PUBLIC SERVICE ACT (CA 146)

 Under the Public Service Act, the body that was referred to was the
Purpose of the Public Service Act: Public Service Commission
1. to secure adequate, sustained service for the public at the least  However, the Public Service Commission has been divided into those
possible cost; and 3
2. to protect and conserve investments which have already been made
for that purpose Note:
Any reference to the Public Service Commission (which is now
Public Service defunct) shall be understood to be the appropriate board, authority or
Meaning of “PUBLIC” in public service – individuals in general without agency of the government that took over its functions
restriction or selection to the extent that the capacity of the utility may
admit such service or use Q: What is the requisite for the operation of a public utility?
A: That is Section 15 of the Public Service Act – Certificate of Public
 “Public” does not mean everyone or all Filipinos Convenience or Certificate of Public Convenience and Necessity
 As long as these people are not prevented from using these utilities,
then, those individuals that comprise a group can be considered Section 15. Certificate of Public Convenience or Certificate of
public Public Convenience and Public Necessity
No public service shall operate in the Philippines without possessing
Public Utility a valid and subsisting certificate from the proper regulatory body known
1. Definition – A public utility is a business or service which is engaged as “certificate of public convenience” or “certificate of public convenience
in regularly supplying the public with some commodity or service of public and necessity,” as the case may be, to the effect that the operation of said
consequence such as: service and the authorization to do business will promote the public
a. electricity interests in a proper and suitable manner.
b. gas
c. water  If a public utility or a common carrier does not have a CPC, it cannot
d. transportation raise the defense that it does not have a CPC so that it will not be
e. telephone service held liable as a common carrier. It can still be held liable as a common
carrier even without a CPC.
 A common carrier is a public utility  It can be held liable if it operates without a CPC. That is a requirement
 The public utility is not the bus. It is not the jeep but the carrier. under the Public Service Act.

