Eastern Shipping Lines, Inc. vs. Court of Appeals and Davao Pilots Association

Executive Order No. 1088, which prescribes uniform and modified pilotage rates, is a valid statute; because the power to fix pilotage rates is legislative in character, the Philippine Ports Authority may not enforce inconsistent circulars or reduce rates below those mandated by EO 1088.

Eastern Shipping Lines, Inc. is a shipping company that availed of pilotage services from Davao Pilots Association. Executive Order No. 1088, enacted on February 3, 1986, prescribed uniform and modified rates for pilotage services rendered to foreign and coastwise vessels in all private or public Philippine ports. Presidential Decree No. 857 vested the Philippine Ports Authority with power to regulate and prescribe pilotage fees, and the PPA issued memorandum circulars on the matter. In Philippine Interisland Shipping Association of the Philippines vs. Court of Appeals, the Court en banc had already ruled that EO 1088 was not unconstitutional.

Davao Pilots Association, the private respondent, provided pilotage services to Eastern Shipping Lines, Inc., a shipping company and regular patron. Between January 14, 1987 and July 22, 1989, the association rendered pilotage services to the shipping line, for which unpaid fees totaled P703,290.18. Despite repeated demands, Eastern Shipping Lines failed to pay. On September 25, 1989, Davao Pilots Association filed a complaint for sum of money and attorney’s fees, praying for payment of P703,290.18 with legal interest from filing, attorney’s fees equivalent to 25% of the principal obligation, and other relief.

On November 18, 1989, Eastern Shipping Lines answered, disputing the claims. It assailed the constitutionality of Executive Order No. 1088, on which the association based its claims. It alleged a pending case before the Court of Appeals elevated by the United Harbor Pilots Association of the Philippines, of which the association was a member, while Eastern Shipping Lines was a member of the Chamber of Maritime Industries of the Philippines, an intervenor in CA-G.R. SP No. 18072; it invoked lis pendens under Section 1(e), Rule 16. It further alleged that the subject of the complaint fell within the authority of the Philippine Ports Authority under Presidential Decree No. 857; that EO 1088 was an unwarranted repeal or modification of the PPA Charter; that the fees charged were arbitrary and confiscatory; that EO 1088 was sourced from Amendment No. 6 of the 1973 Constitution and rendered inoperative by the Freedom Constitution of March 25, 1986 and the present Constitution; and that only the agency vested by law to prescribe rates, charges, or fees for services rendered by a private organization like the association within a Port District was governed by Section 20 of PD 857. As a regular patron, Eastern Shipping Lines claimed it had never been remiss in paying pilotage fees, and prayed that the association await the final outcome of the pending Court of Appeals case, plus damages, attorney’s fees, litigation expenses, and costs.

At pre-trial, the association raised only whether Eastern Shipping Lines was liable for the money claims. Eastern Shipping Lines raised five issues: (1) whether EO 1088 was constitutional; (2) whether it was illegal; (3) whether the association could motu proprio and independently of the Public Estates Authority enforce EO 1088 and collect the pilotage fees prescribed thereunder; (4) assuming EO 1088 was constitutional, valid, and self-executory, whether Eastern Shipping Lines was liable and to what extent and for what items; and (5) whether the association was liable under the counterclaims.

During trial, the association presented Capt. Felix N. Galope on September 5, 1990, who identified exhibits consisting of documents related to the collection of unpaid pilotage fees, the basis for computations, statements of accounts, demand letters, and official recipients of payment. On September 6, 1990, Simplicio Barao, the association’s billing clerk, testified on the records of Captain’s Certificates/Pilotage Chits and Bills/Statements of Accounts on the claims against Eastern Shipping Lines and the details of the outstanding accounts. Eastern Shipping Lines raised no objection, and all of the association’s documentary exhibits were admitted by order dated January 14, 1991. On March 14, 1991, Eastern Shipping Lines presented Celso Occidental, its employee, who submitted exhibits consisting of the association’s old and new billing rates with a payment of P79,585.64, and plane tickets paid by Eastern Shipping Lines for its counsel’s transportation and stenographic transcripts. Its last witness, Capt. Jose Dubouzet, Jr., a harbor pilot, was briefly presented.

The trial court found that the association’s evidence of unpaid pilotage services, supported by voluminous documentary exhibits, was not refuted or rebutted by Eastern Shipping Lines; when the documentary exhibits were formally offered, Eastern Shipping Lines raised no objection, leaving the documents unchallenged and undisputed. Although Eastern Shipping Lines raised five issues, the evidence failed to show any proof to sustain its position, and neither of its two witnesses appeared to have even grazed the outer peripheries of the issues. The Court of Appeals affirmed the trial court’s factual findings and conclusion that Eastern Shipping Lines failed to show any proof to support its position.

