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II.

CONSTITUTIONAL PROVISIONS
Section 11. No franchise, certificate, or any other form of authorization for the
b. Ownership operation of a public utility shall be granted except to citizens of the Philippines or
to corporations or associations organized under the laws of the Philippines, at least
WILSON P. GAMBOA v. FINANCE SECRETARY MARGARITO B. TEVES, sixty per centum of whose capital is owned by such citizens; nor shall such
et al. franchise, certificate, or authorization be exclusive in character or for a longer
G.R. No. 176579, June 28, 2001 period than fifty years. Neither shall any such franchise or right be granted except
under the condition that it shall be subject to amendment, alteration, or repeal by
the Congress when the common good so requires. The State shall encourage equity
FACTS: In 1969, General Telephone and Electronics Corporation (GTE), sold 26 participation in public utilities by the general public. The participation of foreign
percent of the outstanding common shares of PLDT to Philippine investors in the governing body of any public utility enterprise shall be limited to
Telecommunications Investment Corporation (PTIC). In 1977, Prime Holdings, Inc. their proportionate share in its capital, and all the executive and managing officers
(PHI) became the owner of 111,415 shares of stock of PTIC. In 1986, the 111,415 of such corporation or association must be citizens of the Philippines.
shares of stock of PTIC held by PHI were sequestered by the Presidential
Commission on Good Government (PCGG). The 111,415 PTIC shares, which The intent of the framers of the Constitution in imposing limitations and
represent about 46.125 percent of the outstanding capital stock of PTIC, were later restrictions on fully nationalized and partially nationalized activities is for Filipino
declared by this Court to be owned by the Republic of the Philippines. nationals to be always in control of the corporation undertaking said activities.
Otherwise, if the Trial Court ruling upholding respondent's arguments were to be
In 1999, First Pacific, a Bermuda-registered acquired the remaining 54 percent of given credence, it would be possible for the ownership structure of a public utility
the outstanding capital stock of PTIC. On 20 November 2006, the Inter-Agency corporation to be divided into one percent (1%) common stocks and ninety-nine
Privatization Council (IPC) of the Philippine Government through a public bidding percent (99%) preferred stocks. Following the Trial Court ruling adopting
sold the same shares to Parallax Venture who won with a bid of P25.6 billion or respondent's arguments, the common shares can be owned entirely by foreigners
US$510 million. thus creating an absurd situation wherein foreigners, who are supposed to be
minority shareholders, control the public utility corporation.
Thereafter, First Pacific announced that it would exercise its right of first refusal as
a PTIC stockholder and buy the 111,415 PTIC shares by matching the bid price of The term "capital" in Section 11, Article XII of the Constitution refers only to shares
Parallax. On 14 February 2007, First Pacific, through its subsidiary, MPAH, entered of stock entitled to vote in the election of directors, and thus in the present case
into a Conditional Sale and Purchase Agreement of the 111,415 PTIC shares, or only to common shares, and not to the total outstanding capital stock comprising
46.125 percent of the outstanding capital stock of PTIC, with the Philippine both common and non-voting preferred shares.
Government for the price of P25,217,556,000 or US$510,580,189. The sale was
completed on 28 February 2007. Indisputably, one of the rights of a stockholder is the right to participate in the
control or management of the corporation. This is exercised through his vote in the
Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of election of directors because it is the board of directors that controls or manages
46.125 percent of PTIC shares is actually an indirect sale of 12 million shares or the corporation. In the absence of provisions in the articles of incorporation
about 6.3 percent of the outstanding common shares of PLDT. With the sale, First denying voting rights to preferred shares, preferred shares have the same voting
Pacific common shareholdings in PLDT increased from 30.7 percent to 37 percent, rights as common shares. However, preferred shareholders are often excluded from
thereby increasing the common shareholdings of foreigners in PLDT to about 81.47 any control, that is, deprived of the right to vote in the election of directors and on
percent. This, according to petitioner, violates Section 11, Article XII of the 1987 other matters, on the theory that the preferred shareholders are merely investors in
Philippine Constitution which limits foreign ownership of the capital of a public the corporation for income in the same manner as bondholders. In fact, under the
utility to not more than 40 percent. Corporation Code only preferred or redeemable shares can be deprived of the right
to vote. Common shares cannot be deprived of the right to vote in any corporate
On 28 February 2007, petitioner filed the instant petition for prohibition, meeting, and any provision in the articles of incorporation restricting the right of
injunction, declaratory relief, and declaration of nullity of sale of the 111,415 PTIC common shareholders to vote is invalid.
shares.
Considering that common shares have voting rights which translate to control, as
ISSUE: Does the term "capital" in Section 11, Article XII of the Constitution refer opposed to preferred shares which usually have no voting rights, the term "capital"
to the total common shares only or to the total outstanding capital stock of PLDT, a in Section 11, Article XII of the Constitution refers only to common shares.
public utility? However, if the preferred shares also have the right to vote in the election of
directors, then the term "capital" shall include such preferred shares because the
HELD: Section 11, Article XII (National Economy and Patrimony) of the 1987 right to participate in the control or management of the corporation is exercised
Constitution mandates the Filipinization of public utilities, to wit: through the right to vote in the election of directors. In short, the term "capital" in
Section 11, Article XII of the Constitution refers only to shares of stock that can vote fact that, pursuant to the procedure outlined in P.D. 198, it no longer plays a direct
in the election of directors. role in authorizing the formation and maintenance of water districts, it having
vested the same to local legislative bodies and the Local Water Utilities
This interpretation is consistent with the intent of the framers of the Constitution Administration (LWUA).
to place in the hands of Filipino citizens the control and management of public
utilities. Thus, 60 percent of the "capital" assumes, or should result in, "controlling
interest" in the corporation and thus in the present case, only to common shares,
and not to the total outstanding capital stock (common and non-voting preferred d. Subject to Amendment
shares).
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI) vs.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) and JUAN
A. ALEGRE
c. Exclusivity G.R. No. 93237 November 6, 1992

