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    Republic of the PhilippinesSUPREME COURTManila


    G.R. No. L-33827 March 4, 1931

    BATANGAS TRANSPORTATION CO. and ELISEO SILVA, petitioners-appellants,vs.ORLANES and BANAAG TRANS. CO., INC., respondent-appellee.


    G.R. No. L-33839 March 4, 1931

    ORLANES & BANAAG TRANS. CO., INC., petitioner-appellant,vs.BATANGAS TRANSPORTATION CO., respondent-appellee.

    L. D. Lockwood and C. de G. Alvear for Batangas Transportation Co.Rivera and Francisco for appellant Silva.Menandro Quiogue for Orlanes and Banaag Transportation Co.


    On August 14, 1928, the applicant, the Orlanes & Banaag Trans. Co. applied for a certificate of publicconvenience to operate auto-trucks for the transportation of passengers and freight on the following fivelines: Mabini-Tiaong, Fishery of Pansipit (San Nicolas)-San Luis, Inecbulan-Aplaya de Bauan, SanPablo-Dolores and Nasugbu-Manila. (Case No. 17059 of the Public Service Commission.).

    This application was opposed by the Batangas Transportation Co. in writing on December 6 andDecember 19, 1928, as shown by the record, alleging that the Mabini-Bauan and Batangas-Lipa lines

    applied for by the Orlanes & Banaag Trans. Co. are already covered by the application filed by theopponent, the Batangas Transportation Co., case No. 16824, as well as the Lipa-Tiaong line viaLumangbayan and the Pansipit-Taal-San Luis line; that the opponent, the Batangas Transportation Co.,has already been operating on the Bauan-Batangas route for ten years and is at present maintaining ahalf-hour schedule thereon; that a part of the Taal-San Luis line has been applied for by CayetanoOrlanes in case No. 16470, and that, therefore, the present application filed by the Orlanes & BanaagTrans. Co should be limited to that part of the line extending from the Pansipit Fishery to Taal; thatopponent Batangas Transportation Co. has also covered the whole line from San Luis to San Nicolas viaLemery and Taal in the former application, No. 16824, with a half-hour service.

    An opposition was also filed by Eliseo Silva, alleging that he is an auto-truck operator, at presentrendering a regular service between Banaybanay and Lipa, under a certificate of public convenienceissued to him by the Public Service Commission in case No. 16098 with a fixed schedule of trips; that the

    service he is at present rendering is sufficient to satisfy the public needs for auto-trucks; and that theproposed operation by Orlanes & Banaag will not promote the public convenience, as required by Act No.3108, but, on the contrary, will cause ruinous competition.

    The commission heard this application together with those numbered 19364, 20343, 20747, and 20883,and on April 29, 1930, passed upon it authorizing the Orlanes & Banaag Trans. Co. and the BatangasTransportation Co. to operate the Mabini-Tiaong line, with a joint and combined schedule, so that bothcompanies would render an alternate half-hour service; and issuing a certificate of public convenience tothe Batangas Transportation Co. to operate the Pansipit Fishery-San Luis line, at the same time denyingthe application filed by the Orlanes & Banaag Trans. Co.

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    And with reference to the opposition filed by Eliseo Silva, the commission, by an order dated June 26,1930, acting on the motion for reconsideration filed by said opponent, required the applicant Orlanes &Banaag Transportation Co. to observe and comply with the following condition when making trips on theLipa-Banaybanay-San Jose line:.

    The applicant is hereby prohibited from accepting passengers and freight in Lipa or at any point beyondLipa, going towards Banaybanay or any other point before, or from Banaybanay or any other pointbeyond Banaybanay, going to Lipa or at any point before.

    The resolution regarding the Mabini-Tiaong line originated the appeal taken by the BatangasTransportation Co. (G.R. No. 33827), and that of the Pansipit Fishery- San Luis line is the object of theappeal taken by the Orlanes & Banaag Trans. Co. (G.R. No. 33893).

    The appellant Batangas Transportation Co. (G.R. No. 33827) makes the following assignments of error:

    1. The Public Service Commission erred in granting a certificate of public convenience to the applicant,Orlanes & Banaag Transportation Co, to operate a transportation service between Mabini, Batangas, andTiaong, Tayabas via Bauan, Batangas, San Jose, and Lumangbayan (old Rosario).

    2. The Public Service Commission erred in not holding that the Batangas Transportation Co. has apreferred right to extend its lines and operate exclusively on any part of the above line where it does notnow operate.

    3. The Public Service Commission erred in denying the motion for reconsideration of the BatangasTransportation Co.

    Eliseo Silva filed a petition for review of the commission's original resolution in case No. 17059 before theamendatory order referred to above was issued, and in order to obtain a categorical order with respect tothe exclusion of the Banaybanay-Lipa line he appealed, making the following assignments of error:.

    In not excluding Banaybanay-Lipa from the Mabini-Tiaong line, granted to the appellee in the decisionrendered in this case; and.

    In denying the motion for reconsideration filed by the herein appellant.

    For a better understanding of the case we deem it convenient to take into account the facts considered bythe commission, in issuing the order appealed from. The commission states the following in its decision:.

    Mabini-Tiaong Route: The black dotted line marked X in the sketch is that referred to in the applicationfiled by the Orlanes & Banaag Transportation Company; the red pencil dotted line indicates the portionsobjected to by the Batangas Transportation Company; the line in red pencil show the present routesoperated by the Batangas Transportation Company.

    The opposition, then, only covers the following portions:.

    Mabini, Bauan, Batangas, San Jose, Old Rosario or Lumangbayan and Tiaong.The lines at present operated by opponent Batangas Transportation Company start at Bauan forBatangas, Patay, going towards Ibaan; and Lipa and Rosario. These lines are at present operated by theBatangas Transportation Company, covered by case No. 16825, and the lines mentioned in this routehave been applied for in case No. 16824.

    At present the line in black ink represents the present lines of the Orlanes & Banaag TransportationCompany and the black dotted lines represent also the Cayetano Orlanes route under special permits.

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    x x x x x x x x x

    The Orlanes & Banaag Transportation Company also filed an application for the Pansipit Fishery line(San Nicolas), San Luis, via Mercado de Taal, as did also the Batangas Transportation Company in caseNo. 16824. There is only a slight difference between the routes applied for by both companies in thatwhile that of the Orlanes & Banaag Transportation Company goes to the Pansipit Fishery, that of theBatangas Transportation Company goes as far as the barrio of Sto. Tomas. That is to say, that while theformer goes across the river to the fishery, the latter stops on the bank of the river in the barrio of SanNicolas.

    This line then was not operated by any carrier up to the time the Batangas Transportation Company filedits application in case No. 16824 and the Orlanes & Banaag Transportation Company in case No. 17059.

    From the same opposition of the Batangas Transportation Company dated December 6, 1928, it may beseen that it admits the fact that the applicant has applied for the Taal-San Luis line in case No. 16470,and therefore alleges in its opposition that the application should be limited to the part of the line from thePansipit Fishery to Taal.

    The opponent has also applied for the San Luis-San Nicolas line, via Lemery and Taal in case No. 16824.

    Wherefore, in view of the foregoing, it is held that the applicant Batangas Transportation Company isentitled to operate along this line in order to extend its service, so that instead of stopping at Taal, it maycontinue on to San Nicolas, as applied for.

    x x x x x x x x x

    For the foregoing considerations, and in view of the evidence and the facts established in these records,in accordance with the principles laid down by this commission and the doctrines of the HonorableSupreme Court; and taking into account the public needs and convenience, and that the establishment ofthese companies and the authority granted them to do business shall adequately and properly promotethe public interests, we hereby issue the following.


    The Mabini-Tiaong line is hereby adjudicated to the Orlanes & Banaag Transportation Company and theBatangas Transportation Company, for parallel operation with a combined schedule to be submitted byboth companies within the period of thirty days from the promulgation of this decision, in such a mannerthat both companies shall alternately render a half-hour service, to be combined with their presentoperations, subject to the terms, conditions, and regulations hereinafter set forth.

    The San Luis-San Nicolas route via Lemery and Taal is likewise adjudicated to the BatangasTransportation Company, dismissing the opposition filed by the Orlanes & Banaag TransportationCompany, and this operation shall also be subject to the terms, conditions, and regulations hereinafterspecified.

    Considering the motion for reconsideration filed by Eliseo Silva with reference to the decision rendered incase No. 17059, the commission said:

    In the motion and at the oral argument in open session, the movant contended that both in the decisionrendered in this case, and in that rendered in case No. 17059, the Banaybanay-Lipa route is included,without any prohibition or restriction with regard to the authority given in said decisions as to this route,the same being part of the line operated by the opponent-movant Silva, according to the certificate ofpublic convenience to the latter in case No. 16098.

