G.R. No.

115381 December 23, 1994

KILUSANG MAYO UNO LABOR CENTER, petitioner,

vs.
HON. JESUS B. GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND
REGULATORY BOARD, and the PROVINCIAL BUS OPERATORS ASSOCIATION OF
THE PHILIPPINES, respondents.

Potenciano A. Flores for petitioner.

Robert Anthony C. Sison, Cesar B. Brillantes and Jose Z. Galsim for private respondent.

Jose F. Miravite for movants.

KAPUNAN, J.:

Public utilities are privately owned and operated businesses whose service are essential
to the general public. They are enterprises which specially cater to the needs of the
public and conduce to their comfort and convenience. As such, public utility services are
impressed with public interest and concern. The same is true with respect to the
business of common carrier which holds such a peculiar relation to the public interest
that there is superinduced upon it the right of public regulation when private properties
are affected with public interest, hence, they cease to be juris privati only. When,
therefore, one devotes his property to a use in which the public has an interest, he, in
effect grants to the public an interest in that use, and must submit to the control by the
public for the common good, to the extent of the interest he has thus created.1

An abdication of the licensing and regulatory government agencies of their functions as

the instant petition seeks to show, is indeed lamentable. Not only is it an unsound
administrative policy but it is inimical to public trust and public interest as well.

The instant petition for certiorari assails the constitutionality and validity of certain

memoranda, circulars and/or orders of the Department of Transportation and
Communications (DOTC) and the Land Transportation Franchising and Regulatory Board
LTFRB)2 which, among others, (a) authorize provincial bus and jeepney operators to
increase or decrease the prescribed transportation fares without application therefor with
the LTFRB and without hearing and approval thereof by said agency in violation of Sec.
16(c) of Commonwealth Act No. 146, as amended, otherwise known as the Public
Service Act, and in derogation of LTFRB's duty to fix and determine just and reasonable
fares by delegating that function to bus operators, and (b) establish a presumption of
public need in favor of applicants for certificates of public convenience (CPC) and place
on the oppositor the burden of proving that there is no need for the proposed service, in
patent violation not only of Sec. 16(c) of CA 146, as amended, but also of Sec. 20(a) of
the same Act mandating that fares should be "just and reasonable." It is, likewise,
violative of the Rules of Court which places upon each party the burden to prove his own
affirmative allegations.3 The offending provisions contained in the questioned issuances
pointed out by petitioner, have resulted in the introduction into our highways and
thoroughfares thousands of old and smoke-belching buses, many of which are right-hand
driven, and have exposed our consumers to the burden of spiraling costs of public
transportation without hearing and due process.

The following memoranda, circulars and/or orders are sought to be nullified by the
instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June 26, 1990 relative
to the implementation of a fare range scheme for provincial bus services in the country;
(b) DOTC Department Order No.
92-587, dated March 30, 1992, defining the policy framework on the regulation of
transport services; (c) DOTC Memorandum dated October 8, 1992, laying down rules
and procedures to implement Department Order No. 92-587; (d) LTFRB Memorandum
Circular No. 92-009, providing implementing guidelines on the DOTC Department Order
No. 92-587; and (e) LTFRB Order dated March 24, 1994 in Case No. 94-3112.

The relevant antecedents are as follows:

On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued Memorandum
Circular No. 90-395 to then LTFRB Chairman, Remedios A.S. Fernando allowing
provincial bus operators to charge passengers rates within a range of 15% above and
15% below the LTFRB official rate for a period of one (1) year. The text of the
memorandum order reads in full:

One of the policy reforms and measures that is in line with the thrusts and the priorities
set out in the Medium-Term Philippine Development Plan (MTPDP) 1987 — 1992) is the
liberalization of regulations in the transport sector. Along this line, the Government
intends to move away gradually from regulatory policies and make progress towards
greater reliance on free market forces.

Based on several surveys and observations, bus companies are already charging
passenger rates above and below the official fare declared by LTFRB on many provincial
routes. It is in this context that some form of liberalization on public transport fares is to
be tested on a pilot basis.

In view thereof, the LTFRB is hereby directed to immediately publicize a fare range
scheme for all provincial bus routes in country (except those operating within Metro
Manila). Transport Operators shall be allowed to charge passengers within a range of
fifteen percent (15%) above and fifteen percent (15%) below the LTFRB official rate for
a period of one year.

