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Const it ut ion St a t ut es Exec ut ive Issua nc es Judic ia l Issua nc es Ot her Issua nc es Jurisprudenc e Int erna t iona l Lega l Resourc es
AUSL Exc lusive

Republic of t he Philippines
SUPREME COURT
Manila

T HIRD DIVISION

G.R. No. 112702 September 26, 1997

NATIONAL POWER CORPORATION, pet it ioner,

vs.
COURT OF APPEALS and CAGAYAN ELECTRIC POWER AND LIGHT CO., INC. (CEPALCO), respondent s.

G.R. No. 113613 September 26, 1997

PHIVIDEC INDUSTRIAL AUTHORIT Y, pet it ioner,

vs.
COURT OF APPEALS and CAGAYAN ELECTRIC POWER AND LIGHT CO., INC. (CEPALCO), respondent s.

ROMERO, J.:

Offered for resolut ion in t hese consolidat ed pet it ions for review on certiorari is t he issue of whet her or not t he
Nat ional Power Corporat ion (NPC) has jurisdict ion to det ermine whet her it may supply elect ric power direct ly to
t he facilit ies of an indust rial corporat ion in areas where t here is an exist ing and operat ing elect ric power
franchisee.

On June 17, 1961, t he Cagayan Elect ric and power Light Company (CEPALCO) was enfranchised by Republic Act
No. 3247 "to const ruct , maint ain and operat e an elect ric light , heat and power syst em for t he purpose of
generat ing and/or dist ribut ing elect ric light , heat and/or power for sale wit hin t he Cit y of Cagayan de Oro and it s
suburbs" for fift y (50) years. Republic Act No. 3570, approved on June 21, 1963, expanded t he area of coverage
of t he franchise to include t he municipalit ies of Tagoloan and Opol, bot h in t he Province of Misamis Orient al. On
August 4, 1969, Republic Act No. 6020 furt her amended t he same franchise to include in t he areas of CEPALCO's
aut horit y of "generat ing and dist ribut ing elect ric light and power for sale," t he municipalit ies of Villanueva and
Jasaan, also of t he said province.

President ial Decree No. 243, issued on July 12, 1973, creat ed a "body corporat e and polit ic" to be known as t he
Philippine Vet erans Invest ment Development Corporat ion (PHIVIDEC) vest ed wit h aut horit y to engage in
"commercial, indust rial, mining, agricult ural and ot her ent erprises" among ot her powers 1 and "to allow t he full
and cont inued employment of t he product ive capabilit ies of and invest ment of t he vet erans and ret irees of t he
Armed Forces of t he Philippines." On August 13, 1974, President ial Decree No. 538 was promulgat ed to creat e
t he PHIVIDEC Indust rial Aut horit y (PIA), a subsidiary of PHIVIDEC, to carry out t he government policy "to
encourage, promot e and sust ain t he economic and social growt h of t he count ry and t hat t he est ablishment of
professionalized management of well-planned indust rial areas shall furt her t his object ive." 2 Under Sec. 3 of P.D.
No. 538, t he first area for development shall be locat ed in t he municipalit ies of Tagoloan and Villanueva.3 T his
area forms part of t he PHIVIDEC Indust rial Est at e Misamis Orient al (PIE-MO).

As manager of PIE-MO, PIA grant ed t he Ferrochrome Philippines, Inc. (FPI) and Met al Alloys Corporat ion (MAC)
aut horit y to operat e in it s area of development . On July 6, 1979, PIA grant ed CEPALCO a t emporary aut horit y to
ret ail elect ric power to t he indust ries operat ing wit hin t he PIE-MO.4 T he Agreement execut ed by PIA and
CEPALCO aut horized CEPALCO "to operat e, administ er, const ruct and dist ribut e elect ric power wit hin t he
PHIVIDEC Indust rial Est at e, Misamis Orient al, such aut horit y to be co-ext ensive wit h t he t erritorial jurisdict ion of
PHIVIDEC Indust rial Est at e, as defined in Sec. 3 of P.D. No. 538 and shall be for a period of five (5) years, renewable
for anot her five (5) years at t he opt ion of CEPALCO." T he part ies provided furt her t hat :
 9. At t he end of t he fift h year, or at t he end of t he 10t h year, should t his Agreement be t hus renewed, PIA
has t he opt ion to t ake over t he operat ion of t he elect ric service and acquire by purchase CEPALCO's
asset s wit hin PIE-MO. T his opt ion shall be communicat ed to CEPALCO in writ ing at least 24 mont hs
before t he dat e of acquisit ion of asset s and t akeover of operat ion by PIA. Should PIA exercise it s opt ion
to purchase t he asset s of CEPALCO in PIE-MO, PIA shall respect t he right of ownership of and
maint enance by CEPALCO of t hose asset s inside PIE-MO not covered by such purchase. . . .

According to PIA,5 CEPALCO proved no mat ch to t he power demands of t he indust ries in PIE-MO t hat most of
t hese companies operat ing t herein closed shop.6 Impelled by a "desire to provide cheap power cost s to power-
int ensive indust ries operat ing wit hin t he Est at e," PIA applied wit h t he Nat ional Power Corporat ion (NPC) for
direct power connect ion which t he lat t er in due course approved.7 One of t he companies which ent ered into an
agreement wit h t he NPC for a direct sale and supply of power was t he Ferrochrome Phils., Inc. (FPI).

