Transportation Law Super Digest PDF

Transportation Law Super Digests BGC DAY 2 2024 | Prof. Charles Icasiano Page 1 of 141  HELD: The Court affirmed the lower court's ruling and...

Transportation Law Super Digests BGC DAY 2 2024 | Prof. Charles Icasiano Page 1 of 141  HELD: The Court affirmed the lower court's ruling and held that the statute was a legitimate PUBLIC UTILITIES regulation of business under state law as the state was free to regulate commerce within its own boundaries even if it might incidentally become connected with interstate commerce. I. GENERAL DISCUSSION Charlie: Once something obtains a public character either from use or nature of business, it becomes subject to State regulations. There were only so few entities that actually operated a. What is a public utility? grain warehouses. Note: the Sherman Act (the equivalent of the competition act) was not yet effective. [MauTanZam Rev] Those 9 ultimate owners were coordinating with each other before regulation as to Public Utility – Business or service engaged in regularly supplying the public with some price. commodity or service of public consequence such as electricity, gas, water, transportation, __ + holding itself out to the public = ____ telephone, or telegraph service. Implies public use and service. Luzon Stevedoring Co., Inc. v. PSC (1953) Under the amendment: DOCTRINE: It is NOT necessary that one holds himself out as serving or willing to serve the All public utilities are public services; but not all public services are public utilities public in order to be considered public service. Public utility refers to a public service that operates, manages or controls for public use any of the following: FACTS:Respondents were corporations mainly engaged in stevedoring or lighterage and ○ Distribution or transmission of electricity harbor towage business. They were charged and found to be engaged in the transportation ○ Petroleum and petroleum products pipeline transmission or distribution systems of cargo in the Philippines for hire or compensation without authority or approval of the ○ Water pipeline distribution systems and wastewater pipeline systems Commission, resulting in ruinous competition with Philippine Shipowners’ Association. ○ Airports ○ Seaports HELD: They are a public service. An enterprise of any of the kinds enumerated in the law is ○ Public utility vehicles a public service if conducted for hire or compensation even if the operator deals only with a ○ Expressways and tollways portion of the public or limited clientele. Public use – Use by the public. The essential feature of public use is that it is not confined It is only necessary that it must in some way be impressed with a public interest. Public to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted Utility is not determined by the number of people actually served. Nor does the mere fact quality that gives it its public character. that service is rendered only under contract prevent a company from being a public utility. There must be a right which the law compels the power to give to the general public. Public use is not synonymous with public interest. Charlie: There is really some sort of flip flopping wrt public utilities and holding yourself out True criterion to judge the character of the use: Whether the public may enjoy it by right to the public. ITC, that alone is not sufficient. or only by permission. Ex. the LTFRB considered Wunder (a carpooling service) as public. Munn v. Illinois, 94 U.S. 113 (1876) DOCTRINE: When the owner of property devotes it to a use in which the public has an b. What is a public service? interest, he in effect grants to the public an interest in such use, and must to the extent of that interest, submit to be controlled by the public, for the common good, as long as he Commonwealth Act No. 146 or the Public Service Act. Section 13 (b) The term maintains the use. He may withdraw his grant by discontinuing the use. "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 FACTS: Munn and Scott were charged with operating a public warehouse in Chicago in clientele, whether permanent, occasional or accidental, and done for general business which they unlawfully transacted business without procuring a license under “An Act to purposes, regulate public warehouses and the warehousing and inspection of grain, and to give effect to Art. 13 of the Constitution of this State" (Grain Act for brevity). The Criminal Court of any common carrier, railroad, street railway, traction railway, sub-way motor vehicle, Cook County, Illinois held that they had complied except in two respects: first, they had not either for freight or passenger, or both with or without fixed route and whether may be its complied with licensing requirements; second, they had charged rates higher than those classification, freight or carrier service of any class, express service, steamboat or fixed by Section 15 of the Grain Act. They appealed, and the State Supreme Court of Illinois steamship line, pontines, ferries, and water craft, engaged in the transportation of affirmed. They then appealed to the United States Supreme Court, arguing that the Grain passengers or freight or both, shipyard, marine railways, marine repair shop, [warehouse] Act was unconstitutional. wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light, Page 2 of 141  When private property is used for a public purpose and is affected with public interest, it heat and power water supply and power, petroleum, sewerage system, wire or wireless ceases to be juris privati only and becomes subject to regulation. communications system, wire or wireless broadcasting stations and other similar public services: Regulation promotes common good: State protects the public against arbitrary and excessive rates while maintaining the efficiency and quality of services rendered. Provided, however, That a person engaged in agriculture, not otherwise a public service, HOWEVER, the power to regulate rates does not give the State the right to prescribe rates who owns a motor vehicle and uses it personally and/or enters into a special contract which are so low as to deprive the public utility of a reasonable return on investment whereby said motor vehicle is offered for hire or compensation to a third party or third (digester’s note: equivalent to deprivation of property) parties 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 To balance: the rates prescribed must be one that yields a fair return on the public utility cultivation of his or their farm, the transportation, processing, and marketing of upon the value of the property performing the service AND one that is reasonable to the agricultural products of such third party or third parties shall not be considered as public for the services rendered. operating a public service for the purposes of this Act. FACTS: Meralco filed with the ERB an application for the increase of its rates since, on its Implications: This measure allows up to 100% foreign ownership of public services in the application, it was stated that it had an average increase of P0.21 per kwh in its country. distribution charge. It was given a provisional increase by the ERB, subject to the Those not classified as a public utility shall otherwise be considered as a public service, condition that after investigation, if Meralco is entitled to a lesser increase, then it must which will not be bound by the 60-40% nationality requirement. refund or credit the excess amounts collected. Notably, telecommunications, air carriers, domestic shipping, and railways and subways are considered a public service. After the COA submitted its Audit Report, recommending not to include the income As a safeguard, the aforementioned services are considered as critical infrastructure, taxes paid by Meralco as part of its operating expenses, the ERB adopted this in its which is subject to a reciprocity clause. decision. Authorized Meralco to implement a rate adjustment in the average amount of ○ Hence, foreign nationals shall not be allowed to own more than 40% of capital in P0.017 per kwh effecting with respect to Meralco’s billing cycles beginning Feb 1994. The public services engaged in the operation and management of critical infrastructure excess average amount of P0.0167 per kwh from the provisional relief from Feb 1994-Feb unless the country of such foreign national accords reciprocity to Philippine 1998 should be refunded or credited to the customers. It ruled that Income tax is not an nationals. operating expense because it should be borne by the stockholders who are recipients of the ○ Further, an entity controlled by or acting on behalf of the foreign government or income or profits, and it should not be passed on to the consumers. foreign state-owned enterprises shall be prohibited from owning capital in any public service classified as critical infrastructure. HELD: ERB correctly ruled that income tax should not be included in the computation