P.D.P. TRANSIT, INC. AND EUSEBIO DAPLAS, PLAINTIFFS-APPELLANTS, VS. MUÑOZ (HI) MOTORS, INC., DM TRANSIT, INC., AND ALFREDO ABEJA, IN HIS CAPACITY AS DEPUTY SHERIFF OF QUEZON CIT…

The lone question of law tendered for resolution in this appeal
is whether the Court of First Instance of Quezon City
erred in dismissing the complaint, in civil case Q-8882, filed on June 25, 1966
by the P.D.P. Transit, Inc. and Eusebio Daplas against the
Muñoz (HI) Motors, Inc., D.M. Transit, Inc., and Alfredo Abeja as
deputy sheriff of Quezon City, on the ground
of lack of jurisdiction over the subject-matter of the complaint.

The pertinent portions of the complaint are hereun­der quoted:

“II

“That on July 27, 1961, and on various
dates in 1962 and 1963, plaintiff corporation purchased from the defendant Muñoz (Hi) Motors, Inc., on installments, the following
M-A-N Truck chassis and engines:

a)  July
27, 1961 . . . . . . . . . .     Ten
(10) units;

b)  1962  .
. . . . . . . . . . . . . . .     Two (2)
units but which were fore­closed by Muñoz (Hi)
Motors, Inc. from Williams Lins;

c) 1963 . . . . .
. . . . . . . . . . .     One (1) unit,
second hand which could not be registered with the Public Land Transportation Office due to the dubious
acquisition papers of the defendant Muñoz (Hi) Mo­tors,
Inc.

and to secure payment of the purchase price thereof, the former
executed in favor of the latter chattel mortgages on the same units.

III

“That sometime in 1963, after plaintiff corpo­ration has paid
the defendant Muñoz (Hi) Motors, Inc. the total sum
of P150,033.12 against its in­stallment obligation, the latter agreed on the
abatement of the collection of the installments then outstanding until the
final release of the former’s loan of P584,000.00
with the Development Bank of the Philippines, as shown in Annex ‘A’, which is made an integral part
hereof, P284,000.00 of which shall be applied once obtained on its
(plaintiff’s) installment account with the latter, and, as part collateral of
the loan, plaintiff cor­poration shall mortgage the aforementioned ten (10)
units of trucks with the said bank with the active cooperation and
participation of the de­fendant Muñoz (Hi) Motors,
Inc. as shown in the attached copy of a letter of the defendant corpo­ration to
the plaintiff which is made a part hereof as Annex ‘B’ to the complaint.

IV

“That on June 24, 1964,
after the approval but before the release of the said loan of
P584,000.00 to the plaintiff corporation, the defendant Muñoz
(Hi) Motors, Inc., pursuing an illicit trade combination with the defendant DM.
Transit, Inc., (which is also owned and control­led by the stockholders of the
defendant Muñoz (Hi) Motors, Inc.) with the purpose
of crippling and taking over the business of the plaintiff corporation,
repossessed the thirteen (13) units of trucks together with the bodies
constructed thereon by the plaintiff on the ten (10) units valued at P50,000.00, through the defendant Sheriff of Quezon City
by extra-judicially foreclosing, without due notice, the chattel mortgages
thereon men­tioned in paragraph 2 hereof, in gross and malevolent derogation of
its agreement with plain­tiff corporation averred in the paragraph immediately
preceding thereby affecting and caus­ing the nullification of the said loan to
the damage and prejudice of the plaintiff corporation.

V

“That in the auction sale of the chattel mortgages held on
July 16, 1964, defendant cor­poration, in collusion with the defendant Sheriff
who conducted the same, caused to be included thereat, not only the said thirteen (13) units of M-A-N trucks subject
of the said chattel mortgages, but also the franchise of plaintiff Eusebio Daplas to operate the
twelve (12) passenger buses (covering the line AMPARO SUBDIVISION TO DIVISORIA
via NOVALICHES and vice versa) granted him in Public Service Commission Case
No. 131334, which was not and never been included therein, by falsely making it
appear as part of the subject of the said mortgages.  A copy of the Certificate of Sale is attached
hereto and made a part hereof as An­nex ‘C’;

VI

“That subsequent
to the award of the chattels heretofore
mentioned and the franchise of the plaintiff Eusebio Daplas to the defendant Muñoz
(Hi) Motors, Inc. by the defendant Sheriff of Quezon
City, the defendant Muñoz (Hi) Motors, Inc.
transferred the same to its co-defendant, DM Tran­sit, Inc. in pursuant to
its trade combination, considering that
the former cannot operate the same under existing laws.

VII

“That the said auction sale was irregularly conducted by the defendant in
violation of the prescribed procedure, no notice having been given to the
plaintiff corporation.

