Professional Documents
Culture Documents
_______________ In a petition dated June 25, 1958, filed in the same case,
respondent municipality formally asked the Commission to
2
Hereinafter referred to as "Morong Electric". revoke petitioner's certificate of public convenience and to
forfeit its franchise on the ground, among other things, that it
289 failed to comply with the conditions of said certificate and
franchise. Said petition was set for hearing jointly with the
VOL. 25, SEPTEMBER 28, 1968 289 order to show cause. The hearings had been postponed several
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal times.
VOL. 25, SEPTEMBER 28, 1968 293 This Court in several cases has ruled that objection to the
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal delegation of authority to hear a case filed before
_______________
G. R. No. L-20993
5
Law List 1961, First Edition, does not contain the name
1. Under the first assignment of error, petitioner contends that "Pedro S. Talavera."
while Mr. Pedro S. Talavera, who conducted the hearings of
the case below, is a division chief, he is not a lawyer. As such, 6
As amended by R.A. No. 723 which took effect on June 6,
under Section 32 of Commonwealth Act No. 146, as amended, 1962, it reads: "The Commission may also, by proper order,
the Commission should not have delegated to him the authority authorize any of the attorneys of the legal division or division
to conduct the hearings for the reception of evidence of the chiefs of the Commission, if they be lawyers, to bear and
parties.
investigate any case filed with the Commission and in
connection therewith to receive such evidence as may be
We find that, really, Mr. Talavera is not a lawyer.5 Under the material thereto." (Italics supplied.)
second paragraph of Section 32 of Commonwealth Act No.
146, as amended,6 the Commission can only authorize a
7
Sessions of September 23, 1960, December 15, 1960, judgment over the very same evidence presented by it as
February 24, 1961 and August 25, 1961. prosecutor—a situation "not conducive to the arrival at just and
equitable decisions."
294
Settled is the rule that in reviewing the decision of the Public
294 SUPREME COURT REPORTS ANNOTATED Service Commission this. Court is not required to examine the
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal proof de novo and determine for itself whether or not the
preponderance of evidence really
the Commission and to receive the evidence in connection
_______________
therewith is a procedural, not a jurisdictional point, and is
waived by failure to interpose timely the objection and the case 8
Everett Steamship Corp. vs. Chuahiong, L-2933, September
had been decided by the Commission.8 Since petitioner has
26, 1951; Raymundo Trans. vs. Cervo, L-3899, May 21, 1952;
never raised any objection to the authority of Mr. Talavera
Enriquez & Co. vs. Ortega, L-4865, December 22, 1952; and
before the Commission, it should be deemed to have waived
Luzon Stevedoring Co. vs. PSC, L-5458, September 16, 1953.
such procedural defect, and consonant with the precedents on
the matter, petitioner's claim that the Commission acted 9
In Raymundo Trans. vs. Cervo, supra, it was held: "As
without or in excess of jurisdiction in so authorizing Mr.
provided for in Rule 43, section 2 of the Rules of Court an
Talavera should be dismissed.9
appellant can only raise in a petition for review questions that
had been raised before the Public Service Commission."
