Case Summary (G.R. No. L-22766)
Key Dates
- June 18, 1960: Republic Act No. 2677 enacted (amendments to the Public Service Act).
- February 16, 1962: Transfer of Surigao Electric’s rights, privileges, plant and facilities to Arturo Lumanlan, Sr.
- July 11, 1963: PSC order stating it had to approve the tentative schedule of rates submitted by the Municipality of Surigao and concluding on its jurisdictional reach.
- February 7, 1964: PSC denial of motion for reconsideration.
- August 30, 1968: Decision rendered by the Court.
Applicable Law and Authorities
- Republic Act No. 2677 (amendments to the Public Service Act), especially Section 13(a) (exempting public services owned or operated by government entities or government-owned or controlled corporations from the certificate requirement while subjecting them to regulation) and Section 14(e) (exempting certain public services from PSC provisions except with respect to fixing of rates).
- Commonwealth Act No. 454 (prior law governing PSC jurisdiction).
- Republic Act No. 2264 (Local Autonomy Act), contemporaneous legislation relevant to congressional intent on municipal powers.
- Act No. 3419 (legislative franchise under which petitioners claimed rights).
- Commonwealth Act No. 358 (statute providing procedure when government acquires and operates a public utility; cited by petitioners).
- Judicial authorities cited in the decision: Mendoza v. de Leon (recognition of municipal dual character), and Charles River Bridge v. Warren Bridge (principle that franchises do not defeat governmental police power).
Issue Presented
Whether, under the amendatory provisions of RA No. 2677, a municipal government can operate a public service (an electric plant) without obtaining a specific franchise or a certificate of public convenience and necessity from the PSC, and whether the PSC retains regulatory authority—particularly the power to fix rates—over such municipal operations.
Holding
The Court sustained the PSC: municipalities (as government entities/instrumentalities) are exempt from the PSC’s certificate requirement under RA No. 2677 but remain subject to PSC regulation with respect to the fixing of rates. The PSC orders of July 11, 1963 and February 7, 1964 were affirmed; costs were awarded against petitioners.
Reasoning — Statutory Interpretation and Municipal Status
The Court treated the question as one of statutory interpretation, seeking congressional intent in RA No. 2677. The amendatory language eliminated the certificate requirement for “public services owned or operated by government entities or government-owned or controlled corporations,” while simultaneously preserving the PSC’s regulatory power, particularly as to rates. The Court concluded that a municipal government is a “government entity” within the meaning of the amendatory statute. It relied on prior precedent recognizing the dual character of municipal corporations—both governmental (an extension of state administration) and quasi-corporate (Mendoza v. de Leon)—to sustain inclusion of municipalities within the term “government entities.” The Court emphasized that construing the statute to exclude municipal corporations would erode the statutory language and run counter to contemporary legislative expressions (notably the Local Autonomy Act), which sought to enlarge municipal powers. The construction adopted gives effect to all statutory words and harmonizes the legislative scheme.
Reasoning — Franchise Rights, Amendment, and Police Power
The Court rejected petitioners’ reliance on their legislative franchise as a bar to the PSC’s order. Under the Constitution (Article XIV, Section 8, as referenced), no franchise or right is immune from being granted subject to amendment, alteration or repeal by Congress; such amendment may be express or implied by a later, generally applicable act. The Court applied the longstanding principle—illustrated by Charles River Bridge v. Warren Bridge—that private franchises cannot be used to defeat the sovereign’s police power. Thus, even where a private party holds a legislative franchise, a subsequent general statute that alters the regulatory landscape or authorizes governmental instrumentalities to engage in public ser
...continue readingCase Syllabus (G.R. No. L-22766)
Procedural Posture and Relief Sought
- This is a petition for review brought by Surigao Electric Co., Inc., a legislative franchise holder, and Arturo Lumanlan, Sr., to whom, on February 16, 1962, the rights and privileges of the former as well as its plant and facilities were transferred.
- Petitioners challenge the validity of the Public Service Commission's order dated July 11, 1963, in which the Commission stated it had "no other alternative but to approve as [it did approve] the tentative schedule of rates submitted by the applicant," the Municipality of Surigao.
- The petition raises constitutional and statutory questions about the scope of the Public Service Commission's jurisdiction and the continuing effect of petitioners' legislative franchise.
- The Court also records an order of February 7, 1964, denying petitioners' motion for reconsideration; both the July 11, 1963 order and the February 7, 1964 denial of reconsideration are before the Court for review.
Core Question Presented
- The issue articulated by the Public Service Commission, and presented for decision, "boils down to whether or not a municipal government can directly maintain and operate an electric plant without obtaining a specific franchise for the purpose and without a certificate of public convenience and necessity duly issued by the Public Service Commission."
- More broadly, the case requires statutory interpretation of amendments introduced by Republic Act No. 2677 (approved June 18, 1960), particularly whether government entities, including municipalities, are exempted from the certificate of public convenience and necessity requirement and the extent to which the Commission retains regulatory power.
Relevant Statutory Provisions (as cited in the decision)
- Republic Act No. 2677 (approved June 18, 1960), Section 13(a) as amended:
- "The Commission shall have jurisdiction, supervision, and control over all public services and their franchises, equipment, and other properties, and in the exercise of its authority, it shall have the necessary powers and the aid of the public force: Provided, That public services owned or operated by government entities or government-owned or controlled corporations shall be regulated by the Commission in the same way as privately-owned public services, but certificates of Public Convenience or certificates of public convenience and necessity shall not be required of such entities or corporations: And provided, further, That it shall have no authority to require steamboats, motorship lines, whether privately-owned, or owned or operated by any Government controlled corporation or instrumentality to obtain certificate of public convenience or to prescribe their definite routes or lines of service."
- Republic Act No. 2677, Section 14(e) as amended:
- "The following are exempted from the provisions of the preceding section: . . .(e) Public services owned or operated by any instrumentality of the National Government or by any government-owned or controlled corporation except with respect to the fixing of rates."
- The decision contrasts the amended scope of the Commission's authority with prior law (Commonwealth Act No. 454, June 8, 1939), under which public services owned or operated by instrumentalities of the government or by government-owned or controlled corporations were totally beyond the Commission's jurisdiction.
Facts and Background as Stated in the Source
- Congress amended the Public Service Act on June 18, 1960 (Republic Act No. 2677), removing the requirement that government entities or government-owned or controlled corporations obtain certificates of public convenience and necessity from the Public Service Commission while affirming the Commission's power of regulation.
- Petitioners hold a legislative franchise and claim rights and privileges under that franchise; those rights and privileges, together with the petitioners' plant and facilities, were transferred to Arturo Lumanlan, Sr. on February 16, 1962.
- The Municipality of Surigao submitted a tentative schedule of rates which the Public Service Commission approved by its order of July 11, 1963; the Commission grounded its action on its interpretation of the amendator