City of Koronadal vs. Yellow Bus Lines, Inc.

A local government unit cannot compel public utility vehicles to utilize a public terminal and abandon their accredited private terminals where the ordinance itself does not mandate such compulsory use, as the measure is overbroad, unduly oppressive, and violative of the carrier's constitutionally protected property rights.

The City of Koronadal was designated the Administrative Seat of Region XII pursuant to Executive Order No. 304, series of 2004, requiring national government offices to transfer their regional operations there. The Regional Development Council No. XII subsequently approved the city's Developmental Framework Plan, which envisioned a centralized transport terminal. Yellow Bus Lines, Inc. is a duly franchised common carrier engaged in land transportation, operating along the national highway of Koronadal City with its own LTFRB-accredited private terminal. The Sangguniang Panlungsod of Koronadal City enacted Ordinance No. 9, Series of 2018, creating the City of Koronadal Integrated Transport Terminal Complex and the City Transport Terminal Regulatory Board, to provide efficient transportation facilities, reduce traffic congestion and pollution, and raise revenues.

On March 30, 2004, the City of Koronadal became the Administrative Seat of Region XII by virtue of Executive Order No. 304, series of 2004, directing all national government departments, bureaus, and offices to transfer their regional operations to the city. On July 2, 2008, the Regional Development Council No. XII issued Resolution No. 36 approving the Developmental Framework Plan of Koronadal City. On August 1, 2008, the Sangguniang Panlungsod approved Ordinance No. 9, Series of 2018, creating the City of Koronadal Integrated Transport Terminal Complex (CKITTC), intended to provide efficient transportation facilities, reduce traffic congestion and vehicular pollution in the city's business center, raise revenues for public services, and promote the general welfare. The ordinance also created the City Transport Terminal Regulatory Board (CTTRB), with the City Mayor as Chair and the City Treasurer and City Traffic Officer among its members. The ordinance was published on October 1, 2018, in a newspaper of general circulation and took effect fifteen days later.

Yellow Bus Lines, Inc. is a duly franchised common carrier engaged in land transportation, operating along the national highway of Koronadal City with its own private terminal. Its private terminal was accredited by the Land Transportation Franchising and Regulatory Board, with its latest accreditation issued on September 5, 2018. Yellow Bus maintained that since its private terminal was along its franchised routes on the national highway, it had the right to direct its buses to and from that terminal and to load and unload passengers and cargo there.

When the ordinance was implemented on October 16, 2018, three checkpoints were set up on the national highway, manned by traffic aides, security personnel, and tax enforcers. All buses belonging to Yellow Bus traveling along their franchised routes were blocked at the checkpoints and rerouted to the CKITTC, where they were required to pay a terminal fee of PHP 70.00 per entry. Yellow Bus alleged that as a result, it had paid a total of PHP 1,003,660.00 in terminal fees. The diversion roads were narrow with limited clearance, some portions were damaged, and maneuvering was difficult, causing damage to tires, rims, and the sides of buses. The additional travel time along diversion routes was 20 to 25 minutes longer than usual, and buses were made to wait 15 minutes before terminal fee cash tickets were issued, extending dispatch intervals from 5 to 10 minutes at the private terminal to 40 to 45 minutes using the CKITTC.

For its part, Koronadal City argued that the business permit for Yellow Bus's private terminal had been issued when the city had no existing public terminal, and that the ordinance was a valid exercise of the city's legislative and police power, as well as its power to tax and raise revenues, in compliance with the city's Developmental Framework Plan and LTFRB guidelines. Yellow Bus then filed a motion for judgment on the pleadings, which the RTC granted, finding that the petitioners' Answer practically admitted all material allegations of the complaint and failed to tender an issue.

