G.R. No. L-16659; April 26, 1961
ALFREDO REYES, plaintiff-appellant, vs. JOSE PASCUAL, defendant-appellee.

FACTS

Alfredo Reyes filed a complaint to enjoin Jose Pascual from operating a ferry business along the Mercedes-Manguisoc Ferry in Camarines Norte and sought damages. Reyes began operations on September 2, 1958, under an exclusive one-year lease and operation award from the Municipal Council of Mercedes, approved by the provincial board, following a public bidding. He also secured a “bay and river license” from the Bureau of Customs on September 25, 1958. Pascual had commenced his own ferry service on May 15, 1958, under a similar Customs license issued that same date. Pascual was aware of the municipal bidding but did not participate. The ferry line had historically been administered by the Municipality of Mercedes since its creation.
The core legal conflict was whether Reyes’s municipal award or Pascual’s earlier Customs license conferred the superior right to operate. The trial court dismissed Reyes’s complaint, holding that the municipality lacked the power to grant an exclusive privilege and ordering Reyes to pay Pascual damages. Reyes appealed to the Supreme Court.

ISSUE

The primary issue is whether, for a municipal ferry, the authority granted by a municipality under the Revised Administrative Code prevails over a bay and river license issued by the Bureau of Customs, thereby determining who has the legal right to operate the ferry service.

RULING

The Supreme Court reversed the trial court’s decision. The ruling hinges on reconciling three legal regimes: (1) Sections 2318-2320 of the Revised Administrative Code, granting municipalities authority to establish and lease municipal ferries; (2) Republic Act No. 1937 (Tariff and Customs Code), authorizing the Bureau of Customs to issue bay and river licenses; and (3) Commonwealth Act No. 146 , conferring jurisdiction on the Public Service Commission over public utilities including ferries.
The Court applied the principle that a specific statutory grant of authority prevails over a general one. Following its precedent in Municipality of Gattaran v. Elizaga, the Court held that for a ferry lying entirely within municipal boundaries, the municipality’s specific authority to lease the ferry for revenue purposes is paramount. A private operator must first secure this municipal grant before any other regulatory requirement, including a Customs license or a Public Service Commission certificate, becomes operative. The Customs license is a general requirement for vessels in inland waters but does not override the municipality’s specific prerogative to control its own ferry as a local public utility and revenue source.
Consequently, Reyes, as the lawful awardee from the Municipality of Mercedes, possessed the exclusive right to operate the ferry. Pascual’s prior Customs license, obtained without municipal authority, was insufficient. The Court issued a permanent injunction against Pascual. However, finding he acted under an honest mistake of law, the Court absolved him from paying attorney’s fees and litigation expenses to Reyes. Costs were imposed on Pascual.