G.R. No. L-19362 August 30, 1971
TAMARAW TAXICAB CO., INC., petitioner, vs. THE PUBLIC SERVICE COMMISSION, AMADO A. DIMAYUGA and SOUTHERN STAR TAXI CO., INC., respondents.

FACTS

Amado A. Dimayuga was the original grantee of a certificate of public convenience to operate 45 taxicab units. He leased and later sold this franchise to Tamaraw Taxicab Co., Inc. Simultaneously with the 1960 sale, Tamaraw’s president, Juanito Vergel de Dios, executed an “Undertaking” binding the corporation to sell the franchise back to Dimayuga not later than December 31, 1964. In 1961, Dimayuga and Southern Star Taxi Co., Inc. filed an application with the Public Service Commission (PSC) for approval of a sale of the franchise from Tamaraw back to Dimayuga and its subsequent assignment to Southern Star. Tamaraw opposed, arguing the deed of sale was void as it was executed by its president without proper corporate authority.
While the PSC application was pending, Tamaraw filed an action for declaratory relief in the Court of First Instance (CFI) to nullify the 1961 deed of sale. The PSC, acknowledging the pending court case, proceeded to approve the application, finding the transfer not detrimental to public interest and the assignee financially qualified. It issued the approval without prejudice to the CFI’s final decision on the deed’s validity.

ISSUE

Whether the Public Service Commission acted with grave abuse of discretion in approving the transfer of the certificate of public convenience despite a pending judicial action questioning the validity of the underlying deed of sale.

RULING

The Supreme Court affirmed the PSC decision. The Court clarified the distinct jurisdictions of the PSC and regular courts. The PSC’s authority under Section 20(g) of the Public Service Act is limited to determining if a transfer of a franchise has just and reasonable grounds and is not detrimental to the public interest. It does not have jurisdiction to adjudicate questions regarding the validity or enforceability of the contract of sale itself, which is properly within the domain of the courts.
The PSC correctly exercised its mandate by approving the transfer based on its findings that the transferee, Southern Star, was a qualified Filipino corporation and the transfer served the public interest. Its approval was expressly made without prejudice to the outcome of the declaratory relief case in the CFI, thereby respecting judicial authority over the contractual dispute. Furthermore, the Court noted that under the 1960 “Undertaking,” Tamaraw was already bound to reconvey the franchise to Dimayuga by the end of 1964. Thus, regardless of the contested 1961 deed, the franchise would ultimately be transferred, making the PSC’s approval a practical measure to ensure continuity of public service. The PSC did not commit grave abuse of discretion as it acted within its statutory powers.