Case Summary (G.R. No. 37878)
Petitioner
Manila Electric Company sought a judicial determination (by the members of the Supreme Court acting as arbitrators) fixing the conditions and compensation for use of portions of its lines and tracks, specifically the Pasig bridge, by competing transportation companies.
Respondent
Pasay Transportation Company, Inc., and other public utility operators opposed the petition. The Attorney-General was served but disclaimed interest; other operators filed oppositions and submitted memoranda after an oral hearing.
Applicable Law and Statutory Provision at Issue
The provision invoked is Section 11 of Act No. 1446 (franchise granted to Charles M. Swift, subsequently held by Manila Electric Company). Section 11 provides that when any franchise or right of way is granted to another person or corporation over portions of the grantee’s lines and tracks, “the terms on which said other person or corporation shall use such right of way, and the compensation to be paid to the grantee herein by such other person or corporation for said use, shall be fixed by the members of the Supreme Court, sitting as a board of arbitrators, the decision of a majority of whom shall be final.”
Procedural Posture
Upon filing, the petitioner was ordered to serve copies of its petition on the Attorney-General and the affected transportation companies. The Attorney-General disclaimed interest, oppositions were filed by several operators, and the matter was submitted on memoranda following an oral hearing. The case then became ready for resolution on the question whether Section 11 is valid and whether the members of the Supreme Court may properly act as the statutorily mandated board of arbitrators.
Threshold Legal Questions Presented
Two interrelated legal questions were presented: (1) the validity of Section 11 of Act No. 1446 insofar as it prescribes arbitration before members of the Supreme Court and makes their majority decision final; and (2) whether the members of the Supreme Court, sitting as a board of arbitrators, may lawfully exercise the functions thereby imposed upon them.
Arbitration Principles and Public Policy Constraints
The Court recognized arbitration as a consensual method for private dispute resolution: submission to arbitration is contractual in nature. It invoked Civil Code provisions (arts. 1820 and 1821) and Philippine and U.S. precedent to affirm the settled rule that private contractual provisions attempting to exclude the courts entirely from jurisdiction are contrary to public policy and void. The Court stressed that, while it favors amicable arbitration when it does not close judicial doors, arbitration agreements cannot be read to oust judicial review or to vest finality that leaves affected parties without judicial recourse.
Specific Objections to Section 11
Section 11 sought to confer finality on decisions of a board composed of members of the Supreme Court, thereby potentially depriving non‑party public utilities of access to courts for adjudication of rights affecting them. The Court observed that the franchise provision would affect rights of persons who were not signatories to the original franchise contract, and that the statutory scheme, by making the board’s decision “final,” could operate to preclude judicial review—an outcome inconsistent with the principles governing arbitration and judicial jurisdiction.
Delegation of Function and the Nature of the Acted‑Upon Functions
The Court analyzed two alternatives and the anomalies each would produce: either (a) the members of the Supreme Court, sitting as arbitrators, would be exercising judicial functions—an outcome that at best presupposes resort to courts for enforcement and review and at worst would yield internal conflict if the Supreme Court had to review decisions of its own members acting extrajudicially; or (b) they would be exercising administrative or quasi‑judicial functions—which the Court found would be duties the justices could not lawfully assume. In either scenario, the statutory scheme created constitutional and institutional difficulties incompatible with the proper role of the Supreme Court under the Organic Act.
Constitutional/Organic Act Constraints and Precedent
The Court emphasized the distinct institutional role of the Supreme Court as the judicial branch and relied on the Organic Act provision that the Supreme Court “shall possess and exercise jurisdiction as heretofore provided and such additional jurisdiction as shall hereafter be prescribed by law.” The Court construed “jurisdiction” in the Organic Act to mean judicial jurisdiction exercisable by the Court as a court, not functions to be performed by its members in non‑judicial capacities. Quoting Chief Justice Taney (Gordon v. United States), the Court underscored that the judicial power conferred on a supreme tribunal is exclusively judicial and that the court must abstain from exercising powers not strictly judicial in character. The Court found a meaningful distinction between the Supreme Court as an institutional court and the
...continue readingCase Syllabus (G.R. No. 37878)
Case Caption, Citation, and Author of the Decision
- Citation: 57 Phil. 600; G.R. No. 37878; November 25, 1932.
