G.R. No. 119528 March 26, 1997 A.
A. The CAB has no jurisdiction to hear the petitioner's application until the latter
PHILIPPINE AIRLINES, INC., petitioner, vs. CIVIL AERONAUTICS BOARD and
GRAND INTERNATIONAL AIRWAYS, INC., respondents.
TORRES, JR., J.:
This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules
of Court seeks to prohibit respondent Civil Aeronautics Board from exercising
jurisdiction over private respondent's Application for the issuance of a Certificate of
Public Convenience and Necessity, and to annul and set aside a temporary
operating permit issued by the Civil Aeronautics Board in favor of Grand
International Airways (GrandAir, for brevity) allowing the same to engage in
scheduled domestic air transportation services, particularly the Manila-Cebu,
Manila-Davao, and converse routes.
The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support
its petition is the fact that GrandAir does not possess a legislative franchise
authorizing it to engage in air transportation service within the Philippines or
elsewhere. Such franchise is, allegedly, a requisite for the issuance of a Certificate
of Public Convenience or Necessity by the respondent Board, as mandated under
Section 11, Article XII of the Constitution.
Respondent GrandAir, on the other hand, posits that a legislative franchise is no
longer a requirement for the issuance of a Certificate of Public Convenience and
Necessity or a Temporary Operating Permit, following the Court's pronouncements
in the case of Albano vs. Reyes,1 as restated by the Court of Appeals in Avia
Filipinas International vs. Civil Aeronautics Board2 and Silangan Airways, Inc. vs.
Grand International Airways, Inc., and the Hon. Civil Aeronautics Board.3
On November 24, 1994, private respondent GrandAir applied for a Certificate of
Public Convenience and Necessity with the Board, which application was docketed
as CAB Case No. EP-12711.4 Accordingly, the Chief Hearing Officer of the CAB
issued a Notice of Hearing setting the application for initial hearing on December
16, 1994, and directing GrandAir to serve a copy of the application and
corresponding notice to all scheduled Philippine Domestic operators. On
December 14, 1994, GrandAir filed its Compliance, and requested for the issuance
of a Temporary Operating Permit. Petitioner, itself the holder of a legislative
franchise to operate air transport services, filed an Opposition to the application for
a Certificate of Public Convenience and Necessity on December 16, 1995 on the
following grounds:
has first obtained a franchise to operate from Congress.
B. The petitioner's application is deficient in form and substance in that:
1. The application does not indicate a route structure including a computation of
trunkline, secondary and rural available seat kilometers (ASK) which shall always
be maintained at a monthly level at least 5% and 20% of the ASK offered into and
out of the proposed base of operations for rural and secondary, respectively.
2. It does not contain a project/feasibility study, projected profit and loss
statements, projected balance sheet, insurance coverage, list of personnel, list of
spare parts inventory, tariff structure, documents supportive of financial capacity,
route flight schedule, contracts on facilities (hangars, maintenance, lot) etc.
C. Approval of petitioner's application would violate the equal protection clause of
the constitution.
D. There is no urgent need and demand for the services applied for.
E. To grant petitioner's application would only result in ruinous competition
contrary to Section 4(d) of R.A. 776. 5
At the initial hearing for the application, petitioner raised the issue of lack of
jurisdiction of the Board to hear the application because GrandAir did not possess
a legislative franchise.
On December 20, 1994, the Chief Hearing Officer of CAB issued an Order denying
petitioner's Opposition. Pertinent portions of the Order read:
PAL alleges that the CAB has no jurisdiction to hear the petitioner's application
until the latter has first obtained a franchise to operate from Congress.
The Civil Aeronautics Board has jurisdiction to hear and resolve the application. In
Avia Filipina vs. CAB, CA G.R. No. 23365, it has been ruled that under Section 10
(c) (I) of R.A. 776, the Board possesses this specific power and duty.
In view thereof, the opposition of PAL on this ground is hereby denied.
SO ORDERED.
Meantime, on December 22, 1994, petitioner this time, opposed private
respondent's application for a temporary permit maintaining that:
1
1. The applicant does not possess the required fitness and capability of operating
the services applied for under RA 776; and,
2. Applicant has failed to prove that there is clear and urgent public need for the
services applied for.6
On December 23, 1994, the Board promulgated Resolution No. 119(92) approving
the issuance of a Temporary Operating Permit in favor of Grand Air 7 for a period
of three months, i.e., from December 22, 1994 to March 22, 1994. Petitioner
moved for the reconsideration of the issuance of the Temporary Operating Permit
on January 11, 1995, but the same was denied in CAB Resolution No. 02 (95) on
February 2, 1995. 8 In the said Resolution, the Board justified its assumption of
jurisdiction over GrandAir's application.
WHEREAS , the CAB is specifically authorized under Section 10-C (1) of Republic
Act No. 776 as follows:
(c) The Board shall have the following specific powers and duties:
(1) In accordance with the provision of Chapter IV of this Act, to issue, deny,
amend revise, alter, modify, cancel, suspend or revoke, in whole or in part, upon
petitioner-complaint, or upon its own initiative, any temporary operating permit or
Certificate of Public Convenience and Necessity; Provided, however; that in the
case of foreign air carriers, the permit shall be issued with the approval of the
President of the Republic of the Philippines.
WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein
the Supreme Court held that the CAB can even on its own initiative, grant a TOP
even before the presentation of evidence;
WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365),
promulgated on October 30, 1991, held that in accordance with its mandate, the
CAB can issue not only a TOP but also a Certificate of Public Convenience and
Necessity (CPCN) to a qualified applicant therefor in the absence of a legislative
franchise, citing therein as basis the decision of Albano vs. Reyes (175 SCRA 264)
which provides (inter alia) that:
a) Franchises by Congress are not required before each and every public utility
may operate when the law has granted certain administrative agencies the power
to grant licenses for or to authorize the operation of certain public utilities;
b) The Constitutional provision in Article XII, Section 11 that the issuance of a
franchise, certificate or other form of authorization for the operation of a public
utility does not necessarily imply that only Congress has the power to grant such
authorization since our statute books are replete with laws granting specified
agencies in the Executive Branch the power to issue such authorization for certain
classes of public utilities.
WHEREAS, Executive Order No. 219 which took effect on 22 January 1995,
provides in Section 2.1 that a minimum of two (2) operators in each route/link shall
be encouraged and that routes/links presently serviced by only one (1) operator
shall be open for entry to additional operators.
RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by
Philippine Airlines on January 05, 1995 on the Grant by this Board of a Temporary
Operating Permit (TOP) to Grand International Airways, Inc. alleging among others
that the CAB has no such jurisdiction, is hereby DENIED, as it hereby denied, in
view of the foregoing and considering that the grounds relied upon by the movant
are not indubitable.
On March 21, 1995, upon motion by private respondent, the temporary permit was
extended for a period of six (6) months or up to September 22, 1995.
Hence this petition, filed on April 3, 1995.
Petitioners argue that the respondent Board acted beyond its powers and
jurisdiction in taking cognizance of GrandAir's application for the issuance of a
Certificate of Public Convenience and Necessity, and in issuing a temporary
operating permit in the meantime, since GrandAir has not been granted and does
not possess a legislative franchise to engage in scheduled domestic air
transportation. A legislative franchise is necessary before anyone may engage in
air transport services, and a franchise may only be granted by Congress. This is
the meaning given by the petitioner upon a reading of Section 11, Article XII,9 and
Section 1, Article VI, 10 of the Constitution.
To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of
Justice, which reads:
Dr. Arturo C. Corona
Executive Director
Civil Aeronautics Board
PPL Building, 1000 U.N. Avenue
Ermita, Manila
Sir:
2
This has reference to your request for opinion on the necessity of a legislative
franchise before the Civil Aeronautics Board ("CAB") may issue a Certificate of
Public Convenience and Necessity and/or permit to engage in air commerce or air
transportation to an individual or entity.
You state that during the hearing on the application of Cebu Air for a congressional
franchise, the House Committee on Corporations and Franchises contended that
under the present Constitution, the CAB may not issue the abovestated certificate
or permit, unless the individual or entity concerned possesses a legislative
franchise. You believe otherwise, however, for the reason that under R.A. No. 776,
as amended, the CAB is explicitly empowered to issue operating permits or
certificates of public convenience and necessity and that this statutory provision is
not inconsistent with the current charter.
We concur with the view expressed by the House Committee on Corporations and
Franchises. In an opinion rendered in favor of your predecessor-in-office, this
Department observed that, —
. . . it is useful to note the distinction between the franchise to operate and a permit
to commence operation. The former is sovereign and legislative in nature; it can be
conferred only by the lawmaking authority (17 W and P, pp. 691-697). The latter is
administrative and regulatory in character (In re Application of Fort Crook-Bellevue
Boulevard Line, 283 NW 223); it is granted by an administrative agency, such as
the Public Service Commission [now Board of Transportation], in the case of land
transportation, and the Civil Aeronautics Board, in case of air services. While a
legislative franchise is a pre-requisite to a grant of a certificate of public
convenience and necessity to an airline company, such franchise alone cannot
constitute the authority to commence operations, inasmuch as there are still
matters relevant to such operations which are not determined in the franchise , like
rates, schedules and routes, and which matters are resolved in the process of
issuance of permit by the administrative. (Secretary of Justice opn No. 45, s. 1981)
Indeed, authorities are agreed that a certificate of public convenience and
necessity is an authorization issued by the appropriate governmental agency for
the operation of public services for which a franchise is required by law (Almario,
Transportation and Public Service Law, 1977 Ed., p. 293; Agbayani, Commercial
Law of the Phil., Vol. 4, 1979 Ed., pp. 380-381).
Based on the foregoing, it is clear that a franchise is the legislative authorization to
engage in a business activity or enterprise of a public nature, whereas a certificate
of public convenience and necessity is a regulatory measure which constitutes the
franchise's authority to commence operations. It is thus logical that the grant of the
former should precede the latter.
Please be guided accordingly.
(SGD.) SEDFREY A. ORDONEZ
Secretary of Justice
Respondent GrandAir, on the other hand, relies on its interpretation of the
provisions of Republic Act 776, which follows the pronouncements of the Court of
Appeals in the cases of Avia Filipinas vs. Civil Aeronautics Board, and Silangan
Airways, Inc. vs. Grand International Airways (supra).
In both cases, the issue resolved was whether or not the Civil Aeronautics Board
can issue the Certificate of Public Convenience and Necessity or Temporary
Operating Permit to a prospective domestic air transport operator who does not
possess a legislative franchise to operate as such. Relying on the Court's
pronouncement in Albano vs. Reyes (supra), the Court of Appeals upheld the
authority of the Board to issue such authority, even in the absence of a legislative
franchise, which authority is derived from Section 10 of Republic Act 776, as
amended by P.D. 1462. 11
The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a
Temporary Operating Permit. This rule has been established in the case of
Philippine Air Lines Inc., vs. Civil Aeronautics Board, promulgated on June 13,
1968. 12 The Board is expressly authorized by Republic Act 776 to issue a
temporary operating permit or Certificate of Public Convenience and Necessity,
and nothing contained in the said law negates the power to issue said permit
before the completion of the applicant's evidence and that of the oppositor thereto
on the main petition. Indeed, the CAB's authority to grant a temporary permit "upon
its own initiative" strongly suggests the power to exercise said authority, even
before the presentation of said evidence has begun. Assuming arguendo that a
legislative franchise is prerequisite to the issuance of a permit, the absence of the
same does not affect the jurisdiction of the Board to hear the application, but tolls
only upon the ultimate issuance of the requested permit.
The power to authorize and control the operation of a public utility is admittedly a
prerogative of the legislature, since Congress is that branch of government vested
with plenary powers of legislation.
The franchise is a legislative grant, whether made directly by the legislature itself,
or by any one of its properly constituted instrumentalities. The grant, when made,
binds the public, and is, directly or indirectly, the act of the state. 13
The issue in this petition is whether or not Congress, in enacting Republic Act 776,
has delegated the authority to authorize the operation of domestic air transport
3
services to the respondent Board, such that Congressional mandate for the
approval of such authority is no longer necessary.
Congress has granted certain administrative agencies the power to grant licenses
for, or to authorize the operation of certain public utilities. With the growing
complexity of modern life, the multiplication of the subjects of governmental
regulation, and the increased difficulty of administering the laws, there is a
constantly growing tendency towards the delegation of greater powers by the
legislature, and towards the approval of the practice by the courts. 14 It is
generally recognized that a franchise may be derived indirectly from the state
through a duly designated agency, and to this extent, the power to grant franchises
has frequently been delegated, even to agencies other than those of a legislative
nature. 15 In pursuance of this, it has been held that privileges conferred by grant
by local authorities as agents for the state constitute as much a legislative
franchise as though the grant had been made by an act of the Legislature. 16
The trend of modern legislation is to vest the Public Service Commissioner with the
power to regulate and control the operation of public services under reasonable
rules and regulations, and as a general rule, courts will not interfere with the
exercise of that discretion when it is just and reasonable and founded upon a legal
right. 17
It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a
reading of the pertinent issuances governing the Philippine Ports Authority, 18
proves that the PPA is empowered to undertake by itself the operation and
management of the Manila International Container Terminal, or to authorize its
operation and management by another by contract or other means, at its option.
The latter power having been delegated to the to PPA, a franchise from Congress
to authorize an entity other than the PPA to operate and manage the MICP
becomes unnecessary.
Given the foregoing postulates, we find that the Civil Aeronautics Board has the
authority to issue a Certificate of Public Convenience and Necessity, or Temporary
Operating Permit to a domestic air transport operator, who, though not possessing
a legislative franchise, meets all the other requirements prescribed by the law.
Such requirements were enumerated in Section 21 of R.A. 776.
There is nothing in the law nor in the Constitution, which indicates that a legislative
franchise is an indispensable requirement for an entity to operate as a domestic air
transport operator. Although Section 11 of Article XII recognizes Congress' control
over any franchise, certificate or authority to operate a public utility, it does not
mean Congress has exclusive authority to issue the same. Franchises issued by
Congress are not required before each and every public utility may operate. 19 In
many instances, Congress has seen it fit to delegate this function to government
agencies, specialized particularly in their respective areas of public service.
A reading of Section 10 of the same reveals the clear intent of Congress to
delegate the authority to regulate the issuance of a license to operate domestic air
transport services:
Sec. 10. Powers and Duties of the Board. (A) Except as otherwise provided herein,
the Board shall have the power to regulate the economic aspect of air
transportation, and shall have general supervision and regulation of, the
jurisdiction and control over air carriers, general sales agents, cargo sales agents,
and air freight forwarders as well as their property rights, equipment, facilities and
franchise, insofar as may be necessary for the purpose of carrying out the
provision of this Act.
In support of the Board's authority as stated above, it is given the following specific
powers and duties:
(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny,
amend, revise, alter, modify, cancel, suspend or revoke in whole or in part upon
petition or complaint or upon its own initiative any Temporary Operating Permit or
Certificate of Public Convenience and Necessity: Provided however, That in the
case of foreign air carriers, the permit shall be issued with the approval of the
President of the Republic of the Philippines.
Petitioner argues that since R.A. 776 gives the Board the authority to issue
"Certificates of Public Convenience and Necessity", this, according to petitioner,
means that a legislative franchise is an absolute requirement. It cites a number of
authorities supporting the view that a Certificate of Public Convenience and
Necessity is issued to a public service for which a franchise is required by law, as
distinguished from a "Certificate of Public Convenience" which is an authorization
issued for the operation of public services for which no franchise, either municipal
or legislative, is required by law. 20
This submission relies on the premise that the authority to issue a certificate of
public convenience and necessity is a regulatory measure separate and distinct
from the authority to grant a franchise for the operation of the public utility subject
of this particular case, which is exclusively lodged by petitioner in Congress.
We do not agree with the petitioner.
4
Many and varied are the definitions of certificates of public convenience which
courts and legal writers have drafted. Some statutes use the terms "convenience
and necessity" while others use only the words "public convenience." The terms
"convenience and necessity", if used together in a statute, are usually held not to
be separable, but are construed together. Both words modify each other and must
be construed together. The word 'necessity' is so connected, not as an additional
requirement but to modify and qualify what might otherwise be taken as the strict
significance of the word necessity. 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. It does not mean or require
an actual physical necessity or an indispensable thing. 21
The terms "convenience" and "necessity" are to be construed together, although
they are not synonymous, and effect must be given both. The convenience of the
public must not be circumscribed by according to the word "necessity" its strict
meaning or an essential requisites. 22
The use of the word "necessity", in conjunction with "public convenience" in a
certificate of authorization to a public service entity to operate, does not in any way
modify the nature of such certification, or the requirements for the issuance of the
same. It is the law which determines the requisites for the issuance of such
certification, and not the title indicating the certificate.
Congress, by giving the respondent Board the power to issue permits for the
operation of domestic transport services, has delegated to the said body the
authority to determine the capability and competence of a prospective domestic air
transport operator to engage in such venture. This is not an instance of
transforming the respondent Board into a mini-legislative body, with unbridled
authority to choose who should be given authority to operate domestic air transport
services.
To be valid, the delegation itself must be circumscribed by legislative restrictions,
not a "roving commission" that will give the delegate unlimited legislative authority.
It must not be a delegation "running riot" and "not canalized with banks that keep it
from overflowing." Otherwise, the delegation is in legal effect an abdication of
legislative authority, a total surrender by the legislature of its prerogatives in favor
of the delegate. 23
Congress, in this instance, has set specific limitations on how such authority
should be exercised.
Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines or
policies:
Sec. 4. Declaration of policies. In the exercise and performance of its powers and
duties under this Act, the Civil Aeronautics Board and the Civil Aeronautics
Administrator shall consider the following, among other things, as being in the
public interest, and in accordance with the public convenience and necessity:
(a) The development and utilization of the air potential of the Philippines;
(b) The encouragement and development of an air transportation system properly
adapted to the present and future of foreign and domestic commerce of the
Philippines, of the Postal Service and of the National Defense;
(c) The regulation of air transportation in such manner as to recognize and
preserve the inherent advantages of, assure the highest degree of safety in, and
foster sound economic condition in, such transportation, and to improve the
relations between, and coordinate transportation by, air carriers;
(d) The promotion of adequate, economical and efficient service by air carriers at
reasonable charges, without unjust discriminations, undue preferences or
advantages, or unfair or destructive competitive practices;
(e) Competition between air carriers to the extent necessary to assure the sound
development of an air transportation system properly adapted to the need of the
foreign and domestic commerce of the Philippines, of the Postal Service, and of
the National Defense;
(f) To promote safety of flight in air commerce in the Philippines; and,
(g) The encouragement and development of civil aeronautics.
More importantly, the said law has enumerated the requirements to determine the
competency of a prospective operator to engage in the public service of air
transportation.
Sec. 12. Citizenship requirement. Except as otherwise provided in the Constitution
and existing treaty or treaties, a permit authorizing a person to engage in domestic
air commerce and/or air transportation shall be issued only to citizens of the
Philippines 24
Sec. 21. Issuance of permit. The Board shall issue a permit authorizing the whole
or any part of the service covered by the application, if it finds: (1) that the
applicant is fit, willing and able to perform such service properly in conformity with
the provisions of this Act and the rules, regulations, and requirements issued
5
thereunder; and (2) that such service is required by the public convenience and
necessity; otherwise the application shall be denied.

Furthermore, the procedure for the processing of the application of a Certificate of

Public Convenience and Necessity had been established to ensure the weeding
out of those entities that are not deserving of public service. 25

In sum, respondent Board should now be allowed to continue hearing the

application of GrandAir for the issuance of a Certificate of Public Convenience and
Necessity, there being no legal obstacle to the exercise of its jurisdiction.

ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to

DISMISS the instant petition for lack of merit. The respondent Civil Aeronautics
Board is hereby DIRECTED to CONTINUE hearing the application of respondent
Grand International Airways, Inc. for the issuance of a Certificate of Public
Convenience and Necessity.

SO ORDERED.

