TRISHA MAE K.

DEIPARINE

Transportation Law
September 23, 2020

PART I. PUBLIC SERVICE LAW AND UTILITIES

1. Luzon Stevedoring Company, Inc. vs. The Public Service Commission,

G.R. No. L-5458, September 16, 1953

FACTS:

Petitioners apply for review of a decision of the Public Service Commission

restraining them "from further operating their watercraft to transport goods
for hire or compensation between points in the Philippines until the rates they
propose to charge are approved by this Commission.

They are corporations duly organized and existing under the laws of the
Philippines, mainly engaged in the stevedoring or lighterage and harbor
towage business. At the same time, they are engaged in interisland service
which consists of hauling cargoes such as sugar, oil, fertilizer and other
commercial commodities which are loaded in their barges and towed by their
tugboats from Manila to various points in the Visayan Islands, particularly in
the Provinces of Negros Occidental and Capiz, and from said places to Manila.
There is no fixed route in the transportation of these cargoes, the same being
left at the indication of the owner or shipper of the goods. Meanwhile, Visayan
Stevedore transported its barges and towed by its tugboats sugar from
Victorias, Marayo, and Pilar to Manila and for another client from Hinigaran,
Bacolord, Marayo, and Victorias to Manila.

The Commission made the order now sought to be reviewed, upon

complaint of the Philippine Shipowners' Association charging that the then
respondents were engaged in the transportation of cargo in the Philippines for
hire or compensation without authority or approval of the Commission, having
adopted, filed and collected freight charges at the rate of P0.60 per bag or picul,
particularly sugar, loaded and transported in their lighters and towed by their
tugboats between different points in the Province of Negros Occidental and
Manila, which said rates resulted in ruinous competition with complainant.

ISSUE:

Whether or not the contention of the Philippine Shipowner’s Association is

correct.

HELD:YES.
Section 13 (b) of the Public Service Law (Commonwealth Act No. 146)
defines public service as, that which includes every person that now or
hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes any common
carrier or public utility, power and water services, communications, and other
similar public services.

It is not necessary, under this definition, that one holds himself out as
serving or willing to serve the public in order to be considered public service.

The Public Service Law was enacted not only to protect the public against
unreasonable charges and poor, inefficient service, but also to prevent ruinous
competition.

2. National Power Corporation vs. Court of Appeals and CEPALCO, G.R. No.
112702, September 26, 1997

FACTS:

CEPALCO was enfranchised by "to construct, maintain and operate an

electric light, heat and power system for the purpose of generating and/or
distributing electric light, heat and/or power for sale within the City of Cagayan
de Oro and its suburbs" for fifty (50) years. Republic Act No. 3570 expanded
the area of coverage of the franchise to include the municipalities of Tagoloan
and Opol, both in the Province of Misamis Oriental.
Petitioner PHIVDEC was vested with authority to engage in commercial,
industrial, agricultural, and other enterprises. Furthermore, it created
PHIVDEC Industrial Authority (PIA), a subsidiary of PHIVDEC, to carry out its
government policy. The first area for development shall be located in the
municipalities of Tagoloan and Villanueva. For the reason that PIA granted two
corporations to operate in its area of development. PIA also granted CEPALCO a
temporary authority to retail electric power to the industries operating within
the PIE-MO authorizing CEPALCO to operate, administer, construct, and
distribute electric power within PHIVDEC Industrial Estate in Misamis Oriental
for a period of five years, renewable for another five years.
However, according to PIA, CEPALCO proved no match to the power
demands of the industries in PIE-MO that most of the companies operating
therein has closed shops. PIA wanted to provide cheap power costs to
industries operating within their estate hence applied with NPC for direct
power connection which was approved. One of the companies which entered
into an agreement with NPC for a direct sale and supply of power was the
Ferrochrome Philippines, one of CEPALCO’s customer. CEPALCO alleged, that
said Agreement violated its right as the authorized operator of an electric light
and power system in the area. NPC however claimed that it was authorized to
sell electric power in bulk to industrial enterprises. The lower court ordered
NPC to permanently desist from giving power supply to FPI and to enter into
any agreement to direct power connection unless coursed through CEPALCO.
ISSUE:

Whether or not NPC may supply power directly to PIA in the PIA-MO area
where CEPALCO has a franchise.