Guidelines and procedures for the said scheme shall be prepared by LTFRB in
coordination with the DOTC Planning Service.

The implementation of the said fare range scheme shall start on 6 August 1990.

For compliance. (Emphasis ours.)

Finding the implementation of the fare range scheme "not legally feasible," Remedios
A.S. Fernando submitted the following memorandum to Oscar M. Orbos on July 24,
1990, to wit:

With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990 which the
LTFRB received on 19 July 1990, directing the Board "to immediately publicize a fare
range scheme for all provincial bus routes in the country (except those operating within
Metro Manila)" that will allow operators "to charge passengers within a range of fifteen
percent (15%) above and fifteen percent (15%) below the LTFRB official rate for a
period of one year" the undersigned is respectfully adverting the Secretary's attention to
the following for his consideration:

1. Section 16(c) of the Public Service Act prescribes the following for the fixing and
determination of rates — (a) the rates to be approved should be proposed by public
service operators; (b) there should be a publication and notice to concerned or affected
parties in the territory affected; (c) a public hearing should be held for the fixing of the
rates; hence, implementation of the proposed fare range scheme on August 6 without
complying with the requirements of the Public Service Act may not be legally feasible.
2. To allow bus operators in the country to charge fares fifteen (15%) above the present
LTFRB fares in the wake of the devastation, death and suffering caused by the July 16
earthquake will not be socially warranted and will be politically unsound; most likely
public criticism against the DOTC and the LTFRB will be triggered by the untimely motu
propio implementation of the proposal by the mere expedient of publicizing the fare
range scheme without calling a public hearing, which scheme many as early as during
the Secretary's predecessor know through newspaper reports and columnists' comments
to be Asian Development Bank and World Bank inspired.

3. More than inducing a reduction in bus fares by fifteen percent (15%) the
implementation of the proposal will instead trigger an upward adjustment in bus fares by
fifteen percent (15%) at a time when hundreds of thousands of people in Central and
Northern Luzon, particularly in Central Pangasinan, La Union, Baguio City, Nueva Ecija,
and the Cagayan Valley are suffering from the devastation and havoc caused by the
recent earthquake.

4. In lieu of the said proposal, the DOTC with its agencies involved in public
transportation can consider measures and reforms in the industry that will be socially
uplifting, especially for the people in the areas devastated by the recent earthquake.

In view of the foregoing considerations, the undersigned respectfully suggests that the
implementation of the proposed fare range scheme this year be further studied and
evaluated.

On December 5, 1990, private respondent Provincial Bus Operators Association of the

Philippines, Inc. (PBOAP) filed an application for fare rate increase. An across-the-board
increase of eight and a half centavos (P0.085) per kilometer for all types of provincial
buses with a minimum-maximum fare range of fifteen (15%) percent over and below the
proposed basic per kilometer fare rate, with the said minimum-maximum fare range
applying only to ordinary, first class and premium class buses and a fifty-centavo
(P0.50) minimum per kilometer fare for aircon buses, was sought.

On December 6, 1990, private respondent PBOAP reduced its applied proposed fare to
an across-the-board increase of six and a half (P0.065) centavos per kilometer for
ordinary buses. The decrease was due to the drop in the expected price of diesel.

The application was opposed by the Philippine Consumers Foundation, Inc. and Perla C.
Bautista alleging that the proposed rates were exorbitant and unreasonable and that the
application contained no allegation on the rate of return of the proposed increase in
rates.

On December 14, 1990, public respondent LTFRB rendered a decision granting the fare
rate increase in accordance with the following schedule of fares on a straight
computation method, viz:

AUTHORIZED FARES

LUZON
MIN. OF 5 KMS. SUCCEEDING KM.

REGULAR P1.50 P0.37

STUDENT P1.15 P0.28

VISAYAS/MINDANAO

REGULAR P1.60 P0.375

STUDENT P1.20 P0.285
FIRST CLASS (PER KM.)
LUZON P0.385
VISAYAS/
MINDANAO P0.395
PREMIERE CLASS (PER KM.)
LUZON P0.395
VISAYAS/
MINDANAO P0.405

AIRCON (PER KM.) P0.415.4

On March 30, 1992, then Secretary of the Department of Transportation and

Communications Pete Nicomedes Prado issued Department Order No.
92-587 defining the policy framework on the regulation of transport services. The full
text of the said order is reproduced below in view of the importance of the provisions
contained therein:

WHEREAS, Executive Order No. 125 as amended, designates the Department of

Transportation and Communications (DOTC) as the primary policy, planning, regulating
and implementing agency on transportation;

WHEREAS, to achieve the objective of a viable, efficient, and dependable transportation

system, the transportation regulatory agencies under or attached to the DOTC have to
harmonize their decisions and adopt a common philosophy and direction;

WHEREAS, the government proposes to build on the successful liberalization measures

pursued over the last five years and bring the transport sector nearer to a balanced
longer term regulatory framework;

NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, the following
policies and principles in the economic regulation of land, air, and water transportation
services are hereby adopted:

1. Entry into and exit out of the industry. Following the Constitutional dictum against
monopoly, no franchise holder shall be permitted to maintain a monopoly on any route.
A minimum of two franchise holders shall be permitted to operate on any route.

The requirements to grant a certificate to operate, or certificate of public convenience,

shall be: proof of Filipino citizenship, financial capability, public need, and sufficient
insurance cover to protect the riding public.

In determining public need, the presumption of need for a service shall be deemed in
favor of the applicant. The burden of proving that there is no need for a proposed
service shall be with the oppositor(s).

In the interest of providing efficient public transport services, the use of the "prior
operator" and the "priority of filing" rules shall be discontinued. The route measured
capacity test or other similar tests of demand for vehicle/vessel fleet on any route shall
be used only as a guide in weighing the merits of each franchise application and not as a
limit to the services offered.

Where there are limitations in facilities, such as congested road space in urban areas, or
at airports and ports, the use of demand management measures in conformity with
market principles may be considered.

The right of an operator to leave the industry is recognized as a business decision,

subject only to the filing of appropriate notice and following a phase-out period, to
inform the public and to minimize disruption of services.
2. Rate and Fare Setting. Freight rates shall be freed gradually from government
controls. Passenger fares shall also be deregulated, except for the lowest class of
passenger service (normally third class passenger transport) for which the government
will fix indicative or reference fares. Operators of particular services may fix their own
fares within a range 15% above and below the indicative or reference rate.

Where there is lack of effective competition for services, or on specific routes, or for the
transport of particular commodities, maximum mandatory freight rates or passenger
fares shall be set temporarily by the government pending actions to increase the level of
competition.

For unserved or single operator routes, the government shall contract such services in
the most advantageous terms to the public and the government, following public bids for
the services. The advisability of bidding out the services or using other kinds of
incentives on such routes shall be studied by the government.

3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, the
government shall not engage in special financing and incentive programs, including
direct subsidies for fleet acquisition and expansion. Only when the market situation
warrants government intervention shall programs of this type be considered. Existing
programs shall be phased out gradually.

The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics Board,
the Maritime Industry Authority are hereby directed to submit to the Office of the
Secretary, within forty-five (45) days of this Order, the detailed rules and procedures for
the Implementation of the policies herein set forth. In the formulation of such rules, the
concerned agencies shall be guided by the most recent studies on the subjects, such as
the Provincial Road Passenger Transport Study, the Civil Aviation Master Plan, the
Presidential Task Force on the Inter-island Shipping Industry, and the Inter-island Liner
Shipping Rate Rationalization Study.

For the compliance of all concerned. (Emphasis ours)

On October 8, 1992, public respondent Secretary of the Department of Transportation

and Communications Jesus B. Garcia, Jr. issued a memorandum to the Acting Chairman
of the LTFRB suggesting swift action on the adoption of rules and procedures to
implement above-quoted Department Order No. 92-587 that laid down deregulation and
other liberalization policies for the transport sector. Attached to the said memorandum
was a revised draft of the required rules and procedures covering (i) Entry Into and Exit
Out of the Industry and (ii) Rate and Fare Setting, with comments and suggestions from
the World Bank incorporated therein. Likewise, resplendent from the said memorandum
is the statement of the DOTC Secretary that the adoption of the rules and procedures is
a pre-requisite to the approval of the Economic Integration Loan from the World Bank.5

On February 17, 1993, the LTFRB issued Memorandum Circular

No. 92-009 promulgating the guidelines for the implementation of DOTC Department
Order No. 92-587. The Circular provides, among others, the following challenged
portions:

xxx xxx xxx

IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.

