II.
CONSTITUTIONAL PROVISIONS
b. Ownership
WILSON P. GAMBOA v. FINANCE SECRETARY MARGARITO B. TEVES,
et al.
G.R. No. 176579, June 28, 2001
FACTS: In 1969, General Telephone and Electronics Corporation (GTE), sold 26
percent of the outstanding common shares of PLDT to Philippine
Telecommunications Investment Corporation (PTIC). In 1977, Prime Holdings, Inc.
(PHI) became the owner of 111,415 shares of stock of PTIC. In 1986, the 111,415
shares of stock of PTIC held by PHI were sequestered by the Presidential
Commission on Good Government (PCGG). The 111,415 PTIC shares, which
represent about 46.125 percent of the outstanding capital stock of PTIC, were later
declared by this Court to be owned by the Republic of the Philippines.
In 1999, First Pacific, a Bermuda-registered acquired the remaining 54 percent of
the outstanding capital stock of PTIC. On 20 November 2006, the Inter-Agency
Privatization Council (IPC) of the Philippine Government through a public bidding
sold the same shares to Parallax Venture who won with a bid of P25.6 billion or
US$510 million.
Thereafter, First Pacific announced that it would exercise its right of first refusal as
a PTIC stockholder and buy the 111,415 PTIC shares by matching the bid price of
Parallax. On 14 February 2007, First Pacific, through its subsidiary, MPAH, entered
into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or
46.125 percent of the outstanding capital stock of PTIC, with the Philippine
Government for the price of P25,217,556,000 or US$510,580,189. The sale was
completed on 28 February 2007.
Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of
46.125 percent of PTIC shares is actually an indirect sale of 12 million shares or
about 6.3 percent of the outstanding common shares of PLDT. With the sale, First
Pacific common shareholdings in PLDT increased from 30.7 percent to 37 percent,
thereby increasing the common shareholdings of foreigners in PLDT to about 81.47
percent. This, according to petitioner, violates Section 11, Article XII of the 1987
Philippine Constitution which limits foreign ownership of the capital of a public
utility to not more than 40 percent.
On 28 February 2007, petitioner filed the instant petition for prohibition,
injunction, declaratory relief, and declaration of nullity of sale of the 111,415 PTIC
shares.
ISSUE: Does the term "capital" in Section 11, Article XII of the Constitution refer
to the total common shares only or to the total outstanding capital stock of PLDT, a
public utility?
HELD: Section 11, Article XII (National Economy and Patrimony) of the 1987
Constitution mandates the Filipinization of public utilities, to wit:
Section 11. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the Philippines or
to corporations or associations organized under the laws of the Philippines, at least
sixty per centum of whose capital is owned by such citizens; nor shall such
franchise, certificate, or authorization be exclusive in character or for a longer
period than fifty years. Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment, alteration, or repeal by
the Congress when the common good so requires. The State shall encourage equity
participation in public utilities by the general public. The participation of foreign
investors in the governing body of any public utility enterprise shall be limited to
their proportionate share in its capital, and all the executive and managing officers
of such corporation or association must be citizens of the Philippines.
The intent of the framers of the Constitution in imposing limitations and
restrictions on fully nationalized and partially nationalized activities is for Filipino
nationals to be always in control of the corporation undertaking said activities.
Otherwise, if the Trial Court ruling upholding respondent's arguments were to be
given credence, it would be possible for the ownership structure of a public utility
corporation to be divided into one percent (1%) common stocks and ninety-nine
percent (99%) preferred stocks. Following the Trial Court ruling adopting
respondent's arguments, the common shares can be owned entirely by foreigners
thus creating an absurd situation wherein foreigners, who are supposed to be
minority shareholders, control the public utility corporation.
The term "capital" in Section 11, Article XII of the Constitution refers only to shares
of stock entitled to vote in the election of directors, and thus in the present case
only to common shares, and not to the total outstanding capital stock comprising
both common and non-voting preferred shares.
Indisputably, one of the rights of a stockholder is the right to participate in the
control or management of the corporation. This is exercised through his vote in the
election of directors because it is the board of directors that controls or manages
the corporation. In the absence of provisions in the articles of incorporation
denying voting rights to preferred shares, preferred shares have the same voting
rights as common shares. However, preferred shareholders are often excluded from
any control, that is, deprived of the right to vote in the election of directors and on
other matters, on the theory that the preferred shareholders are merely investors in
the corporation for income in the same manner as bondholders. In fact, under the
Corporation Code only preferred or redeemable shares can be deprived of the right
to vote. Common shares cannot be deprived of the right to vote in any corporate
meeting, and any provision in the articles of incorporation restricting the right of
common shareholders to vote is invalid.
Considering that common shares have voting rights which translate to control, as
opposed to preferred shares which usually have no voting rights, the term "capital"
in Section 11, Article XII of the Constitution refers only to common shares.
However, if the preferred shares also have the right to vote in the election of
directors, then the term "capital" shall include such preferred shares because the
right to participate in the control or management of the corporation is exercised
through the right to vote in the election of directors. In short, the term "capital" in
 Section 11, Article XII of the Constitution refers only to shares of stock that can vote
in the election of directors.
This interpretation is consistent with the intent of the framers of the Constitution
to place in the hands of Filipino citizens the control and management of public
utilities. Thus, 60 percent of the "capital" assumes, or should result in, "controlling
interest" in the corporation and thus in the present case, only to common shares,
and not to the total outstanding capital stock (common and non-voting preferred
shares).
c. Exclusivity
METROPOLITAN CEBU WATER DISTRICT (MCWD) v. M. ADALA
526 SCRA 465 (2007)
FACTS: The Metropolitan Cebu Water District (MCWD), a public corporation,
appealed the decision rendered in favor of Margarita A. Adala (Adala) by the
National Water Resources Board (NWRB), granting her a franchise permit to
supply water to three sitios in Bulacao. MCWD was the exclusive distributor of
water in the district. MCWD contended that the proposed waterworks would
interfere with their water supply which it has the right to protect, and the water
needs of the residents in the subject area was already being well served by
petitioner. They also contend that they were granted by Section 47 of Presidential
Decree 198, granting exclusive franchise only to public utilities. Engineer Paredes,
the general manager of MCWD, filed Certificate of Public Convenience by the
National Water Resources Board (NWRB), which permitted the company to
operate and maintain waterworks supply services. MCWD alleged that the Board of
Directors of MCWD did not give consent to the issuance of the franchise applied
for.