METROPOLITAN CEBU WATER DISTRICT (MCWD) v. M. ADALA FACTS: Private respondent Juan A. Alegre's wife, Dr. Jimena Alegre, sent two (2)
526 SCRA 465 (2007) RUSH telegrams through petitioner RCPI's facilities in Taft Ave., Manila at 9:00 in
the morning of 17 March 1989 to his sister and brother-in-law in Valencia, Bohol
and another sister-in-law in Espiritu, Ilocos Norte.
FACTS: The Metropolitan Cebu Water District (MCWD), a public corporation,
appealed the decision rendered in favor of Margarita A. Adala (Adala) by the Both telegrams did not reach their destinations on the expected dates. So, private
National Water Resources Board (NWRB), granting her a franchise permit to respondent filed a letter-complaint against RCPI with National
supply water to three sitios in Bulacao. MCWD was the exclusive distributor of Telecommunications Commission (NTC) for poor service, with a request for the
water in the district. MCWD contended that the proposed waterworks would imposition of the appropriate punitive sanction against the company. Taking
interfere with their water supply which it has the right to protect, and the water cognizance of the complaint, NTC directed RCPI to answer the complaint and set
needs of the residents in the subject area was already being well served by the initial hearing.
petitioner. They also contend that they were granted by Section 47 of Presidential
Decree 198, granting exclusive franchise only to public utilities. Engineer Paredes, NTC held that RCPI was administratively liable for deficient and inadequate service
the general manager of MCWD, filed Certificate of Public Convenience by the under Section 19(a) of C.A. 146 and imposed the penalty of fine payable within
National Water Resources Board (NWRB), which permitted the company to thirty (30) days from receipt in the aggregate amount of one thousand pesos.
operate and maintain waterworks supply services. MCWD alleged that the Board of
Directors of MCWD did not give consent to the issuance of the franchise applied Hence, RCPI filed this petition for review invoking C.A. 146 Sec. 19(a) which limits
for. the jurisdiction of the Public Service Commission (precursor of the NTC) to the
fixing of rates.
ISSUES: Whether or not Section 47 of Presidential Decree 198 grants exclusive
franchise to public utilities ISSUE: Whether or not Public Service Commission (precursor of the NTC) has
jurisdiction to impose fines
HELD: MWCD‘s position that an overly strict construction of the term ―franchise
as used in Section 47 of P.D. 198 would lead to an absurd result impresses. If HELD: The decision appealed from is reversed and set aside for lack of jurisdiction
franchises, in this context, were strictly understood to mean an authorization of the NTC to render it.
issuing directly from the legislature, it would follow that, while Congress cannot
issue franchises for operating waterworks systems without the water district‘s NTC has no jurisdiction to impose a fine. Under Section 21 of C. A. 146, as
consent, the NWRB may keep on issuing CPCs authorizing the very same act even amended, the Commission was empowered to impose an administrative fine in
without such consent. In effect, not only would the NWRB be subject to less cases of violation of or failure by a public service to comply with the terms and
constraints than Congress in issuing franchises. The exclusive character of the conditions of any certificate or any orders, decisions or regulations of the
franchise provided for by Section 47 would be illusory. While the prohibition in Commission. Petitioner operated under a legislative franchise, so there were no
Section 47 of P.D. 198 applies to the issuance of CPCs for the reasons discussed terms nor conditions of any certificate issued by the Commission to violate. Neither
above, the same provision must be deemed void ab initio for being irreconcilable was there any order, decision or regulation from the Commission applicable to
with Article XIV Section 5 of the 1973 Constitution which was ratified on January petitioner that the latter had allegedly violated, disobeyed, defied or disregarded.
17, 1973 – the constitution in force when P.D. 198 was issued on May 25, 1973. That
the legislative authority – in this instance, then President Marcos – intended to No substantial change has been brought about by Executive Order No. 546 invoked
delegate its power to issue franchises in the case of water districts is clear from the by the Solicitor General's Office to bolster NTC's jurisdiction. The Executive Order
is not an explicit grant of power to impose administrative fines on public service RULING: The TRB was granted sufficient power to grant a qualified person or
utilities, including telegraphic agencies, which have failed to render adequate entity with authority to operate the toll facility/system. By explicit provisions of the
service to consumers. Neither has it expanded the coverage of the supervisory and PDs, the TRB was given power to grant administrative franchise for toll facility
regulatory power of the agency. There appears to be no alternative but to reiterate projects. The limiting thrust of Article 11, Section 11 of the Constitution on the grant
the settled doctrine in administrative law that: of franchise or other forms of authorization to operate public utilities may, in
context, be stated as follows: (a) the grant shall be made only in favor of qualified
Too basic in administrative law to need citation of jurisprudence is the rule that Filipino citizens or corporations; (b) Congress can impair the obligation of
jurisdiction and powers of administrative agencies, like respondent Commission, franchises, as contracts; and (c) no such authorization shall be exclusive or exceed
are limited to those expressly granted or necessarily implied from those granted in fifty years. Under the 1987 Constitution, Congress has an explicit authority to grant
the legislation creating such body; and any order without or beyond such a public utility franchise. However, it may validly delegate its legislative authority,
jurisdiction is void and ineffective (Globe Wireless case). under the power of subordinate legislation, to issue franchises of certain public
utilities to some administrative agencies.

DISPOSITIVE: The petitions in G.R. Nos. 166910 173630, and 169917 are hereby
e. Fixed Term DENIED for lack of merit. The petition in G.R. No. 183599 is GRANTED.

