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G.R. No. 47065 June 26, 1940

PANGASINAN TRANSPORTATION CO., INC., petitioner, vs.

THE PUBLIC SERVICE COMMISSION, respondent.

SYLLABUS

1. PUBLIC SERVICE COMMISSION; COMMONWEALTH ACT NO. 146 AS AMENDED BY COMMONWEALTH ACT NO. 454;
CONSTITUTIONALITY; DELEGATION OF LEGISLATIVE POWER. — Section 8 of Article XIII of the Constitution provides, among other
things, that no franchise, certificate, or any other form of authorization for the operation of a public utility shall be "for a longer
period than fifty years," and when it was ordained. in section 15 of Commonwealth Act No. 146, as amended by Commonwealth
Act No. 454, that the Public Service Commission may prescribe as a condition for the issuance of a certificate that it "shall be valid
only for a definite period of time" and, in section 16 (a) that "no such certificates shall be issued for a period of more than fifty
years," the National Assembly meant to give effect to the aforesaid constitutional mandate. More than this. it has thereby also
declared its will that the period to be fixed by the Public Service Commission shall not be longer than fifty years. All that has been
delegated to the commission, therefore, is the administrative function, involving the use of discretion, to carry out the will of the
National Assembly having in view, in addition, the promotion of "public interests in a proper and suitable manner." The fact that
the National Assembly may itself exercise the function and authority thus conferred upon the Public Service Commission does not
make the provision in question constitutionally objectionable.

2. ID.; ID.; ID.; ID. — With the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and
the increased difficulty of administering the laws, there is a constantly growing tendency toward the delegation of greater powers
by the legislature, and toward the approval of the practice by the courts. In harmony with such growing tendency, this court, since
the decision in the case of Compañia General de Tabacos de Filipinas v. Board of Public Utility Commissioners (34 Phil., 136), relied
upon by the petitioner, has, in instances, extended its seal of approval to the "delegation of greater powers by the
legislature."cralaw virtua1aw library

3. ID; ID.; ID.; APPLICABILITY TO EXISTING CERTIFICATES OF PUBLIC CONVENIENCE. — Under the fourth paragraph of section 15 of
Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, the power of the Public Service Commission to prescribe
the conditions "that the service can be acquired by the Commonwealth of the Philippines or by any instrumentality thereof upon
payment of the cost price of its useful equipment, less reasonable depreciation," and "that the certificate shall be valid only for a
definite period of time" is expressly made applicable "to any extension or amendment of certificates actually in force" and "to
authorizations to renew and increase equipment and properties." We have examined the legislative proceedings on the subject and
have found that these conditions were purposely made applicable to existing certificates of public convenience.

4. ID.; ID.; ID.; POWER OF NATIONAL ASSEMBLY TO AMEND OR ALTER EXISTING CERTIFICATES OF PUBLIC CONVENIENCE. — The
National Assembly, by virtue of the Constitution, logically succeeded to the Congress of the United States in the power to amend,
alter or repeal any franchise or right granted prior to or after the approval of the Constitution; and when Commonwealth Acts Nos.
146 and 454 were enacted, the National Assembly, to the extent therein provided, has declared its will and purpose to amend or
alter existing certificates of public convenience.

5. ID.; ID.; ID.; POLICE POWER. — Statutes enacted for the regulation of public utilities, being a proper exercise by the state of its
police power, are applicable not only to those public utilities coming into existence after its passage, but likewise to those already
established and in operation.

6. ID.; ID.; ID.; ID. — Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public Service Commission but are
"a part of the charter of every utility company operating or seeking to operate a franchise" in the Philippines. (Streator Aqueduct
Co. v. Smith Et. Al., 295 Fed., 385.) The business of a common carrier holds such a peculiar relation to the public interest that there
is superinduced upon it the right of public regulation. When private property is "affected with a public interest it ceases to be juris
privati only." When, therefore one devotes his property to a use in which the public has an interest, he, in effect, grants to the
public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he
has thus created. He may withdraw his grant by discontinuing the use, but so long as he maintains the use he must submit to
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control. Indeed, this right of regulation is so far beyond question that it is well settled that the power of the state to exercise
legislative control over public utilities may be exercised through boards of commissioners.

7. ID.; ID.; ID.; ID. — This right of the state to regulate public utilities is founded upon the police power, and statutes for the control
and regulation of utilities are a legitimate exercise thereof, for the protection of the public as well as of the utilities themselves.
Such statutes are, therefore, not unconstitutional, either as impairing the obligation of contracts, taking property without due
process, or denying the equal protection of the laws, especially inasmuch as the question whether or not private property shall be
devoted to a public use and the consequent burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his
property in public service he cannot complain that it becomes subject to the regulatory powers of the state. (51 C. J., sec. 21, pp. 9,
10.) This is the more so in the light of authorities which hold that a certificate of public convenience constitutes neither a franchise
nor a contract, confers no property right, and is a mere license or privilege.

8. ID.; ID.; ID.; RIGHT TO BE HEARD AND TO ADDUCE EVIDENCE; CASE REMANDED FOR FURTHER PROCEEDINGS. — Whilst the
challenged provisions of Commonwealth Act No. 454 are valid and constitutional, Held: That the decision of the Public Service
Commission should be reversed and the case remanded thereto for further proceedings for the reason now to be stated. On the
matter of limitation to twenty-five (25) years of the life of its certificates of public convenience, there had been neither notice nor
opportunity given the petitioner to be heard or present evidence. The commission appears to have taken advantage of the
petitioner to augment petitioner’s equipment in imposing the limitation of twenty-five (25) years which might as well be twenty or
fifteen or any number of years. This is, to say the least, irregular and should not be sanctioned. There are cardinal primary rights
which must be respected even in proceedings of this character. The first of these rights is the right to a hearing, which includes the
right of the party interested or affected to present his own case and submit evidence in support thereof. In the language of Chief
Justice Hughes, in Morgan v. U.S. (304 U.S., 1; 58 Sup. Ct., 773, 999; 82 Law. ed., 1129), ’the liberty and property of the citizen shall
be protected by the rudimentary requirements of fair play." Not only must the party be given an opportunity to present his case
and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented.

LAUREL, J.:

The petitioner has been engaged for the past twenty years in the business of transporting passengers in the Province of
Pangasinan and Tarlac and, to a certain extent, in the Province of Nueva Ecija and Zambales, by means of motor vehicles commonly
known as TPU buses, in accordance with the terms and conditions of the certificates of public convenience issued in its favor by the
former Public Utility Commission in cases Nos. 24948, 30973, 36830, 32014 and 53090. On August 26, 1939, the petitioner filed
with the Public Service Commission an application for authorization to operate ten additional new Brockway trucks (case No.
56641), on the ground that they were needed to comply with the terms and conditions of its existing certificates and as a result of
the application of the Eight Hour Labor Law. In the decision of September 26, 1939, granting the petitioner's application for
increase of equipment, the Public Service Commission ordered:

Y de acuerdo con que se provee por el articulo 15 de la ley No. 146 del Commonwealth, tal como ha sido enmendada por
el articulo 1 de la Ley No. 454, por la presente se enmienda las condiciones de los certificados de convenciencia publica
expedidos en los expedientes Nos. 24948, 30973, 36831, 32014 y la authorizacion el el expediente No. 53090, asi que se
consideran incorporadas en los mismos las dos siguientes condiciones:

Que los certificados de conveniencia publica y authorizacion arriba mencionados seran validos y subsistentes solamente
durante de veinticinco (25) anos, contados desde la fecha de la promulgacion de esta decision.

Que la empresa de la solicitante porda ser adquirida por el Commonwealth de Filipinas o por alguna dependencia del
mismo en cualquier tiempo que lo deseare previo pago del precio d costo de su equipo util, menos una depreciacion
razonable que se ha fijar por la Comision al tiempo de su adquisicion.

Not being agreeable to the two new conditions thus incorporated in its existing certificates, the petitioner filed on October 9, 1939
a motion for reconsideration which was denied by the Public Service Commission on November 14, 1939. Whereupon, on
November 20, 1939, the present petition for a writ of certiorari was instituted in this court praying that an order be issued directing
the secretary of the Public Service Commission to certify forthwith to this court the records of all proceedings in case No. 56641;
that this court, after hearing, render a decision declaring section 1 of Commonwealth Act No. 454 unconstitutional and void; that, if
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this court should be of the opinion that section 1 of Commonwealth Act No. 454 is constitutional, a decision be rendered declaring
that the provisions thereof are not applicable to valid and subsisting certificates issued prior to June 8, 1939. Stated in the
language of the petitioner, it is contended:

1. That the legislative powers granted to the Public Service Commission by section 1 of Commonwealth Act No. 454,
without limitation, guide or rule except the unfettered discretion and judgment of the Commission, constitute a
complete and total abdication by the Legislature of its functions in the premises, and for that reason, the Act, in so far
as those powers are concerned, is unconstitutional and void.
2. That even if it be assumed that section 1 of Commonwealth Act No. 454, is valid delegation of legislative powers, the
Public Service Commission has exceeded its authority because: (a) The Act applies only to future certificates and not
to valid and subsisting certificates issued prior to June 8, 1939, when said Act took effect, and (b) the Act, as applied
by the Commission, violates constitutional guarantees.

Section 15 of Commonwealth Act No. 146, as amended by section 1 of Commonwealth Act No. 454, invoked by the respondent
Public Service Commission in the decision complained of in the present proceedings, reads as follows:

With the exception to those enumerated in the preceding section, no public service shall operate in the Philippines
without possessing a valid and subsisting certificate from the Public Service Commission, known as "certificate of public
convenience," or "certificate of convenience and public necessity," as the case may be, to the effect that the operation of
said service and the authorization to do business will promote the public interests in a proper and suitable manner.

The Commission may prescribed as a condition for the issuance of the certificate provided in the preceding paragraph
that the service can be acquired by the Commonwealth of the Philippines or by any instrumentality thereof upon payment
of the cost price of its useful equipment, less reasonable depreciation; and likewise, that the certificate shall valid only for
a definite period of time; and that the violation of any of these conditions shall produce the immediate cancellation of the
certificate without the necessity of any express action on the part of the Commission.

In estimating the depreciation, the effect of the use of the equipment, its actual condition, the age of the model, or other
circumstances affecting its value in the market shall be taken into consideration.

The foregoing is likewise applicable to any extension or amendment of certificates actually force and to those which may
hereafter be issued, to permits to modify itineraries and time schedules of public services and to authorization to renew
and increase equipment and properties.

Under the first paragraph of the aforequoted section 15 of Act No. 146, as amended, no public service can operate without a
certificate of public convenience or certificate of convenience and public necessity to the effect that the operation of said service
and the authorization to do business will "public interests in a proper and suitable manner." Under the second paragraph, one of
the conditions which the Public Service Commission may prescribed the issuance of the certificate provided for in the first
paragraph is that "the service can be acquired by the Commonwealth of the Philippines or by any instrumental thereof upon
payment of the cost price of its useful equipment, less reasonable depreciation," a condition which is virtually a restatement of the
principle already embodied in the Constitution, section 6 of Article XII, which provides that "the State may, in the interest of
national welfare and defense, establish and operate industries and means of transportation and communication, and, upon
payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the
Government. "Another condition which the Commission may prescribed, and which is assailed by the petitioner, is that the
certificate "shall be valid only for a definite period of time." As there is a relation between the first and second paragraphs of said
section 15, the two provisions must be read and interpreted together. That is to say, in issuing a certificate, the Commission must
necessarily be satisfied that the operation of the service under said certificate during a definite period fixed therein "will promote
the public interests in a proper and suitable manner." Under section 16 (a) of Commonwealth Act. No. 146 which is a complement
of section 15, the Commission is empowered to issue certificates of public convenience whenever it "finds that the operation of the
public service proposed and the authorization to do business will promote the public interests in a proper and suitable manner."
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Inasmuch as the period to be fixed by the Commission under section 15 is inseparable from the certificate itself, said period cannot
be disregarded by the Commission in determining the question whether the issuance of the certificate will promote the public
interests in a proper and suitable manner. Conversely, in determining "a definite period of time," the Commission will be guided by
"public interests," the only limitation to its power being that said period shall not exceed fifty years (sec. 16 (a), Commonwealth Act
No. 146; Constitution, Art. XIII, sec. 8.) We have already ruled that "public interest" furnishes a sufficient standard.
(People vs. Fernandez and Trinidad, G. R. No. 45655, promulgated June 15, 1938; People vs. Rosenthal and Osmeña, G. R. Nos.
46076 and 46077, promulgated June 12, 1939, citing New York Central Securities Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77 Law.
ed. 138, 145, 146; Schenchter Poultry Corporation vs. I.S., 295, 540, 79 Law. ed. 1570, 1585; Ferrazzini vs. Gsell, 34 Phil., 697, 711-
712.)

Section 8 of Article XIII of the Constitution provides, among other things, that no franchise, certificate, or any other form of
authorization for the operation of a public utility shall be "for a longer period than fifty years," and when it was ordained, in section
15 of Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, that the Public Service Commission may prescribed
as a condition for the issuance of a certificate that it "shall be valid only for a definite period of time" and, in section 16 (a) that "no
such certificates shall be issued for a period of more than fifty years," the National Assembly meant to give effect to the aforesaid
constitutional mandate. More than this, it has thereby also declared its will that the period to be fixed by the Public Service
Commission shall not be longer than fifty years. All that has been delegated to the Commission, therefore, is the administrative
function, involving the use discretion, to carry out the will of the National Assembly having in view, in addition, the promotion of
"public interests in a proper and suitable manner." The fact that the National Assembly may itself exercise the function and
authority thus conferred upon the Public Service Commission does not make the provision in question constitutionally
objectionable.

The theory of the separation of powers is designed by its originators to secure action and at the same time to forestall overaction
which necessarily results from undue concentration of powers, and thereby obtain efficiency and prevent deposition. Thereby, the
"rule of law" was established which narrows the range of governmental action and makes it subject to control by certain devices. As
a corollary, we find the rule prohibiting delegation of legislative authority, and from the earliest time American legal authorities
have proceeded on the theory that legislative power must be exercised by the legislature alone. It is frankness, however, to confess
that as one delves into the mass of judicial pronouncement, he finds a great deal of confusion. One thing, however, is apparent in
the development of the principle of separation of powers and that is that the maxim of delegatus non potest delegari or delegata
potestas non potest delegari, attributed to Bracton (De Legius et Consuetedinious Angliae, edited by G. E. Woodbine, Yale University
Press, 1922, vol. 2, p. 167) but which is also recognized in principle in the Roman Law (D. 17.18.3), has been made to adapt itself to
the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of "subordinate
legislation," not only in the United States and England but in practically all modern governments. (People vs. Rosenthal and
Osmeña, G. R. Nos. 46076 and 46077, promulgated June 12, 1939.) Accordingly, with the growing complexity of modern life, the
multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a
constantly growing tendency toward the delegation of greater powers by the legislature, and toward the approval of the practice
by the court. (Dillon Catfish Drainage Dist, v. Bank of Dillon, 141 S. E. 274, 275, 143 S. Ct. 178; State vs. Knox County, 54 S. W. 2d.
973, 976, 165 Tenn. 319.) In harmony with such growing tendency, this Court, since the decision in the case of Compañia General
de Tabacos de Filipinas vs. Board of Public Utility Commissioner (34 Phil., 136), relied upon by the petitioner, has, in instances,
extended its seal of approval to the "delegation of greater powers by the legislature." (Inchausti Steamship Co. vs. Public Utility
Commissioner, 44 Phil., Autobus Co. vs. De Jesus, 56 Phil., 446; People vs. Fernandez & Trinidad, G. R. No. 45655, promulgated June
15, 1938; People vs. Rosenthal & Osmeña, G. R. Nos. 46076, 46077, promulgated June 12, 1939; and Robb and Hilscher vs. People,
G. R. No. 45866, promulgated June 12, 1939.).

Under the fourth paragraph of section 15 of Commonwealth Act No. 146, as amended by Commonwealth Act No. 454, the power
of the Public Service Commission to prescribed the conditions "that the service can be acquired by the Commonwealth of the
Philippines or by any instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable," and "that
the certificate shall be valid only for a definite period of time" is expressly made applicable "to any extension or amendment of
certificates actually in force" and "to authorizations to renew and increase equipment and properties." We have examined the
legislative proceedings on the subject and have found that these conditions were purposely made applicable to existing certificates
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of public convenience. The history of Commonwealth Act No. 454 reveals that there was an attempt to suppress, by way of
amendment, the sentence "and likewise, that the certificate shall be valid only for a definite period of time," but the attempt failed:

xxx xxx xxx

Sr. CUENCO. Señor Presidente, para otra enmienda. En la misma pagina, lineas 23 y 24, pido que se supriman las palabras
'and likewise, that the certificate shall be valid only for a definite period time.' Esta disposicion del proyecto autoriza a la
Comision de Servicios Publicos a fijar un plazo de vigencia certificado de conveniencia publica. Todo el mundo sabe que
bo se puede determinar cuando los intereses del servicio publico requiren la explotacion de un servicio publico y ha de
saber la Comision de Servisios, si en un tiempo determinado, la explotacion de algunos buses en cierta ruta ya no tiene de
ser, sobre todo, si tiene en cuenta; que la explotacion de los servicios publicos depende de condiciones flutuantes, asi
como del volumen como trafico y de otras condiciones. Ademas, el servicio publico se concede por la Comision de
Servicios Publicos el interes publico asi lo exige. El interes publico no tiene duracion fija, no es permanente; es un proceso
mas o menos indefinido en cuanto al tiempo. Se ha acordado eso en el caucus de anoche.

EL PRESIDENTE PRO TEMPORE. ¿Que dice el Comite?

Sr. ALANO. El Comite siente tener que rechazar esa enmienda, en vista de que esto certificados de conveniencia publica es
igual que la franquicia: sepuede extender. Si los servicios presentados por la compañia durante el tiempo de su certificado
lo require, puede pedir la extension y se le extendera; pero no creo conveniente el que nosotros demos un certificado de
conveniencia publica de una manera que podria pasar de cincuenta anos, porque seria anticonstitucional.

xxx xxx xxx

By a majority vote the proposed amendment was defeated. (Sesion de 17 de mayo de 1939, Asamblea Nacional.)

The petitioner is mistaken in the suggestion that, simply because its existing certificates had been granted before June 8, 1939, the
date when Commonwealth Act No. 454, amendatory of section 15 of Commonwealth Act No. 146, was approved, it must be
deemed to have the right of holding them in perpetuity. Section 74 of the Philippine Bill provided that "no franchise, privilege, or
concession shall be granted to any corporation except under the conditions that it shall be subject to amendment, alteration, or
repeal by the Congress of the United States." The Jones Law, incorporating a similar mandate, provided, in section 28, that "no
franchise or right shall be granted to any individual, firm, or corporation except under the conditions that it shall be subject to
amendment, alteration, or repeal by the Congress of the United States." Lastly, the Constitution of the Philippines provided, in
section 8 of Article XIII, that "no franchise or right shall be granted to any individual, firm, or corporation, except under the
condition that it shall be subject to amendment, alteration, or repeal by the National Assembly when the public interest so
requires." The National Assembly, by virtue of the Constitution, logically succeeded to the Congress of the United States in the
power to amend, alter or repeal any franchise or right granted prior to or after the approval of the Constitution; and when
Commonwealth Acts Nos. 146 and 454 were enacted, the National Assembly, to the extent therein provided, has declared its will
and purpose to amend or alter existing certificates of public convenience.

Upon the other hand, statutes enacted for the regulation of public utilities, being a proper exercise by the state of its police power,
are applicable not only to those public utilities coming into existence after its passage, but likewise to those already established
and in operation.

Nor is there any merit in petitioner's contention, that, because of the establishment of petitioner's operations prior to May
1, 1917, they are not subject to the regulations of the Commission. Statutes for the regulation of public utilities are a
proper exercise by the state of its police power. As soon as the power is exercised, all phases of operation of established
utilities, become at once subject to the police power thus called into operation. Procedures' Transportation Co. v. Railroad
Commission, 251 U. S. 228, 40 Sup. Ct. 131, 64 Law. ed. 239, Law v. Railroad Commission, 184 Cal. 737, 195 Pac. 423, 14 A.
L. R. 249. The statute is applicable not only to those public utilities coming into existence after its passage, but likewise to
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those already established and in operation. The 'Auto Stage and Truck Transportation Act' (Stats. 1917, c. 213) is a statute
passed in pursuance of the police power. The only distinction recognized in the statute between those established before
and those established after the passage of the act is in the method of the creation of their operative rights. A certificate of
public convenience and necessity it required for any new operation, but no such certificate is required of any
transportation company for the operation which was actually carried on in good faith on May 1, 1917, This distinction in
the creation of their operative rights in no way affects the power of the Commission to supervise and regulate them.
Obviously the power of the Commission to hear and dispose of complaints is as effective against companies securing
their operative rights prior to May 1, 1917, as against those subsequently securing such right under a certificate of public
convenience and necessity. (Motor Transit Co. et al. v. Railroad Commission of California et al., 209 Pac. 586.)

Moreover, Commonwealth Acts Nos. 146 and 454 are not only the organic acts of the Public Service Commission but are "a part of
the charter of every utility company operating or seeking to operate a franchise" in the Philippines. (Streator Aqueduct Co. v. et al.,
295 Fed. 385.) The business of a common carrier holds such a peculiar relation to the public interest that there is superinduced
upon it the right of public regulation. When private property is "affected with a public interest it ceased to be juris privati only."
When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest
in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created.
He may withdraw his grant by discounting the use, but so long as he maintains the use he must submit to control. Indeed, this
right of regulation is so far beyond question that it is well settled that the power of the state to exercise legislative control over
public utilities may be exercised through boards of commissioners. (Fisher vs. Yangco Steamship Company, 31 Phil., 1, citing
Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143 U.S. 517; New York etc. R.
Co. vs. Bristol 151 U.S. 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S. 689; Louisville etc. Ry Co. vs. Kentucky, 161 U.S. 677,
695.) This right of the state to regulate public utilities is founded upon the police power, and statutes for the control and regulation
of utilities are a legitimate exercise thereof, for the protection of the public as well as of the utilities themselves. Such statutes are,
therefore, not unconstitutional, either impairing the obligation of contracts, taking property without due process, or denying the
equal protection of the laws, especially inasmuch as the question whether or not private property shall be devoted to a public and
the consequent burdens assumed is ordinarily for the owner to decide; and if he voluntarily places his property in public service he
cannot complain that it becomes subject to the regulatory powers of the state. (51 C. J., sec. 21, pp. 9-10.) in the light of authorities
which hold that a certificate of public convenience constitutes neither a franchise nor contract, confers no property right, and is
mere license or privilege. (Burgess vs. Mayor & Alderman of Brockton, 235 Mass. 95, 100, 126 N. E. 456; Roberto vs. Commisioners
of Department of Public Utilities, 262 Mass. 583, 160 N. E. 321; Scheible vs. Hogan, 113 Ohio St. 83, 148 N. E. 581; Martz vs. Curtis [J.
L.] Cartage Co. [1937], 132 Ohio St. 271, 7 N. E. [d] 220; Manila Yellow Taxicab Co. vs. Sabellano, 59 Phil., 773.)

Whilst the challenged provisions of Commonwealth Act No. 454 are valid and constitutional, we are, however, of the opinion that
the decision of the Public Service Commission should be reversed and the case remanded thereto for further proceedings for the
reason now to be stated. The Public Service Commission has power, upon proper notice and hearing, "to amend, modify or revoke
at any time any certificate issued under the provisions of this Act, whenever the facts and circumstances on the strength of which
said certificate was issued have been misrepresented or materially changed." (Section 16, par. [m], Commonwealth Act No. 146.)
The petitioner's application here was for an increase of its equipment to enable it to comply with the conditions of its certificates of
public convenience. On the matter of limitation to twenty five (25) years of the life of its certificates of public convenience, there
had been neither notice nor opportunity given the petitioner to be heard or present evidence. The Commission appears to have
taken advantage of the petitioner to augment petitioner's equipment in imposing the limitation of twenty-five (25) years which
might as well be twenty or fifteen or any number of years. This is, to say the least, irregular and should not be sanctioned. There are
cardinal primary rights which must be respected even in proceedings of this character. The first of these rights is the right to a
hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support
thereof. In the language of Chief Justice Hughes, in Morgan v. U.S., (304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129), "the liberty and
property of the citizen shall be protected by the rudimentary requirements of fair play." Not only must the party be given an
opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must
consider the evidence presented. (Chief Justice Hughes in Morgan vs. U.S., 298 U.S. 468, 56 S. Ct. 906, 80 :Law. ed. 1288.) In the
language of this Court in Edwards vs. McCoy (22 Phil., 598), "the right to adduce evidence, without the corresponding duty on the
part of the board to consider it, is vain. Such right is conspicuously futile if the person or persons to whom the evidence is
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presented can thrust it aside without or consideration." While the duty to deliberate does not impose the obligation to decide
right, it does imply a necessity which cannot be disregarded, namely, that of having something to support its decision. A decision
with absolutely nothing to support it is a nullity, at least when directly attacked. (Edwards vs. McCoy, supra.) This principle
emanates from the more fundamental principle that the genius of constitutional government is contrary to the vesting of unlimited
power anywhere. Law is both a grant and a limitation upon power.

The decision appealed from is hereby reversed and the case remanded to the Public Service Commission for further proceedings in
accordance with law and this decision, without any pronouncement regarding costs. So ordered.

Avanceña, C.J., Imperial, Diaz, Concepcion and Moran, JJ., concur.

G.R. No. L-19857 March 2, 1923

THE ILOILO ICE AND COLD STORAGE COMPANY, petitioner, vs.

PUBLIC UTILITY BOARD, respondent.

MALCOLM, J.:

This action in certiorari is for the purpose of reviewing a decision of the Public Utility Commissioner, affirmed by the Public Utility
Board, holding that the petitioner, the Iloilo Ice and Cold Storage Company, is a public utility and, as such, subject to the control
and jurisdiction of the Public Utility Commissioner.

The case can be best understood by a consideration of its various phases, under the following topic: Statement of the issue,
statement of the case, statement of the facts, statement of the law, statement of the authorities, statement of the petitioner's case,
and of the government's case, and judgment.

STATEMENT OF THE ISSUE

The issue is whether the Iloilo Ice and Cold Storage Company is a public utility, as that term is defined by section 9 of Act No. 2694.