ISSUES: Whether or not Section 47 of Presidential Decree 198 grants exclusive
franchise to public utilities
HELD: MWCD‘s position that an overly strict construction of the term ―franchise
as used in Section 47 of P.D. 198 would lead to an absurd result impresses. If
franchises, in this context, were strictly understood to mean an authorization
issuing directly from the legislature, it would follow that, while Congress cannot
issue franchises for operating waterworks systems without the water district‘s
consent, the NWRB may keep on issuing CPCs authorizing the very same act even
without such consent. In effect, not only would the NWRB be subject to less
constraints than Congress in issuing franchises. The exclusive character of the
franchise provided for by Section 47 would be illusory. While the prohibition in
Section 47 of P.D. 198 applies to the issuance of CPCs for the reasons discussed
above, the same provision must be deemed void ab initio for being irreconcilable
with Article XIV Section 5 of the 1973 Constitution which was ratified on January
17, 1973 – the constitution in force when P.D. 198 was issued on May 25, 1973. That
the legislative authority – in this instance, then President Marcos – intended to
delegate its power to issue franchises in the case of water districts is clear from the
fact that, pursuant to the procedure outlined in P.D. 198, it no longer plays a direct
role in authorizing the formation and maintenance of water districts, it having
vested the same to local legislative bodies and the Local Water Utilities
Administration (LWUA).
d. Subject to Amendment
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI) vs.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) and JUAN
A. ALEGRE
G.R. No. 93237 November 6, 1992
FACTS: Private respondent Juan A. Alegre's wife, Dr. Jimena Alegre, sent two (2)
RUSH telegrams through petitioner RCPI's facilities in Taft Ave., Manila at 9:00 in
the morning of 17 March 1989 to his sister and brother-in-law in Valencia, Bohol
and another sister-in-law in Espiritu, Ilocos Norte.
Both telegrams did not reach their destinations on the expected dates. So, private
respondent filed a letter-complaint against RCPI with National
Telecommunications Commission (NTC) for poor service, with a request for the
imposition of the appropriate punitive sanction against the company. Taking
cognizance of the complaint, NTC directed RCPI to answer the complaint and set
the initial hearing.
NTC held that RCPI was administratively liable for deficient and inadequate service
under Section 19(a) of C.A. 146 and imposed the penalty of fine payable within
thirty (30) days from receipt in the aggregate amount of one thousand pesos.
Hence, RCPI filed this petition for review invoking C.A. 146 Sec. 19(a) which limits
the jurisdiction of the Public Service Commission (precursor of the NTC) to the
fixing of rates.
ISSUE: Whether or not Public Service Commission (precursor of the NTC) has
jurisdiction to impose fines
HELD: The decision appealed from is reversed and set aside for lack of jurisdiction
of the NTC to render it.
NTC has no jurisdiction to impose a fine. Under Section 21 of C. A. 146, as
amended, the Commission was empowered to impose an administrative fine in
cases of violation of or failure by a public service to comply with the terms and
conditions of any certificate or any orders, decisions or regulations of the
Commission. Petitioner operated under a legislative franchise, so there were no
terms nor conditions of any certificate issued by the Commission to violate. Neither
was there any order, decision or regulation from the Commission applicable to
petitioner that the latter had allegedly violated, disobeyed, defied or disregarded.
No substantial change has been brought about by Executive Order No. 546 invoked
by the Solicitor General's Office to bolster NTC's jurisdiction. The Executive Order
 is not an explicit grant of power to impose administrative fines on public service
utilities, including telegraphic agencies, which have failed to render adequate
service to consumers. Neither has it expanded the coverage of the supervisory and
regulatory power of the agency. There appears to be no alternative but to reiterate
the settled doctrine in administrative law that:
Too basic in administrative law to need citation of jurisprudence is the rule that
jurisdiction and powers of administrative agencies, like respondent Commission,
are limited to those expressly granted or necessarily implied from those granted in
the legislation creating such body; and any order without or beyond such
jurisdiction is void and ineffective (Globe Wireless case).
e. Fixed Term
ERNESTO FRANCISCO, JR. V. TOLL REGULATORY BOARD
GR No. 166910, October 19, 2010
f. Take-over Power
FACTS: President Marcos issued PD 1112 authorizing the establishment of toll
facilities on public improvements. It acknowledged the huge financial requirements
and the need to tap the resources of the private sector to implement the
government’s infrastructure programs. PD 1112 allowed the collection of toll fees
for the use of certain public improvements that would allow a reasonable rate of
return on investments. The same decree created the Toll Regulatory Board, vesting
it with the power to enter into contracts for the construction, maintenance, and
operation of tollways, grant authority to operate a toll facility, issue the necessary
Toll Operation Certificate (TOC) and fix initial toll rates, and adjust it from time to
time after due notice and hearing. PD 1113 was issued granting the Philippine
National Construction Corporation for a period of 30 years, a franchise to operate
toll facilities in the North Luzon and South Luzon Expressways. Subsequently, PD
1894 was issued further granting the PNCC a franchise over the Metro Manila
Expressway and the expanded delineated NLEX and SLEX.
Then came the 1987 Constitution with its franchise provision. In 1993, the
Government Corporate
Counsel held that the PNCC may enter into a joint venture agreement with private
entities without going into public bidding. On February 1994, the DPWH together
with other private entities executed a MOU to open the door for entry of private
capital in the Subic and Clark extension projects. PNCC entered into a financial and
technical JVAs with entities for the toll operation of its franchised areas. Several
Supplemental Toll Operation Agreements (STOA) were entered for the South Metro
Manila Skyway, NLEX Expansion, and South Luzon Expressway Projects.