of operating expenses of a public utility. c. Legal Basis and Rationale for Regulation In determining whether or not a rate yields a fair return to the utility, the operating expenses of the utility must be considered. The return allowed to a public utility in accordance with the prescribed rate must be sufficient to provide for the payment of 1987 Constitution, Article XII, Section 6 The use of property bears a social function, such reasonable operating expenses. Thus the public utility is allowed a return on and all economic agents shall contribute to the common good. Individuals and private capital over and above operating expenses. HOWEVER, only such expenses and in groups, including corporations, cooperatives, and similar collective organizations, shall such amounts as are reasonable for the efficient operation of the utility should be have the right to own, establish, and operate economic enterprises, subject to the duty of allowed for determination of the rates to be charged by a public utility. the State to promote distributive justice and to intervene when the common good so Income tax = imposed on an individual or entity as a form of excise tax or a tax on the demands. privilege of earning income.In exchange for the protection extended by the State to the taxpayer, the government collects taxes as a source of revenue to finance its activities. Thus, income tax payments of a public utility are NOT EXPENSES which contribute to Republic v. MERALCO (2002) or are incurred in connection with the production of profit of a public utility DOCTRINE: The investor agrees, by embarking capital in a utility, that its charges to the Should be borne by the taxpayer alone as no benefit is derived by the customers of the public shall be reasonable. His company is the substitute for the State in the performance of public utility for the taxes paid by such entity the public service, thus becoming a public servant. The compensation which the Constitution guarantees an opportunity to earn is the reasonable cost of conducting the Q: Why was MERALCO regulated? business. A: Meralco is PubU because the private property was used for a public purpose. Page 3 of 141  Affected with public interest → becomes susceptible to public regulation The non-economic rationales are not as hard or as concrete as economic rationales for regulations Charlie: Basically I should pass the income tax. Wouldn't that pass on in effect taxable But, it is argued that economic rationales are not subjective also. income as well? The economic rationale is in itself a social rationale, it’s just that it has performed Angel Note: pero income tax is a direct tax and should not be burdened on the consumer this magic trick of making us think that it is the only reasonable and objective parameter for regulation when in fact it’s not. This is one example of how PubUs are regulated → RATE REGULATION. There are other In fact, the thinking that economic progress/growth should be prioritized is being methods of regulation of PubU - permitting reqs, minimum equipment reqs, minimum capital contested. reqs. Increasingly, it is being shown that economic rationales are social norms. Most of the time, public interest rationale impede the extensions of market. They Chapters 2 and 3 - Baldwin, R., Cave, M. and Lodge, M. eds., 2010. are treated as contradicting forces when in fact, they should be harmonized. The Oxford Handbook of Regulation. Oxford University Press. d. Where does the Power to Regulate Public Utilities Reside? Rationale for regulation: Albano v. Reyes, 175 SCRA 264 1. Economic Approach → the market should allocate resources, however it’s DOCTRINE: Franchises issued by Congress are not required before each and every public recognized that there are certain market failures that occur. utility may operate. Thus, the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities. Reasons for market failure Market power - The ability to price above competitive levels or to set levels w/o FACTS: PPA Board by virtue of a resolution, conducted a public bidding for the competitive restraints. development, management and operation of the (manila intl container terminal) MICT. After ○ Monopoly - occurs when there is only one firm supplying all the goods in evaluation of the several bids, the Bidding Committee recommended the award of the an industry contract to respondent ICTSI. Petitioner Rodolfo A. Albano filed the present petition as ○ Oligopoly - when there are a few firms supplying all the goods in an citizen and taxpayer and as a member of the House of Representatives, assailing the award industry (eg. TelCos) of the MICT contract to the ICTSI by the PPA. Externalities - activities that the market does not cover i.e pollution, so it is not covered in the fixing of the price. The petitioner claims that since the MICT is a public utility, it needs a legislative franchise Public Goods - you can’t exclude somebody from the enjoyment of utilities. You before it can legally operate as a public utility, pursuant to Art. 12, Sec. 11 of the 1987 can’t select who benefits from it, and at the same time, somebody’s benefit does Constitution. not detract from the benefit of everybody. Asymmetric information - no perfect information to make good decisions eg. loans, HELD: a franchise specially granted by Congress is not necessary for the operation of the insurance MICP by a private entity, a contract entered into by the PPA and such entity constituting ○ Ex. PRC licenses MDs. If one does not know any MD, the licensing substantial compliance with the law. Under the terms of EO. 30 and PD 857, the PPA may signals the consumer that this MD is sufficiently qualified in order to treat contract with the ICTSI for the management, operation and development of the MICP. him. ○ Truth in Lending Act wrt interest rates PPA's acts of privatizing the MICT and awarding the MICT contract to ICTSI are wholly ○ Addresses market failures and make the market function more efficiently. within the jurisdiction of the PPA under its Charter which empowers the PPA to "supervise, control, regulate, construct, maintain, operate and provide such facilities or services as are 2. Non-Economic Approach → there are other non-economic interest that are necessary in the ports vested in, or belonging to the PPA." factored into regulation and these can be seen in the Constitution. The contract between the PPA and ICTSI, coupled with the President's written approval, constitute the necessary authorization for ICTSI's operation and Regulation of the media - FREE SPEECH management of the MICP. Note the discussion on Equity, racial harmony as used in CH 3. ITC: there is no evidence which clearly shows the constitutional infirmity of the questioned act of government. Q: What is the dispute, if there is one, between economic and non-economic rationale for regulation? Charlie: The PD during the time of Marcos had the force of law because he had legislative Primarily, the source of dispute is that there is this public opinion that values are powers. Pres. Aquino also had legislative power. The franchise was sourced from contestable because we live in a liberalized society. presidential issuances with the force of law. Page 4 of 141 KMU Labor Center v. Garcia, 239 SCRA 386 order or safety and general welfare of their constituents. In effect, both laws become equally DOCTRINE: the authority given by the LTFRB to the provincial bus operators to set a fare effective and mutually complementary. range over and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue delegation of legislative authority. FACTS: 1. Respondent Sangguniang Panlungsod (SP) enacted Resolution No. 210 giving FACTS: Secretary of DOTC, Oscar M. Orbos, issued Memorandum Circular No. 90-395 to Batangas CATV authority to install and operate CATV w/in Batangas City with provision then LTFRB Chairman allowing provincial bus operators to charge passengers rates within that any increase in subscriber rates must be upon approval of the SP. a range of 15% above and 15% below the LTFRB official rate for a period of one (1) year. 2. Batangas CATV increased subscriber rates. Mayor threatened to cancel permit unless The Memorandum Circular authorized the following: Authorized bus and jeepney operators secures approval. Batangas filed petition for injunction to increase or decrease fares without prior application with the LTFRB and without hearing 3. Lower Courts with the effect of authorizing said operators to charge a range of +/- 15% of the LTFRB’s a. RTC ruled for petitioner: LGU should stop interfering. published rate for a period of 1 year. On December 5, 1990, private respondent Provincial b. CA reversed: LGU has authority from the General Welfare Clause of the LGU. Bus Operators Association of the Philippines, Inc. (PBOAP) filed an application for fare rate 4. Arguments increase. KMU filed a petition assailing the fare increase and assailing the constitutionality a. Petitioner: only NTC has authority to fix subscriber rates and validity of the issued circulars. b. Respondent: Resolution No. 210 issued pursuant to LGC giving LGU authority to regulate business. HELD: The SC ruled that the LTFRB cannot delegate legislative authority to fix fares to transport operators because such power is already delegated to them for them to fulfill such HELD: duty. Nowhere in our laws states that the regulatory bodies, the PSC and LTFRB alike, may W/N LGU can regulate subscriber rates charged by CATV operators w/in territorial JD? NO. delegate that power to fix rates to a common carrier, a transport operator, or other public 1. The NTC exercises regulatory power over CATV operators to the exclusion of service. Rate fixing is a delicate and sensitive government function that requires sound other bodies. discretion with the settled goal of arriving at a just and reasonable rate acceptable to both 2. Nothing herein should be interpreted as to strip LGUs of their general power to the public utility and the public. prescribe regulations under the general welfare clause of the LGC. W/N is Resolution No. 210 valid? NO. Q: Would you know the components of your uber/grab fares? 