STATEMENT OF THE CASE

Francisco Villanueva, Jr., secretary of the Public Utility Commission, investigated the operation of ice plants in Iloilo early in
November, 1921. He reported to the Public Utility Commissioner that the Iloilo Ice and Cold Storage Company should be
considered a public utility, and that, accordingly, the proper order should issue.

Agreeable to the recommendation of Secretary Villanueva, the Public Utility Commissioner promulgated an order on December 19,
1921, reciting the facts abovementioned, and directing the Iloilo Ice and Cold Storage Company to show cause why it should not
be considered a public utility and as such required to comply with each and every duty of public utilities provided in Act No. 2307,
as amended by Act No. 2694. To this order, John Bordman, treasurer of the Iloilo Ice and Cold Storage Company, interposed a
special answer, in which it was alleged that the company is, and always has been operated as a private enterprise.

Hearing was then had, at which the testimonies of Francisco Villanueva, Jr., and of John Bordman were received. Various exhibits
were presented and received in evidence. Mr. Bordman, as the managing director and treasurer of the company, later submitted an
affidavit.
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The Public Utility Commissioner rendered a decision holding in effect that the Iloilo Ice and Cold Storage Company was a public
utility, and that, accordingly, it should file in the office of the Public Utility Commissioner, a statement of its charges for ice. This
decision was affirmed on appeal to the Public Utility Board. From this last decision, petitioner has come before this court, asking
that the proceeding below be reviewed, and the decisions set aside.

STATEMENT OF THE FACTS

The petitioner, the Iloilo Ice and Cold Storage Company, is a corporation organized under the laws of the Philippine Islands in 1908,
with a capital stock of P60,000. Continuously since that date, the company has maintained and operated a plant for the
manufacture and sale of ice in the City of Iloilo. It also does business to a certain extent in the Provinces of Negros, Capiz, and
Antique, and with boats which stop at the port of Iloilo. At the time its operation were started, two additional ice plants were
operating in Iloilo. Subsequently, however, the other plants ceased to operate, so that the petitioner now has no competitor in the
field.

The normal production of ice of the Iloilo Ice and Cold Storage Company is about 3 tons per day. In the month of January, 1922, a
total of 83,837 kilos of ice were sold, of which 56,400 kilos were on written contracts in the City of Iloilo and adjoining territory,
14,214 kilos, also on written contracts, to steamers calling at the port of Iloilo, and 13,233 kilos on verbal contracts. Although new
machinery has been installed in the plant, this was merely for replacement purposes, and did not add to its capacity. The demand
for ice has usually been much more than the plant could produce and no effort has been made to provide sufficient ice to supply
all who might apply.

Since 1908, the business of the Iloilo Ice and Cold Storage Company, accordingly to its managing director and treasurer, has been
carried on with selected customers only. Preference, however, is always given to hospitals, the request of practicing physicians, and
the needs of sick persons. The larger part of the company's business is perfected by written contracts signed by the parties served,
which, in the present form, includes an agreement that no right to future service is involved.

The coupon books of the company contain on the outside the following:

This agreement witnesseth, that The Iloilo Ice and Cold Storage Co. will furnish the undersigned with ice as indicated
herein at the rate of one coupon per day. These coupons are not transferable. It is further agreed that the company is not
obligated to similar service in future except by special agreement.

Iloilo, ......................................................................................., 192 ......

(Signed) ....................................................................... No. ..................

Cash sales of ice are accomplished on forms reading: "In receiving the ice represented by this ticket I hereby agree that the Iloilo
Ice and Cold Storage Co. is not bound in future to extend to me further service." A notice posted in the Iloilo store reads: "No ice is
sold to the public by this plant. Purchases can only be made by private contract." In August, 1918, all storage facilities were
abolished, and resumed in 1920 only with contracts, a copy of the form at present in use waiving any right to continued service.

On only one point of fact is there any divergence, and this is relatively unimportant. Secretary Villanueva reported, and the Public
Utility Commissioner found, that the Iloilo Ice and Cold Storage Company sold ice to the public, and advertised its sale through the
papers; while managing director Bordman claims that only once have the instructions of the board of directors prohibiting public
advertising been violated.

STATEMENT OF THE LAW

The original public utility law, Act No. 2307, in its section 14, 1n speaking of the jurisdiction of the Board of Public Utility
Commissioner, and in defining the term "public utility," failed to include ice, refrigeration, and cold storage plants. This deficiency
was, however, remedied by Act No. 2694, enacted in 1917, which amended section 14 of Act No. 2307, to read as follows:

* * * The term "public utility" is hereby defined to include every individual, copartnership, association, corporation or joint
stock company, whether domestic or foreign, their lessee, trustees or receivers appointed by any court whatsoever, or any
 9

municipality, province or other department of the Government of the Philippine Islands, that now or hereafter may own,
operate, manage or control within the Philippine Islands any common carrier, railroad, street railway, traction railway,
steamboat or steamship line, small water craft, such as bancas, virais, lorchas, and others, engaged in the transportation of
passengers and cargo, line of freight and passenger automobiles, shipyard, marine railway, marine repair shop, ferry,
freight or any other car services, public warehouse, public wharf or dock not under the jurisdiction of the Insular Collector
of Customs, ice, refrigeration, cold storage, canal, irrigation, express, subway, pipe line, gas, electric light, heat, power,
water, oil sewer, telephone, wire or wireless telegraph system, plant or equipment, for public use: Provided, That the
Commission or Commissioner shall have no jurisdiction over ice plants, cold storage plants, or any other kind of public
utilities operated by the Federal Government exclusively for its own and not for public use. . . .

It will thus be noted that the term "public utility," in this jurisdiction, includes every individual, copartnership, association,
corporation, or joint stock company that now or hereafter may own, operate, manage, or control, within the Philippine Islands, any
ice, refrigeration, cold storage system, plant, or equipment, for public use. Particular attention is invited to the last phrase, "for
public use."

STATEMENT OF THE AUTHORITIES

The authorities are abundant, although some of them are not overly instructive. Selection is made of the pertinent decisions
coming from our own Supreme Court, the Supreme Court of the United States, and the Supreme Court of California.

In the case of United States vs. Tan Piaco ([1920], 40 Phil., 853), the facts were that the trucks of the defendant furnished service
under special agreements to carry particular persons and property. Following the case of Terminal Taxicab Co. vs. Kutz ([1916], 241
U. S., 252), it was held that since the defendant did not hold himself out to carry all passengers and freight for all persons who
might offer, he was not a public utility and, therefore, was not criminally liable for his failure to obtain a license from the Public
Utility Commissioner. It was said:

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
privileged 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 to 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 owner 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.

In the decision of the Supreme Court of the United States in Terminal Taxicab Company vs. Kutz, supra, it was held: "A taxicab
company is a common carrier within the meaning of the Act of March 4, 1913.sec. 8, and hence subject to the jurisdiction of the
Public Utilities Commission of the District of Columbia as a "public utility" in respect of its exercise of its exclusive right under lease
from the Washington Terminal Company, the owner of the Washington Union Railway Station, to solicit livery and taxicab business
from persons passing to or from trains, and of its exclusive right under contracts with certain Washington hotels to solicit taxicab
business from guest, but that part of its business which consists in furnishing automobiles from its central garage on individual
orders, generally by telephone, cannot be regarded as a public utility, and the rates charged for such service are therefore not open
to inquiry by the Commission." Mr. Justice Holmes, delivering the opinion of the court, in part said:

The rest of the plaintiff's business, amounting to four tenths, consists mainly in furnishing automobiles from its central
garage on orders, generally by telephone. It asserts the right to refuse the service, and no doubt would do so it the pay
was uncertain, but it advertises extensively, and, we must assume, generally accepts any seemingly solvent customer. Still,
the bargains are individual, and however much they may tend towards uniformity in price, probably have not quite the
mechanical fixity of charges that attends the use of taxicabs from the station and hotels. There is no contract with a third
person to serve the public generally. The question whether, as to this part of its business, it is an agency for public use
within the meaning of the statute, is more difficult. . . . Although I have not been able to free my mind from doubt, the
 10

court is of opinion that this 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 community in
which it is passed. But, however it may have been in earlier days as to the common callings, it is assumed in our time that
an invitation to the public to buy does not necessarily entail an obligation to sell. It is assumed an ordinary shopkeeper
may refuse his wares arbitrary to a customer whom he dislikes, and although that consideration is not conclusive (233 U.
S., 407), it is assumed that such a calling is not public as the word is used. In the absence of clear language to the contrary
it would be assumed that an ordinary livery stable stood on the same footing as a common shop, and there seems to be
no difference between the plaintiff's service from its garage and that of a livery stable. It follows that the plaintiff is not
bound to give information as to its garage rates.

The Supreme Court of California in the case of Thayer and Thayer vs. California Development Company ([1912], 164 Cal., 117),
announced, among other things, that the essential feature of a public use is that "it is not confined to privileged individuals, but is
open to the indefinite public. It is this indefiniteness or unrestricted quality that gives it its public character." Continuing, reference
was made to the decision of the United States Supreme Court in Fallbrook Irrigation District vs. Bradley ([1896], 164 U. S., 161),
where the United States Supreme Court considered the question of whether or not the water belonging to an irrigation district
organized under the California statute of 1887, and acquired for and applied to its authorized uses and purposes, was water
dedicated to a public use. Upon this question, the Supreme Court on appeal said:

The fact that the use of the water is limited to the landowner is not therefore a fatal objection to this legislation. It is not
essential that the entire community, or even any considerable portion thereof, should directly enjoy or participate in an
improvement in order to constitute a public use. All landowners in the district have the right to a proportionate share of
the water, and no one landowner is favored above his fellow in his right to the use of the water. It is not necessary, in
order that the use should be public, that every resident in the district should have the right to the use of the water. The
water is not used for general, domestic, or for drinking purposes, and it is plain from the scene of the act that the water is
intended for the use of those who will have occasion to use it on their lands. . . . We think it clearly appears that all who by
reason of their ownership of or connection with any portion of the lands would have occasion to use the water, would in
truth have the opportunity to use it upon the same terms as all others similarly situated. In this away the use, so far as this
point is concerned, is public because all persons have the right to use the water under the same circumstances. This is
sufficient.

The latest pronouncement of the United States Supreme Court here available is found in the case of Producers Transportation
Company vs. Railroad Commission of the State of California ([1920], 251 U. S., 228). Mr. Justice Van Devander, delivering the
opinion of the court, in part said:

It is, of course, true that if the pipe line was constructed solely to carry oil for particular procedures under strictly private
contracts and never was devoted by its owner to public use, that is, to carrying for the public, the State could not by mere
legislative fiat or by any regulating order of a commission convert it into a public utility or make its owner a common
carrier; for that would be taking private property for public use without just compensation, which no State can do
consistently with the due process of law clause of the Fourteenth Amendment. . . . On the other hand, if in the beginning
or during its subsequent operation the pipe line was devoted by its owner to public use, and if the right thus extended to
the public has not been withdrawn, there can be no doubt that the pipe line is a public utility and its owner a common
carrier whose rates and practices are subject to public regulation. Munn vs. Illinois, supra.

The state court, upon examining the evidence, concluded that the company voluntarily had devoted the pipe line to the
use of the public in transporting oil, and it rested this conclusion upon the grounds . . . that, looking through the maze of
contracts, agency agreements and the like, under which the transportation was effected, subordinating form to substance,
and having due regard to the agency's ready admission of new members and its exclusion of none, it was apparent that
the company did in truth carry oil for all producers seeking its service, in other words, for the public. (See Pipe Line Cases,
234 U. S., 548.)

Lastly, we take note of the case of Allen vs. Railroad Commission of the State of California ([1918], 179 Cal., 68; 8 A. L. R., 249). It
was here held that a water company does not, by undertaking to furnish a water supply to a municipality which will require only a
 11

small percentage of its product, become a public utility as to the remainder, which it sells under private contracts. The court
observed that its decision fully recognized that a private water company may be organized to sell water for purposes of private
gain, and that in doing, it does not become a public utility. "To hold that property has been dedicated to a public use," reads the
opinion, "is not a trivial thing, and such dedication is never presumed without evidence of unequivocal intention." Continuing, the
court discusses what is a public utility in the following language:

What is a public utility, over which the state may exercise its regulatory control without regard to the private interest
which may be affected thereby? It its broadest sense everything upon which man bestows labor for purpose other than
those for the benefits of his immediate family is impressed with a public use. No occupation escapes it, no merchant can
avoid it, no professional man can deny it. As an illustrative type one may instance the butcher. He deals with the public; he
invites and is urgent that the public should deal with him. The character of his business is such that, under the police
power of the state, it may well be subject to regulation, and in many places and instances is so regulated. The preservation
of cleanliness, the inspection of meats to see that they are wholesome, all such matters are within the due and reasonable
regulatory powers of the state or nation. But these regulatory powers are not called into exercise because the butcher has
devoted his property to public service so as to make it a public utility. He still has the unquestionable right to fix his prices;
he still has the questioned right to say that he will or will not contract with any member of the public. What differentiates
all such activities from a true public utility is this and this only: That the devotion to public use must be of such character
that the public generally, or that part of it which has been served and which has accepted the services, has the right to
demand that that service shall be conducted, so long as it is continued, with reasonable efficiency under reasonable
charges. Public use, then, means the use by the public and be every individual member of it, as a legal right.

STATEMENT OF THE PETITIONER'S CASE AND OF THE GOVERNMENT'S CASE

Petitioner contends on the facts, that the evidence shows that the petitioner is operating a small ice plant in Iloilo; that no attempt
has been made to supply the needs of all who may apply for accommodation or to expand the plant to meet all demands; that
sales have been made to selected customers only, and that the right has been freely exercised to refuse sales not only to whole
districts, but constantly to individuals as wells; that the greater portion of the business is conducted through signed contracts with
selected individuals, and on occasions, when there is a surplus, the same is sold for cash to selected applicants; that no sales are
made except to persons who have waived all claim of right to similar accommodation in the future; and that no offer, agreement,
or tender of service to the public has ever been made. Petitioner contends, as to the law, that the decisions heretofore referred to
are controlling.

The Government has no quarrel with the petitioner as to the facts. But the Attorney-General attempts to differentiate the
authorities from the instant situation. The Attorney-General also argues that to sanction special contracts would "open a means of
escape from the application of the law."

The result is, therefore, that we have substantial agreement between the petitioner and the government as to the issue, as to the
facts, as to the law, and as to the applicable authorities. The question, however, remains as puzzling as before.

Planting ourselves of the authorities, which discuss the subject of public use, the criterion by which to judge of the character of the
use is whether the public may enjoy it by right or only by permission. (U. S. vs. Tan Piaco, supra.) The essential feature of a public
use is that it is not confined to privileged individuals, but is open to the indefinite public. (Thayler and Thayler vs. California
Development Company, supra.) The use is public if all persons have the right to the use under the same circumstances. (Fall brook
Irrigation District vs. Bradley, supra.) If the company did in truth sell ice to all persons seeking its service, it would be a public utility.
But if on the other hand, it was organized solely for particular persons under strictly private contracts, and never was devoted by its
owners to public use, it could not be held to be a public utility without violating the due process of law clause of the Constitution.
(Producers Transportation Co. vs. Railroad Commission, supra.) And the apparent and continued purpose of the Iloilo Ice and
Storage Company has been, and is, to remain a private enterprise and to avoid submitting to the Public Utility law.

The argument for the Government, nevertheless, merits serious consideration. The attempt of the Public Utility Commissioner to
intervene in corporate affairs, to protect the public, is commendable. Sympathetic thought should always be given to the facts laid
before the Commissioner, with reference to the law under which he is acting.

Aware of the foregoing situation, the members of the Court are of the opinion that the present case is governed by the authorities
mentioned in this decision, which means, of course, that, upon the facts shown in the record, the Iloilo Ice and Storage Company is
not a public utility within the meaning of the law. Like Mr. Justice Holmes, in his opinion in Terminal Taxicab
 12

Company vs. Kutz, supra, when, in speaking for himself personally, he admitted that he had not been able to free his mind from
doubt, so has the writer not been able to free his mind from doubt, but is finally led to accept the authorities as controlling.

JUDGMENT

It is declared that the business of the Iloilo Ice and Cold Storage Company is not a public utility, subject to the control and
jurisdiction of the Public Utility Commissioner, and that, accordingly, the decisions of the Public Utility Commissioner and of the
Public Utility Board must be revoked, without special finding as to costs. So ordered.

G.R. No. 83551 July 11, 1989

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.

Public Service Act; Public Utilities; Franchise; A legislative franchise is not necessary for the operation of the Manila
International Container Port (MICP); Reasons; Case at bar.—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
private entity, a contract entered into by the PPA and such entity constituting substantial compliance with the law.

Same; Same; Same; Under E.O. No. 30 and P.D. No. 857, the PPA may contract with the International Container Terminal
Services Inc. for the management, operation and development of the MICP.—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.

Same; Same; Same; The law granted certain administrative agencies the power to grant licenses for the operation of public
utilities; Theory that MICP is a “wharf” or a “dock”, not necessarily calls for a franchise from Legislative Branch.—Even if the
MICP be considered a public utility, or a public service on the theory that it is a “wharf” or a “dock” as contemplated under the
Public 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)

Same; Same; Same; The lawmaker has empowered the PPA to undertake by itself the operation of MICP or to authorize its
operation by another by contract or other means.—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.

Same; Same; Same; Constitutional Law; he award of the MICP contract approved by the Chief Executive of the Philippines
is constitutional; Legal presumption of validity and regularity of official function.—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.

Same; Same; Same; Same; Petitioner has sufficient standing to institute an action where public right is sought to be
enforced.—That petitioner herein is suing as a citizen and taxpayer and as a Member of the House of Representatives, sufficiently
 13

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 would constitute sufficient authority for upholding petitioner’s standing. [Cf. Tañada 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.]

Same; Same; Same; Same; Public Bidding; The PPA is the agency in the best position to evaluate the feasibility of the
projections of the bidders; The Court nor Congress has the technical expertise to look into this matter.—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. Albano vs. Reyes, 175 SCRA 264, G.R. No. 83551 July 11, 1989

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.")
 14

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

[Emphasis supplied.]

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" [See. 6(a) (v)]. Therefore, under the terms of
 15

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" 3as
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. Tañada 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.
 16

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. [at 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.

G.R. No. 115381 December 23, 1994

KILUSANG MAYO UNO LABOR CENTER, petitioner, vs.

HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD, and the PROVINCIAL
BUS OPERATORS ASSOCIATION OF THE PHILIPPINES, respondents.

Public Utilities; Common Carriers; Words and Phrases; When one devotes his property to a use in which the public has an
interest, he, in effect grants to the public an interest in that use, and must submit to the control by the public for the
common good, to the extent of the interest he has thus created.—Public utilities are privately owned and operated businesses
whose services are essential to the general public. They are enterprises which specially cater to the needs of the public and
conduce to their comfort and convenience. As such, public utility services are impressed with public interest and concern. The same
is true with respect to the business of common carrier which holds such a peculiar relation to the public interest that there is
superinduced upon it the right of public regulation when private properties are affected with public interest, hence, they cease to
be juris privati only. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect grants to
the public an interest in that use, and must submit to the control by the public for the common good, to the extent of the interest
he has thus created.

Same; Same; Judicial Review; Parties; Words and Phrases; “Judicial Power,” Defined .—The requirement of locus standi
inheres from the definition of judicial power. In Lamb v. Phipps, we ruled that judicial power is the power to hear and decide causes
pending between parties who have the right to sue in the courts of law and equity. Corollary to this provision is the principle of
locus standi of a party litigant. One who is directly affected by, and whose interest is immediate and substantial in the controversy
has the standing to sue. The rule therefore requires that a party must show a personal stake in the outcome of the case or an injury
to himself that can be redressed by a favorable decision so as to warrant an invocation of the court’s jurisdiction and to justify the
exercise of the court’s remedial powers in his behalf.

Same; Same; Same; Same; The KMU, whose members had suffered and continue to suffer grave and irreparable injury and
damage from the implementation of certain government memoranda, circulars and orders affecting common carriers, has
the standing to sue to question the same.—At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has
the standing to sue. In the case at bench, petitioner, whose members had suffered and continue to suffer grave and irreparable
injury and damage from the implementation of the questioned memoranda, circulars and/or orders, has shown that it has a clear
 17

legal right that was violated and continues to be violated with the enforcement of the challenged memoranda, circulars and/or
orders. KMU members, who avail of the use of buses, trains and jeepneys everyday, are directly affected by the burdensome cost of
arbitrary increase in passenger fares. They are part of the millions of commuters who comprise the riding public. Certainly, their
rights must be protected, not neglected nor ignored.

Same; Same; Same; Same; The Supreme Court is ready to brush aside a procedural infirmity when the issues raised are of
transcendental importance.—Assuming arguendo that petitioner is not possessed of the standing to sue, this court is ready to
brush aside this barren procedural infirmity and recognize the legal standing of the petitioner in view of the transcendental
importance of the issues raised. And this act of liberality is not without judicial precedent. As early as the Emergency Powers Cases,
this Court had exercised its discretion and waived the requirement of proper party.

Same; Same; Political Law; Administrative Law; Delegation of Powers; Power of Subordinate Legislation; The Legislature
has delegated to the defunct Public Service Commission, and presently the LTFRB, the power of fixing the rates of public
services.—Under the foregoing provision, the Legislature delegated to the defunct Public Service Commission the power of fixing
the rates of public services. Respondent LTFRB, the existing regulatory body today, is likewise vested with the same under Executive
Order No. 202 dated June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB “to determine, prescribe, approve and
periodically review and adjust, reasonable fares, rates and other related charges, relative to the operation of public land
transportation services provided by motorized vehicles.”

Same; Same; Same; Same; Same; Same; Given the task of determining sensitive and delicate matters as route-fixing and
rate-making for the transport sector, the responsible regulatory body is entrusted with the power of subordinate
legislation, under which such administrative body may implement broad policies laid down in a statute by “filling in” the
details which the Legislature may neither have time nor competence to provide.—Such delegation of legislative power to an
administrative agency is permitted in order to adapt to the increasing complexity of modern life. As subjects for governmental
regulation multiply, so does the difficulty of administering the laws. Hence, specialization even in legislation has become necessary.
Given the task of determining sensitive and delicate matters as route-fixing and rate-making for the transport sector, the
responsible regulatory body is entrusted with the power of subordinate legislation. With this authority, an administrative body and
in this case, the LTFRB, may implement broad policies laid down in a statute by “filling in” the details which the Legislature may
neither have time nor competence to provide. However, nowhere under the aforesaid provisions of law are the regulatory bodies,
the PSC and LTFRB alike, authorized to delegate that power to a common carrier, a transport operator, or other public service.

Same; Same; Same; Same; Same; The authority given by the LTFRB to the provincial bus operators to set a fare range over
and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative
authority; Potestas delegata non delegari potest.—In the case at bench, the authority given by the LTFRB to the provincial bus
operators to set a fare range over and above the authorized existing fare, is illegal and invalid as it is tanta-mount to an undue
delegation of legislative authority. Potestas delegata non delegari potest. What has been delegated cannot be delegated. This
doctrine is based on the ethical principle that such a delegated power constitutes not only a right but a duty to be performed by
the delegate through the instrumentality of his own judgment and not through the intervening mind of another. A further
delegation of such power would indeed constitute a negation of the duty in violation of the trust reposed in the delegate
mandated to discharge it directly.

Same; Same; Same; Same; Same; Rate Fixing; Rate making or rate fixing is a delicate and sensitive government function
that requires dexterity of judgment and sound discretion with the settled goal of arriving at a just and reasonable rate
acceptable to both the public utility and the public.—Moreover, rate making or rate fixing is not an easy task. It is a delicate and
sensitive government function that requires dexterity of judgment and sound discretion with the settled goal of arriving at a just
and reasonable rate acceptable to both the public utility and the public. Several factors, in fact, have to be taken into consideration
before a balance could be achieved. A rate should not be confiscatory as would place an operator in a situation where he will
continue to operate at a loss. Hence, the rate should enable public utilities to generate revenues sufficient to cover operational
costs and provide reasonable return on the investments. On the other hand, a rate which is too high becomes discriminatory. It is
contrary to public interest. A rate, therefore, must be reasonable and fair and must be affordable to the end user who will utilize
the services.

Same; Same; Same; Same; Same; Same; Due Process; The government must not relinquish the important function of rate-
fixing; The people deserve to be given full opportunity to be heard in their opposition to any fare increase.—Given the
complexity of the nature of the function of rate-fixing and its far-reaching effects on millions of commuters, government must not
relinquish this important function in favor of those who would benefit and profit from the industry. Neither should the requisite
 18

notice and hearing be done away with. The people, represented by reputable oppositors, deserve to be given full opportunity to be
heard in their opposition to any fare increase.

Same; Same; Certificates of Public Convenience (CPC); Words and Phrases; CPC, Explained; Requisites before a CPC may be
granted.—A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the operation of land
transportation services for public use as required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the
following requirements must be met before a CPC may be granted, to wit: (i) the applicant must be a citizen of the Philippines, or a
corporation or co-partnership, association or joint-stock company constituted and organized under the laws of the Philippines, at
least 60 per centum of its stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the applicant must be
financially capable of undertaking the proposed service and meeting the responsibilities incident to its operation; and (iii) 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. It is understood that there must be proper notice and hearing before the PSC can
exercise its power to issue a CPC.

Same; Same; Same; Administrative Law; Statutory Construction; In case of conflict between a statute and an administrative
order, the former must prevail.—The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)(iii) of
the Public Service Act which requires that before a CPC will be issued, the applicant must prove by proper notice and hearing that
the operation of the public service proposed will promote public interest in a proper and suitable manner. On the contrary, the
policy guideline states that the presumption of public need for a public service shall be deemed in favor of the applicant. In case of
conflict between a statute and an administrative order, the former must prevail.

Same; Same; Same; Same; Evidence; Presumptions; The existence or non-existence of public convenience and necessity is a
question of fact that must be established by evidence in a public hearing conducted for that purpose.—By its terms, public
convenience or necessity generally means something fitting or suited to the public need. As one of the basic requirements for the
grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a reasonable want of the public
and supply a need which the existing facilities do not adequately supply. The existence or non-existence of public convenience and
necessity is therefore a question of fact that must be established by evidence, real and/or testimonial; empirical data; statistics and
such other means necessary, in a public hearing conducted for that purpose. The object and purpose of such procedure, among
other things, is to look out for, and protect, the interests of both the public and the existing transport operators. Verily, the power
of a regulatory body to issue a CPC is founded on the condition that after full-dress hearing and investigation, it shall find, as a fact,
that the proposed operation is for the convenience of the public.

