TRANSPORTATION LAW | ATTY.

VIGOR MENDOZA II

SESSION 10 service act, which requires that the applicant must prove by proper notice and
Case Digests hearing that the operation of the public service will promote public interest.

1. KMU v. Garcia DOCTRINE:

Dec 13, 1994 | Paras, J. | Power of the LTFRB; CPC LTFRB, the existing regulatory body, is vested with the power to fix rates of
PETITIONER: Kilusang Mayo Uno Labor Center public services. Under EO 202, it is authorized “to determine, prescribe, approve
RESPONDENT: Jesus Garcia, LTFRB Sec; Provincial Bus Operators Assoc. of and periodically review and adjust, reasonable fares, rates and other related
the Philippines charges, relative to the operation of public land transportation services provided
by motorized vehicles.”
FACTS: The delegation of legislative power to an administrative agency is permitted in
The Secretary of the Department of Transportation and Communications issued order to adapt to the increasing complexity of modern life. However, there is no
DO 92-587 which deregulated the rate-setting of public transportation services. provision of law that authorizes regulatory bodies to delegate the rate fixing
To implement said DO, the LTFRB issued Circular 92-009 which allowed for the power to a public service operator.
flexibility for public transportation entities to fix their passenger rates at their
discretion, and established a presumption of public need for those who apply to
FACTS:
be holders of Certificates of Public Convenience.
Provincial Bus operators Association of the Philippines sought to take advantage
1. On June 26 1990, DOTC secretary Orbos issued M.O. 90 395 to LTFRB
of the new deregulation scheme and, without public hearing or having filed a
chairman Fernando, allowing provincial bus operators to charge passengers
petition for the purpose, increased their fare rates by 20%.
to charge passengers rates within a range of 15% above and 15% below the
KMU assails the abovementioned issuances on two grounds (1) the authority
LTFRB official rate for a period of 1 year.
given by the LTFRB to set rates above the existing authorized fare without having
2. LTFRB chairman Fernando found the implementation of the fare range
to file a petition for the purpose is invalid and illegal, and (2) The establishment
scheme “not legally feasible” and suggested to DOTC secretary Orbos that
of a presumption of public need in favor of an applicant without having to prove
the proposed implementation be deferred pending further studies and
public necessity is violative of the Public Service Act.
evaluations.
ISSUE:
3. On Dec 5 1990, Provincial Bus Operators Association of the Ph (PBOAP)
W/N The deregulation scheme by the DOTC/LTFRB is constitutional?
applied for a fare rate increase by .085/km. 1 Due to the unexpected drop in
RATIO:
the price of diesel, PBOAP reduced the applied proposed fare rate to an
The authority given by the LTFRB to the provincial bus operators to set a
increase of .065/km
fare range above the existing fare, is illegal as it is tantamount to an undue
4. The application was opposed by the Phil Consumers Foundation (PCF)
delegation of legislative authority. A policy allowing bus operators to change
alleging that the proposed rate was exorbitant and unreasonable.
and increase their fares at will would result in a chaotic situation and an anarchic
5. LTFRB granted the application of PBOAP to increase its fare rate.
state of affairs. This would leave the riding public at the mercy of transport
6. [!]Secretary of the Department of Transportation and Communications
operators who may increase fares ever hour, day, month, or so, whenever it pleases
subsequently issued DO 92-587, defining the policy framework on the
them or whenever they deem it “necessary” to do so.
The LTFRB memorandum which establishes a presumption of public need on the
part of the applicant is clearly incompatible with the provisions of the public

1 and below the proposed basic per kilometer fare rate, with the said minimum-maximum fare
An across-the-board increase of eight and a half centavos (P0.085) per kilometer for all
types of provincial buses with a minimum-maximum fare range of fifteen (15%) percent over range applying only to ordinary, first class and premium class buses and a fifty-centavo
(P0.50) minimum per kilometer fare for aircon buses

regulation of transport services.2 In order to implement DO 92-587, the
LTFRB issued circular 92-009.3 In totality, the issuances deregulated the rate-
setting by the LTFRB for passenger transport, except third class, and left to
the public transport entities the capacity to fix their fares within 15% above
and below the reference rate provided by the LTFRB.
7. PBOAP, taking advantage of DOTC’s deregulation policy, without having
filed a petition for the purpose, and without public hearing, announced a fare
rate increase of 20%.
Kilosang Mayo Uno Labor Union filed an opposition before the LTFRB,
which was dismissed.
8. KMU anchors the present petition for certiorari on two grounds: (1) the
authority given by the LTFRB to set rates above the existing authorized fare
without having to file a petition for the purpose is invalid and illegal, and (2)
The establishment of a presumption of public need in favor of an applicant
without having to prove public necessity is violative of the Public Service
Act.
OSG argues that it is within the DOTC and LTFRB’s authority to set a fare
range scheme and establish a presumption of public need in applications for
certificates of public convenience (CPC)
ISSUE:
W/N KMU has standing to assail the circulars issued by the DOTC & LTFRB? - Yes
W/N The deregulation scheme by the DOTC/LTFRB is constitutional? - NO
RATIO:
1st Issue - Locus Standi
1. In the case at bench, KMU, whose members had suffered and continue to
suffer grave and irreparable injury and damage from the implementation of
the questioned memoranda, circulars and/or orders, has shown that it has a
clear legal right that was violated and continues to be violated with the
enforcement of the challenged memoranda, circulars and/or orders. KMU
members, who avail of the use of buses, trains and jeepneys everyday, are
directly affected by the burdensome cost of arbitrary increase in passenger
2 3
Rate and Fare Setting. Freight rates shall be freed gradually from government controls.
Passenger fares shall also be deregulated, except for the lowest class of passenger service
(normally third class passenger transport) for which the government will fix indicative or
reference fares. Operators of particular services may fix their own fares within a range 15%
above and below the indicative or reference rate.
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
fares. They are part of the millions of commuters who comprise the riding
public. Certainly, their rights must be protected, not neglected nor ignored.
2nd Issue - Constitutionality of the assailed orders of the DOTC & LTFRB
2. LTFRB, the existing regulatory body, is vested with the power to fix rates of
public services. Under EO 202, it is authorized “to determine, prescribe,
approve and periodically review and adjust, reasonable fares, rates and other
related charges, relative to the operation of public land transportation services
provided by motorized vehicles.”
3. The delegation of legislative power to an administrative agency is permitted
in order to adapt to the increasing complexity of modern life. However, there
is no provision of law that authorizes regulatory bodies to delegate the
rate fixing power to a public service operator.
4. In this case, the authority given by the LTFRB to the provincial bus operators
to set a fare range above the existing fare, is illegal as it is tantamount to an
undue delegation of legislative authority. A policy allowing bus operators
to change and increase their fares at will would result in a chaotic situation
and an anarchic state of affairs. This would leave the riding public at the
mercy of transport operators who may increase fares ever hour, day, month,
or so, whenever it pleases them or whenever they deem it “necessary” to do
so.
One veritable consequence of the deregulation of transport fares is a
compounded fare. If transport operators will be authorized to impose and
collect an additional amount equivalent to 20% over and above the authorized
fare over a period of time, this will unduly prejudice a commuter who will be
made to pay a fare that has been computed in a manner similar to those of
bank interest rates.
5. Given the complexity of the nature of the function of rate-fixing and its far-
reaching effects on millions of commuters, government must not relinquish
this important function in favor of those who would benefit and profit from
the industry. Neither should the requisite notice and hearing be done
away with. The people, represented by reputable oppositors, deserve to
The issuance of a Certificate of Public Convenience is determined by public need. The
presumption of public need for a service shall be deemed in favor of the applicant, while
burden of proving that there is no need for the proposed service shall be the oppositors.
V. Rate & Fare Setting. The existing authorized fare range system of plus or minus 15 per
cent for provincial buses and jeepneys shall be widened to 20% and -25% limit in 1994
with the authorized fare to be replaced by an indicative or reference rate as the basis for the
expanded fare range.
 TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II

be given full opportunity to be heard in their opposition to any fare public need for a service in favor of the applicant for a certificate of public convenience
increase. and placing the burden of proving that there is no need for the proposed service to the
oppositor.
On the presumption of public need
6. A Certificate of Public Convenience (CPC) is an authorization granted by the
LTFRB for the operation of transportation services for public use as required
by law. The requisites for the issuance of a CPC under the public service act
are:
i. The applicant must be a citizen of the Philippines, or if a Juridical
entity, at least 60% ownership thereof must be Filipino
ii. The applicant must be financially capable of undertaking the
proposed service and meeting the responsibilities incident to its
operation
iii. The applicant must prove that the operation of the public service
proposed and the authorization to do business will promote the
public interest in a proper and suitable manner.
7. The LTFRB memorandum which establishes a presumption of public need
on the part of the applicant is clearly incompatible with the aforementioned
provision of the public service act, which requires that the applicant must
prove by proper notice and hearing that the operation of the public
service will promote public interest.
8. The power of a regulatory body to issue a CPC is founded on the condition
that after full-dress hearing and investigation, it shall find, as a fact, that the
proposed operation is for the convenience of the public. Basic convenience
is the primary consideration for which a CPC is issued, and that fact alone
must be consistently borne in mind.
9. Deregulation, while it may be ideal in certain situations, may not be ideal at
all in our country given the present circumstances. Advocacy of liberalized
franchising and regulatory process is tantamount to an abdication by the
government of its inherent right to exercise police power, that is, the right of
government to regulate public utilities for protection of the public and the
utilities themselves.

WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED

and the challenged administrative issuances and orders, namely: DOTC Department
Order No. 92-587, LTFRB Memorandum Circular
No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are
hereby DECLARED contrary to law and invalid insofar as they affect provisions
therein (a) delegating to provincial bus and jeepney operators the authority to increase
or decrease the duly prescribed transportation fares; and (b) creating a presumption of
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
 TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II

3. Lucena Grand Central vs JAC Liner (Jaya) 2. Assailed in SC via a petition for prohibition and injunction, against the City
Feb 23, 2005 | Carpio Morales, J. | Franchise of Lucena are City Ordinance Nos. 1631 and 1778 as unconstitutional on the
ground that the same constituted an invalid exercise of police power, an
undue taking of private property, and a violation of the constitutional
PETITIONER: LUCENA GRAND TERMINAL INC
prohibition against monopolies.
RESPONDENT: JAC LINER INC
3. The following are the salient provisions of Ordinance No. 1631 granting the
lucena grand central terminal, inc., a franchise to construct, finance, establish,
JAC liner is a common carrier, it is one of those affected by the city ordinances
operate and maintain a common bus-jeepney terminal facility in the city of
issued by Lucena City.
lucena
2 ordinances were issued by Lucena City in order to alleviate the traffic congestion.
a. SECTION 1. 'There is hereby granted to the Lucena Grand Central
1. Ordinance No. 1631 grants Lucena Grand Terminal an exclusive franchise
Terminal, Inc., a franchise to construct, finance, establish, operate,
to construct, finance, establish, operate and maintain a common bus-
and maintain a common bus-jeepney terminal facility in the City of
jeepney terminal facility in the city of Lucena for 25 years
Lucena.
2. Ordinance No. 1778 regulates entrance in Lucena. It prohibits all buses,
b. SECTION 2. 'This franchise shall continue for a period of twenty-
mini-buses and out-of-town passenger jeepneys from entering the city and
five years, counted from the approval of this Ordinance, and
directs them instead to proceed to the permanent common terminal which
renewable at the option of the grantee for another period of twenty-
is the Lucena Grand Central Terminal.
five (25) years upon such expiration.
The issue in this case is the constitutionality of the ordinances.
c. SECTION 4. During the existence of the franchise, the City
SC held that if the problem is that terminals lack adequate space such that bus
Government of Lucena shall have the following responsibilities and
drivers are compelled to load and unload passengers on the streets instead of inside
obligations:
the terminals and thereby causes traffic, then reasonable specifications for the size
i. It shall not grant any third party any privilege and/or
of terminals could be instituted, with permits to operate the same denied those which
concession to operate a bus, mini-bus and/or jeepney
are unable to meet the specifications. In the subject ordinances, however, the scope
terminal.
of the proscription against the maintenance of terminals is so broad that even entities
4. The important provisions of Ordinance No. 1778 regulating entrance in
which might be able to provide facilities better than the franchised terminal are
Lucena provides:
barred from operating at all. Terminals are not public nuisances because their
a. All buses, mini-buses and out-of-town passenger jeepneys shall be
operation is a legitimate business which, by itself, cannot be said to be injurious to
prohibited from entering the city and are hereby directed to proceed
the rights of property, health, or comfort of the community. But even assuming that
to the common terminal
terminals are nuisances due to their alleged indirect effects upon the flow of traffic,
b. The Lucena Grand Central Terminal is the permanent common
at most they are nuisance per accidens, not per se. Unless a thing is nuisance per se,
terminal as this is the entity which was given the exclusive franchise
however, it may not be abated via an ordinance, without judicial proceedings, as
by the Sangguniang Panglungsod under Ordinance No. 1631
was done in the case at bar.
5. These ordinances, by granting an exclusive franchise for twenty five years,
As to the other issue, Lucena Grand Terminal argues that trial court has no
renewable for another twenty five years, to one entity for the construction and
jurisdiction since it failed to serve copy of its assailed order to OSG. SC said that
operation of one common bus and jeepney terminal facility in Lucena City,
nowhere, however, is it stated in the rules that failure to notify the Solicitor General
to be located outside the city proper, were professedly aimed towards
about the action is a jurisdictional defect.
alleviating the traffic congestion alleged to have been caused by the existence
of various bus and jeepney terminals within the city (as provided for in the
DOCTRINE:
whereas clause of the city ordinance)
Terminals are not public nuisances. For their operation is a legitimate business
6. Respondent JAC Liner, who had maintained a terminal within the city, was
which, by itself, cannot be said to be injurious to the rights of property, health, or
one of those affected by the ordinances.
comfort of the community.
7. Petitioner Lucena Grand Central Terminal, Inc., claiming legal interest as the
grantee of the exclusive franchise for the operation of the common terminal,
FACTS: was allowed to intervene in the petition before the trial court.
1. Respondent JAC Liner, Inc is a common carrier operating buses which ply
various routes to and from Lucena City. TRIAL COURT