Petitioners seek to nullify the various STOAs and assail the constitutionality of
Sections 3(a and d) of PD 1112 in relation to Section 8(b) of PD 1894. Insofar as
they vested the TRB the power to issue, modify, and promulgate toll rate changes
while given the ability to collect tolls.
ISSUE: Whether or not the TRB may be empowered to grant authority to operate
the toll facility/system.
RULING: The TRB was granted sufficient power to grant a qualified person or
entity with authority to operate the toll facility/system. By explicit provisions of the
PDs, the TRB was given power to grant administrative franchise for toll facility
projects. The limiting thrust of Article 11, Section 11 of the Constitution on the grant
of franchise or other forms of authorization to operate public utilities may, in
context, be stated as follows: (a) the grant shall be made only in favor of qualified
Filipino citizens or corporations; (b) Congress can impair the obligation of
franchises, as contracts; and (c) no such authorization shall be exclusive or exceed
fifty years. Under the 1987 Constitution, Congress has an explicit authority to grant
a public utility franchise. However, it may validly delegate its legislative authority,
under the power of subordinate legislation, to issue franchises of certain public
utilities to some administrative agencies.
DISPOSITIVE: The petitions in G.R. Nos. 166910 173630, and 169917 are hereby
DENIED for lack of merit. The petition in G.R. No. 183599 is GRANTED.
DAVID v. MACAPAGAL- ARROYO
489 SCRA 160
FACTS: In February 2006, due to the escape of some Magdalo members and the
discovery of a plan (Oplan Hackle I) to assassinate the president, then president
Gloria Macapagal-Arroyo (GMA) issued Presidential Proclamation 1017 (PP1017)
and is to be implemented by General Order No. 5 (GO 5). The said law was aimed
to suppress lawlessness and the connivance of extremists to bring down the
government.
Pursuant to such PP, GMA cancelled all plans to celebrate EDSA I and at the same
time revoked all permits issued for rallies and other public organization/meeting.
Notwithstanding the cancellation of their rally permit, Kilusang Mayo Uno (KMU)
head Randolf David proceeded to rally which led to his arrest.
Later that day, the Daily Tribune, which Cacho-Olivares is the editor, was raided by
the CIDG and they seized and confiscated anti-GMA articles and write ups. Later
still, another known anti-GMA news agency (Malaya) was raided and seized. On the
same day, Beltran of Anakpawis, was also arrested. His arrest was however
grounded on a warrant of arrest issued way back in 1985 for his actions against
Marcos. His supporters cannot visit him in jail because of the current imposition of
PP 1017 and GO 5.
In March, GMA issued PP 1021 which declared that the state of national emergency
ceased to exist. David and some opposition Congressmen averred that PP1017 is
unconstitutional for it has no factual basis and it cannot be validly declared by the
president for such power is reposed in Congress. Also such declaration is actually a
declaration of martial law. Olivares-Cacho also averred that the emergency
contemplated in the Constitution are those of natural calamities and that such is an
overbreadth. Petitioners claim that PP 1017 is an overbreadth because it encroaches
upon protected and unprotected rights. The Sol-Gen argued that the issue has
become moot and academic by reason of the lifting of PP 1017 by virtue of the
declaration of PP 1021. The Sol-Gen averred that PP 1017 is within the president’s
calling out power, take care power and take over power.
ISSUE: Whether or not PP 1017 and GO 5 is constitutional.
HELD: PP 1017 and its implementing GO are partly constitutional and partly
unconstitutional.
The issue cannot be considered as moot and academic by reason of the lifting of the
questioned PP. It is still in fact operative because there are parties still affected due
to the alleged violation of the said PP. Hence, the SC can take cognition of the case
at bar. The SC ruled that PP 1017 is constitutional in part and at the same time
some provisions of which are unconstitutional. The SC ruled in the following way;
Resolution by the SC on the Factual Basis of its declaration
The petitioners were not able to prove that GMA has no factual basis in issuing PP
1017 and GO 5. A reading of the Solicitor General’s Consolidated Comment and
Memorandum shows a detailed narration of the events leading to the issuance of
PP 1017, with supporting reports forming part of the records. Mentioned are the
escape of the Magdalo Group, their audacious threat of the Magdalo D-Day, the
defections in the military, particularly in the Philippine Marines, and the reproving
statements from the communist leaders. There was also the Minutes of the
Intelligence Report and Security Group of the Philippine Army showing the
growing alliance between the NPA and the military. Petitioners presented nothing
to refute such events. Thus, absent any contrary allegations, the Court is convinced
that the President was justified in issuing PP 1017 calling for military aid. Indeed,
judging the seriousness of the incidents, GMA was not expected to simply fold her
arms and do nothing to prevent or suppress what she believed was lawless violence,
invasion or rebellion. However, the exercise of such power or duty must not stifle
liberty.
Resolution by the SC on the Overbreadth Theory
First and foremost, the overbreadth doctrine is an analytical tool developed for
testing ‘on their faces’ statutes in free speech cases. The 7 consolidated cases at bar
are not primarily ‘freedom of speech’ cases. Also, a plain reading of PP 1017 shows
that it is not primarily directed to speech or even speech-related conduct. It is
actually a call upon the AFP to prevent or suppress all forms of lawless violence.
Moreover, the overbreadth doctrine is not intended for testing the validity of a law
that ‘reflects legitimate state interest in maintaining comprehensive control over
harmful, constitutionally unprotected conduct.’ Undoubtedly, lawless violence,
insurrection and rebellion are considered ‘harmful’ and ‘constitutionally
unprotected conduct.’ Thus, claims of facial overbreadth are entertained in cases
involving statutes which, by their terms, seek to regulate only ‘spoken words’ and
again, that ‘overbreadth claims, if entertained at all, have been curtailed when
invoked against ordinary criminal laws that are sought to be applied to protected
conduct.’ Here, the incontrovertible fact remains that PP 1017 pertains to a
spectrum of conduct, not free speech, which is manifestly subject to state
regulation.