Same; Same; Same; Same; Same; Same; Separation of Powers; Supreme Court; The establishment of a presumption of
public need in favor of an applicant for CPC reverses well-settled and institutionalized judicial, quasi-judicial and
administrative procedures, and would in effect amend the Rules of Court by adding another disputable presumption under
Rule 131; Only the Supreme Court is mandated by law to promulgate rules concerning pleading, practice and procedure.—
Other-wise stated, the establishment of public need in favor of an applicant reverses well-settled and institutionalized judicial,
quasi-judicial and administrative procedures. It allows the party who initiates the proceedings to prove, by mere application, his
affirmative allegations. Moreover, the offending provisions of the LTFRB memorandum circular in question would in effect amend
the Rules of Court by adding another disputable presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of
the Rules of Court. Such usurpation of this Court’s authority cannot be countenanced as only this Court is mandated by law to
promulgate rules concerning pleading, practice and procedure.

Same; Same; Police Power; Deregulation; Advocacy of liberalized franchising and regulatory process is tantamount to an
abdication by the government of its inherent right to exercise police power, of the right to regulate public utilities for
protection of the public and the utilities themselves.—Deregulation, while it may be ideal in certain situations, may not be ideal
at all in our country given the present circumstances. Advocacy of liberalized franchising and regulatory process is tantamount to
an abdication by the government of its inherent right to exercise police power, that is, the right of government to regulate public
utilities for protection of the public and the utilities themselves. Kilusang Mayo Uno Labor Center vs. Garcia, Jr., 239 SCRA 386, G.R.
No. 115381 December 23, 1994
 19

KAPUNAN, J.:

Public utilities are privately owned and operated businesses whose service are essential to the general public. They are enterprises
which specially cater to the needs of the public and conduce to their comfort and convenience. As such, public utility services are
impressed with public interest and concern. The same is true with respect to the business of common carrier which holds such a
peculiar relation to the public interest that there is superinduced upon it the right of public regulation when private properties are
affected with public interest, hence, they cease to be juris privati only. When, therefore, one devotes his property to a use in which
the public has an interest, he, in effect grants to the public an interest in that use, and must submit to the control by the public for
the common good, to the extent of the interest he has thus created.1

An abdication of the licensing and regulatory government agencies of their functions as the instant petition seeks to show, is
indeed lamentable. Not only is it an unsound administrative policy but it is inimical to public trust and public interest as well.

The instant petition for certiorari assails the constitutionality and validity of certain memoranda, circulars and/or orders of the
Department of Transportation and Communications (DOTC) and the Land Transportation Franchising and Regulatory Board
LTFRB)2 which, among others, (a) authorize provincial bus and jeepney operators to increase or decrease the prescribed
transportation fares without application therefor with the LTFRB and without hearing and approval thereof by said agency in
violation of Sec. 16(c) of Commonwealth Act No. 146, as amended, otherwise known as the Public Service Act, and in derogation of
LTFRB's duty to fix and determine just and reasonable fares by delegating that function to bus operators, and (b) establish a
presumption of public need in favor of applicants for certificates of public convenience (CPC) and place on the oppositor the
burden of proving that there is no need for the proposed service, in patent violation not only of Sec. 16(c) of CA 146, as amended,
but also of Sec. 20(a) of the same Act mandating that fares should be "just and reasonable." It is, likewise, violative of the Rules of
Court which places upon each party the burden to prove his own affirmative allegations.3 The offending provisions contained in the
questioned issuances pointed out by petitioner, have resulted in the introduction into our highways and thoroughfares thousands
of old and smoke-belching buses, many of which are right-hand driven, and have exposed our consumers to the burden of
spiraling costs of public transportation without hearing and due process.

The following memoranda, circulars and/or orders are sought to be nullified by the instant petition, viz: (a) DOTC Memorandum
Order 90-395, dated June 26, 1990 relative to the implementation of a fare range scheme for provincial bus services in the country;
(b) DOTC Department Order No. 92-587, dated March 30, 1992, defining the policy framework on the regulation of transport
services; (c) DOTC Memorandum dated October 8, 1992, laying down rules and procedures to implement Department Order No.
92-587; (d) LTFRB Memorandum Circular No. 92-009, providing implementing guidelines on the DOTC Department Order No. 92-
587; and (e) LTFRB Order dated March 24, 1994 in Case No. 94-3112.

The relevant antecedents are as follows:

On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395 to then LTFRB Chairman,
Remedios A.S. Fernando allowing provincial bus operators to charge passengers rates within a range of 15% above and 15% below
the LTFRB official rate for a period of one (1) year. The text of the memorandum order reads in full:

One of the policy reforms and measures that is in line with the thrusts and the priorities set out in the Medium-Term
Philippine Development Plan (MTPDP) 1987 — 1992) is the liberalization of regulations in the transport sector. Along this
line, the Government intends to move away gradually from regulatory policies and make progress towards greater
reliance on free market forces.
 20

Based on several surveys and observations, bus companies are already charging passenger rates above and below the
official fare declared by LTFRB on many provincial routes. It is in this context that some form of liberalization on public
transport fares is to be tested on a pilot basis.

In view thereof, the LTFRB is hereby directed to immediately publicize a fare range scheme for all provincial bus routes in
country (except those operating within Metro Manila). Transport Operators shall be allowed to charge passengers within a
range of fifteen percent (15%) above and fifteen percent (15%) below the LTFRB official rate for a period of one year.

Guidelines and procedures for the said scheme shall be prepared by LTFRB in coordination with the DOTC Planning
Service.

The implementation of the said fare range scheme shall start on 6 August 1990.

For compliance. (Emphasis ours.)

Finding the implementation of the fare range scheme "not legally feasible," Remedios A.S. Fernando submitted the following
memorandum to Oscar M. Orbos on July 24, 1990, to wit:

With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990 which the LTFRB received on 19 July 1990,
directing the Board "to immediately publicize a fare range scheme for all provincial bus routes in the country (except
those operating within Metro Manila)" that will allow operators "to charge passengers within a range of fifteen percent
(15%) above and fifteen percent (15%) below the LTFRB official rate for a period of one year" the undersigned is
respectfully adverting the Secretary's attention to the following for his consideration:
1. Section 16(c) of the Public Service Act prescribes the following for the fixing and determination of rates — (a) the
rates to be approved should be proposed by public service operators; (b) there should be a publication and notice to
concerned or affected parties in the territory affected; (c) a public hearing should be held for the fixing of the rates;
hence, implementation of the proposed fare range scheme on August 6 without complying with the requirements of
the Public Service Act may not be legally feasible.
2. To allow bus operators in the country to charge fares fifteen (15%) above the present LTFRB fares in the wake of the
devastation, death and suffering caused by the July 16 earthquake will not be socially warranted and will be politically
unsound; most likely public criticism against the DOTC and the LTFRB will be triggered by the untimely motu
propioimplementation of the proposal by the mere expedient of publicizing the fare range scheme without calling a
public hearing, which scheme many as early as during the Secretary's predecessor know through newspaper reports
and columnists' comments to be Asian Development Bank and World Bank inspired.
3. More than inducing a reduction in bus fares by fifteen percent (15%) the implementation of the proposal will instead
trigger an upward adjustment in bus fares by fifteen percent (15%) at a time when hundreds of thousands of people
in Central and Northern Luzon, particularly in Central Pangasinan, La Union, Baguio City, Nueva Ecija, and the
Cagayan Valley are suffering from the devastation and havoc caused by the recent earthquake.
4. In lieu of the said proposal, the DOTC with its agencies involved in public transportation can consider measures and
reforms in the industry that will be socially uplifting, especially for the people in the areas devastated by the recent
earthquake.

In view of the foregoing considerations, the undersigned respectfully suggests that the implementation of the proposed
fare range scheme this year be further studied and evaluated.

On December 5, 1990, private respondent Provincial Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application
for fare rate increase. An across-the-board increase of eight and a half centavos (P0.085) per kilometer for all types of provincial
buses with a minimum-maximum fare range of fifteen (15%) percent over and below the proposed basic per kilometer fare rate,
with the said minimum-maximum fare range applying only to ordinary, first class and premium class buses and a fifty-centavo
(P0.50) minimum per kilometer fare for aircon buses, was sought.

On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to an across-the-board increase of six and a
half (P0.065) centavos per kilometer for ordinary buses. The decrease was due to the drop in the expected price of diesel.
 21

The application was opposed by the Philippine Consumers Foundation, Inc. and Perla C. Bautista alleging that the proposed rates
were exorbitant and unreasonable and that the application contained no allegation on the rate of return of the proposed increase
in rates.

On December 14, 1990, public respondent LTFRB rendered a decision granting the fare rate increase in accordance with the
following schedule of fares on a straight computation method, viz:

AUTHORIZED FARES

MIN. OF 5 KMS. SUCCEEDING KM.

LUZON REGULAR P1.50 P0.37
STUDENT P1.15 P0.28

VISAYAS/MINDANAO REGULAR P1.60 P0.375

STUDENT P1.20 P0.285

FIRST CLASS (PER KM.)

LUZON P0.385

VISAYAS/ MINDANAO P0.395

PREMIERE CLASS (PER KM.)

LUZON P0.395

VISAYAS/ MINDANAO P0.405

AIRCON (PER KM.)

P0.415.4

On March 30, 1992, then Secretary of the Department of Transportation and Communications Pete Nicomedes Prado issued
Department Order No.
92-587 defining the policy framework on the regulation of transport services. The full text of the said order is reproduced below in
view of the importance of the provisions contained therein:

WHEREAS, Executive Order No. 125 as amended, designates the Department of Transportation and Communications
(DOTC) as the primary policy, planning, regulating and implementing agency on transportation;

WHEREAS, to achieve the objective of a viable, efficient, and dependable transportation system, the transportation
regulatory agencies under or attached to the DOTC have to harmonize their decisions and adopt a common philosophy
and direction;

WHEREAS, the government proposes to build on the successful liberalization measures pursued over the last five years
and bring the transport sector nearer to a balanced longer term regulatory framework;

NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, the following policies and principles in the
economic regulation of land, air, and water transportation services are hereby adopted:

1. Entry into and exit out of the industry. Following the Constitutional dictum against monopoly, no franchise holder shall
be permitted to maintain a monopoly on any route. A minimum of two franchise holders shall be permitted to operate on
any route.
 22

The requirements to grant a certificate to operate, or certificate of public convenience, shall be: proof of Filipino
citizenship, financial capability, public need, and sufficient insurance cover to protect the riding public.

In determining public need, the presumption of need for a service shall be deemed in favor of the applicant. The burden of
proving that there is no need for a proposed service shall be with the oppositor(s).

In the interest of providing efficient public transport services, the use of the "prior operator" and the "priority of filing"
rules shall be discontinued. The route measured capacity test or other similar tests of demand for vehicle/vessel fleet on
any route shall be used only as a guide in weighing the merits of each franchise application and not as a limit to the
services offered.

Where there are limitations in facilities, such as congested road space in urban areas, or at airports and ports, the use of
demand management measures in conformity with market principles may be considered.

The right of an operator to leave the industry is recognized as a business decision, subject only to the filing of appropriate
notice and following a phase-out period, to inform the public and to minimize disruption of services.

2. Rate and Fare Setting. Freight rates shall be freed gradually from government controls. Passenger fares shall also be
deregulated, except for the lowest class of passenger service (normally third class passenger transport) for which the
government will fix indicative or reference fares. Operators of particular services may fix their own fares within a range 15%
above and below the indicative or reference rate.

Where there is lack of effective competition for services, or on specific routes, or for the transport of particular
commodities, maximum mandatory freight rates or passenger fares shall be set temporarily by the government pending
actions to increase the level of competition.

For unserved or single operator routes, the government shall contract such services in the most advantageous terms to
the public and the government, following public bids for the services. The advisability of bidding out the services or using
other kinds of incentives on such routes shall be studied by the government.

3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, the government shall not engage in special
financing and incentive programs, including direct subsidies for fleet acquisition and expansion. Only when the market
situation warrants government intervention shall programs of this type be considered. Existing programs shall be phased
out gradually.

The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics Board, the Maritime Industry Authority
are hereby directed to submit to the Office of the Secretary, within forty-five (45) days of this Order, the detailed rules and
procedures for the Implementation of the policies herein set forth. In the formulation of such rules, the concerned
agencies shall be guided by the most recent studies on the subjects, such as the Provincial Road Passenger Transport
Study, the Civil Aviation Master Plan, the Presidential Task Force on the Inter-island Shipping Industry, and the Inter-island
Liner Shipping Rate Rationalization Study.

For the compliance of all concerned. (Emphasis ours)

On October 8, 1992, public respondent Secretary of the Department of Transportation and Communications Jesus B. Garcia, Jr.
issued a memorandum to the Acting Chairman of the LTFRB suggesting swift action on the adoption of rules and procedures to
implement above-quoted Department Order No. 92-587 that laid down deregulation and other liberalization policies for the
transport sector. Attached to the said memorandum was a revised draft of the required rules and procedures covering (i) Entry Into
and Exit Out of the Industry and (ii) Rate and Fare Setting, with comments and suggestions from the World Bank incorporated
therein. Likewise, resplendent from the said memorandum is the statement of the DOTC Secretary that the adoption of the rules
and procedures is a pre-requisite to the approval of the Economic Integration Loan from the World Bank.5
 23

On February 17, 1993, the LTFRB issued Memorandum Circular No. 92-009 promulgating the guidelines for the implementation of
DOTC Department Order No. 92-587. The Circular provides, among others, the following challenged portions:

xxx xxx xxx

IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.

The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a
service shall be deemed in favor of the applicant, while burden of proving that there is no need for the proposed service shall
be the oppositor'(s).

xxx xxx xxx

V. Rate and Fare Setting

The control in pricing shall be liberalized to introduce price competition complementary with the quality of service,
subject to prior notice and public hearing. Fares shall not be provisionally authorized without public hearing.

A. On the General Structure of Rates

1. The existing authorized fare range system of plus or minus 15 per cent for provincial buses and jeepneys shall be
widened to 20% and -25% limit in 1994 with the authorized fare to be replaced by an indicative or reference rate as the
basis for the expanded fare range.
2. Fare systems for aircon buses are liberalized to cover first class and premier services.

xxx xxx xxx

(Emphasis ours).

Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC allowing provincial bus
operators to collect plus 20% and minus 25% of the prescribed fare without first having filed a petition for the purpose and without
the benefit of a public hearing, announced a fare increase of twenty (20%) percent of the existing fares. Said increased fares were
to be made effective on March 16, 1994.

On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares.

On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition for lack of merit. The dispositive portion
reads:

PREMISES CONSIDERED, this Board after considering the arguments of the parties, hereby DISMISSES FOR LACK OF
MERIT the petition filed in the above-entitled case. This petition in this case was resolved with dispatch at the request of
petitioner to enable it to immediately avail of the legal remedies or options it is entitled under existing laws.

SO ORDERED.6

Hence, the instant petition for certiorari with an urgent prayer for issuance of a temporary restraining order.

The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting and preventing respondents from
implementing the bus fare rate increase as well as the questioned orders and memorandum circulars. This meant that provincial
bus fares were rolled back to the levels duly authorized by the LTFRB prior to March 16, 1994. A moratorium was likewise enforced
on the issuance of franchises for the operation of buses, jeepneys, and taxicabs.

Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by respondent LTFRB to provincial bus operators to
set a fare range of plus or minus fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (-25%) percent,
 24

over and above the existing authorized fare without having to file a petition for the purpose, is unconstitutional, invalid and illegal.
Second, the establishment of a presumption of public need in favor of an applicant for a proposed transport service without having
to prove public necessity, is illegal for being violative of the Public Service Act and the Rules of Court.

In its Comment, private respondent PBOAP, while not actually touching upon the issues raised by the petitioner, questions the
wisdom and the manner by which the instant petition was filed. It asserts that the petitioner has no legal standing to sue or has no
real interest in the case at bench and in obtaining the reliefs prayed for.

In their Comment filed by the Office of the Solicitor General, public respondents DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB
asseverate that the petitioner does not have the standing to maintain the instant suit. They further claim that it is within DOTC and
LTFRB's authority to set a fare range scheme and establish a presumption of public need in applications for certificates of public
convenience.

We find the instant petition impressed with merit.

At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has the standing to sue.

The requirement of locus standi inheres from the definition of judicial power. Section 1 of Article VIII of the Constitution provides:

xxx xxx xxx

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.

In Lamb v. Phipps,7 we ruled that judicial power is the power to hear and decide causes pending between parties who have the
right to sue in the courts of law and equity. Corollary to this provision is the principle of locus standi of a party litigant. One who is
directly affected by and whose interest is immediate and substantial in the controversy has the standing to sue. The rule therefore
requires that a party must show a personal stake in the outcome of the case or an injury to himself that can be redressed by a
favorable decision so as to warrant an invocation of the court's jurisdiction and to justify the exercise of the court's remedial
powers in his behalf.8

In the case at bench, petitioner, whose members had suffered and continue to suffer grave and irreparable injury and damage from
the implementation of the questioned memoranda, circulars and/or orders, has shown that it has a clear legal right that was
violated and continues to be violated with the enforcement of the challenged memoranda, circulars and/or orders. KMU members,
who avail of the use of buses, trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary increase in
passenger fares. They are part of the millions of commuters who comprise the riding public. Certainly, their rights must be
protected, not neglected nor ignored.

Assuming arguendo that petitioner is not possessed of the standing to sue, this court is ready to brush aside this barren procedural
infirmity and recognize the legal standing of the petitioner in view of the transcendental importance of the issues raised. And this
act of liberality is not without judicial precedent. As early as the Emergency Powers Cases, this Court had exercised its discretion and
waived the requirement of proper party. In the recent case of Kilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et al.,9 we ruled in the
same lines and enumerated some of the cases where the same policy was adopted, viz:

. . . A party's standing before this Court is a procedural technicality which it may, in the exercise of its discretion, set aside
in view of the importance of the issues raised. In the landmark Emergency Powers Cases, [G.R. No. L-2044 (Araneta v.
Dinglasan); G.R. No. L-2756 (Araneta
v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No. L-3055 (Guerrero v. Commissioner of Customs);
and G.R. No. L-3056 (Barredo v. Commission on Elections), 84 Phil. 368 (1949)], this Court brushed aside this technicality
because "the transcendental importance to the public of these cases demands that they be settled promptly and
definitely, brushing aside, if we must, technicalities of procedure. (Avelino vs. Cuenco, G.R. No. L-2621)." Insofar as
taxpayers' suits are concerned, this Court had declared that it "is not devoid of discretion as to whether or not it should be
entertained," (Tan v. Macapagal, 43 SCRA 677, 680 [1972]) or that it "enjoys an open discretion to entertain the same or
not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].
 25

xxx xxx xxx

In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association
of planters, and
non-profit civic organizations were allowed to initiate and prosecute actions before this court to question the
constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities.
Among such cases were those assailing the constitutionality of (a) R.A. No. 3836 insofar as it allows retirement gratuity
and commutation of vacation and sick leave to Senators and Representatives and to elective officials of both Houses of
Congress (Philippine Constitution Association, Inc. v. Gimenez, 15 SCRA 479 [1965]); (b) Executive Order No. 284, issued by
President Corazon C. Aquino on 25 July 1987, which allowed members of the cabinet, their undersecretaries, and assistant
secretaries to hold other government offices or positions (Civil Liberties Union v. Executive Secretary, 194 SCRA 317
[1991]); (c) the automatic appropriation for debt service in the General Appropriations Act (Guingona v. Carague, 196
SCRA 221 [1991]; (d) R.A. No. 7056 on the holding of desynchronized elections (Osmeña v. Commission on Elections, 199
SCRA 750 [1991]); (e) P.D. No. 1869 (the charter of the Philippine Amusement and Gaming Corporation) on the ground
that it is contrary to morals, public policy, and order (Basco v. Philippine Amusement and Gaming Corp., 197 SCRA 52
[1991]); and (f) R.A. No. 6975, establishing the Philippine National Police. (Carpio v. Executive Secretary, 206 SCRA 290
[1992]).

Other cases where we have followed a liberal policy regarding locus standi include those attacking the validity or legality
of (a) an order allowing the importation of rice in the light of the prohibition imposed by R.A. No. 3452 (Iloilo Palay and
Corn Planters Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and 1033 insofar as they proposed
amendments to the Constitution and P.D. No. 1031 insofar as it directed the COMELEC to supervise, control, hold, and
conduct the referendum-plebiscite on 16 October 1976 (Sanidad v. Commission on Elections, supra); (c) the bidding for
the sale of the 3,179 square meters of land at Roppongi, Minato-ku, Tokyo, Japan (Laurel v. Garcia, 187 SCRA 797 [1990]);
(d) the approval without hearing by the Board of Investments of the amended application of the Bataan Petrochemical
Corporation to transfer the site of its plant from Bataan to Batangas and the validity of such transfer and the shift of
feedstock from naphtha only to naphtha and/or liquefied petroleum gas (Garcia v. Board of Investments, 177 SCRA 374
[1989]; Garcia v. Board of Investments, 191 SCRA 288 [1990]); (e) the decisions, orders, rulings, and resolutions of the
Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of Customs, and the Fiscal
Incentives Review Board exempting the National Power Corporation from indirect tax and duties (Maceda v. Macaraig, 197
SCRA 771 [1991]); (f) the orders of the Energy Regulatory Board of 5 and 6 December 1990 on the ground that the
hearings conducted on the second provisional increase in oil prices did not allow the petitioner substantial cross-
examination; (Maceda v. Energy Regulatory Board, 199 SCRA 454 [1991]); (g) Executive Order No. 478 which levied a
special duty of P0.95 per liter of imported oil products (Garcia v. Executive Secretary, 211 SCRA 219 [1992]); (h) resolutions
of the Commission on Elections concerning the apportionment, by district, of the number of elective members of
Sanggunians (De Guia vs. Commission on Elections, 208 SCRA 420 [1992]); and (i) memorandum orders issued by a Mayor
affecting the Chief of Police of Pasay City (Pasay Law and Conscience Union, Inc. v. Cuneta, 101 SCRA 662 [1980]).

In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), this Court, despite its unequivocal ruling that
the petitioners therein had no personality to file the petition, resolved nevertheless to pass upon the issues raised because
of the far-reaching implications of the petition. We did no less in De Guia v. COMELEC (Supra) where, although we
declared that De Guia "does not appear to have locus standi, a standing in law, a personal or substantial interest," we
brushed aside the procedural infirmity "considering the importance of the issue involved, concerning as it does the
political exercise of qualified voters affected by the apportionment, and petitioner alleging abuse of discretion and
violation of the Constitution by respondent."

Now on the merits of the case.

On the fare range scheme.

Section 16(c) of the Public Service Act, as amended, reads:

Sec. 16. Proceedings of the Commission, upon notice and hearing. — The Commission shall have power, upon proper notice
and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned
and saving provisions to the contrary:
 26

xxx xxx xxx

(c) To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as
commutation, mileage kilometrage, and other special rates which shall be imposed, observed, and followed thereafter by
any public service: Provided, That the Commission may, in its discretion, approve rates proposed by public services
provisionally and without necessity of any hearing; but it shall call a hearing thereon within thirty days thereafter, upon
publication and notice to the concerns operating in the territory affected: Provided, further, That in case the public service
equipment of an operator is used principally or secondarily for the promotion of a private business, the net profits of said
private business shall be considered in relation with the public service of such operator for the purpose of fixing the rates.
(Emphasis ours).

xxx xxx xxx

Under the foregoing provision, the Legislature delegated to the defunct Public Service Commission the power of fixing
the rates of public services. Respondent LTFRB, the existing regulatory body today, is likewise vested with the same under
Executive Order No. 202 dated June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB "to determine,
prescribe, approve and periodically review and adjust, reasonable fares, rates and other related charges, relative to the
operation of public land transportation services provided by motorized vehicles."

Such delegation of legislative power to an administrative agency is permitted in order to adapt to the increasing complexity of
modern life. As subjects for governmental regulation multiply, so does the difficulty of administering the laws. Hence, specialization
even in legislation has become necessary. Given the task of determining sensitive and delicate matters as
route-fixing and rate-making for the transport sector, the responsible regulatory body is entrusted with the power of subordinate
legislation. With this authority, an administrative body and in this case, the LTFRB, may implement broad policies laid down in a
statute by "filling in" the details which the Legislature may neither have time or competence to provide. However, nowhere under
the aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a common
carrier, a transport operator, or other public service.

In the case at bench, the authority given by the LTFRB to the provincial bus operators to set a fare range over and above the
authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. Potestas delegata
non delegari potest. What has been delegated cannot be delegated. This doctrine is based on the ethical principle that such a
delegated power constitutes not only a right but a duty to be performed by the delegate through the instrumentality of his own
judgment and not through the intervening mind of another.10 A further delegation of such power would indeed constitute a
negation of the duty in violation of the trust reposed in the delegate mandated to discharge it directly. 11 The policy of allowing the
provincial bus operators to change and increase their fares at will would result not only to a chaotic situation but to an anarchic
state of affairs. This would leave the riding public at the mercy of transport operators who may increase fares every hour, every day,
every month or every year, whenever it pleases them or whenever they deem it "necessary" to do so. In Panay Autobus Co. v.
Philippine Railway Co.,12 where respondent Philippine Railway Co. was granted by the Public Service Commission the authority to
change its freight rates at will, this Court categorically declared that:

In our opinion, the Public Service Commission was not authorized by law to delegate to the Philippine Railway Co. the power
of altering its freight rates whenever it should find it necessary to do so in order to meet the competition of road trucks and
autobuses, or to change its freight rates at will, or to regard its present rates as maximum rates, and to fix lower rates
whenever in the opinion of the Philippine Railway Co. it would be to its advantage to do so.

The mere recital of the language of the application of the Philippine Railway Co. is enough to show that it is
untenable. The Legislature has delegated to the Public Service Commission the power of fixing the rates of public services,
but it has not authorized the Public Service Commission to delegate that power to a common carrier or other public service.
The rates of public services like the Philippine Railway Co. have been approved or fixed by the Public Service Commission,
and any change in such rates must be authorized or approved by the Public Service Commission after they have been
shown to be just and reasonable. The public service may, of course, propose new rates, as the Philippine Railway Co. did in
case No. 31827, but it cannot lawfully make said new rates effective without the approval of the Public Service
Commission, and the Public Service Commission itself cannot authorize a public service to enforce new rates without the
prior approval of said rates by the commission. The commission must approve new rates when they are submitted to it, if
 27

the evidence shows them to be just and reasonable, otherwise it must disapprove them. Clearly, the commission cannot
determine in advance whether or not the new rates of the Philippine Railway Co. will be just and reasonable, because it
does not know what those rates will be.

