1. National Development Company vs. CA, G.R. No.

L-49407, August 19,

1998;
FACTS
The National Development Company (NDC), as the preferred mortgagee of several
ocean-going vessels, appointed Maritime Company of the Philippines (MCP) as its
agent to manage and operate these vessels, including M/V Dona Nati. On February
28, 1964, E. Philipp Corporation loaded 1,200 bales of American raw cotton aboard
Dona Nati in San Francisco, California, consigned to Manila Banking Corporation and
People’s Bank and Trust Company for Riverside Mills Corporation. Additional cargo
was loaded in Tokyo, Japan.
On April 15, 1964, Dona Nati collided with SS Yasushima Maru in Ise Bay, Japan,
resulting in the loss or damage of 550 bales of cotton and other cargo. Development
Insurance and Surety Corporation (DISC), as the insurer, paid P364,915.86 to the
consignees and sought reimbursement from NDC and MCP.
Each party raised different arguments in their defense:
 NDC Contended:
o That the Carriage of Goods by Sea Act (COGSA) should apply, not the
Code of Commerce, since the collision happened in foreign waters.
o Under COGSA, a carrier is not responsible for losses caused by the
negligence of the ship’s crew in navigation. Since the collision resulted
from both captains’ negligence, NDC argued that it should not be held
liable.
o That the complaint should be dismissed for being barred by
prescription.
 MCP Contended:
o That it was only the managing agent, not a ship agent (naviero), and
therefore should not be held solidarily liable with NDC.
o That the insurer had no cause of action against it because the bills of
lading did not prove that the insured parties had ownership or
beneficial interest in the cargo.
o That the loss should be limited to P200 per bale as stated in the bills of
lading.
o That only the Yasushima Maru's pilot was at fault, not the Dona Nati’s
pilot.
The trial court ruled in favor of DISC, holding NDC and MCP solidarily liable under
Article 827 of the Code of Commerce. The Court of Appeals affirmed.
ISSUE
Whether NDC and MCP are liable for the loss of the insured cargo under Philippine
law, despite the collision occurring in foreign waters.
RULING
The Supreme Court affirmed the Court of Appeals’ decision, holding NDC and MCP
jointly and severally liable. It ruled that:
1. Philippine Law Applies – Under Article 1753 of the Civil Code, the liability of a
common carrier is governed by the law of the country where the goods are to
be transported. Since the cargo was destined for the Philippines, the Civil
Code and Code of Commerce apply, not COGSA.
2. Shipowner and Agent Liability – NDC, as the shipowner, and MCP, as the ship
agent, are liable under Articles 826-839 of the Code of Commerce, which
govern vessel collisions. Article 827 holds both vessels at fault solidarily liable
for damage to cargo.
3. No Exemption from Liability – Unlike COGSA, the Code of Commerce does not
exempt carriers from liability for their captain’s negligence. The negligence of
both captains was proven, and extraordinary diligence required by Article
1733 of the Civil Code was not observed.
4. No Limitation on Liability – The P200 per bale limitation in the bills of lading
does not apply because the loss was due to negligence, and carriers cannot
limit liability for losses caused by their own negligence.
5. Prescription Defense Rejected – The case was filed within one year from when
the lost cargo "should have been delivered," in accordance with COGSA’s
one-year prescriptive period.
Thus, NDC and MCP were ordered to pay P364,915.86 plus legal interest and
P10,000 in attorney’s fees.
SO ORDERED.
2. Tatad vs. Sec. Garcia, G.R. No. 114222, April 16, 1995;
3. Radio Communication of the Phils, Inc v. NTC, G.R. No. L-68729, May 29,
1987;
4. Luzon Stevedoring v. Public Service Commission, G.R. No. L-5458,
September 16, 1953; 5. San Pablo v. Pantranco G.R. No. L-61461, August
21, 1987;
6. Manzanal v. Ausejo, G.R. No. L-31056 August 4, 1988,
7. Cogeo-Cubao Operator’s and Driver’s Association v. CA, G.R. No. 100727
March 18, 1992;
8. KMU Labor Center v. Garcia, G.R. No. 115381 December 23, 1994;
Doctrine: 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.
The issuance of a Certificate of Public Convenience is determined by public
need.bThe 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.
Facts:
Petitioner Kilusang Mayo Uno (KMU) Labor Center, a labor organization filed a
petition for certiorari challenging the constitutionality and validity of certain DOTC
and LTFRB memoranda, circulars, and orders, namely:
 DOTC Memorandum Order No. 90-395 (June 26, 1990): Authorized provincial
bus operators to increase or decrease fares within a 15% range above or
below LTFRB rates without prior approval.
