Blanco vs. Manalo

An existing holder of a certificate of public convenience is entitled to preference over a new applicant in the allocation of additional units, provided the incumbent is willing and able to improve its service and has not engaged in trafficking or other disqualifying conduct. Before a new operator may be authorized, the existing operator must first be given the opportunity to remedy any deficiency or inadequacy in its service.

A total of 357 separate applications were filed with the Public Service Commission seeking authority to operate taxicab units within the City of Manila and suburbs, and from any point in that territory to any other place in Luzon accessible to motor vehicle traffic. Fifty-nine applications came from existing taxicab operators requesting additional units; the remaining 298 were filed by non-operators seeking original authority. The City of Manila opposed all applications, while the taxicab operators who had applied for additional units opposed the applications of non-operators, asserting a priority right to any increase.

• The Applications: Fifty-nine existing taxicab operators in Manila and suburbs applied for additional units, while 298 non-operators sought original certificates to operate specified numbers of taxicab units. The City of Manila opposed all applications. The applicant-operators opposed the applications of non-operators, claiming priority over any increase. Fifty-seven applications were dismissed for failure to appear at the hearing, and three were dismissed on the applicants’ own motions.
• The PSC’s Findings: After joint hearings, the Commission found that public necessity existed for additional taxicab units and that all appearing applicants were financially capable. It concluded, however, that authorizing the total of 14,995 units applied for would be unreasonable and limited the increase to 330 units. The Commission allocated the entire increase to existing operators and denied all applications of new entrants.
• Basis for Allocation: The PSC cited the rule in Bohol Land Transportation Co. v. Jureidini that an existing operator must be given the opportunity to improve its service before a new certificate is granted, and the doctrine in Yangco v. Esteban that a third operator should not be permitted where existing operators already serve the public. It further relied on Encarnacion Elchico vda. de Fernando v. Gallardo for the proposition that old operators able and willing to increase their units are entitled to priority over new applicants.
• Additional Considerations: The PSC noted that existing operators had not been making good business due to increased costs of cars, spare parts, and fuel — a circumstance that had prompted an earlier fare increase to ensure a fair return. The Commission also adopted the policy of keeping the number of operators at its current level to avoid further straining its supervisory capacity, given that it had only 92 transportation inspectors nationwide.
• Petitioner’s Allegations: Jaime R. Blanco, a new applicant, contended before the PSC and on appeal that existing operators had sold or assigned their franchises in whole or in part, had violated PSC rules, and that the Commission’s reliance on fair return was outdated. He further alleged that 48 of the authorized units had been granted to nine unlisted operators in violation of due process, and raised procedural objections to the denial of his motion for reconsideration.
• PSC’s Rebuttal: The Commission found no sufficient evidence of “trafficking” — i.e., the practice of securing authority to operate units merely for the purpose of reselling them. It held that certificates of public convenience were property rights that could be sold with its approval, and that the sales shown did not disqualify the operators from receiving additional units.

• Estoppel and Waiver: Petitioner argued that existing operators had sold or assigned their franchises in whole or in part, thereby estopping themselves from claiming, or waiving, the right to preference in the allocation of additional units.
• Violation of PSC Rules: Petitioner maintained that all existing operators had violated the Commission’s rules and regulations, which should have disqualified them from receiving any priority.
• Outdated Fair Return Rationale: Petitioner contended that the PSC erred in relying on the factor of fair and reasonable return on investment, claiming that the decision of Manila Yellow Taxicab v. Public Service Commission rendered such reliance improper.
• Due Process (Unlisted Operators): Petitioner alleged a violation of due process because 48 of the 330 additional units were awarded to nine operators who were not listed in the proceedings.
• Reconsideration Denied on Ground of Unheard Evidence: Petitioner asserted that the PSC erred in refusing to disturb its decision simply because the commissioners who resolved the motion for reconsideration had not personally heard the recorded evidence presented to their predecessors.
• Immediate Effectivity as a Bar: Petitioner argued that the PSC improperly declined to reconsider its decision on the ground that the immediate effectivity of its orders had induced the grantees to invest in the authorized units.
• Denial of Petitioner’s Own Application: Petitioner claimed that the PSC should have granted him the franchise and units he applied for.

• Priority to Incumbent Operators: The existing taxicab operators who had applied for additional units opposed all applications filed by non-operators, contending that any authorized increase should be allocated to them because they were entitled to priority as incumbent certificate holders.
• No Brief Filed on Appeal: Although required to file their brief within 30 days from notice, the respondents did not submit any brief before the Supreme Court.

• Preference after Sale/Assignment: Whether the existing taxicab operators were estopped or had waived their right to preference because they had sold or assigned their franchises in whole or in part.
• Effect of Rule Violations: Whether the existing operators lost their right to preference by reason of alleged violations of PSC rules and regulations.
• Relevance of Fair Return: Whether the PSC erred in relying on the factor of fair and reasonable return on investment in awarding preference to existing operators.
• Due Process (Unlisted Operators): Whether the award of 48 units to nine unlisted operators violated petitioner’s right to due process.
• Reconsideration Based on Recorded Evidence: Whether the PSC erred in denying reconsideration on the ground that the deciding commissioners had not personally heard the recorded evidence.
• Effect of Immediate Effectivity: Whether the PSC improperly refused to disturb its decision because of the immediate effectivity of its orders and the grantees’ subsequent investments.
• Denial of Petitioner’s Application: Whether the PSC erred in not granting petitioner the franchise and units he applied for.