Principal Determinative Characteristic of a Public Utility Distinctions between a CPC and CPCN
That of service or readiness to serve an indefinite public which has CPC CPCN
the right to demand and receive its services or commodities  Issued when it is found that  Issued upon approval of any
the operation of the franchise or privilege
 Anyone who applies for a water line with the DCWD can do so proposed public service will granted by any political
provided he has a land owner, a lessor. That person cannot be promote public interest in a subdivision of the
refused if he has all the documents proper manner for which a Philippines, when in the
 Just like transportation – anyone who wants to get on a taxi can get municipal or legislative judgment of the regulatory
on. There should be no discrimination made by the public utility franchise is not necessary body, such franchise or
(PAL vs. CAB) privilege will properly
Note: conserve the public interest
a. The fact that the service is limited to particular district or town does (approval does not have to
not prevent the business or town does not prevent the business from come from Congress; it can
being a public utility be from the mayor or
b. The number of people actually served does not determine whether a barangay)
person or company is a public utility
c. Such person or company which holds himself out to serve all who  Section 15 of the Public Service Act
wish to avail themselves of the service may be a public utility even
though only 1 or 2 people actually receive service SECTION 15. With the exception of those enumerated in the preceding
section, no public service shall operate in the Philippines without
 Example: If a particular tricycle association only serves a particular possessing a valid and subsisting certificate from the Public Service
barangay, it is still considered a public utility Commission known as "certificate of public convenience," or "certificate of
 As long as it offers its services to anyone who would like to use such public convenience and necessity," as the case may be, to the effect that
services the operation of said service and the authorization to do business will
promote the public interests in a proper and suitable manner.
State Regulation of Public Utilities The Commission may prescribe as a condition for the issuance of the
1. Basis – for the State to regulate public utilities is POLICE POWER certificate provided in the preceding paragraph that the service can be
a. The state may regulate and control public utilities to protect the acquired by the Republic of the Philippines or any instrumentality thereof
public interests to promote the health, comfort, safety and upon payment of the cost price of its useful equipment, less reasonable
welfare of the people depreciation; and likewise, that the certificate shall be valid only for a
b. The legislature may interfere with the management of public definite period of time; and that the violation of any of these conditions
utilities whenever public interest demands shall produce the immediate cancellation of the certificate without the
2. Limitations – The right to regulate public utility under the police necessity of any express action on the part of the Commission.
power does NOT extend beyond the right to: In estimating the depreciation, the effect of the use of the equipment,
a. regulate rates and charges its actual condition, the age of the model, or other circumstances affecting
b. prevent discrimination upon the part of the public utility its value in the market shall be taken into consideration.
against those who employ it; and The foregoing is likewise applicable to any extension or amendment
c. to make orders governing the conduct of the public utility to of certificates actually in force and to those which may hereafter be issued,
the ends: to permit to modify itineraries and time schedules of public services, and
- that its efficiency may be built up and maintained and to authorizations to renew and increase equipment and properties.
- that the public and its employees may be accorded
desirable safeguards and conveniences
3. The state may delegate to the public service commissions the
Where to Obtain the CPC or CPCNs
power to regulate public utilities:
a. Land – Land Transportation Franchising and Regulatory
Body Kind of Public Utility
Board (LTFRB)
LTFRB Those engaged in public LAND
b. Sea – Maritime Industry Authority (MARINA)
transportation services by
c. Air – Civil Aeronautics Board (CAB)
motorized vehicles
Q: Can the state prevent a taxi operator from hiring women as drivers? MARINA Those engaged in operation of
A: No domestic and overseas WATER
carriers
Q: Can the state prevent putting air conditioner in their taxis? CAB Those engaged in AIR commerce
A: No, because the regulation is limited to those 3 limitations and/or transportation, foreign or
domestic
 Ma’am thinks that the state can regulate the color of the taxis
 City or Municipal Council Those engaged in providing land
transportation by the use of
TRICYCLES (not trisikad)
Requisites for the Grant of a CPC or CPCN: (BQ 1995)
1. Applicant must be:
a. citizen of the Republic of the Philippines OR
b. corporation or association organized under the laws of the
Philippines at least 60% of its capital is owned by such
citizens
2. The applicant must be financially capable of undertaking the proposed
service and meeting the responsibilities incident to its operation
3. The applicant must prove that the operation of the public service
proposed and the authorization to do business will promote the public
interest in a proper and suitable manner
 The applicant must show that this particular service is needed in this
particular area
Q: What is the primordial consideration in granting CPC or CPCNs?
A: Public Interest
Situation: X wants to apply for a CPC to operate a jeepney with route from
Maa to Buhangin. You apply with the LTFRB.
Prior Operator Rule
Before permitting a new operator to invade the territory of another
already established with a CPC, the prior operator must first be given the
opportunity to extend its service in order to meet the public needs in the
matter of transportation
 That is a factor when an application is made with the LTFRB
 In the case, is there a prior operator from Maa to Buhangin route?
Parang wala. So, that rule is not a factor
 But if you want to operate a jeepney service – Buhangin to Dakudao
– may jeepney na dyan, the prior operator rule is a factor for the
LTFRB to award a CPC to the applicant
Situation: X wants to apply for a CPC to operate a jeepney with route from
Buhangin to end of Dakudao. What if there is another applicant? There
are 2 applicants – X and Y.
Prior Applicant Rule
