Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal: VOL. 25, SEPTEMBER 28, 1968 285

1/30/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 025
VOL. 25, SEPTEMBER 28, 1968 285

Rizal Light & Ice Co., Inc. vs. Mun. of Morong, Rizal
No. L-20993. September 28, 1968.
RIZAL LIGHT & ICE Co., INC., petitioner, vs. THE

MUNICIPALITY OF MORONG, RlZAL, and THE PUBLIC
SERVICE COMMISSION, respondents.
No. L-21221. September 28, 1968.
RIZAL LIGHT & ICE Co., INC., petitioner, vs. THE

PUBLIC SERVICE COMMISSION and MORONG
ELECTRIC Co., INC., respondents.
Public Service Commission; Hearing; Delegation of authority

to hear a, case; Who may be authorized to hear and investigate a
case filed before it; Effect of failure to interpose objection to illegal
delegation of authority to hear; Case at bar.—The Public Service
Commission can only authorize a division chief to hear and
investigate a case filed before it if he is a lawyer (Sec. 32, par. 2,
Commonwealth Act No. 146, as amended). Objection to the
delegation of authority to hear a case filed before the Commission
and to receive the evidence in connection therewith is a
procedural, not a jurisdictional point, and is waived by failure to
interpose timely the objection and the case had been decided by
the Commission. Since petitioner in the case at bar has never
raised any objection to the authority of Mr. Pedro Talavera (a
division chief—but not a lawyer) to conduct the hearing before the
Commission, it should be deemed to have waived such procedural
defect, and petitioner's claim that the Commission acted without
or in excess of jurisdiction in so authorizing Mr. Talavera should
be dismissed.
Same; Review of decision of the Public Service Commission;
Function of Supreme Court in reviewing a decision of the Public
Service Commission.—Settled is the rule that in reviewing the
decision of the Public Service Commission the Supreme Court is
not required to examine the proof de novo and determine for itself
whether or not the preponderance of evidence really justifies the
decision. The only function of this Court is to determine whether
http://www.central.com.ph/sfsreader/session/00000161466196b8a9c950fc003600fb002c009e/t/?o=False 1/33
or not there is evidence before the Commission upon which its

decision might reasonably be based. The Supreme Court will not
substitute its descretion for that
286
286 SUPREME COURT REPORTS ANNOTATED
of the Commission on questions of fact and will not interfere in

the latter's decision unless it clearly appears that there is no
evidence to support it (citing cases). The evidence that should be
made the basis of the Supreme Court's determination should be
only those presented in the case before the Commission.
Same; "Protection-of-investment rule"; When not applicable;
Paramount consideration in the grant of certificate of public
convenience; To whom duty to protect investment of a public utility
operator refers.—The "protection-of-investment rule" was
enunciated in Batangas Transportation Co. v. Orlanes. 52 Phil.
455, in this wise:
"The Government having taken over the control and supervision of all
public utilities, so long as an operator under a prior license complies with
the terms and conditions of his license and reasonable rules and
regulations for its operation and meets the reasonable demands of the
public, it is the duty of the Commission to protect rather than to destroy
his investment by the granting of the second license to another person for
the same thing over the same route of travel. The granting of such a
license does not serve its convenience or promote the interests of the
public."
The above-quoted rule, however. is not absolute, f or

nobody has exclusive right to secure a franchise or a
certificate of public convenience. Where it has been shown
by ample evidence that the petitioner. despite ample time
and opportunity given to it by the Commission, had failed
to render adequate, sufficient and satisfactory service and
had violated the important conditions of its certificate as
well as the directives and the rules and regulations of the
Commission, the rule cannot apply. To apply that rule
unqualifiedly is to encourage violation or disregard of the
terms and conditions of the certificate and the
Commission's directives and regulations, and would close
the door to other applicants who could establish, operate
and provide adequate, efficient and satisfactory service for
the benefit and convenience of the inhabitants. It should be
emphasized that the paramount consideration should

always be the public interest and public convenience. The
duty of the Commission to protect the investment of a
public utility operator refers only to operators of good
standing—those who comply with the laws, rules and
regulations—and not to operators who are unconcerned
with the public interest and whose investments have failed
or deteriorated because of their own fault (Paredes v.
Public Service Commission, et al., L-7111, May 30, 1955).
Same; Cancellation and revocation of certificate of public

convenience; Circumstances that warranted the imposition of both
a fine and a revocation of certificate of public convenience.—
Section 16 (n) of Commonwealth Act No. 146, as amended, confers
upon the Commission ample power and discretion to order
287
VOL. 25, SEPTEMBER 28, 1968 287
the cancellation and revocation of any certificate of public

convenience issued to an operator who has violated, or has
willfully and contumaciously refused to comply with, any order,
rule or regulation of the Commission or any provision of law.
What matters is that there is evidence to support the action of the
Commission. Where the evidence shows: (a) a contumacious
refusal of the petitioner since 1954 to comply with the directives,
rules and regulations of the Commission; (b) a violation of the
conditions of the certificate of public convenience; and (c)
municipality to comply with commitment as shown by inadequate
service, such circumstances warranted the action of the
Commission in not merely imposing a fine but in revoking
altogether petitioner's certificate.
Same; Requisites for the grant of certificate of public
convenience.—Before any certificate of public convenience may be
granted, three requisites must be complied with, namely: (1) the
applicant must be a citizen of the Philippines or of the United
States, or a corporation or co-partnership, association or
jointstock company constituted and organized under the laws of
the Philippines, sixty per centum at least of the stock or paid-up
capital of which belongs entirely to citizens of the Philippines or of
the United States; (2) the applicant must be financially capable of
undertaking the proposed service and meeting the responsibilities
incident to its operation; and (3) the applicant must prove that the
operation of the public service proposed and the authorization to

do business will promote the public interest in a proper and
suitable manner.
Same; Efficacy of a franchise.—A franchise takes effect upon
its approval by the Public Service Commission (Almendras v.
Ramos, 90 Phil. 231).
APPEAL from two decisions of the Public Service

Commission.
The facts are stated in the opinion of the Court.

Amado A. Amador, Jr. for petitioner.
Atilano C. Bautista and Pompeyo F. Olivas for
respondents.
ZALDIVAR, J.:
These two cases, being interrelated, are decided together.

Case G.R. No. L-20993 is a petition of the Rizal Light &
Ice Co., Inc. to review and set aside 1
the orders of
respondent Public Service Commission , dated August 20,
1962. and February 15, 1963, in PSC Case No. 39716,
_____________
1 Hereinafter referred to as "Commission".
288

cancelling and revoking the certificate of public

convenience and necessity and forfeiting the franchise of
said petitioner. In the same petition, the petitioner prayed
for the issuance of a writ of preliminary injunction ex parte
suspending the effectivity of said orders and/or enjoining
respondents Commission and/or Municipality of Morong,
Rizal, from enforcing in any way the cancellation and
revocation of petitioner's franchise and certificate of public
convenience during the pendency of this appeal. By
resolution of March 12, 1963, this Court denied the petition
for injunction, for lack of merit.
Case G. R. L-21221 is likewise a petition of the Rizal
Light & Ice Co., Inc. to review and set aside the decision of
the Commission dated March 13, 1963 in PSC Case No. 62-
5143 granting a certificate of public convenience 2and
necessity to respondent Morong Electric Co., Inc. to
operate an electric light, heat and power service in the

municipality of Morong, Rizal. In the petition Rizal Light &
Ice Co., Inc. also prayed for the issuance of a writ of
preliminary injunction ex parte suspending the effectivity
of said decision. Per resolution of this Court, dated May 6,
1963, said petition for injunction was denied.
The facts, as they appear in the records of both cases,
are as follows:
Petitioner Rizal Light & Ice Co., Inc. is a domestic
corporation with business address at Morong, Rizal. On
August 15, 1949, it was granted by the Commission a
certificate of public convenience and necessity for the
installation, operation and maintenance of an electric light,
heat and power service in the municipality of Morong,
Rizal.
In an order dated December 19, 1956, the Commission
required the petitioner to appear before it on February 18,
1957 to show cause why it should not be penalized for
violation of the conditions of its certificate of public
convenience and the regulations of the Commission, and for
failure to comply with the directives to raise its service
voltage and maintain them within the limits prescribed in
the Revised Order No. 1 of the Commission, and to acquire
and install a kilowattmeter to indicate the
_______________
2 Hereinafter referred to as "Morong Electric".
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VOL. 25, SEPTEMBER 28, 1968 289

