BATANGAS TRANSPORTATION CO., PETITIONER AND APPELLANT, VS. CAYETANO ORLANES, RESPONDENT AND APPELLEE.

STATEMENT

In his application for a permit, the appellee Orlanes alleges
that he is the holder of a certificate of public convenience issued by the
Public Service Commission in case No. 7306, to operate an autobus line from Taal
to Lucena, passing through Batangas, Bolbok and Bantilan, in the Province of
Batangas, and Candelaria and Sariaya, in the Province of Tayabas, without any
fixed schedule; that by reason of the requirements of public convenience, he has
applied for a fixed schedule from Bantilan to Lucena and return; that in case
No. 7306, he cannot accept passengers or cargo from Taal to any point before
Bolbok, and vice versa; that the public convenience requires that he be
converted into what is known as a regular operator on a fixed schedule between
Taal and Bantilan and intermediate points, and for that purpose, he has
submitted to the Commission a proposed schedule for a license to make trips
between those and intermediate points. He then alleges that by reason of
increase of traffic, the public convenience also requires that he be permitted
to accept passengers and cargo at points between Taal and Bantilan, and he asked
for authority to establish that schedule, and to accept passengers at all points
between Taal and Bantilan.

To this petition the Batangas Transportation Company appeared
and filed an application for a permit, in which it alleged that it is operating
a regular service of auto trucks between the principal municipalities of the
Province of Batangas and some of those of the Province of Tayabas; that since
1918, it has been operating a regular service between Taal and Rosario, and that
in 1920, its service was extended to the municipality of San Juan de Bolbok,
with a certificate of public convenience issued by the Public Service
Commission; that in the year 1925 Orlanes obtained from the Commission a
certificate of public convenience to operate an irregular service of auto trucks
between Taal, Province of Batangas, and Lucena, Province of Tayabas, passing
through the municipalities of Bauan, Batangas, Ibaan, Rosario, and San Juan de
Bolbok, with the express limitation that he could not accept passengers from
intermediate points between Taal and Bolbok, except those which were going to
points beyond San Juan de Bolbok or to the Province of Tayabas; that he
inaugurated this irregular service in March, 1926, but maintained it on that
part of the line between Taal and Bantilan only for about three months, when he
abandoned that portion of it in the month of June and did not renew it until
five days before the hearing of case No. 10301, which was set for November 24,
1926, in which hearing the Batangas Transportation Company asked for additional
hours for its line between Batangas and Bantilan; that in June, 1926, Orlanes
sought to obtain a license as a regular operator on that portion of the line
between Bantilan and Lucena without having asked for a permit for that portion
of the line between Bantilan and Taal; that from June, 1926, Orlanes and the
Batangas Transportation Company were jointly operating a regular service between
Bantilan and Lucena, wjth trips every half an hour, and Orlanes not having asked
for a regular service between Bantilan and Taal, the Batangas Transportation
Company remedied this lack of service under the authority of the Commission, and
increased its trips between Bantilan and Tayabas to make due and timely
connections in Bantilan on a half-hour service between Bantilan and Batangas
with connections there for Taal and all other points in the Province of
Batangas. It is then alleged that the service maintained by the company is
sufficient to satisfy the convenience of the public, and that the public
convenience does not require the granting of the permit for the service which
Orlanes petitions, and that to do so would result in ruinous competition and to
the grave prejudice of the company and without any benefit to the public, and it
prayed that the petition of Orlanes to operate a regular service be denied.

After the evidence was taken upon such issues, the Public
Service Commission granted the petition of Orlanes, as prayed for, and the
company then filed a motion for a rehearing, which was denied, and the case is
now before this court, in which the appellant assigns the following errors:

“The Commission erred in ordering that a certificate of public
convenience be issued in favor of Cayetano Orlanes to operate the proposed
service without finding and declaring that the public interests will be promoted
in a proper and suitable manner by the operation of such service, or when the
evidence does not show that the public interests will be so promoted.

“That the Commission erred in denying the motion for a
rehearing.”

JOHNS, J.:

The questions presented involve a legal construction of the
powers and duties of the Public Service Commission, and the purpose and intent
for which it was created, and the legal rights and privileges of a public
utility operating under a prior license.