6
G.R. No. 162272 April 7, 2009
SANTIAGO C. DIVINAGRACIA, Petitioner, vs. CONSOLIDATED
BROADCASTING SYSTEM, INC. and PEOPLE'S BROADCASTING SERVICE,
INC., Respondents.
DECISION
TINGA, J.:
Does the National Telecommunications Commission (NTC) have jurisdiction over
complaints seeking the cancellation of certificates of public convenience (CPCs)
and other licenses it had issued to the holders of duly-issued legislative franchises
on the ground that the franchisees had violated the terms of their franchises? The
Court, in resolving that question, takes the opportunity to elaborate on the dynamic
behind the regulation of broadcast media in the Philippines, particularly the
interrelationship between the twin franchise and licensing requirements.
I.
Respondents Consolidated Broadcasting System, Inc. (CBS) and People’s
Broadcasting Service, Inc. (PBS) were incorporated in 1961 and 1965,
respectively. Both are involved in the operation of radio broadcasting services in
the Philippines, they being the grantees of legislative franchises by virtue of two
laws, Republic Act (R.A.) No. 7477 and R.A. No. 7582. R.A. No. 7477, enacted on
5 May 1992, granted PBS a legislative franchise to construct, install, maintain and
operate radio and television stations within the Philippines for a period of 25 years.
R.A. No. 7582, enacted on 27 May 1992, extended CBS’s previous legislative
franchise1 to operate radio stations for another 25 years. The CBS and PBS radio
networks are two of the three networks that comprise the well-known "Bombo
Radyo Philippines."2
Section 9 of R.A. No. 7477 and Section 3 of R.A. No. 7582 contain a common
provision predicated on the "constitutional mandate to democratize ownership of
public utilities."3 The common provision states:
SEC. 9. Democratization of ownership.― In compliance with the constitutional
mandate to democratize ownership of public utilities, the herein grantee shall make
public offering through the stock exchanges of at least thirty percent (30%) of its
common stocks within a period of three (3) years from the date of effectivity of this
Act: Provided, That no single person or entity shall be allowed to own more than
five percent (5%) of the stock offerings.4
It further appears that following the enactment of these franchise laws, the NTC
issued four (4) Provisional Authorities to PBS and six (6) Provisional Authorities to
CBS, allowing them to install, operate and maintain various AM and FM broadcast
stations in various locations throughout the nation.5 These Provisional Authorities
were issued between 1993 to 1998, or after the enactment of R.A. No. 7477 and
R.A. No. 7582.
Petitioner Santiago C. Divinagracia6 filed two complaints both dated 1 March 1999
with the NTC, respectively lodged against PBS7 and CBS.8 He alleged that he
was "the actual and beneficial owner of Twelve percent (12%) of the shares of
stock" of PBS and CBS separately,9 and that despite the provisions in R.A. No.
7477 and R.A. No. 7582 mandating the public offering of at least 30% of the
common stocks of PBS and CBS, both entities had failed to make such offering.
Thus, Divinagracia commonly argued in his complaints that the failure on the part
of PBS and CBS "to comply with the mandate of their legislative franchise is a
misuse of the franchise conferred upon it by law and it continues to exercise its
franchise in contravention of the law to the detriment of the general public and of
complainant who are unable to enjoy the benefits being offered by a publicly listed
company."10 He thus prayed for the cancellation of all the Provisional Authorities
or CPCs of PBS and CBS on account of the alleged violation of the conditions set
therein, as well as in its legislative franchises.11
On 1 August 2000, the NTC issued a consolidated decision dismissing both
complaints.12 While the NTC posited that it had full jurisdiction to revoke or cancel
a Provisional Authority or CPC for violations or infractions of the terms and
conditions embodied therein,13 it held that the complaints actually constituted
collateral attacks on the legislative franchises of PBS and CBS since the sole issue
for determination was whether the franchisees had violated the mandate to
democratize ownership in their respective legislative franchises. The NTC ruled
that it was not competent to render a ruling on that issue, the same being more
properly the subject of an action for quo warranto to be commenced by the
Solicitor General in the name of the Republic of the Philippines, pursuant to Rule
66 of the Rules of Court.14
After the NTC had denied Divinagracia’s motion for reconsideration,15 he filed a
petition for review under Rule 43 of the Rules of Court with the Court of Appeals.16
On 18 February 2004, the Court of Appeals rendered a decision17 upholding the
NTC. The appellate court agreed with the earlier conclusion that the complaints
were indeed a collateral attack on the legislative franchises of CBS and PBS and
that a quo warranto action was the proper mode to thresh out the issues raised in
the complaints.
7
Hence this petition, which submits as the principal issue, whether the NTC, with its
retinue of regulatory powers, is powerless to cancel Provisional Authorities and
Certificates of Public Convenience it issued to legislative franchise-holders. That
central issue devolves into several narrower arguments, some of which hinge on
the authority of the NTC to cancel the very Provisional Authorities and CPCs which
it is empowered to issue, as distinguished from the legislative franchise itself, the
cancellation of which Divinagracia points out was not the relief he had sought from
the NTC. Questions are raised as to whether the complaints did actually constitute
a collateral attack on the legislative franchises.
Yet this case ultimately rests to a large degree on fundamentals. Divinagracia’s
case rotates on the singular thesis that the NTC has the power to cancel
Provisional Authorities and CPCs, or in effect, the power to cancel the licenses that
allow broadcast stations to operate. The NTC, in its assailed Decision, expressly
admits that it has such power even as it refrained from exercising the same.18 The
Court has yet to engage in a deep inquiry into the question of whether the NTC
has the power to cancel the operating licenses of entities to whom Congress has
issued franchises to operate broadcast stations, especially on account of an
alleged violation of the terms of their franchises. This is the opportune time to
examine the issue.
II.
To fully understand the scope and dimensions of the regulatory realm of the NTC,
it is essential to review the legal background of the regulation process. As
operative fact, any person or enterprise which wishes to operate a broadcast radio
or television station in the Philippines has to secure a legislative franchise in the
form of a law passed by Congress, and thereafter a license to operate from the
NTC.
The franchise requirement traces its genesis to Act No. 3846, otherwise known as
the Radio Control Act, enacted in 1931.19 Section 1 thereof provided that "[n]o
person, firm, company, association or corporation shall construct, install, establish,
or operate x x x a radio broadcasting station, without having first obtained a
franchise therefor from the National Assembly x x x"20 Section 2 of the law
prohibited the construction or installation of any station without a permit granted by
the Secretary of Public Works and Communication, and the operation of such
station without a license issued by the same Department Secretary.21 The law
likewise empowered the Secretary of Public Works and Communication "to
regulate the establishment, use, and operation of all radio stations and of all forms
of radio communications and transmissions within the Philippine Islands and to
issue such rules and regulations as may be necessary."22
Noticeably, our Radio Control Act was enacted a few years after the United States
Congress had passed the Radio Act of 1927. American broadcasters themselves
had asked their Congress to step in and regulate the radio industry, which was
then in its infancy. The absence of government regulation in that market had led to
the emergence of hundreds of radio broadcasting stations, each using frequencies
of their choice and changing frequencies at will, leading to literal chaos on the
airwaves. It was the Radio Act of 1927 which introduced a licensing requirement
for American broadcast stations, to be overseen eventually by the Federal
Communications Commission (FCC).
This pre-regulation history of radio broadcast stations illustrates the continuing
necessity of a government role in overseeing the broadcast media industry, as
opposed to other industries such as print media and the Internet.24 Without
regulation, the result would be a free-for-all market with rival broadcasters able
with impunity to sabotage the use by others of the airwaves.25 Moreover, the
airwaves themselves the very medium utilized by broadcast―are by their very
nature not susceptible to appropriation, much less be the object of any claim of
private or exclusive ownership. No private individual or enterprise has the physical
means, acting alone to actualize exclusive ownership and use of a particular
frequency. That end, desirable as it is among broadcasters, can only be
accomplished if the industry itself is subjected to a regime of government
regulation whereby broadcasters receive entitlement to exclusive use of their
respective or particular frequencies, with the State correspondingly able by force of
law to confine all broadcasters to the use of the frequencies assigned to them.
Still, the dominant jurisprudential rationale for state regulation of broadcast media
is more sophisticated than a mere recognition of a need for the orderly
administration of the airwaves. After all, a united broadcast industry can
theoretically achieve that goal through determined self-regulation. The key basis
for regulation is rooted in empiricism – "that broadcast frequencies are a scarce
resource whose use could be regulated and rationalized only by the Government."
This concept was first introduced in jurisprudence in the U.S. case of Red Lion v.
Federal Communications Commission.26
Red Lion enunciated the most comprehensive statement of the necessity of
government oversight over broadcast media. The U.S. Supreme Court observed
that within years from the introduction of radio broadcasting in the United States, "it
became apparent that broadcast frequencies constituted a scarce resource whose
use could be regulated and rationalized only by the Government… without
government control, the medium would be of little use because of the cacophony
of competing voices, none of which could be clearly and predictably heard." The
difficulties posed by spectrum scarcity was concretized by the U.S. High Court in
this manner:
8
Scarcity is not entirely a thing of the past. Advances in technology, such as
microwave transmission, have led to more efficient utilization of the frequency
spectrum, but uses for that spectrum have also grown apace. Portions of the
spectrum must be reserved for vital uses unconnected with human communication,
such as radio-navigational aids used by aircraft and vessels. Conflicts have even
emerged between such vital functions as defense preparedness and
experimentation in methods of averting midair collisions through radio warning
devices. "Land mobile services" such as police, ambulance, fire department, public
utility, and other communications systems have been occupying an increasingly
crowded portion of the frequency spectrum and there are, apart from licensed
amateur radio operators' equipment, 5,000,000 transmitters operated on the
"citizens' band" which is also increasingly congested. Among the various uses for
radio frequency space, including marine, aviation, amateur, military, and common
carrier users, there are easily enough claimants to permit use of the whole with an
even smaller allocation to broadcast radio and television uses than now exists.
(citations omitted)27
After interrelating the premise of scarcity of resources with the First Amendment
rights of broadcasters, Red Lion concluded that government regulation of
broadcast media was a necessity:
Where there are substantially more individuals who want to broadcast than there
are frequencies to allocate, it is idle to posit an unabridgeable First Amendment
right to broadcast comparable to the right of every individual to speak, write, or
publish. If 100 persons want broadcast [395 U.S. 367, 389] licenses but there are
only 10 frequencies to allocate, all of them may have the same "right" to a license;
but if there is to be any effective communication by radio, only a few can be
licensed and the rest must be barred from the airwaves. It would be strange if the
First Amendment, aimed at protecting and furthering communications, prevented
the Government from making radio communication possible by requiring licenses
to broadcast and by limiting the number of licenses so as not to overcrowd the
spectrum.
This has been the consistent view of the Court. Congress unquestionably has the
power to grant and deny licenses and to eliminate existing stations. No one has a
First Amendment right to a license or to monopolize a radio frequency; to deny a
station license because "the public interest" requires it "is not a denial of free
speech."
By the same token, as far as the First Amendment is concerned those who are
licensed stand no better than those to whom licenses are refused. A license
permits broadcasting, but the licensee has no constitutional right to be the one who
holds the license or to monopolize a radio frequency to the exclusion of his fellow
citizens. There is nothing in the First Amendment which prevents the Government
from requiring a licensee to share his frequency with others and to conduct himself
as a proxy or fiduciary with obligations to present those views and voices which
are representative of his community and which would otherwise, by necessity, be
barred from the airwaves.28
xxxx
Rather than confer frequency monopolies on a relatively small number of
licensees, in a Nation of 200,000,000, the Government could surely have decreed
that each frequency should be shared among all or some of those who wish to use
it, each being assigned a portion of the broadcast day or the broadcast week. The
ruling and regulations at issue here do not go quite so far. They assert that under
specified circumstances, a licensee must offer to make available a reasonable
amount of broadcast time to those who have a view different from that which has
already been expressed on his station. The expression of a political endorsement,
or of a personal attack while dealing with a controversial public issue, simply
triggers this time sharing. As we have said, the First Amendment confers no right
on licensees to prevent others from broadcasting on "their" frequencies and no
right to an unconditional monopoly of a scarce resource which the Government
has denied others the right to use.
In terms of constitutional principle, and as enforced sharing of a scarce resource,
the personal attack and political editorial rules are indistinguishable from the equal-
time provision of §315, a specific enactment of Congress requiring stations to set
aside reply time under specified circumstances and to which the fairness doctrine
and these constituent regulations are important complements. That provision,
which has been part of the law since 1927, Radio Act of 1927, §18, 44 Stat. 1170,
has been held valid by this Court as an obligation of the licensee relieving him of
any power in any way to prevent or censor the broadcast, and thus insulating him
from liability for defamation. The constitutionality of the statute under the First
Amendment was unquestioned.(citations omitted)29
As made clear in Red Lion, the scarcity of radio frequencies made it necessary for
the government to step in and allocate frequencies to competing broadcasters. In
undertaking that function, the government is impelled to adjudge which of the
competing applicants are worthy of frequency allocation. It is through that role that
it becomes legally viable for the government to impose its own values and goals
through a regulatory regime that extends beyond the assignation of frequencies,
notwithstanding the free expression guarantees enjoyed by broadcasters. As the
government is put in a position to determine who should be worthy to be accorded
the privilege to broadcast from a finite and limited spectrum, it may impose
regulations to see to it that broadcasters promote the public good deemed
9
important by the State, and to withdraw that privilege from those who fall short of
the standards set in favor of other worthy applicants.
Such conditions are peculiar to broadcast media because of the scarcity of the
airwaves. Indeed, any attempt to impose such a regulatory regime on a medium
that is not belabored under similar physical conditions, such as print media, will be
clearly antithetical to democratic values and the free expression clause. This
Court, which has adopted the "scarcity of resources" doctrine in cases such as
Telecom. & Broadcast Attys. of the Phils., Inc. v. COMELEC,30 emphasized the
distinction citing Red Lion:
Petitioners complain that B.P. Blg. 881, §92 singles out radio and television
stations to provide free air time. They contend that newspapers and magazines are
not similarly required as, in fact, in Philippine Press Institute v. COMELEC we
upheld their right to the payment of just compensation for the print space they may
provide under §90.
The argument will not bear analysis. It rests on the fallacy that broadcast media
are entitled to the same treatment under the free speech guarantee of the
Constitution as the print media. There are important differences in the
characteristics of the two media, however, which justify their differential treatment
for free speech purposes. Because of the physical limitations of the broadcast
spectrum, the government must, of necessity, allocate broadcast frequencies to
those wishing to use them. There is no similar justification for government
allocation and regulation of the print media.
In the allocation of limited resources, relevant conditions may validly be imposed
on the grantees or licensees. The reason for this is that, as already noted, the
government spends public funds for the allocation and regulation of the broadcast
industry, which it does not do in the case of the print media. To require the radio
and television broadcast industry to provide free air time for the COMELEC Time is
a fair exchange for what the industry gets.31
Other rationales may have emerged as well validating state regulation of broadcast
media,32 but the reality of scarce airwaves remains the primary, indisputable and
indispensable justification for the government regulatory role. The integration of the
scarcity doctrine into the jurisprudence on broadcast media illustrates how the
libertarian ideal of the free expression clause may be tempered and balanced by
actualities in the real world while preserving the core essence of the constitutional
guarantee. Indeed, without government regulation of the broadcast spectrum, the
ability of broadcasters to clearly express their views would be inhibited by the
anarchy of competition. Since the airwaves themselves are not susceptible to
physical appropriation and private ownership, it is but indispensable that the
government step in as the guardian of the spectrum.
Reference to the scarcity doctrine is necessary to gain a full understanding of the
paradigm that governs the state regulation of broadcast media. That paradigm, as
it exists in the United States, is contextually similar to our own, except in one very
crucial regard – the dual franchise/license requirements we impose.
III.
Recall that the Radio Control Act specifically required the obtention of a legislative
franchise for the operation of a radio station in the Philippines. When the Public
Service Act was enacted in 1936, the Public Service Commission (PSC) was
vested with jurisdiction over "public services," including over "wire or wireless
broadcasting stations."33 However, among those specifically exempted from the
regulatory reach of the PSC were "radio companies, except with respect to the
fixing of rates."34 Thus, following the Radio Control Act, the administrative
regulation of "radio companies" remained with the Secretary of Public Works and
Communications. It appears that despite the advent of commercial television in the
1950s, no corresponding amendment to either the Radio Control Act or the Public
Service Act was passed to reflect that new technology then.
Shortly after the 1972 declaration of martial law, President Marcos issued
Presidential Decree (P.D.) No. 1, which allocated to the Board of Communications
the authority to issue CPCs for the operation of radio and television broadcasting
systems and to grant permits for the use of radio frequencies for such
broadcasting systems. In 1974, President Marcos promulgated Presidential
Decree No. 576-A, entitled "Regulating the Ownership and Operation of Radio and
Television Stations and for other Purposes." Section 6 of that law reads:
Section 6. All franchises, grants, licenses, permits, certificates or other forms of
authority to operate radio or television broadcasting systems shall terminate on
December 31, 1981. Thereafter, irrespective of any franchise, grants, license,
permit, certificate or other forms of authority to operate granted by any office,
agency or person, no radio or television station shall be authorized to operated
without the authority of the Board of Communications and the Secretary of Public
Works and Communications or their successors who have the right and authority
to assign to qualified parties frequencies, channels or other means of identifying
broadcasting systems; Provided, however, that any conflict over, or disagreement
with a decision of the aforementioned authorities may be appealed finally to the
Office of the President within fifteen days from the date the decision is received by
the party in interest.
10
A few years later, President Marcos promulgated Executive Order (E.O.) No. 546,
establishing among others the National Telecommunications Commission. Section
15 thereof enumerates the various functions of the NTC.
Section 15. Functions of the Commission.― The Commission shall exercise the
following functions:
a. Issue Certificate of Public Convenience for the operation of communications
utilities and services, radio communications systems, wire or wireless telephone or
telegraph systems, radio and television broadcasting system and other similar
public utilities;
b. Establish, prescribe and regulate areas of operation of particular operators of
public service communications; and determine and prescribe charges or rates
pertinent to the operation of such public utility facilities and services except in
cases where charges or rates are established by international bodies or
associations of which the Philippines is a participating member or by bodies
recognized by the Philippine Government as the proper arbiter of such charges or
rates;
c. Grant permits for the use of radio frequencies for wireless telephone and
telegraph systems and radio communication systems including amateur radio
stations and radio and television broadcasting systems;
d. Sub-allocate series of frequencies of bands allocated by the International
Telecommunications Union to the specific services;
e. Establish and prescribe rules, regulations, standards, specifications in all cases
related to the issued Certificate of Public Convenience and administer and enforce
the same;
f. Coordinate and cooperate with government agencies and other entities
concerned with any aspect involving communications with a view to continuously
improve the communications service in the country;
g. Promulgate such rules and regulations, as public safety and interest may
require, to encourage a larger and more effective use of communications, radio
and television broadcasting facilities, and to maintain effective competition among
private entities in these activities whenever the Commission finds it reasonably
feasible;
h. Supervise and inspect the operation of radio stations and telecommunications
facilities;
i. Undertake the examination and licensing of radio operators;
j. Undertake, whenever necessary, the registration of radio transmitters and
transceivers; and
k. Perform such other functions as may be prescribed by law.
These enactments were considered when in 2003 the Court definitively resolved
that the operation of a radio or television station does require a congressional
franchise. In Associated Communications & Wireless Services v. NTC,35 the Court
took note of the confusion then within the broadcast industry as to whether the
franchise requirement first ordained in the 1931 Radio Control Act remained extant
given the enactment of P.D. No. 576-A in 1974 and E.O. No. 546 in 1979. Notably,
neither law had specifically required legislative franchises for the operation of
broadcast stations. Nonetheless, the Court noted that Section 1 of P.D. No. 576-A
had expressly referred to the franchise requirement in stating that "[n]o radio
station or television channel may obtain a franchise unless it has sufficient capital
on the basis of equity for its operation for at least one year… ."36 Section 6 of that
law made a similar reference to the franchise requirement.37 From those
references, the Court concluded that the franchise requirement under the Radio
Control Act was not repealed by P.D. No. 576-A.38
Turning to E.O. No. 546, the Court arrived at a similar conclusion, despite a
Department of Justice Opinion stating that the 1979 enactment had dispensed with
the congressional franchise requirement. The Court clarified that the 1989 ruling in
Albano v. Reyes, to the effect that "franchises issued by Congress are not required
before each and every public utility may operate" did not dispense with the
franchise requirement insofar as broadcast stations are concerned.
Our ruling in Albano that a congressional franchise is not required before "each
and every public utility may operate" should be viewed in its proper light. Where
there is a law such as P.D. No. 576-A which requires a franchise for the operation
of radio and television stations, that law must be followed until subsequently
repealed. As we have earlier shown, however, there is nothing in the subsequent
E.O. No. 546 which evinces an intent to dispense with the franchise requirement.
In contradistinction with the case at bar, the law applicable in Albano, i.e., E.O. No.
30, did not require a franchise for the Philippine Ports Authority to take over,
manage and operate the Manila International Port Complex and undertake the
providing of cargo handling and port related services thereat. Similarly, in
Philippine Airlines, Inc. v. Civil Aeronautics Board, et al., we ruled that a legislative
franchise is not necessary for the operation of domestic air transport because
"there is nothing in the law nor in the Constitution which indicates that a legislative
franchise is an indispensable requirement for an entity to operate as a domestic air
transport operator." Thus, while it is correct to say that specified agencies in the
Executive Branch have the power to issue authorization for certain classes of
public utilities, this does not mean that the authorization or CPC issued by the NTC
dispenses with the requirement of a franchise as this is clearly required under P.D.
No. 576-A.39
The Court further observed that Congress itself had accepted it as a given that a
legislative franchise is still required to operate a broadcasting station in the
Philippines.
11
That the legislative intent is to continue requiring a franchise for the operation of
radio and television broadcasting stations is clear from the franchises granted by
Congress after the effectivity of E.O. No. 546 in 1979 for the operation of radio and
television stations. Among these are: (1) R.A. No. 9131 dated April 24, 2001,
entitled "An Act Granting the Iddes Broadcast Group, Inc., a Franchise to
Construct, Install, Establish, Operate and Maintain Radio and Television
Broadcasting Stations in the Philippines"; (2) R.A. No. 9148 dated July 31, 2001,
entitled "An Act Granting the Hypersonic Broadcasting Center, Inc., a Franchise to
Construct, Install, Establish, Operate and Maintain Radio Broadcasting Stations in
the Philippines;" and (3) R.A. No. 7678 dated February 17, 1994, entitled "An Act
Granting the Digital Telecommunication Philippines, Incorporated, a Franchise to
Install, Operate and Maintain Telecommunications Systems Throughout the
Philippines." All three franchises require the grantees to secure a
CPCN/license/permit to construct and operate their stations/systems. Likewise, the
Tax Reform Act of 1997 provides in Section 119 for tax on franchise of radio
and/or television broadcasting companies x x x 40
Associated Communications makes clear that presently broadcast stations are still
required to obtain a legislative franchise, as they have been so since the passage
of the Radio Control Act in 1931. By virtue of this requirement, the broadcast
industry falls within the ambit of Section 11, Article XII of the 1987 Constitution, the
one constitutional provision concerned with the grant of franchises in the
Philippines.41 The requirement of a legislative franchise likewise differentiates the
Philippine broadcast industry from that in America, where there is no need to
secure a franchise from the U.S. Congress.
It is thus clear that the operators of broadcast stations in the Philippines must
secure a legislative franchise, a requirement imposed by the Radio Control Act of
1931 and accommodated under the 1987 Constitution. At the same time, the Court
in Associated Communications referred to another form of "permission" required of
broadcast stations, that is the CPC issued by the NTC. What is the source of such
requirement?
The Radio Control Act had also obliged radio broadcast stations to secure a permit
from the Secretary of Commerce and Industry42 prior to the construction or
installation of any station.43 Said Department Secretary was also empowered to
regulate "the establishment, use and operation of all radio stations and of all forms
of radio communications and transmission within the Philippines."44 Among the
specific powers granted to the Secretary over radio stations are the approval or
disapproval of any application for the construction, installation, establishment or
operation of a radio station45 and the approval or disapproval of any application
for renewal of station or operation license.46
As earlier noted, radio broadcasting companies were exempted from the
jurisdiction of the defunct Public Service Commission except with respect to their
rates; thus, they did not fall within the same regulatory regime as other public
services, the regime which was characterized by the need for CPC or CPCN.
However, following the Radio Control Act, it became clear that radio broadcast
companies need to obtain a similar license from the government in order to
operate, at that time from the Department of Public Works and Communications.
Then, as earlier noted, in 1972, President Marcos through P.D. No. 1, transferred
to the Board of Communications the function of issuing CPCs for the operation of
radio and television broadcasting systems, as well as the granting of permits for
the use of radio frequencies for such broadcasting systems. With the creation of
the NTC, through E.O. No. 546 in 1979, that agency was vested with the power to
"[i]ssue certificate[s] of public convenience for the operation of… radio and
television broadcasting system[s]."47 That power remains extant and undisputed
to date.
This much thus is clear. Broadcast and television stations are required to obtain a
legislative franchise, a requirement imposed by the Radio Control Act and affirmed
by our ruling in Associated Broadcasting. After securing their legislative franchises,
stations are required to obtain CPCs from the NTC before they can operate their
radio or television broadcasting systems. Such requirement while traceable also to
the Radio Control Act, currently finds its basis in E.O. No. 546, the law establishing
the NTC.
From these same legal premises, the next and most critical question is whether the
NTC has the power to cancel the CPCs it has issued to legislative franchisees.
IV.
The complexities of our dual franchise/license regime for broadcast media should
be understood within the context of separation of powers. The right of a particular
entity to broadcast over the airwaves is established by law —i.e., the legislative
franchise — and determined by Congress, the branch of government tasked with
the creation of rights and obligations. As with all other laws passed by Congress,
the function of the executive branch of government, to which the NTC belongs, is
the implementation of the law. In broad theory, the legal obligation of the NTC
once Congress has established a legislative franchise for a broadcast media
station is to facilitate the operation by the franchisee of its broadcast stations.
However, since the public administration of the airwaves is a requisite for the
operation of a franchise and is moreover a highly technical function, Congress has
delegated to the NTC the task of administration over the broadcast spectrum,
12
including the determination of available bandwidths and the allocation of such
available bandwidths among the various legislative franchisees. The licensing
power of the NTC thus arises from the necessary delegation by Congress of
legislative power geared towards the orderly exercise by franchisees of the rights
granted them by Congress.
Congress may very well in its wisdom impose additional obligations on the various
franchisees and accordingly delegate to the NTC the power to ensure that the
broadcast stations comply with their obligations under the law. Because broadcast
media enjoys a lesser degree of free expression protection as compared to their
counterparts in print, these legislative restrictions are generally permissible under
the Constitution. Yet no enactment of Congress may contravene the Constitution
and its Bill of Rights; hence, whatever restrictions are imposed by Congress on
broadcast media franchisees remain susceptible to judicial review and analysis
under the jurisprudential framework for scrutiny of free expression cases involving
the broadcast media.
The restrictions enacted by Congress on broadcast media franchisees have to
pass the mettle of constitutionality. On the other hand, the restrictions imposed by
an administrative agency such as the NTC on broadcast media franchisees will
have to pass not only the test of constitutionality, but also the test of authority and
legitimacy, i.e., whether such restrictions have been imposed in the exercise of
duly delegated legislative powers from Congress. If the restriction or sanction
imposed by the administrative agency cannot trace its origin from legislative
delegation, whether it is by virtue of a specific grant or from valid delegation of
rule-making power to the administrative agency, then the action of such
administrative agency cannot be sustained. The life and authority of an
administrative agency emanates solely from an Act of Congress, and its faculties
confined within the parameters set by the legislative branch of government.
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.
In contrast, when the Radio Control Act of 1931 maintained a similar requirement
for radio stations to obtain a license from a government official (the Secretary of
Commerce and Industry), it similarly empowered the government, through the
Secretary of Public Works and Communications, to suspend or revoke such
license, as indicated in Section 3(m):
Section 3. The Secretary of Public Works and Communications is hereby
empowered, to regulate the construction or manufacture, possession, control, sale
and transfer of radio transmitters or transceivers (combination transmitter-receiver)
and the establishment, use, the operation of all radio stations and of all form of
radio communications and transmissions within the Philippines. In addition to the
above he shall have the following specific powers and duties:
(m) He may, at his direction bring criminal action against violators of the radio laws
or the regulations and confiscate the radio apparatus in case of illegal operation; or
simply suspend or revoke the offender’s station or operator licenses or refuse to
renew such licenses; or just reprimand and warn the offenders;48
Section 3(m) begets the question – did the NTC retain the power granted in 1931
to the Secretary of Public Works and Communications to "x x x suspend or revoke
the offender’s station or operator licenses or refuse to renew such licenses"? We
earlier adverted to the statutory history. The enactment of the Public Service Act in
1936 did not deprive the Secretary of regulatory jurisdiction over radio stations,
which included the power to impose fines. In fact, the Public Service Commission
was precluded from exercising such jurisdiction, except with respect to the fixing of
rates.
Then, in 1972, the regulatory authority over broadcast media was transferred to
the Board of Communications by virtue of P. D. No. 1, which adopted, approved,
and made as part of the law of the land the Integrated Reorganization Plan which
was prepared by the Commission on Reorganization.49 Among the cabinet
departments affected by the plan was the Department of Public Works and
Communications, which was now renamed the Department of Public Works,
Transportation and Communication.50 New regulatory boards under the
administrative supervision of the Department were created, including the Board of
Communications.51
The functions of the Board of Communications were enumerated in Part X,
Chapter I, Article III, Sec. 5 of the Integrated Reorganization Plan.52 What is
noticeably missing from these enumerated functions of the Board of
Communications is the power to revoke or cancel CPCs, even as the Board was
vested the power to issue the same. That same pattern held true in 1976, when
the Board of Communications was abolished by E.O. No. 546.53 Said executive
order, promulgated by then President Marcos in the exercise of his legislative
powers, created the NTC but likewise withheld from it the authority to cancel
licenses and CPCs, even as it was empowered to issue CPCs. Given the very
specific functions allocated by law to the NTC, it would be very difficult to
recognize any intent to allocate to the Commission such regulatory functions
13
previously granted to the Secretary of Public Works and Communications, but not
included in the exhaustive list of functions enumerated in Section 15.
Certainly, petitioner fails to point to any provision of E.O. No. 546 authorizing the
NTC to cancel licenses. Neither does he cite any provision under P.D. No. 1 or the
Radio Control Act, even if Section 3(m) of the latter law provides at least, the
starting point of a fair argument. Instead, 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.54 That argument has been irrefragably refuted by Section
14 of the Public Service Act, and by jurisprudence, most especially RCPI v.
NTC.55 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.56 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.
It is still evident that E.O. No. 546 provides no explicit basis to assert that the NTC
has the power to cancel the licenses or CPCs it has duly issued, even as the
government office previously tasked with the regulation of radio stations, the
Secretary of Public Works and Communications, previously possessed such power
by express mandate of law. In order to sustain petitioner’s premise, the Court will
be unable to rely on an unequivocally current and extant provision of law that
justifies the NTC’s power to cancel CPCs. Petitioner suggests that since the NTC
has the power to issue CPCs, it necessarily has the power to revoke the same.
One might also argue that through the general rule-making power of the NTC, we
can discern a right of the NTC to cancel CPCs.
We must be mindful that the issue for resolution is not a run-of-the-mill matter
which would be settled with ease with the application of the principles of statutory
construction. It is at this juncture that the constitutional implications of this case
must ascend to preeminence.
A.
It is beyond question that respondents, as with all other radio and television
broadcast stations, find shelter in the Bill of Rights, particularly Section 3, Article III
of the Constitution. At the same time, as we have labored earlier to point out,
broadcast media stands, by reason of the conditions of scarcity, within a different
tier of protection from print media, which unlike broadcast, does not have any
regulatory interaction with the government during its operation.
Still, the fact that state regulation of broadcast media is constitutionally justified
does not mean that its practitioners are precluded from invoking Section 3, Article
III of the Constitution in their behalf. Far from it. Our democratic way of life is
actualized by the existence of a free press, whether print media or broadcast
media. As with print media, free expression through broadcast media is protected
from prior restraint or subsequent punishment. The franchise and licensing
requirements are mainly impositions of the laws of physics which would stand to
periodic reassessment as technology advances. The science of today renders
state regulation as a necessity, yet this should not encumber the courts from
accommodating greater freedoms to broadcast media when doing so would not
interfere with the existing legitimate state interests in regulating the industry.
In FCC v. League of Women Voters of California,57 the U.S. Supreme Court
reviewed a law prohibiting noncommercial broadcast stations that received funding
from a public corporation from "engaging in editorializing." The U.S. Supreme
Court acknowledged the differentiated First Amendment standard of review that
applied to broadcast media. Still, it struck down the restriction, holding that "[the]
regulation impermissibly sweeps within its prohibition a wide range of speech by
wholly private stations on topics that do not take a directly partisan stand or that
have nothing whatever to do with federal, state, or local government."58 We are
similarly able to maintain fidelity to the fundamental rights of broadcasters even
while upholding the rationale behind the regulatory regime governing them.
Should petitioner’s position that the NTC has the power to cancel CPCs or licenses
it has issued to broadcast stations although they are in the first place empowered
by their respective franchise to exercise their rights to free expression and as
members of a free press, be adopted broadcast media would be encumbered by
another layer of state restrictions. As things stand, they are already required to
secure a franchise from Congress and a CPC from the NTC in order to operate.
Upon operation, they are obliged to comply with the various regulatory issuances
of the NTC, which has the power to impose fees and fines and other mandates it
may deem fit to prescribe in the exercise of its rule-making power.
The fact that broadcast media already labors under this concededly valid
regulatory framework necessarily creates inhibitions on its practitioners as they
operate on a daily basis. Newspapers are able to print out their daily editions
without fear that a government agency such as the NTC will be able to suspend
their publication or fine them based on their content. Broadcast stations do already
operate with that possibility in mind, and that circumstance ineluctably restrains its
content, notwithstanding the constitutional right to free expression. However, the
14
cancellation of a CPC or license to operate of a broadcast station, if we recognize
that possibility, is essentially a death sentence, the most drastic means to inhibit a
broadcast media practitioner from exercising the constitutional right to free speech,
expression and of the press.
This judicial philosophy aligns well with the preferred mode of scrutiny in the
analysis of cases with dimensions of the right to free expression. When confronted
with laws dealing with freedom of the mind or restricting the political process, of
laws dealing with the regulation of speech, gender, or race as well as other
fundamental rights as expansion from its earlier applications to equal protection,
the Court has deemed it appropriate to apply "strict scrutiny" when assessing the
laws involved or the legal arguments pursued that would diminish the efficacy of
such constitutional right. The assumed authority of the NTC to cancel CPCs or
licenses, if sustained, will create a permanent atmosphere of a less free right to
express on the part of broadcast media. So that argument could be sustained, it
will have to withstand the strict scrutiny from this Court.
Strict scrutiny entails that the presumed law or policy must be justified by a
compelling state or government interest, that such law or policy must be narrowly
tailored to achieve that goal or interest, and that the law or policy must be the least
restrictive means for achieving that interest. It is through that lens that we examine
petitioner’s premise that the NTC has the authority to cancel licenses of broadcast
franchisees.
B.
In analyzing the compelling government interest that may justify the investiture of
authority on the NTC advocated by petitioner, we cannot ignore the interest of the
State as expressed in the respective legislative franchises of the petitioner, R.A.
No. 7477 and R. A. Act No. 7582. Since legislative franchises are extended
through statutes, they should receive recognition as the ultimate expression of
State policy. What the legislative franchises of respondents express is that the
Congress, after due debate and deliberation, declares it as State policy that
respondents should have the right to operate broadcast stations. The President of
the Philippines, by affixing his signature to the law, concurs in such State policy.
Allowing the NTC to countermand State policy by revoking respondent’s vested
legal right to operate broadcast stations unduly gives to a mere administrative
agency veto power over the implementation of the law and the enforcement of
especially vested legal rights. That concern would not arise if Congress had
similarly empowered the NTC with the power to revoke a franchisee’s right to
operate broadcast stations. But as earlier stated, there is no such expression in the
law, and by presuming such right the Court will be acting contrary to the stated
State interest as expressed in respondents’ legislative franchises.
If we examine the particular franchises of respondents, it is readily apparent that
Congress has especially invested the NTC with certain powers with respect to their
broadcast operations. Both R.A. No. 747759 and R.A. No. 758260 require the
grantee "to secure from the [NTC] the appropriate permits and licenses for its
stations," barring the private respondents from "using any frequency in the radio
spectrum without having been authorized by the [NTC]." At the same time, both
laws provided that "[the NTC], however, shall not unreasonably withhold or delay
the grant of any such authority."
An important proviso is stipulated in the legislative franchises, particularly under
Section 5 of R.A. No. 7477 and Section 3 of R.A. No. 7582, in relation to Section
11 of R.A. No. 3902.
Section 5. Right of Government. ― A special right is hereby reserved to the
President of the Philippines, in times of rebellion, public peril, calamity, emergency,
disaster or disturbance of peace and order, to temporarily take over and operate
the stations of the grantee, temporarily suspend the operation of any stations in the
interest of public safety, security and public welfare, or authorize the temporary
use and operation thereof by any agency of the Government, upon due
compensation to the grantee, for the use of said stations during the period when
they shall be so operated.
The provision authorizes the President of the Philippines to exercise considerable
infringements on the right of the franchisees to operate their enterprises and the
right to free expression. Such authority finds corollary constitutional justification as
well under Section 17, Article XII, which allows the State "in times of national
emergency, when the public interest so requires x x x 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." We do not doubt that the President or the State can exercise such
authority through the NTC, which remains an agency within the executive branch
of government, but such can be exercised only under limited and rather drastic
circumstances. They still do not vest in the NTC the broad authority to cancel
licenses and permits.
These provisions granting special rights to the President in times of emergency are
incorporated in our understanding of the legislated state policy with respect to the
operation by private respondents of their legislative franchises. There are
restrictions to the operation of such franchises, and when these restrictions are
indeed exercised there still may be cause for the courts to review whether said
15
limitations are justified despite Section 3, Article I of the Constitution. At the same
time, the state policy as embodied in these franchises is to restrict the
government’s ability to impair the freedom to broadcast of the stations only upon
the occurrence of national emergencies or events that compromise the national
security.
It should be further noted that even the aforequoted provision does not authorize
the President or the government to cancel the licenses of the respondents. The
temporary nature of the takeover or closure of the station is emphasized in the
provision. That fact further disengages the provision from any sense that such
delegated authority can be the source of a broad ruling affirming the right of the
NTC to cancel the licenses of franchisees.
With the legislated state policy strongly favoring the unimpeded operation of the
franchisee’s stations, it becomes even more difficult to discern what compelling
State interest may be fulfilled in ceding to the NTC the general power to cancel the
franchisee’s CPC’s or licenses absent explicit statutory authorization. This
absence of a compelling state interest strongly disfavors petitioner’s cause.
C.
Now, we shall tackle jointly whether a law or policy allowing the NTC to cancel
CPCs or licenses is to be narrowly tailored to achieve that requisite compelling
State goal or interest, and whether such a law or policy is the least restrictive
means for achieving that interest. We addressed earlier the difficulty of envisioning
the compelling State interest in granting the NTC such authority. But let us assume
for argument’s sake, that relieving the injury complained off by petitioner – the
failure of private respondents to open up ownership through the initial public
offering mandated by law – is a compelling enough State interest to allow the NTC
to extend consequences by canceling the licenses or CPCs of the erring
franchisee.
There is in fact a more appropriate, more narrowly-tailored and least restrictive
remedy that is afforded by the law. Such remedy is that adverted to by the NTC
and the Court of Appeals – the resort to quo warranto proceedings under Rule 66
of the Rules of Court.
Under Section 1 of Rule 66, "an action for the usurpation of a public office, position
or franchise may be brought in the name of the Republic of the Philippines against
a person who usurps, intrudes into, or unlawfully holds or exercises public office,
position or franchise."61 Even while the action is maintained in the name of the
Republic62 , the Solicitor General or a public prosecutor is obliged to commence
such action upon complaint, and upon good reason to believe that any case
specified under Section 1 of Rule 66 can be established by proof.63
The special civil action of quo warranto is a prerogative writ by which the
Government can call upon any person to show by what warrant he holds a public
office or exercises a public franchise.64 It is settled that "[t]he determination of the
right to the exercise of a franchise, or whether the right to enjoy such privilege has
been forfeited by non-user, is more properly the subject of the prerogative writ of
quo warranto, the right to assert which, as a rule, belongs to the State ‘upon
complaint or otherwise,’ the reason being that the abuse of a franchise is a public
wrong and not a private injury."65 A forfeiture of a franchise will have to be
declared in a direct proceeding for the purpose brought by the State because a
franchise is granted by law and its unlawful exercise is primarily a concern of
Government.66 Quo warranto is specifically available as a remedy if it is thought
that a government corporation has offended against its corporate charter or
misused its franchise.67
The Court of Appeals correctly noted that in PLDT v. NTC,68 the Court had cited
quo warranto as the appropriate recourse with respect to an allegation by
petitioner therein that a rival telecommunications competitor had failed to construct
its radio system within the ten (10) years from approval of its franchise, as
mandated by its legislative franchise.69 It is beyond dispute that quo warranto
exists as an available and appropriate remedy against the wrong imputed on
private respondents.
Petitioners argue that since their prayer involves the cancellation of the provisional
authority and CPCs, and not the legislative franchise, then quo warranto fails as a
remedy. The argument is artificial. The authority of the franchisee to engage in
broadcast operations is derived in the legislative mandate. To cancel the
provisional authority or the CPC is, in effect, to cancel the franchise or otherwise
prevent its exercise. By law, the NTC is incapacitated to frustrate such mandate by
unduly withholding or canceling the provisional authority or the CPC for reasons
other than the orderly administration of the frequencies in the radio spectrum.
What should occur instead is the converse. If the courts conclude that private
respondents have violated the terms of their franchise and thus issue the writs of
quo warranto against them, then the NTC is obliged to cancel any existing licenses
and CPCs since these permits draw strength from the possession of a valid
franchise. If the point has not already been made clear, then licenses issued by the
NTC such as CPCs and provisional authorities are junior to the legislative
franchise enacted by Congress. The licensing authority of the NTC is not on equal
footing with the franchising authority of the State through Congress. The issuance
of licenses by the NTC implements the legislative franchises established by
16
Congress, in the same manner that the executive branch implements the laws of
Congress rather than creates its own laws. And similar to the inability of the
executive branch to prevent the implementation of laws by Congress, the NTC
cannot, without clear and proper delegation by Congress, prevent the exercise of a
legislative franchise by withholding or canceling the licenses of the franchisee.
And the role of the courts, through quo warranto proceedings, neatly complements
the traditional separation of powers that come to bear in our analysis. The courts
are entrusted with the adjudication of the legal status of persons, the final arbiter of
their rights and obligations under law. The question of whether a franchisee is in
breach of the franchise specially enacted for it by Congress is one inherently
suited to a court of law, and not for an administrative agency, much less one to
which no such function has been delegated by Congress. In the same way that
availability of judicial review over laws does not preclude Congress from
undertaking its own remedial measures by appropriately amending laws, the
viability of quo warranto in the instant cases does not preclude Congress from
enforcing its own prerogative by abrogating the legislative franchises of
respondents should it be distressed enough by the franchisees’ violation of the
franchises extended to them.
Evidently, the suggested theory of petitioner to address his plaints simply
overpowers the delicate balance of separation of powers, and unduly grants
superlative prerogatives to the NTC to frustrate the exercise of the constitutional
freedom speech, expression, and of the press. A more narrowly-tailored relief that
is responsive to the cause of petitioner not only exists, but is in fact tailor-fitted to
the constitutional framework of our government and the adjudication of legal and
constitutional rights. Given the current status of the law, there is utterly no reason
for this Court to subscribe to the theory that the NTC has the presumed authority to
cancel licenses and CPCs issued to due holders of legislative franchise to engage
in broadcast operations.
In resolving the present questions, it was of marked impact to the Court that the
presumed power to cancel would lead to utterly fatal consequences to the
constitutional right to expression, as well as the legislated right of these
franchisees to broadcast. Other regulatory measures of less drastic impact will
have to be assessed on their own terms in the proper cases, and our decision
today should not be accepted or cited as a blanket shearing of the NTC’s
regulatory jurisdiction. In addition, considering our own present recognition of
legislative authority to regulate broadcast media on terms more cumbersome than
print media, it should not be discounted that Congress may enact amendments to
the organic law of the NTC that would alter the legal milieu from which we
adjudicated today.1avvphi1.zw+
Still, the Court sees all benefit and no detriment in striking this blow in favor of free
expression and of the press. While the ability of the State to broadly regulate
broadcast media is ultimately dictated by physics, regulation with a light touch
evokes a democracy mature enough to withstand competing viewpoints and
tastes. Perhaps unwittingly, the position advocated by petitioner curdles a most
vital sector of the press – broadcast media – within the heavy hand of the State.
The argument is not warranted by law, and it betrays the constitutional
expectations on this Court to assert lines not drawn and connect the dots around
throats that are free to speak.
WHEREFORE, the instant petition is DENIED. No pronouncement as to costs.
SO ORDERED