load 3in kilowatts at any particular time of the generating

unit.
For failure of the petitioner to appear at the hearing on
February 18, 1957, the Commission ordered the
cancellation and revocation of petitioner's certificate of
public convenience and necessity and the forfeiture of its
franchise. Petitioner moved for reconsideration of said
order on the ground that its manager, Juan D. Francisco,
was not aware of said hearing. Respondent municipality
opposed the motion alleging that petitioner has not
rendered efficient and satisfactory service and has not
complied with the requirements of the Commission for the
improvement of its service. The motion was set for hearing
and Mr. Pedro S. Talavera, Chief, Industrial Division of the
Commission, was .authorized to conduct 4

the hearing for the
reception of the evidence of the parties
Finding that the failure of the petitioner to appear at
the hearing set for February 18, 1957—the sole basis of the
revocation of petitioner's certificate—was really due to the
illness of its manager, Juan D. Francisco, the Commission
set aside its order of revocation. Respondent municipality
moved for reconsideration of this order of reinstatement of
the certificate, but the motion was denied.
In a petition dated June 25, 1958, filed in the same case,
respondent municipality formally asked the Commission to
revoke petitioner's certificate of public convenience and to
forfeit its franchise on the ground, among other things, that
it failed to comply with the conditions of said certificate
and franchise. Said petition was set for hearing jointly with
the order to show cause. The hearings had been postponed
several times.
Meanwhile, inspections had been made of petitioner's
electric plant and installations by the engineers of the
Commission, as follows,: April 15, 1958 by Engineer
Antonio M. Alli; September 18, 1959, July 12-13, 1960, and
June 21-24, 1961, by Engineer Meliton S. Martinez. The
inspection on June 21-24, 1961 was made upon the request
______________
3 Hereinafter referred to as "Morong Electric".

4 Not "Pedro G. Talavera" as appearing in petitioner's Brief. Mr. Pedro
S. Talavera also conducted the hearings in the main case.
290
290 SUPREME COURT REPORTS ANNO TATED

of the petitioner who manifested during the hearing on

December 15, 1960 that improvements have been made on
its service since the inspection on July 12-13, 1960, and
that, on the basis of the inspection report to be submitted,
it would agree to the submission of the case for decision
without further hearing.
When the case was called for hearing on July 5, 1961,
petitioner failed to appear. Respondent municipality was
then allowed to present its documentary evidence, and
thereafter the case was submitted for decision.
On July 7, 1961, petitioner filed a motion to reopen the
case upon the ground that it had not been f urnished with a
copy of the report of the June 21-24,1961 inspection for it to
reply as previously agreed. In an order dated August 25,

1961, petitioner was granted a period of ten (10) days
within which to submit its written reply to said inspection
report, on condition that should it fail to do so within the
said period the case would be considered submitted for
decision. Petitioner failed to file the reply. In consonance
with the order of August 25, 1961, therefore, the
Commission proceeded to decide the case. On July 29, 1962
petitioner's electric plant was burned.
In its decision, dated August 20, 1962, the Commission,
on the basis of the inspection reports of its aforenamed
engineers, found that the petitioner had failed to comply
with the directives contained in its letters dated May 21,
1954 and September 4, 1954, and had violated the
conditions of its certificate of public convenience as well as
the rules and regulations of the Commission. The
Commission concluded that the petitioner "cannot render
the efficient, adequate and satisfactory electric service
required by its certificate and that it is against public
interest to allow it to continue its operation." Accordingly,
it ordered the cancellation and revocation of petitioner's
certificate of public convenience and the forfeiture of its
franchise.
On September 18, 1962, petitioner moved for
reconsideration of the decision, alleging that before its
electric plant was burned on July 29, 1962, its service was
greatly improved and that it had still existing investment
which the Commission should protect. But eight days
before said motion f or reconsideration was f iled, or on
September
291
VOL. 25, SEPTEMBER 28, 1968 291

Rizal Light & Ice Co.. Inc. vs. Mun. of Morong, Rizal
10,1962, Morong Electric, having been granted a municipal

franchise on May 6, 1962 by respondent municipality to
install, operate and maintain an electric heat, light and
power service in said municipality—approved by the
Provincial Board of Rizal on August 31, 1962—filed with
the Commission an application for a certificate of public
convenience and necessity for said service. Said application
was entitled "Morong Electric Co., Inc., Applicant", and
docketed as Case No. 62-5143.
Petitioner opposed in writing the application of Morong
Electric, alleging among other things, that it is a holder of
a certificate of public convenience to operate an electric
light, heat and power service in the same municipality of

Morong, Rizal, and that the approval of said application
would not promote public convenience, but would only
cause ruinous and wasteful competition. Although the
opposition is dated October 6,1962, it was actually received
by the Commission on November 8, 1962, or twenty four
days after the order of general default was issued in open
court when the application was first called for hearing on
October 15, 1962. On November 12, 1962, however, the
petitioner filed a motion to lift said order of default. But
before said motion could be resolved, petitioner filed
another motion dated, January 4, 1963, this time asking f
or the dismissal of the application upon the ground that
applicant Morong Electric had no legal personality when it
filed its application on September 10, 1962, because its
certificate of incorporation was issued by the Securities and
Exchange Commission only on October 17, 1962. This
motion to dismiss was denied by the Commission in a
formal order issued on January 17, 1963 on the premise
that applicant Morong Electric was a de facto corporation.
Consequently, the case was heard on the merits and both
parties presented their respective evidence. On the basis of
the evidence adduced the Commission, in its decision dated
March 13, 1963. found that there was an absence of electric
service in the municipality of Morong and that applicant
Morong Electric, a Filipino-owned corporation duly
organized and existing under the laws of the Philippines.
has the financial capacity to maintain said service. These
circumstances, con-
292

sidered together with the denial of the motion for

reconsideration filed by petitioner in Case No. 39715 on
February 15, 1963, such that as far as the Commission was
concerned the certificate of the petitioner was already
declared revoked and cancelled, the Commission approved
the application of Morong Electric and ordered the issuance
in its favor of the corresponding certificate of public
convenience and necessity.
On March 8, 1963, petitioner filed with this Court a
petition to review the decision in Case No. 39715 (now G.
R. No. L-20993). Then on April 26, 1963, petitioner also
filed a petition to review the decision in Case No. 62-5143
(now G. R. No. L-21221).
In questioning the decision of the Commission in Case

No. 39715, petitioner contends: (1) that the Commission
acted without or in excess of its jurisdiction when it
delegated the hearing of the case and the reception of
evidence to Mr. Pedro S. Talavera who is not allowed by
law to hear the same; (2) that the cancellation of
petitioner's certificate of public convenience was
unwarranted because no sufficient evidence was adduced
against the petitioner and that petitioner was not able to
present evidence in its defense; (3) that the Commission
failed to give protection to petitioner's investment; and (4)
that the Commission erred in imposing the extreme
penalty of revocation of the certificate.
In questioning the decision in Case No. 62-5143,
petitioner contends: (1) that the Commission erred in
denying petitioner's motion to dismiss and proceeding with
the hearing of the application of the Morong Electric; (2)
that the Commission erred in granting Morong Electric a
certificate of public convenience and necessity since it is
not financially capable to render the service; (3) that the
Commission erred when it made findings of facts that are
not supported by the evidence adduced by the parties at the
trial; and (4) that the Commission erred when it did not
give to petitioner protection to its investment a reiteration
of the third assignment of error in the other case.
We shall now discuss the appeals in these two cases
separately.
293
VOL. 25, SEPTEMBER 28, 1968 293