VIII

“That the aforesaid sale and transfer of the thirteen (13) units together with the Certificate
of Public Convenience of plaintiff Eusebio Daplas under Public Service Commission No. 131334
was accidentally
discovered by the plaintiff corporation, through its president and General Manager, when defendant Muñoz (Hi) Motors, Inc. applied for the
approval of the said sale and transfer with the Public Service Commission,
which application is pending and opposed by the herein plaintiffs.

IX

“That since defendant Muñoz (Hi)
Motors, Inc. elected to extra-judicially foreclosed the chattel mortgages on the thirteen (13) units of M-A-N trucks (chassis and engines only)
purchased on installment by the
plaintiff corporation, it has become illegal for it to recover the
balance of the purchase price on the
Certificate of Public Convenience of plaintiff Eusebio
Daplas, considering the provision of Article 1484 of
the new Civil Code.

X

“That as a direct, immediate and proximate cause of the
illegal and iniquituous acts of the defendant
corporation referred to in paragraph 4 hereof, plain­tiff corporation was
unduly deprived of a much needed capital loan in the amount of P584,000.00
which it could have otherwise obtain from its Development Bank of the
Philippines and utilized to prevent the col­lapse of its business operation
that followed the loss thereof, and thereby sustained actual and compensatory
damages to the extent of not less than P100,000.00.

XI

“That as a result of the sale and dispossession of the
Certificate of Public Convenience caused by the unlawful conspiracy amongst
defendants, plaintiff Eusebio Daplas stands to suffer the loss of P10,000.00 which represents his expenses in the
procurement thereof.

XII

“That the defendant DM Transit, Inc. is pre­sently securing
the authority of the Public Service Commission in PSC Case No. 651826 for the
transfer of said franchise of plaintiff Eusebio Daplas for its eventual operations on the lines covered
therein in its business as a common carrier.  Unless there­fore immediately restrained, the
planned or threat­ened action of the said defendant to operate in said lines
over which plaintiff Daplas is presently operating
shall cause great and irreparable loss or dam­age to the latter.  For this purpose, said plaintiff is willing
and able to post a bond in such amount as the Honorable Court may deem just
and equitable con­ditioned to pay for whatever damages the said defendant may suffer by
reason of the issuance of the writ applied for, should the Court finally
adjudge that the said plaintiff is not entitled thereto.

XIII

“That on account of defendants’ wrongful acts complained
hereof, plaintiffs were compel­led to retain the services of counsel for a contingent fee
of 20% of any amount collected from the defendants.

P R A Y E R

“WHEREFORE, it is respectfully prayed of the Honorable Court
that:

“1)  Immediately upon the filing of this complaint,
a writ of preliminary injunction be issued restraining the defendant DM
Transit, Inc. its assignee and all persons claiming rights or title under it, from
transferring registering and operating or otherwise taking action on the said
franchise of plaintiff Eu­sebio Daplas
under Public Service Commission Case No. 131334 that would negate the rights of
the latter as its registered holder pending resolution of this action.

“2)  After due hearing, judgment be rendered annul­ling
the auction sale of the properties subject of the chattel mortgages object of
this complaint and all pro­ceedings held thereunder,
particularly the award of the defendant Sheriff of the said Certificate of
Public Convenience of plaintiff Eusebio Daplas to defendant Muñoz (Hi)
Motors, Inc.;

“3)  Ordering the defendant corporations to pay
jointly and severally, the plaintiff corporation the sum of P100,000.00 for
actual and compensatory damages for its business losses;

“4)  Ordering the defendants to pay unto the plain­tiff
Eusebio Daplas, jointly and
severally, the sum of P10,000.00 for actual and compensatory damages for his
lost income and profits;

“5)  Defendants be made to pay the costs of
suit.”

On July 10, 1965
the defendants filed a motion
to dismiss, the pertinent portions of which read as follows:

“The subject of the action is the validity of the foreclosure
and sales of a PUB certificate of public convenience issued by the Public
Service Commission to the plaintiff Eusebio Daplas in Case No. 131334. 
The subject certificate was mortgaged by the plaintiff P.D.P. Transit,
Inc. to the defendant Muñoz (Hi) Motors, Inc. with
the knowledge and consent of the plaintiff
Eusebio Daplas.  The terms of the mortgage were broken by
non-payment so defendant Muñoz (Hi) Motors, Inc.
foreclosed.  The defendant Sheriff sold the certificate at auction to the
defendant Muñoz (Hi) Motors, Inc. as the highest
bidder.  Defendant Muñoz (Hi) Motors, Inc. in turn
sold the same to the defendant DM Transit Corporation.

“The corresponding application for the ap­proval of the sales
was filed with the Public Service Commission
pursuant to Sec. 20 of the Public
Service Act on January 22, 1965
(Case No. 65-1826).  Copy of the
application as amended on June 23, 1965 is hereto attached as Annex ‘A’ and
made a part hereof.