ERNESTO FRANCISCO, JR. V. TOLL REGULATORY BOARD


GR No. 166910, October 19, 2010
f. Take-over Power
FACTS: President Marcos issued PD 1112 authorizing the establishment of toll
facilities on public improvements. It acknowledged the huge financial requirements DAVID v. MACAPAGAL- ARROYO
and the need to tap the resources of the private sector to implement the 489 SCRA 160
government’s infrastructure programs. PD 1112 allowed the collection of toll fees
for the use of certain public improvements that would allow a reasonable rate of FACTS: In February 2006, due to the escape of some Magdalo members and the
return on investments. The same decree created the Toll Regulatory Board, vesting discovery of a plan (Oplan Hackle I) to assassinate the president, then president
it with the power to enter into contracts for the construction, maintenance, and Gloria Macapagal-Arroyo (GMA) issued Presidential Proclamation 1017 (PP1017)
operation of tollways, grant authority to operate a toll facility, issue the necessary and is to be implemented by General Order No. 5 (GO 5). The said law was aimed
Toll Operation Certificate (TOC) and fix initial toll rates, and adjust it from time to to suppress lawlessness and the connivance of extremists to bring down the
time after due notice and hearing. PD 1113 was issued granting the Philippine government.
National Construction Corporation for a period of 30 years, a franchise to operate
toll facilities in the North Luzon and South Luzon Expressways. Subsequently, PD Pursuant to such PP, GMA cancelled all plans to celebrate EDSA I and at the same
1894 was issued further granting the PNCC a franchise over the Metro Manila time revoked all permits issued for rallies and other public organization/meeting.
Expressway and the expanded delineated NLEX and SLEX. Notwithstanding the cancellation of their rally permit, Kilusang Mayo Uno (KMU)
head Randolf David proceeded to rally which led to his arrest.
Then came the 1987 Constitution with its franchise provision. In 1993, the
Government Corporate Later that day, the Daily Tribune, which Cacho-Olivares is the editor, was raided by
Counsel held that the PNCC may enter into a joint venture agreement with private the CIDG and they seized and confiscated anti-GMA articles and write ups. Later
entities without going into public bidding. On February 1994, the DPWH together still, another known anti-GMA news agency (Malaya) was raided and seized. On the
with other private entities executed a MOU to open the door for entry of private same day, Beltran of Anakpawis, was also arrested. His arrest was however
capital in the Subic and Clark extension projects. PNCC entered into a financial and grounded on a warrant of arrest issued way back in 1985 for his actions against
technical JVAs with entities for the toll operation of its franchised areas. Several Marcos. His supporters cannot visit him in jail because of the current imposition of
Supplemental Toll Operation Agreements (STOA) were entered for the South Metro PP 1017 and GO 5.
Manila Skyway, NLEX Expansion, and South Luzon Expressway Projects.
In March, GMA issued PP 1021 which declared that the state of national emergency
Petitioners seek to nullify the various STOAs and assail the constitutionality of ceased to exist. David and some opposition Congressmen averred that PP1017 is
Sections 3(a and d) of PD 1112 in relation to Section 8(b) of PD 1894. Insofar as unconstitutional for it has no factual basis and it cannot be validly declared by the
they vested the TRB the power to issue, modify, and promulgate toll rate changes president for such power is reposed in Congress. Also such declaration is actually a
while given the ability to collect tolls. declaration of martial law. Olivares-Cacho also averred that the emergency
contemplated in the Constitution are those of natural calamities and that such is an
ISSUE: Whether or not the TRB may be empowered to grant authority to operate overbreadth. Petitioners claim that PP 1017 is an overbreadth because it encroaches
the toll facility/system. upon protected and unprotected rights. The Sol-Gen argued that the issue has
become moot and academic by reason of the lifting of PP 1017 by virtue of the On the basis of Sec 17, Art 7 of the Constitution, GMA declared PP 1017. The SC
declaration of PP 1021. The Sol-Gen averred that PP 1017 is within the president’s considered the President’s ‘calling-out’ power as a discretionary power solely vested
calling out power, take care power and take over power. in his wisdom, it stressed that ‘this does not prevent an examination of whether
such power was exercised within permissible constitutional limits or whether it was
ISSUE: Whether or not PP 1017 and GO 5 is constitutional. exercised in a manner constituting grave abuse of discretion. The SC ruled that
GMA has validly declared PP 1017 for the Constitution grants the President, as
HELD: PP 1017 and its implementing GO are partly constitutional and partly Commander-in-Chief, a ‘sequence’ of graduated powers. From the most to the least
unconstitutional. benign, these are: the calling-out power, the power to suspend the privilege of the
writ of habeas corpus, and the power to declare Martial Law. The only criterion for
The issue cannot be considered as moot and academic by reason of the lifting of the the exercise of the calling-out power is that ‘whenever it becomes necessary,’ the
questioned PP. It is still in fact operative because there are parties still affected due President may call the armed forces ‘to prevent or suppress lawless violence,
to the alleged violation of the said PP. Hence, the SC can take cognition of the case invasion or rebellion.’ And such criterion has been met.
at bar. The SC ruled that PP 1017 is constitutional in part and at the same time
some provisions of which are unconstitutional. The SC ruled in the following way; Resolution by the SC on the Take Care Doctrine
Resolution by the SC on the Factual Basis of its declaration Pursuant to the 2nd sentence of Sec 17, Art 7 of the Constitution (He shall ensure
The petitioners were not able to prove that GMA has no factual basis in issuing PP that the laws be faithfully executed.) the president declared PP 1017. David et al
1017 and GO 5. A reading of the Solicitor General’s Consolidated Comment and averred that PP 1017 however violated Sec 1, Art 6 of the Constitution for it
Memorandum shows a detailed narration of the events leading to the issuance of arrogated legislative power to the President. Such power is vested in Congress.
PP 1017, with supporting reports forming part of the records. Mentioned are the They assail the clause ‘to enforce obedience to all the laws and to all decrees, orders
escape of the Magdalo Group, their audacious threat of the Magdalo D-Day, the and regulations promulgated by me personally or upon my direction.’ The SC noted
defections in the military, particularly in the Philippine Marines, and the reproving that such provision is similar to the power that granted former President Marcos
statements from the communist leaders. There was also the Minutes of the legislative powers (as provided in PP 1081). The SC ruled that the assailed PP 1017
Intelligence Report and Security Group of the Philippine Army showing the is unconstitutional insofar as it grants GMA the authority to promulgate
growing alliance between the NPA and the military. Petitioners presented nothing ‘decrees.’ Legislative power is peculiarly within the province of the Legislature. Sec
to refute such events. Thus, absent any contrary allegations, the Court is convinced 1, Article 6 categorically states that ‘[t]he legislative power shall be vested in the
that the President was justified in issuing PP 1017 calling for military aid. Indeed, Congress of the Philippines which shall consist of a Senate and a House of
judging the seriousness of the incidents, GMA was not expected to simply fold her Representatives.’ To be sure, neither Martial Law nor a state of rebellion nor a
arms and do nothing to prevent or suppress what she believed was lawless violence, state of emergency can justify GMA’[s exercise of legislative power by issuing
invasion or rebellion. However, the exercise of such power or duty must not stifle decrees. The president can only “take care” of the carrying out of laws but cannot
liberty. create or enact laws.

