Public Service Act.docx

PUBLIC SERVICE ACT (CA 146) Purpose of the Public Service Act: 1. to secure adequate, sustained service for the public at the least possible cost; and 2. to protect and conserve investments which have already been made for that purpose Public Service Meaning of “PUBLIC” in public service – individuals in general without restriction or selection to the extent that the capacity of the utility may admit such service or use  

“Public” does not mean everyone or all Filipinos As long as these people are not prevented from using these utilities, then, those individuals that comprise a group can be considered public

Public Utility 1. Definition – A public utility is a business or service which is engaged in regularly supplying the public with some commodity or service of public consequence such as: a. electricity b. gas c. water d. transportation e. telephone service  

A common carrier is a public utility The public utility is not the bus. It is not the jeep but the carrier.

Principal Determinative Characteristic of a Public Utility That of service or readiness to serve an indefinite public which has the right to demand and receive its services or commodities  

Anyone who applies for a water line with the DCWD can do so provided he has a land owner, a lessor. That person cannot be refused if he has all the documents Just like transportation – anyone who wants to get on a taxi can get on. There should be no discrimination made by the public utility

Note: a. The fact that the service is limited to particular district or town does not prevent the business or town does not prevent the business from being a public utility b. The number of people actually served does not determine whether a person or company is a public utility c. Such person or company which holds himself out to serve all who wish to avail themselves of the service may be a public utility even though only 1 or 2 people actually receive service  

Example: If a particular tricycle association only serves a particular barangay, it is still considered a public utility As long as it offers its services to anyone who would like to use such services

State Regulation of Public Utilities 1. Basis – for the State to regulate public utilities is POLICE POWER a. The state may regulate and control public utilities to protect the public interests to promote the health, comfort, safety and welfare of the people b. The legislature may interfere with the management of public utilities whenever public interest demands 2. Limitations – The right to regulate public utility under the police power does NOT extend beyond the right to: a. regulate rates and charges b. prevent discrimination upon the part of the public utility against those who employ it; and c. to make orders governing the conduct of the public utility to the ends: that its efficiency may be built up and maintained and that the public and its employees may be accorded desirable safeguards and conveniences 3. The state may delegate to the public service commissions the power to regulate public utilities: a. Land – Land Transportation Franchising and Regulatory Board (LTFRB) b. Sea – Maritime Industry Authority (MARINA) c. Air – Civil Aeronautics Board (CAB)

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Under the Public Service Act, the body that was referred to was the Public Service Commission However, the Public Service Commission has been divided into those 3

Note: Any reference to the Public Service Commission (which is now defunct) shall be understood to be the appropriate board, authority or agency of the government that took over its functions Q: What is the requisite for the operation of a public utility? A: That is Section 15 of the Public Service Act – Certificate of Public Convenience or Certificate of Public Convenience and Necessity Section 15. Certificate of Public Convenience or Certificate of Public Convenience and Public Necessity No public service shall operate in the Philippines without possessing a valid and subsisting certificate from the proper regulatory body known as “certificate of public convenience” or “certificate of public convenience and necessity,” as the case may be, to the effect that the operation of said service and the authorization to do business will promote the public interests in a proper and suitable manner. 

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If a public utility or a common carrier does not have a CPC, it cannot raise the defense that it does not have a CPC so that it will not be held liable as a common carrier. It can still be held liable as a common carrier even without a CPC. It can be held liable if it operates without a CPC. That is a requirement under the Public Service Act.

Distinctions between a CPC and CPCN CPC CPCN  Issued when it is found that  Issued upon approval of any the operation of the franchise or privilege proposed public service will granted by any political promote public interest in a subdivision of the proper manner for which a Philippines, when in the municipal or legislative judgment of the regulatory franchise is not necessary body, such franchise or (PAL vs. CAB) privilege will properly conserve the public interest (approval does not have to come from Congress; it can be from the mayor or barangay) 

Section 15 of the Public Service Act

SECTION 15. With the exception of those enumerated in the preceding section, no public service shall operate in the Philippines without possessing a valid and subsisting certificate from the Public Service Commission known as "certificate of public convenience," or "certificate of public convenience and necessity," as the case may be, to the effect that the operation of said service and the authorization to do business will promote the public interests in a proper and suitable manner. The Commission may prescribe as a condition for the issuance of the certificate provided in the preceding paragraph that the service can be acquired by the Republic of the Philippines or any instrumentality thereof upon payment of the cost price of its useful equipment, less reasonable depreciation; and likewise, that the certificate shall be valid only for a definite period of time; and that the violation of any of these conditions shall produce the immediate cancellation of the certificate without the necessity of any express action on the part of the Commission. In estimating the depreciation, the effect of the use of the equipment, its actual condition, the age of the model, or other circumstances affecting its value in the market shall be taken into consideration. The foregoing is likewise applicable to any extension or amendment of certificates actually in force and to those which may hereafter be issued, to permit to modify itineraries and time schedules of public services, and to authorizations to renew and increase equipment and properties.