In the present case the Philippine Railway Co. in effect asked for permission to change its freight rates at will. It may
change them every day or every hour, whenever it deems it necessary to do so in order to meet competition or whenever
in its opinion it would be to its advantage. Such a procedure would create a most unsatisfactory state of affairs and largely
defeat the purposes of the public service law.13(Emphasis ours).

One veritable consequence of the deregulation of transport fares is a compounded fare. If transport operators will be authorized to
impose and collect an additional amount equivalent to 20% over and above the authorized fare over a period of time, this will
unduly prejudice a commuter who will be made to pay a fare that has been computed in a manner similar to those of compounded
bank interest rates.

Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus operators to collect a thirty-seven (P0.37)
centavo per kilometer fare for ordinary buses. At the same time, they were allowed to impose and collect a fare range of plus or
minus 15% over the authorized rate. Thus P0.37 centavo per kilometer authorized fare plus P0.05 centavos (which is 15% of P0.37
centavos) is equivalent to P0.42 centavos, the allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo
increase per kilometer in 1994, then, the base or reference for computation would have to be P0.47 centavos (which is P0.42 +
P0.05 centavos). If bus operators will exercise their authority to impose an additional 20% over and above the authorized fare, then
the fare to be collected shall amount to P0.56 (that is, P0.47 authorized LTFRB rate plus 20% of P0.47 which is P0.29). In effect,
commuters will be continuously subjected, not only to a double fare adjustment but to a compounding fare as well. On their part,
transport operators shall enjoy a bigger chunk of the pie. Aside from fare increase applied for, they can still collect an additional
amount by virtue of the authorized fare range. Mathematically, the situation translates into the following:

Year** LTFRB authorized Fare Range Fare to be

rate*** collected per
kilometer

1990 P0.37 15% (P0.05) P0.42

1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56
1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94

Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive government function that requires dexterity of
judgment and sound discretion with the settled goal of arriving at a just and reasonable rate acceptable to both the public utility
and the public. Several factors, in fact, have to be taken into consideration before a balance could be achieved. A rate should not
be confiscatory as would place an operator in a situation where he will continue to operate at a loss. Hence, the rate should enable
public utilities to generate revenues sufficient to cover operational costs and provide reasonable return on the investments. On the
other hand, a rate which is too high becomes discriminatory. It is contrary to public interest. A rate, therefore, must be reasonable
and fair and must be affordable to the end user who will utilize the services.

Given the complexity of the nature of the function of rate-fixing and its far-reaching effects on millions of commuters, government
must not relinquish this important function in favor of those who would benefit and profit from the industry. Neither should the
requisite notice and hearing be done away with. The people, represented by reputable oppositors, deserve to be given full
opportunity to be heard in their opposition to any fare increase.

The present administrative procedure, 14 to our mind, already mirrors an orderly and satisfactory arrangement for all parties
involved. To do away with such a procedure and allow just one party, an interested party at that, to determine what the rate should
be, will undermine the right of the other parties to due process. The purpose of a hearing is precisely to determine what a just and
reasonable rate is.15 Discarding such procedural and constitutional right is certainly inimical to our fundamental law and to public
interest.

On the presumption of public need.

 28

A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the operation of land transportation services
for public use as required by law. Pursuant to Section 16(a) of the Public Service Act, as amended, the following requirements must
be met before a CPC may be granted, to wit: (i) the applicant must be a citizen of the Philippines, or a corporation or co-
partnership, association or joint-stock company constituted and organized under the laws of the Philippines, at least 60 per
centum of its stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the applicant must be financially
capable of undertaking the proposed service and meeting the responsibilities incident to its operation; and (iii) 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. It is understood that there must be proper notice and hearing before the PSC can exercise its power to
issue a CPC.

While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB Memorandum Circular No. 92-009, Part IV,
provides for yet incongruous and contradictory policy guideline on the issuance of a CPC. The guidelines states:

The issuance of a Certificate of Public Convenience is determined by public need. The presumption of public need for a
service shall be deemed in favor of the applicant, while the burden of proving that there is no need for the proposed service
shall be the oppositor's. (Emphasis ours).

The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)(iii) of the Public Service Act which requires
that before a CPC will be issued, the applicant must prove by proper notice and hearing that the operation of the public service
proposed will promote public interest in a proper and suitable manner. On the contrary, the policy guideline states that the
presumption of public need for a public service shall be deemed in favor of the applicant. In case of conflict between a statute and
an administrative order, the former must prevail.

By its terms, public convenience or necessity generally means something fitting or suited to the public need. 16 As one of the basic
requirements for the grant of a CPC, public convenience and necessity exists when the proposed facility or service meets a
reasonable want of the public and supply a need which the existing facilities do not adequately supply. The existence or
non-existence of public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or
testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that purpose. The object
and purpose of such procedure, among other things, is to look out for, and protect, the interests of both the public and the
existing transport operators.

Verily, the power of a regulatory body to issue a CPC is founded on the condition that after full-dress hearing and investigation, it
shall find, as a fact, that the proposed operation is for the convenience of the public.17 Basic convenience is the primary
consideration for which a CPC is issued, and that fact alone must be consistently borne in mind. Also, existing operators in subject
routes must be given an opportunity to offer proof and oppose the application. Therefore, an applicant must, at all times, be
required to prove his capacity and capability to furnish the service which he has undertaken to render. 18 And all this will be
possible only if a public hearing were conducted for that purpose.

Otherwise stated, the establishment of public need in favor of an applicant reverses well-settled and institutionalized judicial,
quasi-judicial and administrative procedures. It allows the party who initiates the proceedings to prove, by mere application, his
affirmative allegations. Moreover, the offending provisions of the LTFRB memorandum circular in question would in effect amend
the Rules of Court by adding another disputable presumption in the enumeration of 37 presumptions under Rule 131, Section 5 of
the Rules of Court. Such usurpation of this Court's authority cannot be countenanced as only this Court is mandated by law to
promulgate rules concerning pleading, practice and procedure. 19

Deregulation, while it may be ideal in certain situations, may not be ideal at all in our country given the present circumstances.
Advocacy of liberalized franchising and regulatory process is tantamount to an abdication by the government of its inherent right
to exercise police power, that is, the right of government to regulate public utilities for protection of the public and the utilities
themselves.

While we recognize the authority of the DOTC and the LTFRB to issue administrative orders to regulate the transport sector, we
find that they committed grave abuse of discretion in issuing DOTC Department Order No. 92-587 defining the policy framework
on the regulation of transport services and LTFRB Memorandum Circular No. 92-009 promulgating the implementing guidelines on
DOTC Department Order No. 92-587, the said administrative issuances being amendatory and violative of the Public Service Act
and the Rules of Court. Consequently, we rule that the twenty (20%) per centum fare increase imposed by respondent PBOAP on
March 16, 1994 without the benefit of a petition and a public hearing is null and void and of no force and effect. No grave abuse of
 29

discretion however was committed in the issuance of DOTC Memorandum Order No. 90-395 and DOTC Memorandum dated
October 8, 1992, the same being merely internal communications between administrative officers.

WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the challenged administrative issuances and
orders, namely: DOTC Department Order No. 92-587, LTFRB Memorandum Circular No. 92-009, and the order dated March 24,
1994 issued by respondent LTFRB are hereby DECLARED contrary to law and invalid insofar as they affect provisions therein (a)
delegating to provincial bus and jeepney operators the authority to increase or decrease the duly prescribed transportation fares;
and (b) creating a presumption of public need for a service in favor of the applicant for a certificate of public convenience and
placing the burden of proving that there is no need for the proposed service to the oppositor.

The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT insofar as it enjoined the bus fare rate
increase granted under the provisions of the aforementioned administrative circulars, memoranda and/or orders declared invalid.

No pronouncement as to costs.

SO ORDERED.

Padilla, Davide, Jr., Bellosillo and Quiason, JJ., concur.

Footnotes

2 The 20th century ushered in the birth and growth of public utility regulation in the country. After the Americans introduced
public utility regulation at the turn of the century, various regulatory bodies were created. They were the Coastwise Rate
Commission under Act No. 520 passed by the Philippine Commission on November 17, 1902; the Board of Rate Regulation under
Act No. 1779 dated October 12, 1907; the Board of Public Utility Commission under Act No. 2307 dated December 19, 1913; and
the Public Utility Commission under Act No. 3108 dated March 19, 1923.

During the Commonwealth period, the National Assembly passed a more comprehensive public utility law. This was
Commonwealth Act No. 146, as amended or the Public Service Act, as amended. Said law created a regulatory and franchising
body known as the Public Service Commission (PSC). The Commission (PSC) existed for thirty-six (36) years from 1936 up to 1972.

On September 24, 1972, Presidential Decree No. 1 was issued and declared "part of the law of the land." The same effected a major
revamp of the executive department. Under Article III, Part X of P.D. No. 1, the Public Service Commission (PSC) was abolished and
replaced by three (3) specialized regulatory boards. These were the Board of Transportation, the Board of Communications, and the
Board of Power and Waterworks.

The Board of Transportation (BOT) lasted for thirteen (13) years. On March 20, 1985, Executive Order No. 1011 was issued
abolishing the Board of Transportation and the Bureau of Land Transportation. Their powers and functions were merged into the
Land Transportation Commission (LTC).

Two (2) years later, LTC was abolished by Executive Order Nos. 125 dated January 30, 1987 and 125-A dated April 13, 1987 which
reorganized the Department of Transportation and Communications. On June 19, 1987, the Land Transportation Franchising and
Regulatory Board (LTFRB) was created by Executive Order No. 202. The LTFRB, successor of LTC, is the existing franchising and
regulatory body for overland transportation today.

14 Steps in the Filing of Petition for Rate Increase:

A Petition For Adjustment of Rate (either for increase or reduction) may be filed only by a grantee of a CPC. Therefore, when
franchise/CPC grantees or existing public utility operators foresee that the new oil price increase, wage hikes or similar factors
would threaten the survival and viability of their operations, they may then institute a petition for increase of rates. Thus in the case
of public utilities engaged in transportation, telecommunications, energy supply (electricity) and others, the following steps are
usually undertaken in seeking, particularly upwards adjustments of rates:
1. Filing of formal Petition for Rate Increase. — This petition alleges therein among others, the present schedule of rates, the
reasons why the same is no longer economically viable and the revised schedule of rates it proposes to charge. Attached
to said Petition for financial statements, projections/studies showing possible losses from oil price or wage hikes under
 30

the old or existing rates and possible margin of profit (which should be within the 12% allowable limit) under the new or
revised rates;
2. After the petition is docketed, a date is set for hearing for which Notice of Hearing is issued, the same to be published in a
newspaper of general circulation in the area;
3. The parties affected by the application are required to be furnished copies of the petition and the Notice of Hearing
usually by registered mail with return card. The Solicitor General is also separately notified since he is the counsel for the
Government;
4. The Technical Staff of the regulatory body concerned evaluates the documentary evidence attached to the petition to
determine whether there is warrant to the request for rate revision;
5. Then the Commission on Audit (COA) is requested by the regulatory body to conduct an audit and examination of the
books of accounts and other pertinent financial records of the public utility operator seeking the rate revision; if the
applicants/petitioners are numerous, a representative number for examination purposes would do, and the period of
operation covered usually ranges from six (6) months to one (1) year; COA audit report is compared with that of the
regulatory body. Copies of these audit reports are furnished the petitioners and oppositors may submit their exceptions
or objections thereto.
6. Then hearings are conducted. The petitioners may present accountants or such rate experts to explain their plea for rate
revision. Oppositors are also allowed to rebut such evidence-in-chief with their own witnesses and documents. After the
hearings, the corresponding resolution is issued.
To obviate protracted hearings, the parties may agree to submit their respective Position Papers in lieu of oral testimonies.

19 Article VIII, Section 6, 1987 Constitution.

G.R. No. 114222 April 6, 1995

FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON, petitioners, vs.

HON. JESUS B. GARCIA, JR., in his capacity as the Secretary of the Department of Transportation and Communications, and
EDSA LRT CORPORATION, LTD., respondents.

Public Utilities; Administrative Law; What constitutes a public utility is not their ownership but their use to serve the
public.—The phrasing of the question is erroneous; it is loaded. What private respondent owns are the rail tracks, rolling stocks like
the coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities
to serve the public, they do not by themselves constitute a public utility. What constitutes a public utility is not their ownership but
their use to serve the public (Iloilo Ice & Cold Storage Co. v. Public Service Board, 44 Phil. 551, 557-558 [1923]).

Constitutional Law; Franchise; Public Utilities; Constitution does not require a franchise before one can own the facilities
needed to operate a public utility so long as it does not operate them to serve the public.—The Constitution, in no uncertain
terms, requires a franchise for the operation of a public utility. However, it does not require a franchise before one can own the
facilities needed to operate a public utility so long as it does not operate them to serve the public.

Same; Same; Same; There is distinction between “operation” of a public utility and ownership of the facilities used to serve
the public.—In law, there is a clear distinction between the “operation” of a public utility and the ownership of the facilities and
equipment used to serve the public.

Same; Same; Same; Ownership Defined.—Ownership is defined as a relation in law by virtue of which a thing pertaining to one
person is completely subjected to his will in everything not prohibited by law or the concurrence with the rights of another
(Tolentino, II Commentaries and Jurisprudence on the Civil Code of the Philippines 45 [1992]).
 31

Same; Same; Same; The operation of a rail system as a public utility includes the transportation of passengers from one
point to another point, their loading and unloading at designated places and the movement of the trains at prescheduled
times.—The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to
serve the public as a public utility unless the operator has a franchise. The operation of a rail system as a public utility includes the
transportation of passengers from one point to another point, their loading and unloading at designated places and the movement
of the trains at prescheduled times (cf. Arizona Eastern R.R. Co. v. J.A. Matthews, 20 Ariz 282, 180 P. 159, 7 A.L.R. 1149 [1919];
United States Fire Ins. Co. v. Northern P.R. Co., 30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065 [1948]).

Same; Same; Same; Right to operate a public utility may exist independently and separately from the ownership of the
facilities thereof.—The right to operate a public utility may exist independently and separately from the ownership of the facilities
thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility
without owning the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or
by the person in control thereof who may not necessarily be the owner thereof.

Same; Same; Same; Mere owner and lessor of the facilities used by a public utility is not a public utility.—Indeed, a mere
owner and lessor of the facilities used by a public utility is not a public utility (Providence and W.R. Co. v. United States, 46 F. 2d
149, 152 [1930]; Chippewa Power Co. v. Railroad Commission of Wisconsin, 205 N.W. 900, 903, 188 Wis. 246 [1925]; Ellis v.
Interstate Commerce Commission, Ill. 35 S. Ct. 645, 646, 237 U.S. 434, 59 L. Ed. 1036 [1914]). Neither are owners of tank,
refrigerator, wine, poultry and beer cars who supply cars under contract to railroad companies considered as public utilities (Crystal
Car Line v. State Tax Commission, 174 P. 2d 984, 987 [1946]).

Same; Same; Same; Mere formation of public utility corporation does not ipso facto characterize the corporation as one
operating a public utility. It becomes so when it applies for a franchise, certificate or any other form of authorization for
that purpose.—Even the mere formation of a public utility corporation does not ipso facto characterize the corporation as one
operating a public utility. The moment for determining the requisite Filipino nationality is when the entity applies for a franchise,
certificate or any other form of authorization for that purpose (People v. Quasha, 93 Phil. 333 [1953]).

Administrative Law; Public Utilities; Build-Operate-Transfer (BOT) Scheme; Build-operate-and-transfer (BOT) scheme is
defined as one where the contractor undertakes the construction and financing of an infrastructure facility, and operates
and maintains the same.—The BOT scheme is expressly defined as one where the contractor undertakes the construction and
financing of an infrastructure facility, and operates and maintains the same. The contractor operates the facility for a fixed period
during which it may recover its expenses and investment in the project plus a reasonable rate of return thereon. After the
expiration of the agreed term, the contractor transfers the ownership and operation of the project to the government.

Same; Same; Build-and-Transfer (BT) Scheme; In build-and-transfer (BT) scheme, contractor undertakes the construction
and financing of facility, but after completion, ownership and operation thereof are turned over to the government.—In
the BT scheme, the contractor undertakes the construction and financing of the facility, but after completion, the ownership and
operation thereof are turned over to the government. The government, in turn, shall pay the contractor its local investment on the
project in addition to a reasonable rate of return. If payment is to be effected through amortization payments by the government
infrastructure agency or local government unit concerned, this shall be made in accordance with a scheme proposed in the bid and
incorporated in the contract (R.A. No. 6957, Sec. 6).

Same; Same; BOT Scheme; Under the BOT scheme, owner of the infrastructure facility must comply with the citizenship
requirement under the Constitution.—Emphasis must be made that under the BOT scheme, the owner of the infrastructure
facility must comply with the citizenship requirement of the Constitution on the operation of a public utility. No such a requirement
is imposed in the BT scheme.

Same; Same; Contracts; Lease Purchase Agreement; Stipulation that title to leased premises shall be transferred to the
lessee at the end of the lease period upon payment of agreed sum, the lease becomes a lease-purchase agreement.—A
lease is a contract where one of the parties binds himself to give to another the enjoyment or use of a thing for a certain price and
for a period which may be definite or indefinite but not longer than 99 years (Civil Code of the Philippines, Art. 1643). There is no
transfer of ownership at the end of the lease period. But if the parties stipulate that title to the leased premises shall be transferred
to the lessee at the end of the lease period upon the payment of an agreed sum, the lease becomes a lease-purchase agreement.
 32

Same; Same; Same; P.D. No. 1594; Section 5 of BOT Law in relation to Presidential Decree No. 1594 allows the negotiated
award of government infrastructure projects.—Contrary to the comments of then Executive Secretary Drilon, Section 5 of the
BOT Law in relation to Presidential Decree No. 1594 allows the negotiated award of government infrastructure projects.

Same; Same; Same; Same; P.D. No. 1594 is the general law on government infrastructure contracts while BOT Law governs
particular arrangements or schemes aimed at encouraging private sector participation in government infrastructure
projects.—Indeed, where there is a lack of qualified bidders or contractors, the award of government infrastructure contracts may
be made by negotiation. Presidential Decree No. 1594 is the general law on government infrastructure contracts while the BOT Law
governs particular arrangements or schemes aimed at encouraging private sector participation in government infrastructure
projects. The two laws are not inconsistent with each other but are in pari materia and should be read together accordingly.

Same; Same; Same; Same; Section 3 of R.A. 7718 authorizes government infrastructure agencies, government-owned or
controlled corporations and local government units to enter into contract with any duly prequalified proponent.—
Petitioners’ claim that the BLT scheme and direct negotiation of contracts are not contemplated by the BOT Law has now been
rendered moot and academic by R.A. No. 7718. Section 3 of this law authorizes all government infrastructure agencies,
government-owned and controlled corporations and local government units to enter into contract with any duly prequalified
proponent for the financing, construction, operation and maintenance of any financially viable infrastructure or development
facility through a BOT, BT, BLT, BOO (Build-own-and-operate), BTO (Build-transfer-and-operate), CAO (Contract-add-operate), DOT
(Develop-operate-and-transfer), ROT (Rehabilitate-operate-and-transfer), and ROO (Rehabilitate-own-operate) (R.A. No. 7718, Sec.
2 [b-j]).

Statutory Construction; Curative Statute; Curative statute makes valid that which before enactment of the statute was
invalid.—Republic Act No. 7718 is a curative statute. It is intended to provide financial incentives and “a climate of minimum
government regulations and procedures and specific government undertakings in support of the private sector” (Sec. 1). A curative
statute makes valid that which before enactment of the statute was invalid. Thus, whatever doubts and alleged procedural lapses
private respondent and DOTC may have engendered and committed in entering into the questioned contracts, these have now
been cured by R.A. No. 7718 (cf. Development Bank of the Philippines v. Court of Appeals, 96 SCRA 342 [1980]; Santos v. Duata, 14
SCRA 1041 [1965]; Adong v. Cheong Seng Gee, 43 Phil. 43 [1922]).

Public Officials; Regularity of Performance of Function; Government officials are presumed to perform their functions with
regularity and strong evidence is necessary to rebut this presumption.—Government officials are presumed to perform their
functions with regularity and strong evidence is necessary to rebut this presumption. Petitioners have not presented evidence on
the reasonable rentals to be paid by the parties to each other. The matter of valuation is an esoteric field which is better left to the
experts and which this Court is not eager to undertake.

Administrative Law; Public Utilities; DOTC has the power, authority and technical expertise to determine whether or not a
specific transportation or communications project is necessary, viable and beneficial to the people.—Definitely, the
agreements in question have been entered into by DOTC in the exercise of its governmental function. DOTC is the primary policy,
planning, programming, regulating and administrative entity of the Executive branch of government in the promotion,
development and regulation of dependable and coordinated networks of transportation and communications systems as well as in
the fast, safe, efficient and reliable postal, transportation and communications services (Administrative Code of 1987, Book IV, Title
XV, Sec. 2). It is the Executive department, DOTC in particular, that has the power, authority and technical expertise to determine
whether or not a specific transportation or communications project is necessary, viable and beneficial to the people. The discretion
to award a contract is vested in the government agencies entrusted with that function (Bureau Veritas v. Office of the President,
205 SCRA 705 [1992]). Tatad vs. Garcia, Jr., 243 SCRA 436, G.R. No. 114222 April 6, 1995

QUIASON, J.:

This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents from further implementing and enforcing the
"Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" dated April 22, 1992, and the
"Supplemental Agreement to the 22 April 1992 Revised and Restated Agreement To Build, Lease and Transfer a Light Rail Transit
System for EDSA" dated May 6, 1993.

Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are members of the Philippine Senate and are suing in their
capacities as Senators and as taxpayers. Respondent Jesus B. Garcia, Jr. is the incumbent Secretary of the Department of
 33

Transportation and Communications (DOTC), while private respondent EDSA LRT Corporation, Ltd. is a private corporation
organized under the laws of Hongkong.

In 1989, DOTC planned to construct a light railway transit line along EDSA, a major thoroughfare in Metropolitan Manila, which
shall traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The plan, referred to as EDSA Light Rail Transit III (EDSA LRT
III), was intended to provide a mass transit system along EDSA and alleviate the congestion and growing transportation problem in
the metropolis.

On March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises, Inc., represented by Elijahu Levin to DOTC Secretary Oscar
Orbos, proposing to construct the EDSA LRT III on a Build-Operate-Transfer (BOT) basis.

On March 15, 1990, Secretary Orbos invited Levin to send a technical team to discuss the project with DOTC.

On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and For Other Purposes," was signed by President Corazon C. Aquino. Referred to as
the Build-Operate-Transfer (BOT) Law, it took effect on October 9, 1990.

Republic Act No. 6957 provides for two schemes for the financing, construction and operation of government projects through
private initiative and investment: Build-Operate-Transfer (BOT) or Build-Transfer (BT).

In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT III project underway, DOTC, on January 22, 1991 and
March 14, 1991, issued Department Orders Nos. 91-494 and 91-496, respectively creating the Prequalification Bids and Awards
Committee (PBAC) and the Technical Committee.

After its constitution, the PBAC issued guidelines for the prequalification of contractors for the financing and implementation of the
project The notice, advertising the prequalification of bidders, was published in three newspapers of general circulation once a
week for three consecutive weeks starting February 21, 1991.

The deadline set for submission of prequalification documents was March 21, 1991, later extended to April 1, 1991. Five groups
responded to the invitation namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of Hongkong, Mansteel International of
Mandaue, Cebu, Mitsui & Co., Ltd. of Japan, and EDSA LRT Consortium, composed of ten foreign and domestic corporations:
namely, Kaiser Engineers International, Inc., ACER Consultants (Far East) Ltd. and Freeman Fox, Tradeinvest/CKD Tatra of the Czech
and Slovak Federal Republics, TCGI Engineering All Asia Capital and Leasing Corporation, The Salim Group of Jakarta, E. L.
Enterprises, Inc., A.M. Oreta & Co. Capitol Industrial Construction Group, Inc, and F. F. Cruz & co., Inc.

On the last day for submission of prequalification documents, the prequalification criteria proposed by the Technical Committee
were adopted by the PBAC. The criteria totalling 100 percent, are as follows: (a) Legal aspects — 10 percent; (b)
Management/Organizational capability — 30 percent; and (c) Financial capability — 30 percent; and (d) Technical capability — 30
percent (Rollo, p. 122).

On April 3, 1991, the Committee, charged under the BOT Law with the formulation of the Implementation Rules and Regulations
thereof, approved the same.

After evaluating the prequalification, bids, the PBAC issued a Resolution on May 9, 1991 declaring that of the five applicants, only
the EDSA LRT Consortium "met the requirements of garnering at least 21 points per criteria [sic], except for Legal Aspects, and
obtaining an over-all passing mark of at least 82 points" (Rollo, p. 146). The Legal Aspects referred to provided that the BOT/BT
contractor-applicant meet the requirements specified in the Constitution and other pertinent laws (Rollo, p. 114).

Subsequently, Secretary Orbos was appointed Executive Secretary to the President of the Philippines and was replaced by Secretary
Pete Nicomedes Prado. The latter sent to President Aquino two letters dated May 31, 1991 and June 14, 1991, respectively
recommending the award of the EDSA LRT III project to the sole complying bidder, the EDSA LRT Consortium, and requesting for
authority to negotiate with the said firm for the contract pursuant to paragraph 14(b) of the Implementing Rules and Regulations
of the BOT Law (Rollo, pp. 298-302).
 34

In July 1991, Executive Secretary Orbos, acting on instructions of the President, issued a directive to the DOTC to proceed with the
negotiations. On July 16, 1991, the EDSA LRT Consortium submitted its bid proposal to DOTC.

Finding this proposal to be in compliance with the bid requirements, DOTC and respondent EDSA LRT Corporation, Ltd., in
substitution of the EDSA LRT Consortium, entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System for
EDSA" under the terms of the BOT Law (Rollo, pp. 147-177).

