Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-48304 September 11, 1985

PHILIPPINE PORTS AUTHORITY, petitioners,
vs.
HON. RAFAEL L. MENDOZA, in his capacity as Presiding Judge of the Court of First Instance of Cebu, Branch VI, PERNITO ARRASTRE SERVICES, INC., APOLONIO BACALLA, doing business under the style "Bacalla Arrastre Services", ARISTON AGUILAR, doing business under the style "Aguilar Arrastre Services", ROMEO CABRAS, doing business under the style "Cabras Arrastre Services", GUERRERO DAJAO, doing business under the style "Dajao Arrastre Services," NIÑO TAMARRA, doing business under the style "Tamarra Arrastre Services", JESUS GARCIA, doing business under the style "Garcia Arrastre Services", FRANCISCO AGUIRRE, doing business under the style "Sto. Rosario Arrastre Services", TEOFILO ESTOCE doing business under the style "E & C Arrastre Services", RAMON P. TECSON, doing business under the style "Tecson Arrastre Services", MARCELO A. CANSANCIO, doing business under the style "Tabunoc Arrastre Service", SIMEON M. PACA, SR., doing business under the style, "A.O. Paca Arrastres Services", ANDRES ROMARIZ doing business under the style "F. Figueroa Arrastre Service," NILO SERVILA doing business under the style "Servila Arrastre Services", RHODA F. BANGOY, doing business under the style "Tan Arrastre Services", FILOMENO PEPITO, doing business under the style "F. Pepito & Villacruses Arrastre Service", VICTORINO SY, doing business under the style "E. V. Sy Arrastre Services", and ROMEO GADIANO doing business under the style "Cadiano Arrastre Service", respondents.

 

ALAMPAY, J.:

This case relates to a petition for certiorari and prohibition filed by Philippine Ports Authority (PPA) directed principally against the public respondent herein as presiding judge of the Court of First Instance (now Regional Trial Court) of Cebu, Branch VI and naming as private respondents eighteen (18) arrastre groups led by Pernito Arrastre Services, Inc. (hereunder referred to as Pernito, et al.). Petitioner avers that the respondent judge committed a grave abuse of discretion amounting to lack of jurisdiction when it issued in Civil Case No. R-16289, a writ of preliminary injunction prohibiting Philippine Ports Authority, pendente lite, from enforcing its policy of integration in the port of Cebu City and directing it to allow respondent Pernito, et al., to operate individually and independently as arrastre and stevedoring contractors. The dispositive portion of the questioned order, dated March 31, 1978, reads as follows:

WHEREFORE, in view of the foregoing reasons, this Court orders the issuance of a writ of preliminary preventive injunction, prohibiting:

1. The respondent Philippine Ports Authority, through its Cebu City Manager or his representative(s), from enforcing its policy of integration of arrastre operations, or the merger in the City of Cebu, thereby in the meantime allowing petitioners to operate individually as such and the free flow of cargoes serviced by them.

2. The respondent United South Dockhandlers, Inc. from requiring the petitioners to remit to the 100% gross arrastre earnings or any portion thereof and from collecting each charges from said petitioners or from consignees of the cargoes handled by them and from withholding the release of such cargoes; and

3. The respondent United South Dockhandlers, Inc. from appropriating or converting to its own use and operations any equipment belonging to any of the petitioners such as typewriters, adding machines, office machinery, equipment or supplies of any kind, upon petitioners' filing of a bond in the amount of Fifty Thousand (P50,000.00) PESOS executed to the two respondents enjoined, to the effect that petitioners will pay to them such damages as they may sustain by reason of the injunction should this Court finally decide that the petitioners are not entitled thereto. (Petition, Annex 1).

In the aforestated questioned order of March 11, 1978, the respondent judge justified his issuance of the writ of preliminary injunction with the statement that it "preliminary finds that Section 26 of Presidential Decree No. 857 invoked by respondent PPA does not authorize it to order the compulsory merger of arrastre operators into one organization as a sine qua non for the grant of permit" and that "the power of respondent PPA to provide services whether on its own, by contract or otherwise, within the Port Districts and the approaches thereof, including but not limited to certain enumerated services is not exclusionary in character."