Where to Obtain the CPC or CPCNs Body LTFRB

Q: A:

Can the state prevent a taxi operator from hiring women as drivers? No

MARINA

Q: A:

Can the state prevent putting air conditioner in their taxis? No, because the regulation is limited to those 3 limitations

CAB

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Ma’am thinks that the state can regulate the color of the taxis

Kind of Public Utility Those engaged in public LAND transportation services by motorized vehicles Those engaged in operation of domestic and overseas WATER carriers Those engaged in AIR commerce and/or transportation, foreign or domestic

City or Municipal Council

Those engaged in providing land transportation by the use of TRICYCLES (not trisikad)

Requisites for the Grant of a CPC or CPCN: (BQ 1995) 1. Applicant must be: a. citizen of the Republic of the Philippines OR b. corporation or association organized under the laws of the Philippines at least 60% of its capital is owned by such citizens 2. The applicant must be financially capable of undertaking the proposed service and meeting the responsibilities incident to its operation 3. The applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner 

The applicant must show that this particular service is needed in this particular area

Q: A:

What is the primordial consideration in granting CPC or CPCNs? Public Interest

Situation: X wants to apply for a CPC to operate a jeepney with route from Maa to Buhangin. You apply with the LTFRB. Prior Operator Rule Before permitting a new operator to invade the territory of another already established with a CPC, the prior operator must first be given the opportunity to extend its service in order to meet the public needs in the matter of transportation   

That is a factor when an application is made with the LTFRB In the case, is there a prior operator from Maa to Buhangin route? Parang wala. So, that rule is not a factor But if you want to operate a jeepney service – Buhangin to Dakudao – may jeepney na dyan, the prior operator rule is a factor for the LTFRB to award a CPC to the applicant

Situation: X wants to apply for a CPC to operate a jeepney with route from Buhangin to end of Dakudao. What if there is another applicant? There are 2 applicants – X and Y. Prior Applicant Rule Where there are various applicants for a public utility over the same territory, ALL CONDITIONS BEING EQUAL (the amount of money, the number of jeepneys to operate, the conditions of the jeepney, etc.) priority in filing of the application for a CPC becomes an important factor in granting or refusal of the CPC  

This rule is not saying that the prior applicant will be granted the CPC. It is just saying that it is an important factor if all conditions are equal

Protection of Investment Rule One of the purposes of the Public Service Law is to protect and conserve investments which have already been made for that purpose by public service operators  

There is an applicant for a CPC. There are other entities who will oppose if the applicant will be competing with their route or their business Those who have invested a lot (new taxis, new buses, etc) – their investments will be protected under the Protection of Investment Rule

When Prior Operator Rule not applicable: 1. Where public interest would be better served by the new operator (Guico vs. Estate of Buan, Aug. 30, 1957) 2. Where the prior operator has failed to make an offer to meet the increase traffic (Manila Yellow Taxicab vs. Castelo, May 30, 1960) 3. Where the CPC granted to the new operator is a maiden CPC, which does not overlap with the entire route of the old operator but only a short portion thereof as a convergence point (Mandbusco vs. Francisco, 32 SCRA 405) Protection of Investment Rule not applicable 1. If the application of the rule would be conducive to monopoly of service and contrary to the principle that promotes healthy competition (Villa Rey vs. Pangasinan, 5 SCRA 234) Grounds for Suspension or Revocation of CPC 1. Section 16 (m) – The facts and circumstances on the strength on which CPC was issued have been misrepresented or materially changed  Example: In your application, you placed there that you will operate 100 taxis. In truth and in fact, you only operated 50 second-hand taxis. Then, there is misrepresentation of the fact. That is a ground for suspension or revocation

2.

3.