G. R. No. L-20993
1. Under the first assignment of error, petitioner contends

that while Mr. Pedro S. Talavera, who conducted the
hearings of the case below, is a division chief, he is not a
lawyer. As such, under Section 32 of Commonwealth Act
No. 146, as amended, the Commission should not have
delegated to him the authority to conduct the hearings for
the reception of evidence of the parties. 5
We find that, really, Mr. Talavera is not a lawyer.
Under the second paragraph of 6Section 32 of
Commonwealth Act No. 146, as amended, the Commission
can only authorize a division chief to hear and investigate a
case filed before it if he is a lawyer. However, the petitioner
is raising this question for the first time in this appeal. The
record discloses that petitioner never made any objection to

the authority of Mr. Talavera to hear the case and to
receive the evidence of the parties. On the contrary, we find
that petitioner had appeared and submitted evidence of the
hearings conducted by Mr. Talavera, particularly the
hearings relative to the motion for reconsideration of the
order of February 18, 1957 cancelling and revoking its
certificate, We also find that, through counsel, petitioner
had entered into agreements with Mr. Talavera, as hearing
officer, and the counsel for respondent municipality,
regarding 7procedure in order to abbreviate the
proceedings. It is only after the decision in the case turned
out to be adverse to it that petitioner questioned the
proceedings held before Mr. Talavera.
This Court in several cases has ruled that objection to
the delegation of authority to hear a case filed before
_______________
5 Law List 1961, First Edition, does not contain the name "Pedro S.
Talavera."
6 As amended by R.A. No. 723 which took effect on June 6, 1962, it
reads: "The Commission may also, by proper order, authorize any of the
attorneys of the legal division or division chiefs of the Commission, if they
be lawyers, to bear and investigate any case filed with the Commission
and in connection therewith to receive such evidence as may be material
thereto." (Italics supplied.)
7 Sessions of September 23, 1960, December 15, 1960, February 24,
1961 and August 25, 1961.
294

the Commission and to receive the evidence in connection

therewith is a procedural, not a jurisdictional point, and is
waived by failure to interpose timely the objection
8
and the
case had been decided by the Commission. Since petitioner
has never raised any objection to the authority of Mr.
Talavera before the Commission, it should be deemed to
have waived such procedural defect, and consonant with
the precedents on the matter, petitioner's claim that the
Commission acted without or in excess of jurisdiction
9
in so
authorizing Mr. Talavera should be dismissed.
2. Anent the second assigned error, the gist of
petitioner's contention is that the evidence—consisting of
inspection reports upon which the Commission based its
decision is insufficient and untrustworthy in that (1) the

authors of said reports had not been put to test by way of
cross-examination; (2) the reports constitute only one side
of the picture as petitioner was not able to present evidence
in its defense; (3) judicial notice was not taken of the
testimony of Mr. Harry B. Bernardino, former mayor of
respondent municipality, in PSC Case No. 625143 (the
other case, G. R. No. L-21221) to the effect that the
petitioner had improved its service before its electric power
plant was burned on July 29, 1962—which testimony
contradicts the inspection reports; and (4) the Commission
acted both as prosecutor and judge—passing judgment over
the very same evidence presented by it as prosecutor—a
situation "not conducive to the arrival at just and equitable
decisions."
Settled is the rule that in reviewing the decision of the
Public Service Commission this. Court is not required to
examine the proof de novo and determine for itself whether
or not the preponderance of evidence really
_______________
8 Everett Steamship Corp. vs. Chuahiong, L-2933, September 26, 1951;

Raymundo Trans. vs. Cervo, L-3899, May 21, 1952; Enriquez & Co. vs.
Ortega, L-4865, December 22, 1952; and Luzon Stevedoring Co. vs. PSC,
L-5458, September 16, 1953.
9 In Raymundo Trans. vs. Cervo, supra, it was held: "As provided for in
Rule 43, section 2 of the Rules of Court an appellant can only raise in a
petition for review questions that had been raised before the Public
Service Commission."
295
VOL. 25, SEPTEMBER 28, 1968 295

justifies the decision. The only function of this Court is to

determine whether or not there is evidence before the
Commission upon which its decision might reasonably be
based. This Court will not substitute its discretion for that
of the Commission on questions of fact and will not
interfere in the latter's decision unless10it clearly appears
that there is no evidence to support it. Inasmuch as the
only function of this Court in reviewing the decision of the
Commission is to determine whether there is sufficient
evidence before the Commission upon which its decision
can reasonably be based, as it is not required to examine
the proof de novo, the evidence that should be made the
basis of this Court's determination should be only those

presented in this case before the Commission. What then
was the evidence presented before the Commission and
made the basis of its decision subject of the present appeal?
As stated earlier, the Commission based its decision on the
inspection reports submitted by its engineers who
conducted the inspection of petitioner's
11
electric service
upon orders of the Commission. Said inspection reports
specify in detail the deficiencies incurred, and violations
committed, by the petitioner resulting in the inadequacy of
its service. We consider that said reports are sufficient to
serve reasonably as bases of the decision in question. It
should be emphasized, in this connection that said reports,
are not mere documentary proofs presented for the
consideration of the Commission, but are the results of the
Commission's own observations and investigations
12
which it
can rightfully take into consideration, particularly in this
case where the petitioner had
_______________
10 A. L. Ammen Transportation Co. vs. Froilan Japa, L-19643, July 26,

1966; Del Pilar Transit, Inc. vs. Jose M. Silva, L-21547, July 15, 1966;
Pineda vs. Carandang, L-13270-71, March 24, 1960; and Ramos vs. Lat, et
at., L-14476 & L-15773, May 23, 1960.
11 Admitted by the petitioner in its Brief, pp. 3 & 11.
12 "The Public Service Commission in the exercise of its quasi-judicial
and administrative functions has the power to take into consideration the
result of its own observation and investigation of the matter submitted to
it for consideration and decision, in connection with other evidence
presented at the hearing of a case." (Cebu Transit Co. vs. PSC, 79 Phil.
386;
296

not presented any evidence in its defense, and speaking of

petitioner's failure to present evidence, as well as its failure
to cross-examine the authors of the inspection reports,
petitioner should not complain because it had waived not
only its right to cross-examine but also its right to present
evidence. Quoted hereunder are the pertinent portions of
the transcripts of the proceedings where the petitioner,
through counsel, manifested in clear language said waiver
and its decision to abide by the last inspection report of
Engineer Martinez:
Proceedings of December 15, 1960
"COMMISSION:
"It appears at the last hearing of this case on September 23,

1960, that an engineer of this Commission has been ordered to
make an inspection of all electric services in the province of Rizal
and on that date the engineer of this Commission is still
undertaking that inspection and it appears that the said engineer
had actually made that inspection on July 12 and 13, 1960. The
engineer has submitted his report on November 18, 1960 which is
attached to the records of this case.
"ATTY. LUQUE (Counsel for Petitioner):
"x x x (W)e respectfully state that while the report is, as I see it
attached to the records, clear and very thorough, it was made
sometime July of this year and I understand from the respondent
that there is some improvement since this report was made x x x
x we respectfully request that an up-todate inspection be made x x
x x. An inspector of this Commission can be sent to the plant and
considering that the engineer of this Commission, Engineer
Meliton Martinez, is very acquainted to the points involved we
pray that his report will be used by us for the reason that he is a
technical man and he knows well as he has done a good job and I
think our proposition would expedite the matter. We sincerely
believe that the inspection report will be the best evidence to
decide this matter.
x x x x
_______________
Sambrano vs. Northern Luzon Trans. Co., 63 Phil. 554; Manila Yellow
Taxicab Co., Inc. vs. Araullo, et al., 60 Phil. 833; and Manila Yellow
Taxicab Co., Inc. vs. B. Stables Co., 60 Phil. 851.)
"The Commission can take cognizance of the facts diclosed by its own
records." (Dagupan Ice Plant Co., Inc. vs. Lucero, et al., 66 Phil. 120, 123.)
297
VOL. 25, SEPTEMBER 28, 1968 297