The issuance of a Certificate of Public Convenience is determined by public need. The

presumption of public need for a service shall be deemed in favor of the applicant, while
burden of proving that there is no need for the proposed service shall be the
oppositor'(s).
xxx xxx xxx

V. Rate and Fare Setting

The control in pricing shall be liberalized to introduce price competition complementary

with the quality of service, subject to prior notice and public hearing. Fares shall not be
provisionally authorized without public hearing.

A. On the General Structure of Rates

1. The existing authorized fare range system of plus or minus 15 per cent for provincial
buses and jeepneys shall be widened to 20% and -25% limit in 1994 with the authorized
fare to be replaced by an indicative or reference rate as the basis for the expanded fare
range.

2. Fare systems for aircon buses are liberalized to cover first class and premier services.

xxx xxx xxx

(Emphasis ours).

Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation
policy of the DOTC allowing provincial bus operators to collect plus 20% and minus 25%
of the prescribed fare without first having filed a petition for the purpose and without the
benefit of a public hearing, announced a fare increase of twenty (20%) percent of the
existing fares. Said increased fares were to be made effective on March 16, 1994.

On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the
upward adjustment of bus fares.

On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the petition
for lack of merit. The dispositive portion reads:

PREMISES CONSIDERED, this Board after considering the arguments of the parties,
hereby DISMISSES FOR LACK OF MERIT the petition filed in the above-entitled case. This
petition in this case was resolved with dispatch at the request of petitioner to enable it to
immediately avail of the legal remedies or options it is entitled under existing laws.

SO ORDERED.6

Hence, the instant petition for certiorari with an urgent prayer for issuance of a

temporary restraining order.

The Court, on June 20, 1994, issued a temporary restraining order enjoining, prohibiting
and preventing respondents from implementing the bus fare rate increase as well as the
questioned orders and memorandum circulars. This meant that provincial bus fares were
rolled back to the levels duly authorized by the LTFRB prior to March 16, 1994. A
moratorium was likewise enforced on the issuance of franchises for the operation of
buses, jeepneys, and taxicabs.

Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by
respondent LTFRB to provincial bus operators to set a fare range of plus or minus fifteen
(15%) percent, later increased to plus twenty (20%) and minus twenty-five (-25%)
percent, over and above the existing authorized fare without having to file a petition for
the purpose, is unconstitutional, invalid and illegal. Second, the establishment of a
presumption of public need in favor of an applicant for a proposed transport service
without having to prove public necessity, is illegal for being violative of the Public Service
Act and the Rules of Court.
In its Comment, private respondent PBOAP, while not actually touching upon the issues
raised by the petitioner, questions the wisdom and the manner by which the instant
petition was filed. It asserts that the petitioner has no legal standing to sue or has no
real interest in the case at bench and in obtaining the reliefs prayed for.

In their Comment filed by the Office of the Solicitor General, public respondents DOTC
Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate that the petitioner does not
have the standing to maintain the instant suit. They further claim that it is within DOTC
and LTFRB's authority to set a fare range scheme and establish a presumption of public
need in applications for certificates of public convenience.

We find the instant petition impressed with merit.

At the outset, the threshold issue of locus standi must be struck. Petitioner KMU has the
standing to sue.

The requirement of locus standi inheres from the definition of judicial power. Section 1 of
Article VIII of the Constitution provides:

xxx xxx xxx

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the Government.

In Lamb v. Phipps,7 we ruled that judicial power is the power to hear and decide causes
pending between parties who have the right to sue in the courts of law and equity.
Corollary to this provision is the principle of locus standi of a party litigant. One who is
directly affected by and whose interest is immediate and substantial in the controversy
has the standing to sue. The rule therefore requires that a party must show a personal
stake in the outcome of the case or an injury to himself that can be redressed by a
favorable decision so as to warrant an invocation of the court's jurisdiction and to justify
the exercise of the court's remedial powers in his behalf.8

In the case at bench, petitioner, whose members had suffered and continue to suffer
grave and irreparable injury and damage from the implementation of the questioned
memoranda, circulars and/or orders, has shown that it has a clear legal right that was
violated and continues to be violated with the enforcement of the challenged
memoranda, circulars and/or orders. KMU members, who avail of the use of buses,
trains and jeepneys everyday, are directly affected by the burdensome cost of arbitrary
increase in passenger fares. They are part of the millions of commuters who comprise
the riding public. Certainly, their rights must be protected, not neglected nor ignored.