Resolution by the SC on the Calling Out Power Doctrine
On the basis of Sec 17, Art 7 of the Constitution, GMA declared PP 1017. The SC
considered the President’s ‘calling-out’ power as a discretionary power solely vested
in his wisdom, it stressed that ‘this does not prevent an examination of whether
such power was exercised within permissible constitutional limits or whether it was
exercised in a manner constituting grave abuse of discretion. The SC ruled that
GMA has validly declared PP 1017 for the Constitution grants the President, as
Commander-in-Chief, a ‘sequence’ of graduated powers. From the most to the least
benign, these are: the calling-out power, the power to suspend the privilege of the
writ of habeas corpus, and the power to declare Martial Law. The only criterion for
the exercise of the calling-out power is that ‘whenever it becomes necessary,’ the
President may call the armed forces ‘to prevent or suppress lawless violence,
invasion or rebellion.’ And such criterion has been met.
Resolution by the SC on the Take Care Doctrine
Pursuant to the 2nd sentence of Sec 17, Art 7 of the Constitution (He shall ensure
that the laws be faithfully executed.) the president declared PP 1017. David et al
averred that PP 1017 however violated Sec 1, Art 6 of the Constitution for it
arrogated legislative power to the President. Such power is vested in Congress.
They assail the clause ‘to enforce obedience to all the laws and to all decrees, orders
and regulations promulgated by me personally or upon my direction.’ The SC noted
that such provision is similar to the power that granted former President Marcos
legislative powers (as provided in PP 1081). The SC ruled that the assailed PP 1017
is unconstitutional insofar as it grants GMA the authority to promulgate
‘decrees.’ Legislative power is peculiarly within the province of the Legislature. Sec
1, Article 6 categorically states that ‘[t]he legislative power shall be vested in the
Congress of the Philippines which shall consist of a Senate and a House of
Representatives.’ To be sure, neither Martial Law nor a state of rebellion nor a
state of emergency can justify GMA’[s exercise of legislative power by issuing
decrees. The president can only “take care” of the carrying out of laws but cannot
create or enact laws.
Resolution by the SC on the Take Over Power Doctrine
The president cannot validly order the taking over of private corporations or
institutions such as the Daily Tribune without any authority from Congress. On the
other hand, the word emergency contemplated in the constitution is not limited to
natural calamities but rather it also includes rebellion. The SC made a distinction;
the president can declare the state of national emergency but her exercise of
emergency powers does not come automatically after it for such exercise needs
authority from Congress. The authority from Congress must be based on the
following:
(1) There must be a war or other emergency.
(2) The delegation must be for a limited period only.
(3) The delegation must be subject to such restrictions as the Congress may
prescribe.
(4) The emergency powers must be exercised to carry out a national policy
declared by Congress.
Resolution by the SC on the Issue that PP 1017 is a Martial Law Declaration
The SC ruled that PP 1017 is not a Martial Law declaration and is not tantamount to
it. It is a valid exercise of the calling out power of the president by the president.
 AGAN VS. PIATCO
G.R. No. 155001. May 5, 2003
FACTS: On October 5, 1994, AEDC submitted an unsolicited proposal to the
Government through the DOTC/MIAA for the development of NAIA International
Passenger Terminal III (NAIA IPT III).
DOTC constituted the Prequalification Bids and Awards Committee (PBAC) for the
implementation of the project and submitted with its endorsement proposal to the
NEDA, which approved the project.
On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily
newspapers of an invitation for competitive or comparative proposals on AEDC’s
unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended.
On September 20, 1996, the consortium composed of People’s Air Cargo and
Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and
Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted
their competitive proposal to the PBAC. PBAC awarded the project to Paircargo
Consortium. Because of that, it was incorporated into Philippine International
Airport Terminals Co., Inc.
AEDC subsequently protested the alleged undue preference given to PIATCO and
reiterated its objections as regards the prequalification of PIATCO.
On July 12, 1997, the Government and PIATCO signed the “Concession Agreement
for the Build-Operate-and-Transfer Arrangement of the NAIA Passenger Terminal
III” (1997 Concession Agreement). The Government granted PIATCO the franchise
to operate and maintain the said terminal during the concession period and to
collect the fees, rentals and other charges in accordance with the rates or schedules
stipulated in the 1997 Concession Agreement. The Agreement provided that the
concession period shall be for twenty-five (25) years commencing from the in-
service date, and may be renewed at the option of the Government for a period not
exceeding twenty-five (25) years. At the end of the concession period, PIATCO
shall transfer the development facility to MIAA.
Meanwhile, the MIAA which is charged with the maintenance and operation of the
NAIA Terminals I and II, had existing concession contracts with various service
providers to offer international airline airport services, such as in-flight catering,
passenger handling, ramp and ground support, aircraft maintenance and
provisions, cargo handling and warehousing, and other services, to several
international airlines at the NAIA.
On September 17, 2002, the workers of the international airline service providers,
claiming that they would lose their job upon the implementation of the questioned
agreements, filed a petition for prohibition. Several employees of MIAA likewise
filed a petition assailing the legality of the various agreements.
During the pendency of the cases, PGMA, on her speech, stated that she will not
“honor (PIATCO) contracts which the Executive Branch’s legal offices have
concluded (as) null and void.”
ISSUE: Whether or not the State can temporarily take over a business affected
with public interest.
RULING: YES. PIATCO cannot, by mere contractual stipulation, contravene the
Constitutional provision on temporary government takeover and obligate the
government to pay “reasonable cost for the use of the Terminal and/or Terminal
Complex.”
Article XII, Section 17 of the 1987 Constitution provides:
Section 17. In times of national emergency, when the public interest so requires, the
State may, during the emergency and under reasonable terms prescribed by it,
temporarily take over or direct the operation of any privately owned public utility
or business affected with public interest.
The above provision pertains to the right of the State in times of national
emergency, and in the exercise of its police power, to temporarily take over the
operation of any business affected with public interest. The duration of the
emergency itself is the determining factor as to how long the temporary takeover by
the government would last. The temporary takeover by the government extends
only to the operation of the business and not to the ownership thereof. As such
the government is not required to compensate the private entity-owner of the said
business as there is no transfer of ownership, whether permanent or temporary.