Secretary Prado, thereafter, requested presidential approval of the contract.

In a letter dated March 13, 1992, Executive Secretary Franklin Drilon, who replaced Executive Secretary Orbos, informed Secretary
Prado that the President could not grant the requested approval for the following reasons: (1) that DOTC failed to conduct actual
public bidding in compliance with Section 5 of the BOT Law; (2) that the law authorized public bidding as the only mode to award
BOT projects, and the prequalification proceedings was not the public bidding contemplated under the law; (3) that Item 14 of the
Implementing Rules and Regulations of the BOT Law which authorized negotiated award of contract in addition to public bidding
was of doubtful legality; and (4) that congressional approval of the list of priority projects under the BOT or BT Scheme provided in
the law had not yet been granted at the time the contract was awarded (Rollo, pp. 178-179).

In view of the comments of Executive Secretary Drilon, the DOTC and private respondents re-negotiated the agreement. On April
22, 1992, the parties entered into a "Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for
EDSA" (Rollo, pp. 47-78) inasmuch as "the parties [are] cognizant of the fact the DOTC has full authority to sign the Agreement
without need of approval by the President pursuant to the provisions of Executive Order No. 380 and that certain events [had]
supervened since November 7, 1991 which necessitate[d] the revision of the Agreement" (Rollo, p. 51). On May 6, 1992, DOTC,
represented by Secretary Jesus Garcia vice Secretary Prado, and private respondent entered into a "Supplemental Agreement to the
22 April 1992 Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" so as to "clarify
their respective rights and responsibilities" and to submit [the] Supplemental Agreement to the President, of the Philippines for his
approval" (Rollo, pp. 79-80).

Secretary Garcia submitted the two Agreements to President Fidel V. Ramos for his consideration and approval. In a Memorandum
to Secretary Garcia on May 6, 1993, approved the said Agreements, (Rollo, p. 194).

According to the agreements, the EDSA LRT III will use light rail vehicles from the Czech and Slovak Federal Republics and will have
a maximum carrying capacity of 450,000 passengers a day, or 150 million a year to be achieved-through 54 such vehicles operating
simultaneously. The EDSA LRT III will run at grade, or street level, on the mid-section of EDSA for a distance of 17.8 kilometers from
F.B. Harrison, Pasay City to North Avenue, Quezon City. The system will have its own power facility (Revised and Restated
Agreement, Sec. 2.3 (ii); Rollo p. 55). It will also have thirteen (13) passenger stations and one depot in 16-hectare government
property at North Avenue (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).

Private respondents shall undertake and finance the entire project required for a complete operational light rail transit system
(Revised and Restated Agreement, Sec. 4.1; Rollo, p. 58). Target completion date is 1,080 days or approximately three years from
the implementation date of the contract inclusive of mobilization, site works, initial and final testing of the system (Supplemental
Agreement, Sec. 5; Rollo, p. 83). Upon full or partial completion and viability thereof, private respondent shall deliver the use and
possession of the completed portion to DOTC which shall operate the same (Supplemental Agreement, Sec. 5; Revised and
Restated Agreement, Sec. 5.1; Rollo, pp. 61-62, 84). DOTC shall pay private respondent rentals on a monthly basis through an
Irrevocable Letter of Credit. The rentals shall be determined by an independent and internationally accredited inspection firm to be
appointed by the parties (Supplemental Agreement, Sec. 6; Rollo, pp. 85-86) As agreed upon, private respondent's capital shall be
recovered from the rentals to be paid by the DOTC which, in turn, shall come from the earnings of the EDSA LRT III (Revised and
Restated Agreement, Sec. 1, p. 5; Rollo, p. 54). After 25 years and DOTC shall have completed payment of the rentals, ownership of
the project shall be transferred to the latter for a consideration of only U.S. $1.00 (Revised and Restated Agreement, Sec.
11.1; Rollo, p. 67).

On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of Republic Act No. 6957, Entitled "An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes" was
signed into law by the President. The law was published in two newspapers of general circulation on May 12, 1994, and took effect
15 days thereafter or on May 28, 1994. The law expressly recognizes BLT scheme and allows direct negotiation of BLT contracts.

II
 35

In their petition, petitioners argued that:

1) THE AGREEMENT OF APRIL 22, 1992, AS AMENDED BY THE SUPPLEMENTAL AGREEMENT OF MAY 6, 1993, INSOFAR AS IT
GRANTS EDSA LRT CORPORATION, LTD., A FOREIGN CORPORATION, THE OWNERSHIP OF EDSA LRT III, A PUBLIC UTILITY,
VIOLATES THE CONSTITUTION AND, HENCE, IS UNCONSTITUTIONAL;
2) THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE AGREEMENTS IS NOT DEFINED NOR RECOGNIZED IN R.A. NO. 6957
OR ITS IMPLEMENTING RULES AND REGULATIONS AND, HENCE, IS ILLEGAL;
3) THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS VIOLATES R; A. NO. 6957 AND, HENCE, IS UNLAWFUL;
4) THE AWARD OF THE CONTRACT IN FAVOR OF RESPONDENT EDSA LRT CORPORATION, LTD. VIOLATES THE REQUIREMENTS
PROVIDED IN THE IMPLEMENTING RULES AND REGULATIONS OF THE BOT LAW AND, HENCE, IS ILLEGAL;
5) THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO 380 FOR THEIR FAILURE TO BEAR PRESIDENTIAL APPROVAL AND, HENCE,
ARE ILLEGAL AND INEFFECTIVE; AND
6) THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT (Rollo, pp. 15-16).

Secretary Garcia and private respondent filed their comments separately and claimed that:
(1) Petitioners are not the real parties-in-interest and have no legal standing to institute the present petition;
(2) The writ of prohibition is not the proper remedy and the petition requires ascertainment of facts;
(3) The scheme adopted in the Agreements is actually a build-transfer scheme allowed by the BOT Law;
(4) The nationality requirement for public utilities mandated by the Constitution does not apply to private respondent;
(5) The Agreements executed by and between respondents have been approved by President Ramos and are not
disadvantageous to the government;
(6) The award of the contract to private respondent through negotiation and not public bidding is allowed by the BOT Law; and
(7) Granting that the BOT Law requires public bidding, this has been amended by R.A No. 7718 passed by the Legislature On May
12, 1994, which provides for direct negotiation as a mode of award of infrastructure projects.

III

Respondents claimed that petitioners had no legal standing to initiate the instant action. Petitioners, however, countered that the
action was filed by them in their capacity as Senators and as taxpayers.

The prevailing doctrines in taxpayer's suits are to allow taxpayers to question contracts entered into by the national government or
government-owned or controlled corporations allegedly in contravention of the law (Kilosbayan, Inc. v. Guingona, 232 SCRA 110
[1994]) and to disallow the same when only municipal contracts are involved (Bugnay Construction and Development Corporation
v. Laron, 176 SCRA. 240 [1989]).

For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no choice but to follow it and uphold the legal
standing of petitioners as taxpayers to institute the present action.

IV

In the main, petitioners asserted that the Revised and Restated Agreement of April 22, 1992 and the Supplemental Agreement of
May 6, 1993 are unconstitutional and invalid for the following reasons:
1) the EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the Constitution to Filipino
citizens and domestic corporations, not foreign corporations like private respondent;
2) the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the BOT or BT Scheme under the law;
3) the contract to construct the EDSA LRT III was awarded to private respondent not through public bidding which is the
only mode of awarding infrastructure projects under the BOT law; and
4) the agreements are grossly disadvantageous to the government.

1. Private respondent EDSA LRT Corporation, Ltd. to whom the contract to construct the EDSA LRT III was awarded by public
respondent, is admittedly a foreign corporation "duly incorporated and existing under the laws of Hongkong" (Rollo, pp. 50, 79).
There is also no dispute that once the EDSA LRT III is constructed, private respondent, as lessor, will turn it over to DOTC, as lessee,
for the latter to operate the system and pay rentals for said use.

The question posed by petitioners is:

Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a public utility? (Rollo, p. 17).
 36

The phrasing of the question is erroneous; it is loaded. What private respondent owns are the rail tracks, rolling stocks like the
coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities to
serve the public, they do not by themselves constitute a public utility. What constitutes a public utility is not their ownership but
their use to serve the public (Iloilo Ice & Cold Storage Co. v. Public Service Board, 44 Phil. 551, 557 558 [1923]).

The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not require a
franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the
public.

Section 11 of Article XII of the Constitution provides:

No franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to
citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per
centum of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive
character or for a longer period than fifty years . . . (Emphasis supplied).

In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment used
to serve the public.

Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely subjected to his will in
everything not prohibited by law or the concurrence with the rights of another (Tolentino, II Commentaries and Jurisprudence on
the Civil Code of the Philippines 45 [1992]).

The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to serve the
public as a public utility unless the operator has a franchise. The operation of a rail system as a public utility includes the
transportation of passengers from one point to another point, their loading and unloading at designated places and the movement
of the trains at pre-scheduled times (cf. Arizona Eastern R.R. Co. v. J.A.. Matthews, 20 Ariz 282, 180 P.159, 7 A.L.R. 1149 [1919]
;United States Fire Ins. Co. v. Northern P.R. Co., 30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065 [1948]).

The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can
own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the
facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person in
control thereof who may not necessarily be the owner thereof.

This dichotomy between the operation of a public utility and the ownership of the facilities used to serve the public can be very
well appreciated when we consider the transportation industry. Enfranchised airline and shipping companies may lease their
aircraft and vessels instead of owning them themselves.

While private respondent is the owner of the facilities necessary to operate the EDSA. LRT III, it admits that it is not enfranchised to
operate a public utility (Revised and Restated Agreement, Sec. 3.2; Rollo, p. 57). In view of this incapacity, private respondent and
DOTC agreed that on completion date, private respondent will immediately deliver possession of the LRT system by way of lease
for 25 years, during which period DOTC shall operate the same as a common carrier and private respondent shall provide technical
maintenance and repair services to DOTC (Revised and Restated Agreement, Secs. 3.2, 5.1 and 5.2; Rollo, pp. 57-58, 61-62).
Technical maintenance consists of providing (1) repair and maintenance facilities for the depot and rail lines, services for routine
clearing and security; and (2) producing and distributing maintenance manuals and drawings for the entire system (Revised and
Restated Agreement, Annex F).

Private respondent shall also train DOTC personnel for familiarization with the operation, use, maintenance and repair of the rolling
stock, power plant, substations, electrical, signaling, communications and all other equipment as supplied in the agreement
(Revised and Restated Agreement, Sec. 10; Rollo, pp. 66-67). Training consists of theoretical and live training of DOTC operational
personnel which includes actual driving of light rail vehicles under simulated operating conditions, control of operations, dealing
with emergencies, collection, counting and securing cash from the fare collection system (Revised and Restated Agreement, Annex
E, Secs. 2-3). Personnel of DOTC will work under the direction and control of private respondent only during training (Revised and
Restated Agreement, Annex E, Sec. 3.1). The training objectives, however, shall be such that upon completion of the EDSA LRT III
and upon opening of normal revenue operation, DOTC shall have in their employ personnel capable of undertaking training of all
new and replacement personnel (Revised and Restated Agreement, Annex E Sec. 5.1). In other words, by the end of the three-year
 37

construction period and upon commencement of normal revenue operation, DOTC shall be able to operate the EDSA LRT III on its
own and train all new personnel by itself.

Fees for private respondent' s services shall be included in the rent, which likewise includes the project cost, cost of replacement of
plant equipment and spare parts, investment and financing cost, plus a reasonable rate of return thereon (Revised and Restated
Agreement, Sec. 1; Rollo, p. 54).

Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common carrier. For this purpose,
DOTC shall indemnify and hold harmless private respondent from any losses, damages, injuries or death which may be claimed in
the operation or implementation of the system, except losses, damages, injury or death due to defects in the EDSA LRT III on
account of the defective condition of equipment or facilities or the defective maintenance of such equipment facilities (Revised and
Restated Agreement, Secs. 12.1 and 12.2; Rollo, p. 68).

In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with the
public and the public will have no right to demand any services from it.

It is well to point out that the role of private respondent as lessor during the lease period must be distinguished from the role of
the Philippine Gaming Management Corporation (PGMC) in the case of Kilosbayan Inc. v. Guingona, 232 SCRA 110 (1994). Therein,
the Contract of Lease between PGMC and the Philippine Charity Sweepstakes Office (PCSO) was actually a collaboration or joint
venture agreement prescribed under the charter of the PCSO. In the Contract of Lease; PGMC, the lessor obligated itself to build, at
its own expense, all the facilities necessary to operate and maintain a nationwide on-line lottery system from whom PCSO was to
lease the facilities and operate the same. Upon due examination of the contract, the Court found that PGMC's participation was not
confined to the construction and setting up of the on-line lottery system. It spilled over to the actual operation thereof, becoming
indispensable to the pursuit, conduct, administration and control of the highly technical and sophisticated lottery system. In effect,
the PCSO leased out its franchise to PGMC which actually operated and managed the same.

Indeed, a mere owner and lessor of the facilities used by a public utility is not a public utility (Providence and W.R. Co. v. United
States, 46 F. 2d 149, 152 [1930]; Chippewa Power Co. v. Railroad Commission of Wisconsin, 205 N.W. 900, 903, 188 Wis. 246 [1925];
Ellis v. Interstate Commerce Commission, Ill 35 S. Ct. 645, 646, 237 U.S. 434, 59 L. Ed. 1036 [1914]). Neither are owners of tank,
refrigerator, wine, poultry and beer cars who supply cars under contract to railroad companies considered as public utilities (Crystal
Car Line v. State Tax Commission, 174 p. 2d 984, 987 [1946]).

Even the mere formation of a public utility corporation does not ipso facto characterize the corporation as one operating a public
utility. The moment for determining the requisite Filipino nationality is when the entity applies for a franchise, certificate or any
other form of authorization for that purpose (People v. Quasha, 93 Phil. 333 [1953]).

2. Petitioners further assert that the BLT scheme under the Agreements in question is not recognized in the BOT Law and its
Implementing Rules and Regulations.

Section 2 of the BOT Law defines the BOT and BT schemes as follows:

(a) Build-operate-and-transfer scheme — A contractual arrangement whereby the contractor undertakes the construction
including financing, of a given infrastructure facility, and the operation and maintenance thereof. The contractor operates
the facility over a fixed term during which it is allowed to charge facility users appropriate tolls, fees, rentals and charges
sufficient to enable the contractor to recover its operating and maintenance expenses and its investment in the project
plus a reasonable rate of return thereon. The contractor transfers the facility to the government agency or local
government unit concerned at the end of the fixed term which shall not exceed fifty (50) years. For the construction stage,
the contractor may obtain financing from foreign and/or domestic sources and/or engage the services of a foreign and/or
Filipino constructor [sic]: Provided, That the ownership structure of the contractor of an infrastructure facility whose
operation requires a public utility franchise must be in accordance with the Constitution: Provided, however, That in the case
of corporate investors in the build-operate-and-transfer corporation, the citizenship of each stockholder in the corporate
investors shall be the basis for the computation of Filipino equity in the said corporation: Provided, further, That, in the
case of foreign constructors [sic], Filipino labor shall be employed or hired in the different phases of the construction
where Filipino skills are available: Provided, furthermore, that the financing of a foreign or foreign-controlled contractor
from Philippine government financing institutions shall not exceed twenty percent (20%) of the total cost of the
infrastructure facility or project: Provided, finally, That financing from foreign sources shall not require a guarantee by the
 38

Government or by government-owned or controlled corporations. The build-operate-and-transfer scheme shall include a

supply-and-operate situation which is a contractual agreement whereby the supplier of equipment and machinery for a
given infrastructure facility, if the interest of the Government so requires, operates the facility providing in the process
technology transfer and training to Filipino nationals.

(b) Build-and-transfer scheme — "A contractual arrangement whereby the contractor undertakes the construction
including financing, of a given infrastructure facility, and its turnover after completion to the government agency or local
government unit concerned which shall pay the contractor its total investment expended on the project, plus a reasonable
rate of return thereon. This arrangement may be employed in the construction of any infrastructure project including
critical facilities which for security or strategic reasons, must be operated directly by the government (Emphasis supplied).

The BOT scheme is expressly defined as one where the contractor undertakes the construction and financing in infrastructure
facility, and operates and maintains the same. The contractor operates the facility for a fixed period during which it may recover its
expenses and investment in the project plus a reasonable rate of return thereon. After the expiration of the agreed term, the
contractor transfers the ownership and operation of the project to the government.

In the BT scheme, the contractor undertakes the construction and financing of the facility, but after completion, the ownership and
operation thereof are turned over to the government. The government, in turn, shall pay the contractor its total investment on the
project in addition to a reasonable rate of return. If payment is to be effected through amortization payments by the government
infrastructure agency or local government unit concerned, this shall be made in accordance with a scheme proposed in the bid and
incorporated in the contract (R.A. No. 6957, Sec. 6).

Emphasis must be made that under the BOT scheme, the owner of the infrastructure facility must comply with the citizenship
requirement of the Constitution on the operation of a public utility. No such a requirement is imposed in the BT scheme.

There is no mention in the BOT Law that the BOT and BT schemes bar any other arrangement for the payment by the government
of the project cost. The law must not be read in such a way as to rule out or unduly restrict any variation within the context of the
two schemes. Indeed, no statute can be enacted to anticipate and provide all the fine points and details for the multifarious and
complex situations that may be encountered in enforcing the law (Director of Forestry v. Munoz, 23 SCRA 1183 [1968]; People v.
Exconde, 101 Phil. 1125 [1957]; United States v. Tupasi Molina, 29 Phil. 119 [1914]).

The BLT scheme in the challenged agreements is but a variation of the BT scheme under the law.

As a matter of fact, the burden on the government in raising funds to pay for the project is made lighter by allowing it to amortize
payments out of the income from the operation of the LRT System.

In form and substance, the challenged agreements provide that rentals are to be paid on a monthly basis according to a schedule
of rates through and under the terms of a confirmed Irrevocable Revolving Letter of Credit (Supplemental Agreement, Sec. 6; Rollo,
p. 85). At the end of 25 years and when full payment shall have been made to and received by private respondent, it shall transfer
to DOTC, free from any lien or encumbrances, all its title to, rights and interest in, the project for only U.S. $1.00 (Revised and
Restated Agreement, Sec. 11.1; Supplemental Agreement, Sec; 7; Rollo, pp. 67, .87).

A lease is a contract where one of the parties binds himself to give to another the enjoyment or use of a thing for a certain price
and for a period which may be definite or indefinite but not longer than 99 years (Civil Code of the Philippines, Art. 1643). There is
no transfer of ownership at the end of the lease period. But if the parties stipulate that title to the leased premises shall be
transferred to the lessee at the end of the lease period upon the payment of an agreed sum, the lease becomes a lease-purchase
agreement.

Furthermore, it is of no significance that the rents shall be paid in United States currency, not Philippine pesos. The EDSA LRT III
Project is a high priority project certified by Congress and the National Economic and Development Authority as falling under the
Investment Priorities Plan of Government (Rollo, pp. 310-311). It is, therefore, outside the application of the Uniform Currency Act
(R.A. No. 529), which reads as follows:

Sec. 1. — Every provision contained in, or made with respect to, any domestic obligation to wit, any obligation contracted
in the Philippines which provisions purports to give the obligee the right to require payment in gold or in a particular kind
of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, be as it
 39

is hereby declared against public policy, and null, void, and of no effect, and no such provision shall be contained in, or
made with respect to, any obligation hereafter incurred. The above prohibition shall not apply to (a) . . .; (b) transactions
affecting high-priority economic projects for agricultural, industrial and power development as may be determined by
the National Economic Council which are financed by or through foreign funds; . . . .

3. The fact that the contract for the construction of the EDSA LRT III was awarded through negotiation and before congressional
approval on January 22 and 23, 1992 of the List of National Projects to be undertaken by the private sector pursuant to the BOT
Law (Rollo, pp. 309-312) does not suffice to invalidate the award.

Subsequent congressional approval of the list including "rail-based projects packaged with commercial development
opportunities" (Rollo, p. 310) under which the EDSA LRT III projects falls, amounts to a ratification of the prior award of the EDSA
LRT III contract under the BOT Law.

Petitioners insist that the prequalifications process which led to the negotiated award of the contract appears to have been rigged
from the very beginning to do away with the usual open international public bidding where qualified internationally known
applicants could fairly participate.

The records show that only one applicant passed the prequalification process. Since only one was left, to conduct a public bidding
in accordance with Section 5 of the BOT Law for that lone participant will be an absurb and pointless exercise (cf. Deloso v.
Sandiganbayan, 217 SCRA 49, 61 [1993]).

Contrary to the comments of the Executive Secretary Drilon, Section 5 of the BOT Law in relation to Presidential Decree No. 1594
allows the negotiated award of government infrastructure projects.

Presidential Decree No. 1594, "Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts,"
allows the negotiated award of government projects in exceptional cases. Sections 4 of the said law reads as follows:
Bidding. — Construction projects shall generally be undertaken by contract after competitive public bidding. Projects may
be undertaken by administration or force account or by negotiated contract only in exceptional cases where time is of the
essence, or where there is lack of qualified bidders or contractors, or where there is conclusive evidence that greater economy
and efficiency would be achieved through this arrangement, and in accordance with provision of laws and acts on the
matter, subject to the approval of the Minister of Public Works and Transportation and Communications, the Minister of
Public Highways, or the Minister of Energy, as the case may be, if the project cost is less than P1 Million, and the President
of the Philippines, upon recommendation of the Minister, if the project cost is P1 Million or more (Emphasis supplied).

xxx xxx xxx

Indeed, where there is a lack of qualified bidders or contractors, the award of government infrastructure contracts may he made by
negotiation. Presidential Decree No. 1594 is the general law on government infrastructure contracts while the BOT Law governs
particular arrangements or schemes aimed at encouraging private sector participation in government infrastructure projects. The
two laws are not inconsistent with each other but are in pari materia and should be read together accordingly.

In the instant case, if the prequalification process was actually tainted by foul play, one wonders why none of the competing firms
ever brought the matter before the PBAC, or intervened in this case before us (cf. Malayan Integrated Industries Corp. v. Court of
Appeals, 213 SCRA 640 [1992]; Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]).

The challenged agreements have been approved by President Ramos himself. Although then Executive Secretary Drilon may have
disapproved the "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA," there is nothing in our laws that
prohibits parties to a contract from renegotiating and modifying in good faith the terms and conditions thereof so as to meet
legal, statutory and constitutional requirements. Under the circumstances, to require the parties to go back to step one of the
prequalification process would just be an idle ceremony. Useless bureaucratic "red tape" should be eschewed because it
discourages private sector participation, the "main engine" for national growth and development (R.A. No. 6957, Sec. 1), and
renders the BOT Law nugatory.
 40

Republic Act No. 7718 recognizes and defines a BLT scheme in Section 2 thereof as:
(e) Build-lease-and-transfer — A contractual arrangement whereby a project proponent is authorized to finance and
construct an infrastructure or development facility and upon its completion turns it over to the government agency or
local government unit concerned on a lease arrangement for a fixed period after which ownership of the facility is
automatically transferred to the government unit concerned.

Section 5-A of the law, which expressly allows direct negotiation of contracts, provides:
Direct Negotiation of Contracts. — Direct negotiation shall be resorted to when there is only one complying bidder left as defined
hereunder.
a) If, after advertisement, only one contractor applies for prequalification and it meets the prequalification requirements,
after which it is required to submit a bid proposal which is subsequently found by the agency/local government unit (LGU)
to be complying.
b) If, after advertisement, more than one contractor applied for prequalification but only one meets the prequalification
requirements, after which it submits bid/proposal which is found by the agency/local government unit (LGU) to be
complying.
c) If, after prequalification of more than one contractor only one submits a bid which is found by the agency/LGU to be
complying.
d) If, after prequalification, more than one contractor submit bids but only one is found by the agency/LGU to be complying.
Provided, That, any of the disqualified prospective bidder [sic] may appeal the decision of the implementing agency,
agency/LGUs prequalification bids and awards committee within fifteen (15) working days to the head of the agency, in
case of national projects or to the Department of the Interior and Local Government, in case of local projects from the
date the disqualification was made known to the disqualified bidder: Provided, furthermore, That the implementing
agency/LGUs concerned should act on the appeal within forty-five (45) working days from receipt thereof.

Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated by the BOT Law has now been
rendered moot and academic by R.A. No. 7718. Section 3 of this law authorizes all government infrastructure agencies,
government-owned and controlled corporations and local government units to enter into contract with any duly prequalified
proponent for the financing, construction, operation and maintenance of any financially viable infrastructure or development
facility through a BOT, BT, BLT, BOO (Build-own-and-operate), CAO (Contract-add-operate), DOT (Develop-operate-and-transfer),
ROT (Rehabilitate-operate-and-transfer), and ROO (Rehabilitate-own-operate) (R.A. No. 7718, Sec. 2 [b-j]).

From the law itself, once and applicant has prequalified, it can enter into any of the schemes enumerated in Section 2 thereof,
including a BLT arrangement, enumerated and defined therein (Sec. 3).

Republic Act No. 7718 is a curative statute. It is intended to provide financial incentives and "a climate of minimum government
regulations and procedures and specific government undertakings in support of the private sector" (Sec. 1). A curative statute
makes valid that which before enactment of the statute was invalid. Thus, whatever doubts and alleged procedural lapses private
respondent and DOTC may have engendered and committed in entering into the questioned contracts, these have now been
cured by R.A. No. 7718 (cf. Development Bank of the Philippines v. Court of Appeals, 96 SCRA 342 [1980]; Santos V. Duata, 14 SCRA
1041 [1965]; Adong V. Cheong Seng Gee, 43 Phil. 43 [1922].

4. Lastly, petitioners claim that the agreements are grossly disadvantageous to the government because the rental rates are
excessive and private respondent's development rights over the 13 stations and the depot will rob DOTC of the best terms during
the most productive years of the project.

It must be noted that as part of the EDSA LRT III project, private respondent has been granted, for a period of 25 years, exclusive
rights over the depot and the air space above the stations for development into commercial premises for lease, sublease, transfer,
or advertising (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). For and in consideration of these development rights, private
respondent shall pay DOTC in Philippine currency guaranteed revenues generated therefrom in the amounts set forth in the
Supplemental Agreement (Sec. 11; Rollo, p. 93). In the event that DOTC shall be unable to collect the guaranteed revenues, DOTC
shall be allowed to deduct any shortfalls from the monthly rent due private respondent for the construction of the EDSA LRT III
(Supplemental Agreement, Sec. 11; Rollo, pp. 93-94). All rights, titles, interests and income over all contracts on the commercial
spaces shall revert to DOTC upon expiration of the 25-year period. (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).

