Commercial Law,  Legally Yours

PAL v. CAB

Commercial Law. Transportation. Legislative franchise. Certificate of Public Convenience and Necessity.
PHILIPPINE AIRLINES, INC. vs. 
CIVIL AERONAUTICS BOARD and GRAND INTERNATIONAL AIRWAYS, INC.
G.R. No. 11952; March 26, 1997

FACTS:
This Special Civil Action seeks to prohibit respondent Civil Aeronautics Board from exercising jurisdiction over private respondent’s Application for the issuance of a Certificate of Public Convenience and Necessity, and to annul and set aside a temporary operating permit issued by the Civil Aeronautics Board in favor of Grand International Airways, allowing the same to engage in scheduled domestic air transportation services, particularly the Manila-Cebu, Manila-Davao, and converse routes.

Philippine Airlines, Inc. (PAL) alleges that GrandAir does not possess a legislative franchise authorizing it to engage in air transportation service within the Philippines or elsewhere. Such franchise is, as argued, a requisite for the issuance of a Certificate of Public Convenience or Necessity by the respondent Board, as mandated under Section 11, Article XII of the Constitution.

Respondent GrandAir, on the other hand, posits that a legislative franchise is no longer a requirement for the issuance of a Certificate of Public Convenience and Necessity or a Temporary Operating Permit, following the Court’s pronouncements in various jurisprudential cases.

ISSUE:
Whether or not Congress, in enacting Republic Act 776, has delegated the authority to authorize the operation of domestic air transport services to the respondent Board, such that Congressional mandate for the approval of such authority is no longer necessary.

HELD:
It is generally recognized that a franchise may be derived indirectly from the state through a duly designated agency, and to this extent, the power to grant franchises has frequently been delegated, even to agencies other than those of a legislative nature. In pursuance of this, it has been held that privileges conferred by a grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature. The trend of modern legislation is to vest the Public Service Commissioner with the power to regulate and control the operation of public services under reasonable rules and regulations, and as a general rule, courts will not interfere with the exercise of that discretion when it is just and reasonable and founded upon a legal right.

The Civil Aeronautics Board has the authority to issue a Certificate of Public Convenience and Necessity, or Temporary Operating Permit to a domestic air transport operator, who, though not possessing a legislative franchise, meets all the other requirements prescribed by the law. Such requirements were enumerated in Section 21 of R.A. 776. There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an indispensable requirement for an entity to operate as a domestic air transport operator. Although Section 11 of Article XII recognizes Congress’ control over any franchise, certificate or authority to operate a public utility, it does not mean Congress has exclusive authority to issue the same. Franchises issued by Congress are not required before each and every public utility may operate. In many instances, Congress has seen it fit to delegate this function to government agencies, particularly specialized in their respective areas of public service.

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