"ATTY. LUQUE:
"x x x. This is a very important matter and to show the good faith
of respondent in this case we will not even crossexamine the
engineer when he makes a new report. We will agree to the
findings and, your honor please, considering as we have
manifested before that Engineer Martinez is an experienced

engineer of this Commission and the points reported by Engineer
Martinez on the situation of the plant now will prevent the
necessity of having a hearing, of us bringing new evidence and
complainant bringing new evidence. x x x.
x x x x
"COMMISSION (to Atty. Luque) :

Q "Does the Commission understand from the counsel for
applicant that if the motion is granted he will submit this
order to show cause for decision without any further hearing
and the decision will be based on the report of the engineer of
this Commission?
A "We respectfully reply in this manner that we be allowed or be
given an opportunity just to read the report and 99% we will
agree that the report will be the basis of that decision. We just
want to find out the contents of the report, however, we
request that we be furnished with a copy of the report before
the hearing so that we will just make a manifestation that we
will agree.
"COMMISSION (to Atty. Luque):
Q "In order to prevent the delay of the disposition of this case the
Commission will allow counsel for the applicant to submit his
written reply to the report that the engineer of this
Commission. Will he submit this case without further heari ng
upon the receipt of that written reply?
A "Yes, your honor."
Proceedings of August 25, 1961
"ATTY. LUQUE (Counsel for petitioner)

"In order to avoid any delay in the consideration of this case we
are respectfully move (sic) that instead of our witnesses testifying
under oath that we will submit a written reply under oath
together with the memorandum within fifteen (15) days and we
will furnish a copy and upon our submission of said written reply
under oath and memorandum we consider this case submitted.
This suggestion is to abbreviate the necessity of presenting
witnesses here which may prolong the resolution of this case.
"ATTY. OLIVAS: (Counsel for respondent municipality)
"I object on the ground that there is no resolution by this
298

Commission on the action to reopen the case and second this case
has been closed.
"ATTY. LUQUE:
"With regard to the testimony on the ground for opposition we

respectfully submit to this Commission our motion to submit a
written reply together with a memorandum. Also as stated to
expedite the case and to avoid further hearing we will just submit
our written reply. According to our records we are furnished with
a copy of the report of July 17, 1961. We submit your honor.
x x x x
x x x x
"COMMISSION:
"To give applicant a chance to have a day in court the

Commission grants the request of applicant that it be given 10
days within which to submit a written reply on the report of the
engineer of the Commission who inspected the electric service, in
the municipality of Morong, Rizal, and after the submission of the
said written reply within 10 days from today this case will be
considered submitted for decision."
The above-quoted manifestation of counsel for the

petitioner, specifically the statement referring to the
inspection report of Engineer Martinez as the "best
evidence to decide this matter," can serve as an argument
against petitioner's claim that the Commission should have
taken into consideration the testimony of Mr. Bernardino.
But the primary reasons why the Commission could not
have taken judicial cognizance of said testimony are: first,
it is not a proper subject of judicial notice, as it is not a
"known" fact—that is, well established and authoritatively
13
settled, without qualification and contention; second, it
was given in a subsequent and distinct case after the
petitioner's motion for reconsideration was heard14
by the
Commission en banc and submitted for decision.
_______________
13 "Matters of which the Court will take notice are necessarily uniform
or fixed, and do not depend upon uncertain testimony, for as soon as a
matter becomes disputable, it ceases to f all under the head of common
knowledge and will not be judicially recognized." (29 Am Jur 2d 61-62)
14 Petitioner's motion for reconsideration was heard on Jan. 11, 1963
and on that date said motion was considered submitted for decision, while
the testimony of Bernardino was given on January 24, 1963.
299
VOL. 25, SEPTEMBER 28, 1968 299
and third, it was not brought to the attention of the 15

Commission in this case through an appropriate pleading.
Regarding the contention of petitioner that the
Commission had acted both as prosecutor and judge, it
should be considered that there are two matters that had to
be decided in this case, namely, the order to show cause
dated December 19, 1956, and the petition or complaint by
respondent municipality dated June 25, 1958. Both matters
were heard jointly, and the record shows that respondent
municipality had been allowed to present its evidence to
substantiate its complaint. It can not be said, therefore,
that in this case the Commission had acted as prosecutor
and judge. But even assuming, for the sake of argument,
that there was a commingling of the prosecuting and
investigating functions, this exercise of dual function is
authorized by Section 17 (a) of Commonwealth Act No. 146,
as amended, under which the Commission has power "to
investigate, upon its own initiative, or upon complaint in
writing, any matter concerning any public service as
regards matters under its jurisdiction; to require any public
service to furnish safe, adequate, and proper service as the
public interest may require and warrant; to enforce
compliance with any standard, rule, regulation, order or
other requirement of this Act or of the Commission, x x x."
Thus, in the case of Collector of Internal Revenue vs.
Estate of F. P. Buan, L-11438, July 31, 1958, this Court
held that the power of the Commission to cancel and revoke
a certificate of public convenience and necessity may be
exercised by it even without a formal charge filed by any
interested party, with the only limitation that the holder of
the certificate should be given his day in court.
It may not be amiss to add that when prosecuting and
investigating duties are delegated by statute to an
administrative body, as in the case of the Public Service
_______________
15 "Judicial notice is not judicial knowledge; and one having the burden
of establishing a fact of which a court may take judicial notice is not in
consequence relieved of the necessity of bringing the fact to the knowledge
of the Court." (Francisco, Evidence, pp. 51-52 citing Shapleigh, et al v.
Mier, No. 125 [U.S.] Jan. 1937.)
300
Commission, said body may take steps it believes

appropriate for the proper exercise of said duties,
particularly in the manner of informing itself whether
there is probable violation of the law and/or its rules and
regulations. It may initiate an investigation, file a
complaint, and then try the charge as preferred, So long as
the respondent is given a day in court,. there can be no
denial of due process, and objections to said procedure
cannot be sustained.
3. In its third assignment of error, petitioner invokes the
"protection-of-investment rule" enunciated 16
by this Court in
Batangas Transportation Co. vs. Orlanes in this wise:
"The Government having taken over the control and supervision

of all public utilities, so long as an operator under a prior license
complies with the terms and conditions of his license and
reasonable rules and regulations for its operation and meets the
reasonable demands of the public, it is the duty of the
Commission to protect rather than to destroy his investment by
the granting of the second license to another person for the same
thing over the same route of travel. The granting of such a license
does not serve its convenience or promote the interests of the
public."
The above-quoted rule, however, is not absolute, for nobody

has exclusive right 17to secure a franchise or a certificate of
public convenience. Where, as in the present case, it has
been shown by ample evidence that the petitioner, despite
ample time and opportunity given to it by the Commission,
had failed to render adequate, sufficient and satisfactory
service and had violated the important conditions of its
certificate as well as the directives and the rules and
regulations of the Commission, the rule cannot apply. To
apply that rule unqualifiedly is to encourage violation or
disregard of the terms and conditions of the certificate and
the Commission's directives and regulations, and would
close the door to other applicants who could establish,
operate and provide adequate, efficient and satisfactory
service for the benefit and convenience of the
_______________
16 52 Phil. 455, 472; see also Javier v. Orlanes, 53 Phil. 468, and Bohol
Trans. Co. vs. Jureidini, 53 Phil. 560.
17 See Teresa Electric & Power Co., Inc. vs. PSC, L-21804, Sept. 25,
1967; Manila Taxicab, et al vs. PSC, et al., 90 Phil. 301.
301
VOL. 25, SEPTEMBER 28, 1968 301