1. In the hearing conducted on November 25, 1998, all the parties agreed to
dispense with the presentation of evidence and to submit the case for
resolution solely on the basis of the pleadings filed.
2. RTC rendered judgment as follows:
a. Declared City Ordinance No. 1631 as valid, having been issued in
the exercise of the police power of the City Government of Lucena
insofar as the grant of franchise to the Lucena Grand Central
Terminal, Inc., to construct, finance, establish, operate and maintain
common bus-jeepney terminal facility in the City of Lucena
b. But declared the provision of Sec. 4(c) of Ordinance No. 1631 to the
effect that the City Government shall not grant any third party any
privilege and/or concession to operate a bus, mini-bus and/or
jeepney terminal, as illegal and ultra vires because it contravenes the
provisions of Republic Act No. 7160, otherwise known as "The
Local Government Code"
c. Declared City Ordinance No. 1778 as null and void, the same being
also an ultra vires act of the City Government of Lucena arising from
an invalid, oppressive and unreasonable exercise of the police
power.
Lucena Grand Terminal filed MR. Denied. Case was elevated to SC via Rule 45. SC
referred the case to CA. CA affirmed RTC. Lucena Grand Terminal once again came
to SC via Petition for Review,
ISSUE/S:
1. Whether the trial court has jurisdiction over the case, it not having furnished
the Office of the Solicitor General copy of the orders it issued therein - YES
2. Whether the City of Lucena properly exercised its police power when it
enacted the subject ordinances - NO
RULING:
Whether the trial court has jurisdiction over the case, it not having furnished the
Office of the Solicitor General copy of the orders it issued therein
1. Lucena Grand Terminal argues that since the trial court failed to serve a copy
of its assailed orders upon the Office of the Solicitor General, it never
acquired jurisdiction over the case, it citing Section 22, Rule 3 of the Rules
which provides:
a. SEC. 22. Notice to the Solicitor General. In any action involving the
validity of any treaty, law, ordinance, executive order, presidential
decree, rules or regulations, the court in its discretion, may require
the appearance of the Solicitor General who may be heard in person
or through representative duly designated by him.
2. Furthermore, Lucena Grand Terminal invokes Sections 3 and 4 of Rule 63
which respectively provide:
SEC. 3. Notice on Solicitor General. - In any action which involves
the validity of a statute, executive order or regulation, or any other
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
governmental regulation, the Solicitor General shall be notified by
the party assailing the same and shall be entitled to be heard upon
such question.
SEC. 4. Local government ordinances. - In any action involving the
validity of a local government ordinance, the corresponding
prosecutor or attorney of the local government unit involved shall
be similarly notified and entitled to be heard. If such ordinance is
alleged to be unconstitutional, the Solicitor General shall also be
notified and entitled to be heard.
3. Nowhere, however, is it stated in the above-quoted rules that failure to notify
the Solicitor General about the action is a jurisdictional defect.
4. In fact, Rule 3, Section 22 gives the courts in any action involving the
"validity" of any ordinance, inter alia, "discretion" to notify the Solicitor
General.
5. Section 4 of Rule 63, which more specifically deals with cases assailing the
constitutionality, not just the validity, of a local government ordinance,
directs that the Solicitor General "shall also be notified and entitled to be
heard." Who will notify him, Sec. 3 of the same rule provides - it is the party
which is assailing the local government's ordinance.
6. More importantly, however, this Court finds that no procedural defect, fatal
or otherwise, attended the disposition of the case. For JAC Liner actually
served a copy of its petition upon the Office of the Solicitor General, two
days after it was filed. The Solicitor General has issued a Certification to that
effect.
7. There was thus compliance with above-quoted rules.
Whether the City of Lucena properly exercised its police power when it enacted the
subject ordinances.
1. As with the State, the local government may be considered as having properly
exercised its police power only if the following requisites are met:
a. the interests of the public generally, as distinguished from those of
a particular class, require the interference of the State, and
b. the means employed are reasonably necessary for the attainment of
the object sought to be accomplished and not unduly oppressive
upon individuals.
2. Otherwise stated, there must be a concurrence of a lawful subject and lawful
method. That traffic congestion is a public, not merely a private, concern,
cannot be gainsaid.
3. In Calalang v. Williams which involved a statute authorizing the Director of
Public Works to promulgate rules and regulations to regulate and control
traffic on national roads, this Court held: In enacting said law, therefore, the
National Assembly was prompted by considerations of public convenience
and welfare [...] Public welfare, then, lies at the bottom of the enactment of
said law, and the state in order to promote the general welfare may interfere
with personal liberty, with property, and with business and occupations.

4. Lim v. Pacquing instructs: This Court cannot look into allegations that PD
No. 771 was enacted to benefit a select group which was later given authority
to operate the jai-alai under PD No. 810. What is important is the
determination of the issue whether the means employed by the Lucena
Sangguniang Panlungsod to attain its professed objective were reasonably
necessary and not unduly oppressive upon individuals. With the aim of
localizing the source of traffic congestion in the city to a single location, the
common carriers plying routes to and from Lucena City are thus compelled
to close down their existing terminals and use the facilities of petitioner.
5. In De la Cruz v. Paras, this Court declared unconstitutional an ordinance
characterized by overbreadth. In that case, the Municipality of Bocaue,
Bulacan prohibited the operation of all night clubs, cabarets and dance halls
within its jurisdiction for the protection of public morals. Court held: It
cannot be said that such a sweeping exercise of a lawmaking power by
Bocaue could qualify under the term reasonable. The objective of fostering
public morals, a worthy and desirable end can be attained by a measure that
does not encompass too wide a field. Certainly the ordinance on its face is
characterized by overbreadth. The purpose sought to be achieved could have
been attained by reasonable restrictions rather than by an absolute
prohibition.
6. In Lupangco v. Court of Appeals, this Court, in declaring unconstitutional the
resolution subject thereof, advanced a similar consideration. That case
involved a resolution issued by the Professional Regulation Commission
which prohibited examinees from attending review classes and receiving
handout materials, tips, and the like three days before the date of examination
in order to preserve the integrity and purity of the licensure examinations in
accountancy. Besides being unreasonable on its face and violative of
academic freedom, the measure was found to be more sweeping than what
was necessary.
7. As in De la Cruz and Lupangco, the ordinances assailed in this case are
characterized by overbreadth. They go beyond what is reasonably necessary
to solve the traffic problem. Additionally, since the compulsory use of the
terminal operated by Lucena Grand Terminal would subject the users thereof
to fees, rentals and charges, such measure is unduly oppressive, as correctly
found by the appellate court. What should have been done was to determine
exactly where the problem lies and then to stop it right there.
8. The true role of Constitutional Law is to effect an equilibrium between
authority and liberty so that rights are exercised within the framework of the
law and the laws are enacted with due deference to rights. A due deference to
the rights of the individual thus requires a more careful formulation of
solutions to societal problems.
9. From the memorandum filed before this Court by Lucena Grand Terminal it
is gathered that the Sangguniang Panlungsod had identified the cause of
traffic congestion to be the indiscriminate loading and unloading of
passengers by buses on the streets of the city proper, hence, the conclusion
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
that the terminals contributed to the proliferation of buses obstructing traffic
on the city streets.
10. Bus terminals per se do not, however, impede or help impede the flow of
traffic. How the outright proscription against the existence of all terminals,
apart from that franchised to Lucena Grand Terminal, can be considered as
reasonably necessary to solve the traffic problem, this Court has not been
enlightened. If terminals lack adequate space such that bus drivers are
compelled to load and unload passengers on the streets instead of inside the
terminals, then reasonable specifications for the size of terminals could be
instituted, with permits to operate the same denied those which are unable to
meet the specifications.
11. In the subject ordinances, however, the scope of the proscription against the
maintenance of terminals is so broad that even entities which might be able
to provide facilities better than the franchised terminal are barred from
operating at all.
12. Ordinance No. 1557, previously directed bus owners and operators to put up
their terminals "outside the poblacion of Lucena City," Lucena Grand
Terminal informs that said ordinance only resulted in the relocation of
terminals to other well-populated barangays, thereby giving rise to traffic
congestion in those areas. Assuming that information to be true, the
Sangguniang Panlungsod was not without remedy. It could have defined,
among other considerations, in a more precise manner, the area of relocation
to avoid such consequences.
13. As for Lucena Grand Terminal’s argument that the challenged ordinances
were enacted pursuant to the power of the Sangguniang Panlungsod to
"[r]egulate traffic on all streets and bridges; prohibit encroachments or
obstacles thereon and, when necessary in the interest of public welfare,
authorize the removal of encroachments and illegal constructions in public
places"; absent any showing, nay allegation, that the terminals are
encroaching upon public roads, they are not obstacles.
14. The power then of the Sangguniang Panlungsod to prohibit encroachments
and obstacles does not extend to terminals. Neither are terminals public
nuisances. For their operation is a legitimate business which, by itself, cannot
be said to be injurious to the rights of property, health, or comfort of the
community.
15. But even assuming that terminals are nuisances due to their alleged indirect
effects upon the flow of traffic, at most they are nuisance per accidens, not
per se. Unless a thing is nuisance per se, however, it may not be abated via
an ordinance, without judicial proceedings, as was done in the case at bar.
16. As for Lucena Grand Terminal’s claim that the challenged ordinances have
actually been proven effective in easing traffic congestion: Whether an
ordinance is effective is an issue different from whether it is reasonably
necessary. It is its reasonableness, not its effectiveness, which bears upon its
constitutionality.
17. If the constitutionality of a law were measured by its effectiveness, then even
tyrannical laws may be justified whenever they happen to be effective.
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
 TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II

4. MMDA v. BEL-AIR (Mika P.)

March 27, 2000 | J. Puno | FACTS:
1. On December 30, 1995, Bel-Air Village Association (BAVA) received a
PETITIONER: METRO MANILA DEVELOPMENT AUTHORITY
NOTICE from the MMDA Chairman, requesting that BAVA open Neptune
RESPONDENT: BEL-AIR VILLAGE ASSOCIATION
Street, a road inside Bel-Air.
2. According to the Notice, pursuant to the MMDA Law, which requires the
SUMMARY:
MMDA to rationalize the use of roads and/or thoroughfares for the safe and
On December 30, 1995, BAVA received a notice from the MMDA, requesting that
convenient movement of persons, Neptune Street shall be opened to vehicular
it open Neptune Street, one of the streets inside the village. On the same day, BAVA
traffic effective January 2, 1996.
was also told that the perimeter wall separating the village and Kalayaan Avenue
3. On the same day, BAVA was apprised that the perimeter wall separating the
would be demolished.
subdivision from the adjacent Kalayaan Avenue would be demolished.
4. On January 2, 1996, BAVA filed a case against the MMDA with the Makati
BAVA filed an injunction case against the MMDA. The RTC ruled against BAVA,
RTC, praying for the issuance of a TRO and preliminary injunction enjoining
but the CA reversed, leading to the present case.
the opening of Neptune Street and prohibiting the demolition of the perimeter
wall. The trial court issued a TRO.
The issue is W/N the MMDA has the mandate to open Neptune Street to public
5. After due hearing, the RTC denied the issuance of a preliminary injunction.
traffic pursuant to its regulatory and police powers under the MMDA Law
BAVA questioned elevated the case to the CA. After an ocular inspection of
(RA 7924) -- the Court said NO.
Neptune Street, it issued a writ of preliminary injunction enjoining the
implementation of the MMDA's proposed action. The CA eventually
(DOCTRINE) The MMDA is not a lawmaking body of a municipal corporation
rendered a Decision on the merits, finding that the MMDA has no authority
or LGU endowed with police power. The powers of the MMDA are limited to
to order the opening of Neptune Street and cause the demolition of its
formulation, coordination, regulation, implementation, preparation, management,
perimeter walls. It held that the authority is lodged in the City Council of
monitoring, setting of policies, and installation of a system and administration. No
Makati by ordinance.
syllable in RA 7924 grants the MMDA police power, let alone legislative power.
Unlike the legislative bodies of the LGUs, nothing empowers the MMDA or its
ISSUE:
Council to "enact ordinances, approve resolutions and appropriate funds for the
1. W/N the MMDA has the mandate to open private road, Neptune Street to
general welfare" of the inhabitants of Metro Manila. The MMDA is, as termed in
public traffic pursuant to its regulatory and police powers -- NO
the charter itself, a "development authority."
RULING:
The MMDA cannot find recourse in two previous Sangalang cases. Both
IN VIEW WHEREOF, the petition is denied. The Decision and Resolution of the
involved zoning ordinances passed by the municipal council of Makati and the
Court of Appeals in CA-G.R. SP No. 39549 are affirmed.
Metro Manila Commission, but in the instant case, the basis for the proposed
opening of Neptune Street is only contained in the Notice sent by the MMDA The
RATIO:
Notice does not cite any ordinance or law, either by the Sangguniang
1. Police power is lodged primarily in the Legislature. It cannot be exercised
Panlungsod of Makati City or by the MMDA, as the legal basis for the
by any group or body of individuals not possessing legislative power. The
proposed opening of Neptune Street. MMDA simply relied on its authority
Legislature, however, may delegate this power to the President and
under its charter "to rationalize the use of roads and/or thoroughfares for the
administrative boards as well as the lawmaking bodies of municipal
safe and convenient movement of persons." Rationalizing the use of roads and
corporations or local government units. Congress delegated police power
thoroughfares is one of the acts that fall within the scope of transport and traffic
to the local government units in the LGC. Local government units exercise
management, but by no stretch of the imagination can this be interpreted as an
police power through their respective legislative bodies.
express or implied grant of ordinance-making power, much less police power.
2. The MMDA is not a lawmaking body of a municipal corporation or LGU
endowed with police power.
Furthermore, the MMDA is not the same entity as the MMC in Sangalang.
○ With the passage of RA 7924 in 1995, Metropolitan Manila was
Although the MMC is the forerunner of the present MMDA, an examination of PD
declared as a "special development and administrative region" and
824, the charter of the MMC, shows that the latter possessed greater powers which
the Administration of "metro-wide" basic services affecting the
were not bestowed on the present MMDA.
 TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II

