CHAPTER VI

PUBLIC SERVICE

A “public utility ” is a business or service engaged in regularly supplying

the public with some commodity or service of public consequences such as
electricity, gas, water, transportation, telephone or telegraph service. The term
implies public use and service. (National Power Corporation v. Court of
Appeals and Cepalco, G.R. No. 112702, September 26, 1997)
Public utilities are privately owned and operated businesses whose services
are essential to the general public. They are enterprises, which specially cater to the
needs of the public and conduce to their comfort and convenience. As such, public
utility services are impressed with public interest and concern. The same is true
with respect to the business of common carrier which holds such a peculiar relation
to the public interest that there is super induced upon it the right of public
regulation when private properties are affected with public interest, hence, they
cease to be juris privati only. When, therefore, one devotes his property to a use in
which the public has an interest, he, in effect grants to the public an interest in that
use, and must submit to the control by the public for the common good, to the
extent of the interest he has thus created. (Kilusang Mayo Uno Labor Center v.
Hon. Jesus B. Garcia, Jr., the LTFRB and Provincial Bus Operators
Association of the Philippines, Inc., G.R. No. 115381, December 23, 1994)
In JG Summit Holdings, Inc. v. Court of Appeals, 412 SCRA 10,
September 24, 2003, it was held that the terms “public service” and “public
utility,” however, do not have the same legal meaning, at least since the enactment
of C.A. No. 454. The terms are related though.
The definition of “public service ” in the Public Service Act, as last
amended by R.A. No. 2611, includes every person who owns, operates,
manages or controls, for hire or compensation, and done

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PI Bl 1C Sl-RVICF

for general business purposes, any common carrier railroad, street railway,
traction railway, subway motor vehicle, either for freight or passenger, or
both with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express sen'ice, steamboat, or
steamship line, pontines, ferries, and water craft engaged in the
transportation of passengers or freight or both, shipyard, marine railway',
marine repair shop, wharf or dock, ice plant, ice refrigeration plant, canal,
irrigation system gas, electric light, heat and power, water supply and
power, petroleum, sewerage system, wire or wireless comtnunications
systems, broadcasting stations and other similar public services. A ‘‘public
utility,” on the other hand, 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
service. Simply stated, a public utility provides a service or facility needed for
present day living which cannot be denied to anyone who is willing to pay for it.
Formerly, there was a statutory definition of “public utility, ” but it was
abandoned in C.A. No. 454. The definition was instead solely applied to “public
service” apparently because it did not exactly fit the concept of public utility. It is
significant in this regard that while the 1935 Constitution which took effect on
February 2, 1935 specifically mentioned “public utility,” C.A. No. 454 shifted
from “public utility” to “public service” as the sole reference term in the Public
Service Act.
Another dissimilarity is that a public utility requires a franchise, aside
from a certificate of public necessity and convenience, for its operation, while a
public service, which is not a public utility, requires only a certificate of public
convenience. The dichotomy in requirements flows from the enforced
indeterminacy of the market for the service provided by a public utility. Thus, it
may be pointed out that all public utilities are public services but the converse
is not true. This is so because the term “public utility” connotes public use and
service to the public.
A legislative declaration such as the definition by enumeration in the
Public Service Act does not ipso facto render a business or service a public
utility. Whether or not one is a public utility is a matter of judicial, not legislative
determination.

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COMMONWEALTH ACT NO. 146

(SECTIONS 13 TO 16)

Section 13. (a) The Commission shall have jurisdiction, supervision,

and control over all public services and their franchises, equipment, and
other properties, and in the exercise of its authority, it shall have the
necessary powers and the aid of the public force: Provided, That public
service owned or operated by government entities or government-owned or
-controlled corporations shall be regulated by the Commission in the same
way as privately-owned public services, but certificates of public
convenience or certificates of public convenience and necessity shall not be
required of such entities or corporations: And provided, further, That it shall
have no authority to require steamboats, motor ships and steamship lines,
whether privately-owned, owned or operated by any Government
controlled corporation or instrumentality to obtain certificate of public
convenience or to prescribe their definite routes or lines of service.
(b) The term “public service” 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, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger or both, with or without fixed route
and whatever may be its classification, freight or carrier service of any class,
express service, steamboat, or steamship line, pontines, ferries, and water
craft, engaged in the transportation of passengers or freight or both,
shipyard, marine railway, marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal irrigation system, gas, electric light, heat and
power, water supply power, petroleum, sewerage system, wire or wireless
communication systems, wire or wireless broadcasting stations and other
similar public services: Provided, however, That a person engaged in
agriculture, not otherwise a public service, who owns a motor vehicle and
uses it personally and/or enters into a special contract whereby said motor
vehicle is offered for hire or compensation to a third-party or third-parties

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engaged in agriculture, not itself or themselves a public service, for operation by the
latter for a limited time and for a specific purpose directly connected with the
cultivation of his or their farm, the transportation, processing, and marketing of
agricultural products of such third-party or third-parties shall not be considered as
operating a public service for the purposes of this Act.
(c) The word “person” includes every individual, co-partnership, joint
stock company or corporation, whether domestic or foreign, their lessees, trustees or
receivers, as well as any municipality, province, city, government-owned or
-controlled corporation, or agency of the Government of the Philippines, and
whatever other persons or entities that may own or possess or operate public service.
(As amended by R.A. Nos. 1270 and 2677)

Powers and duties of the Public Service Commission, and the purpose and intent
for which it was created, and the legal rights and privileges of a public utility
operating under a prior license.

Batangas Transportation Co. v.

Cayetano Orlanes G.R. No.
28865, December 19,1928
The primary purpose of the Public Service Commission Law is to secure
adequate, sustained service for the public at the least cost, and to protect and
conserve investments, which have already been made for that purpose.
It must be conceded that an autobus line is a public utility, and that in all
things and respects, it is what is legally known as a common carrier, and that it is
an important factor in the business conditions of the Islands, which is daily
branching out and growing very fast.
Before such a business can be operated, it must apply for, and obtain, a
license or permit from the Public Service Commission, and comply with certain
defined terms and conditions, and when the license is once granted, the operator
must conform to, and comply with, all reasonable rules and regulations of the
Public Service Commission. The object and purpose of such a commission,
among other things, is to look