It must be conceded that an autobus line is a public utility,
and that in all things and respects, it is what is legally known as a common
carrier, and that it is an important factor in the business conditions of the
Islands, which is daily branching out and growing very fast.

Before such a business can be operated, it must apply for, and
obtain, a license or permit from the Public Service Commission, and comply with
certain defined terms and conditions, and when the license is once granted, the
operator must conform to, and comply with, all reasonable rules and regulations
of the Public Service Commission. The object and purpose of such a commission,
among other things, is to look out for, and protect, the interests of the
public, and, in the instant case, to provide it with safe and suitable means of
travel over the highways in question, in like manner that a railroad would be
operated under like terms and conditions. To all intents and purposes, the
operation of an autobus line is very similar to that of a railroad, and a
license for its operation should be granted or refused on like terms and
conditions. For many and different reasons, it has never been the policy of a
public service commission to grant a license for the operation of a new line of
railroad which parallels and covers the same field and territory of another old
established line, for the simple reason that it would result in ruinous
competition between the two lines, and would not be of any benefit or
convenience to the public.

The Public Service Commission has ample power and authority to
make any and all reasonable rules and regulations for the operation of any
public utility and to enforce compliance with them, and for failure of such
utility to comply with, or conform to, such reasonable rules and regulations,
the Commission has power to revoke the license for its operation. It also has
ample power to specify and define what is a reasonable compensation for the
services rendered to the traveling public.

That is to say, the Public Service Commission, as such, has the
power to specify and define the terms and conditions upon which the public
utility shall be operated, and to make reasonable rules and regulations for its
operation and the compensation which the utility shall receive for its services
to the public, and for any failure to comply with such rules and regulations or
the violation of any of the terms and conditions for which the license was
granted, the Commission has ample power to enforce the provisions of the license
or even to revoke it, for any failure or neglect to comply with any of its terms
and provisions.

Hence, and for such reasons, the fact that the Commission has
previously granted a license to any person to operate a bus line over a given
highway and refuses to grant a similar license to another person over the same
highway, does not in the least create a monopoly in the person of the licensee,
for the simple reason that at all times the Public Service Commission has the
power to say what is a reasonable compensation to the utility, and to make
reasonable rules and regulations for the convenience of the traveling public and
to enforce them.

In the instant case Orlanes seeks to have a certificate of
public convenience to operate a line of auto trucks with fixed times of
departure between Taal and Bantilan, in the municipality of Bolbok, Province of
Batangas, with the right to receive passengers and freight from intermediate
points. The evidence is conclusive that at the time of his application, Orlanes
was what is known as an irregular operator between Bantilan and Taal, and that
the Batangas Transportation Company was what is known as a regular operator
between Batangas and Rosario. Orlanes now seeks to have his irregular operation
changed into a regular one, with fixed hours of departure and arrival between
Bantilan and Taal, and to set aside and nullify the prohibition against him in
his certificate of public convenience, in substance and to the effect that he
shall not have or receive any passengers or freight at any of the points served
by the Batangas Transportation Company for which that company holds a prior
license from the Commission. His petition to become such a regular operator over
such conflicting routes is largely based upon the fact that, to comply with the
growing demands of the public, the Batangas Transportation Company, in case No.
10301, applied to the Commission for a permit to increase the number of trip
hours at and between the same places from Batangas to Rosario, and for an order
that all irregular operators be prohibited from operating their respective
licenses, unless they should observe the interval of two hours before, or one
hour after, the regular hours of the Batangas Transportation Company.

In his petition Orlanes sought to be relieved from his
prohibition to become a regular operator, and for a license to become a regular
operator with a permission to make three round trips daily between Bantilan and
Taal, the granting of which would make him a regular operator between those
points and bring him in direct conflict and competition over the same points
with the Batangas Transportation Company under its prior license, and in legal
effect that was the order which the Commission made, of which the Batangas
Transportation Company now complains.

The appellant squarely plants its case on the proposition:

“Is a certificate of public convenience going to be issued to a
second operator to operate a public utility in a field where, and in competition
with, a first operator who is already operating a sufficient, adequate and
satisfactory service?”