The private entity-owner affected by the temporary takeover cannot, likewise, claim
just compensation for the use of the said business and its properties as the
temporary takeover by the government is in exercise of its police power and not of
its power of eminent domain.
Article XII, section 17 of the 1987 Constitution envisions a situation wherein the
exigencies of the times necessitate the government to “temporarily take over or
direct the operation of any privately owned public utility or business affected with
public interest.” It is the welfare and interest of the public which is the paramount
consideration in determining whether or not to temporarily take over a particular
business. Clearly, the State in effecting the temporary takeover is exercising its
police power. Police power is the “most essential, insistent, and illimitable of
powers.” Its exercise therefore must not be unreasonably hampered nor its exercise
be a source of obligation by the government in the absence of damage due to
arbitrariness of its exercise. Thus, requiring the government to pay reasonable
compensation for the reasonable use of the property pursuant to the operation of
the business contravenes the Constitution.
g. Privatization of State- Operated Public Utilities *The general rule is CAB has the power to regulate the airline companies/air
transportation industry BUT this case is an exception.
KUWAIT AIRWAYS V. PAL
G.R. NO. 156087, May 8, 2009

FACTS: Kuwait Airways and Philippine Airlines (PAL) entered into a Commercial III. REGULATION OF PUBLIC UTILITIES
Agreement to assist each other to develop traffic on the route Kuwait-Bangkok-
Manila and vice-versa. Under the said agreement, Kuwait Airways obligated itself
to share with PAL revenue earned from the uplift of passengers between Kuwait
and Manila and vice-versa. Sometime later, delegations from Philippines and
a. Authority to Operate
Kuwait (Philippine Panel and Kuwait Panel) met and agreed that effective upon the
signing of the Confidential Memorandum of Understanding (CMU), the exercise of
the third and fourth freedom traffic rights shall not be subject to any royalty
payment or commercial agreements. The Philippine Panel composed of officials
PLDT V. NTC
from CAB, DFA, and PAL and headed by the Executive Director of the CAB signed
190 SCRA 717
the CMU – in behalf of the Philippine Government. A month later, petitioner sent a
letter informing PAL that by virtue of the CMU the termination of the royalty
payment is in effect. PAL insisted that the Agreement should continue to be in force
FACTS: In 1958, Felix Alberto & Co., Inc (FACI) was granted by Congress a
and petitioner is still obligated to pay PAL revenue until such date. Petitioner
franchise to build radio stations (later construed as to include telephony). FACI
refusing to pay, PAL filed a complaint before the RTC which ruled in its favor.
later changed its name to Express Telecommunications Co., Inc. (ETCI). In 1987,
Hence this petition.
ETCI was granted by the National Telecommunications Commission a provisional
authority to build a telephone system in some parts of Manila. Philippine Long
ISSUE: Whether or not CAB can compel PAL to terminate the Commercial
Distance Telephone Co. (PLDT) opposed the said grant as it avers, among others,
Agreement with petitioner.
that ETCI is not qualified because its franchise has already been invalidated when it
failed to exercise it within 10 years from 1958; that in 1987, the Albertos, owners of
RULING: NO.
more than 40% of ETCI’s shares of stocks, transferred said stocks to the new
[We do not doubt that the CAB, in the exercise of its statutory mandate, has the
stockholders (Cellcom, Inc.? – not specified in the case); that such transfer
power to compel Philippine Airlines to immediately terminate its Commercial
involving more than 40% shares of stocks amounted to a transfer of franchise
Agreement with Kuwait Airways pursuant to the CMU. Considering that it is the
which is void because the authorization of Congress was not obtained. The NTC
Philippine government that has the sole authority to charter air policy and
denied PLDT. PLDT then filed a petition for certiorari and prohibition against the
negotiate with foreign governments with respect to air traffic rights, the
NTC.
government through the CAB has the indispensable authority to compel local air
carriers to comply with government determined policies, even at the expense of
ISSUE: Whether or not PLDT’s petition should prosper.
economic rights.]
HELD: NO.
However, this is not a case where the CAB had duly exercised its regulatory
PLDT cannot attack ETCI’s franchise in a petition for certiorari. It cannot be
authority over a local airline in order to implement or further government air
collaterally attacked. It should be directly attacked through a petition for quo
policy. What happened instead was an officer of the CAB, acting in behalf not of the
warranto which is the correct procedure. A franchise is a property right and cannot
Board but of the Philippine government, had committed to a foreign nation the
be revoked or forfeited without due process of law. The determination of the right
immediate abrogation of Philippine Airlines’ commercial agreement with Kuwait
to the exercise of a franchise, or whether the right to enjoy such privilege has been
Airways.
forfeited by non-user, is more properly the subject of the prerogative writ of quo
warranto. Further, for any violation of the franchise, it should be the government
Nor can we presume, simply because Dr. Linlingan, Executive Director of the CAB
who should be filing a quo warranto proceeding because it was the government who
had signed the CMU in behalf of the Philippine Panel that he could have done so
granted it in the first place.
bearing the authority of the Board, in the exercise of regulatory jurisdiction over
Philippine Airlines. For one, the CAB is a collegial body composed of five members
The transfer of more than 40% of the shares of stocks is not tantamount to a
and no one member–even the chairman–can act in behalf of the entire Board. The
transfer of franchise. There is a distinction here. There is no need to obtain
Board is disabled from performing as such without a quorum. For another, the
authorization of Congress for the mere transfer of shares of stocks. Shareholders
Executive Director of the CAB is not even a member of the Board, per R.A. No. 776,
can transfer their shares to anyone. The only limitation is that if the transfer
as amended.
involves more than 40% of the corporation’s stocks, it should be approved by the
NTC. The transfer in this case was shown to have been approved by the NTC. What
requires authorization from Congress is the transfer of franchise; and the person
who shall obtain the authorization is the grantee (ETCI). A distinction should be
made between shares of stock, which are owned by stockholders, the sale of which
requires only NTC approval, and the franchise itself which is owned by the
corporation as the grantee thereof, the sale or transfer of which requires
Congressional sanction. Since stockholders own the shares of stock, they may
dispose of the same as they see fit. They may not, however, transfer or assign the
property of a corporation, like its franchise. In other words, even if the original
stockholders had transferred their shares to another group of shareholders, the
franchise granted to the corporation subsists as long as the corporation, as an
entity, continues to exist. The franchise is not thereby invalidated by the transfer of
the shares. A corporation has a personality separate and distinct from that of each
stockholder. It has the right of continuity or perpetual succession.