Assuming arguendo that petitioner is not possessed of the standing to sue, this court is

ready to brush aside this barren procedural infirmity and recognize the legal standing of
the petitioner in view of the transcendental importance of the issues raised. And this act
of liberality is not without judicial precedent. As early as the Emergency Powers Cases,
this Court had exercised its discretion and waived the requirement of proper party. In
the recent case of Kilosbayan, Inc., et al. v. Teofisto Guingona, Jr., et al.,9 we ruled in
the same lines and enumerated some of the cases where the same policy was
adopted, viz:

. . . A party's standing before this Court is a procedural technicality which it may, in the
exercise of its discretion, set aside in view of the importance of the issues raised. In the
landmark Emergency Powers Cases, [G.R. No. L-2044 (Araneta v. Dinglasan); G.R. No.
L-2756 (Araneta
v. Angeles); G.R. No. L-3054 (Rodriguez v. Tesorero de Filipinas); G.R. No. L-3055
(Guerrero v. Commissioner of Customs); and G.R. No. L-3056 (Barredo v. Commission
on Elections), 84 Phil. 368 (1949)], this Court brushed aside this technicality because
"the transcendental importance to the public of these cases demands that they be
settled promptly and definitely, brushing aside, if we must, technicalities of procedure.
(Avelino vs. Cuenco, G.R. No. L-2621)." Insofar as taxpayers' suits are concerned, this
Court had declared that it "is not devoid of discretion as to whether or not it should be
entertained," (Tan v. Macapagal, 43 SCRA 677, 680 [1972]) or that it "enjoys an open
discretion to entertain the same or not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].

xxx xxx xxx

In line with the liberal policy of this Court on locus standi, ordinary taxpayers, members
of Congress, and even association of planters, and
non-profit civic organizations were allowed to initiate and prosecute actions before this
court to question the constitutionality or validity of laws, acts, decisions, rulings, or
orders of various government agencies or instrumentalities. Among such cases were
those assailing the constitutionality of (a) R.A. No. 3836 insofar as it allows retirement
gratuity and commutation of vacation and sick leave to Senators and Representatives
and to elective officials of both Houses of Congress (Philippine Constitution Association,
Inc. v. Gimenez, 15 SCRA 479 [1965]); (b) Executive Order No. 284, issued by President
Corazon C. Aquino on 25 July 1987, which allowed members of the cabinet, their
undersecretaries, and assistant secretaries to hold other government offices or positions
(Civil Liberties Union v. Executive Secretary, 194 SCRA 317 [1991]); (c) the automatic
appropriation for debt service in the General Appropriations Act (Guingona v. Carague,
196 SCRA 221 [1991]; (d) R.A. No. 7056 on the holding of desynchronized elections
(Osmeña v. Commission on Elections, 199 SCRA 750 [1991]); (e) P.D. No. 1869 (the
charter of the Philippine Amusement and Gaming Corporation) on the ground that it is
contrary to morals, public policy, and order (Basco v. Philippine Amusement and Gaming
Corp., 197 SCRA 52 [1991]); and (f) R.A. No. 6975, establishing the Philippine National
Police. (Carpio v. Executive Secretary, 206 SCRA 290 [1992]).

Other cases where we have followed a liberal policy regarding locus standi include those
attacking the validity or legality of (a) an order allowing the importation of rice in the
light of the prohibition imposed by R.A. No. 3452 (Iloilo Palay and Corn Planters
Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and 1033 insofar
as they proposed amendments to the Constitution and P.D. No. 1031 insofar as it
directed the COMELEC to supervise, control, hold, and conduct the referendum-plebiscite
on 16 October 1976 (Sanidad v. Commission on Elections, supra); (c) the bidding for the
sale of the 3,179 square meters of land at Roppongi, Minato-ku, Tokyo, Japan (Laurel v.
Garcia, 187 SCRA 797 [1990]); (d) the approval without hearing by the Board of
Investments of the amended application of the Bataan Petrochemical Corporation to
transfer the site of its plant from Bataan to Batangas and the validity of such transfer
and the shift of feedstock from naphtha only to naphtha and/or liquefied petroleum gas
(Garcia v. Board of Investments, 177 SCRA 374 [1989]; Garcia v. Board of Investments,
191 SCRA 288 [1990]); (e) the decisions, orders, rulings, and resolutions of the
Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue,
Commissioner of Customs, and the Fiscal Incentives Review Board exempting the
National Power Corporation from indirect tax and duties (Maceda v. Macaraig, 197 SCRA
771 [1991]); (f) the orders of the Energy Regulatory Board of 5 and 6 December 1990
on the ground that the hearings conducted on the second provisional increase in oil
prices did not allow the petitioner substantial cross-examination; (Maceda v. Energy
Regulatory Board, 199 SCRA 454 [1991]); (g) Executive Order No. 478 which levied a
special duty of P0.95 per liter of imported oil products (Garcia v. Executive Secretary,
211 SCRA 219 [1992]); (h) resolutions of the Commission on Elections concerning the
apportionment, by district, of the number of elective members of Sanggunians (De Guia
vs. Commission on Elections, 208 SCRA 420 [1992]); and (i) memorandum orders
issued by a Mayor affecting the Chief of Police of Pasay City (Pasay Law and Conscience
Union, Inc. v. Cuneta, 101 SCRA 662 [1980]).