region placed under "a development authority" referred to as the ● The MMDA in this case cannot find recourse in two previous
MMDA. Sangalang cases.
○ "Metro-wide services" → "services which have metro-wide a. Firstly, both involved zoning ordinances passed by the
impact and transcend local political boundaries or entail huge municipal council of Makati and the MMC. In the instant
expenditures such that it would not be viable for said services to case, the basis for the proposed opening of Neptune Street
is contained in the notice of December 22, 1995 sent by
be provided by the individual local government units comprising petitioner to respondent BAVA, through its president. The
Metro Manila." notice does not cite any ordinance or law, either by the
○ Scope of basic metro-wide services cover the following: Sangguniang Panlungsod of Makati City or by the MMDA,
i. development planning; as the legal basis for the proposed opening of Neptune
ii. transport and traffic management; Street. Petitioner MMDA simply relied on its authority
iii. solid waste disposal and management; under its charter "to rationalize the use of roads and/or
iv. flood control and sewerage management; thoroughfares for the safe and convenient movement of
v. urban renewal, zoning and land use planning, and shelter persons." Rationalizing the use of roads and thoroughfares
services; is one of the acts that fall within the scope of transport and
vi. health and sanitation, urban protection and pollution traffic management. By no stretch of the imagination,
control; and however, can this be interpreted as an express or implied
vii. public safety. grant of ordinance-making power, much less police power.
○ The basic service of transport and traffic management b. Secondly, the MMDA is not the same entity as the MMC
includes: "Transport and traffic management which include the in Sangalang. Although the MMC is the forerunner of the
formulation, coordination, and monitoring of policies, standards, present MMDA, an examination of PD No. 824, the charter
programs and projects to rationalize the existing transport of the MMC, shows that the latter possessed greater powers
operations, infrastructure requirements, the use of thoroughfares, which were not bestowed on the present MMDA.
and promotion of safe and convenient movement of persons and
goods; provision for the mass transport system and the institution of
a system to regulate road users; administration and implementation
of all traffic enforcement operations, traffic engineering services
and traffic education programs, including the institution of a single
ticketing system in Metropolitan Manila."
● The powers of the MMDA are limited to the following acts:
a. Formulation
b. Coordination,
c. Regulation
d. Implementation
e. Preparation
f. Management
g. Monitoring
h. Setting of policies
i. Installation of a system and administration
● There is no syllable in R.A. No. 7924 that grants the MMDA
police power, let alone legislative power. Unlike the legislative
bodies of the local government units, nothing empowers the
MMDA or its Council to "enact ordinances, approve resolutions
and appropriate funds for the general welfare" of the
inhabitants of Metro Manila. The MMDA is, as termed in the
charter itself, a "development authority."

5. MMDA v. Viron (KP)
August 15, 2007 | Carpio-Morales, J. | Public Service Act
PETITIONER: Metropolitan Manila Development Authority and Bayani
Fernando, Chairman of MMDA, Hon. Alberto G. Romulo (Executive Secretary)
RESPONDENTS: Viron Transportation Co. and Mencorp Transportation
System, Inc.
SUMMARY: E.O. No. 179 declared that in an effort to solve the traffic crisis in
Metro Manila, bus terminals along major Metro Manila thoroughfares would be
closed down. The E.O. gave the MMDA the authority to implement and carry out
the said project. Coming before the Court are Mencorp and Viron, two bus
companies, who own a number of bus terminals in various parts of Metro Manila.
The two companies argue that the MMDA does not have the power to issue such
closure, and they likewise argued that an injunction should be implemented, to
stop the MMDA from closing down the terminals.
The issue is whether or not the MMDA has the power to close the terminals. The
Supreme Court ruled in negative, arguing that the MMDA does not have any
police power.
In resolving the issue, the Court took a look at E.O. No. 125. It is stated that the
DOTC Secretary is authorized to issue such orders, rules, regulations, and other
issuances as may be necessary to ensure the effective implementation of the law,
with regard to transportation and communication. Therefore, it is the DOTC that
has the power to administer a transportation project like the one in the case at bar.
Viron and Mencorp likewise argued that the closure of the terminals runs counter
to the provisions of the Public Service Act, which the Court agreed with. Hence,
E.O. No. 179 was declared unconstitutional.
DOCTRINE: The establishment, as well as the maintenance of vehicle parking
areas or passenger terminals, is generally considered a necessary service to be
provided by provincial bus operators like respondents, hence, the investments they
have poured into the acquisition or lease of suitable terminal sites. Eliminating the
terminals would thus run counter to the provisions of the Public Service Act.
(Please check Ratio #10 for codal provisions highlighted.)
FACTS:
1. The case at bar is a petition for review on certiorari, rooted in the traffic
congestion problem. The issue is centered on questioning the Metropolitan
Manila Development Authority (MMDA)’s order to close provincial bus
terminals along EDSA and major thoroughfares of Metro Manila.
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
2. Two orders were issued by Judge Pampilo, Jr. of the RTC Manila, which
declared E.O. No. 179 unconstitutional. The E.O. refers to a plan entitled
“Greater Manila Mass Transport System Project” (the Project).
a. E.O. No. 179 was issued by former President GMA. It is entitled
“Providing for the Establishment of Greater Manila Mass Transport
System.”
b. It states: “WHEREAS, the MMDA has recommended a plan to
decongest traffic by eliminating the bus terminals now located along
major Metro Manila thoroughfares and providing more convenient
access to the mass transport system to the commuting public through
the provision of mass transport terminal facilities”
c. Section 3 of the E.O. also provides that the MMDA will be
designated as the implementing Agency for the project.
d. In sum, the E.O. notes that the primary cause of traffic congestion
in Metro Manila is due to the numerous buses plying the streets and
the inefficient connectivity of the different transport modes.
Because of this, the MMDA had recommended a plan to
decongest traffic by eliminating the bus terminals now located
along major Metro Manila thoroughfares and providing more
and convenient access to the mass transport system.
3. Viron Transport Co., Inc. (Viron) is a domestic corporation engaged in the
business of public transportation with provincial bus operations. They filed a
petition for declaratory relief before the RTC. Viron alleges that the MMDA
was poised to issue a Circular, Memorandum or Order closing, or
tantamount to closing, all provincial bus terminals along EDSA.
4. Viron argued that this meant the closure of its own bus terminal, located in
Sampaloc, as well as two others in QC.
5. Viron further argued that the MMDA’s authority does not include the power
to direct provincial bus operators to be deprived of their property. Viron also
asks on whether the planned closure of the terminals would contravene
the Public Service Act, which mandates public utilities to provide and
maintain their own terminals, as a requisite for the privilege of operating
as common carriers.
6. Likewise, Mencorp Transportation System, Inc. (Mencorp), another
provincial bus operator filed a similar petition for declaratory relief against
Executive Secretary Romulo and MMDA Chairman Fernando.
a. Mencorp likewise asks the Court to declare the E.O. as
unconstitutional, for the same reasons.
b. Mencorp also prayed for the issuance of a TRO and/or writ of
preliminary injunction to restrain the impending closure of the
terminals, which it leases along EDSA and Cubao.
c. However, Mencorp’s prayer was DENIED.
7. The RTC ruled that the E.O. was a valid exercise of police power, as the State
satisfied the two tests of lawful subject matter and lawful means.
8. Viron and Mencorp now come before the SC on appeal.

9. MMDA along with the other petitioners maintain that the E.O. does not
mention the order of closure or elimination of bus terminals, and that the two
companies failed to produce any letter from the Executive Department
apprising them of their plans to close the terminals.
a. They also argue that the E.O. is only an administrative directive to
government agencies to coordinate with MMDA.
ISSUES:
1. WON there is a justiciable issue – YES
2. WON the MMDA has the power to close the bus terminals – NO
RATIO:
There is a justiciable controversy. (Procedural)
1. The following are the essential requisites for a declaratory relief petition: (a)
there must be a justiciable controversy; (b) the controversy must be between
persons whose interests are adverse; (c) the party seeking declaratory relief
must have a legal interest in the controversy; and (d) the issue invoked must
be ripe for judicial determination.
2. The requirement of the presence of a justiciable controversy is satisfied when
an actual controversy or the ripening seeds thereof exist between the parties.
A question becomes justiciable when it is translated into a claim of right,
which is actually contested.
3. In the case at bar, the 4th Whereas clause of the E.O. sets out in CLEAR
STROKES the MMDA’s plan to decongest traffic by ELIMINATING the
bus terminals now located along Metro Manila thoroughfares.
4. In the 5th Whereas clause of the MMC Resolution, it is also stated that there
is a plan to remove the bus terminals located along the major thoroughfare of
Metro Manila.
5. It is very clear that there is an issue, that does not seem to be merely
anticipatory.
4 identify bottlenecks and adopt solutions to problems of implementation;
Section 5 of R.A. No. 7924 also enumerates the powers of the MMDA. They are as follows: (a) Formulate,
coordinate and regulate the implementation of medium and long-term plans and programs for the delivery
of metro-wide services, land use and physical development within Metropolitan Manila, consistent with
national development objectives and priorities;
(b) Prepare, coordinate and regulate the implementation of medium-term investment programs for metro-
wide services which shall indicate sources and uses of funds for priority programs and projects, and which
shall include the packaging of projects and presentation to funding institutions;
(c) Undertake and manage on its own metro-wide programs and projects for the delivery of specific services
under its jurisdiction, subject to the approval of the Council. For this purpose, MMDA can create appropriate
project management offices; DCTSEA
(d) Coordinate and monitor the implementation of such plans, programs and projects in Metro Manila;
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
a. The E.O. would have an adverse effect on Viron and Mencorp, as
the closure of their terminals would lead to a great loss of income.
b. They have thus demonstrated a personal and substantial interest, in
that they will sustain a direct injury, should the E.O. be enforced.
The MMDA does not have the power to close the terminals. (Substantive issue)
1. The MMDA argues that the real issue should not concern their power, but the
power of the President to undertake the implementation of the project. They
argue that the President can do this, in exercise of his or her residual powers.
2. In analyzing whether or not the MMDA held such power, the Court looked
at E.O. No. 125.
a. E.O. No. 125 states that the President mandated the DOTC to be the
primary policy, planning, programming, coordinating,
implementing, regulating, and administrative entity to promote,
develop and regulate networks of transportation and
communications.
b. The DOTC’s grant of authority includes the power to establish and
administer comprehensive and integrated programs for
transportation and communications.
3. In conclusion, the DOTC Secretary is authorized to issue such orders, rules,
regulations, and other issuances as may be necessary to ensure the effective
implementation of the law.
4. Therefore, the authority of the President to order the implementation of the
Project, designating the MMDA as the implementing agency, CANNOT be
sustained.
a. Under E.O No. 125, it is the DOTC and not the MMDA which is
authorized to establish and implement a project, such as the one in
the case at bar.
b. R.A. No. 79244 also provides for the validity of the designation of
the MMDA. It declared Metro Manila as a “special development and
administrative region”, and placed under the administration of
“metro-wide” basic services affecting the region under the MMDA.
(e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall coordinate and
regulate the implementation of all programs and projects concerning traffic management, specifically
pertaining to enforcement, engineering and education. Upon request, it shall be extended assistance and
cooperation, including but not limited to, assignment of personnel, by all other government agencies and
offices concerned;
(f) Install and administer a single ticketing system, fix, impose and collect fines and penalties for all
kinds of violations of traffic rules and regulations, whether moving or non-moving in nature, and
confiscate and suspend or revoke drivers' licenses in the enforcement of such traffic laws and regulations,
the provisions of RA 4136 and PD 1605 to the contrary notwithstanding. For this purpose, the Authority
shall impose all traffic laws and regulations in Metro Manila, through its traffic operation center, and may
deputize members of the PNP, traffic enforcers of local government units, duly licensed security guards, or
members of non-governmental organizations to whom may be delegated certain authority, subject to such
 TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II