HELD:

NO.
The contention of PIA that it may receive power directly from NPC is being
a public utility is of no merit. A public utility is a business or service engaged in
regularly supplying the public with some commodity or service of public
consequence such as electricity, gas, water, transportation, telephone, or
telegraph services. PIA is a subsidiary of PHIVDEC with governmental and
proprietary functions. However, the fact that PIA is a public utility may not be
exercised in a manner as to prejudice the rights of existing franchisees.

3. JG Summit Holdings, Inc. vs. Court of Appeals, et al, G.R. No. 124293,
September 24, 2003, Tinga, J., Separate Opinion

FACTS:
The National Investment and Development Corporation (NIDC), a
government corporation, entered into a Joint Venture Agreement (JVA) with
Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the
construction, operation and management of the Subic National Shipyard, Inc.
(SNS) which subsequently became the Philippine Shipyard and Engineering
Corporation (PHILSECO). Under the JVA, the NIDC and KAWASAKI will
contribute ₱330 million for the capitalization of PHILSECO in the proportion of
60%-40% respectively. NIDC transferred then all of its rights, title and interest
in PHILSECO to PNB and were then transferred to the national government. An
Asset Privatization Trust (APT) was created and was named trustee of the
national government’s share in PHILSECO.
In the interest of the national economy and the government, the COP and
the APT deemed it best to sell the National Government’s share in PHILSECO to
private entities, hence a public bidding was conducted. The JVA entered
between NIDC and KAWASAKI was modified giving the latter the right to top
by 5% the highest bid for the said shares. The interested bidders were given
copies of the JVA and Asset Specific Bidding Rules (ASBR) drafted for the
national government’s 87.6% equity share in PHILSECO. Petitioner was the
highest bidder and acknowledged KAWASAKI/Philyard’s right to top. However,
petitioner protested the offer of Philyards to top its bid on the ground that
KAWASAKI/Philyards is composed of companies who were losing bidders and
that only KAWASAKI has the right to top. However, the notice to top was
already approved.
Consequently, petitioner filed with this Court a Petition for Mandamusbut
was denied as it was not the proper remedy to question the constitutionality or
legality of the right of first refusal and the right to top exercised by
KAWASAKI/Philyards. The decision was reversed stating that PHILSECO is a
public utility and hence must be 60% Filipino-owned. Therefore, the right to
top granted to KAWASAKI is not allowed since foreign corporations are only
allowed a maximum of 40% share. Petitioner was then upheld as the highest
bidder. On a separate motion for reconsideration, respondents raised the issue
whether or not PHILSECO is a public utility.

ISSUE:
Whether or not PHILSECO is a public utility.
HELD:
NO.
A public utility is a service or business engaged in regularly supplying the
public with some commodity or service of public consequence such as
electricity, gas, water, transportation, telephone, or telegraph services. The
principal determinative of a public utility is that of service to or readiness to
serve, an indefinite public or portion of the public as such which has a legal
right to demand and receive its services and commodities. Therefore, a public
utility holds out generally and may not refuse legitimate demand for service.

It must be noted that PHILSECO is a shipyard. A shipyard is a place or

enclosure where ships are built or repaired. Its nature dictates that it only
serves limited clients whom it may choose to serve at its own discretion.
Therefore, a shipyard is not legally obliged to render its service
indiscriminately to the public. Unlike public utilities, the ship building and ship
repair only serves the public incidentally.

4. Francisco Tatad, et al vs. Sec. Garcia, GR. 114222, April 6, 1995

FACTS:

Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are

members of the Philippine Senate and are suing in their capacities as Senators
and as taxpayers. Respondent Jesus B. Garcia, Jr. is the incumbent Secretary of
the Department of Transportation and Communications (DOTC), while private
respondent EDSA LRT Corporation, Ltd. is a private corporation organized
under the laws of Hongkong.
In 1989, DOTC planned to construct a light railway transit line along EDSA
which shall traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The
plan, referred to as EDSA Light Rail Transit III (EDSA LRT III), was intended to
provide a mass transit system along EDSA and alleviate the congestion and
growing transportation problem in the metropolis.
March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises, Inc.,
represented by Elijahu Levin to DOTC Secretary Oscar Orbos, proposing to
construct the EDSA LRT III on a Build-Operate-Transfer (BOT) basis.
July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects
by the Private Sector, and For Other Purposes," was signed by President
Corazon C. Aquino. Referred to as the Build-Operate-Transfer (BOT) Law, it
took effect on October 9, 1990.
In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT
III project underway, DOTC, on January 22, 1991 and March 14, 1991, issued
Department Orders Nos. 91-494 and 91-496, respectively creating the
Prequalification Bids and Awards Committee (PBAC) and the Technical
Committee.
After its constitution, the PBAC issued guidelines for the prequalification of
contractors for the financing and implementation of the project The notice,
advertising the prequalification of bidders, was published in three newspapers
of general circulation once a week for three consecutive weeks starting
February 21, 1991.
The deadline set for submission of prequalification documents was March
21, 1991, later extended to April 1, 1991. Five groups responded to the
invitation namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of Hongkong,
Mansteel International of Mandaue, Cebu, Mitsui & Co., Ltd. of Japan, and EDSA
LRT Consortium, composed of ten foreign and domestic corporations: namely,
Kaiser Engineers International, Inc., ACER Consultants (Far East) Ltd. and
Freeman Fox, Tradeinvest/CKD Tatra of the Czech and Slovak Federal
Republics, TCGI Engineering All Asia Capital and Leasing Corporation, The
Salim Group of Jakarta, E. L. Enterprises, Inc., A.M. Oreta & Co. Capitol Industrial
Construction Group, Inc, and F. F. Cruz & co., Inc.
After evaluating the prequalification, bids, the PBAC issued a Resolution on
May 9, 1991 declaring that of the five applicants, only the EDSA LRT
Consortium "met the requirements of garnering at least 21 points per criteria,
except for Legal Aspects, and obtaining an over-all passing mark of at least 82
points"

ISSUE:
Whether or not the contention of the petitioner is with merit.

HELD:

NO.
The court ruled that what private respondent owns are the rail tracks,
rolling stocks, rail stations, and the power plant, not the public utility. What
constitutes public utility is not the ownership but their use to serve the public.
Under Section 11 Article XII of the Constitution, it provides that no franchise,
certificate, or any other form of authorization for the operation of a public
utility shall be granted to except to citizens of the Philippines or to
corporations or associations organized under the laws of the Philippines at
least 60% of whose capital is owned by such citizens, not shall such franchise,
certificate or authorization be exclusive character or for a longer period than
fifty years.
Therefore, there is a clear distinction under the law between operation of
public utility and ownership of the facilities and equipment used to serve the
public. The court further explained that the right to operate a public utility may
exist independently and separately from the ownership of the facilities thereof.
It must be noted that under the abovementioned Agreement, private
respondent will immediately deliver possession of the LRT System, upon its
completion, by way of lease to DOTC upon which the latter shall operate the
same as a common carrier. In sum, private respondent will not run the light rail
vehicles and collect fees from the riding public. It will have no dealings with the
public and the public will have no right to demand any services from it.

5. Rodolfo B. Albano vs. Hon. Rainerio O. Reyes, et al, G.R. No. 83551, July
11, 1989

FACTS:
This is a Petition for Prohibition with prayer for Preliminary Injunction or
Restraining Order seeking to restrain the respondents Philippine Ports
Authority (PPA) and the Secretary of the Department of Transportation and
Communications Rainerio O. Reyes from awarding to the International
Container Terminal Services, Inc. (ICTSI) the contract for the development,
management and operation of the Manila International Container Terminal
(MICT).
On 1987, the Philippine Ports Authority (PPA) was directed to prepare the
invitation to bid and all relevant documents and technical requirements
necessary for the public bidding of the development, management, and
operation of the Manila International Container Terminal (MICT). Seven
consortia companies submitted bids and upon evaluation, the award was given
to respondent International Container Terminal Services Inc., (ICTSI).
Petitioner Albano however filed the case at bar assailing the award of the MICT
contract to ITSI claiming that since MICT is a public utility, it needs a legislative
franchise before it can legally operate as a public utility. The contention of
Albano is based on Article XII Section XI of the 1987 Constitution.