Petitioner herein also assails the April 17, 1978 Order of the respondent judge which allowed, without notice and hearing, a certain Aquino Arrastre Services and Watergate Arrastre Service to intervene any adopt the petition filed in the Court below and extended to them the benefit of the injunction order.

At first, only petitioner PPA questioned the subject orders by filing this petition. United South Dockhandlers, Inc. hereinafter referred to as (USDI) opted to let the effects of the order stay as far as they are concerned on July 8, 1978. However, USDI filed a "Motion to Intervene" (rollo, p. 227) which was granted by this Court on October 24, 1978 (lbid, p. 271). On November 22, 1978, for reasons therein stated USDI filed a Manifestation that it is withdrawing its Motion to Intervene (lbid, p. 274) but the same was denied by this Court in a resolution dated February 1, 1979. USDI filed a Manifestation that it is adopting in toto the Petition of PPA (lbid, p. 327).

The relevant antecedent facts of this case as may be gleaned from the petition are not disputed by the respondents herein and these are as follows:

1. Prior to the declaration of martial law in the Philippines, the operation of arrastre and stevedoring services in the country's various domestic ports was in great disarray. The pernicious "cabo system" ruled by bosses had proliferated and caused untold burdens to legitimate labor groups. Violence and thefts in the ports were rampant and imperilled both human and cargo traffic between the islands.

2. In November 1972, following the proclamation of martial law an Ad Hoc Committee on Waterfront Services was created to study the problems of arrastre and stevedoring operations in these ports. The committee was composed of representatives of the Department of Labor, the shipping community the arrastre and stevedoring labor contractors, the Bureau of Customs, the labor sector and port end-users, under -he chairmanship of the Deputy Commissioner of Customs.

3. On April 23, 1973 the Committee submitted its report and recommendation. It recommended the servicing of such shipping company by only one arrastre and stevedoring contractor in a given port. The objective was the integration of arrastre-stevedoring operations in each port so that ultimately only one contractor would be authorized to service the needs of that port.

4. On August l,1973 and September l, 1974 the Bureau of Customs approved and implemented the recommendation of the Ad Hoc Committee on the initial integration of arrastre and stevedoring services. Two years later, on May 8, 1975, the Bureau of Customs issued Memorandum Order No. 28-75, providing for the merger of all existing cargo handling contractors in each port.

5. At that time, there were in the port of the City of Cebu more than fifty arrastre-stevedoring contractors. The problems, as elsewhere, were the same. The "cabo system" of exploiting labor and the lack of rationality in the handling of cargoes prevailed in the port. To effect the gradual integration of arrastre and stevedoring operations, the Bureau of Customs decided to require the merger of the several contractors in two stages, first into ten corporations, and then to one.

Accordingly, the ten corporations were formed, namely: (1)Masayon Arrastre & Forwarding Corp., (2) Vismin Stevedores & Forwarders, Inc., (3) Cebu Materials Handling Corp. (4) Solid Arrastre & Forwarding Co., Inc., (5) Sto. Nino Stevedoring & Arrastre Corp. (6) Integrated Port Services (Cebu), Inc., (7) Panama Arrastre & Stevedoring Co., Inc., (8) Cebu Allied Maritime Services, Inc., (9) Cebu Integrated Arrastre, Inc., and (10) Cenvis Arrastre Services, Inc.

6. The ten corporations named above were issued separable permits by the Bureau of Customs. In 1977 Bisaya Land Transportation Co., Inc., the eleventh cargo handling contractor, was likewise authorized to do business in the port of the City of Cebu. Apart from these eleven corporations, none other was authorized to perform arrastre and stevedoring services in the port. All the other previously existing contractors were assimilated by the eleven organizations issued credentials and permits by the Bureau of Customs.

Neither respondent Pernito Arrastre Services nor any of the other respondents in this case were issued permits by the Bureau of Customs to operate arrastre services. Respondent Pernito operated under the permit of the Vismin Stevedores & Forwarders, Inc.

7. On July 11, 1974, Presidential Decree No. 505 was promulgated creating the petitioner Philippine Ports Authority (PPA). The Decree was subsequently amended by Presidential Decree No. 857 dated December 23, 1975. Under the Decree, the PPA is entrusted with the function of carrying out an integrated program for the planning, development, financing and operation of ports and port districts throughout the country. The powers, duties, and jurisdiction of the Bureau of Customs concerning arrastre operations were transferred to, and vested in, the petitioner PPA.