2. Anent the second assigned error, the gist of petitioner's
contention is that the evidence—consisting of inspection
295
reports upon which the Commission based its decision is
insufficient and untrustworthy in that (1) the authors of said
reports had not been put to test by way of cross-examination; VOL. 25, SEPTEMBER 28, 1968 295
(2) the reports constitute only one side of the picture as Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
petitioner was not able to present evidence in its defense; (3)
judicial notice was not taken of the testimony of Mr. Harry B. justifies the decision. The only function of this Court is to
Bernardino, former mayor of respondent municipality, in PSC determine whether or not there is evidence before the
Case No. 625143 (the other case, G. R. No. L-21221) to the Commission upon which its decision might reasonably be
effect that the petitioner had improved its service before its based. This Court will not substitute its discretion for that of
electric power plant was burned on July 29, 1962—which the Commission on questions of fact and will not interfere in
testimony contradicts the inspection reports; and (4) the the latter's decision unless it clearly appears that there is no
Commission acted both as prosecutor and judge—passing evidence to support it.10 Inasmuch as the only function of this
12
Court in reviewing the decision of the Commission is to "The Public Service Commission in the exercise of its quasi-
determine whether there is sufficient evidence before the judicial and administrative functions has the power to take into
Commission upon which its decision can reasonably be based, consideration the result of its own observation and
as it is not required to examine the proof de novo, the evidence investigation of the matter submitted to it for consideration and
that should be made the basis of this Court's determination decision, in connection with other evidence presented at the
should be only those presented in this case before the hearing of a case." (Cebu Transit Co. vs. PSC, 79 Phil. 386;
Commission. What then was the evidence presented before the
Commission and made the basis of its decision subject of the 296
present appeal? As stated earlier, the Commission based its
decision on the inspection reports submitted by its engineers 296 SUPREME COURT REPORTS ANNOTATED
who conducted the inspection of petitioner's electric service Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
upon orders of the Commission.11 Said inspection reports
specify in detail the deficiencies incurred, and violations
committed, by the petitioner resulting in the inadequacy of its not presented any evidence in its defense, and speaking of
service. We consider that said reports are sufficient to serve petitioner's failure to present evidence, as well as its failure to
reasonably as bases of the decision in question. It should be cross-examine the authors of the inspection reports, petitioner
emphasized, in this connection that said reports, are not mere should not complain because it had waived not only its right to
documentary proofs presented for the consideration of the cross-examine but also its right to present evidence. Quoted
Commission, but are the results of the Commission's own hereunder are the pertinent portions of the transcripts of the
observations and investigations which it can rightfully take into proceedings where the petitioner, through counsel, manifested
consideration,12 particularly in this case where the petitioner in clear language said waiver and its decision to abide by the
had last inspection report of Engineer Martinez:
10
A. L. Ammen Transportation Co. vs. Froilan Japa, L-19643, "COMMISSION:
July 26, 1966; Del Pilar Transit, Inc. vs. Jose M. Silva, L-
21547, July 15, 1966; Pineda vs. Carandang, L-13270-71, "It appears at the last hearing of this case on September 23,
March 24, 1960; and Ramos vs. Lat, et at., L-14476 & L- 1960, that an engineer of this Commission has been ordered to
15773, May 23, 1960. make an inspection of all electric services in the province of
Rizal and on that date the engineer of this Commission is still
11
Admitted by the petitioner in its Brief, pp. 3 & 11. undertaking that inspection and it appears that the said engineer
had actually made that inspection on July 12 and 13, 1960. The
engineer has submitted his report on November 18, 1960 which Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
is attached to the records of this case.
"ATTY. LUQUE:
"ATTY. LUQUE (Counsel for Petitioner):
"x x x. This is a very important matter and to show the good
"x x x (W)e respectfully state that while the report is, as I see it faith of respondent in this case we will not even crossexamine
attached to the records, clear and very thorough, it was made the engineer when he makes a new report. We will agree to the
sometime July of this year and I understand from the findings and, your honor please, considering as we have
respondent that there is some improvement since this report manifested before that Engineer Martinez is an experienced
was made x x x x we respectfully request that an up-todate engineer of this Commission and the points reported by
inspection be made x x x x. An inspector of this Commission Engineer Martinez on the situation of the plant now will
can be sent to the plant and considering that the engineer of this prevent the necessity of having a hearing, of us bringing new
Commission, Engineer Meliton Martinez, is very acquainted to evidence and complainant bringing new evidence. x x x.
the points involved we pray that his report will be used by us x x x x
for the reason that he is a technical man and he knows well as
he has done a good job and I think our proposition would
"COMMISSION (to Atty. Luque) :
expedite the matter. We sincerely believe that the inspection
report will be the best evidence to decide this matter. Q "Does the Commission understand from the counsel for
x x x x applicant that if the motion is granted he will submit this
order to show cause for decision without any further
_______________ hearing and the decision will be based on the report of the
engineer of this Commission?