5. The case of MMDA v. Bel-Air Village Association, Inc. has also already privileges. These must nonetheless yield to the legislation safeguarding the
settled the fact that the MMDA has NO POLICE POWER, and that its interest of the people, should the need arise.
function is limited to the delivery of seven basic services. 10. An order for the closure of the terminals is not in line with the provisions of
a. “It will be noted that the powers of the MMDA are limited to the the Public Service Act. The Public Service Commission (now LTFRB) was
following acts: formulation, coordination, regulation, empowered to “impose such conditions as to construction, equipment,
implementation, preparation, management, monitoring, setting of maintenance, service, or operation as the public interests and
policies, installation of a system and administration. There is no convenience may reasonably require” in approving any franchise or
syllable in R.A. No. 7924 that grants the MMDA police power, let privilege. The following sections also highlight the other powers of the
alone legislative power. Even the Metro Manila Council has not Commission, such as:
been delegated any legislative power. Unlike the legislative bodies a. Section 16 (g) of the Act reads: “To compel any public service to
of the local government units, there is no provision in R.A. No. furnish safe, adequate, and proper service as regards the
7924 that empowers the MMDA or its Council to 'enact manner of furnishing the same as well as the maintenance of the
ordinances, approve resolutions and appropriate funds for the necessary material and equipment.”
general welfare' of the inhabitants of Metro Manila. The b. Section 16 (h) of the Act reads: “To require any public service
MMDA is, as termed in the charter itself, a 'development to establish, construct, maintain, and operate any reasonable
authority.' It is an agency created for the purpose of laying down extension of its existing facilities”
policies and coordinating with the various national government 11. The establishment, as well as the maintenance of vehicle parking areas or
agencies, people's organizations, non- governmental passenger terminals, is generally considered a necessary service to be
organizations and the private sector for the efficient and provided by provincial bus operators like respondents, hence, the investments
expeditious delivery of basic services in the vast metropolitan they have poured into the acquisition or lease of suitable terminal sites.
area.” Eliminating the terminals would thus run counter to the provisions of the
b. Section 2 of the MMDA Charter likewise states that: The MMDA Public Service Act.
shall perform planning, monitoring and coordinative functions, and 12. In sum, the Court stresses that it is the DOTC which has the power to establish
in the process exercise regulatory and supervisory authority over and administer a transportation project such as the one in the case at bar.
the delivery of the metro-wide services within Metro Manila.
6. Therefore, the MMDA has no authority to implement the Project, as
envisioned by the E.O.
7. The prohibition against the existence of Viron and Mencorp’s terminals also
cannot be considered as a reasonable necessity to ease traffic congestion in
the metropolis. On the contrary, the elimination of respondents' bus terminals
brings forth the distinct possibility and the equally harrowing reality of traffic
congestion in the common parking areas, a case of transference from one site
to another.
8. Less intrusive measures such as curbing the proliferation of "colorum" buses,
vans and taxis entering Metro Manila and using the streets for parking and
passenger pick-up points, as respondents suggest, might even be more
effective in easing the traffic situation. So would the strict enforcement of
traffic rules and the removal of obstructions from major thoroughfares.
9. However, with regard to the confiscatory nature of the E.O, the Court wanted
to note that the certificates of public convenience issued to Viron and
Mencorp confer NO PROPERTY RIGHT, and are mere licenses or

conditions and requirements as the Authority may impose; and prior coordination with and consent of the local government unit concerned.

(g) Perform other related functions required to achieve the objectives of the MMDA, including the
undertaking of delivery of basic services to the local government units, when deemed necessary subject to

006 LTFRB v. Florida Transport (Clark)
June 28, 2017 | Peralta, J. | Public Service Act
PETITIONER: Land Transportation Franchising and Regulatory Board (LTFRB)
RESPONDENTS: G.V. Florida Transport, Inc.
SUMMARY: A vehicular accident occurred at Sitio Paggang, Barangay Talubin,
Bontoc, Mountain Province involving a public utility bus coming from Sampaloc,
Manila, bound for Poblacion Bontoc and bearing a "G.V. Florida" body mark with
License Plate No. TXT-872. Based on the records of LTO and LTFRB, License
Plate No. TXT-872 actually belongs to a different bus owned by and registered
under the name of a certain Norberto Cue, Sr. and that the bus involved in the
accident is not duly authorized to operate as a public transportation. Thus, on the
same day of the accident, LTFRB, pursuant to its regulatory powers, immediately
issued an Order preventively suspending, for a period not exceeding 30 days, the
operations of 10 buses of Cue as well as GV Florida’s entire fleet of buses,
consisting of 228 units, under its 28 CPCs. In its Incident Report it was found that
the registered owner is Dagupan Bus Co., Inc. while the previous owner is GV
Florida bus company. Dagupan Bus filed its Answer claiming that it is not the owner
of the bus which was involved in the accident; the owner is G.V. Florida and that it
entered into a Memorandum of Agreement with G.V. Florida, and the subsequent
registration of the subject bus in the name of Dagupan Bus is a mere preparatory act
FACTS:
on the part of G.V. Florida to substitute the old authorized units of Dagupan Bus
plying the Cagayan route for the CPC of Florida covering the Bataan route. LTFRB
rendered its Decision canceling Cue's CPC No. 2007-0407 and suspending the
operation of respondent's 186 buses under 28 of its CPCs for a period of 6 months,
ordering the plates destructed and destroyed prior to turn over to the LTO, all
existing CPCs are suspended for 6 months after the lapse of preventive suspension.
ISSUE: WoN the LTFRB have the power to suspend a fleet of a public utlity that
violates the law – YES, because it is expressly granted by the law. Section 16(n) of
Commonwealth Act. No. 146, otherwise known as the Public Service Act in relation
to Section 5(b) of Executive Order No. 202 authorized LTFRB "to issue, amend,
revise, suspend or cancel Certificates of Public Convenience or permits authorizing
the operation of public land transportation services provided by motorized vehicles,
and to prescribe the appropriate terms and conditions therefor."
The power of the LTFRB to suspend the CPCs issued to public utility vehicles
depends on its assessment of the gravity of the violation, the potential and actual
harm to the public, and the policy impact of its own actions. In this regard, the Court
gives due deference to LTFRB’s exercise of its sound administrative discretion in
applying its special knowledge, experience and expertise to resolve G.V. Florida's
case. The law gives to the LTFRB (previously known, among others, as Public
Service Commission or Board of Transportation) ample power and discretion to
decree or refuse the cancellation of a certificate of public convenience issued to an
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
operator as long as there is evidence to support its action and so long as the action
is justified, this Court will not substitute its discretion for that of the regulatory
agency which, in this case, is the LTFRB.
Neither is the Court convinced by the contention that the authority given to LTFRB,
under the abovequoted Section 16(n) of the Public Service Act does not mean that
LTFRB is given the power to suspend the entire operations of a transport company.
This Court has held that when the context so indicates, the word "any" may be
construed to mean, and indeed it has been frequently used in its enlarged and Plural
sense as meaning "all " "all or every" "each " "each one of all " "every" without
limitation.
DOCTRINE: The Public Service Commission 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.
1. Around 7:20 in the morning of February 7, 2014, a vehicular accident
occurred at Sitio Paggang, Barangay Talubin, Bontoc, Mountain Province
involving a public utility bus coming from Sampaloc, Manila, bound for
Poblacion Bontoc and bearing a "G.V. Florida" body mark with License Plate
No. TXT-872. The mishap claimed the lives of 15 passengers and injured 32
others.
2. An initial investigation report, which came from the Department of
Transportation and Communications of the Cordillera Administrative Region
(DOTC-CAR), showed that based on the records of the Land Transportation
Office (LTO) and herein LTFRB, License Plate No. TXT-872 actually
belongs to a different bus owned by and registered under the name of a certain
Norberto Cue, Sr. under Certificate of Public Convenience (CPC) Case No.
2007-0407 and bears engine and chassis numbers LX004564 and
KN2EAM12PK004452, respectively; and that the bus involved in the
accident is not duly authorized to operate as a public transportation. Thus, on
the same day of the accident, LTFRB, pursuant to its regulatory powers,
immediately issued an Order preventively suspending, for a period not
exceeding 30 days, the operations of 10 buses of Cue under its CPC Case No.
2007-0407, as well as GV Florida’s entire fleet of buses, consisting of 228
units, under its 28 CPCs. In the same Order, GV Florida and Cue were
likewise directed to comply with the following:
a. Inspection and determination of road worthiness of the authorized
PUB unit of GV Florida-operators bringing the said buses to the

Motor Vehicle Inspection Service (MVIS) of the Land
Transportation Office, together with the authorized representatives
of the Board;
b. Undergo Road Safety Seminar of GV Florida-operators' drivers and
conductors to be conducted or scheduled by the Board and/or its
authorized seminar provider;
c. Compulsory Drug Testing of the GV Florida-operators' drivers and
conductors to be conducted by authorized/accredited agency of the
Department of Health and the Land Transportation Office;
d. Submit the Certificates of Registration and latest LTO Official
Receipts of the units, including the names of the respective drivers
and conductors; and
e. Submit the video clippings of roadworthiness inspection, Road
Safety Seminar and Drug Testing.
3. Furthermore, GV Florida and Cue were ordered to show cause why their
respective CPCs should not be suspended, canceled or revoked due to the said
accident.
4. Thereafter, in its Incident Report dated February 12, 2014, the DOTC-CAR
stated, among others: that the License Plate Number attached to the ill-fated
bus was indeed TXT-872, which belongs to a different unit owned by Cue;
that the wrecked bus had actual engine and chassis numbers DE12T-
601104BD and KTP1011611C, respectively; that, per registration records,
the subject bus was registered as "private" on April 4, 2013 with issued
License Plate No. UDO 762; and that the registered owner is Dagupan Bus
Co., Inc. while the previous owner is GV Florida bus company.
5. As a result, Dagupan Bus was also ordered to submit an Answer on the
DOTC-CAR Incident Report, particularly, to explain why the bus involved
in the above accident, which is registered in its name, was sporting the name
"G.V. Florida" at the time of the accident.
6. Subsequently, Dagupan Bus filed its Answer claiming that: it is not the owner
of the bus which was involved in the accident; the owner is G.V. Florida;
Dagupan Bus entered into a Memorandum of Agreement with G.V. Florida,
which, among others, facilitated the exchange of its CPC covering the
Cagayan route for the CPC of Florida covering the Bataan route; and the
subsequent registration of the subject bus in the name of Dagupan Bus is a
mere preparatory act on the part of G.V. Florida to substitute the old
authorized units of Dagupan Bus plying the Cagayan route which are being
operated under the abovementioned CPC which has been exchanged with G.
V. Florida.
7. On the other hand, Cue filed his Position Paper contending that: License Plate
No. TXT-872 was issued by the LTO to one among ten public utility buses
under CPC No. 2007-040i issued to him as operator of the Mountain Province
Cable Tours; the application for the extension of the validity of the said CPC
is pending with LTFRB; the subject CPC, together with all authorized units,
had been sold to G.V. Florida in September 2013; and thereafter, Cue
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
completely ceded the operation and maintenance of the subject buses in favor
of G.R. Florida.
8. In its Position Paper, GV Florida alleged that: it, indeed, bought Cue's CPC
and the ten public utility buses operating under the said CPC, including the
one which bears License Plate No. TXT-872; since Cue's buses were already
old and dilapidated, and not wanting to stop its operations to the detriment of
the riding public, it replaced these buses with new units using the License
Plates attached to the old buses, pending approval by LTFRB of the sale and
transfer of Cue's CPC in its favor; and it exercised utmost good faith in
deciding to dispatch the ill-fated bus notwithstanding the absence of prior
adequate compliance with the requirements that will constitute its operation
legal.
9. On March 14, 2014, LTFRB rendered its Decision canceling Cue's CPC No.
2007-0407 and suspending the operation of respondent's 186 buses under 28
of its CPCs for a period of 6 months, ordering the plates destructed and
destroyed prior to turn over to the LTO, all existing CPCs are suspended for
6 months after the lapse of preventive suspension. Hence, the Law
Enforcement Unit of this Board, the Land Transportation Office (LTO), the
Metro Manila Development Authority (MMDA), the Philippine National
Police-Highway Patrol Group (PNP-HPG), and other authorized traffic
enforcement agencies are hereby ordered to APPREHEND and IMPOUND
the said vehicles, if found operating.
10. CA partially affirmed by setting aside the suspension as well as recalling the
apprehension and impoundment of 186 authorized bus units under the 28
CPCs found operating.
ISSUE/s:
1. WoN the LTFRB have the power to suspend a fleet of a public utlity that
violates the law – YES, because it is expressly granted by the law.
RATIO:
1. LTFRB contends that it is vested by law with jurisdiction to regulate the
operation of public utilities; that under Section 5(b) of Executive Order No.
202, it is authorized "to issue, amend, revise, suspend or cancel Certificates
of Public Convenience or permits authorizing the operation of public land
transportation services provided by motorized vehicles, and to prescribe the
appropriate terms and conditions therefor;" and that LTFRB's authority to
impose the penalty of suspension of CPCs of bus companies found to have
committed violations of the law is broad and is consistent with its mandate
and regulatory capability. The Court agrees.
Section 16(n) of Commonwealth Act. No. 146, otherwise known as the
Public Service Act, provides:
Section 16. Proceedings of the Commission, upon notice and hearing. - The
Commission shall have power, upon proper notice and hearing in accordance
with the rules and provisions of this Act, subject to the limitations and
exceptions mentioned and saving provisions to the contrary:
xxxx