8. Upon assumption of its functions, petitioner PPA made a thorough investigation and study of port problems. It found that stevedoring services (on-ship work) in the Philippines were separated from arrastre services (dock work), each one being provided by separate contractors. Furthermore, petitioner PPA found that there were too many companies/organizations supplying stevedoring or arrastre services, or both. This proliferation of services was wasteful and inefficient. As a consequence of which workers were underpaid and did not enjoy regularity of work. Overall port efficiency suffered in the long term and shipping costs unavoidably went up.

Accordingly, on May 4, 1976 the Board of Directors of petitioner PPA passed Resolution No. 10, approving and adopting a set of Policies on Port Administration, Management and Operation. By this action, petitioner PPA adopted as its own the Bureau of Customs policy of placing on only one organization the responsibility for the operation of arrastre and stevedoring services in one port.

9. In order to implement its policy of integration, petitioner PPA issued on May 27, 1977, Memorandum Order No. 21 which provides, in its pertinent parts, as follows:

6. In order to ensure utmost efficiency and economy in cargo handling operations, to provide better service to port users and to amply protect the interest of labor and all other port users, and the government as well, it is the policy of the Authority that there should be only one arrastre-stevedors operator/contractor to engage in cargo handling services in a port.

Conformably with this policy, it is necessary that two or more contractors presently operating within the same port premises who desire to continue or renew their cargo handling services must merge into only one organization within a prescribed period after receipt of due notice from the Authority.

10. Accordingly, the existing eleven arrastre-stevedoring contractors mentioned in paragraphs 7 and 8 above began discussions of plans for merger. Thereafter, they submitted to petitioner PPA a Memorandum Agreement which embodied a plan for total merger.

In October, 1977, the eleven port services contractors in the Cebu City Port formed the United South Dockhandlers, Inc. (hereinafter referred to as USDI). The latter corporation was recognized by petitioner PPA and granted a special permit on November 4, 1977, to handle exclusively the cargo handling requirements of the entire port in the City of Cebu pending the eventual award of a management contract.

11. On February 27, 1977, private respondents Pernito, et al. (numbering 18 in all) instituted an action for declaratory relief and mandamus with preliminary preventive and mandatory injunction and damages against petitioner PPA and USDI. The case was filed with the Court of First Instance of Cebu (Branch VI), presided over by respondent judge. It was docketed as Civil Case No. R-16829.

12. Pernito, et al., alleged in their pleadings filed in the court below that they were among the more than fifty independent arrastre/stevedoring contractors doing business in the Cebu City port prior to the issuance on May 8, 1975 of Bureau of Customs Memorandum Order No. 28-75; that they joined the merger of contractors into ten arrastre-stevedoring corporations; that following the issuance by the PPA of its Memorandum Order No. 21, the matter of total merger became an issue because the small contractors including respondent Pernito, et al., refused to be assimilated with the big contractors which were allegedly controlled by shipping companies; that after assurances that the interest of small operators would be protected, the eleven licensed corporations agreed to merge their resources and formed the USDI.

Pernito, et al., further alleged that the controlling interests in USDI reneged on their commitments to the small stockholders; that as a result, respondent Pernito, et al., left USDI and applied with PPA for separate permits to operate their services, but their (Pernito, et al.) applications were denied. Apart from questioning the denial of their applications, Pernito, et al. likewise questioned the 10% of gross receipts being collected by PPA from arrastre and stevedoring contractors.

13. On March 3l, 1978, respondent judge issued an injunction order which, among other things, enjoined PPA, pendente lite, from implementing its policy of integration and allowing Pernito, et al, to freely operate arrastre and stevedoring services in the port of Cebu.

14. On April 17, 1978, respondent judge, without notice and hearing, allowed a certain Aquino Arrastre Services and a certain Watergate Arrastre Services to intervene and extended to them the benefits of the injunction. (Petition, pg. 3-12; Rollo, 4-13).

Hence, this petition.