V.
An entire subset of questions may arise following this decision, involving issues or
situations not presently before us. We wish to make clear that the only aspect of
the regulatory jurisdiction of the NTC that we are ruling upon is its presumed power
to cancel provisional authorities, CPCs or CPCNs and other such licenses required
of franchisees before they can engage in broadcast operations. Moreover, our
conclusion that the NTC has no such power is borne not simply from the statutory
language of E.O. No. 546 or the respective stipulations in private respondents’
franchises, but moreso, from the application of the strict scrutiny standard which,
despite its weight towards free speech, still involves the analysis of the competing
interests of the regulator and the regulated.

17
G.R. No. 115381 December 23, 1994
KILUSANG MAYO UNO LABOR CENTER, petitioner, vs. HON. JESUS B.
GARCIA, JR., the LAND TRANSPORTATION FRANCHISING AND
REGULATORY BOARD, and the PROVINCIAL BUS OPERATORS
ASSOCIATION OF THE PHILIPPINES, respondents.
KAPUNAN, J.:
Public utilities are privately owned and operated businesses whose service are
essential to the general public. They are enterprises which specially cater to the
needs of the public and conduce to their comfort and convenience. As such, public
utility services are impressed with public interest and concern. The same is true
with respect to the business of common carrier which holds such a peculiar
relation to the public interest that there is superinduced upon it the right of public
regulation when private properties are affected with public interest, hence, they
cease to be juris privati only. When, therefore, one devotes his property to a use in
which the public has an interest, he, in effect grants to the public an interest in that
use, and must submit to the control by the public for the common good, to the
extent of the interest he has thus created.1
An abdication of the licensing and regulatory government agencies of their
functions as the instant petition seeks to show, is indeed lamentable. Not only is it
an unsound administrative policy but it is inimical to public trust and public interest
as well.
The instant petition for certiorari assails the constitutionality and validity of certain
memoranda, circulars and/or orders of the Department of Transportation and
Communications (DOTC) and the Land Transportation Franchising and Regulatory
Board LTFRB)2 which, among others, (a) authorize provincial bus and jeepney
operators to increase or decrease the prescribed transportation fares without
application therefor with the LTFRB and without hearing and approval thereof by
said agency in violation of Sec. 16(c) of Commonwealth Act No. 146, as amended,
otherwise known as the Public Service Act, and in derogation of LTFRB's duty to
fix and determine just and reasonable fares by delegating that function to bus
operators, and (b) establish a presumption of public need in favor of applicants for
certificates of public convenience (CPC) and place on the oppositor the burden of
proving that there is no need for the proposed service, in patent violation not only
of Sec. 16(c) of CA 146, as amended, but also of Sec. 20(a) of the same Act
mandating that fares should be "just and reasonable." It is, likewise, violative of the
Rules of Court which places upon each party the burden to prove his own
affirmative allegations.3 The offending provisions contained in the questioned
issuances pointed out by petitioner, have resulted in the introduction into our
highways and thoroughfares thousands of old and smoke-belching buses, many of
which are right-hand driven, and have exposed our consumers to the burden of
spiraling costs of public transportation without hearing and due process.
The following memoranda, circulars and/or orders are sought to be nullified by the
instant petition, viz: (a) DOTC Memorandum Order 90-395, dated June 26, 1990
relative to the implementation of a fare range scheme for provincial bus services in
the country; (b) DOTC Department Order No. 92-587, dated March 30, 1992,
defining the policy framework on the regulation of transport services; (c) DOTC
Memorandum dated October 8, 1992, laying down rules and procedures to
implement Department Order No. 92-587; (d) LTFRB Memorandum Circular No.
92-009, providing implementing guidelines on the DOTC Department Order No.
92-587; and (e) LTFRB Order dated March 24, 1994 in Case No. 94-3112.
The relevant antecedents are as follows:
On June 26, 1990; then Secretary of DOTC, Oscar M. Orbos, issued
Memorandum Circular No. 90-395 to then LTFRB Chairman, Remedios A.S.
Fernando allowing provincial bus operators to charge passengers rates within a
range of 15% above and 15% below the LTFRB official rate for a period of one (1)
year. The text of the memorandum order reads in full:
One of the policy reforms and measures that is in line with the thrusts and the
priorities set out in the Medium-Term Philippine Development Plan (MTPDP) 1987
— 1992) is the liberalization of regulations in the transport sector. Along this line,
the Government intends to move away gradually from regulatory policies and
make progress towards greater reliance on free market forces.
Based on several surveys and observations, bus companies are already charging
passenger rates above and below the official fare declared by LTFRB on many
provincial routes. It is in this context that some form of liberalization on public
transport fares is to be tested on a pilot basis.
In view thereof, the LTFRB is hereby directed to immediately publicize a fare range
scheme for all provincial bus routes in country (except those operating within Metro
Manila). Transport Operators shall be allowed to charge passengers within a range
of fifteen percent (15%) above and fifteen percent (15%) below the LTFRB official
rate for a period of one year.
Guidelines and procedures for the said scheme shall be prepared by LTFRB in
coordination with the DOTC Planning Service.
The implementation of the said fare range scheme shall start on 6 August 1990.
18
For compliance. (Emphasis ours.)
Finding the implementation of the fare range scheme "not legally feasible,"
Remedios A.S. Fernando submitted the following memorandum to Oscar M. Orbos
on July 24, 1990, to wit:
With reference to DOTC Memorandum Order No. 90-395 dated 26 June 1990
which the LTFRB received on 19 July 1990, directing the Board "to immediately
publicize a fare range scheme for all provincial bus routes in the country (except
those operating within Metro Manila)" that will allow operators "to charge
passengers within a range of fifteen percent (15%) above and fifteen percent
(15%) below the LTFRB official rate for a period of one year" the undersigned is
respectfully adverting the Secretary's attention to the following for his
consideration:
1. Section 16(c) of the Public Service Act prescribes the following for the fixing and
determination of rates — (a) the rates to be approved should be proposed by
public service operators; (b) there should be a publication and notice to concerned
or affected parties in the territory affected; (c) a public hearing should be held for
the fixing of the rates; hence, implementation of the proposed fare range scheme
on August 6 without complying with the requirements of the Public Service Act may
not be legally feasible.
2. To allow bus operators in the country to charge fares fifteen (15%) above the
present LTFRB fares in the wake of the devastation, death and suffering caused
by the July 16 earthquake will not be socially warranted and will be politically
unsound; most likely public criticism against the DOTC and the LTFRB will be
triggered by the untimely motu propio implementation of the proposal by the mere
expedient of publicizing the fare range scheme without calling a public hearing,
which scheme many as early as during the Secretary's predecessor know through
newspaper reports and columnists' comments to be Asian Development Bank and
World Bank inspired.
3. More than inducing a reduction in bus fares by fifteen percent (15%) the
implementation of the proposal will instead trigger an upward adjustment in bus
fares by fifteen percent (15%) at a time when hundreds of thousands of people in
Central and Northern Luzon, particularly in Central Pangasinan, La Union, Baguio
City, Nueva Ecija, and the Cagayan Valley are suffering from the devastation and
havoc caused by the recent earthquake.
4. In lieu of the said proposal, the DOTC with its agencies involved in public
transportation can consider measures and reforms in the industry that will be
socially uplifting, especially for the people in the areas devastated by the recent
earthquake.
In view of the foregoing considerations, the undersigned respectfully suggests that
the implementation of the proposed fare range scheme this year be further studied
and evaluated.
On December 5, 1990, private respondent Provincial Bus Operators Association of
the Philippines, Inc. (PBOAP) filed an application for fare rate increase. An across-
the-board increase of eight and a half centavos (P0.085) per kilometer for all types
of provincial buses with a minimum-maximum fare range of fifteen (15%) percent
over and below the proposed basic per kilometer fare rate, with the said minimum-
maximum fare range applying only to ordinary, first class and premium class buses
and a fifty-centavo (P0.50) minimum per kilometer fare for aircon buses, was
sought.
On December 6, 1990, private respondent PBOAP reduced its applied proposed
fare to an across-the-board increase of six and a half (P0.065) centavos per
kilometer for ordinary buses. The decrease was due to the drop in the expected
price of diesel.
The application was opposed by the Philippine Consumers Foundation, Inc. and
Perla C. Bautista alleging that the proposed rates were exorbitant and
unreasonable and that the application contained no allegation on the rate of return
of the proposed increase in rates.
On December 14, 1990, public respondent LTFRB rendered a decision granting
the fare rate increase in accordance with the following schedule of fares on a
straight computation method, viz:
AUTHORIZED FARES
LUZON
MIN. OF 5 KMS. SUCCEEDING KM.
REGULAR P1.50 P0.37
STUDENT P1.15 P0.28
VISAYAS/MINDANAO
REGULAR P1.60 P0.375
STUDENT P1.20 P0.285
FIRST CLASS (PER KM.)
19
LUZON P0.385
VISAYAS/
MINDANAO P0.395
PREMIERE CLASS (PER KM.)
LUZON P0.395
VISAYAS/
MINDANAO P0.405
AIRCON (PER KM.) P0.415.4
On March 30, 1992, then Secretary of the Department of Transportation and
Communications Pete Nicomedes Prado issued Department Order No.
92-587 defining the policy framework on the regulation of transport services. The
full text of the said order is reproduced below in view of the importance of the
provisions contained therein:
WHEREAS, Executive Order No. 125 as amended, designates the Department of
Transportation and Communications (DOTC) as the primary policy, planning,
regulating and implementing agency on transportation;
WHEREAS, to achieve the objective of a viable, efficient, and dependable
transportation system, the transportation regulatory agencies under or attached to
the DOTC have to harmonize their decisions and adopt a common philosophy and
direction;
WHEREAS, the government proposes to build on the successful liberalization
measures pursued over the last five years and bring the transport sector nearer to
a balanced longer term regulatory framework;
NOW, THEREFORE, pursuant to the powers granted by laws to the DOTC, the
following policies and principles in the economic regulation of land, air, and water
transportation services are hereby adopted:
1. Entry into and exit out of the industry. Following the Constitutional dictum
against monopoly, no franchise holder shall be permitted to maintain a monopoly
on any route. A minimum of two franchise holders shall be permitted to operate on
any route.
The requirements to grant a certificate to operate, or certificate of public
convenience, shall be: proof of Filipino citizenship, financial capability, public need,
and sufficient insurance cover to protect the riding public.
In determining public need, the presumption of need for a service shall be deemed
in favor of the applicant. The burden of proving that there is no need for a
proposed service shall be with the oppositor(s).
In the interest of providing efficient public transport services, the use of the "prior
operator" and the "priority of filing" rules shall be discontinued. The route
measured capacity test or other similar tests of demand for vehicle/vessel fleet on
any route shall be used only as a guide in weighing the merits of each franchise
application and not as a limit to the services offered.
Where there are limitations in facilities, such as congested road space in urban
areas, or at airports and ports, the use of demand management measures in
conformity with market principles may be considered.
The right of an operator to leave the industry is recognized as a business decision,
subject only to the filing of appropriate notice and following a phase-out period, to
inform the public and to minimize disruption of services.
2. Rate and Fare Setting. Freight rates shall be freed gradually from government
controls. Passenger fares shall also be deregulated, except for the lowest class of
passenger service (normally third class passenger transport) for which the
government will fix indicative or reference fares. Operators of particular services
may fix their own fares within a range 15% above and below the indicative or
reference rate.
Where there is lack of effective competition for services, or on specific routes, or
for the transport of particular commodities, maximum mandatory freight rates or
passenger fares shall be set temporarily by the government pending actions to
increase the level of competition.
For unserved or single operator routes, the government shall contract such
services in the most advantageous terms to the public and the government,
following public bids for the services. The advisability of bidding out the services or
using other kinds of incentives on such routes shall be studied by the government.
3. Special Incentives and Financing for Fleet Acquisition. As a matter of policy, the
government shall not engage in special financing and incentive programs,
including direct subsidies for fleet acquisition and expansion. Only when the
market situation warrants government intervention shall programs of this type be
considered. Existing programs shall be phased out gradually.
The Land Transportation Franchising and Regulatory Board, the Civil Aeronautics
Board, the Maritime Industry Authority are hereby directed to submit to the Office
20
of the Secretary, within forty-five (45) days of this Order, the detailed rules and
procedures for the Implementation of the policies herein set forth. In the
formulation of such rules, the concerned agencies shall be guided by the most
recent studies on the subjects, such as the Provincial Road Passenger Transport
Study, the Civil Aviation Master Plan, the Presidential Task Force on the Inter-
island Shipping Industry, and the Inter-island Liner Shipping Rate Rationalization
Study.
For the compliance of all concerned. (Emphasis ours)
On October 8, 1992, public respondent Secretary of the Department of
Transportation and Communications Jesus B. Garcia, Jr. issued a memorandum to
the Acting Chairman of the LTFRB suggesting swift action on the adoption of rules
and procedures to implement above-quoted Department Order No. 92-587 that laid
down deregulation and other liberalization policies for the transport sector.
Attached to the said memorandum was a revised draft of the required rules and
procedures covering (i) Entry Into and Exit Out of the Industry and (ii) Rate and
Fare Setting, with comments and suggestions from the World Bank incorporated
therein. Likewise, resplendent from the said memorandum is the statement of the
DOTC Secretary that the adoption of the rules and procedures is a pre-requisite to
the approval of the Economic Integration Loan from the World Bank.5
On February 17, 1993, the LTFRB issued Memorandum Circular
No. 92-009 promulgating the guidelines for the implementation of DOTC
Department Order No. 92-587. The Circular provides, among others, the following
challenged portions:
xxx xxx xxx
IV. Policy Guidelines on the Issuance of Certificate of Public Convenience.
The issuance of a Certificate of Public Convenience is determined by public need.
The presumption of public need for a service shall be deemed in favor of the
applicant, while burden of proving that there is no need for the proposed service
shall be the oppositor'(s).
xxx xxx xxx
V. Rate and Fare Setting
The control in pricing shall be liberalized to introduce price competition
complementary with the quality of service, subject to prior notice and public
hearing. Fares shall not be provisionally authorized without public hearing.
A. On the General Structure of Rates
1. The existing authorized fare range system of plus or minus 15 per cent for
provincial buses and jeepneys shall be widened to 20% and -25% limit in 1994
with the authorized fare to be replaced by an indicative or reference rate as the
basis for the expanded fare range.
2. Fare systems for aircon buses are liberalized to cover first class and premier
services.
xxx xxx xxx
(Emphasis ours).
Sometime in March, 1994, private respondent PBOAP, availing itself of the
deregulation policy of the DOTC allowing provincial bus operators to collect plus
20% and minus 25% of the prescribed fare without first having filed a petition for
the purpose and without the benefit of a public hearing, announced a fare increase
of twenty (20%) percent of the existing fares. Said increased fares were to be
made effective on March 16, 1994.
On March 16, 1994, petitioner KMU filed a petition before the LTFRB opposing the
upward adjustment of bus fares.
On March 24, 1994, the LTFRB issued one of the assailed orders dismissing the
petition for lack of merit. The dispositive portion reads:
PREMISES CONSIDERED, this Board after considering the arguments of the
parties, hereby DISMISSES FOR LACK OF MERIT the petition filed in the above-
entitled case. This petition in this case was resolved with dispatch at the request of
petitioner to enable it to immediately avail of the legal remedies or options it is
entitled under existing laws.
SO ORDERED.6
Hence, the instant petition for certiorari with an urgent prayer for issuance of a
temporary restraining order.
The Court, on June 20, 1994, issued a temporary restraining order enjoining,
prohibiting and preventing respondents from implementing the bus fare rate
increase as well as the questioned orders and memorandum circulars. This meant
that provincial bus fares were rolled back to the levels duly authorized by the
LTFRB prior to March 16, 1994. A moratorium was likewise enforced on the
issuance of franchises for the operation of buses, jeepneys, and taxicabs.
21
Petitioner KMU anchors its claim on two (2) grounds. First, the authority given by
respondent LTFRB to provincial bus operators to set a fare range of plus or minus
fifteen (15%) percent, later increased to plus twenty (20%) and minus twenty-five (-
25%) percent, over and above the existing authorized fare without having to file a
petition for the purpose, is unconstitutional, invalid and illegal. Second, the
establishment of a presumption of public need in favor of an applicant for a
proposed transport service without having to prove public necessity, is illegal for
being violative of the Public Service Act and the Rules of Court.
In its Comment, private respondent PBOAP, while not actually touching upon the
issues raised by the petitioner, questions the wisdom and the manner by which the
instant petition was filed. It asserts that the petitioner has no legal standing to sue
or has no real interest in the case at bench and in obtaining the reliefs prayed for.
In their Comment filed by the Office of the Solicitor General, public respondents
DOTC Secretary Jesus B. Garcia, Jr. and the LTFRB asseverate that the petitioner
does not have the standing to maintain the instant suit. They further claim that it is
within DOTC and LTFRB's authority to set a fare range scheme and establish a
presumption of public need in applications for certificates of public convenience.
We find the instant petition impressed with merit.
At the outset, the threshold issue of locus standi must be struck. Petitioner KMU
has the standing to sue.
The requirement of locus standi inheres from the definition of judicial power.
Section 1 of Article VIII of the Constitution provides:
xxx xxx xxx
Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and enforceable, and
to determine whether or not there has been a grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.
In Lamb v. Phipps,7 we ruled that judicial power is the power to hear and decide
causes pending between parties who have the right to sue in the courts of law and
equity. Corollary to this provision is the principle of locus standi of a party litigant.
One who is directly affected by and whose interest is immediate and substantial in
the controversy has the standing to sue. The rule therefore requires that a party
must show a personal stake in the outcome of the case or an injury to himself that
can be redressed by a favorable decision so as to warrant an invocation of the
court's jurisdiction and to justify the exercise of the court's remedial powers in his
behalf.8
In the case at bench, petitioner, whose members had suffered and continue to
suffer grave and irreparable injury and damage from the implementation of the
questioned memoranda, circulars and/or orders, has shown that it has a clear legal
right that was violated and continues to be violated with the enforcement of the
challenged memoranda, circulars and/or orders. KMU members, who avail of the
use of buses, trains and jeepneys everyday, are directly affected by the
burdensome cost of arbitrary increase in passenger fares. They are part of the
millions of commuters who comprise the riding public. Certainly, their rights must
be protected, not neglected nor ignored.
Assuming arguendo that petitioner is not possessed of the standing to sue, this
court is ready to brush aside this barren procedural infirmity and recognize the
legal standing of the petitioner in view of the transcendental importance of the
issues raised. And this act of liberality is not without judicial precedent. As early as
the Emergency Powers Cases, this Court had exercised its discretion and waived
the requirement of proper party. In the recent case of Kilosbayan, Inc., et al. v.
Teofisto Guingona, Jr., et al.,9 we ruled in the same lines and enumerated some of
the cases where the same policy was adopted, viz:
. . . A party's standing before this Court is a procedural technicality which it may, in
the exercise of its discretion, set aside in view of the importance of the issues
raised. In the landmark Emergency Powers Cases, [G.R. No. L-2044 (Araneta v.
Dinglasan); G.R. No. L-2756 (Araneta v. Angeles); G.R. No. L-3054 (Rodriguez v.
Tesorero de Filipinas); G.R. No. L-3055 (Guerrero v. Commissioner of Customs);
and G.R. No. L-3056 (Barredo v. Commission on Elections), 84 Phil. 368 (1949)],
this Court brushed aside this technicality because "the transcendental importance
to the public of these cases demands that they be settled promptly and definitely,
brushing aside, if we must, technicalities of procedure. (Avelino vs. Cuenco, G.R.
No. L-2621)." Insofar as taxpayers' suits are concerned, this Court had declared
that it "is not devoid of discretion as to whether or not it should be entertained,"
(Tan v. Macapagal, 43 SCRA 677, 680 [1972]) or that it "enjoys an open discretion
to entertain the same or not." [Sanidad v. COMELEC, 73 SCRA 333 (1976)].
xxx xxx xxx
In line with the liberal policy of this Court on locus standi, ordinary taxpayers,
members of Congress, and even association of planters, and non-profit civic
organizations were allowed to initiate and prosecute actions before this court to
question the constitutionality or validity of laws, acts, decisions, rulings, or orders
of various government agencies or instrumentalities. Among such cases were
22
those assailing the constitutionality of (a) R.A. No. 3836 insofar as it allows
retirement gratuity and commutation of vacation and sick leave to Senators and
Representatives and to elective officials of both Houses of Congress (Philippine
Constitution Association, Inc. v. Gimenez, 15 SCRA 479 [1965]); (b) Executive
Order No. 284, issued by President Corazon C. Aquino on 25 July 1987, which
allowed members of the cabinet, their undersecretaries, and assistant secretaries
to hold other government offices or positions (Civil Liberties Union v. Executive
Secretary, 194 SCRA 317 [1991]); (c) the automatic appropriation for debt service
in the General Appropriations Act (Guingona v. Carague, 196 SCRA 221 [1991];
(d) R.A. No. 7056 on the holding of desynchronized elections (Osmeña v.
Commission on Elections, 199 SCRA 750 [1991]); (e) P.D. No. 1869 (the charter of
the Philippine Amusement and Gaming Corporation) on the ground that it is
contrary to morals, public policy, and order (Basco v. Philippine Amusement and
Gaming Corp., 197 SCRA 52 [1991]); and (f) R.A. No. 6975, establishing the
Philippine National Police. (Carpio v. Executive Secretary, 206 SCRA 290 [1992]).
Other cases where we have followed a liberal policy regarding locus standi include
those attacking the validity or legality of (a) an order allowing the importation of rice
in the light of the prohibition imposed by R.A. No. 3452 (Iloilo Palay and Corn
Planters Association, Inc. v. Feliciano, 13 SCRA 377 [1965]; (b) P.D. Nos. 991 and
1033 insofar as they proposed amendments to the Constitution and P.D. No. 1031
insofar as it directed the COMELEC to supervise, control, hold, and conduct the
referendum-plebiscite on 16 October 1976 (Sanidad v. Commission on Elections,
supra); (c) the bidding for the sale of the 3,179 square meters of land at Roppongi,
Minato-ku, Tokyo, Japan (Laurel v. Garcia, 187 SCRA 797 [1990]); (d) the
approval without hearing by the Board of Investments of the amended application
of the Bataan Petrochemical Corporation to transfer the site of its plant from
Bataan to Batangas and the validity of such transfer and the shift of feedstock from
naphtha only to naphtha and/or liquefied petroleum gas (Garcia v. Board of
Investments, 177 SCRA 374 [1989]; Garcia v. Board of Investments, 191 SCRA
288 [1990]); (e) the decisions, orders, rulings, and resolutions of the Executive
Secretary, Secretary of Finance, Commissioner of Internal Revenue,
Commissioner of Customs, and the Fiscal Incentives Review Board exempting the
National Power Corporation from indirect tax and duties (Maceda v. Macaraig, 197
SCRA 771 [1991]); (f) the orders of the Energy Regulatory Board of 5 and 6
December 1990 on the ground that the hearings conducted on the second
provisional increase in oil prices did not allow the petitioner substantial cross-
examination; (Maceda v. Energy Regulatory Board, 199 SCRA 454 [1991]); (g)
Executive Order No. 478 which levied a special duty of P0.95 per liter of imported
oil products (Garcia v. Executive Secretary, 211 SCRA 219 [1992]); (h) resolutions
of the Commission on Elections concerning the apportionment, by district, of the
number of elective members of Sanggunians (De Guia vs. Commission on
Elections, 208 SCRA 420 [1992]); and (i) memorandum orders issued by a Mayor
affecting the Chief of Police of Pasay City (Pasay Law and Conscience Union, Inc.
v. Cuneta, 101 SCRA 662 [1980]).
In the 1975 case of Aquino v. Commission on Elections (62 SCRA 275 [1975]), this
Court, despite its unequivocal ruling that the petitioners therein had no personality
to file the petition, resolved nevertheless to pass upon the issues raised because
of the far-reaching implications of the petition. We did no less in De Guia v.
COMELEC (Supra) where, although we declared that De Guia "does not appear to
have locus standi, a standing in law, a personal or substantial interest," we
brushed aside the procedural infirmity "considering the importance of the issue
involved, concerning as it does the political exercise of qualified voters affected by
the apportionment, and petitioner alleging abuse of discretion and violation of the
Constitution by respondent."
Now on the merits of the case.
On the fare range scheme.
Section 16(c) of the Public Service Act, as amended, reads:
Sec. 16. Proceedings of the Commission, upon notice and hearing. — The
Commission shall have power, upon proper notice and hearing in accordance with
the rules and provisions of this Act, subject to the limitations and exceptions
mentioned and saving provisions to the contrary:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls, charges, classifications, or
schedules thereof, as well as commutation, mileage kilometrage, and other special
rates which shall be imposed, observed, and followed thereafter by any public
service: Provided, That the Commission may, in its discretion, approve rates
proposed by public services provisionally and without necessity of any hearing; but
it shall call a hearing thereon within thirty days thereafter, upon publication and
notice to the concerns operating in the territory affected: Provided, further, That in
case the public service equipment of an operator is used principally or secondarily
for the promotion of a private business, the net profits of said private business shall
be considered in relation with the public service of such operator for the purpose of
fixing the rates. (Emphasis ours).
xxx xxx xxx
Under the foregoing provision, the Legislature delegated to the defunct Public
Service Commission the power of fixing the rates of public services. Respondent
23
LTFRB, the existing regulatory body today, is likewise vested with the same under
Executive Order No. 202 dated June 19, 1987. Section 5(c) of the said executive
order authorizes LTFRB "to determine, prescribe, approve and periodically review
and adjust, reasonable fares, rates and other related charges, relative to the
operation of public land transportation services provided by motorized vehicles."
Such delegation of legislative power to an administrative agency is permitted in
order to adapt to the increasing complexity of modern life. As subjects for
governmental regulation multiply, so does the difficulty of administering the laws.
Hence, specialization even in legislation has become necessary. Given the task of
determining sensitive and delicate matters as route-fixing and rate-making for the
transport sector, the responsible regulatory body is entrusted with the power of
subordinate legislation. With this authority, an administrative body and in this case,
the LTFRB, may implement broad policies laid down in a statute by "filling in" the
details which the Legislature may neither have time or competence to provide.
However, nowhere under the aforesaid provisions of law are the regulatory bodies,
the PSC and LTFRB alike, authorized to delegate that power to a common carrier,
a transport operator, or other public service.
In the case at bench, the authority given by the LTFRB to the provincial bus
operators to set a fare range over and above the authorized existing fare, is illegal
and invalid as it is tantamount to an undue delegation of legislative authority.
Potestas delegata non delegari potest. What has been delegated cannot be
delegated. This doctrine is based on the ethical principle that such a delegated
power constitutes not only a right but a duty to be performed by the delegate
through the instrumentality of his own judgment and not through the intervening
mind of another.10 A further delegation of such power would indeed constitute a
negation of the duty in violation of the trust reposed in the delegate mandated to
discharge it directly.11 The policy of allowing the provincial bus operators to
change and increase their fares at will would result not only to a chaotic situation
but to an anarchic state of affairs. This would leave the riding public at the mercy of
transport operators who may increase fares every hour, every day, every month or
every year, whenever it pleases them or whenever they deem it "necessary" to do
so. In Panay Autobus Co. v. Philippine Railway Co.,12 where respondent
Philippine Railway Co. was granted by the Public Service Commission the
authority to change its freight rates at will, this Court categorically declared that:
In our opinion, the Public Service Commission was not authorized by law to
delegate to the Philippine Railway Co. the power of altering its freight rates
whenever it should find it necessary to do so in order to meet the competition of
road trucks and autobuses, or to change its freight rates at will, or to regard its
present rates as maximum rates, and to fix lower rates whenever in the opinion of
the Philippine Railway Co. it would be to its advantage to do so.
The mere recital of the language of the application of the Philippine Railway Co. is
enough to show that it is untenable. The Legislature has delegated to the Public
Service Commission the power of fixing the rates of public services, but it has not
authorized the Public Service Commission to delegate that power to a common
carrier or other public service. The rates of public services like the Philippine
Railway Co. have been approved or fixed by the Public Service Commission, and
any change in such rates must be authorized or approved by the Public Service
Commission after they have been shown to be just and reasonable. The public
service may, of course, propose new rates, as the Philippine Railway Co. did in
case No. 31827, but it cannot lawfully make said new rates effective without the
approval of the Public Service Commission, and the Public Service Commission
itself cannot authorize a public service to enforce new rates without the prior
approval of said rates by the commission. The commission must approve new
rates when they are submitted to it, if the evidence shows them to be just and
reasonable, otherwise it must disapprove them. Clearly, the commission cannot
determine in advance whether or not the new rates of the Philippine Railway Co.
will be just and reasonable, because it does not know what those rates will be.
In the present case the Philippine Railway Co. in effect asked for permission to
change its freight rates at will. It may change them every day or every hour,
whenever it deems it necessary to do so in order to meet competition or whenever
in its opinion it would be to its advantage. Such a procedure would create a most
unsatisfactory state of affairs and largely defeat the purposes of the public service
law.13 (Emphasis ours).
One veritable consequence of the deregulation of transport fares is a compounded
fare. If transport operators will be authorized to impose and collect an additional
amount equivalent to 20% over and above the authorized fare over a period of
time, this will unduly prejudice a commuter who will be made to pay a fare that has
been computed in a manner similar to those of compounded bank interest rates.
Picture this situation. On December 14, 1990, the LTFRB authorized provincial bus
operators to collect a thirty-seven (P0.37) centavo per kilometer fare for ordinary
buses. At the same time, they were allowed to impose and collect a fare range of
plus or minus 15% over the authorized rate. Thus P0.37 centavo per kilometer
authorized fare plus P0.05 centavos (which is 15% of P0.37 centavos) is
equivalent to P0.42 centavos, the allowed rate in 1990. Supposing the LTFRB
grants another five (P0.05) centavo increase per kilometer in 1994, then, the base
or reference for computation would have to be P0.47 centavos (which is P0.42 +
P0.05 centavos). If bus operators will exercise their authority to impose an
additional 20% over and above the authorized fare, then the fare to be collected
shall amount to P0.56 (that is, P0.47 authorized LTFRB rate plus 20% of P0.47
which is P0.29). In effect, commuters will be continuously subjected, not only to a
24
double fare adjustment but to a compounding fare as well. On their part, transport
operators shall enjoy a bigger chunk of the pie. Aside from fare increase applied
for, they can still collect an additional amount by virtue of the authorized fare
range. Mathematically, the situation translates into the following:
Year** LTFRB authorized Fare Range Fare to be
rate*** collected per kilometer
1990 P0.37 15% (P0.05) P0.42
1994 P0.42 + 0.05 = 0.47 20% (P0.09) P0.56
1998 P0.56 + 0.05 = 0.61 20% (P0.12) P0.73
2002 P0.73 + 0.05 = 0.78 20% (P0.16) P0.94
Moreover, rate making or rate fixing is not an easy task. It is a delicate and
sensitive government function that requires dexterity of judgment and sound
discretion with the settled goal of arriving at a just and reasonable rate acceptable
to both the public utility and the public. Several factors, in fact, have to be taken
into consideration before a balance could be achieved. A rate should not be
confiscatory as would place an operator in a situation where he will continue to
operate at a loss. Hence, the rate should enable public utilities to generate
revenues sufficient to cover operational costs and provide reasonable return on the
investments. On the other hand, a rate which is too high becomes discriminatory. It
is contrary to public interest. A rate, therefore, must be reasonable and fair and
must be affordable to the end user who will utilize the services.
Given the complexity of the nature of the function of rate-fixing and its far-reaching
effects on millions of commuters, government must not relinquish this important
function in favor of those who would benefit and profit from the industry. Neither
should the requisite notice and hearing be done away with. The people,
represented by reputable oppositors, deserve to be given full opportunity to be
heard in their opposition to any fare increase.
The present administrative procedure, 14 to our mind, already mirrors an orderly
and satisfactory arrangement for all parties involved. To do away with such a
procedure and allow just one party, an interested party at that, to determine what
the rate should be, will undermine the right of the other parties to due process. The
purpose of a hearing is precisely to determine what a just and reasonable rate
is.15 Discarding such procedural and constitutional right is certainly inimical to our
fundamental law and to public interest.
On the presumption of public need.
A certificate of public convenience (CPC) is an authorization granted by the LTFRB
for the operation of land transportation services for public use as required by law.
Pursuant to Section 16(a) of the Public Service Act, as amended, the following
requirements must be met before a CPC may be granted, to wit: (i) the applicant
must be a citizen of the Philippines, or a corporation or co-partnership, association
or joint-stock company constituted and organized under the laws of the Philippines,
at least 60 per centum of its stock or paid-up capital must belong entirely to
citizens of the Philippines; (ii) the applicant must be financially capable of
undertaking the proposed service and meeting the responsibilities incident to its
operation; and (iii) the applicant must prove that the operation of the public service
proposed and the authorization to do business will promote the public interest in a
proper and suitable manner. It is understood that there must be proper notice and
hearing before the PSC can exercise its power to issue a CPC.
While adopting in toto the foregoing requisites for the issuance of a CPC, LTFRB
Memorandum Circular No. 92-009, Part IV, provides for yet incongruous and
contradictory policy guideline on the issuance of a CPC. The guidelines states:
The issuance of a Certificate of Public Convenience is determined by public need.
The presumption of public need for a service shall be deemed in favor of the
applicant, while the burden of proving that there is no need for the proposed
service shall be the oppositor's. (Emphasis ours).
The above-quoted provision is entirely incompatible and inconsistent with Section
16(c)(iii) of the Public Service Act which requires that before a CPC will be issued,
the applicant must prove by proper notice and hearing that the operation of the
public service proposed will promote public interest in a proper and suitable
manner. On the contrary, the policy guideline states that the presumption of public
need for a public service shall be deemed in favor of the applicant. In case of
conflict between a statute and an administrative order, the former must prevail.
By its terms, public convenience or necessity generally means something fitting or
suited to the public need.16 As one of the basic requirements for the grant of a
CPC, public convenience and necessity exists when the proposed facility or
service meets a reasonable want of the public and supply a need which the
existing facilities do not adequately supply. The existence or non-existence of
public convenience and necessity is therefore a question of fact that must be
established by evidence, real and/or testimonial; empirical data; statistics and such
other means necessary, in a public hearing conducted for that purpose. The object
and purpose of such procedure, among other things, is to look out for, and protect,
the interests of both the public and the existing transport operators.
Verily, the power of a regulatory body to issue a CPC is founded on the condition
that after full-dress hearing and investigation, it shall find, as a fact, that the
proposed operation is for the convenience of the public.17 Basic convenience is
the primary consideration for which a CPC is issued, and that fact alone must be
25
consistently borne in mind. Also, existing operators in subject routes must be given
an opportunity to offer proof and oppose the application. Therefore, an applicant
must, at all times, be required to prove his capacity and capability to furnish the
service which he has undertaken to render. 18 And all this will be possible only if a
public hearing were conducted for that purpose.
Otherwise stated, the establishment of public need in favor of an applicant
reverses well-settled and institutionalized judicial, quasi-judicial and administrative
procedures. It allows the party who initiates the proceedings to prove, by mere
application, his affirmative allegations. Moreover, the offending provisions of the
LTFRB memorandum circular in question would in effect amend the Rules of Court
by adding another disputable presumption in the enumeration of 37 presumptions
under Rule 131, Section 5 of the Rules of Court. Such usurpation of this Court's
authority cannot be countenanced as only this Court is mandated by law to
promulgate rules concerning pleading, practice and procedure. 19
presumption of public need for a service in favor of the applicant for a certificate of
public convenience and placing the burden of proving that there is no need for the
proposed service to the oppositor.
The Temporary Restraining Order issued on June 20, 1994 is hereby MADE
PERMANENT insofar as it enjoined the bus fare rate increase granted under the
provisions of the aforementioned administrative circulars, memoranda and/or
orders declared invalid.
No pronouncement as to costs.
SO ORDERED.

