Philippine Airlines, Inc. v.

Civil Aeronautics Board

270 SCRA 538, G.R. No. 119528
26 March 1997
Torres, Jr., J.

Topic
Administrative Agencies

Parties
● Petitioner: Philippine Airlines, Inc. (PAL)
● Respondents: Civil Aeronautics Board (CAB) and Grand International Airways,
Inc. (GrandAir)

Facts
(in chronological order)
On November 24, 1994, GrandAir applied for a Certificate of Public Convenience
and Necessity (referred to as "CPCN" from hereon) with the CAB. The Chief Hearing
Officer of the CAB accordingly set the initial hearing on December 16 and directed
GrandAir to provide a copy of the application and its corresponding notice to all
scheduled Philippine Domestic operators. GrandAir filed its Compliance and requested
for a Temporary Operating Permit (referred to as "TOP" from hereon) on December 14.
Two days later, on December 16, PAL filed its Opposition to the application.

At the initial hearing for the application, PAL claimed the CAB lacked jurisdiction to
hear GrandAir’s application because the latter did not possess a legislative franchise.
However, the Chief Hearing Officer of the CAB issued an Order denying PAL’s
Opposition. Unperturbed, PAL then opposed GrandAir's application for a TOP on
December 22. The next day, the Board promulgated Resolution No. 119(92), approving
the issuance of a TOP in favor of Grand Air for a period of three months, from
December 22, 1994 to March 22, 1995. PAL filed for a Motion for Reconsideration on
January 11, 1995, but was denied in CAB Resolution No. 02 (95) on February 2. Upon
the approval of GrandAir’s motion to the CAB on March 21, GrandAir’s TOP was
extended for a period of six months or up to September 22, 1995.

Following the events, PAL eventually filed a petition with the Supreme Court on
April 3, 1995.
Prayer
PAL prayed for the Court to prohibit the CAB from exercising jurisdiction over
GrandAir’s application for the issuance of a CPCN and to set aside a TOP issued by the
CAB to GrandAir as the latter did not possess a legislative franchise at the time of
application.

Petitioner’s Arguments
PAL argued CAB acted beyond its powers and jurisdiction when it took notice of
GrandAir's application for the issuance of a CPCN and when it issued GrandAir a TOP.
It pointed out a few irregularities but highlighted the fact that GrandAir has not been
granted a legislative franchise, which PAL claimed is a requisite for the issuance of a
CPCN, as mandated under Section 11, Article XII and Section 1, Article VI of the
Constitution.

The other arguments PAL presented include the deficiency in form and substance
of GrandAir’s application, the lack of evidence to prove the clear and urgent public need
for GrandAir’s services, and the violation of the equal protection clause stated in the
Constitution if the application was to be approved. PAL also claimed GrandAir did not
possess the required fitness and capability of operating the services applied for under
Section 4(d) of R.A. 776 and would thus only result in destructive competition.

Respondents’ Counter Arguments

Or Defenses
In the Order of the Chief Hearing Officer of the CAB dated December 20, 1994, it
has been ruled in the case of Avia Filipina vs. Civil Aeronautics Board that the CAB
does possess the jurisdiction to hear and resolve GrandAir’s application under Section
10-C (1) of Republic Act No. 776. Additionally, the CAB asserted that the issuance of a
franchise, certificate or other form of authorization for the operation of a public utility
does not necessarily imply that only Congress has the power to grant such
authorization. It expounded there were laws granting specified agencies in the
Executive Branch the power to issue such authorization for certain classes of public
utilities as stated in Article XII, Section 11 of the Constitution.

GrandAir countered that a legislative franchise was no longer a requirement for the
issuance of a CPCN and TOP. It also relied on the provisions of Republic Act 776 and
the cases of Albano vs. Reyes, Avia Filipinas International vs. Civil Aeronautics Board,
and Silangan Airways, Inc. vs. Grand International Airways, Inc., and Civil Aeronautics
Board.

Issue
(Problems/questions presented before the court for resolution)
Whether or not the Civil Aeronautics Board can issue a Certificate of Public
Convenience and Necessity or a Temporary Operating Permit to GrandAir, a
prospective domestic air transport operator who does not possess a legislative
franchise to operate as such.

Ruling
(underscore the law and legal basis of resolution)
The Supreme Court ruled that the CAB has jurisdiction over GrandAir’s application
and thus dismissed the instant petition for lack of merit and ordered the CAB to continue
hearing the application of GrandAir for the issuance of a Certificate of Public
Convenience and Necessity.

The CAB is expressly authorized by Republic Act 776 to issue a TOP or CPCN​,
and nothing contained in the said law negates the power to issue said permits. For the
sake of argument that a legislative franchise is a prerequisite, the ​absence of one does
not affect the jurisdiction of the Board to hear the application​, but tolls only upon the
ultimate issuance of the said permit. The Court also found that the CAB has the
authority to issue the permits as ​GrandAir met all the other requirements prescribed by
the law, specifically those enumerated in Section 21 of the same act.​ Moreover, ​Section
10 of the same conveyed the clear intent of Congress to delegate the authority to
regulate the issuance of a license to operate domestic air transport services,

Additionally, the Court disclosed that Congress granted certain administrative

agencies the power to grant licenses for, or to authorize the operation of certain public
utilities. It is recognized that a franchise may be derived from agencies other than those
of a legislative nature. Therefore, ​privileges bestowed by grant by local authorities as
agents for the state work as much a legislative franchise as though the grant had been
made by an act of the legislature​. Although Section 11 of Article XII recognizes
Congress' control over any franchise, certificate or authority to operate a public utility, it
does not mean Congress has exclusive authority to issue the same. Furthermore,
Congress granted the CAB the authority to determine the capability and competence of
a prospective domestic air transport operator to engage in such venture​. To assist the
Board, the same law also enumerated the requirements to determine the competency of
a prospective operator to engage in the public service of air transportation.
 However, the CAB was not intended to be a "roving commission" with unlimited
legislative authority. ​The assignment of authority is regulated by legislative restrictions
and specific limitations on how such authority should be exercised as amended in
Section 4 of R.A. No. 776​. Otherwise, the delegation is in legal effect a total surrender
by the legislature of its prerogatives in favor of the delegate.

Additional Notes:
Finally, to address PAL’s misunderstanding of the name of the permit, the use of
the word "necessity", in conjunction with "public convenience" in a certificate of
authorization to a public service entity to operate, does not in any way modify the nature
of such certification, or the requirements for the issuance of the same. It is the law
which determines the requisites for the issuance of such certification, and not the title
indicating the certificate.