In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), this
Court, despite its unequivocal ruling that the petitioners therein had no personality to file
the petition, resolved nevertheless to pass upon the issues raised because of the far-
reaching implications of the petition. We did no less in De Guia v. COMELEC
(Supra) where, although we declared that De Guia "does not appear to have locus
standi, a standing in law, a personal or substantial interest," we brushed aside the
procedural infirmity "considering the importance of the issue involved, concerning as it
does the political exercise of qualified voters affected by the apportionment, and
petitioner alleging abuse of discretion and violation of the Constitution by respondent."

Now on the merits of the case.

On the fare range scheme.

Section 16(c) of the Public Service Act, as amended, reads:

Sec. 16. Proceedings of the Commission, upon notice and hearing. — The Commission
shall have power, upon proper notice and hearing in accordance with the rules and
provisions of this Act, subject to the limitations and exceptions mentioned and saving
provisions to the contrary:

xxx xxx xxx

(c) To fix and determine individual or joint rates, tolls, charges, classifications, or
schedules thereof, as well as commutation, mileage kilometrage, and other special rates
which shall be imposed, observed, and followed thereafter by any public
service: Provided, That the Commission may, in its discretion, approve rates proposed
by public services provisionally and without necessity of any hearing; but it shall call a
hearing thereon within thirty days thereafter, upon publication and notice to the
concerns operating in the territory affected: Provided, further, That in case the public
service equipment of an operator is used principally or secondarily for the promotion of a
private business, the net profits of said private business shall be considered in relation
with the public service of such operator for the purpose of fixing the rates. (Emphasis
ours).

xxx xxx xxx

Under the foregoing provision, the Legislature delegated to the defunct Public Service
Commission the power of fixing the rates of public services. Respondent LTFRB, the
existing regulatory body today, is likewise vested with the same under Executive Order
No. 202 dated June 19, 1987. Section 5(c) of the said executive order authorizes LTFRB
"to determine, prescribe, approve and periodically review and adjust, reasonable fares,
rates and other related charges, relative to the operation of public land transportation
services provided by motorized vehicles."

Such delegation of legislative power to an administrative agency is permitted in order to

adapt to the increasing complexity of modern life. As subjects for governmental
regulation multiply, so does the difficulty of administering the laws. Hence, specialization
even in legislation has become necessary. Given the task of determining sensitive and
delicate matters as
route-fixing and rate-making for the transport sector, the responsible regulatory body is
entrusted with the power of subordinate legislation. With this authority, an
administrative body and in this case, the LTFRB, may implement broad policies laid down
in a statute by "filling in" the details which the Legislature may neither have time or
competence to provide. However, nowhere under the aforesaid provisions of law are the
regulatory bodies, the PSC and LTFRB alike, authorized to delegate that power to a
common carrier, a transport operator, or other public service.