Deregulation, while it may be ideal in certain situations, may not be ideal at all in
our country given the present circumstances. Advocacy of liberalized franchising
and regulatory process is tantamount to an abdication by the government of its
inherent right to exercise police power, that is, the right of government to regulate
public utilities for protection of the public and the utilities themselves.

While we recognize the authority of the DOTC and the LTFRB to issue
administrative orders to regulate the transport sector, we find that they committed
grave abuse of discretion in issuing DOTC Department Order No. 92-587 defining
the policy framework on the regulation of transport services and LTFRB
Memorandum Circular No. 92-009 promulgating the implementing guidelines on
DOTC Department Order No. 92-587, the said administrative issuances being
amendatory and violative of the Public Service Act and the Rules of Court.
Consequently, we rule that the twenty (20%) per centum fare increase imposed by
respondent PBOAP on March 16, 1994 without the benefit of a petition and a
public hearing is null and void and of no force and effect. No grave abuse of
discretion however was committed in the issuance of DOTC Memorandum Order
No. 90-395 and DOTC Memorandum dated October 8, 1992, the same being
merely internal communications between administrative officers.

WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED

and the challenged administrative issuances and orders, namely: DOTC
Department Order No. 92-587, LTFRB Memorandum Circular
No. 92-009, and the order dated March 24, 1994 issued by respondent LTFRB are
hereby DECLARED contrary to law and invalid insofar as they affect provisions
therein (a) delegating to provincial bus and jeepney operators the authority to
increase or decrease the duly prescribed transportation fares; and (b) creating a

26
G.R. No. 138295 August 28, 2003
PILIPINO TELEPHONE CORPORATION, Petitioner, vs. NATIONAL
TELECOMMUNICATIONS COMMISSION and INTERNATIONAL
COMMUNICATIONS CORPORATION, Respondents.
DECISION
CARPIO, J.:
The Case
This petition for review on certiorari1 seeks to reverse the Joint Decision2 of the
Court of Appeals in CA-G.R. SP No. 477523 and CA-G.R. SP No. 479724 dated
15 April 1999 denying due course to the petition for certiorari5 filed by Pilipino
Telephone Corporation ("PILTEL") and dismissing the same.
The Facts
On 20 March 1995, the National Telecommunications Commission ("NTC") issued
PILTEL a Provisional Authority ("PA") to install, operate and maintain telephone
exchanges and public calling offices. The areas covered by PILTEL’s PA included
Sulu, Zamboanga del Norte, Zamboanga del Sur, Tawi-Tawi, Misamis Occidental,
Davao del Sur, South Cotabato, Saranggani and Davao City.
On 21 June 1996, while PILTEL’s PA was still valid and subsisting, the
International Communications Corporation ("ICC") applied with the NTC for a PA to
construct, operate and maintain local exchange services in some of the areas
covered by PILTEL’s PA. Among the areas included in ICC’s application were
Misamis Occidental, Zamboanga del Sur, Davao del Sur, South Cotabato and
Saranggani.
On 11 November 1996, PILTEL filed its Opposition to ICC’s PA application.
On 9 March 1998, the NTC issued an Order ("NTC Order") granting ICC a PA to
establish local exchange services in areas that included Misamis Occidental,
Zamboanga del Sur, Davao del Sur, South Cotabato and Saranggani.
PILTEL filed a petition for certiorari with prayer for the issuance of a temporary
restraining order or writ of preliminary injunction with the Court of Appeals on 5
June 1998 to nullify the NTC Order. On 28 July 1998, ICC filed its Comment to
PILTEL’s Petition, while PILTEL filed its Reply on 28 August 1998.
On 21 September 1998, PILTEL filed an Urgent Motion to Resolve its application
for the issuance of a temporary restraining order. PILTEL alleged, among others,
that it had yet to receive ICC’s Comment despite the lapse of a considerable time
from the Court of Appeals’ Resolution requiring ICC to file its Comment.
On 15 April 1999, the Court of Appeals issued a Joint Decision, the dispositive
portion of which reads:
WHEREFORE, for finding no grave abuse of discretion, tantamount to lack xxx or
excess of jurisdiction, on the part of the National Telecommunications Commission
in issuing its challenged Order dated March 9, 1998 in NTC Case No. 96-194
which granted a provisional authority to International Communications Corporation,
the two (2) consolidated cases of CA-G.R. SP No. 47752 and CA-G.R. SP No.
47972 are both hereby DENIED DUE COURSE and accordingly DISMISSED.
Costs against the petitioners.
SO ORDERED.6
Hence, this petition.
The Ruling of the Court of Appeals
In its petition for certiorari, PILTEL claimed that the NTC acted with grave abuse of
discretion amounting to lack of jurisdiction in granting ICC a PA to operate local
exchange service in areas previously assigned to PILTEL. PILTEL alleged that the
NTC Order violates Department of Transportation and Communications Circular
No. 91-260, Executive Order No. 109 and NTC Memorandum Circular No. 11-9-
93. PILTEL also claimed that the NTC Order is tantamount to an unwarranted
taking of property without due process of law and violates the equal protection
clause of the Constitution. Lastly, PILTEL alleged that the implementation of the
NTC Order would foster ruinous competition.
In denying due course to the petition for certiorari, the Court of Appeals gave the
following reasons:
First. Petitioner has not sufficiently shown us that other than this special civil action
under Rule 65, they have no plain, speedy, and adequate remedy in the ordinary
course of law against their perceived grievance. xxx
Second. Assuming arguendo that the propriety of the present recourse is not
infirm, it is settled, however, that before certiorari may be availed of, petitioner
must have filed a motion for reconsideration of the order or act complained of to
27
enable the tribunal, board or office concerned to pass upon and correct its
mistakes without the intervention of the higher courts. xxx
Third. Further assuming arguendo that certiorari [was] the proper remedy,
petitioner still failed to show that the order complained of was tainted with grave
abuse of discretion, so much so that after a careful deliberation of the arguments
and grounds in support thereof, it undoubtedly appears that the disputed order was
issued based on meritorious grounds.7
The Issues
In assailing the decision of the Court of Appeals, PILTEL contends that:
A. THE PETITIONER PROPERLY AVAILED OF THE REMEDY OF CERTIORARI
UNDER RULE 65 OF THE 1997 RULES OF CIVIL PROCEDURE CONSIDERING
THAT:
1. THERE IS NO APPEAL OR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY
IN THE ORDINARY COURSE OF LAW AVAILABLE TO PETITIONER.
2. THE ISSUES RAISED BY PETITIONER ARE PURELY OF LAW, HENCE, THE
FILING OF A MOTION FOR RECONSIDERATION OF THE QUESTIONED
ORDER IS NOT A CONDITION SINE QUA NON.
B. THE NATIONAL TELECOMMUNICATIONS COMMISSION ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION CONSIDERING THAT:
1. THE GRANT OF THE PROVISIONAL AUTHORITY TO ICC TO OPERATE
LOCAL EXCHANGE SERVICE IN AREAS PREVIOUSLY ASSIGNED TO PILTEL
UNDER ITS OWN PROVISIONAL AUTHORITY IS VIOLATIVE OF NTC
MEMORANDUM CIRCULAR NO. 11-9-93.
2. THE GRANT OF THE PROVISIONAL AUTHORITY TO ICC TO OPERATE
LOCAL EXCHANGE SERVICE IN AREAS PREVIOUSLY ASSIGNED TO PILTEL
IS TANTAMOUNT TO CONFISCATION OF PROPERTY WITHOUT DUE
PROCESS OF LAW.
3. THE GRANT OF THE PROVISIONAL AUTHORITY TO ICC TO OPERATE
LOCAL EXCHANGE SERVICE IN AREAS PREVIOUSLY ASSIGNED TO PILTEL
WOULD VIOLATE THE LATTER’S RIGHTS AS A PRIOR OPERATOR AND ITS
RIGHT TO BE PROTECTED IN ITS INVESTMENT.8
The Court’s Ruling
The petition lacks merit.
Whether PILTEL properly availed of the remedy of certiorari
PILTEL insists that the NTC Order is not a proper subject of an appeal since it is
interlocutory which did not resolve ICC’s pending application for a Certificate of
Public Convenience and Necessity. Even assuming that appeal is an available
remedy, PILTEL contends that it is not adequate to relieve promptly PILTEL from
the injurious effects9 of the NTC Order which was immediately executory under
the NTC Rules of Practice and Procedure.10 PILTEL also insists that a motion for
reconsideration is dispensable since the issues raised in the NTC were the same
issues presented in the Court of Appeals and these are purely questions of law.
Thus, PILTEL argues, a motion for reconsideration before the NTC would have
served no purpose.11
The settled rule is a motion for reconsideration is a prerequisite for the filing of a
petition for certiorari.12 A petitioner must exhaust all other available remedies
before resorting to certiorari. An exception to this rule arises if the petitioner raises
purely legal issues. However, contrary to PILTEL’s view, the issues raised in its
petition for certiorari before the Court of Appeals were mainly factual in nature.
Since PILTEL disputes NTC’s factual findings and seeks a re-evaluation of the
facts and evidence on record, the issues PILTEL raised are not proper subjects for
certiorari. Evidentiary matters or matters of fact raised in the NTC are not proper
grounds in the proceedings for certiorari before the Court of Appeals.13 The sole
office of a writ of certiorari is the correction of errors of jurisdiction and does not
include a review of the NTC’s evaluation of the evidence and factual findings.14
Even if the NTC Order was immediately executory, it did not excuse PILTEL from
filing a motion for reconsideration. Contrary to PILTEL’s view, a motion for
reconsideration is the plain, speedy and adequate remedy to the adverse NTC
Order.15 Had PILTEL filed a motion for reconsideration of the NTC Order, the NTC
would have had the opportunity to correct the alleged errors.16 In addition,
PILTEL’s failure to file a motion for reconsideration rendered its petition for
certiorari dismissible because of failure to exhaust administrative remedies.
In Republic v. Express Telecommunication Co., Inc.,17 the Court ruled that
Extelcom failed to exhaust available administrative remedies when it filed with the
Court of Appeals a petition for certiorari and prohibition without a motion for
reconsideration, thus:
28
Clearly, Extelcom violated the rule on exhaustion of administrative remedies when
it went directly to the Court of Appeals on a petition for certiorari and prohibition
from the Order of the NTC dated May 3, 2000, without first filing a motion for
reconsideration. It is well-settled that the filing of a motion for reconsideration is a
prerequisite to the filing of a special civil action for certiorari.
xxx
This case does not fall under any of the recognized exceptions to this rule.
Although the Order of the NTC dated May 3, 2000 granting provisional authority to
Bayantel was immediately executory, it did not preclude the filing of a motion for
reconsideration. Under the NTC Rules, a party adversely affected by a decision,
order, ruling or resolution may within fifteen (15) days file a motion for
reconsideration. That the Order of the NTC became immediately executory does
not mean that the remedy of filing a motion for reconsideration is foreclosed to the
petitioner. (Emphasis supplied)
(a) The rural network component consisting of a number of dispersed switching
centers throughout Regions 6, 7, 9, 10, 11 and 12 interconnected by a digital
microwave transmission system.
(b) The transit (Inter-exchange carrier) network consisting of transit switching
centers of Manila and Cebu for the interconnection of the ICC LEC Networks with
the network of other LEC operators, IGF operators (as well as ICC IGF), CMTS
operators and operators of PCO Networks.
Its network design is based on conservative projections and value based
engineering assumptions to ensure than an effective and efficient network is
provided.
The structure of ICC’s LEC has two (2) layer hierarchical network: the transit layer
which provides the classic trunk (tool) switching and inter-carrier interconnect
functions; and the local exchange carrier.

In fine, the Court of Appeals correctly dismissed PILTEL’s petition for certiorari for Applicant will be using Northern Telecom DMS 100/200 and DMS 300 (Toll
PILTEL’s failure to file a motion for reconsideration of the NTC Order. Exchange) digital switching equipment for its LEC Network/Service in the twenty-
two (22) provinces in Visayas and Mindanao areas.
Whether NTC committed grave abuse of discretion
Applicant’s proposed LEC project in the Visayas and Mindanao areas will be
In Benito v. Commission on Elections,18 the Court defined grave abuse of implemented within [a] three (3) year period with a total number of 250,000 lines as
discretion as follows: mentioned in the submitted Feasibility Study. The distribution of ICC’s committed
lines for its proposed LEC project in the cities and municipalities of the twenty-two
Grave abuse of discretion means such capricious and whimsical exercise of (22) provinces in the Visayas and Mindanao areas are enumerated in Annex "B" of
judgment as is equivalent to lack of jurisdiction, or, in other words where the power the amended application.
is exercised in an arbitrary or despotic manner by reason of passion or personal
hostility, and it must be so patent and gross as to amount to an evasion of positive xxx
duty or to a virtual refusal to perform the duty enjoined or to act at all in As regards the capital costs for the present proposed project, applicant’s financial
contemplation of law. It is not sufficient that a tribunal, in the exercise of its power, documents show the following figures:
abused its discretion, such abuse must be grave. (Emphasis supplied) Year 1 ₱1.796 Billion
Year 2 1.434 Billion
Assuming that PILTEL’s petition for certiorari was proper, PILTEL nevertheless Year 3 2.319 Billion
miserably failed to show that the NTC gravely abused its discretion amounting to TOTAL ₱5.549 Billion
lack or excess of jurisdiction in issuing the NTC Order. The NTC is the regulatory Applicant’s projected revenues and expenses (in thousand pesos) are as follows:
agency of the national government with jurisdiction over all telecommunications
entities. 19 The law expressly vests in the NTC the power and discretion to grant a Year Net Income/Loss
provisional permit or authority.20 In this case, the NTC did not commit grave abuse 1 (549,178.00)
of discretion when it issued the questioned Order. The NTC Order explicitly 2 (489,243.00)
provides for the basis of the issuance of the PA, as follows: 3 (425,208.00)
4 6,796.00
The technical feasibility study submitted and offered in evidence by the applicant 5 276,434.00
contains technical designs which consist of two main components, to wit: 6 456,457.00