“Sec. 20 of the Public Service Act provides as follows:

‘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, any part thereof;
or merge or consolidate its property, franchise, privileges or rights, or any part thereof, with those of any
other public service.  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 mortgage or encumbrance, for liabilities of more than one year
maturity, or 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 by to prevent the sale, alienation, or
lease by any pub­lic service of
any of its property in the ordinary course of its business.

“In view of the foregoing provision, it is the Public Service
Commission that has jurisdic­tion over the subject of the complaint and the
exercise of such jurisdiction by the Commission, we respectfully submit, should
not be interfered with by this Honorable Court.”

On July 17, 1965
the plaintiffs filed their opposition to the motion to dismiss; a rejoinder to
this opposition was filed on October
18, 1965.

On October 27, 1965, relying upon the provisions of Section 20 of
the Public Service Act,^[1]
the court dismissed the complaint, reasoning as follows:

“This is an action involving the validity of the sheriff’s
sale of the public utilities and cer­tificate of public convenience granted to plaintiff Eusebio
Daplas in Public Service Commission Case No.
131334.  Under the Public Service Act,
owners and operators of public service utilities could not alienate or mortgage its properties or franchises without the
approval of the Public Service Commission.

*                    *                       *

“Considering that the corresponding application for the approval of
the aforementioned sale was already filed with the Public Service Commission,
and considering that the Commission is the
only entity empowered to withdraw a franchise or certificate of public convenience from its bona fide
holder (Garcia vs. Bonifacio, et al., G. R. No.
L11153, September 30, 1958), the exercise of the
Commission of its function may not be interfered with.”

The plaintiffs’ motion for reconsideration of December 8, 1965 was denied on January 20, 1966.

Hence the present recourse.

The question squarely before us is whether the causes of action stated in the
complaint may be legally taken cognizance of by the Public Service Commission
or are matters within the exclusive province of the ordinary courts of Justice.

The Public Service Commission is not a judicial tribunal; its functions
are limited and administrative in character; it possesses only such jurisdiction and power as are expressly or by necessary implication conferred
upon it by statute; and it is without power or jurisdiction to
pass upon questions that are within the
exclusive province of the ordinary courts of justice.^[2]

In the case at bar, the plaintiffs seek (1) the annul­ment, on
the ground of fraud, of the extra-judicial foreclo­sure sale of not only the
thirteen “M-A-N” trucks of the ap­pellant company but also the
certificate of public convenience granted to the plaintiff Eusebio
Daplas by the Public Service Commission, and (2)
recovery of damages incurred by reason of the said allegedly vitiated sale in
the amount of P100,000.  The complaint
especially places in focus the invalidity of the extra-judicial sale of the
public service franchise, averring that this franchise is not part of or
involved in the chattel mortgage that was executed by the plaintiffs in favor
of the defendants, and that the foreclosure was conducted without the requisite
prior notice.

It is of course beyond dispute that the Public Service Commission
is authorized by law to pass upon the question of whether or not the transferee
in a sale or assignment of a public service franchise is qualified to serve the
public interest.  But it is rather
obvious that the questions tendered to the court a quo for
determination under the allegations of the complaint, namely, the validity of
the auction sale, especially and particularly in reference to the certificate
of public convenience, the due execution and genuineness of the instrument
covering the sale, and fraud in connection there­with, properly belong to the
exclusive jurisdiction of the courts of justice.^[3]
From nothing in the delimited compass of
the Public Service Act can be deduced legal authority that empowers the Public
Service Commission to hear, determine and decide the aforementioned causes of
action.^[4]

ACCORDINGLY, the order of October 27, 1965 of the court a quo is
hereby set aside, and this case is remanded to the court of origin for further
proceedings in accordance with law.  Costs
against the defendants-appellees.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, Zaldivar, Sanchez, Angeles,
and Fernando, JJ., concur.

^[1]
Quoted in the defendants’ motion to dismiss, supra.

^[2]
Batangas Laguna Tayabas Bus
Co. vs. Public Service Commis­sion, L-25994 and
L-26004 to L-26046, August 31, 1966,
17 Sup. Ct. Rep. Ann. 1115, and the cases therein cited.

^[3]
Hoc Lian Dry Goods vs. Meralco,
63 Phil. 804; Dagdag, et al. vs. Public
Service Comm., 104 Phil. 162; Batangas Laguna Tayabas Bus Co. vs. PSC, L-25994, L-26004 to
L-26046, August 31, 1966, 17 Sup. Ct. Rep. Ann. 1111; Darang
vs. Ty Belizar, et al.,
L-19478, January 31, 1967.

^[4]
Montoya vs. Ignacio, 94 Phil. 182; Dagdag, et al.,
vs. Public Service Comm., 104 Phil. 162; Hoc Lian
Dry Goods Club vs. Manila Elec. Co., 63 Phil. 804.