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out for, and protect, the interests of the public, and, in the instant case, to provide
it with safe and suitable means of travel over the highways in question, in like
manner that a railroad would be operated under like terms and conditions. To all
intents and purposes, the operation of an autobus line is very similar to that of a
railroad, and a license for its operation should be granted or refused on like terms
and conditions. For many and different reasons, it has never been the policy of a
public service commission to grant a license for the operation of a new line of
railroad which parallels and covers the same field and territory of another old
established line, for the simple reason that it would result in ruinous competition
between the two lines, and would not be of any benefit or convenience to the
public.
The Public Service Commission has ample power and authority to make
any and all reasonable rules and regulations for the operation of any public utility
and to enforce compliance with them, and for failure of such utility to comply
with, or conform to, such reasonable rules and regulations; the Commission has
power to revoke the license for its operation. It also has ample power to specify
and define what is a reasonable compensation for the services rendered to the
traveling public.
That is to say, the Public Service Commission, as such, 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.
Hence, and for such reasons, the fact that the Commission has previously
granted a license to any person to operate a bus line over a given highway and
refuses to grant a similar license to another person over the same highway, does not
in the least create a monopoly in the person of the licensee, for the simple reason
that at all times the Public Service Commission has the power to say what is a
reasonable

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compensation to the utility, and to make reasonable rules and regulations for the
convenience of the traveling public and to enforce them.
The proceeding we are considering is governed by Section 13. That is the
general section of the Act comprehensively describing the duty of the Commission,
vesting it with power to fix and order substituted new rates for existing rates. The
power is expressly made to depend on the condition that, after full hearing and
investigation, the commission shall find existing rates to be unjust, unreasonable,
unjustly discriminatory, or unduly preferential. We conclude that a valid order of the
Commission under the act must contain a finding of fact after hearing and
investigation, upon which the order is founded, and that, for lack of such a finding,
the order in this case was void.
“Is a certificate of public convenience going to be issued to a second operator
to operate a public utility in a field where, and in competition with, a first operator
who is already operating a sufficient, adequate and satisfactory service?”
So long as the first licensee keeps and performs the terms and conditions of
its license and complies with the reasonable rules and regulations of the
Commission and meets the reasonable demands of the public, it should have more or
less of a vested and preferential right over a person who seeks to acquire another and
a later license over the same route. Otherwise, the first licensee would not have any
protection on his investment, and would be subject to ruinous competition and thus
defeat the very purpose and intent for which the Public Service Commission was
created.
The Court is clearly of the opinion that the order of the Commission granting
the petition of Orlanes in question, for the reasons therein stated, is null and void,
and that it is in direct conflict with the underlying and fundamental principles for
which the Commission was created.
The question presented is very important and far-reaching and one of first
impression in this court, and for such reasons [the Court] ha[s] given this case the
careful consideration which its importance deserves. The government having taken
over the control and supervision of all public utilities, so long as an operator under a
prior license complies with the terms and conditions of license and reasonable rules
and

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regulations for its operation and meets the reasonable demands of the public, it is
the duty of the Commission to protect rather than to destroy his investment by the
granting of a subsequent license to another for the same thing over the same route
of travel. The granting of such a license does not serve its convenience or promote
the interests of the public.

Section 14. The following are exempted from the provisions of the
preceding section:
(a) Warehouses;
(b) Vehicles drawn by animals and baticas moved by oar or sail,
and tugboats and lighters;
(c) Airship within the Philippines except as regards the fixing of
their maximum rates on freight and passengers;
(d) Radio companies except with respect to the fixing of rates;
(e) Public services owned or operated by any instrumentality of
the National Government or by any government-owned or -controlled
corporation, except with respect to the fixing of rates. (As amended by
R.A. No. 2031)
Section 15. With the exception of those enumerated in the
preceding section, no public service shall operate in the Philippines
without possessing a valid and subsisting certificate from the Public
Service Commission, known as “certificate of public convenience,” or
“certificate of convenience and public necessity,” as the case may be, to
the effect that the operation of said service and the authorization to do
business will promote the public interests in a proper and suitable
manner.
The Commission may prescribe as a condition for the issuance
of the certificate provided in the preceding paragraph that the service
can be acquired by the Republic of the Philippines or by any
instrumentality thereof upon payment of the cost price of its useful
equipment, less reasonable depreciation; and likewise, that the
certificate shall be valid only for a definite period of time, and that the
violation of any of these conditions shall produce the immediate

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cancellation of the certificate without the necessity of any express action on

the part of the Commission.
In estimating the depreciation, the effect of the use of the equipment,
its actual condition, the age of the model, or other circumstances affecting
its value in the market shall be taken into consideration.
The foregoing is likewise applicable to any extension or amendment
of certificates actually in force and to those which may hereafter be issued,
to permit to modify itineraries and time schedules of public services, and to
authorizations to renew and increase equipment and properties. (As
amended by Com. Act No, 454)

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:
(a) To issue certificates which shall be known as Certificates of
Public Convenience, authorizing the operation of public services within the
Philippines whenever the Commission finds 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: Provided, That thereafter,
certificates of public convenience and necessity will be granted only to
citizens of the Philippines or of the United States or to corporations, co-
partnerships, associations or joint-stock companies constituted and
organized under the laws of the Philippines: Provided, That sixty per centum
of the stock or paid-up capital of any such corporation, co-partnership,
association or joint-stock company must belong entirely to citizens of the
Philippines or of the United States: Provided, further, That no such
certificates shall be issued for a period of more than fifty years.
(b) To approve, subject to constitutional limitations, any franchise
or privilege granted under the provisions of Act No. 667, as amended by Act
No. 1022, by any political subdivision of

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the Philippines when, in the judgment of the Commission, such franchise

or privilege will properly conserve the public interests, and the
Commission shall in so approving impose such conditions as to
construction, equipment, maintenance, service, or operation as the public
interests and convenience may reasonably require, and to issue certificates
of public convenience and necessity when such is required or provided by
any law or franchise.
(c) To fix and determine individual or joint rates, tools, charges,
classifications, or schedules thereof, as well as commutations, mileage,
kilometrage, and other special rates which shall be imposed, observed, and
followed thereafter by a public service: Provided, That the Commission
may, in its discretion, approve rates proposed by public services
provisionally and without necessity of any hearing; but it shall call a
hearing thereon within thirty days thereafter, upon publication and notice
to the concerns operating in the territory affected: Provided, further, That
in case the public service equipment of an operator is used principally or
secondarily for the promotion of a private business, the net profits of said
private business shall be considered in relation with the public service of
such operator for the purpose of fixing the rates.
(d) To fix just and reasonable standards, classifications,
regulations, practices, measurements, or service to be furnished, imposed,
observed, and followed thereafter by any public services.
(e) To ascertain and fix adequate and serviceable standards for the
measurement of quantity, quality, pressure, initial voltage, or other
condition pertaining to the supply of the product or service rendered by
any public service, and to prescribe reasonable regulations for the
examination and test of such product or service and for the measurement
thereof.
(f) To establish reasonable rules, regulations, instructions,
specifications, and standards, to secure the accuracy of all meters and
appliances for measurements.
(g) To compel any public service to furnish safe, adequate, and
proper service as regards the manner of furnishing the same as well as the
maintenance of the necessary material and equipment.