NAPOCOR v. CA
GR 103442-45 May 21, 1993
FACTS: This is a consolidated case comprising of four separate complaints., filed
against NPC and a particular Chavez.
Plaintiffs filed a complaint against respondent for the lost of lives and destruction
of properties due to the negligence of the latter in releasing water from Angat dam
during the typhoon “Kading”
Benjamin Chavez, being the supervisor at that time of a multi-purpose
hydroelectric plant in the Angat River at Hilltop, Norzagaray, Bulacan, failed to
exercise due diligence in monitoring the water level at the dam.
NPC’s allegations were as follows:
1) the NPC exercised due care, diligence and prudence in the operation and
maintenance of the hydroelectric plant;
2) the NPC exercised the diligence of a good father in the selection of its employees;
3) written notices were sent to the different municipalities of Bulacan warning the
residents therein about the impending release of a large volume of water with the
onset of typhoon "Kading" and advise them to take the necessary precautions;
4) the water released during the typhoon was needed to prevent the collapse of the
dam and avoid greater damage to people and property;
5) in spite of the precautions undertaken and the diligence exercised, they could
still not contain or control the flood that resulted and;
6) the damages incurred by the private respondents were caused by a fortuitous
event or force majeure and are in the nature and character of damnum absque
injuria. By way of special affirmative defense, the defendants averred that the NPC
cannot be sued because it performs a purely governmental function.
The trial court dismissed the complaints as against the NPC on the ground that the
provision of its charter allowing it to sue and be sued does not contemplate actions
based on tort. Its decision on 30 April 1990 dismissing the complaints "for lack of
sufficient and credible evidence."
Court of Appeals reversed the appealed decision and awarded damages in favor of
the private respondents. Based on the findings that From the mass of evidence
extant in the record, We are convinced, and so hold that the flash flood on October
27, 1978, was caused not by rain waters (sic), but by stored waters (sic) suddenly
and simultaneously released from the Angat Dam by defendants-appellees,
particularly from midnight of October 26, 1978 up to the morning hours of October
27, 1978.
ISSUE:
Whether or not respondent is negligent?
Whether or not the notices of warning were insufficient?
Whether or not The damages suffered was not DAMNUM ABSQUE INJURIA?
HELD: We declared therein that the proximate cause of the loss and damage
sustained by the plaintiffs therein — who were similarly situated as the private
respondents herein — was the negligence of the petitioners, and that the 24
October 1978 "early warning notice" supposedly sent to the affected municipalities,
the same notice involved in the case at bar, was insufficient.
The petitioners were guilty of "patent gross and evident lack of foresight,
imprudence and negligence in the management and operation of Angat Dam," and
that "the extent of the opening of the spillways, and the magnitude of the water
released, are all but products of defendants-appellees' headlessness, slovenliness,
and carelessness."
To exempt the obligor from liability under Article 1174 of the Civil Code, for a
breach of an obligation due to an "act of God," the following must concur: (a) the
cause of the breach of the obligation must be independent of the will of the debtor;
(b) the event must be either unforseeable or unavoidable; (c) the event must be
such as to render it impossible for the debtor to fulfill his obligation in a moral
manner; and (d) the debtor must be free from any participation in, or aggravation
of the injury to the creditor. (Vasquez v. Court of Appeals, 138 SCRA 553; Estrada v.
Consolacion, 71 SCRA 423; Austria v. Court of Appeals, 39 SCRA 527; Republic of
the Phil. v. Luzon Stevedoring Corp., 21 SCRA 279; Lasam v. Smith, 45 Phil. 657).
Accordingly, petitioners cannot be heard to invoke the act of God or force majeure
to escape liability for the loss or damage sustained by private respondents since
they, the petitioners, were guilty of negligence. The event then was not occasioned
exclusively by an act of God or force majeure; a human factor — negligence or
imprudence — had intervened. The effect then of the force majeure in question may
be deemed to have, even if only partly, resulted from the participation of man.
Thus, the whole occurrence was thereby humanized, as it were, and removed from
the laws applicable to acts of God
ii. Revocation or Cancellation
DIVINAGRACIA V. CONSOLIDATED BROADCASTING SYSTEM
(G.R. NO. 162272)
FACTS: Respondents Consolidated Broadcasting System, Inc. (CBS) and People’s
Broadcasting Service, Inc. (PBS) are radio networks both involved in the operation
of radio broadcasting services in the Philippines, they being the grantees of
legislative franchises. Following the enactment of these franchise laws, NTC issued
Provisional Authorities allowing them to install, operate and maintain various AM
and FM broadcast stations in various locations throughout the nation. Petitioner
Santiago C. Divinagracia, alleging that he was a stockholder of respondent
companies, filed two complaints with the NTC alleging that despite the provisions
of the law mandating the public offering of at least 30% of the common stocks of
Respondents, both entities had failed to make such offering. Petitioner prayed for
the cancellation of all the Provisional Authorities or CPCs of Respondents. The NTC
dismissed both complaints, positing that although it had full jurisdiction to revoke
or cancel a Provisional Authority or CPC for violations or infractions of the terms
and conditions, it refrained from exercising the same.
ISSUE: Whether or not NTC has the power to cancel Provisional Authorities and
CPCs of entities which Congress has issued franchises to operate
RULING: NO.
We earlier replicated the various functions of the NTC, as established by E.O. No.
546. One can readily notice that even as the NTC is vested with the power to issue
CPCs to broadcast stations, it is not expressly vested with the power to cancel such
CPCs, or otherwise empowered to prevent broadcast stations with duly issued
franchises and CPCs from operating radio or television stations.
