Title
National Power Corp. vs. Court of Appeals
Case
G.R. No. 84695
Decision Date
May 8, 1990
NPC authorized to directly supply power to BOI-registered FINE despite MERALCO's franchise; Court upheld public interest over exclusivity.
dispute
direct power connection
dismissal
A

Case Summary (G.R. No. 84695)

Factual Background

FINE, a corporation registered with the Board of Investments (BOI) and engaged in the manufacture of plastics for export, filed an application for a direct power connection with NPC in September 1986. NPC, relying on a Memorandum of Understanding between NPC and BOI, wrote MERALCO on November 18, 1986, stating that NPC was authorized to connect directly to its system qualified industrial consumers, and requesting MERALCO’s input as to any definite policy decision that MERALCO might adopt on FINE’s request and a similar request from Rizal Cement. MERALCO, in a letter dated December 3, 1986, declined to grant the request. It argued that allowing large consumers to tap directly to NPC would mean foregoing the share of the subsidy burden borne by other large consumers, and would cause costly duplication of facilities. On February 27, 1987, MERALCO further asserted that the direct connection under the BOI-NPC memorandum of understanding dated January 12, 1981 presupposed the inability of the utility or cooperatives to meet certain standards of financial and technical capability, which MERALCO claimed was not true in its case.

NPC, in a letter dated March 16, 1987, indicated that absent a clear policy inhibiting NPC from complying with the request, NPC would prepare and put up the necessary facilities to supply power to FINE and would negotiate the terms and conditions. MERALCO responded on March 20, 1987, registering strong objection, reiterating its supposed financial and technical capability, and urging NPC to hold off further action. MERALCO’s urging was anchored on a draft executive order creating the Energy Regulatory Board, which it suggested might be issued momentarily, and which it feared would be pre-empted by NPC’s direct action. Nevertheless, on July 12, 1987, NPC began supplying FINE’s electric requirements through a direct power supply connection.

Filing of the Lower Court Petition and Procedural Events

On July 22, 1987, MERALCO filed with the Regional Trial Court of Pasig, presided over by Judge Eutropio Migrino, a petition for prohibition, mandamus and damages with preliminary injunction against NPC and FINE, docketed as Civil No. 54733. FINE opposed on August 4, 1987, contending that MERALCO’s application for injunctive relief had become moot and academic because direct power service had already been consummated prior to the filing of the petition, and NPC’s power lines and facilities had long been installed and were operational. MERALCO then amended its petition to include an application for a writ of preliminary mandatory injunction.

On August 11, 1987, FINE moved to dismiss the amended petition on insufficiency of allegations to plead a cause of action, and NPC adopted the motion. The trial judge allowed the reception of MERALCO’s evidence in support of preliminary mandatory injunction despite FINE’s objection. On August 25, 1987, MERALCO was granted leave to file a second amended petition to add an allegation of grave and irreparable injury. After the filing of the second amended petition, FINE manifested that it adopted its earlier motion to dismiss dated August 10, 1987, and MERALCO opposed that adoption on September 11, 1987. On September 16, 1987, the respondent judge denied the motion to dismiss, reasoning that when a motion to dismiss is anchored on lack of cause of action, the facts alleged are assumed and no other facts may be considered in resolving it, and holding that if not properly traversed, the allegations could render a valid judgment.

FINE did not move for reconsideration. Instead, on October 1, 1987, it filed with the Court of Appeals a petition for certiorari, prohibition and mandamus. NPC, on October 13, 1987, filed a petition for leave to intervene to adopt the petition and for extension of time to file a supplemental petition, which was filed on October 28, 1987.

Court of Appeals Disposition

The Court of Appeals, through a decision promulgated on August 11, 1988, dismissed the petition for certiorari, prohibition and mandamus. That dismissal led to the present petition for review on certiorari, in which the Supreme Court later resolved, in a resolution dated March 8, 1989, to give due course and require simultaneous memoranda.

The Parties’ Contentions

MERALCO’s lower court petition rested on its standing as a holder of a franchise to sell and distribute electric power in areas that included Calamba, Laguna. MERALCO asserted that it had the right to be heard on an application for direct power connection and that it could defeat such application by demonstrating its ability or willingness to match NPC’s rates. MERALCO also maintained the policy concerns reflected in its letters, particularly the claim that direct tapping would forfeit its share in the subsidy burden ultimately borne by other consumers and would require duplication of facilities.