    The movant also contends that in other applications similar to those of Mariano Uy Tek Ko and

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    Segismundo, et al., the route in question was also applied for, but on account of the movant's opposition,the applications were denied.

    A careful examination of the records of this commission shows that this contention is well founded.According to the certificate of public convenience issued in favor of Eliseo Silva in case No. 16098,Banaybanay-Lipa is a part of the lines of this opponent.

    Besides Eliseo Silva, the Batangas Transportation Co. is also an operator along the route in question.And in several cases wherein applications were made for said route, the same were denied.

    In view of all the foregoing and considering that the request contained in the motion for reconsideration isjustified, the commission hereby grants the same and orders the applicant the Orlanes & BanaagTransportation Co. to observe and comply with the following condition when making trips along theLipa-Banaybanay-San Jose line authorized in this case:

    "The applicant is hereby prohibited from taking passengers and freight from Lipa or beyond toBanaybanay or any point before, or from Banaybanay or beyond to Lipa or any point before."

    This condition is hereby included in the ones prescribed in the first condition of the decision rendered inthis case on April 28th, 1930, and the applicant is hereby admonished that upon the first violation of said

    condition the certificate of public convenience issued to it by said decision shall be cancelled.

    Accepting, as we do, the facts set forth in the decision of the commission, we believe the resolutionappealed from is supported by the evidence of record, and, in accordance with section 35 of Act No.3108, we find no reason either to reverse or modify said resolution.

    The ground alleged by the Batangas Transportation Co. that being an old operator in the Province ofBatangas, it is entitled to the exclusive right of extending its line of operations to any public thoroughfarethat may be constructed in said province, is untenable; for this would be equivalent to establishing amonopoly in this business in its favor. The decision of this court in Javier vs. Orlanes (53 Phil., 468), citedin support of the appellant Batangas Transportation Co., has not the effect of establishing in favor of anold carrier a sort of Torrens title on all lines constructed or to be constructed for public traffic within the

    jurisdiction of the province where it operates. It is true that in the decision cited it was held that before

    permitting a new company or a new operator to invade the territory of another already established with acertificate of public convenience, thereby entering into competition with it, if this be for the benefit of thepublic, the prior operator must be given an opportunity to extend its service in order to meet the publicneeds in the matter of transportation. This refers to a definite line, operated by one operator, on which anew operator should not be allowed to operate, without the former having refused to extend its serviceson the line already operated to meet the public needs in the matter of transportation. But this rule is notapplicable to lines or roads not operated by the old carrier, in which case the opportunity to exploit thetransportation business along those new lines must be given to all those who may apply for it,notwithstanding the fact that the former carrier has a certificate of public convenience to engage in thisbusiness in a definite province.

    Inasmuch as the record shows that the order appealed from is in accordance with the facts stated in thecommission's decision, and inasmuch as it has not been shown that there was abuse of discretion on the

    part of the commission, we are of opinion that the appeal taken by the Batangas Transportation Co.should be dismissed.

    In regard to the appeal taken by Eliseo Silva, it will suffice to say that the right conferred upon him by hiscertificate of public convenience to operate on the Banaybanay-Lipa line is safeguarded by the orderissued by the commission on June 26, 1930, quoted above, and hence, we believe this appeal has nomerit.

    With reference to the Pansipit-San Nicolas line, the Orlanes & Banaag Trans. Co. bases its appeal uponthe fact that being an operator in the Province of Batangas at present, it is entitled to extend its service to

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    the San Luis-Pansipit line.

    The Batangas Transportation Co., in turn, argues that since it holds a certificate of public convenience tooperate an auto-truck service in the Province of Batangas, it is entitled to extend its service to the newlines of San Luis-Taal and Taal and Taal-San Nicolas in question. The record shows that the applicantOrlanes & Banaag Trans. Co. has a permit to operate its auto-trucks from certain points in the Province ofBatangas to Manila, but without any right to handle passengers at intermediate points within saidProvince of Batangas; whereas the Batangas Transportation Co. has a certificate of public convenienceto operate its auto-trucks for passengers and freight between several points of said Province of Batangas.

    With regard to the new lines or routes within the jurisdiction of the Province of Batangas recently openedto public traffic, financial conditions and business facilities being equal, we believe priority in the filing ofthe application to be an important factor in determining the right to the certificate applied for.

    According to the record, no one had operated on this line until the Batangas Transportation Co. filed itsapplication in case No. 16824, after which the Orlanes & Banaag Trans. Co. also applied for it in thepresent case No. 17059. It is true that the Orlanes & Banaag had applied for the Taal-San Luis line incase No. 16470, but it does not appear that the commission acted upon it until it was again included inthe present case No. 17059. The Batangas Transportation Co. then was the first to apply for the SanLuis-San Nicolas line via Taal. And considering the financial condition of this company and its capacity to

    render satisfactory service to the public, we believe the commission was right in issuing the certificate ofpublic convenience in question to it, with the understanding, however, that the commission should requirethe Batangas Transportation Co. to run its auto-trucks to the Pansipit Fishery, crossing the river in thebarrio of San Nicolas.

    The appellant Orlanes & Banaag Trans. Co. erroneously contends that the appellee is not entitled to askfor a positive remedy in this case, being a mere opponent, for the appellee is also an applicant, as thedecision appealed from shows.

    By virtue of the foregoing, the decision appealed from must be, and is hereby, affirmed with regard to thelines in question, Mabini-Tiaong and San Luis-Pansipit (San Nicolas). Without costs So ordered.

    Avancea, C.J., Johnson, Malcolm, Ostrand, Johns, Romualdez and Villa-Real, JJ., concur.

    Separate Opinions

    STREET, J., concurring and dissenting:

    I dissent from the decision rendered in G.R. No. 33827, and concur in the decision rendered in G.R. No.33839.

    Republic of the PhilippinesSUPREME COURTManila


    G.R. No. L-24701 December 16, 1970


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    Graciano C. Regala and Associates for petitioner.

    E. R. Castro and D. A. Guzman for respondents.


    On May 11, 1965 the Public Service Commission decided its Case No. 124626, approving the applicationof Mario Z. Lanuza for a certificate of public convenience to install and operate a 20-ton daily capacityice-plant in Pagsanjan, Laguna, and to sell the ice to be produced in said municipality as well as in themunicipalities of Longos, Paete, Pakil, Pangil, Siniloan, Famy, Sta. Maria, Cavinti, Magdalena, Majayjay,Nagcarlan, Rizal, Lilio, Sta. Cruz, Lumban, Pila and Victoria, all in the province of Laguna.

    Three existing operators had opposed the application. One of them, Victorino de Pea, who has anice-plant in Mauban, Quezon, withdrew his opposition after the applicant excluded the municipality ofLuisiana from the territory originally applied for. Another oppositor, Emilio Gomez, did not appeal from thedecision of the Public Service Commission. The petitioner here, the Estate of Teofilo M. Tiongson,remains the only oppositor in the present appeal.

    The petitioner is the grantee of a certificate of public convenience to maintain and operate a 30-ton(increased to 40 tons in 1960 and then to 70 tons in 1964) ice plant in San Pablo City, with authority tosell ice therein as well as in the municipalities of Sta. Cruz, Rizal, Nagcarlan, Calauan, Victoria, Pila,Lumban, Paete, Pakil, Pangil, Cavinti, Siniloan and Alaminos.

    There is no question as to the applicant's financial capacity. The principal issue is whether there issufficient need for ice in the places stated in the decision to justify the establishment of a plant inPagsanjan with the daily capacity authorized by the Commission. This issue is essentially one of fact onwhich, as a rule, the findings of the Commission are binding on this Court unless it clearly appears thatthere is no evidence to reasonably support them. 1 Such findings in this case, and the conclusion derivedtherefrom, are as follows:

    At one of the hearings of this case, applicant, a businessman and Filipino citizen, manifested that at

    present there is no ice plant in Pagsanjan, Laguna; that there was formerly one in that municipality but itwas transferred to San Pablo City; that the nearest ice plant is located in Kalayaan (Longos, Laguna)which is about 10 kilometers from Pagsanjan, Laguna; that there is a demand for ice by the people ofPagsanjan and of the towns proposed to be served by the applicant because the present supply of icecoming from ice plant operators and distributed by ice dealers is inadequate; that in the territory proposedto be served by applicant, ice is needed for "halo-halo," for cooling soft drinks and drinking water, and forthe preservation of the fish caught by fishermen; that aside from these refreshment parlors, there are"sari-sari" stores selling soft drinks; that along Laguna de Bay from Lumban to Sta. Maria, Laguna, from30% to 50% of the people are engaged in fishing throughout the year; that fishes caught consist of"dalag," "hito," "carpa", "banak," and "shrimps" and to preserve these fishes from the time they are caughtuntil they are sold or disposed of, ice is needed; that ice is also needed in movie houses where soft drinksare sold, in homes, clinics and hospitals that in a small town where there are about 20 stores, about 6blocks of ice of 300 lbs. each are consumed during the day, and in a big town like Sta. Cruz, the

    consumption is about 20 blocks of ice of 300 lbs. each during the rainy season and the consumption isabout double during the dry season; and that due to the inadequacy of ice supply in the towns proposedto be served by applicant, an ice block of ice of 300 lbs. costs from P5.00 to P8.00.

    xxx xxx xxx

    Applicant presented the following witnesses: Manuel Zaide, a fish dealer of Paete, Laguna; WillieLimlengco, a businessman and sari-sari store owner of Pagsanjan Laguna; Conrado Almario, arefreshment parlor and sari-sari store owner of Lumban, Laguna; Alfonso Rebong, Municipal Mayor ofVictoria, Laguna; and Ernesto Marina, business (sic) and sari-sari store owner of Pila, Laguna.