There is no claim or pretense that the Batangas Transportation
Company has violated any of the terms and conditions of its license. Neither
does the Public Service Commission find as a fact that the granting of a license
to Orlanes as a regular operator between the points in question is required or
necessary for the convenience of the traveling public, or that there is any
complaint or criticism by the public of the services rendered by the Batangas
Transportation Company over the route in question.

The law creating the Public Service Commission of the
Philippine Islands is known as Act No. 3108, as amended by Act No. 3316, and
under it the supervision and control of public utilities is very broad and
comprehensive.

Section 15 of Act No. 3108 provides that the Commission shall
have power, after hearing, upon notice, by order in writing to require every
public utility:

(a) To comply with the laws of the Philippine Islands;

(b) To
furnish safe, adequate, and proper service as regards the manner of furnishing
the same as well as the maintenance of the necessary material and equipment,
etc.;

(c) To establish, construct, maintain, and operate any
reasonable extension of its existing facilities, where such extension is
reasonable and practicable and will furnish sufficient business to justify the
construction and maintenance of the same;

(d) To keep a uniform system of books, records and
accounts;

(e) To make specific answers with regard to any point on which
the Commission requires information, and to furnish annual reports of finances
and operations;

(f) To carry, whenever the Commission may require, a proper and
adequate depreciation account;

(g) To notify the Commission of all
accidents;

(h) That when any public utility proposes to increase or reduce
any existing individual rates, it shall give the Commission written notice
thirty days prior to the proposed change; and

(i) “No public utility as herein defined shall operate in the
Philippine Islands without having first secured from the Commission a
certificate, which shall be known as Certificate of Public Convenience, to the
effect that the operation of said public utility and the authorization to do
business will promote the public interests in a proper and suitable maner.”

Section 16 specifically prohibits any discrimination in the
handling of freight charges.

In construing a similar law of the State of Kansas, the United
States Supreme Court, in an opinion written by Chief Justice Taft, in Wichita
Railroad and Light Co. vs. Public Utilities Commission of Kansas (260 U. S., 48;
67 Law. ed., 124), said:

“The proceeding we are considering is governed by section 13.
That is the general section of the act comprehensively describing the duty of
the Commission, vesting it with power to fix and order substituted new rates for
existing rates. The power is expressly made to depend on the condition that,
after full hearing and investigation, the Commission shall find existing rates
to be unjust, unreasonable, unjustly discriminatory, or unduly preferential. We
conclude that a valid order of the Commission under the act must contain a
finding of fact after hearing and investigation, upon which the order is
founded, and that, for lack of such a finding, the order in this case was
void.

“This conclusion accords with the construction put upon similar
statutes in other states. (State Public Utilities Commision ex rel. Springfield
vs. Springfield Gas and E. Co., 291 111., 209; P. U. R., 1920C, 640; 125 N. E.
891; State Public Utilities Co. vs. Baltimore and O. S. W. R. Co., 281 111.,
405; P. U. R., 1918B, 655; 118 N. E., 81.) Moreover, it accords with general
principles of constitutional government. The maxim that a legislature may not
delegate legislative power has some qualifications, as in the creation of
municipalities, and also in the creation of administrative boards to apply to
the myriad details of rate schedules the regulatory police power of the state.
The latter qualification is made necessary in order that the legislative power
may be effectively exercised. In creating such an administrative agency, the
legislature, to prevent its being a pure delegation of legislative power, must
enjoin upon it a certain course of procedure and certain rules of decision in
the performance of its function. It is a wholesome and necessary principle that
such an agency must pursue the procedure and rules enjoined, and show a
substantial compliance therewith, to give validity to its action. When,
therefore, such an administrative agency is required, as a condition precedent
to an order, to make a finding of facts, the validity of the order must rest
upon the needed finding. If it is lacking, the order is ineffective.

“It is pressed on us that the lack of an express finding may be
supplied by implication and by reference to the averments of the petition
invoking the action of the Commission. We cannot agree to this point. It is
doubtful whether the facts averred in the petition were sufficient to justify a
finding that the contract rates were unreasonably low; but we do not find it
necessary to answer this question. We rest our decision on the principle that an
express finding of unreasonableness by the Commission was indispensable under
the statutes of the state.”

