COMMONWEALTH TRANSPORT SERVICES AND DEVELOPMENT COOPERATIVE, PETITIONER, VS. GIL L. TEVES, JR., RESPONDENT.

Commonwealth Transport Services and Development Cooperative versus Teves

The Case

This is a petition for review on certiorari brought by Commonwealth Transport Services and Development Cooperative, known as COMMTRANSDECO, against Gil L. Teves, Jr., a jeepney driver plying the Barangay Maly, San Mateo to Philcoa, Quezon City route. Teves sued COMMTRANSDECO and the Municipality of San Mateo, Rizal over the ten-peso per trip terminal fee exacted at a common terminal, and the courts below split on the question. The case matters because it is a compact laboratory on the two requisites of a valid police power measure, and on how a local government unit's delegated police power may be exercised through a cooperative's collection scheme.

Procedural History

Teves filed a complaint for damages and injunction, with an application for a writ of preliminary injunction and a temporary restraining order, before Branch 77 of the Regional Trial Court of San Mateo, Rizal. The trial court denied the temporary restraining order, and later dismissed the complaint, holding that the ordinance was a valid exercise of police power under the General Welfare Clause of the Local Government Code of 1991. Teves moved for reconsideration, which was denied, and he appealed to the Court of Appeals. The Court of Appeals reversed and set aside the trial court's decision and order, directing COMMTRANSDECO and the Municipality of San Mateo to cease and desist from imposing and collecting the ten-peso per trip terminal fee, while dismissing all other claims. On the motions for partial reconsideration, the Court of Appeals rendered an amended decision ordering COMMTRANSDECO to pay Teves 150,000 pesos in temperate damages, with legal interest. COMMTRANSDECO then filed the present petition for review on certiorari under Rule 45 of the Rules of Court.

Facts

Teves drives a jeepney on the Barangay Maly, San Mateo to Philcoa route, and the operator holds a Certificate of Public Convenience for that route issued by the Land Transportation Franchising and Regulatory Board. In January 2008, the Sangguniang Bayan of San Mateo issued a resolution identifying an open space as a common terminal for COMMTRANSDECO members plying the route. Teves and some eighty jeepney drivers signed a petition opposing the common terminal, but Ordinance Number 2008-004 of the Transportation Code of San Mateo was nonetheless passed in February 2008.

Section 33 of the Ordinance required public passenger jeepneys to stop at the proper terminal designated by the Public Utility Franchise Regulatory Board, and provided that the expenses of operating the terminal, such as rent, dispatcher's pay, utilities, and salaries, shall come from the total collection of terminal fees. The Ordinance did not itself provide for the collection of a ten-peso per trip terminal fee.

Beginning April 2008, COMMTRANSDECO and the Municipality collected a ten-peso terminal fee: stubs were issued to drivers upon payment at the common terminal, the drivers surrendered the stubs to the Traffic Enforcement Group on the way back to Philcoa, and failure to possess a stub was treated as trip-cutting, punishable by a five-hundred-peso fine payable at the municipal hall before the driver could continue plying the route. Teves argued that the scheme did not curb trip-cutting, because stubs could also be obtained at the municipal hall, about three kilometers from the common terminal, allowing drivers to return to Philcoa without completing their route. The fee, he said, amounted to thirty percent of his daily earnings.

Issues

• Whether or not the imposition and collection of the ten-peso per trip terminal fee is a valid exercise of police power.
• Whether or not Section 33 of Ordinance Number 2008-004 expressly authorizes the imposition and collection of the ten-peso per trip terminal fee.
• Whether or not the Court of Appeals erred in passing upon the validity of the fee when it was allegedly raised for the first time on appeal.
• Whether or not the award of temperate damages to Teves was proper.

