Luque vs. Villegas

A certificate of public convenience constitutes neither a franchise nor a contract and confers no property right; it is a mere license or privilege, which may be subjected to reasonable restraints and burdens through the police power of the state, including municipal traffic ordinances and administrative bus bans, without violating the due process, equal protection, or non-impairment clauses of the Constitution.

Traffic congestion in the City of Manila had reached critical and emergency proportions. To address this, the Municipal Board enacted Ordinance No. 4986 on July 13, 1964, rerouting provincial buses and jeepneys and limiting their entry into the city. Nearly simultaneously, the Public Service Commission, through Commissioner Enrique Medina, issued Administrative Order No. 1 (February 7, 1964) and Administrative Order No. 3 (April 21, 1964), which established a bus ban: only a small percentage of provincial units were permitted to cross the city boundary, and loading/unloading was confined to designated points. Passengers and operators from the southern provinces, whose terminals were in Manila, brought an original action to nullify both the ordinance and the administrative orders.

• Nature of the Action: Original petition for certiorari and mandamus filed by passengers from Cavite and Batangas who ride provincial buses, and by public service operators holding certificates of public convenience for PUB and PUJ vehicles with terminals in Manila, against Manila City officials, the PSC, and two bus companies. The petition challenged the constitutionality and legality of Ordinance No. 4986 and the Commissioner’s Administrative Orders No. 1 and No. 3, series of 1964.

• The Ordinance and Administrative Orders: Ordinance No. 4986 (“An Ordinance Rerouting Traffic on Roads and Streets in the City of Manila, and for Other Purposes”) restricted provincial PUB and PUJ vehicles from entering Manila except through designated south entry points, with loading and unloading allowed only at Harrison Boulevard. It created a flexible shuttle bus service, allowing each provincial operator a number of shuttle buses (maximum one per ten authorized units) to ferry passengers from the entry control points into the city. Administrative Order No. 1 required provincial public utilities to bear a “For Provincial Operation” marking; only units with a special PSC-Mayor sticker could cross the boundary line to reach their Manila terminal, and loading/unloading was limited to specific locations (San Andres-Taft Rotonda, Plaza Lawton, Harrison-Mabini). Administrative Order No. 3, resolving reconsideration, allocated entry quotas — generally 10% of a provincial operator’s fleet, raised to 15% for those operating within a 50-kilometer radius of Manila City Hall, with operators of fewer than five units banned entirely from crossing the boundary.

• Petitioners’ Allegations: Operators claimed the ordinance and orders destroyed vested rights to operate inside Manila and to reach their downtown terminals, and that passengers’ vested right to be transported directly into the city was impaired. They further argued that the measures were an unconstitutional class legislation because inter-urban buses and private vehicles were treated more favorably than provincial buses. They also asserted that only the Public Service Commission — not the City — could amend certificates of public convenience, and that the implementation was arbitrary and unreasonable.

• Stipulated Context: Traffic in Manila had “grown to alarming and emergency proportions.” Provincial buses were differentiated from inter-urban buses by their larger size, longer loading/unloading times due to freight and baggage, long-distance routes, fixed schedules, and predominant use of national highways rather than city streets.

• Vested Rights of Operators: Petitioner operators maintained that their subsisting certificates of public convenience granted a vested property right to operate their PUB and PUJ vehicles to and from their Manila terminals, which Ordinance 4986 and the administrative orders destroyed without due process.
• Vested Rights of Passengers: Petitioner passengers argued they held a vested right to be transported directly from their provinces to downtown Manila without transfer, a right allegedly acquired through uninterrupted practice since before the war, now impaired by the forced shuttle system.
• Class Legislation: Petitioners contended the ordinance discriminated unjustifiably against provincial buses and jeepneys in favor of inter-urban buses (which could still enter Manila freely) and private vehicles, thereby violating the equal protection clause.
• Ultra Vires / Improper delegation: Petitioners argued that the power to amend, modify, or revoke certificates of public convenience is vested exclusively in the Public Service Commission under Section 16(m) of the Public Service Act, requiring notice and hearing; the City of Manila exceeded its authority by effectively amending certificates through a traffic ordinance.
• Arbitrariness and Unreasonableness: Petitioners claimed the enforcement of the ban was arbitrary, oppressive, and unreasonable because the prohibited streets represented “the cream of their business.”