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(h) To require any public service to establish, construct, maintain, and

operate any reasonable extension of its existing facilities, where, in the
judgment of said Commission, such extension is reasonable and practicable
and will furnish sufficient business to justify the construction and
maintenance of the same, and when the financial condition of the said public
service reasonably warrant the original expenditure required in making and
operating such extension.
(i) To direct any railroad, street railway or traction company to
establish and maintain at any junction or point of connection or intersection
with any other line of said road or tract, or with any other line of any other
railroad, street railway or traction company, such just and reasonable
connection as shall be necessary to promote the convenience of shippers of
property, or of passengers, and in like manner to direct any railroad, street
railways, or traction company engaged in carrying merchandise, to construct,
maintain and operate, upon reasonable terms, a switch connection with any
private sidetrack which may be constructed by any shipper to connect with the
railroad, street railway or traction company line where, in the judgment of the
Commission, such connection is reasonable and practicable, and can be put in
with safety, and will furnish sufficient business to justify the construction and
maintenance of the same.
(j) To authorize, in its discretion, any railroad, street railway or
traction company to lay its tracts across the tracks of any other railroad,
street railway or traction company, or across any public highway.
(k) To direct any railroad or street railway company to install such
safety devices or adopt such other reasonable measures as may in the
judgment of the Commission be necessary for the protection of the public at
passing grade crossings of: (1) public highways and railroads, (2) public
highways and street railways, or (3) railroads and streets railways.
(l) To fix and determine proper and adequate rates of depreciation
of the property of any public service which will he observed in a proper and
adequate depreciation account to

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be carried for the protection of stockholders, bondholders or creditors,

in accordance with such rules, regulations, and form of account as the
Commission may prescribe. Said rates shall be sufficient to provide the
amounts required over and above the expense of maintenance to keep
such property in a state of efficiency corresponding to the progress of
the industry. Each public service shall conform its depreciation
accounts to the rates so determined and fixed, and shall set aside the
money so provided for out of its earnings and carry the same in a
depreciation fund. The income from investments of money in such fund
shall likewise be carried in such fund. This fund shall not be expended
otherwise than for depreciation, improvements, new constructions,
extensions or conditions to the property of such public service.
(m) To amend, modify or revoke at any time any certificate
issued under the provisions of this Act, whenever the facts and
circumstances on the strength of which said certificate was issued have
been misrepresented or materially changed.
(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.
(o) To fix, determine, and regulate, as the convenience of the
State may require, a special type for auto-buses, trucks, and motor
trucks, to be hereafter constructed, purchased, and operated by
operators after the approval of this Act; to fix and determine a special
registration fee for auto-buses, trucks, and motor trucks so constructed,
purchased and operated: Provided, That said fees shall be smaller than
those charged for auto-buses, trucks, and motor trucks of types not made
regulation under the subsection.

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Certificate of Public Convenience, Defined

A certificate of public convenience (CPC) is an authorization granted
by the LTFRB for the operation of land transportation services for public use
as required by the law. Pursuant to Section 16(a) of the Public Service Act, as
amended, the following requirements must be met before a CPC may be
granted, to wit: (i) the applicant must be a citizen of the Philippines, or a
corporation or co-partnership, association or joint-stock company constituted
and organized under the laws of the Philippines, at least 60 per centum of its
stock or paid-up capital must belong entirely to citizens of the Philippines; (ii)
the applicant must be financially capable of undertaking the proposed service
and meeting the responsibilities incident to its operation; and (iii) the
applicant must prove that the operation of the public service proposed
and the authorization to do business will promote the public interest in a
proper and suitable manner. It is understood that there must be proper notice
and hearing before the PSC can exercise its power to issue a CPC.
By its terms, public convenience or necessity generally means
something fitting or suited to the public need. As one of the basic requirements
for the grant of a CPC, public convenience and necessity exists when the
proposed facility or service meets reasonable want of the public and supply a
need, which the existing facilities do not adequately supply. The existence or
non-existence of public convenience and necessity is therefore a question of
fact that must be established by evidence, real and/or testimonial; empirical
data; statistics and such other means necessary, in a public hearing conducted
for that purpose. The object and purpose of such procedure, among other
things, is to look out for, and protect, the interests of both the public and the
existing transport operators.
Verily, the power of a regulatory body to issue a CPC is founded on the
condition that after full-dress hearing and investigation, it shall find, as a fact,
that the proposed operation is for the convenience of the public. Basic
convenience is the primary consideration for which a CPC is issued, and that
fact alone must be consistently borne in mind. Also, existing operators in
subject routes must be given an opportunity to offer proof and oppose the
application. Therefore, an applicant must, at

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all times, be required to prove his capacity and capability to furnish the service
which he has undertaken to render. And all this will be possible only if a
public hearing were conducted for that purpose. (KMU Labor Center v. Hon.
Garcia, supra)
Certificate of Public Convenience and Certificate of Convenience and
Public Necessity, distinguished.
“Certificate of Public Convenience ” is issued by the Commission
authorizing the operation of public service within the Philippines whenever the
Commission finds that the operation of the public service proposed will promote the
public interests in a proper and suitable manner; while “certificate of public
convenience and necessity ” is issued by the Commission upon approval of any
franchise or privilege granted by any political subdivision of the Philippines when
in the judgment of the Commission, such franchise or privilege will properly
conserve the public interest. fSee Subsections [a] and [b])
In Philippine Airlines, Inc. v. Civil Aeronautics Board and Grand
International Airways, G.R. No. 119528, March 26, 1997, it was held that there
is no more distinction between certificate of public convenience and certificate of
convenience and public necessity. Said the Supreme Court: “Many and varied are
the definition of certificates of public convenience which court’s and legal writers
have drafted. Some statutes use the terms “convenience and necessity ” while
others use only the words “public convenience. ” The terms “convenience and
necessity, ” if used together in a statute, are usually held not to be separable, but are
construed together. Both words modify each other and must be construed together.
The word “necessity ” is so connected, not as an additional requirement but to
modify and qualify what might otherwise be taken as the strict significance of the
word necessity. Public convenience and necessity exists when the proposed facility
will meet a reasonable want of the public and supply a need, which the existing
facilities do not adequately afford. It does not mean or require an actual physical
necessity or an indispensable thing.”
“The terms ‘convenience’ and ‘necessity’ are to be construed together,
although they are not synonymous, and effect must be given both. The convenience
of the public must not be circumscribed by

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according to the word ‘necessity’ its strict meaning or an essential requisite.”

