PANAY AUTOBUS COMPANY, PETITIONER AND APPELLANT, VS. PHILIPPINE RAILWAY CO., RESPONDENT AND APPELLEE.

This
is a petition of the Panay Autobus Company for the review of the
decision of the Public Service Commission in case No. 31724.

On April 18, 1932, R. R. Hancock, vice-president and general manager of
the Philippine Railway Co., filed with the Public Service Commission in
case No. 31724 the following petition:

“We
have the honor to request the authority of the Commission to alter the
freight rates of the Philippine Railway Company on the Cebu and Panay
Divisions whenever in our judgment we find it necessary in order to
meet the competition of road trucks and auto busses.

“This is in line with the request contained in our letter of April 8th,
wherein we asked to be allowed to alter our passenger rates at will.

“The Commission has no doubt been advised by its inspectors that
freight, as well as passengers, is handled by road trucks and auto
busses without regard to any regulation or law; they run up and down
the highways and into our station grounds, bargaining for every piece
of freight and every passenger.

“Their charges are based primarily on the railway rates. The trucks
simply go to a shipper and ask what the railway charges, and then offer
to haul the freight at a few centavos less per bulto or ton.

“As our rates are fixed, we have no chance to secure the freight. The
Railway Company is placed at a great disadvantage in not being able to
bid for the business, and consequently loses out whenever the road
autos can charge a slightly lower rate.

“For the above reasons, we respectfully request that the rates at
present in effect be considered the maximum, and that we may fix lower
rates whenever in our opinion it will be to the advantage of the
Railway Company to do so.”

The petition was set for hearing on June 21, 1932, and the operators affected thereby were notified.

On May 28, 1932 the Cebu Autobus Company through its attorneys filed an opposition to said petition on the following grounds:

“1.
That the Cebu Autobus Company holds a certificate of public convenience
to operate an autobus service for the transportation of passengers and
freight between all the principal points in the Province of Cebu.

“2. That the establishment of sliding rates is repugnant to the fundamental principles of Public Utility Regulations.

“3. That the granting of the above application will promote unnecessary and ruinous competition between the operators.

“4. That the granting of sliding rates will promote discrimination with
regard to its enforcement, that is to say, one shipper of cargoes may
be charged the maximum rates, whereas another shipper is charged a much
lower rate.”

On April 23, 1932 the general
manager of the Philippine Railway Co. filed with the Public Service
Commission in case No. 31827:

Proposed Freight Classification No. 5, Panay Division,
Proposed Freight Tariff No. 8, Panay Division,
Revised Rules Governing Traffic, All Divisions,

providing for a reduction in the freight rates on many articles.

A hearing on the petition in case No, 31724 was held on June 21, 1932.
At the hearing Attorney Alvear appeared for the Cebu Autobus Co., and
maintained that the commission could not grant the applicant the
permission which it requested. Upon ascertaining that the application
of the Philippine Railway Co. related to the Panay Division, Attorney
Alvear reserved the right to file an opposition on behalf of the Panay
Autobus Co., the petitioner and appellant herein. The only witness
presented was Hancock. He testified that the applicant wished to reduce
its freight rates because of the reduction in market prices and the
competition which the Philippine Railway had to contend with; that a
flexible tariff would in his opinion increase the earnings of the
Railway Company; that order No. 3 of the Public Service Commission
fixing the maximum rates for steamers has proved very satisfactory;
that it was not the intention of the Philippine Railway Co. to violate
in any way section 16 of Act No. 3108, and that any reduction in
freight rates would be applied to all kinds of cargo without
discrimination; that it was not his intention to enforce the reduced
rates on the Cebu Division; that the fixing of the rates was to be left
entirely to the discretion of the officials of the Railway Company, who
would apply the rates with- out discrimination and notify the
commission; that the present maximum rate from Iloilo to Capiz is P15 a
ton, and he wished to reduce it to P5 or P6.

The tariff
schedule in case No. 31827 was submitted at the same hearing. On June
21, 1932 the commission rendered the following decision:

“Se
trata de una peticion de reduccion de tarifas formulada por la
Philippine Railway Co. en lo que concierne principalmente a la tarifa
de carga en la Division de Panay.

“La propuesta tarifa reducida esta conocida por ‘freight classification
No. 5’ donde se detallan la clase de articulos o mercancias que pueden
ser trasportados y lo que se conoce por tarifa ‘Freight No. 8’ con
indicacion en ambas tarifas 5 y 8 del propuesto cobro.