1. Resolution No. 210 is void for violating the mandate of existing laws. A: Flat rate + surge rate that depends on the demand 2. Resolution No. 210 violated the State's deregulation policy. 3. E.O. No. 205 does not violate the constitutional prohibition against non-impairment Q: Related this to the KMU case, what do you think of ride-sharing/ride-hailing firms? of contracts. A: It’s possible that this isn’t regulated properly. Grab is a lot more expensive now since Uber is no longer around. Charlie: cable tv lol Charlie: Isn’t it funny? We have this case about how a PubU (common carrier) can’t charge 1-Utak v. COMELEC, G.R. No. 206020, April 14, 2015 15% below or above of a certain rate, but we also have LTFRB allowing Grab (common DOCTRINE: A franchise or permit to operate transportation utilities pertains to carrier) to charge consumers more. considerations affecting the operation of the PUV as such, e.g., safety of the passengers, routes or zones of operation, maintenance of the vehicle, of reasonable fares, rates, and Gia Q: Yesterday (Sept 16) LTFRB approved the fare increase so is this the opposite of this other charges, or, in certain cases, nationality. case because there was actually dialogue between the parties? A: Regardless of W/N there was a public hearing conducted, the fact that individual Thus, a government issuance, which purports to regulate a franchise or permit to operate common carriers were allowed to set within a certain rate RATHER THAN a fixed rate is the PUVs, must pertain to the considerations affecting its operation as such; OTHERWISE, it issue here. Fixed rate + discretionary increase IS NOT ALLOWED. becomes a regulation or supervision not on the franchise or permit to operate, but on the very ownership of the vehicle used for public transport. Batangas CATV v. Court of Appeals, G.R. No. 138819, September 29, 2004 DOCTRINE: Thus, we hold that the NTC, under E.O. No. 205, has exclusive jurisdiction FACTS: In connection with the May 13, 2013 national and local elections as well as over matters affecting CATV operation, including specifically the fixing of subscriber subsequent elections, COMELEC promulgated Resolution No. 9615 providing for the rules rates, but nothing herein precludes LGUs from exercising its general power, under R.A. implementing RA No. 9006 (“Fair Elections Act”) wherein Sec. 7 (g) items (5) and (6), in No. 7160, to prescribe regulations to promote the health, morals, peace, education, good relation to Sec. 7 (f) thereof provides that the posting, displaying election campaign or propaganda material in PUVs and in public transport terminals is prohibited. Page 5 of 141 The petitioner (1-UTAK) sought clarification from the COMELEC regarding the application of Any franchise or certificate necessary for the operation of a public service shall be the abovementioned provisions and requested that it be reconsidered since it impedes the granted by Congress unless otherwise previously delegated by law to the relevant right to free speech of the private owners of PUVs and transport terminals. Administrative Agencies. COMELEC en banc denied the petitioner’s request to reconsider the implementation of the NOTE AMENDMENT RE: PSC relevant provisions explaining that having placed their property for use by the general public Section 3. Recognition of Transfer of Jurisdiction to Various Administrative and having secured a license or permit to do so, 1-UTAK and other PUV owners, as well as Agencies. - All references to the Public Service Commission in Commonwealth Act No. transport terminal owners, cannot now complain that their property is subject to regulation 146, as amended, shall pertain to any Administrative Agency to which the powers and by the State. duties of the Public Service Commission were transferred by subsequent laws, such as but not limited to: HELD: Sec. 7 (g) items (5) and (6), in relation to Sec. 7 (f) of Reso No. 9615 are not within (a) Civil Aeronautics Board (CAB); the constitutionally delegated power of the COMELEC to supervise or regulate the franchise (b) Civil Aviation Authority of the Philippines (CAAP); or permit to operate of transportation utilities. The posting of election campaign material on (c) Department of Energy (DOE); vehicles used for public transport or on transport terminals is not only a form of political (d) Department of Environment and Natural Resources (DENR); expression, but also an act of ownership — it has nothing to do with the franchise or permit (e) DICT to operate the PUV or transport terminal. Like any other administrative regulations, Reso (f) Department of Transportation (DOTr); No. 9615, or any part thereof, must not run counter to the Constitution, and since it does, IT (g) Energy Regulatory Commission (ERC); IS NULL AND VOID. (h) Land Transportation Franchising and Regulatory Board (LTFRB); (i) Land Transportation Office (LTO); Charlie: Political speech regulation of PubUs is NOT considered as a regulation of PubUs. (j) Local Water Utilities Administration (LWUA); (k) Maritime Industry Authority (MARINA); (l) Metropolitan Waterworks and Sewerage System (MWSS); Commonwealth Act No. 146 or the Public Service Act. Section 13 (a) The (m) National Telecommunication Commission (NTC); Commission shall have jurisdiction, supervision, and control over all public services and (n) National Water Resources Board (NWRB); their franchises, equipment, and other properties, and in the exercise of its authority, it (o) Philippine National Railways (PNR); shall have the necessary powers and the aid of the public force: (p) Philippine Ports Authority (PPA); and (q) Toll Regulatory Board (TRB). EXC#1: Provided, That public services 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, e. What happened to the Public Service Commission? but certificates of public convenience or certificates of public convenience and necessity shall not be required of such entities or corporations: See footnote #2 in KMU Labor Center v. Garcia, supra The 20th century ushered in the birth and growth of public utility regulation in the country. EXC#2: And provided, further, That it shall have no authority to require steamboats, After the Americans introduced public utility regulation at the turn of the century, various motor ships and steamship lines, whether privately-owned, or owned or operated regulatory bodies were created. They were the Coastwise Rate Commission under Act No. by any Government controlled corporation or instrumentality to obtain certificate of 520 passed by the Philippine Commission on November 17, 1902; the Board of Rate public convenience or to prescribe their definite routes or lines of service. Regulation under Act No. 1779 dated October 12, 1907; the Board of Public Utility Commission under Act No. 2307 dated December 19, 1913; and the Public Utility NOTE AMENDMENT: (a) The Commission shall have jurisdiction and supervision over Commission under Act No. 3108 dated March 19, 1923. all public services, including public utilities, and their franchises, equipment, and other properties, and in the exercise of its authority, it shall have the necessary powers and the During the Commonwealth period, the National Assembly passed a more comprehensive aid of public force: Provided, That public services, including public utilities, owned or public utility law. This was Commonwealth Act No. 146, as amended or the Public Service operated by government entities shall be regulated by the Commission in the same Act, as amended. Said law created a regulatory and franchising body known as the Public way as privately-owned public services. Service Commission (PSC). The Commission (PSC) existed for thirty-six (36) years from 1936 up to 1972. Nothing in this Act shall be interpreted to diminish, limit, or restrict the authority of Congress from granting