G.R. No. 148339 - Lucena Grand Central Terminal Inc. vs. JAC Liner Inc.

Case Summary (G.R. No. 148339)

Factual Background

The Sangguniang Panlungsod of Lucena enacted Ordinance No. 1631, which granted a twenty-five year franchise renewable for another twenty-five years to Lucena Grand Central Terminal, Inc. to construct, finance, establish, operate and maintain a single common bus-jeepney terminal facility in Lucena City, and stipulated that the City would not grant any third party privilege or concession to operate a bus, mini-bus or jeepney terminal. The Sangguniang Panlungsod also enacted Ordinance No. 1778, which regulated the entrance of buses, mini-buses and out-of-town passenger jeepneys, directed them to proceed to the common terminal for loading and unloading, declared temporary terminals inoperable, and expressly designated the Lucena Grand Central Terminal as the officially sanctioned and permanent common terminal, prohibiting other terminals within the city proper. The ordinances were justified by the legislative body as measures to relieve worsening traffic congestion by localizing passenger loading and unloading to a single facility located outside the poblacion.

Trial Court Proceedings

JAC Liner, Inc. filed a petition for prohibition and injunction in the Regional Trial Court of Lucena City challenging the constitutionality of Ordinance No. 1631 and Ordinance No. 1778 on grounds that included invalid exercise of police power, an undue taking of private property, and violation of the constitutional prohibition against monopolies. Lucena Grand Central Terminal, Inc. intervened as the grantee of the exclusive franchise. The parties agreed to submit the case on the pleadings without presenting evidence. By Order dated March 31, 1999, Branch 54 of the RTC declared Ordinance No. 1631 valid insofar as it granted a franchise, but held Section 4(c) of that ordinance illegal and ultra vires relative to the Local Government Code; the RTC declared Ordinance No. 1778 null and void as an oppressive and unreasonable exercise of police power and issued writs restraining enforcement insofar as the ordinance compelled use of the franchised terminal and prohibited other terminals inside Lucena City. The RTC denied the intervenor’s motion to dismiss.

Appellate Proceedings

Petitioner’s motion for reconsideration in the RTC was denied, and petitioner filed a petition for review under Rule 45 with the Supreme Court. The Supreme Court referred the petition to the Court of Appeals on November 24, 1999. The Court of Appeals dismissed the petition and affirmed the trial court’s orders by Decision dated December 15, 2000, and denied petitioner’s motion for reconsideration by Resolution dated June 5, 2001. Thereafter petitioner sought relief before the Supreme Court, which resolved the case by denying the petition on February 23, 2005.

Issues Presented

The Supreme Court identified two central issues: first, whether the trial court acquired jurisdiction over the case given the asserted failure to notify the Office of the Solicitor General of the proceedings; and second, whether the City of Lucena properly exercised its police power in enacting Ordinance No. 1631 and Ordinance No. 1778.

Parties' Contentions

Petitioner contended that the RTC lacked jurisdiction because it did not furnish copies of its orders to the Solicitor General, invoking Section 22, Rule 3 and Sections 3 and 4 of Rule 63 which require notification and entitlement to be heard in actions involving the validity or constitutionality of ordinances or other governmental regulations. Petitioner further argued that the ordinances were enacted pursuant to the Sangguniang Panlungsod’s power to regulate traffic, prohibit encroachments, and abate nuisances and that the grant of an exclusive franchise was a legitimate exercise of those powers. Respondent and the trial court maintained that the Solicitor General had been served with a copy of the petition and that the ordinances were unconstitutional because they were overbroad, unduly oppressive, and amounted to an unlawful delegation of exclusive privileges that coerced carriers to patronize petitioner’s terminal.

Jurisdictional Ruling

The Supreme Court held that no jurisdictional defect existed. It observed that Rule 3, Section 22 confers discretion upon courts to require the Solicitor General’s appearance in actions involving the validity of ordinances, and that Sections 3 and 4 of Rule 63 assign the duty to notify the Solicitor General to the party assailing the ordinance. More importantly, the Court found that respondent had in fact served a copy of its petition upon the Office of the Solicitor General on October 1, 1998, and that the Solicitor General issued a certification to that effect; accordingly, there was compliance with the Rules and the trial court had jurisdiction to hear and decide the case.