The use of the word “necessity,” in conjunction with “public convenience”
in a certificate of authorization to a public service entity to operate, does not in any
way modify the nature of such certification, or the requirements for the issuance of
the same. It is the law, which determines the requisites for the issuance of such
certification, and not the title indicating the certificate.

Philippine Airlines v. Civil Aeronautics

Board and Grand International Airways
G.R. No. 119528, March 26,1997
FACTS: Petitioner Philippine Airlines, Inc. in a Special Civil Action for
Certiorari and Prohibition under Rule 65 of the Rules of Court seeks to prohibit
respondent Civil Aeronautics Board from exercising jurisdiction over private
respondent’s Application for the issuance of a Certificate of Public Convenience
and Necessity, and to annul and set aside a temporary operating permit issued by
the Civil Aeronautics Board in favor of Grand International Airways (Grandair, for
brevity) allowing the same to engage in scheduled domestic air transportation
services, particularly the Manila-Cebu, Manila-Davao, and converse routes.
Petitioners argue that the respondent Board acted beyond its powers and
jurisdiction in taking cognizance of Grand Airs application for the issuance of a
Certificate of Public Convenience and Necessity, and in issuing a temporary
operating permit in the meantime, since Grand Air 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 service.
Respondent Grandair, on the other hand, posits that a legislative franchise is
no longer a requirement for the issuance of a Certificate of Public Convenience and
Necessity or a Temporary Operating Permit, following the Court’s
pronouncements in the case of Albano v. Reyes, as restated by the Court of
Appeals in Avia Filipinas International v. Civil Aeronautics Board and
Silangan Airways, Inc. v. Grand International Airways, Inc., and the Hon.
Civil Aeronautics Board.

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ISSUES: 1) Whether the Civil Aeronautics Board can issue the

Certificate of Public Convenience and Necessity or Temporary Operating
Permit to a prospective domestic air transport operator who does not possess
a legislative franchise to operate as such.
2) Whether Congress, in enacting R.A. No. 776, has delegated the
authority to authorize the operation of domestic air transport services to the
respondent Board, such that Congressional mandate for the approval of such
authority is no longer necessary.
HELD: The Civil Aeronautics Board has jurisdiction over Grand
Air’s Application for a Temporary Operating Permit. This rule has been
established in the case of Philippine Air Lines, Inc. v. Civil Aeronautics
Board, promulgated on June 13,1968. The Board is expressly authorized by
R.A. No. 776 to issue a temporary operating permit or Certificate of Public
Convenience and Necessity, and nothing contained in the said law negates
the power to issue said permit before the completion of the applicant’s
evidence and that of the oppositor thereto on the main petition. Indeed, the
CAB’s authority to grant a temporary permit “upon its own initiative”
strongly suggests the power to exercise said authority, even before the
presentation of said evidence has begun. Assuming arguendo that a
legislative franchise is prerequisite to the issuance of a permit, the absence
of the same does not affect the jurisdiction of the Board to hear the
application, but tolls only upon the ultimate issuance of the requested
permit.
The power to authorize and control the operation of a public utility is
admittedly a prerogative of the legislature, since Congress is that branch of
government vested with plenary powers of legislation.
“The franchise is a legislative grant, whether made directly by the
legislature itself, or by any one of its properly constituted instrumentalities.
The grant, when made, binds the public, and is, directly or indirectly, the act
of the state.”
On the second issue, the Supreme Court held that:
Congress has granted certain administrative agencies the power to
grant licenses for, or to authorize the operation of certain public utilities.
With the growing complexity of modem life, the multiplication of the
subjects of governmental regulation, and the increased difficulty of
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administering the laws, there is a constantly growing tendency towards

the delegation of greater powers by the legislature, and towards the
approval of the practice by the courts. It is generally recognized that a
franchise may be delivered 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.
The trend of modem 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.
Given the foregoing postulates, [W]e find that the Civil Aeronautics
Board has the authority to issue a Certificate of Public Convenience and
Necessity, or Temporary Operating Permit to a domestic air transport
operator, who, though not possessing a legislative franchise, meets all the
other requirements prescribed by the law. Such requirements were
enumerated in Section 21 of R.A. No. 776.
There is nothing in the law or 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 public utility, it does not mean that 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.
Prior applicant rule. — Where there are various applicants for a
public utility over the same territory, all conditions being equal, priority
in the filing of the application for a certificate of public convenience
becomes an important factor in the granting or refusal of a certificate.
(Batangas Trans. Co. v. Orlanes, 52 Phil. 455)

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 TRANSPORTATION LAWS

Old operator rule. — Before permitting a new operator to invade the

territory of another already established with a certificate of public convenience,
thereby entering into competition with it, the prior operator must be given an
opportunity to extend its service in order to meet the public. (Javier v.
Orlanes, 53 Phil. 468)
Third operator rule. — Where two operators are more than serving the
public, there is no reason to permit a third operator to engage in competition
with them. Thus, the fact that it is only one trip and of little consequence, is not
sufficient reason to grant the application. (Yangco v. Esteban, 58 Phil. 346)
However, if later on circumstances would change requiring the operation of
new units or extending existing facilities, the third operator rule would be
subject to the prior applicant rule and also as to who may best subserve the
public interests.
Protection of investment rule. — It is one of the primary purposes of the
Public Service Law to protect and conserve investments, which have already
been made for that purpose by public service operators. (Batangas Trans. Co.
v. Orlanes, 52 Phil 455)

First applicant to operate service be given preference if financially competent.

Tomas Litimco v. La Mallorca

G.R. Nos. L-17041-42, May 18,1962
FACTS: Tomas Litimco filed a petition before the Public Service
Commission praying for authority to operate a TPU service on the line
Manila-Malolos via Sta. Isabel with the use of 10 units. To the petition, several
operators filed written oppositions. On the date set for hearing, petitioner adduced
evidence in support of his petition, but none of the oppositors submitted evidence
in support of their oppositions. Thereafter, the petition was submitted for
decision.
On November 7, 1958, before the Public Service Commission could
render its decision, La Mallorca, another operator, moved to reopen the case
stating that if the petition to operate the line proposed be granted it would work to
its prejudice and so it requested a reopening in order that it may file its opposition
and present evidence in support