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    All witnesses presented at the hearings of this case manifest that there is shortage of ice supply in theterritory proposed to be served by the applicant, especially during summer months; that the fish dealersdo not get their ice requirements so that most often fish are not preserved in ice when sent to otherplaces to be sold like Sta. Maria, San Pablo City, or Manila; and that when the ice supply is inadequate,shrimps which are shipped to Manila are often cooked to minimize spoilage.

    The oppositors to this application have not established to the satisfaction of the Commission theadequacy of the service rendered by them in the eighteen (18) municipalities proposed to be served bythe applicant, considering that most of these municipalities are far from the locations of their ice plants.

    After a thorough examination of the evidence submitted by the parties and after a careful consideration ofour records on existing service in the territory applied for, and considering that an ice plant whichmanufactures its ice in the locality where it sells that commodity is more advantageous and convenient tothe general public in that locality than ice plant located some kilometers away, and that applicant isfinancially capable of undertaking the installation, and maintaining the operation of the proposed service,the Commission believes that the oppositions filed by Emilio Gomez, operator of an ice plant in San Juan,Longos, Laguna, and Teofilo Tiongson, operator of an ice plant in San Pablo City, in this case should be,as these are hereby overruled and that the application herein filed may be, as it is hereby, APPROVED.

    The foregoing findings are assailed on two grounds: (1) that only eight witnesses were presented by theapplicant, who individually testified as to the need for ice in each of only seven of the municipalitiesincluded in the application; and (2) that their testimony even as to those referred to by them is deficient.We have gone over the record in this regard and found enough support therein for the decision appealedfrom. Manuel Zaide is a fish dealer in Paete, Willie Limlengco is a sari-sari and refreshment store-ownerin Pagsanjan; Conrado Almario has a similar business in Lumban; Alfonso Rebong was the municipalmayor of Victoria since 1960; Ernesto Marina is a businessman in Pila; Jose Acuiza is a businessmanand fisherman in Pakil; Jose Maceda was the municipal secretary of Pagsanjan; and Eligio Lorenzo is agrocery merchant in Sta. Cruz. They all affirmed the inadequacy and frequent lack of ice supply in theirrespective localities not only for home consumption but also for restaurants and refreshment parlors aswell as for the fishing industry or occupation of the inhabitants, particularly in the regions borderingLaguna Bay. It is true their combined testimony did not cover all the municipalities applied for, but theapplicant himself, respondent here, demonstrated sufficient familiarity with the entire area to be able to

    give evidence, as he did, on the ice-supply situation in everyone of them. He did a lot of traveling asowner of three movie houses in Pagsanjan, Sta. Cruz and Pila, and in connection with his application inthis case personally conducted a thorough investigation of the local demands for ice in the municipalitiescovered by said application. That he is the applicant does not necessarily affect his credibility; on thecontrary, such an investigation was necessary and called for by sound business policy, for no one wouldinvest capital in the production and sale of any commodity without first ascertaining the needs of theprospective market.

    One significant fact may be noted insofar as the petitioner's existing ice plant in San Pablo is concerned.The petitioner formerly operated another plant in Pagsanjan, and in each of them it had one delivery truckto service the customers in different municipalities. The Pagsanjan plant, however, was closed in 1952and transferred to San Pablo, and since then the petitioner has been maintaining only one delivery-truckservice, with a single dealer-employee in charge. Under the circumstances the Public Service

    Commission correctly remarked that "the oppositors have not established ... the adequacy of the servicerendered by them in the eighteen (18) municipalities proposed to be served by the applicant, consideringthat most of these municipalities are far from the locations of their ice-plants.

    The "prior operator" and "protection of investment" rules cited by petitioner cannot take precedence overthe convenience of the public. There is no ice plant at present in Pagsanjan; and from the testimony ofthe witnesses for the applicant there exists a great demand for ice not only there but also in certainneighboring municipalities. There is nothing in the record to show that the petitioner had exerted efforts tomeet this demand before the respondent made his offer to service the areas where ice was needed. 2Moreover the respondent is authorized to produce only 20 tons of ice daily, whereas the petitioner has

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    been allowed to increase its daily capacity from 30 to 40 tons in 1960, and recently, in 1964, to 70 tons.This only proves that there is indeed a great demand for ice in the area applied for by the respondent,and negates the probability of ruinous competition. On the contrary the resulting competition willundoubtedly benefit the public through improvement in the service and reduction in retail prices.

    On the whole, we find no reason to deviate from the rule heretofore consistently applied that findings andconclusions of fact made by the Public Service Commission, when supported by evidence, are bindingupon this Court.

    WHEREFORE, the decision appealed is affirmed, with costs against the petitioner.

    Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Barredo and Villamor, JJ., concur.

    Concepcion, C. J., took no part.

    Dizon and Makasiar, JJ., are on leave.


    1 RC Ledesma vs. PSC, L-26900, Feb. 27, 1970, 31 SCRA 805; and cases cited.

    2 Phil. Long Distance Telephone Company vs. City of Davao, L-23080, September 20, 1965.

    Republic of the PhilippinesSUPREME COURTManila


    G.R. No. L-21061 June 27, 1968

    FORTUNATO F. HALILI, petitioner,vs.RUPERTO CRUZ, respondent.

    Amado A. Amador for petitioner.Benjamin S. Somera for respondent.


    This is a petition for review of the decision of the Public Service Commission, in its Case No. 61-6113,granting to respondent-appellee Ruperto Cruz a certificate of public convenience to operate atransportation service for passengers and freight, with authority to operate ten units on the line he applied

    for.Herein respondent filed, on September 19, 1961, with the Public Service Commission an application,praying for the grant of a certificate of public convenience to operate, under PUB denomination, ten busesbetween Norzagaray (Bulacan) and Piers (Manila), via Novaliches Road, A. Bonifacio Road, BlumentrittStreet, Rizal Avenue, MacArthur Bridge, Aduana and 13th Streets; and on the return trip, via BostonStreet, MacArthur Bridge, Rizal Avenue, Blumentritt Street, A. Bonifacio Road, and Novaliches Road. Theapplication was opposed by De Dios Transportation Co., Inc., Raymundo Transportation Co., Inc., PDPTransit Inc., Villa Rey Transit, Inc., and by herein petitioner-appellant Fortunato F. Halili who was theoperator of the transportation service known as "Halili Transit." Petitioner, in his opposition alleged,

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    substantially, that he was an operator of a bus service on the line applied for, enumerating at the sametime the other lines he operated which were traversed by the route mentioned in respondent's application;that his service, as well as that of other bus operators on the route, was more than adequate to meet thedemands of the traveling public; that the grant of the application would merely result in wasteful andruinous competition, and that the respondent was not financially capable of operating and maintaining theservice proposed by him.

    After several hearings in which the parties presented their evidence, oral and documentary, the PublicService Commission rendered a decision, on February 13, 1963, granting a certificate of publicconvenience to respondent Ruperto Cruz to operate ten buses under PUB denomination on the lineNorzagaray (Bulacan) Piers (Manila) passing through the routes applied for. The decision states,among others, as follows:

    After a careful study of the evidence presented by the contesting parties, we find the following factsestablished; that applicant is applying for a service from Norzagaray to Piers and vice-versa; that not oneof the oppositors herein operate a service up to Piers most of them go up to Divisoria and the rest upto Folgueras; that there are commuters starting from Norzagaray up to Piers; that applicant has theexperience in the operation of a PUB service and that applicant has the means with which to operate andmaintain the service herein applied for.

    From the facts in evidence, this Commission is of the belief that the weight of evidence tips in favor of theapplicant.

    It appearing, therefore, that applicant is a Filipino citizen, that he is financially capable to operate andmaintain the service herein applied for, and that public convenience and necessity will be promoted bythe approval of this application, and furthermore, that the oppositions of the oppositors herein are withoutmerit, the same are overruled and the instant application APPROVED.