That is to say, in legal effect,’that the power of the
Commission to issue a certificate of public convenience depends on the condition
precedent that, after a full hearing and investigation, the Commission shall have
found as a fact that the operation of the proposed public service and its
authority to do business must be based upon the finding that it is for the
convenience of the public.

In the Philippine Islands the certificate of public
convenience is as follows:

“CERTIFICATE OF PUBLIC CONVENIENCE

“To whom it may concern:

“THIS IS TO CERTIFY, That in pursuance of the power and
authority conferred upon it by subsection (i) of section 15 of Act No. 3108
of the Philippine Legislature,

“THE PUBLIC SERVICE COMMISSION OF THE PHILIPPINE ISLANDS, after
having duly considered the application of …………………………………. for a certificate of public convenience
the operation of ……………………………….. in connection with the
evidence submitted in support thereof, has rendered its decision
on …………………………., 192…., in case No. …………, declaring
that the operation by the applicant ………………………………. of
the business above described will promote the public interests in a proper and
suitable manner, and granting ……………… to this effect the
corresponding authority, subject to the conditions prescribed in said
decision.

“Given at Manila, Philippine Islands, this …….. day of
………………………….., 192…..

“PUBLIC SERVICE COMMISSION OF THE PHILIPPINE ISLANDS

“By
………………………………………………………

“Commissioner

“Attested:

……………………………………………………………

“Secretary“

That is to say, that the certificate of public convenience
granted to Orlanes in the instant case expressly recites that it “will promote
the public interests in a proper and suitable manner.” Yet no such finding of
fact was made by the Commission.

In the instant case, the evidence is conclusive that the
Batangas Transportation Company operated its line five years before Orlanes ever
turned a wheel, yet the legal effect of the decision of the Public Service
Commission is to give an irregular operator, who was the last in the field, a
preferential right over a regular operator, who was the first in the field. That
is not the law, and there is no legal principle upon which it can be
sustained.

So long as the first licensee keeps and performs the terms and
conditions of its license and complies with the reasonable rules and regulations
of the Commission and meets the reasonable demands of the public, it should have
more or less of a vested and preferential right over a person who seeks to
acquire another and a later license over the same route. Otherwise, the first
licensee would not have any protection on his investment, and would be subject
to ruinous competition and thus defeat the very purpose and intent for which the
Public Service Commission was created.

It does not appear that the public has ever made any complaint
against the Batangas Transportation Company, yet on its own volition and to meet
the increase of its business, it has applied to the Public Service Commission
for authority to increase the number of daily trips to nineteen, thus showing a
spirit that ought to be commended.

Such is the rule laid down in the case of Re B. F. Davis Motor
Lines, cited by the Public Service Commission of Indiana (P. U. R., 1927-B, page
729), in which it was held:

“A motor vehicle operator having received a certificate with a
voluntary stipulation not to make stops (that is, not to carry passengers) on a
part of a route served by other carriers, and having contracted with such
carriers not to make the stops, will not subsequently be authorized to make such
stops where the other carriers are able to carry all passengers who present
themselves for transportation within the restricted district.”

And in Re Mount Baker Development Co., the Public Service
Commission of Washington (P. U. R., 1925D, 705), held:

“A certificate authorizing through motor carrier service should
not authorize local service between points served by the holders of a
certificate, without first giving the certificate holders an opportunity to
render additional service desired.”

In the National Coal Company case (47 Phil., 356), this court
said:

“When there is no monopoly.—There is no such’thing as a
monopoly where a property is operated as a public utility under the rules and
regulations of the Public Utility Commission and the terms and provisions of the
Public Utility Act.”