Resolution by the SC on the Overbreadth Theory Resolution by the SC on the Take Over Power Doctrine
First and foremost, the overbreadth doctrine is an analytical tool developed for The president cannot validly order the taking over of private corporations or
testing ‘on their faces’ statutes in free speech cases. The 7 consolidated cases at bar institutions such as the Daily Tribune without any authority from Congress. On the
are not primarily ‘freedom of speech’ cases. Also, a plain reading of PP 1017 shows other hand, the word emergency contemplated in the constitution is not limited to
that it is not primarily directed to speech or even speech-related conduct. It is natural calamities but rather it also includes rebellion. The SC made a distinction;
actually a call upon the AFP to prevent or suppress all forms of lawless violence. the president can declare the state of national emergency but her exercise of
Moreover, the overbreadth doctrine is not intended for testing the validity of a law emergency powers does not come automatically after it for such exercise needs
that ‘reflects legitimate state interest in maintaining comprehensive control over authority from Congress. The authority from Congress must be based on the
harmful, constitutionally unprotected conduct.’ Undoubtedly, lawless violence, following:
insurrection and rebellion are considered ‘harmful’ and ‘constitutionally (1) There must be a war or other emergency.
unprotected conduct.’ Thus, claims of facial overbreadth are entertained in cases (2) The delegation must be for a limited period only.
involving statutes which, by their terms, seek to regulate only ‘spoken words’ and (3) The delegation must be subject to such restrictions as the Congress may
again, that ‘overbreadth claims, if entertained at all, have been curtailed when prescribe.
invoked against ordinary criminal laws that are sought to be applied to protected (4) The emergency powers must be exercised to carry out a national policy
conduct.’ Here, the incontrovertible fact remains that PP 1017 pertains to a declared by Congress.
spectrum of conduct, not free speech, which is manifestly subject to state Resolution by the SC on the Issue that PP 1017 is a Martial Law Declaration
regulation. The SC ruled that PP 1017 is not a Martial Law declaration and is not tantamount to
it. It is a valid exercise of the calling out power of the president by the president.
Resolution by the SC on the Calling Out Power Doctrine
AGAN VS. PIATCO
G.R. No. 155001. May 5, 2003
ISSUE: Whether or not the State can temporarily take over a business affected
FACTS: On October 5, 1994, AEDC submitted an unsolicited proposal to the with public interest.
Government through the DOTC/MIAA for the development of NAIA International
Passenger Terminal III (NAIA IPT III).
RULING: YES. PIATCO cannot, by mere contractual stipulation, contravene the
DOTC constituted the Prequalification Bids and Awards Committee (PBAC) for the Constitutional provision on temporary government takeover and obligate the
implementation of the project and submitted with its endorsement proposal to the government to pay “reasonable cost for the use of the Terminal and/or Terminal
NEDA, which approved the project. Complex.”

On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily
newspapers of an invitation for competitive or comparative proposals on AEDC’s Article XII, Section 17 of the 1987 Constitution provides:
unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended. Section 17. In times of national emergency, when the public interest so requires, the
State may, during the emergency and under reasonable terms prescribed by it,
On September 20, 1996, the consortium composed of People’s Air Cargo and temporarily take over or direct the operation of any privately owned public utility
Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and or business affected with public interest.
Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted
their competitive proposal to the PBAC. PBAC awarded the project to Paircargo
Consortium. Because of that, it was incorporated into Philippine International The above provision pertains to the right of the State in times of national
Airport Terminals Co., Inc. emergency, and in the exercise of its police power, to temporarily take over the
operation of any business affected with public interest. The duration of the
AEDC subsequently protested the alleged undue preference given to PIATCO and emergency itself is the determining factor as to how long the temporary takeover by
reiterated its objections as regards the prequalification of PIATCO. the government would last. The temporary takeover by the government extends
only to the operation of the business and not to the ownership thereof. As such
On July 12, 1997, the Government and PIATCO signed the “Concession Agreement the government is not required to compensate the private entity-owner of the said
for the Build-Operate-and-Transfer Arrangement of the NAIA Passenger Terminal business as there is no transfer of ownership, whether permanent or temporary.
III” (1997 Concession Agreement). The Government granted PIATCO the franchise The private entity-owner affected by the temporary takeover cannot, likewise, claim
to operate and maintain the said terminal during the concession period and to just compensation for the use of the said business and its properties as the
collect the fees, rentals and other charges in accordance with the rates or schedules temporary takeover by the government is in exercise of its police power and not of
stipulated in the 1997 Concession Agreement. The Agreement provided that the its power of eminent domain.
concession period shall be for twenty-five (25) years commencing from the in-
service date, and may be renewed at the option of the Government for a period not
exceeding twenty-five (25) years. At the end of the concession period, PIATCO Article XII, section 17 of the 1987 Constitution envisions a situation wherein the
shall transfer the development facility to MIAA. exigencies of the times necessitate the government to “temporarily take over or
direct the operation of any privately owned public utility or business affected with
Meanwhile, the MIAA which is charged with the maintenance and operation of the public interest.” It is the welfare and interest of the public which is the paramount
NAIA Terminals I and II, had existing concession contracts with various service consideration in determining whether or not to temporarily take over a particular
providers to offer international airline airport services, such as in-flight catering, business. Clearly, the State in effecting the temporary takeover is exercising its
passenger handling, ramp and ground support, aircraft maintenance and police power. Police power is the “most essential, insistent, and illimitable of
provisions, cargo handling and warehousing, and other services, to several powers.” Its exercise therefore must not be unreasonably hampered nor its exercise
international airlines at the NAIA. be a source of obligation by the government in the absence of damage due to
arbitrariness of its exercise. Thus, requiring the government to pay reasonable
On September 17, 2002, the workers of the international airline service providers, compensation for the reasonable use of the property pursuant to the operation of
claiming that they would lose their job upon the implementation of the questioned the business contravenes the Constitution.
agreements, filed a petition for prohibition. Several employees of MIAA likewise
filed a petition assailing the legality of the various agreements.

