Panay Autobus Co v.

PNR

Facts of the case:

This is a petition of the Panay Autobus Company for the review of the decision of the
Public Service Commission in case No. 31724.

On April 8, 1932, R. R. Hancock, vice-president and general manager of the Philippine

Railway Co., filed with the Public Service Commission in case No. 31724 the following
petition:

We have the honor to request the authority of the Commission to alter the freight
rates of the Philippine Railway Company on the Cebu and Panay Divisions
whenever in our judgment we find it necessary in order to meet the competition
of road trucks and auto busses.

This is in line with the request contained in our letter of April 8th, wherein we
asked to be allowed to alter our passenger rates at will.

The Commission has no doubt been advised by its inspectors that freight, as well
as passengers, is handled by road trucks and auto busses without regard to any
regulation or law; they run up and down the highways and into our station
grounds bargaining for every piece of freight and every passenger.

Their changes are based primarily on the railway rates. The trucks simply go to a
shipper and ask that what the railway charges, and then offer to haul the freight
at a few centavos less per bulto or ton.

As our rates are fixed we have no chance to secure the freight. The Railway
Company is placed at a great disadvantage in not being able to bid for the
business, and consequently loses out whenever the road autos can charge a
slightly lower rate.

For the above reasons, we respectfully request that the rates at present in effect
be considered the maximum , and that we may fix other lower rates whenever in
our opinion it will be to the advantage of the Railway Company to do so.

The petition was set for hearing on June 21, 1932, and the operators affected thereby
were notified.

On May 28, 1932 the Cebu Autobus Company through its attorneys filed an opposition
to said petition on the following grounds:

1. That the Cebu Autobus Company holds a certificate of public convenience to

operate an autobus service for the transportation of passengers and freight
between all the principal points in the Province of Cebu.
 2. That the establishment of sliding rate is repugnant to the fundamental
principles of Public Utility Regulations.

3. That the granting of the above application will promote unnecessary and
ruinous competition between the operators.

4. That the granting of sliding rates will promote discrimination with regard to
its enforcement, that is to say, one shipper of cargoes may be charged the
maximum rates, whereas another shipper is charged a much lower rate.

On April 23, 1932 the general manager of the Philippine Railway Co. filed with the
Public Service Commission in case No. 31827:

Ruling:

The mere recital of the language of the application of the Philippine Railway Co. is
enough to show that it is untenable. The legislature has delegated to the Public Service
Commission the power of fixing the rates of public services, but it has not authorized the
Public Service Commission to delegate that power to common carrier or other public
service. The rates of public services like the Philippine Railway Co. have been approved
or fixed by the Public Service Commission and any change in such rates must be
authorized or approved by the Public Service Commission after they have been shown
to be just and reasonable. The public service may, of course, propose new rates, as the
Philippine Railway Co. did in case No. 31827, but it cannot lawfully make said new rates
effective without the approval of the Public Service Commission, and the Public Service
Commission itself cannot authorize a public service to enforce rates without the prior
approval of said rates by the commission. The commission must approve new rates
when they are submitted to it, if the evidence shows them to be just and reasonable,
otherwise it must disapprove them. Clearly, the commission cannot determine in
advance whether or not the new rates of the Philippine Railway Co, will be just and
reasonable, because it does not know what those rates will be.

In the present case the Philippine Railway Co. in effect asked for permission to change
its freight rates at will. It may change them every day or every hour, whenever it deems
it necessary to do so in order to meet competition or whenever in its opinion it would be
to its advantage. Such a procedure would create a most unsatisfactory state of affairs
and largely defeat the purposes of the public service law.

The testimony of Hancock regarding order No. 3 of the Public Service Commission
fixing the maximum rates for steamers is quoted in the decision. Said order finds its
authority in Act No. 3418, which clearly has no application in the present case. It is
provided in said act that the commission shall not excercise any control or supervision
over vessels operated within the Philippine Islands, except with regard to the fixing of
maximum passenger and freight rates. By this express provision of law the jurisdiction
of the Public Service Commission over vessels is limited to the fixing of maximum
passenger and freight rates. The owners of vessels engaged in the interisland trade do
not reduce their rates because they have been authorized by the Public Service
Commission to do so. They reduce their rates without regard to the Public Service
Commission, because its jurisdiction is limited to the fixing of maximum rtes.