Sambrano vs. Northern Luzon Trans. Co., 63 Phil. 554; Manila A "We respectfully reply in this manner that we be allowed or
Yellow Taxicab Co., Inc. vs. Araullo, et al., 60 Phil. 833; and be given an opportunity just to read the report and 99% we
Manila Yellow Taxicab Co., Inc. vs. B. Stables Co., 60 Phil. will agree that the report will be the basis of that decision.
851.) We just want to find out the contents of the report, however,
"The Commission can take cognizance of the facts diclosed we request that we be furnished with a copy of the report
by its own records." (Dagupan Ice Plant Co., Inc. vs. Lucero, et before the hearing so that we will just make a manifestation
al., 66 Phil. 120, 123.) that we will agree.
"COMMISSION (to Atty. Luque):
297 Q "In order to prevent the delay of the disposition of this case
the Commission will allow counsel for the applicant to
VOL. 25, SEPTEMBER 28, 1968 297 submit his written reply to the report that the engineer of
this Commission. Will he submit this case without further "With regard to the testimony on the ground for opposition we
heari ng upon the receipt of that written reply? respectfully submit to this Commission our motion to submit a
A "Yes, your honor." written reply together with a memorandum. Also as stated to
expedite the case and to avoid further hearing we will just
submit our written reply. According to our records we are
Proceedings of August 25, 1961
furnished with a copy of the report of July 17, 1961. We submit
your honor.
"ATTY. LUQUE (Counsel for petitioner)
x x x x
x x x x
"In order to avoid any delay in the consideration of this case we
are respectfully move (sic) that instead of our witnesses
"COMMISSION:
testifying under oath that we will submit a written reply under
oath together with the memorandum within fifteen (15) days
"To give applicant a chance to have a day in court the
and we will furnish a copy and upon our submission of said
Commission grants the request of applicant that it be given 10
written reply under oath and memorandum we consider this
days within which to submit a written reply on the report of the
case submitted. This suggestion is to abbreviate the necessity
engineer of the Commission who inspected the electric service,
of presenting witnesses here which may prolong the resolution
in the municipality of Morong, Rizal, and after the submission
of this case.
of the said written reply within 10 days from today this case
will be considered submitted for decision."
"ATTY. OLIVAS: (Counsel for respondent municipality)
The above-quoted manifestation of counsel for the petitioner,
"I object on the ground that there is no resolution by this
specifically the statement referring to the inspection report of
Engineer Martinez as the "best evidence to decide this matter,"
298
can serve as an argument against petitioner's claim that the
Commission should have taken into consideration the
298 SUPREME COURT REPORTS ANNOTATED testimony of Mr. Bernardino. But the primary reasons why the
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal Commission could not have taken judicial cognizance of said
testimony are: first, it is not a proper subject of judicial notice,
Commission on the action to reopen the case and second this as it is not a "known" fact—that is, well established and
case has been closed. authoritatively settled, without qualification and contention;13
second, it was given in a subsequent and distinct case after the
"ATTY. LUQUE: petitioner's motion for reconsideration was heard by the
Commission en banc and submitted for decision.14
_______________ authorized by Section 17 (a) of Commonwealth Act No. 146,
as amended, under which the Commission has power "to
13
"Matters of which the Court will take notice are necessarily investigate, upon its own initiative, or upon complaint in
uniform or fixed, and do not depend upon uncertain testimony, writing, any matter concerning any public service as regards
for as soon as a matter becomes disputable, it ceases to f all matters under its jurisdiction; to require any public service to
under the head of common knowledge and will not be furnish safe, adequate, and proper service as the public interest
judicially recognized." (29 Am Jur 2d 61-62) may require and warrant; to enforce compliance with any
standard, rule, regulation, order or other requirement of this
14
Petitioner's motion for reconsideration was heard on Jan. 11, Act or of the Commission, x x x." Thus, in the case of
1963 and on that date said motion was considered submitted Collector of Internal Revenue vs. Estate of F. P. Buan, L-
for decision, while the testimony of Bernardino was given on 11438, July 31, 1958, this Court held that the power of the
January 24, 1963. Commission to cancel and revoke a certificate of public
convenience and necessity may be exercised by it even without
299 a formal charge filed by any interested party, with the only
limitation that the holder of the certificate should be given his
VOL. 25, SEPTEMBER 28, 1968 299 day in court.