• Proper Exercise of Police Power: Respondents countered that Ordinance 4986 and the administrative orders were valid police power measures designed to relieve critical traffic congestion, promote public safety, and serve the general welfare, and that such police power cannot be defeated by a franchise or privilege.
• No Vested Right in a Certificate: Respondents asserted that a certificate of public convenience is a mere license or privilege, not a contract or property right, and is always subject to amendment, modification, or revocation by the State, as well as to local traffic regulations.
• Authority Under the Manila Charter and Public Service Act: Respondents invoked Section 18(hh) of the Revised Charter of the City of Manila (Republic Act No. 409, as amended), which granted the Municipal Board authority to regulate traffic and to license or prohibit the occupancy of streets. They also relied on Section 17(j) of the Public Service Act, which empowers the PSC to require public services to comply with municipal ordinances. The Commissioner’s orders were characterized as rules and regulations issued pursuant to Sections 13(a), 16(g), and 17(a) of the Public Service Act.
• Reasonable Classification: Respondents argued that the distinction between provincial and inter-urban buses was based on substantial differences in size, weight, route length, type of cargo, and impact on city traffic, and that private vehicles, operated for non-commercial purposes, belonged to a different class altogether. Therefore, no unconstitutional discrimination existed.

• Vested Rights: Whether Ordinance 4986 and the PSC administrative orders impair vested rights of public service operators and passengers in violation of due process.
• Equal Protection: Whether the bus ban constitutes class legislation that denies provincial operators and passengers the equal protection of the laws by favoring inter-urban buses and private vehicles.
• Police Power / Validity: Whether the ordinance and administrative orders represent a valid exercise of police power, or are arbitrary, oppressive, and unreasonable.
• Authority of the City and PSC Commissioner: Whether the City of Manila and the PSC Commissioner had the legal authority to enact the challenged traffic and entry restrictions without amending the operators’ certificates of public convenience through the PSC’s formal adjudicatory process.

• Vested Rights: No vested right was impaired. A certificate of public convenience is neither a franchise nor a contract; it confers no property right and is a mere license or privilege. The State, through the Public Service Commission, retains the power to impose new burdens, alter, or even revoke the certificate whenever the public interest requires. Furthermore, all certificates are issued subject to the condition that the operator shall comply with all rules and regulations of the Commission and all applicable municipal ordinances. Consequently, holders acquired no “absolute, complete, and unconditional” right to operate on specific streets. As for passengers, their asserted right to direct transport is entirely dependent on the manner in which public services are regulated; it does not rise to the level of a vested right that can override police power regulations.
• Equal Protection: The ordinance does not violate the equal protection clause. Substantial distinctions exist between provincial and inter-urban buses: provincial buses carry freight, are larger and heavier, take longer to load/unload, and cover long distances on national highways, whereas inter-urban buses mainly use city streets over short contiguous routes. Private vehicles are not operated for profit and typically have a single destination, placing them in a different class. The law applies uniformly to all members within each class, and the classification rests on real and substantial differences reasonably related to the ordinance’s purpose of relieving traffic congestion.
• Police Power / Validity: Both the ordinance and the administrative orders were a proper exercise of police power. The measures were adopted as a direct response to emergency-level traffic congestion that menaced public safety and convenience. Police power is a continuing attribute of the State and may restrict the use of streets and the operation of public services whenever the general welfare demands it. No franchise or previously lawful business can be used to frustrate reasonable regulation. The restrictions were not arbitrary but rationally tailored to the declared objective.
• Authority of the City and PSC Commissioner: The City of Manila was authorized to enact the ordinance under Section 18(hh) of its Revised Charter, which empowered the Municipal Board to regulate the use of streets and license or prohibit their occupancy. The earlier ruling in Lagman vs. City of Manila conclusively held that the Charter, as a special and later law, prevails over general provisions of the Public Service Act. The PSC Commissioner’s orders were authorized under Sections 13(a), 16(g), and 17(a) of the Public Service Act, granting the Commission power to prescribe rules and regulations for public services. Section 17(j) further subjected public services to compliance with municipal ordinances. The orders did not amend certificates of public convenience but constituted standing regulations to which all certificates were already subject.

• Nature of a Certificate of Public Convenience — A certificate of public convenience constitutes neither a franchise nor a contract, confers no property right, and is a mere license or privilege. It does not vest the holder with a proprietary interest in the route or in the continued exercise of the privilege free from regulation. The State may alter, amend, modify, or revoke it whenever the public interest requires, subject only to statutory procedural safeguards (citing Pangasinan Transportation Co., Inc. vs. PSC, 70 Phil. 221; A.L. Ammen Transportation Co., Inc. vs. La Comision de Servicios Publicos, 72 Phil. 459; Fisher vs. Yangco Steamship Co., 31 Phil. 1).
• Vested Right Defined — A vested right is one that is fixed, unalterable, absolute, complete, and unconditional — a present interest that has become the property of a particular person, independent of a contingency. It is distinct from a mere expectancy or a contingent interest founded on the anticipated continuance of existing laws. The Court applied this standard to hold that neither operators nor passengers held such a right to continue using specific Manila streets or to be transported directly into the city.
• Police Power Over Public Services and Streets — The operation of common carriers is affected with a public interest and may be subjected to reasonable restraints and burdens through the police power in order to secure the general comfort, safety, and welfare. No franchise or contract can divest the state or a municipal corporation of its continuing police power; a business lawful today may be restricted or prohibited tomorrow if changed circumstances make it a menace to public welfare. Traffic regulation is a quintessential police power subject (citing Calalang vs. Williams, 70 Phil. 726; Pasay Transportation Co., Inc. vs. PSC, 59 Phil. 278; Surigao Electric Co., Inc. vs. Municipality of Surigao, 24 SCRA 898).
• Equal Protection / Reasonable Classification — The equal protection clause does not demand absolute equality; it requires that persons under like circumstances be treated alike. Legislation that applies only to a specified class is valid if (1) it applies equally to all persons within that class, and (2) substantial and real distinctions exist between those within the class and those outside it, and such distinctions are reasonably related to the purpose of the law. The classification of provincial versus inter-urban buses and public versus private vehicles was sustained under this test (citing Ichong vs. Hernandez, 101 Phil. 1155; Ormoc Sugar Co., Inc. vs. Treasurer of Ormoc City, 22 SCRA 603).