Pending action on the instant petition, this Court on May 30, 1978, issued a temporary restraining order enjoining respondents from effecting the questioned orders of March 31, 1978 and April 17, 1978 (Rollo, pp. 117 and 120). The order was confirmed by this Court in a subsequent order issued on June 6, 1978, "restraining (1) respondent judge from giving effect to his orders dated March 31, 1978 where he issued an injunction against the petitioner Philippine Ports Authority and from hearing Civil Case No. R-16829 until further orders; and (2) private respondent Pernito Arrastre Services, Inc. from performing arrastre and stevedoring services in the port of Cebu" Rollo, P. 124). On July 24, 1979, this Court modified its restraining order of May 30, 1978 by lifting the portion thereof restraining respondent judge from proceeding with the hearing of Civil Case No. R-16829 (Rollo, 329).

Whether or not the respondent judge committed a grave abuse of discretion amounting to lack of jurisdiction when it issued the March 31, 1978 Order can be determined only after the resolution of the various issues in the case. As culled from the petition, the respondents' comments, and the various pleadings in this case, the principal issues to be resolved in this petition are:

1. Whether or not the Petitioner PPA has the power to require integration of arrastre-stevedoring services in Philippine ports.

2. Whether or not PPA's policy of integration through compulsory merger is unconstitutional and void for being violative of

a) Section 2, Article XIV of the 1973 Constitution on private monopolies and combinations in restraint of trade, and

b) Section 20, Act 3518 prohibiting combinations, mergers, or acquisition in restraint of trade.

3. Whether or not the questioned orders restored the status quo before the present controversy.

4. Whether or not the questioned orders constitute a judicial interference in purely administrative functions.

On the first issue, We hold that petitioner PPA has power to regulate and require integration of arrastre and stevedoring services in Philippine ports. The objectives in the creation of PPA is defined in Section 2 of Presidential Decree No. 857, which reads:

a) To coordinate, streamline, improve and optimize the planning, development, financing, construction, maintenance and operation of Ports, port facilities, port physical plants, and all equipment used in connection with the operation of a Port.

b) To ensure the smooth flow of waterborne commerce passing through the country's Ports whether public or private, in the conduct of international and domestic trade.

c) To promote regional development through the dispersal of industries and commercial activities throughout the different regions.

d) To foster inter-island seaborne commerce and foreign trade.

e) To redirect and reorganize port administration beyond its specific and traditional functions of harbor development and cargo handling operations to the broader function of total port district development, including encouraging the full and efficient utilization of the Port's hinterland and tributary areas.

f) To ensure that all income and revenues accruing out of dues, rates and charges for the use of facilities and services provided by the Authority are properly collected and accounted for by the Authority, that all such income and revenues win be adequate to defray the cost of providing the facilities and services (inclusive of operating and maintenance cost, administration and overhead) of the Port Districts, and to ensure that a reasonable return on the assets employed shall be realized.

In line with these objectives, Section 26 of P.D. No. 857 empowered PPA to make rules and regulations governing Philippine ports. Said rules and regulations governing Philippine ports. Said Section 26 provides:

Section 26. Power to Make Regulations—

a) The Authority may, after consultation with relevant Government agencies, make rules or regulations for the planning, development, construction, maintenance, control supervision and management of any port or port District and the services to be provided therein, and for the maintenance of good order therein, and generally for carrying out the purposes of this Decree.

b) The Authority may provide separate regulations for each category of ports or port districts. (Rollo, p. 16).

With respect to the issue at bar, specific power was granted under Section 6, Subsection 2, par. V of P.D. 857. Paragraph V reads:

(V) To provide services (whether on its own by contract or otherwise) within the Port Districts and the approaches thereof, including but not limited to—

—berthing, towing, mooring, moving, slipping, or docking any vessel;

—loading or discharging any vessel

—sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.

Under said paragraph (V), the PPA has been granted a wide discretion in adopting and implementing the policy which it deems most effective in the successful attainment of the laws' objectives. It can either provide the necessary services on its own or engage the services of one or more contractors.

After a thorough investigation and study of port problems, it adopted the Bureau of Customs policy of placing in only one organization the responsibility for the operation of arrastre and stevedoring services. The benefits envisioned to be derived from the adopting of policy are the achievement of economies of scale and better supervision and control of ports' operation. As outlined in PPA Resolution No. 10 dated May 4, 1976, the expected advantages are (1) Optimum utilization of equipment, facilities, and labor; (2) Improved and stabilized labor compensation; (3) Larger capital base; (4) Increased borrowing base; (5) Savings in overhead costs; (6) Flexibility of operations; (7) Maintenance program improvement; (8) Uniform reporting and accounting system; and (9) Better dealing with the government.

