TELECOMMUNICATIONS

PRACTICE ATTY. AQUINO

GMCR, INC. ET AL. V. BELL TELECOMMUNICATIONS GLOBE TELECOMS, INC. V. NTC SMART V. NTC AMBIL, JR. V. COMELEC ASSOCIATION OF PHILIPPINE COCONUT DESICCATORS V. PCA SPOUSES MIRASOL V. COURT OF APPEALS GMA V. ABS-CBN 1 12 27 34 41 48 57

GMCR, INC. ET AL. V. BELL TELECOMMUNICATIONS

FIRST DIVISION

[G. R. No. 126496. April 30, 1997]

GMCR,

INC.; SMART COMMUNICATIONS, INC.; INTERNATIONAL COMMUNICATIONS CORP.; ISLA COMMUNICATIONS CO., INC.,petitioners, vs. BELL TELECOMMUNICATION PHILIPPINES, INC.; THE NATIONAL TELECOMMUNICATIONS COMMISSION and HON. SIMEON L. KINTANAR in his official capacity as Commissioner of the National Telecommunications, respondents.

[G. R. No. 126526. April 30, 1997]

COMMISSIONER SIMEON L. KINTANAR, NATIONAL TELECOMMUNICATIONS COMMISSION, petitioner, vs. BELL TELECOMMUNICATION PHILIPPINES, INC., respondent. D E C I S I O N HERMOSISIMA, JR., J.: Before us are consolidated petitions seeking the review and reversal of the decision[1] of the respondent Court of Appeals[2] declaring the National Telecommunications

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Commission (hereafter, NTC) to be a collegial body under Executive Order No. 546[3] and ordering the NTC to heretofore sit and act en banc, i.e., with the concurrence of at least two commissioners, for a valid dispensation of its quasi-judicial functions. Established by evidence are the following facts: On October 19, 1993, private respondent Bell Telecommunication Philippines, Inc. (hereafter, BellTel) filed with the NTC an Application for a Certificate of Public Convenience and Necessity to Procure, Install, Operate and Maintain Nationwide Integrated Telecommunications Services and to Charge Rates Therefor and with Further Request for the Issuance of Provisional Authority. This application was docketed as NTC Case No. 93-481. At the time of the filing of this application, private respondent BellTel had not been granted a legislative franchise to engage in the business of telecommunications service. Since private respondent BellTel was, at that time, an unenfranchised applicant, it was excluded in the deliberations for service area assignments for local exchange carrier service[4]. Thus, only petitioners GMCR, Inc., Smart Communications, Inc., Isla Communications Co., Inc. and International Communications Corporation, among others, were beneficiaries of formal awards of service area assignments in April and May, 1994. On March 25, 1994, Republic Act No. 7692 was enacted granting private respondent BellTel a congressional franchise which gave private respondent BellTel the right, privilege and authority to carry on the business of providing telecommunications services in and between provinces, cities, and municipalities in the Philippines and for this purpose, to establish, operate, manage, lease, maintain and purchase telecommunications systems, including mobile, cellular and wired or wireless telecommunications systems, fiber optics, satellite transmit and receive systems, and other telecommunications systems and their value-added services such as, but not limited to, transmission of voice, data, facsimile, control signals, audio and video, information service bureau, and all other telecommunications systems technologies as are at present available or be made available through technical advances or innovations in the future, or construct, acquire, lease and operate or manage transmitting and receiving stations and switching stations, both for local and international services, lines, cables or systems, as is, or are convenient or essential to efficiently carry out the purposes of this franchise.[5] On July 12, 1994, private respondent BellTel filed with the NTC a second Application[6] praying for the issuance of a Certificate of Public Convenience and Necessity for the installation, operation and maintenance of a combined nationwide local toll (domestic and international) and tandem telephone exchanges and facilities using wire, wireless, microwave radio, satellites and fiber optic cable with Public Calling Offices (PCOs) and very small aperture antennas (VSATs) under an integrated system. This second application was docketed as NTC Case No. 94-229. In this second application, BellTel proposed to install 2,600,000 telephone lines in ten (10) years using the most modern and latest state-of-the-art facilities and equipment and to provide a 100% digital local exchange telephone network. Private respondent BellTel moved to withdraw its earlier application docketed as NTC Case No. 93-481. In an Order dated July 11, 1994, this earlier application was ordered withdrawn, without prejudice. The second application of private respondent BellTel which was docketed as NTC Case No. 94-229 was assigned to a Hearing

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Officer for reception of private respondent BellTels evidence. Written opposition and other pertinent pleadings were filed by petitioners GMCR, Inc., Smart Communications, Inc., Isla Communications Co., Inc. and International Communications Corporation as oppositors. Other oppositors to private respondent BellTels application were Capitol Wireless, Inc., Eastern Misamis Oriental Telephone Cooperative, Liberty Broadcasting Network, Inc., Midsayap Communication, Northern Telephone, PAPTELCO, Pilipino Telephone Corporation, Philippine Global Communications, Inc., Philippine Long Distance Telephone Company, Philippine Telegraph and Telephone Corporation, Radio Communications of the Philippines, Inc. and Extelcom and Telecommunications Office. On December 20, 1994, private respondent BellTel completed the presentation of its evidence-in-chief. In the course of the proceedings, the witnesses of BellTel were cross- examined by the aforementioned oppositors. On December 21, 1994, BellTel filed its Formal Offer of Evidence together with all the technical, financial and legal documents in support of its application. Pursuant to its rules, the application was referred to the Common Carriers Authorization Department (CCAD) for study and recommendation. On February 6, 1995, the CCAD, through Engr. Marle Rabena, submitted to Deputy Commissioner Fidelo Q. Dumlao, a Memorandum dated February 6, 1995[7]manifesting his findings and recommending that based on technical documents submitted, BellTels proposal is technically feasible.[8] Subsequently, Mr. Raulito Suarez, the chief of the Rates and Regulatory Division of CCAD, conducted a financial evaluation of the project proposal of private respondent BellTel. On March 29, 1995, Mr. Suarez made the finding that BellTel has the financial capability to support its proposed project at least for the initial two (2) years. Agreeing with the findings and recommendations of the CCAD, NTC Deputy Commissioners Fidelo Dumlao and Consuelo Perez adopted the same and expressly signified their approval thereto by making the following notation on the aforestated Memorandum of the CCAD dated February 6, 1995: With the finding of financial capability and technical feasibility, the application merits due/favorable consideration.[9] Below this notation, Deputy Commissioners Fidelo Dumlao and Consuelo Perez affixed their signatures and the date, 4/6/95. In view of these favorable recommendations by the CCAD and two members of the NTC, the Legal Department thereof prepared a working draft[10] of the order granting provisional authority to private respondent BellTel. The said working draft was initialed by Deputy Commissioners Fidelo Q. Dumlao and Consuelo Perez but was not signed by Commissioner Simeon Kintanar. While ordinarily, a decision that is concurred in by two of the three members composing a quasi-judicial body is entitled to promulgation, petitioners claim that pursuant to the prevailing policy and the corresponding procedure and practice in the NTC, the exclusive authority to sign, validate and promulgate any and all orders, resolutions and decisions of the NTC is lodged in the Chairman, in this case, Commissioner Simeon Kintanar, and, thus, since only Commissioner Simeon Kintanar is recognized by the NTC Secretariat as the sole authority to sign any and all orders, resolutions and decisions of the NTC, only his vote counts; Deputy Commissioners Dumlao and Perez have allegedly no voting power and both their concurrence which actually constitutes the majority is inutile without the assent of Commissioner Kintanar. Anxious over the inaction of the NTC in the matter of its petition praying for the issuance of a provisional authority,

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private respondent BellTel filed on May 5, 1995 an Urgent Ex- Parte Motion to Resolve Application and for the Issuance of a Provisional Authority[11]. Reference was explicitly made to the findings of the CCAD and recommendations of Deputy Commissioners Dumlao and Perez that were all favorable to private respondent BellTel. Mention was also made of the aforementioned working draft of the order granting a provisional authority to BellTel, which draft was made by the Legal Department of the NTC and initialed by the said deputy commissioners. No action was taken by the NTC on the aforecited motion. Thus, on May 12, 1995, private respondent BellTel filed a Second Urgent Ex-Parte Motion[12] reiterating its earlier prayer. Petitioners-oppositors filed an Opposition[13] to aforestated two motions of private respondent BellTel. the On June 23, 1995, petitioners-oppositors filed their Joint Opposition[15] to the aforecited motion. On July 4, 1995, the NTC denied the said motion in an Order solely signed by Commissioner Simeon Kintanar. On July 17, 1995, private respondent BellTel filed with this court a Petition for Certiorari, Mandamus and Prohibition seeking the nullification of the aforestated Order dated July 4, 1995 denying the Motion to Promulgate. On July 26, 1995, we issued a Resolution referring said petition to the respondent Court of Appeals for proper determination and resolution pursuant to Section 9, par. 1 of B.P. Blg. 129. In the interim, the Solicitor General filed with the respondent appellate court a Manifestation In Lieu of Comment[16] in which the Solicitor General took a legal position adverse to that of the NTC. The Solicitor General, after a close examination of the laws creating the NTC and its predecessors and a studious analysis of certain Department of Transportation and Communications (DOTC) orders, NTC circulars, and Department of Justice (DOJ) legal opinions pertinent to the issue of collegiality of the NTC, made the following recommendations: WHEREFORE, the Solicitor General respectfully prays that this Honorable Court: (a) declare respondent National Telecommunications Commission as a collegial body; (b) restrain respondent Commissioner Simeon Kintanar from arrogating unto himself alone the powers of the said agency; (c) order NTC, acting as a collegial body, to resolve petitioner Bell Telecoms application under NTC-94-229;

In an Order dated May 16, 1995, signed solely by Commissioner Simeon Kintanar, the NTC, instead of resolving the two pending motions of private respondent BellTel, set the said motions for a hearing on May 29, 1995. On May 29, 1995, however, no hearing was conducted as the same was reset on June 13, 1995. On June 13, 1995, the day of the hearing, private respondent BellTel filed a Motion to Promulgate (Amending the Motion to Resolve)[14] In said motion, private respondent prayed for the promulgation of the working draft of the order granting a provisional authority to private respondent BellTel, on the ground that the said working draft had already been signed or initialed by Deputy Commissioners Dumlao and Perez who, together, constitute a majority out of the three commissioners composing the NTC. To support its prayer, private respondent BellTel asserted that the NTC was a collegial body and that as such, two favorable votes out of a maximum three votes by the members of the commission, are enough to validly promulgate an NTC decision.

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(d) declare NTC Memorandum Circulars 1-1-93 and 3-1-93 as void; [and] (e) uphold the legality of DOTC Department Order 92-614.[17] On September 23, 1996, respondent Court of Appeals promulgated the herein assailed decision the dispositive portion of which reads as follows: IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby rendered as follows: 1. Petitioners petition for a writ of Certiorari and Prohibition is hereby granted. Accordingly, NTC Memorandum Circular No. 1-1-93, Annex J of the Petition, Memorandum Circular No. 3-1-93, Annex K of the Petition and the Order of Kintanar, Annex L of the Petition, are hereby SET ASIDE for being contrary to law. The Respondents and all those acting for and in their behalf are hereby enjoined and prohibited from implementing or enforcing the same; [and] 2. Petitioners petition for mandamus is hereby GRANTED in that the Respondent NTC, composed of Kintanar and deputy commissioners Perez and Dumlao, are hereby directed to meet en banc and to consider and act on the draft Order, Annex B of the Petition, within fifteen (15) days from the finality of this Decision. Without pronouncement as to costs. SO ORDERED.[18] The herein assailed decision being unacceptable to petitioner Simeon Kintanar and petitioners GMCR, Inc., Smart Communications, Inc., Isla Communications Co., Inc. and 3.2 CA contradicts itself by holding that DOTC MC 92-614 prevails and [requires] collegiality. International Communications Corporation as oppositors in the application of private respondent BellTel for a provisional authority, they filed with this court separate petitions for review. Commissioner Kintanars petition, docketed as G.R. No. 126526, ascribes to the respondent appellate court the following assignment of errors: 1. The Court of Appeals, in setting aside NTC MC 1-1-93 and MC 3-1-93 and the Order of the Commission dated July 4, 1995, made a collateral attack on a law which was nowhere called for in the pleadings of the parties nor is authorized by the Rules of Court. 2. The Court of Appeals erred in assuming and imposing that the Commission is a collegial body simply by reason of the fact that other bodies which were a spin off from the defunct Public Service Commission were created as a collegial body. The law that created EO 546 erased the collegial character of the proceedings before the NTC. 3. The Court of Appeals decision contains serious contradiction; worse, it considered evidence not formally offered or incorporated into the records of the case; yet failed to consider evidence submitted by petitioner-appellant nor on the prejudicial issue on non-joinder of indispensable parties- 3.1 CA erred in assuming that the NTC is collegial by the fact that Charters of other regulatory agencies expressly made them collegial while this express provision was absent in NTCs charter.