29
7 649,782.00
8 910,524.00
9 1,226,510.00
10 1,563,005.00
Applicant submitted its amended Articles of Incorporation approved by the
Securities and Exchange Commission on July 31, 1996 as shown by the attached
Certificate of Increase of Capital Stock wherein applicants Authorized Capital
Stock was increased from ₱1,500,000, xxx (illegible) Million shares with par value
of ₱100 each.
Of the increase of ₱3,500,000,000.00 in the authorized capital stock, the amount
of ₱2,185,000,000.00 has been subscribed and fully paid by Bayan
Telecommunications Holdings Corporation.
Per 1996 Annual Report submitted by the applicant, the following figures reflected
their financial position:
Total assets = ₱11,369,996,565
Total liabilities =6,779,971,249
Total stockholder’s equity = 4,590,025,316
with a debt-to-equity ratio of 60% to 40%.
Applicant has an outstanding balance for permit fee amounting to ₱88,988,089.00
for the following xxx (illegible) previously authorized, to wit:
xxx
The Commission has noted that the present application received favorable
endorsements/resolutions from twenty-three (23) Local Government Units (LGU)
and non-Government Organizations (NGOs) in the Visayas and Mindanao Regions
manifesting support for the applicant’s proposed projects.
In determining the service areas to be assigned to herein applicant with a view to
rationalizing the distribution thereof to qualified applicants, the Commission took
into consideration the other pending applications for LEC services, the existing
number of authorized LEC applicants, the need to provide LEC service to all areas
of the country the soonest time possible, as well as the fact that earlier on, this
Commission had occasion to commend in another case herein applicant ICC for
being the first to have completed, nay exceeded, its compliance with its
commitments under Executive Order 109 and NTC Memorandum Circular No. 11-
9-93.
WHEREFORE, it appearing that a prima facie evidence exists that applicant is
financially and technically capable of undertaking the proposed project, and in
order to fast-track the development of telecommunication services through the
provisioning of telephone services to all areas of the country, and to foster as well
healthy competition among authorized service providers, the Commission hereby
grants applicant International Communications Corporation a Provisional Authority
(P.A.), predicated upon its legislative franchise, R.A. No. 3259, as amended by
R.A. No. 4905, and R.A. No. 7633, to install, operate and maintain local telephone
exchanges in the following provinces, xxx21 (Emphasis supplied)
We will not disturb the factual findings of the NTC on the technical and financial
capability of the ICC to undertake the proposed project. We generally accord great
weight and even finality to factual findings of administrative bodies such as the
NTC, if substantial evidence supports the findings as in this case.22 The exception
to this rule is when the administrative agency arbitrarily disregarded evidence
before it or misapprehended evidence to such an extent as to compel a contrary
conclusion had it properly appreciated the evidence.23 PILTEL gravely failed to
show that this exception applies to the instant case. Moreover, the exercise of
administrative discretion, such as the issuance of a PA, is a policy decision and a
matter that the NTC can best discharge, not the courts.24
PILTEL contends that the NTC violated Section 23 of NTC Memorandum Circular
No. 11-9-93, otherwise known as the "Implementing Guidelines on the Provisions
of EO 109," which states:
Section 23. No other company or entity shall be authorized to provide local
exchange service in areas where the LECs comply with the relevant provisions of
NTC MC No. 10-17-90 and NTC MC No. 10-16-90 and that the local exchange
service area is not underserved. (Emphasis supplied)
Section 23 of EO 109 does not categorically state that the issuance of a PA is
exclusive to any telecommunications company. Neither Congress nor the NTC can
grant an exclusive "franchise, certificate, of any other form of authorization" to
operate a public utility. In Republic v. Express Telecommunications Co.,25 the
Court held that "the Constitution is quite emphatic that the operation of a public
utility shall not be exclusive."26 Section 11, Article XII of the Constitution provides:
Sec. 11. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted 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
30
under the condition that it shall be subject to amendment, alteration, or repeal by
the Congress when the common good so requires. xxx27 (Emphasis supplied)
Thus, in Radio Communications of the Philippines, Inc. v. National
Telecommunications Commission,28 the Court ruled that the "Constitution
mandates that a franchise cannot be exclusive in nature."
Even PILTEL’s franchise, Republic Act No. 6030 ("RA 6030"), expressly declares
that PILTEL’s right to provide telecommunications services is not exclusive.
Section 13 of RA 6030 states:
SECTION 13. The rights herein granted shall not be exclusive, and the right and
power to grant to any corporation, association or person other than the grantee
franchise for the telephone or electrical transmission of messages and signals
shall not be impaired or affected by the granting of this franchise: xxx." (Emphasis
supplied)
Moreover, Section 1 of RA 6030 expressly states that the grant of a franchise to
PITEL is "[s]ubject to the conditions established xxx in the Constitution."
Consequently, PILTEL does not enjoy any exclusive right to operate
telecommunications services in the areas covered by its PA.
Among the declared national policies in Republic Act No. 7925, otherwise known
as the "Public Telecommunications Policy Act of the Philippines," is the healthy
competition among telecommunications carriers, to wit:30
A healthy competitive environment shall be fostered, one in which
telecommunications carriers are free to make business decisions and to interact
with one another in providing telecommunications services, with the end in view of
encouraging their financial viability while maintaining affordable rates.
Obviously, "the need for a healthy competitive environment in telecommunications
is sufficient impetus for the NTC to consider all those applicants, who are willing to
offer competition, develop the market and provide the environment necessary for
greater public service."31
Furthermore, "free competition in the industry may also provide the answer to a
much-desired improvement in the quality and delivery of this type of public utility,
to improved technology, fast and handy mobil[e] service, and reduced user
dissatisfaction."32
PILTEL’s contention that the NTC Order amounts to a confiscation of property
without due process of law is untenable. "Confiscation" means the seizure of
private property by the government without compensation to the owner.33 A
franchise to operate a public utility is not an exclusive private property of the
franchisee. Under the Constitution, no franchisee can demand or acquire
exclusivity in the operation of a public utility. Thus, a franchisee of a public utility
cannot complain of seizure or taking of property because of the issuance of
another franchise to a competitor. Every franchise, certificate or authority to
operate a public utility is, by constitutional mandate, non-exclusive. PILTEL cannot
complain of a taking of an exclusive right that it does not own and which no
franchisee can ever own.
Likewise, PILTEL’s argument that the NTC Order violates PILTEL’s rights as a
prior operator has no merit. The Court resolved a similar question in Republic v.
Republic Telephone Company, Inc.34 In striking down Retelco’s claim that it had a
right to be protected in its investment as a franchise-holder and prior operator of a
telephone service in Malolos, Bulacan, the Court held:
RETELCO’s foremost argument is that "such operations and maintenance of the
telephone system and solicitation of subscribers by [petitioners] constituted an
unfair and ruinous competition to the detriment of [RETELCO which] is a grantee
of both municipal and legislative franchises for the purpose." In effect, RETELCO
pleads for protection from the courts on the assumption that its franchises vested
in it an exclusive right as prior operator. There is no clear showing by RETELCO,
however, that its franchises are of an exclusive character. xxx At any rate, it may
very well be pointed out as well that neither did the franchise of PLDT at the time
of the controversy confer exclusive rights upon PLDT in the operation of a
telephone system. In fact, we have made it a matter of judicial notice that all
legislative franchises for the operation of a telephone system contain the following
provision:
"It is expressly provided that in the event the Philippine Government should desire
to maintain and operate for itself the system and enterprise herein authorized, the
grantee shall surrender his franchise and will turn over to the Government said
system and all serviceable equipment therein, at cost, less reasonable
depreciation."
In sum, the Court of Appeals correctly dismissed PILTEL’s petition for certiorari not
only because PILTEL failed to exhaust the available administrative remedies but
also because NTC acted within its jurisdiction in issuing the NTC Order.
WHEREFORE, we DENY the petition. The Decision of the Court of Appeals dated
15 April 1999 in CA-G.R. SP No. 47752 and CA-G.R. SP No. 47972 is AFFIRMED.
Costs against petitioner.
SO ORDERED.
31
G.R. No. 213088
LAND TRANSPORTATION FRANCHISING AND REGULATORY BOARD
(LTFRB), Petitioner vs. G.V. FLORIDA TRANSPORT, INC., Respondent
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking the reversal and
setting aside of the Decision 1 of the Court of Appeals (CA), dated June 26, 2014
in CA-G.R. SP No. 134772.
The pertinent factual and procedural antecedents of the case are as follows:
Around 7:20 in the morning of February 7, 2014, a vehicular accident occurred at
Sitio Paggang, Barangay Talubin, Bontoc, Mountain Province involving a public
utility bus coming from Sampaloc, Manila, bound for Poblacion Bontoc and bearing
a "G.V. Florida" body mark with License Plate No. TXT-872. The mishap claimed
the lives of fifteen (15) passengers and injured thirty-two (32) others.
An initial investigation report, which came from the Department of Transportation
and Communications of the Cordillera Administrative Region (DOTC-CAR),
showed that based on the records of the Land Transportation Office (LTO) and
herein petitioner, License Plate No. TXT-872 actually belongs to a different bus
owned by and registered under the name of a certain Norberto Cue, Sr. (Cue)
under Certificate of Public Convenience (CPC) Case No. 2007-0407 and bears
engine and chassis numbers LX004564 and KN2EAM12PK004452, respectively;
and that the bus involved in the accident is not duly authorized to operate as a
public transportation.
Thus, on the same day of the accident, herein petitioner, pursuant to its regulatory
powers, immediately issued an Order2 preventively suspending, for a period not
exceeding thirty (30) days, the operations of ten (10) buses of Cue under its CPC
Case No. 2007-0407, as well as respondent's entire fleet of buses, consisting of
two hundred and twenty-eight (228) units, under its twenty-eight (28) CPCs. In the
same Order, respondent and Cue were likewise directed to comply with the
following:
1. Inspection and determination of road worthiness of the authorized PUB unit of
respondents-operators bringing the said buses to the Motor Vehicle Inspection
Service (MVIS) of the Land Transportation Office, together with the authorized
representatives of the Board;
2. Undergo Road Safety Seminar of respondents-operators' drivers and
conductors to be conducted or scheduled by the Board and/or its authorized
seminar provider;
3. Compulsory Drug Testing of the respondents-operators' drivers and conductors
to be conducted by authorized/accredited agency of the Department of Health and
the Land Transportation Office;
4. Submit the Certificates of Registration and latest LTO Official Receipts of the
units, including the names of the respective drivers and conductors; and
5. Submit the video clippings of roadworthiness inspection, Road Safety Seminar
and Drug Testing. 3
Furthermore, respondent and Cue were ordered to show cause why their
respective CPCs should not be suspended, canceled or revoked due to the said
accident.
Thereafter, in its Incident Report dated February 12, 2014, the DOTC-CAR stated,
among others: that the License Plate Number attached to the ill-fated bus was
indeed TXT-872, which belongs to a different unit owned by Cue; that the wrecked
bus had actual engine and chassis numbers DE12T-601104BD and
KTP1011611C,4 respectively; that, per registration records, the subject bus was
registered as "private" on April 4, 2013 with issued License Plate No. UDO 762;
and that the registered owner is Dagupan Bus Co., Inc. (Dagupan Bus) while the
previous owner is herein respondent bus company.
As a result, Dagupan Bus was also ordered to submit an Answer on the DOTC-
CAR Incident Report, particularly, to explain why the bus involved in the above
accident, which is registered in its name, was sporting the name "G.V. Florida" at
the time of the accident.
Subsequently, Dagupan Bus filed its Answer claiming that: it is not the owner of
the bus which was involved in the accident; the owner is G.V. Florida; Dagupan
Bus entered into a Memorandum of Agreement with G.V. Florida, which, among
others, facilitated the exchange of its CPC covering the Cagayan route for the CPC
of Florida covering the Bataan route; and the subsequent registration of the subject
bus in the name of Dagupan Bus is a mere preparatory act on the part of G.V.
Florida to substitute the old authorized units of Dagupan Bus plying the Cagayan
route which are being operated under the abovementioned CPC which has been
exchanged with G. V. Florida.
32
On the other hand, Cue filed his Position Paper contending that: License Plate No.
TXT-872 was issued by the LTO to one among ten public utility buses under CPC
No. 2007-040i issued to him as operator of the Mountain Province Cable Tours;
the application for the extension of the validity of the said CPC is pending with
petitioner; the subject CPC, together with all authorized units, had been sold to
G.V. Florida in September 2013; and thereafter, Cue completely ceded the
operation and maintenance of the subject buses in favor of G.R. Florida.
In its Position Paper, herein respondent alleged that: it, indeed, bought Cue's CPC
and the ten public utility buses operating under the said CPC, including the one
which bears License Plate No. TXT-872; since Cue's buses were already old and
dilapidated, and not wanting to stop its operations to the detriment of the riding
public, it replaced these buses with new units using the License Plates attached to
the old buses, pending approval by petitioner of the sale and transfer of Cue's
CPC in its favor; and it exercised utmost good faith in deciding to dispatch the ill-
fated bus notwithstanding the absence of prior adequate compliance with the
requirements that will constitute its operation legal.
On March 14, 2014, herein petitioner rendered its Decision canceling Cue's CPC
No. 2007-0407 and suspending the operation of respondent's 186 buses under 28
of its CPCs for a period of six (6) months. Pertinent portions of the dispositive
portion of the said Decision read as follows:
WHEREFORE, premises considered and by virtue of Commonwealth Act 146
(otherwise known as "The Public Service Law"), as amended, and Executive Order
No. 202, the Board hereby ORDERS that:
a. The Certificate of Public Convenience of respondent operator NORBERTO M.
CUE, SR. under Case No. 2007- 0407, now under the beneficial ownership of
respondent operator G.V. FLORIDA TRANSPORT, INC., be CANCELLED and
REVERTED to the State. Therefore, upon receipt of this Decision, respondent-
operator G.V. FLORIDA TRANSPORT, INC. is hereby directed to CEASE and
DESIST from operating the Certificate of Public Convenience under Case No.
2007-0407 involving ten (10) authorized units, to wit:
xxxx
b. Upon finality of this Decision, the above-mentioned for hire plates of respondent-
operator NORBERTO M. CUE, SR. are hereby ordered DESTRUCTED (sic) and
DESTROYED prior to their turn over to the Land Transportation Office (LTO).
xxxx
c. All existing Certificates of Public Convenience of respondent-operator G.V.
FLORIDA TRANSPORT, INC. under case numbers listed under case numbers
listed below are hereby SUSPENDED for a period of SIX (6) MONTHS
commencing from March 11, 2014, which is the lapse of the 30-day preventive
suspension order issued by this Board, to wit:
xxxx
[d.] During the period of suspension of its CPCs and as a condition for the lifting
thereof, respondent-operator G.V. FLORIDA TRANSPORT, INC. must comply with
the following:
1. All its authorized drivers must secure the National Competency III issued by the
Technical Education and Skills Development Authority (TESDA)
2. All its conductors must secure Conductor's License from the Land
Transportation Office (LTO);
3. Submit all its authorized units that have not undergone inspection and
determination of roadworthiness to the Motor Vehicle Inspection Service of the
LTO, together with the authorized representatives of the Board; and
4. Compulsory Drug testing of all its authorized drivers and conductors to be
conducted by the authorized accredited agency of the Department of Health and
the Land Transportation Office at least thirty (30) days before the expiration of its
suspension.
[e.] The Show Cause Order issued against respondent-operator DAGUPAN BUS
CO., INC. is hereby SET ASIDE.
The Information Systems Management Division (ISMD) is also directed to make
proper recording of this Decision for future reference against subject vehicles and
respondents-operators. During the period of suspension of its CPCs, respondent-
operator G.V. FLORIDA TRANSPORT, INC. is allowed to confirm its authorized
units subject to submission of all requirements for confirmation.
The Law Enforcement Unit of this Board, the Land Transportation Office (LTO), the
Metro Manila Development Authority (MMDA), the Philippine National Police-
Highway Patrol Group (PNP-HPG), and other authorized traffic enforcement
agencies are hereby ordered to APPREHEND and IMPOUND the said vehicles, if
found operating.
SO ORDERED.6
33
Respondent then filed with the CA a petition for certiorari under Rule 65 of the
Rules of Court, with prayer for the issuance of a preliminary mandatory injunction,
assailing petitioner's above Decision.
On June 26, 2014, the CA promulgated its questioned Decision, disposing as
follows:
WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision dated
March 14, 2014 of the Land Transportation Franchising and Regulatory Board is
MODIFIED as follows:
1. The Order canceling and reverting to the State of the Certificate of Public
Convenience of operator Cue under Case No. 2007-0407, under the beneficial
ownership of petitioner G.V. Florida Transport, Inc. is AFFIRMED;
2. The penalty of suspension for a period of six (6) months against all existing 28
Certificates of Public Convenience of petitioner G.V. Florida, Transport, Inc., is
REVERSED and SET ASIDE;
3. The condition set forth in the Decision for the lifting of the penalty of suspension
is DELETED; and
4. The order to apprehend and impound petitioner G.V. Florida Transport, Inc.'s
186 authorized bus units under the 28 CPCs if found operating is RECALLED
Accordingly, petitioner G.V. Florida Transport, Inc. prayer for mandatory injunctive
relief is hereby GRANTED. The Land Transportation and Franchising Regulatory
Board is hereby ordered to immediately LIFT the order of suspension and
RETURN or CAUSE the RETURN of the confiscated license plates of petitioner
G.V. Florida Transport, Inc.'s 186 authorized bus units under its 28 Certificates of
Public Convenience without need of further order from this Court. Said Office is
further DIRECTED to submit its Compliance within five (5) days from receipt
thereof.
SO ORDERED.7
Hence, the present petition grounded on a lone issue, to wit:
DOES THE LTFRB HAVE THE POWER TO SUSPEND THE FLEET OF A
PUBLIC UTILITY THAT VIOLATES THE LAW, TO THE DAMAGE OF THE
PUBLIC?8
The main issue brought before this Court is whether or not petitioner is justified in
suspending respondent's 28 CPCs for a period of six (6) months. In other words, is
the suspension within the powers of the LTFRB to impose and is it reasonable?
Petitioner contends that it is vested by law with jurisdiction to regulate the
operation of public utilities; that under Section 5(b) of Executive Order No. 202 (E.
0. 202),9 it is authorized "[t]o issue, amend, revise, suspend or cancel Certificates
of Public Convenience or permits authorizing the operation of public land
transportation services provided by motorized vehicles, and to prescribe the
appropriate terms and conditions therefor;" and that petitioner's authority to impose
the penalty of suspension of CPCs of bus companies found to have committed
violations of the law is broad and is consistent with its mandate and regulatory
capability.
On the other hand, respondent, in its Comment to the present Petition, contends
that the suspension of its 28 CPCs is tantamount to an outright confiscation of
private property without due process of law; and that petitioner cannot simply
ignore respondent's property rights on the pretext of promoting public safety.
Respondent insists that the penalty imposed by petitioner is not commensurate to
the infraction it had committed.
The Court rules in favor of petitioner.
Section 16(n) of Commonwealth Act. No. 146, otherwise known as the Public
Service Act, provides:
Section 16. Proceedings of the Commission, upon notice and hearing. - The
Commission shall have power, upon proper notice and hearing in accordance with
the rules and provisions of this Act, subject to the limitations and exceptions
mentioned and saving provisions to the contrary:
xxxx
(n) To suspend or revoke any certificate issued under the provisions of this Act
whenever the holder thereof has violated or willfully and contumaciously refused to
comply with any order rule or regulation of the Commission or any provision of this
Act: Provided, That the Commission, for good cause, may prior to the hearing
suspend for a period not to exceed thirty days any certificate or the exercise of any
right or authority issued or granted under this Act by order of the Commission,
whenever such step shall in the judgment of the Commission be necessary to
avoid serious and irreparable damage or inconvenience to the public or to private
interests.
34
xxxx
Also, Section 5(b) of E.O. 202 states:
Sec. 5. Powers and Functions of the Land Transportation Franchising and
Regulatory Board. The Board shall have the following powers and functions:
Also, Section 5(b) of E.O. 202 states:
Sec. 5. Powers and Functions of the Land Transportation Franchising and
Regulatory Board. The Board shall have the following powers and functions:
xxxx
b. To issue, amend, revise, suspend or cancel Certificates of Public Convenience
or permits authorizing the operation of public land transportation services provided
by motorized vehicles, and to prescribe the appropriate terms and conditions
therefor;
xxxx
In the present case, respondent is guilty of several violations of the law, to wit: lack
of petitioner's approval of the sale and transfer of the CPC which respondent
bought from Cue; operating the ill-fated bus under its name when the same is
registered under the name of Dagupan Bus Co., Inc.; attaching a vehicle license
plate to the ill-fated bus when such plate belongs to a different bus owned by Cue;
and operating the subject bus under the authority of a different CPC. What makes
matters worse is that respondent knowingly and blatantly committed these
violations. How then can respondent claim good faith under these circumstances?
Respondent, nonetheless, insists that it is unreasonable for petitioner to suspend
the operation of 186 buses covered by its 28 CPCs, considering that only one bus
unit, covered by a single CPC, was involved in the subject accident.
The Court is not persuaded. It bears to note that the suspension of respondent's
28 CPCs is not only because of the findings of petitioner that the ill-fated bus was
not roadworthy. 10 Rather, and more importantly, the suspension of the 28 CPCs
was also brought about by respondent's wanton disregard and obstinate defiance
of the regulations issued by petitioner, which is tantamount to a willful and
contumacious refusal to comply with the requirements of law or of the orders, rules
or regulations issued by petitioner and which is punishable, under the law, by
suspension or revocation of any of its CPCs.
The Court agrees with petitioner that its power to suspend the CPCs issued to
public utility vehicles depends on its assessment of the gravity of the violation, the
potential and actual harm to the public, and the policy impact of its own actions. In
this regard, the Court gives due deference to petitioner's exercise of its sound
administrative discretion in applying its special knowledge, experience and
expertise to resolve respondent's case.
Indeed, the law gives to the LTFRB (previously known, among others, as Public
Service Commission or Board of Transportation) ample power and discretion to
decree or refuse the cancellation of a certificate of public convenience issued to an
operator as long as there is evidence to support its action. 11 As held by this Court
in a long line of cases, 12 it was even intimated that, in matters of this nature so
long as the action is justified, this Court will not substitute its discretion for that of
the regulatory agency which, in this case, is the LTFRB.
Moreover, the Court finds the ruling in Rizal Light & Ice Co., Inc. v. The
Municipality of Morang, Rizal and The Public Service Commission, 13 instructive,
to wit:
xxxx
It should be observed that Section 16(n) of Commonwealth Act No. 146, as
amended, confers upon the Commission ample power and discretion to order the
cancellation and revocation of any certificate of public convenience issued to an
operator who has violated, or has willfully and contumaciously refused to comply
with, any order, rule or regulation of the Commission or any provision of law. What
matters is that there is evidence to support the action of the Commission. In the
instant case, as shown by the evidence, the contumacious refusal of the petitioner
since 1954 to comply with the directives, rules and regulations of the Commission,
its violation of the conditions of its certificate and its incapability to comply with its
commitment as shown by its inadequate service, were the circumstances that
warranted the action of the Commission in not merely imposing a fine but in
revoking altogether petitioner's certificate. To allow petitioner to continue its
operation would be to sacrifice public interest and convenience in favor of private
interest.
A grant of a certificate of public convenience confers no property rights but is a
mere license or privilege, and such privilege is forfeited when the grantee fails to
comply with his commitments behind which lies the paramount interest of the
public, for public necessity cannot be made to wait, nor sacrificed for private
convenience. (Collector of Internal Revenue v. Estate of F. P. Buan, et al., L-11438
and Santiago Sambrano, et al. v. PSC, et al., L-11439 & L- 11542-46, July 31,
1958)
35
(T)he Public Service Commission, . . . has the power to specify and define the
terms and conditions upon which the public utility shall be operated, and to make
reasonable rules and regulations for its operation and the compensation which the
utility shall receive for its services to the public, and for any failure to comply with
such rules and regulations or the violation of any of the terms and conditions for
which the license was granted, the Commission has ample power to enforce the
provisions of the license or even to revoke it, for any failure or neglect to comply
with any of its terms and provisions. x xx x x x14
Respondent likewise contends that, in suspending its 28 CPCs, the LTFRB acted
in reckless disregard of the property rights of respondent as a franchise holder,
considering that it has put in substantial investments amounting to hundreds of
millions in running its operations. In this regard, the Court's ruling in the case of
Luque v. Villegas 15 is apropos:
xxxx
Contending that they possess valid and subsisting certificates of public
convenience, the petitioning public services aver that they acquired a vested right
to operate their public utility vehicles to and from Manila as appearing in their said
respective certificates of public convenience.
Petitioner's argument pales on the face of the fact that the very nature of a
certificate of public convenience is at cross purposes with the concept of vested
rights. To this day, the accepted view, at least insofar as the State is concerned, is
that "a certificate of public convenience constitutes neither a franchise nor a
contract, confers no property right, and is a mere license or privilege." The holder
of such certificate does not acquire a property right in the route covered thereby.
Nor does it confer upon the holder any proprietary right or interest of franchise in
the public highways. Revocation of this certificate deprives him of no vested right.
Little reflection is necessary to show that the certificate of public convenience is
granted with so many strings attached. New and additional burdens, alteration of
the certificate, and even revocation or annulment thereof is reserved to the State.
We need but add that the Public Service Commission, a government agency
vested by law with "jurisdiction, supervision, and control over all public services
and their franchises, equipment, and other properties" is empowered, upon proper
notice and hearing, amongst others: (1) "[t]o amend, modify or revoke at any time
a certificate issued under the provisions of this Act [Commonwealth Act 146, as
amended], whenever the facts and circumstances on the strength of which said
certificate was issued have been misrepresented or materially changed"; and (2)
"[t]o suspend or revoke any certificate issued under the provisions of this Act
whenever the holder thereof has violated or wilfully and contumaciously refused to
comply with any order, rule or regulation of the Commission or any provision of this
Act: Provided, That the Commission, for good cause, may prior to the hearing
suspend for a period not to exceed thirty days any certificate or the exercise of any
right or authority issued or granted under this Act by order of the Commission,
whenever such step shall in the judgment of the Commission be necessary to
avoid serious and irreparable damage or inconvenience to the public or to private
interests."
Jurisprudence echoes the rule that the Commission is authorized to make
reasonable rules and regulations for the operation of public services and to enforce
them. In reality, all certificates of public convenience issued are subject to the
condition that all public services "shall observe and comply [with] ... all the rules
and regulations of the Commission relative to" the service. To further emphasize
the control imposed on public services, before any public service can "adopt,
maintain, or apply practices or measures, rules, or regulations to which the public
shall be subject in its relation with the public service," the Commission's approval
must first be had.
And more. Public services must also reckon with provincial resolutions and
municipal ordinances relating to the operation of public utilities within the province
or municipality concerned. The Commission can require compliance with these
provincial resolutions or municipal ordinances.
Illustrative of the lack of "absolute, complete, and unconditional" right on the part of
public services to operate because of the delimitations and restrictions which
circumscribe the privilege afforded a certificate of public convenience is the
following from the early (March 31, 1915) decision of this Court in Fisher vs.
Yangco Steamship Company, 31 Phil. 1, 18-19:
Common carriers exercise a sort of public office, and have duties to perform in
which the public is interested. Their business is, therefore, affected with a public
interest, and is subject of public regulation. (New Jersey Steam Nav. Co. vs.
Merchants Banks, 6 How. 344, 382; Munn vs. Illinois, 94 U.S. 113, 130.) Indeed,
this right of regulation is so far beyond question that it is well settled that the power
of the state to exercise legislative control over railroad companies and other
carriers 'in all respects necessary to protect the public against danger, injustice
and oppression' may be exercised through boards of commissioners. (New York,
etc. R. Co. vs. Bristol, 151 U.S. 556, 571; Connecticut, etc. R. Co. vs. Woodruff,
153 U.S. 689.).
xxxx
36
.... The right to enter the public employment as a common carrier and to offer one's
services to the public for hire does not carry with it the right to conduct that
business as one pleases, without regard to the interests of the public and free from
such reasonable and just regulations as may be prescribed for the protection of the
public from the reckless or careless indifference of the carrier as to the public
welfare and for the prevention of unjust and unreasonable discrimination of any
kind whatsoever in the performance of the carrier's duties as a servant of the
public.
Business of certain kinds, including the business of a common carrier, holds such
a peculiar relation to the public interest that there is superinduced upon it the right
of public regulation. (Budd vs. New York, 143 U.S. 517, 533.) When private
property is "affected with a public interest it ceases to be Juris privati only."
Property becomes clothed with a public interest when used in a manner to make it
of public consequence and affect the community at large. "When, therefore, one
devotes his property to a use in which the public has an interest, he, in effect,
grants to the public an interest in that use, and must submit to be controlled by the
public for the common good, to the extent of the interest he has thus created. He
may withdraw his grant by discontinuing the use, but so long as he maintains the
use he must submit to control." (Munn vs. Illinois, 94 U.S. 113; Georgia R. & Bkg.
Co. vs. Smith, 128 U.S. 174; Budd vs. New York, 143 U.S. 517; Louisville, etc. Ry.
Co. vs. Kentucky, 161 U.S. 677, 695.).
The foregoing, without more, rejects the vested rights theory espoused by
petitioning bus operators.
x x x16
Neither is the Court convinced by respondent's contention that the authority given
to petitioner, under the abovequoted Section 16(n) of the Public Service Act does
not mean that petitioner is given the power to suspend the entire operations of a
transport company. Respondent must be reminded that, as quoted above, the law
clearly states that petitioner has the power "[t]o suspend or revoke any certificate
issued under the provisions of [the Public Service Act] whenever the holder thereof
has violated or willfully and contumaciously refused to comply with any order rule
or regulation of the Commission or any provision of this Act x x x" This Court has
held that when the context so indicates, the word "any" may be construed to mean,
and indeed it has been frequently used in its enlarged and Plural sense as
meaning "all " "all or every" "each " "each one of all " ' ' ' ' ' "every" without
limitation; indefinite number or quantity, an indeterminate unit or number of units
out of many or all, one or more as the case may be, several, some. 17 Thus, in the
same vein, the Merriam-Webster Dictionary defines the word "any" as "one, some,
or all indiscriminately of whatever quantity"; "used to indicate a maximum or
whole"; "unmeasured or unlimited in amount, number, or extent." 18 Hence, under
the above definitions, petitioner undoubtedly wields authority, under the law, to
suspend not only one but all of respondent's CPCs if warranted, which is proven to
be the case here.
As to whether or not the penalty imposed by petitioner is reasonable, respondent
appears to trivialize the effects of its deliberate and shameless violations of the
law. Contrary to its contention, this is not simply a case of one erring bus unit.
Instead, the series or combination of violations it has committed with respect to the
ill-fated bus is indicative of its design and intent to blatantly and maliciously defy
the law and disregard, with impunity, the regulations imposed by petitioner upon all
holders of CPCs. Thus, the Court finds nothing irregular in petitioner's imposition of
the penalty of sixmonths suspension of the operations of respondent's 28 CPCs. In
other words, petitioner did not commit grave abuse of discretion in imposing the
questioned penalty.
Lastly, the suspension of respondent's CPCs finds relevance in light of the series
of accidents met by different bus units owned by different operators in recent
events. This serves as a reminder to all operators of public utility vehicles that their
franchises and CPCs are mere privileges granted by the government. As such,
they are sternly warned that they should always keep in mind that, as common
carriers, they bear the responsibility of exercising extraordinary diligence in the
transportation of their passengers. Moreover, they should conscientiously comply
with the requirements of the law in the conduct of their operations, failing which
they shall suffer the consequences of their own actions or inaction.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of
Appeals, dated June 26, 2014 in CA-GR. SP No. 134772, is REVERSED and SET
ASIDE. The March 14, 2014 Decision of the Land Transportation Franchising and
Regulatory Board is REINSTATED.
SO ORDERED.
37
G.R. No. 170656 August 15, 2007
THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI
FERNANDO as Chairman of the Metropolitan Manila Development Authority,
petitioners, vs. VIRON TRANSPORTATION CO., INC., respondent.
DECISION
CARPIO MORALES, J.:
The following conditions in 1969, as observed by this Court:
Vehicles have increased in number. Traffic congestion has moved from bad to
worse, from tolerable to critical. The number of people who use the thoroughfares
has multiplied x x x,1
have remained unchecked and have reverberated to this day. Traffic jams continue
to clog the streets of Metro Manila, bringing vehicles to a standstill at main road
arteries during rush hour traffic and sapping people’s energies and patience in the
process.
The present petition for review on certiorari, rooted in the traffic congestion
problem, questions the authority of the Metropolitan Manila Development Authority
(MMDA) to order the closure of provincial bus terminals along Epifanio de los
Santos Avenue (EDSA) and major thoroughfares of Metro Manila.
Specifically challenged are two Orders issued by Judge Silvino T. Pampilo, Jr. of
the Regional Trial Court (RTC) of Manila, Branch 26 in Civil Case Nos. 03-105850
and 03-106224.
The first assailed Order of September 8, 2005,2 which resolved a motion for
reconsideration filed by herein respondents, declared Executive Order (E.O.) No.
179, hereafter referred to as the E.O., "unconstitutional as it constitutes an
unreasonable exercise of police power." The second assailed Order of November
23, 20053 denied petitioners’ motion for reconsideration.
The following facts are not disputed:
President Gloria Macapagal Arroyo issued the E.O. on February 10, 2003,
"Providing for the Establishment of Greater Manila Mass Transport System," the
pertinent portions of which read:
WHEREAS, Metro Manila continues to be the center of employment opportunities,
trade and commerce of the Greater Metro Manila area;
WHEREAS, the traffic situation in Metro Manila has affected the adjacent
provinces of Bulacan, Cavite, Laguna, and Rizal, owing to the continued
movement of residents and industries to more affordable and economically viable
locations in these provinces;
WHEREAS, the Metropolitan Manila Development Authority (MMDA) is tasked to
undertake measures to ease traffic congestion in Metro Manila and ensure the
convenient and efficient travel of commuters within its jurisdiction;
WHEREAS, a primary cause of traffic congestion in Metro Manila has been the
numerous buses plying the streets that impedes [sic] the flow of vehicles and
commuters due to the inefficient connectivity of the different transport modes;
WHEREAS, the MMDA has recommended a plan to decongest traffic by
eliminating the bus terminals now located along major Metro Manila thoroughfares
and providing more convenient access to the mass transport system to the
commuting public through the provision of mass transport terminal facilities that
would integrate the existing transport modes, namely the buses, the rail-based
systems of the LRT, MRT and PNR and to facilitate and ensure efficient travel
through the improved connectivity of the different transport modes;
WHEREAS, the national government must provide the necessary funding
requirements to immediately implement and render operational these projects; and
extent to MMDA such other assistance as may be warranted to ensure their
expeditious prosecution.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the
Philippines, by virtue of the powers vested in me by law, do hereby order:
Section 1. THE PROJECT. – The project shall be identified as GREATER MANILA
TRANSPORT SYSTEM Project.
Section 2. PROJECT OBJECTIVES. – In accordance with the plan proposed by
MMDA, the project aims to develop four (4) interim intermodal mass transport
terminals to integrate the different transport modes, as well as those that shall
hereafter be developed, to serve the commuting public in the northwest, north,
east, south, and southwest of Metro Manila. Initially, the project shall concentrate
on immediately establishing the mass transport terminals for the north and south
Metro Manila commuters as hereinafter described.
38
Section 3. PROJECT IMPLEMENTING AGENCY. – The Metropolitan Manila
Development Authority (MMDA), is hereby designated as the implementing
Agency for the project. For this purpose, MMDA is directed to undertake such
infrastructure development work as may be necessary and, thereafter, manage the
project until it may be turned-over to more appropriate agencies, if found suitable
and convenient. Specifically, MMDA shall have the following functions and
responsibilities:
a) Cause the preparation of the Master Plan for the projects, including the designs
and costing;
b) Coordinate the use of the land and/or properties needed for the project with the
respective agencies and/or entities owning them;
c) Supervise and manage the construction of the necessary structures and
facilities;
d) Execute such contracts or agreements as may be necessary, with the
appropriate government agencies, entities, and/or private persons, in accordance
with existing laws and pertinent regulations, to facilitate the implementation of the
project;
e) Accept, manage and disburse such funds as may be necessary for the
construction and/or implementation of the projects, in accordance with prevailing
accounting and audit polices and practice in government.
f) Enlist the assistance of any national government agency, office or department,
including local government units, government-owned or controlled corporations, as
may be necessary;
g) Assign or hire the necessary personnel for the above purposes; and
h) Perform such other related functions as may be necessary to enable it to
accomplish the objectives and purposes of this Executive Order.4 (Emphasis in the
original; underscoring supplied)
As the above-quoted portions of the E.O. noted, the primary cause of traffic
congestion in Metro Manila has been the numerous buses plying the streets and
the inefficient connectivity of the different transport modes;5 and the MMDA had
"recommended a plan to decongest traffic by eliminating the bus terminals now
located along major Metro Manila thoroughfares and providing more and
convenient access to the mass transport system to the commuting public through
the provision of mass transport terminal facilities"6 which plan is referred to under
the E.O. as the Greater Manila Mass Transport System Project (the Project).
The E.O. thus designated the MMDA as the implementing agency for the Project.
Pursuant to the E.O., the Metro Manila Council (MMC), the governing board and
policymaking body of the MMDA, issued Resolution No. 03-07 series of 20037
expressing full support of the Project. Recognizing the imperative to integrate the
different transport modes via the establishment of common bus parking terminal
areas, the MMC cited the need to remove the bus terminals located along major
thoroughfares of Metro Manila.8
On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic corporation
engaged in the business of public transportation with a provincial bus operation,9
filed a petition for declaratory relief10 before the RTC11 of Manila.
In its petition which was docketed as Civil Case No. 03-105850, Viron alleged that
the MMDA, through Chairman Fernando, was "poised to issue a Circular,
Memorandum or Order closing, or tantamount to closing, all provincial bus
terminals along EDSA and in the whole of the Metropolis under the pretext of traffic
regulation."12 This impending move, it stressed, would mean the closure of its bus
terminal in Sampaloc, Manila and two others in Quezon City.
Alleging that the MMDA’s authority does not include the power to direct provincial
bus operators to abandon their existing bus terminals to thus deprive them of the
use of their property, Viron asked the court to construe the scope, extent and
limitation of the power of the MMDA to regulate traffic under R.A. No. 7924, "An
Act Creating the Metropolitan Manila Development Authority, Defining its Powers
and Functions, Providing Funds Therefor and For Other Purposes."
Viron also asked for a ruling on whether the planned closure of provincial bus
terminals would contravene the Public Service Act and related laws which
mandate public utilities to provide and maintain their own terminals as a requisite
for the privilege of operating as common carriers.13
Mencorp Transportation System, Inc. (Mencorp), another provincial bus operator,
later filed a similar petition for declaratory relief14 against Executive Secretary
Alberto G. Romulo and MMDA Chairman Fernando.
Mencorp asked the court to declare the E.O. unconstitutional and illegal for
transgressing the possessory rights of owners and operators of public land
transportation units over their respective terminals.
Averring that MMDA Chairman Fernando had begun to implement a plan to close
and eliminate all provincial bus terminals along EDSA and in the whole of the
metropolis and to transfer their operations to common bus terminals,15 Mencorp
prayed for the issuance of a temporary restraining order (TRO) and/or writ of
preliminary injunction to restrain the impending closure of its bus terminals which it
was leasing at the corner of EDSA and New York Street in Cubao and at the
intersection of Blumentritt, Laon Laan and Halcon Streets in Quezon City. The
39
petition was docketed as Civil Case No. 03-106224 and was raffled to Branch 47
of the RTC of Manila.
Mencorp’s petition was consolidated on June 19, 2003 with Viron’s petition which
was raffled to Branch 26 of the RTC, Manila.
Mencorp’s prayer for a TRO and/or writ of injunction was denied as was its
application for the issuance of a preliminary injunction.16
In the Pre-Trial Order17 issued by the trial court, the issues were narrowed down
to whether 1) the MMDA’s power to regulate traffic in Metro Manila included the
power to direct provincial bus operators to abandon and close their duly
established and existing bus terminals in order to conduct business in a common
terminal; (2) the E.O. is consistent with the Public Service Act and the Constitution;
and (3) provincial bus operators would be deprived of their real properties without
due process of law should they be required to use the common bus terminals.
Upon the agreement of the parties, they filed their respective position papers in
lieu of hearings.
By Decision18 of January 24, 2005, the trial court sustained the constitutionality
and legality of the E.O. pursuant to R.A. No. 7924, which empowered the MMDA to
administer Metro Manila’s basic services including those of transport and traffic
management.
The trial court held that the E.O. was a valid exercise of the police power of the
State as it satisfied the two tests of lawful subject matter and lawful means, hence,
Viron’s and Mencorp’s property rights must yield to police power.
On the separate motions for reconsideration of Viron and Mencorp, the trial court,
by Order of September 8, 2005, reversed its Decision, this time holding that the
E.O. was "an unreasonable exercise of police power"; that the authority of the
MMDA under Section (5)(e) of R.A. No. 7924 does not include the power to order
the closure of Viron’s and Mencorp’s existing bus terminals; and that the E.O. is
inconsistent with the provisions of the Public Service Act.
Petitioners’ motion for reconsideration was denied by Resolution of November 23,
2005.
Hence, this petition, which faults the trial court for failing to rule that: (1) the
requisites of declaratory relief are not present, there being no justiciable
controversy in Civil Case Nos. 03-105850 and 03-106224; and (2) the President
has the authority to undertake or cause the implementation of the Project.19
Petitioners contend that there is no justiciable controversy in the cases for
declaratory relief as nothing in the body of the E.O. mentions or orders the closure
and elimination of bus terminals along the major thoroughfares of Metro Manila.
Viron and Mencorp, they argue, failed to produce any letter or communication from
the Executive Department apprising them of an immediate plan to close down their
bus terminals.
And petitioners maintain that the E.O. is only an administrative directive to
government agencies to coordinate with the MMDA and to make available for use
government property along EDSA and South Expressway corridors. They add that
the only relation created by the E.O. is that between the Chief Executive and the
implementing officials, but not between third persons.
The petition fails.
It is true, as respondents have pointed out, that the alleged deficiency of the
consolidated petitions to meet the requirement of justiciability was not among the
issues defined for resolution in the Pre-Trial Order of January 12, 2004. It is
equally true, however, that the question was repeatedly raised by petitioners in
their Answer to Viron’s petition,20 their Comment of April 29, 2003 opposing
Mencorp’s prayer for the issuance of a TRO,21 and their Position Paper of August
23, 2004.22
In bringing their petitions before the trial court, both respondents pleaded the
existence of the essential requisites for their respective petitions for declaratory
relief,23 and refuted petitioners’ contention that a justiciable controversy was
lacking.24 There can be no denying, therefore, that the issue was raised and
discussed by the parties before the trial court.
The following are the essential requisites for a declaratory relief petition: (a) there
must be a justiciable controversy; (b) the controversy must be between persons
whose interests are adverse; (c) the party seeking declaratory relief must have a
legal interest in the controversy; and (d) the issue invoked must be ripe for judicial
determination.25
The requirement of the presence of a justiciable controversy is satisfied when an
actual controversy or the ripening seeds thereof exist between the parties, all of
whom are sui juris and before the court, and the declaration sought will help in
ending the controversy.26 A question becomes justiciable when it is translated into
a claim of right which is actually contested.27
In the present cases, respondents’ resort to court was prompted by the issuance of
the E.O. The 4th Whereas clause of the E.O. sets out in clear strokes the MMDA’s
40
plan to "decongest traffic by eliminating the bus terminals now located along major
Metro Manila thoroughfares and providing more convenient access to the mass
transport system to the commuting public through the provision of mass transport
terminal facilities x x x." (Emphasis supplied)
Section 2 of the E.O. thereafter lays down the immediate establishment of
common bus terminals for north- and south-bound commuters. For this purpose,
Section 8 directs the Department of Budget and Management to allocate funds of
not more than one hundred million pesos (P100,000,000) to cover the cost of the
construction of the north and south terminals. And the E.O. was made effective
immediately.
The MMDA’s resolve to immediately implement the Project, its denials to the
contrary notwithstanding, is also evident from telltale circumstances, foremost of
which was the passage by the MMC of Resolution No. 03-07, Series of 2003
expressing its full support of the immediate implementation of the Project.
Notable from the 5th Whereas clause of the MMC Resolution is the plan to
"remove the bus terminals located along major thoroughfares of Metro Manila and
an urgent need to integrate the different transport modes." The 7th Whereas
clause proceeds to mention the establishment of the North and South terminals.
As alleged in Viron’s petition, a diagram of the GMA-MTS North Bus/Rail Terminal
had been drawn up, and construction of the terminal is already in progress. The
MMDA, in its Answer28 and Position Paper,29 in fact affirmed that the government
had begun to implement the Project.
It thus appears that the issue has already transcended the boundaries of what is
merely conjectural or anticipatory.lawphil
Under the circumstances, for respondents to wait for the actual issuance by the
MMDA of an order for the closure of respondents’ bus terminals would be
foolhardy for, by then, the proper action to bring would no longer be for declaratory
relief which, under Section 1, Rule 6330 of the Rules of Court, must be brought
before there is a breach or violation of rights.
As for petitioners’ contention that the E.O. is a mere administrative issuance which
creates no relation with third persons, it does not persuade. Suffice it to stress that
to ensure the success of the Project for which the concerned government agencies
are directed to coordinate their activities and resources, the existing bus terminals
owned, operated or leased by third persons like respondents would have to be
eliminated; and respondents would be forced to operate from the common bus
terminals.
It cannot be gainsaid that the E.O. would have an adverse effect on respondents.
The closure of their bus terminals would mean, among other things, the loss of
income from the operation and/or rentals of stalls thereat. Precisely, respondents
claim a deprivation of their constitutional right to property without due process of
law.
Respondents have thus amply demonstrated a "personal and substantial interest
in the case such that [they have] sustained, or will sustain, direct injury as a result
of [the E.O.’s] enforcement."31 Consequently, the established rule that the
constitutionality of a law or administrative issuance can be challenged by one who
will sustain a direct injury as a result of its enforcement has been satisfied by
respondents.
On to the merits of the case.
Respondents posit that the MMDA is devoid of authority to order the elimination of
their bus terminals under the E.O. which, they argue, is unconstitutional because it
violates both the Constitution and the Public Service Act; and that neither is the
MMDA clothed with such authority under R.A. No. 7924.
Petitioners submit, however, that the real issue concerns the President’s authority
to undertake or to cause the implementation of the Project. They assert that the
authority of the President is derived from E.O. No. 125, "Reorganizing the Ministry
of Transportation and Communications Defining its Powers and Functions and for
Other Purposes," her residual power and/or E.O. No. 292, otherwise known as the
Administrative Code of 1987. They add that the E.O. is also a valid exercise of the
police power.
E.O. No. 125,32 which former President Corazon Aquino issued in the exercise of
legislative powers, reorganized the then Ministry (now Department) of
Transportation and Communications. Sections 4, 5, 6 and 22 of E.O. 125, as
amended by E.O. 125-A,33 read:
SECTION 4. Mandate. — The Ministry shall be the primary policy, planning,
programming, coordinating, implementing, regulating and administrative entity of
the Executive Branch of the government in the promotion, development and
regulation of dependable and coordinated networks of transportation and
communication systems as well as in the fast, safe, efficient and reliable postal,
transportation and communications services.
To accomplish such mandate, the Ministry shall have the following objectives:
41
(a) Promote the development of dependable and coordinated networks of
transportation and communications systems;
(b) Guide government and private investment in the development of the country’s
intermodal transportation and communications systems in a most practical,
expeditious, and orderly fashion for maximum safety, service, and cost
effectiveness; (Emphasis and underscoring supplied)
xxxx
SECTION 5. Powers and Functions. — To accomplish its mandate, the Ministry
shall have the following powers and functions:
(a) Formulate and recommend national policies and guidelines for the preparation
and implementation of integrated and comprehensive transportation and
communications systems at the national, regional and local levels;
(b) Establish and administer comprehensive and integrated programs for
transportation and communications, and for this purpose, may call on any agency,
corporation, or organization, whether public or private, whose development
programs include transportation and communications as an integral part thereof, to
participate and assist in the preparation and implementation of such program;
(c) Assess, review and provide direction to transportation and communications
research and development programs of the government in coordination with other
institutions concerned;
(d) Administer all laws, rules and regulations in the field of transportation and
communications; (Emphasis and underscoring supplied)
xxxx
SECTION 6. Authority and Responsibility. — The authority and responsibility for
the exercise of the mandate of the Ministry and for the discharge of its powers and
functions shall be vested in the Minister of Transportation and Communications,
hereinafter referred to as the Minister, who shall have supervision and control over
the Ministry and shall be appointed by the President. (Emphasis and underscoring
supplied)
SECTION 22. Implementing Authority of Minister. — The Minister shall issue such
orders, rules, regulations and other issuances as may be necessary to ensure the
effective implementation of the provisions of this Executive Order. (Emphasis and
underscoring supplied)
It is readily apparent from the abovequoted provisions of E.O. No. 125, as
amended, that the President, then possessed of and exercising legislative powers,
mandated the DOTC to be the primary policy, planning, programming,
coordinating, implementing, regulating and administrative entity to promote,
develop and regulate networks of transportation and communications. The grant of
authority to the DOTC includes the power to establish and administer
comprehensive and integrated programs for transportation and communications.
As may be seen further, the Minister (now Secretary) of the DOTC is vested with
the authority and responsibility to exercise the mandate given to the department.
Accordingly, the DOTC Secretary is authorized to issue such orders, rules,
regulations and other issuances as may be necessary to ensure the effective
implementation of the law.
Since, under the law, the DOTC is authorized to establish and administer
programs and projects for transportation, it follows that the President may exercise
the same power and authority to order the implementation of the Project, which
admittedly is one for transportation.
Such authority springs from the President’s power of control over all executive
departments as well as the obligation for the faithful execution of the laws under
Article VII, Section 17 of the Constitution which provides:
SECTION 17. The President shall have control of all the executive departments,
bureaus and offices. He shall ensure that the laws be faithfully executed.
This constitutional provision is echoed in Section 1, Book III of the Administrative
Code of 1987. Notably, Section 38, Chapter 37, Book IV of the same Code defines
the President’s power of supervision and control over the executive departments,
viz:
SECTION 38. Definition of Administrative Relationships. — Unless otherwise
expressly stated in the Code or in other laws defining the special relationships of
particular agencies, administrative relationships shall be categorized and defined
as follows:
(1) Supervision and Control. — Supervision and control shall include authority to
act directly whenever a specific function is entrusted by law or regulation to a
subordinate; direct the performance of duty; restrain the commission of acts;
review, approve, reverse or modify acts and decisions of subordinate officials or
units; determine priorities in the execution of plans and programs. Unless a
different meaning is explicitly provided in the specific law governing the
relationship of particular agencies the word "control" shall encompass supervision
42
and control as defined in this paragraph. x x x (Emphasis and underscoring
supplied)
Thus, whenever a specific function is entrusted by law or regulation to a
subordinate, the President may act directly or merely direct the performance of a
duty.34
Respecting the President’s authority to order the implementation of the Project in
the exercise of the police power of the State, suffice it to stress that the powers
vested in the DOTC Secretary to establish and administer comprehensive and
integrated programs for transportation and communications and to issue orders,
rules and regulations to implement such mandate (which, as previously discussed,
may also be exercised by the President) have been so delegated for the good and
welfare of the people. Hence, these powers partake of the nature of police power.
Police power is the plenary power vested in the legislature to make, ordain, and
establish wholesome and reasonable laws, statutes and ordinances, not repugnant
to the Constitution, for the good and welfare of the people.35 This power to
prescribe regulations to promote the health, morals, education, good order or
safety, and general welfare of the people flows from the recognition that salus
populi est suprema lex ─ the welfare of the people is the supreme law.
While police power rests primarily with the legislature, such power may be
delegated, as it is in fact increasingly being delegated.36 By virtue of a valid
delegation, the power may be exercised by the President and administrative
boards37 as well as by the lawmaking bodies of municipal corporations or local
governments under an express delegation by the Local Government Code of
1991.38
The authority of the President to order the implementation of the Project
notwithstanding, the designation of the MMDA as the implementing agency for the
Project may not be sustained. It is ultra vires, there being no legal basis therefor.
It bears stressing that under the provisions of E.O. No. 125, as amended, it is the
DOTC, and not the MMDA, which is authorized to establish and implement a
project such as the one subject of the cases at bar. Thus, the President, although
authorized to establish or cause the implementation of the Project, must exercise
the authority through the instrumentality of the DOTC which, by law, is the primary
implementing and administrative entity in the promotion, development and
regulation of networks of transportation, and the one so authorized to establish and
implement a project such as the Project in question.
By designating the MMDA as the implementing agency of the Project, the
President clearly overstepped the limits of the authority conferred by law, rendering
E.O. No. 179 ultra vires.
In another vein, the validity of the designation of MMDA flies in the absence of a
specific grant of authority to it under R.A. No. 7924.
To recall, R.A. No. 7924 declared the Metropolitan Manila area39 as a "special
development and administrative region" and placed the administration of "metro-
wide" basic services affecting the region under the MMDA.
Section 2 of R.A. No. 7924 specifically authorizes the MMDA to perform "planning,
monitoring and coordinative functions, and in the process exercise regulatory and
supervisory authority over the delivery of metro-wide services," including transport
and traffic management.40 Section 5 of the same law enumerates the powers and
functions of the MMDA as follows:
(a) Formulate, coordinate and regulate the implementation of medium and long-
term plans and programs for the delivery of metro-wide services, land use and
physical development within Metropolitan Manila, consistent with national
development objectives and priorities;
(b) Prepare, coordinate and regulate the implementation of medium-term
investment programs for metro-wide services which shall indicate sources and
uses of funds for priority programs and projects, and which shall include the
packaging of projects and presentation to funding institutions;
(c) Undertake and manage on its own metro-wide programs and projects for the
delivery of specific services under its jurisdiction, subject to the approval of the
Council. For this purpose, MMDA can create appropriate project management
offices;
(d) Coordinate and monitor the implementation of such plans, programs and
projects in Metro Manila; identify bottlenecks and adopt solutions to problems of
implementation;
(e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall
coordinate and regulate the implementation of all programs and projects
concerning traffic management, specifically pertaining to enforcement, engineering
and education. Upon request, it shall be extended assistance and cooperation,
including but not limited to, assignment of personnel, by all other government
agencies and offices concerned;
43
(f) Install and administer a single ticketing system, fix, impose and collect fines and
penalties for all kinds of violations of traffic rules and regulations, whether moving
or non-moving in nature, and confiscate and suspend or revoke drivers’ licenses in
the enforcement of such traffic laws and regulations, the provisions of RA 4136
and PD 1605 to the contrary notwithstanding. For this purpose, the Authority shall
impose all traffic laws and regulations in Metro Manila, through its traffic operation
center, and may deputize members of the PNP, traffic enforcers of local
government units, duly licensed security guards, or members of non-governmental
organizations to whom may be delegated certain authority, subject to such
conditions and requirements as the Authority may impose; and
(g) Perform other related functions required to achieve the objectives of the
MMDA, including the undertaking of delivery of basic services to the local
government units, when deemed necessary subject to prior coordination with and
consent of the local government unit concerned." (Emphasis and underscoring
supplied)
The scope of the function of MMDA as an administrative, coordinating and policy-
setting body has been settled in Metropolitan Manila Development Authority
(MMDA) v. Bel-Air Village Association, Inc.41 In that case, the Court stressed:
Clearly, the scope of the MMDA’s function is limited to the delivery of the seven (7)
basic services. One of these is transport and traffic management which includes
the formulation and monitoring of policies, standards and projects to rationalize the
existing transport operations, infrastructure requirements, the use of thoroughfares
and promotion of the safe movement of persons and goods. It also covers the
mass transport system and the institution of a system of road regulation, the
administration of all traffic enforcement operations, traffic engineering services and
traffic education programs, including the institution of a single ticketing system in
Metro Manila for traffic violations. Under this service, the MMDA is expressly
authorized to "to set the policies concerning traffic" and "coordinate and regulate
the implementation of all traffic management programs." In addition, the MMDA
may install and administer a single ticketing system," fix, impose and collect fines
and penalties for all traffic violations.
It will be noted that the powers of the MMDA are limited to the following acts:
formulation, coordination, regulation, implementation, preparation, management,
monitoring, setting of policies, installation of a system and administration. There is
no syllable in R.A. No. 7924 that grants the MMDA police power, let alone
legislative power. Even the Metro Manila Council has not been delegated any
legislative power. Unlike the legislative bodies of the local government units, there
is no provision in R.A. No. 7924 that empowers the MMDA or its Council to ‘enact
ordinances, approve resolutions and appropriate funds for the general welfare’ of
the inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a
‘development authority.’ It is an agency created for the purpose of laying down
policies and coordinating with the various national government agencies, people’s
organizations, non-governmental organizations and the private sector for the
efficient and expeditious delivery of basic services in the vast metropolitan area. All
its functions are administrative in nature and these are actually summed up in the
charter itself, viz:
‘SECTION 2. Creation of the Metropolitan Manila Development Authority. — . . .
The MMDA shall perform planning, monitoring and coordinative functions, and in
the process exercise regulatory and supervisory authority over the delivery of
metro-wide services within Metro Manila, without diminution of the autonomy of the
local government units concerning purely local matters.’42 (Emphasis and
underscoring supplied)
In light of the administrative nature of its powers and functions, the MMDA is
devoid of authority to implement the Project as envisioned by the E.O; hence, it
could not have been validly designated by the President to undertake the Project.
It follows that the MMDA cannot validly order the elimination of respondents’
terminals.
Even the MMDA’s claimed authority under the police power must necessarily fail in
consonance with the above-quoted ruling in MMDA v. Bel-Air Village Association,
Inc. and this Court’s subsequent ruling in Metropolitan Manila Development
Authority v. Garin43 that the MMDA is not vested with police power.
Even assuming arguendo that police power was delegated to the MMDA, its
exercise of such power does not satisfy the two tests of a valid police power
measure, viz: (1) the interest of the public generally, as distinguished from that of a
particular class, requires its exercise; and (2) the means employed are reasonably
necessary for the accomplishment of the purpose and not unduly oppressive upon
individuals.44 Stated differently, the police power legislation must be firmly
grounded on public interest and welfare and a reasonable relation must exist
between the purposes and the means.
As early as Calalang v. Williams,45 this Court recognized that traffic congestion is
a public, not merely a private, concern. The Court therein held that public welfare
underlies the contested statute authorizing the Director of Public Works to
promulgate rules and regulations to regulate and control traffic on national roads.
Likewise, in Luque v. Villegas,46 this Court emphasized that public welfare lies at
the bottom of any regulatory measure designed "to relieve congestion of traffic,
44
which is, to say the least, a menace to public safety."47 As such, measures
calculated to promote the safety and convenience of the people using the
thoroughfares by the regulation of vehicular traffic present a proper subject for the
exercise of police power.
Notably, the parties herein concede that traffic congestion is a public concern that
needs to be addressed immediately. Indeed, the E.O. was issued due to the felt
need to address the worsening traffic congestion in Metro Manila which, the
MMDA so determined, is caused by the increasing volume of buses plying the
major thoroughfares and the inefficient connectivity of existing transport systems. It
is thus beyond cavil that the motivating force behind the issuance of the E.O. is the
interest of the public in general.
Are the means employed appropriate and reasonably necessary for the
accomplishment of the purpose. Are they not duly oppressive?
With the avowed objective of decongesting traffic in Metro Manila, the E.O. seeks
to "eliminate[e] the bus terminals now located along major Metro Manila
thoroughfares and provid[e] more convenient access to the mass transport system
to the commuting public through the provision of mass transport terminal facilities x
x x."48 Common carriers with terminals along the major thoroughfares of Metro
Manila would thus be compelled to close down their existing bus terminals and use
the MMDA-designated common parking areas.
In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,49 two city ordinances
were passed by the Sangguniang Panlungsod of Lucena, directing public utility
vehicles to unload and load passengers at the Lucena Grand Central Terminal,
which was given the exclusive franchise to operate a single common terminal.
Declaring that no other terminals shall be situated, constructed, maintained or
established inside or within the city of Lucena, the sanggunian declared as
inoperable all temporary terminals therein.
The ordinances were challenged before this Court for being unconstitutional on the
ground that, inter alia, the measures constituted an invalid exercise of police
power, an undue taking of private property, and a violation of the constitutional
prohibition against monopolies.
Citing De la Cruz v. Paras50 and Lupangco v. Court of Appeals,51 this Court held
that the assailed ordinances were characterized by overbreadth, as they went
beyond what was reasonably necessary to solve the traffic problem in the city. And
it found that the compulsory use of the Lucena Grand Terminal was unduly
oppressive because it would subject its users to fees, rentals and charges.
The true role of Constitutional Law is to effect an equilibrium between authority and
liberty so that rights are exercised within the framework of the law and the laws are
enacted with due deference to rights.
A due deference to the rights of the individual thus requires a more careful
formulation of solutions to societal problems.
From the memorandum filed before this Court by petitioner, it is gathered that the
Sangguniang Panlungsod had identified the cause of traffic congestion to be the
indiscriminate loading and unloading of passengers by buses on the streets of the
city proper, hence, the conclusion that the terminals contributed to the proliferation
of buses obstructing traffic on the city streets.
Bus terminals per se do not, however, impede or help impede the flow of traffic.
How the outright proscription against the existence of all terminals, apart from that
franchised to petitioner, can be considered as reasonably necessary to solve the
traffic problem, this Court has not been enlightened. If terminals lack adequate
space such that bus drivers are compelled to load and unload passengers on the
streets instead of inside the terminals, then reasonable specifications for the size
of terminals could be instituted, with permits to operate the same denied those
which are unable to meet the specifications.
In the subject ordinances, however, the scope of the proscription against the
maintenance of terminals is so broad that even entities which might be able to
provide facilities better than the franchised terminal are barred from operating at
all. (Emphasis and underscoring supplied)
As in Lucena, this Court fails to see how the prohibition against the existence of
respondents’ terminals can be considered a reasonable necessity to ease traffic
congestion in the metropolis. On the contrary, the elimination of respondents’ bus
terminals brings forth the distinct possibility and the equally harrowing reality of
traffic congestion in the common parking areas, a case of transference from one
site to another.
Less intrusive measures such as curbing the proliferation of "colorum" buses, vans
and taxis entering Metro Manila and using the streets for parking and passenger
pick-up points, as respondents suggest, might even be more effective in easing the
traffic situation. So would the strict enforcement of traffic rules and the removal of
obstructions from major thoroughfares.
As to the alleged confiscatory character of the E.O., it need only to be stated that
respondents’ certificates of public convenience confer no property right, and are
45
mere licenses or privileges.52 As such, these must yield to legislation poured into the acquisition or lease of suitable terminal sites. Eliminating the
safeguarding the interest of the people. terminals would thus run counter to the provisions of the Public Service Act.