ISSUE:
Whether or not the contention of Albano is with merit
HELD:
NO.
The court ruled that the applicable provisions did not required that a
franchise especially granted by Congress is needed for the operation of MICT as
the contract entered into by PPA and such entity is already sufficient. The court
cited Executive Order No. 172 and 3030 which states that franchises issued by
Congress are not required before each and every public utility may operate.
Thus, the law has granted certain administrative agencies the power to grant
licenses for or to authorize the operation of certain public utilities. In addition,
the Court cited EO 30 and PD 857 wherein lawmakers empowered PPA to
undertake by itself and the operation and management of the MICP or to
authorize its operation and management by another by contract or other
means, at its option. Therefore, a franchise from the Congress to authorize an
entity other than the PPA to operate and manage the MICP is already
unnecessary.
6. United States v. Tan Piaco, G.R. No. L-15122, March 10, 1920

FACTS:
Said defendants were charged with a violation of the Public Utility Law
(Act No. 2307 as amended by Acts Nos. 2362 and 2694), in that they were
operating a public utility without permission from the Public Utility
Commissioner.
Appellant herein rented two automobile trucks and was using them along
the highways of the province of Leyte for the purpose of carrying passengers
and freight under a special contract. Appellant however did not carry all
passengers and all freight for all persons who might offer passengers and
freight.

ISSUE:
Whether or not appellant is operating a public utility

HELD:
NO.
Upon perusal of the documents submitted, the Court ruled that under the
special contract, appellant shall only carry particular persons and property. In
that way, passengers or owners of the freight may still have control over the
vehicle as to the contents, direction, and time of use, which does not fall under
the definition of a public utility.
The court explained that there are two things necessary for one to be
considered a public utility:
(a) the individual, co-partnership, corporation etc. is a public utility; and
(b) the individual, co-partnership, corporation etc. must be for public use.

The essential feature of the public use is that it is not confined to privileged
individuals, but is open to the indefinite public. In determining whether a use is
public, it is necessary to look at the proposed mode of doing it. If the use is
merely optional with the owners, or the public benefit is merely incidental, it is
not public use.

7. La Paz Ice Plant & Cold Storage Co., Inc. vs. John Bordman, G.R. No.
L-43668, March 31, 1938

FACTS:

The plaintiff commenced this action to enjoin the defendants from

continuing to exploit the ice factory which they have established in the City of
Iloilo, Province of Iloilo, because they have not provided themselves with the
certificate of public convenience required by Act No. 3108 and its
amendments. In 1908, Iloilo Ice & Cold Storage Co., respondent herein,
established an ice plant in Iloilo City and sold its products by means of tickets
sold to a limited number of customers. I 1923, it changed its name to Iloilo
Commercial & Ice Co., and started selling ice to the general public at a price
 similar to that of the plaintiff’s. Respondents did not provide themselves with a
Certificate of Public Convenience as the factory was established prior to the
enactment of Act No. 3108 which requires for the same. Petitioner is also an
operator of an ice plant and was provided with a certificate of public
convenience. Petitioner required respondent to also obtain such certificate to
avoid ruinous competition but the latter refused to do so.

ISSUE:
Whether or not respondents are required to obtain a certificate of public
convenience

HELD:
NO.
The court cited subsection (i) of Section 15 of Act No. 3108 as amended by
section 2 of Act No. 4033 that public services existing before its approval shall
not provide themselves with a certificate of public convenience bu shall only
pay the fees fixed by law for the issuance of the said certificate.

8. Heirs of Wilson P. Gamboa vs. Finance Secretary Margarito B. Teves et

al, G.R. No. 176579, October 9, 2012

FACTS:

Gamboa questioned the indirect sales of the 12million shares of Philippine

Long Distance Telephone Company (PLDT) to First Pacific, a foreign company.
The total common shareholdings of foreigners increased to about 81.47%.
According to petitioner, it violates the Constitution, specifically Section 11
Article XII wherein petitioners are only allowed to own a capital of a public
utility of at most 40%. The Court ruled that the word “capital” shall mean the
shares of stock entitled to vote in the election of directors and not the total
outstanding capital stock.