 DOTC Department Order No. 92-587 (March 30, 1992): Established a policy
framework for transport deregulation, allowing operators to determine fare
levels within a set range and introducing a presumption of public need for
new transport services.
 DOTC Memorandum (October 8, 1992): Implemented the policy of
liberalization in transport fares.
 LTFRB Memorandum Circular No. 92-009 (February 17, 1993): Provided
guidelines for implementing DOTC Order No. 92-587, increasing the fare
adjustment range to 20% above and 25% below the authorized rate.
 LTFRB Order (March 24, 1994): Dismissed KMU’s opposition to fare increases
without a hearing.
The relevant antecedents are as follows:
The fare range policy was initially introduced in 1990 under DOTC Secretary Oscar
Orbos, allowing provincial bus operators to set fares within a 15% range without
applying for an increase with the LTFRB. LTFRB Chairperson Remedios A.S. Fernando
opposed this, citing that it violated the Public Service Act, which required hearings
before fare adjustments.
Despite this, the policy was later expanded in 1992-1993 under DOTC Secretary
Pete Nicomedes Prado, allowing operators to adjust fares within a 20% to -25%
range.
On December 5, 1990, the Provincial Bus Operators Association of the Philippines
(PBOAP) filed a petition for an across-the-board fare increase.
The LTFRB approved a fare adjustment in December 1990, setting fares for different
bus types (ordinary, first-class, premium, and air-conditioned buses).
In March 1994, bus operators implemented a 20% fare increase based on the fare
range scheme without filing a petition or conducting a hearing.
KMU opposed the fare increase, arguing that:
  Allowing bus operators to set fare ranges was unconstitutional and
constituted an undue delegation of LTFRB’s power to determine just and
reasonable fares.
 The presumption of public need in favor of franchise applicants violated the
Public Service Act, which required applicants to prove public necessity.
 Commuters suffered arbitrary fare increases without due process, as the fare
hikes were imposed without public hearings.
LTFRB and PBOAP’s Position:

 The PBOAP argued that the fare increase was justified and within legal
bounds.
 The DOTC and LTFRB defended their policies, asserting:
 The fare range scheme was within their discretion to regulate.
 Deregulation of fares and transport franchises was aimed at
fostering competition.
 KMU lacked legal standing to challenge the policy.

KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares.
However, LTFRB issued one of the assailed orders dismissing the petition for lack of
merit. Hence, the instant petition for certiorari with an urgent prayer for issuance of
a temporary restraining order.
Issue: Whether the DOTC and LTFRB committed grave abuse of discretion in
allowing bus operators to set their own fare ranges (within a specified percentage)
without prior approval and public hearings, in violation of the Public Service Act.
Ruling: Yes, DOTC and LTFRB committed grave abuse of discretion in allowing bus
operators to set their own fare ranges (within a specified percentage) without prior
approval and public hearings, in violation of the Public Service Act.
The Court ruled that the LTFRB cannot delegate its rate-fixing power to bus
operators, as it constitutes an undue delegation of legislative power.
Under Section 16(c) of the Public Service Act, only LTFRB has the authority to
determine and approve fare increases after due notice and hearing.
The fare range policy (allowing bus operators to adjust fares by ±15%, later
widened to +20% and -25%) violated this law because it enabled private operators
to unilaterally impose fare increases.
The March 16, 1994, 20% fare increase was declared null and void as it was
implemented without a petition and a public hearing.
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.
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. 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.
On the Presumption of Public Need – Violation of Due Process
The Court struck down the LTFRB’s policy of presuming public need in favor of
applicants for (CPCs).
Under Section 16(a) of the Public Service Act, an applicant for a CPC must prove
that its operation serves public necessity. The LTFRB cannot shift the burden of proof
to oppositors.
This violated due process and contradicted the Rules of Court, which do not
recognize such a presumption.
9. PAL v. CAB, G.R. No. 119528, March 26, 1997.
Doctrine: There is nothing in the law nor in the Constitution, which indicates that a
legislative franchise is an indispensable requirement for an entity to operate as a
domestic air transport operator. Although Section 11 of Article XII recognizes
Congress' control over any franchise, certificate or authority to operate a public
utility, it does not mean Congress has exclusive authority to issue the same.
Franchises issued by Congress are not required before each and every public utility
may operate.