Petitioner relies on the power granted to the Public Service Commission to revoke
CPCs or CPCNs under Section 16(m) of the Public Service Act. That argument has
been irrefragably refuted by Section 14 of the Public Service Act, and by
jurisprudence, most especially RCPI v. NTC. As earlier noted, at no time did radio
companies fall under the jurisdiction of the Public Service Commission as they
were expressly excluded from its mandate under Section 14. In addition, the Court
ruled in RCPI that since radio companies, including broadcast stations and
telegraphic agencies, were never under the jurisdiction of the Public Service
Commission except as to rate-fixing, that Commission’s authority to impose fines
did not carry over to the NTC even while the other regulatory agencies that
emanated from the Commission did retain the previous authority their predecessor
had exercised. No provision in the Public Service Act thus can be relied upon by the
petitioner to claim that the NTC has the authority to cancel CPCs or licenses.
iii. CPC v. CPCN
PHILIPPINE AIRLINES, INC. VS. CIVIL AERONAUTICS BOARD
(270 SCRA 538)
FACTS: Grand Air applied for a Certificate of Public Convenience and Necessity
with the Civil Aeronautics Board (CAB). The Chief Hearing Officer issued a notice
of hearing directing Grand Air to serve a copy of the application and notice to all
scheduled Philippine Domestic operators. Grand Air filed its compliance and
requested for a Temporary Operating Permit (TOP). PAL filed an opposition to the
application on the ground that the CAB had no jurisdiction to hear the application
until Grand Air first obtains a franchise to operate from Congress. The Chief
Hearing Officer denied the opposition and the CAB approved the issuance of the
TOP for a period of 3 months. The opposition for the TOP was likewise denied. The
CAB justified its assumption of jurisdiction over Grand Air’s application on the
basis of Republic Act 776 which gives it the specific power to issue any TOP or
Certificate of Public Convenience and Necessity.
ISSUE: Whether or not the CAB can issue a Certificate of Public Convenience and
Necessity or TOP even though the prospective operator does not have a legislative
franchise?
HELD: Yes, as mentioned by the CAB, it is duly authorized to do so under
Republic Act 776 and a legislative franchise is not necessary before it may do so,
since Congress has delegated the authority to authorize the operation of domestic
air transport services to the CAB, an administrative agency. The delegation of such
authority is not without limits since Congress had set specific standard and
limitations on how such authority should be exercised.
Public convenience and necessity exists when the proposed facility will meet a
reasonable want of the public and supply a need which the existing facilities do not
adequately afford.
Thus, the Board should be allowed to continue hearing the application, since it has
jurisdiction over it provided that the applicant meets all the requirements of the
law.
b. Rate- Fixing
PHILCOMSAT VS ALCUAZ
180 SCRA 218
FACTS: By virtue of Republic Act No. 5514, the Philippine Communications
Satellite Corporation (PHILCOMSAT) was granted the authority to “construct and
operate such ground facilities as needed to deliver telecommunications services
from the communications satellite system and ground terminal or terminals” in the
Philippines. PHILCOMSAT provides satellite services to companies like Globe
Mackay (now Globe) and PLDT.
Under Section 5 of the same law, PHILCOMSAT was exempt from the jurisdiction,
control and regulation of the Public Service Commission later known as the
 National Telecommunications Commission (NTC). However, Executive Order No.
196 was later promulgated and the same has placed PHILCOMSAT under the
jurisdiction of the NTC. Consequently, PHILCOMSAT has to acquire permit to
operate from the NTC in order to continue operating its existing satellites. NTC
gave the necessary permit but it however directed PHILCOMSAT to reduce its
current rates by 15%. NTC based its power to fix the rates on EO 546.
PHILCOMSAT now sues NTC and its commissioner (Jose Luis Alcuaz) assailed the
said directive and holds that the enabling act (EO 546) of the NTC, empowering it
to fix rates for public service communications, does not provide the necessary
standards which were constitutionally required, hence, there is an undue
delegation of legislative power, particularly the adjudicatory powers of NTC.
PHILCOMSAT asserts that nowhere in the provisions of EO 546, providing for the
creation of NTC and granting its rate-fixing powers, nor of EO 196, placing
PHILCOMSAT under the jurisdiction of NTC, can it be inferred that NTC is guided
by any standard in the exercise of its rate-fixing and adjudicatory powers.
PHILCOMSAT subsequently clarified its said submission to mean that the order
mandating a reduction of certain rates is undue delegation not of legislative but of
quasi-judicial power to NTC, the exercise of which allegedly requires an express
conferment by the legislative body.
ISSUE: Whether or not there is an undue delegation of power.
HELD: No. There is no undue delegation. The power of the NTC to fix rates is
limited by the requirements of public safety, public interest, reasonable feasibility
and reasonable rates, which conjointly more than satisfy the requirements of a
valid delegation of legislative power. Fundamental is the rule that delegation of
legislative power may be sustained only upon the ground that some standard for its
exercise is provided and that the legislature in making the delegation has
prescribed the manner of the exercise of the delegated power.
Therefore, when the administrative agency concerned, NTC in this case, establishes
a rate, its act must both be non-confiscatory and must have been established in the
manner prescribed by the legislature; otherwise, in the absence of a fixed standard,
the delegation of power becomes unconstitutional. In case of a delegation of rate-
fixing power, the only standard which the legislature is required to prescribe for the
guidance of the administrative authority is that the rate be reasonable and just.
However, it has been held that even in the absence of an express requirement as to
reasonableness, this standard may be implied.
However, in this case, it appears that the manner of fixing the rates was done
without due process since no hearing was made in ascertaining the rate imposed
upon PHILCOMSAT.
ii. Provisional Rates
PADUA V. RANADA
G.R. No. 141949. October 14, 2002
FACTS: Toll Regulatory Board (TRB) issued Resolution No. 2001-89 authorizing
provisional toll rate adjustments on Metro Manila Skyway. It was thereafter
published in newspapers of general circulation for three (3) consecutive weeks.
However, there was no hearing conducted for the matter. Deliberations were not
even attended by Board Members except TRB Executive Director Jaime Dumlao,
Jr. Petitioners assail the validity of the resolution.