inhabitants. It should be emphasized that the paramount

consideration should always be the public interest and
public convenience. The duty of the Commission to protect
the investment of a public utility operator refers only to
operators of good standing—those who comply with the
laws, rules and regulations—and not to operators who are
unconcerned with the public interest and whose
investments18
have failed or deteriorated because of their
own fault.
4. The last assignment of error assails the propriety of
the penalty imposed by the Commission on the petitioner—
that is, the revocation of the certificate and the forfeiture of
the franchise. Petitioner contends that the imposition of a
fine would have been sufficient, as had been done by the
Commission in cases of a similar nature.
It should be observed that Section 16 (n) of
Commonwealth Act No. 146, as amended, confers upon the
Commission ample power and discretion to order the
cancellation and revocation of any certificate of public
convenience issued to an operator who has violated. or has
willfully and contumaciously refused to comply with, any
order, rule or regulation of the Commission or any
provision of law. What matters is that there is evidence to
support the action of the Commission. In the instant case,
as shown by the evidence, the contumacious refusal of the
petitioner since 1954 to comply with the directives, rules
and regulations of the Commission, its violation of the
conditions of its certificate and its incapability to comply
with its commitment as shown by its inadequate service,
were the circumstances that warranted the action of the
Commission in not merely imposing a fine but in revoking
altogether petitioner's certificate. To allow petitioner to
continue its operation would be to sacrifice public interest
and convenience in favor of private interest.
"A grant of a certificate of public convenience confers no property

rights but is a mere license or privilege, and such privilege is
forfeited when the grantee fails to comply with his commitments
behind which lies the paramount interest of the public, for public
necessity cannot be made to wait, nor sacri-
_______________
18 Paredes vs. PSC, et al., L-7111, May 30, 1955.
302

ficed for private convenience." (Collector of Internal Revenue v.

Estate of F. P. Buan. et al., L-11438 and Santiago Sambrano, et
al. v. PSC, et al., L-11439 & L-11542-46, July 31. 1958)
"(T)he Public Service Commission. x x x has the power to
specify and define the terms and conditions upon which the public
utility shall be operated, and to make reasonable rules and
regulations for its operation and the compensation which the
utility shall receive for its services to the public, and for any
failure to comply with such rules and regulations or the violation
of any of the terms and conditions for which the license was
granted, the Commission has ample power to enforce the
provisions of the license or even to revoke it, for any failure or
neglect to comply with any of its terms and provisions." (Batangas
Trans. Co. v. Orlanes, 52 Phil. 455, 460: italics supplied)
Presumably, the petitioner has in mind Section 21 of

Commonwealth Act No. 146, as amended, which provides
that a public utility operator violating or failing to comply
with the terms and conditions of any certificate, or any
orders, decisions, or regulations of the Commission, shall
be subject to a fine and that the Commission is authorized
and empowered to impose such fine, after due notice and
hearing. It should be noted, however, that the last sentence
of said section states that the remedy provided therein
"shall not be a bar to, or affect any other remedy provided
in this Act but shall be cumulative and additional to such
remedy or remedies." In other words, the imposition of a f
ine may only be one of the remedies which the Commission
may resort to, in its discretion. But that remedy is not
exclusive of, or has preference over, the other remedies.
And this Court will not substitute its discretion for that of
the Commission, as long as there is evidence to support the
exercise of that discretion by the Commission.
G. R. No. L-21221
Coming now to the other case. let it be stated at the outset

that before any certificate may be granted, authorizing the
operation of a public service, three requisites must be
complied with, namely: (1) the applicant must be a citizen
of the Philippines or of the United States, or a corporation
or co-partnership, association 01 joint-stock company
constituted and organized under the laws of the

Philippines, sixty per centum at least of the stock or paid
303
VOL. 25, SEPTEMBER 28, 1968 303

up capital of which belongs entirely 19

to citizens of the
Philippines or of the United States; (2) the applicant must
be financially capable of undertaking the proposed service20
and meeting the responsibilities incident to its operation;
and (3) the applicant must prove that the operation of the
public service proposed and the authorization to do
business will promote
21
the public interest in a proper and
suitable manner.
As stated earlier, in the decision appealed from, the
Commission found that Morong Electric is a corporation
duly organized and existing under the laws of the
Philippines, the stockholders of which are Filipino citizens,
that it is financially capable of operating an electric light,
heat and power service, and that at the time the decision
was rendered there was absence of electric service in
Morong, Rizal. While the petitioner does not 22
dispute the
need of an electric service in Morong, Rizal, it claims, in
effect, that Morong Electric should not have been granted
the certif icate of public convenience and necessity because
(1) it did not have a corporate personality at the time it was
granted a franchise and when it applied for said certificate;
(2) it is not financially capable of undertaking an electric
service, and (3) petitioner was rendering efficient service
before its electric plant was burned, and therefore, being a
prior operator its investment should be protected and no
new party should be granted a f ranchise and certificate of
public convenience and necessity to operate an electric
service in the same locality.
1. The bulk of petitioner's arguments assailing the
personality of Morong Electric dwells
23
on the proposition
that since a franchise is a contract , at least two competent
parties are necessary to the execution thereof, and parties
_______________
19 Ishi v. PSC, 63 Phil. 428.

20 Manila Yellow Taxicab v. Austin Taxicab Co., 59 Phil. 771.
21 Sec. 15, Com. Act No. 146; Batangas Trans. Co. v. Orlanes, 52 Phil
455. See also Martin, Phil. Commercial Laws, Vol. 3, pp. 1195-1196;
Almario, Transportation and Public Service Law, pp. 300-301; Agbayani,

Commercial Laws of the Phil., Vol 4 (1964 Ed.), pp. 2363-2364.
22 T.s.n., p. 89 (Session on January 11, 1963).
23 City of Manila vs. PSC, 52 Phil. 515.
304

are not competent except they are in being. Hence, it is

contended that until a corporation has come into being, in
this jurisdiction, by the issuance of a certificate of
incorporation by the Securities and Exchange Commission
(SEC) it cannot enter into any contract as a corporation.
The certificate of incorporation of the Morong Electric was
issued by the SEC on October 17, 1962, so only from that
date, not before, did it acquire juridical personality and
legal existence. Petitioner concludes that the franchise
granted to Morong Electric on May 6, 1962 when it was not
yet in esse is null and void and cannot be the subject of the
Commission's consideration. On the other hand, Morong
Electric argues, and to which argument the Commission
agrees, that it was a de facto corporation at the time the
franchise was granted and, as such, it was not
incapacitated to enter into any contract or to apply for and
accept a franchise. Not having been incapacitated, Morong
Electric maintains that the franchise granted to it is valid
and the approval or disapproval thereof can be properly
determined by the Commission.
Petitioner's contention that Morong Electric did not yet
have a legal personality on May 6, 1962 when a municipal
franchise was granted to it is correct The juridical
personality and legal existence of Morong Electric began
only on October 17, 1962 when24 its certificate of
incorporation was issued by the SEC. Before that date, or
pending the issuance of said certif icate of incorporation,
the incorporators
25
cannot be considered as de facto
corporation. But the fact that Morong Electric had no
corporate existence on the day the franchise was granted in
its name does not render the franchise invalid, because
later Morong Electric obtained its certificate of
incorporation and then accepted the franchise In
accordance with the terms and conditions thereof. This
view is sustained by eminent American authorities. Thus,
McQuiuin says:
_______________
24 Hall vs. Judge Piccio, 86 Phil. 603, 605; See also Fisher, The Phil.
Law of Stock Corp., p. 36.
25 Tolentino Commercial Laws of the Philippines, Vol. II, 8th Ed., p.
723; See also Guevara, The Phil. Corp. Law, New Ed., p. 18.
305
VOL. 25, SEPTEMBER 28, 1968 305