The terms of the agreements were arrived at after a painstaking study by DOTC. The determination by the proper administrative
agencies and officials who have acquired expertise, specialized skills and knowledge in the performance of their functions should
 41

be accorded respect absent any showing of grave abuse of discretion (Felipe Ysmael, Jr. & Co. v. Deputy Executive Secretary, 190
SCRA 673 [1990]; Board of Medical Education v. Alfonso, 176 SCRA 304 [1989]).

Government officials are presumed to perform their functions with regularity and strong evidence is necessary to rebut this
presumption. Petitioners have not presented evidence on the reasonable rentals to be paid by the parties to each other. The matter
of valuation is an esoteric field which is better left to the experts and which this Court is not eager to undertake.

That the grantee of a government contract will profit therefrom and to that extent the government is deprived of the profits if it
engages in the business itself, is not worthy of being raised as an issue. In all cases where a party enters into a contract with the
government, he does so, not out of charity and not to lose money, but to gain pecuniarily.

5. Definitely, the agreements in question have been entered into by DOTC in the exercise of its governmental function. DOTC is the
primary policy, planning, programming, regulating and administrative entity of the Executive branch of government in the
promotion, development and regulation of dependable and coordinated networks of transportation and communications systems
as well as in the fast, safe, efficient and reliable postal, transportation and communications services (Administrative Code of 1987,
Book IV, Title XV, Sec. 2). It is the Executive department, DOTC in particular that has the power, authority and technical expertise
determine whether or not a specific transportation or communication project is necessary, viable and beneficial to the people. The
discretion to award a contract is vested in the government agencies entrusted with that function (Bureau Veritas v. Office of the
President, 205 SCRA 705 [1992]).

WHEREFORE, the petition is DISMISSED. SO ORDERED.

Separate Opinions

MENDOZA, J., concurring:

I concur in all but Part III of the majority opinion. Because I hold that petitioners do not have standing to sue, I join to dismiss the
petition in this case. I write only to set forth what I understand the grounds for our decisions on the doctrine of standing are and,
why in accordance with these decisions, petitioners do not have the rights to sue, whether as legislators, taxpayers or citizens. As
members of Congress, because they allege no infringement of prerogative as legislators.1 As taxpayers because petitioners allege
neither an unconstitutional exercise of the taxing or spending powers of Congress (Art VI, §§24-25 and 29)2 nor an illegal
disbursement of public money.3 As this Court pointed out in Bugnay Const. and Dev. Corp. v. Laron,4 a party suing as taxpayer
"must specifically prove that he has sufficient interest in preventing the illegal expenditure of money raised by taxation and that he
will sustain a direct injury as a result of the enforcement of the questioned statute or contract. It is not sufficient that he has merely
a general interest common to all members of the public." In that case, it was held that a contract, whereby a local government
leased property to a private party with the understanding that the latter would build a market building and at the end of the lease
would transfer the building of the lessor, did not involve a disbursement of public funds so as to give taxpayer standing to
question the legality of the contract. I see no substantial difference, as far as the standing is of taxpayers to question public
contracts is concerned, between the contract there and the build-lease-transfer (BLT) contract being questioned by petitioners in
this case.

Nor do petitioners have standing to bring this suit as citizens. In the cases5 in which citizens were authorized to sue, this Court
found standing because it thought the constitutional claims pressed for decision to be of "transcendental importance," as in fact it
subsequently granted relief to petitioners by invalidating the challenged statutes or governmental actions. Thus in the Lotto
case6 relied upon by the majority for upholding petitioners standing, this Court took into account the "paramount public interest"
involved which "immeasurably affect[ed] the social, economic, and moral well-being of the people . . . and the counter-productive
and retrogressive effects of the envisioned on-line lottery system:"7 Accordingly, the Court invalidated the contract for the
operation of lottery.

But in the case at bar, the Court precisely finds the opposite by finding petitioners' substantive contentions to be without merit To
the extent therefore that a party's standing is affected by a determination of the substantive merit of the case or a preliminary
estimate thereof, petitioners in the case at bar must be held to be without standing. This is in line with our ruling in Lawyers League
for a Better Philippines v. Aquino8 and In re Bermudez 9 where we dismissed citizens' actions on the ground that petitioners had no
personality to sue and their petitions did not state a cause of action. The holding that petitioners did not have standing followed
from the finding that they did not have a cause of action.
 42

In order that citizens' actions may be allowed a party must show that he personally has suffered some actual or threatened injury
as a result of the allegedly illegal conduct of the government; the injury is fairly traceable to the challenged action; and the injury is
likely to be redressed by a favorable action. 10 As the U.S. Supreme Court has held:

Typically, . . . the standing inquiry requires careful judicial examination of a complaint's allegation to ascertain whether the
particular plaintiff is entitled to an adjudication of the particular claims asserted. Is the injury too abstract, or otherwise not
appropriate, to be considered judicially cognizable? Is the line of causation between the illegal conduct and injury too
attenuated? Is the prospect of obtaining relief from the injury as a result of a favorable ruling too speculative? These
questions and any others relevant to the standing inquiry must be answered by reference to the Art III notion that federal
courts may exercise power only "in the last resort, and as a necessity, Chicago & Grand Trunk R. Co. v. Wellman, 143 US
339, 345, 36 L Ed 176,12 S Ct 400 (1892), and only when adjudication is "consistent with a system of separated powers and
[the dispute is one] traditionally thought to be capable of resolution through the judicial process," Flast v Cohen, 392 US
83, 97, 20 L Ed 2d 947, 88 S Ct 1942 (1968). See Valley Forge, 454 US, at 472-473, 70 L Ed 2d 700, 102 S Ct 752.11

Today's holding that a citizen, qua citizen, has standing to question a government contract unduly expands the scope of public
actions and sweeps away the case and controversy requirement so carefully embodied in Art. VIII, §5 in defining the jurisdiction of
this Court. The result is to convert the Court into an office of ombudsman for the ventilation of generalized grievances. Consistent
with the view that this case has no merit I submit with respect that petitioners, as representatives of the public interest, have no
standing.

Narvasa, C.J., Bidin, Melo, Puno, Vitug and Francisco, JJ., concur.

DAVIDE, JR., J., dissenting:

After wading through the record of the vicissitudes of the challenged contract and evaluating the issues raised and the arguments
adduced by the parties, I find myself unable to joint majority in the well-written ponencia of Mr. Justice Camilo P. Quiason.

I most respectfully submit that the challenged contract is void for at least two reasons: (a) it is an-ultra-vires act of the Department
of Transportation and Communications (DOTC) since under R.A. 6957 the DOTC has no authority to enter into a Build-Lease-and-
Transfer (BLT) contract; and (b) even assuming arguendo that it has, the contract was entered into without complying with the
mandatory requirement of public bidding.

Respondents admit that the assailed contract was entered into under R.A. 6957. This law, fittingly entitled "An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes,"
recognizes only two (2) kinds of contractual arrangements between the private sector and government infrastructure agencies: (a)
the Build-Operate-and-Transfer (BOT) scheme and (b) the Build-and-Transfer (BT) scheme. This conclusion finds support in Section
2 thereof which defines only the BOT and BT schemes, in Section 3 which explicitly provides for said schemes thus:

Sec. 3 Private Initiative in Infrastructure. — All government infrastructure agencies, including government-owned
and controlled corporations and local government units, are hereby authorized to enter into contract with any
duly prequalified private contractor for the financing, construction, operation and maintenance of any financially
viable infrastructure facilities through the build-operate-and transfer or build-and-transfer scheme, subject to the
terms and conditions hereinafter set forth; (Emphasis supplied).

and in Section 5 which requires public bidding of projects under both schemes.

All prior acts and negotiations leading to the perfection of the challenged contract were clearly intended and pursued for such
schemes.

A Build-Lease-and-Transfer (BLT) scheme is not authorized under the said law, and none of the aforesaid prior acts and
negotiations were designed for such unauthorized scheme. Hence, the DOTC is without any power or authority to enter into the
BLT contract in question.
 43

The majority opinion maintains, however, that since "[t]here is no mention in the BOT Law that the BOT and the BT schemes bar
any other arrangement for the payment by the government of the project cost," then "[t]he law must not be read in such a way as
to rule outer unduly restrict any variation within the context of the two schemes." This interpretation would be correct if the law
itself provides a room for flexibility. We find no such provisions in R.A. No. 6957 if it intended to include a BLT scheme, then it
should have so stated, for contracts of lease are not unknown in our jurisdiction, and Congress has enacted several laws relating to
leases. That the BLT scheme was never intended as a permissible variation "within the context" of the BOT and BT schemes is
conclusively established by the passage of R.A. No. 7718 which amends:

a. Section 2 by adding to the original BOT and BT schemes the following schemes:
(1) Build-own-and-operate (BOO)
(2) Build-Lease-and-transfer (BLT)
(3) Build-transfer-and-operate (BTO)
(4) Contract-add-and-operate (CAO)
(5) Develop-operate-and-transfer (DOT)
(6) Rehabilitate-operate-and-transfer (ROT)
(7) Rehabilitate-own-and-operate (ROO).

b. Section 3 of R.A. No. 6957 by deleting therefrom the phrase "through the build-operate-and-transfer or build-and-
transfer scheme."

II

Public bidding is mandatory in R.A. No. 6957. Section 5 thereof reads as follows:

Sec. 5 Public Bidding of Projects. — Upon approval of the projects mentioned in Section 4 of this Act, the concerned head
of the infrastructure agency or local government unit shall forthwith cause to be published, once every week for three (3)
consecutive weeks, in at least two (2) newspapers of general circulation and in at least one (1) local newspaper which is
circulated in the region, province, city or municipality in which the project is to be constructed a notice inviting all duly
prequalified infrastructure contractors to participate in the public bidding for the projects so approved. In the case of a
build-operate-and-transfer arrangement, the contract shall be awarded to the lowest complying bidder based on the
present value of its proposed tolls, fees, rentals, and charges over a fixed term for the facility to be constructed, operated,
and maintained according to the prescribed minimum design and performance standards plans, and specifications. For
this purpose, the winning contractor shall be automatically granted by the infrastructure agency or local government unit
the franchise to operate and maintain the facility, including the collection of tolls, fees, rentals; and charges in accordance
with Section 6 hereof.

In the case of a build-and-transfer arrangement, the contract shall be awarded to the lowest complying bidder based on
the present value of its proposed, schedule of amortization payments for the facility to be constructed according to the
prescribed minimum design and performance standards, plans and specifications: Provided, however, That a Filipino
constructor who submits an equally advantageous bid shall be given preference.

A copy of each build-operate-and-transfer or build-and-transfer contract shall forthwith be submitted to Congress for its
information.

The requirement of public bidding is not an idle ceremony. It has been aptly said that in our jurisdiction "public bidding is the
policy and medium adhered to in Government procurement and construction contracts under existing laws and regulations. It is
the accepted method for arriving at a fair and reasonable price and ensures that overpricing, favoritism, and other anomalous
practices are eliminated or minimized. And any Government contract entered into without the required bidding is null and void
and cannot adversely affect the rights of third parties." (Bartolome C. Fernandez, Jr., A TREATISE ON GOVERNMENT CONTRACTS
UNDER PHILIPPINE LAW 25 [rev. ed. 1991], citing Caltex vs. Delgado Bros., 96 Phil. 368 [1954]).
 44

The Office of the President, through then Executive Secretary Franklin Drilon Correctly disapproved the contract because no public
bidding is strict compliance with Section 5 of R.A. No. 6957 was conducted. Secretary Drilon Further bluntly stated that the
provision of the Implementing Rules of said law authorizing negotiated contracts was of doubtful legality. Indeed, it is null and void
because the law itself does not recognize or allow negotiated contracts.

However the majority opinion posits the view that since only private respondent EDSA LRT was prequalified, then a public bidding
would be "an absurd and pointless exercise." I submit that the mandatory requirement of public bidding cannot be legally
dispensed with simply because only one was qualified to bid during the prequalification proceedings. Section 5 mandates that the
BOT or BT contract should be awarded "to the lowest complying bidder," which logically means that there must at least be two (2)
bidders. If this minimum requirement is not met, then the proposed bidding should be deferred and a new prequalification
proceeding be scheduled. Even those who were earlier disqualified may by then have qualified because they may have, in the
meantime, exerted efforts to meet all the qualifications.

This view of the majority would open the floodgates to the rigging of prequalification proceedings or to unholy conspiracies
among prospective bidders, which would even include dishonest government officials. They could just agree, for a certain
consideration, that only one of them qualify in order that the latter would automatically corner the contract and obtain the award.

That section 5 admits of no exception and that no bidding could be validly had with only one bidder is likewise conclusively shown
by the amendments introduced by R.A. No. 7718 Per section 7 thereof, a new section denominated as Section 5-A was introduced
in R.A. No. 6957 to allow direct negotiation contracts. This new section reads:

Sec. 5-A. Direct Negotiation Of Contracts — Direct negotiation, shall be resorted to when there is only one complying
bidder left as defined hereunder.

a) If, after advertisement, only one contractor applies for prequalification requirements, after which it is required to
submit a bid/proposal which subsequently found by the agency/local government unit (LGU) to be complying.
b) If, after advertisement, more than one contractor applied for prequalification but only one meets the
prequalification requirements, after which it submits bid/proposal which is found by the agency/local
government unit (LGU) to be complying,
c) If after prequalification of more than one contractor only one submits a bid which is found by the agency/LGU to
be complying.
d) If, after prequalification, more than one contractor, only one submit bids but only one is found by the
agency/LGU to be complying: Provided, That, any of the disqualified prospective bidder may appeal the decision
contractor of the implementing agency/LGUs prequalification bids an award committee within fifteen (15)
working days to the head of the agency, in case of national projects or to the Department of the Interior and
Local Government, in case of local projects from the date the disqualification was made known to the
disqualified bidder Provided, That the implementing agency/LGUs concerned should act on the appeal within
forty-five (45) working days from receipt thereof.

Can this amendment be given retroactive effect to the challenged contract so that it may now be considered a permissible
negotiated contract? I submit that it cannot be R.A. No. 7718 does not provide that it should be given retroactive effect to pre-
existing contracts. Section 18 thereof says that it "shall take effect fifteen (15) days after its publication in at least two (2)
newspapers of general circulation." If it were the intention of Congress to give said act retroactive effect then it would have so
expressly provided. Article 4 of the Civil Code provides that "[l]aws shall have no retroactive effect, unless the contrary is provided."

The presumption is that all laws operate prospectively, unless the contrary clearly appears or is clearly, plainly, and unequivocally
expressed or necessarily implied. In every case of doubt, the doubt will be resolved against the retroactive application of laws.
(Ruben E Agpalo, STATUTORY CONSTRUCTION 225 [2d ed. 1990]). As to amendatory acts, or acts which change an existing statute,
Sutherland states:

In accordance with the rule applicable to original acts, it is presumed that provisions added by the amendment affecting
substantive rights are intended to operate prospectively. Provisions added by the amendment that affect substantive
rights will not be construed to apply to transactions and events completed prior to its enactment unless the legislature
has expressed its intent to that effect or such intent is clearly implied by the language of the amendment or by the
circumstances surrounding its enactment. (1 Frank E. Horack, Jr., SUTHERLAND'S STATUTES AND STATUTORY
CONSTRUCTION 434-436 [1943 ed.]).
 45

I vote then to grant the instant petition and to declare void the challenged contract and its supplement.

FELICIANO, J., dissenting:

After considerable study and effort, and with much reluctance, I find I must dissent in the instant case. I agree with many of the
things set out in the majority opinion written by my distinguished brother in the Court Quiason, J. At the end of the day, however, I
find myself unable to join in the result reached by the majority.

I join in the dissenting opinion written by Mr. Justice. Davide, Jr; which is appropriately drawn on fairly narrow grounds. At the same
time; I wish to address briefly one of the points made by Justice Quiason in the majority opinion in his effort to meet the difficulties
posed by Davide Jr., J.

I refer to the invocation of the provisions of presidential Decree No. 1594 dated 11 June 1978 entitled: "Prescribing policies,
Guidelines, Rules and Regulations for Government Infrastructure Contracts·" More specifically, the majority opinion invokes
paragraph 1 of Section 4 of this Degree which reads as follows:

Sec. 4. Bidding. — Construction projects shall, generally be undertaken by contract after competitive public bidding.
Projects may be undertaken by administration or force account or by negotiated contract only in exceptional cases where
time is of the essence, or where there is lack of qualified bidders or contractors, or where there is a conclusive evidence
that greater economy and efficiency would be achieved through this arrangement, and in accordance with provisions of
laws and acts on the matter, subject to the approval of the Ministry of public Works, Transportation and Communications,
the Minister of Public Highways, or the Minister of Energy, as the case may be, if the project cost is less than P1 Million,
and of the President of the Philippines, upon the recommendation of the Minister, if the project cost is P1 Million or more.

xxx xxx xxx

I understand the unspoken theory in the majority opinion to be that above Section 4 and presumably the rest of Presidential
Decree No. 1594 continue to exist and to run parallel to the provisions of Republic Act No. 6957, whether in its original form or as
amended by Republic Act No. 7718.

A principal difficulty with this approach is that Presidential Decree No. 1594 purports to apply to all "government contracts for
infrastructure and other construction projects." But Republic Act No. 6957 as amended by Republic Act No. 7718, relates only to
"infrastructure projects" which are financed, constructed, operated and maintained "by the private sector" "through
the build/operate-and-transfer or build-and-transfer scheme" under Republic Act No. 6597 and under a series of other comparable
schemes under Republic Act No. 7718. In other words, Republic Act No. 6957 and Republic Act. No. 7718 must be held, in my view,
to be special statutes applicable to a more limited field of "infrastructure projects" than the wide-ranging scope of application of
the general statute i.e., Presidential Decree No. 1594. Thus, the high relevance of the point made by Mr. Justice Davide that
Republic Act No. 6957 in specific connection with BCT- and BLT type and BLT type of contracts imposed an unqualified requirement
of public bidding set out in Section 5 thereof.

It should also be pointed out that under Presidential Decree No. 1594, projects may be undertaken "by administration or force
account or by negotiated contract only"
1) in exceptional cases where time is of the essence; or
2) where there is lack of bidders or contractors; or
3) where there is a conclusive evidence that greater economy and efficiency would be achieved through these arrangements,
and in accordance with provision[s] of laws and acts on the matter.

It must, upon the one hand, be noted that the special law Republic Act No. 6957 made absolutely no mention of negotiated
contracts being permitted to displace the requirement of public bidding. Upon the other hand, Section 5-a, inserted in Republic Act
No. 6957 by the amending statute Republic Act No. 7718, does not purport to authorize direct negotiation of
contracts situations where there is a lack of pre-qualified contractors or, complying bidders. Thus, even under the amended special
statute, entering into contracts by negotiation is not permissible in the other (2) categories of cases referred to in Section 4 of
Presidential Decree No. 1594, i.e., "in exceptional cases where time is of the essence" and "when there is conclusive evidence that
greater economy and efficiency would be achieved through these arrangements, etc."
 46

The result I reach is that insofar as BOT, etc.-types of contracts are concerned, the applicable public bidding requirement is that set
out in Republic Act No. 6957 and, with respect to such type of contracts opened for pre-qualification and bidding after the date of
effectivity of Republic Act No. 7718, The provision of Republic Act No. 7718. The assailed contract was entered into before Republic
Act. No. 7718 was enacted.

The difficulties. of applying the provisions of Presidential Degree No. 1594 to the Edsa LRT-type of contracts are aggravated when
one considers the detailed "Implementing Rules and Regulations as amended April 1988" issued under that Presidential
Decree.1 For instance:

IB [2.5.2] 2.4.2 By Negotiated Contract

xxx xxx xxx

a. In times of emergencies arising from natural calamities where immediate action is necessary to prevent imminent
loss of life and/or property.
b. Failure to award the contract after competitive public bidding for valid cause or causes [such as where the prices
obtained through public bidding are all above the AAE and the bidders refuse to reduce their prices to the AAE].

In these cases, bidding may be undertaken through sealed canvass of at least three (3) qualified contractors. Authority to
negotiate contracts for projects under these exceptional cases shall be subject to prior approval by heads of agencies
within their limits of approving authority.

c. Where the subject project is adjacent or contiguous to an on-going project and it could be economically
prosecuted by the same contractor provided that he has no negative slippage and has demonstrated a
satisfactory performance. (Emphasis supplied).

Note that there is no reference at all in these Presidential Decree No. 1594 Implementing Rules and Regulations to absence of pre-
qualified applicants and bidders as justifying negotiation of contracts as distinguished from requiring public bidding or a second
public bidding.

Note also the following provision of the same Implementing Rules and Regulations:

IB 1 Prequalification

The following may be become contractors for government projects:

1. Filipino
a. Citizens (single proprietorship)
b. Partnership of corporation duly organized under the laws of the Philippines, and at least seventy five percent (75%)
of the capital stock of which belongs to Filipino citizens.

2. Contractors forming themselves into a joint venture, i.e., a group of two or more contractors that intend to be jointly
and severally responsible for a particular contract, shall for purposes of bidding/tendering comply with LOI 630, and, aside
from being currently and properly accredited by the Philippine Contractors Accreditation Board, shall comply with the
provisions of R.A. 4566, provided thatjoint ventures in which Filipino ownership is less than seventy five percent ( 75%) may
be prequalified where the structures to be built require the application of techniques and/or technologies which are not
adequately possessed by a Filipino entity as defined above.

[The foregoing shall not negate any existing and future commitments with respect to the bidding and aware of contracts
financed partly or wholly with funds from international lending institutions like the Asian Development Bank and the
Worlds Bank as well as from bilateral and other similar sources.(Emphases supplied)
 47

The record of this case is entirely silent on the extent of Philippine equity in the Edsa LRT Corporation; there is no suggestion that
this corporation is organized under Philippine law and is at least seventy-five (75%) percent owned by Philippine citizens.

Public bidding is the normal method by which a government keeps contractors honest and is able to assure itself that it would be
getting the best possible value for its money in any construction or similar project. It is not for nothing that multilateral financial
organizations like the World Bank and the Asian Development Bank uniformly require projects financed by them to be
implemented and carried out by public bidding. Public bidding is much too important a requirement casually to loosen by a
latitudinarian exercise in statutory construction.

The instant petition should be granted and the challenged contract and its supplement should be nullified and set aside. A true
public bidding, complete with a new prequalification proceeding, should be required for the Edsa LRT Project.

G.R. No. 119528 March 26, 1997

PHILIPPINE AIRLINES, INC., petitioner, vs.

CIVIL AERONAUTICS BOARD and GRAND INTERNATIONAL AIRWAYS, INC., respondents.

Public Utilities; Transportation; Air Transportation; Franchises; Civil Aeronautics Board; The Civil Aeronautics Board is
expressly authorized by Republic Act No. 776 to issue a temporary operating permit or Certificate of Public Convenience
and Necessity, and nothing contained in the said law negates the power to issue said permit before the completion of the
applicant’s evidence and that of the oppositor thereto on the main petition.—The Civil Aeronautics Board has jurisdiction over
GrandAir’s Application for a Temporary Operating Permit. This rule has been established in the case of Philippine Air Lines Inc., vs.
Civil Aeronautics Board, promulgated on June 13, 1968. The Board is expressly authorized by Republic Act No. 776 to issue a
temporary operating permit or Certificate of Public Convenience and Necessity, and nothing contained in the said law negates the
power to issue said permit before the completion of the applicant’s evidence and that of the oppositor thereto on the main
petition. Indeed, the CAB’s authority to grant a temporary permit “upon its own initiative” strongly suggests the power to exercise
said authority, even before the presentation of said evidence has begun. Assuming arguendo that a legislative franchise is
prerequisite to the issuance of a permit, the absence of the same does not affect the jurisdiction of the Board to hear the
application, but tolls only upon the ultimate issuance of the requested permit.

Same; Same; Same; Same; Words and Phrases; “Franchise,” Explained; The power to authorize and control the operation of
a public utility is admittedly a prerogative of the legislature, since Congress is that branch of government vested with
plenary powers of legislation.—The power to authorize and control the operation of a public utility is admittedly a prerogative of
the legislature, since Congress is that branch of government vested with plenary powers of legislation. “The franchise is a legislative
grant, whether made directly by the legislature itself, or by any one of its properly constituted instrumentalities. The grant, when
made, binds the public, and is, directly or indirectly, the act of the state.”

Same; Same; Same; Same; Delegation of Powers; Administrative Law; It is generally recognized that a franchise may be
derived indirectly from the state through a duly designated agency, and to this extent, the power to grant franchises has
frequently been delegated, even to agencies other than those of a legislative nature.—Congress has granted certain
administrative agencies the power to grant licenses for, or to authorize the operation of, certain public utilities. With the growing
complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of
administering the laws, there is a constantly growing tendency towards the delegation of greater powers by the legislature, and
towards the approval of the practice by the courts. It is generally recognized that a franchise may be derived indirectly from the
state through a duly designated agency, and to this extent, the power to grant franchises has frequently been delegated, even to
agencies other than those of a legislative nature. In pursuance of this, it has been held that privileges conferred by grant by local
authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the
Legislature.

Same; Same; Same; Same; Same; The trend of modern legislation is to vest the Public Service Commissioner with the
power to regulate and control the operation of public services under reasonable rules and regulations.—The trend of
modern legislation is to vest the Public Service Commissioner with the power to regulate and control the operation of public
services under reasonable rules and regulations, and as a general rule, courts will not interfere with the exercise of that discretion
when it is just and reasonable and founded upon a legal right.
 48

Same; Same; Same; Same; Same; The Civil Aeronautics Board has the authority to issue a Certificate of Public Convenience
and Necessity, or Temporary Operating Permit to a domestic air transport operator, who, though not possessing a
legislative franchise, meets all the other requirements prescribed by law.—Given the foregoing postulates, we find that the
Civil Aeronautics Board has the authority to issue a Certificate of Public Convenience and Necessity, or Temporary Operating
Permit to a domestic air transport operator, who, though not possessing a legislative franchise, meets all the otherrequirements
prescribed by the law. Such requirements were enumerated in Section 21 of R.A. No. 776.