During the pendency of the cases, PGMA, on her speech, stated that she will not
“honor (PIATCO) contracts which the Executive Branch’s legal offices have
concluded (as) null and void.”
g. Privatization of State- Operated Public Utilities *The general rule is CAB has the power to regulate the airline companies/air
transportation industry BUT this case is an exception.
KUWAIT AIRWAYS V. PAL
G.R. NO. 156087, May 8, 2009

FACTS: Kuwait Airways and Philippine Airlines (PAL) entered into a Commercial III. REGULATION OF PUBLIC UTILITIES
Agreement to assist each other to develop traffic on the route Kuwait-Bangkok-
Manila and vice-versa. Under the said agreement, Kuwait Airways obligated itself
to share with PAL revenue earned from the uplift of passengers between Kuwait
and Manila and vice-versa. Sometime later, delegations from Philippines and
a. Authority to Operate
Kuwait (Philippine Panel and Kuwait Panel) met and agreed that effective upon the
signing of the Confidential Memorandum of Understanding (CMU), the exercise of
the third and fourth freedom traffic rights shall not be subject to any royalty
payment or commercial agreements. The Philippine Panel composed of officials
PLDT V. NTC
from CAB, DFA, and PAL and headed by the Executive Director of the CAB signed
190 SCRA 717
the CMU – in behalf of the Philippine Government. A month later, petitioner sent a
letter informing PAL that by virtue of the CMU the termination of the royalty
payment is in effect. PAL insisted that the Agreement should continue to be in force
FACTS: In 1958, Felix Alberto & Co., Inc (FACI) was granted by Congress a
and petitioner is still obligated to pay PAL revenue until such date. Petitioner
franchise to build radio stations (later construed as to include telephony). FACI
refusing to pay, PAL filed a complaint before the RTC which ruled in its favor.
later changed its name to Express Telecommunications Co., Inc. (ETCI). In 1987,
Hence this petition.
ETCI was granted by the National Telecommunications Commission a provisional
authority to build a telephone system in some parts of Manila. Philippine Long
ISSUE: Whether or not CAB can compel PAL to terminate the Commercial
Distance Telephone Co. (PLDT) opposed the said grant as it avers, among others,
Agreement with petitioner.
that ETCI is not qualified because its franchise has already been invalidated when it
failed to exercise it within 10 years from 1958; that in 1987, the Albertos, owners of
RULING: NO.
more than 40% of ETCI’s shares of stocks, transferred said stocks to the new
[We do not doubt that the CAB, in the exercise of its statutory mandate, has the
stockholders (Cellcom, Inc.? – not specified in the case); that such transfer
power to compel Philippine Airlines to immediately terminate its Commercial
involving more than 40% shares of stocks amounted to a transfer of franchise
Agreement with Kuwait Airways pursuant to the CMU. Considering that it is the
which is void because the authorization of Congress was not obtained. The NTC
Philippine government that has the sole authority to charter air policy and
denied PLDT. PLDT then filed a petition for certiorari and prohibition against the
negotiate with foreign governments with respect to air traffic rights, the
NTC.
government through the CAB has the indispensable authority to compel local air
carriers to comply with government determined policies, even at the expense of
ISSUE: Whether or not PLDT’s petition should prosper.
economic rights.]
HELD: NO.
However, this is not a case where the CAB had duly exercised its regulatory
PLDT cannot attack ETCI’s franchise in a petition for certiorari. It cannot be
authority over a local airline in order to implement or further government air
collaterally attacked. It should be directly attacked through a petition for quo
policy. What happened instead was an officer of the CAB, acting in behalf not of the
warranto which is the correct procedure. A franchise is a property right and cannot
Board but of the Philippine government, had committed to a foreign nation the
be revoked or forfeited without due process of law. The determination of the right
immediate abrogation of Philippine Airlines’ commercial agreement with Kuwait
to the exercise of a franchise, or whether the right to enjoy such privilege has been
Airways.
forfeited by non-user, is more properly the subject of the prerogative writ of quo
warranto. Further, for any violation of the franchise, it should be the government
Nor can we presume, simply because Dr. Linlingan, Executive Director of the CAB
who should be filing a quo warranto proceeding because it was the government who
had signed the CMU in behalf of the Philippine Panel that he could have done so
granted it in the first place.
bearing the authority of the Board, in the exercise of regulatory jurisdiction over
Philippine Airlines. For one, the CAB is a collegial body composed of five members
The transfer of more than 40% of the shares of stocks is not tantamount to a
and no one member–even the chairman–can act in behalf of the entire Board. The
transfer of franchise. There is a distinction here. There is no need to obtain
Board is disabled from performing as such without a quorum. For another, the
authorization of Congress for the mere transfer of shares of stocks. Shareholders
Executive Director of the CAB is not even a member of the Board, per R.A. No. 776,
can transfer their shares to anyone. The only limitation is that if the transfer
as amended.
involves more than 40% of the corporation’s stocks, it should be approved by the
NTC. The transfer in this case was shown to have been approved by the NTC. What based on tort. Its decision on 30 April 1990 dismissing the complaints "for lack of
requires authorization from Congress is the transfer of franchise; and the person sufficient and credible evidence."
who shall obtain the authorization is the grantee (ETCI). A distinction should be
made between shares of stock, which are owned by stockholders, the sale of which Court of Appeals reversed the appealed decision and awarded damages in favor of
requires only NTC approval, and the franchise itself which is owned by the the private respondents. Based on the findings that From the mass of evidence
corporation as the grantee thereof, the sale or transfer of which requires extant in the record, We are convinced, and so hold that the flash flood on October
Congressional sanction. Since stockholders own the shares of stock, they may 27, 1978, was caused not by rain waters (sic), but by stored waters (sic) suddenly
dispose of the same as they see fit. They may not, however, transfer or assign the and simultaneously released from the Angat Dam by defendants-appellees,
property of a corporation, like its franchise. In other words, even if the original particularly from midnight of October 26, 1978 up to the morning hours of October
stockholders had transferred their shares to another group of shareholders, the 27, 1978.
franchise granted to the corporation subsists as long as the corporation, as an
entity, continues to exist. The franchise is not thereby invalidated by the transfer of ISSUE:
the shares. A corporation has a personality separate and distinct from that of each Whether or not respondent is negligent?
stockholder. It has the right of continuity or perpetual succession. Whether or not the notices of warning were insufficient?
Whether or not The damages suffered was not DAMNUM ABSQUE INJURIA?