(n) To suspend or revoke any certificate issued under the provisions of this
Act whenever the holder thereof has violated or willfully and contumaciously
refused to comply with any order rule or regulation of the Commission or any
provision of this Act: Provided, That the Commission, for good cause, may
prior to the hearing suspend for a period not to exceed thirty days any
certificate or the exercise of any right or authority issued or granted under
this Act by order of the Commission, whenever such step shall in the
judgment of the Commission be necessary to avoid serious and irreparable
damage or inconvenience to the public or to private interests.
xxxx
Also, Section 5(b) of E.O. 202 states:
Sec. 5. Powers and Functions of the Land Transportation Franchising and
Regulatory Board. The Board shall have the following powers and functions:
xxxx
b. To issue, amend, revise, suspend or cancel Certificates of Public
Convenience or permits authorizing the operation of public land
transportation services provided by motorized vehicles, and to prescribe the
appropriate terms and conditions therefor;
xxxx
2. G.V. Florida is guilty of several violations of the law: lack of LTFRB's
approval of the sale and transfer of the CPC which G.V. Florida bought from
Cue; operating the ill-fated bus under its name when the same is registered
under the name of Dagupan Bus Co., Inc.; attaching a vehicle license plate to
the ill-fated bus when such plate belongs to a different bus owned by Cue;
and operating the subject bus under the authority of a different CPC. What
makes matters worse is that G.V. Florida knowingly and blatantly committed
these violations.
3. G.V. Florida insists that it is unreasonable for LTFRB to suspend the
operation of 186 buses covered by its 28 CPCs, considering that only one bus
unit, covered by a single CPC, was involved in the subject accident. The
Court is not persuaded.
4. The suspension of G.V. Florida’s 28 CPCs is not only because of the findings
of LTFRB that the ill-fated bus was not roadworthy. It was also brought about
by G.V. Florida’s wanton disregard and obstinate defiance of the regulations
issued by LTFRB, which is tantamount to a willful and contumacious refusal
to comply with the requirements of law or of the orders, rules or regulations
issued by LTFRB and which is punishable, under the law, by suspension or
revocation of any of its CPCs.
5. The power of the LTFRB to suspend the CPCs issued to public utility
vehicles depends on its assessment of the gravity of the violation, the
potential and actual harm to the public, and the policy impact of its own
actions. In this regard, the Court gives due deference to LTFRB’s exercise of
its sound administrative discretion in applying its special knowledge,
experience and expertise to resolve G.V. Florida's case.
6. The law gives to the LTFRB (previously known, among others, as Public
Service Commission or Board of Transportation) ample power and discretion
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
to decree or refuse the cancellation of a certificate of public convenience
issued to an operator as long as there is evidence to support its action and so
long as the action is justified, this Court will not substitute its discretion for
that of the regulatory agency which, in this case, is the LTFRB.
7. 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
sacrificed for private convenience.
8. The Public Service Commission 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.
9. G.V. Florida likewise contends that, in suspending its 28 CPCs, the LTFRB
acted in reckless disregard of the property rights of respondent as a franchise
holder, considering that it has put in substantial investments amounting to
hundreds of millions in running its operations. The Court is not persuaded.
10. A certificate of public convenience constitutes neither a franchise nor a
contract, confers no property right, and is a mere license or privilege." The
holder of such certificate does not acquire a property right in the route
covered thereby. Nor does it confer upon the holder any proprietary right or
interest of franchise in the public highways. Revocation of this certificate
deprives him of no vested right.
11. The right to enter the public employment as a common carrier and to offer
one's services to the public for hire does not carry with it the right to conduct
that business as one pleases, without regard to the interests of the public and
free from such reasonable and just regulations as may be prescribed for the
protection of the public from the reckless or careless indifference of the
carrier as to the public welfare and for the prevention of unjust and
unreasonable discrimination of any kind whatsoever in the performance of
the carrier's duties as a servant of the public. When private property is
"affected with a public interest it ceases to be Juris privati only." Property
becomes clothed with a public interest when used in a manner to make it of
public consequence and affect the community at large. "When, therefore, one
devotes his property to a use in which the public has an interest, he, in effect,
grants to the public an interest in that use, and must submit to be controlled
by the public for the common good, to the extent of the interest he has thus
created. He may withdraw his grant by discontinuing the use, but so long as
he maintains the use he must submit to control."
12. Neither is the Court convinced by the contention that the authority given to
LTFRB, under the abovequoted Section 16(n) of the Public Service Act does
 TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II

not mean that LTFRB is given the power to suspend the entire operations of
a transport company.
13. This Court has held that when the context so indicates, the word "any" may
be construed to mean, and indeed it has been frequently used in its enlarged
and Plural sense as meaning "all " "all or every" "each " "each one of all " ' '
' ' ' "every" without limitation; indefinite number or quantity, an indeterminate
unit or number of units out of many or all, one or more as the case may be,
several, some.
14. The Court finds nothing irregular in LTFRB's imposition of the penalty of six
months suspension of the operations of G.V. Florida’s 28 CPCs

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of

Appeals, dated June 26, 2014 in CA-GR. SP No. 134772, is REVERSED and SET
ASIDE. The March 14, 2014 Decision of the Land Transportation Franchising and
Regulatory Board is REINSTATED.

7. Gamboa v. Secretary of Finance (¥)

28 June 2011 |Carpio, J. | Filipinization of Public Utilities

Petitioners: Wilson Gamboa
Respondents: Finance Secretary Margarito B. Teves, et al.
Summary: PTIC shares totaling 46.125% of its total outstanding capital stock
were sequestered and later sold by the government through public bidding.
First Pacific, Benin the major stockholder of PTIC, exercised its right of first
refusal and acquired the PTIC shares. First Pacific is a foreign investment
corporation, and the sale of the PTIC shares which led to it wholly owning
PTIC, led to the indirect sale of 6.3% of the outstanding common shares of
PLDT (PTIC was a stockholder of PLDT). This sale is thus being assailed for
being violative of the constitutional limitation of 40% capital to be owned by
foreigners in public utilities. Gamboa argues that “capital” should refer to
common shares only or those shares which give stockholders voting rights in
the election of BoD officers because it is this right which gives control to the
stockholders. If “capital” were to be construed to include both common and
preferred non-voting shares, foreigners may end up controlling public utilities
by making preferred non voting shares given to Filipinos the majority of the
whole and retaining a smaller percentage for common shares but owned mostly
by foreigners. Respondents do not provide for a definition of “capital” and
instead argues for the dismissal of the petition on procedural grounds. The SC
partly granted the petition of Gamboa which was treated as a mandamus and
held that in keeping with the purpose of the citizenship requirement of
preventing aliens from assuming control of public utilities, which may
be inimical to the national interest, mere legal title is insufficient to meet
the 60 percent Filipino-owned "capital" required in the Constitution. Full
beneficial ownership of 60 percent of the outstanding capital stock,
coupled with 60 percent of the voting rights, is required.
Doctrine: Any citizen or juridical entity desiring to operate a public
utility must meet the minimum nationality requirement prescribed in
Section 11, Article XII of the Constitution. Hence, for a corporation to
be granted authority to operate a public utility, at least 60 percent of its
"capital" must be owned by Filipino citizens.
The term "capital" in Section 11, Article XII of the Constitution refers
only to shares of stock entitled to vote in the election of directors, and
thus in the present case only to common shares, and not to the total
outstanding capital stock comprising both common and non-voting
preferred shares.
FACTS:
1. 1928 - Act No. 3436 was enacted which granted PLDT a franchise
and he right to engage in telecommunications business.
2. 1969 - General Telephone and Electronics Corporation (GTE), an
American company and a major PLDT stockholder sold 26% of the
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
outstanding common shares of PLDT to Philippine
Telecommunications Investment Corp (PITC).
3. 1977 - Prime Holdings Inc. (PHI) was incorporated by several
persons. Subsequently, PHI became the owner of 111,415 shares of
stock ofPTIC by virtue of 3 deeds of Assignemnt.
4. 1986 - the 111,415 shares of stock of PTIC held by PHIc were
sequestered by the PCGG. This represented 46.125% of the
outstanding capital stock of PTIC and later declared by the court to
be owned by the Republic of the Philippines (RP).
5. 1999 - First Pacific, a Bermuda-registered, HK based investment
firm, acquired the remaining 54% of the outstanding capital stock of
PTIC.
6. 2006 - RP declared that it would sell the PTIC shares amounting to
46.125% of its outstanding capital stock (hereinafter PTIC shares)
through a public bidding.
a. There were only 2 bidders: Parallax, and Pan-Asia.
b. Parallax won with a bid of P25.6B
7. First Pacific announced that it would exercise its right of first refusal
as a PTIC stockholder and buy the PTIC shares by matching the bid
price of Parallax but it failed to do so.
a. First Pacific entered into a Conditional Sale and Purchase
Agreement of the PTIC shares with RP for the price of
approx P25B. The sale was completed in 2007.
8. Since PTIC is a stockholder of PLDT, the sale by RP of the PTIC
shares is actually an indirect sale of 12M shares or about 6.3%
of the outstanding common shares of PLDT.
a. With the sale, First Pacific’s common shareholding’s in
PLDT increased from 30.7% to 37%, thereby increasing
the common shareholding’s of foreigners in PLDT to about
81.47%. (Note: Facts 1-8 are facts alleged by Gamboa)
9. According to the respondents, the House of Representatives
Committee on Good Government conducted a public gearing on the
particular of the then impending sale of the PTIC shares and their
Report concluded that:
a. The auction of the government's PTIC shares bore due
diligence, transparency and conformity with existing
legal procedures; and
b. First Pacific's intended acquisition of the government's
PTIC shares resulting in First Pacic's 100% ownership
of PTIC will not violate the 40 percent constitutional
limit on foreign ownership of a public utility since PTIC
holds only 13.847 percent of the total outstanding
common shares of PLDT.
10. Gamboa filed a petition for prohibition, injunction, declaratory relief
and declaration of nullify of sale of the PTIC shares, contending:
a. That the sale of PTIC shares would result in an increase in

