KMU Labor Center v.

Garcia
G.R. No. 115381 December 23, 1994
KAPUNAN, J.

TOPIC: Where does the Power to Regulate Public Utilities Reside?

Summary: The Kilusang Mayo Uno Labor Center (KMU) assails the constitutionality and validity of a
memorandum arguing that, among others, the said issuance authorize provincial bus and jeepney
operators to increase or decrease the prescribed transportation fares without application therefore with
the LTFRB, and without hearing and approval thereof by said agency.
The Court granted the petition. Under Section 16 (c) of the Public Service Act, as amended, the
legislature delegated to the defunct Public Service Commission the power of fixing the rates of public
services. LTFRB, the existing regulatory body today, is likewise vested with the same under Executive
Order 202. The authority given by the LTFRB to the bus operators to set fares over and above the
authorized existing fare is illegal and invalid, as it is tantamount to undue delegation of legislative
authority. Under the maxim potestas delegate non delegari potest – “what has been delegated cannot be
delegated.” The policy allowing provincial bus operators to change and increase their fares would result
not only to a chaotic situation but to an anarchic state of affairs. Furthermore, under the Section 16 (a)
of Public Service Act, there must be proper notice and hearing in the fixing of rates, to arrive at a just
and reasonable rate acceptable to both the public utility and the public.
Doctrine: The DOTC and the LTFRB are given the authority to issue administrative orders to regulate
the transport sector, as delegated by the legislative branch. Executive Order No. 202 authorizes LTFRB
"to determine, prescribe, approve and periodically review and adjust, reasonable fares, rates and other
related charges, relative to the operation of public land transportation services provided by motorized
vehicles."

FACTS:
[The Memorandum]

 Secretary of DOTC issued Memorandum Circular No. 90-395 to the LTFRB Chairman allowing
provincial bus operators to charge passengers rates within a range of 15% above and 15% below
the LTFRB official rate for a period of 1 year.
 Finding the implementation of the fare range scheme "not legally feasible," LTFRB Chairman
submitted a memorandum suggesting that the proposed fare range scheme be further evaluated
 Then, the Secretary of the DOTC issued Department Order No. 92-587 defining the policy
framework on the regulation of transport services.
 Thereafter, the LTFRB issued Memorandum Circular No. 92-009 promulgating the guidelines for
the implementation of DOTC Department Order No. 92-587.
 The said order and guideline provide that:
o Provincial bus operators are allowed to collect plus 20% and minus 25% of the prescribed
fare without first having filed a petition for the purpose and without the benefit of a
public hearing
[The Petition]
  Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy
of the DOTC, announced a fare increase of 20% of the existing fares.
 Petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares
 The LTFRB issued one of the assailed orders dismissing the petition for lack of merit.
 Hence, the instant petition for certiorari with an urgent prayer for issuance of a temporary
restraining order.
 Petitioner KMU anchors its claim on 2 grounds.
o First, the authority given by respondent LTFRB to provincial bus operators to set a fare
range is unconstitutional, invalid and illegal.
o Second, the establishment of a presumption of public need in favor of an applicant for a
proposed transport service without having to prove public necessity, is illegal for being
violative of the Public Service Act and the Rules of Court.
 In response, Public Respondents DOTC Secretary Garcia and the LTFRB aver that:
o the petitioner does not have the standing to maintain the instant suit.
o and that it is within DOTC and LTFRB's authority to set a fare range scheme and
establish a presumption of public need in applications for certificates of public
convenience.

ISSUE+HELD:
1. W/N Petitioner has legal standing to sue --- YES
 In the case at bench, Petitioner, whose members had suffered and continue to suffer grave and
irreparable injury and damage from the said implementation, has shown that it has a clear
legal right that was violated and continues to be violated.
o KMU members, who avail of the use of buses, trains and jeepneys everyday, are
directly affected by the burdensome cost of arbitrary increase in passenger fares.
o They are part of the millions of commuters who comprise the riding public.
Certainly, their rights must be protected, not neglected nor ignored.