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
It may not be amiss to add that when prosecuting and
investigating duties are delegated by statute to an
and third, it was not brought to the attention of the Commission administrative body, as in the case of the Public Service
in this case through an appropriate pleading.15
_______________
Regarding the contention of petitioner that the Commission had
acted both as prosecutor and judge, it should be considered that 15
"Judicial notice is not judicial knowledge; and one having
there are two matters that had to be decided in this case, the burden of establishing a fact of which a court may take
namely, the order to show cause dated December 19, 1956, and judicial notice is not in consequence relieved of the necessity
the petition or complaint by respondent municipality dated of bringing the fact to the knowledge of the Court." (Francisco,
June 25, 1958. Both matters were heard jointly, and the record Evidence, pp. 51-52 citing Shapleigh, et al v. Mier, No. 125
shows that respondent municipality had been allowed to [U.S.] Jan. 1937.)
present its evidence to substantiate its complaint. It can not be
said, therefore, that in this case the Commission had acted as 300
prosecutor and judge. But even assuming, for the sake of
argument, that there was a commingling of the prosecuting and
investigating functions, this exercise of dual function is 300 SUPREME COURT REPORTS ANNOTATED
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal directives and the rules and regulations of the Commission, the
rule cannot apply. To apply that rule unqualifiedly is to
Commission, said body may take steps it believes appropriate encourage violation or disregard of the terms and conditions of
for the proper exercise of said duties, particularly in the manner the certificate and the Commission's directives and regulations,
of informing itself whether there is probable violation of the and would close the door to other applicants who could
law and/or its rules and regulations. It may initiate an establish, operate and provide adequate, efficient and
investigation, file a complaint, and then try the charge as satisfactory service for the benefit and convenience of the
preferred, So long as the respondent is given a day in court,.
there can be no denial of due process, and objections to said _______________
procedure cannot be sustained. 16
52 Phil. 455, 472; see also Javier v. Orlanes, 53 Phil. 468,
3. In its third assignment of error, petitioner invokes the and Bohol Trans. Co. vs. Jureidini, 53 Phil. 560.
"protection-of-investment rule" enunciated by this Court in 17
Batangas Transportation Co. vs. Orlanes16 in this wise: See Teresa Electric & Power Co., Inc. vs. PSC, L-21804,
Sept. 25, 1967; Manila Taxicab, et al vs. PSC, et al., 90 Phil.
"The Government having taken over the control and 301.
supervision of all public utilities, so long as an operator under a
prior license complies with the terms and conditions of his 301
license and reasonable rules and regulations for its operation
and meets the reasonable demands of the public, it is the duty VOL. 25, SEPTEMBER 28, 1968 301
of the Commission to protect rather than to destroy his Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
investment by the granting of the second license to another
person for the same thing over the same route of travel. The inhabitants. It should be emphasized that the paramount
granting of such a license does not serve its convenience or consideration should always be the public interest and public
promote the interests of the public." convenience. The duty of the Commission to protect the
investment of a public utility operator refers only to operators
The above-quoted rule, however, is not absolute, for nobody of good standing—those who comply with the laws, rules and
has exclusive right to secure a franchise or a certificate of regulations—and not to operators who are unconcerned with
public convenience.17 Where, as in the present case, it has been the public interest and whose investments have failed or
shown by ample evidence that the petitioner, despite ample deteriorated because of their own fault.18
time and opportunity given to it by the Commission, had failed
to render adequate, sufficient and satisfactory service and had 4. The last assignment of error assails the propriety of the
violated the important conditions of its certificate as well as the penalty imposed by the Commission on the petitioner—that is,
the revocation of the certificate and the forfeiture of the 302
franchise. Petitioner contends that the imposition of a fine
would have been sufficient, as had been done by the 302 SUPREME COURT REPORTS ANNOTATED
Commission in cases of a similar nature. Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