Even then, for reasons which bear reiteration, the MMDA cannot order the closure
of respondents’ terminals not only because no authority to implement the Project
has been granted nor legislative or police power been delegated to it, but also
because the elimination of the terminals does not satisfy the standards of a valid
police power measure.
Finally, an order for the closure of respondents’ terminals is not in line with the
provisions of the Public Service Act.
Paragraph (a), Section 13 of Chapter II of the Public Service Act (now Section 5 of
Executive Order No. 202, creating the Land Transportation Franchising and
Regulatory Board or LFTRB) vested the Public Service Commission (PSC, now
the LTFRB) with "x x x jurisdiction, supervision and control over all public services
and their franchises, equipment and other properties x x x."
Consonant with such grant of authority, the PSC was empowered to "impose such
conditions as to construction, equipment, maintenance, service, or operation as
the public interests and convenience may reasonably require"53 in approving any
franchise or privilege.
This Court commiserates with the MMDA for the roadblocks thrown in the way of
its efforts at solving the pestering problem of traffic congestion in Metro Manila.
These efforts are commendable, to say the least, in the face of the abominable
traffic situation of our roads day in and day out. This Court can only interpret, not
change, the law, however. It needs only to be reiterated that it is the DOTC ─ as
the primary policy, planning, programming, coordinating, implementing, regulating
and administrative entity to promote, develop and regulate networks of
transportation and communications ─ which has the power to establish and
administer a transportation project like the Project subject of the case at bar.
No matter how noble the intentions of the MMDA may be then, any plan, strategy
or project which it is not authorized to implement cannot pass muster.
WHEREFORE, the Petition is, in light of the foregoing disquisition, DENIED. E.O.
No. 179 is declared NULL and VOID for being ultra vires.
SO ORDERED.