    It is the above-mentioned decision of the Public Service Commission that is now sought to be reviewedby this Court.

    Petitioner contends that:

    1. "The finding of the Public Service Commission that there was a public need for the operation byrespondent of ten buses on the line of Norzagaray (Bulacan) - Piers (Manila) is not supported by theevidence;

    2. "The Public Service Commission erred when it did not recognize the fact that petitioner-appellant wasrendering sufficient and adequate service on the line in question; and

    3. "The Public Service Commission erred in failing to give petitioner-appellant the right of protection toinvestment to which petitioner-appellant is entitled."

    In support of his first two contentions petitioner argues that the 500 passengers found by the Commissionas commuting daily from Norzagaray to Manila could easily be accommodated in the buses of existingoperators; that the existing operators were authorized to operate 31 buses which made around 100 round

    trips a day; that since a bus could accommodate about 50 passengers, the existing authorized servicescould easily accommodate not only the 500 but even 5000 passengers a day. Petitioner also assertedthat the Commission failed to consider that 200 of the 500 commuters worked in the Republic CementFactory located at Norzagaray and so there were really only 300 commuters daily traveling on theNorzagaray Manila line. Petitioner further claimed that the new terminal proposed in the applicationwas not based on actual need, because there were no importing firms, or business establishments, ormanufacturing concerns, in Norzagaray, whose employees had to make trips to the piers at the southharbor in a Manila. On the question of public necessity, petitioner pointed out that the evidence presentedby the respondent consisted only of the testimony of two witnesses who did not make any formal orsystematic study of the movement and frequency of public utility buses, so that their testimonies were

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    based only on casual observations. On the other hand, as petitioner pointed out, the oppositors presentedfive witnesses, two of whom made meticulous, systematic and daily observations on the line applied for.Petitioner urged that according to Exhibits "1", "1-A" to "1-R", consisting of different pages of entries in acheckbook at the various PSC checkpoints in the proposed line, buses passing the checkpoints werecarrying only from 1 to 5 passengers which fact proved that the existing operators more thanadequately served the needs of the public.

    Petitioner likewise asserted that public necessity did not require the operation of the ten buses applied forby the respondent because of the fact that on December 20, 1961, the Public Service Commissiongranted to herein petitioner, in Case No. 61-5807, authority to operate only 10 buses on the lineNorzagaray Manila, even if he had applied for 20 buses; and that out of the many application tooperate buses from Paradise Farms (Bulacan) to Manila, only 10 buses were authorized.

    The first two contentions of petitioner raise questions of fact. This Court has repeatedly held that wherethe Public Service Commission has reached a finding, after weighing the conflicting evidence, that publicnecessity and convenience warrant the operation of additional public utility service, the finding must notbe disturbed as long as there is evidence reasonably supporting such finding.1 In reviewing the decisionof the Commission, this Court is not even required to examine the proof de novo and determine for itselfwhether or not the preponderance of evidence really justifies the decision. The only function of this Courtis to determine whether or not there is evidence before the Commission upon which its decision might

    reasonably be based.2

    The Commission stated in its decision that "after a careful study of the evidence presented by thecontesting parties ... the Commission is of the belief that the weight of evidence tips in favor of theapplication." There is evidence on record that there are numerous students, professionals, merchants,and employees in both government and private concerns, that commute daily between Norzagaray andManila and the intermediate points along the line;3 that along the same line have emerged numerouscenters of population, residential subdivisions and housing projects, industrial projects like the RepublicCement Factory, Angat River Dam Hydro-electric Power Project, and hollow blocks manufacturingestablishments;4 that commuters experienced difficulties in getting accommodated on buses travelingbetween Norzagaray and Manila; that the Villa Rey Transit used to make two trips from Angat to Manilavia Norzagaray, the La Mallorca Pambusco also two trips from Norzagaray to Manila via Sta. Maria, andthe Halili Transit likewise two trips from Norzagaray to Manila via the Novaliches Road; that said trips

    were fully loaded at Norzagaray such that many commuters from Norzagaray had to take jeeps whichbrought them only up to Sta. Maria and Bocaue and there waited for other means of transportation tobring them to Manila;5 and that commuters from Manila to Norzagaray also had to resort to broken tripsfor lack of direct trips.6 We are persuaded that the evidence in the record support the decision appealedfrom.

    Petitioner claims that the Public Service Commission did not consider the checker's reports (Exhs. 1, 1-A,to 1-R), on the face of which it appears that there was no overcrowding in the buses checked at thevarious checkpoints. The Commission, however, states in its decision that it had arrived at the finding"after a careful study of the evidence presented by the contesting parties," and necessarily theevidence thus studied included the checker's reports. But assuming, gratia argumenti, that said reportswere not considered the failure of the Commission to consider the reports would not constitute areversible error, because we find that the reports refer to trips of buses from Manila to Ipo, Sapang Palay,

    San Jose and back, and from upland to lowland and back, and none of the buses checked had trips alongNorzagaray-Manila or Manila-Norzagaray line. The relative weight of these checker's reports as evidencemust have been considered by the Commission before making its decision. As we have stated, thefinding of fact of the Public Service Commission is conclusive on this Court. Thus, in a case, this Courtsaid:

    It appearing that the main issues raised by petitioner merely affect questions of fact which by their verynature involve an evaluation of the relative weight of the evidence of both parties, or the credibility ofwitnesses who testified before the Commission, following the law and jurisprudence applicable to thematter in this jurisdiction, said questions are now conclusive upon this Court, and cannot be looked into, it

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    G.R. No. L-64693 April 27, 1984


    Manuel A. Concordia for petitioner.

    Nicasio Ocampo for himself and on behalf of his correspondents.

    ESCOLIN, J.:+.wph!1

    "Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim thatmust be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek

    relief from the courts, and each must bear the consequences of his acts.

    The factual background of this case is undisputed.

    Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents,purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars tobe used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner LitaEnterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate ofpublic convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00per taxicab unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitionerLita Enterprises, Inc, Possession, however, remained with tile spouses Ocampo who operated andmaintained the same under the name Acme Taxi, petitioner's trade name.

    About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin,collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustainedtherefrom. A criminal case was eventually filed against the driver Emeterio Martin, while a civil case fordamages was instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises,Inc., as registered owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of FirstInstance of Manila, petitioner Lita Enterprises, Inc. was adjudged liable for damages in the amount ofP25,000.00 and P7,000.00 for attorney's fees.

    This decision having become final, a writ of execution was issued. One of the vehicles of respondentspouses with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to oneSonnie Cortez, the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon andsold at public auction for P8,000.00 to a certain Mr. Lopez.

    Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. Herequested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, butthe latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., RositaSebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance ofmotor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of Manila.Trial on the merits ensued and on July 22, 1975, the said court rendered a decision, the dispositiveportion of which reads: t.hqw

    WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de Galvez,Visayan Surety & Insurance Company and the Sheriff of Manila are concerned.

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    Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota carsnot levied upon with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] byexecuting a deed of conveyance in favor of the plaintiff.

    Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate ofconvenience from March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars.(Annex A, Record on Appeal, p. 102-103, Rollo)

    Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied bythe court a quo on October 27, 1975. (p. 121, Ibid.)

    On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modifiedthe decision by including as part of its dispositive portion another paragraph, to wit: t.hqw

    In the event the condition of the three Toyota rears will no longer serve the purpose of the deed ofconveyance because of their deterioration, or because they are no longer serviceable, or because theyare no longer available, then Lita Enterprises, Inc. is ordered to pay the plaintiffs their fair market value asof July 22, 1975. (Annex "D", p. 167, Rollo.)

    Its first and second motions for reconsideration having been denied, petitioner came to Us, praying that:t.hqw

    1. ...

    2. ... after legal proceedings, decision be rendered or resolution be issued, reversing, annulling oramending the decision of public respondent so that:

    (a) the additional paragraph added by the public respondent to the DECISION of the lower court(CFI) be deleted;

    (b) that private respondents be declared liable to petitioner for whatever amount the latter has paid orwas declared liable (in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian

    Vda. de Galvez, as heir of the victim Florante Galvez, who died as a result ot the gross negligence ofprivate respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)

    Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabitsystem", whereby a person who has been granted a certificate of convenience allows another person whoowns motors vehicles to operate under such franchise for a fee. A certificate of public convenience is aspecial privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot becountenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graftand corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this isa pernicious system that cannot be too severely condemned. It constitutes an imposition upon the goofaith of the government.

    Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as

    being contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It isa fundamental principle that the court will not aid either party to enforce an illegal contract, but will leavethem both where it finds them. Upon this premise, it was flagrant error on the part of both the trial andappellate courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Codedenies them such aid. It provides:t.hqw

    ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminaloffense, the following rules shall be observed;

    (1) when the fault, is on the part of both contracting parties, neither may recover what he has given

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    by virtue of the contract, or demand the performance of the other's undertaking.