Q: A:

Section 16 (n) – The holder thereof has violated or willfully and contumaciously refused to comply with any order, rule or regulation of the regulatory bodies or any provision of the Public Service Act Article 1765, Civil Code – The common carrier repeatedly fails to comply with his duty to observe extraordinary diligence as prescribed by law Can a CPC be revoked or cancelled motu propio? No

Due Process in Revocation or Cancellation of CPC: (BQ 1992) 1. There must be notice and hearing 2. But according to the SC in the case of CIR vs. Buan (July 31, 1958), a formal charge is not necessary for as long as the holder of CPC is given his day in court 

Court – it could be before the body

Section 16 (n) – Suspension of CPC: 1. May be done PRIOR to a hearing BUT cannot exceed 30 days 2. Ground – to avoid serious and irreparable damage inconvenience to the public or private interests 

or

Example: If all the buses of a particular bus company are defective, then, the CPC can be suspended before a hearing is conducted to avoid serious and irreparable damage or inconvenience Operators of Public Services

Section 19 (a) – Unlawful Service It shall be unlawful for any public service to; 1. Provide or maintain any service that is unsafe, improper or inadequate or 2. Withhold or refuse any service which can reasonably be demanded and furnished as found and determined by the Commission in a final order which shall be conclusive and shall take effect in accordance with this Act. Upon appeal or otherwise  

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If a carrier provides or maintains taxicabs that are unsafe, improper or inadequate, that is a ground already for the suspension or cancellation of CPC If a jeepney operator or the driver of the jeepney refuse to allow passengers to board where they choose passenger, that is already a ground for revocation or cancellation of CPC because this is part of the Public Service Act – refusal to comply with any rule or regulation or provision of the Act is a ground (Section 16 (n)) These are unlawful per se. It is really unlawful to do so

Let us go to unlawful, not per se, but without approval of the Commission Section 20. Acts Which are UNLAWFUL Without Approval of the Commission 1. Section 20 (a) – To increase its rates 2. Section 20 (b) – To operate new units (Ammen Transportation vs. Francisco, Nov. 29, 1957) 3. Section 20 (g) – Sell, mortgage or lease its CPC, property, franchise or rights (Cogeo-Cubao vs. CA 207 SCRA 346) Q: Is it unlawful to decrease your rates? Wowo: No, because it is favorable to the public Lyndon: I disagree Ma’am. With LTFRB, where if they undercharge they will also be held liable. There is this LTFRB regulation where the moment you undercharge or overcharge, in both instances, you will be held liable for not complying with the issuance of the LTFRB. Raymond: I think it can lower Ma’am. I think it is discretionary.    

It is not in the Public Service Act. Under the Public Service Act, the unlawful act is to increase the approval. If it is in the regulation of the LTFRB, then, perhaps. That is a regulation that is to be followed. Example: Cebu Pacific – zero fare. They often change. Ma’am does not know if they get the approval of CAB everytime  But under the Public Service Act, it is unlawful to increase without the approval of the regulatory body. If your application says 100 units, then, you can operate only 100 units. If you want to increase, you have to get the approval of the regulatory body concerned.

Case:

AMMEN TRANSPORTATION vs. FRANCISCO

HELD: He must show that there is a public need for it. There are the requirements to entitle a common carrier to increase his units: a. He had regularly undertaken all his authorized trips b. His buses were sufficiently loaded with passengers

c.

Many travelers could not be conveniently accommodated

Q: A:

Can a taxi operator sell one unit to another person? Yes, as long as he has the approval of the regulatory body (LTFRB)

Q: Can a taxi operator sell his CPC? A: Yes, provided there is approval. Without the approval, that is a unlawful and a violation of the Public Service Act Effect of Sale or Lease of CPC Without Prior Approval of Regulatory Body: 1. The sale or lease is valid and binding between the parties 2. BUT it is not effective against the regulatory body concerned 3. The approval is only necessary to protect the public interest 4. The registered owner is liable for damages sustained by a third person 

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If the registered owner sells a taxi to X and the taxi figured in an accident and the passenger sues, the registered owner is still the previous owner since he sold without the approval of the regulatory body. The registered owner is held liable to third persons for damages, regardless of who the actual owner is

Case:

BENEDICTO vs. IAC

FACTS: Benedicto, a common carrier, sold her truck to Tee. The truck was used to transport lumber by Greenhills Woods. The lumber never arrived. An action was filed by Greenhills against Benedicto, who denies liability on the ground that she has already sold the truck to Tee. Despite the sale, Benedicto remained the registered owner of the truck because she has not been paid for the full amount of the truck by Tee.

person is the kabit operator, such jeepney can be sold at a public auction to satisfy the court’s award. It cannot be considered as a stranger’s property. Case:

JEROES vs. CA

FACTS: A jeepney was being operated under the kabit system. The jeepney was operating in a reckless manner resulting to the death and injury to third persons. In the criminal case for homicide and physical injuries through reckless imprudence, the driver was convicted. The family of the third party sued the driver, operator and the real owner of the jeepney. ISSUE:

Can they be made liable for damages?