• Preference after Sale/Assignment: The PSC correctly retained the preference. Certificates of public convenience were treated as property that could be sold with the Commission’s approval. The evidence did not show “trafficking,” i.e., a practice of applying for units solely to resell them. No operator was shown to have engaged in that speculative practice, so the sales did not strip the incumbents of their priority.
• Effect of Rule Violations: No sufficient evidence established that the operators had violated PSC rules and regulations in a manner that would forfeit their right to preference. The allegation, even if assumed true, did not automatically nullify the priority that the law and settled jurisprudence accord to existing operators.
• Relevance of Fair Return: The PSC’s consideration of the financial condition of existing operators was consistent with Manila Yellow Taxicab v. Public Service Commission, which held that preference should not be granted in the absence of evidence of resultant loss to present operators should a new applicant be authorized. Here, the Commission specifically found that existing operators “had not been making good business lately due to the recent increase in the prices of cars, spare parts and fuel,” a finding that satisfied the requirement of showing detriment to incumbents. Moreover, the PSC independently relied on a valid policy of maintaining the current number of operators to ensure effective supervision, a ground that was not shown to be wrong.
• Due Process (Unlisted Operators): The issue was of little consequence. Petitioner was a new applicant, not an existing operator. Even if the award to unlisted operators were irregular, it did not prejudice him; the units would still have been allocated to other existing operators under the priority rule, not to a new entrant like petitioner.
• Reconsideration Based on Recorded Evidence: The refusal to reconsider was not erroneous. The PSC could validly decide the motion on the strength of the recorded evidence even if the commissioners then sitting had not been the ones who personally received it. No reversible error was shown.
• Effect of Immediate Effectivity: The PSC did not commit an error in declining to disturb its decision solely on the ground that the grantees had already made investments in reliance on the order’s immediate effectivity. The denial of reconsideration was independently supported by the merits.
• Denial of Petitioner’s Application: Petitioner’s application was properly denied. Under the operative priority doctrine, the Commission acted within its discretion in distributing the 330 additional units exclusively among incumbent operators who were willing and able to improve service, to the exclusion of new applicants.

• Preference of Existing Operator (Prior Operator Rule) — Before a certificate of public convenience and necessity may be granted to a new applicant, an existing operator holding a proper certificate must be given the opportunity to improve its service if it is deficient or inadequate. Where existing operators are already serving the public, there is no justification to permit a new operator to enter and compete. An old operator that is unquestionably able and ready to increase its equipment is entitled to protection and priority over a new applicant. (Bohol Land Transportation Co. v. Jureidini, 53 Phil. 560; Yangco v. Esteban, 58 Phil. 345; Encarnacion Elchico vda. de Fernando v. Gallardo, G.R. No. L-4860, 5 September 1953, applied.)
• Qualification on Preference (Fair Return / Detriment) — The preference of existing operators over new applicants in the distribution of additional authorized units is not absolute. Under Manila Yellow Taxicab v. Public Service Commission, G.R. No. L-2875, 31 October 1951, no preference should be granted in the absence of evidence that the existing operator would suffer a resultant loss if a new applicant were given the franchise or a portion of the additional units. The PSC’s finding that incumbents had not been making good business due to rising costs satisfied this evidentiary requirement, thereby justifying the exclusive allocation to them.
• Policy of Limiting Number of Operators for Effective Supervision — The Public Service Commission may, in the exercise of its regulatory discretion, adopt a policy of maintaining the number of operators at its current level to avoid overburdening its limited supervision and enforcement resources. Such a policy, when not shown to be unreasonable, can serve as an independent ground for denying applications of new entrants.

• “In the case of Bohol Land Transportation Co. vs. Jureidini, (53, Phil. 560) the Supreme Court ruled that ‘before granting a certificate of public necessity and convenience to a transportation company or common carrier on land, there being another with a proper certificate, the latter should be given an opportunity to improve its service, if deficient or inadequate,’ and in the case of Yangco vs. Esteban (58, Phil. 345), the Supreme Court laid down the following doctrine: ‘Where two operators are more than serving the public there is no reason to permit a third operator to engage in competition with them. …’ Furthermore, the Supreme Court stated ‘being old operators, unquestionably able and ready to increase their units, the petitioners are entitled to protection and priority as against new operators.’” — This passage encapsulates the prior operator rule that controlled the allocation.
• “It is the policy of this Commission that a taxicab operator should have at least the minimum of five (5) units, consequently, it would not be possible to grant to any new applicant and it would be unfair to grant to some of the new applicants and deny to the others as they are all found under equal circumstances.” — The PSC’s practical rationale for denying all new applicants rather than picking among them.
• “Another factor considered by the Commission in granting the increased units to applicant-operators only is the decision of the Commission to keep the number of present operators to its present level. The Commission has experienced great difficulty in its supervision of TPU jitneys and auto-calesas in Manila and suburbs due to the great number of operators. … with the maintenance of the present number of taxicab operators there will be no additional burden in the exercise of its power of supervision.” — The policy justification grounded on administrative feasibility.

• Bohol Land Transportation Co. v. Jureidini, 53 Phil. 560 — Applied as the controlling rule that an existing operator must first be given the chance to improve its service before a new certificate is awarded.
• Yangco v. Esteban, 58 Phil. 345 — Followed for the principle that a third operator should not be allowed to compete where existing operators adequately serve the public.
• Encarnacion Elchico vda. de Fernando v. Gallardo, G.R. No. L-4860, 5 September 1953 — Cited to reinforce that old operators able and ready to increase units have priority over new applicants.
• Manila Yellow Taxicab v. Public Service Commission, G.R. No. L-2875, 31 October 1951 — Distinguished and reconciled; the Court held that the PSC’s finding of poor business conditions among existing operators satisfied the requirement of showing resultant loss, thus the preference was not foreclosed.

• N/A (No specific statutory or codal provisions were cited in the decision.)

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Teehankee, Villamor, and Makasiar, JJ., concurred. Barredo, J., took no part.

None.