It should be observed that Section 16 (n) of Commonwealth
ficed for private convenience." (Collector of Internal Revenue
Act No. 146, as amended, confers upon the Commission ample
v. Estate of F. P. Buan. et al., L-11438 and Santiago Sambrano,
power and discretion to order the cancellation and revocation
et al. v. PSC, et al., L-11439 & L-11542-46, July 31. 1958)
of any certificate of public convenience issued to an operator
who has violated. or has willfully and contumaciously refused
"(T)he Public Service Commission. x x x has the power to
to comply with, any order, rule or regulation of the
specify and define the terms and conditions upon which the
Commission or any provision of law. What matters is that there
public utility shall be operated, and to make reasonable rules
is evidence to support the action of the Commission. In the
and regulations for its operation and the compensation which
instant case, as shown by the evidence, the contumacious
the utility shall receive for its services to the public, and for any
refusal of the petitioner since 1954 to comply with the
failure to comply with such rules and regulations or the
directives, rules and regulations of the Commission, its
violation of any of the terms and conditions for which the
violation of the conditions of its certificate and its incapability
license was granted, the Commission has ample power to
to comply with its commitment as shown by its inadequate
service, were the circumstances that warranted the action of the enforce the provisions of the license or even to revoke it, for
Commission in not merely imposing a fine but in revoking any failure or neglect to comply with any of its terms and
altogether petitioner's certificate. To allow petitioner to provisions." (Batangas Trans. Co. v. Orlanes, 52 Phil. 455, 460:
continue its operation would be to sacrifice public interest and italics supplied)
convenience in favor of private interest.
Presumably, the petitioner has in mind Section 21 of
"A grant of a certificate of public convenience confers no Commonwealth Act No. 146, as amended, which provides that
property rights but is a mere license or privilege, and such a public utility operator violating or failing to comply with the
privilege is forfeited when the grantee fails to comply with his terms and conditions of any certificate, or any orders,
commitments behind which lies the paramount interest of the decisions, or regulations of the Commission, shall be subject to
public, for public necessity cannot be made to wait, nor sacri- a fine and that the Commission is authorized and empowered to
impose such fine, after due notice and hearing. It should be
noted, however, that the last sentence of said section states that
_______________
the remedy provided therein "shall not be a bar to, or affect any
18 other remedy provided in this Act but shall be cumulative and
Paredes vs. PSC, et al., L-7111, May 30, 1955.
additional to such remedy or remedies." In other words, the
imposition of a f ine may only be one of the remedies which organized and existing under the laws of the Philippines, the
the Commission may resort to, in its discretion. But that stockholders of which are Filipino citizens, that it is financially
remedy is not exclusive of, or has preference over, the other capable of operating an electric light, heat and power service,
remedies. And this Court will not substitute its discretion for and that at the time the decision was rendered there was
that of the Commission, as long as there is evidence to support absence of electric service in Morong, Rizal. While the
the exercise of that discretion by the Commission. petitioner does not dispute the need of an electric service in
Morong, Rizal,22 it claims, in effect, that Morong Electric
G. R. No. L-21221 should not have been granted the certif icate of public
convenience and necessity because (1) it did not have a
Coming now to the other case. let it be stated at the outset that corporate personality at the time it was granted a franchise and
before any certificate may be granted, authorizing the operation when it applied for said certificate; (2) it is not financially
of a public service, three requisites must be complied with, capable of undertaking an electric service, and (3) petitioner
namely: (1) the applicant must be a citizen of the Philippines or was rendering efficient service before its electric plant was
of the United States, or a corporation or co-partnership, burned, and therefore, being a prior operator its investment
association 01 joint-stock company constituted and organized should be protected and no new party should be granted a f
under the laws of the Philippines, sixty per centum at least of ranchise and certificate of public convenience and necessity to
the stock or paid operate an electric service in the same locality.