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3.3 The decisions by Undersecretary Lichauco signed by her and her 2 deputies are in no way indicative of collegiality and should not be considered as having any persuasive effect xxx. 3.4 The Court of Appeals erred in applying the Board of Communications Rules of Practice and Procedures. 4. The Court of Appeals erred when it granted mandamus, directing and in effect controlling Commissioner Kintanar and deputy Commissioners Dumlao and Perez, to meet en banc to consider and act on a draft Order only which the Court itself recognized no longer had the approval of two (2) Commissioners while in the same token the Court of Appeals had set aside a duly promulgated Order of July 4, 1995 allegedly because it did not carry the approval of 2 commissioners.[19] On the other hand, petitioners-oppositors, in their petition docketed as G.R. No. 126496, assail the decision of respondent appellate court on the following grounds: 1. The Court of Appeals erred in not dismissing the instant Petition outright for its failure to implead indispensable parties, in violation of Section 5, Rule 65 and Sec. 3, Rule 7 of the Revised Rules of Court; 2. The Court of Appeals seriously erred in taking cognizance of and passing upon BellTels Petition, which on its face is premature since the Order of July 4, 1996 assailed was not a final decision of the Commission; 3. Even assuming arguendo that the Court of Appeals can take cognizance of the Petition, the disposition in Decision therein which nullifies NTC Memorandum Circulars 1-1-93 and 3-1-93 itself constitutes a collateral attack on the said laws, the validity of which were never put in issue by any of the parties, contrary to the clear legal requirement that the validity of laws can be attacked only in direct proceedings instituted for that purpose; 4. It was in fact improper for the Court of Appeals to pass on the validity of NTC Circular No. 1-1-93 and Memorandum Circular No. 3-1-93 since the same was absolutely unnecessary for the resolution of the Petition; 5. Even assuming that the Court of Appeals correctly defined the prime issues as being that of collegiality, nonetheless the Court of Appeals committed a serious error of law in declaring the NTC as a collegial body despite the clear intent of E.O. No. 546 and the provisions of DOTC MC 95-640, and the obvious implications of pending bills in Congress on the reorganization of the NTC; 6. The Decision, in mandating that the NTC Commissioner and Deputy Commissioners sit to consider the draft-and only the draft-in rendering its Decision in BellTels application constitutes an unwarranted, unauthorized and unlawful interference in and canalization of the discretionary functions of the Commission as a quasi-judicial entity; and 7. The Decision condones the illegal and unethical act of BellTel of surreptitiously securing a draft decision, and encourages and places premium on future similar illegal acts-all in violation of the ruling and the mandate of the Supreme Court in In Re Jurado: Adm. Matter No. 90-5-383 (July 12, 1990).[20]

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On December 16, 1996, private respondent BellTel filed an Omnibus Motion[21] praying for, among others, the consolidation of G.R. Nos. 126496 and 126526. On December 18, 1996, respondent BellTel filed its Comment.[22] On the same day, the NTC and Commissioner Kintanar filed a Manifestation/Motion[23] echoing the prayer for the consolidation of the G.R. Nos. 126496 and 126526. On December 19, 1996, the Office of the Solicitor General filed a Manifestation/Motion[24] reiterating that its legal stance in this case is adverse to that of the NTC and praying that it be excluded from filing any comment in behalf of the NTC. In a Resolution dated February 5, 1997, we resolved, among others, to excuse the Solicitor General from filing any comment in behalf of the NTC, require the NTC to file its own comment in G.R. No. 126496 and to consolidate G.R. Nos. 126496 and 126526. On March 6, 1997, the NTC and Commissioner Kintanar filed a Manifestation/Motion[25] praying that the latters petition in G.R. No. 126526 be adopted as their comment in the consolidated cases. Upon the joinder of issues in these consolidated cases, we perceive the fundamental issue to be that of the collegiality of the NTC as a quasi-judicial agency. We find the consolidated petitions wanting of merit. First. We hereby declare that the NTC is a collegial body requiring a majority vote out of the three members of the commission in order to validly decide a case or any incident therein. Corollarily, the vote alone of the chairman of the commission, as in this case, the vote of Commissioner Kintanar, absent the required concurring vote coming from the rest of the membership of the commission to at least arrive at a majority decision, is not sufficient to legally render an NTC order, resolution or decision. Simply put, Commissioner Kintanar is not the National Telecommunications Commission. He alone does not speak for and in behalf of the NTC. The NTC acts through a three-man body, and the three members of the commission each has one vote to cast in every deliberation concerning a case or any incident therein that is subject to the jurisdiction of the NTC. When we consider the historical milieu in which the NTC evolved into the quasi-judicial agency it is now under Executive Order No. 146 which organized the NTC as a three-man commission and expose the illegality of all memorandum circulars negating the collegial nature of the NTC under Executive Order No. 146, we are left with only one logical conclusion: the NTC is a collegial body and was a collegial body even during the time when it was acting as a one-man regime. We thus quote with approval the encompassing legal ruminations of the respondent Court of Appeals in disposing of the issue of the collegiality of the NTC: In resolving the issue, We recall that, on November 17, 1936, the National Assembly passed Commonwealth Act No. 146 which created the Public Service Commission (PSC). While providing that the PSC shall consist of a Public Service Commissioner and a Deputy Commissioner, the law made it clear that the PSC was not a collegial body by stating that the Deputy Commissioner could act only on matters delegated to him by the Public Service Commissioner. As amended by RA 2677, the Public Service Commission was transformed into and emerged as a collegial body, composed of one Public Service Commissioner and five (5) Associate Commissioners. The amendment provided that contested cases and all cases involving the fixing of rates shall be decided by the Commission en banc.

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On September 24, 1972, then President Ferdinand E. Marcos signed, into law, Presidential Decree No. 1 adopting and approving the Integrated Reorganization Plan which, in turn, created the Board of Communications (BOC) in place of the PSC. This time, the new regulatory board was composed of three (3) officers exercising quasi-judicial functions: x x x The Board of Communications shall be composed of a full time Chairman who shall be of unquestioned integrity and recognized prominence in previous public and/or private employment; two full-time members who shall be competent on all aspects of communications, preferably one of whom shall be a lawyer and the other an economist x x x On January 25, 1978, the BOC promulgated its Rules of Procedure and Practice in connection with applications and proceedings before it. On July 23, 1979, President Marcos issued Executive Order No. 546, creating the Ministries of Public Works, and of Transportation and Communications, merged the defunct Board of Communications and the Telecommunications Control Bureau into a single entity, the National Telecommunications Commission (NTC). The said law was issued by then President Marcos in the exercise of his legislative powers. Sec. 16 of E.O. 546 provides that -- x x x The Commission shall be composed of a Commissioner and two Deputy Commissioners, preferably one of whom shall be a lawyer and another an economist. x x x The aforementioned Executive Order took effect on September 24, 1979 x x x. However, the NTC did not promulgate any Rules of Procedure and Practice. Consequently, the then existing Rules of Procedure and Practice promulgated by the BOC was applied to proceedings in the NTC. In the meantime, the Decisions of the NTC were signed by the Chairman alone of the NTC which rendered the two (2) deputy Commissioners non-participative in the task of decision-making. This prompted the then Minister of Transportation and Communication Jose P. Dans, Jr. to seek the legal opinion of the then Minister of Justice Ricardo C. Puno, as to whether the NTC was a collegial body or not. On January 11, 1984, Minister Puno sent a letter-opinion x x x to the effect that the NTC was not a collegial body but a single entity and thus the then practice of only the Chairman of the NTC signing the Decisions of the NTC was authorized by law. x x x Admittedly, the opinion of the Secretary of Justice is entitled to great weight x x x. However, the same is not controlling or conclusive on the courts x x x. We find and declare, in the present recourse, that the Puno Opinion is not correct. Admittedly, EO 546 does not specifically state that the NTC was a collegial body. Neither does it provide that the NTC should meet En Banc in deciding a case or in exercising its adjudicatory or quasi-judicial functions. But the absence of such provisions does not militate against the collegial nature of the NTC under the context of Section 16 of EO 546 and under the Rules of Procedure and Practice applied by the NTC in its proceedings. Under [Rule 15] of said Rules, the BOC (now the NTC) sits En Banc: x x x In every case heard by the Board en banc, the orders, rulings, decisions and resolutions disposing of the merits of the matter within its jurisdiction shall be reached with the concurrence of at least two regular members after deliberation and consultation and thereafter assigned to a member for the writing of the opinion. Any member dissenting from the order, ruling, decision or resolution shall state in writing the reason for his dissent.

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In all other cases, a duly assigned Member shall issue all orders, rulings, decisions and resolutions pertinent to the case assigned to him. Copy of the decision on the merit of the case so assigned shall be furnished the Chairman of the Board. x x x Inscrutably, a case before the BOC may be assigned to and heard by only a member thereof who is tasked to prepare and promulgate his Decision thereon, or heard, En Banc, by the full membership of the BOC in which case the concurrence of at least two (2) of the membership of the BOC is necessary for a valid Decision x x x. While it may be true that the aforesaid Rules of Procedure was promulgated before the effectivity of Executive Order No. 546, however, the Rules of Procedure of BOC governed the rules of practice and procedure before the NTC when it was established under Executive Order No. 546. This was enunciated by the Supreme Court in the case of Philippine Consumers Foundation, Inc. versus National Telecommunications Commission, 131 SCRA 200 when it declared that: The Rules of Practice and Procedure promulgated on January 25, 1978 by the Board of Communications, the immediate predecessor of respondent NTC x x x govern the rules of practice and procedure before the BOC then, now respondent NTC. x x x In the case of Philippine Long Distance Telephone Company versus National Telecommunications, et al., 190 SCRA 717, the Supreme Court applied and cited Rule 15 of the Rules of Procedure and Practice of BOC x x x. Hence, under its Rules of Procedure and Practice, the Respondent NTC, as its predecessor, the BOC, had consistently been and remains a collegial body. [a] body composed of several persons acting under lawful authority to perform some public service. (City of Louisville Municipal Housing Commission versus Public Housing Administration, 261 Southwestern Reporter, 2nd, page 286). A Commission is also defined as a board or committee of officials appointed and empowered to perform certain acts or exercise certain jurisdiction of a public nature or service x x x (Black, Law Dictionary, page 246). There is persuasive authority that a commission is synonymous with board (State Ex. Rel. Johnson versus Independent School District No. 810, Wabash County, 109 Northwestern Reporter 2nd, page 596). Indeed, as can be easily discerned from the context of Section 16 of Executive Order No. 546, the Commission is composed of a Commissioner and two (2) deputy commissioners x x x not the commissioner, alone, as pontificated by Kintanar. The conjunctive word and is not without any legal significance. It is not, by any chance, a surplusage in the law. It means in addition to (McCaull Webster Elevator Company versus Adams, 167 Northwestern Reporter, 330, page 332). The word and, whether it is used to connect words, phrases or full sentence[s], must be accepted as binding together and as relating to one another x x x. In interpreting a statute, every part thereof should be given effect on the theory that it was enacted as an integrated law and not as a combination of dissonant provisions. As the aphorism goes, that the thing may rather have effect than be destroyed x x x. If it was the intention of President Marcos to constitute merely a single entity, a one-man governmental body, instead of a commission or a three-man collegial body, he would not have Respondents Kintanars and NTCs pose that Respondent Kintanar, alone, is vested with authority to sign and promulgate a Decision of the NTC is antithetical to the nature of a commission as envisaged in Executive Order No. 546. It must be borne in mind that a Commission is defined as:

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constituted a commission and would not have specifically decreed that the Commission is composed of, not the commissioner alone, but of the commissioner and the two (2) deputy commissioners. Irrefragably, then, the NTC is a commission composed not only of Kintanar, but Perez and Dumlao as well, acting together in the performance of their adjudicatory or quasi-judicial functions, conformably with the Rules of Procedure and Practice promulgated by the BOC and applicable to the NTC. The barefaced fact that x x x of Executive Order 546 used the word deputy to designate the two (2) other members of the Commission does not militate against the collegiality of the NTC. x x x The collegiality of the NTC cannot be disparaged by the mere nominal designation of the membership thereof. Indeed, We are convinced that such nominal designations are without functional implications and are designed merely for the purpose of administrative structure or hierarchy of the personnel of the NTC. x x x In hindsight, even Secretary Garcia was in accord with the collegiality of the NTC when he promulgated and issued Department Order No. 92-614 x x x. Even then Commissioner Mariano Benedicto openly expressed his vehement opposition to the Department Order of Secretary Garcia and opted to seek refuge in the opinion of the then Minister of Justice Puno x x x. It was only when Commissioner Benedicto resigned and Respondent Kintanar was designated to replace Commissioner Benedicto that Secretary Garcia flip-flapped [sic], and suddenly found it expedient to recall his Department Order No. 92-614 and authorize Kintanar to decide, all by himself, all cases pending with the NTC in frontal violation of the Rules of Procedure and Practice before the NTC, more specifically Rule 15 thereof x x x. x x x The Respondents cannot find solace in House Bill No. 10558 to buttress their argument x x x because under the House Bill, the NTC is transformed into a collegial body. Indeed, We find Respondents pose tenuous. For, it can likewise be argued, with justification, that House Bill No. 10558 indeed confirms the existing collegial nature of the NTC by so expressly reaffirming the same. x x x In sum, then, We find and so declare that NTC Circular No. 1-1-93 x x x Memorandum Circular No. 3-1-93 x x x and the Order of Kintanar x x x declaring the NTC as a single entity or non- collegial entity, are contrary to law and thus null and void and should be, as they are hereby, set aside.[26] Second. Petitioners take us to task with their vigorous contention that respondent appellate courts act of nullifying NTC Memorandum Circular No. 1-1-93 issued by then Commissioner Mariano Benedicto, Jr. and NTC Memorandum Circular No. 3-1-93 issued also by then Commissioner Benedicto on January 6, 1993, was a collateral attack against the aforecited circulars and an unnecessary and abusive exercise of the courts power to nullify administrative regulations. It must be remembered by petitioners, however, that administrative regulations derive their validity from the statute that they were, in the first place, intended to implement. Memorandum Circulars 1-1-93 and 3-1-93 are on their face null and void ab initio for being unabashedly contrary to law. They were nullified by respondent Court of Appeals because they are absolutely illegal and, as such, are without any force and effect. The fact that implementation of these illegal regulations has resulted in the institutionalization of the one- man rule in the NTC, is not and can never be a ratification of such an illegal practice. At the least, these illegal regulations are an

