1. [2002V1023] REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY BOARD petitioner, vs. MANILA ELECTRIC COMPANY, respondent.

2002 Nov 153rd DivisionG.R. No. 141314D E C I S I O N

PUNO, J.:

In third world countries like the Philippines, equal justice will have a synthetic ring unless the economic rights of the people, especially the poor, are protected with the same resoluteness as their right to liberty. The cases at bar are of utmost significance for they concern the right of our people to electricity and to be reasonably charged for their consumption. In configuring the contours of this economic right to a basic necessity of life, the Court shall define the limits of the power of respondent MERALCO, a giant public utility and a monopoly, to charge our people for their electric consumption. The question is: should public interest prevail over private profits?

The facts are brief and undisputed. On December 23, 1993, MERALCO filed with the ERB an application for the revision of its rate schedules. The application reflected an average increase of 21 centavos per kilowatthour (kwh) in its distribution charge. The application also included a prayer for provisional approval of the increase pursuant to Section 16(c) of the Public Service Act and Section 8 of Executive Order No. 172.

On January 28, 1994, the ERB issued an Order granting a provisional increase of P0.184 per kwh, subject to the following condition.

"In the event, however, that the Board finds, after hearing and submission by the Commission on Audit of an audit report on the books and records of the applicant that the latter is entitled to a lesser increase in rates, all excess amounts collected from the applicants customers as a result of this Order shall either be refunded to them or correspondingly credited in their favor for application to electric bills covering future consumptions."[1] In the same Order, the ERB requested the Commission on Audit (COA) to conduct an "audit and examination of the books and other records of account of the applicant for such period of time, which in no case shall be less than 12 consecutive months, as it may deem appropriate" and to submit a copy thereof to the ERB immediately upon completion.[2]

On February 11, 1997, the COA submitted its Audit Report SAO No. 95-07 (the "COA Report") which contained, among others, the recommendation not to include income taxes paid by MERALCO as part of its operating expenses for purposes of rate determination and the use of the net average investment method for the computation of the proportionate value of the properties used by MERALCO during the test year for the determination of the rate base.[3]

Subsequently, the ERB rendered its decision adopting the above recommendations and authorized MERALCO to implement a rate adjustment in the average amount of P0.017 per kwh, effective with respect to MERALCOs billing cycles beginning February 1994. The ERB further ordered that "the provisional relief in the amount of P0.184 per kilowatthour granted under the Boards Order dated January 28, 1994 is hereby superseded and modified and the excess average amount of P0.167 per kilowatthour starting with [MERALCOs] billing cycles beginning February 1994 until its billing cycles beginning February 1998, be refunded to [MERALCOs] customers or correspondingly credited in their favor for future consumption."[4] The ERB held that income tax should not be treated as operating expense as this should be "borne by the stockholders who are recipients of the income or profits realized from the operation of their business" hence, should not be passed on to the consumers.[5] Further, in applying the net average investment method, the ERB adopted the recommendation

of COA that in computing the rate base, only the proportionate value of the property should be included, determined in accordance with the number of months the same was actually used in service during the test year.[6] On appeal, the Court of Appeals set aside the ERB decision insofar as it directed the reduction of the MERALCO rates by an average of P0.167 per kwh and the refund of such amount to MERALCOs customers beginning February 1994 and until its billing cycle beginning February 1998.[7] Separate Motions for Reconsideration filed by the petitioners were denied by the Court of Appeals.[8]

Petitioners are now before the Court seeking a reversal of the decision of the Court of Appeals by arguing primarily that the Court of Appeals erred: a) in ruling that income tax paid by MERALCO should be treated as part of its operating expenses and thus considered in determining the amount of increase in rates imposed by MERALCO and b) in rejecting the net average investment method used by the COA and the ERB and instead adopted the average investment method used by MERALCO.

We grant the petition.

The regulation of rates to be charged by public utilities is founded upon the police powers of the State and statutes prescribing rules for the control and regulation of public utilities are a valid exercise thereof. When private 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 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 property is continued, the same is subject to public regulation.[9]

In regulating rates charged by public utilities, the State protects the public against arbitrary and excessive rates while maintaining the efficiency and quality of services rendered. However, the power to regulate rates does not give the State the right to prescribe rates which are so low as to deprive the public utility of a reasonable return on investment. Thus, the rates prescribed by the State must be one that yields a fair return on the public utility upon the value of the property performing the service and one that is reasonable to the public for the services rendered.[10] The fixing of just and reasonable rates involves a balancing of the investor and the consumer interests.[11]

In his famous dissenting opinion in the 1923 case of Southwestern Bell Tel. Co. v. Public Service Commission,[12] Mr. Justice Brandeis wrote: "The thing devoted by the investor to the public use is not specific property, tangible and intangible, but capital embarked in an enterprise. Upon the capital so invested, the Federal Constitution guarantees to the utility the opportunity to earn a fair return" The Constitution does not guarantee to the utility the opportunity to earn a return on the value of all items of property used by the utility, or of any of them.

The investor agrees, by embarking capital in a utility, that its charges to the public shall be reasonable. His company is the substitute for the State in the performance of the public service, thus becoming a public servant. The compensation which the Constitution guarantees an opportunity to earn is the reasonable cost of conducting the business.

While the power to fix rates is a legislative function, whether exercised by the legislature itself or delegated through an administrative agency, a determination of whether the rates so fixed are reasonable and just is a purely judicial question and is subject to the review of the courts.[13]

The ERB was created under Executive Order No. 172 to regulate, among others, the distribution of energy resources and to fix rates to be charged by public utilities involved in the distribution of electricity. In the fixing of rates, the only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. It has been held that even in the absence of an express requirement as to reasonableness, this standard may be implied.[14] What is a just and reasonable rate is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent judgment. The requirement of reasonableness comprehends such rates which must not be so low as to be confiscatory, or too high as to be oppressive. In determining whether a rate is confiscatory, it is essential also to consider the given situation, requirements and opportunities of the utility.[15]

Settled jurisprudence holds that factual findings of administrative bodies on technical matters within their area of expertise should be accorded not only respect but even finality if they are supported by substantial evidence even if not overwhelming or preponderant.[16] In one case, [17] we cautioned that courts should "refrain from substituting their discretion on the weight of the evidence for the discretion of the Public Service Commission on questions of fact and will only reverse or modify such orders of the Public Service Commission when it really appears that the evidence is insufficient to support their conclusions."[18]

In the cases at bar, findings and conclusions of the ERB on the rate that can be charged by MERALCO to the public should be respected.[19] The function of the court, in exercising its power of judicial review, is to determine whether under the facts and circumstances, the final order entered by the administrative agency is unlawful or unreasonable.[20] Thus, to the extent that the administrative agency has not been arbitrary or capricious in the exercise of its power, the timehonored principle is that courts should not interfere. The principle of separation of powers dictates that courts should hesitate to review the acts of administrative officers except in clear cases of grave abuse of discretion.[21]

In determining the just and reasonable rates to be charged by a public utility, three major factors are considered by the regulating agency: a) rate of return; b) rate base and c) the return itself or the computed revenue to be earned by the public utility based on the rate of return and rate base.[22] The rate of return is a judgment percentage which, if multiplied with the rate base, provides a fair return on the public utility for the use of its property for service to the public.[23] The rate of return of a public utility is not prescribed by statute but by administrative and judicial pronouncements. This Court has consistently adopted a 12% rate of return for public utilities.[24] The rate base, on the other hand, is an evaluation of the property devoted by the utility to the public service or the value of invested capital or property which the utility is entitled to a return.[25]

In the cases at bar, the resolution of the issues involved hinges on the determination of the kind and the amount of operating expenses that should be allowed to a public utility to generate a fair return and the proper valuation of the rate base or the value of the property entitled to a return.

I Income Tax as Operating Expense Cannot be Allowed For Rate-Determination Purposes

In determining whether or not a rate yields a fair return to the utility, the operating expenses of the utility must be considered. The return allowed to a public utility in accordance with the prescribed rate must be sufficient to provide for the payment of such reasonable operating expenses incurred by the public utility in the provision of its services to the public. Thus, the public utility is allowed a return on capital over and above operating expenses. However, only such

expenses and in such amounts as are reasonable for the efficient operation of the utility should be allowed for determination of the rates to be charged by a 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 public utility is inconsistent with the nature of operating expenses. In general, operating expenses are those which are reasonably incurred in connection with business operations to yield revenue or income. They are items of expenses which contribute or are attributable to the production of income or revenue. As correctly put by the ERB, operating expenses "should be a requisite of or necessary in the operation of a utility, recurring, and that it redounds to the service or benefit of customers."[26]

Income tax, it should be stressed, is imposed on an individual or entity as a form of excise tax or a tax on the privilege of earning income.[27] In exchange for the protection extended by the State to the taxpayer, the government collects taxes as a source of revenue to finance its activities. Clearly, by its nature, income tax payments of a public utility are not expenses which contribute to or are incurred in connection with the production of profit of a public utility. Income tax should be borne by the taxpayer alone as they are payments made in exchange for benefits received by the taxpayer from the State. No benefit is derived by the 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 public utility for purposes of generating revenue or profit. Accordingly, the burden of paying income tax should be Meralcos alone and should not be shifted to the consumers by including the same in the computation of its operating expenses.

The principle behind the inclusion of operating expenses in the determination of a just and reasonable rate is to allow the public utility to recoup the reasonable amount of expenses it has incurred in connection with the services it provides. It does not give the public utility the license to indiscriminately charge any and all types of expenses incurred without regard to the nature thereof, i.e., whether or not the expense is attributable to the production of services by the public utility. To charge consumers for expenses incurred by a public utility which are not related to the service or benefit derived by the customers from the public utility is unjustified and inequitable.

While the public utility is entitled to a reasonable return on the fair value of the property being used for the service of the public, no less than the Federal Supreme Court of the United States emphasized: "[t]he public cannot properly be subjected to unreasonable rates in order simply that stockholders may earn dividends" If a corporation cannot maintain such a [facility] and earn dividends for stockholders, it is a misfortune for it and them which the Constitution does not require to be remedied by imposing unjust burdens on the public."[28]

We are not impressed by the reliance by MERALCO on some American case law allowing the treatment of income tax paid by a public utility as operating expense for rate-making purposes. Suffice to state that with regard to ratedetermination, the government is not hidebound to apply any particular method or formula.[29] The question of what constitutes a reasonable return for the public utility is necessarily determined and controlled by its peculiar environmental milieu. Aside from the financial condition of the public utility, there are other critical factors to consider for purposes of rate regulation. Among others, they are: particular reasons involved for the request of the rate increase, the quality of services rendered by the public utility, the existence of competition, the element of risk or hazard involved in the investment, the capacity of consumers, etc.[30] Rate regulation is the art of reaching a result that is good for the public utility and is best for the public.

For these reasons, the Court cannot give in to the importunings of MERALCO that we blindly apply the rulings of American courts on the treatment of income tax as operating expenses in rate regulation cases. An approach allowing the indiscriminate inclusion of income tax payments as operating expenses may create an undesirable precedent and serve as a blanket authority for public utilities to charge their income tax payments to operating expenses and unjustly shift the tax burden to the customer. To be sure, public utility taxation in the United States is going through the eye of

criticism. Some commentators are of the view that by allowing the public utility to collect its income tax payment from its customers, a form of "sales tax" is, in effect, imposed on the public for consumption of public utility services. By charging their income tax payments to their customers, public utilities virtually become "tax collectors" rather than taxpayers.[31] In the cases at bar, MERALCO has not justified why its income tax should be treated as an operating expense to enable it to derive a fair return for its services.

It is also noteworthy that under American laws, public utilities are taxed differently from other types of corporations and thus carry a heavier tax burden. Moreover, different types of taxes, charges, tolls or fees are assessed on a public utility depending on the state or locality where it operates. At a federal level, public utilities are subject to corporate income taxes and Social Security taxes in the same manner as other business corporations. At the state and local levels, public utilities are subject to a wide variety of taxes, not all of which are imposed on each state. Thus, it is not unusual to find different taxes or combinations of taxes applicable to respective utility industries within a particular state.[32] A significant aspect of state and local taxation of public utilities in the United States is that they have been singled out for special taxation, i.e., they are required to pay one or more taxes that are not levied upon other industries. In contrast, in this jurisdiction, public utilities are subject to the same tax treatment as any other corporation and local taxes paid by it to various local government units are substantially the same. The reason for this is that the power to tax resides in our legislature which may prescribe the limits of both national and local taxation, unlike in the federal system of the United States where state legislature may prescribe taxes to be levied in their respective jurisdictions.

MERALCO likewise cites decisions of the ERB[33] allowing the application of a tax recovery clause for the imposition of an additional charge on consumers for taxes paid by the public utility. A close look at these decisions will show they are inappropos. In the said cases, the ERB approved the adoption of a formula which will allow the public utility to recover from its customers taxes already paid by it. However, in the cases at bar, the income tax component added to the operating expenses of a public utility is based on an estimate or approximate figure of income tax to be paid by the public utility. It is this estimated amount of income tax to be paid by MERALCO which is included in the amount of operating expenses and used as basis in determining the reasonable rate to be charged to the customers. Accordingly, the varying factual circumstances in the said cases prohibit a square application of the rule under the previous ERB decisions.