franchises to public services, as may be provided by law. On September 24, 1972, Presidential Decree No. 1 was issued and declared "part of the law of the land." The same effected a major revamp of the executive department. Under Page 6 of 141 Article III, Part X of P.D. No. 1, the Public Service Commission (PSC) was abolished and HELD: The Milk Industry is not a public utility, but it is subject to regulation in public interest. replaced by three (3) specialized regulatory boards. These were the Board of It is NOT a business so affected is one in which property is devoted to an enterprise of a Transportation, the Board of Communications, and the Board of Power and sort which the public itself might appropriately undertake, OR (2) one whose owner relies on Waterworks. a public grant or franchise for the right to conduct the business, OR (3) in which he is bound to serve all who apply; HOWEVER, property does become clothed with a public interest The Board of Transportation (BOT) lasted for thirteen (13) years. On March 20, 1985, when used in a manner to make it of public consequence, and affect the community at Executive Order No. 1011 was issued abolishing the Board of Transportation and the large. Bureau of Land Transportation. Their powers and functions were merged into the Land Transportation Commission (LTC). ITC: The milk industry in NY has been the subject of long-standing and drastic regulation in the public interest. The production and distribution of milk is a paramount industry upon Two (2) years later, LTC was abolished by Executive Order Nos. 125 dated January 30, which the prosperity of the state in a great measure depends; existing economic conditions 1987 and 125-A dated April 13, 1987 which reorganized the Department of Transportation have largely destroyed the purchasing power of milk producers for industrial products, have and Communications. On June 19, 1987, the Land Transportation Franchising and broken down the orderly production and marketing of milk, and have seriously impaired the Regulatory Board (LTFRB) was created by Executive Order No. 202. The LTFRB, agricultural assets supporting the credit structure of the state and its local governmental successor of LTC, is the existing franchising and regulatory body for overland subdivisions. transportation today. Charlie: In the US, agricultural products are super subsidized, and that’s why they have so NOTE AMENDMENT RE: PSC much grain. Shipping regulation: MARINA Tatad v. Garcia, 243 SCRA 436 Telecommunications: NTC & DICT (to a certain extent) DOCTRINE: In law, there is a clear distinction between the "operation" of a public utility and Electricity: DOE & ERC the ownership of the facilities and equipment used to serve the public. Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely Charlie: You can’t have a super regulator for ALL PubUs. It requires specialized knowledge subjected to his will in everything not prohibited by law or the concurrence with the rights of and specialized regulations for each industry. another. The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to serve the public as a public utility unless the f. Not a Public Utility operator has a franchise. The operation of a rail system as a public utility includes the transportation of passengers from one point to another point, their loading and unloading at Nebbia v. New York, 291 U.S. 502 (1934) designated places and the movement of the trains at prescheduled times. The right to DOCTRINE: Property does become clothed with a public interest when used in a manner to operate a public utility may exist independently and separately from the ownership of the make it of public consequence, and affect the community at large.'. Thus understood, facilities thereof. One can own said facilities without operating them as a public utility, or 'affected with a public interest' is the equivalent of 'subject to the exercise of the police conversely, one may operate a public utility without owning the facilities used to serve the power' public. The devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof. This dichotomy FACTS: The NY Legislature established a Milk Control Board with the power to fix the min between the operation of a public utility and the ownership of the facilities used to serve the and max retail prices to be charged by stores to consumers. public can be very well appreciated when we consider the transportation industry. Enfranchised airline and shipping companies may lease their aircraft and vessels instead of The Board pegged a quarter of milk at 9 cents and under the assailed statute (Agriculture owning them themselves. and Markets Law), it was unlawful for a milk dealer to sell or buy or offer to sell or buy milk at any price less or more than such price. Petitioner Nebbia, a proprietor of a grocery store, FACTS: The DOTC and EDSA LRT Corporation, Ltd., (in substitution of the EDSA LRT sold two quarts of milk and a 5-cent loaf of bread for 18 cents in violation of the board’s Consortium), entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit above-order. The county court and CA affirmed his conviction. System for EDSA". EDSA LRT Corporation, Ltd. is a private corporation organized under the laws of Hongkong. The main agreement and supplement provided the following: He assails the statute and order, arguing that direct fixation of prices is a type of regulation absolutely forbidden. Public control of rates or prices is per se unreasonable and TLDR of the agreement: Once the EDSA LRT III is constructed, priv. respondent, as lessor, unconstitutional, save as applied to businesses affected with a public interest or public will turn it over to DOTC, as lessee, for the latter to operate the system and pay rentals for utilities. said use. Page 7 of 141 Petitioner’s Arguments and light to its own cement factory. Teresa Electric Light and Power Co., an electric plant The agreement insofar as it grants EDSA LRT Corporation, a foreign corporation, operator also in Rizal opposed this saying they are the duly authorized operators of electric the ownership of EDSA LRT III, a public utility, is unconstitutional heat, light, and power in the area, among other things. Filipinas claims they do not need EDSA LRT III is a public utility, and the ownership and operation thereof is limited approval of the Municipal council as they already have all the requirements present and that by the Constitution to Filipino citizens and domestic corporations they will be limited to themselves and not affect the business of Teresa. The PSC issued the certificate. HELD: What the EDSA LRT Corp owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant, not a public utility. HELD: SC upheld the grant to Filipinas, ruling that nobody has any exclusive right to secure A mere owner and lessor of the facilities used by a public utility is not a public utility a franchise or a certificate of public convenience, and Teresa was unable to supply the EDSA LRT Corp will not run the light rail vehicles and collect fees from the riding power needs of Filipinas. public. It will have no dealings with the public and the public will have no right to The above requirements show that the act was intended to apply exclusively to demand any services from it. any person or corporation who desires a franchise to construct and maintain an electric line or power plant and line for business purposes, that is, to render Charlie: Weird case law, diba? service to the general public at such rate of compensation as may be approved Refer to the definition of “public service” and regulated by the government. Clearly, therefore, it should not be made to apply to Filipinas who applied for a The Iloilo Ice and Cold Storage Company v. Public Utility Board (1923) certificate of public convenience and service to operate and maintain an electric DOCTRINE: The criterion by which to judge the character of the use is whether the public plant exclusively for its own use in connection with the operation of its cement may enjoy it by right or only by permission. The essential feature of a public use is that it is factory and for the use of its employees living within the compound of the factory — not confined to privileged individuals, but is open to the indefinite public. the latter to receive service free of charge. FACTS: Petitioner is a corporation that has maintained and operated a plant for the Charlie discussion manufacture and sale of ice in the City of Iloilo. Business is carried with selected customers. The electric industry has several players. The secretary of the Public Utility Commission reported to the Public Utility Commissioner 1. Generation that the Iloilo Ice and Cold Storage Company should be considered a public utility. The 2. Transmission from power generator to distributors Commissioner agreed and rendered a decision holding in effect that the Iloilo Ice and Cold 3. Distribution (eg. MERALCO) Storage Company was a public utility, and that, accordingly, it