“En la vista comparecio el abogado Sr. Alvear formulando una importante
cuestion de derecho, o sea, que la Comision no esta autorizada a
aprobar lo pedido invocando al efecto el inciso (a) del articulo 16 de la Ley No. 3108, tal como esta enmendada. Sin embargo, nosotros resolveremos la cuestion bajo el inciso (h) del articulo 15 de la misma Ley citada.

“Mr. Hancock que declaro por la compañia peticionaria presto el siguiente testimonio:

”
‘Es el deseo de la solicitante de reducir sus tarifas de carga por la
reduccion de los precios en el mercado de los articulos y por la muy
extensa competencia que tenemoa con toda clase de transportaciones por
tierra. Estamos convencidos de que una tarifa flexible podria aumentar
los ingresos y sometemos que la orden No. 3 de la Comision de Servicios
Publicos fija los tipos maximos ‘para los vapores, y este sistema ha
tenido un resultado muy satisfactorio, segun sabemos, y no es la
intencion de la Philippine Railway Co. el infringir de algun modo el
art. 16 de la Ley No. 3108 y que cualquiera reduccion que nosotros
hagamos en los precios de carga sera para todos y no sobre una
determinada clase de mercancia, y nuestra tarifa para ese efecto se
numerara y se clasificara, y nosotros daremos cuenta de esto a la
Comision y al publico en general.’

“Como
se trata en la propuesta tarifa No. 5 y No. 8 de una reduccion de la
tarifa actual, y la razon fundamental que ha movido a la compañia
peticionaria al pedir la tarifa, es el fenomeno real de que el precio
de los articulos ha bajado considerablemente, y como por otra parte la
Cebu Autobus Co. no ha aportado prueba en contrario que desmienta los
extremos cubiertos por la declaracion de Mr. Hancock, siendo la
politica de la Comision, tal como lo hemos enunciado en recientes
decisiones, el acceder a peticiones de reduccion de tarifas,
recientemente el caso de la Central de Asturias contra
Philippine Railway Co., Expedientes Nos. 27862 y 27893 en la Division
de Cebu ha solicitado rebaja de tarifas y la Comision en Pleno ha
resuelto acceder a la tarifa de pasajes; no habiendo motivos que
desvirtuen la razonabilidad de la peticion decidimos por la presente
aprobar la reduccion pedida con efectividad desde esta fecha.

“Tocante al punto legal suscitado por el abogado Alvear de que bajo la clausula (a) del art. 16 de la Ley No. 3108 no podemos actuar sobre la peticion, aparece muy claro en el inciso (h)
del art. 15 de la misma que esta Comision, en materia de reduccion o
aumento de tarifas o alteraciones en las mismas, esta autorizada,
previa peticion en forma, a ver y determinar en que casos procede
autorizarse el aumento o reduccion, cambio o alteracion justa y
razonable de la tarifa que se propone poner en vigor; desde luego que
tambien aparece claro en el inciso (h) del art. 15 de la Ley
que el ‘burden of proof descansa en la parte que solicita quien ha de
demostrar que lo que pide en sentido de aumento o reduccion o cambio o
alteracion es justo y razonable, pudiendose llegar a una conclusion
definitiva, previa vista de la solicitud, y ello se ha hecho
precisamente en el caso presente.

“Por tanto aprobamos la
tarifa Freight Classification No. 5 Panay Division, y Freight Tariff
No. 8 Panay Division con efectividad en la Panay Division, y
desestimamos la contencion al efecto de que no tenemos autorizacion
para resolver los meritos de la peticion tal como se contiende por el
abogado Alvear.

“Esta decision entrara inmediatamente en vigor y quedara firme a los 30 dias de su notificacion a las partes.”

On June 28, 1932 the Panay Autobus Company filed its opposition to the
applications of the Philippine Railway Co. in cases Nos. 31724 and
31827 on the following grounds:

“That the
opponent company operates a bus service in the Island of Panay with the
right and privilege to transport passengers and freight at schedule of
rates fixed by this Honorable Commission;

“That the
petition for flexible rates could not be granted by this Honorable as
it is against the fundamental principles of public utility regulation;

“That
the granting of a flexible rate will work ruinous competition with
other common carriers in the field”; and on the same date asked for a
rehearing on the ground that the decision was contrary to law and the
fundamental principles of public utility regulation. The motion for a
rehearing was denied by the commission on July 20, 1932.

The appellant makes the following assignments of error:

“I. The commission erred in dictating the decision for the following reasons:

“(1) Because it did not find and declare that rates lower than the maximum rate are just and reasonable.

“(2) Because it delegated to appellee its powers and duties to fix and determine what are just and reasonable rates.

“(3) Because the authority granted to appellee is contrary to the fundamental rules of public utility regulation.

