JAIME T. BUENAFLOR, PETITIONER, VS. CAMARINES SUR INDUSTRY CORPORATION, RESPONDENT.

Jaime T. Buenaflor has appealed the decision of the Public Service
Commission which rejected his application to install and operate a
5-ton ice plant in Sabang (Calabanga, Camarines Sur) even as it
permitted Camarines Sur Industry Corporation to build in that barrio, a
factory with the same output.

On June 25, 1957, Buenaflor
filed his said application (P. S. Case 107548) together with another
application to establish a cold storage and refrigeration service of
about 6,000 cubic feet capacity (P.S. Case 107549). The Commission, by
order of September 12, 1957, set the applications for hearing on
October 9, 1957, requiring applicant to publish them in two newspapers,
and to serve copy thereof to Iñigo Daza and Camarines Sur Industry
Corporation (hereinafter called Camarines Corporation). These owned ice
plants in neighboring municipalities and had been apparently selling
ice to Sabang’s inhabitants.

After receiving copy of
Buenaflor’s applications, the Camarines Corporation submitted to the
Commission on October 1,1957, its own two applications: one for
authority to construct and manage a 5-ton ice plant, and another for a
cold storage and refrigeration system, both in Sabang too (P. S. Cases
109874 and 109875). It likewise registered opposition to Buenaflor’s
proposed ice business, on the ground that it was the pioneer
distributor of the commodity in that particular locality.

When the petitions of Buenaflor were called for hearing on October 9,
1957, the attorney for Camarines Corporation voicing its application,
invited attention to his client’s applications, moved for postponement,
and agreed to a joint hearing of the four applications of both parties
on October 25, 1957.

On the last mentioned date, Buenaflor’s
attorneys presented a motion to dismiss the Camarines Corporation’s
applications, challenging its personality, inasmuch as its corporate
life had expired in November 1953, in accordance with its own articles
of incorporation. Surprised by the move, counsel of Camarines
Corporation asked, and was granted, time to answer. Immediately
thereafter, the corporators of Camarines Corporation got busy and
executed on October 30, 1957, and registered October 31, 1967, new articles
of incorporation of Camarines Sur Industry Corporation, and at the same
time, notarized a deed of conveyance assigning to the new corporation,
all the assets of the expired (old) corporation, together with its
existing certificates of public convenience to operate ice factories in
Naga and Magarao.

Without loss of time, the corporators of
the defunct (old) corporation and the newly organized corporation
petitioned the Public Service Commission for the approval of the
conveyance, and on November 7, 1957, the Commission provisionally
approved the transfer of assets, plus the certificates of pubic
convenience.

On November 8, 1957, the Camarines Corporation
(new) answered the motion to dismiss, by alleging—to the amazement of
Buenaflor—its recent incorporation, plus its acquisition of the assets
and certificates of the old Camarines Corporation with the Commission’s
approval as above described.

Reiterating his application,
while resisting the Camarines Corporation, Buenaflor argued: (a) he was
first to apply; (b) although the old Camarines Corporation had been
operating an ice plant in Magarao town, only six kilometers away, it
neglected to take the trouble of applying until Buenaflor had made his
application; (c) the preference which the new Camarines Corporation claims by virtue of the old
corporation’s having distributed ice in Sabang for the years previous
to Buenaflor’s application, should not be granted, because since 1953
such old corporation had ceased to be a juridical entity, and could not lawfully continue in business nor invoke any protection or preference.

Evidence was presented in support of the applications and oppositions.

The Commission, in its decision of December 12, 1958, after settling
forth the gist of the proofs submitted to it, made the following
considerations and conclusions.

“There is a clear need for an ice
plant and a cold storage service in the barrio of Sabang and question
to decide is who of the applicant should be granted the necessary
authority inasmuch as we do not believe from the evidence that we
should authorize two ice plants of 5 tons each and two cold storage
chambers with a total capacity of 14,000 cubic feet. As to the ice
plant service, we find that Buenaflor filed his application ahead of
the Camarines Corporation but the evidence and our records show that
the Camarines Corporation is really the pioneer ice plant in Magarao
since 1945 which now has a capacity of 10 tons, and another ice plant
in Naga since 1946 which now has a capacity of 12½ tons. It is
established that the Camarines Corporation has been rendering ice
service thru delivery in Sabang but we doubt whether its service has
been adequate because there is satisfactory proof that ice also comes
from other places. The fact, however, is that the Camarines Corporation
cannot be said to have neglected its duty to serve Sabang and we
believe that the shortage in its service has been due to the fact that
the produce of its Naga and Magarao. plants are needed for its other
territories with not much to spare for Sabang. We think that as the
pioneer ice plant operator in Naga and Magarao with authority to serve
Sabang the Camarines Corpoartion, which has not abandoned its service
in Sabang, is entitled to the protection of its investments and to put
up an ice plant in Sabang, it having been shown that there is a need
for a plant in Sabang, and that the Camarines Corporation has been
rendering service therein although in a limited manner. We believe,
therefore, that applicant Camarines Corporation has a better right than
Buenaflor to the certificate for a 5-ton ice plant in Sabang. As to the
cold storage service, we think that Buenaflor has a better right to the
certificate. * * * By virtue of Buenaflor’s right of priority in the
filing of his application and the fact that he is as financially
capable as the Camarines Corporation to install the service, we believe
that the certificate for the cold storage service in Sabang should be
granted to Buenaflor, but inasmuch as we take notice of the fact that a
cold storage operator also needs ice for the preservation of fish and
other perishable foodstuffs when these cannot be immediately deposited
in the refrigerating chambers and also to provide its customers with
ice they need after the goods are removed from the chambers, we believe
that applicant Buenaflor may also be granted a certificate for a one
(1) ton ice plant in Sabang together with a certificate for 5,000 cubic
feet cold storage service.”