Where there are various applicants for a public utility over the same
territory, ALL CONDITIONS BEING EQUAL (the amount of money, the
number of jeepneys to operate, the conditions of the jeepney, etc.) priority
in filing of the application for a CPC becomes an important factor in
granting or refusal of the CPC
 This rule is not saying that the prior applicant will be granted the CPC.
 It is just saying that it is an important factor if all conditions are equal
Protection of Investment Rule
One of the purposes of the Public Service Law is to protect and
conserve investments which have already been made for that purpose by
public service operators
 There is an applicant for a CPC. There are other entities who will
oppose if the applicant will be competing with their route or their
business
 Those who have invested a lot (new taxis, new buses, etc) – their
investments will be protected under the Protection of Investment Rule
When Prior Operator Rule not applicable:
1. Where public interest would be better served by the new operator
(Guico vs. Estate of Buan, Aug. 30, 1957)
2. Where the prior operator has failed to make an offer to meet the
increase traffic (Manila Yellow Taxicab vs. Castelo, May 30, 1960)
3. Where the CPC granted to the new operator is a maiden CPC,
which does not overlap with the entire route of the old operator
but only a short portion thereof as a convergence point (Mandbusco
vs. Francisco, 32 SCRA 405)
Protection of Investment Rule not applicable
1. If the application of the rule would be conducive to monopoly of
service and contrary to the principle that promotes healthy
competition (Villa Rey vs. Pangasinan, 5 SCRA 234)
Grounds for Suspension or Revocation of CPC
1. Section 16 (m) – The facts and circumstances on the strength on
which CPC was issued have been misrepresented or materially
changed
 Example: In your application, you placed there that you will
operate 100 taxis. In truth and in fact, you only operated 50
second-hand taxis. Then, there is misrepresentation of the fact.
That is a ground for suspension or revocation
2. Section 16 (n) – The holder thereof has violated or willfully and
contumaciously refused to comply with any order, rule or
regulation of the regulatory bodies or any provision of the Public
Service Act
3. Article 1765, Civil Code – The common carrier repeatedly fails to
comply with his duty to observe extraordinary diligence as
prescribed by law
Q: Can a CPC be revoked or cancelled motu propio?
A: No
Due Process in Revocation or Cancellation of CPC: (BQ 1992)
1. There must be notice and hearing
2. But according to the SC in the case of CIR vs. Buan (July 31,
1958), a formal charge is not necessary for as long as the holder of
CPC is given his day in court
 Court – it could be before the body
Section 16 (n) – Suspension of CPC:
1. May be done PRIOR to a hearing BUT cannot exceed 30 days
2. Ground – to avoid serious and irreparable damage or
inconvenience to the public or private interests
 Example: If all the buses of a particular bus company are defective,
then, the CPC can be suspended before a hearing is conducted to
avoid serious and irreparable damage or inconvenience
Operators of Public Services
Section 19 (a) – Unlawful Service
It shall be unlawful for any public service to;
1. Provide or maintain any service that is unsafe, improper or
inadequate or
2. Withhold or refuse any service which can reasonably be
demanded and furnished
as found and determined by the Commission in a final order which
shall be conclusive and shall take effect in accordance with this Act. Upon
appeal or otherwise
 If a carrier provides or maintains taxicabs that are unsafe, improper
or inadequate, that is a ground already for the suspension or
cancellation of CPC
 If a jeepney operator or the driver of the jeepney refuse to allow
passengers to board where they choose passenger, that is already a
ground for revocation or cancellation of CPC because this is part of
the Public Service Act – refusal to comply with any rule or regulation
or provision of the Act is a ground (Section 16 (n))
 These are unlawful per se. It is really unlawful to do so
Let us go to unlawful, not per se, but without approval of the Commission
Section 20. Acts Which are UNLAWFUL Without Approval of the
Commission
1. Section 20 (a) – To increase its rates
2. Section 20 (b) – To operate new units (Ammen Transportation vs.
Francisco, Nov. 29, 1957)
3. Section 20 (g) – Sell, mortgage or lease its CPC, property,
franchise or rights (Cogeo-Cubao vs. CA 207 SCRA 346)
Q: Is it unlawful to decrease your rates?
Wowo: No, because it is favorable to the public
Lyndon: I disagree Ma’am. With LTFRB, where if they undercharge they
will also be held liable. There is this LTFRB regulation where the moment
you undercharge or overcharge, in both instances, you will be held liable
for not complying with the issuance of the LTFRB.
Raymond: I think it can lower Ma’am. I think it is discretionary.
 It is not in the Public Service Act. Under the Public Service Act, the
unlawful act is to increase the approval. If it is in the regulation of
the LTFRB, then, perhaps. That is a regulation that is to be followed.
 Example: Cebu Pacific – zero fare. They often change. Ma’am does
not know if they get the approval of CAB everytime 
 But under the Public Service Act, it is unlawful to increase without the
approval of the regulatory body.
 If your application says 100 units, then, you can operate only 100
units. If you want to increase, you have to get the approval of the
regulatory body concerned.
Case: AMMEN TRANSPORTATION vs. FRANCISCO
HELD: He must show that there is a public need for it.
There are the requirements to entitle a common carrier to increase
his units:
a. He had regularly undertaken all his authorized trips
b. His buses were sufficiently loaded with passengers
c. Many travelers could not be conveniently accommodated
Q: Can a taxi operator sell one unit to another person?
A: Yes, as long as he has the approval of the regulatory body (LTFRB)
Q: Can a taxi operator sell his CPC?
A: Yes, provided there is approval. Without the approval, that is a
unlawful and a violation of the Public Service Act
Effect of Sale or Lease of CPC Without Prior Approval of
Regulatory Body:
1. The sale or lease is valid and binding between the parties
2. BUT it is not effective against the regulatory body concerned
3. The approval is only necessary to protect the public interest
4. The registered owner is liable for damages sustained by a third
person
 If the registered owner sells a taxi to X and the taxi figured in an
accident and the passenger sues, the registered owner is still the
previous owner since he sold without the approval of the regulatory
body.