• Constitutionality and Delegation: Petitioner contended that Executive Order No. 1088 is unconstitutional because its interpretation and application are left to private respondent, a private person, and because it constitutes an undue delegation of powers.
• PPA Circulars as Governing Rates: Petitioner insisted that it should pay pilotage fees in accordance with and on the basis of the memorandum circulars issued by the Philippine Ports Authority, the administrative body vested under Presidential Decree No. 857 with the power to regulate and prescribe pilotage fees.
• Private Respondent’s Power to Interpret: Petitioner repeatedly asked whether private respondent is vested with power to interpret Executive Order No. 1088.
• Lis Pendens and PPA Jurisdiction: In its answer, petitioner alleged a pending case before the Court of Appeals involving identical issues and invoked lis pendens under Section 1(e), Rule 16; it also argued that the subject complaint fell within the authority of the Philippine Ports Authority under PD 857 and that EO 1088 was an unwarranted repeal or modification of the PPA Charter.
• Arbitrary Fees and Constitutional Source: Petitioner alleged that the fees charged were arbitrary and confiscatory and that EO 1088 was sourced from Amendment No. 6 of the 1973 Constitution and rendered inoperative by the Freedom Constitution and the present Constitution.

• Constitutionality of EO 1088: Whether Executive Order No. 1088 is unconstitutional.
• Undue Delegation: Whether Executive Order No. 1088 constitutes an undue delegation of powers because its interpretation and application are left to private respondent, a private person.
• Conflict with PPA Circulars: Whether petitioner may pay pilotage fees under Philippine Ports Authority memorandum circulars instead of Executive Order No. 1088, and whether PPA circulars inconsistent with EO 1088 are valid.
• Liability for Pilotage Fees: Whether petitioner is liable to private respondent for unpaid pilotage fees computed under Executive Order No. 1088.

• Constitutionality of EO 1088: No. Executive Order No. 1088 is valid and constitutional; the Court adhered to Philippine Interisland Shipping Association of the Philippines vs. Court of Appeals, which upheld it.
• Undue Delegation: No. EO 1088 does not constitute undue delegation; the power to fix pilotage rates is legislative in character, and EO 1088 leaves no room for interpretation.
• Conflict with PPA Circulars: PPA circulars inconsistent with EO 1088 are void and ineffective. Administrative acts are valid only when not contrary to law or the Constitution; if conflict exists, the law prevails.
• Liability for Pilotage Fees: Yes. Petitioner has no legal basis to refuse payment of pilotage fees computed according to EO 1088 rates.

• Constitutionality of EO 1088: The Court began from its en banc ruling in Philippine Interisland Shipping Association of the Philippines vs. Court of Appeals, which held that EO 1088 was not unconstitutional. It quoted that what determines whether an act is a law or an administrative issuance is not its form but its nature, and that the power to fix rates of charges for services, including pilotage service, has always been regarded as legislative in character. EO 1088 provides adjusted pilotage service rates without withdrawing the PPA’s power to impose, prescribe, increase or decrease rates, charges or fees. Its legislative purpose is the rationalization of pilotage service charges through the imposition of uniform and adjusted rates for foreign and coastwise vessels in all Philippine ports. Thus, EO 1088 is a valid statute, and the PPA is duty bound to comply with its provisions; the PPA may increase the rates but may not decrease them below those mandated by EO 1088.
• Undue Delegation: Petitioner’s claim that EO 1088 is unconstitutional because its interpretation and application are left to private respondent, a private person, and because it constitutes undue delegation was not persuasive. The Court upheld EO 1088 as a valid statute and observed that EO 1088 leaves no room for interpretation, so private respondent cannot be faulted for relying on its clear and unmistakable provisions. The Court characterized petitioner’s query on whether private respondent had power to interpret EO 1088 as duplicitous.
• Conflict with PPA Circulars: Because the PPA circulars are inconsistent with EO 1088, they are void and ineffective. Article 7 of the Civil Code provides that administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution. The Court cited Land Bank of the Philippines vs. Court of Appeals for the rule that the conclusive effect of administrative construction is not absolute and that action of an administrative agency may be disturbed or set aside by the judicial department if there is an error of law, grave abuse of power or lack of jurisdiction, or grave abuse of discretion clearly conflicting with either the letter or spirit of the law. An administrative agency like the PPA has no discretion whether to implement the law or not; its duty is to enforce it. If there is any conflict between a PPA circular and a law, such as EO 1088, the latter prevails.
• Liability for Pilotage Fees: Based on the foregoing, petitioner has no legal basis to refuse payment of pilotage fees to private respondent as computed according to the rates set by EO 1088. Private respondent cannot be faulted for relying on the clear and unmistakable provisions of EO 1088. The trial court’s award, affirmed by the Court of Appeals, was accordingly sustained.