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erroneous interpretation of E.O. No. 546 and in the context of and its predecessor laws. At the most, these illegal regulations are attempts to validate the one-man rule in the NTC as executed by persons with the selfish interest of maintaining their illusory hold of power. Since the questioned memorandum circulars are inherently and patently null and void for being totally violative of the spirit and letter of E.O. No. 546 that constitutes the NTC as a collegial body, no court may shirk from its duty of striking down such illegal regulations. Third. In its certiorari action before the respondent Court of Appeals, private respondent BellTel was proceeding against the NTC and Commissioner Kintanar for the formers adherence and defense of its one-man rule as enforced by the latter. Thus, only the NTC and Commissioner Kintanar may be considered as indispensable parties. After all, it is they whom private respondent BellTel seek to be chastised and corrected by the court for having acted in grave abuse of their discretion amounting to lack or excess of jurisdiction. The oppositors in NTC Case No. 94-229 are not absolutely necessary for the final determination of the issue of grave abuse of discretion on the part of the NTC and of Commissioner Kintanar in his capacity as chairman of NTC because the task of defending them primarily lies in the Office of the Solicitor General. Furthermore, were the court to find that certiorari lies against the NTC and Commissioner Kintanar, the oppositors cause could not be significantly affected by such ruling because the issue of grave abuse of discretion goes not into the merits of the case in which the oppositors are interested but into the issue of collegiality that requires, regardless of the merits of a case, that the same be decided on the basis of a majority vote of at least two members of the commission. The issue in this case is, it bears repeating, not the merits of the application of private respondent BellTel for a provisional authority to operate what promises to be the most technologically advanced telephone service in the country. This court is not in any way concerned with whether or not private respondent BellTels project proposal is technically feasible or financially viable, and this court should not, in fact, delve into these matters which are patently outside of its review jurisdiction. All that respondent Court of Appeals passed upon was the question of whether or not the NTC and Commissioner Kintanar committed grave abuse of discretion, and so we must review and ascertain the correctness of the findings of the respondent appellate court on this score, and this score alone. Thus, the claim of petitioners that there is here a case of non-joinder of indispensable parties in the persons of all of the oppositors in NTC Case No. 94-229, is untenable. Fourth. Petitioners, in apparent paranoia, argue that what the respondent appellate court has actually ordered, was that the NTC sit and meet en banc and forthwith grant private respondent BellTels application for a provisional authority. Petitioners, however, have obviously over-read the second part of the dispositive portion of the herein assailed decision rendered by respondent Court of Appeals. There is no dispute that jurisprudence is settled as to the propriety of mandamus in causing a quasi-judicial agency to exercise its discretion in a case already ripe for adjudication and long-awaiting the proper disposition. As to how this discretion is to be exercised, however, is a realm outside the office of the special civil action of mandamus. It is elementary legal knowledge, after all, that mandamus does not lie to control discretion. When the respondent Court of Appeals directed Commissioners Kintanar, Dumlao and Perez to meet en banc and to consider and act on the working draft of the order granting provisional authority to BellTel, said court was simply ordering the NTC to sit and meet en banc as a collegial body, and the

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subject of the deliberation of the three-man commission would be the said working draft which embodies one course of action that may be taken on private respondent BellTels application for a provisional authority. The respondent Court of Appeals, however, did not order the NTC to forthwith grant said application. This is understandable since every commissioner of the three-man NTC has a vote each to cast in disposing of private respondent BellTels application and the respondent appellate court would not pre-empt the exercise by the members of the commission of their individual discretion in private respondent BellTels case. Respondent appellate court intends, however, for the NTC to promptly proceed with the consideration of private respondent BellTels application for provisional authority, for the same has been ripe for decision since December, 1994. With the marked propensity of Commissioner Kintanar to delay action on the said application and his insistent arrogation of sole power to promulgate any and all NTC decisions, respondent Court of Appeals order for the NTC to sit and meet en banc to consider private respondent BellTels application for a provisional authority, attains deep significance. Fifth. The accusation of petitioners that the working draft of the order granting provisional authority to private respondent BellTel, was obtained by the latter through illegal means, is a serious charge. However, not a single piece of evidence has been proffered by petitioners to prove this charge. Private respondent BellTel makes no secret of the source of the said working draft. In private respondent BellTels Urgent Ex-Parte Motion to Resolve Application and For Issuance of Provisional Authority, it is alleged that said working draft was prepared by Atty. Basilio Bolante of the Legal Department of the NTC.[27] Said working draft was initialed by the CCAD Head, Engr. Edgardo Cabarios and by Deputy Commissioners Dumlao and Perez.[28] The working draft is attached to the records of NTC Case No. 94-229 which may be borrowed by any person for any stated purpose.[29] Significantly, no one among the aforementioned persons has renounced the working draft or declared it to be spurious. More importantly, petitioners have utterly failed to offer proof of any illegality in the preparation or procurement of said working draft. The more critical point that matters most, however, is that we cannot be diverted from the principal issue in this case concerning the collegiality of the NTC. In the ultimate, the issue of the procurement of the working draft is more apropos for a criminal or administrative investigation than in the instant proceedings largely addressed to the resolution of a purely legal question. WHEREFORE, premises considered, the instant consolidated petitions are hereby DISMISSED for lack of merit. Costs against petitioners. SO ORDERED. Bellosillo, Vitug, and Kapunan, JJ., concur. Padilla (Chairman), no part; in view of interests in GMRC, Inc.

GLOBE TELECOMS, INC. V. NTC

SECOND DIVISION

[G.R. No. 143964. July 26, 2004]

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GLOBE TELECOM, INC., petitioner, vs. THE NATIONAL TELECOMMUNICATIONS COMMISSION, COMMISSIONER JOSEPH A. SANTIAGO, DEPUTY COMMISSIONERS AURELIO M. UMALI and NESTOR DACANAY, and SMART COMMUNICATIONS, INC. respondents. D E C I S I O N TINGA, J.: Telecommunications services are affected by a high degree of public interest.[1] Telephone companies have historically been regulated as common carriers,[2] and indeed, the 1936 Public Service Act has classified wire or wireless communications systems as a public service, along with other common carriers.[3] Yet with the advent of rapid technological changes affecting the telecommunications industry, there has been a marked reevaluation of the traditional paradigm governing state regulation over telecommunications. For example, the United States Federal Communications Commission has chosen not to impose strict common regulations on incumbent cellular providers, choosing instead to let go of the reins and rely on market forces to govern pricing and service terms.[4] In the Philippines, a similar paradigm shift can be discerned with the passage of the Public Telecommunications Act of 1995 (PTA). As noted by one of the laws principal authors, Sen. John Osmea, under prior laws, the government regulated the entry of pricing and operation of all public telecommunications entities. The new law proposed to dismantle gradually the barriers to entry, replace government control on price and income with market instruments, and shift the focus of governments intervention towards ensuring service standards and protection of customers.[5] Towards this goal, Article II, Section 8 of the PTA sets forth the regulatory logic, mandating that 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.[6] The statute itself defines the role of the government to promote a fair, efficient and responsive market to stimulate growth and development of the telecommunications facilities and services.[7] The present petition dramatizes to a degree the clash of philosophies between traditional notions of regulation and the au corant trend to deregulation. Appropriately, it involves the most ubiquitous feature of the mobile phone, Short Messaging Service (SMS)[8] or text messaging, which has been transformed from a mere technological fad into a vital means of communication. And propitiously, the case allows the Court to evaluate the role of the National Telecommunications Commission (NTC) in this day and age. The NTC is at the forefront of the government response to the avalanche of inventions and innovations in the dynamic telecommunications field. Every regulatory action it undertakes is of keen interest not only to industry analysts and players but to the public at large. The intensive scrutiny is understandable given the high financial stakes involved and the inexorable impact on consumers. And its rulings are traditionally accorded respect even by the courts, owing traditional deference to administrative agencies equipped with special knowledge, experience and capability to hear and determine promptly disputes on technical matters.[9] At the same time, judicial review of actions of administrative agencies is essential, as a check on the unique powers vested unto these instrumentalities.[10] Review is available to reverse the findings of the specialized administrative agency if the record

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before the Court clearly precludes the agencys decision from being justified by a fair estimate of the worth of the testimony of witnesses or its informed judgment on matters within its special competence, or both.[11] Review may also be warranted to ensure that the NTC or similarly empowered agencies act within the confines of their legal mandate and conform to the demands of due process and equal protection.[12] to grant Smarts request for the interconnection of their respective SMS or text messaging services, in violation of the mandate of Republic Act 7925, Executive Order No. 39, and their respective implementing rules and regulations.[18] Globe filed its Answer with Motion to Dismiss on 7 June 1999, interposing grounds that the Complaint was premature, Smarts failure to comply with the conditions precedent required in Section 6 of NTC Memorandum Circular 9-7-93,[19] and its omission of the mandatory Certification of Non-Forum Shopping.[20] Smart responded that it had already submitted the voluminous documents asked by Globe in connection with other interconnection agreements between the two carriers, and that with those voluminous documents the interconnection of the SMS systems could be expedited by merely amending the parties existing CMTS-to-CMTS interconnection agreements.[21] On 19 July 1999, NTC issued the Order now subject of the present petition. In the Order, after noting that both Smart and Globe were equally blameworthy for their lack of cooperation in the submission of the documentation required for interconnection and for having unduly maneuvered the situation into the present impasse,[22]NTC held that since SMS falls squarely within the definition of value-added service or enhanced-service given in NTC Memorandum Circular No. 8- 9-95 (MC No. 8-9-95) the implementation of SMS interconnection is mandatory pursuant to Executive Order (E.O.) No. 59.[23] The NTC also declared that both Smart and Globe have been providing SMS without authority from it, in violation of Section 420 (f) of MC No. 8-9-95 which requires PTEs intending to provide value-added services (VAS) to secure prior approval from NTC through an administrative process. Yet, in view of what it noted as the peculiar circumstances of the case, NTC refrained from issuing a Show Cause Order with a Cease and Desist Order, and instead directed the parties to secure the

Antecedent Facts Globe and private respondent Smart Communications, Inc. (Smart) are both grantees of valid and subsisting legislative franchises,[13] authorizing them, among others, to operate a Cellular Mobile Telephone System (CMTS), utilizing the Global System for Mobile Communication (GSM) technology.[14] Among the inherent services supported by the GSM network is the Short Message Services (SMS),[15] also known colloquially as texting, which has attained immense popularity in the Philippines as a mode of electronic communication. On 4 June 1999, Smart filed a Complaint[16] with public respondent NTC, praying that NTC order the immediate interconnection of Smarts and Globes GSM networks, particularly their respective SMS or texting services. The Complaint arose from the inability of the two leading CMTS providers to effect interconnection. Smart alleged that Globe, with evident bad faith and malice, refused to grant Smarts request for the interconnection of SMS.[17] On 7 June 1999, NTC issued a Show Cause Order, informing Globe of the Complaint, specifically the allegations therein that, among othersdespite formal request made by Smart to Globe for the interconnection of their respective SMS or text messaging services, Globe, with evident bad faith, malice and to the prejudice of Smart and Globe and the public in general, refused