Police Power Analysis and Holding

The Supreme Court applied the established twofold requisites for a proper exercise of police power: first, that the interest involved be public rather than private; and second, that the means adopted be reasonably necessary to achieve the declared objective and not unduly oppressive upon individuals. The Court accepted that traffic congestion constituted a public interest warranting state interference, but concluded that the challenged ordinances failed the second requisites. The measures were characterized as overbroad because they prohibited the operation of all terminals within the city and compelled the exclusive use of a single franchised terminal located outside the city proper. The Court held that the ordinances went beyond what was reasonably necessary to address the traffic problem and were unduly oppressive because compulsory use of the franchised terminal imposed fees, rentals, and charges upon carriers and passengers. The Court further reasoned that terminals per se were not shown to be encroachments on public roads or nuisances per se, and that any nuisance that is nuisance per accidens cannot be abated summarily by ordinance without judicial proceedings. The Court therefore agreed with the trial court and the Court of Appeals that the ordinances were

Case Syllabus (G.R. No. 148339)

Parties and Procedural Posture

Petitioner, Lucena Grand Central Terminal, Inc., was the grantee of an exclusive franchise to construct, finance, establish, operate, and maintain a common bus-jeepney terminal in Lucena City and intervened in the RTC proceedings asserting legal interest therein.
Respondent, JAC Liner, Inc., was a common carrier operating a terminal within Lucena City and filed a petition for prohibition and injunction assailing the validity of certain city ordinances.
The petition for prohibition and injunction was filed in the Regional Trial Court, Branch 54, Lucena City, and the parties agreed to submit the case on the pleadings without further evidence.
The RTC rendered judgment on March 31, 1999, with specified declarations as to the validity and invalidity of provisions in the challenged ordinances and issued injunctive relief.
The RTC denied petitioners motion for reconsideration by Order dated August 6, 1999, and petitioner pursued review under Rule 45 before the Supreme Court.
The Supreme Court, by Resolution of November 24, 1999, referred the petition to the Court of Appeals which dismissed the petition by Decision dated December 15, 2000, and denied reconsideration by Resolution dated June 5, 2001.
The petitioners final recourse was a petition for review to the Supreme Court which resolved the matter by denying the petition in the present decision.

Key Factual Allegations

Ordinance No. 1631 granted an exclusive franchise to Lucena Grand Central Terminal, Inc. to operate a common bus-jeepney terminal in Lucena City for a period of 25 years renewable for another 25 years.
Ordinance No. 1631, Section 4(c), provided that the City Government shall not grant any third party privilege or concession to operate a bus, mini-bus, or jeepney terminal during the existence of the franchise.
Ordinance No. 1778 regulated the entry of all buses, mini-buses, and out-of-town passenger jeepneys into Lucena City by directing them to proceed to the designated common terminal for loading and unloading and declaring temporary terminals inoperable.
Ordinance No. 1778 amended prior local ordinances to designate the Lucena Grand Central Terminal as the officially sanctioned and permanent common terminal and to prohibit any other terminals inside the City of Lucena.
The ordinances were adopted purportedly to alleviate worsening traffic congestion caused by various bus and jeepney terminals within the city proper.
The compulsory use of the franchised terminal would require common carriers to close existing terminals inside the city and to use the franchised facility located outside the city proper and thereby incur fees and charges.

Statutory Framework

The parties invoked procedural provisions including Rule 3, Sec. 22 and Rule 63, Secs. 3 and 4 of the Rules relating to notice to the Solicitor General in actions attacking the validity of ordinances and other governmental regulations.
The trial court considered the applicability of Republic Act No. 7160 and specifically referenced the LOCAL GOVERNMENT CODE Section 458(5)(vi) as authorizing the Sangguniang Panlungsod to regulate traffic and abate encroachments.
The opinion referenced the Civil Code provisions on abatement of nuisances, Articles 694 to 707, as the proper procedural framework for nuisance abatement.
The parties and the courts relied upon established constitutional and administrative jurisprudence cited in the opinion to evaluate the exercise of police power.

Issues Presented

Whether the trial court acquired jurisdiction over the petition where it had not served a copy of its orders upon the Solicitor General in accordance with the quoted procedural rules.
Whether the City of Lucena properly and constitutionally exercised its police power in enacting Ordinance No. 1631 and Ordinance No. 1778, including the grant of an exclusive franchise and the prohibition of other terminals within the city.

Contentions of the Parties

Petitioner contended that the RTC lacked jurisdiction because the trial court failed to notify the Solicitor General as required by the Rules and that the ordinances were valid exercises of police power to regulate traffic and abate nuisances.
Petitioner further contended that