• Validity and Mandatory Nature of the Ordinance: Petitioners argued that the Ordinance is a valid law, mandatory in nature, and applicable to all PUVs in Koronadal City, including Yellow Bus, citing Sections 4 and 5 of the Ordinance, which they contended were clear and unequivocal and admitted of no exception.
• Equal Protection: Petitioners maintained that excluding Yellow Bus from the coverage of the Ordinance would give undue advantage to wealthy PUVs, encourage circumvention of regulation, and violate the equal protection clause for lack of a valid and reasonable justification.
• Local Government Regulatory Power: Petitioners argued that Koronadal City has the power to control and regulate traffic and terminals within the city pursuant to the general welfare clause and Section 458(5)(v) and (vi) of the Local Government Code, and that matters concerning the establishment of a terminal are beyond the LTFRB's authority.
• Judgment on the Pleadings Improper: Petitioners contended that the pleadings presented ostensible issues necessitating the presentation of evidence, including questions on the validity of documents presented by respondent and requirements for subsequent compliance with the ordinance.
• Failure to Notify the OSG: Petitioners argued that the failure to give notice to the Office of the Solicitor General was fatal to respondent's case, citing Rule 63, Section 3 of the Rules of Court.

• Ordinance Not Mandatory: Respondent argued that the CA did not err in ruling that the Ordinance does not make the use of the CKITTC mandatory, but only governs, regulates, and prescribes the operation of the CKITTC such that PUVs utilizing its services shall pay the corresponding fees.
• No Valid Delegation to CTTRB: Respondent posited that there is no valid delegation of the local government unit's police power to the CTTRB, and thus the CTTRB cannot implement the rerouting of Yellow Bus's buses from their franchised route to the CKITTC.
• OSG Notice Not Required: Respondent claimed that notice to the OSG is not necessary since the case does not assail the validity of the Ordinance but only its implementation against it.
• Judgment on the Pleadings Proper: Respondent contended that the RTC did not err in rendering judgment on the pleadings because petitioners' denials in their Answer were general, not specific, warranting such judgment.

• Judgment on the Pleadings: Whether the RTC properly rendered judgment on the pleadings.
• Notice to the OSG: Whether the failure to give notice to the Office of the Solicitor General was fatal to respondent's case.
• Validity of the Ordinance's Implementation: Whether the CA erred in affirming the RTC's grant of the Complaint for injunction, specifically whether the Ordinance mandated compulsory use of the CKITTC and whether the forcible rerouting of Yellow Bus's buses was a valid exercise of police power.

• Judgment on the Pleadings: Yes. Judgment on the pleadings was proper because petitioners' Answer practically admitted all material allegations of the complaint and failed to tender a genuine issue, merely insisting on the validity and applicability of the Ordinance.
• Notice to the OSG: No. The requirement of notice to the OSG under Rule 63, Section 3 applies to petitions for declaratory relief and similar remedies, not to complaints for injunction. There was already an alleged violation or breach that would have warranted dismissal of a petition for declaratory relief.
• Validity of the Ordinance's Implementation: No, the CA did not err. The Ordinance did not mandate compulsory use of the CKITTC or prohibit private terminals, and the forcible rerouting of Yellow Bus's buses was an invalid exercise of police power—overbroad, disproportionate, and unduly oppressive of the carrier's property rights.

• Judgment on the Pleadings: Under Rule 34, Section 1 of the Rules of Court, judgment on the pleadings is proper where the answer fails to tender an issue or admits the material allegations of the adverse party's pleading. A review of petitioners' Answer revealed that they practically admitted all material allegations in respondent's Complaint. Petitioners failed to allege material facts contrary to those alleged by respondent; they only insisted on the validity of the Ordinance and its application to respondent. This was insufficient to controvert the material allegations in the Complaint, and for failure of the Answer to tender an issue, judgment on the pleadings was proper.

• Notice to the OSG: Rule 63 of the Rules of Court, including the requirement of notice to the OSG under Section 3, applies to petitions for declaratory relief and other similar remedies only, not to complaints for injunction. A petition for declaratory relief must be filed before any breach or violation of an obligation, its purpose being to secure an authoritative statement of rights and obligations to guide enforcement or compliance. Here, respondent asserted that its buses were actually blocked from plying their usual route and ordered to use the CKITTC, constituting an alleged violation or breach that would have warranted dismissal of a declaratory relief petition. The injunction complaint was therefore the proper remedy.