In the case at bench, the authority given by the LTFRB to the provincial bus operators to
set a fare range over and above the authorized existing fare, is illegal and invalid as it is
tantamount to an undue delegation of legislative authority. Potestas delegata non
delegari potest. What has been delegated cannot be delegated. This doctrine is based on
the ethical principle that such a delegated power constitutes not only a right but a duty
to be performed by the delegate through the instrumentality of his own judgment and
not through the intervening mind of another. 10 A further delegation of such power would
indeed constitute a negation of the duty in violation of the trust reposed in the delegate
mandated to discharge it directly. 11 The policy of allowing the provincial bus operators to
change and increase their fares at will would result not only to a chaotic situation but to
an anarchic state of affairs. This would leave the riding public at the mercy of transport
operators who may increase fares every hour, every day, every month or every year,
whenever it pleases them or whenever they deem it "necessary" to do so. In Panay
Autobus Co. v. Philippine Railway Co.,12 where respondent Philippine Railway Co. was
granted by the Public Service Commission the authority to change its freight rates at
will, this Court categorically declared that:

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.13 (Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded fare.
If transport operators will be authorized to impose and collect an additional amount
equivalent to 20% over and above the authorized fare over a period of time, this will
unduly prejudice a commuter who will be made to pay a fare that has been computed in
a manner similar to those of compounded bank interest rates.

Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus
operators to collect a thirty-seven (P0.37) centavo per kilometer fare for ordinary buses.
At the same time, they were allowed to impose and collect a fare range of plus or minus
15% over the authorized rate. Thus P0.37 centavo per kilometer authorized fare plus
P0.05 centavos (which is 15% of P0.37 centavos) is equivalent to P0.42 centavos, the
allowed rate in 1990. Supposing the LTFRB grants another five (P0.05) centavo increase
per kilometer in 1994, then, the base or reference for computation would have to be
P0.47 centavos (which is P0.42 + P0.05 centavos). If bus operators will exercise their
authority to impose an additional 20% over and above the authorized fare, then the fare
to be collected shall amount to P0.56 (that is, P0.47 authorized LTFRB rate plus 20% of
P0.47 which is P0.29). In effect, commuters will be continuously subjected, not only to a
double fare adjustment but to a compounding fare as well. On their part, transport
operators shall enjoy a bigger chunk of the pie. Aside from fare increase applied for,
they can still collect an additional amount by virtue of the authorized fare range.
Mathematically, the situation translates into the following:

Year** LTFRB authorized Fare Range Fare to be

rate*** collected per
kilometer

1990 P0.37 15% (P0.05) P0.42

1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56
1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94

Moreover, rate making or rate fixing is not an easy task. It is a delicate and sensitive
government function that requires dexterity of judgment and sound discretion with the
settled goal of arriving at a just and reasonable rate acceptable to both the public utility
and the public. Several factors, in fact, have to be taken into consideration before a
balance could be achieved. A rate should not be confiscatory as would place an operator
in a situation where he will continue to operate at a loss. Hence, the rate should enable
public utilities to generate revenues sufficient to cover operational costs and provide
reasonable return on the investments. On the other hand, a rate which is too high
becomes discriminatory. It is contrary to public interest. A rate, therefore, must be
reasonable and fair and must be affordable to the end user who will utilize the services.

Given the complexity of the nature of the function of rate-fixing and its far-reaching
effects on millions of commuters, government must not relinquish this important
function in favor of those who would benefit and profit from the industry. Neither should
the requisite notice and hearing be done away with. The people, represented by
reputable oppositors, deserve to be given full opportunity to be heard in their opposition
to any fare increase.

The present administrative procedure, 14 to our mind, already mirrors an orderly and
satisfactory arrangement for all parties involved. To do away with such a procedure and
allow just one party, an interested party at that, to determine what the rate should be,
will undermine the right of the other parties to due process. The purpose of a hearing is
precisely to determine what a just and reasonable rate is. 15 Discarding such procedural
and constitutional right is certainly inimical to our fundamental law and to public
interest.

On the presumption of public need.

A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the
operation of land transportation services for public use as required by law. Pursuant to
Section 16(a) of the Public Service Act, as amended, the following requirements must be
met before a CPC may be granted, to wit: (i) the applicant must be a citizen of the
Philippines, or a corporation or co-partnership, association or joint-stock company
constituted and organized under the laws of the Philippines, at least 60 per centum of its
stock or paid-up capital must belong entirely to citizens of the Philippines; (ii) the
applicant must be financially capable of undertaking the proposed service and meeting
the responsibilities incident to its operation; and (iii) the applicant must prove that the
operation of the public service proposed and the authorization to do business will
promote the public interest in a proper and suitable manner. It is understood that there
must be proper notice and hearing before the PSC can exercise its power to issue a CPC.