Cont ending t hat t he said agreement violat ed it s right as t he aut horized operator of an elect ric light and power
syst em in t he area and t he nat ional elect rificat ion policy, CEPALCO filed Civil Case No. Q-35945, a pet it ion for
prohibit ion, mandamus and injunct ion before t he Regional Trial Court of Quezon Cit y against t he NPC.
Not wit hst anding NPC's claim t hat it was aut horized by it s Chart er to sell elect ric power "in bulk" to indust rial
ent erprises, t he lower court rendered a decision on May 2, 1984, rest raining t he NPC from supplying power
direct ly to FPI upon t he ground t hat such direct sale, supply and delivery of elect ric power by t he NPC to FPI was
violat ive of t he right s of CEPALCO under it s legislat ive franchise. Hence, t he lower court ordered t he NPC to
"permanent ly desist " from effect ing direct supply of power to t he FPI and "from ent ering into and/or
implement ing any agreement or arrangement for such direct power connect ion, unless coursed t hrough t he
power line" of CEPALCO.

Event ually, t he case reached t his Court t hrough G.R. No. 72085.8 On December 28, 1989, t he Court denied t he
appeal int erposed by NPC on t he ground t hat t he st at utory aut horit y given to t he NPC as regards direct supply
of power to BOI-regist ered ent erprises "should always be subordinat e to t he 'tot al-elect rificat ion-of-t he-ent ire-
count ry-on-an-area-coverage basis policy' enunciat ed in P. D. No. 40," 9 We held furt her t hat :

Nor should we lose sight of t he fact ual findings of t he court a quo t hat pet it ioner-appellee CEPALCO had
not only been aut horized by t he Phividec Indust rial Aut horit y to provide elect rical power to t he Phividec
Indust rial Est at e wit hin which t he FPI plant is locat ed, but t hat pet it ioner-appellee CEPALCO had in fact ,
supplied t he lat t er's power requirement s for t he const ruct ion of it s plant , upon FPI's applicat ion t herefor
as early as October 17, 1980.

It bears emphasis t hen t hat "it is only aft er a hearing (or an opport unit y for such a hearing) where it is
est ablished t hat t he affect ed privat e franchise holder is incapable or unwilling to mat ch t he reliabilit y and
rat es of NPC t hat direct connect ion wit h NPC may be grant ed." Here, pet it ioner-appellee's reliabilit y as a
power supplier and abilit y to mat ch t he NPC rat es were never put in issue.

It is immat erial t hat pet it ioner-appellee's franchise was not exclusive. A privilege to sell wit hin specified
t erritory, even if not exclusive, is a valuable propert y right ent it led to prot ect ion against unaut horized
compet it ion.10

Not wit hst anding said decision, in Sept ember 1990, FPI filed a new applicat ion for t he direct supply of elect ric
power from NPC. T he Hearing Commit t ee of t he NPC had st art ed hearing t he applicat ion but CEPALCO filed wit h
t he Regional Trial Court of Quezon Cit y a pet it ion for cont empt against NPC officials led by Ernesto Aboit iz. On
August 10, 1992, t he t rial court found t he respondent s in direct cont empt of court and accordingly imposed
upon t hem a fine of P500.00 each.

T he respondent NPC officials challenged before t his Court t he judgment holding t hem in cont empt of court
t hrough G.R. No. 107809, (Aboit iz v. Regino).11 In t he Decision of July 5, 1993, t he Court upheld t he cont empt
ruling and, aft er quot ing t he lower court 's decision of May 2, 1984 which t he Court upheld in G.R. No. 72085, said:

T hese direct ives show t hat t he lower court (and t his Court ) int ended t he arrangement bet ween FPI and
CEPALCO to be permanent and free from NAPOCOR's influence or int ervent ion. Any at t empt on t he part of
NAPOCOR or it s officers and/or employees to st rike a deal wit h FPI would be a clear and direct
disobedience to a lawful order and t herefore cont empt uous.

T he pet it ioners call t he at t ent ion of t he Court to t he st at ement of CEPALCO t hat "NAPOCOR has already
implement ed in full" t he May 2, 1984 decision of t he lower court as affirmed by t his Court . T hey suggest
t hat in view of t his, t he decision no longer has any binding effect upon t he part ies, or to put it anot her
way, has become functus officio. Consequent ly, when t hey ent ert ained t he re-applicat ion of FPI for direct
power connect ion to NAPOCOR, t hey were not disobeying t he May 2, 1984 order of t he t rial court and so
should not be held in cont empt .
 T his argument must be reject ed in view of our finding of t he permanence and comprehensiveness of t he
challenged order of t he t rial court . "Permanent " is not a difficult word to underst and. It means "last ing or
int ended to last indefinit ely wit hout change." As for t he scope of t he order, NAPOCOR was direct ed to
"desist from effect ing, causing, and cont inuing t he direct supply, sale and delivery of elect ricit y from it s
power line to t he plant of Ferrochrome Philippines, Inc., and from entering into and/or implementing any
agreement or arrangement for such direct power connection, unless coursed through the power line of petitioner."
(Emphasis supplied.)

Meanwhile, t he NPC Hearing Commit t ee 12 proceeded wit h it s hearings. CEPALCO was duly not ified t hereof but it
opt ed to quest ion t he commit t ee's jurisdict ion. It did not submit any evidence. Consequent ly, in it s Report and
Recommendat ion dat ed Sept ember 27, 1991, t he commit t ee gave weight to t he evidence present ed by FPI t hat
CEPALCO charged higher rat es t han what t he NPC would if allowed to supply power direct ly to FPI. Alt hough t he
commit t ee considered as unfounded FPI's claim of CEPALCO's unreliabilit y as a power supplier,13 it nonet heless
held t hat :