II Use of "Net Average Investment Method" is Not Unreasonable

In the determination of the rate base, property used in the operation of the public utility must be subject to appraisal and evaluation to determine the fair value thereof entitled to a fair return. With respect to those properties which have not been used by the public utility for the entire duration of the test year, i.e., the year subject to audit examination for rate-making purposes, a valuation method must be adopted to determine the proportionate value of the property. Petitioners maintain that the net average investment method (also known as "actual number of months use method") recommended by COA and adopted by the ERB should be used, while MERALCO argues that the average investment method (also known as the "trending method") to determine the proportionate value of properties should be applied.

Under the "net average investment method," properties and equipment used in the operation of a public utility are entitled to a return only on the actual number of months they are in service during the period.[34] In contrast, the "average investment method" computes the proportionate value of the property by adding the value of the property at the beginning and at the end of the test year with the resulting sum divided by two.[35] The ERB did not abuse its discretion when it applied the net average 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 computation of

the proportionate value of the property and equipment in accordance with the actual number of months such property or equipment is in service for purposes of determining the rate base is favored, as against the trending method employed by MERALCO, "to reflect the real status of the property."[36] By using the net average investment method, the ERB and the COA considered for determination of the rate base the value of properties and equipment used by MERALCO in proportion to the period that 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 rate base of a public utility entitled to a return must be based on properties and equipment actually being used or are useful to the operations of the public utility.[37]

MERALCO does not seriously contest this treatment of actual usage of property but opposes the method of computation or valuation thereof adopted by the ERB and the COA on the ground that the net average investment method "assumes an ideal situation where a utility, like MERALCO, is able to record in its books within any given month the value of all the properties actually placed in service during that month."[38] MERALCO contends that immediate recordal in its books of the property or equipment is not possible as MERALCOs franchise covers a wide area and that due to the volume of properties and equipment put into service and the amount of paper work required to be accomplished for recording in the books of the company, "it takes three to six months (often longer) before an asset placed in service is recorded in the books" of MERALCO.[39] Hence, MERALCO adopted the "average investment method" or the "trending method" which computes the average value of the property at the beginning and at the end of the test year to compensate for the irregular recording in its books.

MERALCOS stance is belied by the COA Report which states that the "verification of the records, as confirmed by the Management Staff, disclosed that properties are recorded in the books as these are actually placed in service."[40] Moreover, while the case was pending trial before the ERB, the ERB conducted an ocular inspection to examine the assets in service, records and books of accounts of MERALCO to ascertain the physical existence, ownership, valuation and usefulness of the assets contained in the COA Report.[41] Thus, MERALCOs contention that the date of recordal in the books does not reflect the date when the asset is placed in service is baseless.

Further, computing the proportionate value of assets used in service in accordance with the actual number of months the same is used during the test year is a more accurate method of determining the value of the properties of a public utility entitled to a return. If, as determined by COA, the date of recordal in the books of MERALCO reflects the actual date the equipment or property is used in service, there is no reason for the ERB to adopt the trending method applied by MERALCO if a more precise method is available for determining the proportionate value of the assets placed in service.

If we were to sustain the application of the "trending method," the public utility may easily manipulate the valuation of its property entitled to a return (rate base) by simply including a highly capitalized asset in the computation of the rate base even if the same was used for a limited period of time during the test year. With the inexactness of the trending method and the possibility that the valuation of certain properties may be subject to the control of and abuse by the public utility, the Court finds no reasonable basis to overturn the recommendation of COA and the decision of the ERB. MERALCO further insists that the Court should sustain the "trending method" in view of previous decisions by the Public Service Commission and of this Court which "upheld" the use of this method. By refusing to adopt the trending method, MERALCO argues that the ERB violated the rule on stare decisis.

Again, we are not impressed. It is a settled rule that the goal of rate-making is to arrive at a just and reasonable rate for both the public utility and the public which avails of the formers products and services.[42] However, what is a just and reasonable rate cannot be fixed by any immutable method or formula. Hence, it has been held that no public utility has a vested right to any particular method of valuation.[43] Accordingly, with respect to a determination of the proper method to be used in the valuation of property and equipment used by a public utility for rate-making purposes, the

administrative agency is not bound to apply any one particular formula or method simply because the same method has been previously used and applied. In fact, nowhere in the previous decisions cited by MERALCO which applied the trending method did the Court rule that the same should be the only method to be applied in all instances.

At any rate, MERALCO has not adequately shown that the rates prescribed by the ERB are unjust or confiscatory as to deprive its stockholders a reasonable return on investment. In the early case of Ynchausti S.S. Co. v. Public Utility Commissioner, this Court held: "there is a legal presumption that the rates fixed by an administrative agency are reasonable, and it must be conceded that the fixing of rates by the Government, through its authorized agents, involves the exercise of reasonable discretion and, unless there is an abuse of that discretion, the courts will not interfere."[44] Thus, the burden is upon the oppositor, MERALCO, to prove that the rates fixed by the ERB are unreasonable or otherwise confiscatory as to merit the reversal of the ERB. In the instant cases, MERALCO was unable to discharge this burden.

WHEREFORE, in view of the foregoing, the instant petitions are GRANTED and the decision of the Court of Appeals in C.A. G.R. SP No. 46888 is REVERSED. Respondent MERALCO is authorized to adopt a rate adjustment in the amount of P0.017 per kilowatthour, effective with respect to MERALCOs billing cycles beginning February 1994. Further, in accordance with the decision of the ERB dated February 16, 1998, the excess average amount of P0.167 per kilwatthour starting with the applicants billing cycles beginning February 1998 is ordered to be refunded to MERALCOs customers or correspondingly credited in their favor for future consumption.

SO ORDERED.

Panganiban, Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

2.
[1989V549] RODOLFO B. ALBANO, petitioner, vs. HON. RAINERIO O. REYES, PHILIPPINE PORTS AUTHORITY, INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., E. RAZON, INC., ANSCOR CONTAINER CORPORATION, and SEALAND SERVICES. LTD., respondents.1989 July 11En BancG.R. No. 83551D E C I S I O N

PARAS, J.:

This is a Petition for Prohibition with prayer for Preliminary Injunction or Restraining Order seeking to restrain the respondents Philippine Ports Authority (PPA) and the Secretary of the Department of Transportation and Communications Rainerio O. Reyes from awarding to the International Container Terminal Services, Inc. (ICTSI) the contract for the development, management and operation of the Manila International Container Terminal (MICT).

On April 20, 1987, the PPA Board adopted its Resolution No. 850 directing PPA management to prepare the Invitation to Bid and all relevant bidding documents and technical requirements necessary for the public bidding of the development, management and operation of the MICT at the Port of Manila, and authorizing the Board Chairman, Secretary Rainerio O. Reyes, to oversee the preparation of the technical and the documentation requirements for the MICT leasing as well as to implement this project.

Accordingly, respondent Secretary Reyes, by DOTC Special Order 87-346, created a seven (7) man "Special MICT Bidding Committee" charged with evaluating all bid proposals, recommending to the Board the best bid, and preparing the corresponding contract between the PPA and the winning bidder or contractor. The Bidding Committee consisted of three (3) PPA representatives, two (2) Department of Transportation and Communications (DOTC) representatives, one (1) Department of Trade and Industry (DTI) representative and one (1) private sector representative. The PPA management prepared the terms of reference, bid documents and draft contract which materials were approved by the PPA Board.

The PPA published the Invitation to Bid several times in a newspaper of general circulation which publication included the reservation by the PPA of "the right to reject any or all bids and to waive any informality in the bids or to accept such bids which may be considered most advantageous to the government."

Seven (7) consortia of companies actually submitted bids, which bids were opened on July 17, 1987 at the PPA Head Office. After evaluation of the several bids, the Bidding Committee recommended the award of the contract to develop, manage and operate the MICT to respondent International Container Terminal Services, Inc. (ICTSI) as having offered the best Technical and Financial Proposal. Accordingly, respondent Secretary declared the ICTSI consortium as the winning bidder.

Before the corresponding MICT contract could be signed, two successive cases were filed against the respondents which assailed the legality or regularity of the MICT bidding. The first was Special Civil Action 55489 for "Prohibition with Preliminary Injunction" filed with the RTC of Pasig by Basilio H. Alo, an alleged "concerned taxpayer", and, the second was Civil Case 88-43616 for "Prohibition with Prayer for Temporary Restraining Order (TRO)" filed with the RTC of Manila by C.F. Sharp Co., Inc., a member of the nine (9) firm consortium ---- "Manila Container Terminals, Inc." which had actively participated in the MICT Bidding.

Restraining Orders were issued in Civil Case 88-43616 but these were subsequently lifted by this Court in Resolutions dated March 17, 1988 (in G.R. No. 82218 captioned "Hon. Rainerio O. Reyes etc., et al. vs. Hon. Doroteo N. Caneba, etc., et al.) and April 14, 1988 (in G.R. No. 81947 captioned "Hon. Rainerio O. Reyes etc., et al. vs. Court of Appeals, et al.")

On May 18, 1988, the President of the Philippines approved the proposed MICT Contract, with directives that "the responsibility for planning, detailed engineering, construction, expansion, rehabilitation and capital dredging of the port, as well as the determination of how the revenues of the port system shall be allocated for future port works, shall remain with the PPA; and the contractor shall not collect taxes and duties except that in the case of wharfage or tonnage dues and harbor and berthing fees, payment to the Government may be made through the contractor who shall issue provisional receipts and turn over the payments to the Government which will issue the official receipts." (Annex "I"). The next day, the PPA and the ICTSI perfected the MICT Contract (Annex "3") incorporating therein by "clarificatory guidelines" the aforementioned presidential directives. (Annex "4").

Meanwhile, the petitioner, Rodolfo A. Albano filed the present petition as citizen and taxpayer and as a member of the House of Representatives, assailing the award of the MICT contract to the ICTSI by the PPA. The petitioner claims that since the MICT is a public utility, it needs a legislative franchise before it can legally operate as a public utility, pursuant to Article 12, Section 11 of the 1987 Constitution.

The petition is devoid of merit.

A review of the applicable provisions of law indicates that a franchise specially granted by Congress is not necessary for the operation of the Manila International Container Port (MICP) by a private entity, a contract entered into by the PPA and such entity constituting substantial compliance with the law.

1. Executive Order No. 30, dated July 16, 1986, provides:

WHEREFORE, I, CORAZON C. AQUINO, President of the Republic of the Philippines, by virtue of the powers vested in me by the Constitution and the law, do hereby order the immediate recall of the franchise granted to the Manila International Port Terminals, Inc. (MIPTI) and authorize the Philippine Ports Authority (PPA) to take over, manage and operate the Manila International Port Complex at North Harbor, Manila and undertake the provision of cargo handling and port related services thereat, in accordance with P.D. 857 and other applicable laws and regulations.

Section 6 of Presidential Decree No. 857 (the Revised Charter of the Philippine Ports Authority) states:

a) The corporate duties of the Authority shall be:

xxx

xxx

xxx

(ii) To supervise, control, regulate, construct, maintain, operate, and provide such facilities or services as are necessary in the ports vested in, or belonging to the Authority.

xxx

xxx

xxx

(v) To provide services (whether on its own, by contract, or otherwise) within the Port Districts and the approaches thereof, including but not limited to

berthing, towing, mooring, moving, slipping, or docking of any vessel; loading or discharging any vessel; sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.

xxx

xxx

xxx

b) The corporate powers of the Authority shall be as follows:

xxx

xxx

xxx

(vi) To make or enter into contracts of any kind or nature to enable it to discharge its functions under this Decree.

xxx

xxx

xxx

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 undertake the providing of cargo handling and port related services thereat, the law provides that such shall be "in accordance with P.D. 857 and other applicable laws and regulations." On the other hand, P.D. No. 857 expressly empowers the PPA to provide services within Port Districts "whether on its own, by contract, or otherwise" [Sec. 6(a) (v)]. Therefore, under the terms of E.O. No. 30 and P.D. No. 857, the PPA may contract with the International Container Terminal Services, Inc. (ICTSI) for the management, operation and development of the MICP.

2. Even if the MICP be considered a public utility, 1 or a public service 2 on the theory that it is a "wharf" or a "dock" 3 as contemplated under the Public Service Act, its operation would not necessarily call for a franchise from the Legislative Branch. Franchises issued by Congress are not required before each and every public utility may operate. Thus, the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities. (See E.O. Nos. 172 and 202)

That the Constitution provides in Art. XII, Sec. 11 that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility shall be subject to amendment, alteration or repeal by Congress does not necessarily imply, as petitioner posits, that only Congress has the power to grant such authorization. Our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such authorization for certain classes of public utilities. 4

As stated earlier, E.O. No. 30 has tasked the PPA with the operation and management of the MICP, in accordance with P.D. 857 and other applicable laws and regulations. However, P.D. 857 itself authorizes the PPA to perform the service by itself, by contracting it out, or through other means. Reading E.O. No. 30 and P.D. No. 857 together, the inescapable conclusion 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 management by another by contract or other means, at its option. The latter 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 becomes unnecessary.