Section 16 of the Public Service Commission prohibits any public service from exacting
any unjustly discriminatory rate, but if the Philippine Railway Co. is to alter its rates
whenever it may be necessary to meet the competition of road trucks and autobuses, or
to reduce its rates whenever it would be to the advantage of the Railway Company to do
so, it cannot prevent its rates from being discriminatory. It may charge one shipper P5 a
ton from Iloilo to Capiz, but immediately thereafter in order to meet competition it may
be obliged to give another shipper a rate of P4 a ton. It can scarely be contended that
such a rate would not be discriminatory. Under the order of the commission, there is no
stability of rates. They may be varied at the will of the railroad officials, provided that
they are not increased. The commission thereby gives up once of its most important
functions, and leaves it to competition to fix the rates.

If the conditions complained of by Hancock exist, and we do not doubt that they do, it is
the duty of the Public Service Commission to correct them by enforcing the law and its
orders as to those operators responsible therefor, not by delegating its powers to the
Philippine Railway Co. and authorizing it to reduce its rates whenever necessary to meet
such unlawful competition.
 Kilusang Mayo Uno Labor Center vs Garcia

Facts of the case:

The Kilusang Mayo Uno Labor Center (KMU) assails the constitutionality and validity
of a memorandum which, among others, authorize provincial bus and jeepney operators
to increase or decrease the prescribed transportation fares without application therefore
with the LTFRB, and without hearing and approval thereof by said agency.

Ruling:

Under Section 16 (c) of the Public Service Act, as amended, the legislature delegated to
the defunct Public Service Commission the power of fixing the rates of public services.
LTFRB, the existing regulatory body today, is likewise vested with the same under
Executive Order 202.

The authority given by the LTFRB to the bus operators to set fares over and above the
authorized existing fare is illegal and invalid, as it is tantamount to undue delegation of
legislative authority. Under the maxim potestas delegate non delegari potest – “what
has been delegated cannot be delegated.”

The policy allowing provincial bus operators to change and increase their fares would
result not only to a chaotic situation but to an anarchic state of affairs. This would leave
the riding public at the mercy of transport operators who may increase fares, every
hour, every day, every month or every year, whenever it pleases them or whenever they
deem it necessary to do so. Furthermore, under the Section 16 (a) of Public Service Act,
there must be proper notice and hearing in the fixing of rates, to arrive at a just and
reasonable rate acceptable to both the public utility and the public.
 Ynchaustic v. Public Utility Commission

Facts of the case:

The petitioners are members of the Philippine Shipowners' Association and engaged in
the operation of vessels in and around the Philippine Islands. By reason of a decrease in
the volume of business handled by its members and for and on their behalf, it duly filed
with the Public Utility Commissioner of the Philippine Islands a declaration that on and
after May 1, 1920, it would make a 10 per cent increase in shipping rates above those
allowed under Order No. 16 of the Board of Rate Regulation.

This increase was allowed and became effective by an order of the Public Utility
Commissioner dated April 24, 1920, and final on May 1, 1920.

In a short time and on account of low wages, there was a general strike of the seamen
and officers operating the vessels owned by the members of the association and it
became necessary to increase the wages paid the men and to make other concessions
which materially increased operating expenses, by reason of which the 10 per cent
increased rate was insufficient to meet the increased operating expense. June 21, 1920,
the association filed an amended declaration with the Public Utility Commissioner,
praying for a further raise of 10 per cent on freight rates over those established May 1,
1920, to the effect that from and after July 20, 1920, it would make a 15 per cent increase
on the freight rates fixed by Order No. 16, and that the increase would be in addition to
all others which had been approved and authorized by the Public Utility Commissioner.

