LEONARDO GARCIA, PLAINTIFF AND APPELLANT, VS. FRANCISCO BONIFACIO AND SIMPLICIO PEÑA, DEFENDANTS AND APPELLEES.

Garcia versus Bonifacio

The Case

This is the story of Leonardo Garcia, who bought a certificate of public convenience together with a jeepney from Francisco Bonifacio, and then found that the certificate had already been cancelled and that another man, Simplicio Peña, was holding a certificate of his own. Garcia went to the Court of First Instance of Manila to recover damages and to compel the defendants to convey the certificate to him. The trial judge, the Honorable Bienvenido Tan, dismissed the complaint on the ground that Garcia had no rights enforceable before the courts, not even damages, because he had never secured the approval of the sale by the Public Service Commission. The case matters because it fixes a rule every Bar candidate must carry: a sale of a certificate of public convenience is not operative without the approval of the Commission, and the courts will not grant relief that bypasses that approval.

Procedural History

Leonardo Garcia filed his complaint, later amended, in the Court of First Instance of Manila against Francisco Bonifacio and Simplicio Peña, asking for damages and for an order compelling the conveyance of the certificate of public convenience. Judge Bienvenido Tan dismissed the complaint, holding that the plaintiff had no rights enforceable before the courts, not even damages, since he had not secured the approval of the sale by the Public Service Commission, and that he should go to the Commission for relief. Garcia appealed the order of dismissal directly to the Supreme Court, which decided the appeal in September 1958 and affirmed the order below.

Facts

A certificate of public convenience was issued by the Public Service Commission to Eustacio Lazcano. Lazcano sold the certificate to Simplicio Peña on February 15, 1953, and Peña in turn sold it to Francisco Bonifacio on June 19, 1953. Leonardo Garcia then acquired the certificate from Bonifacio by a deed of absolute sale dated February 27, 1956, together with one jeepney.

Garcia later discovered that the certificate in the name of Lazcano which he had bought from Bonifacio had already been cancelled. This happened because Peña presented to the Commission a false deed of sale purporting to be from Lazcano to him, dated April 28, 1955, and obtained another certificate for himself. Peña also requested, and received, permission to drop from the service the very jeepney he had previously transferred to Bonifacio, which Garcia had acquired. For that reason Garcia was prevented from operating the jeepney.

The defendants offered other circumstances to explain their side, particularly to support their defense that upon the plaintiff's failure to secure the Commission's approval, steps had to be taken to prevent the cancellation of the certificate through abandonment. The Supreme Court did not recount these circumstances, because it agreed that the courts were not the appropriate place to obtain what the plaintiff desired: the conveyance of the certificate, with the concomitant privilege to operate the jeepney as a common carrier.

Issues

• Whether or not the courts may compel the conveyance of a certificate of public convenience, and award damages for the loss of the privilege to operate, when the sale of the certificate has not been approved by the Public Service Commission.
• Whether or not the plaintiff's claim that the vendor denied the sale excused him from seeking the approval of the Commission.
• Whether or not the plaintiff may recover damages, moral and exemplary, and attorney's fees, without first securing the approval of the sale by the Commission.

Applicable Provisions

Section 20 of the Public Service Act, as quoted in the decision, provides:

SEC. 20. Acts requiring the approval of the Commission. Subject to established limitations and exceptions and saving provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the Commission previously had (g) To sell, alienate, mortgage, encumber or lease its property, franchises, certificates, privileges, or rights, or any part thereof; The approval herein required shall be given, after notice to the public and after hearing the persons interested at a public hearing, if it be shown that there are just and reasonable grounds for making the sale, alienation, lease, merger, or consolidation to be approved, and that the same are not detrimental to the public interest, and in case of a sale, the date on which the same is to be consummated shall be fixed in the order of approval: Provided, however, That nothing herein contained shall be construed to prevent the transaction from being negotiated or completed before its approval.

This provision makes the approval of the Commission a condition sine qua non, an indispensable condition, before a sale of a certificate of public convenience becomes operative, and it is the provision on which the entire ruling rests.

Ruling

On the first issue, the Court held that the Manila court had no authority to grant the relief demanded, because the sale had not been approved by the Commission. The law is quite clear and specific: no sale of a certificate of public convenience shall be operative without the approval of the Public Service Commission, which may be given even after the contract of sale is perfected. The consummation of the sale, however, takes place and the operation under the certificate begins on the date fixed by the Commission in its decree of approval. The plaintiff admitted that he never asked for such approval, which is not a mere formality that could be dispensed with or taken for granted, because the statute directs that the Commission must, before approving, be convinced after a hearing and notice that the sale shall not hinder the public's convenience.

On the second issue, the Court rejected the plaintiff's argument that he could not properly go to the Commission because there was a dispute as to the terms of the sale, with the vendor denying that he had made it. The Court called this an erroneous assumption, the root and basis of the plaintiff's contentions, and pointed to its own ruling in Del Rosario versus Vergara, where the alleged seller denied having made the sale of the certificate for which the approval of the Commission was requested by the purchaser, and the Commission, after listening to both sides, approved the sale notwithstanding the seller's objection, and the Supreme Court affirmed. The Court added that if the certificate sold to the plaintiff was later illegally transferred to Peña, who now holds the Commission's approval and certificate, there is no better place than the Commission itself to thresh out the respective rights of the parties, since that Commission is the only entity empowered to withdraw the certificate from Peña and to transfer it to the plaintiff or grant him a new certificate, if the evidence and the law so warranted.

On the third issue, the Court conceded for the moment, without deciding, the alleged lack of authority of the Commission to award monetary damages. It then examined the items prayed for. The claim for loss of earning could not evidently be granted, because the plaintiff had no right to operate the jeepney without having previously secured the approval of the Commission, which he never asked, and therefore he could claim no loss of earning. The moral and exemplary damages may only be recovered, if at all, after the plaintiff's position is upheld; yet even if the sale be disapproved, perhaps the plaintiff may recover if such disapproval should rest on actionable acts of the defendants, or one of them. At any rate, damages, if any, should be awarded only after the matter of the sale has been clarified or approved. As to attorney's fees, when the complaint is dismissed, the defendant could not obviously be charged with the plaintiff's counsel fees.

Doctrine

A sale of a certificate of public convenience is not operative without the approval of the Public Service Commission, and that approval may be given even after the contract of sale is perfected. The consummation of the sale, and the beginning of operation under the certificate, take place on the date fixed by the Commission in its decree of approval. The approval is not a mere formality: the Commission must be convinced, after notice and a public hearing, that the sale is not detrimental to the public interest. A party who has not sought that approval cannot ask the courts to compel the conveyance of the certificate, nor recover damages for the loss of the privilege to operate, because he has no right to operate without the approval. The denial of the sale by the alleged vendor is no excuse, since the Commission may hear both sides and approve the sale notwithstanding the seller's objection, as held in Del Rosario versus Vergara. The Commission is the only entity empowered to withdraw a certificate from its holder and transfer it to another, or to grant a new certificate. Damages, moral and exemplary, may be recovered, if at all, only after the matter of the sale has been clarified or approved, and attorney's fees cannot be charged to the defendant when the complaint is dismissed.

Disposition

The Supreme Court found no reversible error in the appealed order, affirmed the dismissal of the complaint, and imposed costs against the appellant, Leonardo Garcia.

Remember This

Memorize this line: no sale of a certificate of public convenience shall be operative without the approval of the Public Service Commission, which may be given even after the contract of sale is perfected. Examiners use this case to test the requirement of Commission approval for the sale of a certificate of public convenience, and to test whether a plaintiff may recover damages for loss of earnings without first securing that approval.