should file in the office of the Public Utility Commissioner, a statement of its charges for ice. Tradeoff: Electricity supply stability vs. High prices HELD: Petitioner is not a public utility. Read doctrine. ITC: it was organized solely for EPIRA only limited the regulation to transmission & distribution to encourage foreign players particular persons under strictly private contracts, and never was devoted by its owners to to invest in the industry. public use. IOW, only transmission & distribution are deemed PubUs. Q: This case vs. Luzon Stevedoring? JG Summit Holdings, Inc. v. Court of Appeals, G.R. No. 124293, September 24, 2003 A: It sounds contradicting. DOCTRINE: "Public use" means the same as "use by the public." The essential feature of It’s really difficult to determine what’s a public service or not. the public use is that it is not confined to privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that gives it its public character. In Teresa Electric & Power Co. v PSC, 21 SCRA 198 determining whether a use is public, we must look not only to the character of the business DOCTRINE: The requirement of a municipal franchise under the provisions of Act No. 667 to be done, but also to the proposed mode of doing it. If the use is merely optional with the was intended to apply exclusively to any person or corporation who desires a franchise to owners, or the public benefit is merely incidental, it is not a public use, authorizing the construct and maintain an electric line or power plant and line, for business purposes; it exercise of jurisdiction of the public utility commission. There must be, in general, a right should not be made to apply to Filipinas who applied for a certificate of public convenience which the law compels the owner to give to the general public. It is not enough that the and service to operate and maintain an electric plant exclusively for its own use in general prosperity of the public is promoted. Public use is not synonymous with public connection with the operation of its cement factory and for free use of its employees living interest. The true criterion by which to judge the character of the use is whether the public within the compound of the factory. may enjoy it by right or only by permission. FACTS: Filipinas Cement Corp. applied for a certificate of public convenience with the FACTS: During the bidding for the National Government’s share in PHILSECO, petitioner Public Service Commission to operate an electric plant in Teresa, Rizal to supply electricity JG Summit Holdings was declared the highest bidder. While the Committee on Privatization Page 8 of 141 approved the sale, this was subject to the right of the government’s business partner, Kawasaki Heavy Industries (and its PH assignee, Philyards) to top JGSMI’s bid by 5% as R.A. No. 9136 or Electric Power Industry Reform Act of 2001. specified in the bidding rules. When Philyards decided to invoke this right to top, petitioner Section 6 Generation Sector. - Generation of electric power shall be competitive and filed a petition for mandamus with the CA which was dismissed. However, upon appeal to open. the Supreme Court, the latter initially reversed the CA, holding that PHILSECO, a shipyard, was a public utility, and therefore the right to top granted to KAWASAKI (a Japanese corp.) Upon the effectivity of this Act, any new generation company shall, before it operates, would allow a foreign corporation to own more than 40% in the shipyard. This led to the secure from the Energy Regulatory Commission a certificate of compliance pursuant to herein motion for reconsideration, with the primary issue being: whether a shipyard is a the standards set forth in this Act, as well as health, safety and environmental clearances public utility. from the appropriate government agencies under existing laws. HELD: The Court held that it is not a public utility. Any law to the contrary notwithstanding, power generation shall not be considered a public utility operation. For this purpose, any person or entity engaged or which shall By nature, a shipyard is not a public utility. - The principal determinative characteristic of a engage in power generation and supply of electricity shall not be required to secure a public utility is that of service to, or readiness to serve, an indefinite public or portion of the local or national franchise. public as such which has a legal right to demand and receive its services or commodities. A public utility “holds out generally and may not refuse legitimate demand for service.” The Upon implementation of retail competition and open access, the prices charged by a true criterion to judge the character of the public use is whether the public may enjoy it by generation company for supply of electricity shall not be subject to regulation by the ERC right or only by permission Applying this criterion, the Court held that a shipyard cannot be except as otherwise provided in this Act considered a public utility. While it publicly offers its services, it may choose whom to serve at its discretion. The public also does not have a legal right to demand that such services be Pursuant to the objective of lowering electricity rates to end-users, sales of generated rendered. power by generation companies shall be value added tax zero-rated. No law currently declares a shipyard as a public utility. - With the express repeal of BP Blg. The ERC shall, in determining the existence of market power abuse or anti-competitive 391 by EO No. 226, the revival of sections 13(b) and 15 of CA No. 146 (which classified behavior, require from generation companies the submission of their individual pricing shipyards as public utilities) have no leg to stand on. A law that has been expressly formulas as well as their financial statements. repealed ceases to exist and becomes inoperative from the moment the repealing law becomes effective. Hence, there is simply no basis in the conclusion that shipyards remain Section 29 Supply Sector. - The supply of electricity to the contestable market shall to be a public utility. A repealed statute cannot be the basis for classifying shipyards as require a license from the ERC, except for distribution utilities and electric public utilities. Thus, absent any legislative declaration that a shipyard has been considered cooperatives with respect to their existing franchise areas. a public utility, there is no reason to continue declaring it as such. For this purpose, the ERC shall promulgate rules and regulations prescribing the Charlie: Relate this to Iloilo, it’s weird, right? The resolution would’ve been different if they qualifications of electricity suppliers which shall include, among other requirements, a relied on the shipyard definition demonstration of their technical capability, financial capability, and creditworthiness: Provided, That the ERC shall have authority to require electricity suppliers to furnish a bond or other evidence of the ability of a supplier to withstand market disturbances or Enterprises not covered by definition of public service other events that may increase the cost of providing service. Commonwealth Act No. 146 or the Public Service Act. Section 14 The following are exempted from the provisions of the preceding section: Any law to the contrary notwithstanding, supply of electricity to the contestable (a) Warehouses; market shall not be considered a public utility operation. For this purpose, any (b) Vehicles drawn by animals and bancas moved by oar or sail, and tugboats person or entity which shall engage in the supply of electricity to the contestable market and lighters; shall not be required to secure a local or national franchise. (c) Airships within the Philippines except as regards the fixing of their maximum rates on freight and passengers; The prices to be charged by suppliers for the supply of electricity to the contestable (d) Radio companies except with respect to the fixing of rates; market shall not be subject to regulation by the ERC. (e) Public services owned or operated by any instrumentality of the National Government or by any government-owned or controlled corporation, except Electricity suppliers shall be subject to the rules and regulations concerning abuse of with respect to the fixing of rates. market power, cartelization, and other anti-competitive or discriminatory behavior to be promulgated by the ERC. Page 9 of 141  Nothing in this Act shall be interpreted to diminish, limit, or restrict the authority of In its billings to end-users, every supplier shall identify and segregate the components of Congress from granting franchises to public services, as may be provided by law. Any its supply charge, as defined herein. franchise or certificate necessary for the operation of a public service shall be granted by Congress unless otherwise previously delegated by law to the relevant Administrative Agencies. R.A. No. 10668 or ACT ALLOWING FOREIGN VESSELS TO TRANSPORT AND CO-LOAD