NAPOCOR v. CA HELD: We declared therein that the proximate cause of the loss and damage
GR 103442-45 May 21, 1993 sustained by the plaintiffs therein — who were similarly situated as the private
respondents herein — was the negligence of the petitioners, and that the 24
FACTS: This is a consolidated case comprising of four separate complaints., filed October 1978 "early warning notice" supposedly sent to the affected municipalities,
against NPC and a particular Chavez. the same notice involved in the case at bar, was insufficient.

Plaintiffs filed a complaint against respondent for the lost of lives and destruction The petitioners were guilty of "patent gross and evident lack of foresight,
of properties due to the negligence of the latter in releasing water from Angat dam imprudence and negligence in the management and operation of Angat Dam," and
during the typhoon “Kading” that "the extent of the opening of the spillways, and the magnitude of the water
released, are all but products of defendants-appellees' headlessness, slovenliness,
Benjamin Chavez, being the supervisor at that time of a multi-purpose and carelessness."
hydroelectric plant in the Angat River at Hilltop, Norzagaray, Bulacan, failed to
exercise due diligence in monitoring the water level at the dam. To exempt the obligor from liability under Article 1174 of the Civil Code, for a
breach of an obligation due to an "act of God," the following must concur: (a) the
NPC’s allegations were as follows: cause of the breach of the obligation must be independent of the will of the debtor;
(b) the event must be either unforseeable or unavoidable; (c) the event must be
1) the NPC exercised due care, diligence and prudence in the operation and such as to render it impossible for the debtor to fulfill his obligation in a moral
maintenance of the hydroelectric plant; manner; and (d) the debtor must be free from any participation in, or aggravation
2) the NPC exercised the diligence of a good father in the selection of its employees; of the injury to the creditor. (Vasquez v. Court of Appeals, 138 SCRA 553; Estrada v.
3) written notices were sent to the different municipalities of Bulacan warning the Consolacion, 71 SCRA 423; Austria v. Court of Appeals, 39 SCRA 527; Republic of
residents therein about the impending release of a large volume of water with the the Phil. v. Luzon Stevedoring Corp., 21 SCRA 279; Lasam v. Smith, 45 Phil. 657).
onset of typhoon "Kading" and advise them to take the necessary precautions;
4) the water released during the typhoon was needed to prevent the collapse of the Accordingly, petitioners cannot be heard to invoke the act of God or force majeure
dam and avoid greater damage to people and property; to escape liability for the loss or damage sustained by private respondents since
5) in spite of the precautions undertaken and the diligence exercised, they could they, the petitioners, were guilty of negligence. The event then was not occasioned
still not contain or control the flood that resulted and; exclusively by an act of God or force majeure; a human factor — negligence or
6) the damages incurred by the private respondents were caused by a fortuitous imprudence — had intervened. The effect then of the force majeure in question may
event or force majeure and are in the nature and character of damnum absque be deemed to have, even if only partly, resulted from the participation of man.
injuria. By way of special affirmative defense, the defendants averred that the NPC Thus, the whole occurrence was thereby humanized, as it were, and removed from
cannot be sued because it performs a purely governmental function. the laws applicable to acts of God

The trial court dismissed the complaints as against the NPC on the ground that the
provision of its charter allowing it to sue and be sued does not contemplate actions
ii. Revocation or Cancellation PHILIPPINE AIRLINES, INC. VS. CIVIL AERONAUTICS BOARD
(270 SCRA 538)