Same; Same; Same; Same; Same; There is nothing in the law nor in the Constitution, which indicates that a legislative
franchise is an indispensable requirement for an entity to operate as a domestic air transport operator.—There is nothing in
the law nor in the Constitution, which indicates that a legislative franchise is an indispensable requirement for an entity to operate
as a domestic air transport operator. 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. Franchises issued by
Congress are not required before each and every public utility may operate. In many instances, Congress has seen it fit to delegate
this function to government agencies, specialized particularly in their respective areas of public service.

Same; Same; Same; Same; Same; Words and Phrases; “Convenience and Necessity,” Explained; The terms “convenience and
necessity,” if used together in a statute, are usually held not to be separable, but are construed together—both words
modify each other.—Many and varied are the definitions of certificates of public convenience which courts and legal writers have
drafted. Some statutes use the terms “convenience and necessity” while others use only the words “public convenience.” The terms
“convenience and necessity,” if used together in a statute, are usually held not to be separable, but are construed together. Both
words modify each other and must be construed together. The word ‘necessity’ is so connected, not as an additional requirement
but to modify and qualify what might otherwise be taken as the strict significance of the word necessity. Public convenience and
necessity exists when the proposed facility will meet a reasonable want of the public and supply a need which the existing facilities
do not adequately afford. It does not mean or require an actual physical necessity or an indispensable thing. “The terms
‘convenience’ and ‘necessity’ are to be construed together, although they are not synonymous, and effect must be given both. The
convenience of the public must not be circumscribed by according to the word ‘necessity’ its strict meaning or an essential
requisites.”

Same; Same; Same; Same; Same; Congress, by giving the CAB the power to issue permits for the operation of domestic
transport services, has delegated to the said body the authority to determine the capability and competence of a
prospective domestic air transport operator to engage in such venture.—Congress, by giving the respondent Board the power
to issue permits for the operation of domestic transport services, has delegated to the said body the authority to determine the
capability and competence of a prospective domestic air transport operator to engage in such venture. This is not an instance of
transforming the respondent Board into a minilegislative body, with unbridled authority to choose who should be given authority
to operate domestic air transport services. Philippine Airlines, Inc. vs. Civil Aeronautics Board, 270 SCRA 538, G.R. No. 119528 March
26, 1997

TORRES, JR., J.:

This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules of Court seeks to prohibit respondent Civil
Aeronautics Board from exercising jurisdiction over private respondent's Application for the issuance of a Certificate of Public
Convenience and Necessity, and to annul and set aside a temporary operating permit issued by the Civil Aeronautics Board in favor
of Grand International Airways (GrandAir, for brevity) allowing the same to engage in scheduled domestic air transportation
services, particularly the Manila-Cebu, Manila-Davao, and converse routes.

The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support its petition is the fact that GrandAir does not
possess a legislative franchise authorizing it to engage in air transportation service within the Philippines or elsewhere. Such
franchise is, allegedly, a requisite for the issuance of a Certificate of Public Convenience or Necessity by the respondent Board, as
mandated under Section 11, Article XII of the Constitution.

Respondent GrandAir, on the other hand, posits that a legislative franchise is no longer a requirement for the issuance of a
Certificate of Public Convenience and Necessity or a Temporary Operating Permit, following the Court's pronouncements in the
case of Albano vs. Reyes,1 as restated by the Court of Appeals in Avia Filipinas International vs. Civil Aeronautics Board2 and Silangan
Airways, Inc. vs. Grand International Airways, Inc., and the Hon. Civil Aeronautics Board.3
 49

On November 24, 1994, private respondent GrandAir applied for a Certificate of Public Convenience and Necessity with the Board,
which application was docketed as CAB Case No. EP-12711.4 Accordingly, the Chief Hearing Officer of the CAB issued a Notice of
Hearing setting the application for initial hearing on December 16, 1994, and directing GrandAir to serve a copy of the application
and corresponding notice to all scheduled Philippine Domestic operators. On December 14, 1994, GrandAir filed its Compliance,
and requested for the issuance of a Temporary Operating Permit. Petitioner, itself the holder of a legislative franchise to operate air
transport services, filed an Opposition to the application for a Certificate of Public Convenience and Necessity on December 16,
1995 on the following grounds:

A. The CAB has no jurisdiction to hear the petitioner's application until the latter has first obtained a franchise to operate
from Congress.
B. The petitioner's application is deficient in form and substance in that:
1. The application does not indicate a route structure including a computation of trunkline, secondary and rural
available seat kilometers (ASK) which shall always be maintained at a monthly level at least 5% and 20% of the
ASK offered into and out of the proposed base of operations for rural and secondary, respectively.
2. It does not contain a project/feasibility study, projected profit and loss statements, projected balance sheet,
insurance coverage, list of personnel, list of spare parts inventory, tariff structure, documents supportive of
financial capacity, route flight schedule, contracts on facilities (hangars, maintenance, lot) etc.
C. Approval of petitioner's application would violate the equal protection clause of the constitution.
D. There is no urgent need and demand for the services applied for.
E. To grant petitioner's application would only result in ruinous competition contrary to Section 4(d) of R.A. 776. 5

At the initial hearing for the application, petitioner raised the issue of lack of jurisdiction of the Board to hear the application
because GrandAir did not possess a legislative franchise.

On December 20, 1994, the Chief Hearing Officer of CAB issued an Order denying petitioner's Opposition. Pertinent portions of the
Order read:

PAL alleges that the CAB has no jurisdiction to hear the petitioner's application until the latter has first obtained a
franchise to operate from Congress.

The Civil Aeronautics Board has jurisdiction to hear and resolve the application. In Avia Filipina vs. CAB, CA G.R. No. 23365,
it has been ruled that under Section 10 (c) (I) of R.A. 776, the Board possesses this specific power and duty.

In view thereof, the opposition of PAL on this ground is hereby denied.

SO ORDERED.

Meantime, on December 22, 1994, petitioner this time, opposed private respondent's application for a temporary permit
maintaining that:
1. The applicant does not possess the required fitness and capability of operating the services applied for under RA 776;
and,
2. Applicant has failed to prove that there is clear and urgent public need for the services applied for.6

On December 23, 1994, the Board promulgated Resolution No. 119(92) approving the issuance of a Temporary Operating Permit in
favor of Grand Air 7 for a period of three months, i.e., from December 22, 1994 to March 22, 1994. Petitioner moved for the
reconsideration of the issuance of the Temporary Operating Permit on January 11, 1995, but the same was denied in CAB
Resolution No. 02 (95) on February 2, 1995. 8 In the said Resolution, the Board justified its assumption of jurisdiction over
GrandAir's application.

WHEREAS , the CAB is specifically authorized under Section 10-C (1) of Republic Act No. 776 as follows:

(c) The Board shall have the following specific powers and duties:

(1) In accordance with the provision of Chapter IV of this Act, to issue, deny, amend revise, alter, modify, cancel, suspend
or revoke, in whole or in part, upon petitioner-complaint, or upon its own initiative, any temporary operating permit or
 50

Certificate of Public Convenience and Necessity; Provided, however; that in the case of foreign air carriers, the permit shall
be issued with the approval of the President of the Republic of the Philippines.

WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein the Supreme Court held that the CAB can
even on its own initiative, grant a TOP even before the presentation of evidence;

WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365), promulgated on October 30, 1991, held that in
accordance with its mandate, the CAB can issue not only a TOP but also a Certificate of Public Convenience and Necessity
(CPCN) to a qualified applicant therefor in the absence of a legislative franchise, citing therein as basis the decision
of Albano vs. Reyes (175 SCRA 264) which provides (inter alia) that:

a) Franchises by Congress are not required before each and every public utility may operate when the law has granted
certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities;

b) The Constitutional provision in Article XII, Section 11 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 since 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.

WHEREAS, Executive Order No. 219 which took effect on 22 January 1995, provides in Section 2.1 that a minimum of two
(2) operators in each route/link shall be encouraged and that routes/links presently serviced by only one (1) operator shall
be open for entry to additional operators.

RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by Philippine Airlines on January 05, 1995 on the
Grant by this Board of a Temporary Operating Permit (TOP) to Grand International Airways, Inc. alleging among others
that the CAB has no such jurisdiction, is hereby DENIED, as it hereby denied, in view of the foregoing and considering that
the grounds relied upon by the movant are not indubitable.

On March 21, 1995, upon motion by private respondent, the temporary permit was extended for a period of six (6) months or up to
September 22, 1995.

Hence this petition, filed on April 3, 1995.

Petitioners argue that the respondent Board acted beyond its powers and jurisdiction in taking cognizance of GrandAir's
application for the issuance of a Certificate of Public Convenience and Necessity, and in issuing a temporary operating permit in
the meantime, since GrandAir has not been granted and does not possess a legislative franchise to engage in scheduled domestic
air transportation. A legislative franchise is necessary before anyone may engage in air transport services, and a franchise may only
be granted by Congress. This is the meaning given by the petitioner upon a reading of Section 11, Article XII,9 and Section 1, Article
VI, 10 of the Constitution.

To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of Justice, which reads:
 51

Dr. Arturo C. Corona

Executive Director
Civil Aeronautics Board
PPL Building, 1000 U.N. Avenue
Ermita, Manila

Sir:

This has reference to your request for opinion on the necessity of a legislative franchise before the Civil Aeronautics Board
("CAB") may issue a Certificate of Public Convenience and Necessity and/or permit to engage in air commerce or air
transportation to an individual or entity.

You state that during the hearing on the application of Cebu Air for a congressional franchise, the House Committee on
Corporations and Franchises contended that under the present Constitution, the CAB may not issue the abovestated
certificate or permit, unless the individual or entity concerned possesses a legislative franchise. You believe otherwise,
however, for the reason that under R.A. No. 776, as amended, the CAB is explicitly empowered to issue operating permits
or certificates of public convenience and necessity and that this statutory provision is not inconsistent with the current
charter.

We concur with the view expressed by the House Committee on Corporations and Franchises. In an opinion rendered in
favor of your predecessor-in-office, this Department observed that, —

. . . it is useful to note the distinction between the franchise to operate and a permit to commence operation. The former
is sovereign and legislative in nature; it can be conferred only by the lawmaking authority (17 W and P, pp. 691-697). The
latter is administrative and regulatory in character (In re Application of Fort Crook-Bellevue Boulevard Line, 283 NW 223);
it is granted by an administrative agency, such as the Public Service Commission [now Board of Transportation], in the
case of land transportation, and the Civil Aeronautics Board, in case of air services. While a legislative franchise is a pre-
requisite to a grant of a certificate of public convenience and necessity to an airline company, such franchise alone cannot
constitute the authority to commence operations, inasmuch as there are still matters relevant to such operations which
are not determined in the franchise, like rates, schedules and routes, and which matters are resolved in the process of
issuance of permit by the administrative. (Secretary of Justice opn No. 45, s. 1981)

Indeed, authorities are agreed that a certificate of public convenience and necessity is an authorization issued by the
appropriate governmental agency for the operation of public services for which a franchise is required by law (Almario,
Transportation and Public Service Law, 1977 Ed., p. 293; Agbayani, Commercial Law of the Phil., Vol. 4, 1979 Ed., pp. 380-
381).

Based on the foregoing, it is clear that a franchise is the legislative authorization to engage in a business activity or
enterprise of a public nature, whereas a certificate of public convenience and necessity is a regulatory measure which
constitutes the franchise's authority to commence operations. It is thus logical that the grant of the former should
precede the latter.

Please be guided accordingly.

(SGD.) SEDFREY A. ORDONEZ

Secretary of Justice

Respondent GrandAir, on the other hand, relies on its interpretation of the provisions of Republic Act 776, which follows the
pronouncements of the Court of Appeals in the cases of Avia Filipinas vs. Civil Aeronautics Board, and Silangan Airways,
Inc. vs. Grand International Airways (supra).

In both cases, the issue resolved was whether or not the Civil Aeronautics Board can issue the Certificate of Public Convenience and
Necessity or Temporary Operating Permit to a prospective domestic air transport operator who does not possess a legislative
franchise to operate as such. Relying on the Court's pronouncement in Albano vs. Reyes (supra), the Court of Appeals upheld the
authority of the Board to issue such authority, even in the absence of a legislative franchise, which authority is derived from Section
10 of Republic Act 776, as amended by P.D. 1462. 11
 52

The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a Temporary Operating Permit. This rule has been
established in the case of Philippine Air Lines Inc., vs. Civil Aeronautics Board, promulgated on June 13, 1968. 12 The Board is
expressly authorized by Republic Act 776 to issue a temporary operating permit or Certificate of Public Convenience and Necessity,
and nothing contained in the said law negates the power to issue said permit before the completion of the applicant's evidence
and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary permit "upon its own
initiative" strongly suggests the power to exercise said authority, even before the presentation of said evidence has begun.
Assuming arguendo that a legislative franchise is prerequisite to the issuance of a permit, the absence of the same does not affect
the jurisdiction of the Board to hear the application, but tolls only upon the ultimate issuance of the requested permit.

The power to authorize and control the operation of a public utility is admittedly a prerogative of the legislature, since Congress is
that branch of government vested with plenary powers of legislation.

The franchise is a legislative grant, whether made directly by the legislature itself, or by any one of its properly constituted
instrumentalities. The grant, when made, binds the public, and is, directly or indirectly, the act of the state. 13

The issue in this petition is whether or not Congress, in enacting Republic Act 776, has delegated the authority to authorize the
operation of domestic air transport services to the respondent Board, such that Congressional mandate for the approval of such
authority is no longer necessary.

Congress has granted certain administrative agencies the power to grant licenses for, or to authorize the operation of certain
public utilities. With the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the
increased difficulty of administering the laws, there is a constantly growing tendency towards the delegation of greater powers by
the legislature, and towards the approval of the practice by the courts. 14 It is generally recognized that a franchise may be derived
indirectly from the state through a duly designated agency, and to this extent, the power to grant franchises has frequently been
delegated, even to agencies other than those of a legislative nature. 15 In pursuance of this, it has been held that privileges
conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had
been made by an act of the Legislature. 16

The trend of modern legislation is to vest the Public Service Commissioner with the power to regulate and control the operation of
public services under reasonable rules and regulations, and as a general rule, courts will not interfere with the exercise of that
discretion when it is just and reasonable and founded upon a legal right. 17

It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a reading of the pertinent issuances governing the
Philippine Ports Authority, 18 proves that the PPA is empowered to undertake by itself the operation and management of the
Manila International Container Terminal, 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 to PPA, a franchise from Congress to authorize an entity other than the
PPA to operate and manage the MICP becomes unnecessary.

Given the foregoing postulates, we find that the Civil Aeronautics Board has the authority to issue a Certificate of Public
Convenience and Necessity, or Temporary Operating Permit to a domestic air transport operator, who, though not possessing a
legislative franchise, meets all the other requirements prescribed by the law. Such requirements were enumerated in Section 21 of
R.A. 776.

There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an indispensable requirement for
an entity to operate as a domestic air transport operator. 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.
Franchises issued by Congress are not required before each and every public utility may operate. 19 In many instances, Congress
has seen it fit to delegate this function to government agencies, specialized particularly in their respective areas of public service.

A reading of Section 10 of the same reveals the clear intent of Congress to delegate the authority to regulate the issuance of a
license to operate domestic air transport services:

Sec. 10. Powers and Duties of the Board. (A) Except as otherwise provided herein, the Board shall have the power to
regulate the economic aspect of air transportation, and shall have general supervision and regulation of, the jurisdiction
and control over air carriers, general sales agents, cargo sales agents, and air freight forwarders as well as their property
 53

rights, equipment, facilities and franchise, insofar as may be necessary for the purpose of carrying out the provision of this
Act.

In support of the Board's authority as stated above, it is given the following specific powers and duties:

(C) The Board shall have the following specific powers and duties:

(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend, revise, alter, modify, cancel, suspend
or revoke in whole or in part upon petition or complaint or upon its own initiative any Temporary Operating Permit or
Certificate of Public Convenience and Necessity: Provided however, That in the case of foreign air carriers, the permit shall
be issued with the approval of the President of the Republic of the Philippines.

Petitioner argues that since R.A. 776 gives the Board the authority to issue "Certificates of Public Convenience and Necessity", this,
according to petitioner, means that a legislative franchise is an absolute requirement. It cites a number of authorities supporting
the view that a Certificate of Public Convenience and Necessity is issued to a public service for which a franchise is required by law,
as distinguished from a "Certificate of Public Convenience" which is an authorization issued for the operation of public services for
which no franchise, either municipal or legislative, is required by law. 20

This submission relies on the premise that the authority to issue a certificate of public convenience and necessity is a regulatory
measure separate and distinct from the authority to grant a franchise for the operation of the public utility subject of this particular
case, which is exclusively lodged by petitioner in Congress.

We do not agree with the petitioner.

Many and varied are the definitions of certificates of public convenience which courts and legal writers have drafted. Some statutes
use the terms "convenience and necessity" while others use only the words "public convenience." The terms "convenience and
necessity", if used together in a statute, are usually held not to be separable, but are construed together. Both words modify each
other and must be construed together. The word 'necessity' is so connected, not as an additional requirement but to modify and
qualify what might otherwise be taken as the strict significance of the word necessity. Public convenience and necessity exists when
the proposed facility will meet a reasonable want of the public and supply a need which the existing facilities do not adequately
afford. It does not mean or require an actual physical necessity or an indispensable thing. 21

The terms "convenience" and "necessity" are to be construed together, although they are not synonymous, and
effect must be given both. The convenience of the public must not be circumscribed by according to the word
"necessity" its strict meaning or an essential requisites. 22

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.

Congress, by giving the respondent Board the power to issue permits for the operation of domestic transport services, has
delegated to the said body the authority to determine the capability and competence of a prospective domestic air transport
operator to engage in such venture. This is not an instance of transforming the respondent Board into a mini-legislative body, with
unbridled authority to choose who should be given authority to operate domestic air transport services.

To be valid, the delegation itself must be circumscribed by legislative restrictions, not a "roving commission" that
will give the delegate unlimited legislative authority. It must not be a delegation "running riot" and "not
canalized with banks that keep it from overflowing." Otherwise, the delegation is in legal effect an abdication of
legislative authority, a total surrender by the legislature of its prerogatives in favor of the delegate. 23

Congress, in this instance, has set specific limitations on how such authority should be exercised.

Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines or policies:
 54

Sec. 4. Declaration of policies. In the exercise and performance of its powers and duties under this Act, the Civil Aeronautics Board
and the Civil Aeronautics Administrator shall consider the following, among other things, as being in the public interest, and in
accordance with the public convenience and necessity:
a) The development and utilization of the air potential of the Philippines;
b) The encouragement and development of an air transportation system properly adapted to the present and future of
foreign and domestic commerce of the Philippines, of the Postal Service and of the National Defense;
c) The regulation of air transportation in such manner as to recognize and preserve the inherent advantages of, assure the
highest degree of safety in, and foster sound economic condition in, such transportation, and to improve the relations
between, and coordinate transportation by, air carriers;
d) The promotion of adequate, economical and efficient service by air carriers at reasonable charges, without unjust
discriminations, undue preferences or advantages, or unfair or destructive competitive practices;
e) Competition between air carriers to the extent necessary to assure the sound development of an air transportation system
properly adapted to the need of the foreign and domestic commerce of the Philippines, of the Postal Service, and of the
National Defense;
f) To promote safety of flight in air commerce in the Philippines; and,
g) The encouragement and development of civil aeronautics.

More importantly, the said law has enumerated the requirements to determine the competency of a prospective operator to
engage in the public service of air transportation.

Sec. 12. Citizenship requirement. Except as otherwise provided in the Constitution and existing treaty or treaties, a permit
authorizing a person to engage in domestic air commerce and/or air transportation shall be issued only to citizens of the
Philippines 24

Sec. 21. Issuance of permit. The Board shall issue a permit authorizing the whole or any part of the service covered by the
application, if it finds: (1) that the applicant is fit, willing and able to perform such service properly in conformity with the provisions
of this Act and the rules, regulations, and requirements issued thereunder; and (2) that such service is required by the public
convenience and necessity; otherwise the application shall be denied.

Furthermore, the procedure for the processing of the application of a Certificate of Public Convenience and Necessity had been
established to ensure the weeding out of those entities that are not deserving of public service. 25

In sum, respondent Board should now be allowed to continue hearing the application of GrandAir for the issuance of a Certificate
of Public Convenience and Necessity, there being no legal obstacle to the exercise of its jurisdiction.

ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to DISMISS the instant petition for lack of merit. The
respondent Civil Aeronautics Board is hereby DIRECTED to CONTINUE hearing the application of respondent Grand International
Airways, Inc. for the issuance of a Certificate of Public Convenience and Necessity.

SO ORDERED.

G.R. No. 166471 March 22, 2011

TAWANG MULTI-PURPOSE COOPERATIVE Petitioner, vs.

LA TRINIDAD WATER DISTRICT, Respondent.

Equity; If acts that cannot be legally done directly can be done indirectly, then all laws would be illusory.—What cannot be
legally done directly cannot be done indirectly. This rule is basic and, to a reasonable mind, does not need explanation. Indeed, if
acts that cannot be legally done directly can be done indirectly, then all laws would be illusory. In Alvarez v. PICOP Resources, Inc.,
606 SCRA 444 (2009), the Court held that, “What one cannot do directly, he cannot do indirectly.” In Akbayan Citizens Action Party
v. Aquino, 558 SCRA 468 (2008), quoting Agan, Jr. v. Philippine International Air Terminals Co., Inc., 402 SCRA 612 (2003), the Court
held that, “This Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be
done indirectly.” In Central Bank Employees Association, Inc. v. Bangko Sentral ng Pilipinas, 446 SCRA 299 (2004), the Court held
that, “No one is allowed to do indirectly what he is prohibited to do directly.”
 55

Public Utilities; Franchises; The President, Congress and the Court cannot create directly franchises for the operation of a
public utility that are exclusive in character.—The President, Congress and the Court cannot create directly franchises for the
operation of a public utility that are exclusive in character. The 1935, 1973 and 1987 Constitutions expressly and clearly prohibit the
creation of franchises that are exclusive in character. x x x Plain words do not require explanation. The 1935, 1973 and 1987
Constitutions are clear—franchises for the operation of a public utility cannot be exclusive in character. The 1935, 1973 and 1987
Constitutions expressly and clearly state that, “nor shall such franchise x x x be exclusive in character.” There is no exception.

Same; Same; Water Resources; The President, Congress and the Court cannot create indirectly franchises that are exclusive
in character by allowing the Board of Directors (BOD) of a water district and the Local Water Utilities Administration
(LWUA) to create franchises that are exclusive in character.—The President, Congress and the Court cannot create directly
franchises that are exclusive in character. What the President, Congress and the Court cannot legally do directly they cannot do
indirectly. Thus, the President, Congress and the Court cannot create indirectly franchises that are exclusive in character by allowing
the Board of Directors (BOD) of a water district and the Local Water Utilities Administration (LWUA) to create franchises that are
exclusive in character. In PD No. 198, as amended, former President Ferdinand E. Marcos (President Marcos) created indirectly
franchises that are exclusive in character by allowing the BOD of LTWD and the LWUA to create directly franchises that are
exclusive in character. Section 47 of PD No. 198, as amended, allows the BOD and the LWUA to create directly franchises that are
exclusive in character. Section 47 states: Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency
for domestic, industrial or commercial water service within the district or any portion thereof unless and except to the extent that
the board of directors of said district consents thereto by resolution duly adopted, such resolution, however, shall be subject to
review by the Administration.

Same; Same; There is no “reasonable and legitimate” ground to violate the Constitution.— The dissenting opinion states two
“reasonable and legitimate grounds” for the creation of exclusive franchise: (1) protection of “the government’s investment,” and
(2) avoidance of “a situation where ruinous competition could compromise the supply of public utilities in poor and remote areas.”
There is no “reasonable and legitimate” ground to violate the Constitution. The Constitution should never be violated by anyone.
Right or wrong, the President, Congress, the Court, the BOD and the LWUA have no choice but to follow the Constitution. Any act,
however noble its intentions, is void if it violates the Constitution. This rule is basic.

Police Power; Police power does not include the power to violate the Constitution.—Police power does not include the power
to violate the Constitution. Police power is the plenary power vested in Congress to make laws not repugnant to the Constitution.
This rule is basic. In Metropolitan Manila Development Authority v. Viron Transportation Co., Inc., 530 SCRA 341 (2007), the Court
held that, “Police power is the plenary power vested in the legislature to make, ordain, and establish wholesome and reasonable
laws, statutes and ordinances, not repugnant to the Constitution.” In Carlos Superdrug Corp. v. Department of Social Welfare and
Development, 526 SCRA 130 (2007), the Court held that, police power “is ‘the power vested in the legislature by the constitution to
make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances x x x not repugnant to the
constitution.’” In Metropolitan Manila Development Authority v. Garin, 456 SCRA 176 (2005), the Court held that, “police power, as
an inherent attribute of sovereignty, is the power vested by the Constitution in the legislature to make, ordain, and establish all
manner of wholesome and reasonable laws, statutes and ordinances x x x not repugnant to the Constitution.”Public Utilities;
Franchises; View that despite its title, Sec. 47 of PD 198, does not absolutely prohibit other franchises from water service from
being granted to other persons or agencies. It merely requires the consent of the local water district’s Board of Directors before
another franchise within the district is granted.—An exclusive franchise, in its plainest meaning, signifies that no other entity, apart
from the grantee, could be given a franchise. Section 47 of P.D. No. 198, by its clear terms, does not provide for an exclusive
franchise in stating that: “Sec. 47. Exclusive Franchise.—No franchise shall be granted to any other person or agency for domestic,
industrial, or commercial water service within the district or any portion thereof unless and except to the extent that the board of
directors of said district consents thereto by resolution duly adopted, such resolution, however, shall be subject to review by the
Administration.” Despite its title, the assailed provision does not absolutely prohibit other franchises for water service from being
granted to other persons or agencies. It merely requires the consent of the local water district’s Board of Directors before another
franchise within the district is granted. Thus, it is a regulation on the grant of any subsequent franchise where the local water
district, as original grantee, may grant or refuse its consent. If it consents, the non-exclusive nature of its franchise becomes only
too clear. Should it refuse, its action does not remain unchecked as the franchise applicant may ask the LWUA to review the local
water district’s refusal. It is thus the LWUA (on the Office of the President in case of further appeal) that grants a subsequent
franchise if one will be allowed.