“II. The commission erred in denying the motion for rehearing.”

As we have already stated, this petition for a review is confined to
case No. 31724. The matter as presented to us by the records of the
Public Service Commission is confusing. It does not clearly appear from
the decision in question, which corresponds to cases Nos. 31724 and
31827, what was the holding of the commission as to the application of
the Philippine Railway Co. in case No. 31724, requesting authority to
alter its freight rates on the Cebu and Panay Divisions whenever in its
judgment it should find it necessary in order to meet the competition
of road trucks and autobuses; that the rates at present in effect be
considered the maximum, and that the Philippine Railway Co. be
authorized to fix lower rates whenever in its opinion it would be to
its advantage to do so.

The commission overruled the
objection of the attorney for the appellant, and apparently granted the
application of the Philippine Railway Co.

In our opinion,
the Public Service Commission was not authorized by law to delegate to
the Philippine Railway Co. the power of altering its freight rates
whenever it should find it necessary to do so in order to meet the
competition of road trucks and autobuses, or to change its freight
rates at will, or to regard its present rates as maximum rates, and to
fix lower rates whenever in the opinion of the Philippine Railway Co.
it would be to its advantage to do so.

The mere recital of
the language of the application of the Philippine Railway Co. is enough
to show that it is untenable. The Legislature has delegated to the
Public Service Commission the power of fixing the rates of public
services, but it has not authorized the Public Service Commission to
delegate that power to a common carrier or other public service. The
rates of public services like the Philippine Railway Co. have been
approved or fixed by the Public Service Commission, and any change in
such rates must be authorized or approved by the Public Service
Commission after they have been shown to be just and reasonable. The
public service may, of course, propose new rates, as the Philippine
Railway Co. did in case No; 31827, but it cannot lawfully make said new
rates effective without the approval of the Public Service Commission,
and the Public Service Commission itself cannot authorize a public
service to enforce new rates without the prior approval of said rates
by the commission. The commission must approve new rates when they are
submitted to it, if the evidence shows them to be just and reasonable,
otherwise it must disapprove them. Clearly, the commission cannot
determine in advance whether or not the new rates of the Philippine
Railway Co. will be just and reasonable, because it does not know what
those rates will be.

In the present case the Philippine
Railway Co. in effect asked for permission to change its freight rates
at will. It may change them every day or every hour, whenever it deems
it necessary to do so in order to meet competition or whenever in its
opinion it would be to its advantage. Such a procedure would create a
most unsatisfactory state of affairs and largely defeat the purposes of
the public service law.

The testimony of Hancock regarding
order No. 3 of the Public Service Commission fixing the maximum rates
for steamers is quoted in the decision. Said order finds its authority
in Act No. 3418, which clearly has no application in the present case.
It is provided in said act that the commission shall not exercise any
control or supervision over vessels operated within the Philippine
Islands, except with regard to the fixing of maximum passenger and
freight rates. By this express provision of law the jurisdiction of the
Public Service Commission over vessels is limited to the fixing of
maximum passenger and freight rates. The owners of vessels engaged in
the interisland trade do not reduce their rates because they have been
authorized by the Public Service Commission to do so. They reduce their
rates without regard to the Public Service Commission, because its
jurisdiction is limited to the fixing of maximum rates.

Section 16 of the Public Service Law prohibits any public service from
exacting any unjustly discriminatory rate, but if the Philippine
Railway Co. is to alter its rates whenever it may be necessary to meet
the competition of road trucks and autobuses, or to reduce its rates
whenever it would be to the advantage of the Railway Company to do so,
it cannot prevent its rates from being discriminatory. It may charge
one shipper P5 a ton from Iloilo to Capiz, but immediately thereafter
in order to meet competition it may be obliged to give another shipper
a rate of P4 a ton. It can scarcely be contended that such a rate would
not be discriminatory. Under the order of the commission, there is no
stability of rates. They may be varied at the wall of the railroad
officials, provided that they are not increased. The commission thereby
gives up one of its most important functions, and leaves it to
competition to fix, the rates.

If the conditions complained
of by Hancock exist, and we do not doubt that they do, it is the duty
of the Public Service Commission to correct them by enforcing the law
and its orders as to those operators responsible therefor, not by
delegating its powers to the Philippine Railway Co. and authorizing it
to reduce its rates whenever necessary to meet such unlawful
competition.

For the foregoing reasons, so much of the
decision in question as grants the application of the Philippine
Railway Co. in case No. 31724 to reduce its rates at will to meet
competition is reversed, with the costs in favor of the appellant.

Villamor, Villa-Real, Hull, and Imperial, JJ., concur.