• Validity of the Ordinance's Implementation: For an injunction to prosper, two requisites must concur: (1) a right to be protected, and (2) acts violative of that right. As to the first element, respondent's ownership of its private terminal includes the right to acquire, use, and dispose of it, a right protected by the Constitution. As to the second, petitioners argued their act was a valid exercise of police power. While police power is the least limitable governmental power, its exercise must be reasonable and not oppressive. A valid exercise requires: (1) the interests of the public generally require interference, and (2) the means employed are reasonably necessary and not unduly oppressive. The first requirement was satisfied, as regulation of vehicular traffic to promote safety and convenience is a proper subject of police power. However, the second requirement was not met. Compelling all PUVs to utilize the CKITTC and abandon private terminals was overbroad and disproportionate. It was not shown that this was the only solution, and petitioners did not allege or prove that less intrusive measures had been explored. Moreover, the Ordinance itself did not mandate compulsory use of the CKITTC: Section 4 merely listed the actors and stakeholders in the terminal's operation; Section 11 only required PUVs utilizing the terminal's services to pay fees; and Section 19's prohibition on loading and unloading in non-specified areas did not necessarily refer to areas outside the CKITTC. Since the Ordinance contained no prohibition against private terminals, petitioners had no basis to block and reroute respondent's buses. Preventing respondent from using its private terminal and charging it for the CKITTC was outright oppressive and confiscatory, violating property rights that cannot be abridged under the guise of the general welfare clause.

• Validity of LGU Exercise of Police Power — A local government unit's exercise of police power requires the concurrence of two elements: (1) the interests of the public generally, as distinguished from those of a particular class, require the interference of the State, and (2) the means employed are reasonably necessary for the attainment of the object sought to be accomplished and not unduly oppressive. The first requirement is an aspect of the equal protection clause; the second is a component of due process. In this case, while the first requirement was satisfied, the second was not, because compelling all PUVs to use the public terminal and abandon private terminals was overbroad and disproportionate, with no showing that less intrusive alternatives had been explored.

• Requisites of Injunction — For an injunction to prosper, two requisites must concur: (1) there must be a right to be protected, and (2) the acts against which the injunction is to be directed are violative of said right. Both were present: respondent had a constitutionally protected property right over its private terminal, and petitioners' forcible rerouting of its buses violated that right.

• Judgment on the Pleadings — Judgment on the pleadings is proper where the answer fails to tender an issue, i.e., it does not deny the material allegations in the complaint or admits said material allegations by admitting their truthfulness and/or omitting to deal with them at all. Petitioners' Answer practically admitted all material allegations and merely insisted on the validity of the Ordinance, which was insufficient to controvert those allegations.

• Property Rights as Limitation on Police Power — Ownership of private property includes the right to acquire, use, and dispose of it, a right protected by the Constitution. Local government units cannot, even in the exercise of police power, compel PUVs to utilize a public terminal and prevent them from using their private terminal in the absence of a clear showing of reasonable necessity. Preventing a carrier from using its private terminal and charging it for a public terminal is outright oppressive and confiscatory.

• "requiring all PUVs to utilize the CKITTC and abandon their private terminals cannot be considered as reasonably necessary to achieve the objective of alleviating traffic congestion and ensuring safety and order in the city's business center. On the contrary, this kind of measure is overbroad and disproportionate to the end sought to be accomplished." — This passage articulates the ratio decidendi on the second element of valid police power exercise, holding that the means employed must be reasonably necessary and not unduly oppressive.

• "Since there was no prohibition against the use of private terminals under the Ordinance, petitioners have no basis to block and order the rerouting of the buses of respondent to the CKITTC." — This establishes the critical textual basis for the ruling: the Ordinance itself did not mandate use of the public terminal, so the city's actions exceeded what the law authorized.

• "The police power granted to local government units must always be exercised with utmost observance of the rights of the people to due process and equal protection of the law. Such power cannot be exercised whimsically, arbitrarily or despotically as its exercise is subject to a qualification, limitation or restriction demanded by the respect and regard due to the prescription of the fundamental law, particularly those forming part of the Bill of Rights." — This quotation, cited from City of Manila vs. Laguio, defines the constitutional limitation on delegated police power and is frequently cited in subsequent jurisprudence on the boundaries of local government regulation.