It is the theory of the law that a public utility should have a fair and reasonable return
upon its property which is used by the public, and, under the modern authorities, the
rate is based upon the physical valuation of the property, because in effect the property
is both used and consumed by the public. In an action to condemn land to a public use,
it would not be contended that the measure of damages to the owner would be the
original cost of the land, or that if at one time the land was of a much greater value and
had depreciated, the owner would then be entitled to recover the once greater value. In
such a case the measure of damages would be the actual value at the time of the
appropriation. So, on principle, the vessel here is deemed taken and condemned by the
public at the time of the filing of the petition, and the rate should go up and down as the
physical valuation of the vessel goes up and down, and the purpose of the hearing is to
place a physical valuation upon the vessel and then base a reasonable rate upon that
valuation. Hence, the original cost of the vessel is not the basis for the valuation and is
not important, except in so far as it may enable the Commissioner to determine the
present value of the vessel.

When a public utility once enters the public service, it is no longer a free agent and the
control and operation of its property is subject to reasonable rules and regulations by the
public, and to that extent and for that purpose it is a taking of the property by the public.
As one of the conditions upon which you can operate a public utility, the public says
you must operate it under reasonable rules and regulations, otherwise you cannot
operate a public utility. Hence, when property becomes a public utility, it ipso facto, for
operating purposes, amounts to an actual taking and appropriation of the property to
the public use, so long as it is a public utility. In legal effect such operation amounts to
a pro tanto taking and appropriation.

It is elementary constitutional law that private property cannot be taken for public use
without just compensation is first assessed and tendered. But where the taking is not
full, final, or complete, but is in the nature only of a continuous daily taking and
appropriation, it must follow that there will be a fluctuation in the market value of the
property during the period of public service, which, as to a vessel, would change with
the cost of labor and material necessary for its construction. But in fixing the rate, it
would not be fair to the public to base it upon a peak cost, and, for the same reason, it
would not be fair to the owner of the property to place it upon a minimum cost. Neither
would it be fair to either party to base the rate upon any abnormal condition. A just rate
must be founded upon conditions which are fair and reasonable both to the owner and
the public.

Ruling:

The Attorney-General agrees "that it is error to base the reasonableness of rates on the
original cost exclusive of all other consideration," but contends that it does not appear
that the Commissioner based the rates exclusively on the original cost, and that,
therefore, his rulings must be sustained. He also contends that the Commissioner had
only two data upon which to base a rate. The original cost and the estimated cost. That
he could not accept the estimated cost, because it was based upon abnormal war prices
and as no evidence of the reasonable value was presented, the Commissioner accepted
the original cost, and, hence, it should be presumed that he was of the opinion that the
original cost represented the fair value or something near the fair value of the property.

The purpose of the hearing was to determine what was a just and reasonable rate. Under
the authorities above cited, such a rate should not be based upon the original cost of the
vessel. Neither, under existing conditions, should it be based upon the estimated cost.
The one is not fair to the shipowner, and the other is not fair to the public. For example,
the original cost of the Venus was P115,000, and the estimated cost of reproduction was
P409,446.03. The original cost of the Vizcaya was P120,000, and the estimated cost was
P533,318.73. The figures of these two vessels fairly show the relative difference in the
cost of reproduction and the original cost of the different vessels, and are strong
evidence of the existence of abnormal conditions. In addition, this court will take judicial
knowledge of the recent World War and that Peace was declared in November, 1918,
and the amended declaration upon which the hearing was had was filed June 21, 1920, a
little more than eighteen months after peace was declared, and that conditions were then
more or less abnormal. If, as the Attorney-General says, the Commissioner based the
annual income rate on the original cost of the vessel, it was legal, prejudicial error, and
was not fair to the owner.