FOREIGN CARGOES FOR DOMESTIC TRANSSHIPMENT AND FOR (d) Public Utility. - Public Utility refers to a public service that operates, manages or OTHER PURPOSES controls for public use any of the following: (1) Distribution of Electricity; Section 4 Carriage of a Foreign Cargo by a Foreign Vessel. – A foreign vessel: (2) Transmission of Electricity; (a) Arriving from a foreign port, shall be allowed to carry a foreign cargo to its Philippine (3) Petroleum and Petroleum Products Pipeline Transmission Systems; port of final destination, after being cleared at its port of entry; (4) Water Pipeline Distribution Systems and Wastewater Pipeline Systems, (b) Arriving from a foreign port, shall be allowed to carry a foreign cargo by another including sewerage pipeline systems; foreign vessel calling at the same port of entry to the Philippine port of final (5) Seaports; and destination of such foreign cargo; (6) Public Utility Vehicles. (c) Departing from a Philippine port of origin through another Philippine port to its foreign port of final destination, shall be allowed to carry a foreign cargo intended for export; All concessionaires, joint ventures and other similar entities that wholly operate, manage and or control for public use the sectors above are public utilities. (d) Departing from a Philippine port of origin, shall be allowed to carry a foreign cargo by another foreign vessel through a domestic transshipment port and transferred at Nothing in this Act shall be interpreted as a requirement for legislative franchise where such domestic transshipment port to its foreign port of final destination. the law does not require any. No other person shall be deemed a public utility unless otherwise subsequently provided by law. For purposes of this Act, an empty foreign container van going to or coming from any Philippine port, or going to or coming from a foreign port, and being transshipped (e) Upon the recommendation of the National Economic and Development Authority between two (2) Philippine ports shall be allowed. (NEDA), the President may recommend to Congress the classification of a public service as a public utility on the basis of the following criteria: Section 7 Carriage by Foreign Vessels Not a Public Service, Foreign Vessels Not (1) The person or juridical entity regularly supplies and transmits and distributes to Common Carriers. – Foreign vessels engaging in carriage conducted in accordance with the public through a network a commodity or service of public consequence; this Act shall not be considered common carriers as provided in Republic Act No. 386, (2) The commodity or service is a natural monopoly that needs to be regulated otherwise known as the "Civil Code of the Philippines"; neither shall such foreign vessels when the common good so requires. For this purpose, natural monopoly exists be considered as offering a public service and thus shall fall outside the coverage of when the market demand for a commodity or service can be supplied by a Republic Act No. 9295, otherwise known as the "Domestic Shipping Development Act of single entity at a lower cost that by two or more entities; 2004". (3) The commodity or service is necessary for the maintenance of life and occupation of the public; and (4) The commodity or service is obligated to provide adequate service to the public R.A. No. 11659 or Amending PSA on demand. Section 4 Section 13 of Commonwealth Act No. 146, as amended, is hereby further All public services, including those classified as public utilities under this Act, shall amended to read as follows: continue to be regulated and supervised by the relevant Administrative Agencies under existing laws. "Section 13. (a) The Commission shall have jurisdiction and supervision over all public services, including public utilities, and their franchises, equipment, and other properties, A public service which is not classified as a public utility under this Act shall be and in the exercise of its authority, it shall have the necessary powers and the aid of considered a business affected with public interest for purposes of Sections 17 and public force: Provided, That public services, including public utilities, owned or operated 18 of Article XII of the Constitution. by government entities shall be regulated by the Commission in the same way as privately-owned public services. Notwithstanding any law to the contrary, nationality requirements shall not be imposed by the relevant Administrative Agencies on any public service not Page 10 of 141  classified as a public utility. The NEDA shall provide periodic advice to Administrative Agencies on the proper application of the constitutional and other legal restrictions to local and foreign-owned subcontractors, without putting operational resiliency at risk. Charles: The Amendment drastically limited what can be considered a PU Nature of concession agreements Freedom from Debt Coalition v. MWSS, G.R. No. 173044, December 10, 2007 DOCTRINE: In determining whether the concessionaires are public utilities or mere agents of MWSS, there must be an examination of the intention of MWSS and the concessionaires at the time of the bidding process, negotiation, and execution of the Concession Agreements. FACTS: In 1995, the government embarked upon the privatization of the waterworks and sewerage system of MWSS (Metropolitan Waterworks and Sewerage System). In light of this MWSS chose to enter into concession arrangements with Manila Water Company, Inc., and Maynilad Water Services, Inc. As consideration for the performance of their obligations, the concessionaires are empowered to charge and collect water and sewerage services based on standard rates. Under the Concession Agreements, the concessionaires' rate of net return shall not exceed twelve percent (12%) per annum. The MWSS Regulatory Office then issued a Notice of Extraordinary Price Adjustment (NEPA) to both concessionaires, stating that Grounds for Extraordinary Price Adjustment (GEPA) have occurred. This came about when an SC Resolution was promulgated, holding that "income tax payments of a utility are not expenses which contribute to or are incurred in connection with the production of profit of a public utility.” However, the concessionaires opposed the NEPA and requested that it be set aside on the grounds that they are not public utilities but mere agents and contractors of MWSS by virtue of the Concession Agreements. The issue in this case is W/N the concessionaires were public utilities. HELD: The SC was unable to resolve the issue because it dismissed the petition on procedural grounds. One of them being that the petition raises issues of fact which cannot be addressed by them. In determining whether the concessionaires are public utilities or mere agents of MWSS, there must be an examination of the intention of MWSS and the concession. This matter is a factual issue requiring presentation and evaluation of evidence such as bidding documents, memoranda, and the testimonies of the participants of the bidding and contract negotiations. These matters are beyond the Court's function as it is not a trier of facts. Takeaway: Accdg to MWSS, concessionaires are mere agents of PubUs. Ali: They are applying the ownership v. operation of public utilities. Here the agent was the operator while in Tatad it was the operator who was the PubU. Page 11 of 141  ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the II. Constitutional Provisions voting rights, is constitutionally required for the State’s grant of authority to operate a public utility. i. See Article XII, Secs. 6,11,17,18,19, 1987 Constitution The undisputed fact that the PLDT preferred shares, 99.44% owned by Filipinos, are 1987 Constitution, Article XII non-voting and earn only 1/70 of the dividends that PLDT common shares earn, grossly violates the constitutional requirement of 60 percent Filipino control and Filipino beneficial Section 6 The use of property bears a social function, and all economic agents shall ownership of a public utility. contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, FACTS: PLDT was granted a franchise to engage in the telecommunications business in and operate economic enterprises, subject to the duty of the State to promote 1928 through Act. No. 3436. In 1969, 26% of the outstanding common shares were sold by distributive justice and to intervene when the common good so demands. General Telephone and Electronics Corporation (GTE) (an American company) to Philippine Telecommunications Investment Corporation (PTIC), who in turn assigned 111,415 shares Section 11 No franchise, certificate, or any other form of authorization for the of stock of PTIC (46% of outstanding capital stock) to Prime Holdings Inc. (PHI). operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per These shares of PTIC were later sequestered by PCGG and adjudged by the court to centum of whose capital is owned by such citizens; nor shall such franchise, certificate, belong to