In the instant case, the PPA, in the exercise of the option granted it by P.D. No. 857, chose to contract out the operation and management of the MICP to a private corporation. This is clearly within its power to do. Thus, PPA's acts of privatizing the MICT and awarding the MICT contract to ICTSI are wholly within the jurisdiction of the PPA under its Charter which empowers the PPA to "supervise, control, regulate, construct, maintain, operate and 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).

The contract between the PPA and ICTSI, coupled with the President's written approval, constitute the necessary authorization for ICTSI's operation and management of the MICP. The award of the MICT contract approved by no less than the President of the Philippines herself enjoys the legal presumption of validity and regularity of official action. In the case at bar, there is no evidence which clearly shows the constitutional infirmity of the questioned act of government.

For these reasons the contention that the contract between the PPA and ICTSI is illegal in the absence of a franchise from Congress appears bereft of any legal basis.

3. On the peripheral issues raised by the party, the following observations may be made:

A. That petitioner herein is suing as a citizen and taxpayer and as a Member of the House of Representatives, sufficiently clothes him with the standing to institute the instant suit questioning the validity of the assailed contract. While the expenditure of public funds may not be involved under the contract, public interest is definitely involved considering the important role of the MICP in the economic development of the country and the magnitude of the financial consideration involved. Consequently, the disclosure provision in the Constitution 5 would constitute sufficient authority for upholding petitioner's standing. [Cf. Taada v. Tuvera, G.R. No. 63915, April 24, 1985, 136 SCRA 27, citing Severino v. Governor General, 16 Phil. 366 (1910), where the Court considered the petitioners with sufficient standing to institute an action where a public right is sought to be enforced.]

B. That certain committees in the Senate and the House of Representatives have, in their respective reports, and the latter in a resolution as well, declared their opinion that a franchise from Congress is necessary for the operation of the MICP by a private individual or entity, does not necessarily create a conflict between the Executive and the Legislative Branches needing the intervention of the Judicial Branch. The court is not faced with a situation where the Executive Branch has contravened an enactment of Congress. As discussed earlier, neither is the Court confronted with a case of one branch usurping a power pertaining to another.

C. Petitioner's contention that what was bid out, i.e., the development, management and operation of the MICP, was not what was subsequently contracted, considering the conditions imposed by the President in her letter of approval, thus rendering the bids and projections immaterial and the procedure taken ineffectual, is not supported by the established facts. The conditions imposed by the President did not materially alter the substance of the contract, but merely dealt on the details of its implementation.

D. The determination of whether or not the winning bidder is qualified to undertake the contracted service should be left to the sound judgment of the PPA. The PPA, having been tasked with the formulation of a plan for the development of port facilities and its implementation [Sec. 6(a) (i)], is the agency in the best position to evaluate the feasibility of the projections of the bidders and to decide which bid is compatible with the development plan. Neither the Court, nor Congress, has the time and the technical expertise to look into this matter.

Thus, the Court in Manuel v. Villena (G.R. No. L-28218, February 27, 1971, 37 SCRA 745] stated:

[C]ourts, as a rule, refuse to interfere with proceedings undertaken by administrative bodies or officials in the exercise of administrative functions. This is so because such bodies are generally better equipped technically to decide administrative questions and that non-legal factors, such as government policy on the matter, are usually involved in the decisions. rat p. 750.]

In conclusion, it is evident that petitioner has failed to show a clear case of grave abuse of discretion amounting to lack or excess of jurisdiction as to warrant the issuance of the writ of prohibition.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

Fernan (C.J.), Narvasa, Melencio-Herrera, Cruz, Gancayco, Bidin, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur. Feliciano, J., In the result. Padilla, J., No part in the deliberations. Sarmiento, J., No part. One of the respondents was my client.

Separate Opinions

GUTIERREZ, JR., J., concurring:

I concur in the Court's decision that the determination of whether or not the winning bidder is qualified to undertake the contracted service should be left to the sound judgment of the Philippine Ports Authority (PPA). I agree that the PPA is the agency which can best evaluate the comparative qualifications of the various bidding contractors and that in making such evaluation it has the technical expertise which neither this Court nor Congress possesses.

However, I would feel more comfortable in the thought that the above rulings are not only grounded on firm legal foundations but are also factually accurate if the PPA shows greater consistency in its submissions to this Court.

I recall that in E. Razon, Inc. v. Philippine Ports Authority (151 SCRA 233 [1977]), this Court decided the case in favor of the PPA because, among others, of its submissions that: (1) the petitioner therein committed violations as to outside stevedoring services, inadequate equipment, delayed submission of reports, and non-compliance with certain port regulations; (2) respondent Marina Port Services and not the petitioner was better qualified to handle arrastre services; (3) the petitioner being controlled by Alfredo Romualdez could not enter into a management contract with PPA and any such contract would be null and void; and (4) even if the petitioner may not have shared in the illegal intention behind the transfer of majority shares, it shared in the benefits of the violation of law.

I was surprised during the oral arguments of the present petition to hear the counsel for PPA submit diametrically different statements regarding the capabilities and worth of E. Razon, Inc., as an arrastre operator. It now turns out that the Manila International Container Terminal will depend a great deal on the expertise, reliability and competence of E. Razon, Inc., for its successful operations. The time difference between the two petitions is insubstantial. After going over the pleadings of the present petition, I am now convinced that it is the submissions of PPA in this case and not its contentions in G.R. No. 75197 which are accurate and meritorious. There is the distinct possibility that we may have been unfair in the earlier petition because of assertions made therein which are contradictory to the submissions in the instant petition. No such doubts would exist if the Government is more consistent in its pleadings on such important factual matters as those raised in these two petitions.

--------------Footnotes

1. A "public utility" is a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service. Apart from statutes

which define the public utilities that are within the purview of such statutes, it would be difficult to construct a definition of a public utility which would fit every conceivable case. As its name indicates, however, the term public utility implies a public use and service to the public. (Am. Jur. 2d V. 64, p. 549). 2. The Public Service Act (C.A. No. 146, as amended) provides that the term public service "includes every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, either for freight or passenger, or both with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries, and water craft, engaged in the transportation of passengers and freight or both, shipyard, marine railway, refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power, petroleum, sewerage system, wire or wireless communications system, wire or wireless broadcasting stations and other similar public services.." [Sec. 13 (b).]. 3. Under P.D. 857 the term dock "includes locks, cuts entrances, graving docks, inclined planes, slipways, quays, and other works and things appertaining to any dock", while wharf "means a continuous structure built parallel to along the margin of the sea or alongside riverbanks, canals, or waterways where vessels may lie alongside to receive or discharge cargo, embark or disembark passengers, or lie at rest." [Sec. 3(j) and (o).]. 4. Examples of such agencies are:

1. The Land Transportation Franchising and Regulatory Board created under E.O. No. 202, which is empowered to "issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the operation of public land transportation services provided by motorized vehicles, and to prescribe the appropriate terms and conditions therefor." [Sec. 5(b).].

2. The Board of Energy, reconstituted into the Energy Regulatory Board created under E.O. No. 172, is empowered to license refineries and regulate their capacities and to issue certificates of public convenience for the operation of electric power utilities and services, except electric cooperatives [Sec. 9 (d) and (e), P.D. No. 1206.].

5. Art. II, Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full disclosure of all its transactions involving public interest.

3.DOMINADOR RAYMUNDO, petitioner-appellant, vs. LUNETA MOTOR CO., ET AL., respondent-appellees.1933 November 29En BancG.R. Nos. 399902, 39903D E C I S I O N

MALCOLM, J:

The question squarely raised in these two cases concerns the forced sales of certificates of public convenience held by public service operators and the liability to execution of such certificates.

Breaking into the narration of the facts at the proper point, we find Nicanor de Guzman, signing as Guzco Transit, purchasing trucks from the Luneta Motor Co. and to pay for them executing a series of promissory notes guaranteed by a chattel mortgage on several trucks. On failure of De Guzman or Guzco Transit to pay the promissory notes, suit was brought in the Court of First Instance of Manila for the collection of the amount outstanding and unpaid. When the complaint was presented, a writ of attachment was obtained against the properties of the Guzco Transit, and as a consequence garnishment was served on the Secretary of the Public Service Commission attaching the right, title, and participation of the Guzco Transit in the certificates of public convenience issued in cases Nos. 25635, 23914, and 24255

covering the bus transportation lines between Manila and Cardona, Rizal, and between Manila and Pililla, Rizal. These certificates were ordered sold by the Court of First Instance of Manila, and in fact the certificates of public convenience Nos. 25635 and 23914 were sold to the Luneta Motor Co. as the highest bidder. The approval of the sheriff's sale was prayed for before the Public Service Commission, and is one of the cases under review.

Going back a moment, it is necessary to insert in the statement of facts that on July 6, 1932, or nine days after the certificates were attached by the Luneta Motor Co., the same certificates, together with certificate No. 25951 and several trucks, were sold by De Guzman for the Guzco Transit to Dominador Raymundo. The approval of this sale was sought from the Public Service Commission, and is the other case now under review. On the two cases being heard together, the commission in its decision approved the sale at public auction in favor of the Luneta Motor Co., and disapproved the sale made to Dominador Raymundo, reserving to Raymundo the right to present another petition for the approval of the sale of certificate of public convenience No. 25951 which was not included in the sale in favor of the Luneta Motor Co.

Sweeping incidental matters to one side, the prime question need not be complicated by determining if a sale of a certificate of public convenience without any equipment may be the object of execution and garnishment sale, for this is a matter of policy to be determined by the Public Service Commission, and it appears that sales of certificates of public convenience without equipment have been approved by the commission. Also it is evident that the articles of incorporation of the Luneta Motor Co. are broad enough in scope to authorize the company, if it so desires, to engage in the autotruck business, and if not, there would be nothing to preclude the company from transferring the certificates to a third party with the approval of the Public Service Commission. Further, the nature of the partnership which may have been entered into by Nicanor de Guzman and Agapito C. Correa cannot now be discussed, considering that the promissory notes were signed Guzco Transit, by Nicanor de Guzman, and considering that the judgment against Guzco Transit in the Court of First Instance of Manila has become final. Finally, the dismissal in case No. 33033 pertaining to certificate No. 25951 was without prejudice, and the appellees disclaim any interest in this certificate. Therefore, the question to be decided on this appeal is, which of the two sales, the one at public auction by virtue of an attachment, or the voluntary sale made after the property had been levied upon, should prevail and a decision on this question is dependent on a decision relative to the liability to execution of certificates of public convenience.

The Public Service Law, Act No. 3108, as amended, authorizes certificates of public convenience to be secured by public service operators from the Public Service Commission. (Sec. 15 [i].) A certificate of public convenience granted to the owner or operator of public service motor vehicles, it has been held, grants a right in the nature of a limited franchise. (Public Utilities Commission vs. Garviloch [1919], 54 Utah, 406.)

The Code of Civil Procedure establishes the general rule that "property, both real and personal, or any interest therein of the judgment debtor, not exempt by law, and all property and rights of property seized and held under attachment in the action, shall be liable to execution." (Sec. 450.) The statutory exemptions do not include franchises or certificates of public convenience. (Sec. 452.) The word "property" as used in section 450 of the Code of Civil Procedure comprehends every species of title, inchoate or complete, legal or equitable. The test by which to determine whether or not property can be attached and sold upon execution is whether the judgment debtor has such a beneficial interest therein that he can sell or otherwise dispose of it for value. (Reyes vs. Grey [1911], 21 Phil., 73.)

It will be noted that the Public Service Law and the Code of Civil Procedure are silent on the question at issue, that is, silent in the sense of not containing specific provisions on the right to attach certificates of public convenience. The same attitude was not assumed in the enactment of Act No. 667, section 10, as amended, which gave authority for the mortgage and sale under foreclosure proceedings of franchises granted by provincial and municipal governments. A similar tendency was evident in the Corporation Law, for in section 56 and following thereof express provisions were made for the sale on execution of franchises of the designated classes and of the property used in connection with them. Should the legislative intention thus evidenced be taken as meaning that the generality of the language used by

the Code of Civil Procedure was too vague to permit of forced sales of franchises and certificates of public convenience, or notwithstanding the provisions to be found in these special laws, is the language of the Code of Civil Procedure broad enough to include certificates of public convenience? We lean to the latter proposition, and will now proceed to elucidate our viewpoint.

The test to be applied was announced by our Supreme Court in Reyes vs. Grey, supra, and there is nothing in Tufexis vs. Olaguera and Municipal Council of Guinobatan ([1915], 32 Phil., 654), cited by appellant, which sanctions a contrary test. That rule it will be recalled tested the liability of property to execution by determining if the interest of the judgment debtor in the same can be sold or conveyed to another in any way. Now the Public Service Law permits the Public Service Commission to approve the sale, alienation, mortgaging, encumbering, or leasing of property, franchises, privileges, or rights or any part thereof (sec. 16 [h]), and in practice the purchase and sale of certificates of public convenience has been permitted by the Public Service Commission. If the holder of a certificate of public convenience can sell it voluntarily, there is no valid reason why the same certificate cannot be taken and sold involuntarily pursuant to court process.