ISSUES:
Whether or not Resolution No. 2001-89 is invalid on the ground that:
(a) it was in violation of due process;
(b) the provisional toll rate adjustments are exorbitant, oppressive, onerous and
unconscionable; and,
(c) TRB Executive Director Jaime Dumlao, Jr. alone authorized the provisional
increase.
RULING:
“(a) No. TRB clearly complied with the publication requirements. Also, the TRB
may grant and issue ex-parte to any petitioner, without need of notice, publication
or hearing, provisional authority to collect, pending hearing and decision on the
merits of the petition, the increase in rates prayed for or such lesser amount as the
TRB may in its discretion provisionally grant.
“(b) No. This is obviously a question of fact requiring knowledge of the formula
used and the factors considered in determining the assailed rates. Definitely, this
task is within the province of the TRB. The SC takes cognizance of the wealth of
jurisprudence on the doctrine of primary administrative jurisdiction and
exhaustion of administrative remedies. In this era of clogged court dockets, the
need for specialized administrative boards or commissions with the special
knowledge, experience and capability to hear and determine promptly disputes on
technical matters or intricate questions of facts, subject to judicial review in case of
grave abuse of discretion, is indispensable. Between the power lodged in an
administrative body and a court, the unmistakable trend is to refer it to the
former.”
“(c) No. It is not true that it was TRB Executive Director Dumlao, Jr. alone who
issued Resolution No. 2001-89. The Resolution itself contains the signature of the
four TRB Directors. Petitioner Padua would argue that while these Directors signed
the Resolution, none of them personally attended the hearing. This argument is
misplaced. Under our jurisprudence, an administrative agency may employ other
persons, such as a hearing officer, examiner or investigator, to receive evidence,
conduct hearing and make reports, on the basis of which the agency shall render its
decision. Such a procedure is a practical necessity. Corollarily, in a catena of cases,
the Supreme Court laid down the cardinal requirements of due process in
administrative proceedings, one of which is that “the tribunal or body or any of its
judges must act on its or his own independent consideration of the law and facts of
the controversy, and not simply accept the views of a subordinate.” Thus, it is
logical to say that this mandate was rendered precisely to ensure that in cases
where the hearing or reception of evidence is assigned to a subordinate, the body or
agency shall not merely rely on his recommendation but instead shall personally
weigh and assess the evidence which the said subordinate has gathered.”
 FREEDOM FROM DEBT COALITION vs. ERC possesses all the facilities to gather data and information and has a much broader
G.R. 161113, August 9, 2005 perspective to properly evaluate them. His personality in such instance is in reality
but a projection of that of Congress. Thus, being the agent of Congress and not of
FACTS: Section 34 of RA 9136 (EPIRA), imposes Universal Charge upon end- the President, the President cannot alter or modify or nullify, or set aside the
users of electricity, a charge imposed for the recovery of stranded cost. ERC issued findings of the Secretary and to substitute the judgment of the former for that of
its Implementing Rules and Regulations defining Universal Charge refers to the the latter. Congress simply granted the Secretary the authority to ascertain the
charge, if any, imposed for the recovery of Stranded Debts, Stranded Contract Costs existence of a fact. If it is exists, the Secretary, by legislative mandate, must submit
of NPC and Stranded Contract Costs of Eligible Contracts of Distribution Utilities such information to the President who must impose the 12% VAT rate. There is no
and other purposes pursuant to Section 34 of the EPIRA. National Power undue delegation of legislation power but only of the discretion as to the execution
Corporation-Strategic Power Utilities Group (NPC-SPUG) filed with Energy of a law.
Regulatory Commission (ERC) a petition for the availment from the Universal
Charge of its share for Missionary Electrification. The ERC decided the NPC’s
petition authorizing it to draw up to P70, 000, 000.00 from PSALM for its 2003
Watershed Rehabilitation Budget subject to the availability of funds for the
Environmental Fund component of the Universal Charge. On the basis of the said
ERC decisions, Panay Electric Company, Inc. (PECO) charged Romeo P. Gerochi
and all other end-users with the Universal Charge as reflected in their respective
electric bills starting from the month of July 2003. Petitioners submit that the
assailed provision of law and its IRR which sought to implement the same are
unconstitutional on the following grounds: 1. The universal charge provided for
under Section 34 of the EPIRA and sought to be implemented under Sec. 2, Rule 18
of the IRR of the said law is a tax which is to be collected from all electric end-users
and self-generating entities. The power to tax is strictly a legislative function and as
such, the delegation of said power to any executive or administrative agency like
the ERC is unconstitutional, giving the same unlimited authority. The assailed
provision clearly provides that the Universal Charge is to be determined, fixed and
approved by the ERC, hence leaving to the latter complete discretionary legislative
authority;2. The ERC is also empowered to approve and determine where the funds
collected should be used; 3. The imposition of the Universal Charge on all end-
users is oppressive and confiscatory and amounts to taxation without
representation as the consumers were not given a chance to be heard and
represented.

ISSUE: Whether or not there is undue delegation of legislative power to tax on the
part of the ERC.

HELD: No, there is no undue delegation of powers to the ERC. The EPIRA is
complete in all its essential terms and conditions, and it contains sufficient
standards. Although Sec. 34 of the EPIRA merely provides that within one (1) year
from the effectivity thereof, a Universal Charge to be determined, fixed and
approved by the ERC, shall be imposed on all electricity end-users, and therefore,
does not state the specific amount to be paid as Universal Charge, the amount
nevertheless is made certain by the legislative parameters provided by the law itself
when it provided for the promulgation and enforcement of a National Grid Code,
and a Distribution Code. In making his recommendation to the President on the
existence of either of the two conditions, the Secretary of Finance is not acting as
the alter ego of the President or even her subordinate. In such instance, he is not
subject to the power of control and direction of the President. He is acting as the
agent of the legislative department, to determine and declare the event upon which
its expressed will is to take effect. The Secretary becomes the means or tool by
which legislative policy is determined and implemented, considering that he