ANTONIO S. COHON, PETITIONER, VS. COURT OF APPEALS, HON. REYNALDO MARQUEZ, IN HIS CAPACITY AS DEPUTY ADMINISTRATOR AND HEARING OFFICER OF THE MARITIME INDUSTRY AUTHORITY (MARINA…

Before Us for review is the Decision** dated March 3, 1988 of respondent Court of
Appeals denying due course to the petition filed by petitioner Antonio S. Cohon and dismissing the same for lack of merit.  Petitioner also presents for review the
Resolution of May 31, 1988
of said appellate court denying his motion for reconsideration of the subject
decision.

The prefatory facts, as found by respondent Court of Appeals, are
not disputed.  Thus:

“Respondent Enrique Tan, Jr. applied for and was granted a
certificate of public convenience to operate inter-island shipping service for
transportation of passengers and freight on the line Cebu-Cataingan-Placer­-Kawayan-Masbate
and vice versa, with the use of one motor vessel named “M/V Young
Lady”, in a decision of the Board of Transportation (BOT) dated August
26, 1981 in BOT Case No. 78-26975.

“Tan’s operation was stopped sometime in December, 1983, due to engine breakdown of his vessel “M/V
Young Lady” and thereafter he completely abandoned the service of the
route.

“In April, 1985, to provide a much
needed service caused by Tan’s abandonment of operations, petitioner herein,
Antonio Cohon, doing business under the name and
style of “Lapu-Lapu Shipping Lines” applied
with the BOT, and was granted a Certificate of Public Convenience (CPC) for the
Cebu-Kataingan route.

“Around May or June, 1985 petitioner discovered that FGR
Shipping Lines, an alleged interloper, was operating illegally on his route
under Tan’s CPC which he allegedly leased, for which reason he filed a
complaint with MARINA (MARINA Case No. 85-003C) charging FGR with illegal
operations.

“Claiming to have purchased Tan’s CPC, co-respondent Vicente Atilano, together with Tan, filed with MARINA on May 29,
1985 an “Application for Approval of Sale and Transfer with substitution
of Unit”, respondent Atilano proposing to use
the “M/V Yellow Rose” instead of the “M/V Young Lady” which
was then unfit for public service, docketed as MARINA Case No. 85-079.

“Petitioner opposed the joint petition on the following
grounds:

‘1.  He has been granted a CPC by the former BOT
in a decision dated April 26, 1985
(BOT Case No. 84-7228), one of the approved routes of which is Cebu-Kataingan route;

‘2.  His service on this route with the use of the
motor vehicle “M/V Honey” has been regular and uninterrupted,
adequate and efficient;

‘3.  Vendor Tan’s franchise had already expired in
May, 1985 and his vessel “M/V Young Lady” which he sold to Atilano has been unseaworthy and
has not been in operation since 1983;

‘4.  Vendor Tan, having ceased to serve the Cebu-Cataingan route since late 1983, is guilty of non­-user
of franchise that had since expired;

‘5.  Approval of the joint petition will prove
detrimental to petitioner and the interest of the riding public and will result
in destructive competition.’

“FGR filed an application for a CPC in its name, which was
opposed by herein petitioner, docketed as MARINA Case No. 85­226.  This application was finally dismissed by MARINA
on January 19, 1987.

“After MARINA Case No. 85-079 was reset for hearing on March 11, 1987, the same was
dismissed for failure to prosecute because of the non-appearance of both
private respondents and their counsel.

“On a motion to set aside order of dismissal and to reset case
for hearing, apparently with the notice to petitioner, the case was reinstated
and a hearing was conducted on an amended application filed by respondents who
then finished presenting their evidence.

“On July 14, 1987
petitioner filed an urgent motion to set aside all proceedings
after March 11, 1987, which
was denied but petitioner was merely given the right to recall
the sole witness of respondents for cross-examination.

“In the course of the hearing of September 16, 1987, petitioner sought to prove the
invalidity of Tan’s CPC by showing that it was signed by only one BOT Member
instead of at least two board members as allegedly required by law.  Respondent Marquez blocked petitioner’s
efforts saying that the CPC is not subject to collateral attack and that
petitioner should file a separate action directly impugning the CPC’s validity.

“Accordingly, petitioner on October 7, 1987 filed MARINA Case
No. 87-029-C entitled “Petition for declaration of Nullity of Certificate
of Public Convenience and/or Cancellation of CPC,” praying that Tan’s CPC
be declared void ab initio,
or in the alternative that the same be cancelled by reason of abandonment.