 The registered owner is held liable to third persons for damages,
regardless of who the actual owner is
Case: BENEDICTO vs. IAC
FACTS: Benedicto, a common carrier, sold her truck to Tee. The truck
was used to transport lumber by Greenhills Woods. The lumber never
arrived. An action was filed by Greenhills against Benedicto, who denies
liability on the ground that she has already sold the truck to Tee. Despite
the sale, Benedicto remained the registered owner of the truck because
she has not been paid for the full amount of the truck by Tee.
ISSUE: May Benedicto be held liable for the undelivered lumber?
HELD: YES, third persons can sue the registered owner who did not get
the prior consent or approval of the regulatory body.
Case: ROQUE vs. MALIBAY
FACTS: Juan is a registered owner of a jeepney. He sold the jeepney to
Pedro without the approval of the regulatory body. Later, judgment was
rendered against Juan. Juan had a creditor who filed a case against him
and judgment was rendered against him. And the jeepney, which was still
in the name of Juan, was attached to satisfy the judgment against Juan.
ISSUE: Was the attachment valid?
HELD: YES, the attachment was valid because the sale in favor of Pedro
was not approved by the Public Service Commission. Therefore, the
transfer was not binding against public.
Prescriptive Period for filing a case (Section 28)
1. 60 days – violations of orders, decisions and regulations of the
regulatory bodies
2. 180 days – violations of the provisions of the Public Service Act
Kabit System
An arrangement whereby a person who has been granted a CPC
allows another person who owns motor vehicles to operate under such
franchise for a fee
Kabit System – Legal or Not?
1. Not penalized outright as a criminal offense
2. But invariably recognized as contrary to public policy and
therefore VOID and INEXISTENT b under Article 1409 of the Civil
Code
3. One of the root causes of the prevalence of graft and corruption in
the government transportation offices
4. It is an abuse of the CPC which is a special privilege granted by
the government
 If you are caught engaging the kabit system, you will not be assisted
by the court.
Case: SANTOS vs. SIBUG (BQ 1990)
FACTS: Vidad had a CPC while Santos owns a jeepney which has no CPC.
Santos made it appear that he transferred the jeepney to Vidad, the CPC
holder, so that he could operate under the latter’s CPC, under the kabit
system. For the protection of Santos, Vidad executed a re-transfer
document on the jeepney to Santos but not registered.
ISSUE: May the jeepney be attached to satisfy a judgment against Vidad
HELD: YES, where a jeepney is registered in the name of an authorized
public utility operator when it is actually owned by another, that other
person is the kabit operator, such jeepney can be sold at a public auction
to satisfy the court’s award. It cannot be considered as a stranger’s
property.
Case: JEROES vs. CA
FACTS: A jeepney was being operated under the kabit system. The
jeepney was operating in a reckless manner resulting to the death and
injury to third persons. In the criminal case for homicide and physical
injuries through reckless imprudence, the driver was convicted. The family
of the third party sued the driver, operator and the real owner of the
jeepney.
ISSUE: Can they be made liable for damages?
HELD: They are all jointly and severally liable for damages if they
engaged in the kabit system.
Case: LISA ENTERPRISES vs. CA
FACTS: Lisa Enterprises, without a franchise to operate a taxicab
business, bought 5 cars and entered into an arrangement with X for the
use of X’ certificate of public convenience in consideration of P 1,000 plus
P 200 per taxicab. The taxicabs of Lisa were registered in the name of X.
But the possession remained with the plaintiff. On paper, X owns the
taxicabs. Later, Lisa was able to acquire its own CPC and wants to get
back the taxicabs from X. X did not want to return the taxicabs. So, Lisa
filed a case in court for reconveyance of the taxi
HELD: The SC held that you engaged in kabit system. You are in pari
delicto. No affirmative relief will be given of any kind will be given to one
against the other. You are both at fault.
Boundary System
An arrangement between:
1. The owner of a motor vehicle who holds a CPC, and
2. The driver who uses the motor vehicle for a fixed number of hours
and pays to the owner a fixed amount and shoulders the gasoline
used
3. Share of the driver in lieu of a fixed compensation – the excess of
the total amount of fares earned or collected over and above the
amount paid to the owner
4. It is a contract of employment between:
a. the owner of the public utility, and
b. the driver
 Under your Labor Laws, the driver is considered as an employee of
the operator
 If their take home does not reach the minimum wage, the operator
is liable for the difference if the driver sues the operator for
underpayment of wages
BAR QUESTIONS
2003 # 9
Bayan Bus Lines had been operating satisfactorily a bus service over
the route Manila to Tarlac and vice versa via the McArthur Highway. With
the upgrading of the new North Expressway, Bayan Bus Lines service
became seemingly inadequate despite its efforts of improving the same.
Pasok Transportation, Inc., now applies for the issuance to it by the Land
Transportation Franchising and Regulatory Board of a certificate of public
convenience for the same Manila-Tarlac-Manila route. Could Bayan Bus
Lines, Inc., invoke the “prior operator” rules against Pasok Transportation,
Inc.? Why? (6%)
A: Bayan Bus Lines cannot invoke the prior operator rule. This falls
under the exceptions of the prior operator rule. As stated in the case of
Manila Taxicab, the SC held that the prior operator rule does not apply
when the prior operator has failed to make an offer to meet the increase
in traffic. In this case, the service of the prior operator was inadequate
despite efforts. In other words, it cannot meet the needs of the traveling
public.
1998 # IV
The Batong Bakal Corporation filed with the Board of Energy an
application for a Certificate of Public Convenience for the purpose of
supplying electric power and lights to the factory and its employees living
within the compound. The application was opposed by the Bulacan Electric
Corporation contending that the Batong Bakal Corporation has not secured
a franchise to operate and maintain an electric plant. Is the opposition’s
contention correct?
A: You can cite the case of PAL vs. CAB.
A franchise is not required for an applicant to be issued a CPC. A
legislative franchise is required for a CPCN.
1995 # 1
 What requirements must be met before a certificate of public
convenience may be granted under the Public Service Act?