Form (sic) t he foregoing and on t he basis of t he decision of t he Supreme Court in t he case of National
Power Corporation and Fine Chemicals (Phils.) Inc. v. The Court of Appeals and the Manila Electric Company, G.R.
No. 84695, May 8, 1990, FPI is ent it led to a direct connect ion to NPC as applied for considering t hat
CEPALCO is unwilling to mat ch t he rat es of NPC for direct ly serving FPI and t hat FPI is a duly regist ered BOI
regist ered ent erprises (sic). T he Supreme Court in t he aforest at ed case has ruled as follows:

As consist ent ly ruled by t he Court pursuant to P.D. No. 380 as amended by P.D. No. 395, NPC is
st at utorily empowered to direct ly service all t he requirement s of a BOI regist ered ent erprise
provided t hat , first , any affect ed privat e franchise holder is afforded an opport unit y to be
heard on t he applicat ion t herefor and second, from such a hearing, it is est ablished t hat said
privat e franchise holder is incapable or unwilling to mat ch t he reliabilit y and rat es of NPC for
direct ly serving t he lat t er (Nat ional Power Corporat ion v. Jacinto, 134 SCRA 435 [1985].
Nat ional Power Corporat ion v. Court of Appeals, 161 SCRA 103 [1988]).14

However, considering t he "bet t er and priorit y right " of PIA, t he commit t ee recommended t hat inst ead of a direct
power connect ion by t he NPC to FPI, t he connect ion should be made to PIA "as a ut ilit y user for it s indust rial
Est at e at Tagoloan, Misamis Orient al." 15

For it s part , on November 3, 1989, CEPALCO filed wit h t he Energy Regulatory Board (ERB) a pet it ion praying t hat
t he ERB "order t he discont inuance of all exist ing direct supply of power by t he NPC wit hin pet it ioner's franchise
area" (ERB Case No. 89-430). On July 17, 1992, t he ERB ruled t hat CEPALCO "is relat ively efficient and reliable as
manifest ed by it s very low syst em losses (far from t he 14% st andard) and very high power factors" and
t herefore CEPALCO is t echnically capable "to dist ribut e power to it s consumers wit hin it s franchise area,
part icularly t he indust rial customers." It disposed of t he pet it ion as follows:

WHEREFORE, in view of t he foregoing premises, when t he pet it ioner has been proven to be capable of
dist ribut ing power to it s indust rial consumers and having passed t he secondary considerat ions wit h a
passing mark of 85%, judgment is hereby rendered grant ing t he relief prayed for. Accordingly, it is hereby
declared t hat all direct connect ion of indust ries to NPC wit hin t he franchise area of CEPALCO is no longer
necessary. T herefore, all exist ing NPC direct supply of power to indust rial consumers wit hin t he franchise
area of CEPALCO is hereby ordered discont inued. . . . .16

However, during t he pendency of t he Aboit iz case in t his Court or on August 3, 1992, PIA cont ract ed t he NPC for
t he const ruct ion of a 138 kilovolt (KV) t ransmission line from Namut ulan subst at ion to t he receiving and/or
subst at ion of PIA.17

As expect ed, on February 17, 1993, CEPALCO filed in t he Regional Trial Court of Pasig (Branch 68), a pet it ion for
certiorari, prohibit ion, mandamus and injunct ion against t he NPC and some officials of bot h t he NPC and PIA.18
Docket ed as SCA No. 290, t he pet it ion specifically sought t he issuance of a t emporary rest raining order.
However, aft er hearing, t he prayer for t he t emporary rest raining order was denied by t he court in it s order of
March 12, 1993.19 CEPALCO filed a mot ion for t he reconsiderat ion of said order while NPC and PIA moved for t he
dismissal of t he pet it ion.20

On June 23, 1993, not ing t he cases filed by CEPALCO all seeking exclusivit y in t he dist ribut ion of elect ric power
to areas covered by it s franchise, t he court 21 ruled t hat "t he right of pet it ioner to supply elect ric power in t he
aforesaid area to t he exclusion of ot her ent it ies had been set t led once and for all by t he Regional Trial Court of
Quezon Cit y wherein pet it ioner obt ained a favorable judgment ." Hence, t he pet it ion was dismissed on t he
ground of res judicata.22

Fort hwit h, CEPALCO elevat ed t he case to t his Court t hrough a pet it ion for certiorari, prohibit ion and injunct ion
wit h prayer for t he issuance of a preliminary injunct ion or a t emporary rest raining order. T he pet it ion was
docket ed as G.R. No. 110686 but on August 18, 1993, t he Court referred it to t he Court of Appeals pursuant to
Sec. 9, paragraph 1 of B.P. Blg. 129 conferring upon t he appellat e court original jurisdict ion to issue writ s of
prohibit ion and certiorari and auxiliary writ s.23 In t he Court of Appeals, t he pet it ion was docket ed as CA-G.R. No.
31935-SP.

On Sept ember 10, 1993, t he Fift eent h Division of t he Court of Appeals issued a resolut ion24 denying t he prayer
for t he issuance of a t emporary rest raining order on t he st rengt h of Sec. 1 of P.D. No. 1818. It ruled t hat since
t he NPC is a public ut ilit y, it "enjoys t he prot ect ive mant le" of said decree prohibit ing court s from issuing
rest raining orders or preliminary injunct ions in cases involving infrast ruct ure and nat ural resource development
project s of, and operat ed by, t he government .25

However, on Sept ember 17, 1993, upon a mot ion for reconsiderat ion filed by CEPALCO and a re-evaluat ion of t he
provisions of P.D. No. 1818, t he Court of Appeals set aside it s resolut ion of Sept ember 10, 1993 and held t hat :

. . . t he project int ended by respondent NPC, which is t he const ruct ion, complet ion and operat ion of t he
138-kv line, is not in consonance wit h t he int endment of said Decree which is to prot ect public ut ilit ies
and t heir project s and act ivit ies int ended for public convenience and necessit y. T he project of
respondent NPC is int ended to serve exclusively t he needs of privat e ent it ies, Met al Alloys Corporat ion
and Ferrochrome Philippine in Tagoloan, Misamis Orient al.