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requisite authority to provide SMS within thirty (30) days, subject to the payment of fine in the amount of two hundred pesos (P200.00) from the date of violation and for every day during which such violation continues.[24] Globe filed with the Court of Appeals a Petition for Certiorari and Prohibition[25] to nullify and set aside the Order and to prohibit NTC from taking any further action in the case. It reiterated its previous arguments that the complaint should have been dismissed for failure to comply with conditions precedent and the non-forum shopping rule. It also claimed that NTC acted without jurisdiction in declaring that it had no authority to render SMS, pointing out that the matter was not raised as an issue before it at all. Finally, Globe alleged that the Order is a patent nullity as it imposed an administrative penalty for an offense for which neither it nor Smart was sufficiently charged nor heard on in violation of their right to due process.[26] The Court of Appeals issued a Temporary Restraining Order on 31 August 1999. In its Memorandum, Globe also called the attention of the appellate court to the earlier decision of NTC pertaining to the application of Isla Communications Co., Inc. (Islacom) to provide SMS, allegedly holding that SMS is a deregulated special feature of the telephone network and therefore does not require the prior approval of NTC.[27] Globe alleged that its departure from its ruling in the Islacom case constitutes a denial of equal protection of the law. On 22 November 1999, a Decision[28] was promulgated by the Former Special Fifth Division of the Court of Appeals[29] affirming in toto the NTC Order. Interestingly, on the same day Globe and Smart voluntarily agreed to interconnect their respective SMS systems, and the interconnection was effected at midnight of that day.[30] Yet, on 21 December 1999, Globe filed a Motion for Partial Reconsideration,[31] seeking to reconsider only the portion of the Decision that upheld NTCs finding that Globe lacked the authority to provide SMS and its imposition of a fine. Both Smart and NTC filed their respective comments, stressing therein that Globe indeed lacked the authority to provide SMS.[32] In reply, Globe asserted that the more salient issue was whether NTC complied with its own Rules of Practice and Procedure before making the finding of want of authority and imposing the fine. Globe also reiterated that it has been legally operating its SMS system since 1994 and that SMS being a deregulated special feature of the telephone network it may operate SMS without prior approval of NTC. After the Court of Appeals denied the Motion for Partial Reconsideration,[33] Globe elevated the controversy to this Court. Globe contends that the Court of Appeals erred in holding that the NTC has the power under Section 17 of the Public Service Law[34] to subject Globe to an administrative sanction and a fine without prior notice and hearing in violation of the due process requirements; that specifically due process was denied Globe because the hearings actually conducted dwelt on different issues; and, the appellate court erred in holding that any possible violation of due process committed by NTC was cured by the fact that NTC refrained from issuing a Show Cause Order with a Cease and Desist Order, directing instead the parties to secure the requisite authority within thirty days. Globe also contends that in treating it differently from other carriers providing SMS the Court of Appeals denied it equal protection of the law. The case was called for oral argument on 22 March 2004. Significantly, Smart has deviated from its original position. It no longer prays that the Court affirm the assailed Decision and Order, and the twin rulings therein that SMS is VAS and that Globe was required to secure prior authority before offering SMS. Instead, Smart now argues that SMS is not

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VAS and that NTC may not legally require either Smart or Globe to secure prior approval before providing SMS. Smart has also chosen not to make any submission on Globes claim of due process violations.[35] As presented during the oral arguments, the central issues are: (1) whether NTC may legally require Globe to secure NTC approval before it continues providing SMS; (2) whether SMS is a VAS under the PTA, or special feature under NTC MC No. 14-11- 97; and (3) whether NTC acted with due process in levying the fine against Globe.[36] Another issue is also raised whether Globe should have first filed a motion for reconsideration before the NTC, but this relatively minor question can be resolved in brief. and novelty[42] so much so that it is judicious for the Court to resolve them on the merits instead of hiding behind procedural fineries.

The Merits Now, on to the merits of the petition. Deregulation is the mantra in this age of globalization. Globe invokes it in support of its claim that it need not secure prior authority from NTC in order to operate SMS. The claim has to be evaluated carefully. After all, deregulation is not a magic incantation that wards off the spectre of intrusive government with the mere invocation of its name. The principles, guidelines, rules and regulations that govern a deregulated system must be firmly rooted in the law and regulations that institute or implement the deregulation regime.[43] The implementation must likewise be fair and evenhanded. Globe hinges its claim of exemption from obtaining prior approval from the NTC on NTC Memorandum Circular No. 14-11- 97 (MC No. 14-11-97). Globe notes that in a 7 October 1998 ruling on the application of Islacom for the operation of SMS, NTC declared that the applicable circular for SMS is MC No. 14- 11-97.[44] Under this ruling, it is alleged, NTC effectively denominated SMS as a special feature which under MC No. 14- 11-97 is a deregulated service that needs no prior authorization from NTC. Globe further contends that NTCs requiring it to secure prior authorization violates the due process and equal protection clauses, since earlier it had exempted the similarly situated Islacom from securing NTC approval prior to its operation of SMS.[45] On the other hand, the assailed NTC Decision invokes the NTC Implementing Rules of the PTA (MC No. 8-9-95) to justify its

Necessity of Filing Motion for Reconsideration Globe deliberately did not file a motion for reconsideration with the NTC before elevating the matter to the Court of Appeals via a petition for certiorari. Generally, a motion for reconsideration is a prerequisite for the filing of a petition for certiorari.[37] In opting not to file the motion for reconsideration, Globe asserted before the Court of Appeals that the case fell within the exceptions to the general rule.[38] The appellate court in the questioned Decision cited the purported procedural defect,[39] yet chose anyway to rule on the merits as well. Globes election to elevate the case directly to the Court of Appeals, skipping the standard motion for reconsideration, is not a mortal mistake. According to Globe, the Order is a patent nullity, it being violative of due process; the motion for reconsideration was a useless or idle ceremony; and, the issue raised purely one of law.[40]Indeed, the circumstances adverted to are among the recognized exceptions to the general rule.[41] Besides, the issues presented are of relative importance

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claim that Globe and Smart need to secure prior authority from the NTC before offering SMS. The statutory basis for the NTCs determination must be thoroughly examined. Our first level of inquiry should be into the PTA. It is the authority behind MC No. 8-9-95. It is also the law that governs all public telecommunications entities (PTEs) in the Philippines.[46] most popular face of telecommunications, but it is no longer the only one. There are other faces such as data communications, electronic mail, voice mail, facsimile transmission, video conferencing, mobile radio services like trunked radio, cellular radio, and personal communications services, radio paging, and so on. Because of the mind-boggling developments in semiconductors, the traditional boundaries between computers, telecommunications, and broadcasting are increasingly becoming blurred.[50] One of the novel introductions of the PTA is the concept of a value-added service (VAS). Section 11 of the PTA governs the operations of a value-added service provider, which the law defines as an entity which relying on the transmission, switching and local distribution facilities of the local exchange and inter-exchange operators, and overseas carriers, offers enhanced services beyond those ordinarily provided for by such carriers.[51] Section 11 recognizes that VAS providers need not secure a franchise, provided that they do not put up their own network.[52] However, a different rule is laid down for telecommunications entities such as Globe and PLDT. The section unequivocally requires NTC approval for the operation of a value-added service. It reads, viz: Telecommunications entities may provide VAS, subject to the additional requirements that: a) prior approval of the Commission is secured to ensure that such VAS offerings are not cross-subsidized from the proceeds of their utility operations; b) other providers of VAS are not discriminated against in rates nor denied equitable access to their facilities; and

Public Telecommunications Act The PTA has not strictly adopted laissez-faire as its underlying philosophy to promote the telecommunications industry. In fact, the law imposes strictures that restrain within reason how PTEs conduct their business. For example, it requires that any access charge/revenue sharing arrangements between all interconnecting carriers that are entered into have to be submitted for approval to NTC.[47] Each telecommunication category[48] established in the PTA is governed by detailed regulations. Also, international carriers and operators of mobile radio services are required to provide local exchange service in unserved or underserved areas.[49] At the same time, the general thrust of the PTA is towards modernizing the legal framework for the telecommunications services sector. The transmutation has become necessary due to the rapid changes as well within the telecommunications industry. As noted by Senator Osmea in his sponsorship speech: [D]ramatic developments during the last 15 years in the field of semiconductors have drastically changed the telecommunications sector worldwide as well as in the Philippines. New technologies have fundamentally altered the structure, the economics and the nature of competition in the telecommunications business. Voice telephony is perhaps the

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c) separate books of accounts are maintained for the VAS. (Emphasis supplied)[53] Oddly enough, neither the NTC nor the Court of Appeals cited the above-quoted provision in their respective decisions, which after all, is the statutory premise for the assailed regulatory action. This failure is but a mere indicia of the pattern of ignorance or incompetence that sadly attends the actions assailed in this petition. It is clear that the PTA has left open-ended what services are classified as value-added, prescribing instead a general standard, set forth as a matter of principle and fundamental policy by the legislature.[54] The validity of this standard set by Section 11 is not put into question by the present petition, and there is no need to inquire into its propriety.[55] The power to enforce the provisions of the PTA, including the implementation of the standards set therein, is clearly reposed with the NTC.[56] It can also be gleaned from Section 11 that the requirement that PTEs secure prior approval before offering VAS is tied to a definite purpose, i.e., to ensure that such VAS offerings are not cross-subsidized from the proceeds of their utility operations. The reason is related to the fact that PTEs are considered as public services,[57] and mandated to perform certain public service functions. Section 11 should be seen in relation to E.O. 109, which mandates that international gateway operators shall be required to provide local exchange service,[58] for the purpose of ensuring availability of reliable and affordable telecommunications service in both urban and rural areas of the country.[59] Under E.O. No. 109, local exchange services are to be cross-subsidized by other telecommunications services within the same company until universal access is achieved.[60] Section 10 of the PTA specifically affirms the requirements set by E.O. No. 109. The relevance to VAS is clear: public policy maintains that the offer of VAS by PTEs cannot interfere with the fundamental provision by PTEs of their other public service requirements. More pertinently to the case at bar, the qualification highlights the fact that the legal rationale for regulation of VAS is severely limited. There is an implicit recognition that VAS is not strictly a public service offering in the way that voice-to-voice lines are, for example, but merely supplementary to the basic service. Ultimately, the regulatory attitude of the State towards VAS offerings by PTEs is to treat its provisioning as a business decision subject to the discretion of the offeror, so long as such services do not interfere with mandatory public service requirements imposed on PTEs such as those under E.O. No. 109. Thus, non-PTEs are not similarly required to secure prior approval before offering VAS, as they are not burdened by the public service requirements prescribed on PTEs.[61] Due regard must be accorded to this attitude, which is in consonance with the general philosophy of deregulation expressed in the PTA.

The Pertinent NTC Memorandum Circulars Next, we examine the regulatory framework devised by NTC in dealing with VAS. NTC relied on Section 420(f) of the Implementing Rules of the PTA (Implementing Rules) as basis for its claim that prior approval must be secured from it before Globe can operate SMS. Section 420 of the Implementing Rules, contained in MC No. 8-9- 95, states in full: VALUE ADDED SERVICES (VAS) (a) A non-PTE VAS provider shall not be required to secure a franchise from Congress.

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(b) A non-PTE VAS provider can utilize its own equipment capable only of routing, storing and forwarding messages in whatever format for the purpose of providing enhanced or augmented telecommunications services. It shall not put up its own network. It shall use the transmission network, toll or local distribution, of the authorized PTES. (c) The provision of VAS shall not in any way affect the cross subsidy to the local exchange network by the international and national toll services and CMTS service. (d) Entities intending to provide value added services only shall submit to the commission application for registration for approval. The application form shall include documents showing, among others, system configuration, mode of operation, method of charging rates, lease agreement with the PTE, etc. (e) The application for registration shall be acted upon by the Commission through an administrative process within thirty (30) days from date of application. (f) PTEs intending to provide value added services are required to secure prior approval by the Commission through an administrative process. (g) VAS providers shall comply strictly with the service performance and other standards prescribed commission. (Emphasis supplied.) Instead of expressly defining what VAS is, the Implementing Rules defines what enhanced services are, namely: a service which adds a feature or value not ordinarily provided by a public telecommunications entity such as format, media conversion, encryption, enhanced security features, computer processing, and the like.[62] Given that the PTA defines VAS as enhanced services, the definition provided in the Implementing Rules may likewise be applied to VAS. Still, the language of the Implementing Rules is unnecessarily confusing. Much trouble would have been spared had the NTC consistently used the term VAS as it is used in the PTA. The definition of enhanced services in the Implementing Rules, while more distinct than that under the PTA, is still too sweeping. Rather than enumerating what possible features could be classified as VAS or enhanced services, the Implementing Rules instead focuses on the characteristics of these features. The use of the phrase the like,[63] and its implications of analogy, presumes that a whole myriad of technologies can eventually be subsumed under the definition of enhanced services. The NTC should not be necessarily faulted for such indistinct formulation since it could not have known in 1995[64] what possible VAS would be available in the future. The definition laid down in the Implementing Rules may validly serve as a guide for the NTC to determine what emergent offerings would fall under VAS. Still, owing to the general nature of the definition laid down in the Implementing Rules, the expectation arises that the NTC would promulgate further issuances defining whether or not a specific feature newly available in the market is a VAS. Such expectation is especially demanded if the NTC is to penalize PTEs who fail to obtain prior approval in accordance with Section 11 of the PTA. To our knowledge, the NTC has yet to come out with an administrative rule or regulation listing which of the offerings in the market today fall under VAS or enhanced services.