"The fact that a company is not completely incorporated at the

time the grant is made to it by a municipality to use the streets
does not, in most jurisdictions, affect the validity of the grant. But
such grant cannot take effect until the corporation is organized.
And in Illinois it has been decided that the ordinance granting the
franchise maybe presented before the corporation grantee is fully
organized, where the organization is completed before the passage
and acceptance." (McQuillin, Municipal Corporations, 3rd Ed.,
Vol. 12, Chap. 34, Sec. 34.21)
Fletcher says:
"While a franchise cannot take effect until the grantee corporation

is organized, the franchise may, nevertheless, be applied for
before the company is fully organized.
"A grant of a street franchise is valid although the corporation
is not created until afterwards." (Fletcher, Cyclopedia Corp.
Permanent Edition, Rev. Vol. 6-A, Sec. 2881)
And Thompson gives the reason for the rule:
"(I)n the matter of the secondary franchise the authorities are

numerous in support of the proposition that an ordinance
granting a privilege to a corporation is not void because the
beneficiary of the ordinance is not fully organized at the time of
the introduction of the ordinance. It is enough that organization is
complete prior to the passage and acceptance of the ordinance.
The reason is that a privilege of this character is a mere license to
the corporation until it accepts the grant and complies with its
terms and conditions."
26
(Thompson on Corporations, Vol. 4, 3rd
Ed., Sec. 2929)
The incorporation of Morong Electric on October 17, 1962

and its acceptance of the franchise as shown by its action in
prosecuting the application filed with the Commission for
the approval of said franchise, not only perfected a contract
between the respondent municipality and Morong Electric
but also cured the deficiency pointed out by the petitioner

in the application of Morong Electric. Thus, the
Commission did not err in denying petitioner's motion to
dismiss said application and in proceeding to hear the
same. The efficacy of the franchise, however, arose only
upon its approval by the Commismission on March 13,
1963. The reason is that—
_______________
26 McQuillin, Fletcher and Thompson cite as authorities the cases of

Clarksburg Electric Light Co. vs. Clarksburg, 47 W. Va. 739, 35 S. E. 994,
50 L.R.A. 142 and Chicago Telephone Co. vs. Northwestern Tel. Co., 199
III. 884, 65 N. E. 329.
306

"Under Act No. 667, as amended by Act No. 1022, a municipal

council has the power to grant electric franchises, subject to the
approval of the provincial board and the President. However,
under Section 16 (b) of Commonwealth Act No. 146, as amended,
the Public Service Commission is empowered 'to approve, subject
to constitutional limitations any franchise or privilege granted
under the provisions of Act No. 667, as amended by Act No. 1022,
by any political subdivision of the Philippines when, in the
judgment of the Commission, such franchise or privilege will
properly conserve the public interests, and the Commission shall
in -so approving impose such conditions as to construction,
equipment, maintenance, service, or operation as the public
interests and convenience may reasonably require, and to issue
certificates of public convenience and necessity when such is
required or provided by any law or franchise.' Thus, the efficacy of
a municipal electric franchise arises, therefore, only after the
approval of the Public Service Commission." (Almendras vs.
Ramos, 90 Phil. 231)
The conclusion herein reached regarding the validity of the

franchise granted to Morong Electric is not incompatible
with the holding of this Court in Cagayan 27
Fishing
Development Co., Inc. vs. Teodoro Sandiko upon which
the petitioner leans heavily in support of its position. In
said case this Court held that a corporation should have a
full and complete organization and existence as an entity
before it can enter into any kind of a contract or transact
any business. It should be pointed out, however, that this
Court did not say in that case that the rule is absolute or
that under no circumstances may the acts of promoters of a
corporation be ratified or accepted by the corporation if and
when subsequently organized. Of course, there are
exceptions. It will be noted that American courts generally
hold that a contract made by the promoters of a corporation
on its behalf may be adopted, 28
accepted or ratified by the
corporation when organized;
2. The validity of the franchise and the corporate
personality of Morong Electric to accept the same having
been shown, the next question to be resolved is whether
said company has the financial qualification to operate
_______________
27 65 Phil. 223.
28 Fletcher, Cyclopedia Corporation, Permanent Ed., Vol. I, Chap. 9,
Sec. 207, p. 681.
307
VOL. 25, SEPTEMBER 28, 1968 307

an electric light, heat and power service. Petitioner

challenges the financial capability of Morong Electric, by
pointing out the inconsistencies in the testimony of Mr.
Jose P. Ingal, president of said company, regarding its
assets and the amount of its initial investment for the
electric plant. In this connection it should be stated that on
the basis of the evidence presented on the matter, the
Commission has found the Morong Electric to be
"financially qualified to install, maintain and operate the
proposed electric light, heat and power service." This is
essentially a factual determination which. in a number of
cases, this Court has said it will not disturb unless patently
unsupported by evidence. An examination of the record of
this case readily shows that the testimony of Mr. Ingal and
the documents he presented to establish the financial
capability of Morong Electric provide reasonable grounds
for the above finding of the Commission.
"It is now a very well-settled rule in this jurisdiction that the

findings and conclusions of fact made by the Public Service
Commission, after weighing the evidence adduced by the parties
in a public service case, will not be disturbed by the Supreme
Court unless those findings and conclusions appear not to be
reasonably supported by evidence." (La Mallorca and Pampanga

Bus Co. vs. Mercado, L-19120, November 29, 1965)
"For purposes of appeal, what is decisive is that said
testimonial evidence provides reasonable -support for the Public
Service Commission's findings of financial capacity on the part of
applicants, rendering such findings beyond our power to disturb."
(Del Pilar Transit vs. Silva, L-21547, July 15, 1966)
It may be worthwhile to mention in this connection 29

that
per inspection report dated January 20, 1964 of Mr.
Meliton Martinez of the Commission, who inspected the
electric service of Morong on January 15-16, 1964, Morong
Electric "is serving electric service to the entire area
covered by its approved plan and has constructed its line in
accordance with the plans and specifications approved by
the Commission." By reason thereof, it was recommended
that the requests of Morong Electric (1) for the withdrawal
of its deposit in the amount of P1,
_______________
29 Marked Annex "A" of the memorandum of Morong Electric in lieu of

oral arguments.
308

Rizal Light & lce Co., Inc. vs. Mun. of Morong, Rizal
000.00 with the Treasurer of the Philippines, and (2) for

the approval of Resolution No. 160 of the Municipal Council
of Morong, Rizal, exempting the operator from making the
additional P9,000.00 deposit mentioned in its petition,
dated September 16, 1963, be granted. This report removes
any doubt as to the financial capability of Morong Electric
to operate and maintain an electric light, heat and power
service.
3. With the financial qualification of Morong Electric
beyond doubt, the remaining question to be resolved is
whether, or not, the findings of fact of the Commission
regarding petitioner's service are supported by evidence. It
is the contention of the petitioner that the Commission
made some findings of fact prejudicial to its position but
which do not find support from the evidence presented in
this case. Specifically, petitioner refers to the statements or
findings that its service had "turned from bad to worse",
that it miserably failed to comply with the oft-repeated
promises to bring about the needed improvement, that its
equipment is unserviceable, and that it has no longer any

plant site and, therefore, has discredited itself. Petitioner
further states that such statements are not only devoid of
evidentiary support but contrary to the testimony of its
witness, Mr. Harry Bernardino, who testified that
petitioner was rendering efficient and satisfactory service
before its electric plant was burned on July 29, 1962.
On the face of the decision appealed from, it is obvious
that the Commission in describing the kind of service
petitioner was rendering before its certificate was ordered
revoked and cancelled, took judicial notice of the records of
the previous case (PSC Case No. 39715) where the quality
of petitioner's service had been squarely put in issue. It will
be noted that the findings of the Commission were made
notwithstanding the fact that the aforementioned
testimony of Mr. Bernardino had been emphasized and
pointed out30 in petitioner's Memorandum to the
Commission. The implication is simple: that as between
the testimony of Mr. Bernardino and the in-
_______________
30 P. 16, Memorandum of Oppositor (herein petitioner).
309
VOL. 25, SEPTEMBER 28, 1968 309

spection reports of the engineers of the Commission, which

served as the basis of the revocation order, the Commission
gave credence to the latter. Naturally, whatever conclusion
or finding of fact that the Commission arrived at regarding
the quality of petitioner's service are not borne out by the
evidence presented
31
in this case but by evidence in the
previous case. In this connection, we repeat, the
conclusion, arrived at by the Commission after weighing
the conflicting evidence in the two related cases, is a
conclusion of fact which this Court will not disturb.
"And it has been held time and again that where the Commission
has reached a conclusion of fact after weighing the conflicting
evidence, that conclusion must be respected, and the Supreme
Court will not interfere unless it clearly appears that there is no
evidence to support the decision of the Commission." (La Mallorca
and Pampanga Bus Co. vs. Mercado, L-19120, November 29, 1965
citing Pangasinan Trans. Co., Inc. vs. Dela Cruz, 95 Phil. 278)
For that matter, petitioner's pretension that it has a prior

right to the operation of an electric service in Morong,
Rizal, is not tenable; and its plea for protection of its
investment, as in the previous case, cannot be entertained.
WHEREFORE, the two decisions of the Public Service
Commission, appealed from, should be, as they are hereby
affirmed, with costs in the two cases against petitioner
Rizal Light & Ice Co., Inc. It is so ordered.
Conception, C.J., Reyes, J.B.L., Dizon, Makalintal,