• “[A] certificate of public convenience constitutes neither a franchise nor a contract, confers no property right, and is a mere license or privilege. The holder of such certificate does not acquire a property right in the route covered thereby. Nor does it confer upon the holder any proprietary right or interest of franchise in the public highways. Revocation of this certificate deprives him of no vested right.”
• “Rights are vested when the right to enjoyment, present or prospective, has become the property of some particular person or persons as a present interest. The right must be absolute, complete, and unconditional, independent of a contingency, and a mere expectancy of future benefit, or a contingent interest in property founded on anticipated continuance of existing laws, does not constitute a vested right.”
• “No franchise or right can be availed of to defeat the proper exercise of police power — the authority ‘to enact rules and regulations for the promotion of the general welfare.’ … [B]y the exercise of the police power, which is a continuing one, a business lawful today may in the future, because of the changed situation, the growth of population or other causes, become a menace to the public health and welfare, and be required to yield to the public good.”
• “[T]he equal protection of the law clause ‘does not demand absolute equality amongst residents; it merely requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and liabilities enforced’; and, … ‘is not infringed by legislation which applies only to those persons falling within a specified class, if it applies alike to all persons within such class, and reasonable grounds exist for making a distinction between those who fall within such class and those who do not.’”

• Lagman vs. City of Manila, 17 SCRA 579 (1966) — Controlling precedent; upheld the validity of the same Ordinance No. 4986 against identical challenges. The Court ruled the Manila Charter, as a special and later law, prevailed over the Public Service Act regarding traffic regulation, and that Section 17(j) of the Public Service Act acknowledged the binding effect of municipal ordinances on public services.
• Lagman vs. Medina, 26 SCRA 442 (1968) — Controlling precedent; upheld the validity of Administrative Order No. 1, series of 1964, holding the bus ban rules were within the PSC’s regulatory power and did not constitute an amendment of certificates of public convenience requiring notice and hearing.
• Calalang vs. Williams, 70 Phil. 726 (1940) — Followed; established that police power justifies traffic regulations aimed at relieving congestion, which menaces public safety, and that public welfare lies at the bottom of all regulatory measures.
• Ichong vs. Hernandez, 101 Phil. 1155 (1955) — Followed; articulated the standard for valid classification under the equal protection clause.
• Fisher vs. Yangco Steamship Company, 31 Phil. 1 (1915) — Followed; declared that common carriers exercise a sort of public office, their business is affected with a public interest, and they must submit to public regulation.
• Pangasinan Transportation Co., Inc. vs. Public Service Commission, 70 Phil. 221 (1940) — Followed; established that a certificate of public convenience is neither a franchise nor a contract but a mere license or privilege.

• Section 18(hh), Republic Act No. 409 (Revised Charter of the City of Manila) — Empowered the Municipal Board to regulate traffic on streets and to license or prohibit the occupancy thereof. Construed as an exception to the general provisions of the Public Service Act and Commonwealth Act No. 548, granting the City police power authority to enact the rerouting ordinance.
• Section 13(a), Commonwealth Act No. 146 (Public Service Act) — Vested the Public Service Commission with jurisdiction, supervision, and control over all public services and their franchises, equipment, and other properties; cited as basis for the Commissioner’s regulatory authority.
• Section 16(m), Commonwealth Act No. 146 — Empowered the PSC to amend, modify, or revoke certificates of public convenience after notice and hearing; petitioners relied on this to argue exclusive PSC authority, but the Court held that the bus ban rules were not amendments requiring such procedure.
• Section 16(n), Commonwealth Act No. 146 — Authorized the PSC to suspend or revoke certificates for violations of its orders, rules, or regulations.
• Section 17(j), Commonwealth Act No. 146 — Empowered the PSC to require public services to comply with provincial resolutions and municipal ordinances relating to their operation; used to support the proposition that ordinances are directly enforceable against public services.
• Section 20(k), Commonwealth Act No. 146 — Required public services to obtain Commission approval before adopting practices, rules, or regulations to which the public would be subject; emphasized the comprehensive regulatory control over public services.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, and Barredo, JJ., concurred without separate opinions.