_______________
up capital of which belongs entirely to citizens of the
Philippines or of the United States;19 (2) the applicant must be 19
Ishi v. PSC, 63 Phil. 428.
financially capable of undertaking the proposed service and
meeting the responsibilities incident to its operation;20 and (3) 20
Manila Yellow Taxicab v. Austin Taxicab Co., 59 Phil. 771.
the applicant must prove that the operation of the public service
proposed and the authorization to do business will promote the 21
Sec. 15, Com. Act No. 146; Batangas Trans. Co. v. Orlanes,
public interest in a proper and suitable manner.21
52 Phil 455. See also Martin, Phil. Commercial Laws, Vol. 3,
pp. 1195-1196; Almario, Transportation and Public Service
As stated earlier, in the decision appealed from, the
Commission found that Morong Electric is a corporation duly
Law, pp. 300-301; Agbayani, Commercial Laws of the Phil., Petitioner's contention that Morong Electric did not yet have a
Vol 4 (1964 Ed.), pp. 2363-2364. legal personality on May 6, 1962 when a municipal franchise
was granted to it is correct The juridical personality and legal
22
T.s.n., p. 89 (Session on January 11, 1963). existence of Morong Electric began only on October 17, 1962
when its certificate of incorporation was issued by the SEC.24
23
City of Manila vs. PSC, 52 Phil. 515. Before that date, or pending the issuance of said certif icate of
incorporation, the incorporators cannot be considered as de
304 facto corporation.25 But the fact that Morong Electric had no
corporate existence on the day the franchise was granted in its
304 SUPREME COURT REPORTS ANNOTATED name does not render the franchise invalid, because later
Morong Electric obtained its certificate of incorporation and
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
then accepted the franchise In accordance with the terms and
conditions thereof. This view is sustained by eminent American
are not competent except they are in being. Hence, it is authorities. Thus, McQuiuin says:
contended that until a corporation has come into being, in this
jurisdiction, by the issuance of a certificate of incorporation by _______________
the Securities and Exchange Commission (SEC) it cannot enter
into any contract as a corporation. The certificate of 24
Hall vs. Judge Piccio, 86 Phil. 603, 605; See also Fisher, The
incorporation of the Morong Electric was issued by the SEC on Phil. Law of Stock Corp., p. 36.
October 17, 1962, so only from that date, not before, did it
acquire juridical personality and legal existence. Petitioner 25
Tolentino Commercial Laws of the Philippines, Vol. II, 8th
concludes that the franchise granted to Morong Electric on Ed., p. 723; See also Guevara, The Phil. Corp. Law, New Ed.,
May 6, 1962 when it was not yet in esse is null and void and p. 18.
cannot be the subject of the Commission's consideration. On
the other hand, Morong Electric argues, and to which argument 305
the Commission agrees, that it was a de facto corporation at the
time the franchise was granted and, as such, it was not
incapacitated to enter into any contract or to apply for and VOL. 25, SEPTEMBER 28, 1968 305
accept a franchise. Not having been incapacitated, Morong Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
Electric maintains that the franchise granted to it is valid and
the approval or disapproval thereof can be properly determined "The fact that a company is not completely incorporated at the
by the Commission. time the grant is made to it by a municipality to use the streets
does not, in most jurisdictions, affect the validity of the grant.
But such grant cannot take effect until the corporation is
organized. And in Illinois it has been decided that the approval of said franchise, not only perfected a contract
ordinance granting the franchise maybe presented before the between the respondent municipality and Morong Electric but
corporation grantee is fully organized, where the organization also cured the deficiency pointed out by the petitioner in the
is completed before the passage and acceptance." (McQuillin, application of Morong Electric. Thus, the Commission did not
Municipal Corporations, 3rd Ed., Vol. 12, Chap. 34, Sec. err in denying petitioner's motion to dismiss said application
34.21) and in proceeding to hear the same. The efficacy of the
franchise, however, arose only upon its approval by the
Fletcher says: Commismission on March 13, 1963. The reason is that—
1. A. Requisites of the Rule.— It had been held however that inadequate service, by itself, was
not sufficient to grant a certificate of public convenience to a
1. 1. Operator must be first in the line.—The operator newcomer without first giving the old or prior operator an
invoking- the rule must be the first operator granted a opportunity to improve its service (Manila Electric Co. v.