2. W/N the questioned issuances are illegal --- YES

On undue delegation of legislative power

 Section 16(c) of the Public Service Act provides that:

o The Commission shall have power, upon proper notice and hearing:
 To fix and determine individual or joint rates, tolls, charges, classifications,
or schedules thereof, as well as commutation, mileage kilometrage, and other
special rates which shall be imposed, observed, and followed thereafter by
any public service: Provided, That the Commission may, in its discretion,
approve rates proposed by public services provisionally and without
necessity of any hearing; but it shall call a hearing thereon within thirty days
thereafter, upon publication and notice to the concerns operating in the
territory affected
 Under the foregoing provision, the Legislature delegated to the defunct Public Service
Commission the power of fixing the rates of public services.
 o Respondent LTFRB, the existing regulatory body today, is likewise vested with the
same under Executive Order No. 202
 Such delegation of legislative power to an administrative agency is permitted in order to
adapt to the increasing complexity of modern life

 ITC, the authority given by the LTFRB to the provincial bus operators to set a fare range over
and above the authorized existing fare, is illegal and invalid as it is tantamount to an undue
delegation of legislative authority.
o This is hinged on the latin maxim Potestas delegata non delegari potest or “What has
been delegated cannot be delegated.”
o The policy of allowing the provincial bus operators to change and increase their fares
at will would leave the riding public at the mercy of transport operators who may
increase fares whenever it pleases them or whenever they deem it "necessary" to do
so.

 Moreover, rate fixing is a delicate and sensitive government function that requires sound
discretion with the settled goal of arriving at a just and reasonable rate acceptable to both the
public utility and the public
o Through the said memorandum, the rate could increase at a compounded rate
(increase by 20% the rate that was already increased)
o A rate which is too high becomes discriminatory, and this, contrary to public interest
o Given this, government must not relinquish this important function in favor of those
who would benefit and profit from the industry.

On hearing as requirement of due process

 Neither should the requisite notice and hearing be done away with
o The people, represented by reputable oppositors, deserve to be given full opportunity
to be heard in their opposition to any fare increase
o To do away with such a procedure and allow just one party, an interested party at
that, to determine what the rate should be, will undermine the right of the other
parties to due process
o Discarding such procedural and constitutional right is certainly inimical to our
fundamental law and to public interest.

On the presumption of public need

 A certificate of public convenience (CPC) is an authorization granted by the LTFRB for the
operation of land transportation services for public use as required by law
 Pursuant to Section 16(a) of the Public Service Act, as amended, the following requirements
must be met before CPC may be granted:
o … the applicant must prove that the operation of the public service proposed
and the authorization to do business will promote the public interest in a proper
and suitable manner
  Section 16(c)(iii) of the Public Service Act provides that:
o that before a CPC will be issued, the applicant must prove by proper notice and
hearing that the operation of the public service proposed will promote public
interest in a proper and suitable manner.

 However, the questioned LTFRB Memorandum Circular No. 92-009, Part IV, provides for
incongruous and contradictory policy guideline on the issuance of a CPC:
o “The issuance of a Certificate of Public Convenience is determined by public need.
The presumption of public need for a service shall be deemed in favor of the
applicant, while the burden of proving that there is no need for the proposed
service shall be the oppositor's.”
 The establishment of public need in favor of an applicant reverses well-settled and
institutionalized judicial, quasi-judicial and administrative procedures.
o It allows the party who initiates the proceedings to prove, by mere application, his
affirmative allegations.
o Moreover, the offending provisions of the LTFRB memorandum circular in question
would in effect amend the Rules of Court by adding another disputable presumption
under Rule 131, Section 5 of the Rules of Court.
o Such usurpation of this Court's authority cannot be countenanced

RULING: Petition GRANTED

DISPOSITIVE:
WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED and the challenged
administrative issuances and orders, namely: DOTC Department Order No. 92-587, LTFRB
Memorandum Circular
No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are hereby DECLARED
contrary to law and invalid insofar as they affect provisions therein (a) delegating to provincial bus and
jeepney operators the authority to increase or decrease the duly prescribed transportation fares; and (b)
creating a presumption of public need for a service in favor of the applicant for a certificate of public
convenience and placing the burden of proving that there is no need for the proposed service to the
oppositor.
The Temporary Restraining Order issued on June 20, 1994 is hereby MADE PERMANENT insofar as it
enjoined the bus fare rate increase granted under the provisions of the aforementioned administrative
circulars, memoranda and/or orders declared invalid.
No pronouncement as to costs.
SO ORDERED.