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Still, there is MC No. 14-11-97, entitled Deregulating the Provision of Special Features in the Telephone Network. Globe invokes this circular as it had been previously cited by the NTC as applicable to SMS. On 2 October 1998, Islacom wrote a letter to the NTC, informing the agency that it will be offering the special feature of SMS for its CMTS, and citing therein that the notice was being given pursuant to NTC Memorandum Circular No. 14- 11-97.[65] In response, the NTC acknowledged receipt of the letter informing it of Islacoms offering the special feature of SMS for its CMTS, and instructed Islacom to adhere to the provisions of MC No. 14-11-97.[66] The clear implication of the letter is that NTC considers the Circular as applicable to SMS. An examination of MC No. 14-11-97 further highlights the state of regulatory confusion befalling the NTC. The relevant portions thereof are reproduced below: SUBJECT: DEREGULATING THE PROVISION OF SPECIAL FEATURES IN THE TELEPHONE NETWORK. For the purpose of exempting specific telecommunications service from rate or tariff regulations if the service has sufficient competition to ensure fair and reasonable rates or tariffs, the Commission hereby deregulates the provision of special features inherent to the Telephone Network. Section 1. For the purpose of this Circular, Special Feature shall refer to a feature inherent to the telephone network which may not be ordinarily provided by a Telephone Service Provider such as call waiting, call forwarding, conference calling, speed dialing, caller ID, malicious call ID, call transfer, charging information, call pick-up, call barring, recorded announcement, no double connect, warm line, wake-up call, hotline, voicemail, and special features offered to customers with PABXs such as direct inward dialing and number hunting, and the like; provided that in the provision of the feature, no law, rule, regulation or international convention on telecommunications is circumvented or violated. The Commission shall periodically update the list of special features in the Telephone Network which, including the charging of rates therefor, shall be deregulated. Section 2. A duly authorized Telephone Service Provider shall inform the Commission in writing of the special features it can offer and the corresponding rates thirty (30) days prior to launch date. xxx Section 4. Authorized Telephone Service Providers shall continue to charge their duly approved rates for special services for 3 months from the effectivity of this circular, after which they may set their own rates. xxx (Emphasis supplied) Just like VAS as defined under the PTA, special features are also not ordinarily provided by the telephone company. Considering that MC No. 14-11-97 was promulgated after the passage of the PTA, it can be assumed that the authors of the Circular were well aware of the regulatory scheme formed under the PTA. Moreover, MC No. 14-11-97 repeatedly invokes the word deregulation, and it cannot be denied that the liberalization ethos was introduced by the PTA. Yet, the net effect of MC No. 14-11-97 is to add to the haze beclouding the NTCs rationale for regulation. The introduction of a new concept, special feature, which is not provided for in the PTA just adds to the confusion, especially in light of the similarities between special features and VAS. Moreover, there is no requirement

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that a PTE seeking to offer special features must secure prior approval from the NTC. Is SMS a VAS, enhanced service, or a special feature? Apparently, even the NTC is unsure. It had told Islacom that SMS was a special feature, then subsequently held that it was a VAS. However, the pertinent laws and regulations had not changed from the time of the Islacom letter up to the day the Order was issued. Only the thinking of NTC did. More significantly, NTC never required ISLACOM to apply for prior approval in order to provide SMS, even after the Order to that effect was promulgated against Globe and Smart. This fact was admitted by NTC during oral arguments.[67] NTCs treatment of Islacom, apart from being obviously discriminatory, puts into question whether or not NTC truly believes that SMS is VAS. NTC is unable to point out any subsequent rule or regulation, enacted after it promulgated the adverse order against Globe and Smart, affirming the newly- arrived determination that SMS is VAS. In fact, as Smart admitted during the oral arguments, while it did comply with the NTC Order requiring it to secure prior approval, it was never informed by the NTC of any action on its request.[68] While NTC counters that it did issue a Certificate of Registration to Smart, authorizing the latter as a provider of SMS, such Certificate of Registration was issued only on 13 March 2003, or nearly four (4) years after Smart had made its request.[69] This inaction indicates a lack of seriousness on the part of the NTC to implement its own rulings. Also, it tends to indicate the lack of belief or confusion on NTCs part as to how SMS should be treated. Given the abstract set of rules the NTC has chosen to implement, this should come as no surprise. Yet no matter how content the NTC may be with its attitude of sloth towards regulation, the effect may prove ruinous to the sector it regulates. Every party subject to administrative regulation deserves an opportunity to know, through reasonable regulations promulgated by the agency, of the objective standards that have to be met. Such rule is integral to due process, as it protects substantive rights. Such rule also promotes harmony within the service or industry subject to regulation. It provides indubitable opportunities to weed out the most frivolous conflicts with minimum hassle, and certain footing in deciding more substantive claims. If this results in a tenfold in administrative rules and regulations, such price is worth paying if it also results in clarity and consistency in the operative rules of the game. The administrative process will best be vindicated by clarity in its exercise.[70] In short, the legal basis invoked by NTC in claiming that SMS is VAS has not been duly established. The fault falls squarely on NTC. With the dual classification of SMS as a special feature and a VAS and the varying rules pertinent to each classification, NTC has unnecessarily complicated the regulatory framework to the detriment of the industry and the consumers. But does that translate to a finding that the NTC Order subjecting Globe to prior approval is void? There is a fine line between professional mediocrity and illegality. NTCs byzantine approach to SMS regulation is certainly inefficient. Unfortunately for NTC, its actions have also transgressed due process in many ways, as shown in the ensuing elucidation.

Penalized Via a Quasi-Judicial Process, Globe and Smart are Entitled to Corresponding Protections It is essential to understand that the assailed Order was promulgated by NTC in the exercise of its quasi-judicial functions. The case arose when Smart had filed the initial

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complaint against Globe before NTC for interconnection of SMS.[71] NTC issued a Show Cause Order requiring Globe to answer Smarts charges. Hearings were conducted, and a decision made on the merits, signed by the three Commissioners of the NTC, sitting as a collegial body.[72] The initial controversy may have involved a different subject matter, interconnection, which is no longer contested. It cannot be denied though that the findings and penalty now assailed before us was premised on the same exercise of jurisdiction. Thus, it is not relevant to this case that the process for obtaining prior approval under the PTA and its Implementing Rules is administrative in nature. While this may be so, the assailed NTCs determination and corresponding penalty were rendered in the exercise of quasi-judicial functions. Therefore, all the requirements of due process attendant to the exercise of quasi-judicial power apply to the present case. Among them are the seven cardinal primary rights in justiciable cases before administrative tribunals, as enumerated in Ang Tibay v. CIR.[73] They are synthesized in a subsequent case, as follows: There are cardinal primary rights which must be respected even in proceedings of this character. The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that of having something to support its decision. Not only must there be some evidence to support a finding or conclusion, but the evidence must be substantial. The decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected.[74] NTC violated several of these cardinal rights due Globe in the promulgation of the assailed Order. First. The NTC Order is not supported by substantial evidence. Neither does it sufficiently explain the reasons for the decision rendered. Our earlier discussion pertained to the lack of clear legal basis for classifying SMS as VAS, owing to the failure of the NTC to adopt clear rules and regulations to that effect. Muddled as the legal milieu governing SMS already is, NTCs attempt to apply its confusing standards in the case of Globe and Smart is even more disconcerting. The very rationale adopted by the NTC in its Order holding that SMS is VAS is short and shoddy. Astoundingly, the Court of Appeals affirmed the rationale bereft of intelligent inquiry, much less comment. Stated in full, the relevant portion of the NTC Order reads: xxx Getting down [to] the nitty-gritty, Globes SMS involves the transmission of data over its CMTS which is Globes basic service. SMS is not ordinarily provided by a CMTS operator like Globe, and since SMS enhances Globes CMTS, SMS fits in to a nicety [sic] with the definition of value-added-service or enhanced- service under NTC Memorandum Circular [8]-9-95 (Rule 001, Item [15]).[75] The Court usually accords great respect to the technical findings of administrative agencies in the fields of their expertise, even if they are infelicitously worded. However, the above- quoted finding is nothing more than bare assertions, unsupported by substantial evidence.[76] The Order reveals that no deep inquiry was made as to the nature of SMS or what its provisioning entails. In fact, the Court is unable to find how exactly does SMS fits into a nicety with NTC M.C. No. 8-9-95, which defines enhanced services as analogous to format, media conversion, encryption, enhanced security features, computer processing, and the like.[77] The NTC merely notes that

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SMS involves the transmission of data over [the] CMTS, a phraseology that evinces no causal relation to the definition in M.C. No. 8-9-95. Neither did the NTC endeavor to explain why the transmission of data necessarily classifies SMS as a VAS. In fact, if the transmission of data over [the] CMTS is to be reckoned as the determinative characteristic of SMS, it would seem that this is already sufficiently covered by Globe and Smarts respective legislative franchises.[78] Smart is authorized under its legislative franchise to establish and operate integrated telecommunications/computer/ electronic services for public domestic and international communications,[79] while Globe is empowered to establish and operate domestic telecommunications, and stations for transmission and reception of messages by means of electricity, electromagnetic waves or any kind of energy, force, variations or impulses, whether conveyed by wires, radiated through space or transmitted through other media and for the handling of any and all types of telecommunications services.[80] The question of the proper legal classification of VAS is uniquely technical, tied as at is to the scientific and technological application of the service or feature. Owing to the dearth of substantive technical findings and data from the NTC on which a judicial review may reasonably be premised, it is not opportunely proper for the Court to make its own technical evaluation of VAS, especially in relation to SMS. Judicial fact- finding of the de novo kind is generally abhorred and the shift of decisional responsibility to the judiciary is not favored as against the substantiated and specialized determination of administrative agencies. [81] With greater reason should this be the standard for the exercise of judicial review when the administrative agency concerned has not in the first place come out with a technical finding based on evidence, as in this case. Yet at the same time, this absence of substantial evidence in support of the finding that SMS is VAS already renders reversible that portion of the NTC Order. Moreover, the Order does not explain why the NTC was according the VAS offerings of Globe and Smart a different regulatory treatment from that of Islacom. Indeed, to this day, NTC has not offered any sensible explanation why Islacom was accorded to a less onerous regulatory requirement, nor have they compelled Islacom to suffer the same burdens as Globe and Smart. While stability in the law, particularly in the business field, is desirable, there is no demand that the NTC slavishly follow precedent.[82] However, we think it essential, for the sake of clarity and intellectual honesty, that if an administrative agency decides inconsistently with previous action, that it explain thoroughly why a different result is warranted, or if need be, why the previous standards should no longer apply or should be overturned.[83] Such explanation is warranted in order to sufficiently establish a decision as having rational basis.[84] Any inconsistent decision lacking thorough, ratiocination in support may be struck down as being arbitrary. And any decision with absolutely nothing to support it is a nullity.[85] Second. Globe and Smart were denied opportunity to present evidence on the issues relating to the nature of VAS and the prior approval. Another disturbing circumstance attending this petition is that until the promulgation of the assailed Order Globe and Smart were never informed of the fact that their operation of SMS without prior authority was at all an issue for consideration. As a result, neither Globe or Smart was afforded an opportunity to present evidence in their behalf on that point.

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NTC asserts that since Globe and Smart were required to submit their respective Certificates of Public Convenience and Necessity and franchises, the parties were sufficiently notified that the authority to operate such service was a matter which NTC could look into. This is wrong-headed considering the governing law and regulations. It is clear that before NTC could penalize Globe and Smart for unauthorized provision of SMS, it must first establish that SMS is VAS. Since there was no express rule or regulation on that question, Globe and Smart would be well within reason if they submitted evidence to establish that SMS was not VAS. Unfortunately, no such opportunity arose and no such arguments were raised simply because Globe and Smart were not aware that the question of their authority to provide SMS was an issue at all. Neither could it be said that the requisite of prior authority was indubitable under the existing rules and regulations. Considering the prior treatment towards Islacom, Globe (and Smart, had it chosen to do so) had every right to rely on NTCs disposal of Islacoms initiative and to believe that prior approval was not necessary. Neither was the matter ever raised during the hearings conducted by NTC on Smarts petition. This claim has been repeatedly invoked by Globe. It is borne out by the records or the absence thereof. NTC could have easily rebuffed this claim by pointing to a definitive record. Yet strikingly, NTC has not asserted that the matter of Globes authority was raised in any pleading or proceeding. In fact, Globe in its Consolidated Reply before this Court challenged NTC to produce the transcripts of the hearings it conducted to prove that the issue of Globes authority to provide SMS was put in issue. The Court similarly ordered the NTC to produce such transcripts.[86]NTC failed to produce any.[87] The opportunity to adduce evidence is essential in the administrative process, as decisions must be rendered on the evidence presented, either in the hearing, or at least contained in the record and disclosed to the parties affected.[88] The requirement that agencies hold hearings in which parties affected by the agencys action can be represented by counsel may be viewed as an effort to regularize this struggle for advantage within a legislative adversary framework.[89] It necessarily follows that if no evidence is procured pertinent to a particular issue, any eventual resolution of that issue on substantive grounds despite the absence of evidence is flawed. Moreover, if the parties did have evidence to counter the ruling but were wrongfully denied the opportunity to offer the evidence, the result would be embarrassing on the adjudicator. Thus, the comical, though expected, result of a definitive order which is totally unsupported by evidence. To this blatant violation of due process, this Court stands athwart. Third. The imposition of fine is void for violation of due process The matter of whether NTC could have imposed the fine on Globe in the assailed Order is necessarily related to due process considerations. Since this question would also call to fore the relevant provisions of the Public Service Act, it deserves its own extensive discussion. Globe claims that the issue of its authority to operate SMS services was never raised as an issue in the Complaint filed against it by Smart. Nor did NTC ever require Globe to justify its authority to operate SMS services before the issuance of the Order imposing the fine. The Court of Appeals, in its assailed decision, upheld the power of NTC to impose a fine and to make a pronouncement on Globes alleged lack of operational authority without need of hearing, simply by citing the provision of the Public Service Act[90] which enumerates the instances when NTC may act motu proprio. That is Section 17, paragraph (a), which reads thus:

