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

Appeal by petitioner Camarines Sur Industry Corporation from a joint decision
of the Public Service Commission in the above-entitled cases, insofar as it
grants the application of respondent Jaime T. Buenaflor for a certificate of
public convenience to install, maintain and operate a one-ton ice plant in the
barrio, of Sabang, municipality of Calabanga, province of Camarines Sur, with
authority to sell the ice therein produced in said barrio only, as well as a
cold storage service of 5,000 cubic feet, and denies petitioner’s application
for such certificate of public convenience to install, maintain and operate the
aforementioned cold storage service in the same barrio.

In said decision, the Commission, likewise, granted petitioner’s application
for a certificate of public convenience to install, maintain and operate a 5-ton
ice plant in the barrio of Sabang and denied respondent’s application for such
certificate of public convenience. From this part of said decision respondent
appealed to this Court, in which the appeal was docketed as cases G. R. No.
L.-14991 to L-14994, entitled “Jaime T. Buenaflor vs. Camarines Sur
Industry Corporation,” which were decided on May 30, 1960.^[*] Inasmuch as the evidence and the facts in the
two sets of cases (L-14991 to L-14994 and L-15490 to L-15493) are the same, we
quote from the statement of facts made in our decision in eases L-14991 to
L-14994:

“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, 3957, 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 a 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, &n 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 opposition, 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 bad expired in November 1953, in accordance with
its own articles of incorporation. Surprised by the move, counsel of Camarincs
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, 1957, 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 an November 7, 1957, the Commission
provisionally approved the transfer of assets, plus the certificates of public
convenience.

On November 8, 1957, the Caniarines 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,
Buenaiior 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 to 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 setting 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 the question to decide is who of the applicants 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 operator in Sabang. It has operated an 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 wo daubt 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
Corporation, which has not abandoned its service in Sabang, is entitled to the
protection of its investments and to put 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 need& ice for the
preservation of fish and other perishable foodstuffs when tliese 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 chamber, 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’.” (Jaime T. Buenaflor vs. Camarines Sur Industry Corp.
108 Phil., 473).

In the present appeal, petitioner maintains that, being the pioneer ice plant
operator in the City of Naga and Municipality of Magarao, with authority to
serve the municipality of Calabanga, including its barrio of Sabang, and tho
pionser cold storage operator in the City of Naga, it should be given preference
and its capital investment should be protected as against a new comer, like
respondent Buenaflor, and that the decision appealed from permitting the latter
to establish and operate a one-ton ice plant and a 5,000 cubic feet cold storage
service in Sabang, and, at the same time, authorizing petitioner to operate a
5-ton ice plant in said barrio, the total need of which is only five tons of
ice, violates said preferential right of petitioner herein. The premise upon
which this argument is based has been removed, however, by our decision in
L-14991 to L-14994, which reversed the decision of the Public Service Commission
granting petitioner’s application for a certificate of public convenience to
install, maintain and operate said 5-ton ice plant in the barrio of Sabang, and
denying respondent’s application for such certificate of public convenience, and
approved the latter. What is more, in reaching such decision, we said:

“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 tip 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.
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 l, 1957, it had no juridical personality, it had ceased to
exist as a corporation and could not sue nor apply for a certificate, for it was
incapable .of receiving a grant. It was not even a corporation de facto.
And then, there is no application subscribed by the new Camarines Corporation.
Far from being more 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 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 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. 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. And yet, as stated, the new
corporation has not filed any application for a certificate .of public
convenience in Sabaugj 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 the ice plant establishments.

Costs against Camarines Corporation.”

Again, the petitioner herein is either the old corporation or the new one. If
the former, then it has no authority to function, for its corporate existence
expired years ago, and, hence, it can neither interpose the present appeal, nor
seek a certificate of public convenience. If the latter, then it has no.
standing in these cases, for it has filed no application for authority to
install, maintain and operate a cold storage service in the barrio of Sabang.
Apart from this, had the old corporation complied with law, it would have ceased
to function, except to liquidate its affairs, since 1953, when its’ franchise
expired, and it could not have invoked the right of preference upon which it
relics, when respondent herein filed its aforementioned application in 1957. It
is its continued operation after 1953 that gave it a semblance of right to such
preference. To acknowledge it now would, however, be, as we held in L-14991 to
L-14994, to reward the illegality thus committed by the old corporation.

Wherefore, the decision appealed from is hereby affirmed with costs against
the petitioner. It is so ordered.

Bengzon, C.J., Labrador, Reyes, J.B.L.,
Barrera, Paredes, and Dizon, JJ., concur.

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^[*] 108 Phil., 472.