    The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification orby prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy tocontracts that are null void."

    The principle of in pari delicto is well known not only in this jurisdiction but also in the United States wherecommon law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition isuniversal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained forits specific performance, or to recover the property agreed to be sold or delivered, or damages for itsproperty agreed to be sold or delivered, or damages for its violation. The rule has sometimes been laiddown as though it was equally universal, that where the parties are in pari delicto, no affirmative relief ofany kind will be given to one against the other." 3 Although certain exceptions to the rule are provided bylaw, We see no cogent reason why the full force of the rule should not be applied in the instant case.

    WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P.Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manilaand CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-Appellees, versusLita Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisionsrendered therein are hereby annuleled and set aside. No costs.


    Republic of the PhilippinesSUPREME COURTManila


    G.R. No. L-14183 November 28, 1959

    BENEDICTO DINGLASAN, petitioner,

    vs.NATIONAL LABOR UNION, respondent.

    Rafael Dinglasan for petitioner.Eulogio R. Lerum for respondent.

    BARRERA, J.:

    This is a petition to review the decision of the Court of Industrial Relations of February 27, 1958 (in CaseNo. 3ULP), finding the petitioner guilty of unfair labor practice under the Industrial Peace Act.1

    On June 30, 1953, the respondent union filed with the above-mentioned court a complaint for allegedunfair labor practice committed by the petitioner, in that he locked out from employment 46 drivers,

    members of the respondent union, on June 27, 1953.Before filing his answer, the petitioner asked for the dismissal of the complaint on the grounds that thecourt had no jurisdiction over the person of the petitioner and the subject matter of the action, and therespondent union was not the real party in interest. The petitioner claimed that there existed noemployer-employee relationship between the petitioner and the drivers, members of the respondentunion, the relationship being one of lessor and lessee only, as the jeeps being used by the said driverswere rented out by the petitioner under the so-called "boundary system". The motion was denied by thecourt in its order of February 16, 1954, but on petitioner's motion for reconsideration, the court, en banc,in its resolution of June 23, 1954, unanimously reconsidered its first order and finally declared that there

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    was no employer-employee relationship between the parties.

    The respondent union appealed to this Court, and on March 23, 1956, we rendered a decision (in G. R.No. L-7945) * reversing the said resolution and holding that an employer-employee relationship existedbetween the parties. The said decision became final on May 29, 1956.

    In view of the decision of this Court, the petitioner, on June 4, 1957, filed in the court a quo his answer tothe complaint of June 30, 1953, denying (1) the legitimacy of the respondent union, and (2) the chargeunfair labor practice, claiming that he acted in good faith based on his honest belief that he was not anemployer of the drivers, members of the respondent union, but only a lessor of his jeepneys.

    Thereafter, the case was heard, and on February 27, 1958, the court rendered a decision, as follows:

    It would appear that the main question at issue is whether the respondent has committed the chargesalleged in the complaint.

    According to the complaint, the respondent had knowledge of the formation of a union on June 26, 1953and respondent upon learning the same decided on dismissing all the driver members because he did notwant to have a union within his company. This Particular union, it turned out, was a chapter or affiliate ofthe complainant union which was organized sometime on June 24, 1953. On June 27, 1953, the

    respondent dismissed the drivers appearing in the complaint by refusing them the use of the jeepneysregularly assigned to them.

    On the other hand, respondent claims otherwise. The respondent, it is alleged fearing that a strike mightbe called by the drivers decided on not renting out the jeepneys on said date, June 27, 1953.

    Based on the versions submitted in evidence by the parties, it is clear that the respondent engaged in theunfair labor practice charged in the complaint, amounting to a virtual lockout of his employee drivers,hence constituting discrimination under Republic Act No. 875. As the records of this case disclose, the actof locking out committed by respondent was made without the required notice and no collectivebargaining negotiation were ever made. The mere suspicion by respondent, that a strike might be calledby the union, is no justification for such an act.

    We hold therefore, the respondent guilty of the unfair labor practices in the complaint.

    However, there are certain aspects of this case which merit consideration. It has been contended byrespondent, since the beginning of this case, that he is not the employer of the drivers listed in thecomplaint and had honestly acted under the such belief. This very Court itself, unanimously were of thesame opinion that there was no employer-employee relationship. In the application of the affirmativereliefs granted by the law, this good faith the respondent must be taken into consideration in thoseportions where the law allows this Court to use it sound discretion and judgment. And the particularportion we have in mind in Section 5 of Republic Act No. 875.

    Furthermore, it appears that some of the drivers listed in the complaint have neither to returned to work orare already working elsewhere and there is a need for further proceedings in this respect.

    IN VIEW OF THE FOREGOING, this Court hereby orders the respondent:(1) To cease and desist from further committing the unfair labor practices complained of;

    (2) To reinstate the drivers listed in the complaint, except those who have been already reinstated;

    (3) To pay back wages to all drivers listed in the complaint, but in the exercise of the Court'sdiscretion said back wages shall commence only from May 29. 1956, based on the minimum daily wageof P4.00, deducting therefrom and from said date the period when said drivers have found substantiallyequivalent and regular employment for themselves, for which reason further hearings shall be had for the

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    sole purpose of determining the respective amount of back wages due each driver up to the time they areactually re-employed by respondent.


    On March 8, 1958, petitioner filed a motion for reconsidering which was denied by the court in itsresolution en banc, of July 30, 1958. hence, this petition for review.

    It is the contention of responding union that petitioner, upon learning that his drivers had formed a laborunion among themselves, refused on June 27, 1953, to let the muse and operate the jeepneys regularlyassigned to them, which act, it is alleged, constitutes an unlawful lockout and an unfair labor practice. Thepetitioner, on the other hand, claims that he did not lock out his drivers, members of the respondentunion, on June 27, 1953, as contended by them. Believing honestly that no employer-employeerelationship existed between him and them, and fearing that the drivers were intending to declare a strikeand might abandon his jeepneys in the streets of the city, he decided, as a precautionary measure toprotect his interest, to suspend their operation temporarily and consult his attorney. Upon obtaining hiscounsel's advice, he immediately announced to the drivers the following morning, June 28, that they couldthen take out his jeepneys. While some four or five of them needed petitioner's request, the othersrefused to return to operate. Those who took advantage of petitioner's offer had, however, to come backafter a few hours because some of the drivers on strike had admonished them to return the jeepneys and

    join the strike. For some days this situation continued until on October 8, 1953, when the case was firstsubmitted for decision, thirty-four (34) of the forty six (46) drivers had already returned to work under thesame conditions as before June 27, 1953.

    We have examined the record and we are satisfied that what occurred on June 26, 1953, and the daysfollowing was substantially as testified to by petitioner Benedicto Dinglasan and his witnesses, three ofwhom are among the drivers of his Jeepneys, two (Julio Ongpin and Francisco Leao) are completelydisinterested persons, two are patrolmen, and the remaining two are his employees, as against the soletestimony of Juanito Cruz, President of the local group of the respondent labor union, and the essentiallyhear say declaration of Zosimo Yjares who claims to be the secretary of the drivers' association.

    While we agree with the lower court that the act of the petitioner in suspending the operation of hisjeepneys on June 27, is legally and technically not in consonance with the industrial Peace Act (the court

    a quo termed it "a virtual lockout") so as to entitle the drivers to be reinstated nevertheless, as the trialcourt correctly stated in its decision,.

    there are certain aspects of this case which merit consideration. It has been contended by respondent,since the beginning of his case, that he is not the employer of the drivers listed in the complaint and hashonestly noted under such belief. This very Court itself, unanimously were of the same opinion that therewas no employer-employee relationship. In the application of the affirmative reliefs granted by law, thisgood faith of the respondent must be taken into consideration in those portions where the law allows thiscourt or use its sound discretion and judgment. The particular portion we have in mind is Section 5 ofRepublic Act No. 875.

    In the exercise of this discretion, that is, whether the reinstatement will be with or without back pay, asidefrom the fact that there was no willful violation of the Industrial Peace Act, there is an additional

    circumstance that may be considered in favor of herein petitioner. As already mentioned above,petitioner, the day following his suspension of the operation of the jeepneys, urged the drivers to returnand resume the work, notwithstanding which, the latter not only refused, but even compelled those whodid, to joint the strike. It is clear therefrom that the cassation or stoppage of the operation after June 27,was not the direct consequence of petitioner's locking them up or of any willful unfair or discriminatory actof the former, but the result of their (the drivers) voluntary and deliberate refusal to return to work. Takinginto account the foregoing circumstances and considering their similarity to those in the case ofPhilippines marine Radio Officers' Association vs. Court of Industrial Relation et al., 102 Phil., 373,wherein it was held that there is no reason for granting backpay if there is not been any willful unfair laborpractice or refusal of the respondent companies to admit their laborers back to work, while the drivers

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    members of respondent union may, in this case, be entitled to reinstatement, we find no justification fortheir receiving back wage for the period that they themselves refused to return to work.