Section 775 of Pond on Public Utilities, which is recognized as
a standard authority, states the rule thus:

“The policy of regulation, upon which our present public
utility commission plan is based and which tends to do away with competition
among public utilities as they are natural monopolies, is at once the reason and
the justification for the holding of our courts that the regulation of an
existing system of transportation, which is properly serving a given field, or
may be required to do so, is to be preferred to competition among several
independent systems. While requiring a proper service from a single system for a
city or territory in consideration for protecting it as a monopoly for all the
service required and in conserving its resources, no economic waste results and
service may be furnished at the minimum cost. The prime object ancf real purpose
of commission control is to secure adequate sustained service for the public at
the least possible cost, and to protect and conserve investments already made
for this purpose. Experience has demonstrated beyond any question that
competition among natural monopolies is wasteful economically and results
finally in insufficient and unsatisfactory service and extravagant
rates.”

The rule has been laid down, without dissent in numerous
decisions, that where an operator is rendering good, sufficient and adequate
service to the public, that the convenience does not require and pie public
interests will not be promoted in a proper and suitable manner by giving another
operator a certificate of public convenience to operate a competing line over
the same route.

In Re Haydis (Cal.), P. U. R., 1920A, 923:

“A certificate of convenience and necessity for the operation
of an auto truck line in occupied territory will not be granted, where there is
no complaint as to existing rates and the present company is rendering adequate
service.”

In Re Chester Auto Bus Line (Pa.), P. U. R., 1923E, 384:

“A Commission should not approve an additional charter and
grant an additional certificate to a second bus company to operate in territory
covered by a certificate granted to another bus company as a subsidiary of a
railway company for operation in conjunction with the trolley system where one
bus service would be ample for all requirements.”

In Re Branham (Ariz.), P. U. R., 1924C, 500:

“A showing must be clear and affirmative that an existing
utility is unable or has refused to maintain adequate and satisfactory service,
before a certificate of convenience and necessity will be granted for the
operation of an additional service.”

In Re Lambert (N. H.), P. U. R., 1923D, 572:

“Authority to operate a jitney bus should be refused when
permission has been given to other parties to operate and, from the evidence,
they are equipped adequately to accommodate the public in this respect, no
complaints having been received in regard to service rendered.”

In Re White (Md.), P. U. R., 1924E, 316:

“A motor vehicle operator who has built up a business between
specified points after years of effort should not be deprived of the fruits of
his labor and of the capital he has invested in his operation by a larger
concern desiring to operate between the same points.”

In Re Kocin (Mont.), P. U. R.f 1924C, 214:

“A certificate authorizing the operation of passenger motor
service should be denied where the record shows that the admission of another
operator into the territory served by present licensees is not necessary and
would render their licenses oppressive and confiscated because of further
division and depletion of revenues and would defeat the purpose of the statute
and disorganize the public service.”

In Re Nevada California Stage Co., P. U. R., 1924A, 460:

“The Nevada Commission denied an application for a certificate
of convenience and necessity for the operation of an automobile passenger
service in view of the fact that the service within the territory proposed to be
served appeared to be adequate and it was the policy of the Commission to
protect the established line in the enjoyment of business which it had built up,
and in view of the further fact that it was very uncertain whether the applicant
could secure sufficient business to enable him to operate
profitably.”

In Re Idaho Light & P. Co. (Idaho), P. U. R., 1915A, 2:

“Unless it is shown that the utility desiring to enter a
competitive field can give such service as will be a positive advantage to the
public, a certificate of convenience will be denied by the Idaho Commission,
provided that the existing utility is furnishing adequate service at reasonable
rates at the time of the threatened competition.”

In Scott vs. Latham (N. Y. 2d Dist), P. U. R., 1921C, 714:

“Competition between bus lines should be prohibited the same as
competition between common carriers.”

In Re Portland Taxicab Co. (Me.), P. U. R., 1923E, 772:

“Certificates permitting the operation of motor vehicles for
carrying passengers for hire over regular routes between points served by steam
and electric railways should not be granted when the existing service is
reasonable, safe, and adequate as required by statute.”

In Re Murphy (Minnesota), P. U. R., 1927C, 807:

“Authority to operate an auto transportation service over a
route which is served by another auto transportation company should be denied if
no necessity is shown for additional service.”