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PUBLIC SERVICE

thereof. The motion was granted and, accordingly, the case was set for hearing
on January 12, 1959. However, instead of presenting evidence in support of its
opposition, La Mallorca moved for postponement, only to announce days later
that instead of merely objecting to the petition, it decided to file an application
under a separate number (Case No. 63120) requesting for authority to operate
the same line applied for by petitioner by rerouting 4 of its 10 round trip units
of the line Malolos-Manila via Guiguinto. To this application, several
oppositions were presented, including petitioner himself, although only the
latter presented evidence in support of his opposition. Because of the identity
of the issues involved, the two applications were heard jointly.
After a protracted hearing, the Public Service Commission rendered
decision denying petitioner’s application but granting that of respondents on the
ground that the latter has a better right to render the service applied for. Petitioner
interposed the present petition for review.
ISSUE: Whether or not the priority in filing of the application, other
conditions being equal, is an important factor in determining the rights of public
service companies.
HELD: Yes. There is no doubt that petitioner was the first to apply
for the service in the territory in question. Through his amended application,
petitioner has applied for the new service as early as October 24,1958, while
respondent only was awakened and followed suit when it filed its
application on January 21,1959, after petitioner’s application was already
submitted for decision. Since it is admitted that petitioner is financially
competent and able to operate the line proposed, for it is a matter of record
that he is also an operator of a bus line from Manila to Malolos via Bulacan,
[W]e see no plausible reason why he should not be given preference to
operate the service applied for considering that he is the first one to apply for
such line. This is in accord with the policy constantly adopted by this Court
in analogous cases, which we find to be sound, to stave off any act of
discrimination or partiality against any applicant for operation of a new line.
While there may be cases where an applicant, even if ahead in time, was not
given the service, it is because it was proven that he was financially
incompetent, or otherwise disqualified, to render the service. If an applicant
is qualified financially,

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 TRANSPORTATION LAWS

and is able to undertake the service, he should be given the preference as a

matter of fairness and justice. Indeed, this Court has postulated that “priority
in the filing of the application for a certificate of public convenience is, other
conditions being equal, an important factor in determining the rights of the
public service companies.” Considering that petitioner has filed his
application much ahead in point of time than respondent, and is financially
competent, the action of the Public Service Commission in giving preference
to respondent is not justified.
The argument that the application of petitioner for the operation of the
new line calls for the purchase of 10 new trucks which would result in further
depletion of the dollar reserve of our government, while the application for
re-routing of respondent will not entail any further expenditure, is of no
consequence, if the operation will redound to the benefit of the riding public.
The operation of a new line as a general proposition always involves a new
investment, which may happen even with old operators. In the course of
operation, and with the passing of time, new equipment and facilities may be
found necessary to maintain an efficient service, which additional
expenditure cannot certainly be considered as a cause for disruption of the
service. This is a matter of finance, which concerns exclusively the one who
desires to operate the new line. At any rate, the new line merely covers seven
kilometers of new territory, which traverses three sparsely populated barrios,
and considering that respondent did not deem it necessary to cover said
territory except after the passing of many years, and only thought of giving
the service when petitioner filed his application. Fairness requires that
preference be given to petitioner.

A certificate of public convenience may be granted to a new operator

without giving the old operator an opportunity to improve its
equipment and service.

Fortunato F. Halili v. Ruperto Cruz

G.R. No. L-21061, June 27,1968
FACTS: Herein respondent filed, on September 19, 1961, with the
Public Service Commission an application, praying for the grant of a
certificate of public convenience to operate, under PUB denomination,

330
 CIIAITKR V!
I’Um.lC SRRV1CT.

|() buses between Norzagaray (Bulacan) and Piers (Manila), via Novaliehes Road,
A. Bonifacio Road, Blumentritt Street, Rizal Avenue, MacArtluir Bridge, Aduana
and 13th Streets; and on the return trip, via Boston Street, MacArtluir Bridge,
Rizal Avenue, Blumentritt, A. Bonifacio Road, and Novaliehes Road. The
application was opposed by l)e Dios Transportation Co., Inc., Raymundo
Transportation Co., Inc., POP Transit Inc., Villa Rey Transit, Inc., and by herein
petitioner- appellant Fortunato F. Halili who was the operator of the
transportation service known as “Halili Transit.” Petitioner, in his opposition
alleged, substantially, that he was an operator of a bus service on the line applied
for, enumerating at the same time the other lines he operated which were
traversed by the route mentioned in respondent’s application; that his service, as
well as that of other bus operators on the route, was more than adequate to meet
the demands of the traveling public; that the grant of the application would
merely result in wasteful and ruinous competition, and that the respondent was
not financially capable of operating and maintaining the service proposed by him.
After several hearings in which the parties presented their evidence, oral
and documentary, the Public Service Commission rendered a decision, on
February 13, 1963, granting a certificate of public convenience to respondent
Ruperto Cruz to operate 10 buses under PUB denomination on the line
Norzagaray (Bulacan)-Piers (Manila) passing through the routes applied for.
Petitioner contends that “The Public Service Commission erred in
failing to give petitioner-appellant the right of protection to investment to
which petitioner-appellant is entitled.”
ISSUE: Whether or not the protection to investment rule is a paramount
consideration in the grant of certificate of public convenience.
HELD: Petitioner claims, that the Public Service Commission failed to
give him the protection that he is entitled to, being an old and established
public service operator. As a general principle, public utility operators must
be protected from ruinous competition, such that before permitting a new
operator to serve in a territoiy already served by another operator, the latter
should first be given opportunity to improve his equipment and service. This
principle, however, is subject

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 TRANSPORTATION LAWS

to justifiable exceptions. The primary consideration in the grant of a certificate of

public convenience must always be public convenience. Thus, this Court said:
“While it is the duty of the government as far as possible to protect
public utility operators against unfair and unjustified competition, it is
nevertheless obvious that public convenience must have the first
consideration, x x x.” (Raymundo Transportation Co. v. Perez, 56 Phil.
274)
The public convenience is properly served if passengers who take buses at
points in one part of a line are able to proceed beyond those points without having
to change buses. On this point, this Court said:
“It is the convenience of the public that must be taken into account,
other things being equal, and that convenience would be effectuated by
passengers who take buses at points in one part of a line being able to
proceed beyond those points without having to change buses and to wait
for the arrival of buses of a competitive operator. We can perceive how
under such conditions one public utility could gain business at the expense
of a rival.”
In the instant case, public convenience would be properly served if
commuters from Norzagaray going to the Piers in Manila could go to their
destination without the need of changing buses. Certainly, the Public Service
Commission has power to grant a certificate of public convenience to a new
operator, and the old operator cannot with reason complain that it had not been
given opportunity to improve its equipment and service, if it is shown that the old
operator has not placed in the service all the units of equipment that it had been
authorized to operate, and also when the old operator has violated, or has not
complied with, important conditions in its certificate. In the instant case, it has
been shown that petitioner had not operated all the units that it was authorized to
operate.
Note: The rule where there are various applicants for a public utility over
the same territory, is that priority of application, while an element to be
considered, does not necessarily control the granting of a certificate of public
convenience. The question to be considered in such

