. 202 dated June 19, 1987. Section 5(c) of the said executive order Assistant Regional Director. The Regional Franchising and Regulatory authorizes LTFRB "to determine, prescribe, approve and periodically review Offices shall hear and decide uncontested applications/petitions for routes, and adjust, reasonable fares, rates and other related charges, relative to the within their respective administrative regions: Provided, That operation of public land transportation services provided by motorized vehicles." MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES

22 By its terms, public convenience or necessity generally means something In the case at bench, the authority given by the LTFRB to the provincial bus fitting or suited to the public need. 16 As one of the basic requirements for the operators to set a fare range over and above the authorized existing fare, is grant of a CPC, public convenience and necessity exists when the proposed illegal and invalid as it is tantamount to an undue delegation of legislative facility or service meets a reasonable want of the public and supply a need authority. Potestas delegata non delegari potest. What has been delegated which the existing facilities do not adequately supply. The existence or cannot be delegated. This doctrine is based on the ethical principle that such non-existence of public convenience and necessity is therefore a question of a delegated power constitutes not only a right but a duty to be performed by fact that must be established by evidence, real and/or testimonial; empirical the delegate through the instrumentality of his own judgment and not through data; statistics and such other means necessary, in a public hearing the intervening mind of another. A further delegation of such power would conducted for that purpose. The object and purpose of such procedure, indeed constitute a negation of the duty in violation of the trust reposed in among other things, is to look out for, and protect, the interests of both the the delegate mandated to discharge it directly. The policy of allowing the public and the existing transport operators. provincial bus operators to change and increase their fares at will would result not only to a chaotic situation but to an anarchic state of affairs. This Verily, the power of a regulatory body to issue a CPC is founded on the would leave the riding public at the mercy of transport operators who may condition that after full-dress hearing and investigation, it shall find, as a fact, increase fares every hour, every day, every month or every year, whenever it that the proposed operation is for the convenience of the public. pleases them or whenever they deem it "necessary" to do so. WATER On the presumption of public need… SECTION 14. Maritime Industry Authority. The Maritime Industry Authority is While adopting in toto the foregoing requisites for the issuance of a CPC,

hereby retained and shall have the following functions: LTFRB Memorandum Circular No. 92-009, Part IV, provides for yet 1. Develop and formulate, plans, policies, programs, project, standards, incongruous and contradictory policy guideline on the issuance of a CPC. specifications and guidelines geared towards the promotion and The guidelines states: development of the Maritime Industry, the growth and effective regulation of shipping enterprises, for the national security objectives of The issuance of a Certificate of Public Convenience is determined by public the country; need. The presumption of public need for a service shall be deemed in favor 2. Establish, prescribe and regulate routes, zones and /or areas of of the applicant, while the burden of proving that there is no need for the operation of particular operators of public water services; proposed service shall be the oppositor's. 3. Issue certificates of public convenience for the operation of domestic and overseas water carriers; The above-quoted provision is entirely incompatible and inconsistent with 4. Register vessels as well as issue certificates, licenses or documents Section 16(c)(iii) of the Public Service Act which requires that before a CPC necessary or incident thereto; will be issued, the applicant must prove by proper notice and hearing that the 5. Undertake the safety regulatory functions pertaining to vessels operation of the public service proposed will promote public interest in a construction and operations including the determination of manning proper and suitable manner. On the contrary, the policy guideline states that levels and issuance of certificates competency to seamen; the presumption of public need for a public service shall be deemed in favor 6. Enforce laws, prescribe and enforce rules and regulation, including of the applicant. In case of conflict between a statute and an administrative penalties for violation thereof, governing water transportation and the order, the former must prevail. Philippine merchant marine with the aid of other law enforcement agencies; MA. ANGELA AGUINALDO ATENEO LAW 2010

TRANSPORTATION NOTES 23 7. Undertake the issuance of licenses to qualified seamen and harbor, bay PERSONS, CORPORATIONS, ASSOCIATIONS, OR FIRMS, WHAT DOES and river pilots; IT ENTAIL? 8. Determine, fix and/or prescribe charges and/or rates pertinent to the • Important for suability operation of public water transport utilities, facilitate all services except in cases where charges or rates are established by international bodies PUBLIC, WHAT DOES IT MEANS or association of which the Philippine is a participating member or by • Engenders the same notion with public utilities bodies or association recognized by the Philippine Government as the • Not confined to privileged individuals, but is open to the indefinite proper arbiter of such charges or rates;

public 9. Accredit marine surveyors and maritime enterprises engaged in • Doesnʼt have to make reference to all the people in a given shipbuilding, ship repair, ship breaking, domestic and overseas population as long as the offer to provide the service is made shipping, ship management and agency; indiscriminately whether to a certain section of the population or the 10. Supervise the Philippine Merchant Marine Academy as recognized whole populace herein in accordance with its charter, the provision hereof and • One of the tests: public may enjoy it by right or only by permission? applicable laws, rules and regulation under the chairmanship of the • It is connected with the conduct of offering ( see US v. Tan Piaco) or maritime administrator; mode of doing it 11. Issue and register the Continuous Discharge Book of Filipino Seamen; 12. Establish and prescribe rules and regulation, standards and procedures FOR COMPENSATION, MEANING for the efficient and effective discharge of the above functions; • When he holds himself to the public as he holds business for 13. Perform such other function as may now or hereafter be provided by the compensation and not for free law. ENGAGED IN CARRYING OR TRANSPORTING, MEANING. COMMON CARRIERS • De Guzman v. Court of Appeals: no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity; IN GENERAL avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or DEFINITIONS; ESSENTIAL ELEMENTS unscheduled basis; neither does it distinguish between a carrier offering its services to the " general public," i.e., the general

Article 1732. Common carriers are persons, corporations, firms or community or population, and one who offers services or solicits associations engaged in the business of carrying or transporting passengers business only from a narrow segment of the general population. or goods or both, by land, water, or air, for compensation, offering their services to the public. ELEMENTS OF COMMON CARRIER OPEN FOR DISCUSSION: IMPORTANT!!! (1) Persons, corporations, associations or firms Burden of proof upon the one who alleges the other is a common (2) Engaged in the business of carrying or transporting carrier (3) For compensation (4) Public—the same “public” term employed in public utilities 15 US V. TAN PIACO MA. ANGELA AGUINALDO ATENEO LAW 2010 TRANSPORTATION NOTES 24 40 PHIL 853 authorizing the exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the law compels the power to give to FACTS: the general public. It is not enough that the general prosperity of the public is The appellant rented two automobile trucks and was using them upon the promoted. Public use is not synonymous with public interest. The true highways of the Province of Leyte for the purpose of carrying some criterion by which to judge of the character of the use is whether the

passengers and freight; that he carried passengers and freight under a public may enjoy it by right or only by permission. special contract in each case; that he had not held himself out to carry all passengers and all freight for all persons who might offer passengers and For all of the foregoing reasons, we agree with the Attorney-General that the freight. appellant was not operating a public utility, for public use, and was not, therefore, subject to the jurisdiction of the Public Utility Commission. He was charged consequently for violating the Public Utility Act for operating a public utility without authorization from the Commission. In settling this 16