Further, Section 16 (g) and (h) of the Public Service Act54 provided that the
Commission shall have the power, upon proper notice and hearing in accordance
with the rules and provisions of this Act, subject to the limitations and exceptions
mentioned and saving provisions to the contrary:

(g) To compel any public service to furnish safe, adequate, and proper service as
regards the manner of furnishing the same as well as the maintenance of the
necessary material and equipment.

(h) To require any public service to establish, construct, maintain, and operate any
reasonable extension of its existing facilities, where in the judgment of said
Commission, such extension is reasonable and practicable and will furnish
sufficient business to justify the construction and maintenance of the same and
when the financial condition of the said public service reasonably warrants the
original expenditure required in making and operating such extension.(Emphasis
and underscoring supplied)

The establishment, as well as the maintenance of vehicle parking areas or

passenger terminals, is generally considered a necessary service to be provided
by provincial bus operators like respondents, hence, the investments they have

46
G.R. No. 138810 September 29, 2004
BATANGAS CATV, INC., petitioner, vs. THE COURT OF APPEALS, THE
BATANGAS CITY SANGGUNIANG PANLUNGSOD and BATANGAS CITY
MAYOR, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
In the late 1940s, John Walson, an appliance dealer in Pennsylvania, suffered a
decline in the sale of television (tv) sets because of poor reception of signals in his
community. Troubled, he built an antenna on top of a nearby mountain. Using
coaxial cable lines, he distributed the tv signals from the antenna to the homes of
his customers. Walson’s innovative idea improved his sales and at the same time
gave birth to a new telecommunication system -- the Community Antenna
Television (CATV) or Cable Television.1
This technological breakthrough found its way in our shores and, like in its country
of origin, it spawned legal controversies, especially in the field of regulation. The
case at bar is just another occasion to clarify a shady area. Here, we are tasked to
resolve the inquiry -- may a local government unit (LGU) regulate the subscriber
rates charged by CATV operators within its territorial jurisdiction?
This is a petition for review on certiorari filed by Batangas CATV, Inc. (petitioner
herein) against the Sangguniang Panlungsod and the Mayor of Batangas City
(respondents herein) assailing the Court of Appeals (1) Decision2 dated February
12, 1999 and (2) Resolution3 dated May 26, 1999, in CA-G.R. CV No. 52361.4
The Appellate Court reversed and set aside the Judgment5 dated October 29,
1995 of the Regional Trial Court (RTC), Branch 7, Batangas City in Civil Case No.
4254,6 holding that neither of the respondents has the power to fix the subscriber
rates of CATV operators, such being outside the scope of the LGU’s power.
The antecedent facts are as follows:
On July 28, 1986, respondent Sangguniang Panlungsod enacted Resolution No.
2107 granting petitioner a permit to construct, install, and operate a CATV system
in Batangas City. Section 8 of the Resolution provides that petitioner is authorized
to charge its subscribers the maximum rates specified therein, "provided, however,
that any increase of rates shall be subject to the approval of the Sangguniang
Panlungsod."8
Sometime in November 1993, petitioner increased its subscriber rates from ₱88.00
to ₱180.00 per month. As a result, respondent Mayor wrote petitioner a letter9
threatening to cancel its permit unless it secures the approval of respondent
Sangguniang Panlungsod, pursuant to Resolution No. 210.
Petitioner then filed with the RTC, Branch 7, Batangas City, a petition for injunction
docketed as Civil Case No. 4254. It alleged that respondent Sangguniang
Panlungsod has no authority to regulate the subscriber rates charged by CATV
operators because under Executive Order No. 205, the National
Telecommunications Commission (NTC) has the sole authority to regulate the
CATV operation in the Philippines.
On October 29, 1995, the trial court decided in favor of petitioner, thus:
"WHEREFORE, as prayed for, the defendants, their representatives, agents,
deputies or other persons acting on their behalf or under their instructions, are
hereby enjoined from canceling plaintiff’s permit to operate a Cable Antenna
Television (CATV) system in the City of Batangas or its environs or in any manner,
from interfering with the authority and power of the National Telecommunications
Commission to grant franchises to operate CATV systems to qualified applicants,
and the right of plaintiff in fixing its service rates which needs no prior approval of
the Sangguniang Panlungsod of Batangas City.
The counterclaim of the plaintiff is hereby dismissed. No pronouncement as to
costs.
IT IS SO ORDERED."10
The trial court held that the enactment of Resolution No. 210 by respondent
violates the State’s deregulation policy as set forth by then NTC Commissioner
Jose Luis A. Alcuaz in his Memorandum dated August 25, 1989. Also, it pointed
out that the sole agency of the government which can regulate CATV operation is
the NTC, and that the LGUs cannot exercise regulatory power over it without
appropriate legislation.
Unsatisfied, respondents elevated the case to the Court of Appeals, docketed as
CA-G.R. CV No. 52361.
On February 12, 1999, the Appellate Court reversed and set aside the trial court’s
Decision, ratiocinating as follows:
"Although the Certificate of Authority to operate a Cable Antenna Television
(CATV) System is granted by the National Telecommunications Commission
47
pursuant to Executive Order No. 205, this does not preclude the Sangguniang
Panlungsod from regulating the operation of the CATV in their locality under the
powers vested upon it by Batas Pambansa Bilang 337, otherwise known as the
Local Government Code of 1983. Section 177 (now Section 457 paragraph 3 (ii) of
Republic Act 7160) provides:
‘Section 177. Powers and Duties – The Sangguniang Panlungsod shall:
a) Enact such ordinances as may be necessary to carry into effect and discharge
the responsibilities conferred upon it by law, and such as shall be necessary and
proper to provide for health and safety, comfort and convenience, maintain peace
and order, improve the morals, and promote the prosperity and general welfare of
the community and the inhabitants thereof, and the protection of property therein;
xxx
d) Regulate, fix the license fee for, and tax any business or profession being
carried on and exercised within the territorial jurisdiction of the city, except travel
agencies, tourist guides, tourist transports, hotels, resorts, de luxe restaurants, and
tourist inns of international standards which shall remain under the licensing and
regulatory power of the Ministry of Tourism which shall exercise such authority
without infringement on the taxing and regulatory powers of the city government;’
Under cover of the General Welfare Clause as provided in this section, Local
Government Units can perform just about any power that will benefit their
constituencies. Thus, local government units can exercise powers that are: (1)
expressly granted; (2) necessarily implied from the power that is expressly
granted; (3) necessary, appropriate or incidental for its efficient and effective
governance; and (4) essential to the promotion of the general welfare of their
inhabitants. (Pimentel, The Local Government Code of 1991, p. 46)
Verily, the regulation of businesses in the locality is expressly provided in the Local
Government Code. The fixing of service rates is lawful under the General Welfare
Clause.
Resolution No. 210 granting appellee a permit to construct, install and operate a
community antenna television (CATV) system in Batangas City as quoted earlier in
this decision, authorized the grantee to impose charges which cannot be increased
except upon approval of the Sangguniang Bayan. It further provided that in case of
violation by the grantee of the terms and conditions/requirements specifically
provided therein, the City shall have the right to withdraw the franchise.
Appellee increased the service rates from EIGHTY EIGHT PESOS (₱88.00) to
ONE HUNDRED EIGHTY PESOS (₱180.00) (Records, p. 25) without the approval
of appellant. Such act breached Resolution No. 210 which gives appellant the right
to withdraw the permit granted to appellee."11
Petitioner filed a motion for reconsideration but was denied.12
Hence, the instant petition for review on certiorari anchored on the following
assignments of error:
"I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE GENERAL
WELFARE CLAUSE of the LOCAL GOVERNMENT CODE AUTHORIZES
RESPONDENT SANGGUNIANG PANLUNGSOD TO EXERCISE THE
REGULATORY FUNCTION SOLELY LODGED WITH THE NATIONAL
TELECOMMUNICATIONS COMMISSION UNDER EXECUTIVE ORDER NO. 205,
INCLUDING THE AUTHORITY TO FIX AND/OR APPROVE THE SERVICE
RATES OF CATV OPERATORS; AND
II
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION APPEALED
FROM AND DISMISSING PETITIONER’S COMPLAINT."13
Petitioner contends that while Republic Act No. 7160, the Local Government Code
of 1991, extends to the LGUs the general power to perform any act that will benefit
their constituents, nonetheless, it does not authorize them to regulate the CATV
operation. Pursuant to E.O. No. 205, only the NTC has the authority to regulate the
CATV operation, including the fixing of subscriber rates.
Respondents counter that the Appellate Court did not commit any reversible error
in rendering the assailed Decision. First, Resolution No. 210 was enacted pursuant
to Section 177(c) and (d) of Batas Pambansa Bilang 337, the Local Government
Code of 1983, which authorizes LGUs to regulate businesses. The term
"businesses" necessarily includes the CATV industry. And second, Resolution No.
210 is in the nature of a contract between petitioner and respondents, it being a
grant to the former of a franchise to operate a CATV system. To hold that E.O. No.
205 amended its terms would violate the constitutional prohibition against
impairment of contracts.14
The petition is impressed with merit.
48
Earlier, we posed the question -- may a local government unit (LGU) regulate the
subscriber rates charged by CATV operators within its territorial jurisdiction? A
review of pertinent laws and jurisprudence yields a negative answer.
President Ferdinand E. Marcos was the first one to place the CATV industry under
the regulatory power of the national government.15 On June 11, 1978, he issued
Presidential Decree (P.D.) No. 151216 establishing a monopoly of the industry by
granting Sining Makulay, Inc., an exclusive franchise to operate CATV system in
any place within the Philippines. Accordingly, it terminated all franchises, permits
or certificates for the operation of CATV system previously granted by local
governments or by any instrumentality or agency of the national government.17
Likewise, it prescribed the subscriber rates to be charged by Sining Makulay, Inc.
to its customers.18
On July 21, 1979, President Marcos issued Letter of Instruction (LOI) No. 894
vesting upon the Chairman of the Board of Communications direct supervision
over the operations of Sining Makulay, Inc. Three days after, he issued E.O. No.
54619 integrating the Board of Communications20 and the Telecommunications
Control Bureau21 to form a single entity to be known as the "National
Telecommunications Commission." Two of its assigned functions are:
"a. Issue Certificate of Public Convenience for the operation of communications
utilities and services, radio communications systems, wire or wireless telephone or
telegraph systems, radio and television broadcasting system and other similar
public utilities;
b. Establish, prescribe and regulate areas of operation of particular operators of
public service communications; and determine and prescribe charges or rates
pertinent to the operation of such public utility facilities and services except in
cases where charges or rates are established by international bodies or
associations of which the Philippines is a participating member or by bodies
recognized by the Philippine Government as the proper arbiter of such charges or
rates;"
Although Sining Makulay Inc.’s exclusive franchise had a life term of 25 years, it
was cut short by the advent of the 1986 Revolution. Upon President Corazon C.
Aquino’s assumption of power, she issued E.O. No. 20522 opening the CATV
industry to all citizens of the Philippines. It mandated the NTC to grant Certificates
of Authority to CATV operators and to issue the necessary implementing rules and
regulations.
On September 9, 1997, President Fidel V. Ramos issued E.O. No. 43623
prescribing policy guidelines to govern CATV operation in the Philippines. Cast in
more definitive terms, it restated the NTC’s regulatory powers over CATV
operations, thus:
"SECTION 2. The regulation and supervision of the cable television industry in the
Philippines shall remain vested solely with the National Telecommunications
Commission (NTC).
SECTION 3. Only persons, associations, partnerships, corporations or
cooperatives, granted a Provisional Authority or Certificate of Authority by the
Commission may install, operate and maintain a cable television system or render
cable television service within a service area."
Clearly, it has been more than two decades now since our national government,
through the NTC, assumed regulatory power over the CATV industry. Changes in
the political arena did not alter the trend. Instead, subsequent presidential
issuances further reinforced the NTC’s power. Significantly, President Marcos and
President Aquino, in the exercise of their legislative power, issued P.D. No. 1512,
E.O. No. 546 and E.O. No. 205. Hence, they have the force and effect of statutes
or laws passed by Congress.24 That the regulatory power stays with the NTC is
also clear from President Ramos’ E.O. No. 436 mandating that the regulation and
supervision of the CATV industry shall remain vested "solely" in the NTC. Black’s
Law Dictionary defines "sole" as "without another or others."25 The logical
conclusion, therefore, is that in light of the above laws and E.O. No. 436, the NTC
exercises regulatory power over CATV operators to the exclusion of other bodies.
But, lest we be misunderstood, nothing herein should be interpreted as to strip
LGUs of their general power to prescribe regulations under the general welfare
clause of the Local Government Code. It must be emphasized that when E.O. No.
436 decrees that the "regulatory power" shall be vested "solely" in the NTC, it
pertains to the "regulatory power" over those matters which are peculiarly within
the NTC’s competence, such as, the: (1) determination of rates, (2) issuance of
"certificates of authority, (3) establishment of areas of operation, (4) examination
and assessment of the legal, technical and financial qualifications of applicant
operators, (5) granting of permits for the use of frequencies, (6) regulation of
ownership and operation, (7) adjudication of issues arising from its functions, and
(8) other similar matters.26 Within these areas, the NTC reigns supreme as it
possesses the exclusive power to regulate -- a power comprising varied acts, such
as "to fix, establish, or control; to adjust by rule, method or established mode; to
direct by rule or restriction; or to subject to governing principles or laws."27
Coincidentally, respondents justify their exercise of regulatory power over
petitioner’s CATV operation under the general welfare clause of the Local
Government Code of 1983. The Court of Appeals sustained their stance.
49
There is no dispute that respondent Sangguniang Panlungsod, like other local
legislative bodies, has been empowered to enact ordinances and approve
resolutions under the general welfare clause of B.P. Blg. 337, the Local
Government Code of 1983. That it continues to posses such power is clear under
the new law, R.A. No. 7160 (the Local Government Code of 1991). Section 16
thereof provides:
"SECTION 16. General Welfare. – Every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as powers
necessary, appropriate, or incidental for its efficient and effective governance, and
those which are essential to the promotion of the general welfare. Within their
respective territorial jurisdictions, local government units shall ensure and support,
among others, the preservation and enrichment of culture, promote health and
safety, enhance the right of the people to a balanced ecology, encourage and
support the development of appropriate and self-reliant, scientific and
technological capabilities, improve public morals, enhance economic prosperity
and social justice, promote full employment among their residents, maintain peace
and order, and preserve the comfort and convenience of their inhabitants."
In addition, Section 458 of the same Code specifically mandates:
"SECTION 458. Powers, Duties, Functions and Compensation. — (a) The
Sangguniang Panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare of
the city and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the city as provided for under Section 22 of
this Code, x x x:"
The general welfare clause is the delegation in statutory form of the police power
of the State to LGUs.28 Through this, LGUs may prescribe regulations to protect
the lives, health, and property of their constituents and maintain peace and order
within their respective territorial jurisdictions. Accordingly, we have upheld
enactments providing, for instance, the regulation of gambling,29 the occupation of
rig drivers,30 the installation and operation of pinball machines,31 the
maintenance and operation of cockpits,32 the exhumation and transfer of corpses
from public burial grounds,33 and the operation of hotels, motels, and lodging
houses34 as valid exercises by local legislatures of the police power under the
general welfare clause.
Like any other enterprise, CATV operation maybe regulated by LGUs under the
general welfare clause. This is primarily because the CATV system commits the
indiscretion of crossing public properties. (It uses public properties in order to
reach subscribers.) The physical realities of constructing CATV system – the use
of public streets, rights of ways, the founding of structures, and the parceling of
large regions – allow an LGU a certain degree of regulation over CATV
operators.35 This is the same regulation that it exercises over all private
enterprises within its territory.
But, while we recognize the LGUs’ power under the general welfare clause, we
cannot sustain Resolution No. 210. We are convinced that respondents strayed
from the well recognized limits of its power. The flaws in Resolution No. 210 are:
(1) it violates the mandate of existing laws and (2) it violates the State’s
deregulation policy over the CATV industry.
I.
Resolution No. 210 is an enactment of an LGU acting only as agent of the national
legislature. Necessarily, its act must reflect and conform to the will of its principal.
To test its validity, we must apply the particular requisites of a valid ordinance as
laid down by the accepted principles governing municipal corporations.36
Speaking for the Court in the leading case of United States vs. Abendan,37 Justice
Moreland said: "An ordinance enacted by virtue of the general welfare clause is
valid, unless it contravenes the fundamental law of the Philippine Islands, or an Act
of the Philippine Legislature, or unless it is against public policy, or is
unreasonable, oppressive, partial, discriminating, or in derogation of common
right." In De la Cruz vs. Paraz,38 we laid the general rule "that ordinances passed
by virtue of the implied power found in the general welfare clause must be
reasonable, consonant with the general powers and purposes of the corporation,
and not inconsistent with the laws or policy of the State."
The apparent defect in Resolution No. 210 is that it contravenes E.O. No. 205 and
E.O. No. 436 insofar as it permits respondent Sangguniang Panlungsod to usurp a
power exclusively vested in the NTC, i.e., the power to fix the subscriber rates
charged by CATV operators. As earlier discussed, the fixing of subscriber rates is
definitely one of the matters within the NTC’s exclusive domain.
In this regard, it is appropriate to stress that where the state legislature has made
provision for the regulation of conduct, it has manifested its intention that the
subject matter shall be fully covered by the statute, and that a municipality, under
its general powers, cannot regulate the same conduct.39 In Keller vs. State,40 it
was held that: "Where there is no express power in the charter of a municipality
authorizing it to adopt ordinances regulating certain matters which are specifically
covered by a general statute, a municipal ordinance, insofar as it attempts to
regulate the subject which is completely covered by a general statute of the
legislature, may be rendered invalid. x x x Where the subject is of statewide
concern, and the legislature has appropriated the field and declared the rule, its
50
declaration is binding throughout the State." A reason advanced for this view is
that such ordinances are in excess of the powers granted to the municipal
corporation.41
Since E.O. No. 205, a general law, mandates that the regulation of CATV
operations shall be exercised by the NTC, an LGU cannot enact an ordinance or
approve a resolution in violation of the said law.
It is a fundamental principle that municipal ordinances are inferior in status and
subordinate to the laws of the state. An ordinance in conflict with a state law of
general character and statewide application is universally held to be invalid.42 The
principle is frequently expressed in the declaration that municipal authorities, under
a general grant of power, cannot adopt ordinances which infringe the spirit of a
state law or repugnant to the general policy of the state.43 In every power to pass
ordinances given to a municipality, there is an implied restriction that the
ordinances shall be consistent with the general law.44 In the language of Justice
Isagani Cruz (ret.), this Court, in Magtajas vs. Pryce Properties Corp., Inc.,45 ruled
that:
"The rationale of the requirement that the ordinances should not contravene a
statute is obvious. Municipal governments are only agents of the national
government. Local councils exercise only delegated legislative powers conferred
on them by Congress as the national lawmaking body. The delegate cannot be
superior to the principal or exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo the acts of Congress,
from which they have derived their power in the first place, and negate by mere
ordinance the mandate of the statute.
‘Municipal corporations owe their origin to, and derive their powers and rights
wholly from the legislature. It breathes into them the breath of life, without which
they cannot exist. As it creates, so it may destroy. As it may destroy, it may
abridge and control. Unless there is some constitutional limitation on the right, the
legislature might, by a single act, and if we can suppose it capable of so great a
folly and so great a wrong, sweep from existence all of the municipal corporations
in the State, and the corporation could not prevent it. We know of no limitation on
the right so far as to the corporation themselves are concerned. They are, so to
phrase it, the mere tenants at will of the legislature.’
This basic relationship between the national legislature and the local government
units has not been enfeebled by the new provisions in the Constitution
strengthening the policy of local autonomy. Without meaning to detract from that
policy, we here confirm that Congress retains control of the local government units
although in significantly reduced degree now than under our previous
Constitutions. The power to create still includes the power to destroy. The power to
grant still includes the power to withhold or recall. True, there are certain notable
innovations in the Constitution, like the direct conferment on the local government
units of the power to tax, which cannot now be withdrawn by mere statute. By and
large, however, the national legislature is still the principal of the local government
units, which cannot defy its will or modify or violate it."
Respondents have an ingenious retort against the above disquisition. Their theory
is that the regulatory power of the LGUs is granted by R.A. No. 7160 (the Local
Government Code of 1991), a handiwork of the national lawmaking authority. They
contend that R.A. No. 7160 repealed E.O. No. 205 (issued by President Aquino).
Respondents’ argument espouses a bad precedent. To say that LGUs exercise the
same regulatory power over matters which are peculiarly within the NTC’s
competence is to promote a scenario of LGUs and the NTC locked in constant
clash over the appropriate regulatory measure on the same subject matter. LGUs
must recognize that technical matters concerning CATV operation are within the
exclusive regulatory power of the NTC.
At any rate, we find no basis to conclude that R.A. No. 7160 repealed E.O. No.
205, either expressly or impliedly. It is noteworthy that R.A. No. 7160 repealing
clause, which painstakingly mentions the specific laws or the parts thereof which
are repealed, does not include E.O. No. 205, thus:
"SECTION 534. Repealing Clause. — (a) Batas Pambansa Blg. 337, otherwise
known as the Local Government Code." Executive Order No. 112 (1987), and
Executive Order No. 319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders,
instructions, memoranda and issuances related to or concerning the barangay are
hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding
hospital fund; Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the
Special Education Fund; Presidential Decree No. 144 as amended by Presidential
Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended; Presidential
Decree No. 436 as amended by Presidential Decree No. 558; and Presidential
Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed
and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-
funded projects.
(e) The following provisions are hereby repealed or amended insofar as they are
inconsistent with the provisions of this Code: Sections 2, 16, and 29 of Presidential
51
Decree No. 704; Section 12 of Presidential Decree No. 87, as amended; Sections
52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree No. 463, as
amended; and Section 16 of Presidential Decree No. 972, as amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which are
inconsistent with any of the provisions of this Code are hereby repealed or
modified accordingly."
Neither is there an indication that E.O. No. 205 was impliedly repealed by R.A. No.
7160. It is a settled rule that implied repeals are not lightly presumed in the
absence of a clear and unmistakable showing of such intentions. In Mecano vs.
Commission on Audit,46 we ruled:
"Repeal by implication proceeds on the premise that where a statute of later date
clearly reveals an intention on the part of the legislature to abrogate a prior act on
the subject, that intention must be given effect. Hence, before there can be a
repeal, there must be a clear showing on the part of the lawmaker that the intent in
enacting the new law was to abrogate the old one. The intention to repeal must be
clear and manifest; otherwise, at least, as a general rule, the later act is to be
construed as a continuation of, and not a substitute for, the first act and will
continue so far as the two acts are the same from the time of the first enactment."
As previously stated, E.O. No. 436 (issued by President Ramos) vests upon the
NTC the power to regulate the CATV operation in this country. So also
Memorandum Circular No. 8-9-95, the Implementing Rules and Regulations of
R.A. No. 7925 (the "Public Telecommunications Policy Act of the Philippines").
This shows that the NTC’s regulatory power over CATV operation is continuously
recognized.
It is a canon of legal hermeneutics that instead of pitting one statute against
another in an inevitably destructive confrontation, courts must exert every effort to
reconcile them, remembering that both laws deserve a becoming respect as the
handiwork of coordinate branches of the government.47 On the assumption of a
conflict between E.O. No. 205 and R.A. No. 7160, the proper action is not to
uphold one and annul the other but to give effect to both by harmonizing them if
possible. This recourse finds application here. Thus, we hold that the NTC, under
E.O. No. 205, has exclusive jurisdiction over matters affecting CATV operation,
including specifically the fixing of subscriber rates, but nothing herein precludes
LGUs from exercising its general power, under R.A. No. 7160, to prescribe
regulations to promote the health, morals, peace, education, good order or safety
and general welfare of their constituents. In effect, both laws become equally
effective and mutually complementary.
The grant of regulatory power to the NTC is easily understandable. CATV system
is not a mere local concern. The complexities that characterize this new
technology demand that it be regulated by a specialized agency. This is
particularly true in the area of rate-fixing. Rate fixing involves a series of technical
operations.48 Consequently, on the hands of the regulatory body lies the ample
discretion in the choice of such rational processes as might be appropriate to the
solution of its highly complicated and technical problems. Considering that the
CATV industry is so technical a field, we believe that the NTC, a specialized
agency, is in a better position than the LGU, to regulate it. Notably, in United
States vs. Southwestern Cable Co.,49 the US Supreme Court affirmed the Federal
Communications Commission’s (FCC’s) jurisdiction over CATV operation. The
Court held that the FCC’s authority over cable systems assures the preservation of
the local broadcast service and an equitable distribution of broadcast services
among the various regions of the country.
II.
Resolution No. 210 violated the State’s deregulation policy.
Deregulation is the reduction of government regulation of business to permit freer
markets and competition.50 Oftentimes, the State, through its regulatory agencies,
carries out a policy of deregulation to attain certain objectives or to address certain
problems. In the field of telecommunications, it is recognized that many areas in
the Philippines are still "unserved" or "underserved." Thus, to encourage private
sectors to venture in this field and be partners of the government in stimulating the
growth and development of telecommunications, the State promoted the policy of
deregulation.
In the United States, the country where CATV originated, the Congress observed,
when it adopted the Telecommunications Act of 1996, that there was a need to
provide a pro-competitive, deregulatory national policy framework designed to
accelerate rapidly private sector deployment of advanced telecommunications and
information technologies and services to all Americans by opening all
telecommunications markets to competition. The FCC has adopted regulations to
implement the requirements of the 1996 Act and the intent of the Congress.
Our country follows the same policy. The fifth Whereas Clause of E.O. No. 436
states:
"WHEREAS, professionalism and self-regulation among existing operators,
through a nationally recognized cable television operator’s association, have
enhanced the growth of the cable television industry and must therefore be
maintained along with minimal reasonable government regulations;"
52
This policy reaffirms the NTC’s mandate set forth in the Memorandum dated
August 25, 1989 of Commissioner Jose Luis A. Alcuaz, to wit:
"In line with the purpose and objective of MC 4-08-88, Cable Television System or
Community Antenna Television (CATV) is made part of the broadcast media to
promote the orderly growth of the Cable Television Industry it being in its
developing stage. Being part of the Broadcast Media, the service rates of CATV
are likewise considered deregulated in accordance with MC 06-2-81 dated 25
February 1981, the implementing guidelines for the authorization and operation of
Radio and Television Broadcasting stations/systems.
Further, the Commission will issue Provisional Authority to existing CATV
operators to authorize their operations for a period of ninety (90) days until such
time that the Commission can issue the regular Certificate of Authority."
When the State declared a policy of deregulation, the LGUs are bound to follow.
To rule otherwise is to render the State’s policy ineffective. Being mere creatures
of the State, LGUs cannot defeat national policies through enactments of contrary
measures. Verily, in the case at bar, petitioner may increase its subscriber rates
without respondents’ approval.
service area." It is clear that in the absence of constitutional or legislative
authorization, municipalities have no power to grant franchises.53 Consequently,
the protection of the constitutional provision as to impairment of the obligation of a
contract does not extend to privileges, franchises and grants given by a
municipality in excess of its powers, or ultra vires.54
One last word. The devolution of powers to the LGUs, pursuant to the
Constitutional mandate of ensuring their autonomy, has bred jurisdictional tension
between said LGUs and the State. LGUs must be reminded that they merely form
part of the whole. Thus, when the Drafters of the 1987 Constitution enunciated the
policy of ensuring the autonomy of local governments,55 it was never their
intention to create an imperium in imperio and install an intra-sovereign political
subdivision independent of a single sovereign state.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of
Appeals dated February 12, 1999 as well as its Resolution dated May 26, 1999 in
CA-G.R. CV No. 52461, are hereby REVERSED. The RTC Decision in Civil Case
No. 4254 is AFFIRMED.
No pronouncement as to costs.

At this juncture, it bears emphasizing that municipal corporations are bodies politic SO ORDERED.
and corporate, created not only as local units of local self-government, but as
governmental agencies of the state.51 The legislature, by establishing a municipal
corporation, does not divest the State of any of its sovereignty; absolve itself from
its right and duty to administer the public affairs of the entire state; or divest itself of
any power over the inhabitants of the district which it possesses before the charter
was granted.52

Respondents likewise argue that E.O. No. 205 violates the constitutional
prohibition against impairment of contracts, Resolution No. 210 of Batangas City
Sangguniang Panlungsod being a grant of franchise to petitioner.

We are not convinced.