Accordingly, t he Court of Appeals issued a t emporary rest raining order direct ing t he privat e respondent s t herein
"to immediat ely cease and desist from proceeding wit h t he const ruct ion, complet ion and operat ion of t he 138-
kv line subject of t he pet it ion." T he NPC, PIA and t he officers of bot h were direct ed to explain why t he preliminary
injunct ion prayed for should not issue.26

In due course, t he Court of Appeals rendered t he decision27 of November 15, 1993 assailed herein. Aft er ruling
t hat t he lower court gravely abused it s discret ion in dismissing t he pet it ion below on t he grounds of res judicata
and litis pendentia, t he Court of Appeals confront ed squarely t he issue of whet her or not "t he NPC it self has t he
power to det ermine t he propriet y of direct power connect ion from it s lines to any ent it y locat ed wit hin t he
franchise area of anot her public ut ilit y." 28

Elucidat ing t hat t he ruling of t his Court in bot h G.R. No. 78609 (NPC v. Court of Appeals) 29 and G.R. No. 87697 (Del
Mont e [Philippines], Inc. v. Hon. Felix M. de Guzman, et c., et c., et al.)30 cat egorically held t hat before a direct
connect ion to t he NPC maybe grant ed, a proper administ rat ive body must conduct a hearing "to det ermine
which ent it y, t he franchise holder or t he NPC, has t he right to supply elect ric power to t he ent it y applying for
direct connect ion," t he Court of Appeals declared:

We have no doubt t hat t he ERB, and not t he NPC, is t he administ rat ive body referred to by t he Supreme
Court where t he hearing is to be conduct ed to det ermine t he propriet y of direct connect ion. T he chart er
of t he ERB (PD 1206 in relat ion to EO 172) is clear on t his:

T he Board shall, aft er due not ice and hearing, exercise t he following powers and funct ions,
among ot hers:

xxx xxx xxx

e. Issue Cert ificat e of Public Convenience for t he operat ion of elect ric power ut ilit ies and
services, . . . including t he est ablishment and regulat ion of areas of operat ion of part icular
operators of public power ut ilit ies and services, t he fixing of st andards and specificat ions in
all cases relat ed to t he issued Cert ificat e of Public Convenience . . .

Moreover, NPC is not an administ rat ive body as jurisprudent ially defined, and t hat t he NPC cannot usurp a
power it has never been conferred by it s chart er or by ot her law — t he power to det ermine t he validit y of
direct connect ion agreement it ent ers into in violat ion of a power dist ributor's franchise.

T hus, considering t hat PIA professes to be and int ends to engage in t he business of a public power ut ilit y,
it must first apply for a public convenience and necessit y (conferment of operat ing aut horit y) wit h t he
ERB. T his may have been t he opport une t ime for ERB to det ermine whet her to allow PIA to direct ly
connect wit h NPC, wit h not ice and opport unit y for CEPALCO considering t hat , as t he lat t er alleges, t his
new line which NPC is inst alling duplicat es t hat exist ing Cepalco 138 kv line which NPC it self t urned over to
Cepalco and for which it was paid in full.

Consequent ly, t he Court of Appeals affirmed t he dismissal of t he pet it ion, annulled and set aside t he decision of
t he Hearing Commit t ee of t he NPC on direct connect ion wit h PIA, and ordered t he NPC "to desist from
cont inuing t he const ruct ion of t hat NPC-Nat umulan-Phividec 138 kv t ransmission line." 31
Wit hout filing a mot ion for t he reconsiderat ion of said Decision, NPC filed in t his Court on December 9, 1993, a
mot ion for an ext ension of t ime wit hin which to file "t he proper pet it ion." T he mot ion which was docket ed as G.R.
No. 112702, was grant ed on December 20, 1993 wit h warning t hat no furt her ext ension would be grant ed.
T hereaft er, NPC filed a mot ion praying t hat it be excused from filing t he pet it ion on account of t he filing by PIA in
t he Court of Appeals of a mot ion for t he reconsiderat ion of t he Decision of November 15, 1993. In t he Resolut ion
of February 2, 1994, t he Court not ed and grant ed pet it ioner' s mot ion and considered t he case "closed and
t erminat ed." 32 T his resolut ion was wit hdrawn in t he Resolut ion of February 8, 199533 in view of t he "inadvert ent
clerical error" t erminat ing t he case, aft er t he NPC had mailed it s pet it ion for review on certiorari on February 21,
1994.34

In t he meant ime, PIA filed a mot ion for reconsiderat ion of t he appellat e court 's Decision of November 15, 1993
arguing in t he main t hat , not being a part y to previous cases bet ween CEPALCO and NPC, it was not bound by
decisions of t his Court . T he Court of Appeals denied t he mot ion on January 28, 1994 on t he basis of stare decisis
where once t he court has laid down a principle of law as applicable to a cert ain st at e of fact s, it will adhere to
and apply t he principle to all fut ure cases where t he fact s are subst ant ially t he
same.35 Hence, PIA filed a pet it ion for review on certiorari which was docket ed as G.R. No. 113613.