HELD: They are all jointly and severally liable for damages if they engaged in the kabit system. Case:

LISA ENTERPRISES vs. CA

FACTS: Lisa Enterprises, without a franchise to operate a taxicab business, bought 5 cars and entered into an arrangement with X for the use of X’ certificate of public convenience in consideration of P 1,000 plus P 200 per taxicab. The taxicabs of Lisa were registered in the name of X. But the possession remained with the plaintiff. On paper, X owns the taxicabs. Later, Lisa was able to acquire its own CPC and wants to get back the taxicabs from X. X did not want to return the taxicabs. So, Lisa filed a case in court for reconveyance of the taxi HELD: The SC held that you engaged in kabit system. You are in pari delicto. No affirmative relief will be given of any kind will be given to one against the other. You are both at fault.

FACTS: Juan is a registered owner of a jeepney. He sold the jeepney to Pedro without the approval of the regulatory body. Later, judgment was rendered against Juan. Juan had a creditor who filed a case against him and judgment was rendered against him. And the jeepney, which was still in the name of Juan, was attached to satisfy the judgment against Juan.

Boundary System An arrangement between: 1. The owner of a motor vehicle who holds a CPC, and 2. The driver who uses the motor vehicle for a fixed number of hours and pays to the owner a fixed amount and shoulders the gasoline used 3. Share of the driver in lieu of a fixed compensation – the excess of the total amount of fares earned or collected over and above the amount paid to the owner 4. It is a contract of employment between: a. the owner of the public utility, and b. the driver

ISSUE:

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ISSUE:

May Benedicto be held liable for the undelivered lumber?

HELD: YES, third persons can sue the registered owner who did not get the prior consent or approval of the regulatory body. Case:

ROQUE vs. MALIBAY

Was the attachment valid?

HELD: YES, the attachment was valid because the sale in favor of Pedro was not approved by the Public Service Commission. Therefore, the transfer was not binding against public. Prescriptive Period for filing a case (Section 28) 1. 60 days – violations of orders, decisions and regulations of the regulatory bodies 2. 180 days – violations of the provisions of the Public Service Act Kabit System An arrangement whereby a person who has been granted a CPC allows another person who owns motor vehicles to operate under such franchise for a fee Kabit System – Legal or Not? 1. Not penalized outright as a criminal offense 2. But invariably recognized as contrary to public policy and therefore VOID and INEXISTENT b under Article 1409 of the Civil Code 3. One of the root causes of the prevalence of graft and corruption in the government transportation offices 4. It is an abuse of the CPC which is a special privilege granted by the government 

If you are caught engaging the kabit system, you will not be assisted by the court.

Case:

SANTOS vs. SIBUG (BQ 1990)

FACTS: Vidad had a CPC while Santos owns a jeepney which has no CPC. Santos made it appear that he transferred the jeepney to Vidad, the CPC holder, so that he could operate under the latter’s CPC, under the kabit system. For the protection of Santos, Vidad executed a re-transfer document on the jeepney to Santos but not registered. ISSUE:

May the jeepney be attached to satisfy a judgment against Vidad

HELD: YES, where a jeepney is registered in the name of an authorized public utility operator when it is actually owned by another, that other

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Under your Labor Laws, the driver is considered as an employee of the operator If their take home does not reach the minimum wage, the operator is liable for the difference if the driver sues the operator for underpayment of wages BAR QUESTIONS