FACTS: Grand Air applied for a Certificate of Public Convenience and Necessity
DIVINAGRACIA V. CONSOLIDATED BROADCASTING SYSTEM with the Civil Aeronautics Board (CAB). The Chief Hearing Officer issued a notice
(G.R. NO. 162272) of hearing directing Grand Air to serve a copy of the application and notice to all
scheduled Philippine Domestic operators. Grand Air filed its compliance and
requested for a Temporary Operating Permit (TOP). PAL filed an opposition to the
FACTS: Respondents Consolidated Broadcasting System, Inc. (CBS) and People’s application on the ground that the CAB had no jurisdiction to hear the application
Broadcasting Service, Inc. (PBS) are radio networks both involved in the operation until Grand Air first obtains a franchise to operate from Congress. The Chief
of radio broadcasting services in the Philippines, they being the grantees of Hearing Officer denied the opposition and the CAB approved the issuance of the
legislative franchises. Following the enactment of these franchise laws, NTC issued TOP for a period of 3 months. The opposition for the TOP was likewise denied. The
Provisional Authorities allowing them to install, operate and maintain various AM CAB justified its assumption of jurisdiction over Grand Air’s application on the
and FM broadcast stations in various locations throughout the nation. Petitioner basis of Republic Act 776 which gives it the specific power to issue any TOP or
Santiago C. Divinagracia, alleging that he was a stockholder of respondent Certificate of Public Convenience and Necessity.
companies, filed two complaints with the NTC alleging that despite the provisions
of the law mandating the public offering of at least 30% of the common stocks of ISSUE: Whether or not the CAB can issue a Certificate of Public Convenience and
Respondents, both entities had failed to make such offering. Petitioner prayed for Necessity or TOP even though the prospective operator does not have a legislative
the cancellation of all the Provisional Authorities or CPCs of Respondents. The NTC franchise?
dismissed both complaints, positing that although it had full jurisdiction to revoke
or cancel a Provisional Authority or CPC for violations or infractions of the terms HELD: Yes, as mentioned by the CAB, it is duly authorized to do so under
and conditions, it refrained from exercising the same. Republic Act 776 and a legislative franchise is not necessary before it may do so,
since Congress has delegated the authority to authorize the operation of domestic
ISSUE: Whether or not NTC has the power to cancel Provisional Authorities and air transport services to the CAB, an administrative agency. The delegation of such
CPCs of entities which Congress has issued franchises to operate authority is not without limits since Congress had set specific standard and
limitations on how such authority should be exercised.
RULING: NO.
We earlier replicated the various functions of the NTC, as established by E.O. No. Public convenience and necessity exists when the proposed facility will meet a
546. One can readily notice that even as the NTC is vested with the power to issue reasonable want of the public and supply a need which the existing facilities do not
CPCs to broadcast stations, it is not expressly vested with the power to cancel such adequately afford.
CPCs, or otherwise empowered to prevent broadcast stations with duly issued
franchises and CPCs from operating radio or television stations. Thus, the Board should be allowed to continue hearing the application, since it has
Petitioner relies on the power granted to the Public Service Commission to revoke jurisdiction over it provided that the applicant meets all the requirements of the
CPCs or CPCNs under Section 16(m) of the Public Service Act. That argument has law.
been irrefragably refuted by Section 14 of the Public Service Act, and by
jurisprudence, most especially RCPI v. NTC. As earlier noted, at no time did radio
companies fall under the jurisdiction of the Public Service Commission as they
were expressly excluded from its mandate under Section 14. In addition, the Court b. Rate- Fixing
ruled in RCPI that since radio companies, including broadcast stations and
telegraphic agencies, were never under the jurisdiction of the Public Service PHILCOMSAT VS ALCUAZ
Commission except as to rate-fixing, that Commission’s authority to impose fines 180 SCRA 218
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 FACTS: By virtue of Republic Act No. 5514, the Philippine Communications
had exercised. No provision in the Public Service Act thus can be relied upon by the Satellite Corporation (PHILCOMSAT) was granted the authority to “construct and
petitioner to claim that the NTC has the authority to cancel CPCs or licenses. operate such ground facilities as needed to deliver telecommunications services
from the communications satellite system and ground terminal or terminals” in the
Philippines. PHILCOMSAT provides satellite services to companies like Globe
Mackay (now Globe) and PLDT.
iii. CPC v. CPCN
Under Section 5 of the same law, PHILCOMSAT was exempt from the jurisdiction,
control and regulation of the Public Service Commission later known as the
National Telecommunications Commission (NTC). However, Executive Order No. However, there was no hearing conducted for the matter. Deliberations were not
196 was later promulgated and the same has placed PHILCOMSAT under the even attended by Board Members except TRB Executive Director Jaime Dumlao,
jurisdiction of the NTC. Consequently, PHILCOMSAT has to acquire permit to Jr. Petitioners assail the validity of the resolution.
operate from the NTC in order to continue operating its existing satellites. NTC
gave the necessary permit but it however directed PHILCOMSAT to reduce its ISSUES:
current rates by 15%. NTC based its power to fix the rates on EO 546. Whether or not Resolution No. 2001-89 is invalid on the ground that:
PHILCOMSAT now sues NTC and its commissioner (Jose Luis Alcuaz) assailed the (a) it was in violation of due process;
said directive and holds that the enabling act (EO 546) of the NTC, empowering it (b) the provisional toll rate adjustments are exorbitant, oppressive, onerous and
to fix rates for public service communications, does not provide the necessary unconscionable; and,
standards which were constitutionally required, hence, there is an undue (c) TRB Executive Director Jaime Dumlao, Jr. alone authorized the provisional
delegation of legislative power, particularly the adjudicatory powers of NTC. increase.
PHILCOMSAT asserts that nowhere in the provisions of EO 546, providing for the
creation of NTC and granting its rate-fixing powers, nor of EO 196, placing RULING:
PHILCOMSAT under the jurisdiction of NTC, can it be inferred that NTC is guided “(a) No. TRB clearly complied with the publication requirements. Also, the TRB
by any standard in the exercise of its rate-fixing and adjudicatory powers. may grant and issue ex-parte to any petitioner, without need of notice, publication
PHILCOMSAT subsequently clarified its said submission to mean that the order or hearing, provisional authority to collect, pending hearing and decision on the
mandating a reduction of certain rates is undue delegation not of legislative but of merits of the petition, the increase in rates prayed for or such lesser amount as the
quasi-judicial power to NTC, the exercise of which allegedly requires an express TRB may in its discretion provisionally grant.
conferment by the legislative body.
“(b) No. This is obviously a question of fact requiring knowledge of the formula
ISSUE: Whether or not there is an undue delegation of power. used and the factors considered in determining the assailed rates. Definitely, this
task is within the province of the TRB. The SC takes cognizance of the wealth of
HELD: No. There is no undue delegation. The power of the NTC to fix rates is jurisprudence on the doctrine of primary administrative jurisdiction and
limited by the requirements of public safety, public interest, reasonable feasibility exhaustion of administrative remedies. In this era of clogged court dockets, the
and reasonable rates, which conjointly more than satisfy the requirements of a need for specialized administrative boards or commissions with the special
valid delegation of legislative power. Fundamental is the rule that delegation of knowledge, experience and capability to hear and determine promptly disputes on
legislative power may be sustained only upon the ground that some standard for its technical matters or intricate questions of facts, subject to judicial review in case of
exercise is provided and that the legislature in making the delegation has grave abuse of discretion, is indispensable. Between the power lodged in an
prescribed the manner of the exercise of the delegated power. administrative body and a court, the unmistakable trend is to refer it to the
Therefore, when the administrative agency concerned, NTC in this case, establishes former.”
a rate, its act must both be non-confiscatory and must have been established in the
manner prescribed by the legislature; otherwise, in the absence of a fixed standard, “(c) No. It is not true that it was TRB Executive Director Dumlao, Jr. alone who
the delegation of power becomes unconstitutional. In case of a delegation of rate- issued Resolution No. 2001-89. The Resolution itself contains the signature of the
fixing power, the only standard which the legislature is required to prescribe for the four TRB Directors. Petitioner Padua would argue that while these Directors signed
guidance of the administrative authority is that the rate be reasonable and just. the Resolution, none of them personally attended the hearing. This argument is
However, it has been held that even in the absence of an express requirement as to misplaced. Under our jurisprudence, an administrative agency may employ other
reasonableness, this standard may be implied. persons, such as a hearing officer, examiner or investigator, to receive evidence,
However, in this case, it appears that the manner of fixing the rates was done conduct hearing and make reports, on the basis of which the agency shall render its
without due process since no hearing was made in ascertaining the rate imposed decision. Such a procedure is a practical necessity. Corollarily, in a catena of cases,
upon PHILCOMSAT. the Supreme Court laid down the cardinal requirements of due process in
administrative proceedings, one of which is that “the tribunal or body or any of its
judges must act on its or his own independent consideration of the law and facts of
the controversy, and not simply accept the views of a subordinate.” Thus, it is
ii. Provisional Rates logical to say that this mandate was rendered precisely to ensure that in cases
where the hearing or reception of evidence is assigned to a subordinate, the body or
PADUA V. RANADA agency shall not merely rely on his recommendation but instead shall personally
G.R. No. 141949. October 14, 2002 weigh and assess the evidence which the said subordinate has gathered.”