certificate of public convenience to operate a public Mateo, [1938] 66 Phil. 19, 22-23; Raymundo Trans. Co. v.
utility in the line in question. The protection of or Laguna-Tayabas Bus Co., [1930]
preference for a prior operator over a newcomer cannot
be invoked by a petitioner where the respondent had 311
operated long before the petitioner a taxicab service in
the same field (Robles v. Blaylock, L-17629, March 31, VOL, 25, SEPTEMBER 28, 1968 311
1964). Rizal Light & lce Co., Inc. vs. Mun. of Morong, Rizal
2. 2. Prior operator must be an established operator.—An
old operator invoking the rule must be an established
operator in the f ull sense of the word. Although the 55 Phil. 404, 408; Bohol Land Trans. Co., Jureidini, [1929] 53
prior operator had a certificate of public convenience Phil. 560, 565-566; Javier v. Orlanes, [1929] 53 Phil. 468;
before the filing of the application of the newcomer, the Batangas Trans. Co. v. Orlanes, supra). The remedy is not to
rule will not apply if the prior operator had secured its award a new service to another but for the Public Service
certificate of convenience for barely two (2) months Commission to take administrative action against the old
prior to the application in question (Valdez v. Public operator requiring it to improve its service and to comply
Service Commission, L-13837-38, May 30, 1960). strictly with the terms and conditions of its certificate (Manila
3. 3. Prior operator must be operating a sufficient and Electric Co. v. Mateo, supra at 22).
satisfactory service.—A prior operator must be
operating a sufficient and satisfactory service to be The fact that a prior operator, which is a common carrier, did
entitled to preferential right. Where it is in no condition not bid for the mail contract of the place it serves is not
to supply the needs or services, such as when the old sufficient reason to issue in favor of the one who obtained the
operator supplying the power needs in a territory had contract a certificate of public necessity and convenience
only a load capacity of 200 kilowatts while the power without f irst giving an opportunity to the former to improve its
need was 6,000 kilowatts, the old operator rule did not service, binding itself to carry the mails in accordance with law
apply (Teresa Electric & Power Co. v. Public Service (Bohol Land Trans. Co. v. Jureidini, supra at 569).
Failure of the old operator to improve its service after having 1. B. Reason for the Rule.—"The policy of regulation,
been required to do so will cause the grant of another certificate upon which our present public utility commission is
of public convenience to a new applicant. Thus, where the prior based and which tends to do away with competition
operator failed for about three (3) years to complete its among public utilities as they are natural monopolies, is
equipment to meet the traffic, the Public Service Commission at once the reason and the justification for the holding
was justified in granting another authorization to a newcomer of our courts that the regulation of an existing system of
for the establishment of another service in the same line transportation, which is properly serving a given field,
(Manila Yellow Taxicab v. Public Service Commission, [1051] or may be required to do so, is to be preferred to
90 Phil. 301, 309; De la Rosa v. Corpus, [1938] 66 Phil. 8 [for competition among several independent systems. While
a period of four (4) years] citing Bohol Land Trans. Co. v. requiring a proper service from a single system for a
Jureidini, supra and Raymundo Trans. Co. v. Perez, 56 Phil. city or territory in consideration for protecting it as a
274). monopoly for all the service required and in conserving
its resources, no economic waste results and service
A showing must be clear and affirmative that an existing utility may be furnished at the minimum costs. The prime
is unable or has refused to maintain adequate and satisfactory object and real purpose of Commission control is to
service (Batangas Trans. Co. v. Orlanes, supra at 468). In a secure adequate sustained service for the public at the
case involving an application of a newcomer for another least possible cost, and to protect and conserve
certificate on the same line in competition with an old operator, investments already made for this purpose. Experience
it was held that lack of means of transportation during the feast has demonstrated beyond any question that competition
days could not serve as the basis for determining the among natural monopolies is wastef ul economically
sufficiency or insufficiency of the service. The testimony of and results finally in insufficient and unsatisfactory
two ex-employees of the old operator that they used to leave service and extravagant rates." (Batangas Trans. Co. v.
passengers behind for lack of room was not believed because Orlanes, supra at 467.)
