U. Bañez Electric Light Company v. Abra Electric Cooperative, Inc.
REITERATIONFacts
The Antecedents: U. Bañez Electric Light Company (UBELCO) alleged it held a Congressional franchise (Republic Act No. 4143) for an electric system in Bangued, Abra. UBELCO claimed that under its franchise, the National Power Corporation (NPC) could only supply power to areas adjacent to or over its territory after negotiating with or obtaining consent from UBELCO. UBELCO further alleged that NPC unlawfully refused to enter into a power service contract with it, while Abra Electric Cooperative, Inc. (ABRECO), with the encouragement of the National Electrification Administration (NEA), was illegally attempting to establish an electric system in Bangued without a valid franchise and without NPC negotiating with UBELCO, causing UBELCO damage. Procedural History: UBELCO filed a complaint in the Court of First Instance of Abra seeking an injunction, a declaration that ABRECO's franchise was void, an order for NPC to contract with UBELCO, and damages. After the defendants filed their answers, ABRECO, NEA, and NPC moved to dismiss the complaint, citing failure to state a cause of action and lack of jurisdiction. The trial court dismissed the complaint for failure to state a cause of action. UBELCO appealed this dismissal to the Court of Appeals, which then certified the case to the Supreme Court due to the purely legal questions involved. The Petition: The appeal raised the single issue of whether the complaint, based on its allegations, sufficiently stated a cause of action against the defendants. UBELCO argued that the lower court erred by disregarding admitted facts and considering matters not deemed admitted. The Supreme Court, however, affirmed the dismissal, holding that subsequent legislation (Republic Acts Nos. 6038 and 6395) modified UBELCO's franchise pro tanto. These laws mandated NPC to prioritize supplying power to electric cooperatives and provide them maximum assistance, superseding UBELCO's prior right to negotiate. Therefore, NPC could supply ABRECO directly without UBELCO's consent, and the complaint did not sufficiently plead a cause of action for the reliefs sought.
Issue(s)
Whether the complaint sufficiently stated a cause of action against the defendants. Whether the National Power Corporation (NPC) can supply electric power to Abra Electric Cooperative, Inc. (ABRECO) without negotiating with and through U. Bañez Electric Light Company (UBELCO), or with UBELCO's authority and consent, despite UBELCO's prior franchise; and whether the principal reliefs sought by UBELCO should be granted. Whether the National Electrification Administration (NEA) and ABRECO's actions in establishing an electric system in Bangued, Abra, violated UBELCO's rights.
Ruling
The Supreme Court affirmed the order of dismissal. It held that based on the allegations deemed admitted and in light of subsequent laws, NPC could supply ABRECO directly with electric power as mandated by RA 6038 and RA 6395 without negotiating with or seeking the consent of UBELCO. The Court found that the complaint did not sufficiently state a cause of action against the appellees, and the principal reliefs prayed for could not be granted.
Ratio Decidendi
On the sufficiency of the cause of action: A motion to dismiss for failure to state a cause of action hypothetically admits the truth of the facts alleged in the complaint. However, this admission is limited to relevant and material facts well pleaded and inferences fairly deducible therefrom, excluding conclusions of law or facts subject to judicial notice. The court may also consider relevant laws and jurisprudence. In this case, the subsequent enactment of Republic Act No. 6038 (NEA Charter) and Republic Act No. 6395 (NPC Charter) modified the terms of UBELCO's prior franchise (RA 4143). RA 6038 mandates that NPC shall give preference in the sale of its power and energy to cooperatives and provide them maximum support and assistance. RA 6395, in revising NPC's charter, empowers NPC to sell power in bulk to various entities, including electric cooperatives, and mandates that NPC's relations with electric cooperatives shall be governed by the NEA Charter. Therefore, NPC could supply ABRECO directly, as mandated by these later laws, without needing to negotiate with UBELCO. On the modification of UBELCO's franchise and the principal reliefs sought: The Congressional franchise granted to UBELCO under RA 4143, enacted in 1964, stipulated that NPC could make available its power and heat in areas adjacent to or over UBELCO's franchise territory only after negotiations with and through UBELCO, or with its authority and consent. However, the subsequent enactment of RA 6038 in 1969 and RA 6395 in 1971 introduced significant changes. These laws, particularly the NEA Charter, established a policy of preference and maximum support for electric cooperatives. The Court held that these statutory mandates, considered in relation to the constitutional provision against monopoly in public utilities, modified UBELCO's franchise pro tanto. Thus, the NPC's obligation to give preference to cooperatives superseded the prior requirement of negotiation with UBELCO. Given the Court's interpretation of RA 6038 and RA 6395, NPC could not be restrained from contracting with ABRECO, nor could it be compelled to contract with UBELCO under the terms UBELCO desired, especially since NPC was mandated to prioritize cooperatives. Furthermore, the Court noted that NPC and ABRECO had already concluded a power contract, making it too late to restrain them from entering into such an agreement. On the illegality of ABRECO's franchise and actions: The complaint alleged that ABRECO's franchise from the Municipal Council of Bangued was ultra vires and void, and that ABRECO and NEA were violating UBELCO's rights. However, the Court noted that the lower court correctly disregarded these as mere averments of legal conclusions. The subsequent laws, RA 6038 and RA 6395, provided a legal framework that allowed for the operation of electric cooperatives and the supply of power by NPC to them, potentially overriding prior franchise restrictions or municipal grants that conflicted with this national policy. The Court found that, based on the admitted facts and applicable laws, UBELCO had not sufficiently pleaded a cause of action for the declaration of ABRECO's franchise as void or for enjoining its operations.
Main Doctrine
Republic Acts amending or modifying existing franchises, particularly those concerning the preference given to electric cooperatives in the sale of power by the National Power Corporation, can be applied retroactively or prospectively to modify the terms of prior franchises, even without express amendment of the original franchise, in light of public interest and constitutional provisions against monopoly.