G.R. No. L-53492 - Pernito Arrastre Services, Inc. vs. Mendoza

In November 1972, the Government created an Ad Hoc Committee on Waterfront Services to study the arrastre and stevedoring operations in various Philippine ports.
The Committee identified multiple issues, such as the oppressive "cabo system," violence, thefts, and inefficiencies that affected port operations and commerce.
To remedy these problems, the Committee recommended integrating arrastre and stevedoring operations so that ultimately only one contractor would operate in each port.
On April 23, 1973, the Committee formally recommended this integration.
On May 8, 1975, the Bureau of Customs issued Memorandum Order No. 28-75 to merge all existing cargo-handling contractors.
In order to integrate the 36 existing labor contractors at the Port of Tacloban, the Bureau of Customs mandated their merger into four corporations, which eventually paved the way for a single operator.

Tacloban Waterfront Labor and Arrastre Service Cooperative, Inc. (TWALSCI) – which later became part of petitioner Eastern Leyte Arrastre Service.
San Juanico Pumpboats and Motor Launches Stevedoring and Delivery Service, Inc.
Sealand, Inc.
Tacloban Port Services, Inc.

This decree transferred the powers and duties regarding arrastre and stevedoring operations from the Bureau of Customs to the Philippine Ports Authority (PPA).
Under Section 20(b) and Section 6(b)(ix) of P.D. No. 857, the PPA had the authority to regulate service rates and collect charges from port service operators.

The PPA imposed a ten percent (10%) charge on the monthly gross earnings of the operators, a central element challenged by some petitioners.

On January 31, 1978, the PPA issued a temporary permit to petitioner Leyte Integrated Port Service, Inc. (LIPSI), which stipulated conditions such as its non-transferability and provisional validity pending issuance of a special permit.
Around the same period, other private arrastre operators, including Pernito Arrastre Services, Inc., operated under temporary or hold-over arrangements.

On February 27, 1978, petitioners (including Pernito Arrastre Services and other operators) sought declaratory relief and mandamus before the Court of First Instance of Cebu against the PPA.

Their challenge focused on the integration policy, the exclusive right of one arrastre operator per port, and the validity of the imposed 10% charge.

The trial court, on March 31, 1978, issued a writ of injunction restraining the PPA from enforcing the integration policy while presuming the reasonableness of the fee.
Subsequent actions led the PPA to file a petition for certiorari, resulting in a temporary restraining order preventing the trial court from enforcing its earlier order.
A supplemental application for a preliminary injunction against the fee imposition was also denied by the trial court, prompting further litigation.

PPA, citing violations committed by petitioner LIPSI (such as inefficiency, failure to procure necessary equipment, unauthorized employment of non-absorbed labor contractors, use of child labor, and non-remittance of government shares), issued several warnings.
On April 26, 1979, the PPA issued Special Order No. 114-79, directing the creation of the Philippine Ports Authority-Tacloban Arrastre Ports Services (PPA-TAPS) and ordering a take-over of the arrastre and stevedoring services at the port.
By June 1, 1979, PPA-TAPS had assumed full control over operations, simultaneously absorbing the existing dock labor force and instituting reforms such as regular payrolls, proper remittances, and improved worker benefits.
The take-over led to disputes with other private contractors and port users, notably triggering an action by petitioner Eastern Leyte against respondent International Copra Export Corporation (INTERCO), and subsequent motions and petitions in various courts.
Consolidated petitions (G.R. Nos. 53492, 54265, 54394, and 54565) eventually questioned the constitutional validity of:

The PPA’s authority to take over port operations.
The imposition of the 10% charge based on temporary permits.
The alleged impairment of existing contracts and restrictions on a free enterprise system.

Whether the PPA’s take-over of arrastre and stevedoring operations was a valid exercise of its police power in the interest of public welfare.
Whether the temporary permits granted to the petitioners conferred any vested property right that would render their cancellation or non-renewal a violation of due process.
Whether the collection of a 10% charge was excessive or improperly served as a revenue-generating measure rather than a regulatory tool.
Whether the integration policy, potentially creating a regulated monopoly, violated constitutional rights and the non-impairment clause of contracts.

Is the PPA’s assumption and consolidation of arrastre and stevedoring services in the Port of Tacloban a valid exercise of its police power?
Does such take-over, motivated by public welfare and safety considerations, justify the exclusion of private operators?

Do the temporary permits issued to petitioners constitute a vested property right?
Does the revocation or non-renewal of these permits violate the constitutional guarantee of due process and the non-impairment of contracts?

Is the ten percent (10%) fee on the gross earnings for arrastre and stevedoring operations a reasonable and lawful exercise of the PPA’s regulatory power?
Does the fee exceed the bounds of regulatory discretion by acting as an undue revenue-generating measure?

Does the policy to integrate disparate operators into one entity infringe upon the petitioners’ right to free enterprise?
Can the exclusive grant or regulated monopoly sanctioned by the integration be justified in light of public interest concerns?