    Wherefore, the decision appealed from is accordingly modified in the sense that the reinstatement will bewithout back pay. In all other respects, the same is affirmed, without costs. So ordered.

    Republic of the PhilippinesSUPREME COURTManila


    G.R. No. L-57298 September 7, 1984



    AVELINO IGNACIO, NICANOR SILLA and ROSILA REYES; and BENEDICTO KALAW KATIGBAK in hiscapacity as the General Manager of the MYC Agro-Industrial Corporation; and CEFERINO AREVALO;


    V.E. del Rosario & Associates for petitioner.

    Remulla, Estrella, Bihasa, Lata & Associates for respondents.

    Austria & Vargas for respondents Federal Ins., Castro Ins. Agency and F.E. Zuellig Inc.

    Rodolfo Ma. Acob for respondent Jaguar Transit Co., Inc.

    Pedro Magpayo, Jr. for respondent Federal Zuellig.

    RELOVA, J.:

    This is a petition for review of the decision of the then Court of Appeals in CA. G. R. No. 56343-R, findingpetitioner liable for damages.

    About 4:30 in the afternoon of March 21, 1971, a Toyota truck with Plate No. 12-90-4 CT '70 owned bypetitioner and operated by Ceferino Arevalo hit the right center side of a jeepney with Plate No.24-97-40-3 1970 owned by Nicanor Silla and operated by Alfredo Rodolfo. There were fifteen (15)

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    passengers of the jeepney, namely: (1) Laureano Lacson, (2) Salome Bautista, (3) Chona Alcaraz, (4)Ruby Gonzaga, (5) Felicitacion Gonzaga, (6) Epifania Bautista, (7) Avelino Ignacio, (8) Erlinda Candado,(9) Leniza Alcaraz, (10) Sotera Ramirez, (11) Rosario Ordoez, (12) Maximina Bautista, (13) CornelioBautista, (14) Hermogena Bautista and (15) Felicidad Alcaraz. The jeepney, at the time of the impact,was parked at Regiment Street, Anabu Imus, Cavite. As a consequence, said jeepney turned turtle andwas pushed to a cemented fence owned by Lucila Reyes, pinning down to death Carlito Pakingan,Hipolito Caldo, Azucena Camaclang-Navarrete and Fortunato Bonifacio. Likewise, the passengers:Laureano Lacson, Salome Bautista and Chona Alcaraz died because of the injuries sustained in thisincident; the other passengers suffered various injuries on the different parts of their bodies.

    The aforementioned jeepney and the wall fence were also damaged.

    Complaint for damages was filed by the owner of the wall fence, the aforementioned victims and the heirsof the deceased victims against petitioner MYC-AGRO-INDUSTRIAL CORPORATION, the registeredowner of the Toyota truck; Ceferino Arevalo, the driver of said truck; and, Benedicto Kalaw-Katigbak, thegeneral manager of petitioner corporation.

    In its responsive pleading, petitioner admitted ownership of the Toyota truck but alleged that the same,together with nine (9) other units were leased to the Jaguar Transportation, Inc. and that Ceferino

    Arevalo, as well as Benedicto Kalaw-Katigbak are not its (petitioner) employees. Thereafter, petitioner,

    defendant in the damage suit, filed a third-party complaint against Jaguar Transportation Company.

    Third-party Jaguar pleads that its liability is only secondary and that it had already complied with itsobligation under its contract of lease with petitioner when it secured a third-party liability insurance fromFederal Insurance Company, Inc. It then filed a fourth-party complaint against Federal InsuranceCompany, Inc., F. E. Zuellig, Inc. and Casto Madamba, claiming that Jaguar had obtained an insurancepolicy from Federal Insurance Company, Inc. of which F. E. Zuellig is its general manager, andfourth-party defendant Casto Madamba is the general agent of defendant Federal Insurance Company,Inc.

    In its answer to the fourth-party complaint, the fourth-party defendants alleged that Jaguar has no causeof action against them because F. E. Zuellig is only the general manager of Federal Insurance Company,Inc.; that Casto Madamba is only the general agent of Federal Insurance Company, Inc., and that the

    proper party in interest is herein petitioner, the registered owner of the Toyota truck.

    Ceferino Arevalo, driver of the truck in question was named defendant in Criminal Case No. 53-71 of thethen Court of First Instance of Cavite, Branch V. Upon arraignment, he pleaded guilty to the crimes ofmultiple homicide, multiple serious physical injuries, multiple less serious physical injuries, slight physicalinjuries and damage to property thru reckless imprudence.

    Evidence is clear that the death of seven (7) persons and the injuries suffered by private respondentswere due to the negligence and reckless operation of the Toyota truck, owned by herein petitioner anddriven by Ceferino Arevalo. On March 21, 1971, when the accident happened, subject vehicle wasregistered in the name of petitioner which, however, would want to exculpate itself from liability becauseof the contract of lease with sale (Exhibit "1") allegedly executed on December 1, 1970 between it andJaguar Transportation Company. Petitioner claims that because of the lease contract with sale to Jaguar

    it had no more control over the vehicle; that Ceferino Arevalo is not its employee but that of Jaguar. Onthis score, the trial court as well as the then Court of Appeals made the finding that

    ... A reading of said contract cannot but produce the conviction that the same was drawn up for no otherpurpose but to set up a buffer between MYC and the public. It is really nothing but a simulated contract, asubterfuge, intended to shift liability from MYC to Jaguar Transportation Company which appears to benothing more than a conduit of MYC. The obvious purpose is to create an apparent relationship ofemployer-employee between Jaguar and the persons operating MYC's trucks. Thus, while the contract isdenominated as one of lease with sale and the ten Toyota trucks were supposed to be leased to Jaguar;the right of Jaguar to use these trucks was subject to a hauling contract with defendant MYC. The

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    supposed lessee Jaguar may use these trucks only if the lessor shall have no more need for the trucksherein leased. (Par. 3 of Exhibit 1) Even if Jaguar should be able to lease these trucks to other partiesbecause the lessor MYC has no more need for the same as the milling season is over, said contractexecuted by Jaguar with a third party shag be terminated as soon as the milling season is over, saidcontract executed by Jaguar with a third party shall be terminable as soon as the lessor shall have a needfor the leased motor vehicle. Par. 2 of the lease contract exposes the true nature of this alleged contractof lease with sale as nothing more than a disguise effected by defendant MYC to relieve itself of theburdens and responsibilities of an employer with respect to these trucks. That the defendant MYCremained the true and real owner and possessor of these trucks is further indicated by the fact that thosetrucks, although purportedly sold to Jaguar on installment, were never mortgaged to MYC by way ofsecurity; the same trucks leased and sold to Jaguar were exclusively used for the business of MYC in thehauling of its agricultural products; said trucks may not be sold, leased, alienated or encumbered byJaguar without MYC's written consent. During the 3 year period of the contract Exhibit I before fullpayment of the supposed installment price of P362,129.10 by Jaguar all these trucks continue to beunder the effective dominion of MYC all the rights of ownership to use, enjoy and dispose of these remained with MYC. As a matter of fact, the ownership was not to be transferred until after three years.

    After the incident of March 21, 1971, the trucks were all "repossessed" by defendant MYC, a mereceremony since MYC never lost possession. (pp. 175-177, Record on Appeal)

    After trial, the lower court rendered judgment ordering "defendants MYC Agro-Industrial Corporation and

    Ceferino Arevalo jointly and severally to pay to plaintiffs the following: P3,348.75 to Felicidad Alcaraz;P3,399.15 to Rodolfo, Felicidad and Leniza, all surnamed Alcaraz; P18,000.00 to Rodolfo and Felicidad

    Alcaraz; P4,689.80 for Sotera Ramirez; P20,300.00 for Teodora Sardido-Tabing and Petra de Aro;P45,485.00 for Constancia Manalaysay Vda. de Lacson, Almario, Solidad, Susan, Elvira, Carolina,Cecilia, and Ariel, all surnamed Lacson; P22,760.00 for Purificacion Camerino Vda. de Caldo, Leonila,Nemencia, Yolanda, Edna, Lorna and Genie all surnamed Caldo; P21,000.00 for Lucila Ramos Vda. dePakingan, Geraldo, Rowena, and Isidro all surnamed Pakingan; P20,500.00 for plaintiff BellaBalajadia-Bonifacio; P1,989.49 for Erlinda Candado; P230.50 for Avelino Ignacio; P8,484.00 for NicanorSilla P2,150.00 for Aniano Maximina, Epifania and Cornelio, all surnamed Bautista; P4,724.50 to plaintiffsRogelio, Felicitacion and Ruby, all surnamed Gonzaga; P1,724.55 for the injuries sustained by RubyGonzaga; P850.00 for plaintiff Hermogena Bautista; P23,000.00 for plaintiffs Emiliano, Nemencio,Rodolfo, Eduardo, Melanio, Aida, Lualhati, and Dominador, all surnamed Navarrete; P221.10 for plaintiff

    Alfredo Rodolfo and P300.00 for plaintiff Rosila Reyes; by way of actual and compensatory damages; by

    way of exemplary damages, the amount of P50,000.00 likewise awarded to plaintiffs as exemplarydamages to be divided among them in proportion of their share of actual and compensatory damages.Defendant is further ordered to pay to plaintiffs the amount of P20,000.00 as Attorney's fees and the costsof this suit. The Complaint against Benedicto Katigbak, the counterclaim, the third-party and fourth partycomplaint are dismissed." (pp. 181-182, Record on Appeal)

    From the foregoing judgment which was affirmed in toto by respondent Court of Appeals, petitioner wentto this Court alleging in substance that the appellate court erred in holding that Jaguar TransportationCompany was a mere dummy or conduit of petitioner which should be considered as the true owner ofthe vehicle.