the Republic. Then, 54% of PTIC shares were sold to First Pacific, a Hong or authorization be exclusive in character or for a longer period than fifty years. Neither Kong-based investment firm, and the remaining 46% was sold through public bidding by the shall any such franchise or right be granted except under the condition that it shall be Inter-Agency Privatization Council, and eventually ended up being bought by First Pacific subject to amendment, alteration, or repeal by the Congress when the common good so subsidiary Metro Pacific Asset Holdings Inc. (MPAH) after the corporation exercised it’s right requires. The State shall encourage equity participation in public utilities by the general of first refusal. public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive The transaction was deemed an indirect sale of 12 million shares or 6.3% of the outstanding and managing officers of such corporation or association must be citizens of the common shares of PLDT, making First Pacific’s common shareholdings of PLDT to 37% Philippines. and the total common shareholdings of foreigners in PLDT to 81.4%, where Japanese NTT DoCoMo owns 51.56% of the other foreign shareholdings/equity. Petitioner Wilson Gamboa, Section 17 In times of national emergency, when the public interest so requires, the alleged that the sale of 111,415 shares to MPAH violates Sec. 11 of Art. XII of the State may, during the emergency and under reasonable terms prescribed by it, Constitution, which limits foreign ownership of the capital of a public utility to not more than temporarily take over or direct the operation of any privately-owned public utility or 40%. business affected with public interest. HELD: The Court agreed with the petitioner that the term "capital" in Section 11, Article XII Section 18. The State may, in the interest of national welfare or defense, establish and of the Constitution refers only to shares of stock entitled to vote in the election of directors, operate vital industries and, upon payment of just compensation, transfer to public and thus in the present case only to common shares, and not to the total outstanding capital ownership utilities and other private enterprises to be operated by the Government. stock comprising both common and non-voting preferred shares. Section 19. The State shall regulate or prohibit monopolies when the public interest Common shares - ordinary rights; they can vote in all shareholder actions so requires. No combinations in restraint of trade or unfair competition shall be allowed. Preferred shares - may still participate in certain corporate actions. In the Matter of: The Corporate Rehabilitation of Bayan Telecommunications, Inc., ii. Ownership, Management and Control DOCTRINE: The provision explicitly reserves to Filipino citizens control over public utilities to "conserve and develop our patrimony" and ensure "a self reliant and independent Gamboa v. Teves, G.R. No. 176579, June 28, 2011 national economy effectively controlled by Filipinos." DOCTRINE: The term capital from Art. XII Sec. 11 refers to shares of stock that can vote in the election of directors. Capital stocks refer to the voting stock or controlling interest of a FACTS: Rehabilitation case of Bayantel where its creditors are pushing for the conversion of corporation. debt to equity to 77.7% equity. They allege that it will not violate the nationality requirement of the 1987 Constitution. The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest in the hands of Filipinos in accordance with the constitutional mandate. Full beneficial Page 12 of 141 HELD: No. This is precisely the scenario proscribed by the Filipinization provision of the A corporation has 100 Common (voting) shares, 100 preferred A (voting) shares, and 100 Constitution. Preferred B (non-voting) shares: 2 steps to determine whether the conversion of debt to equity in excess of 40% of the To be compliant with the relevant decisions it must have the following proportion of Filipino outstanding capital stock violates the constitutional limit on foreign ownership of a public and foreign ownership utility: 1. Identify into which class of shares the debt shall be converted a. Common shares, preferred shares that have the right to vote in the election of Gamboa 2012 Resolution Roy v. Herbosa directors or non-voting preferred shares; 2. Determine the number of shares with voting rights held by foreign entities prior to Common Filipino: Minimum 60 conversion. Foreign: Maximum 40 Preferred A If upon conversion, the total number of shares held by foreign entities exceeds 40% of the capital stock with voting rights, the constitutional limit on foreign ownership is violated. Preferred B Filipino: Minimum 60 No minimum or maximum, as Foreign: Maximum 40 long as total 300 shares result in minimum of 60% Filipino Roy v. Herbosa, G.R. No. 207246, 22 November 2016 Ownership DOCTRINE: Section 2 of SEC-MC No. 8 even goes beyond requiring a 60-40 ratio in favor of Filipino nationals in the voting stocks; it moreover requires the 60-40 percentage Under Roy v. Herbosa, the following are acceptable: ownership in the total number of outstanding shares of stock, whether voting or not. Ex. 1 Common Filipino: Minimum 90 3 safeguards of the consti wrt a stock corp engaged in the business of a public utility Foreign: Maximum 10 (1) 60% of its capital must be owned by Filipino citizens; (2) participation of foreign investors in its board of directors is limited to their proportionate Preferred A Filipino: Minimum 90 share in its capital; and Foreign: Maximum 10 (3) all its executive and managing officers must be citizens of the Philippines. Preferred B Filipino: Minimum 0 FACTS: The SEC, thru Chairperson Herbosa issued SEC-MC No. 8, pursuant to the Foreign: Maximum 100 directive of the SC in the case of Gamboa to apply the definition of the term “capital.” SEC-MC No. 8 took into consideration BOTH (a) the total number of outstanding shares of Result At least 60% Filipino ownership of each class of voting shares, stock entitled to vote in the election of directors; AND (b) the total number of outstanding and at least 60% ownership of all shares shares of stock, whether or not entitled to vote in the election of directors in defining “capital,” while in the case of Gamboa, the SC ruled that the term “capital” under Sec 11, Art Ex. 2 Common Filipino: Minimum 80 XII, 1987 Consti refers ONLY to shares of stock ENTITLED TO VOTE in the election of Foreign: Maximum 20 directors. Petitioner Roy and intervenors challenge the SEC-MC because it is contrary to the Gamboa ruling, and insisted to apply the 60-40 Filipino ownership requirement Preferred A Filipino: Minimum 80 SEPARATELY to each class of shares of a public utility, whether: Common, Preferred Foreign: Maximum 20 non-voting, Preferred voting, or Any other class of shares. Preferred B Filipino: Minimum 20 HELD: SEC-MC No. 8 even went beyond the Gamboa ruling, and made it more beneficial to Foreign: Maximum 80 Filipino shareholders. The SC ruled that the proposition of the petitioner and intervenors would result in disastrous effects on the Philippine Stock Exchange. Result At least 60% Filipino ownership of each class of voting shares, and at least 60% ownership of all shares Sir’s Docu Sample 60-40 Capital Rule To reiterate, as long as each class of voting shares is at least 60% Filipino owned and the entire capital stock is at least 60% Filipino owned, this is acceptable under Roy v. Herbosa Page 13 of 141 Charlie: Funny because the main argument said that the dissent misunderstood Gamboa, but it was the dissenter (Carpio) who wrote Gamboa interest in a proper and suitable manner: Provided, That any certificate authorizing the operation, management or control of a public service shall only be issued to 60 (common + 60 (pref voting) + balance can be whatever but it must come out 60% total corporations, partnerships, associations or joint stock companies that are capital owned by Filipinos constituted and organized under the laws of the Philippines. NOTE THAT ROY IS DA CURRENT RULING. YOU CAN FORGET GAMBOA. Section 20 Acts requiring the approval of the Commission. - Subject to established limitations and exceptions and saving provisions to the contrary, it shall be unlawful for IOW: 60% in EACH class of voting stock + as long as the WHOLE CAPITAL STOCK IS AT any public service or for the owner, lessee or operator thereof, without the approval and LEAST 60% authorization of the Commission previously had - (i) To sell, alienate or in any matter transfer shares of its capital stock to any alien if the SEC MC No. 8-2013 (Guidelines on Compliance with Filipino-Foreign Ownership result of that sale, alienation, or transfer in itself or in connection with another previous Requirements) in relation to Public Service Act, Sec 16(a) and Sec 20 (i) sale shall be the reduction to less than sixty percent (60%) of the capital stock belonging to Philippine Nationals in the operation of a public utility as required by SEC MC No. 8-2013 (Guidelines on Compliance with Filipino-Foreign Ownership the Constitution. Such sale, alienation or transfer shall be void and of no effect and shall Requirements) be sufficient cause for ordering the cancellation of the certificate. SECTION 2. All covered corporations shall, at all times, observe the constitutional or statutory ownership requirement. For purposes of determining compliance therewith, the iii. Exclusivity: cannot be exclusive required percentage of Filipino ownership shall be applied to BOTH (a) the total number of outstanding shares of stock entitled to vote in the election of directors; AND (b) the Metro Cebu Water v. Adala, G.R. No. 168914, July 4, 2007 total number of outstanding shares of stock, whether or not entitled to vote in the election DOCTRINE: Public convenience and necessity exists when the proposed facility will meet a of directors. 