- Title as given in the source: MANILA ELECTRIC COMPANY, PETITIONER, VS. PASAY TRANSPORTATION COMPANY, INC., ET AL., RESPONDENTS.
- Decision authored by Justice Malcolm (MALCOLM, J.).
Nature of the Petition and Core Relief Sought
- The petition was filed by the Manila Electric Company.
- The petitioner requested the members of the Supreme Court, sitting as a board of arbitrators, to:
- Fix the terms upon which certain transportation companies shall be permitted to use the Pasig bridge of the Manila Electric Company.
- Fix the compensation to be paid to the Manila Electric Company by such transportation companies.
- The preliminary and basic question raised by the petition concerned:
- The validity of section 11 of Act No. 1446.
- The legal right of the members of the Supreme Court, sitting as a board of arbitrators, to act on the petition.
Statutory Provision Invoked (Section 11, Act No. 1446)
- Act No. 1446 is entitled: "An Act granting a franchise to Charles M. Swift to construct, maintain, and operate an electric railway, and to construct, maintain, and operate an electric light, heat, and power system from a point in the City of Manila in an easterly direction to the town of Pasig, in the Province of Rizal."
- Section 11 of Act No. 1446 provides:
- "Whenever any franchise or right of way is granted to any other person or corporation, now or hereafter in existence, over portions of the lines and tracks of the grantee herein, the terms on which said other person or corporation shall use such right of way, and the compensation to be paid to the grantee herein by such other person or corporation for said use, shall be fixed by the members of the Supreme Court, sitting as a board of arbitrators, the decision of a majority of whom shall be final."
Procedural History Before the Court
- Upon filing, the court ordered that petitioner serve copies of the petition on:
- The Attorney-General.
- The transportation companies affected by the petition.
- The Attorney-General disclaimed any interest in the proceedings.
- Opposition was entered to the petition by a number of public utility operators.
- After an oral hearing and submission of memoranda, the petition was made ready for resolution.
Legal and Doctrinal Issues Identified by the Court
- Whether section 11 of Act No. 1446 validly vests authority in "members of the Supreme Court, sitting as a board of arbitrators," to fix terms and compensation for use of the grantee's lines and tracks.
- Whether the members of the Supreme Court, sitting as a board of arbitrators whose decision of a majority "shall be final," have the legal right to act in such capacity.
- Whether the provision improperly affects the rights of persons not parties to the original franchise contract.
- The compatibility of a statutory scheme compelling arbitration (or designation of arbitrators) with established principles that arbitration is a creature of contract and that parties cannot by private agreement oust the courts of jurisdiction.
Contract, Arbitration, and Public Policy Principles Considered
- The court noted the law calls for arbitration as a method of the parties' own choice and that "a submission to arbitration is a contract."
- Parties to an arbitration agreement may not oust the courts of jurisdiction of the matters submitted to arbitration.
- Articles 1820 and 1821 of the Civil Code were cited as supporting familiar rules regarding arbitration (as referenced in the source).
- The court cited Philippine and U.S. precedent for the rule that a contract clause providing that disputes "shall be referred to arbitrators and to them alone" is contrary to public policy and cannot oust courts of jurisdiction, with authorities cited in the opinion:
- Wahl and Wahl vs. Donaldson, Sims & Co. (1903), 2 Phil., 301.
- Puentebella vs. Negros Coal Co. (1927), 50 Phil., 69.
- Vega vs. San Carlos Milling Co. (1924), 51 Phil., 908.
- District of Columbia vs. Bailey (1897), 171 U. S., 161.
Court’s Recognition of Limits to the Arbitration Principle
- The court stated it would not extend the principles governing arbitration too far and recognized:
- Courts should look "with favor upon such amicable arrangements," unless the arbitration agreement absolutely closes the courts' doors.
- A distinction may exist between a private contract for submission to arbitration and agreements to arbitrate falling within the terms of a statute affecting others than the parties to a particular franchise.
- Nevertheless, the court emphasized that section 11 makes the board's decision "final," which, if literally enforced, would leave a public utility not a party to the contract without recourse to the courts.
Precedent Relied On and Distinctions Drawn
- Petitioner's principal reliance: Tallassee Falls Mfg. Co. vs. Commissioners' Court (1908), 158 Ala., 263.
- In that case it was held that a state legislature authorizing a commissioners' court to regulate and fix toll rates for a bridge did not unconstitutionally delegate legislative power to the courts.