NPC and FINE relied on the statutory framework recognizing NPC’s authority to directly service the power requirements of BOI-registered enterprises, while conditioning that authority on procedural safeguards for affected franchise holders. FINE and NPC also insisted that, notwithstanding the denial of the motion to dismiss in the trial court, the case should not proceed to a full trial where no sufficient cause of action was pleaded.

Legal Issue Before the Supreme Court

The Supreme Court identified the main issue as whether MERALCO’s petition in the lower court should have been dismissed. This required examining whether MERALCO’s resort to a petition for prohibition and mandamus, challenging NPC’s direct supply to a BOI-registered industrial consumer, could survive the trial court’s ruling on a motion to dismiss anchored on lack of cause of action, and whether any exception to the ordinary procedure of proceeding to trial and appeal applied.

Doctrinal Framework on Motions to Dismiss and Certiorari Review

The Court recognized the general rule that when a motion to dismiss is denied, the usual remedy is to answer, proceed to trial, and appeal if an adverse decision results. That general principle, as illustrated in Newsweek, Inc. v. I.A.C. (142 SCRA 177 [1986]), was said to apply to incidents that are normally part of the ordinary course of litigation. However, the Court identified recognized exceptions, especially where the trial court acts without or in excess of jurisdiction or with grave abuse of discretion.

The Court emphasized that MERALCO’s motion-to-dismiss posture was grounded on lack of cause of action, so that there was “no need for a full blown trial,” in line with Newsweek, Inc. v. I.A.C. It also invoked a procedural policy, derived from Gayos v. Gayos (67 SCRA 146 [1975]) and reiterated in Alger Electric, Inc. v. Court of Appeals (135 SCRA 43 [1985]), that the Court strives to settle the entire controversy in a single proceeding to prevent future litigation.

Statutory Authority of NPC and the Franchise Holder’s Right to Be Heard

On the merits, MERALCO claimed that it should have been allowed to be heard and to resist FINE’s application through evidence of its capability and willingness to match NPC’s rates. The Supreme Court treated MERALCO’s position in relation to P.D. No. 380 as amended by P.D. No. 395, which the Court consistently construed to empower NPC to directly service the requirements of BOI-registered enterprises. The Court reiterated that such empowerment is subject to two requisites: first, that any affected private franchise holder must be afforded an opportunity to be heard; and second, that after such hearing, it must be established that the private franchise holder is incapable or unwilling to match the reliability and rates of NPC for direct service.

The Court cited its earlier rulings in National Power Corporation v. Jacinto (134 SCRA 435 [1985]), National Power Corporation v. Canares (140 SCRA 336 [1985]), and National Power Corporation v. Court of Appeals (161 SCRA 103 [1988]) for these propositions.

Application: MERALCO’s Opportunity to Be Heard and Its Failure to Match Rates

The Court noted that, while MERALCO might have initially been deprived of the right to be heard in an administrative proceeding, MERALCO had nevertheless been given “ample opportunity” in subsequent judicial proceedings to show that it was capable and willing to match NPC rates, and yet it failed. The Court pointed to MERALCO’s own testimony during the trial court hearing for a preliminary mandatory injunction on August 12, 1987, where MERALCO witness V.C. Flordeliza admitted that MERALCO could not charge the same rate NPC charged because MERALCO needed to make a profit on its investment. The cited cross-examination reflected that NPC’s rate to MERALCO was approximately P1.00 per kilowatthour, while MERALCO charged about P2.00 per kilowatthour to its customers, and that MERALCO could not sell to its customers at the same rate NPC charged it because MERALCO had to make a profit as allowed by the Board of Energy. The Court treated these admissions as evidence that MERALCO did not categorically commit itself to matching NPC rates and, instead, sought to evade the central issue.

The Court further observed that MERALCO did not categorically state that it could match NPC’s rates. It confined its position to claims of financial and technical capability for meeting FINE’s power requirements while asserting, in its memorandum, that it would be “highly improper” to require MERALCO to demonstrate ability to match NPC’s rates. The Court characterized this posture as an attempt to avoid confronting the legal requirement of matching rates and reliability.

Due Process Considerations

The Court found “no denial of due process.” It explained that procedural due process requires notice and an opportunity to be heard, citing Planters Products, Inc. v. National Labor Relations Commission (G.R. No. 78524, January 20, 1989). It further held that what due process abhors is absolute lack of opportunity to be heard, citing Relucio III

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