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Sec. 17. Proceedings of [the National Telecommunications Commission] without previous hearing. The Commission shall have power, without previous hearing, subject to established limitations and exceptions and saving provisions to the contrary: (a) To investigate, upon its own initiative, or upon complaint in writing, any matter concerning any public service as regards matters under its jurisdiction; to require any public service to furnish safe, adequate, and proper service as the public interest may require and warrant; to enforce compliance with any standard, rule, regulation, order or other requirement of this Act or of the Commission, and to prohibit or prevent any public service as herein defined from operating without having first secured a certificate of public convenience or public necessity and convenience, as the case may be, and require existing public services to pay the fees provided for in this Act for the issuance of the proper certificate of public convenience or certificate of public necessity and convenience, as the case may be, under the penalty, in the discretion of the Commission, of the revocation and cancellation of any acquired rights. On the other hand, NTC itself, in the Order, cites Section 21 as the basis for its imposition of fine on Globe. The provision states: Sec. 21. Every public service violating or failing to comply with the terms and conditions of any certificate or any orders, decisions or regulations of the Commission shall be subject to a fine of not exceeding two hundred pesos per day for every day during which such default or violation continues; and the Commission is hereby authorized and empowered to impose such fine, after due notice and hearing. [Emphasis supplied.] Sections 17 and 21 of the Public Service Act confer two distinct powers on NTC. Under Section 17, NTC has the power to investigate a PTE compliance with a standard, rule, regulation, order, or other requirement imposed by law or the regulations promulgated by NTC, as well as require compliance if necessary. By the explicit language of the provision, NTC may exercise the power without need of prior hearing. However, Section 17 does not include the power to impose fine in its enumeration. It is Section 21 which adverts to the power to impose fine and in the same breath requires that the power may be exercised only after notice and hearing. Section 21 requires notice and hearing because fine is a sanction, regulatory and even punitive in character. Indeed, the requirement is the essence of due process. Notice and hearing are the bulwark of administrative due process, the right to which is among the primary rights that must be respected even in administrative proceedings.[91] The right is guaranteed by the Constitution itself and does not need legislative enactment. The statutory affirmation of the requirement serves merely to enhance the fundamental precept. The right to notice and hearing is essential to due process and its non-observance will, as a rule, invalidate the administrative proceedings.[92] In citing Section 21 as the basis of the fine, NTC effectively concedes the necessity of prior notice and hearing. Yet the agency contends that the sanction was justified by arguing that when it took cognizance of Smarts complaint for interconnection, it may very well look into the issue of whether the parties had the requisite authority to operate such services.[93] As a result, both parties were sufficiently notified that this was a matter that NTC could look into in the course of the proceedings. The parties subsequently attended at least five hearings presided by NTC.[94] That particular argument of the NTC has been previously disposed of. But it is essential to emphasize the need for a hearing before a fine may be imposed, as it is clearly a punitive measure undertaken by an administrative agency in the exercise

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of its quasi-judicial functions. Inherently, notice and hearing are indispensable for the valid exercise by an administrative agency of its quasi-judicial functions. As the Court held in Central Bank of the Phil. v. Hon. Cloribel:[95] [T]he necessity of notice and hearing in an administrative proceeding depends on the character of the proceeding and the circumstances involved. In so far as generalization is possible in view of the great variety of administrative proceedings, it may be stated as a general rule that notice and hearing are not essential to the validity of administrative action where the administrative body acts in the exercise of executive, administrative, or legislative functions; but where a public administrative body acts in a judicial or quasi-judicial matter, and its acts are particular and immediate rather than general and prospective, the person whose rights or property may be affected by the action is entitled to notice and hearing.[96] The requirement of notice and hearing becomes even more imperative if the statute itself demands it, as in the case of Section 21 of the Public Service Act. As earlier stated, the Court is convinced that prior to the promulgation of the assailed Order Globe was never notified that its authority to operate SMS was put in issue. There is an established procedure within NTC that provides for the steps that should be undertaken before an entity such as Globe could be subjected to a disciplinary measure. Section 1, Rule 10 of the NTC Rules of Procedure provides that any action, the object of which is to subject a holder of a certificate of public convenience or authorization, or any person operating without authority from NTC, to any penalty or a disciplinary or other measure shall be commenced by the filing of a complaint. Further, the complaint should state, whenever practicable, the provisions of law or regulation violated, and the acts or omissions complained of as constituting the offense.[97] While a complaint was indeed filed against Globe by Smart, the lack of Globes authority to operate SMS was not raised in the Complaint, solely predicated as it was on Globes refusal to interconnect with Smart.[98] Under the NTC Rules of Procedure, NTC is to serve a Show Cause Order on the respondent to the complaint, containing therein a statement of the particulars and matters concerning which the Commission is inquiring and the reasons for such actions.[99] The Show Cause Order served on Globe in this case gave notice of Smarts charge that Globe, acting in bad faith and contrary to law, refused to allow the interconnection of their respective SMS systems.[100] Again, the lack of authority to operate SMS was not adverted to in NTCs Show Cause Order. The records also indicate that the issue of Globes authority was never raised in the subsequent hearings on Smarts complaint. Quite noticeably, the respondents themselves have never asserted that the matter of Globes authority was raised in any pleading or proceeding. In fact, Globe in its Consolidated Reply before this Court challenged NTC to produce the transcripts of the hearings it conducted to prove that the issue of Globes authority to provide SMS was put in issue. It did not produce any transcript. Being an agency of the government, NTC should, at all times, maintain a due regard for the constitutional rights of party litigants.[101] In this case, NTC blindsided Globe with a punitive measure for a reason Globe was not made aware of, and in a manner that contravened express provisions of law. Consequently, the fine imposed by NTC on Globe is also invalid. Otherwise put, since the very basis for the fine was invalidly laid, the fine is necessarily void.

Conclusion

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In summary: (i) there is no legal basis under the PTA or the memorandum circulars promulgated by the NTC to denominate SMS as VAS, and any subsequent determination by the NTC on whether SMS is VAS should be made with proper regard for due process and in conformity with the PTA; (ii) the assailed Order violates due process for failure to sufficiently explain the reason for the decision rendered, for being unsupported by substantial evidence, and for imputing violation to, and issuing a corresponding fine on, Globe despite the absence of due notice and hearing which would have afforded Globe the right to present evidence on its behalf. Thus, the Order effectively discriminatory and arbitrary as it is, was issued with grave abuse of discretion and it must be set aside. NTC may not legally require Globe to secure its approval for Globe to continue providing SMS. This does not imply though that NTC lacks authority to regulate SMS or to classify it as VAS. However, the move should be implemented properly, through unequivocal regulations applicable to all entities that are similarly situated, and in an even-handed manner. Concurrently, the Court realizes that the PTA is not intended to constrain the industry within a cumbersome regulatory regime.[102] The policy as pre-ordained by legislative fiat renders the traditionally regimented business in an elementary free state to make business decisions, avowing that it is under this atmosphere that the industry would prosper.[103] It is disappointing at least if the deregulation thrust of the law is skirted deliberately. But it is ignominious if the spirit is defeated through a crazy quilt of vague, overlapping rules that are implemented haphazardly. By no means should this Decision be interpreted as removing SMS from the ambit of jurisdiction and review by the NTC. The issue before the Court is only the prior approval requirement as imposed on Globe and Smart. The NTC will continue to exercise, by way of its broad grant, jurisdiction over Globe and Smarts SMS offerings, including questions of rates and customer complaints. Yet caution must be had. Much complication could have been avoided had the NTC adopted a proactive position, promulgating the necessary rules and regulations to cope up with the advent of the technologies it superintends. With the persistent advent of new offerings in the telecommunications industry, the NTCs role will become more crucial than at any time before. If NTCs behavior in the present case is but indicative of a malaise pervading this crucial regulatory arm of the State, the Court fears the resultant confusion within the industry and the consuming public. The credibility of an administrative agency entrusted with specialized fields subsists not on judicial doctrine alone, but more so on its intellectual strength, adherence to law, and basic fairness. WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated 22 November 1999, as well as its Resolution dated 29 July 2000, and the assailed Order of the NTC dated 19 July 1999 are hereby SET ASIDE. No cost. SO ORDERED. Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico- Nazario, JJ., concur.

SMART V. NTC
FIRST DIVISION

[G.R. No. 151908. August 12, 2003]

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SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION (PILTEL), petitioners, vs. NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondent. (2) There shall be no charge for calls that are diverted to a voice mailbox, voice prompt, recorded message or similar facility excluding the customers own equipment. (3) PTEs shall verify the identification and address of each purchaser of prepaid SIM cards. Prepaid call cards and SIM cards shall be valid for at least 2 years from the date of first use. Holders of prepaid SIM cards shall be given 45 days from the date the prepaid SIM card is fully consumed but not beyond 2 years and 45 days from date of first use to replenish the SIM card, otherwise the SIM card shall be rendered invalid. The validity of an invalid SIM card, however, shall be installed upon request of the customer at no additional charge except the presentation of a valid prepaid call card. (4) Subscribers shall be updated of the remaining value of their cards before the start of every call using the cards. (5) The unit of billing for the cellular mobile telephone service whether postpaid or prepaid shall be reduced from 1 minute per pulse to 6 seconds per pulse. The authorized rates per minute shall thus be divided by 10.[1] The Memorandum Circular provided that it shall take effect 15 days after its publication in a newspaper of general circulation and three certified true copies thereof furnished the UP Law Center. It was published in the newspaper, The Philippine Star, on June 22, 2000.[2] Meanwhile, the provisions of the Memorandum Circular pertaining to the sale and use of prepaid cards and the unit of billing for cellular mobile telephone service took effect 90 days from the effectivity of the Memorandum Circular. On August 30, 2000, the NTC issued a Memorandum to all cellular mobile telephone service (CMTS) operators which contained measures to minimize if not totally eliminate the

[G.R. No. 152063. August 12, 2003]

GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS CO., INC. (ISLACOM), petitioners, vs. COURT OF APPEALS (The Former 6th Division) and the NATIONAL TELECOMMUNICATIONS COMMISSION, respondents. D E C I S I O N YNARES-SANTIAGO, J.: Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission (NTC) issued on June 16, 2000 Memorandum Circular No. 13-6-2000, promulgating rules and regulations on the billing of telecommunications services. Among its pertinent provisions are the following: (1) The billing statements shall be received by the subscriber of the telephone service not later than 30 days from the end of each billing cycle. In case the statement is received beyond this period, the subscriber shall have a specified grace period within which to pay the bill and the public telecommunications entity (PTEs) shall not be allowed to disconnect the service within the grace period.

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incidence of stealing of cellular phone units. The Memorandum directed CMTS operators to: a. strictly comply with Section B(1) of MC 13-6-2000 requiring the presentation and verification of the identity and addresses of prepaid SIM card customers; b. require all your respective prepaid SIM cards dealers to comply with Section B(1) of MC 13-6-2000; c. deny acceptance to your respective networks prepaid and/or postpaid customers using stolen cellphone units or cellphone units registered to somebody other than the applicant when properly informed of all information relative to the stolen cellphone units; d. share all necessary information of stolen cellphone units to all other CMTS operators in order to prevent the use of stolen cellphone units; and e. require all your existing prepaid SIM card customers to register and present valid identification cards.[3] This was followed by another Memorandum dated October 6, 2000 addressed to all public telecommunications entities, which reads: This is to remind you that the validity of all prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years from date of first use pursuant to MC 13-6-2000. In addition, all CMTS operators are reminded that all SIM packs used by subscribers of prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years from date of first use. Also, the billing unit shall be on a six (6) seconds pulse effective 07 October 2000. For strict compliance.[4] On October 20, 2000, petitioners Isla Communications Co., Inc. and Pilipino Telephone Corporation filed against the National Telecommunications Commission, Commissioner Joseph A. Santiago, Deputy Commissioner Aurelio M. Umali and Deputy Commissioner Nestor C. Dacanay, an action for declaration of nullity of NTC Memorandum Circular No. 13-6- 2000 (the Billing Circular) and the NTC Memorandum dated October 6, 2000, with prayer for the issuance of a writ of preliminary injunction and temporary restraining order. The complaint was docketed as Civil Case No. Q-00-42221 at the Regional Trial Court of Quezon City, Branch 77.[5] Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no jurisdiction to regulate the sale of consumer goods such as the prepaid call cards since such jurisdiction belongs to the Department of Trade and Industry under the Consumer Act of the Philippines; that the Billing Circular is oppressive, confiscatory and violative of the constitutional prohibition against deprivation of property without due process of law; that the Circular will result in the impairment of the viability of the prepaid cellular service by unduly prolonging the validity and expiration of the prepaid SIM and call cards; and that the requirements of identification of prepaid card buyers and call balance announcement are unreasonable. Hence, they prayed that the Billing Circular be declared null and void ab initio. Soon thereafter, petitioners Globe Telecom, Inc and Smart Communications, Inc. filed a joint Motion for Leave to Intervene and to Admit Complaint-in-Intervention.[6] This was granted by the trial court.