• "it must be evident that no other alternative for the accomplishment of the purpose [is] less intrusive of private rights can work." — This formulation of the "reasonably necessary" standard for police power measures captures the proportionality requirement central to the Court's analysis.

• Lucena Grand Central Terminal, Inc. vs. JAC Liner, Inc., 492 Phil. 314 (2005) — Controlling precedent followed. The Court declared an ordinance overbreadth for declaring all terminals inoperable and mandating use of a common terminal, holding that the outright proscription against private terminals was not reasonably necessary to solve traffic and was unduly oppressive due to imposed fees. Applied directly to the present case to invalidate the compulsory use of the CKITTC.

• Metro Manila Development Authority vs. Viron Transportation, Inc., 557 Phil. 121 (2007) — Controlling precedent followed. The Court invalidated Executive Order No. 179 eliminating bus terminals along Metro Manila thoroughfares, ruling that the prohibition against private terminals was not reasonably necessary and that less intrusive measures existed. Applied to the present case to show that less invasive alternatives should have been explored.

• City of Manila vs. Laguio, Jr., 495 Phil. 289 (2005) — Cited for the principle that police power delegated to LGUs must be exercised with utmost observance of due process and equal protection, and that individual rights may be adversely affected only to the extent fairly required by legitimate demands of public interest.

• Legaspi vs. City of Cebu, 723 Phil. 90 (2013) — Cited for the proposition that the delegation of power to LGUs under Section 458(5)(v) and (vi) of the Local Government Code is a statutory manifestation of Congress's intention to allow cities to address traffic congestion, with broad latitude subject to constitutional and statutory limitations.

• Luque vs. Villegas, 141 Phil. 108 (1969) — Cited for the principle that regulatory measures designed to relieve traffic congestion are premised on public welfare and are a proper subject for the exercise of police power.

• Section 16, Local Government Code of 1991 (General Welfare Clause) — Delegates police power to local government units, empowering them to prescribe regulations to protect the lives, health, and property of their constituents and maintain peace and order. The Court recognized this as the statutory basis for the city's exercise of police power but held that the exercise must be reasonable and not oppressive.

• Section 458(5)(v) and (vi), Local Government Code of 1991 — Empowers the sangguniang panlungsod to regulate the use of streets, establish bus and vehicle stops and terminals, regulate the operation of conveyances for hire, and regulate traffic on all streets and bridges. Cited by petitioners as authority for the ordinance; the Court acknowledged the broad latitude granted to LGUs but found the means employed exceeded constitutional limits.

• Rule 34, Section 1, Rules of Court — Governs judgment on the pleadings, authorizing the court to direct judgment where the answer fails to tender an issue or admits the material allegations of the adverse party's pleading. Applied to uphold the RTC's judgment on the pleadings.

• Rule 63, Section 3, Rules of Court — Requires notice to the Solicitor General in actions involving the validity of a statute, executive order, or regulation. The Court held this provision inapplicable to complaints for injunction, which are not among the remedies covered by Rule 63.

• Article III, Section 1, 1987 Constitution — Provides that no person shall be deprived of life, liberty, or property without due process of law. The Court invoked this provision to protect respondent's property rights in its private terminal against the city's oppressive rerouting measures.

Gesmundo, C.J., Caguioa, Hernando, Lazaro-Javier, Inting, Zalameda, Gaerlan, Rosario, Dimaampao, Marquez, Kho, Jr., and Villanueva, JJ., concurred.

Leonen, SAJ, filed a separate concurring opinion. He concurred with the ponencia's conclusion that nothing in the Ordinance made use of the CKITTC compulsory and that the writ of injunction was in order. He expounded, however, on the appropriate standard of judicial review for assessing the ordinance's validity, arguing that because no fundamental rights or suspect classifications are involved, the rational basis test should apply rather than strict scrutiny or intermediate review. Under the rational basis test, the ordinance would be upheld as long as there is a legitimate government interest and a reasonable connection between that interest and the means employed. He noted that the ordinance rationally advanced the legitimate government interest of providing efficient transportation and reducing traffic congestion. He also emphasized that Yellow Bus Lines never raised the constitutionality of the Ordinance as an issue and was explicit that it only assailed its implementation, so the constitutionality question was not properly before the Court.