While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB
Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and
contradictory policy guideline on the issuance of a CPC. The guidelines states:

The issuance of a Certificate of Public Convenience is determined by public need. The

presumption of public need for a service shall be deemed in favor of the applicant, while
the burden of proving that there is no need for the proposed service shall be the
oppositor's. (Emphasis ours).

The above-quoted provision is entirely incompatible and inconsistent with Section 16(c)
(iii) of the Public Service Act which requires that before a CPC will be issued, the
applicant must prove by proper notice and hearing that the operation of the public
service proposed will promote public interest in a proper and suitable manner. On the
contrary, the policy guideline states that the presumption of public need for a public
service shall be deemed in favor of the applicant. In case of conflict between a statute
and an administrative order, the former must prevail.

By its terms, public convenience or necessity generally means something fitting or suited
to the public need.16 As one of the basic requirements for the grant of a CPC, public
convenience and necessity exists when the proposed facility or service meets a
reasonable want of the public and supply a need which the existing facilities do not
adequately supply. The existence or
non-existence of public convenience and necessity is therefore a question of fact that
must be established by evidence, real and/or testimonial; empirical data; statistics and
such other means necessary, in a public hearing conducted for that purpose. The object
and purpose of such procedure, among other things, is to look out for, and protect, the
interests of both the public and the existing transport operators.

Verily, the power of a regulatory body to issue a CPC is founded on the condition that
after full-dress hearing and investigation, it shall find, as a fact, that the proposed
operation is for the convenience of the public. 17 Basic convenience is the primary
consideration for which a CPC is issued, and that fact alone must be consistently borne in
mind. Also, existing operators in subject routes must be given an opportunity to offer
proof and oppose the application. Therefore, an applicant must, at all times, be required
to prove his capacity and capability to furnish the service which he has undertaken to
render. 18 And all this will be possible only if a public hearing were conducted for that
purpose.
Otherwise stated, the establishment of public need in favor of an applicant reverses well-
settled and institutionalized judicial, quasi-judicial and administrative procedures. It
allows the party who initiates the proceedings to prove, by mere application, his
affirmative allegations. Moreover, the offending provisions of the LTFRB memorandum
circular in question would in effect amend the Rules of Court by adding another
disputable presumption in the enumeration of 37 presumptions under Rule 131, Section
5 of the Rules of Court. Such usurpation of this Court's authority cannot be
countenanced as only this Court is mandated by law to promulgate rules concerning
pleading, practice and procedure. 19

Deregulation, while it may be ideal in certain situations, may not be ideal at all in our
country given the present circumstances. Advocacy of liberalized franchising and
regulatory process is tantamount to an abdication by the government of its inherent
right to exercise police power, that is, the right of government to regulate public utilities
for protection of the public and the utilities themselves.

While we recognize the authority of the DOTC and the LTFRB to issue administrative
orders to regulate the transport sector, we find that they committed grave abuse of
discretion in issuing DOTC Department Order No. 92-587 defining the policy framework
on the regulation of transport services and LTFRB Memorandum Circular No. 92-009
promulgating the implementing guidelines on DOTC Department Order No. 92-587, the
said administrative issuances being amendatory and violative of the Public Service Act
and the Rules of Court. Consequently, we rule that the twenty (20%) per centum fare
increase imposed by respondent PBOAP on March 16, 1994 without the benefit of a
petition and a public hearing is null and void and of no force and effect. No grave abuse
of discretion however was committed in the issuance of DOTC Memorandum Order No.
90-395 and DOTC Memorandum dated October 8, 1992, the same being merely internal
communications between administrative officers.

WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the
challenged administrative issuances and orders, namely: DOTC Department Order No.
92-587, LTFRB Memorandum Circular No. 92-009, and the order dated March 24, 1994
issued by respondent LTFRB are hereby DECLARED contrary to law and invalid insofar as
they affect provisions therein (a) delegating to provincial bus and jeepney operators the
authority to increase or decrease the duly prescribed transportation fares; and (b)
creating a presumption of public need for a service in favor of the applicant for a
certificate of public convenience and placing the burden of proving that there is no need
for the proposed service to the oppositor.

The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT
insofar as it enjoined the bus fare rate increase granted under the provisions of the
aforementioned administrative circulars, memoranda and/or orders declared invalid.

No pronouncement as to costs.

SO ORDERED.

Padilla, Davide, Jr., Bellosillo and Quiason, JJ., concur.