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On October 27, 2000, the trial court issued a temporary restraining order enjoining the NTC from implementing Memorandum Circular No. 13-6-2000 and the Memorandum dated October 6, 2000.[7] In the meantime, respondent NTC and its co-defendants filed a motion to dismiss the case on the ground of petitioners failure to exhaust administrative remedies. Subsequently, after hearing petitioners application for preliminary injunction as well as respondents motion to dismiss, the trial court issued on November 20, 2000 an Order, the dispositive portion of which reads: WHEREFORE, premises considered, the defendants motion to dismiss is hereby denied for lack of merit. The plaintiffs application for the issuance of a writ of preliminary injunction is hereby granted. Accordingly, the defendants are hereby enjoined from implementing NTC Memorandum Circular 13-6- 2000 and the NTC Memorandum, dated October 6, 2000, pending the issuance and finality of the decision in this case. The plaintiffs and intervenors are, however, required to file a bond in the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00), Philippine currency. SO ORDERED.[8] Defendants filed a motion for reconsideration, which was denied in an Order dated February 1, 2001.[9] Respondent NTC thus filed a special civil action for certiorari and prohibition with the Court of Appeals, which was docketed as CA-G.R. SP. No. 64274. On October 9, 2001, a decision was rendered, the decretal portion of which reads: WHEREFORE, premises considered, the instant petition for certiorari and prohibition is GRANTED, in that, the order of the court a quo denying the petitioners motion to dismiss as well as the order of the court a quo granting the private respondents prayer for a writ of preliminary injunction, and the writ of preliminary injunction issued thereby, are hereby ANNULLED and SET ASIDE. The private respondents complaint and complaint-in-intervention below are hereby DISMISSED, without prejudice to the referral of the private respondents grievances and disputes on the assailed issuances of the NTC with the said agency. SO ORDERED.[10] Petitioners motions for reconsideration were denied in a Resolution dated January 10, 2002 for lack of merit.[11] Hence, the instant petition for review filed by Smart and Piltel, which was docketed as G.R. No. 151908, anchored on the following grounds: A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) AND NOT THE REGULAR COURTS HAS JURISDICTION OVER THE CASE. B. THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN AVAILABLE ADMINISTRATIVE REMEDY. C. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BILLING CIRCULAR ISSUED BY

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THE RESPONDENT NTC IS UNCONSTITUTIONAL AND CONTRARY TO LAW AND PUBLIC POLICY. D. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE RIGHT TO WARRANT THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION.[12] Likewise, Globe and Islacom filed a petition for review, docketed as G.R. No. 152063, assigning the following errors: 1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINES OF PRIMARY JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS FOR LEGAL NULLIFICATION (BECAUSE OF LEGAL INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY ADMINISTRATIVE REGULATION PROMULGATED BY AN AGENCY IN THE EXERCISE OF ITS RULE MAKING POWERS AND INVOLVES ONLY QUESTIONS OF LAW. 2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS. 3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY WHERE THE ADMINISTRATIVE ACTION IS COMPLETE AND EFFECTIVE, WHEN THERE IS NO OTHER REMEDY, AND THE PETITIONER STANDS TO SUFFER GRAVE AND IRREPARABLE INJURY. 4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE PETITIONERS IN FACT EXHAUSTED ALL ADMINISTRATIVE REMEDIES AVAILABLE TO THEM. 5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN ISSUING ITS QUESTIONED RULINGS IN THIS CASE BECAUSE GLOBE AND ISLA HAVE A CLEAR RIGHT TO AN INJUNCTION.[13] The two petitions were consolidated in a Resolution dated February 17, 2003.[14] On March 24, 2003, the petitions were given due course and the parties were required to submit their respective memoranda.[15] We find merit in the petitions. Administrative agencies possess quasi-legislative or rule- making powers and quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make rules and regulations which results in delegated legislation that is within the confines of the granting statute and the doctrine of non-delegability and separability of powers.[16] The rules and regulations that administrative agencies promulgate, which are the product of a delegated legislative power to create new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by the legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law, and be not in contradiction to, but in conformity with, the standards prescribed by law.[17] They must conform to and be consistent with the provisions of the enabling statute in order for such rule or regulation to be

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valid. Constitutional and statutory provisions control with respect to what rules and regulations may be promulgated by an administrative body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute. In case of conflict between a statute and an administrative order, the former must prevail.[18] Not to be confused with the quasi-legislative or rule-making power of an administrative agency is its quasi-judicial or administrative adjudicatory power. This is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. The administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or administrative duty entrusted to it. In carrying out their quasi-judicial functions, the administrative officers or bodies are required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them as basis for their official action and exercise of discretion in a judicial nature.[19] In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not exhaust administrative remedies before going to court. This principle applies only where the act of the administrative agency concerned was performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative power. In Association of Philippine Coconut Dessicators v. Philippine Coconut Authority,[20] it was held: The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so strenuously urged by the Solicitor General on behalf of respondent, has obviously no application here. The resolution in question was issued by the PCA in the exercise of its rule- making or legislative power. However, only judicial review of decisions of administrative agencies made in the exercise of their quasi- judicial function is subject to the exhaustion doctrine. Even assuming arguendo that the principle of exhaustion of administrative remedies apply in this case, the records reveal that petitioners sufficiently complied with this requirement. Even during the drafting and deliberation stages leading to the issuance of Memorandum Circular No. 13-6-2000, petitioners were able to register their protests to the proposed billing guidelines. They submitted their respective position papers setting forth their objections and submitting proposed schemes for the billing circular.[21] After the same was issued, petitioners wrote successive letters dated July 3, 2000[22] and July 5, 2000,[23] asking for the suspension and reconsideration of the so-called Billing Circular. These letters were not acted upon until October 6, 2000, when respondent NTC issued the second assailed Memorandum implementing certain provisions of the Billing Circular. This was taken by petitioners as a clear denial of the requests contained in their previous letters, thus prompting them to seek judicial relief. In like manner, the doctrine of primary jurisdiction applies only where the administrative agency exercises its quasi-judicial or adjudicatory function. Thus, in cases involving specialized disputes, the practice has been to refer the same to an administrative agency of special competence pursuant to the doctrine of primary jurisdiction. The courts will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the question

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demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the premises of the regulatory statute administered. The objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court. It applies where the 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, has 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.[24] However, where what is assailed is the validity or constitutionality of a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the regional trial courts.[25] This is within the scope of judicial power, which includes the authority of the courts to determine in an appropriate action the validity of the acts of the political departments.[26] 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.[27] In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its Memorandum dated October 6, 2000 was pursuant to its quasi-legislative or rule-making power. As such, petitioners were justified in invoking the judicial power of the Regional Trial Court to assail the constitutionality and validity of the said issuances. In Drilon v. Lim,[28] it was held: We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this authority being embraced in the general definition of the judicial power to determine what are the valid and binding laws by the criterion of their conformity to the fundamental law. Specifically, B.P. 129 vests in the regional trial courts jurisdiction over all civil cases in which the subject of the litigation is incapable of pecuniary estimation, even as the accused in a criminal action has the right to question in his defense the constitutionality of a law he is charged with violating and of the proceedings taken against him, particularly as they contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in all cases in which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.[29] In their complaint before the Regional Trial Court, petitioners averred that the Circular contravened Civil Code provisions on sales and violated the constitutional prohibition against the deprivation of property without due process of law. These are within the competence of the trial judge. Contrary to the finding of the Court of Appeals, the issues raised in the complaint do not entail highly technical matters. Rather, what is required of the judge who will resolve

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this issue is a basic familiarity with the workings of the cellular telephone service, including prepaid SIM and call cards and this is judicially known to be within the knowledge of a good percentage of our population and expertise in fundamental principles of civil law and the Constitution. Hence, the Regional Trial Court has jurisdiction to hear and decide Civil Case No. Q-00-42221. The Court of Appeals erred in setting aside the orders of the trial court and in dismissing the case. WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 64274 dated October 9, 2001 and its Resolution dated January 10, 2002 are REVERSED and SET ASIDE. The Order dated November 20, 2000 of the Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-00-42221 is REINSTATED. This case is REMANDED to the court a quo for continuation of the proceedings. SO ORDERED. Davide, Jr., C.J., (Chairman), Vitug, and Carpio, JJ., concur. Azcuna, J., took no part RUPERTO A. AMBIL, JR., petitioner, vs. THE COMMISSION ON ELECTIONS (FIRST DIVISION, FORMERLY SECOND DIVISION) and JOSE T. RAMIREZ, respondents. D E C I S I O N PARDO, J.: The case before the Court is a special civil action for certiorari and prohibition with preliminary injunction or temporary restraining order seeking to nullify the order dated June 15, 2000 of the Commission on Elections (Comelec), First Division,[1] giving notice to the parties of the promulgation of the resolution on the case entitled Jose T. Ramirez, Protestee, versus Ruperto A. Ambil, Jr., Election Protest Case No. 98-29, on June 20, 2000, at 2:00 in the afternoon and to prohibit the respondent Commission on Election from promulgating the so called Guiani ponencia.[2] The facts are as follows: Petitioner Ruperto A. Ambil, Jr. and respondent Jose T. Ramirez were candidates for the position of Governor, Eastern Samar, during the May 11, 1998 elections.[3]On May 16, 1998, the Provincial Board of Canvassers proclaimed Ruperto A. Ambil, Jr. as the duly elected Governor, Eastern Samar, having obtained 46,547 votes, the highest number of votes in the election returns. On June 4, 1998, respondent Ramirez who obtained 45,934 votes, the second highest number of votes, filed with the Comelec, an election protest[4] challenging the results in a total of 201 precincts.[5] The case was assigned to the First Division (formerly Second), Commission on Elections.[6] On January 27, 2000, Commissioner Japal M. Guiani prepared and signed a proposed resolution in the case. To such proposed ponencia, Commissioner Julio F. Desamito dissented. Commissioner Luzviminda G. Tancangco at first did

AMBIL, JR. V. COMELEC

EN BANC

[G.R. No. 143398. October 25, 2000]

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not indicate her vote but said that she would wish to see both positions, if any, to make her (my) final decision.[7] In the meantime, on February 15, 2000, Commissioner Guiani retired from the service. On March 3, 2000, the President of the Philippines appointed Commissioner Rufino S. Javier to the seat vacated by Commissioner Guiani. Commissioner Javier assumed office on April 4, 2000. On or about February 24, 2000, petitioner Ambil and respondent Ramirez received a purported resolution promulgated on February 14, 2000, signed by Commissioner Guiani and Tancangco, with Commissioner Desamito dissenting. The result was in favor of respondent Ramirez who was declared winner by a margin of 1,176 votes.[8] On February 28, 2000, the Comelec, First Division, declared that the thirteen-page resolution is a useless scrap of paper which should be ignored by the parties in this case there being no promulgation of the Resolution in the instant case. [9] On March 31, 2000, the Comelec, First Division, issued an order setting the promulgation of the resolution in the case (EPC Case No. 98-29) on April 6, 2000, at 2:00 in the afternoon.[10] However, on April 6, 2000, petitioner Ambil filed a motion to cancel promulgation challenging the validity of the purported Guiani resolution. TheComelec, First Division, acting on the motion, on the same date, postponed the promulgation until this matter is resolved.[11] On June 14, 2000, two members of the First Division, namely, Commissioners Luzviminda G. Tancangco and Rufino S. Javier, sent a joint memorandum to Commissioner Julio F. Desamito, presiding Commissioner, stating: Pursuant to your recommendation in your April 18, 2000 Memorandum to the Commission En Banc that this case be submitted for a reconsultation by the members of the First Division, it is our position that we promulgate as soon as possible the Guiani Resolution of the case. This is notwithstanding the Jamil vs. Comelec (283 SCRA 349), Solidbank vs. IAC (G. R. No. 73777) and other doctrinal cases on the issue. After all, this Commission stood pat on its policy that what is controlling is the date the ponente signed the questioned Resolution as what we did in promulgating the case of Dumayas vs. Bernal (SPC 98-137). In view of the foregoing, we recommend that we proceed with the promulgation of the subject resolution and let the aggrieved party challenge it through a Motion for Reconsideration before the Commission en banc or through a certiorari case before the Supreme Court.[12] On June 15, 2000, the Comelec, First Division, through Commissioner Julio F. Desamito, issued an order setting the promulgation of the resolution in the case on June 20, 2000, at 2:00 oclock in the afternoon.[13] Without waiting for the promulgation of the resolution, on June 19, 2000, petitioner interposed the instant petition.[14] Petitioner Ambil seeks to annul the order dated June 15, 2000 setting the promulgation of the resolution of the case (EPC Case No. 98-29) on June 20, 2000 at 2:00 in the afternoon, and prohibiting the Comelec, First Division, from promulgating the purported Guiani resolution and directing the Comelec, First Division, to deliberate anew on the case and to promulgate the resolution reached in the case after such deliberation.[15] On June 20, 2000, we issued a temporary restraining order enjoining respondent Comelec from implementing the June 15, 2000 order for the promulgation of the resolution set on June 20, 2000 at 2:00 in the afternoon. At the same time, the Court directed the respondents to comment on the petition within ten (10) days from notice.[16]