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PUBLIC SERVICE

cases is, which applicant can render the best service, considering the
conditions and qualifications of the applicant to furnish the same. But
where other conditions are equal, priority in the filing of the application for
a certificate of public convenience becomes an important factor in the
granting or refusal of a certificate. (Cruz v. Marcelo, L-l5301- 01, March
30, 1962, reiterating the rulings in Pineda v. Carandang, L-l3270-71,
March 24, 1960; Benitez v. Santos, L-12911-12, and Lopez v. Santos,
L-l3073-74, February 29, 1960; andBatangas Trans. Co., etal. v. Or
lanes, et ai, 55 Phil. 745)

Additional Service by Old Operators

Raymundo Transportation Co.
G.R. No. L-7880, May 18,1956
FACTS: Teofilo Cerda is a holder of a certificate of public
convenience granted him by the Public Service Commission to operate a
bus service for the transportation of passengers and freight on the line
Binangonan (Rizal) to Manila and vice versa. This certificate is but a
conversion into a permanent one of the emergency certificate previously
given him by the Commission way back in 1947. On September 12, 1953,
he asked for authority to increase his present number of trips by eight
additional round trips with the use of three additional buses on the ground
that public convenience required the operation of the additional trips. His
application was opposed by Raymundo Transportation Co., A. Gergaray
Tanchingco and the Halili Transit alleging that the services they are
rendering on the same line are more than sufficient to satisfy the needs of
the traveling public, and hence, there is no need for the additional trips on
the same line.
At the hearing, the applicant presented the testimony of Sisenando
Sison, Pedro Fineza, and Fernando Flores, all residents of Binangonan,
Rizal, while on the part of the oppositors, only the first two submitted
evidence in support of their opposition, and on the strength of the evidence
submitted, the Commission found that the preponderance of evidence
“justifies the authorization of additional trips on the line although not in the
number asked by the applicant” and granted him authority to operate only
four additional round trips with one auto-truck

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 TRANSPORTATION LAWS

subject to certain specified conditions. From this decision, oppositor

Raymundo Transportation Co., interposed the present petition for review.
It is contended for petitioner that the decision of the Public Service
Commission is erroneous because if there is any need for additional service,
petitioner should be given the preference of rendering it being an old
operator.
HELD: As to the claim that petitioner should be given the privilege
of rendering the additional service because it is an old operator, suffice it to
say that this rule only applies when the old operator offers to meet the
increase in the demand the moment it arises and not after another operator
had offered to render the additional service as was done in the present case.
(Angat-Manila Trans. Co., Inc. v. Victoria Vda. de Tengco, 95 Phil. 58)
The rule protects those who are vigilant in meeting the needs of the traveling
public.
The decision appealed from is affirmed, with costs against petitioner.

The “prior operator” and “protection of investment” rules cannot take

precedence over the convenience of the public.

Intestate Estate of Teofilo M. Tiongson v.

The Public Service Commission and Mario Z. Lanuza
G.R. No. L-2470I, December 16,1970
FACTS: On May 11, 1965, the Public Service Commission
decided its Case No. 124626, approving the application of Mario Z.
Lanuza for a certificate of public convenience to install and operate a
20-ton daily capacity ice-plant in Pagsanjan, Laguna, and to sell the ice to
be produced in said municipality as well as in the municipalities of
Longos, Paete, Pakil, Pangil, Siniloan, Famy, Sta. Maria, Cavinti,
Magdalena, Majayjay, Nagcarlan, Rizal, Lilio, Sta. Cruz, Lumban, Pila
and Victoria, all in the province of Laguna.
Three existing operators had opposed the application. One of them,
Victorino de Pena, who has an ice plant in Mauban, Quezon,

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withdrew his opposition after the applicant excluded the municipality of

Luisiana from the territory originally applied for. Another oppositor, Emilio
Gomez, did not appeal from the decision of the Public Service Commission.
The petitioner here, the Estate of Teofilo M. Tiongson, remains the only
oppositor in the present appeal.
The petitioner is the grantee of a certificate of public convenience to
maintain and operate a 30-ton (increased to 40 tons in 1960 and then to 70
tons in 1964) ice plant in San Pablo City, with authority to sell ice therein as
well as in the municipalities of Sta. Cruz, Rizal, Nagcarlan, Calauan,
Victoria, Pila, Lumban, Paete, Pakil, Pangil, Cavinti, Siniloan, and Alaminos.
ISSUE: There is no question as to the applicant’s financial capacity.
The principal issue is whether there is sufficient need for ice in the places
stated in the decision to justify the establishment of a plant in Pagsanjan with
the daily capacity authorized by the Commission. This issue is essentially one
of fact on which, as a rule, the findings of the Commission are binding on this
Court unless it clearly appears that there is no evidence to reasonably support
them.
HELD: The Court has gone over the record in this regard and found
enough support therein for the decision appealed from. Manuel Zaide is a fish
dealer in Paete; Willing Limlengco is a sari-sari and refreshment
store-owner in Pagsanjan; Conrado Almario has a similar business in
Lumban; Alfonso Rebong was the municipal mayor of Victoria since 1960;
Ernesto Marina is a businessman in Pila; Jose Acuiza is a businessman and
fisherman in Pakil; Jose Maceda was the municipal secretary of Pagsanjan;
and Eligio Lorenzo is a grocery merchant in Sta. Cruz. They all affirmed the
inadequacy and frequent lack of ice supply in their respective localities not
only for home consumption but also for restaurants and refreshment parlors
as well as for the fishing industry or occupation of the inhabitants,
particularly in the regions bordering Laguna Bay. It is true their combined
testimony did not cover all the municipalities applied for, but the applicant
himself, respondent here, demonstrated sufficient familiarity with the entire
area to be able to give evidence, as he did, on the ice-supply situation in
everyone of them. He did a lot of traveling as owner of three movie-houses in
Pagsanjan,

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 TRANSPORTATION LAWS

Sta. Cruz and Pila, and in connection with his application in this case, personally
conducted a thorough investigation of the local demands for ice in the
municipalities covered by said application. That he is the applicant does not
necessarily affect his credibility; on the contrary, such an investigation was
necessary and called for by sound business policy, for no one would invest
capital in the production and sale of any commodity without first ascertaining the
needs of the prospective market.
One significant fact may be noted insofar as the petitioner’s existing ice
plant in San Pablo is concerned. The petitioner formerly operated another plant
in Pagsanjan, and each of them had one delivery truck to service the customers in
different municipalities. The Pagsanjan plant, however, was closed in 1952 and
transferred to San Pablo, and since then, the petitioner has been maintaining only
one delivery-truck service, with a single dealer-employee in charge. Under the
circumstances, the Public Service Commission correctly remarked that “the
oppositors have not established the adequacy of the service rendered by them in
the eighteen (18) municipalities proposed to be served by the applicant,
considering that most of these municipalities are far from the locations of their
ice-plants.
The “prior operator ” and “protection of investment ” rules cited by
petitioner cannot take precedence over the convenience of the public. There is no
ice plant at present in Pagsanjan; and from the testimony of the witnesses for the
applicant, there exists a great demand for ice not only there but also in certain
neighboring municipalities. There is nothing in the record to show that the
petitioner had exerted efforts to meet this demand before the respondent made
his offer to service the areas where ice was needed. Moreover, the respondent is
authorized to produce only 20 tons of ice daily, whereas, the petitioner has been
allowed to increase its daily capacity from 30 to 40 tons in 1960, and recently, in
1964, to 70 tons. This only proves that there is indeed a great demand for ice in
the area applied for by the respondent, and negates the probability of ruinous
competition. On the contrary, the resulting competition will undoubtedly benefit
the public through improvement in the service and reduction in retail prices.