ISSUE:

Whether or not the contention of Gamboa is correct.

HELD:
YES, the court ruled that under the constitution, the operation of public
utilities shall be exclusively given to Filipino citizens or corporations or
associations at least 60% of whose capital is owned by Filipino citizens.
Therefore, in case of individuals operating a public utility, he or she must be a
Filipino. Whereas for corporations or associations at least 60% of their capital
must be owned by Filipino citizens. Therefore, to own and operate a public
utility, a corporation’s capital must be at least 60% owned by Filipino citizens.
 9. Metropolitan Cebu Water District vs. Margarita A. Adala, G.R. No.
168914, July 4, 2007

FACTS:
Respondent filed an application with the National Water Resource Board
(NCWB) for the issuance of a Certificate of Public Convenience to operate and
maintain waterworks system in some areas in Brgy. Bulacao, Cebu City.
However, it was opposed by petitioner, that as its Board of Directors did not
consent to the issuance of the franchise applied for and such consent from the
Board is necessary pursuant to P.D. 198. The opposition was however
dismissed by the lower court stating that the operation of respondent will
redound to the benefit of the public and granted the application for a Certificate
of Public Convenience. Petitioner filed a motion for reconsideration but was
denied. It then appealed to the RTC but the same was dismissed. The petitioner
maintains its opposition citing Section 47 of PD 198 which states that no
franchise shall be granted to any other person or agency for domestic,
industrial or commercial water service within the district or any portion
thereof unless and except to the extent that the board of directors of said
district consents thereto.

ISSUE:
Whether or not the consent of the Board of Directors of NCWB is a
condition sine qua non to grant the Certificate of Public Convenience.

HELD:
NO, the court ruled that water districts fall under the term public utility as
defined in the case of National Power Corporation vs CA. A public utility is a
business or service engaged regularly in supplying the public with some
commodity or service of public consequence such as electricity, gas, water,
transportation, telephone, or telegraph. The court further ruled that Section 47
of PD 198, the legal basis of petitioner, is clearly repugnant to Article XIV Section
5 of the 1987 Constitution. It is unconstitutional and may not, therefore be relied
upon by petitioner in support of its opposition against respondent’s application
for CPC.
10. Ernesto B. Francisco Jr. vs. Toll Regulatory Board et al, G.R. No.
166910, October 19, 2010

FACTS:
Pursuant to PD 1112, a Toll Regulatory Board was created which shall have
the power to enter, if behalf of the Republic, into contracts for the construction,
maintenance and operation of tollways, grant authority to operate toll facility,
issue Toll Operation Certificate and fix initial toll rates, and adjust the same. PD
111 was enacted which granted Philippine National Construction Corporation
(PNCC) a period of thirty years to construct, maintain and operate toll facilities
in the North Luzon and South Luzon Expressways with the right to collect toll
fees at such rates as TRB will authorize.
A Memorandum of Understanding was entered for the construction,
rehabilitation and expansion of the expressways. In addition, a Supplemental
Toll Operation Agreement (STOA) was also approved which defines the scope
of the road project coverage, the terminal date of the concession and provisions
on initial toll rate built-in formula for adjustment of toll rates, investment
recovery clauses and contract termination in the event of the concessionaire’s,
PNCC’s or TRB’s default, as the case may be. Petitioner sought to nullify the
STOA as it violates the Constitution and that it is alleged to be infirm as they
effectively awarded a purported BOT without public bidding.

ISSUE:
Whether or not the STOA is in violation of the constitution.

HELD:
NO, the TRB possess sufficient power to grant a qualified person or entity
with authority to construct, maintain, and operate toll facility and issue the
corresponding toll operating permit or TOC. Furthermore, TRB cannot extend
the STOA for more than fifty years as it is the maximum period provided under
the Constitution.

