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

Batangas Transportation versus Orlanes

The Case

This is the case of Batangas Transportation versus Orlanes, decided by the Supreme Court in December 1928. The Batangas Transportation Company, an established regular operator of auto trucks in Batangas and Tayabas, opposed the petition of Cayetano Orlanes, an irregular operator, to convert his service into a regular one on a fixed schedule over the same route. The question is whether the Public Service Commission may grant a certificate of public convenience to a second operator in a field already adequately served by a first operator holding a prior license. The case matters because it lays down the rule on the preferential right of the prior licensee and the necessity of an express finding that the public interests will be promoted in a proper and suitable manner.

Procedural History

Orlanes filed with the Public Service Commission an application to convert his irregular service into a regular one on a fixed schedule between Taal and Bantilan, with authority to accept passengers and cargo at intermediate points. The Batangas Transportation Company appeared and opposed, asking that the petition be denied. After taking evidence, the Public Service Commission granted the petition of Orlanes as prayed for. The company moved for a rehearing, which was denied. The company then brought the case to the Supreme Court, assigning as errors that the Commission ordered the issuance of a certificate without finding and declaring that the public interests would be promoted in a proper and suitable manner, and that the evidence did not show that the public interests would be so promoted.

Facts

Since 1918, the Batangas Transportation Company had been operating a regular service between Taal and Rosario, and in 1920 its service was extended to San Juan de Bolbok under a certificate of public convenience. In 1925, Orlanes obtained a certificate to operate an irregular service between Taal and Lucena, with the express limitation that he could not accept passengers from intermediate points between Taal and Bolbok, except those going beyond San Juan de Bolbok or to the Province of Tayabas. He inaugurated this irregular service in March 1926, but maintained it on the portion between Taal and Bantilan for only about three months, abandoning that portion in June and not renewing it until five days before the hearing of another case.

In June 1926, Orlanes sought a license as a regular operator on the portion between Bantilan and Lucena without having asked for a permit for the portion between Bantilan and Taal. From June 1926, Orlanes and the company jointly operated a regular service between Bantilan and Lucena. Because Orlanes had not asked for a regular service between Bantilan and Taal, the company remedied the lack of service and increased its trips to make timely connections.

Orlanes then applied to convert his irregular operation into a regular one with fixed hours between Bantilan and Taal, and to set aside the prohibition against accepting passengers at points served by the company. The company opposed, alleging that its service was sufficient and that granting the petition would result in ruinous competition. The Commission granted the petition, and the company elevated the matter to the Supreme Court.

Issues

• Whether or not a certificate of public convenience may be issued to a second operator to operate a public utility in a field where, and in competition with, a first operator already rendering sufficient, adequate, and satisfactory service.
• Whether or not the Public Service Commission may grant such a certificate without an express finding of fact that the operation will promote the public interests in a proper and suitable manner.

Applicable Provisions

Subsection (i) of Section 15 of Act Number 3108, as amended by Act Number 3316, provides:

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 manner.

This provision makes the finding that the operation will promote the public interests in a proper and suitable manner a condition precedent to the grant of a certificate.

Ruling

On the first issue, the Court ruled that the certificate should not have been granted. An autobus line is a public utility and a common carrier, and a license for its operation should be granted or refused on like terms and conditions as a railroad. It has never been the policy of a public service commission to grant a license for a new line which parallels and covers the same field as an old established line, because it would result in ruinous competition and would not benefit the public. So long as the first licensee keeps and performs the terms and conditions of its license, complies with the reasonable rules and regulations of the Commission, and meets the reasonable demands of the public, it should have a vested and preferential right over a person who seeks a later license over the same route. Otherwise, the first licensee would have no protection for its investment and would be subject to ruinous competition, defeating the very purpose for which the Commission was created. The Court noted that the company had operated its line five years before Orlanes ever turned a wheel, yet the Commission's decision gave an irregular operator, the last in the field, a preferential right over a regular operator, the first in the field.

On the second issue, the Court ruled that the Commission's order was void for lack of the required finding. Quoting the United States Supreme Court in the Wichita Railroad and Light Company case, the Court held:

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.

The Court explained that the power of the Commission to issue a certificate 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 is for the convenience of the public. The certificate itself recites that the operation will promote the public interests in a proper and suitable manner, yet no such finding of fact was made by the Commission. The Court also noted that there was no claim that the company had violated any term of its license, no finding that the grant to Orlanes was required for the convenience of the traveling public, and no complaint by the public against the company's service.

Doctrine

A certificate of public convenience may not be issued to a second operator over a route already adequately served by a prior licensee who keeps and performs the terms of its license and meets the reasonable demands of the public. The prior licensee has a vested and preferential right over a later applicant over the same route. The grant of a certificate requires, as a condition precedent, an express finding of fact, after hearing and investigation, that the operation will promote the public interests in a proper and suitable manner; absent such a finding, the order is void. The fact that the Commission refuses a similar license to another over the same highway does not create a monopoly, because the Commission retains power to fix reasonable compensation and to make and enforce reasonable rules for the convenience of the traveling public.

Disposition

The Supreme Court ruled in favor of the Batangas Transportation Company, setting aside the order of the Public Service Commission granting the certificate to Orlanes.

Remember This

Memorize the line that so long as the first licensee performs the terms of its license and meets the reasonable demands of the public, it has a vested and preferential right over a later applicant over the same route. Examiners use this case on the preferential right of the prior licensee and on the requirement of an express finding that the public interests will be promoted in a proper and suitable manner before a certificate of public convenience may issue.