2003 # 9 Bayan Bus Lines had been operating satisfactorily a bus service over the route Manila to Tarlac and vice versa via the McArthur Highway. With the upgrading of the new North Expressway, Bayan Bus Lines service became seemingly inadequate despite its efforts of improving the same. Pasok Transportation, Inc., now applies for the issuance to it by the Land Transportation Franchising and Regulatory Board of a certificate of public convenience for the same Manila-Tarlac-Manila route. Could Bayan Bus Lines, Inc., invoke the “prior operator” rules against Pasok Transportation, Inc.? Why? (6%) A: Bayan Bus Lines cannot invoke the prior operator rule. This falls under the exceptions of the prior operator rule. As stated in the case of Manila Taxicab, the SC held that the prior operator rule does not apply when the prior operator has failed to make an offer to meet the increase in traffic. In this case, the service of the prior operator was inadequate despite efforts. In other words, it cannot meet the needs of the traveling public. 1998 # IV The Batong Bakal Corporation filed with the Board of Energy an application for a Certificate of Public Convenience for the purpose of supplying electric power and lights to the factory and its employees living within the compound. The application was opposed by the Bulacan Electric Corporation contending that the Batong Bakal Corporation has not secured a franchise to operate and maintain an electric plant. Is the opposition’s contention correct? A:

You can cite the case of PAL vs. CAB. A franchise is not required for an applicant to be issued a CPC. A legislative franchise is required for a CPCN. 1995 # 1

What requirements must be met before a certificate of public convenience may be granted under the Public Service Act? A:

We already discussed that 

1993 # XIII 1) Robert is a holder of a certificate of public convenience to operate a taxicab service in Manila and suburbs. One evening, one of his taxicab units was boarded by three robbers as they escaped after staging a hold-up. Because of said incident, the LTFRB revoked the certificate of public convenience of Robert on the ground that said operator failed to render safe, proper and adequate service as required under Sec 19a of the Public Service Act. a) Was the revocation of the certificate of public convenience of Robert justified? Explain. A:

It was not justified. Grounds for revocation are not present. This can even be considered a fortuitous event. If you look at your Constitution, there is substantive and procedural due process. Procedurally, there was no notice and hearing. As to the grounds, the grounds for revocation do not exist. b) When can the Commission (Board) exercise its power to suspend or revoke certificate of public convenience? A: You state the grounds. And then, you have to add after due notice and hearing. 1993 # XIII Pepay, a holder of a certificate of public convenience, failed to register to the complete number of units required by her certificate. However, she tried to justify such failure by the accidents that allegedly befell her, claiming that she was so shocked and burdened by the successive accidents and misfortunes that she did not know what she was doing, she was confused and thrown off tangent momentarily, although she always had the money and financial ability to buy new trucks and repair the destroyed one. Are the reasons given by Pepay sufficient grounds to excuse her from completing units? Explain. A: No, she is not justified. A ground for suspension under Section 16 (m) is present - the facts and circumstances on the strength on which CPC was issued have been misrepresented or materially changed. Those are shallow reasons. She has the money or financial ability to buy a new truck and to comply with her CPC. 1992 # VI Antonio was granted a Certificate of Public Convenience (CPC) in 1986 to operate a ferry between Mindoro and Batangas using the motor vessel “MV Lotus.” He stopped operations in 1988 due to unserviceability of the vessel. In 1989, Basilio was granted a CPC for the same route. After a few months, he discovered that Carlos was operating on his route under Antonio’s CPC. Because Basilio filed a complaint for illegal operations with the Maritime Industry Authority, Antonio and Carlos jointly filed an application for sale and transfer of Antonio’s CPC and substitution of the vessel “MV Lotus” with another owned by Carlos. Should Antonio’s and Carlos’ joint application be approved? Giver your reasons. A: NO, because kabit system is present. Once you engage in a kabit system, you cannot do anything anymore, as what the SC said in the case of Lisa Enterprises. 1990 # XI Johnny owns a Sarao jeepney. He asked his neighbor Van if he could operate the said jeepney under Van’s certificate of public convenience. Van agreed and, accordingly, Johnny registered his jeepney under Van name. On June 10, 1990, one of the passenger jeepneys operated by Van bumped Tomas. Tomas was injured and in due time, he filed a complaint for damages against Van and his driver for the injuries he suffered. The court rendered judgment in favor of Tomas and ordered Van and his driver, jointly and severally, to pay Tomas actual and moral damages, attorney’s fees, and costs. The Sheriff levied on the jeepney belonging to Johnny but registered in the name of Van. Johnny filed a 3rd party claim with the Sheriff alleging ownership of the jeepney levied upon and stating that the jeepney was registered in the name of Van merely to enable Johnny to make use of Van’s certificate of public convenience. May the Sheriff proceed with the public auction of Johnny’s jeepney. Discuss with reasons. A:

YES, because they engaged in a kabit system. - END -