    We cannot uphold the contention of petitioner. In the first place, Jaguar's answer to third party complainttendered no genuine or real issue. Secondly, Jaguar's representative did not even appear in court after

    impleading fourth party defendants and its President, Benedicto Katigbak, did not adduce evidence in hisbehalf. Thirdly, the sign MYC which stands for petitioner still appears on subject vehicle and, as aptlyobserved by the appellate court the agreement which allegedly transferred the truck from MYC to Jaguarfailed to provide for a chattel mortgage to secure said transfer. The well-known practice is that motorvehicles acquired through installment payments are secured by a chattel mortgage over the vehicle sold.None exists in the instant case (p. 51, Rollo)." Finally, it is undisputed that the registered owner of theToyota truck is petitioner. As held in Vargas vs. Langcay, 6 SCRA 174, "[t]he registered owner/operator ofa passenger vehicle is jointly and severally hable with the driver for damages incurred by passengers orthird persons as a consequence of injuries (or death) sustained in the operation of said vehicles. ...Regardless of who the actual owner of a vehicle is, the operator of record continues to be the operator of

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    the vehicles as regards the public and third persons, and as such is directly and primarily responsible forthe consequences incident to its operation, so that, in contemplation of law, such owner/operator ofrecord is the employer of the driver, the actual operator and employer being considered merely as hisagent."

    ACCORDINGLY, the petition is hereby DENIED for lack of merit.


    Republic of the PhilippinesSUPREME COURTManila


    G.R. No. L-48747 September 30, 1982

    ANGEL JEREOS, petitioner,vs.



    Review on certiorari of the decision rendered by the respondent Court of Appeals in case CA-G.R. & No.60232-R, entitled: "Soledad Rodriguez, et al., plaintiffs-appellants, versus Narciso Jaravilla, et al.,defendants; Narciso Jaravilla and Domingo Pardorla, Jr., defendants-appellants; Angel Jereos,defendant-appellee."

    Private respondent, Domingo Pardorla, Jr. is the holder of a certificate of public convenience for theoperation of a jeepney line in Iloilo City. On February 23, 1971, one of his jeepneys, driven by NarcisoJaravilla, hit Judge Jesus S. Rodriguez and his wife, Soledad, while they were crossing Bonifacio Drive,Iloilo City, causing injuries to them, which resulted in the death of Judge Rodriguez. Narciso Jaravilla wasprosecuted and, on his plea of guilty, was convicted of the crime of Homicide and Physical Injuriesthrough Reckless Imprudence and sentenced accordingly. Thereafter, Soledad Rodriguez and herchildren filed with the Court of First Instance of Iloilo an action for damages against Narciso Jaravilla,Domingo Pardorla, Jr., and Angel Jereos, the actual owner of the jeepney. 1

    Angel Jereos denied ownership of the jeepney in question and claimed that the plaintiffs have no cause ofaction against him. 2

    Domingo Pardorla, Jr., upon the other hand, claimed that he was only the franchise owner and hasnothing to do with the actual operation and supervision of the passenger jeepney in question which isunder the actual control, operation and supervision of Angel Jereos who operates the same under the"kabit system." 3

    After appropriate proceedings, the Court of First Instance of Iloilo rendered judgment on October 24,1978, ordering Narciso Jaravilla and Doming Pardorla, Jr. to pay, jointly and severally, damages to theplaintiffs. Angel Jereos was exonerated for the reason that the Court found no credible evidence tosupport plaintiffs' as well as defendant Pardorla's contention that defendant Jereos was the operator ofthe passenger jeepney in question at the time of the accident which happened on February 3, 1971,

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    defendant Jereos sold on November 19, 1970 the said passenger jeepney to Flaviana Tanoy as shown inthe notarized deed of sale (Exh. 1-Jereos) who later transferred ownership thereof to defendant Pardorla,Jr., whose registration certificate thereof is marked Exh. 3-B-Jereos was issued by the LandTransportation Commission on November 24, 1970. 4

    Both plaintiffs and the defendants Narciso Jaravilla and Domingo Pardorla, Jr., appealed to the Court ofAppeals. The plaintiffs contended that the trial court erred in not finding the defendant Angel Jereos jointlyand severally liable with the their defendants for the damages incurred by them. The defendants NarcisoJaravilla and Domingo Pardorla, Jr., however, did not file their brief.

    On July 10, 1978, the Court of Appeals rendered a decision, modifying the decision of the trial court, andholding that Angel Jereos is jointly and severally liable with the other defendants for the damagesawarded by the trial court to the plaintiffs, for the reason that the rule stated in the case of Vargas vs.Langcay (6 SCRA 174) that it is the registered owner of a passenger vehicle who is jointly and severallyliable with the driver for damages incurred by passengers or third persons as a consequence of injuries ordeath sustained in the operation of said motor vehicle, which is invoked by Angel Jereos, cannot beapplied in this case since the sale of the jeepney by Angel Jereos to his own sister-in-law, FlavianaPanoy, and its registration in the name of Domingo Pardorla, Jr., were simulated, fictitious transactions,parts and parcel of a strategem, to place Angel Jereos beyond the reach of his creditors past or future. 5

    Angel Jereos appeals from this decision. He contends that the respondent Court, of Appeals erred inholding that the sale of the jeep to Flaviana Tanoy was simulated and fictitious and hence, it erred infinding him the actual or real owner of the illfated jeepney.

    The respondents claim, however, that the issue of whether or not the sale of the vehicle in question toFlaviana Tanoy and 'hereafter, to Domingo Pardorla, Jr. is simulated or fictitious, is one of fact and maynot be reviewed by this Court on appeal.

    But, the petitioner counters that the findings of fact of the respondent appellate court is reviewablebecause the said findings are contrary to those of the trial court which were based upon an evaluation ofthe credibility of witnesses and should not have been disturbed by the appellate court, following the rulethat trial courts are in a better position to judge and evaluate the evidence presented in the course of thetrial.

    The established rule in this jurisdiction is that findings of fact of the Court of Appeals, when supported bysubstantial evidence, is not reviewable on appeal by certiorari. Said findings of the appellate court arefinal and cannot be disturbed by the Supreme Court. However, where the findings of the Court of Appealsare contrary to those of the trial court, a minute scrutiny by the Supreme Court is in order and resort toduly proven evidence becomes necessary. 6

    In the instant case, the Court of Appeals found that the trial court, in exempting Angel Jereos from liability,"relied solely on the deed of sale (Exh. 1-Jereos)- ignoring altogether the testimony of Flora Jaravilla (wifeof the driver) and of appellee Domingo Pardorla, Jr. " Hence, it had reason to exercise its appellate

    jurisdiction over the lower courts and modify the findings of fact of the trial court.

    The respondent Domingo Pardorla, Jr., in whose line the jeepney in question was registered under the

    "kabit system" declared that:... this jeep was formerly attached to Imelda Mirasol then one of the units of Imelda Mirasol met anaccident which cost many lives. Now, Angel Jereos was afraid that later on his jeep might be attachedsince there is a pending case against Mirasol. Now according to Angel Jereos he went to see ImeldaMirasol and asked her to execute a deed of sale in favor of Angel Jeroes. Now, when Angel Jereos cameto me and asked if there is still vacancy in my line I told him there is. He told me that his jeep will betransferred under my line. I told him yes, prepare the papers. Now, after he has prepared the papers andhe came back to me he told me he will just put it under the name of Flaviana Tanoy, his sister-in-law but Iasked him that cannot be, what is your reason. According to him so that later on it can be hardly traced

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    when something wrong with the case of Imelda Mirasol comes, then I will just put it under the name ofFlaviana Tanoy, my sister-in-law but the jeep is still mine that is why I am the one who is paying you.