G.R. Nos. 112702 and 113613 were consolidat ed on June 15, 1994.36

In G.R. No. 112702, pet it ioner NPC cont ends t hat privat e respondent CEPALCO is not ent it led to relief because it
has been forum-shopping. Privat e respondent had filed Civil Case No. Q-93-14597 in t he Regional Trial Court of
Quezon Cit y which had been forwarded to it by t he Regional Trial Court of Pasig. Said case and t he inst ant case
(SCA No. 290) deal wit h t he same issue of restoring CEPALCO' s right to supply power to FPI and MAC. Pet it ioner
t hus cont ends t hat because t he principle of litis pendentia applies, alt hough ot her part ies are involved in t he
case before t he Quezon Cit y court , t here is no basis for grant ing relief to privat e respondent CEPALCO "(s)ince
t he dismissal for lack of jurisdict ion was affirmed by t he respondent court ." 37 Corollarily, pet it ioner assert s t hat
because t he main case herein was dismissed "wit hout t rial," t he respondent appellat e court should not have
accorded privat e respondent affirmat ive relief.38

Pet it ioner NPC's cont ent ion is based on t he fact t hat on October 6, 1992, privat e respondent CEPALCO filed
against t he NPC in t he Regional Trial Court of Pasig, Civil Case No. 62490, an act ion for specific performance and
damages wit h prayer for preliminary mandatory injunct ion direct ing t he NPC to immediat ely restore to CEPALCO
t he dist ribut ion of power pert aining to MAC's consumpt ion.39 However, no summons was served and t he ex-
part e writ prayed for was not issued. Nevert heless, t he case was forwarded to t he Regional Trial Court of
Quezon Cit y where it was docket ed as Civil Case No. 93-14597. T hat case was pending when SCA No. 290 was
filed before t he Regional Trial Court of Pasig.

T he Court of Appeals affirmed t he lower court 's dismissal of t he case neit her on t he grounds of res judicata nor
ligis pendentia but on t he "only one unresolved issue, which is whether the NPC itself has the power to determine the
propriety of direct power connection from its lines to any entity located within the franchise area of another public
utility." 40 T he Court of Appeals opined t hat t he effect s of litis pendentia could not have result ed in t he dismissal of
SCA No. 290 because Civil Case No. Q-35945 which became G.R. No. 72085 was based on fact s tot ally different
from t hat of SCA No. 290.

In invoking litis pendentia, however, pet it ioner NPC refers to t his case, SCA No. 290, and Civil Case No. 93-14597.
SCA No. 290 and Civil Case No. 93-14597 may bot h have t he same object ive, t he restorat ion of CEPALCO's right
to dist ribut e power to PIE-MO areas under it s franchise aside from t he fact t hat t he cases involve pract ically
t he same part ies. However, litis pendentia may not be successfully invoked to cause t he dismissal of SCA No.
290.

In order to const it ut e a ground for t he abat ement or dismissal of an act ion, litis pendentia must exhibit t he
concurrence of t he following requisit es: (a) ident it y of part ies, or at least such as represent ing t he same
int erest in bot h act ions; (b) ident it y of right s assert ed and relief prayed for, t he relief being founded on t he
same fact s, and (c) ident it y in t he t wo (2) cases should be such t hat t he judgment t hat may be rendered in t he
pending case would, regardless of which part y is successful, amount to res judicata in t he ot her.41 As a rule, t he
second case filed should be abat ed under t he maxim qui prior est tempore, potior est jure. However, t his rule is not
a hard and fast one. T he "priorit y-in-t ime rule" may give way to t he crit erion of "more appropriate action." More
recent ly, t he crit erion used was t he "interest of justice rule." 42

We hold t hat t he last crit erion should be t he basis for resolving t his case, alt hough it was filed lat er t han Civil
Case No. 62490 which, upon it s t ransfer, became Civil Case No. 93-14795. In so doing, we shall avoid mult iplicit y
of suit s which is t he mat rix upon which litis pendentia is anchored and event ually bring about t he final set t lement
of t he recurring issue of whet her or not t he NPC may supply power direct ly to t he indust ries wit hin PIE-MO,
not wit hst anding t he operat ion of franchisee CEPALCO in t he same area.
It should be not ed t hat t here is yet pending anot her case, namely, Civil Case No. 91-383, inst it ut ed by PIA against
CEPALCO in t he Regional Trial Court of Misamis Orient al which apparent ly deals wit h a relat ed issue — PIA' s
franchise or aut horit y to provide power to ent erprises wit hin t he PIE-MO.43 Hence, t he principle of litis pendentia
which ordinarily demands t he dismissal of an act ion filed lat er t han anot her, should be considered under t he
primordial concept of "int erest of just ice," in order t hat a recurrent issue common to all cases may be
definit ively resolved.

T he principal and common quest ion raised in t hese consolidat ed cases is: whet her or not t he NPC may supply
power direct ly to PIA in t he PIE-MO area where CEPALCO has a direct ly franchise. Pet it ioner PIA in G.R. No.
113613 assert s t hat it may receive power direct ly from t he NPC because it is a public ut ilit y. It avers t hat P.D. No.
538, as amended, empowers PIA "as and to be a public ut ilit y to operat e and serve t he power needs wit hin PIE-
MO, i.e., a specific area const it ut ing a small port ion of pet it ioner's franchise coverage," wit hout , however,
specifying t he part icular provision which so empower PIA.44

A "public ut ilit y" is a business or service engaged in regularly supplying t he public wit h some commodit y or
service of public consequence such as elect ricit y, gas, wat er, t ransport at ion, t elephone or t elegraph service.45
T he t erm implies public use and service.46

Pet it ioner PIA is a subsidiary of t he PHIVIDEC wit h "government al and propriet ary funct ions." 47 Sec. 4 of P.D. No.
538 specifically confers upon it t he following powers:

a. To operat e, administ er and manage t he PHIVIDEC Indust rial Areas and ot her areas which shall hereaft er
be proclaimed, designat ed and specified in subsequent President ial Proclamat ion; to const ruct acquire,
own, lease, operate and maintain infrast ruct ure facilit ies, factory buildings, warehouses, dams, reservoirs,
wat er dist ribut ion, electric light and power systems, t elecommunicat ions and t ransport at ion net works, or
such ot her facilit ies and services necessary or useful in the conduct of industry and commerce or in the
attainment of the purposes and objectives of this Decree; (Emphasis supplied.)