If this was all that there was to the case, we might hesitate to approve attachments of certificates of public convenience. But there is more. Certificates of public convenience have come to have considerable material value. They are valuable assets. In many cases the certificates are the cornerstones on which are builded the business of bus transportation. The United States Supreme Court considers a franchise granted in consideration of the performance of public service as constituting property within the protection of the Fourteenth Amendment to the United States Constitution. (Frost vs. Corporation Commission of Oklahoma [1929], 278 U. S., 515.) If the holder of the certificate of public, convenience can thus be protected in his constitutional rights, we see no reason why the certificate of public convenience should not assume corresponding responsibilities and be susceptible as property or an interest therein of being liable to execution. In at least one State, the certificate of the railroad commission permitting the operation of a bus line has been held to be included in the term "property" in the broad sense of the term. If this is true, the certificate under our law, considered as a species of property, would be liable to execution. (Willis vs. Buck [1928], 81 Mont., 472.)

As has been intimated herein before, a practice has grown up in the Public Service Commission of permitting the alienation of certificates of public convenience and in so doing approval has been given to the sale through foreclosure proceedings of the certificates of public convenience to third parties. The very decision in the two cases before us is an illustration of this practice. The same tendency is to be noted in the lower courts. As an example in the instant record, there is a previous foreclosure of a mortgage apparently uncontested. Not only this, but tacit approval to the attachment of certificates of public convenience either through chattel mortgages or court writs has been given by this court. (Orlanes & Banaag Transportation Co. vs. Public Service Commission [1932], 57 Phil., 634; Manila Electric Company vs. Orlanes & Banaag Transportation Co. [1933], 57 Phil., 805; Nos 39525 and 39531, Red Line Transportation Co. vs. Rural Transit Co. and Bachrach Motor Co., November 17, 1933. 1 )

When the motion of the plaintiff praying that the certificates of public convenience granted by the Public Service Commission which were attached be sold at public auction and the answer opposing the granting of the motion on the ground that franchises can not be the subject of attachment and sale by garnishhment came before the Court of First Instance of Manila, the presiding Judge, Anacleto Diaz, promulgated an order which sustained the right of the plaintiff to attachment and garnishment. That order gains particular force because a later judgment by consent was taken and no appeal was attempted to this court. It is true that the sale further required the approval of the Public Service Commission, but the Public Service Commission respected the decision of the court and so we have the concurrence of the court and the commission on this question. In the order in first instance appears the following well considered language:

"It remains to be determined whether, under the law, certificates of public convenience are liable to attachment and seizure by legal process. The law is silent as to this matter. It can not be denied that such franchises are valuable. They

are subject to being sold for a consideration as much as any other property. They are even more valuable than ordinary properties, taking into consideration that they are not granted to every one who applies for them but only to those who undertake to furnish satisfactory and convenient service to the public. It may also be said that dealers in motor vehicles even extend credit to owners of such certificates or franchises. The law permits the seizure by means of a writ of attachment not only of chattels but also of shares and credits. While these franchises may be said to be of intangible character, they are however of value and are considered properties which can be seized through legal process.

"For all the foregoing, the court is of the opinion that the plaintiff is entitled to the remedy it prays for in its motion which is hereby granted."

The ruling of the Supreme Court on the question raised by the record and the assignments of error is this: Certificates of public convenience secured by public service operators are liable to execution, and the Public Service Commission is authorized to approve the transfer of the certificates of public convenience to the execution creditor. As a consequence, the decision brought on review will be affirmed, with costs against the appellant.

Avancea, C.J., Villa-Real, Hull and Imperial, JJ., concur.

4. RAMON J. GUICO, petitioner, vs. ESTATE OF FLORENCIO P. BUAN, oppositor-respondent.1957 August 30En BancG.R. No. L-9769D E C I S I O N

REYES, A., J.:

On December 6, 1954, Ramon J. Guico applied for a certificate of public convenience for the operation of a bus service on the following lines:

Bangued (Abra) - Manila and vice versa; Laoag (Ilocos Norte) - Manila and vice versa; Vigan (Ilocos Sur) - Manila and vice versa; Aparri (Cagayan) - Manila via Claveria and vice versa.

At the hearing, however, the last, i.e., the Aparri-Manila line was dropped from the application.

On the 17 of the same month, the Estate of Florencio P. Buan, which was already operating on the lines applied for, on its part asked for authority to run additional trips on those lines and later filed its opposition to Guico's application.

Equally opposed by the other transportation companies affected - among them the Manila Railroad Company and the Pangasinan Transportation Company - the two applications were, by agreement of the parties, heard in joint trial. And the Commission having found after hearing that there really was need for more trips on the lines covered by the applications, albeit the need was not such as to warrant the operation of all the trips proposed by the two applicants, it

authorized an additional 11 round trips a day, being of the opinion after going over the evidence and its own records that those 11 trips, distributed as follows: 4 on the line Laoag-Manila, 5 on the line Vigan-Manila and 2 on the line Bangued-Manila, would provide the additional service needed by the public.

In choosing, however, the operator that was to run the additional trips, the Commission expressed preference for the Estate of Buan as the one with the means and the requisite capacity and experience to maintain the same and also because, as the authorized operator on the lines, it should under the doctrine of protection, be given opportunity to provide the additional service that had been found to be needed. All of the additional trips authorized were therefore, adjudged to the said Estate.

Not satisfied with the decision, the applicant Guico brought the case here for review.

As stated, the Commission recognizes the need for more service on the lines in question but after going over the evidence and its own records concludes that 11 round trips a day should suffice. Petitioner disputes this conclusion and claims that, on the basis of the evidence presented, more trips should have been authorized. We consider the question thus raised factual and find no justification for revising the Commission's estimate, the same not being without support in evidence. In this connection we have to give recognition to the fact that the number of trips that would be required to endow a bus line with adequate service is something that cannot be determined or estimated with precision. It is subject to many variables and, too often, parties base their estimates on the observation and testimony of more or less interested witnesses. On the other hand, the Commission, which exercises supervision over these public utilities and has, besides, ready access to information contained in its own records, of which it may take judicial notice, is peculiarly in a position to appraise the needs of any given line and form a fair estimate as to the number of trips necessary to meet those needs. In the circumstances, we should do well to defer to the judgment of the Commission in that regard and refrain from interfering with the exercise of its discretion except where it clearly appears that such discretion has been gravely abused. After going over the record we do not feel that the present case calls for such interference.

It is contended, however, that it was not right for the Commission to adjudge all of the authorized additional trips to respondent, it being claimed that the latter has no certificate of public convenience for the line Vigan-Manila; that petitioner should have been given the preference because his application was filed ahead of that of the respondent; and that it was petitioner's evidence rather than respondent's that proved the need for additional service.

It may be true, as claimed, that respondent has no certificate of public convenience exclusively for the line Vigan-Manila alone. However, there is no disputing the fact that respondent has a certificate for the line Aparri-Manila via Claveria and Vigan, and protection of this line should extend to all of its parts, including the portion Vigan-Manila on which, according to the Commission, respondent is authorized (presumably under the same certificate) to run three round trips daily, an arrangement which virtually makes Vigan an intermediate station or terminal for the authorized line AparriManila.

Respondent's right to protection as an established operator on the lines applied for is not to be defeated by mere priority in the filing of the application of the newcomer. Note must especially be taken of the fact that the lines - LaoagManila, Vigan-Manila and Bangued-Manila are hundreds of kilometers long and, according to the Commission, require new and well-built trucks and an operator with ample means, such as the respondent, if a regular and continuous service is to be maintained. The Commission has also observed that the small operators on these lines have not been operating regularly so that their services have been unreliable. On the other hand, the Commission has found that the respondent has been operating since 1952 and has maintained service regularly and in accordance with the terms of its certificate. It says:

". . . It appears that applicant Estate of Buan has been operating on these lines since 1952 and that it has maintained its service regularly and in accordance with the terms of its certificate, and such being the case it should be given the opportunity to provide the necessary additional service in preference to another who has no authority or certificate to operate on the lines involved. Furthermore, applicant Estate of Buan, according to the evidence, has the experience, trained personnel and capital necessary to undertake a bus service of this nature which will require not only a big investment to start the service but the financial capacity to maintain the service regularly, to replace worn-out equipment and to answer for obligations to the public."

The charge that respondent has abandoned its trips on parts of the line Vigan-Aparri does not necessarily speak ill of respondent's service considering the explanation given that the abandonment was due to the bad condition of the road to Aparri, and, moreover, the alleged abandonment is on the line excluded by applicant from his application.

Petitioner is not necessarily entitled to preference just because, as he alleges, it was his evidence, rather than respondent's, that established the fact that there was still need for additional service. Whose evidence it was that proved such need is not important. What is important is whose operation would best subserve the public interests. On that score we find no sufficient justification for not respecting the opinion of the Commission that the additional service in this case could best be operated by the respondent.

In view of the foregoing, the decision under review is affirmed, with costs against the petitioner.

Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Endencia and Felix, JJ., concur.

5. MANILA YELLOW TAXI-CAB, INC., petitioner, vs. EDMUNDO L. CASTELO, respondent.1960 May 301st DivisionG.R. No. L-13910D E C I S I O N

BAUTISTA ANGELO, J.:

On March 7, 1957, Edmundo L. Castelo filed an application with the Public Service Commission for a certificate of public convenience to operate ten (10) units of taxicab service in the City of Cabanatuan, and to all points, barrios and municipalities in the Island of Luzon. The Manila Yellow Taxi-Cab Co., Inc., a grantee of a certificate of public convenience operating ten taxicab units in the same territory, opposed the application alleging, among others, that the taxicab service now rendered by it is more than sufficient to meet the needs of the riding public so that to approve the application would only create a ruinuous competition, and that, in the event the Commission finds that there is need for the proposed service, preferential right should be given to said oppositor it being an old operator. After trial, the Commission, by a two to one vote, found for Castelo and rendered decision granting him a certificate to operate six (6) units of taxicab service in said territory. Not satisfied with the decision, the oppositor elevated this case to this Court contending that the Commission "ERRED IN HOLDING THAT THERE IS NEED FOR MORE TAXICAB FACILITIES IN THE CITY OF CABANATUAN AND THAT THE SERVICE NOW EXISTING IS NOT SUFFICIENT FOR THE NEEDS OF THE PUBLIC." To support its claim, oppositor submitted testimonial as well as documentary evidence consisting in the testimonies of six witnesses, namely: Pedro C. Ladignon, Arturo Pineda, Vicenta de Jesus, Mario Santos, Romeo A. Punzal, and Pedrito C. Arguelles. The documentary evidence consists of Exhibits 1, 2 and 3, which show that oppositor is operating its taxicab business in Cabanatuan City at a loss.