    His testimony is corroborated by Adriano Saladero, an employee of Pardorla, Jr., to whom Angel Jereospays the monthly dues for the registration of his jeepneys under the certificate of public convenienceissued to Pardorla, Jr., and by Flora Jaravilla, the wife of the driver of the jeepney, who categoricallystated that the jeepney driven by her husband, Narciso Jaravilla, was owned by Angel Jereos to whomthey pay a daily "boundary" of P16.80; and that they park the said jeepney near the house of AngelJereos after returning it at night.

    Finally, the petitioner, citing the case of Vargas vs. Langcay, 7 contends that it is the registered owner ofthe vehicle, rather than the actual owner, who must be jointly and severally liable with the driver of thepassenger vehicle for damages incurred by third persons as a consequence of injuries or death sustainedin the operation of said vehicle.

    The contention is devoid of merit. While the Court therein ruled that the registered owner or operator of apassenger vehicle is jointly and severally liable with the driver of the said vehicle for damages incurred bypassengers or third persons as a consequence of injuries or death sustained in the operation of the saidvehicle, the Court did so to correct the erroneous findings of the Court of Appeals that the liability of theregistered owner or operator of a passenger vehicle is merely subsidiary, as contemplated in Art. 103 of

    the Revised Penal Code. In no case did the Court exempt the actual owner of the passenger vehicle fromliability. On the contrary, it adhered to the rule followed in the cases of Erezo vs. Jepte, 8 Tamayo vs.

    Aquino, 9 and De Peralta vs. Mangusang, 10 among others, that the registered owner or operator has theright to be indemnified by the real or actual owner of the amount that he may be required to pay asdamage for the injury caused.

    The right to be indemnified being recognized, recovery by the registered owner or operator may be madein any form-either by a cross-claim, third-party complaint, or an independent action. The result is thesame.

    WHEREFORE, the petition should be, as it is hereby, DENIED. With costs against the petitioner.


    Republic of the PhilippinesSUPREME COURTManila


    G.R. No. 131512 January 20, 2000

    LAND TRANSPORTATION OFFICE [LTO], represented by Assistant Secretary Manuel F. Bruan, LTORegional Office, Region X represented by its Regional Director, Timoteo A. Garcia; and LTO Butuanrepresented by Rosita G. Sadiaga, its Registrar, petitioners,

    vs.CITY OF BUTUAN, represented in this case by Democrito D. Plaza II, City Mayor, respondents.

    VITUG, J.:

    The 1987 Constitution enunciates the policy that the territorial and political subdivisions shall enjoy localautonomy.1 In obedience to that mandate of the fundamental law, Republic Act ("R.A.") No. 7160,otherwise known as the Local Government Code,2 expresses that the territorial and political subdivisionsof the State shall enjoy genuine and meaningful local autonomy in order to enable them to attain theirfullest development as self-reliant communities and make them more effective partners in the attainment

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    of national goals, and that it is a basic aim of the State to provide for a more responsive and accountablelocal government structure instituted through a system of decentralization whereby local government unitsshall be given more powers, authority, responsibilities and resources.

    While the Constitution seeks to strengthen local units and ensure their viability, clearly, however, it hasnever been the intention of that organic law to create an imperuim in imperio and install an infra sovereignpolitical subdivision independent of a single sovereign state.

    The Court is asked in this instance to resolve the issue of whether under the present set up the power ofthe Land Registration Office ("LTO") to register, tricycles in particular, as well as to issue licenses for thedriving thereof, has likewise devolved to local government units.

    The Regional Trial Court (Branch 2) of Butuan City held3 that the authority to register tricycles, the grantof the corresponding franchise, the issuance of tricycle drivers' license, and the collection of fees thereforhad all been vested in the Local Government Units ("LGUs"). Accordingly, it decreed the issuance of apermanent writ of injunction against LTO, prohibiting and enjoining LTO, as well as its employees andother persons acting in its behalf, from (a) registering tricycles and (b) issuing licenses to drivers oftricycles. The Court of Appeals, on appeal to it, sustained the trial court.1wphi1.nt

    The adverse rulings of both the court a quo and the appellate court prompted the LTO to file the instant

    petition for review on certiorari to annul and set aside the decision,4 dated 17 November 1997, of theCourt of Appeals affirming the permanent injunctive writ order of the Regional Trial Court (Branch 2) ofButuan City.

    Respondent City of Butuan asserts that one of the salient provisions introduced by the Local GovernmentCode is in the area of local taxation which allows LGUs to collect registration fees or charges along with,in its view, the corresponding issuance of all kinds of licenses or permits for the driving of tricycles.

    The 1987 Constitution provides:

    Each local government unit shall have the power to create its own sources of revenues and to levy taxes,fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent withthe basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local


    Sec. 129 and Section 133 of the Local Government Code read:

    Sec. 129. Power to Create Sources or Revenue. Each local government unit shall exercise its power tocreate its own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein,consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusivelyto the local government units.

    Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwiseprovided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shallnot extend to the levy of the following:

    x x x x x x x x x(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licensesor permits for the driving thereof, except tricycles.

    Relying on the foregoing provisions of the law, the Sangguniang Panglungsod ("SP") of Butuan, on 16August 1992, passed SP Ordinance No. 916-92 entitled "An Ordinance Regulating the Operation ofTricycles-for-Hire, providing mechanism for the issuance of Franchise, Registration and Permit, andimposing Penalties for Violations thereof and for other Purposes." The ordinance provided for, amongother things, the payment of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the

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    registration of the vehicle, and fees for the issuance of a permit for the driving thereof.

    Petitioner LTO explains that one of the functions of the national government that, indeed, has beentransferred to local government units is the franchising authority over tricycles-for-hire of the LandTransportation Franchising and Regulatory Board ("LTFRB") but not, it asseverates, the authority of LTOto register all motor vehicles and to issue to qualified persons of licenses to drive such vehicles.

    In order to settle the variant positions of the parties, the City of Butuan, represented by its City MayorDemocrito D. Plaza, filed on 28 June 1994 with the trial court a petition for "prohibition, mandamus,injunction with a prayer for preliminary restraining order ex-parte" seeking the declaration of the validity ofSP Ordinance No. 962-93 and the prohibition of the registration of tricycles-for-hire and the issuance oflicenses for the driving thereof by the LTO.

    LTO opposed the prayer in the petition.

    On 20 March 1995, the trial court rendered a resolution; the dispositive portion read:

    In view of the foregoing, let a permanent injunctive writ be issued against the respondent LandTransportation Office and the other respondents, prohibiting and enjoining them, their employees,officers, attorney's or other persons acting in their behalf from forcing or compelling Tricycles to be

    registered with, and drivers to secure their licenses from respondent LTO or secure franchise from LTFRBand from collecting fees thereon. It should be understood that the registration, franchise of tricycles anddriver's license/permit granted or issued by the City of Butuan are valid only within the territorial limits ofButuan City.

    No pronouncement as to costs.6

    Petitioners timely moved for a reconsideration of the above resolution but it was to no avail. Petitionersthen appealed to the Court of Appeals. In its now assailed decision, the appellate court, on 17 November1997, sustained the trial court. It ruled:

    WHEREFORE, the petition is hereby DISMISSED and the questioned permanent injunctive writ issued bythe court a quo dated March 20, 1995 AFFIRMED.7

    Coming up to this Court, petitioners raise this sole assignment of error, to wit:

    The Court of Appeals [has] erred in sustaining the validity of the writ of injunction issued by the trial courtwhich enjoined LTO from (1) registering tricycles-for-hire and (2) issuing licenses for the driving thereofsince the Local Government Code devolved only the franchising authority of the LTFRB. Functions of theLTO were not devolved to the LGU's.8

    The petition is impressed with merit.

    The Department of Transportation and Communications9 ("DOTC"), through the LTO and the LTFRB,has since been tasked with implementing laws pertaining to land transportation. The LTO is a line agencyunder the DOTC whose powers and functions, pursuant to Article III, Section 4 (d) [1],10 of R.A. No.

    4136, otherwise known as Land Transportation and Traffic Code, as amended, deal primarily with theregistration of all motor vehicles and the licensing of drivers thereof. The LTFRB, upon the other hand, isthe governing body tasked by E.O. No. 202, dated 19 June 1987, to regulate the operation of public utilityor "for hire" vehicles and to grant franchises or certificates of public convenience ("CPC").11 Finely put,registration and licensing functions are vested in the LTO while franchising and regulatory responsibilitieshad been vested in the LTFRB.

    Under the Local Government Code, certain functions of the DOTC were transferred to the LGUs, thusly:

    Sec. 458. Powers, Duties, Functions and Com