G.R. No. 29955 - City of Manila vs. Public Service Commission

The Manila Electric Company, the utility at issue, is central to the dispute and holds a franchise originally granted by legislative acts and municipal ordinances.

The Manila Electric Company’s franchise was originally granted by Act No. 484 of the Philippine Commission (as implemented by Ordinance No. 44 of 1903) and subsequently amended by Act No. 1112 (as carried into effect by Ordinance No. 70 of 1904).
The franchise, which was to run for fifty years, authorized the construction and operation of an electric street railway on specified city streets and included stipulations regarding route modifications, maintenance obligations, and the right to make “reasonable” changes in light of scientific progress.
Provisions within the franchise mandated that any alteration of routes or abandonment of part of the service required municipal approval from the City of Manila.

The Manila Electric Company applied to the Public Service Commission (PSC) for permission to abandon its trolley bus service in Intramuros and street car service on Taft Avenue.
The proposed change was to temporarily substitute the existing service with an auto bus service on a specified route.
The PSC initially granted an experimental permit for a 30-day period and later extended it for an additional 30 days.
Before the experimental period expired, the company petitioned for permanent authority to operate the auto bus service under its franchise.

The City of Manila, through its fiscal, opposed the permanent substitution of services on the basis that:

The franchise requires the city’s consent for any abandonment or change of operation.
The change, though beneficial, violated conditions laid down in the franchise, particularly regarding the use of city streets and the nature of the service provided.

The Public Service Commission, supported by the Attorney-General and the Manila Electric Company, asserted its power under the Public Service Law to regulate and authorize such changes.

The franchise is understood to be a special contract between the City of Manila and the Manila Electric Company, originally authorized by legislative acts and implemented by the municipal authorities.
Over the years, changes in service modes and routes had been made with express legislative or municipal approval, reinforcing the principle that any alterations required the direct involvement of the city.
Statutory provisions, including those later incorporated in Acts Nos. 2307, 2362, 2694, and 3108 (the Public Service Law), delegated general supervisory power to the PSC, but did not expressly overrule the municipal right to approve changes affecting city infrastructure.

Previous decisions, such as Manila Electric Railroad & Light Co. vs. Board of Public Utility Commissioners (1915) and City of Manila vs. Manila Electric Railroad & Light Co. and Board of Public Utility Commissioners (1917), illustrate conflicts regarding regulatory authority between the municipal government and the PSC.
In another case (Manila Railroad Co. vs. Rafferty [1919]), the court highlighted the doctrine that special charters or franchises are not to be lightly repealed or altered by subsequent general legislation.
Analogous decisions from U.S. jurisdictions (e.g., cases from Oklahoma, New Jersey, and California) were considered but required adaptation to the specific statutory language and context of Philippine law.

Whether the power to authorize the Manila Electric Company’s abandonment of its trolley bus and street car service and its substitution with an auto bus service rests with the Public Service Commission or with the City of Manila.

Whether the PSC had the legal authority to grant permanent permission for substituting street railway operations, given that the company’s franchise explicitly required municipal consent for changes affecting its service and routes.

Whether the later general provisions of the Public Service Law, which delegate broad supervisory powers to the PSC, imply a repeal or alteration of the specific, special franchise conditions originally granted by the City of Manila.

Whether allowing the PSC to authorize changes without municipal approval would unduly disturb the property rights and contractual obligations established under the franchise.