A: We already discussed that 

1993 # XIII
1) Robert is a holder of a certificate of public convenience to operate a
taxicab service in Manila and suburbs. One evening, one of his taxicab units
was boarded by three robbers as they escaped after staging a hold-up.
Because of said incident, the LTFRB revoked the certificate of public
convenience of Robert on the ground that said operator failed to render
safe, proper and adequate service as required under Sec 19a of the Public
Service Act.

a) Was the revocation of the certificate of public convenience of Robert

justified? Explain.

A: It was not justified.

Grounds for revocation are not present. This can even be considered
a fortuitous event.
If you look at your Constitution, there is substantive and procedural
due process. Procedurally, there was no notice and hearing. As to the
grounds, the grounds for revocation do not exist.

b) When can the Commission (Board) exercise its power to suspend or

revoke certificate of public convenience?

A: You state the grounds. And then, you have to add after due notice
and hearing.

1993 # XIII
Pepay, a holder of a certificate of public convenience, failed to register
to the complete number of units required by her certificate. However, she
tried to justify such failure by the accidents that allegedly befell her,
claiming that she was so shocked and burdened by the successive
accidents and misfortunes that she did not know what she was doing, she
was confused and thrown off tangent momentarily, although she always
had the money and financial ability to buy new trucks and repair the
destroyed one. Are the reasons given by Pepay sufficient grounds to
excuse her from completing units? Explain.

A: No, she is not justified. A ground for suspension under Section 16

(m) is present - the facts and circumstances on the strength on which CPC
was issued have been misrepresented or materially changed.
Those are shallow reasons. She has the money or financial ability to
buy a new truck and to comply with her CPC.

1992 # VI
Antonio was granted a Certificate of Public Convenience (CPC) in 1986
to operate a ferry between Mindoro and Batangas using the motor vessel
“MV Lotus.” He stopped operations in 1988 due to unserviceability of the
vessel. In 1989, Basilio was granted a CPC for the same route. After a few
months, he discovered that Carlos was operating on his route under
Antonio’s CPC. Because Basilio filed a complaint for illegal operations with
the Maritime Industry Authority, Antonio and Carlos jointly filed an
application for sale and transfer of Antonio’s CPC and substitution of the
vessel “MV Lotus” with another owned by Carlos. Should Antonio’s and
Carlos’ joint application be approved? Giver your reasons.

A: NO, because kabit system is present. Once you engage in a kabit

system, you cannot do anything anymore, as what the SC said in the case
of Lisa Enterprises.

1990 # XI
Johnny owns a Sarao jeepney. He asked his neighbor Van if he could
operate the said jeepney under Van’s certificate of public convenience. Van
agreed and, accordingly, Johnny registered his jeepney under Van name.
On June 10, 1990, one of the passenger jeepneys operated by Van bumped
Tomas. Tomas was injured and in due time, he filed a complaint for
damages against Van and his driver for the injuries he suffered. The court
rendered judgment in favor of Tomas and ordered Van and his driver,
jointly and severally, to pay Tomas actual and moral damages, attorney’s
fees, and costs.

The Sheriff levied on the jeepney belonging to Johnny but registered

in the name of Van. Johnny filed a 3rd party claim with the Sheriff alleging
ownership of the jeepney levied upon and stating that the jeepney was
registered in the name of Van merely to enable Johnny to make use of
Van’s certificate of public convenience. May the Sheriff proceed with the
public auction of Johnny’s jeepney. Discuss with reasons.

A: YES, because they engaged in a kabit system.

- END -