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Municipality of Echague v. Hon. Leopoldo

M. Abellera and Avelina Ballad
G.R. No. L-48671, December 12,1986
FACTS: Since 1936, the petitioner municipality, through its then
municipal council, and later, its Sangguniang Bayan, had been operating a
municipal ferry service traversing the Cagayan River to and from the
Barangays Soyung-Malitao and Barangays Embarcadero-Dammang East
and West, all within the municipality of Echague, Isabela. In this regard,
petitioner either operated the ferry service itself, or annually leased the
operation of the same to the highest bidder.
On November 16, 1977, herein private respondent Avelino Ballad
furnished petitioner, through its then incumbent mayor, a xerox copy of a
Decision issued on October 13, 1977 by the Board of Transportation
granting respondent Ballad a Certificate of Public Convenience to operate a
two-motor boat service for the regular and public transportation of
passengers and freight between Barrio Soyung-Dammang West and vice
versa across the Cagayan River all in the municipality of Echague, Isabela.
In furnishing petitioner with a copy of the Decision in his favor, private
respondent gave notice that he would start his ferry boat service operation in
January 1978 and petitioner Municipality has to stop its own feiry boat
service within the aforementioned routes.
Petitioner expressed its surprise over said Decision because it is
averred that it was never notified of the application of respondent Ballad
with the Board of Transportation to operate the ferry service. On January
17,1977, the respondent Board of Transportation, upon motion of petitioner
Municipality, issued an Order suspending the operation of the motorboat
service of private respondent after a rehearing of the case by the Board en
banc.
On February 14, 1978, the petitioner filed a Motion for
Reconsideration of the Decision, dated October 13, 1977, on the grounds of
lack of notice and deprivation of the opportunity to be heard by respondent
Board; and the award of said Certificate of Public Convenience to
respondent Ballad was approved without favorable indorsement by
resolution of the Sangguniang Bayan of Echague, Isabela of Ballad’s
application.

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 TRANSPORTATION LAWS

The respondent Board, on June 26, 1978, denied the Motion for
Reconsideration and lifted and set aside the Order of suspension dated
January 17, 1977.
ISSUE: Whether or not under RD. No. 1 or the Integrated
Reorganization Plan, which vests on the Board of Transportation the
jurisdiction and authority to issue Certificate of Public Convenience for the
operation of public land, water and air transportation utilities, there would
still be need for an applicant for a ferry boat service operating between two
points within a municipality to obtain a favorable resolution of the
Sangguniang Bayan of said municipality before the Board of Transportation,
can validly award the corresponding franchise to the applicant, considering
the provisions of Sections 2318-2320 of the Revised Administrative Code.
HELD: Indeed, the records reflect that in the case at bar there was no
compliance made with the essential requirements of administrative due
process. It appears that the notice of hearing was duly published once in two
Manila daily newspapers of general circulation in the Philippines.
Nonetheless, Respondent Board ruled that petitioner is not entitled to be
notified of the hearing inasmuch as petitioner Municipality never informed
the respondent Board that it is an operator of a ferry boat service, and that
petitioner Municipality being then a de facto ferry boat operator, has no
personality to oppose the application of private respondent Ballad.
The Court cannot consider the alleged publication of the said notice in
two unnamed Manila dailies as sufficient compliance of notice to petitioner
when the singular date of such supposed publication is not even mentioned by
respondents nor disclosed by the records. As a party to be directly affected by
the setting up of a ferry service by private respondent, petitioner Municipality is
entitled to be directly informed and afforded an opportunity to be heard by the
Board.
The Court holds that the specific jurisdiction and authority given by
Sections 2318-2320 of the Revised Administrative Code to a municipality to
operate or lease the ferry service within its own territorial limits should
prevail. The grant of supervision and authority by Administrative Code to
municipalities or municipal councils over public utilities such as municipal
ferries, markets, etc., is specific, and

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undoubtedly was “intended to provide an additional source of revenue to municipal

corporations for their maintenance and operation.” (Municipality of Gattaran v.
Elizaga, 91 Phil. 440) On the other hand, the authority conferred on the
respondent Board of Transportation was intended principally to insure and
safeguard the convenience, comfort and safety of the public.
The Court declines to accept the proposition that the operation of the ferry
being then exercised by petitioner municipality, pursuant to clear provisions of the
law, was removed by a general reorganization plan, which was intended only to
indicate the agency which would supervise or regulate the operation of public
services. The provisions of the Revised Administrative Code which grant to the
municipal council or Sangguniang Bayan the power to acquire or establish
i
municipal ferries, are different and should be distinguished from the authority of
the Board of Transportation to issue a Certificate of Public Convenience. While the
establishment of a municipal ferry is first given to a municipality, ferry service will
nevertheless be subject to the supervision and control of the Board of
Transportation. The winner in a public bidding conducted by the municipal council
obtains the privilege to operate the ferry service, but he has to apply for a
Certificate of Public Convenience from the Board of Transportation which then has
the duty to regulate the operation, route, rates to be charged, as well as specify the
kind of equipment to be used for the comfort, convenience and safety of the public
using the ferry.
Note: The aforestated sections of the Administrative Code read as follows:

“Section 2318. Municipal ferries, wharves, markets, etc. — A

municipal council shall have authority to acquire or establish municipal
ferries, wharves, markets, slaughterhouses, pounds, and cemeteries. Public
utilities thus owned by the municipality may be conducted by the municipal
authorities upon account of the municipality or may be let for a stipulated
return to private parties.”
“Section 2320. Establishment of certain public utilities by private
parties under license. — Where provisions of the next

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two preceding sections hereof, for maintaining or conducting the

ferries, wharves, markets, or slaughterhouses requisite for the needs
of the municipality, the municipal council shall have authority in its
discretion, to let the privilege of establishing and maintaining such
utilities to private parties by license granted upon such terms as shall
be fixed by the council.”
“The right to reject any or all bids shall be preserved in all
proposals for such bids; and the maximum charges, rents, or fees
which may be exacted by the lessees shall be fixed in advance and
shall be stated in the proposals for bids. The decision of a municipal
council rejecting any bid or awarding any such privilege shall be
subject to final revisal by the provincial board.”