Sanchez, Castro, Angeles and Fernando, JJ., concur.
Decisions affirmed.
ANNOTATION THE OLD OPERATOR RULE
I. Statement of the Rule.

As first stated in Batangas Trans. Co. v. Orlanes, (1928)
_______________
31 The close connection of the matter in controversy in the two cases

warranted the Commission to take judicial notice of the records of the
previous case, the findings of fact therein and the ruling of the
Commission (See also 5 Moran, 1963 Ed., p. 42.)
310

52 Phil. 455, "a certificate of public convenience will not be

issued to a second operator to operate a public utility in a
field where. and in competition with, a first operator who is
already operating a sufficient and satisfactory service.''
A. Requisites of the Rule.—
1. Operator must be first in the line.—The operator

invoking- the rule must be the first operator
granted a certificate of public convenience to
operate a public utility in the line in question. The
protection of or preference for a prior operator over
a newcomer cannot be invoked by a petitioner
where the respondent had operated long before the
petitioner a taxicab service in the same field (Robles
v. Blaylock, L-17629, March 31, 1964).
2. Prior operator must be an established operator.—An

old operator invoking the rule must be an
established operator in the f ull sense of the word.
Although the prior operator had a certificate of
public convenience before the filing of the
application of the newcomer, the rule will not apply
if the prior operator had secured its certificate of
convenience for barely two (2) months prior to the
application in question (Valdez v. Public Service
Commission, L-13837-38, May 30, 1960).
3. Prior operator must be operating a sufficient and
satisfactory service.—A prior operator must be
operating a sufficient and satisfactory service to be
entitled to preferential right. Where it is in no
condition to supply the needs or services, such as
when the old operator supplying the power needs in
a territory had only a load capacity of 200 kilowatts
while the power need was 6,000 kilowatts, the old
operator rule did not apply (Teresa Electric & Power
Co. v. Public Service Commission, L-21804, Sept.
25, 1967, 21 SCRA 198, 202).
It had been held however that inadequate service, by itself,

was not sufficient to grant a certificate of public
convenience to a newcomer without first giving the old or
prior operator an opportunity to improve its service
(Manila Electric Co. v. Mateo, [1938] 66 Phil. 19, 22-23;
Raymundo Trans. Co. v. Laguna-Tayabas Bus Co., [1930]
311
VOL, 25, SEPTEMBER 28, 1968 311

55 Phil. 404, 408; Bohol Land Trans. Co., Jureidini, [1929]

53 Phil. 560, 565-566; Javier v. Orlanes, [1929] 53 Phil.
468; Batangas Trans. Co. v. Orlanes, supra). The remedy is
not to award a new service to another but for the Public
Service Commission to take administrative action against
the old operator requiring it to improve its service and to
comply strictly with the terms and conditions of its
certificate (Manila Electric Co. v. Mateo, supra at 22).
The fact that a prior operator, which is a common
carrier, did not bid for the mail contract of the place it
serves is not sufficient reason to issue in favor of the one
who obtained the contract a certificate of public necessity
and convenience without f irst giving an opportunity to the
former to improve its service, binding itself to carry the
mails in accordance with law (Bohol Land Trans. Co. v.

Jureidini, supra at 569).
Failure of the old operator to improve its service after
having been required to do so will cause the grant of
another certificate of public convenience to a new
applicant. Thus, where the prior operator failed for about
three (3) years to complete its equipment to meet the
traffic, the Public Service Commission was justified in
granting another authorization to a newcomer for the
establishment of another service in the same line (Manila
Yellow Taxicab v. Public Service Commission, [1051] 90
Phil. 301, 309; De la Rosa v. Corpus, [1938] 66 Phil. 8 [for a
period of four (4) years] citing Bohol Land Trans. Co. v.
Jureidini, supra and Raymundo Trans. Co. v. Perez, 56
Phil. 274).
A showing must be clear and affirmative that an
existing utility is unable or has refused to maintain
adequate and satisfactory service (Batangas Trans. Co. v.
Orlanes, supra at 468). In a case involving an application of
a newcomer for another certificate on the same line in
competition with an old operator, it was held that lack of
means of transportation during the feast days could not
serve as the basis for determining the sufficiency or
insufficiency of the service. The testimony of two ex-
employees of the old operator that they used to leave
passengers behind for lack of room was not believed
because
312

"they were duty bound to report that fact to the company

and should have done so, and since they failed to do so, it is
presumed that there was no such deficiency." (Bohol Land
Trans Co. v. Jureidini, supra at 564.)
B. Reason for the Rule.—"The policy of regulation,

upon which our present public utility commission is
based and which tends to do away with competition
among public utilities as they are natural
monopolies, is at once the reason and the
justification for the holding of our courts that the
regulation of an existing system of transportation,
which is properly serving a given field, or may be
required to do so, is to be preferred to competition
among several independent systems. While
requiring a proper service from a single system for

a city or territory in consideration for protecting it
as a monopoly for all the service required and in
conserving its resources, no economic waste results
and service may be furnished at the minimum
costs. The prime object and real purpose of
Commission control is to secure adequate sustained
service for the public at the least possible cost, and
to protect and conserve investments already made
for this purpose. Experience has demonstrated
beyond any question that competition among
natural monopolies is wastef ul economically and
results finally in insufficient and unsatisfactory
service and extravagant rates." (Batangas Trans.
Co. v. Orlanes, supra at 467.)
"So long as the first licensee keeps and performs the terms
and conditions of its license and complies with the
reasonable rules and regulations of the Commission and
meets the reasonable demands of the public, it should have
more or less of a vested and preferential right over a person
who seeks to acquire another and a later license over the
same route. Otherwise, the first licensee would not have
any protection on his investment, and would be subject to
ruinous competition and thus defeat the very purpose and
intent for which the Public Service Commission was
created." (Batangas Trans. Co. v. Orlanes, supra at 466.)
There is the equal need of doing equity to those who
have risked capital to render the service which those who
313
VOL. 25, SEPTEMBER 28, 1968 313

were called upon to do so were not disposed or were not in a

position to supply." (Manila Yellow Taxicab v. Public
Service Commission, supra at 307.)
Where the law granting franchise to an old operator
expressly provided that the rights thereunder conferred are
not exclusive, the old operator cannot invoke its "vested
rights" as prior operator against the entry of another in its
area of operation (Philippine Long Distance Telephone Co.
v. City of Davao, L-23080, Sept. 20, 1965.)
II. Exceptions to the Rule