As the above authorities hold, the original cost of a vessel should only be considered for
the purpose of determining its present or market value. Although it may be true that it
was the duty of the owner of the vessel to have submitted evidence to the Commissioner
of the present or market value of the vessel under normal conditions, yet the failure to
do this would not justify the Commissioner in basing the rate on the original cost. As a
fair and impartial tribunal, it should require competent proof of the necessary facts upon
which to base the rates, and where, as in this case, the only proof offered was the
original and estimated costs, neither of which is competent except as it tends to show the
present or market value of the vessel, the Commissioner had no right to accept either
rate as the true basis, or one to the exclusion of the other, and should have required that
proof should be furnished of the present or market value of the vessel under reasonably
normal conditions. The basing of the rate on the original cost of the vessel was
prejudicial, legal error. This same principle should apply to the 5 per cent depreciation.
The percentage for depreciation should be based on the market value and not on the
original cost of the vessel. Complaint is made that 10 per cent return on the investment
is not sufficient. The question as to what is a reasonable rate is one which largely rests in
the discretion of the Commissioner, with which, without some good reason, this court is
not disposed to interfere. Complaint is also made that "the average of repairs for the past
five years is substituted in place of actual expenditures for repairs during the period
covered by the operating statements thus bringing into the average a period when labor
and material costs were far below what they were today." Under normal conditions this
contention would be sound, but as shown here the conditions were not normal.

It is the order of this court that this cause be reversed and remanded with directions to
the Commissioner to require and take proof of the present or market value of the vessel,
and that, in arriving at such value, he consider the actual cost of the vessel, its cost of
reproduction, and any other evidence which will tend to show its present or market
value, and that when the present or market value of the vessel is thus determined, he
shall then fix a reasonable return on the investment based on such value, and that also
the depreciation percentage be based on the same value. On all other questions this
court declines to interfere with the order of the Commissioner. Neither party will
recover costs.
 Vigan Electric Co v. PSC

Facts of the case:

In an alleged letter-petition, petitioner was charge with black market of electric meters
and that its meters were installed in bad faith to register excessive rates.

Petitioner received a communication from General Auditing Officer that it will be

audited.

PSC issued subsequently a subpoena duces tecum requiring petitioners to produce

before PSC, during a conference scheduled for April 10, 1962, certain book of accounts.

Petitioner moved to quash such subpoena.

The conference was postponed twice until it was finally cancelled.

In May 1962, OSC issued an order, which after finding that petitioner had an excess of
revenues by 18%, lowered the present meter rates of the petitioners. Hence, this petition
for certiorari is instituted.

Ruling:

In support to its special defense, respondent PSC maintains that rate-fixing is a

legislative function; that legislative or rule-making powers may constitutionally be
exercised without previous notice or hearing. Although the rule-making power and
even the power to fix rates – when such are meant to apply to all enterprises of a given kind
throughout the Philippines – may partake of legislative character, such is not the nature of the
order complained of. Here, the order exclusively applies to petitioner. What is more, it is
predicated upon the finding of fact, whether the petitioner is making a profit more than
12% of its invested capital which is denied by the petitioner. Obviously, the latter is
entitled to cross-examine the maker of the said report, and to introduce evidence to
disprove the contents thereof and/or explain or complement the same, as well as to
refute the conclusions drawn therefrom by the respondent. In other words, in making
said finding of fact, respondent performed a function partaking of a quasi-judicial character, the
valid exercise of which demands previous notice and hearing.

Indeed, Sections 16(c) and 20 (a) of CA No. 146, explicitly require notice and hearing.
Wherefore, we hold that the determination of the issue involved in the order complained of
partakes the nature of quasi-judicial function and that, having been issued without previous
notice and hearing, said order is clearly violative of the due process clause, and hence, null and
void.
 Philippine Communication Corp v. Alcuaz

Facts of the case:

The petition before us seeks to annul and set aside an Order 1 issued by respondent
Commissioner Jose Luis Alcuaz of the National Telecommunications Commission

Herein petitioner is engaged in providing for services involving telecommunications.

Charging rates for certain specified lines that were reduced by order of herein
respondent Jose AlcuazCommissioner of the National Telecommunications
Commission. The rates were ordered to be reduced by fifteen percent (15%) due to
Executive Order No. 546 which granted the NTC the power to fix rates. Said order was
issued without prior notice and hearing.

