ORLANES & BANAAG TRANSPORTATION COMPANY, INC., ET AL., PETITIONERS, VS. PUBLIC SERVICE COMMISSION AND LAGUNA-TAYABAS BUS COMPANY AND PARSONS HARDWARE CO., INC., RESPONDENTS.

Orlanes and Banaag Transportation Company versus Public Service Commission and Laguna-Tayabas Bus Company

The Case

This is a petition for certiorari brought by Orlanes and Banaag Transportation Company and by two of its stockholders against the Public Service Commission and the Laguna-Tayabas Bus Company, asking the Supreme Court to suspend and ultimately annul an order of the Commission dated November 20, 1931. The order did not approve the sale of the company's certificates of public convenience; it merely recognized the Laguna-Tayabas Bus Company as transferee in fact and allowed it to operate temporarily under those certificates. The case matters because it is a classic lesson on the limits of certiorari against an interlocutory order of an administrative body, and on how the Commission may act under its general supervisory jurisdiction to keep a public service alive while a civil case pends.

Procedural History

The controversy began before the Public Service Commission, where Parsons Hardware Company filed a petition for approval of the sale and transfer to it of five certificates of public convenience, and the Orlanes and Banaag Transportation Company opposed. The Philippine Trust Company later intervened as judicial receiver, and the Laguna-Tayabas Bus Company was substituted as petitioner after Parsons assigned its rights. After several postponements, the Commission issued the order of November 20, 1931, which the petitioners challenged. They came directly to the Supreme Court by petition for certiorari filed on December 17, 1931. The Court denied their prayer for suspension of the order and directed the Commission to certify up the record. The case was heard on the merits on September 3, 1932, and decided in December 1932.

Facts

On September 27, 1930, the Orlanes and Banaag Transportation Company executed a chattel mortgage in favor of Parsons Hardware Company covering certain assets, including five certificates of public convenience for bus service over routes in the Province of Tayabas. The Commission approved that mortgage in compliance with the Public Service Law. When the mortgagor failed to pay the debt at maturity, amounting to about 51,000 pesos, the sheriff of Tayabas foreclosed and sold the five certificates to Parsons Hardware Company for 30,000 pesos.

Four days after the sheriff's sale, Parsons filed with the Commission a petition for approval of the sale and transfer of the certificates. Notice was published and the petition was set for hearing. The transportation company opposed. The Philippine Trust Company intervened as judicial receiver appointed by the Court of First Instance of Tayabas. Parsons then transferred all its rights in the certificates to the Laguna-Tayabas Bus Company, which was substituted as petitioner by order of the Commission.

Two stockholders, Pio Gaudier and Felix Valencia, intervened and secured an indefinite postponement, alleging they had sued in the Court of First Instance to attack the legality of the sheriff's sale. Parsons and the Laguna-Tayabas Bus Company moved for reconsideration, praying that the Commission immediately dispose of the case and approve the sale without prejudice to whatever the courts might do. After a hearing before Commissioner Del Rosario, the Commission in plenary session issued the order of November 20, 1931, recognizing the Laguna-Tayabas Bus Company as transferee in fact and authorizing it to operate temporarily under the certificates, expressly without resolving the legality of the sheriff's sale, which was left to the civil case.

Issues

• Whether or not the petitioners were denied an opportunity to defend their rights at the hearing before Commissioner Del Rosario, because they were allegedly misled into believing that only the postponement would be taken up.
• Whether or not the order of November 20, 1931, was void because it was issued after a hearing attended by only one commissioner, when the law requires contested matters to be heard and decided by the Commission in full or at least by two commissioners.

Applicable Provisions

Section 2 of Act No. 3844 provides:

All contested matters that may be presented before the Commission shall be heard and decided upon by the Commission in full or at least by two Commissioners, and before any Commissioner is assigned to write the decision or any resolution which affects in some way the right of the parties concerned, the matter shall be voted upon by the members of the Commission who have taken part in the direction of the case.

This is the provision the petitioners invoke to attack the hearing held before a single commissioner.

Section 24, paragraph (j), of Act No. 3108 provides:

A substantial compliance with the requirements of this Act shall be sufficient to give effect to all the rules, orders, acts, and regulations of the Commission and they shall not be declared inoperative, illegal, or void for any omission of a technical nature in respect thereto.

This supplies the standard of substantial compliance the Court applies to the proceedings.

Section 13 of Act No. 3108, as amended by Act No. 3316, provides:

The Commission shall have general supervision and regulation of, jurisdiction and control over, all public services and also over their property, property rights, equipment, facilities and franchises so far as may be necessary for the purposes of carrying out the provisions of this Act.

This general grant is the source of the Commission's power to issue the temporary order.

Ruling

On the first issue, the Court held that the petitioners were not denied their day in court. The motion for reconsideration had been duly served and expressly prayed that the Commission immediately dispose of the case. The application had been pending since February 1931, the issues were joined, and the oppositors had filed objections on the merits. The Commission had not decided the merits at all. Its order was purely interlocutory and temporary, subject to revocation or modification at any time. It did not approve the transfer; it plainly held that question in abeyance until the validity of the sheriff's sale could be judicially determined. The objection that the merits had already been decided was therefore unsound.

On the second issue, the Court held the contention unsound in both particulars. First, the order did not revoke the petitioners' certificates. Second, the statute is not to be so narrowly construed. The record showed that no decision determining the rights of the parties was made by Commissioner Del Rosario; the evidence consisted only of two documents and a memorandum. The fact that all three commissioners signed the order of November 20, 1931, was a sufficient compliance with Section 2. The Court added that the order fell within the general grant of jurisdiction in Section 13, given the difficult and unexpected situations confronting the Commission and the public's entitlement to adequate, safe and proper service.

Doctrine

First, an order of the Public Service Commission that is purely interlocutory and temporary, that does not approve a transfer of certificates and expressly leaves the legality of the sale to the courts, does not deprive oppositors of their day in court and is not a proper subject of certiorari on the ground that the merits were prejudged.

Second, the requirement in Section 2 of Act No. 3844 that contested matters be heard and decided by the Commission in full or at least by two commissioners is satisfied where a single commissioner receives evidence without deciding the rights of the parties, and all the commissioners thereafter sign the order. This follows from the rule of substantial compliance in Section 24, paragraph (j), of Act No. 3108.

Third, the Commission may issue such temporary orders under its general supervision and control over public services in Section 13 of Act No. 3108, as amended, so far as necessary to carry out the law and protect the public interest.

Disposition

The petition for certiorari was denied, with costs against the petitioners, and the order of the Public Service Commission was left in force.

Remember This

Memorize the line that an interlocutory and temporary order of the Commission, which approves nothing and leaves the legal question to the courts, is within its general jurisdiction and satisfies the law by substantial compliance. Examiners use this case to test the distinction between an interlocutory order and a final one, and the doctrine of substantial compliance in administrative proceedings.