Same; Same; View that a government agency’s refusal to consent to the grant of a franchise to another entity, based on
reasonable and legitimate grounds, should not be construed as a violation of the constitutional mandate on the non-
exclusivity of a franchise where the standards for the grant or refusal are clearly spelled out in the law.—I submit that the
prerogative of the local water district’s board of directors or the LWUA to give or refuse its consent to the application for a CPC
 56

cannot be considered as a constitutional infringement. A government agency’s refusal to consent to the grant of a franchise to
another entity, based on reasonable and legitimate grounds, should not be construed as a violation of the constitutional mandate
on the non-exclusivity of a franchise where the standards for the grant or refusal are clearly spelled out in the law. Effectively, what
the law and the State (acting through its own agency or a government-owned or controlled corporation) thereby undertake is
merely an act of regulation that the Constitution does not prohibit. To say that a legal provision is unconstitutional simply because
it enables a grantee, a government instrumentality, to determine the soundness of granting a subsequent franchise in its area is
contrary to the government’s inherent right to exercise police power in regulating public utilities for the protection of the public
and the utilities themselves.

Same; Same; View that the local water districts and the Local Water Utilities Administration (LWUA) are government-
owned and controlled corporations (GOCCs). The directors of the local water districts and the trustees of the LWUA are
government employees subject to civil service laws and anti-graft laws. Moreover, the LWUA is attached to the Office of
the President which has the authority to review its acts. Should these acts in the Executive Department constitute grave
abuse of discretion, the Court may strike them down under its broad powers of review.—The refusal of the local water district
or the LWUA to consent to other franchises would carry with it the legal presumption that public officers regularly perform their
official functions. If, on the other hand, the officers, directors or trustees of the local water districts and the LWUA act arbitrarily and
unjustifiably refuse their consent to an applicant of a franchise, they may be held liable for their actions. The local water districts
and the LWUA are government-owned and controlled corporations (GOCCs). The directors of the local water districts and the
trustees of the LWUA are government employees subject to civil service laws and anti-graft laws. Moreover, the LWUA is attached
to the Office of the President which has the authority to review its acts. Should these acts in the Executive Department constitute
grave abuse of discretion, the Courts may strike them down under its broad powers of review.

Same; Same; View that a first reason the government seeks to prioritize local water districts is the protection of its
investments—it pours its scarce financial resources into these water districts.—A first reason the government seeks to
prioritize local water districts is the protection of its investments—it pours its scarce financial resources into these water districts.
The law primarily establishes the LWUA as a specialized lending institution for the promotion, development and financing of water
utilities. Section 73 of P.D. No. 198 also authorizes the LWUA to contract loans and credits, and incur indebtedness with foreign
governments or international financial institutions for the accomplishment of its objectives. Moreover, the President of the
Philippines is empowered not only to negotiate or contract with foreign governments or international financial institutions on
behalf of the LWUA; he or she may also absolutely and unconditionally guarantee, in the name of the Republic of the Philippines,
the payment of the loans. In addition, the law provides that the General Appropriations Act shall include an outlay to meet the
financial requirements of non-viable local water districts or the special projects of local water districts.

Same; Same; The law adopts a policy to keep the operations of local water districts economically secure and viable.—The
law also adopts a policy to keep the operations of local water districts economically secure and viable. The “whereas” clauses of the
law explain the need to establish local water districts: the lack of water utilities in provincial areas and the poor quality of the water
found in some areas. The law sought to solve these problems by encouraging the creation of local water districts that the national
government would support through technical advisory services and financing. These local water districts are heavily regulated and
depend on government support for their subsistence. If a private entity provides stiff competition against a local water district,
causes it to close down and, thereafter, chooses to discontinue its business, the problem of finding a replacement water supplier
for a poor, remote area will recur. Not only does the re-organization of a local water district drain limited public funds; the
residents of these far-flung areas would have to endure the absence of water supply during the considerable time it would take to
find an alternative water supply.

Same; Same; As a matter of foresight, Section 47 of Presidential Decree No. 198 and other provisions within the law aim to
avert the negative effects of competition on the financial stability of local water districts.—As a matter of foresight, Section
47 of P.D. No. 198 and other provisions within the law aim to avert the negative effects of competition on the financial stability of
local water districts. These sections work hand in hand with Section 47 of P.D. No. 198. Section 31 of P.D. No. 198, which is very
similar to Section 47 of P.D. No. 198, directly prohibits persons from selling or disposing water for public purposes within the
service area of the local water district: Section 31. Protection of Waters and Facilities of District.—A district shall have the right to: x
x x x (c) Prohibit any person, firm or corporation from vending selling, or otherwise disposing of water for public purposes within
the service area of the district where district facilities are available to provide such service, or fix terms and conditions by permit for
such sale or disposition of water. Thus, Section 47 of P.D. No. 198 provides that before a person or entity is allowed to provide
water services where the local water district’s facilities are already available, one must ask for the consent of the board of directors
of the local water district, whose action on the matter may be reviewed by the LWUA.
 57

Same; Same; In all, Section 47 of Presidential Decree (P.D.) 198 does not violate the constitutional proscription against
exclusive franchises as other persons and entities may still obtain franchises for water utilities within the district upon the
consent of the local water district or upon a favorable finding by the Local Water Utilities Administration (LWUA), which,
in turn, is accountable to the Office of the Preisdent.—In all, Section 47 of P.D. No. 198 does not violate the constitutional
proscription against exclusive franchises as other persons and entities may still obtain franchises for water utilities within the district
upon the consent of the local water district or upon a favorable finding by the LWUA, which, in turn, is accountable to the Office of
the President. By granting this privilege to local water districts, the law does not seek to favor private interests as these districts are
GOCCs whose profits are exclusively for public use and whose expenditures the law subjects to the strictest scrutiny. The
restrictions applied to other private persons or entities are intended to protect the government’s considerable investment in local
water districts and to promote its policy of prioritizing local water districts as a means of providing water utilities throughout the
country. The protectionist approach that the law has taken towards local water districts is not per se illegal as the Constitution does
not promote a total deregulation in the operation of public utilities and is a proper exercise by the government of its police power.

ABAD, J., Concurring Opinion:

Courts; Judgments; Statutes; Separation of Powers; The Supreme Court’s power of review does not permit it to rewrite
Presidential Decree (P.D.) 198 in a subsequent case and breathe life to its dead provisions—only Congress can.—Since the
Court, exercising its Constitutional power of judicial review, has declared Section 47 of P.D. 198 void and unconstitutional, such
section ceased to become law from the beginning. The Supreme Court’s power of review does not permit it to rewrite P.D. 198 in a
subsequent case and breathe life to its dead provisions. Only Congress can. Besides, such course of action is unwise. The Court will
be establishing a doctrine whereby people and the other branches of government will not need to treat the Court’s declaration of
nullity of law too seriously. They can claim an excuse for continuing to enforce such law since even the Court concedes that it can
in another case change its mind regarding its nullity. Tawang Multi-Purpose Cooperative vs. La Trinidad Water District, 646 SCRA
21, G.R. No. 166471 March 22, 2011

DECISION

CARPIO, J.:

The Case
This is a petition for review on certiorari under Rule 45 of the Rules of Court. The petition1 challenges the 1 October 2004
Judgment2 and 6 November 2004 Order3 of the Regional Trial Court (RTC), Judicial Region 1, Branch 62, La Trinidad, Benguet, in
Civil Case No. 03-CV-1878.

The Facts
Tawang Multi-Purpose Cooperative (TMPC) is a cooperative, registered with the Cooperative Development Authority, and
organized to provide domestic water services in Barangay Tawang, La Trinidad, Benguet.

La Trinidad Water District (LTWD) is a local water utility created under Presidential Decree (PD) No. 198, as amended. It is
authorized to supply water for domestic, industrial and commercial purposes within the municipality of La Trinidad, Benguet.

On 9 October 2000, TMPC filed with the National Water Resources Board (NWRB) an application for a certificate of public
convenience (CPC) to operate and maintain a waterworks system in Barangay Tawang. LTWD opposed TMPC’s application. LTWD
claimed that, under Section 47 of PD No. 198, as amended, its franchise is exclusive. Section 47 states that:

Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency for domestic, industrial or commercial
water service within the district or any portion thereof unless and except to the extent that the board of directors of said district
consents thereto by resolution duly adopted, such resolution, however, shall be subject to review by the Administration.

In its Resolution No. 04-0702 dated 23 July 2002, the NWRB approved TMPC’s application for a CPC. In its 15 August 2002
Decision,4 the NWRB held that LTWD’s franchise cannot be exclusive since exclusive franchises are unconstitutional and found that
TMPC is legally and financially qualified to operate and maintain a waterworks system. NWRB stated that:

With respect to LTWD’s opposition, this Board observes that:

 58

1. It is a substantial reproduction of its opposition to the application for water permits previously filed by this same CPC applicant,
under WUC No. 98-17 and 98-62 which was decided upon by this Board on April 27, 2000. The issues being raised by Oppositor
had been already resolved when this Board said in pertinent portions of its decision:

"The authority granted to LTWD by virtue of P.D. 198 is not Exclusive. While Barangay Tawang is within their territorial jurisdiction,
this does not mean that all others are excluded in engaging in such service, especially, if the district is not capable of supplying
water within the area. This Board has time and again ruled that the "Exclusive Franchise" provision under P.D. 198 has misled most
water districts to believe that it likewise extends to be [sic] the waters within their territorial boundaries. Such ideological adherence
collides head on with the constitutional provision that "ALL WATERS AND NATURAL RESOURCES BELONG TO THE STATE". (Sec. 2,
Art. XII) and that "No franchise, certificate or authorization for the operation of public [sic] shall be exclusive in character".

xxxx

All the foregoing premises all considered, and finding that Applicant is legally and financially qualified to operate and maintain a
waterworks system; that the said operation shall redound to the benefit of the homeowners/residents of the subdivision, thereby,
promoting public service in a proper and suitable manner, the instant application for a Certificate of Public Convenience is, hereby,
GRANTED.5

LTWD filed a motion for reconsideration. In its 18 November 2002 Resolution,6 the NWRB denied the motion.

LTWD appealed to the RTC.

The RTC’s Ruling

In its 1 October 2004 Judgment, the RTC set aside the NWRB’s 23 July 2002 Resolution and 15 August 2002 Decision and cancelled
TMPC’s CPC. The RTC held that Section 47 is valid. The RTC stated that:

The Constitution uses the term "exclusive in character". To give effect to this provision, a reasonable, practical and logical
interpretation should be adopted without disregard to the ultimate purpose of the Constitution. What is this ultimate
purpose? It is for the state, through its authorized agencies or instrumentalities, to be able to keep and maintain ultimate
control and supervision over the operation of public utilities. Essential part of this control and supervision is the authority
to grant a franchise for the operation of a public utility to any person or entity, and to amend or repeal an existing
franchise to serve the requirements of public interest. Thus, what is repugnant to the Constitution is a grant of franchise
"exclusive in character" so as to preclude the State itself from granting a franchise to any other person or entity than the
present grantee when public interest so requires. In other words, no franchise of whatever nature can preclude the State,
through its duly authorized agencies or instrumentalities, from granting franchise to any person or entity, or to repeal or
amend a franchise already granted. Consequently, the Constitution does not necessarily prohibit a franchise that is
exclusive on its face, meaning, that the grantee shall be allowed to exercise this present right or privilege to the exclusion
of all others. Nonetheless, the grantee cannot set up its exclusive franchise against the ultimate authority of the State. 7

TMPC filed a motion for reconsideration. In its 6 November 2004 Order, the RTC denied the motion. Hence, the present petition.

Issue
TMPC raises as issue that the RTC erred in holding that Section 47 of PD No. 198, as amended, is valid.

The Court’s Ruling

The petition is meritorious.

What cannot be legally done directly cannot be done indirectly. This rule is basic and, to a reasonable mind, does not need
explanation. Indeed, if acts that cannot be legally done directly can be done indirectly, then all laws would be illusory.

In Alvarez v. PICOP Resources, Inc.,8 the Court held that, "What one cannot do directly, he cannot do indirectly."9 In Akbayan
Citizens Action Party v. Aquino,10 quoting Agan, Jr. v. Philippine International Air Terminals Co., Inc.,11 the Court held that, "This
Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be done
 59

indirectly."12 In Central Bank Employees Association, Inc. v. Bangko Sentral ng Pilipinas,13the Court held that, "No one is allowed to
do indirectly what he is prohibited to do directly."14

The President, Congress and the Court cannot create directly franchises for the operation of a public utility that are exclusive in
character. The 1935, 1973 and 1987 Constitutions expressly and clearly prohibit the creation of franchises that are exclusive in
character. Section 8, Article XIII of the 1935 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of
the Philippines or to corporations or other entities organized under the laws of the Philippines, sixty per centum of the capital of
which is owned by citizens of the Philippines, nor shall such franchise, certificate or authorization be exclusive in character or for
a longer period than fifty years. (Empahsis supplied)

Section 5, Article XIV of the 1973 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of
the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of the
capital of which is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a
longer period than fifty years. (Emphasis supplied)

Section 11, Article XII of the 1987 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of
the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose
capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a longer
period than fifty years. (Emphasis supplied)

Plain words do not require explanation. The 1935, 1973 and 1987 Constitutions are clear — franchises for the operation of a public
utility cannot be exclusive in character. The 1935, 1973 and 1987 Constitutions expressly and clearly state that, "nor shall such
franchise x x x be exclusive in character." There is no exception.

When the law is clear, there is nothing for the courts to do but to apply it. The duty of the Court is to apply the law the way it is
worded. In Security Bank and Trust Company v. Regional Trial Court of Makati, Branch 61,15 the Court held that:

Basic is the rule of statutory construction that when the law is clear and unambiguous, the court is left with no alternative but
to apply the same according to its clear language. As we have held in the case of Quijano v. Development Bank of the
Philippines:

"x x x We cannot see any room for interpretation or construction in the clear and unambiguous language of the above-quoted
provision of law. This Court had steadfastly adhered to the doctrine that its first and fundamental duty is the application of
the law according to its express terms, interpretation being called for only when such literal application is impossible. No process
of interpretation or construction need be resorted to where a provision of law peremptorily calls for application. Where a
requirement or condition is made in explicit and unambiguous terms, no discretion is left to the judiciary. It must see to it
that its mandate is obeyed."16(Emphasis supplied)

In Republic of the Philippines v. Express Telecommunications Co., Inc.,17 the Court held that, "The Constitution is quite emphatic that
the operation of a public utility shall not be exclusive."18 In Pilipino Telephone Corporation v. National Telecommunications
Commission,19 the Court held that, "Neither Congress nor the NTC can grant an exclusive ‘franchise, certificate, or any other form of
authorization’ to operate a public utility."20 In National Power Corp. v. Court of Appeals,21 the Court held that, "Exclusivity of any
public franchise has not been favored by this Court such that in most, if not all, grants by the government to private corporations,
the interpretation of rights, privileges or franchises is taken against the grantee."22 In Radio Communications of the Philippines, Inc.
v. National Telecommunications Commission,23 the Court held that, "The Constitution mandates that a franchise cannot be exclusive
in nature."24

Indeed, the President, Congress and the Court cannot create directly franchises that are exclusive in character. What the President,
Congress and the Court cannot legally do directly they cannot do indirectly. Thus, the President, Congress and the Court cannot
create indirectly franchises that are exclusive in character by allowing the Board of Directors (BOD) of a water district and the Local
Water Utilities Administration (LWUA) to create franchises that are exclusive in character.
 60

In PD No. 198, as amended, former President Ferdinand E. Marcos (President Marcos) created indirectly franchises that are
exclusive in character by allowing the BOD of LTWD and the LWUA to create directly franchises that are exclusive in character.
Section 47 of PD No. 198, as amended, allows the BOD and the LWUA to create directly franchises that are exclusive in character.
Section 47 states:

Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency for domestic, industrial or commercial
water service within the district or any portion thereof unless and except to the extent that the board of directors of said
district consents thereto by resolution duly adopted, such resolution, however, shall be subject to review by the
Administration. (Emphasis supplied)

In case of conflict between the Constitution and a statute, the Constitution always prevails because the Constitution is the basic law
to which all other laws must conform to. The duty of the Court is to uphold the Constitution and to declare void all laws that do
not conform to it.

In Social Justice Society v. Dangerous Drugs Board,25 the Court held that, "It is basic that if a law or an administrative rule violates
any norm of the Constitution, that issuance is null and void and has no effect. The Constitution is the basic law to which all laws
must conform; no act shall be valid if it conflicts with the Constitution."26 In Sabio v. Gordon,27 the Court held that, "the Constitution
is the highest law of the land. It is the ‘basic and paramount law to which all other laws must conform.’"28 In Atty. Macalintal v.
Commission on Elections,29the Court held that, "The Constitution is the fundamental and paramount law of the nation to which all
other laws must conform and in accordance with which all private rights must be determined and all public authority administered.
Laws that do not conform to the Constitution shall be stricken down for being unconstitutional." 30 In Manila Prince Hotel v.
Government Service Insurance System,31 the Court held that:

Under the doctrine of constitutional supremacy, if a law or contract violates any norm of the constitution that law or
contract whether promulgated by the legislative or by the executive branch or entered into by private persons for private
purposes is null and void and without any force and effect. Thus, since the Constitution is the fundamental, paramount and
supreme law of the nation, it is deemed written in every statute and contract."32 (Emphasis supplied)

To reiterate, the 1935, 1973 and 1987 Constitutions expressly prohibit the creation of franchises that are exclusive in character.
They uniformly command that "nor shall such franchise x x x be exclusive in character." This constitutional prohibition is
absolute and accepts no exception. On the other hand, PD No. 198, as amended, allows the BOD of LTWD and LWUA to create
franchises that are exclusive in character. Section 47 states that, "No franchise shall be granted to any other person or agency x x
x unless and except to the extent that the board of directors consents thereto x x x subject to review by the
Administration." Section 47 creates a glaring exception to the absolute prohibition in the Constitution. Clearly, it is patently
unconstitutional.

Section 47 gives the BOD and the LWUA the authority to make an exception to the absolute prohibition in the Constitution. In
short, the BOD and the LWUA are given the discretion to create franchises that are exclusive in character. The BOD and the LWUA
are not even legislative bodies. The BOD is not a regulatory body but simply a management board of a water district. Indeed,
neither the BOD nor the LWUA can be granted the power to create any exception to the absolute prohibition in the Constitution, a
power that Congress itself cannot exercise.

In Metropolitan Cebu Water District v. Adala,33 the Court categorically declared Section 47 void. The Court held that:
Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the issuance of CPCs for the reasons discussed above, the
same provision must be deemed void ab initio for being irreconcilable with Article XIV, Section 5 of the 1973
Constitution which was ratified on January 17, 1973 — the constitution in force when P.D. 198 was issued on May 25, 1973.
Thus, Section 5 of Art. XIV of the 1973 Constitution reads:

"SECTION 5. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except
to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum
of the capital of which is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition
that it shall be subject to amendment, alteration, or repeal by the Batasang Pambansa when the public interest so requires. The
State shall encourage equity participation in public utiltities by the general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be limited to their proportionate share in the capital thereof."
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This provision has been substantially reproduced in Article XII Section 11 of the 1987 Constitution, including the prohibition against
exclusive franchises.
xxxx

Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public utilities, is clearly repugnant to Article XIV,
Section 5 of the 1973 Constitution, it is unconstitutional and may not, therefore, be relied upon by petitioner in support of its
opposition against respondent’s application for CPC and the subsequent grant thereof by the NWRB.

WHEREFORE, Section 47 of P.D. 198 is unconstitutional.34 (Emphasis supplied)

The dissenting opinion declares Section 47 valid and constitutional. In effect, the dissenting opinion holds that (1) President Marcos
can create indirectly franchises that are exclusive in character; (2) the BOD can create directly franchises that are exclusive in
character; (3) the LWUA can create directly franchises that are exclusive in character; and (4) the Court should allow the creation of
franchises that are exclusive in character.

Stated differently, the dissenting opinion holds that (1) President Marcos can violate indirectly the Constitution; (2) the BOD can
violate directly the Constitution; (3) the LWUA can violate directly the Constitution; and (4) the Court should allow the violation of
the Constitution.

The dissenting opinion states that the BOD and the LWUA can create franchises that are exclusive in character "based on
reasonable and legitimate grounds," and such creation "should not be construed as a violation of the constitutional mandate on
the non-exclusivity of a franchise" because it "merely refers to regulation" which is part of "the government’s inherent right to
exercise police power in regulating public utilities" and that their violation of the Constitution "would carry with it the legal
presumption that public officers regularly perform their official functions." The dissenting opinion states that:

To begin with, a government agency’s refusal to grant a franchise to another entity, based on reasonable and legitimate
grounds, should not be construed as a violation of the constitutional mandate on the non-exclusivity of a franchise; this
merely refers to regulation, which the Constitution does not prohibit. To say that a legal provision is unconstitutional
simply because it enables a government instrumentality to determine the propriety of granting a franchise is contrary to
the government’s inherent right to exercise police power in regulating public utilities for the protection of the public and
the utilities themselves. The refusal of the local water district or the LWUA to consent to the grant of other franchises
would carry with it the legal presumption that public officers regularly perform their official functions.

The dissenting opinion states two "reasonable and legitimate grounds" for the creation of exclusive franchise: (1) protection of "the
government’s investment,"35 and (2) avoidance of "a situation where ruinous competition could compromise the supply of public
utilities in poor and remote areas."36

There is no "reasonable and legitimate" ground to violate the Constitution. The Constitution should never be violated by anyone.
Right or wrong, the President, Congress, the Court, the BOD and the LWUA have no choice but to follow the Constitution. Any act,
however noble its intentions, is void if it violates the Constitution. This rule is basic.

In Social Justice Society,37 the Court held that, "In the discharge of their defined functions, the three departments of government
have no choice but to yield obedience to the commands of the Constitution. Whatever limits it imposes must be
observed."38 In Sabio,39 the Court held that, "the Constitution is the highest law of the land. It is ‘the basic and paramount law to
which x x x all persons, including the highest officials of the land, must defer. No act shall be valid, however noble its
intentions, if it conflicts with the Constitution.’"40 In Bengzon v. Drilon,41 the Court held that, "the three branches of government
must discharge their respective functions within the limits of authority conferred by the Constitution."42 In Mutuc v. Commission on
Elections,43 the Court held that, "The three departments of government in the discharge of the functions with which it
is [sic] entrusted have no choice but to yield obedience to [the Constitution’s] commands. Whatever limits it imposes must
be observed."44

Police power does not include the power to violate the Constitution. Police power is the plenary power vested in Congress to make
laws not repugnant to the Constitution. This rule is basic.

In Metropolitan Manila Development Authority v. Viron Transportation Co., Inc.,45 the Court held that, "Police power is the plenary
power vested in the legislature to make, ordain, and establish wholesome and reasonable laws, statutes and ordinances, not
 62

repugnant to the Constitution."46 In Carlos Superdrug Corp. v. Department of Social Welfare and Development,47 the Court held
that, police power "is ‘the power vested in the legislature by the constitution to make, ordain, and establish all manner of
wholesome and reasonable laws, statutes, and ordinances x x x not repugnant to the constitution.’"48 In Metropolitan Manila
Development Authority v. Garin,49 the Court held that, "police power, as an inherent attribute of sovereignty, is the power vested by
the Constitution in the legislature to make, ordain, and establish all manner of wholesome and reasonable laws, statutes and
ordinances x x x not repugnant to the Constitution."50

There is no question that the effect of Section 47 is the creation of franchises that are exclusive in character. Section 47 expressly
allows the BOD and the LWUA to create franchises that are exclusive in character.

The dissenting opinion explains why the BOD and the LWUA should be allowed to create franchises that are exclusive in character
— to protect "the government’s investment" and to avoid "a situation where ruinous competition could compromise the supply of
public utilities in poor and remote areas." The dissenting opinion declares that these are "reasonable and legitimate grounds." The
dissenting opinion also states that, "The refusal of the local water district or the LWUA to consent to the grant of other franchises
would carry with it the legal presumption that public officers regularly perform their official functions."

When the effect of a law is unconstitutional, it is void. In Sabio,51 the Court held that, "A statute may be declared
unconstitutional because it is not within the legislative power to enact; or it creates or establishes methods or forms that infringe
constitutional principles; or its purpose or effect violates the Constitution or its basic principles."52 The effect of Section 47
violates the Constitution, thus, it is void.

In Strategic Alliance Development Corporation v. Radstock Securities Limited,53 the Court held that, "This Court must perform its duty
to defend and uphold the Constitution."54 In Bengzon,55 the Court held that, "The Constitution expressly confers on the judiciary the
power to maintain inviolate what it decrees."56 In Mutuc,57 the Court held that:

The concept of the Constitution as the fundamental law, setting forth the criterion for the validity of any public act whether
proceeding from the highest official or the lowest functionary, is a postulate of our system of government. That is to manifest fealty
to the rule of law, with priority accorded to that which occupies the topmost rung in the legal hierarchy. The three departments of
government in the discharge of the functions with which it is [sic] entrusted have no choice but to yield obedience to its
commands. Whatever limits it imposes must be observed. Congress in the enactment of statutes must ever be on guard lest the
restrictions on its authority, whether substantive or formal, be transcended. The Presidency in the execution of the laws cannot
ignore or disregard what it ordains. In its task of applying the law to the facts as found in deciding cases, the judiciary is called
upon to maintain inviolate what is decreed by the fundamental law. Even its power of judicial review to pass upon the validity of
the acts of the coordinate branches in the course of adjudication is a logical corollary of this basic principle that the Constitution is
paramount. It overrides any governmental measure that fails to live up to its mandates. Thereby there is a recognition of its being
the supreme law.58

Sustaining the RTC’s ruling would make a dangerous precedent. It will allow Congress to do indirectly what it cannot do directly. In
order to circumvent the constitutional prohibition on franchises that are exclusive in character, all Congress has to do is to create a
law allowing the BOD and the LWUA to create franchises that are exclusive in character, as in the present case.

WHEREFORE, we GRANT the petition. We DECLARE Section 47 of Presidential Decree No. 198 UNCONSTITUTIONAL. We SET
ASIDE the 1 October 2004 Judgment and 6 November 2004 Order of the Regional Trial Court, Judicial Region 1, Branch 62, La
Trinidad, Benguet, in Civil Case No. 03-CV-1878 and REINSTATE the 23 July 2002 Resolution and 15 August 2002 Decision of the
National Water Resources Board.

SO ORDERED.