Pedro C. Ladignon, a lawyer of Sta. Rosa, Nueva Ecija, testified that he goes to Cabanatuan City three to four times a week; that the means of transportation in the city are calesas, jitneys, big buses and the ten taxicabs of oppositor; that he frequently sees empty taxicabs of oppositor; that the riding public patronizes calesas, jitneys, auto-calesas and big buses because the fare is cheaper than the taxicabs. On cross-examination, he stated that he was a former classmate of Mr. Punzal, the branch manager of oppositor; that he does not know of any jitney or calesa which carries passengers from one point of the poblacion to another within the City of Cabanatuan, and that the jitneys and big buses carry passengers from the city to places outside of its limits. Arturo Pineda, Vicente de Jesus and Mario Santos corroborated the testimony of Ladignon, while Romeo A. Punzal, branch manager of oppositor, testified that he is operating ten units in the city the latest models being Studebaker 1952; that during daytime the available passengers are mostly emergency cases from hospitals and merchants; that there are about 900 to 1,000 calesas and about 500 to 500 jitneys in Cabanatuan City which are used as means of transportation there and other towns; that the taxicab business of oppositor in the city is losing because the average earning during the lean months is from P6.00 to P7.00 per day per cab and it is only during carnival season in Cabanatuan City that the taxicab averaged from P20.00 to P25.00 a day. However, on cross-examination, he stated that of the 10 units operated by oppositor, actually 7 are in operation, for the other three are undergoing repairs for around one month already; that there are flag-up cases involving drivers for which some had been discharged, and that some of those discharged reported daily earnings of P6.00 to P7.00. Applicant, on the other hand, also presented testimonial and documentary evidence, the latter consisting of resolutions of Cabanatuan Jaycees and of Cabanatuan City Council endorsing the move of applicant to operate additional taxi units for the benefit and convenience of the public. Testifying in his own behalf, he stated that there are seven colleges in Cabanatuan City with an average enrollment of 2,000 students each, most of whom attend night schools; that there are many government offices in the city such as the PC Headquarters, Provincial Jail, Nursery, SEATO Camp, FACOMA, etc.; that the students as well as the government employees are forced to use calesas because of lack of available taxis; that oppositor operates old units of 1952 model; that plenty of dust get into the cars because the floors have holes; that patients of hospitals cannot use the same because of this inconvenience, and there is only one ambulance service offered by the provincial hospital whose charge is higher than that of taxicabs; that there are many organizations which have their offices in Cabanatuan City such as the Rotary, Jaycee Club and the Lions Club; that the units of oppositor are inadequate especially during rainy season when most of the cocheros devote their time to planting palay; and that the resolutions of the Jaycees and the City Council of Cabanatuan were passed without his intervention. Enrique Ortiz, a member of Cabanatuan City Council, corroborated applicant's testimony as to the inadequacy of the service rendered by oppositor. He stated that the passengers are rendered uncomfortable due to the dust coming from holes of the floors of its cars, and that at the regular meeting of the city council composed of five Nacionalistas and three Liberals, the councilors unanimously agreed to seek approval of oppositor's application. On cross-examination, he stated that it is hard to get transportation in going to the barrios at night; that during daytime the cocheros first ask the passenger how far he was going and if the place is about three kilometers away they refuse to render service. He further stated that there are five theaters in the city and the people who go out at 11:00 o'clock at night have to walk for lack of transportation facilities. Another witness of applicant, Francisco San Vicente, testified as follows: that he is an executive officer of the Philippine Statesman College and as such he had occasion to study the existing conditions regarding the transportation need of his students; that during dismissal hours large number of students mill around the waiting shed and the entrance of the school premises waiting for buses, calesas and jeeps up to 10:00 o'clock at night; that in May of 1957, at a meeting held by the Rotary Club, of which he is secretary, the board of directors petitioned the Public Service Commission to grant more taxicab units in Cabanatuan City, a copy of which was furnished the Mayor of Cabanatuan; and that many passengers from Manila walk home when they arrive in Cabanatuan at 11:00 o'clock at night because there are no calesas, jitneys, or taxis available. Upon the foregoing evidence submitted by both parties, the Public Service Commission made the following comment: "After a careful examination of the entire record, we find merit in the claim of the applicant that there is a need for more taxicab facilities in that City of Cabanatuan and that the service now existing is not sufficient for the needs of the public. It appears that Cabanatuan is a large city that is well populated with many business and commercial establishments located in different places as well as schools and colleges, both public and private, and that the people travel from their homes to those places continuously. There is a showing that there are many horse-drawn vehicles and auto-calesas operating within the City, but it is a fact that the service of those vehicles is totally different from that of a

taxicab. There are circumstances under which an auto-calesa or a horse-drawn vehicle would not serve the purpose of a passenger who needs a conveyance for his own use up to the place where he desires to go, to wait for him there, and bring to another place, which service can only be furnished by a taxicab. . . . We find from the evidence that this is the situation in Cabanatuan City where although there are auto-calesas plying within the city there is a class of passengers who need taxicab facilities for their business or social trips. We are inclined to believe the evidence of the applicant that although the oppositor is authorized to operate 10 units in Cabanatuan City, most of the time less than 10 units are in operation because frequently units break down due to their defective condition and this is also a reason why the vehicles are not patronized even by those who need taxicabs. Oppositor's claim that it has not made any profit in the operation of its taxicabs cannot be attributed to the fact that there is no demand for taxicab service but probably to the circumstance that because of the physical condition of its vehicles, the taxicab-using public does not patronize them. We are satisfied from the evidence that the authorization to the applicant of six (6) taxicab units to supplement the service now rendered by oppositor, will promote public interests and convenience in a proper and suitable manner." We are inclined to uphold the above finding of the Commission. As we have held in one case, whether public necessity and convenience warrant the putting up of additional service is a question of fact and the finding of the Public Service Commission being "supported by sufficient evidence . . . the same should be left undisturbed" (Raymundo Transportation Co. vs. Cervo, 91 Phil., 313). And we even went to the extent of holding that this Court "will not substitute its discretion for that of the Commission on question of fact and will not interfere in the later's decision unless it clearly appears that there is no evidence to support it" (Santiago Ice Plant Co. vs. Lahoz, 87 Phil., 221; 47 Off. Gaz. [12] 403). Here, a cursory examination of the record will show that the finding of the Commission is supported by ample evidence for, as found by it, Cabanatuan is a large and well populated city where many schools, colleges, business and commercial establishments are operating, and where people travel from their homes continuously, so that even if the 10 units of oppositor are actually put in operation they cannot cope with the demand of the traveling public. Oppositor claims, however, that even if it be found that there is still need for additional taxi service the authority to fill it should be given to oppositor by virtue of its preferential right as an old operator. To meet this contention, suffice it to quote hereunder what we said in the case of Isidro vs. Ocampo, 105 Phil., 911; 56 Off. Gaz. (41) 6341: ". . . Moreover, even assuming for a moment that petitioner were an old operator on the line in question, nevertheless he has not applied for an increase in his service but allowed another to do so; and according to a line of decisions, it has been ruled that the granting of preference to an old operator applies only when said old operator has made an offer to meet the increase in traffic and not when another operator even a new one, like respondent . . . , has made the offer to serve the new line or increased the service on said line." (See also cases cited therein) Wherefore, the decision of the Public Service Commission is affirmed, with costs against oppositor. Pars, C. J., Bengzon, Padilla, Montemayor, Labrador, Concepcin, Barrera and Gutirrez David, JJ., concur.

6. G.R. No. L-23688 April 30, 1970 MANDBUSCO, INC., MANDALUYONG BUS CO., INC., PRESCILO CAMAGANACAN, BLAS REYES and ANASTACIO ESMAO, petitioners, vs. PABLO FRANSCISCO, respondent. Clemente and Clemente for petitioners. Baldomero S. Luque for respondent. CASTRO, J.: The respondent Pablo Francisco applied for a certificate of public convenience covering the operation of five (5) PUJ jitneys from barrio Pinagbuhatan, Pasig, Rizal to the intersection of Highway 54 and Shaw Boulevard, Mandaluyong, Rizal (otherwise known as the "Crossing") and vice-versa. Hearing was conducted, after due notice and publication, enabling both the respondent applicant and the oppositors Mandbusco, Inc., et al., to adduce their respective evidence. On June 15, 1964 a decision was rendered by the Public Service Commission granting the respondent's application, it appearing to a division of three commissioners that: After [a] careful study of the evidence presented by the parties, the Commission finds that the proposed service will benefit the people of Bo. Pinagbuhatan considering that there is no direct service from that place to the crossing of Highway 54 and Shaw Blvd. It can be noted also that the provincial capitol, provincial hospital and other big

establishments are located past the Poblacion of Pasig and nearer to the other proposed terminal at Highway 54 and Shaw Blvd. and that residents from Pinagbuhatan have to take 2 rides to reach these places. The dispositive portion of the decision reads: Finding further from the evidence adduced by the applicant that he is [a] Filipino citizen, legally and financially capable [of operating and maintaining] the same, the oppositions filed in this case are hereby overruled and the certificate of public convenience applied for, may be, as it is hereby GRANTED to the applicant .... It is mainly at the findings above-quoted that the petitioners, all bus operators, have aimed their present petition for review, following the rejection of their motion for reconsideration by the Commission en banc. The petitioners want to make capital of the declarations of their two witnesses, Federico Dantayana and Arturo Clemente. Let us appraise these declarations. Dantayana, an official inspector of the Commission, testified that he posted himself somewhere along the route covered by the respondent's application, and conducted a survey of the number of passenger vehicles availing themselves of the use of the Shaw Boulevard in going to and coming from Pasig, Rizal. The inspection sheets offered in evidence show that buses with a usual loading capacity of from 65 to 75 passengers each were barely half-filled on the whole, while "jitneys" with a usual loading capacity of 13 passengers each actually carried an average of only 6 passengers each for every trip. These facts, the petitioners argue, illustrate an excess of available passenger vehicles over the actual needs of the riding public. They negate the advisability of allowing the applicant's "jitneys" to serve the route between barrio Pinagbuhatan and the crossing of Highway 54 and Shaw Boulevard in Mandaluyong. Closely scrutinizing Dantayana's testimony, we cannot acquiesce in the petitioners' conclusions. The length of the route which the respondent applied for is divided into two parts. The first starts at barrio Pinagbuhatan and ends at the poblacion of the town of Pasig. The second begins at the poblacion and winds up at the crossing of Highway 54 and Shaw Boulevard in Mandaluyong. Dantayana's survey covered passenger vehicles passing through the second part of the route applied for. It appears, however, that the second part is actually only a converging point for passenger vehicles coming from towns east of Pasig, not to mention other passenger vehicles, equally numerous, destined for Manila coming from their terminals located in the Pasig poblacion itself. In short, Dantayana's survey does not at all indicate the volume of the traffic of passenger vehicles corning all the way from barrio Pinagbuhatan. After all, the primary objective of the grant of the certificate of public convenience in question was the welfare of the inhabitants of barrio Pinagbuhatan and other inhabitants along the first part of the route applied for. The petitioners' only other witness, Arturo Clemente, the president of both the Mandbusco, Inc. and of the Pasig-Manila Bus Operators Association, testified that a total of 125 buses are operating between Pasig, Rizal and Quiapo, Manila, all taking the Shaw Boulevard, which thoroughfare is part of the route applied for by the respondent. Likewise, a total of 51 "jitneys" serve that same portion of Shaw Boulevard to and from the various points in Pasig. In addition, a total of 171 buses coming from towns east of Pasig pass daily through the latter town, proceed to Shaw Boulevard, and then to Manila. All these public conveyances, the witness pointed out, are more than adequate to meet the transportation needs of the riding public in the areas served. The petitioners, the witness added, have made substantial investments in their business and, therefore, the allowance of additional public transportation vehicles, clearly unneeded, would result in ruinous competition and threaten the stability of their financial positions. This argument suffers, however, from the same basic oversight afflicting the testimony of Dantayana. All the vehicles mentioned by Clemente, except possibly for two buses a matter which we will shortly discuss do not run the full course of the route applied for by the respondent. The overlapping of service exists only with regard to the second part of that route, and this is clearly unavoidable since the stretch of road from the Pasig poblacion to the crossing serves as a common access to Highway 54 whence passengers embark for separate destinations. In the course of the hearing the petitioners presented a certificate of public convenience allowing the Mandaluyong Bus Co., Inc. to utilize two of their buses, and a third as reserve, for the line from Pinagbuhatan (Pasig, Rizal) to Plaza Miranda (Quiapo, Manila) via Mandaluyong, Rizal. This, according to petitioners, should completely negate the finding of the Commission that there exists no direct service from barrio Pinagbuhatan to the crossing of Highway 54 and Shaw Boulevard. We disagree. The certificate of public convenience adverted to merely proves that authority has been given to the grantee to operate public utility vehicles in the designated territory. It cannot serve as proof that the grantee has made actual use of such authority. Lacking any positive proof that the petitioners (or any of them) adequately serve the transportation requirements of the inhabitants of barrio Pinagbuhatan and the adjacent places, we are not inclined to overturn the finding of fact of the Commission, realizing as we do, after the reading of the record, that the same is reasonably supported by evidence.1 The petitioners invoke the "old operator rule," which is to the effect that a public utility operator should be shielded from ruinous competition by affording him the opportunity to improve his equipment and service before allowing a new operator to serve in the same territory he covers.2 This rule has no application in this case because the certificate of public convenience granted to the respondent is a maiden franchise covering the particular line connecting barrio Pinagbuhatan and the crossing of Highway 54 and Shaw Boulevard. The certificate of public convenience authorizing the Mandaluyong Bus Co., Inc. to operate two buses, with one reserve, on the line extending from barrio Pinagbuhatan to Plaza Miranda in Quiapo, Manila, while in a sense overlapping with the authority given to the respondent, was essentially intended to cover the great distance run between barrio Pinagbuhatan and Quiapo, Manila, via Pasig Boulevard, P. Sanchez, V. Mapa, Valenzuela, Old Sta. Mesa, Sta. Mesa Boulevard, Legarda, Tanduay, P. Casal, Ayala Bridge, Concepcion, Arroceros, Quezon Bridge and Quezon Boulevard. Upon the other hand, the grant in favor of the respondent covers only a brief shuttle run of 8 kilometers linking barrio Pinagbuhatan directly with the Pasig poblacion and the crossing of Highway 54 and Shaw Boulevard. The Commission favored the respondent with the certificate of public convenience in question; we are not prepared to substitute our discretion with that of the Public Service Commission in the determination of what can best meet the requirements of public convenience. The ability of the respondent to finance the maintenance and operation of the service he applied for is likewise questioned by the petitioners. This issue is now academic for the reason that the respondent has, since his receipt of the franchise, actually registered the five units covered by the authority. He has, moreover, registered one reserve unit for the same line, with the approval of the Commission. These units, plus the assets he proved he owns, are sufficient guaranty that the respondent can sustain the service he applied for.3

The petitioners, in their brief, invoke the Public Service Commission Memorandum of May 15, 1963 and its Supplemental Memorandum of July 22, 1963, with a view to establishing that the certificate of public convenience in favor of respondent was issued in violation of these memoranda. The first memorandum comes as a suggestion to all Commissioners that action on all pending applications, for certificates of public convenience for the operation of passenger service in Manila, Quezon City, Pasay City, Caloocan, Mandaluyong, Paraaque, San Juan and Makati, be suspended until further studies could be made. The supplemental memorandum contains an order addressed to the Secretary of the Commission enjoining him from calendaring for hearing or for continuation of hearing any application for passenger service in Manila and suburbs; and any decision purporting to have been rendered prior to May 15, 1963 but had not been turned over to the Secretary and recorded prior to the date of the order, should be withheld until further orders. It is not difficult to see that the territory applied for is not among the one enumerated in the Memorandum of May 15, 1963. The respondent's service stretches mainly across the town of Pasig in Rizal, and if it abuts into a tiny fraction of Mandaluyong, one of the areas covered by the enumeration, the incursion is incidental and does not necessarily render Mandaluyong the mainstream of the respondent's service. Moreover, even if the memorandum in question comprehend the present application, still public welfare and convenience, where positively found by the Commission to be subserved, should prevail. 4 ACCORDINGLY, the decision appealed from is hereby affirmed. No pronouncement as to costs. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, and Villamor, JJ., concur. Teehankee, J., concurs in the result. Barredo, J., took no part.