In the case of Anglo-Fil Trading Corporation vs. Lazaro, G.R. No. 54966, September 2, 1983, this Court already held and so declared that the rationalization and effective utilization of port facilities is to the advantage of the government. We ruled that the discretion in choosing the stevedoring contractor for the South Harbor, Port of Manila belongs by law to PPA. As long as standards are set in determining the contractor and such standards are reasonable and related for the purpose for which they are used, the courts should not inquire into the wisdom of PPA's choice.

In the case at bar, private respondents contend that USDI to which the petitioner PPA has awarded the franchise or special privilege to render the arrastre and stevedoring services has no adequate facilities and equipment. USDI however, is the result of the merger of the eleven (11) biggest arrastre and stevedoring contractors operating in the Port of Cebu. Private respondents themselves admitted that they are "small arrastre-stevedore operators . . while USDI is controlled by the big arrastre corporations". It cannot, therefore, correctly be said that USDI has "no equipment" and never operated the arrastre and stevedoring services in the port of Cebu" (Comment, p. 22). (lbid, p. 6, Rollo, 158). In the aforecited case of Anglo-Fil Trading Corporation, we held that:

It is settled rule that unless the case justifies it, the judiciary will not interfere in purely administrative matters (Monark International, Inc. vs. Noriel, 83 SCRA 114). Such discretionary power vested in the proper administrative body, in the absence of arbitrariness and grave abuse of discretion so as to go beyond the statutory authority, is not subject to the contrary judgment or control of others (See Meralco Securities Corporation vs. Savellano, 117 SCRA 804). In general, courts have no supervisory power over the proceedings and actions of the administrative departments of the government. This is particularly true with respect to acts involving the exercise of judgment of discretion and to findings of fact. (Pajo vs. Ago, and Ortiz, 108 Phil. 905.

In opposing this petition, the private respondents assail the policy adopted by PPA to grant only one permit to only one group as violative of the constitutional and statutory provision on monopolies and combinations in restraint of trade. Private respondents herein cite Act No. 3518, specifically Sec. 20 thereof, and Section 2, Article XIV of the 1973 Constitution. The aforecited constitutional provision reads:

The state shall regulate or prohibit private monopolies when the public interest so requires. No combination in restraint of trade or unfair competition shall be allowed. (Section 2, Article XIV, 1973 Constitution).

Section 20 of Act No. 3518 provides:

No corporation engaged in commerce may acquire, directly and indirectly, the whole or any part of the stock or other share capital of another corporation or corporations engaged in commerce, where the effect of such acquisition may be to substantially lessen competition between the corporation or corporations whose stock is so acquired and the corporations making the acquisition, or between any of them or to restrain such commerce in any section or community, or tend to create a monopoly with any line of commerce.

Private monopolies are not necessarily prohibited. The use of the word "regulate" in the Constitution indicates that some monopolies, properly regulated, are allowed. Regulate means includes the power to control, to govern, and to restrain, but regulate should not be construed as synonymous with suppress or prohibit (Kwong Sing vs. City of Manila, 41 Phil. 108). "Competition can best regulate a free economy. Like all basic beliefs, however, that principle must accommodate hard practical experience. There are areas where for special reasons the force of competition, when left wholly free, might operate too destructively to safeguard the public interest. Public utilities are an instance of that consideration." (Oleck, Modern Corporation Law, Vol. IV, p. 197). By their very nature, certain public services or public utilities such as those which supply water, electricity, transportation, telegraph, etc. must be given exclusive franchises if public interest is to be served. Such exclusive franchises are not violative of the law against monopolies (Anglo-Fil Trading Corporation vs. Lazaro, supra).

In the case at bar, the area affected is maritime transportation in the port of Cebu. The operations there, particularly arrastre and stevedoring, affect not only the City of Cebu, the principal port in the South, but also the economy of the whole country as well. Any prolonged disjunction of the services being rendered there will prejudice not only inter-island and international trade and commerce. Operations in said port are therefore imbued with public interest and are subject to regulation and control for the public good and welfare. PPA's policy of integration through compulsory merger may not even be in this instance considered as promoting a monopoly because the fact of the matter is that while the sole operator permitted by PPA to engage in the arrastre and stevedoring operations in the port of Cebu is only USDI, actually USDI is comprised of the eleven (11) port services contractors that previously used said ports but decided to merge and ultimately constituted themselves as USDI.