“On the same date petitioner filed his “Motion to Suspend Proceedings” in Case No. 85-079
on the ground that MARINA Case
No. 87­-029-C for declaration of nullity raises a prejudicial question the resolution of which is
determinative of the merits of MARINA Case No. 85-079 for approval of the sale
and transfer of Tan’s CPC to Atilano.

“Respondent Marquez orally denied the motion for suspension in
the hearing of October 7, 1987,
which was confirmed by written order dated October 27, 1987. 
Reconsideration was sought but subsequently denied.” (pp. 30-32, Rollo)

Petitioner submits these allegations:

1.  Respondent Court of
Appeals committed an error in declaring
that private respondent’s Certificate of Public Convenience is valid on the
basis of its argument that the original BOT case wherein said Certificate had
been granted was principally a case of rate fixing which should have required
the approval of at least two members of the defunct BOT board.  The Certificate definitely spelled out the
freight and passenger rates.

The law provides that all cases involving the fixing of rates
must have concurrence and signatures of at least two board members.  The law referred to are the Rules of Practice
and Procedure then enforced by the defunct BOT, specifically Sec. 2 of Rule 14
of said Rules.

Considering that the CPC which involved the fixing of rates was
issued against the mandatory requirements of the aforecited
law, it follows that the decision allowing the grant of the CPC and the CPC
itself are void and ineffective and, therefore, the Certificate did not confer
any right or privilege to respondent-awardee.  For being invalid from the beginning, the
same cannot be ratified nor validated. 
It further follows that the Maritime Industry Authority (the agency
which took over the powers and functions of the Board of Transportation) has no
jurisdiction to proceed with MARINA Case No. 85-079 which allegedly involved
the approval and sale of the invalid CPC.

2.  Respondent Court of
Appeals failed to perceive or appreciate the real nature of the main issue raised
by petitioner the – invalidity of private respondent’s CPC which is a
jurisdictional and threshold issue since it is only proper and logical to
determine first if the Certificate subject of a purported sale is valid and
actually exists before resolving whether or not to approve the sale and
transfer thereof.

The question of the CPC’s invalidity is a jurisdictional issue
since the very premise of MARINA Case No. 85-079 (for approval of the sale of
the CPC) is the existence of a valid CPC. 
A finding as to the nullity and non-existence of the subject CPC would
render the aforecited case legally baseless and would
thus deprive MARINA of its
jurisdiction to act on or proceed with the case.

The ruling of the Court of Appeals stating that the proceedings
in MARINA Case No. 85-079 can continue without first resolving the issue of the
invalidity of the CPC would result in a major absurdity and would cause serious
damage to petitioner.  For, the
consequence of such a ruling is that respondent Atilano
as transferee of the void CPC and successor-in-interest of private respondent
would automatically be allowed to operate the route covered by the CPC and
compete with petitioner to his prejudice.

Private respondent, on the other hand, contends:

1.  The CPC under question
was validly granted to him because his application was for the issuance of a
certificate of public convenience and not for the fixing of rates in which
case, the grant thereof of one BOT member was sufficient.  The fact that rates were indicated did not make
the application a case for the
fixing of rates.  The rates are merely
incidental to the grant of the certificate in order to make the grantee aware
of what rates to charge and which rates are the usual standard rates.

Under the BOT Rules and Procedure, the signature or approval of
two board members is required only in cases which are contested or specifically
involving the fixing of rates.

2.  If the application for a
CPC were treated as one concerning the fixing of rates, such action would result
in absurdity because every application would then be an application for rate
fixing, which should not be the case.

The resolution of this case hinges on the basic issue of whether
or not a certificate of public convenience embodying a schedule of rates for
passengers, freight and cargo, which was granted on the basis of an application
for the issuance of said certificate to operate an interisland
shipping service, should be considered as a certificate primarily involving a
fixing of rates.

The other questions of whether or not the award of the
certificate of public convenience was legal and regular with only one BOT
member approving the same, and whether or not the determination of the validity
of the Certificate is a jurisdictional issue, would depend on the resolution of
the aforestated pivotal issue.

We find merit in private respondent’s submission. The application
of private respondent was filed specifically for the issuance of a certificate
of public convenience and not for the fixing of rates.

The decision itself of the defunct Board of Transportation
supports the above finding when it explicitly declares that the applicant
private respondent requests for the issuance of a CPC to operate an
inter-island shipping service for the transportation of passengers and freight.