While it is true that operators of public convenience and
service deserve some protection from unnecessary or
unlawful competition, yet the rule is that nobody has any

exclusive right to secure a franchise or a certificate of
public convenience. Above any or all public convenience
and service should be quided by public service and interest;
the latter are the primordial considerations to be taken into
account." (Teresa Electric Power Co. v. Public Service
Commission, supra at 202 quoted with approval in
Philippine Rabbit Bus Lines, Inc. v. Gabatin, L-34472, July
31, 1968, 24 SCRA 411, 421-422.)
A. Failure to Offer to Meet the Increase in the Demand.—
The prior operator rule does not apply where the old
operator does not offer to meet the increase in the demand
the moment it arises and does so only when another
operator who is a new one has made the offer to serve the
public needs (Philippine Long Distance Telephone Co. v.
City of Davao, supra citing Fernando v. Gallardo, L-4860,
Sept. 8, 1953, Raymundo Trans. Co. v. Cerda, L-7880, May
18. 1956; Saulog Transit, Inc. v. Medina, L-7244. June 28,
1956: Estate of F. P, Buan v. La Mallorca, L-8729. Feb. 28,
1957; Manila Yellow Taxicab Co. v. Castelo, L-13910, May
30, 1960; Isidro v. Ocampo, L-12331, May 29, 1959 citing
Inter-Provincial Autobus Co. v. Clarete, L-41000-02, May
15, 1952; Angat-Manila Trans. Co. v. La, Mallorca, L-8729,
Feb. 28, 1957; Dangwa Trans. Co. v. Public Service
Commission, supra; Valero v. Parpana, L-15328-9, Oct. 31,
1960; Mandaluyong Bus Co. v. Enrique, L-21964, Oct. 19,
1966, 18 SCRA 352, 355).
314

Where the old operator was authorized to operate 75 buses

in all its lines but its rights with respect to 30 had been
leased, this circumstance added to the fact that it had
registered only 17 buses which were not even in continuous
operation although it was entitled to operate 45 units in its
remaining lines, showed that there was a shortage of
transportation facilities in the lines mentioned and that the
old operator was unable to meet fully the demands of public
convenience (Zarate v. Rizal-Manila Transit, Inc., L-11300,
May 29, 1959).
An old operator was likewise denied protection of the
prior operator rule because, of the more than 400 buses it
was authorized to operate, he was able only to register 315,
not including the 35 units he also failed to register under
another certificate of public convenience (Halili v, Heras, L-

18889-90, April 30, 1964).
B. Failure to Comply with the Requirements of
Franchise.—A pioneer operator will not be given preference
if he fails to comply with the requirements of his franchise
to operate a given number of units within a given period
amounting to abandonment of the unregistered units
(Halili v. Heras, supra).
Where an operator had an authority to make 24 hourly
runs or trips in one day but it could only run one or two
buses a day, which was an open violation of the terms of its
certificate of public convenience and which had been the
subject of several complaints from different sources, the
prior operator rule did not apply (Raymundo Trans. Co. v.
Perez, supra at 275-276.)
Failure of a common carrier in its duty under the law to
carry the mail for three (3) consecutive days in its territory
without suff icient excuse does not, by itself, warrant the
issuance of another certificate of public convenience to a
new operator, The violation should first be investigated by
the Public Service Commission with a hearing of the
parties before the necessary measures justified by the
result are taken against the old operator. (Bohol Land
Trans. Co. v. Jureidini, supra at 569.)
C. Where Destructive Monopoly Would Result From the
Operation of the Rule.—The prior operator rule does
315
VOL. 25, SEPTEMBER 28, 1968 315

not apply where destructive monopoly would result from

the maintenance of a single operator in a given service.
Reasonable competition would have a salutary effect upon
public interest and public convenience. It should be favored
in lieu of monopoly (Valdez v. Public Service Commission,
supra.)
"If public need and convenience demand or require the
service, if the service to be rendered applied for would not
result in or bring about ruinous competition, and if the
ability of the applicant for service to satisfy public need and
convenience is shown, a competition of two services and not
a monopoly would redound to the benefit of the community
where the service is to be rendered." (Robles v. Blaylock,
supra.)
But operators of public convenience and service "deserve
some protection from unnecessary or unlawful
competition." (Philippine Rabbit Bus Lines, Inc. v. Gabatin,

supra.)
Ruinous competition is to be avoided even in the
Philippine system of free enterprise. But there must be
concrete evidence that such ruinous competition would
come about as a result of the coming in of a competitor and
not just the fear of it (Dangwa Trans. Co. v. Public Service
Commission, supra.)
D. Where Old Operator Denies the Need for Units on the
Line.—The prior operator rule does not apply to the benefit
of an old operator who denies the need for more units on
the line (La Mallorca v . Mendiola, L-19558, April 29, 1966,
16 SCRA 648, 651.)—ATTY. AMBROSIO R. BLANCO.
Notes.—For another statement of the "protection-of-

investment rule" and the exception thereto, see Halili vs.
Cruz, L-21061, June 27, 1968, 23 SCRA 1174.
For cases where the factual findings of the Public
Service Commission were modified or ignored, see Central
Taxicab Corporation vs. Public Service Commission, L-
24289, Feb. 17, 1968, 22 SCRA 616, and the cases cited
therein.
_______________
316
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1/30/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 025

VOL. 25, SEPTEMBER 28, 1968 285

No. L-20993. September 28, 1968.

RIZAL LIGHT & ICE Co., INC., petitioner, vs. THE

No. L-21221. September 28, 1968.

RIZAL LIGHT & ICE Co., INC., petitioner, vs. THE

Public Service Commission; Hearing; Delegation of authority

or not there is evidence before the Commission upon which its

286 SUPREME COURT REPORTS ANNOTATED

of the Commission on questions of fact and will not interfere in

The above-quoted rule, however. is not absolute, f or

emphasized that the paramount consideration should

Same; Cancellation and revocation of certificate of public

VOL. 25, SEPTEMBER 28, 1968 287

the cancellation and revocation of any certificate of public

operation of the public service proposed and the authorization to

APPEAL from two decisions of the Public Service

The facts are stated in the opinion of the Court.

These two cases, being interrelated, are decided together.

1 Hereinafter referred to as "Commission".

288 SUPREME COURT REPORTS ANNOTATED

cancelling and revoking the certificate of public

operate an electric light, heat and power service in the

2 Hereinafter referred to as "Morong Electric".

VOL. 25, SEPTEMBER 28, 1968 289

load 3in kilowatts at any particular time of the generating

Commission, was .authorized to conduct 4

3 Hereinafter referred to as "Morong Electric".

290 SUPREME COURT REPORTS ANNO TATED

of the petitioner who manifested during the hearing on

reply as previously agreed. In an order dated August 25,

VOL. 25, SEPTEMBER 28, 1968 291

10,1962, Morong Electric, having been granted a municipal

light, heat and power service in the same municipality of

292 SUPREME COURT REPORTS ANNOTATED

sidered together with the denial of the motion for

In questioning the decision of the Commission in Case

VOL. 25, SEPTEMBER 28, 1968 293

1. Under the first assignment of error, petitioner contends

record discloses that petitioner never made any objection to

294 SUPREME COURT REPORTS ANNOTATED

the Commission and to receive the evidence in connection

decision is insufficient and untrustworthy in that (1) the

8 Everett Steamship Corp. vs. Chuahiong, L-2933, September 26, 1951;

VOL. 25, SEPTEMBER 28, 1968 295

justifies the decision. The only function of this Court is to

basis of this Court's determination should be only those

10 A. L. Ammen Transportation Co. vs. Froilan Japa, L-19643, July 26,

296 SUPREME COURT REPORTS ANNOTATED

not presented any evidence in its defense, and speaking of

Proceedings of December 15, 1960

"It appears at the last hearing of this case on September 23,

"ATTY. LUQUE (Counsel for Petitioner):

VOL. 25, SEPTEMBER 28, 1968 297

manifested before that Engineer Martinez is an experienced

"COMMISSION (to Atty. Luque) :

Proceedings of August 25, 1961

"ATTY. LUQUE (Counsel for petitioner)

"ATTY. OLIVAS: (Counsel for respondent municipality)

"I object on the ground that there is no resolution by this

298 SUPREME COURT REPORTS ANNOTATED

"With regard to the testimony on the ground for opposition we

"To give applicant a chance to have a day in court the