Clearly t hen, t he PIA is aut horized to render indirect service to the public by it s administ rat ion of t he PHIVIDEC
indust rial areas like t he PIE-MO and may, t herefore, be considered a public ut ilit y. As it is expressly aut horized by
law to perform t he funct ions of a public ut ilit y, a cert ificat e of public convenience, as suggest ed by t he Court of
Appeals, is not necessary for it to avail of a direct power connect ion from t he NPC. However, such aut horit y to
be a public ut ilit y may not be exercised in such a manner as to prejudice t he right s of exist ing franchisees. In
fact , by it s act ions, PIA recognized t he right s of t he franchisees in t he area.

Accordingly, in pursuit of it s powers "to grant such franchise for and to operat e and maint ain wit hin t he Areas
elect ric light , heat or power syst ems," et c. under Sec. 4 (i) of P.D. No. 538 and it s rule-making power under Sec. 4
(1) of t he same law, on July 20, 1979, t he PIA Board of Directors promulgat ed t he "Rules and Regulat ions To
Implement t he Int ent and Provisions of President ial Decree No. 538." 48 Rule XI t hereof on "Ut ilit ies and Services"
provides as follows:

Sec. 1. Ut ilit ies — It is t he responsibilit y of t he Aut horit y to provide all required ut ilit ies and services inside
t he Est at e:

xxx xxx xxx

a) Cont ract s for t he purchase of public ut ilit ies and/or services shall be subject
to t he prior approval of t he Aut horit y; Provided, however, that similar contract(s)
existing prior to the effectivity of this Rules and Regulations shall continue to be in full
force and effect.

xxx xxx xxx

(Emphasis supplied.)

It should be not ed t hat t he Rules and Regulat ions took effect t hirt y (30) days aft er it s publicat ion in t he Official
Gazet t e on Sept ember 24, 1979 or more t han t hree (3) mont hs aft er t he July 6, 1979 cont ract bet ween PIA and
CEPALCO was ent ered into. As such, t he Rules and Regulat ions it self allowed t he cont inuance of t he supply of
elect ric power to PIE-MO by CEPALCO.

T hat t he cont ract of July 6, 1979 was not renewed by t he part ies aft er t he expirat ion of t he five-year period
st ipulat ed t herein did not change t he fact t hat wit hin t hat five-year period, in violat ion of bot h t he cont ract and
it s Rules and Regulat ions, PIA applied wit h t he NPC for direct power connect ion. T he
mat t er was aggravat ed by NPC's favorable act ion on t he applicat ion, tot ally unmindful of t he ext ent of it s
powers under t he law which, in National Power Corporation v. Court of Appeals,49 t he Court delimit s as follows:
 . . . . It is immat erial whet her t he direct connect ion is merely an improvement or an increase in exist ing
volt age, as alleged by pet it ioner, or a tot ally new and separat e elect ric service as claimed by privat e
respondent . T he law on t he mat t er is clear. PD 40 promulgat ed on 7 November 1972 expressly provides
t hat the generation of electric power shall be undertaken solely by the NPC. However Section 3 of the same
decree also provides that the distribution of electric power shall be undertaken by cooperatives, private utilities
(such as the CEPALCO), local governments and other entities duly authorized, subject to state regulation. (
Emphasis supplied.)

T he same case ruled t hat "(i)t is only aft er a hearing (or an opport unit y for such a hearing) where it is
est ablished t hat t he affect ed private franchise holder is incapable or unwilling to mat ch t he reliabilit y and rat es
of NPC t hat a direct connect ion wit h NPC may be grant ed." 50 As earlier st at ed, t he Court arrived at t he same
ruling in t he lat er cases of G.R. Nos. 72085, 84695 and 87697.

Pet it ioner NPC at t empt ed to abide by t hese rulings when it conduct ed a hearing to det ermine whet her it may
supply power direct ly to PIA. While it not ified CEPALCO of t he hearing, t he NPC is not t he proper aut horit y referred
to by t his Court in t he aforement ioned earlier decisions, not only because t he subject of t he hearing is a mat t er
involving t he NPC it self, but also because t he law has creat ed t he proper administ rat ive body vest ed wit h
aut horit y to conduct a hearing.

CEPALCO shares t he view of t he Court of Appeals t hat t he Energy Regulatory Board (ERB) is t he proper
administ rat ive body for such hearings. However, a recent legislat ive development has overt aken said view.

T he ERB, which used to be t he Board of Energy, is t asked wit h t he following powers and funct ions by Execut ive
Order No. 172 which took effect immediat ely aft er it s issuance on May 8, 1987:

Sec. 3. Jurisdiction, Powers and Functions of the Board. — When warrant ed and only when public necessit y
requires, t he Board may regulat e t he business of import ing, export ing, re-export ing, shipping,
t ransport ing, processing, refining, market ing and import ing, distributing energy resources. . . .