Thus, the dispositive portion of the
BOT decision, in squarely responding to the request, states as follows:

“Wherefore, it is ordered that pursuant to the
provisions of Section 16 (a) of Commonwealth Act 146, as amended, let a certificate
of public convenience be issued to herein applicant, Enrique Tan,
Jr. (Grace Shipping Lines) authorizing him to operate an inter-island
shipping service on the line:  Cebu-Cataingan-Placer-Kawayan-Masbate and vice versa, with
the use of one (1) motor vessel, subject to the following.”
(underscoring supplied) (p. 53, Rollo)

Notably, the fixing of the rates is an essential pre­-condition
to the approval of the application for the certificate of public convenience
and the award of the same.  It is not merely
incidental as private respondent claims; it is more of a mandatory condition
that comes with the grant of the certificate. 
The CPC embodies certain conditions imposable upon its approval and
certain conditions which should be complied with in order to sustain the
validity of the certificate.

As per verification with the Franchise Department of the Maritime
Industry Authority, a CPC normally includes the standard rates for passengers,
cargo, and freight.

Thus, it appears that the CPC was granted on the basis of private
respondent’s application for the issuance thereof and clearly, not for the
fixing of rates.  This finding is
sufficiently supported by the dispositive portion of
the BOT decision as aforequoted.

Since the application was not contested at the time of its
consideration and since the same was definitely not for the fixing of rates,
the requisite approval of two (2) Board members does not apply as contended by
private respondent.  The approval of one
member was enough to grant a valid certificate. 
In this regard, therefore, private respondent’s CPC was legally granted
and valid.

But what started as a valid CPC assumed a different status by
reason of a subsequent violation of two (2) mandatory conditions embodied in
the decision.  We are speaking of No. 11
of the “Conditions” which provides:

“11.  That the authority herein granted shall be
good only for the applicant’s motor vessel named “M/V Young Lady”
while the license issued to him by the Philippine Coast Guard is still
subsisting and in effect.” (p. 56, Rollo)

The aforestated condition mandates that
the CPC was granted exclusively for the operation of “MV Young Lady”
and not for any other vessel.  This
simply means that the moment such particular vessel became unseaworthy
as when it was abandoned due to engine trouble, then it follows that the object
covered by the license and CPC became inexistent.  Correspondingly, the CPC became ineffective.

It should be noted that the CPC covered the “MV/Young
Lady” only.  Said certificate was
awarded exclusively for the operation of the vessel.  Hence, when the said ship became unseaworthy due to engine trouble in December, 1983,
private respondent had to abandon completely the service of the route covered
by the CPC.  At that very moment, private
respondent already committed a violation of no. 2 of the “Conditions”
imposed under the Certificate.

Condition No. 2 reads thus:

“Applicant shall not operate his motor vessels unless they are fit for public service and that
before operating his motor vessel, applicant shall renew his Coastwise License
within thirty (30) days from receipt of this decision and furnish copy thereof
to the Board within thirty (30) days after renewal and every year
thereafter.  Failure of applicant to
renew said license will be sufficient cause for the cancellation of the
authority herein granted.” (Rollo, p. 55)

It becomes evident that private respondent could not have renewed
his Coastwise License in 1983 because the vessel “MV/Young Lady” was
already grounded and hence, there was no more ship over which a license should
be secured.  This was a sufficient cause
for the cancellation of the CPC.

It appears clearly from the Conditions aforementioned that the
original vessel covered by the License and Certificate could not be substituted
with another vessel.  Such being the
case, private respondent could not legally sell and transfer his CPC in 1985 to
Atilano when at that time, the “MV/Young
Lady” subject of the Certificate was no longer operational.  Without the original and basic motor vessel, the CPC became unenforceable
and incapable of being the subject matter of a sale and transfer.  This alone had the effect of invalidating the
CPC and private respondent therefore, had no valid CPC to sell and transfer to Atilano. 
Consequently, MARINA Case
No. 85-079 had no legal basis to proceed. 
Better still, it should not have been instituted for lack of right of
action.

Considering the foregoing, the appealed decision is hereby
REVERSED and public respondent Reynaldo Marquez, Deputy Administrator of MARINA
is hereby directed to DISMISS MARINA Case No. 85-079.

SO ORDERED.

Melencio-Herrera, (Chairman),
Padilla, and Regalado,
JJ., concur.

Sarmiento, J., no part, on leave.

** Penned by Justice Oscar R. Victoriano, concurred in by Justices Ricardo P. Tensuan and Venancio D. Aldecoa, Jr.