FACTS: Toll Regulatory Board (TRB) issued Resolution No. 2001-89 authorizing
provisional toll rate adjustments on Metro Manila Skyway. It was thereafter
published in newspapers of general circulation for three (3) consecutive weeks.
FREEDOM FROM DEBT COALITION vs. ERC possesses all the facilities to gather data and information and has a much broader
G.R. 161113, August 9, 2005 perspective to properly evaluate them. His personality in such instance is in reality
but a projection of that of Congress. Thus, being the agent of Congress and not of
FACTS: Section 34 of RA 9136 (EPIRA), imposes Universal Charge upon end- the President, the President cannot alter or modify or nullify, or set aside the
users of electricity, a charge imposed for the recovery of stranded cost. ERC issued findings of the Secretary and to substitute the judgment of the former for that of
its Implementing Rules and Regulations defining Universal Charge refers to the the latter. Congress simply granted the Secretary the authority to ascertain the
charge, if any, imposed for the recovery of Stranded Debts, Stranded Contract Costs existence of a fact. If it is exists, the Secretary, by legislative mandate, must submit
of NPC and Stranded Contract Costs of Eligible Contracts of Distribution Utilities such information to the President who must impose the 12% VAT rate. There is no
and other purposes pursuant to Section 34 of the EPIRA. National Power undue delegation of legislation power but only of the discretion as to the execution
Corporation-Strategic Power Utilities Group (NPC-SPUG) filed with Energy of a law.
Regulatory Commission (ERC) a petition for the availment from the Universal
Charge of its share for Missionary Electrification. The ERC decided the NPC’s
petition authorizing it to draw up to P70, 000, 000.00 from PSALM for its 2003
Watershed Rehabilitation Budget subject to the availability of funds for the
Environmental Fund component of the Universal Charge. On the basis of the said
ERC decisions, Panay Electric Company, Inc. (PECO) charged Romeo P. Gerochi
and all other end-users with the Universal Charge as reflected in their respective
electric bills starting from the month of July 2003. Petitioners submit that the
assailed provision of law and its IRR which sought to implement the same are
unconstitutional on the following grounds: 1. The universal charge provided for
under Section 34 of the EPIRA and sought to be implemented under Sec. 2, Rule 18
of the IRR of the said law is a tax which is to be collected from all electric end-users
and self-generating entities. The power to tax is strictly a legislative function and as
such, the delegation of said power to any executive or administrative agency like
the ERC is unconstitutional, giving the same unlimited authority. The assailed
provision clearly provides that the Universal Charge is to be determined, fixed and
approved by the ERC, hence leaving to the latter complete discretionary legislative
authority;2. The ERC is also empowered to approve and determine where the funds
collected should be used; 3. The imposition of the Universal Charge on all end-
users is oppressive and confiscatory and amounts to taxation without
representation as the consumers were not given a chance to be heard and
represented.

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

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