T he Board shall, upon prior not ice and hearing, exercise t he following, among ot her powers and funct ions:

(a) Fix and regulat e t he prices of pet roleum product s;

(b) Fix and regulat e t he rat e schedule or prices of piped gas to be charged by duly franchised
gas companies which dist ribut e gas by means of underground pipe syst em;

(c) Fix and regulat e t he rat es of pipeline concessionaires under t he provisions of Republic Act
No. 387, as amended, ot herwise known as t he "Pet roleum Act of 1949," as amended by
President ial Decree No. 1700;

(d) Regulat e t he capacit ies of new refineries or addit ional capacit ies of exist ing refineries
and license refineries t hat may be organized aft er t he issuance of t his Execut ive Order, under
such t erms and condit ions as are consist ent wit h t he nat ional int erest ;

(e) Whenever t he Board has det ermined t hat t here is a short age or any pet roleum product , or
when public int erest so requires, it may t ake such st eps as it may consider necessary,
including t he t emporary adjust ment of t he levels of prices of pet roleum product s and t he
payment to t he Oil Price St abilizat ion Fund creat ed under President ial Decree No. 1956 by
persons or ent it ies engaged in t he pet roleum indust ry of such amount s as may be
det ermined by t he Board, which will enable t he import er to recover it s cost of import at ion.

As may be gleaned from said provisions, t he ERB is basically a price or rat e-fixing agency. Apparent ly recognizing
t his basic funct ion, Republic Act No. 7638 (An Act Creat ing t he Depart ment of Energy, Rat ionalizing t he
Organizat ion and Funct ions of Government Agencies Relat ed to Energy, and for Ot her Purposes),51 which was
approved on December 9, 1992 and which took effect fift een days aft er it s complet e publicat ion in at least t wo
(2) nat ional newspapers of general circulat ion, specifically provides as follows:

Sec. 18. Rationalization or Transfer of Functions of Attached or Related Agencies. — T he non-price regulatory
jurisdict ion, powers, and funct ions of t he Energy Regulatory Board as provided for in Sect ion 3 of
Execut ive Order No. 172 are hereby t ransferred to t he Depart ment .

T he foregoing t ransfer of powers and funct ions shall include all applicable funds and appropriat ions,
records, equipment , propert y, and such personnel as may be necessary. Provided, T hat only such amount
of funds and appropriat ions of t he Board as well as only t he personnel t hereof which are complet ely or
primarily involved in t he exercise by said Board of it s non-price regulatory powers and funct ions shall be
affect ed by such t ransfer.
 T he power of t he NPC to det ermine, fix, and prescribe t he rat es being charged to it s customers under
Sect ion 4 of Republic Act No. 6395, as amended, as well as t he power of elect ric cooperat ives to fix rat es
under Sect ion 16 (o), Chapt er II of President ial Decree No. 269, as amended, are hereby t ransferred to t he
Energy Regulatory Board. T he Board shall exercise it s new powers only aft er due not ice and hearing and
under t he same procedure provided for in Execut ive Order No. 172.

Upon t he effect ivit y of Republic Act No. 7638, t hen Act ing Chairman of t he Energy Coordinat ing Council Delfin
Lazaro t ransmit t ed to t he Depart ment of Just ice t he query of whet her or not t he "non-power rat e powers and
funct ions" of t he ERB are included in t he "jurisdict ion, powers and funct ions t ransferred to t he Depart ment of
Energy." Answering t he query in t he affirmat ive, t he Depart ment of Just ice rendered Opinion No. 22 dat ed
February 12, 1993 t he pert inent port ion of which st at es:

. . . we believe t hat since t he provision of Sect ion 18 on t he t ransfer of cert ain powers and funct ions from
ERB to DOE is clear and unequivocal, and devoid of any ambiguit y, in t he sense t hat it cat egorically refers
to "non-price jurisdict ion, powers and funct ions" of ERB under Sect ion 3 of E.O. No. 172, t here is no room
for int erpret at ion, but only for applicat ion, of t he law. T his is a cardinal rule of st at utory const ruct ion.

Clearly, t he paramet ers of t he t ransfer of funct ions from ERB to DOE pursuant to Sect ion 18, are
circumscribed by t he provision of Sect ion 3 of E.O. No. 172 alone so t hat , if t here are ot her "relat ed"
funct ions of ERB under ot her provisions of E.O. No. 172 or ot her energy laws, t hese "relat ed" funct ions,
which may conceivably refer to what you call "non-power rat e powers and funct ions" of ERB, are clearly
not cont emplat ed by Sect ion 18 and are, t herefore, not to be deemed included in t he t ransfer of
funct ions from ERB to DOE under t he said provision.

It may be argued t hat Sect ion 26 of R.A. No. 7638 cont ains a repealing clause which provides t hat :

All laws, president ial decrees, execut ive orders, rules and regulat ions or part s t hereof,
inconsist ent wit h t he provisions of t his Act , are hereby repealed or modified accordingly. . . .

and, t herefore, all provisions of E.O. No. 172 and relat ed laws which are inconsist ent wit h t he policy,
purpose and int ent of R.A. No. 7638 are deemed repealed. It has been said, however, t hat a general
repealing clause of such nat ure does not operat e as an express repeal because it fails to ident ify or
designat e t he act or act s t hat are int ended to be repealed. Rat her, it is a clause which predicat es t he
int ended repeal upon t he condit ion t hat a subst ant ial conflict must be found on exist ing and prior act s of
t he same subject mat t er. Such being t he case, t he presumpt ion against implied repeals and t he rule on
st rict const ruct ion regarding implied repeals shall apply ex propio vigore. For t he legislat ure is presumed to
know t he exist ing laws so t hat , if repeal of part icular or specific laws is int ended, t he proper st ep is to so
express it . T he failure to add a specific repealing clause part icularly ment ioning t he st at ut e to be
repealed indicat es t hat t he int ent was not to repeal any exist ing law on t he mat t er, unless an
irreconcilable inconsist ency and repugnancy exist s in t he t erms of t he new and t he old laws (Iloilo Palay
and Corn Plant ers Associat ion, Inc. vs. Feliciano, 13 SCRA 377; Cit y of Naga vs. Agna, 71 SCRA 176, cit ed in
Agpalo, St at utory Const ruct ion, 1990 Edit ion, pp. 191-192).