First Pacific’s common shareholding’s in PLDT to 37%
and this combined with Japanese NT Docomo’s common
shareholding’s in PLDT would result to a total foreign
common shareholding’s in PLDT of 51.56% which is over
the 40% constitutional limit.
b. This argument is advanced on the theory that the “60%
capital” requirement referred to in the Constitutional
provision for public utilities refers to shares which have
voting powers, not shares or capital in a broad sense.
11. It is admitted that PLDT’s non-voting preferred shares are mostly
held by Filipino citizens. The respondents likewise do not dispute.
That more than 40% of the common shares of PLDT are held by
foreigners.
a. Respondents do not give a definition of “capital” and only
hinge their arguments on procedural grounds..
ISSUE:
1. W/N the the term "capital" in Section 11, Article XII of the
Constitution refer to common shares or to the total outstanding
capital stock (combined total of common and non-voting
preferred shares)? - COMMON SHARES AND/OR PREFERRED
SHARES WITH VOTING RIGHTS.
2.
RULING: PARTLY GRANTED. The term "capital" in Section 11,
Article XII of the 1987 Constitution refers only to shares of stock
entitled to vote in the election of directors, and thus in the present
case only to common shares, and not to the total outstanding capital
stock (common and non-voting preferred shares). Respondent
Chairperson of the Securities and Exchange Commission is DIRECTED
to apply this denition of the term "capital" in determining the extent of
allowable foreign ownership in respondent Philippine Long Distance
Telephone Company, and if there is a violation of Section 11, Article
XII of the Constitution, to impose the appropriate sanctions under the
law.
RATIO:
1. The SC ignored the procedural defect of the SC not having original
jurisdiction over petitions for declaratory relief and treated the
petition as a mandamu petition. It likewise held that Gamboa has
locus standing because he is a stockholder of PLDT and the petition
raises matters of transcendental importance to the public. SC said
that it is high time to finally resolve this issue that has been
unanswered for 75 years. It recounted that the same issue involving
5 corporations or associations organized under the laws of the Philippines, at least
No franchise, certicate, or any other form of authorization for the operation of
a public utility shall be granted except to citizens of the Philippines or to
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
substantially the same parties was already tackled in Fernandez v.
Cojuangco, which was sadly dismissed on procedural grounds.
Hence, SC said that this time, they’re going to settle the merits of
the issue.
2. Sec. 11, Art. XII of the 1987 Constitution mandatesthe Filipinzation
of public utilities.5
a. Father Bernas, reminds us that the Filipinization
provision in the 1987 Constitution is one of the
products of the spirit of nationalism which gripped the
1935 Constitutional Convention. The 1987 Constitution
"provides for the Filipinization of public utilities by
requiring that any form of authorization for the
operation of public utilities should be granted only to
'citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines
at least sixty per centum of whose capital is owned
by such citizens.' The provision is [an express]
recognition of the sensitive and vital position of
public utilities both in the national economy and for
national security.
b. The evident purpose of the citizenship requirement
is to prevent aliens from assuming control of public
utilities, which may be inimical to the national
interest.
c. This specic provision explicitly reserves to Filipino
citizens control of public utilities, pursuant to an
overriding economic goal of the 1987 Constitution: to
"conserve and develop our patrimony" and ensure
"a self-reliant and independent national economy
effectively controlled by Filipinos."
3. Any citizen or juridical entity desiring to operate a public
utility must meet the minimum nationality requirement
prescribed in Section 11, Article XII of the Constitution. Hence,
for a corporation to be granted authority to operate a public
utility, at least 60 percent of its "capital" must be owned by
Filipino citizens.
a. The term "capital" in Section 11, Article XII of the
Constitution refers only to shares of stock entitled to
vote in the election of directors, and thus in the present
case only to common shares, and not to the total
outstanding capital stock comprising both common and
non-voting preferred shares.
b. One of the rights of a stockholder is the right to
sixty per centum of whose capital is owned by such citizens;

participate in the control or management of the
corporation. This is exercised through his vote in the
election of directors because it is the board of directors
that controls or manages the corporation.
c. In the absence of provisions in the articles of
incorporation denying voting rights to preferred
shares, preferred shares have the same voting rights
as common shares. However, preferred shareholders
are often excluded from any control, that is, deprived
of the right to vote in the election of directors and on
other matters, on the theory that the preferred
shareholders are merely investors in the corporation for
income in the same manner as bondholders. In fact,
under the Corporation Code only preferred or
redeemable shares can be deprived of the right to vote.
Common shares cannot be deprived of the right to vote.
d. Considering that common shares have voting rights
which translate to control, as opposed to preferred
shares which usually have no voting rights, the term
"capital" in Section 11, Article XII of the
Constitution refers only to common shares. However,
if the preferred shares also have the right to vote
in the election of directors, then the term "capital"
shall include such preferred shares because the right
to participate in the control or management of the
corporation is exercised through the right to vote in
the election of directors.
4. Thus, 60% of the "capital" assumes, or should result in,
"controlling interest" in the corporation.
a. Reinforcing this interpretation of the term "capital," as
referring to controlling interest or shares entitled to
vote, is the denition of a "Philippine national" in the
Foreign Investments Act of 1991.6
5. Mere legal title is insufficient to meet the 60 percent Filipino-
owned "capital" required in the Constitution. Full beneficial
ownership of 60 percent of the outstanding capital stock,
coupled with 60 percent of the voting rights, is required.
6. Applied to the case at bench:
a. Holders of PLDT preferred shares are explicitly denied
of the right to vote in the election of directors. On the
other hand, holders of common shares are granted the
exclusive right to vote in the election of directors.
6 organized under the laws of the Philippines of which at least sixty percent (60%) of the
The term "Philippine national" shall mean a citizen of the Philippines; or a domestic
partnership or association wholly owned by citizens of the Philippines; or a corporation
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
b. Based on PLDT’s General Information Sheet:
i. Foreigners hold 120,046,690 common shares of
PLDT whereas Filipinos hold only 66,750,622
common shares. That’s 64.27% of the total
number of PLDT’s common shares owned by
foreigners. It is clear that foreigners exercise
control over PLDT.
ii. The par value of PLDT common shares is
P5.00 per share, whereas the par value of
preferred shares is P10.00 per share. In other
words, preferred shares have twice the par
value of common shares but cannot elect
directors and have only 1/70 of the dividends
of common shares.
c. The Dividend Declarations of PLDT shows that:
i. PLDT declared dividends for the common
shares at P70.00 per share, while the declared
dividends for the preferred shares amounted to
a measly P1.00 per share.
d. 99.44% of the preferred shares are owned by Filipinos.
And preferred shares constitute 77.85% of the
authorized capital stock of PLDT while common shares
constitute only 22.15%.
e. The abovementioned show that beneficial interest in
PLDT is not with the non-voting preferred shares
but with the common shares, blatantly violating the
constitutional requirement of 60 percent Filipino control
and Filipino beneficial ownership in a public utility. In
short, Filipinos hold less than 60 percent of the voting
stock, and earn less than 60 percent of the dividends,
of PLDT. This directly contravenes the express
command in Section 11, Article XII of the Constitution.
7. Indisputably, construing the term "capital" in Section 11,
Article XII of the Constitution to include both voting and
non-voting shares will result in the abject surrender of our
telecommunications industry to foreigners, amounting to a
clear abdication of the State's constitutional duty to limit control
of public utilities to Filipino citizens. Such an interpretation
certainly runs counter to the constitutional provision reserving
certain areas of investment to Filipino citizens, such as the
exploitation of natural resources as well as the ownership of
land, educational institutions and advertising businesses.
capital stock outstanding and entitled to vote is owned and held by citizens of the
Philippines;
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II

8. EASCO v. LTFRB (Jen)
October 7, 2003 | Panganiban, J |
PETITIONER:
EASTERN ASSURANCE & SURETY CORPORATION (EASCO)
RESPONDENT: LAND TRANSPORTATION FRANCHISING
REGULATORY BOARD (LTFRB)
SUMMARY: (synopsis from case)
LTFRB issued MC No. 2001-001 and implementing circulars fixing, among others,
the insurance coverage of PUVS on the basis of the number of persons that may be
killed or injured instead of on the entire vehicle alone and requiring as a condition
for the issuance of certificate of public convenience an insurance policy or certifcate
provided by a member of one of two accredited groups. EASCO filed a Petition for
Certiorari and Prohibition assailing said MC No. 2001-001 and the implementing
circulars claiming they had deprived it of its right to engage in the passenger
accident insurance business and are violative of the constitutional proscription
against monopoly, unfair competition and combination in restraint of trade. In
authorizing and regulating two insurance monopolies, the LTFRB acted within its
prerogatives in promoting public interest and protecting the riding public. After all,
the consortia are open to all insurance companies, including petitioner. There is no
discrimination against any legitimate insurer.
DOCTRINE:
1. It should be stressed that PUVs, as common carriers, are engaged in a
business affected with public interest. 1Under Article 1756 of the Civil
Code, in cases of death or injuries to passengers, common carriers are
presumed to be at fault and are required to compensate the victims, unless
they observed extraordinary diligence. To assure this compensation, PUVs
are required to obtain insurance policies.
FACTS:
1. The operation of monopolies is not totally banned by the Constitution.
However, the State shall regulate them when public interest so requires. In
the present case, the two consortia of insurance companies that have been
authorized to issue passenger insurance policies are adequately regulated by
the LTFRB to protect the riding public. While individual insurance
companies may somehow be adversely affected by this scheme, the
paramount public interest involved must be upheld. In any event, all
legitimate insurance companies are allowed to become members of the
consortia. Thus, there is no restraint of trade or unfair competition involved.
7 system and/or the accreditation and de-listing criteria without need of prior approval from the Commission.'
The Commission interposes no objection to, there being no legal obstacle to the same, . . . the suggestion
of various insurance groups to allow only 2 groups to participate in the Passenger Accident Insurance
Program (PAIP) of the LTFRB. It is understood that all insurance companies accredited by the Commission
may participate in the program by joining any of the groups; it did not object to the suggestion of the various
transport groups to create an accreditation and de-listing criteria to be used in the implementation of the
PAIP; It also is of the position that the LTFRB may, on its own set up, require and implement the two groups
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
2. "[I]n its desire to improve public service and its assistance to the victims of
road accidents involving PUVs [public utility vehicles], the LTFRB
conducted a thorough investigation on the sufficiency of existing insurance
policies for PUVs. In the course of its investigation, the Board discovered
that insurance coverage of PUVs was only P50,000.00 for the entire vehicle
and
regardless of the number of passengers or persons killed or injured.
3. It undertook nationwide consultations among the transport operators and
insurance companies and held meetings with the officials of the Insurance
Commission. The Board issued MC No. 09-11 fixing the insurance coverage
of PUVs on the basis of the number of persons that may be killed or injured
instead of the entire vehicle alone. The coverage is denominated a s Passenger
Accident Insurance Coverage (PAIC), which fixes the coverage of
P50,000.00 per passenger.
4. During the effectivity of Memorandum Circular (MC) No. 99-011, the Board
received several complaints from various transport organizations such as the
Federation of Jeepney Operators and Drivers Association of the Philippines
(FEJODAP), Pagkakaisa ng mga Samahan ng Tsuper at for Nationwide
(PISTON), and the Philippine Confederation of Drivers Organization,
Alliance of Concerned Transport Operators (PCDO-ACTO).
5. The thrust of their complaints are: (1) the proliferation of fake insurance
policies; (2) the predatory pricing among competing insurance firms; (3) the
proliferation of fixers in the premises of the LTFRB endorsing certain
insurance companies; and (4) the 'moonlighting' by personnel of the LTFRB
who induced operators to secure their policies from favored companies.
6. To address these complaints, the Board held a series of meetings with the
o􏰄cers of various transport groups composed of operators of bus, jeepney
and taxi as well as representatives of several insurance companies and
officials of the Insurance Commission.
7. "In a meeting petitioner Eastern Assurance & Surety Corporation (EASCO)
was represented by a certain Dante Baronia, the transport groups proposed
the creation of [a] 'two-group system' and of [a] 'blacklisting scheme.”
8. "In a letter dated 19 January 2001, the aforesaid proposal was then referred
by the Board to the Insurance Commission for confirmation, to wit: 7
a. Did not object
9. Insurance Commissioner Eduardo Malinis wrote LTFRB Chairman Dante M.
Lantin confirming the points in the Jan 19 2001 letter regarding the
implementation of the Passenger Personal Accident Insurance Program
10. LTFRB issued the assailed MC No. 2001-001 (pls see origs to see full text;
it’s too long :<)8
...
8
'After a year of implementation, the Board now has received numerous complaints coming from various
transport groups and from its regional offices. These complaints [range] from non-payment or late payment