The Camarines
Corporation did not appeal, Buenaflor appealed in so far as he was
denied authority to erect a 5-ton ice plant.

Therefore, the
question of cold storage service is not here in issue, since Buenaflor
got it, and Camarines Corporation did not appeal.

As to the
ice plant, Buenaflor insists he should be given authority to establish
a 5-ton ice plant—not the new Camarines Corporation. His line of
argument centers around the expiration of the old Corporation’s charter
in 1953; and we think he touches the vital spot.

It is
admitted—and the Commission found—that the needs of Sabang Barrio will
be conveniently served with the establishment of a 5-ton ice plant. But
it elected to deny Buenaflor’s application, even as it awarded the
privilege to the new Camarines Corporation on the ground that it (the old corporation) had been serving ice in Sabang up to the time of Buenaflor’s application, and was, consequently, the pioneer operator there.

The fact, however, is that since 1953, the old Corporation had been illegally plying its business of selling ice in Sabang because, under the Corporation Law, Sec. 77, after November 1953, it could not lawfully continue the business
for which it had been established (operate ice plant, sell ice, etc).
After November 1953, it could only continue to exist for three years
for the purpose of prosecuting and defending suits by or against it,
and of enabling it gradually to settle and close its affairs, to
dispose and convey its property and to divide its capital stock. It
could not, without violating the law, continue to sell ice. And yet,
the Commission awarded the certificate on the basis of such service and
distribution of ice—applying the “prior operator” rule.^[1] In other words, the new Camarines Corporation is rewarded, precisely because the old corporation, its predecessor, had violated the law during that period (1953-1957). We can not, and should not countenance such anomalous result.

On the other hand, when the old
Camarines Corporation docketed its application October 1,1957, it had
no juridical personality, it had ceased to exist as a corporation and
could not sue^[2] nor apply for a certificate, for it was incapable of receiving a grant^[3]. It was not even a corporation de facto^[4]. And then, there is no application subscribed by the new
Camarines Corporation. Far from being mere technicality, these points
support a conclusion which appears to be just and equitable, not only
for the reasons already indicated, but also to compensate Buenaflor’s
diligence and courage in exposing the irregular practice^[5]
of a “ghost” corporation foisting its services upon the unsuspecting
public of Sabang and neighboring territory—enjoying a franchise without
paying, perhaps, the corporate income tax^[6] and other burdens attached to corporate existence.

Remembering the Camarines Corporation’s automatic cessation in November
1956 (three years after November 1953) we must decline to regard the
new Camarines Corporation (formed October 30, 1957) as a continuation of the old.^[7]
At most, it is the transferee of the properties of the old corporation
(or more properly, the assets of the stockholders) plus the certificate
of public convenience to operate the ice plant in Naga and Magarao.^[8]
And yet, as stated, the new corporation has not filed any application
for certificate of public convenience in Sabang, and has not published
such application.

On these grounds, we think it was error to
grant preferential treatment to the new Camarines Corporation over
Jaime T. Buenaflor who, besides being qualified, in the eyes of the
Commission, had applied for the privilege months in advance of the old
Camarines Corporation, and of the incorporation of the new Camarines
Corporation.

Wherefore, revoking the appealed decision in so
far as it awarded the certificate to said Corporation, we hereby
approve Buenaflor’s application for five tons, instead of one ton,
subject to the usual conditions imposed by the Public Service
Commission on ice plant establishments.

Costs against Camarines Corporation.

Paras, C. J., Montemayor, Bautista Angelo, Labrador, Concepcion, Barrera, and Gutierrez David, JJ., concur.

Padilla and Endencia, JJ., took no part.

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^[1] Javier vs. Orlanes, 55 Phil., 468; Bachrach Motors Co. vs. Elhico, 91 Phil., 584; 48 Off. Gaz., 2700.

^[2] Fletcher, Cyc. of Corp. (1942) Vol. XVI, secs. 8116, 8118; Philippine Milling Co. vs. Court of Appeals, 100 Phil., 566; 53 Off. Gaz., 623.

^[3] 7 R. C. L. Corporations par. 745.

^[4] Fletcher, op. cit. Vol. XVI, secs. 8113, 3842; 19 Corpus Juris Secundum, pp. 1486, 1562.

^[5] Not to say illegal.

^[6] Fletcher, supra, sec 8129.

^[7] If it were a continuation, could it be made responsible for the laws violation in 1953-1957?

^[8]
Buenaflor contends, apparently with some reason, that the transfer was
ineffective, because upon cessation of its corporate life, the
certificate of public convenience of the old Camarines Corporation
automatically reverted to the State (cf. Corpus Juris Secundum, sec.
1729). We do not, because we need not reach this issue.