312 "So long as the first licensee keeps and performs the terms and
conditions of its license and complies with the reasonable rules
312 SUPREME COURT REPORTS ANNOTATED and regulations of the Commission and meets the reasonable
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal demands of the public, it should have more or less of a vested
and preferential right over a person who seeks to acquire
another and a later license over the same route. Otherwise, the
"they were duty bound to report that fact to the company and first licensee would not have any protection on his investment,
should have done so, and since they failed to do so, it is and would be subject to ruinous competition and thus defeat
presumed that there was no such deficiency." (Bohol Land the very purpose and intent for which the Public Service
Trans Co. v. Jureidini, supra at 564.)
Commission was created." (Batangas Trans. Co. v. Orlanes, quoted with approval in Philippine Rabbit Bus Lines, Inc. v.
supra at 466.) Gabatin, L-34472, July 31, 1968, 24 SCRA 411, 421-422.)
There is the equal need of doing equity to those who have A. Failure to Offer to Meet the Increase in the Demand.—The
risked capital to render the service which those who prior operator rule does not apply where the old operator does
not offer to meet the increase in the demand the moment it
313 arises and does so only when another operator who is a new
one has made the offer to serve the public needs (Philippine
VOL. 25, SEPTEMBER 28, 1968 313 Long Distance Telephone Co. v. City of Davao, supra citing
Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal Fernando v. Gallardo, L-4860, Sept. 8, 1953, Raymundo
Trans. Co. v. Cerda, L-7880, May 18. 1956; Saulog Transit,
Inc. v. Medina, L-7244. June 28, 1956: Estate of F. P, Buan v.
were called upon to do so were not disposed or were not in a La Mallorca, L-8729. Feb. 28, 1957; Manila Yellow Taxicab
position to supply." (Manila Yellow Taxicab v. Public Service Co. v. Castelo, L-13910, May 30, 1960; Isidro v. Ocampo, L-
Commission, supra at 307.) 12331, May 29, 1959 citing Inter-Provincial Autobus Co. v.
Clarete, L-41000-02, May 15, 1952; Angat-Manila Trans. Co.
Where the law granting franchise to an old operator expressly v. La, Mallorca, L-8729, Feb. 28, 1957; Dangwa Trans. Co. v.
provided that the rights thereunder conferred are not exclusive, Public Service Commission, supra; Valero v. Parpana, L-
the old operator cannot invoke its "vested rights" as prior 15328-9, Oct. 31, 1960; Mandaluyong Bus Co. v. Enrique, L-
operator against the entry of another in its area of operation 21964, Oct. 19, 1966, 18 SCRA 352, 355).
(Philippine Long Distance Telephone Co. v. City of Davao, L-
23080, Sept. 20, 1965.) 314
II. Exceptions to the Rule 314 SUPREME COURT REPORTS ANNOTATED
While it is true that operators of public convenience and Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
service deserve some protection from unnecessary or unlawful
competition, yet the rule is that nobody has any exclusive right Where the old operator was authorized to operate 75 buses in
to secure a franchise or a certificate of public convenience. all its lines but its rights with respect to 30 had been leased, this
Above any or all public convenience and service should be circumstance added to the fact that it had registered only 17
quided by public service and interest; the latter are the buses which were not even in continuous operation although it
primordial considerations to be taken into account." (Teresa was entitled to operate 45 units in its remaining lines, showed
Electric Power Co. v. Public Service Commission, supra at 202 that there was a shortage of transportation facilities in the lines
mentioned and that the old operator was unable to meet fully
the demands of public convenience (Zarate v. Rizal-Manila C. Where Destructive Monopoly Would Result From the
Transit, Inc., L-11300, May 29, 1959). Operation of the Rule.—The prior operator rule does