Under Section 5 of Republic Act No. 5514, petitioner was exempt from the jurisdiction of
the then Public Service Commission, now respondent NTC. However, pursuant to
Executive Order No. 196 issued on June 17, 1987, petitioner was placed under the
jurisdiction, control and regulation of respondent NTC

Ruling:

In Vigan Electric Light Co., Inc. vs. Public Service Commission the Supreme Court said
that although the rule-making power and even the power to fix rates- when such rules
and/or rates are meant to apply to all enterprises of a given kind throughout the
Philippines-may partake of a legislative character. Respondent Alcuaz no doubt contains
all the attributes of a quasi-judicial adjudication. Foremost is the fact that said order
pertains exclusively to petitioner and to no other

The respondent admits that the questioned order was issued pursuant to its quasi-
judicial functions. It, however, insists that notice and hearing are not necessary since the
assailed order is merely incidental to the entire proceedings and, therefore, temporary in
nature but the supreme court said that While respondents may fix a temporary rate
pending final determination of the application of petitioner, such rate-fixing order,
temporary though it may be, is not exempt from the statutory procedural requirements
of notice and hearing

The Supreme Court Said that it is clear that with regard to rate-fixing, respondent has no
authority to make such order without first giving petitioner a hearing, whether the order
be temporary or permanent. In the Case at bar the NTC didn’t scheduled hearing nor it
did give any notice to the petitioner
 MIAA v. Airspan Corp

Facts of the case:

Manila International Airport Authority (MIAA) is the operator of the Ninoy International Airport
located at Paranaque City. The Officers of Paranaque City sent notices to MIAA
due to real estate tax delinquency. MIAA then settled some of the amount. When MIAA
failed to settle the entire amount, theofficers of Paranaque city threatened to levy and
subject to auction the land and buildings of MIAA, which they did. MIAA sought for a
Temporary Restraining Order from the CA but failed to do so within the 60 days reglementary
period, so the petition was dismissed. MIAA then sought for the TRO with the Supreme Court a
day before the public auction, MIAA was granted with the TRO but unfortunately the TRO was
received by the Paranaque City officers 3 hours after the public auction.

MIAA claims that although the charter provides that the title of the land and building are with
MIAA still the ownership is with the Republic of the Philippines. MIAA also
contends that it is an instrumentality of the government and as such exempted from real
estate tax. That the land and buildings of MIAA are of public dominion therefore cannot
be subjected to levy and auction sale. On the other hand, the officers of Paranaque City
claim that MIAA is a government owned and controlled corporation therefore not exempted to
real estate tax.

Ruling:

The local government code, government owned and controlled corporations are not exempted
from real estate tax. MIAA is not a government owned and controlled corporation, for to become
one MIAA should either be a stock or non-stock corporation. MIAA is not a stock corporation
for its capital is not divided into shares. It is not a non-stock corporation since it has no members.
MIAA is an instrumentality of the government vested with corporate powers and government
functions.

Under the civil code, property may either be under public dominion or private ownership. Those
under public dominion are owned by the State and are utilized for public use, public service and
for the development of national wealth. The ports included in the public dominion pertain either
to seaports or airports. When properties under public dominion cease to be for public use and
service, form part of the patrimonial property of the state.

The court held that the land and buildings of MIAA are part of the public dominion. Since the
airport is devoted for public use, for the domestic and international travel and transportation.
Even if MIAA charge fees, this is for support of its operation and for regulation and does not
change the character of the land and buildings of MIAA as part of the public dominion. As part
of the public dominion the land and buildings of MIAA are outside the commerce of man. To
subject them to levy and public auction is contrary to public policy. Unless the President issues a
proclamation withdrawing the airport land and buildings from public use, these properties
remain to be of public dominion and are inalienable. As long as the land and buildings are for
public use the ownership is with the Republic of the Philippines.