7. G.R. No. 70876 July 19, 1990

MA. LUISA BENEDICTO, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and GREENHILLS WOOD INDUSTRIES COMPANY, INC. respondents. Britanico, Panganiban, Benitez, Africa, Linsangan and Barinaga for petitioner. Abelardo V. Viray for private respondent. FELICIANO, J.: This Petition for Review asks us to set aside the Decision of the then Intermediate Appellate Court dated 30 January 1985 in A.C.-G.R. CV No. 01454, which affirmed in toto the decision of the Regional Trial Court ("RTC") of Dagupan City in Civil Case No. 5206. There, the RTC held petitioner Ma. Luisa Benedicto liable to pay private respondent Greenhills Wood Industries Company, Inc. ("Greenhills") the amounts of P16,016.00 and P2,000.00 representing the cost of Greenhills' lost sawn lumber and attorney's fees, respectively. Private respondent Greenhills, a lumber manufacturing firm with business address at Dagupan City, operates sawmill in Maddela, Quirino. Sometime in May 1980, private respondent bound itself to sell and deliver to Blue Star Mahogany, Inc., ("Blue Star") a company with business operations in Valenzuela, Bulacan 100,000 board feet of sawn lumber with the understanding that an initial delivery would be made on 15 May 1980. 1 To effect its first delivery, private respondent's resident manager in Maddela, Dominador Cruz, contracted Virgilio Licuden, the driver of a cargo truck bearing Plate No. 225 GA TH to transport its sawn lumber to the consignee Blue Star in Valenzuela, Bulacan. This cargo truck was registered in the name of petitioner Ma. Luisa Benedicto, the proprietor of Macoven Trucking, a business enterprise engaged in hauling freight, with main office in B.F. Homes, Paraaque. On 15 May 1980, Cruz in the presence and with the consent of driver Licuden, supervised the loading of 7,690 board feet of sawn lumber with invoice value of P16,918.00 aboard the cargo truck. Before the cargo truck left Maddela for Valenzuela, Bulacan, Cruz issued to Licuden Charge Invoices Nos. 3259 and 3260 both of which were initialed by the latter at the bottom left corner. 2 The first invoice was for the amount of P11,822.80 representing the value of 5,374 board feet of sawn lumber, while the other set out the amount of P5,095.20 as the value of 2,316 board feet. Cruz instructed Licuden to give the original copies of the two (2) invoices to the consignee upon arrival in Valenzuela, Bulacan 3 and to retain the duplicate copies in order that he could afterwards claim the freightage from private respondent's Manila office. 4 On 16 May 1980, the Manager of Blue Star called up by long distance telephone Greenhills' president, Henry Lee Chuy, informing him that the sawn lumber on board the subject cargo truck had not yet arrived in Valenzuela, Bulacan. The latter in turn informed Greenhills' resident manager in its Maddela saw-mill of what had happened. In a letter 5 dated 18 May 1980, Blue Star's administrative and personnel manager, Manuel R. Bautista, formally informed Greenhills' president and general manager that Blue Star still had not received the sawn lumber which was supposed to arrive on 15 May 1980 and because of this delay, "they were constrained to look for other suppliers." On 25 June 1980, after confirming the above with Blue Star and after trying vainly to persuade it to continue with their contract, private respondent Greenhill's filed Criminal Case No. 668 against driver Licuden for estafa. Greenhills also filed against petitioner Benedicto Civil Case No. D-5206 for recovery of the value of the lost sawn lumber plus damages before the RTC of Dagupan City. In her answer, 6 petitioner Benedicto denied liability alleging that she was a complete stranger to the contract of carriage, the subject truck having been earlier sold by her to Benjamin Tee, on 28 February 1980 as evidenced by a deed of sale. 7 She claimed that the truck had remained registered in her name notwithstanding its earlier sale to Tee because the latter had paid her only P50,000.00 out of the total agreed price of P68,000.00 However, she averred that Tee had been operating the said truck in Central Luzon from that date (28 February 1980) onwards, and that, therefore, Licuden was Tee's employee and not hers. On 20 June 1983, based on the finding that petitioner Benedicto was still the registered owner of the subject truck, and holding that Licuden was her employee, the trial court adjudged as follows: WHEREFORE, in the light of the foregoing considerations, this Court hereby renders judgment against defendant Maria Luisa Benedicto, ordering her to pay the Greenhills Wood Industries Co. Inc., thru its President and General

Manager, the amount of P16,016 cost of the sawn lumber loaded on the cargo truck, with legal rate of interest from the filing of the complaint to pay attorney's fees in the amount of P2,000.00; and to pay the costs of this suit. SO ORDERED. 8 On 30 January 1985, upon appeal by petitioner, the Intermediate Appellate Court affirmed 9 the decision of the trial court in toto. Like the trial court, the appellate court held that since petitioner was the registered owner of the subject vehicle, Licuden the driver of the truck, was her employee, and that accordingly petitioner should be responsible for the negligence of said driver and bear the loss of the sawn lumber plus damages. Petitioner moved for reconsideration, without success. 10 In the present Petition for Review, the sole issue raised is whether or not under the facts and applicable law, the appellate court was correct in finding that petitioner, being the registered owner of the carrier, should be held liable for the value of the undelivered or lost sawn lumber. Petitioner urges that she could not be held answerable for the loss of the cargo, because the doctrine which makes the registered owner of a common carrier vehicle answerable to the public for the negligence of the driver despite the sale of the vehicle to another person, applies only to cases involving death of or injury to passengers. What applies in the present case, according to petitioner, is the rule that a contract of carriage requires proper delivery of the goods to and acceptance by the carrier. Thus, petitioner contends that the delivery to a person falsely representing himself to be an agent of the carrier prevents liability from attaching to the registered owner. The Court considers that petitioner has failed to show that appellate court committed reversible error in affirming the trial court's holding that petitioner was liable for the cost of the sawn lumber plus damages. There is no dispute that petitioner Benedicto has been holding herself out to the public as engaged in the business of hauling or transporting goods for hire or compensation. Petitioner Benedicto is, in brief, a common carrier. The prevailing doctrine on common carriers makes the registered owner liable for consequences flowing from the operations of the carrier, even though the specific vehicle involved may already have been transferred to another person. This doctrine rests upon the principle that in dealing with vehicles registered under the Public Service Law, the public has the right to assume that the registered owner is the actual or lawful owner thereof It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is. 11 The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. Thus, contrary to petitioner's claim, private respondent is not required to go beyond the vehicle's certificate of registration to ascertain the owner of the carrier. In this regard, the letter presented by petitioner allegedly written by Benjamin Tee admitting that Licuden was his driver, had no evidentiary value not only because Benjamin Tee was not presented in court to testify on this matter but also because of the aforementioned doctrine. To permit the ostensible or registered owner to prove who the actual owner is, would be to set at naught the purpose or public policy which infuses that doctrine. In fact, private respondent had no reason at all to doubt the authority of Licuden to enter into a contract of carriage on behalf of the registered owner. It appears that, earlier, in the first week of May 1980, private respondent Greenhills had contracted Licuden who was then driving the same cargo truck to transport and carry a load of sawn lumber from the Maddela sawmill to Dagupan City. 12 No one came forward to question that contract or the authority of Licuden to represent the owner of the carrier truck. Moreover, assuming the truth of her story, petitioner Benedicto retained registered ownership of the freight truck for her own benefit and convenience, that is, to secure the payment of the balance of the selling price of the truck. She may have been unaware of the legal security device of chattel mortgage; or she, or her buyer, may have been unwilling to absorb the expenses of registering a chattel mortgage over the truck. In either case, considerations both of public policy and of equity require that she bear the consequences flowing from registered ownership of the subject vehicle. Petitioner Benedicto, however, insists that the said principle should apply only to cases involving negligence and resulting injury to or death of passengers, and not to cases involving merely carriage of goods. We believe otherwise. A common carrier, both from the nature of its business and for insistent reasons of public policy, is burdened by the law with the duty of exercising extraordinary diligence not only in ensuring the safety of passengers but also in caring for goods transported by it. 13 The loss or destruction or deterioration of goods turned over to the common carrier for conveyance to a designated destination, raises instantly a presumption of fault or negligence on the part of the carrier, save only where such loss, destruction or damage arises from extreme circumstances such as a natural disaster or calamity or act of the public enemy in time of war, or from an act or omission of the shipper himself or from the character of the goods or their packaging or container. 14 This presumption may be overcome only by proof of extraordinary diligence on the part of the carrier. 15 Clearly, to permit a common carrier to escape its responsibility for the passengers or goods transported by it by proving a prior sale of the vehicle or means of transportation to an alleged vendee would be to attenuate drastically the carrier's duty of extraordinary diligence. It would also open wide the door to collusion between the carrier and the supposed vendee and to shifting liability from the carrier to one without financial capability to respond for the resulting damages. In other words, the thrust of the public policy here involved is as sharp and real in the case of carriage of goods as it is in the transporting of human beings. Thus, to sustain petitioner Benedicto's contention, that is, to require the shipper to go behind a certificate of registration of a public utility vehicle, would be utterly subversive of the purpose of the law and doctrine. Petitioner further insists that there was no perfected contract of carriage for the reason that there was no proof that her consent or that of Tee had been obtained; no proof that the driver, Licuden was authorized to bind the registered owner; and no proof that the parties had agreed on the freightage to be paid. Once more, we are not persuaded by petitioner's arguments which appear to be a transparent attempt to evade statutory responsibilities. Driver Licuden was entrusted with possession and control of the freight truck by the registered owner (and by the alleged secret owner, for that matter). Driver Licuden, under the circumstances, was clothed with at least implied authority to contract to carry goods and to accept delivery of such goods for carriage to a specified destination. That the freight to be paid may-not have been fixed before loading and carriage, did not prevent the contract of carriage from arising, since the freight was at least determinable if not fixed by the tariff schedules in petitioner's main business office. Put in somewhat different terms, driver Licuden is in law regarded as the employee and agent of the petitioner, for whose acts petitioner must respond. A contract of carriage of goods was shown; the sawn lumber was loaded on board the freight truck; loss or nondelivery of the lumber at Blue Star's premises in Valenzuela, Bulacan was also proven; and petitioner has not proven either that she had exercised extraordinary diligence to prevent such loss or non-delivery or that the loss or non-delivery was due to some casualty or force majeure inconsistent with her liability. 16 Petitioner's liability to private respondent Greenhills was thus fixed and complete, without prejudice to petitioner's right to proceed against her putative transferee Benjamin Tee and driver Licuden for reimbursement or contribution. 17
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WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the former Intermediate Appellate Court dated 30 January 1985 is hereby AFFIRMED. Costs against petitioner. SO ORDERED. Fernan (Chairman), Gutierrez, Jr., and Cortes, JJ., concur

8. We have already held in the case of Montoya vs. Ignacio, 94 Phil., 182 (December 29, 1953), which the court below cited, that the law (section 20 [g], C. A. No. 146 as amended) requires the approval of the Public Service Commission in order that a franchise, or any privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the grantee; and that if property covered by the franchise is transferred or leased without this requisite approval, the transfer is not binding against the public or the Service Commission; and in contemplation of law, the grantee of record continues to be responsible under the franchise in relation to the Commission and to the public. There we gave the reason for this rule to be as follows:

". . . Since a franchise is personal in nature any transfer or lease thereof should be notified to the Public Service Commission so that the latter may take proper safeguards to protect the interest of the public. In fact, the law requires that, before the approval is granted, there should be a public hearing, with notice to all interested parties, in order that the Commission may determine if there are good and reasonable grounds justifying the transfer or lease of the property covered by the franchise, or if the sale or lease is detrimental to public interest. . . ."

The above ruling was later reiterated in the cases of Timbol vs. Osias, L-7547, April 30, 1955 and Roque vs. Malibay Transit Inc., L- 8561, November 18, 1955.