In view of t he foregoing, it is our opinion t hat only t he non-price regulatory funct ions of ERB under Sect ion
3 of E.O. 172 are t ransferred to t he DOE. All ot her powers of ERB which are not wit hin t he purview of it s
"non-price regulatory jurisdict ion, powers and funct ions" as defined in Sect ion 3 are not so t ransferred to
DOE and accordingly remain vest ed in ERB.

T he det erminat ion of which of t wo public ut ilit ies has t he right to supply elect ric power to an area which is
wit hin t he coverage of bot h is cert ainly not a rat e-fixing funct ion which should remain wit h t he ERB. It deals wit h
t he regulat ion of t he dist ribut ion of energy resources which, under Execut ive Order No. 172, was expressly a
funct ion of ERB. However, wit h t he enact ment of Republic Act No. 7638, t he Depart ment of Energy took over
such funct ion. Hence, it is t his Depart ment which shall t hen det ermine whet her CEPALCO or PIA should supply
power to PIE-MO.

Clearly, pet it ioner NPC's assert ion t hat it s "aut horit y to ent ert ain and hear direct connect ion applicat ions is a
necessary incident of it s express aut horit y to sell elect ric power in bulk" is now baseless.52 Even wit hout t he
new legislat ion affect ing it s power to conduct hearings, it is cert ainly irregular, if not downright anomalous for
t he NPC it self to det ermine whet her it should supply power direct ly to t he PIA or t he indust ries wit hin t he PIE-
MO. It simply cannot arrogat e unto it self t he aut horit y to exercise non-rat e fixing powers which now devolves
upon t he Depart ment of Energy and to hear and event ually grant it self t he right to supply power in bulk.53

On t he ot her hand, vent ilat ing t he issue in a public hearing would not unduly prejudice CEPALCO alt hough it was
enfranchised by law earlier t han t he PIA. Exclusivit y of any public franchise has not been favored by t his Court
such t hat in most , if not all, grant s by t he government to privat e corporat ions, t he int erpret at ion of right s,
privileges or franchises is t aken against t he grant ee. T hus in Alger Electric, Inc. v. Court of Appeals,54 t he Court
said.
 . . . Exclusivit y is given by law wit h t he underst anding t hat t he company enjoying it is self-sufficient and
capable of supplying t he needed service or product at moderat e or reasonable prices. It would be against
public int erest where t he firm grant ed a monopoly is merely an unnecessary conduit of elect ric power,
jacking up prices as a superfluous middleman or an inefficient producer which cannot supply cheap
elect ricit y to power int ensive indust ries. It is in t he public int erest when indust ries dependent on heavy
use of elect ricit y are given reliable and direct power at t he lower cost s t hus enabling t he sale of nat ionally
market ed product s at prices wit hin t he reach of t he masses. . . .

WHEREFORE, bot h pet it ions in G.R. No. 112702 and 113613 are hereby DENIED. T he Depart ment of Energy is
direct ed to conduct a hearing wit h ut most dispat ch to det ermine whet her it is t he Cagayan Elect ric Power and
Light Co., Inc. or t he Nat ional Power Corporat ion, t hrough t he PHIVIDEC Indust rial Aut horit y, which should supply
elect ric power to t he indust ries in t he PHIVIDEC Indust rial Est at e-Misamis Orient al.

T his Decision is immediat ely executory.

SO ORDERED.

Narvasa, C.J., Melo and Francisco, JJ., concur.

Panganiban, J., took no part.

Footnotes

1 Sec. 3 (a).

2 Secs. 1 & 2.

3 Sec. 3 of P.D. No. 538 describes t he area as follows: "T he first Area which t he Aut horit y shall
develop shall be t hat locat ed in t he municipalit ies of Tagoloan and Villanueva in t he Province of
Misamis Orient al, bounded on t he West by Macajalar Bay, on t he Nort h by t he Taganga Creek, on t he
East by t he Kiamo and Kirahon plat eaus and t he Sout h by t he Tagoloan River cont aining an area of
3,000 hect ares more or less . . . .

4 Rollo of G.R. No. 113613, pp. 118-121.

5 In it s Report and Recommendat ion dat ed Sept ember 27, 1991 on t he applicat ion of FPI and
PHIVIDEC for direct power connect ion to t he NPC, t he NPC Hearing Commit t ee found t hat PHIVIDEC
had t erminat ed t he Agreement of July 6, 1979 and t hat CEPALCO's cont inued supply of power to
t he PIE-MO was merely upon PHIVIDEC's tolerance (Rollo of G.R. No. 113613, p. 424).

6 Ibid., pp. 61-62.

7 Ibid., p. 142.

8 Cagayan Elect ric Power and Light Company, Inc. v. Nat ional Power Corporat ion, G.R. No. 72085,
December 28, 1989, 180 SCRA 628, 631.

9 Ibid., p. 633.

10 Ibid., p. 634.

11 G.R. No. 107809, July 5, 1993, 224 SCRA 500.

12 Wit h Hector N. Campos as chairman and Eleut erio M. Olaer, C.C. Alcant ara and Armando Minia as
members.

13 Rollo of G.R. No. 113613, pp. 425-426.

14 Ibid., p. 426.

15 Ibid., p. 428.

16 Rollo of G.R. No. 113613, pp. 105-107.

17 Ibid., p. 143.

18 Ibid., p. 148.

19 Ibid., p. 166.