LGU’s indubitably now have the power to regulate the operation

of tricycles-for-hire and to grant franchises for the operation
thereof
The Department of Transportation and Communications (“DOTC”),
through the LTO and the LTFRB, has since been tasked with implementing
laws pertaining to land transportation. The LTO is a line agency under the
DOTC whose powers and functions, pursuant to Article III, Section 4(d)[l],
of R.A. No. 4136, otherwise known as Land Transportation and Traffic
Code, as amended, deal primarily with the registration of all motor vehicles
and the licensing of drivers thereof. The LTFRB, upon the other hand, is the
governing body tasked by E.O. No. 202, dated June 19,1987, to regulate the
operation of public utility or “for hire” vehicles and to grant franchises or
certificates of public convenience (“CPC”). Finely put, registration and
licensing functions are vested in the LTO while franchising and regulatory
responsibilities had been vested in the LTFRB.
Under the Local Government Code, certain functions of the DOTC
were transferred to the LGUs, thusly:
“SEC. 458. Powers, Duties, Functions and Compensation.
—

“xxx XXX XXX

“(3) Subject to the provisions of Book II of this Code,

enact ordinances granting franchises and authorizing the

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issuance of permits or licenses, upon such conditions and for

such purposes intended to promote the general welfare of the
inhabitants of the city and pursuant to this legislative authority
shall:
“xxx xxx xxx
“(VI) Subject to the guidelines prescribed by the
Department of Transportation and communications, regulate
the operation of tricycles and grant franchises for the operation
thereof within the territorial jurisdiction of the city.” (Emphasis
supplied)

LGUs indubitably now have the power to regulate the operation of

tricycles-for-hire and to grant franchise for the operation thereof. “To
regulate” means to fix, establish, or control; to adjust by rule, method, or
established mode; to direct by rule or restriction; or to subject governing
principles or laws. A franchise is defined to be a special privilege to do certain
things conferred by government on an individual or corporation, and which
does not belong to citizens generally of common right. On the other hand, “to
register,” means to record formally and exactly, to enroll, or to enter precisely
in a list or the like, and a “driver’s license” is the certificate or license issued
by the government which authorizes a person to operate a motor vehicle. The
devolution of the functions of the DOTC, performed by the LTFRB, to the
LGUs, as so aptly observed by the Solicitor General, is aimed at curbing the
alarming increase of accidents in national highways involving tricycles. It has
been the perception that local governments are in good position to achieve the
end desired by the law making body because of their proximity to the
situation that can enable them to address that serious concern better than the
national government.
It may not be amiss to state, nevertheless, that under Article 458
(a)[3-VI] of the Local Government Code, the power of LGUs to regulate the
operation of tricycles and to grant franchises for the operation thereof is still
subject to the guidelines prescribed by DOTC. In compliance therewith, the
Department of Transportation and Communications (“DOTC”) issued
“Guidelines to Implement the Devolution of LTFRBs

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 TRANSPORTATION LAWS

Franchising Authority over Tricycles-For-Hire to Local Government

units pursuant to the Local Government Code. ” Pertinent provisions of
the guidelines state:
“In lieu of the Land Transportation Franchising and Regulatory
Board (LTFRB) in the DOTC, the Sangguniang Bayan I Sangguniang
Panglungsod (SB/SP) shall perform the following:
“(a) Issue, amend, revise, renew, suspend, or cancel MTOP and
prescribe the appropriate terms and conditions therefore;
“xxx XXX XXX
“Operating Conditions:
“1. For safety reasons, no tricycles should operate on national
highways utilized by 4 wheel vehicles greater than 4 tons and where
normal speed exceed 40 KPH. However, the SB/SP may provide
exceptions if there is no alternative route.
“2. Zones must be within the boundaries of the municipal-
ity/city. However, existing zones within more than one municipal-
ity/city shall be maintained, provided that operators serving said zone
shall secure MTOPs from each of the municipalities/cities having
jurisdiction over the areas covered by the zone.
“3. A common color for tricycles-for-hire operating in the same
zone may be imposed. Each unit shall be assigned and bear an
identification number, aside from its LTO license plate number.
“4. An operator wishing to stop service completely, or to
suspend service for more than one month, should report in writing
such termination or suspension to the SB/SP which originally granted
the MTOP prior thereto. Transfer to another zone may be permitted
upon application.
“5. The MTOP shall be valid for three (3) years, renewable for
the same period. Transfer to another zone, change of ownership of
unit or transfer of MTOP shall be construed as an amendment to an
MTOP and shall require appropriate approval of the SB/SP.
“6. Operators shall employ only drivers duly licensed by LTO
for tricycle-for-hire.

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PUBLIC SERVICE

“7. No tricycle-for-hire shall be allowed to carry more passengers

and/or goods than it is designed for.
“8. A tricycle-for-hire shall be allowed to operate like a taxi service,
i.e., service is rendered upon demand and without a fixed route within a
zone.”
Such as can be gleaned from the explicit language of the statute, as well as
the corresponding guidelines issued by DOTC, the newly delegated powers
pertain to the franchising and regulatory powers therefore exercised by the
LTFRB and not to the functions of the LTO relative to the registration of
motor vehicles and issuance of license for the driving thereof Clearly
unaffected by the Local Government Code are the powers of LTO under R.A.
No. 4136 requiring the registration of all kinds of motor vehicles used or operated
on or upon any public highway in the country. Thus —
“SEC. 5. All motor vehicles and other vehicles must be
registered— (a) No motor vehicle shall be used or operated on or upon
any public highway of the Philippines unless the same is properly
registered for the current year in accordance with the provisions of this
Act.” (Article 1, Chapter II, R.A. No. 4136). (Land Transportation
Office v. City of Butuan, G.R. No. 131512, January 20, 2000, 322
SCRA 805)

EXECUTIVE ORDER NO. 202

CREATING THE LAND TRANSPORTATION FRANCHISING AND

REGULATORY BOARD
WHEREAS, the Department of Transportation and Communications is
vested with, among others, quasi-judicial powers and functions pursuant to
Executive Order No. 125, as amended:
NOW, THEREFORE, I, CORAZON C. AQUINO, president of the
Philippines, do hereby order:
SECTION 1. Creation of the Land Transportation Franchising and
Regulatory Board. — There is hereby created in

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