In Re Hall, editorial notes, P. U. R., 1927E:

“A certificate of convenience and necessity for the operation
of a motor carrier service has been denied by the Colorado Commission where the
only ground adduced for the certificate was that competition thereby afforded to
an existing utility would benefit the public by lowering rates. The Commission,
said: ‘Up to the present time the Commission has never issued a certificate
authorizing a duplication of motor vehicle operation over a given route unless
it appeared that the service already rendered was not adequate, that there was
no ruinous competition or that the second applicant could, while operating on a
sound businesslike basis, afford transportation at cheaper rates than those
already in effect. There has been no complaint to date as to the rates now being
charged on the routes over which the applicant desires to serve. Moreover, the
Commission stands ready, at any time the unreasonableness of the rates of any
carrier are questioned, to determine their reasonableness and to order them
reduced if they are shown to be unreasonable.’ In this case the Commission also
expressed its disapproval of the practice of an applicant securing a certificate
for the sole purpose of transferring it to another.”

In Re Sumner (Utah), P. U. R., 1927D, 734:

“The operation of an automobile stage line will not be
authorized over a route adequately served by a railroad and other bus line,
although the proposed service would be an added convenience to the
territory.”

In Bartonville Bus Line vs. Eagle Motor Coach Line (111. Sup.
Court), 157 N. E., 175; P. U. R., 1927E, 333:

“The policy of the state is to compel an established public
utility occupying a given field to provide adequate service and at the same time
protect it from ruinous competition, and to allow it an apportunity to provide
additional service when required instead of permitting such service by a newly
established competitor.”

Upon the question of “Reasons and Rule for Regulation,” in
section 775, Pond says:

“The policy of regulation, upon which our present public
utility commission plan is based and which tends to do away with competition
among public utilities as they are natural monopolies, is at once the reason and
the justification for the holding of our courts that the regulation of an
existing system of transportation, which is properly serving a given field or
may be required to do so, is to be preferred to competition among several
independent systems. While requiring a proper service from a single system for a
city or territory in consideration for protecting it as a monopoly for all the
service required and in conserving its resources, no economic waste results and
service may be furnished at the minimum cost. The prime object and real purpose
of commission control is to secure adequate sustained service for the public at
the least possible cost, and to protect and conserve investments already made
for this purpose. Experience has demonstrated beyond any question that
competition among natural monopolies is wasteful economically and results
finally in insufficient and unsatisfactory service and extravagant rates.
Neither the number of the individuals demanding other service nor the question
of the fares constitutes the entire question, but rather what the proper agency
should be to furnish the best service to the public generally and continuously
at the least cost. Anything which tends to cripple seriously or destroy an
established system of transportation that is necessary to a community is not a
convenience and necessity for the public and its introduction would be a
handicap rather than a help ultimately in such a field.”

That is the legal construction which should be placed on
paragraph (e) of section 14, and paragraphs (b) and (c) of section 15 of the
Public Service Law.

We are clearly of the opinion that the order of the Commission
granting the petition of Orlanes in question, for the reasons therein stated, is
null and void, and that it is in direct conflict with the underlying and
fundamental principles for which the Commission was created.

The question presented is very important and far-reaching and
one, of first impression in this court, and for such reasons we have given this
case the careful consideration which its importance deserves. The Government
having taken over the control and supervision of all public utilities, so long
as an operator under a prior’ license complies with the terms and conditions of
his license and reasonable rules and regulations for its operation and meets the
reasonable demands of the public, it is the duty of the Commission to protect
rather than to destroy his investment by the granting of a subsequent license to
another for the same thing over the same route of travel. The granting of such a
license does not serve its convenience or promote the interests of the
public.

The decision of the Public Service Commission, granting to
Orlanes the license in question, is revoked and set aside, and the case is
remanded to the Commission for such other and further proceedings as are not
inconsistent with this opinion. Neither party to recover costs on this appeal.
So ordered.

Johnson, Street, Malcolm, and Ostrand, JJ., concur.

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DISSENTING

ROMUALDEZ, J., WITH WHOM CONCURS VILLA-REAL, J.:

I believe the Public Service Commission had jurisdiction to try
this case and that there is sufficient evidence of record to sustain the
appealed judgment. However, I think there should be no conflict between the trip
hours, and that the Commission could do away with it by making the necessary
arrangements.

Order reversed and set aside, and case remanded for further
proceedings.