Facts:
On November 24, 1994, GrandAir applied for a (Certificate of Public Convenience
and Necessity) CPCN to operate scheduled domestic air transport services on
Manila-Cebu and Manila-Davao routes. The respondent Civil Aeronautics Board
(CAB) scheduled a hearing on December 16, 1994, and directed GrandAir to
notify other Philippine domestic airlines, including petitioner Philippine Airlines, Inc.
(PAL).
PAL opposed the application on various grounds, primarily that GrandAir lacked a
legislative franchise from Congress, which PAL claimed was a constitutional
requirement under Section 11, Article XII of the 1987 Philippine Constitution.
Despite PAL’s opposition, CAB denied the challenge and on December 23, 1994,
granted GrandAir a Temporary Operating Permit (TOP) valid for three months, later
extended to six months.
PAL filed a motion for reconsideration, which was denied by CAB.
Hence this petition.
PAL’s Arguments:
 GrandAir lacked a legislative franchise, a constitutional prerequisite before
being granted a CPCN.
 CAB acted beyond its jurisdiction in hearing GrandAir’s application and
issuing a TOP.
 Approval of GrandAir’s application would result in ruinous competition
contrary to Section 4(d) of R.A. 776 (Civil Aeronautics Act).
 GrandAir failed to prove public necessity and demand for its services.
GrandAir’s Defense:
 Cited Albano v. Reyes (1989) and Avia Filipinas v. CAB (1991), arguing that a
legislative franchise was not required for CAB to issue a CPCN or a TOP.
 CAB had authority under R.A. 776 to regulate air transportation and issue
permits independently of Congress.
 Executive Order No. 219 encouraged competition in air transport, allowing
multiple operators per route.
Issues:
1. Whether the CAB has the authority to issue a CPCN or a TOP to GrandAir despite
the latter’s lack of a legislative franchise granted by Congress. YES
2.Whether or not Congress, in enacting Republic Act 776, has delegated the
authority to authorize the operation of domestic air transport services to the
respondent Board, such that Congressional mandate for the approval of such
authority is no longer necessary. YES
Ruling:
1. Yes, CAB has the authority to issue a CPCN or a TOP to despite the latter’s lack of
a legislative franchise granted by Congress.
The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a
Temporary Operating Permit. This rule has been established in the case of Philippine
Air Lines Inc., vs. Civil Aeronautics Board, promulgated on June 13,1968.
The Board is expressly authorized by Republic Act 776 to issue a temporary
operating permit or Certificate of Public Convenience and Necessity, and nothing
contained in the said law negates the power to issue said permit before the
completion of the applicant's evidence and that of the oppositor thereto on the
main petition. Indeed, the CAB's authority to grant a temporary permit "upon its
own initiative" strongly suggests the power to exercise said authority, even before
the presentation of said evidence has begun.
Assuming arguendo that a legislative franchise is prerequisite to the issuance of a
permit, the absence of the same does not affect the jurisdiction of the Board to hear
the application, but tolls only upon the ultimate issuance of the requested permit.
2. Yes, Congress has granted certain administrative agencies the power to grant
licenses for, or to authorize the operation of certain public utilities. With the growing
complexity of modern life, the multiplication of the subjects of governmental
regulation, and the increased difficulty of administering the laws, there is a
constantly growing tendency towards the delegation of greater powers by the
legislature, and towards the approval of the practice by the courts.
It is generally recognized that a franchise may be derived indirectly from the state
through a duly designated agency, and to this extent, the power to grant franchises
has frequently been delegated, even to agencies other than those of a legislative
nature.
In pursuance of this, it has been held that privileges conferred by grant by local
authorities as agents for the state constitute as much a legislative franchise as
though the grant had been made by an act of the Legislature.
There is nothing in the law nor in the Constitution, which indicates that a legislative
franchise is an indispensable requirement for an entity to operate as a domestic air
transport operator. Although Section 11 of Article XII recognizes Congress' control
over any franchise, certificate or authority to operate a public utility, it does not
mean Congress has exclusive authority to issue the same. Franchises issued by
Congress are not required before each and every public utility may operate.
In many instances, Congress has seen it fit to delegate this function to government
agencies, specialized particularly in their respective areas of public service.
Congress, by giving the respondent Board the power to issue permits for the
operation of domestic transport services, has delegated to the said body the
authority to determine the capability and competence of a prospective domestic air
transport operator to engage in such venture.
This is not an instance of transforming the respondent Board into a mini-legislative
body, with unbridled authority to choose who should be given authority to
operatedomestic air transport services.