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The Board has always been mindful of its duty to formulate and implement policies, which are geared towards the improvement of public service to the commuting public and enhancement of the conditions of operators and drivers, as well. The Board has likewise introduced programs, which are intended to improve the franchising system. Such programs are made with the end in view of rectifying the flaws of the franchising system, which flaws are detrimental to public service.

After a further and thorough study of the franchising system, the Board finds some flaws, but not limited hereto, in the system, to wit:

A. Having two or more persons (with the exception of spouses) in one Certificate of Public Convenience (CPC). For instance, a CPC with five (5) authorized units is owned by five persons, to which only one person owns each authorized unit. The policy should have been that for each authorized unit, the same must be owned by the five persons.

B. Many franchise holders operate under an arrangement with non-franchise holders, commonly known as the “kabit system”, whereby a person who has been granted a CPC allows another person who owns a motor vehicle to operate under such franchise for a fee. In the case of Dizon vs. Octavio, 51 Official Gazette 4059 (1955), the Honorable Supreme Court enunciated that one of the primary factors considered in the granting of a CPC for the business of public transportation is the financial capacity of the holder of the franchise, so that liabilities arising from accidents may be duly compensated. The “kabit system” renders illusory such purpose, and worse, may still be availed of by the grantee to escape civil liability caused by a negligent use of a vehicle owned by another and operated under his franchise. If a registered owner is allowed to escape liability by proving who the supposed owner of the vehicle is, it would be easy for him to transfer the subject vehicle to another who possesses no financial capacity with which to cover for any liability arising from the operation.

In line with the policy of the State to encourage and obtain maximum productivity of existing public utility vehicles, eradicate the harmful and unlawful trade of clandestine operators by replacing or allowing them to become legitimate and responsible operators and update the standards that should henceforth be followed in the operation of public utility vehicles, and pursuant to Department Order 2005-010 setting forth the Policy Guidelines on the Exercise of Authority and Functions by this Board and empowering it to issue Memorandum Circulars governing the powers and functions provided for in Section 5 of EO 202, the Board hereby promulgates and implements the Segregation Program for Authorized Units from their valid and existing CPC. Thus, the following guidelines thereof are hereby made and issued.

1. The Segregation Program shall only apply to those who fall under Items A and B with existing and valid CPC.

2. The Program shall only apply to PUJ and taxi units.

3. The Program covers both parties in the “kabit system”. The registered operator of the “mother franchise” shall be referred to as the First Party, and the real owner of the attached units shall be referred to as the Second Party.

4. The following segregation Fees shall be collected per unit declared from both parties aside from the usual fees and charges of the Board:

                                                               

a. First Party:
	a.1 PUJ	- P2,000.00
	a.2 Taxi	- P3,000.00
b. Second Party
	b.1 PUJ	- P3,500.00
	b.2 Taxi	- P5,000.00

5. Segregated franchise shall be deducted from the authorized units of the First Party.

6. The Board shall inspect all units sought to be segregated. An original copy of the Franchise verification and payment of the Inspection Fee in the amount of Fifty Pesos (P50.00) per unit shall be presented to the inspector upon inspection of the unit.

7. If the Franchise Verification reveals that the unit sought to be segregated is authorized to two (2) or more CPC, the verifier shall indicate such in each and every page of the Verification Form and immediately inform the

a. For Central Office – Chief of the Management and Information Division for the Central Office, who will then inform the Chief of the Legal Division for appropriate recommendation to the Board;

b. For the Regional Offices – Chief, Transportation Development Officer, who will then inform the Regional Director to act appropriately.

8. In cases of double authority, the right to apply for Segregation shall be given to the

one who can present the unit for inspection.

9. The new CPC shall be granted to the Second Party with a new case number and the mother franchise shall be cancelled. Should there be remaining units with the First Party after segregation, the First Party may avail of this Voluntary Segregation after payment of corresponding fees and penalties. The First Party who does not appear and avail of this Segregation, shall forever be banned from acquiring any other CPC of any denomination from the Board.

10. No application for Segregation shall be accepted without an attached stencil of the unit done by an LTFRB personnel and original copy of the Inspection Report duly signed by the authorized employee.

11. All Application for Segregation shall be given a new Case Number and the old Case Number shall be cancelled though indicated therein for reference.

12. No Application for Dropping and Substitution shall be accepted during the Segregation Program for CPC.

13. Those falling under Item A are ordered to apply for Segregation; otherwise, the CPC from which their units are authorized shall be deemed cancelled and revoked.

14. Application period for the Segregation Program shall be from 01 February 2006 up to 30 June 2006.

This Memorandum Circular supersedes any and all issuances inconsistent herewith, and takes effect fifteen (15) days following its publication in a newspaper of general circulation and the filing of three (3) copies hereof with the UP Law Center, pursuant to Presidential Memorandum Circular No. 11, dated 09 October 1992.

SO ORDERED.

Adopted: 19 Jan. 2006