G.R. No. L-13638-40, June 30, 1964
MANILA ELECTRIC COMPANY, petitioner, vs. PUBLIC SERVICE COMMISSION ETC., ET AL., respondents.

FACTS

Manila Electric Company (Meralco) filed three applications with the Public Service Commission (PSC) for the revision and reduction of its electric rates, which were initially approved. Subsequently, upon a petition by respondent Dr. Pedro Gil, the General Auditing Office (GAO) audited Meralco’s books and submitted a report to the PSC. The PSC then scheduled a hearing to consider further rate revisions based on this GAO report. During this hearing, which the PSC termed “informal,” Meralco was directed to submit a memorandum specifying its objections to the GAO report and the reasons therefor, as a prerequisite for presenting its evidence.
Meralco complied by filing an answer that contested the GAO’s findings on legal and accounting principles. However, the PSC, without receiving any further evidence from Meralco, proceeded to decide the cases. It ruled that the GAO report was admissible as official evidence, that Meralco’s objections were essentially legal rather than factual, and that no further hearing was necessary. The PSC justified this by distinguishing between its judicial and legislative functions, implying that a full hearing was not required for the latter.

ISSUE

Whether the Public Service Commission denied Meralco its right to due process by deciding the rate revision cases without affording it a full opportunity to present evidence in a formal hearing.

RULING

Yes. The Supreme Court set aside the PSC’s decision, holding that Meralco was denied due process of law. The Court emphasized that the constitutional guarantee of due process binds all government branches and agencies, including administrative bodies like the PSC. This guarantee requires notice and a meaningful opportunity to be heard, which includes the right of an affected party to present its case and submit supporting evidence for the tribunal’s consideration.
The legal logic is clear: while the PSC possesses broad regulatory powers, its exercise must conform to fundamental fairness. Directing Meralco to file a memorandum outlining its objections did not substitute for an actual hearing where it could present and test evidence. The PSC’s characterization of the proceeding as “informal” and its subsequent denial of a hearing based on a distinction between judicial and legislative functions were erroneous. The Court found that the cold fact remained that Meralco “had not been given its day in court.” The GAO report, while admissible, did not preclude Meralco’s right to cross-examine the auditors or present countervailing evidence to challenge its findings and application. Consequently, the case was remanded to the PSC for proper proceedings where Meralco could exercise its right to a full hearing.