Applicable Provisions

Section 16 of the Local Government Code of 1991, the General Welfare Clause, is the source of the delegated police power discussed in the decision, and the Court quotes its two branches:

The first, known as the general legislative power, authorizes the municipal council to enact ordinances and make regulations not repugnant to law, as may be necessary to carry into effect and discharge the powers and duties conferred upon the municipal council by law. The second, known as the police power proper, authorizes the municipality to enact ordinances as may be necessary and proper for the health and safety, prosperity, morals, peace, good order, comfort, and convenience of the municipality and its inhabitants, and for the protection of their property.

This clause is the constitutional and statutory anchor of the measure, and the case turns on whether the measure stays within its limits.

Section 33, paragraph g, of Ordinance Number 2008-004 is the provision COMMTRANSDECO relies upon as the legal basis for the fee:

Ang gastusin na kaugnay sa operasyon ng mga sakayan gaya ng upa, bayad dispatsyer, bayad sa kuryente at tubig, pasahod sa mga kawani at iba pa ay manggagaling sa kabuuang koleksyon ng terminal fees.

The Court reads this provision as merely identifying the source of terminal operating expenses, not as authorizing the exaction of a specific fee from drivers.

Article 2224 of the Civil Code governs temperate damages:

Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty.

This provision supports the award to Teves for the loss of earnings that could not be proved with exact certainty.

Ruling

On the first issue, the Court held that the fee is an invalid exercise of police power. A local government unit properly exercises police power only if two requisites concur: the interests of the public generally require the interference of the State, and the means employed are reasonably necessary for the attainment of the object and not unduly oppressive. The Court found that the scheme failed both. It did not serve the Ordinance's purpose of reducing trip-cutting, since drivers could obtain stubs at the municipal hall without completing their routes, and the fee was unduly oppressive, being thirty percent of Teves's daily earnings, with no showing of how the amount was determined or whether it was proportionate to the cost of operating the terminal.

On the second issue, the Court agreed with the Court of Appeals that Section 33, paragraph g, merely provides that terminal expenses shall be sourced from the total collection of terminal fees, and does not expressly authorize the imposition or collection of a ten-peso per trip fee. The collection therefore had no specific legal basis under the Ordinance.

On the third issue, the Court held that the Court of Appeals did not err. Its decision did not delve into the validity of the Ordinance as such, but only assessed whether the imposition and collection of the fee was a valid exercise of police power, an issue Teves had sufficiently raised in his assignment of errors, to which COMMTRANSDECO had presented counterarguments.

On the fourth issue, the Court upheld the award of temperate damages. Temperate damages may be recovered where some pecuniary loss has been suffered but its amount cannot be determined with exact certainty, and the amount is left to the discretion of the courts, more than nominal but less than compensatory. Since jeepneys do not customarily issue receipts, the loss could not be proved with certainty, but the fact of loss was established, and the Court adopted the award of 150,000 pesos.

Doctrine

A police power measure is valid only when two requisites concur: the interests of the public generally, as distinguished from those of a particular class, require the interference of the State, and the means employed are reasonably necessary for the attainment of the object sought and not unduly oppressive. Absent either requisite, the measure is an arbitrary intrusion into private rights and violates the due process clause.

An ordinance that merely states that terminal expenses shall be sourced from the total collection of terminal fees does not, by that language alone, authorize the imposition and collection of a specific per trip fee. The exaction must have a specific legal basis.

Temperate damages under Article 2224 of the Civil Code may be awarded where pecuniary loss is established but its exact amount cannot be proved with certainty, and the amount rests in the sound discretion of the courts.

Disposition

The petition was denied, the decisions of the Court of Appeals were affirmed, COMMTRANSDECO and the Municipality of San Mateo were directed to cease and desist from collecting the ten-peso per trip terminal fee, and COMMTRANSDECO was ordered to pay Teves 150,000 pesos in temperate damages with six percent interest per annum from finality until fully paid.

Remember This

Memorize the twin requisites of a valid police power measure: public interest and means reasonably necessary and not unduly oppressive. Examiners use this case to test the limits of a local government unit's delegated police power and the requisites for temperate damages under Article 2224 of the Civil Code.