There is no law specifically authorizing the LGUs to grant franchises to operate

CATV system. Whatever authority the LGUs had before, the same had been
withdrawn when President Marcos issued P.D. No. 1512 "terminating all
franchises, permits or certificates for the operation of CATV system previously
granted by local governments." Today, pursuant to Section 3 of E.O. No. 436,
"only persons, associations, partnerships, corporations or cooperatives granted a
Provisional Authority or Certificate of Authority by the NTC may install, operate and
maintain a cable television system or render cable television service within a

53
G.R. No. 160703 September 23, 2005
GMA NETWORK, INC., Petitioners, vs. ABS-CBN BROADCASTING
CORPORATION, CENTRAL CATV, INC., PILIPINO CABLE CORPORATION
and PHILIPPINE HOME CABLE HOLDINGS, INC., Respondent.
DECISION
YNARES-SANTIAGO, J.:
Petitioner GMA Network, Inc. ("GMA") filed on May 6, 2003 before the Regional
Trial Court of Quezon City a complaint for damages1 against respondents ABS-
CBN Broadcasting Corporation ("ABS-CBN"), Central CATV, Inc. ("SkyCable"),
Philippine Home Cable Holdings, Inc. ("Home Cable") and Pilipino Cable
Corporation ("Sun Cable"), which was raffled to Branch 972 and docketed as Civil
Case No. Q03-49500.
In its complaint, GMA alleged that respondents engaged in unfair competition
when the cable companies arbitrarily re-channeled petitioner’s cable television
broadcast on February 1, 2003, in order to arrest and destroy its upswing
performance in the television industry.
GMA argued that respondents were able to perpetrate such unfair business
practice through a common ownership and interlocking businesses. SkyCable and
Sun Cable are wholly-owned subsidiaries of Sky Vision Corporation ("Sky Vision")
which is allegedly controlled by Lopez, Inc. On the other hand, Home Cable is a
wholly-owned subsidiary of Unilink Communications Corporation ("Unilink"), which
is owned by Mediaquest Holdings, Inc., a company controlled by the Pension Trust
Fund of the PLDT Employees ("PLDT Group").
Pursuant to a Master Consolidation Agreement, the ownership, rights and interests
in Sky Vision and Unilink were purportedly placed under a holding company known
as "Beyond Cable", 66.5 % of which is owned by the Benpres Group, composed of
Lopez Inc., Benpres Holdings and ABS-CBN, while 33.5% thereof is owned by the
PLDT Group. As a result of this business combination, respondents have cornered
at least 71% of the total cable television market in Mega Manila. They are thus
able to dictate the signal transmission, channel position, and the airing of shows,
programs, and broadcast of non-cable companies like ABS-CBN and GMA, which
the law requires them to carry.
GMA alleged that the re-channeling of its cable television broadcast resulted in
damage to its business operations, thus:
17. Following their arbitrary act of re-channeling the cable position of plaintiff GMA
from "Channel 12" to "Channel 14", the defendants "SkyCable" and Pilipino Cable
(or "Sun Cable") deliberately failed to transmit the signal of plaintiff GMA to their
channels in clear audio transmission resulting in noticeable dropouts and spillover
of extraneous sound and in clear visual transmission resulting in distorted and/or
degraded visual presentation;
18. Soon thereafter, numerous complaints of distortions, degradations and
disorders of GMA’s shows on the cable channels were received by plaintiff GMA
from subscribers of the defendant cable companies "SkyCable", "Home Cable"
and "Sun Cable", such as "snowy reception", "no signal", and "no audio". These
complaints escalated to alarming proportions when plaintiff GMA made public the
audio and visual distortions of its TV shows on the cable channels;
19. The audio disorder and the visual distortion and/or degradation of plaintiff
GMA’s signal transmission happened mostly during the showing of plaintiff GMA’s
top rating programs;
19.1. These distortions did not occur in the cable TV shows of defendant ABS-
CBN on the channels of the co-defendant cable companies;
20. It is a matter of common knowledge, and defendants are fully aware, that the
quality of signal and audio transmission and established channel position in cable
TV of a non-cable television network, like plaintiff GMA, are crucial factors in
arriving at the ratings of the network and its programs and which ratings are, in
turn, determinative of the business judgment of commercial advertisers, producers
and blocktimers to sign broadcast contracts with the network, which contracts are
the lifeblood of TV networks and stations like plaintiff GMA;
20.1. Defendants are also aware that 50% of so-called "people meter" which is a
device used by the ratings suppliers (AGB Philippines and AC Nielsen) to
determine the ratings and audience shares of TV programs are placed in cable TV.
20.2. These unjust, high-handed and unlawful acts of the defendants adversely
affected the viewership, quality of the programs, and ratings of plaintiff GMA for
which defendants are liable;
22. As a result of defendants’ acts of unfair competition, corporate combinations
and manipulations as well as unjust, oppressive, high-handed and unlawful
business practices, plaintiff suffered business interruptions and injury in its
operations for which it should be compensated in the amount of P10Million by way
of actual and compensatory damages[.]3
54
On July 15, 2003, SkyCable and Sun Cable moved for dismissal of the complaint
on the grounds of litis pendentia and forum-shopping since there was a similar
case pending before the National Telecommunications Commission (NTC) entitled
"GMA Network, Inc. v. Central CATV, Inc., Philippine Home Cable Holdings, Inc.,
and Pilipino Cable Corporation". The case, docketed as NTC ADM Case No. 2003-
085, allegedly involved the same cause of action and the same parties, except for
ABS-CBN. SkyCable and Sun Cable also asserted that it is the NTC that has
primary jurisdiction over the issues raised in the complaint. Moreover, GMA had no
cause of action against the two entities and failed to exhaust administrative
remedies.4
On July 17, 2003, Home Cable filed an Answer with Compulsory Counterclaims5
pleading, as affirmative defenses, the same matters alleged in the motion to
dismiss of SkyCable and Sun Cable. ABS-CBN also filed an Answer with
Compulsory Counterclaims6 contending that GMA had no cause of action against
it and that the complaint failed to state any.
GMA opposed the motion to dismiss7 and filed a Reply to the answer of Home
Cable8 and ABS-CBN.9 A preliminary hearing was held on the motion to dismiss
as well as the affirmative defenses.
In due course, the trial court issued the assailed resolution10 dismissing the
complaint. The trial court held that the resolution of the legal issues raised in the
complaint required the determination of highly technical, factual issues over which
the NTC had primary jurisdiction. Additionally, it held that GMA had no cause of
action against ABS-CBN because:
... It is evident that plaintiff’s cause of action is against the cable companies and
not against ABS-CBN since it does not establish that defendant ABS-CBN had a
hand in the re-channeling of plaintiff’s cable transmission because essentially
defendant ABS-CBN is similarly situated as plaintiff. The mere fact that the people
behind ABS-CBN is allegedly the same people who are at the helm of these cable
companies, and thus were "engaged in unfair competition and/or unfair trade
practices" is a conclusion of law and does not satisfy the requirement that the
plaintiff state "ultimate facts" in asserting its cause of action. …11
Hence, this petition filed by GMA under Section 2(c), Rule 41 in relation to Rule 45
of the Rules of Court, asserting that:
A
THE TRIAL COURT ERRED IN RULING THAT THE NTC HAS PRIMARY
JURISDICTION OVER PETITIONER’S COMPLAINT FOR DAMAGES AND IN
DISMISSING THE CASE FOR LACK OF JURISDICTION.
B
THE TRIAL COURT ERRED IN RULING THAT PETITIONER’S COMPLAINT
STATES NO CAUSE OF ACTION AGAINST RESPONDENT ABS-CBN.12
GMA asserts that the resolution of the issues raised in the complaint does not
entail highly technical matters requiring the expertise of the NTC. Petitioner insists
that the subject matter of the complaint merely involves respondents’ wrongful acts
of unfair competition and/or unfair trade practices resulting to damages, jurisdiction
over which lies with the regular courts and not the NTC.
We disagree.
GMA’s complaint for damages is based on the alleged arbitrary re-channeling of its
broadcast over the cable companies’ television systems, thereby resulting in the
distortion and degradation of its video and audio signals. The re-channeling was
allegedly made possible through the common ownership and interlocking
businesses of respondent corporations and was designed to thwart petitioner’s
upswing performance in the television ratings game. In other words, the wrongful
acts complained of and upon which the damages prayed for are based, have to do
with the operations and ownership of the cable companies. These factual matters
undoubtedly pertain to the NTC and not the regular courts.
That the matters complained of by GMA are within the NTC’s exclusive domain
can be discerned from the statutes governing the broadcasting and cable
television industry. Section 15 of Executive Order No. 546,13 by which the NTC
was created, provides for its general functions as follows:
a. Issue Certificate of Public Convenience for the operation of communications
utilities and services, radio communications systems, wire or wireless telephone or
telegraph system, radio and television broadcasting system and other similar
public utilities;
b. Establish, prescribe and regulate areas of operation of particular operators of
public service communications; and determine and prescribe charges or rates
pertinent to the operation of such public utility facilities and services except in
cases where charges or rates are established by international bodies or
associations of which the Philippines is a participating member or by bodies
recognized by the Philippine Government as the proper arbiter of such charges or
rates;
g. Promulgate such rules and regulations, as public safety and interest may
require, to encourage a larger and more effective use of communications, radio
and television broadcasting facilities, and to maintain effective competition among
55
private entities in these activities whenever the Commission finds it reasonably
feasible[.]
In 1987, Executive Order No. 205 was issued which empowers the NTC to grant
certificates of authority for the operation of cable antenna television system subject
to the limitation that the authority to operate shall not infringe on the television and
broadcast markets. Executive Order No. 436 issued in 1997, specifically vests the
NTC with the sole power of regulation and supervision over the cable television
industry.
In Batangas CATV, Inc. v. Court of Appeals,16 we held that the NTC’s regulatory
power over the broadcasting and cable television industry extends to matters
which are peculiarly within its competence. These include the: (1) determination of
rates, (2) issuance of certificates of authority, (3) establishment of areas of
operation, (4) examination and assessment of the legal, technical and financial
qualifications of applicant operators, (5) granting of permits for the use of
frequencies, (6) regulation of ownership and operation, (7) adjudication of issues
arising from its functions, and (8) other similar matters.17 With respect to the
foregoing, therefore, the NTC exercises exclusive, original and primary jurisdiction
to the exclusion of the regular courts.
In the case at bar, before the trial court can resolve the issue of whether GMA is
entitled to an award of damages, it would have to initially ascertain whether there
was arbitrary re-channeling which distorted and downgraded GMA’s signal. The
ascertainment of these facts, which relate to the operations of the cable
companies, would require the application of technical standards imposed by the
NTC as well as determination of signal quality "within the limitations imposed by
the technical state of the art".18 These factual questions would necessarily entail
specialized knowledge in the fields of communications technology and engineering
which the courts do not possess. It is the NTC which has the expertise and skills to
deal with such matters.
The regulation of ownership of television and cable television companies is
likewise within the exclusive concern of the NTC, pursuant to its broader regulatory
power of ensuring and promoting a "larger and more effective use of
communications, radio and television broadcasting facilities" in order that the
public interest may well be served. The NTC is mandated to maintain effective
competition among private entities engaged in the operation of public service
communications. It is also the agency tasked to grant certificates of authority to
cable television operators, provided that the same "does not infringe on the
television and broadcast markets."
As such, GMA’s allegations of unlawful business combination and unjust business
practices also properly pertain to the NTC. It is in the best position to judge matters
relating to the broadcasting industry as it is presumed to have an unparalleled
understanding of its market and commercial conditions. Moreover, it is the NTC
that has the information, statistics and data peculiar to the television broadcasting
industry. It is thus the body that is ideally suited to act on petitioner’s allegations of
market control and manipulation.
In Industrial Enterprises, Inc. v. Court of Appeals,19 the Court held that:
… It may occur that the Court has jurisdiction to take cognizance of a particular
case, which means that the matter involved is also judicial in character. However, if
the case is such that its determination requires the expertise, specialized skills and
knowledge of the proper administrative bodies because technical matters or
intricate questions of facts are involved, then relief must first be obtained in an
administrative proceeding before a remedy will be supplied by the courts even
though the matter is within the proper jurisdiction of a court. This is the doctrine of
primary jurisdiction. It applies "where a claim is originally cognizable in the courts,
and comes into play whenever enforcement of the claim requires the resolution of
issues which, under a regulatory scheme, have been placed within the special
competence of an administrative body; in such case the judicial process is
suspended pending referral of such issues to the administrative body for its
view[.]20
Consequently, while it is true that the regular courts are possessed of general
jurisdiction over actions for damages, it would nonetheless be proper for the courts
to yield its jurisdiction in favor of an administrative body when the determination of
underlying factual issues requires the special competence or knowledge of the
latter. In this era of clogged court dockets, administrative boards or commissions
with special knowledge, experience and capability to promptly hear and determine
disputes on technical matters or intricate questions of facts, subject to judicial
review in case of grave abuse of discretion, are well nigh indispensable. Between
the power lodged in an administrative body and a court, therefore, the
unmistakable trend is to refer it to the former.21
In this regard, we note that there is a pending case before the NTC in which the
factual issues raised in petitioner’s complaint have also been pleaded. Although
petitioner prays in the NTC case for the administrative remedy of cancellation of
the cable companies’ certificates of authority, licenses and permits, it is inevitable
that, in granting or denying this prayer, the NTC would have to pass upon the
same factual issues posed in petitioner’s complaint before the trial court. The latter
was thus correct in applying the doctrine of primary jurisdiction if only to avoid
conflicting factual findings between the court and the NTC.
56
Finally, the complaint failed to state a cause of action against ABS-CBN and the
other respondents, considering that the ultimate facts upon which the complaint for
damages depends fall within the technical competence of an administrative body.
Otherwise stated, pending determination by the NTC of the factual questions
involved in the case, petitioner’s complaint, which is founded upon such factual
issues, would be premature.

WHEREFORE, the petition is DENIED. The assailed resolution dated October 30,
2003 of the Regional Trial Court of Quezon City, Branch 97, is AFFIRMED.

SO ORDERED.

57
G.R. No. L-61438 June 24, 1983
ERDULFO C. BOISER doing business under the name and style PREMIERE
AUTOMATIC TELEPHONE NETWORK, petitioner, vs. COURT OF APPEALS,
PHILIPPINE LONG DISTANCE TELEPHONE CO., CONRADO HERNANDEZ,
ROMAN JUEZAN and WILSON MORRELL, respondents.
GUTIERREZ, JR., J.:
This is a petition for certiorari and prohibition, with a prayer for preliminary
injunction or restraining order, to set aside the July 26, 1982 resolution of the
respondent Court of Appeals which enjoined the enforcement of a March 2, 1979
restraining order of the Court of First Instance of Cebu. The resolution of the Court
of Appeals, in effect, allows the disconnection of telephone communications
between Tagbilaran, Bohol and Mandaue, Cebu thus cutting telephone
communications with the rest of the country and the world, for the duration of the
restraining order.
The petitioner has been operating a telephone system in Tagbilaran City and other
municipalities in the province of Bohol since April 15, 1965, doing business under
the name and style of Premiere Automatic Telephone Network. Sometime in
August, 1965, the petitioner and private respondent Philippine Long Distance
Telephone Company (PLDT) entered into a contract denominated as
"Interconnecting Agreement" whereby PLDT bound itself to provide Premiere with
long distance and overseas facilities through the use of the PLDT relay station in
Mandaue City, Province of Cebu. The arrangement enabled subscribers of
Premiere in Bohol to make or receive long distance and overseas calls to and from
any part of the Philippines and other countries of the world. Petitioner on the other
hand had the obligation to preserve and maintain the facilities provided by
respondent PLDT, provide relay switching services and qualified radio operators,
and otherwise maintain the required standards in the operation of facilities under
the agreement.
On February 27, 1979, without any prior notice to the petitioner, respondent PLDT
issued a "circuit authorization order" to its co- respondents, PLDT employees
Roman Juezan and Wilson Morrell to terminate the connection of PLDT's relay
station with the facilities of the petitioner's telephone system in the province of
Bohol. Petitioner avers that this order was in gross violation of the aforecited "
Interconnecting Agreement." To avert serious consequences to the public and
private hours resulting from any disruption of the petitioner's telephone network
and, of course, to the long distance and overseas aspects of its business, the
petitioner was compelled to seek judicial relief. It instituted Civil Case No. 17867
with the then Court of First Instance of Cebu now a Regional Trial Court, for
injunction and damages.
On March 2, 1979, the Court of First Instance of Cebu is a temporary restraining
order against respondent PLDT and directed the preservation of the status quo
between the parties.
On August 2, 1979, or five (5) months after the issuance of the temporary
restraining order, the private respondents filed a motion to dissolve or lift the
restraining order. Thereafter, the petitioner and the private respondents submitted
the merits of the main case to a hearing and agreed to consider jointly in said trial
on the merits the motion to dissolve or lift temporary restraining order including the
propriety of the issuance of the writ of preliminary injunction.
The hearing on the merits progressed and petitioner was already in the process of
winding up its evidence in Civil Case No. 17867 before the Court of First Instance,
Cebu when on July 20, 1982, or nearly three (3) years after the filing of their
motion to dissolve or lift temporary restraining order, the private respondents
elevated the case to the respondent Court of Appeals by filing the petitioner for
certiorari. CA-G.R. No. 14554-SP.
The petition filed with the Court of Appeals had for its object the setting aside of
the CFI restraining order which enjoined PLDT and the other respondents from
disconnecting the Mandaue-Tagbilaran telephone connections. The ground
alleged in the petition was:
RESPONDENT JUDGE HAS NO AUTHORITY TO ISSUE THE RESTRAINING
ORDER, DATED MARCH 2, 1979, CONSIDERING THAT THE ISSUE OR
SUBJECT-MATTER OF THE COMPLAINT FOR WHICH THE SAID ORDER WAS
ISSUED PROPERLY DEVOLVES WITHIN THE JURISDICTION OF THE
NATIONAL TELECOMMUNICATIONS COMMISSION AND NOT WITH THE
REGULAR COURTS. THE REGULAR COURTS.
As earlier mentioned, the respondent Court of Appeals issued its July 26, 1982
resolution which reads:
Without necessarily giving the course to the petition, respondents are directed to
file their Comments (not a motion to dismiss), sufficient in form and substance to
constitute an answer, within ten (10) days from notice of this resolution.
Meanwhile, the respondents are restrained from enforcing the Order of March 2,
1979, until further orders from Us.
58
The hearing of the application for the issuance of a writ. of preliminary injunction is
hereby set on August 10, 1982, ...
Subsequently, the hearing was re-set by the respondent Court of Appeals for
September 6, 1982. The petitioner countered by filing this petition.
The petitioner states that the Court of Appeals, now Intermediate Appellate Court,
should dismiss CA-G.R. No. 14554-SP on the following grounds:
That the respondent Court of Appeals has no jurisdiction or has committed a grave
abuse of discretion amounting to lack or in excess of jurisdiction in taking
cognizance of CA-G.R. No. 14554-SP; and
That the petition CA-G.R. No. 14554-SP, before respondent Court of Appeals (now
Intermediate Appellate Court) is premature and has no legal and factual basis.
The jurisdictional issue raised by Premiere in this petition is tied up to the
jurisdictional issue raised by PLDT on its petition filed with the Court of Appeals.
According to PLDT, the principal issue in dispute is the propriety or validity of the
"Circuit Authorization Order" it issued to its own employees co- respondents
Ramon Juezan and Wilson Morrell regarding the use of its own relay station by
petitioner Boiser. PLDT emphasizes, and this is the main thrust of its case both
here and below, that the order which cut off the Tagbilaran-Mandaue phone
connections is an internal transaction and business of PLDT, and that it relates to
a purely technical matter pertaining basically to the operation of the
communications network of a public utility corporation. According to PLDT, the CFI
of Cebu has arrogated upon itself the authority of supervising or overseeing the
operations of PLDT at its Cebu relay station.
Respondent PLDT maintains that the National Telecommunications Commission is
the body with jurisdiction to hear and decide controversies arising from the
operation of telephone systems or the interconnection of communications facilities,
not the Court of First Instance.
Petitioner Boiser or Premiere, in turn, contends in the petition before this Court that
the CFI of Cebu acted within its jurisdiction and there being no grave abuse of
discretion, the challenge to its interlocutory order should not have been entertained
by the Court of Appeals.
In seeking the dissolution or lifting of the March 2, 1979 CFI restraining order,
PLDT stated that the disconnection it effected was authorized by:
(1) The interconnecting agreement between PLDT and Premiere Automatic
Telephone Network, and
(2) The decision of the Board of Communications dated July 29,1977 in BOC Case
No. 76-53.
Paragraph 13 of the Interconnecting and Operating Agreement between PLDT and
Premiere provides:
Violation of any of the conditions or terms of this Agreement or of the
Interconnecting and traffic Agreement attached hereto shall constitute sufficient
cause for the cancellation of this Agreement and the severance of connection on
May (30) days advance notice given in writing by either party unless such violation
creates manifest hazard to life, property or to facilities of transmission and
reception in which event severance may be made without notice.
Section 2 of the Interconnecting and traffic Agreement mentioned in the above
Paragraph 13, in turn, provides:
Sec. 2. If either company defaults in the payment of any amounts hereunder or
violates any other provision of this Agreement, and if such default or violation
continues for thirty (30) days after written notice thereof, the other company may
terminate this Agreement forthwith by written notice.
It may be noted that the above provision mentions a default or violation continuing
for thirty days after written notice and the termination of the agreement by another
written notice.
There is nothing in the provision about the period when such written notice should
be given by the party wishing to terminate. Such period can be found in paragraph
13 of the Interconnecting Agreement quoted earlier. Therefore, even granting that
there was default on the part of the petitioner, the 30-day requisite notice should
have been followed. Whether or not the requirement was followed calls for the
presentation of evidence before the proper tribunal.
The second authority for disconnection cited by the private respondents is the
decision in BOC Case No. 76-53. The decision deals with members of
PAPTELCO, of which petitioner is one who have outstanding accounts with PLDT.
The BOC decision refers to outstanding accounts of PAPTELCO members
representing PLDT's unremitted shares for domestic long distance and overseas
calls. 'me pertinent provision of the decision is Sec. 3(f) which states that:
In addition to the penalty clause imposed under the preceding paragraph, if any
PAPTELCO member neglects or fails to comply with obligations under this
59
Agreement, its service may be disconnected by PLDT after sixty (60) days written
notice to said PAPTELCO member, unless its delinquency shall have been fully
paid or made current.
It appears clear from the aforecited provision that 60 days prior notice must be
given before disconnection may be effected.
There is, therefore, more than ample basis for the Cebu CFI, now Cebu Regional
Trial Court, to assume jurisdiction and to continue trying Civil Case No. 17867.
The case before the trial court is for injunction arising from breach of contract.
Premiere asks for compliance with the terms of the contract and for the payment of
P100,000.00 exemplary and moral damages in addition to attorney's fees.
PLDT has cited in full the authority and powers given by Presidential Decree No. 1
to the Board of Communications, now National Telecommunications Commission.
There is nothing in the Commission's powers which authorizes it to adjudicate
breach of contract cases, much less to award moral and exemplary damages. The
two authorities cited by the private respondents in the bid to dissolve the CFI
restraining order do not appear adequate to disregard the thirty (30) day prior
notice provided by the Interconnecting Agreement. But even if they were, this
question is one which should be clarified in the civil case for breach of contract.
Clearly, therefore, what the petitioner is questioning is an order which does not
merely involve "a purely internal transaction of a telecommunications company"
but one which would necessary affect rights guaranteed it by the contract allegedly
violated.
We ruled in RCPI v. Board of Communications (80 SCRA 471):
We agree with petitioner RCPI. In one case We have ruled that the Public Service
Commission and its successor in interest, the Board of Communications, 'being a
creature of the legislature and not a court, can exercise only such jurisdiction and
powers as are expressly or by necessary implication, conferred upon it by statute'.
Filipino Bus Co. vs. Phil. Railway Co., 57 Phil. 860.) The functions of the Public
Service Commission are limited and administrative in nature and it has only
jurisdiction and power as are expressly or by necessary implication conferred upon
it by Statute. (Batangas Laguna, Tayabas Bus Co. vs. Public Service Commission,
L-25994 and L-26004-26046, August 31, 1966, 17 SCRA 111.) As successor in of
the Public Service Commission, the Board of Communications exercises the same
powers, jurisdiction and functions as that provided for in the Public Service Act for
the Public Service Commission. ...
The Board of Communications has been renamed National Telecommunications
Commission. The NTC has no jurisdiction, and the PLDT has made no showing of
any, not even by necessary implication, to decide an issue involving breach of
contract. And as we stated in RCPI v. Board of Communications, "if in the two
cases before us, complainants Diego Morales and Pacifica Inocencio allegedly
suffered injury due to petitioner's breach of contractual obligation, ... the proper
forum for them to ventilate their grievances for possible recovery of damages
against petitioner should be in the courts and not in the respondent Board of
Communications." Jurisdiction is conferred only by the Constitution or the law.
(Pimentel v. Comelec, 101 SCRA 769). It cannot be conferred by the will of the
parties. (Salandanan v. Tizon, 62 SCRA 388). The jurisdiction of the court is
determined by the allegations in the complaint. (Lat v. PLDT, 67 SCRA 425.)
The petitioner alleges in its second ground for this petition that the case before the
Court of Appeals is premature and has no legal or factual basis.
The private respondents explain that they elevated the case to the Court of
Appeals because the Cebu CFI had taken an unreasonably long time to resolve
the motion to lift its restraining order. PLDT argues that further delays would be
prejudicial and, therefore, the restraining order issued by the Court of Appeals is
proper.
The Court of First Instance of Cebu issued its restraining order on March 2, 1979.
The motion to lift the order was filed five months later on August 2, 1979. The
motion was properly filed with the trial court, but the lack of urgency in its filing and
the failure of the private respondents to immediately and vigorously press for the
lifting of the restraining order militate against a finding of grave abuse sufficient to
justify a writ of certiorari. The petitioners point out that from the filing of the motion
to lift restraining order on August 2, 1979 up to the filing of the petition for certiorari
with the Court of Appeals on July 20, 1982, almost three years lapsed and in all
that time, there was no request, motion, nor hint for the trial court to resolve the
pending motion to lift the restraining order.
As stated in Butuan Bay Wood Export Corporation v. Court of Appeals (97 SCRA
297, 305):
Indeed, before a petition for certiorari can be brought against an order of a lower
court, all available remedies must be exhausted. (Plaza v. Mencias, No. I,18253,
October 31, 1962, 6 SCRA 563.) Likewise, in a host of case (Aquino v. Estenzo, L-
20791, May 19, 1965, citing Herrera v. Barreto, 25 Phil. 345; Uy Chu v. Imperial,
44 Phil. 27; Amante v. Sison, 60 Phil. 949; Manzanares v. Court of First Instance,
61 Phil. 850; Vicencio v. Sison, 62 Phil. 300, 306; Manila Post Publishing Co. v.
Sanchez, 81 Phil. 614; Alvarez v. Ibañez, 83 Phil. 104; Nicolas v. Castillo, 97 Phil.
60
336; Collector of Internal Revenue v. Reyes, 100 Phil. 822; Ricafort v. Fernan, 101
Phil. 575; Cueto v. Ortiz, L-11555, May 31, 1960; Pagkakaisa Samahang
Manggagawa sa San Miguel Brewery v. Enriquez, L-12999, July 26, 1960; Santos
v. Cardeñola L-18412, July 31, 1962; Sy It v. Tiangco, L-18376, Feb. 27,1962;
Plaza v. Mencias, L-18253, Oct. 31, 1962), We ruled that before a petition for
certiorari in a higher court, the attention of the lower court should first be called to
its supposed error and its correction should be sought. If this is not done, the
petition for certiorari should be denied. The reason for this rule is that issues which
Courts of First Instance are bound to decide should not summarily be taken from
them and submitted to an appellate court without first giving such lower courts the
opportunity to dispose of the same with due deliberation.
Quite the contrary, the private respondents submitted to a trial on the merits and
formally agreed that, in addition to the merits, the motion to dissolve or lift
temporary restraining order and the propriety of the writ of preliminary injunction
would be considered and resolved in the trial of the case. The private respondents
agreed that evidence submitted during trial would include evidence on the pending
motion. In fact, the petitioner was already in the process of winding up its evidence
before the Court of First Instance when the private respondents filed their petition
with the Court of Appeals.
Private respondents' handling of their case dispels any suspicion of unreasonable
delay on the part of the Court of First Instance to resolve such motion.
The private respondents aver that there are special circumstances which warrant
immediate and direct action of an appellate court. The alleged circumstances
include the failure of respondent PLDT to make full use of its own relay station and
the alleged refusal of the petitioner to pay for its use thereby grievously affecting
the expansion and modernization program of the respondent PLDT.
Special circumstances may indeed warrant immediate intervention of a higher
court even while the lower court is deliberating on the action to take on a pending
matter. (Matute v. Court of Appeals, 26 SCRA 768; De Gala-Sison v. Maddela, 67
SCRA 478). The private respondents, however, have failed to make a showing of
such special or exceptional circumstances. We fail to see how closing one relay
station serving the province of Bohol would hasten PLDT's program of national
expansion. There are various other legal remedies, administrative and judicial,
available to handle the alleged non-payment by Premiere of PLDT's share in long
distance and overseas calls. The case before the Court of Appeals is not the
proper remedy for enforcing collections from Premiere under the circumstances of
this case. And more important, matters dependent on the presentation of evidence
are best handled at the trial court level.
The private respondents overlook the fact that telephone and telecommunications
services are affected by a high degree of public interest. It is not Premiere alone
which win suffer from the appellate injunction but the people of Bohol. And as far
as we can gather from the records, the consumers have been paying for the
services given them. They are not at fault in this controversy between Premiere
and PLDT.
In Republic Telephone Co. V. Philippine Long Distance Telephone Co. (25 SCRA
80), we sustained the "legalization" of unauthorized services maintained by PLDT
for fifteen (15) years instead of ordering the discontinuance of the telephone
system found operating illegally. The reason — public interest would thus be better
served.
In Republic v. Philippine Long Distance Telephone Co. (26 SCRA 620) we restated
the rule that the Republic, acting for and in behalf of the Government Telephone
System, and the PLDT cannot be coerced to enter into an interconnecting contract,
where the two could not agree on terms. We ruled, however, that while the
Republic may not compel PLDT to celebrate a contract with it, the Republic may, in
the exercise of the sovereign power of eminent domain, require PLDT to permit
interconnection with the Government Telephone System, as the needs of the
government service may require, subject to payment of just compensation. The
justification was, again, the general interest or public interest.
In Cababa v. Remigio (8 SCRA 50), we sustained the acts of the Public Service
Commission under the principle that while an already established public utility
operator must be protected in his investments, the first consideration is still the
protection of public interests and convenience. The question which ultimately
determines issues raised by or against public utilities is what action is for the best
interests of the public?
In the petition now before us, we do not grapple with such issues as legalization of
illegal services or compelling unwilling parties to enter into interconnection of
services. We simply rule that pending final determination of the case before the
trial court, the appellate court should refrain from acting on the petition now before
it and from issuing orders that would punish the people of Bohol because Premiere
and PLDT cannot see eye to eye.
The basic policies for the telephone industry embodied in Presidential Decree No.
217 are premised on the principle that telephone service is a crucial element in the
conduct of business activity, efficient telephone services contribute directly to
national development, and telephone services must be made available at
reasonable cost to as many subscribers as possible. Both law and policy
considerations can for the issuance of the prayer for writs.
61
WHEREFORE, the petition for writs of certiorari and prohibition is GRANTED. The
questioned resolution of the Court of Appeals is SET ASIDE and our restraining
order issued on August 25, 1982 is made PERMANENT. The Intermediate
Appellate Court is directed to dismiss the petition in CA-G.R. No. 14554.

SO ORDERED,

62