NATIONAL POWER CORPORATION AND FINE CHEMICALS (PHILS.), INC., PETITIONERS, VS. THE COURT OF APPEALS AND THE MANILA ELECTRIC COMPANY, RESPONDENTS.

National Power Corporation and Fine Chemicals versus Court of Appeals and Manila Electric Company

The Case

This is a petition for review on certiorari brought by the National Power Corporation and Fine Chemicals (Phils.), Inc. against the Court of Appeals and the Manila Electric Company. The Manila Electric Company had sued in the Regional Trial Court to stop the National Power Corporation from supplying electric power directly to Fine Chemicals, a registered export manufacturer. The case matters because it fixes the conditions under which the National Power Corporation may directly serve a registered enterprise, and it settles the standing of a franchise holder who cannot match the rates of the National Power Corporation.

Procedural History

The Manila Electric Company filed a petition for prohibition, mandamus and damages with preliminary injunction before the Regional Trial Court of Pasig. Fine Chemicals opposed the application for preliminary injunction on the ground that it had become moot, since the direct power service had already been consummated. The Manila Electric Company then amended its petition to include an application for a writ of preliminary mandatory injunction, and later obtained leave to file a second amended petition alleging grave and irreparable injury. Fine Chemicals moved to dismiss the amended petition for failure to state a cause of action, and the National Power Corporation adopted that motion. The trial court denied the motion to dismiss, holding that the complaint could support a valid judgment if not properly traversed. Without filing a motion for reconsideration, Fine Chemicals went to the Court of Appeals on a petition for certiorari, prohibition and mandamus, and the National Power Corporation sought leave to intervene. The Court of Appeals dismissed the petition. The case then reached the Supreme Court by petition for review on certiorari, and the Court gave due course to the petition.

Facts

Fine Chemicals is a corporation registered with the Board of Investments and engaged in the manufacture of plastics for export. In September 1986 it applied with the National Power Corporation for a direct power connection. The National Power Corporation wrote to the Manila Electric Company, stating that under a memorandum of understanding with the Board of Investments it was authorized to connect qualified industrial consumers directly to its system, but that as a matter of policy it did not compete directly with its customers, and so it asked to be informed of the Manila Electric Company's definite decision.

The Manila Electric Company replied that it could not grant the request, because allowing large consumers to tap directly into the National Power Corporation would mean foregoing the share of the subsidy burden ultimately borne by the other remaining large consumers, and would mean costly duplication of facilities. It later added that the direct connection contemplated under the memorandum of understanding presupposed the inability of the utility to meet certain standards of financial and technical capability, which was not true of the Manila Electric Company. The National Power Corporation informed the Manila Electric Company that, absent a clear-cut policy inhibiting it, it was preparing the necessary facilities and negotiating the terms of supply. The Manila Electric Company registered its strong objection and urged the National Power Corporation to hold off, citing a draft executive order creating the Energy Regulatory Board.

On July 12, 1987, the National Power Corporation began supplying the electric requirements of Fine Chemicals by direct connection. Ten days later, the Manila Electric Company filed its petition in the Regional Trial Court of Pasig.

Issues

• Whether or not the petition of the Manila Electric Company in the lower court should be dismissed for failure to state a cause of action.
• Whether or not the National Power Corporation may directly supply a registered enterprise over the objection of the private franchise holder.
• Whether or not the Manila Electric Company was denied due process when it was not heard in an administrative proceeding before the direct connection was made.

Applicable Provisions

The decision applies Presidential Decree Number 380, as amended by Presidential Decree Number 395, which empowers the National Power Corporation to serve registered enterprises directly. The Court states the rule as follows:

As consistently ruled by this Court pursuant to P.D. No. 380 as amended by P.D. No. 395, NPC is statutorily empowered to directly service all the requirements of a BOI registered enterprise provided that, first, any affected private franchise holder is afforded an opportunity to be heard on the application therefor and second, from such a hearing, it is established that said private franchise holder is incapable or unwilling to match the reliability and rates of NPC for directly serving the latter.

These two conditions govern every application for direct service, and the case turns on whether they were satisfied.

Ruling

On the first issue, the Court ruled that the petition of the Manila Electric Company should be dismissed. Although the general rule is to file an answer, go to trial, and raise the denial of a motion to dismiss on appeal, the Court recognized exceptions where the court denying the motion acts without or in excess of jurisdiction or with grave abuse of discretion, and where the motion rests on the ground that the complaint states no cause of action, so that no full-blown trial is needed. The Court also invoked the rule that it strives to settle the entire controversy in a single proceeding, leaving no root or branch to bear the seeds of future litigation.

On the second issue, the Court held that the National Power Corporation is statutorily empowered to serve a registered enterprise directly, provided the affected franchise holder is heard and is shown to be incapable or unwilling to match the reliability and rates of the National Power Corporation. While the Manila Electric Company may initially have been deprived of a hearing in an administrative proceeding, it was given ample opportunity in the courts to show that it could match those rates, and it failed. Its own witness admitted on cross examination that it could not charge the same rate, saying that it had to make a profit on its investment. Before the Supreme Court, it never committed itself categorically, confining itself to the statement that it was financially and technically capable, and averring that it would be highly improper to ask whether it could match the rate of the National Power Corporation.

On the third issue, the Court held that there was no denial of due process. The heart of procedural due process is the need for notice and an opportunity to be heard, and what due process abhors is not lack of previous notice but absolute lack of opportunity to be heard. The Court further held that the exclusive nature of any public franchise is not favored, and quoted with approval the rule that exclusivity is given by law with the understanding that the company enjoying it is self-sufficient and capable of supplying the needed service at moderate or reasonable prices, and that it would be against public interest where the firm granted a monopoly is merely an unnecessary conduit of electric power, jacking up prices as a superfluous middleman.

Doctrine

Under Presidential Decree Number 380, as amended by Presidential Decree Number 395, the National Power Corporation may directly service all the requirements of a registered enterprise, subject to two conditions: the affected private franchise holder must be afforded an opportunity to be heard on the application, and from such hearing it must be established that the franchise holder is incapable or unwilling to match the reliability and rates of the National Power Corporation. The opportunity to be heard may be supplied in subsequent judicial proceedings, for what due process requires is notice and an opportunity to be heard, not a particular forum. The exclusive nature of a public franchise is not favored, and the interpretation of rights, privileges or franchises granted by the government to private corporations is taken against the grantee.

Disposition

The Court granted the petition and dismissed the petition of the Manila Electric Company in the lower court.

Remember This

Memorize the two conditions: the franchise holder must be heard, and it must be shown incapable or unwilling to match the reliability and rates of the National Power Corporation. Examiners use this case on direct power connection of registered enterprises, on the disfavored status of franchise exclusivity, and on the exceptions allowing immediate resort to certiorari from a denial of a motion to dismiss for failure to state a cause of action.