But over and above the platter of whether the monopoly has been created, the overriding and more significant consideration is public interest. Accordingly, We hold that PPA's policy of integration is not violative of any constitutional and legal provision on monopolies.

In the questioned order, Pernito, et al., were allowed to operate individually and render arrastre and stevedoring services in the port of Cebu while the case is pending because according to the respondent judge, this was the last peaceable uncontested status before the present controversy. His appreciation of the facts is incorrect. The present controversy arose when Pernito, et al., sought, but were denied, permits to operate in the port of Cebu. PPA denied their applications because of its policy of integration. Before the case was filed, therefore, the status quo was that Pernito, et al., had no permit to operate individually. Prior to their application for separate permits, Pernito, et al., operated pursuant to the various and respective licenses of the different arrastre operators, Pernito Arrastre Services, Inc., in particular, operated under the license issued to Vismin Stevedores & Forwarders, Inc, This scheme is what is commonly known in the transportation business as the "kabit-system."

Long before the case below was filed, Pernito, et al., was in conformity with the integration policy of the PPA. They never questioned its validity and legality. In fact, in the petition for declaratory relief and mandamus they filed below, they even admitted having pleaded with PPA for the integration of the eleven (11) arrastre operators into two (2) corporations: one corporation to be composed of the arrastre corporations controlled by shipping magnates and the other one to be composed of the bona fide small arrastre operators to service the needs of small and medium sized vessels or that, in the alternative, the eleven be integrated into one arrastre corporation, 51% to be owned by the bona fide arrastre operators and 49% by shipping magnates (See Rollo, p. 60). Although these alternative proposals were rejected by PPA, Pernito, et al., continued to accede and conform to the integration policy when they agreed to join USDI after obtaining some concessions from its big stockholders. It was only when the controlling interests in USDI allegedly reneged on their alleged commitments to Pernito, et al., that the latter seceded from USDI and applied for separate permits. The actual controversy is not really between PPA and Pernito, et al., but between the latter and the controlling interests of USDI. What petitioners appear to be actually assailing, therefore, is not the integration policy of PPA but the management policies of the integrated or merged corporation, USDI.

The status quo or the last actual peaceable uncontested status preceding the pending controversy, therefore, indicate a time when Pernito, et al., had no permits of their own to operate in the port of Cebu. The questioned orders, therefore, would not return the actual status quo but would resurrect the burdensome situations that prevailed before, when the services were performed by numerous individual operators.

Under the challenged orders of the respondent judge, he would allow 19 individual operators to handle cargoes along with USDI. Worse, he even allowed a certain Aquino Arrastre Services and a certain Watergate Arrastre Services to intervene and avail of the benefits of the injunction granted to Pernito, et al., without notice and benefit of a hearing, thus, raising the number to 20. By so doing, respondent judge had arrogated unto himself PPA's power to regulate arrastre and stevedoring services at the port of Cebu and to determine who are qualified to operate the services mentioned. We find no hesitancy in holding that the respondent judge's actions are tainted with a grave and manifest abuse of discretion.

The issuance of a preliminary injunction, it is true, rests upon the sound discretion of the court. Sound judicial discretion, however, is no license to undo the law by defeating its objectives (Vivo vs. Cloribel, L-23239, November 23, 1966, 15 SCRA 713).

WHEREFORE, petition is hereby granted. The orders of March 31, 1978 and April 17, 1978 of respondent court enjoining petitioner from enforcing its policy of integration is hereby reversed and set aside. The May 30, 1978 temporary restraining order, as clarified in the June 8, 1978 resolution and as modified in the July 24, 1979 resolution, is hereby made permanent.

No pronouncement as to costs.

SO ORDERED.

Makasiar, C.J., Aquino, Concepcion, Jr., Abad Santos, Melencio-Herrera, Plana, Escolin, Relova, Gutierrez, Jr., De la Fuente and Cuevas, JJ., concur.

Teehankee, J., reserves his vote.


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