• Nature of Act Determines Whether Law or Administrative Issuance — What determines whether an act is a law or an administrative issuance is not its form but its nature. The power to fix rates of charges for services, including pilotage service, has always been regarded as legislative in character. EO 1088, although an executive order, is a valid statute because it prescribes uniform and adjusted pilotage rates.
• PPA’s Power vis-à-vis EO 1088 — EO 1088 provides adjusted pilotage service rates without withdrawing the PPA’s power to impose, prescribe, increase or decrease rates, charges or fees. The PPA may increase rates but may not decrease them below those mandated by EO 1088. PPA circulars inconsistent with EO 1088 are void and ineffective.
• Administrative Construction Not Conclusive — The conclusive effect of administrative construction is not absolute. Action of an administrative agency may be disturbed or set aside by the judicial department if there is an error of law, grave abuse of power or lack of jurisdiction, or grave abuse of discretion clearly conflicting with either the letter or spirit of the law. This rule was applied to the PPA circulars.
• Administrative Agency’s Duty to Enforce the Law — An administrative agency, like the PPA, has no discretion whether to implement the law or not; its duty is to enforce it. If there is any conflict between a PPA circular and a law, such as EO 1088, the latter prevails.
• No Undue Delegation Where EO Leaves No Room for Interpretation — EO 1088 leaves no room for interpretation; private respondent cannot be faulted for relying on its clear and unmistakable provisions. This defeats the claim that interpretation was left to a private person.

• "It is not an answer to say that E.O. No. 1088 should not be considered a statute because that would imply the withdrawal of power from the PPA. What determines whether an act is a law or an administrative issuance is not its form but its nature. Here as we have already said, the power to fix the rates of charges for services, including pilotage service, has always been regarded as legislative in character." — This states the ratio for treating EO 1088 as a valid statute despite its form.
• "We conclude that E.O. No. 1088 is a valid statute and that the PPA is duty bound to comply with its provisions. The PPA may increase the rates but it may not decrease them below those mandated by E.O. No. 1088. . . . ." — This is the core holding on EO 1088’s validity and the PPA’s duty to comply.
• "Because the PPA circulars are inconsistent with EO 1088, they are void and ineffective. “Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution.”" — This applies Article 7 of the Civil Code and resolves the conflict between PPA circulars and EO 1088.
• "It is axiomatic that an administrative agency, like the PPA, has no discretion whether to implement the law or not. Its duty is to enforce it. Unarguably, therefore, if there is any conflict between the PPA circular and a law, such as EO 1088, the latter prevails." — This defines the administrative agency’s duty and the hierarchy of laws over administrative issuances.

• Philippine Interisland Shipping Association of the Philippines vs. Court of Appeals, 266 SCRA 489, January 22, 1997 — The en banc controlling precedent; it ruled that EO 1088 was not unconstitutional, and the Court quoted and adhered to it.
• Land Bank of the Philippines vs. Court of Appeals, 249 SCRA 149, October 6, 1995 — Cited for the rule that the conclusive effect of administrative construction is not absolute and that administrative action may be set aside for error of law, grave abuse of power or lack of jurisdiction, or grave abuse of discretion conflicting with the law.
• Peralta vs. Civil Service Commission, 212 SCRA 425, 432 (1992) — Cited in Land Bank for the same proposition on judicial review of administrative action.

• Executive Order No. 1088, Sections 1–4 — Enacted February 3, 1986, entitled “Providing For Uniform And Modified Rates For Pilotage Services Rendered To Foreign And Coastwise Vessels In All Private Or Public Philippine Ports.” It sets pilotage rates based on tonnage for foreign and coastwise vessels, provides for payment in dollars or pesos, repeals inconsistent issuances, and takes effect immediately. The Court upheld its validity and applied its rates.
• Presidential Decree No. 857 — Vested the Philippine Ports Authority with power to regulate and prescribe pilotage fees. The Court held that PPA circulars inconsistent with EO 1088 are void and that the PPA is duty bound to comply with EO 1088.
• Article 7, Civil Code of the Philippines — Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution. The Court used this provision to declare PPA circulars inconsistent with EO 1088 void and ineffective.

Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ., concur.