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 Corporations covered by special laws 2 which provide specific citizenship requirements indispensable thing. shall comply with the provisions of said law. FACTS: Margarita Adala filed an application with the NWRB for a CPC to operate and SECTION 3. All Corporate Secretaries of covered corporations are directed to monitor maintain the waterworks system in Cebu City. and observe compliance with the provisions on ownership requirements provided in the Constitution, the FIA, its IRR, other applicable laws, rules and regulations and with the This was opposed by MCWD because its BOD had not consented to the issuance of the provisions of this Circular. franchise (such consent is a mandatory condition pursuant to Sec. 47 of P.D. 198). Adala claimed that the term “franchise” as used in Sec. 47 does not include CPCs; hence, no need The Corporate Secretary cannot delegate the responsibility of complying with the for the consent of MCWD’s BOD. After hearing and an ocular inspection of the area, the provisions of this Circular without the express authority from the Board of Directors or NWRB dismissed petitioner's opposition "for lack of merit and/or failure to state the cause of Trustees, as the case may be. action." In turn, instant application for a CPC WAS GRANTED. HELD: The term “franchise” should be interpreted broadly so as to include, not only Commonwealth Act No. 146 or the Public Service Act. as amended authorizations issuing directly from Congress in the form of statute (legislative franchise), but also those granted by administrative agencies (such as CPCs) to which the power to Section 16 Proceedings of the Commission, upon notice and hearing. - The grant franchises has been delegated by Congress. 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 However, while Sec. 47 of P.D. 198 applies to the issuance of CPCs, the same provision saving provisions to the contrary : must be deemed void ab initio for being irreconcilable with Article XIV, Sec. 5 of the 1973 Constitution (substantially reproduced in Art. XII Sec. 11 of the 1987 Constitution), which (a) To issue certificates authorizing the operation of public service within the prohibits exclusive franchises. Philippines whenever the Commission finds that the operation of the public service proposed and the authorization to do business will promote the public Page 14 of 141 Tawang Multi-Purpose Cooperative v. La Trinidad Water District, G.R. No. 166471, HELD: W/N RCPI must secure cert of public convenience and necessity? YES March 22, 2011 1. Petitioner’s legis franchise does not give it authority to set up operations anywhere in DOCTRINE: The 1935, 1973 and 1987 Constitutions are clear — franchises for the the PH. operation of a public utility cannot be exclusive in character. The 1935, 1973 and 1987 2. Petitioner is covered by PSC abolition (PD 1) + creation of NTC (EO 546). These in Constitutions expressly and clearly state that, "nor shall such franchise... be exclusive in effect amended petitioner’s legis franchise. character." There is no exception. No exceptions. 3. Petitioner did not show any grant of authority under EO 546. FACTS: Francisco v. Toll Regulatory Board, G.R. No. 166910, October 19, 2010 Tawang Multi-Purpose Cooperative (TMPC) filed with the National Water Resources DOCTRINE: A franchise is a legislative grant of a special privilege to a person, including not Board (NWRB) an application for a certificate of public convenience (CPC) to operate only authorizations issuing directly from Congress in the form of statute, but also those and maintain a waterworks system in Barangay Tawang, La Trinidad, Benguet. granted by administrative agencies to which the power to grant franchise has been La Trinidad Water District (LTWD) a local water utility created under Presidential delegated by Congress. Decree (PD) No. 198, opposed TMPC's application. LTWD claimed that, under Section 47 of PD No. 198, as amended, its franchise is exclusive. GR: A legislative franchise cannot be modified or amended by an administrative body with general delegated powers to grant authorities or franchises. HELD: EXC: Unless otherwise allowed by the enabling law. Section 47 of PD198 was declared UNCONSTITUTIONAL for running contrary to Sec. 11, Art. XII of the 1987 Constitution. FACTS: Pres-fucking-Marcos issued PD No. 1112 which created the Toll Regulatory Board The President, Congress and the Court all cannot create directly franchises for the (TRB) and invested it the power to grant authority to operate a toll facility, among others. He operation of a public utility that are exclusive in character. The 1935, 1973 and 1987 also issued a 30-year franchise to Philippine National Construction Corporation (PNCC) Constitutions expressly and clearly prohibit the creation of franchises that are exclusive under PD No. 1113 to construct, maintain and operate toll facilities in the NLEX and SLEX, in character. with the right to collect toll fees at such rates as it may fix and authorize. Such franchise was enlarged by PD 1894 to include the MMEX, and the expanded and delineated NLEX and SLEX. iv. Subject to Amendment: by Congress when common good PNCC entered into JVAs with private entities/investors for the toll operation of its franchised requires areas involving the execution of Supplemental Toll Operation Agreements (STOAs). These STOAs define the scope of the road project coverage, the terminal date of the concession, RCPI v. NTC, 150 SCRA 450 (L-68729) and includes provisions on initial toll rate and a built-in formula for adjustment of toll rates, DOCTRINE: No franchise, certificate, or any other form of authorization for the operation of investment recovery clauses and contract termination in the event of default. a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose This translated into various projects—one of which is the NLEX EXPANSION PROJECT for capital is owned by such citizens; nor shall such franchise, certificate, or authorization be which the PNCC and First Philippine Infrastructure and Development Corporation (FPIDC) exclusive in character or for a longer period than fifty years. Neither shall any such executed a JVA, and the Manila North Tollways Corporation (MNTC) was formed. franchise or right be granted except under the condition that it shall be subject to Furthermore, the Republic, through the TRB, PNCC and MNTC, executed a STOA for the amendment, alteration, or repeal by the Congress when the common good so North Luzon Tollway project (MNTC STOA) in which MNTC was authorized, inter alia, to requires… (Constitution, Art. XII, Sec. 11). subcontract the operation and maintenance of the project, provided that the majority of the outstanding shares of the contractor shall be owned by MNTC. FACTS: 1. Petitioner RCPI has been operating a radio communications system since 1957. Petitioners thus assail the MNTC STOA provision [Clause 17.4.1] which provides lenders 2. NTC authorized private respondent Kayumanggi Radio Network Incorporated to the unrestricted right to appoint a substitute entity as grantee (in case MNTC defaults with operate radio communications systems in Catarman, Samar and in San Jose, Mindoro. its loans) for being UNCONSTITUTIONAL because it is tantamount to an amendment of 3. Private respondent filed a complaint that petitioner was operating w/o a cert of public PNCC’s original franchise. con. 4. In its defense, petitioner argues that the its telephone services in the places subject of HELD: MNTC STOA provision CONSTITUTIONAL. the complaint are covered by the legislative franchise recognized by both the public 1) The TRB has the power to grant the authority to construct and operate toll road projects respondent and its predecessor, the PSC. → in effect, they are saying that they don’t and toll facilities by way of a TOA and the corresponding TOC, but at the same time, it need a cert of public con bec they already have the legis franchise also has the power to impose conditions on the franchise, albeit in a limited sense.