11. Claiming that Memorandum Circular No. 2001-001 and the implementing
Circulars had deprived it of its right to engage in the passenger accident
insurance business, EASCO filed a Petition for Certiorari and Prohibition
with the CA questioning the validity of those issuances.
12. CA: The CA ruled that Memorandum Circular No. 2001-001 had not been
issued ultra vires by the LTFRB and constituted a valid exercise of police
power.
a. ". . . [T]he Board has the power to require as a condition for the
issuance of certificate of public convenience an insurance policy or
certificate provided by a member of one of the two accredited
groups. The clear purpose of the condition is to ensure the benefit of
the riding public and pedestrians who may become victims of
accidents involving PUVs. For this purpose, the Board may, as it
did, coordinate with the Insurance Commission, the governmental
agency regulating the insurance business, for the adoption of 'the
two-group and blacklisting system' to enhance the insurance
coverage of passengers and persons who become victims of accident
for their benefit or of their heirs. "Without doubt, the imposition of
the requirements is germane to the powers, functions and purpose of
the Board as a regulatory body in charge of administering public
utilities. . . "
of claims, fake certificates of cover, predatory pricing, non- payment or under payment of taxes, graft and
corruption, and the non implementation of the computerized data bank of all public utility vehicles.
'In addressing these concerns, the different transport groups proposed the creation of a two (2) group system
whereby all insurance companies who would like to participate in the passenger accident insurance program
of the LTFRB must join any of the two groups, and that the passenger insurance requirement of the PUV
operators be divided between these two groups on the basis of the number of their respective LTO license
plates. Xxx
'IN VIEW OF THE FOREGOING PREMISES, and upon the clamor of the transport operators who are the
ones paying the added insurance cost, paragraph seven (7) of Memorandum Circular No. 99-011 is hereby
amended to read as follows: 'In order to make sure that future claims of PUV operators and passenger
accident victims are paid within the required time, and in order to minimize, if not eliminate, fake certificates
of cover and graft and corruption, as well as to ensure the payment of the proper taxes much needed by the
government, as well as to create a computerized data bank without any cost to the government which is
necessary for transport planning[,] the Board will only accept, as proof of compliance of this program,
insurance polic[i]es/certificates of cover duly approved by the Insurance Commission speci􏰄cally for this
project, and issued by any of the two groups as authorized by the Board.'
'CREATION OF THE TWO GROUP SYSTEM
'Accordingly, as there is already one group duly authorized by the Board to participate in this program in
the person of the Passenger Accident Managers, Inc. (PAMI for brevity), THERE IS A NEED TO FORM
ANOTHER GROUP IN ORDER TO FULLY IMPLEMENT THE PROGRAM. All other insurance
companies who wish to continue participating in the program, therefore, are hereby required to either join
PAMI or form a second group. 'In order to maintain their good standing with the Board, each group must
maintain and present to the Board proof of compliance with the following minimum requirements:
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
b. Moreover, the CA found that the Circular had not violated the
provisions of the Constitution on free enterprise, equal protection
and substantive due process. The appellate court explained "that
PAIC II and PAMI merely serve as service arms of their respective
members. In other words, these two (2) groups, strictly speaking, are
not engaged in insurance business. Moreover, the 'two-
group/consortium' scheme under the Memorandum Circular No.
2001-001 is open to all insurance firms [that] want to join any of the
two groups. It does not vest any privilege or advantage to any single
firm or group to carry out the business of providing the insurance
coverage under the program
c. The fact that the program is open to all insurance firms including
petitioner negates its pretense of exclusivity. No firm is
discriminated against since the two consortia cannot refuse
membership in their respective groups to any interested firm [that]
wants and is qualified to join."
ISSUES:
1. Whether the LTFRB Memorandum Circulars are valid - yup
2. Whether it committed grave abuse of discretion - no
3. Whether it acted without jurisdiction and usurped the exclusive jurisdiction
of the Insurance commission - no
RATIO:
ODD EVEN SYSTEM
'In order to address the issue of graft and corruption, there is a need to remove discretion on the part of
government officials. Accordingly, the Board supports the proposal of the transport groups and hereby
adopts the following system:
'All PUV's covered by this program whose LTO license plate, as per latest LTO Official Receipt, has an
even middle number must have an insurance policy/certificate cover coming from the 􏰄rst insurance group
(in its case PAMI), while those with an odd middle number must have a policy/cover coming from the
second group. This odd-even system shall be interchanged on a year to year basis in order to ensure equality
and fairness in distribution. The Board will not accept any insurance policy that does not comply with this
odd-even scheme except in the ff. Cases where the operator may choose the insurance group of its choice
provided if is one of the two authorized by the Board, to wit:
1. Where the operator or franchise holder has 50 or more operating units registered in its name;
2. Where the operator files a verified petition with the Board justifying his preference over the other
group. In this case, the Board may allow a switch if it can be shown that there are more benefits
to be attained [from] the insurance group of his choice, and provided further that these benefits
are legal and do not result to any form of predatory pricing, such as . . . unjustified commissions
and discounts.'
'Other than [for] these reasons[,] no switch may be allowed by any officer of the LTFRB unless otherwise
duly approved by the Board en banc.
INTERIM GUIDELINES:xx 'All insurance companies who are "blacklisted" in any government agency or
instrumentality including court and other quasi-judicial agencies are automatically disallowed to participate
in this program. Accordingly, no policy or certificate of cover shall be accepted from these companies as
proof of compliance with this program. The Board shall issue from time to time the list of the "blacklisted"
or suspended companies.

[1st Issue]
2. Petitioner contends that MC. 2001-001 and the subsequent implementing
Circulars violate the constitutional proscription against monopoly as well as
unfair competition and combination in restraint of trade. Petitioner further
argues that these were issued with grave abuse of discretion and without
jurisdiction on the part of the LTFRB.
3. The constitutional provision on monopolies is found in Article XII as
follows9
4. While embracing free enterprise as an economic creed, the Constitution does
not totally prohibit the operation of monopolies. 10 However, it mandates the
State to regulate them when public interest so requires.
5. Intense competition has led insurance companies/agents offering insurance
policies for public utility vehicles to resort to ruinous tactics to sell their
services. Notorious agents of these companies have engaged in predatory
pricing — selling the compulsory insurance coverage at an unbelievable
discount of sixty to eighty percent (60 to 80%) off the market rate. The huge
coverage and liability under the "no-fault clause" of the passenger accident
insurance are grossly disproportionate to the small premiums actually being
paid.
6. Moreover, different persons or operators were issued certificates of cover
(COC) or policies bearing the same number. Thus, clams under these policies
were not paid, or payments were unreasonably delayed, resulting in prejudice
to the riding public.
7. The present case shows a clear public necessity to regulate the proliferation
of such insurance companies. Because of the PUV operators' complaints, the
LTFRB thus assessed the situation. It found that in order to protect the
interests of the riding public and to resolve problems involving the passenger
insurance coverage of PUVs, it had to issue MC No. 2001-001 authorizing
the two-group system. Subsequently, it promulgated Memorandum Circular
No. 2001-010 accrediting PAMI and PAIC II as the two groups allowed to
participate in the program.
8. MCNo. 2001-010 required that "[a]ll public utility vehicles whose LTO
license plate, as per latest LTO Official Receipt, with an EVEN middle
number (0, 2, 4, 6 and 8) shall be insured with UCPB insurance (PAMI),
while those with an ODD middle number (1, 3, 5, 7 and 9) shall be insured
with Great Domestic Insurance (PAIC 2) . . . ."
9. Undoubtedly, MC No. 2001-010 authorized and regulated two separate
monopolies. In Garcia v. Corona, the Court stated:
a. "The simplest form of monopoly exists when there is only one seller
or producer of a product or service for which there are no substitute.
In its more complex form, monopoly is defined as the joint
acquisition or maintenance by members of a conspiracy formed for
9 10
"Sec. 19. The State shall regulate or prohibit monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed."
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
that purpose, of the power to control and dominate trade and
commerce in a commodity to such an extent that they are able, as a
group, to exclude actual or potential competitors from the
field,accompanied with the intention or purpose to exercise such
power."
10. It should be stressed that PUVs, as common carriers, are engaged in a
business affected with public interest. Under Article 1756 of the Civil Code,
in cases of death or injuries to passengers, common carriers are presumed to
be at fault and are required to compensate the victims, unless they observed
extraordinary diligence. To assure this compensation, PUVs are required to
obtain insurance policies.
11. Even with this insurance requirement, the riding public remains at risk of
inadequate cover, because many insurance companies are individually
incapable of meeting the compensation standards. Worse, the pernicious
competition and fraudulent practices described above have resulted in failure
to meet the compensation requirements of the law.
12. Indeed, in authorizing and regulating the two insurance monopolies, the
LTFRB acted within its prerogatives in promoting public interest and
protecting the riding public. After all, the consortia are open to all insurance
companies, including petitioner. There is no discrimination against any
legitimate insurer. On the whole, the public is given protection without unfair
competition or undue restraint of trade. As the Court of Appeals pointed out,
the two consortia are not engaged in the insurance business; they merely serve
as "service arms" of their respective members.
13. At bottom, the subject MCs were issued for the stated purpose of promoting
public interest; and of protecting the riding public and PUV operators from
being defrauded by fake, undervalued or misrepresented insurance policies.
[2nd Issue]
1. In alleging grave abuse of discretion on the part of the LTFRB, petitioner
describes at length potential disasters to the insuring public that may result
from the two-group system authorized by the assailed Circulars. Petitioner
calls into question the wisdom of those Circulars by projecting scenarios
which, however, cannot be properly addressed and resolved in the present
case. Litigations are limited to resolving actual, not hypothetical,
controversies.
2. Doubts on the capability of the assailed Circulars to provide an adequate
long-term solution to PUV operators' insurance problems are not legally
sufficient to strike down those Circulars. In our form of government, courts
cannot inquire into the wisdom or the expediency of the acts of the executive
or the legislative branches of government, unless there is a clear showing that
those acts are constitutionally infirm or have been committed with grave
abuse of discretion amounting to lack or excess of jurisdiction. 10
"In Angara v. Electoral Commission, Justice Laurel made it clear that 'the judiciary does not pass upon
questions of wisdom, justice or expediency of legislation.' And fittingly so for in the exercise of judicial
power, we are allowed only 'to settle actual controversies involving rights which are legally demandable

3. By grave abuse of discretion is meant such capricious and whimsical exercise
of judgment equivalent to lack of jurisdiction. Mere abuse of discretion is not
enough. It must be grave, as when it is exercised arbitrarily or despotically
by reason of passion or personal hostility; and such abuse must be so patent
and so gross as to amount to an evasion of a positive duty or to a virtual
refusal to perform the duty enjoined or to act at all in contemplation of law.17
The jurisprudential elements of arbitrariness, despotism, passion and hostility
have not been shown to exist under the present circumstances.
4. Further, petitioner argues that the LTFRB's haste in accrediting PAMI and
PAIC II is an indication of grave abuse of discretion. However, since the two-
group system was to take effect starting March 1, 2001, accrediting the two
groups on February 28, 2001 was not unreasonable. In the absence of contrary
evidence, we must uphold the presumption of regularity in the performance
of duties by public officers
[3rd issue]
1. Petitioner contends that in issuing the assailed Circulars, the LTFRB
effectively delimited, regulated and controlled the business of passenger
accident insurance. It argues that the Board acted without jurisdiction and
usurped the exclusive jurisdiction of the Insurance Commission.
2. Executive Order No. 202,19 which created the LTFRB, conferred the
following powers on the Board:
a. Xxx "b. To issue, amend, revise, suspend or cancel Certificates of
Public Convenience or permits authorizing the operation of public
land transportation services provided by motorized vehicles, and to
prescribe the appropriate terms and conditions therefore;
b. "m. To perform such other functions and duties as may be provided
by law, or as may be necessary, or proper or incidental to the
purposes and objectives of this EO"
3. Paragraph "b" gives the LTFRB the power to prescribe appropriate terms and
conditions for the issuance, amendment, revision, and suspension or
cancellation of certificates of public convenience (CPC) or of permits
authorizing the operation of public land transportation services. Under this
paragraph, the Board has the prerogative to require, as a condition for the
issuance of CPCs, that an applicant get insurance coverage from a particular
group of insurance companies.
4. Corollary to this power must necessarily be construed the authority of the
LTFRB to require insurance companies to group themselves for the purpose
of providing passenger accident insurance coverage. Paragraph "m" directly
authorizes it to perform such other functions as may be necessary or
incidental to the purposes and objectives of EO 202.
5. By providing passenger accident insurance policies to operators of PUVs,
insurance companies and their businesses directly affect public land
and enforceable, 'and may not annul an act of political departments simply because we feel it is unwise or
impractical. It is true that, under the expanded concept of the political question, we may now also 'determine
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
transportation. By limiting its regulation of such companies to the segment
of their business that directly affects public land transportation, the LTFRB
has acted within its jurisdiction in issuing the assailed Circulars.
6. Administrative bodies like the LTFRB have expertise in specific matters
within the purview of their respective jurisdictions. Thus, the law concedes
to them the power to promulgate rules and regulations to implement the
policies of a given statute — provided such rules and regulations conform to
the terms and standards prescribed by that statute and purport to carry its
general policies into effect.
7. It should also be pointed out that before issuing the Circulars, the LTFRB
made proper representation and coordination with the Insurance
Commission, which had no objection to the two-consortia scheme.
[EASCO’s business]
1. Since petitioner has failed to show any cogent reason to strike down the
assailed Circulars, their implementation cannot be restrained. They may
indeed adversely affect its business, but the protection of the general welfare
is of paramount importance. Petitioner's individual business interests must be
subordinated to the benefit of the greater number.
[Publication]
1. Petitioner raises for the first time in its Memorandum the issue of the alleged
noncompliance with the publication requirement, which must first be met
before the assailed Circulars can be deemed valid. This argument is improper
at this stage. Points of law, theories, issues and arguments not adequately
brought to the attention of the lower court need not be — and ordinarily will
not be — considered by a reviewing court, as they cannot be raised for the
first time on appeal.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioner.
9. PHILIPPINE AIRLINES, INC. vs CIVIL AERONAUTICS BOARD (Feli ℅
C2020 STA. MARIA)
March 26, 1997 | Torres, Jr. J. | Certificate of Public Convenience and Necessity
whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the Government.'"