9. G.R. No. L-26815 May 26, 19810

ADOLFO L. SANTOS, petitioner, vs. ABRAHAM SIBUG and COURT OF APPEALS, respondents. MELENCIO-HERRERA, J.:

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The controversy in this case will be resolved on the basis of the following facts and expositions. Prior to April 26, 1963 (the ACCIDENT DATE), Vicente U. Vidad (VIDAD, for short) was a duly authorized passenger jeepney operator. Also prior to the ACCIDENT DATE, petitioner Adolfo L. Santos (SANTOS, for short) was the owner of a passenger jeep, but he had no certificate of public convenience for the operation of the vehicle as a public passenger jeep. SANTOS then transferred his jeep to the name of VIDAD so that it could be operated under the latter's certificate of public convenience. ln other words, SANTOS became what is known in ordinary parlance as a kabit operator. For the protection of SANTOS, VIDAD executed a re-transfer document to the former, which was to be a private document presumably to be registered if and where it was decided that the passenger jeep of SANTOS was to be withdrawn from the kabit arrangement. On the ACCIDENT DATE, private respondent Abraham Sibug (SIBUG for short) was bumped by a passenger jeepney operated by VIDAD and driven by Severe Gragas. As a result thereof, SIBUG filed a complaint for damages against VIDAD and Gragas with the Court of First Instance of Manila, Branch XVII, then presided by Hon. Arsenic Solidum. That Civil Case will hereinafter be referred to as the BRANCH XVII CASE. On December 5, 1963, a judgment was rendered by Branch XVII, sentencing VIDAD and Gragas, jointly and severally, to pay SIBUG the sums of P506.20 as actual damages; P3,000.00 as moral damages; P500.00 as attorney's fees, and costs. 1 On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, with Plate No. PUJ-343-64, registered in the name of VIDAD, and scheduled the public auction sale thereof on May 8,1964. On April 11, 1964, SANTOS presented a third-party claim with the Sheriff alleging actual ownership of the motor vehicle levied upon, and stating that registration thereof in the name of VIDAD was merely to enable SANTOS to make use of VIDAD'S Certificate of Public Convenience. After the third-party complaint was filed, SIBUG submitted to the Sheriff a bond issued by the Philippine Surety Insurance Company (THE BONDING COMPANY, for short), To save the Sheriff from liability if he were to proceed with the sale and if SANTOS' thirdparty claim should be ultimately upheld. On April 22, 1964, that is, before the scheduled sale of May 8, 1964, SANTOS instituted an action for Damages and injunction with a prayer for Preliminary Mandatory Injunction against SIBUG; VIDAD; and the Sheriff in Civil Case No. 56842 of Branch X, of the same Court of First Instance of Manila (hereinafter referred to as the BRANCH X CASE). The complaint was later amended to include the BONDING COMPANY as a party defendant although its bond had not become effective. ln the Complaint, SANTOS alleged essentially that he was the actual owner of the motor vehicle subject of levy: that a fictitious Deed of Sale of said motor vehicle was executed by him in VIDAD'S favor for purposes of operating said vehicle as a passenger jeepney under the latter's franchise; that SANTOS did not receive any payment from VIDAD in consideration of said sale; that to protect SANTOS' proprietary interest over the vehicle in question, VIDAD in turn had executed a Deed of Sale in favor of SANTOS on June 27, 1962; that SANTOS was not a party in the BRANCH XVII CASE and was not in any manner liable to the

registered owner VIDAD and the driver Gragas; that SANTOS derived a daily income of P30.00 from the operation of said motor vehicle as a passenger jeepney and stood to suffer irreparable damage will possession of said motor vehicle were not restored to him. SANTOS then prayed that 1,) pending trial, a Writ of Preliminary Mandatory injunction be issued ex-parte commanding the Sheriff of Manila to restore the motor vehicle to him and that the Sheriff be enjoined from proceeding with its sale; 2) that, after trial, the Deed of Sale in favor of VIDAD be declared absolutely fictitious and, therefore, null and void, and adjudging SANTOS to be the absolute owner of the vehicle in questioned and 3) that damages be awarded to SANTOS as proven during the trial plus attorney's fees in the amount of P450.00 and costs. 2 No public sale was conducted on May 8, 1964. On May 11, 1964, Branch X issued a Restraining Order enjoining the Sheriff from conducting the public auction sale of the motor vehicle levied upon. 3 The Restraining Order was issued wrongfully. Under the provisions of Section 17, Rule 39, the action taken by the Sheriff cannot be restrained by another Court or by another Branch of the same Court. The Sheriff has the right to continue with the public sale on his own responsibility, or he can desist from conducting the public sale unless the attaching creditor files a bond securing him against the third-party-claim. But the decision to proceed or not with the public sale lies with him. As said in Uy Piaoco vs. Osmea 9 Phil. 299, 307, "the powers of the Sheriff involve both discretional power and personal liability." The mentioned discretional power and personal liability have been further elucidated in Planes and Verdon vs. Madrigal & Co., et al., 94 Phil. 754, where it was held.
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The duty of the sheriff in connection with the execution and satisfaction of judgment of the court is governed by Rule 39 of the Rules of Court. Section 15 thereof provides for the procedure to be. followed where the property levied on execution 'is claimed by a by person. lf the third-party claim is sufficient, the sheriff, upon receiving it, is not bound to proceed with the levy of the property, unless he is given by the judgment creditor an indemnity bond against the claim (Mangaoang vs. Provincial Sheriff, 91 Phil., 368). Of course, the sheriff may proceed with the levy even without the Indemnity bond, but in such case he will answer for any damages with his own personal funds (Waits vs. Peterson, et al., S Phil. 419 Alzua et al. vs. Johnson, 21 Phil., 308; Consults No. 341 de los abogados de Smith, Bell & Co., 48 Phil., 565). And the rule also provides that nothing therein contained shall prevent a third person from vindicating his claim to the property by any proper action (Sec. 15 of Rule 39.). It appears from the above that if the attaching creditor should furnish an adequate bond. the Sheriff has to proceed with the public auction. When such bond is not filed, then the Sheriff shall decide whether to proceed. or to desist from proceeding, with the public auction. lf he decides to proceed, he will incur personal liability in favor of the successful third-party claimant. On October 14, 1965, Branch X affirmed SANTOS' ownership of the jeepney in question based on the evidence adduced, and decreed:

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WHEREFORE, judgment is hereby rendered, enjoining the defendants from proceeding with the sale of the vehicle in question ordering its return to the plaintiff and furthermore sentencing the defendant Abraham Sibug to pay the plaintiff the sum of P15.00 a day from April 10, 1964 until the vehicle is returned to him, and P500.00 as attorney's fee's as well as the costs. 4 This was subsequently amended on December 5, 1965, upon motion for reconsideration filed by SANTOS, to include the BONDING COMPANY as jointly slid severally liable with SIBUG. 5
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... provided that the liability of the Philippine Surety & insurance Co., Inc. shall in no case exceed P6,500.00. Abraham Sibug is furthermore condemned to pay the Philippine Surety & Insurance Co., Inc. the same sums it is ordered to pay under this decision. The jugdment in the BRANCH X CASE appears to be quite legally unpalatable For instance, since the undertaking furnished to the Sheriff by the BONDING COMPANY did not become effective for the reason that the jeep was not sold, the public sale thereof having been restrained, there was no reason for promulgating judgment against the BONDING COMPANY. lt has also been noted that the Complaint against VIDAD was dismissed. Most important of all, the judgment against SIBUG was inequitable. ln asserting his rights of ownership to the vehicle in question, SANTOS candidly admitted his participation in the illegal and pernicious practice in the transportation business known as the kabit system. Sec.. 20 (g) of the Public Service Act, then the applicable law, specifically provided:
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... it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the Commission previously had ... (g) to sell, alienate, mortgage, encumber or lease its property, franchise, certificates, privileges, or rights, or any part thereof. In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the registered owner and operator of record at the time of the accident. lt is true that VIDAD had executed a re-sale to SANTOS, but the document was not registered. Although SANTOS, as the kabit was the true owner as against VIDAD, the latter, as the registered owner/operator and grantee of the franchise, is directly and primarily responsible and liable for the damages caused to SIBUG, the injured party, as a consequence of the negligent or careless operation of the vehicle. 6 This ruling is based on the principle that the operator of record is considered the operator of the vehicle in contemplation of law as regards the public and third persons 7 even if the vehicle involved in the accident had been sold to another where such sale had not been approved by the then Public Service Commission. 8 For the same basic reason, as the vehicle here in question was registered in VIDAD'S name, the levy on execution against said vehicle should be enforced so that the judgment in the BRANCH XVII CASE may be satisfied, notwithstanding the fact that the secret ownership of the vehicle belonged to another. SANTOS, as the kabit should not be allowed to defeat the levy on his vehicle and to avoid his responsibilities as a kabit owner for he had led the public to believe that the vehicle belonged to VIDAD. This is one way of curbing the pernicious kabit system that facilitates the commission of fraud against the travelling public. As indicated in the Erezo case, supra, SANTOS' remedy. as the real owner of the vehicle, is to go against VIDAD, the actual operator who was responsible for the accident, for the recovery of whatever damages SANTOS may suffer by reason of the execution. In fact, if SANTOS, as the kabit had been impleaded as a party defendant in the BRANCH XVII CASE, he should be held jointly and severally liable with VIDAD and the driver for damages suffered by SIBUG, 9 as well as for exemplary damages. 10 From the judgment in the BRANCH X CASE SIBUG appealed. Meanwhile, SANTOS moved for immidiately execution. SIBUG opposed it on the ground that Branch X had no jurisdiction over the BRANCH XVII CASE, and that Branch X had no power to interfere by injunction with the judgment of Branch XVII a Court of concurrent or coordinate jurisdiction. 11 On November 13, 1965, Branch X released an order authorizing immediate execution on the theory that the BRANCH X CASE is "principally an action for the issuance of a writ of prohibition to forbid the Sheriff from selling at public auction property not belonging to the judgment creditor (sic) and there being no attempt in this case to interfere with the Judgment or decree of another court of concurrent jurisdiction." 12

Without waiting for the resolution of his Motion for Reconsideration, SIBUG sought relief from respondent Appellate Court in a Petition for certiorari with Preliminary injunction. On November 18, 1965, respondent Court of Appeals enjoined the enforcement of the Branch X Decision and the Order of execution issued by said Branch. 13 On September 28, 1966, respondent Count of Appeals rendered the herein challenged Decision nullifying the judgment renderred in the Branch X Case and permanently restraining V from taking cognizance of the BRANCH X CASE SANTOS. It ruled that:
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... the respondent Court Branch X, indeed, encroached and interfered with the judgment of Branch XVII when it issued a restraining order and finally a decision permanently enjoining the other court from excuting the decision rendered in Civil Case No. 54335. This to our mind constitutes an interference with the powers and authority of the other court having co-equal and coordinate jurisdiction. To rule otherwise, would indubitably lead to confusion which might hamper or hinder the proper administration of justice. ... 14 Respondent Court further held that SANTOS may not be permitted to prove his ownership over a particular vehicle being levied upon but registered in another's name in a separated action, observing that:
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As the vehicle in question was registered in the name of Vicente U. Vidad, the government or any person affected by the representation that said vehicle is registered under the name of a particular person had the right to rely on his declaration of ownership and registration: and the registered owner or any other person for that matter cannot be permitted to repudiate said declaration with the objective of proving that said registered vehicle is owned by another person and not by the registered owner (sec. 68, (a), Rule 123, and art. 1431, New Civil Code) xxx xxx xxx Were we to allow a third person to prove that he is the real owner of a particular vehicle and not the registered owner it would in effect be tantamount to sanctioning the attempt of the registered owner of the particular vehicle in evading responsibility for it cannot be dispelled that the door would be opened to collusion between a person and a registered owner for the latter to escape said responsibility to the public or to any person. ... SANTOS now seeks a review of respondent Court's Decision contending that:

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1) The respondent Court of Appeals erred in holding that Branch X of the Court of First Instance of Manila has no jurisdiction to restrain by Writ of Injunction the auction sale of petitioner's motor vehicle to satisfy the judgment indebtedness of another person: 2) The respondent Court of Appeals erred in holding that petitioner as owner of a motor vehicle that was levied upon pursuant to a Writ of Execution issued by Branch XVII of the Court of i stance of Manila in Civil Case No. 54335 cannot be allowed to prove in a separate suit filed in Branch X of the same court (Civil Case No. 56842) that he is the true owner of the said motor vehicle and not its registered owner; 3) The respondent Court of Appeals erred in declaring null and void the decision of the Court of First Instance of Manila (Branch X ) in Civil Case No. 56482. We gave due course to the Petition for Review on certiorari on December 14, 1966 and considered the case submitted for decision on July 20, 1967. One of the issues ventilated for resolution is the general question of jurisdiction of a Court of First Instance to issue, at the instance of a thirdparty claimant, an Injunction restraining the execution sale of a passenger jeepney levied upon by a judgment creditor in another Court of First Instance. The corollary issue is whether or not the third-party claimant has a right to vindicate his claim to the vehicle levied upon through a separate action. Since this case was submitted for decision in July, 1967, this Court, in Arabay, lnc. vs. Hon. Serafin Salvador, 15 speaking through Mr. Justice Ramon Aquino, succinctly held:
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It is noteworthy that, generally, the rule, that no court has authority to interfere by injunction with the judgments or decrees of a concurrent or coordinate jurisdiction having equal power to grant the injunctive relief, is applied in cases, where no third-party claimant is involved, in order to prevent one court from nullifying the judgment or process of another court of the same rank or category, a power which devolves upon the proper appellate court. xxx xxx xxx When the sheriff, acting beyond the bounds of his authority, seizes a stranger's property, the writ of injunction, which is issued to stop the auction sale of that property, is not an interference with the writ of execution issued by another court because the writ of execution was improperly implemented by the sheriff. Under that writ, he could attach the property of the judgment debtor. He is not authorized to levy upon the property of the third-party claimant (Polaris Marketing Corporation vs. Plan, L-40666, January 22, 1976, 69 SCRA 93, 97; Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94, 102). An earlier case, Abiera vs. Hon. Court of Appeals, et al., 16 explained the doctrine more extensively:

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Courts; Jurisdiction Courts without power to interfere by injunction with judgments or decrees of a court of concurrent jurisdiction. No court has power to interfere by injunction with the judgments or decrees of a court of concurrent or coordinate jurisdiction having equal power to grant the relief sought by injunction. Same, Same; Same; When applicable. For this doctrine to apply, the injunction issued by one court must interfere with the judgment or decree issued by another court of equal or coordinate jurisdiction and the relief sought by such injunction must be one which could be granted by the court which rendered the judgment or issued the decree. Same, Same Same; Exception Judgment rendered by another court in favor of a third person who claims property levied upon on execution. Under section 17 of Rule 39 a third person who claims property levied upon on

execution may vindicate such claim by action. A judgment rendered in his favor - declaring him to be the owner of the property - would not constitute interference with the powers or processes of the court which rendered the judgment to enforce which the execution was levied. lf that be so - and it is so because the property, being that of a stranger, is not subject to levy - then an interlocutory order, such as injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be considered as such interference either. Execution; Where property levied on claimed by third person; "Action" in section l7, Rule 39 of the Rules of Court, interpreted The right of a person who claims to be the owner of property levied upon on execution to file a thirdparty claim with the sheriff is not exclusive, and he may file an action to vindicate his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any damages that may be suffered by the third party claimant. By "action", as stated in the Rule, what is meant is a separate and independent action. Applied to the case at bar, it mill have to be held that, contrary to the rationale in the Decision of respondent Court, it was appropriate, as a matter of procedure, for SANTOS, as an ordinary third-party claimant, to vindicate his claim of ownership in a separate action under Section 17 of Rule 39. And the judgment rendered in his favor by Branch X, declaring him to be the owner of the property, did not as a basic proposition, constitute interference with the powers or processes of Branch XVII which rendered the judgment, to enforce which the was levied upon. And this is so because property belonging to a stranger is not ordinarily subject to levy. While it is true that the vehicle in question was in custodia legis, and should not be interfered with without the permission of the proper Court, the property must be one in which the defendant has proprietary interest. Where the Sheriff seizes a stranger's property, the rule does not apply and interference with his custody is not interference with another Court's Order of attachment. 17 However, as a matter of substance and on the merits, the ultimate conclusion of respondent Court nullifying the Decision of Branch X permanently enjoining the auction sale, should be upheld. Legally speaking, it was not a "stranger's property" that was levied upon by the Sheriff pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact, registered in the name of VIDAD, one of the judgment debtors. And what is more, the aspect of public service, with its effects on the riding public, is involved. Whatever legal technicalities may be invoked, we find the judgment of respondent Court of Appeals to be in consonance with justice. WHEREFORE, as prayed for by private respondent Abraham Sibug, the petition for review on certiorari filed by Adolfo L. Santos is dismissed with costs against the petitioner. SO ORDERED. Makasiar, Guerrero and De Castro, * JJ., concur. Teehankee (Chairman), concurs in the result

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10.
11. G.R. No. L-15122 March 10, 1920 THE UNITED STATES, plaintiff-appellee, vs. TAN PIACO, VENTURA ESTUYA, PEDRO HOMERES, MAXIMINO GALSA and EMILIO LEOPANDO, defendants. TAN PIACO, appellant.
Recaredo Ma. Calvo for appellant. Attorney-General Paredes for appellee.

JOHNSON, J.:

Said defendants were charged with a violation of the Public Utility Law (Act No. 2307 as amended by Acts Nos. 2362 and 2694), in that they were operating a public utility without permission from the Public Utility Commissioner.

Upon the complain presented each of said defendants were arrested and brought to trial. After hearing the evidence the Honorable Cayetano Lukban, judge, found that the evidence was insufficient to support the charges against Ventura Estuya, Pedro Homeres, Maximino Galsa and Emilio Leopando, and absolved them from all liability under the complaint and discharged them from all liability under the complaint and discharged them from the custody of the law. The lower court found the defendant Tan Piaco guilty of the crime charged in the complaint and sentence him to pay a fine of P100, and, in case of insolvency, to suffer subsidiary imprisonment, and to pay one-fifth part of the costs. From that sentence Tan Piaco appealed to this court.

The facts proved during the trial of the cause may be stated as follows:

The appellant rented two automobile trucks and was using them upon the highways of the Province of Leyte for the purpose of carrying some passengers and freight; that he carried passengers and freight under a 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 freight.

The Attorney-General, in a carefully prepared brief, says: "The question is whether the appellant, under the above facts, was a public utility under the foregoing definitions," and was therefore subject to the control and regulation of the Public Utility Commission. "We have not found anything in the evidence showing that the appellant operated the trucks in question for public use. These trucks, so far as indicated by the evidence and as far as the appellant is concerned, furnished service under special agreements to carry particular persons and property. . . . For all that we can deduce from the evidence, these passengers, or the owners of the freight, may have controlled the whole vehicles 'both as to content, direction, and time of use,' which facts, under all the circumstances of the case, would, in our opinion, take away the defendant's business from the provisions of the Public Utility Act."

In support of the conclusion of the Attorney-General, he cites the case of Terminal Taxicab Co. vs. Kutz (241 U. S.. 252). In that case the Terminal Taxicab Co. furnished automobiles from its central garage on special orders and did not hold itself out to accommodate any and all persons. The plaintiff reserve to itself the right to refuse service. The Supreme Court of the United States, speaking through Mr. Justice Holmes, said: "The bargains made by the plaintiff are individual, and however much they may tend towards uniformity in price, probably have not the mechanical fixity of charges that attend the use of taxicabs from the stations to the hotels. The court is of the opinion that that part of the business is not to be regarded as a public utility. It is true that all business, and for the matter of that, every life in all its details, has a public aspect, some bearing upon the welfare of the country in which it is passed." The court held that by virtue of the fact that said company did not hold itself out to serve any and all persons, it was not a public utility and was not subject to the jurisdiction of the public utility commission.

Upon the facts adduced during the trial of the cause, and for the foregoing reasons, the Attorney-General recommends that the sentence of the lower court be revoked and that the appellant be absolved from all liability under the complaint.

Section 14 of Act No. 2307, as amended by section 9 of Act No. 2694, provides that: "The Public Utility Commission or Commissioners shall have general supervision and regulation of, jurisdiction and control over, all public utilities. . . . The term 'public utility' is hereby defined to include every individual, copartnership, association, corporation or joint stock company, etc., etc., that now or hereafter may own, operate, managed, or control any common carrier, railroad, street railway, etc., etc., engaged in the transportation of passengers, cargo, etc., etc., for public use."

Under the provisions of said section, two things are necessary: (a) The individual, copartnership, etc., etc., must be a public utility; and ( b) the business in which such individual, copartnership, etc. etc., is engaged must be for public use. So long as the individual or copartnership, etc., etc., is engaged in a purely private enterprise, without attempting to render service to all who may apply, he can in no sense be considered a public utility, for public use.

"Public use" means the same as "use by the public." The essential feature of the public use is that it is not confined to privilege individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In determining whether a use is public, we must look not only the character of the business to be done, but also to the proposed mode of doing it. If the use is merely optional with the owners, or the public benefit is merely incidental, it is not a public use, 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 the general public. It is not enough that the general prosperity of the public is promoted. Public use is not synonymous with public interest. The true criterion by which to judge of the character of the use is whether the public may enjoy it by right or only by permission.

For all of the foregoing reasons, we agree with the Attorney-General that the appellant was not operating a public utility, for public use, and was not, therefore, subject to the jurisdiction of the Public Utility Commission.

Therefore, the sentence of the lower court is hereby revoked, and it is hereby ordered and decreed that the complaint be dismissed and that the defendant be absolved from all liability under the same, and that he be discharged from the custody of the law, without any finding as to costs. So ordered.

Arellano, C.J., Torres, Araullo, Street, Malcolm and Avancea, JJ., concur.

13. G.R. No. L-47822 December 22, 1988 PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.

Jacinto Callanta for private respondent.

FELICIANO, J.:

Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in Pangasinan. Upon gatherin g sufficient quantities of such scrap material, respondent would bring such material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged freight rates which were commonly lower than regular commercial rates.

Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada, respondent's driver and employee.

Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.

On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to exercise the extraordinary diligence required of him by the law, should be held liable for the value of the undelivered goods.

In his Answer, private respondent denied that he was a common carrier and argued that he could not be held responsible for the value of the lost goods, such loss having been due to force majeure.

On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P 2,000.00 as attorney's fees.

On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a common carrier; in finding that he had habitually offered trucking services to the public; in not exempting him from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees.

The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in transporting return loads of freight "as a casual occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this Court by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:

1. that private respondent was not a common carrier;

2. that the hijacking of respondent's truck was force majeure; and

3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)

We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts earlier set forth, be properly characterized as a common carrier.

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public.

The above article makes 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 local Idiom as "a sideline"). Article 1732 also carefully 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 unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the " general public," i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1733 deliberaom making such distinctions.

So understood, the concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the Public Service Act, "public service" includes:

... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting stations and other similar public services. ... (Emphasis supplied)

It appears to the Court that private respondent is properly characterized as a common carrier even though he merely "back-hauled" goods for other merchants from Manila to Pangasinan, although such back-hauling was done on a periodic or occasional rather than regular or scheduled manner, and even though private respondent's principal occupation was not the carriage of goods for others. There is no dispute that private respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial freight rates is not relevant here.

The Court of Appeals referred to the fact that private respondent held no certificate of public convenience, and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such carrier has also complied with the requirements of the applicable regulatory statute and implementing regulations and has been granted a certificate of public convenience or other franchise. To exempt private respondent from the liabilities of a common carrier because he has not secured the necessary certificate of public convenience, would be offensive to sound public policy; that would be to reward private respondent precisely for failing to comply with applicable statutory requirements. The business of a common carrier impinges directly and intimately upon the safety and well being and property of those members of the general community who happen to deal with such carrier. The law imposes duties and liabilities upon common carriers for the safety and protection of those who utilize their services and the law cannot allow a common carrier to render such duties and liabilities merely facultative by simply failing to obtain the necessary permits and authorizations.

We turn then to the liability of private respondent as a common carrier.

Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers. The specific import of extraordinary diligence in the care of goods transported by a common carrier is, according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.

Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of the goods which they carry, "unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character-of the goods or defects in the packing or-in the containers; and (5) Order or act of competent public authority.

It is important to point out that the above list of causes of loss, destruction or deterioration which exempt the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even if they appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as follows:

In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. (Emphasis supplied)

Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the instant case the hijacking of the carrier's truck does not fall within any of the five (5) categories of exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle must be dealt with under the provisions of Article 1735, in other words, that the private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption, however, may be overthrown by proof of extraordinary diligence on the part of private respondent.

Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not believe, however, that in the instant case, the standard of extraordinary diligence required private respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of his own life and the lives of the driver and his helper.

The precise issue that we address here relates to the specific requirements of the duty of extraordinary diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.

As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article 1745 provides in relevant part:

Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

xxx xxx xxx

(5) that the common carrier shall not be responsible for the acts or omissions of his or its employees;

(6) that the common carrier's liability for acts committed by thieves, or of r obbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; and

(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on account of the defective condition of the car vehicle, ship, airplane or other equipment used in the contract of carriage. (Emphasis supplied)

Under Article 1745 (6) above, a common carrier is held responsible and will not be allowed to divest or to diminish such responsibility even for acts of strangers like thieves or robbers, except where such thieves or robbers in fact acted "with grave or irresistible threat, violence or force." We believe and so hold that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are reached where the goods are lost as a result of a robbery which is attended by "grave or irresistible threat, violence or force."

In the instant case, armed men held up the second truck owned by private respondent which carried petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe ." There, the accused were charged with willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta, Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat, violence or force. 3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days and later releasing them in another province (in Zambales). The hijacked truck was subsequently found by the police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of robbery in band. 4

In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they shall have complied with the rigorous standard of extraordinary diligence.

We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not liable for the value of the undelivered merchandise which was lost because of an event entirely beyond private respondent's control.

ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.