11. Randolf S. David et al vs. Gloria M. Arroyo et al., G.R. No. 171396, May 3,
2006

FACTS:
The case at bar are seven consolidated petitions for certiorari and
prohibition alleging that then President Arroyo, in issuing Presidential
Proclamation No. 1017 and General Order No. 05 declaring a State of National
Emergenct, has committed a grave abuse of discretion. In threshing out the
legal basis of such proclamation, it was found that President Arroyo did not
rely on Section 18 Article VII of the 1987 Constitution. She however anchored it
on Section 17 of Article XII which stated that the State may take over
privately-owned public utilities and business affected with public interest.
 ISSUE:
Whether or not the President, as part of her emergency powers, may take
over privately owned public utility or business affected with public interest,
without the concurrence of the Congress.

HELD:
NO, under the Constitution, although the President alone can declare a state
of national emergency, but he has no power to take over privately-owned public
utilities or business affected with public interest. Without legislation, the
President has no power to point out the types of business affected with public
interest that should be taken over. In short, the President has no absolute
authority to exercise all the powers of the State under Section 17, Article VII in
the absence of an emergency powers act passed by the Congress.

12. Francisco Tatad, et al vs. Sec. Garcia, GR. 114222, April 6, 1995

FACTS:

DOTC planned to construct a railway transit along EDSA to provide a mass

transit system along EDSA as well as to alleviate the congestion and growing
transportation problem. On 1990, the Build-Operate-Transfer (BOT) Law was
enacted which provided two schemes for the financing, construction and
operation of government projects through private initiative and investment
Build-Operate-Transfer (BOT) or Build-Transfer (BT). In view of the enactment
of such law, a Prequalification Bids and Awards Committee was created which
provided for the guidelines for the contractors for the financing and
implementation of the project. Five group submitted their prequalification
documents but it was only EDSA LRT Consortium which met the requirements.
DOTC and respondent EDSA LRT Corporation Ltd., in substitution of EDSA
LRT Consortium then entered into an Agreement to building, lease, and
transfer a light rail transit system for EDSA under the terms of the BOT Law
which was then submitted to the President for approval. However, Executive
Secretary Franklin Drilon informed then Secretary Prado that the President
could not grant the requested approval. In view of the comments of Drilon,
DOTC and respondent EDSA LRT Corporation Ltd., re-negotiated the agreement
and entered into a Revised and Restated Agreeent to Build, Lease, and Transfer
a Light Rail Transit System for EDSA. The Agreement was however questioned
by petitioners as EDSA LRT Corporation Ltd., is a foreign corporation and thus
should not own EDSA LRT III.

ISSUE:
Whether or not the Agreement vests upon LRT Corporation Ltd., the
ownership of EDSA LRT III

HELD:
NO, the court ruled that there is a clear distinction between the operation
of a public utility and ownership of the facilities and equipment used to serve
the public. Ownership is defined as a relation in law by virtue of which a thing
pertaining to one person is completely subjected to his will in everything not
prohibited by law or the concurrence with the rights of another. It must be
noted that private respondent and DOTC agreed that on completion date,
private respondent will immediately deliver possession of the LRT system by
way of lease for 25 years, during which period DOTC shall operate the same as
a common carrier and private respondent shall provide technical maintenance
and repair services to DOTC.

13. Philippine Airlines vs. Civil Aeronautics Board, G.R. No. 119528, March
26, 1997

FACTS:
On 1994, private respondent GrandAir applied for a Certificate of Public
Convenience and Necessity with the Civil Aeronautics Board. This was however
opposed by petitioner PAL stating among others that CAB has no jurisdiction to
hear the application until GrandAir has obtained a franchise to operate from
the Congress.

ISSUE:
Whether or not the contention of petitioner is with merit.

HELD:
NO, the court ruled that it is not stated in the law that a legislative franchise
is necessary for an entity to operate as a domestic air transport operator.
Although Section 11 Article XII recognizes the Congress’s control over any
franchise, certificate or authority to operate a public utility, it does not mean
Congress has exclusive authority to issue the same. Congress may delegate the
authority to regulate the issuance of a license to operate domestic air transport
services. Congress, by giving the respondent Board the power to issue permits
for the operation of domestic transport services, has delegated to the said body
the authority to determine the capability and competence of a prospective
domestic air transport operator to engage in such venture. This is not an
instance of transforming the respondent Board into a mini-legislative body,
with unbridled authority to choose who should be given authority to operate
domestic air transport services.