PETITIONER: Philippine Airlines, Inc.
RESPONDENTS: Civil Aeronautics Board and Grand International Airways,
Inc.
SUMMARY: GrandAir applied for a Certificate of Public Convenience and
Necessity with the Civil Aeronautics Board (CAB). Philippine Airlines, Inc (PAL),
the holder of a legislative franchise to operate air transport services filed an
opposition to the application mainly on the ground that the CAB has no jurisdiction
to hear GrandAir’s application, until the GrandAir has first obtained a franchise to
operate from Congress. The Chief Hearing Officer of CAB denied PAL’s
opposition. PAL also opposed GrandAir’s application for a temporary permit but the
CAB promulgated a resolution approving the issuance of a temporary permit in favor
of GrandAir. The issue in this case is WON the Congress, in enacting RA 776 (The
Civil Aeronautics Act), has delegated the authority to authorize the operation of
domestic air transport services to the CAB, such that Congressional mandate for the
approval of such authority is no longer necessary? – YES. The SC held that the CAB
has the authority to issue a Certificate of Public Convenience and Necessity, or
Temporary Operating Permit to a domestic air transport operator, who, though not
possessing a legislative franchise, meets all the other requirements prescribed by the
law. There is nothing in the law nor in the Constitution, which indicates that a
legislative franchise is an indispensable requirement for an entity to operate as a
domestic air transport operator. Congress, by giving the CAB the power to issue
permits for the operation of domestic transport services, has delegated to the said
body the authority to determine the capability and competence of a prospective
domestic air transport operator to engage in such venture. Furthermore, the
procedure for the processing of the application of the Certificate had been
established to ensure the weeding out of those entities that are not deserving of
public service.
DOCTRINE: Franchises issued by Congress are not required before each and every
public utility may operate. In many instances, Congress has seen it fit to delegate
this function to government agencies, specialized particularly in their respective
areas of public service.
FACTS:
1. The main reason submitted by Philippine Airlines, Inc. (PAL) to support its
petition is the fact that GrandAir does not possess a legislative franchise
authorizing it to engage in air transportation service within the Philippines or
elsewhere. Such franchise is, allegedly, a requisite for the issuance of a
Certificate of Public Convenience or Necessity by the Civil Aeronautics
Board (CAB), as mandated by the Constitution.
2. GrandAir posits that a legislative franchise is no longer a requirement for the
issuance of a Certificate of Public Convenience and Necessity or a
Temporary Operating Permit, following the Court's pronouncements in some
cases.
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
3. GrandAir applied for a Certificate of Public Convenience and Necessity with
the Board, which application. The Chief Hearing Officer of the CAB issued
a Notice of Hearing setting the application for initial hearing and directing
GrandAir to serve a copy of the application and corresponding notice to all
scheduled Philippine Domestic operators.
4. GrandAir filed its Compliance, and requested for the issuance of a Temporary
Operating Permit. PAL, itself the holder of a legislative franchise to operate
air transport services, filed an Opposition to the application for a Certificate
of Public Convenience and Necessity on the following grounds:
"A. The CAB has no jurisdiction to hear the GrandAir's application until the
latter has first obtained a franchise to operate from Congress.
B. GrandAir's application is deficient in form and substance
C. Approval of GrandAir's application would violate the equal protection
clause of the constitution.
D. There is no urgent need and demand for the services applied for.
E. To grant GrandAir 's application would only result in ruinous competition
contrary to Section 4(d) of R.A. 776.
5. At the initial hearing for the application, PAL raised the issue of lack of
jurisdiction of the Board to hear the application because GrandAir did not
possess a legislative franchise.
6. The Chief Hearing Officer of CAB issued an Order denying PAL’s
Opposition.
7. PAL opposed GrandAir’s application for a temporary permit maintaining
that:" 1. The applicant does not possess the required fitness and capability of
operating the services applied for under RA 776; and, 2. Applicant has failed
to prove that there is clear and urgent public need for the services applied
for."
8. The CAB promulgated Resolution approving the issuance of a Temporary
Operating Permit in favor of Grand Air for a period of 3 months. PAL moved
for the reconsideration of the issuance of the Temporary Operating Permit
but the same was denied. In the said Resolution, the Board justified its
assumption of jurisdiction over GrandAir's application.
"WHEREAS, the CAB is specifically authorized under Section 10-
C (1) of Republic Act No. 776 as follows:
'(c) The Board shall have the following specific powers and duties:
(1) In accordance with the provision of Chapter IV of this Act, to
issue, deny, amend revise, alter, modify, cancel, suspend or revoke,
in whole or in part, upon petitioner-complaint, or upon its own
initiative, any temporary operating permit or Certificate of Public
Convenience and Necessity; Provided, however; that in the case of
foreign air carriers, the permit shall be issued with the approval of
the President of the Republic of the Philippines."
WHEREAS, more recently, Avia Filipinas vs. CAB, held that in
accordance with its mandate, the CAB can issue not only a TOP but
also a Certificate of Public Convenience and Necessity (CPCN) to a
qualified applicant therefor in the absence of a legislative franchise,

citing therein as basis the decision of Albano vs. Reyes which
provides that:
a) Franchises by Congress are not required before each and every
public utility may operate when the law has granted certain
administrative agencies the power to grant licenses for or to
authorize the operation of certain public utilities;
b) The Constitutional provision in Article XII, Section 11 that the
issuance of a franchise, certificate or other form of authorization for
the operation of a public utility does not necessarily imply that only
Congress has the power to grant such authorization since our statute
books are replete with laws granting specified agencies in the
Executive Branch the power to issue such authorization for certain
classes of public utilities.
9. Upon motion by GrandAir, the temporary permit was extended for a period
of six (6) months.
10. PAL argues that CAB acted beyond its powers and jurisdiction in taking
cognizance of GrandAir's application for the issuance of a Certificate of
Public Convenience and Necessity, and in issuing a temporary operating
permit in the meantime, since GrandAir has not been granted and does not
possess a legislative franchise to engage in scheduled domestic air
transportation. A legislative franchise is necessary before anyone may engage
in air transport services, and a franchise may only be granted by Congress.
This is the meaning given by PAL upon a reading of Section 11, Article XII11,
and Section 1, Article VI12, of the Constitution.
ISSUES: WON the Congress, in enacting RA 776, has delegated the authority to
authorize the operation of domestic air transport services to the CAB, such that
Congresssional mandate for the approval of such authority is no longer necessary? –
YES. There is nothing in the law nor in the Constitution, which indicates that a
legislative franchise is an indispensable requirement for an entity to operate as a
domestic air transport operator. Congress, by giving the CAB the power to issue
permits for the operation of domestic transport services, has delegated to the said body
the authority to determine the capability and competence of a prospective domestic air
transport operator to engage in such venture.
RATIO:
11
Section 11. No franchise, certificate, or any other form of authorization for the operation of
a public utility shall be granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines at least sixty per centum of whose
capital is owned by such citizens, nor shall such franchise, certificate, or authorization be
exclusive in character or for a longer period than fifty years. Neither shall any franchise or
right be granted except under the condition that it shall be subject to amendment, alteration, or
repeal by the Congress when the common good so requires. The state shall encourage equity
participation in public utilities by the general public. The participation of foreign investors in
the governing body of any public utility enterprise shall be limited to their proportionate share
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
1. Congress has granted certain administrative agencies the power to grant
licenses for, or to authorize the operation of certain public utilities.
2. It is generally recognized that a franchise may be derived indirectly from the
state through a duly designated agency, and to this extent, the power to grant
franchises has frequently been delegated, even to agencies other than those
of a legislative nature. In pursuance of this, it has been held that privileges
conferred by grant by local authorities as agents for the state constitute as
much a legislative franchise as though the grant had been made by an act of
the Legislature.
3. The trend of modern legislation is to vest the Public Service Commissioner
with the power to regulate and control the operation of public services under
reasonable rules and regulations, and as a general rule, courts will not
interfere with the exercise of that discretion when it is just and reasonable and
founded upon a legal right.
4. The CAB has the authority to issue a Certificate of Public Convenience and
Necessity, or Temporary Operating Permit to a domestic air transport
operator, who, though not possessing a legislative franchise, meets all the
other requirements prescribed by the law, Section 21 of R.A. 776.
5. There is nothing in the law nor in the Constitution, which indicates that a
legislative franchise is an indispensable requirement for an entity to operate
as a domestic air transport operator. Although Section 11 of Article XII
recognizes Congress' control over any franchise, certificate or authority to
operate a public utility, it does not mean Congress has exclusive authority to
issue the same. Franchises issued by Congress are not required before each
and every public utility may operate. In many instances, Congress has seen it
fit to delegate this function to government agencies, specialized particularly
in their respective areas of public service.
6. A reading of Section 10 of the same reveals the clear intent of Congress to
delegate the authority to regulate the issuance of a license to operate domestic
air transport services:
SECTION 10. Powers and Duties of the Board. (A) Except as
otherwise provided herein, the Board shall have the power to
regulate the economic aspect of air transportation, and shall have
general supervision and regulation of, the jurisdiction and control
over air carriers, general sales agents, cargo sales agents, and air
in its capital, and all the executive and managing officers of such corporation or association
must be citizens of the Philippines.
12
Section 1. The legislative power shall be vested in the Congress of the Philippines, which
shall consist of a Senate and a House of Representatives, except to the extent reserved to the
people by the provision on initiative and referendum.

freight forwarders as well as their property rights, equipment,
facilities and franchise, insofar as may be necessary for the purpose
of carrying out the provision of this Act. In support of the Board's
authority as stated above, it is given the following specific powers
and duties: (C) The Board shall have the following specific powers
and duties:
(1) In accordance with the provisions of Chapter IV of this Act, to
issue, deny, amend, revise, alter, modify, cancel, suspend or revoke
in whole or in part upon petition or complaint or upon its own
initiative any Temporary Operating Permit or Certificate of Public
Convenience and Necessity: Provided however, That in the case of
foreign air carriers, the permit shall be issued with the approval of
the President of the Republic of the Philippines.
7. PAL argues that since R.A. 776 gives the Board the authority to issue
"Certificates of Public Convenience and Necessity", this means that a
legislative franchise is an absolute requirement. This submission relies on the
premise that the authority to issue a certificate of public convenience and
necessity is a regulatory measure separate and distinct from the authority to
grant a franchise for the operation of the public utility subject of this
particular case, which is exclusively lodged by PAL in Congress.
8. We do not agree with the PAL. Many and varied are the definitions of
certificates of public convenience which courts and legal writers have
drafted. Some statutes use the terms "convenience and necessity" while others
use only the words "public convenience." The terms "convenience and
necessity", if used together in a statute, are usually held not to be separable,
but are construed together. Both words modify each other and must be
construed together.
9. The word 'necessity' is so connected, not as an additional requirement but to
modify and qualify what might otherwise be taken as the strict significance
of the word necessity. Public convenience and necessity exists when the
proposed facility will meet a reasonable want of the public and supply a need
which the existing facilities do not adequately afford. It does not mean or
require an actual physical necessity or an indispensable thing.
10. Congress, by giving the CAB the power to issue permits for the operation of
domestic transport services, has delegated to the said body the authority to
determine the capability and competence of a prospective domestic air
transport operator to engage in such venture.
11. Congress, in this instance, has set specific limitations on how such authority
should be exercised. Firstly, Section 4 of R.A. No. 776, as amended, sets out
the following guidelines or policies:
"SECTION 4. Declaration of policies. In the exercise and
performance of its powers and duties under this Act, the Civil
Aeronautics Board and the Civil Aeronautics Administrator shall
consider the following, among other things, as being in the public
interest, and in accordance with the public convenience and
necessity:
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II
(a) The development and utilization of the air potential of the
Philippines;
(b) The encouragement and development of an air transportation
system properly adapted to the present and future of foreign and
domestic commerce of the Philippines, of the Postal Service and of
the National Defense;
(c) The regulation of air transportation in such manner as to
recognize and preserve the inherent advantages of, assure the
highest degree of safety in, and foster sound economic condition in,
such transportation, and to improve the relations between, and
coordinate transportation by, air carriers;
(d) The promotion of adequate, economical and efficient service by
air carriers at reasonable charges, without unjust discriminations,
undue preferences or advantages, or unfair or destructive
competitive practices;
(e) Competition between air carriers to the extent necessary to assure
the sound development of an air transportation system properly
adapted to the need of the foreign and domestic commerce of the
Philippines, of the Postal Service, and of the National Defense;
(f) To promote safety of flight in air commerce in the Philippines;
and,
(g) The encouragement and development of civil aeronautics.
12. More importantly, the said law has enumerated the requirements to determine
the competency of a prospective operator to engage in the public service of
air transportation.
SECTION 12. Citizenship requirement. Except as otherwise
provided in the Constitution and existing treaty or treaties, a permit
authorizing a person to engage in domestic air commerce and/or air
transportation shall be issued only to citizens of the Philippines.
SECTION 21. Issuance of permit. The Board shall issue a permit
authorizing the whole or any part of the service covered by the
application, if it finds: (1) that the applicant is fit, willing and able
to perform such service properly in conformity with the provisions
of this Act and the rules, regulations, and requirements issued
thereunder; and (2) that such service is required by the public
convenience and necessity; otherwise the application shall be
denied.
13. Furthermore, the procedure for the processing of the application of the
Certification had been established to ensure the weeding out of those entities
that are not deserving of public service.
14. In sum, CAB should now be allowed to continue hearing the application of
GrandAir for the issuance of a Certificate of Public Convenience and
Necessity, there being no legal obstacle to the exercise of its jurisdiction.
TRANSPORTATION LAW | ATTY. VIGOR MENDOZA II