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On July 10, 2000, respondent Ramirez filed his comment.[17] Respondent Ramirez admitted that the proposed resolution of Commissioner Guiani was no longer valid after his retirement on February 15, 2000.[18] He submitted that Comelec, First Division, its membership still constituting a majority, must elevate the protest case to the Comelec en banc until resolved with finality.[19] In his comment filed on August 29, 2000, the Solicitor General interposed no objection to the petition.[20] At issue in this petition is whether Comelec, First Division, in scheduling the promulgation of the resolution in the case (EPC Case No. 98-29) acted without jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction. We find the petition without merit. To begin with, the power of the Supreme Court to review decisions of the Comelec is prescribed in the Constitution, as follows: Section 7. Each commission shall decide by a majority vote of all its members any case or matter brought before it within sixty days from the date of its submission for decision orresolution. A case or matter is deemed submitted for decision or resolution upon the filing of the last pleading, brief, or memorandum required by the rules of the commission or by the commission itself. Unless otherwise provided by this constitution or by law, any decision, order, or ruling of each commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy thereof.[21] [emphasis supplied] We have interpreted this provision to mean final orders, rulings and decisions of the COMELEC rendered in the exercise of its adjudicatory or quasi-judicial powers.[22] This decision must be a final decision or resolution of the Comelec en banc,[23] not of a division,[24] certainly not an interlocutory order of a division.[25] The Supreme Court has no power to reviewvia certiorari, an interlocutory order or even a final resolution of a Division of the Commission on Elections.[26] The mode by which a decision, order or ruling of the Comelec en banc may be elevated to the Supreme Court is by the special civil action of certiorari under Rule 65 of the 1964 Revised Rules of Court, now expressly provided in Rule 64, 1997 Rules of Civil Procedure, as amended.[27] Rule 65, Section 1, 1997 Rules of Civil Procedure, as amended, requires that there be no appeal, or any plain, speedy and adequate remedy in the ordinary course of law. A motion for reconsideration is a plain and adequate remedy provided by law.[28] Failure to abide by this procedural requirement constitutes a ground for dismissal of the petition.[29] In like manner, a decision, order or resolution of a division of the Comelec must be reviewed by the Comelec en banc via a motion for reconsideration before the finalen banc decision may be brought to the Supreme Court on certiorari. The pre-requisite filing of a motion for reconsideration is mandatory.[30] Article IX- C, Section 3, 1987 Constitution provides as follows: Section 3. The Commission on Elections may sit en banc or in two divisions, and shall promulgate its rules of procedure in order to expedite disposition of election cases, including pre- proclamation controversies. All such election cases shall be heard and decided in division, provided that motions for reconsideration of decisions shall be decided by the Commissionen banc. [emphasis supplied]

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Similarly, the Rules of Procedure of the Comelec provide that a decision of a division may be raised to the en banc via a motion for reconsideration.[31] The case at bar is an election protest involving the position of Governor, Eastern Samar.[32] It is within the original jurisdiction of the Commission on Elections in division.[33] Admittedly, petitioner did not ask for a reconsideration of the divisions resolution or final decision.[34] In fact, there was really no resolution or decision to speak of [35] because there was yet no promulgation, which was still scheduled on June 20, 2000 at 2:00 oclock in the afternoon. Petitioner went directly to the Supreme Court from an order of promulgation of the Resolution of this case by the First Division of the Comelec.[36] Under the existing Constitutional scheme, a party to an election case within the jurisdiction of the Comelec in division can not dispense with the filing of a motion for reconsideration of a decision, resolution or final order of the Division of the Commission on Elections because the case would not reach the Comelec en banc without such motion for reconsideration having been filed and resolved by the Division. The instant case does not fall under any of the recognized exceptions to the rule in certiorari cases dispensing with a motion for reconsideration prior to the filing of a petition.[37] In truth, the exceptions do not apply to election cases where a motion for reconsideration is mandatory by Constitutional fiat to elevate the case to the Comelec en banc,whose final decision is what is reviewable via certiorari before the Supreme Court.[38] We are aware of the ruling in Kho v. Commission on Elections,[39] that in a situation such as this where the Commission on Elections in division committed grave abuse of discretion or acted without or in excess of jurisdiction in issuing interlocutory orders relative to an action pending before it and the controversy did not fall under any of the instances mentioned in Section 2, Rule 3 of the COMELEC Rules of Procedure, the remedy of the aggrieved party is not to refer the controversy to the Commission en banc as this is not permissible under its present rules but to elevate it to this Court via a petition for certiorari under Rule 65 of the Rules of Court. This isthe case relied upon by the dissenting justice to support the proposition that resort to the Supreme Court from a resolution of a Comelec Division is allowed.[40]Unfortunately, the Kho case has no application to the case at bar. The issue therein is, may the Commission on Elections in division admit an answer with counter-protest after the period to file the same has expired?[41] The Comelec First Division admitted the answer with counter-protest of the respondent. The Supreme Court declared such order void for having been issued with grave abuse of discretion tantamount to lack of [42] jurisdiction. However, an important moiety in the Kho case was not mentioned in the dissent. It is that the Comelec, First Division, denied the prayer of petitioner for the elevation of the case to en banc because the orders of admission were mere interlocutory orders.[43] Hence, the aggrieved party had no choice but to seek recourse in the Supreme Court. Such important fact is not present in the case at bar. We must emphasize that what is questioned here is the order dated June 15, 2000, which is a mere notice of the promulgation of the resolution in EPC Case No. 98-29. We quote the order in question in full, to wit: Pursuant to Section 5 of Rule 18 of the COMELEC RULES OF PROCEDURE, and the Joint Memorandum of Commissioners Luzviminda G. Tancangco and Rufino S. Javier to the Presiding Commissioner of the First Division dated 14 June 2000 paragraph 5 of which states:

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In view of the foregoing, we recommend that we proceed with the promulgation of the subject resolution and let the aggrieved party challenge it through a Motion for Reconsideration before the Commission en banc or through a certiorari case before the Supreme Court. the promulgation of the Resolution in this case is hereby set on Tuesday, June 20, 2000 at 2:00 oclock in the afternoon at the Comelec Session Hall, Intramuros, Manila. No further motion for postponement of the promulgation shall be entertained. The Clerk of the Commission is directed to give the parties, through their Attorneys, notice of this Order through telegram and by registered mail or personal delivery. SO ORDERED. Given this 15th day of June, 2000 in the City of Manila, Philippines. FOR THE DIVISION: [Sgd.] JULIO F. DESAMITO Pres iding Commissioner[44] There is nothing irregular about the order of promulgation of the resolution in the case, except in the mind of suspicious parties. Perhaps what was wrong in the order was the reference to the memorandum of the two commissioners that was not necessary and was a superfluity, or excessus in linguae. All the members of the Division were incumbent Commissioners of the Commission on Elections (COMELEC) and had authority to decide the case in the Division. What appears to be patently null and void is the so-called Guiani resolution if it is the one to be promulgated. We cannot assume that the Comelec will promulgate a void resolution and violate the Constitution and the law. We must assume that the members of the Commission in Division or en banc are sworn to uphold and will obey the Constitution. Consequently, the Guiani resolution is not at issue in the case at bar. No one knows the contents of the sealed envelope containing the resolution to be promulgated on June 20, 2000, simply because it has not been promulgated! It may be true that the parties received a copy of what purports to be the Guiani resolution,[45] declaring respondent Jose T. Ramirez the victor in the case. Such Guiani resolution is admitted by the parties and considered by the Commission on Elections as void. The Solicitor General submitted an advice that the same resolution is deemed vacated by the retirement of Commissioner Guiani on February 15, 2000.[46] It can not be promulgated anymore for all legal intents and purposes. We rule that the so-called Guiani resolution is void for the following reasons: First: A final decision or resolution becomes binding only after it is promulgated and not before. Accordingly, one who is no longer a member of the Commission at the time the final decision or resolution is promulgated cannot validly take part in that resolution or decision.[47] Much more could he be the ponente of the resolution or decision. The resolution or decision of the Division must be signed by a majority of its members and duly promulgated. Commissioner Guiani might have signed a draft ponencia prior to his retirement from office, but when he vacated his office without the final decision or resolution having been promulgated, his vote was automatically

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invalidated.[48] Before that resolution or decision is so signed and promulgated, there is no valid resolution or decision to speak of.[49] Second: Atty. Zacarias C. Zaragoza, Jr., Clerk of the First Division, Commission on Elections, denied the release or promulgation of the Guiani resolution. He disowned the initials on the face of the first page of the resolution showing its promulgation on February 14, 2000, and said that it was a forgery. There is no record in the Electoral Contests and Adjudication Department (ECAD) of the Commission on Election that a resolution on the main merits of the case was promulgated.[50] Third: By an order dated February 28, 2000, the Comelec, First Division, disclaimed the alleged thirteen (13) page resolution for being a useless scrap of paper which should be ignored by the parties there being no promulgation of the resolution in the case.[51] Fourth: It is unlikely that Commissioner Tancangco affixed her signature on the Guiani resolution. On the date that it was purportedly promulgated, which was February 14, 2000, the Division issued an order where Commissioner Tancangco expressed her reservations and stated that she wished to see both positions, if any, before she made her final decision.[52] A final decision or resolution of the Comelec, in Division or en banc is promulgated on a date previously fixed, of which notice shall be served in advance upon the parties or their attorneys personally or by registered mail or by telegram.[53] It is jurisprudentially recognized that at any time before promulgation of a decision or resolution, the ponente may change his mind.[54] Moreover, in this case, before a final decision or resolution could be promulgated, the ponente retired and a new commissioner appointed. And the incoming commissioner has decided to take part in the resolution of the case. It is presumed that he had taken the position of his predecessor because he co-signed the request for the promulgation of the Guiani resolution.[55] If petitioner were afraid that what would be promulgated by the Division was the Guiani resolution, a copy of which he received by mail, which, as heretofore stated, was not promulgated and the signature thereon of the clerk of court was a forgery, petitioner could seek reconsideration of such patently void resolution and thereby the case would be elevated to the Commission en banc.[56] Considering the factual circumstances, we speculated ex mero motu that the Comelec would promulgate a void resolution. The sea of suspicion has no shore, and the court that embarks upon it is without rudder or compass.[57] We must not speculate that the Comelec would still promulgate a void resolution despite knowledge that it is invalid or void ab initio. Consequently, the filing of the instant petition before this Court was premature. Petitioner failed to exhaust adequate administrative remedies available before the COMELEC. In a long line of cases, this Court has held consistently that before a party is allowed to seek the intervention of the court, it is a pre-condition that he should have availed of all the means of administrative processes afforded him. Hence, if a remedy within the administrative machinery can still be resorted to by giving the administrative officer concerned every opportunity to decide on a matter that comes within his jurisdiction, then such remedy should be exhausted first before the courts judicial power can be sought. The premature invocation of courts [58] intervention is fatal to ones cause of action.

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This is the rule on exhaustion of administrative remedies. A motion for reconsideration then is a pre-requisite to the viability of a special civil action for certiorari, unless the party who avails of the latter can convincingly show that his case falls under any of the following exceptions to the rule: (1) when the question is purely legal, (2) where judicial intervention is urgent, (3) where its application may cause great and irreparable damage, (4) where the controverted acts violate due process, (5) failure of a high government official from whom relief is sought to act on the matter, and seeks when the issue for non-exhaustion of administrative remedies has been rendered moot.[59] This doctrine of exhaustion of administrative remedies was not without its practical and legal reasons, for one thing, availment of administrative remedy entails lesser expenses and provides for a speedier disposition of controversies. It is no less true to state that the courts of justice for reasons of comity and convenience will shy away from a dispute until the system of administrative redress has been completed and complied with so as to give the administrative agency concerned every opportunity to correct its error and to dispose of the case. However, we are not amiss to reiterate that the principal of exhaustion of administrative remedies as tested by a battery of cases is not an ironclad rule. This doctrine is a relative one and its flexibility is called upon by the peculiarity and uniqueness of the factual and circumstantial settings of a case. Hence, it is disregarded (1) when there is a violation of due process, (2) when the issue involved is purely a legal question, (3) when the administrative action is patently illegal amounting to lack or excess of jurisdiction, (4) when there is estoppel on the part of the administrative agency concerned, (5) when there is irreparable injury, (6) when the respondent is a department secretary whose acts as an alter ego of the president bears the implied and assumed approval of the latter, (7) when to require exhaustion of administrative remedies would be unreasonable, (8) when it would amount to a nullification of a claim, (9) when the subject matter is a private land in land case proceedings, (10) when the rule does not provide a plain, speedy and adequate remedy, and (11) when there are circumstances indicating the urgency of judicial intervention.[60] The administrative authorities must be given an opportunity to act and correct the errors committed in the administrative forum.[61] Only after administrative remedies are exhausted may judicial recourse be allowed.[62] This case does not fall under any of the exceptions and indeed, as heretofore stated, the exceptions do not apply to an election case within the jurisdiction of the Comelec in Division. Hence, the petition at bar must be dismissed for prematurity. Failure to exhaust administrative remedies is fatal to a party's cause of action and a dismissal based on that ground is tantamount to a dismissal based on lack of cause of action.[63] WHEREFORE, the Court hereby DISMISSES the petition for prematurity. The Court orders the Commission on Elections, First Division, to resolve with all deliberate dispatch Election Protest Case No. 98-29 and to promulgate its resolution thereon adopted by majority vote within thirty (30) days from notice hereof. The temporary restraining order issued on June 20, 2000, is hereby lifted and dissolved, effective immediately. No costs. SO ORDERED. Bellosillo, Melo, Puno, Vitug, Panganiban, Purisima, Gonzaga- Reyes, and Ynares-Santiago, JJ., concur. Davide, Jr., C.J., Mendoza, and Quisumbing, JJ., join the dissent of Mr. Justice De Leon. Kapunan, J., voted for this ponencia during the deliberations on 17 October 2000.

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Buena, J., no part. De Leon, Jr., J., see dissenting opinion. statutes regulating the desiccated coconut industry, in particular, and the coconut industry, in general. As disclosed by the parties pleadings, the facts are as follows: On November 5, 1992, seven desiccated coconut processing companies belonging to the APCD brought suit in the Regional Trial Court, National Capital Judicial Region in Makati, Metro Manila, to enjoin the PCA from issuing permits to certain applicants for the establishment of new desiccated coconut processing plants. Petitioner alleged that the issuance of licenses to the applicants would violate PCAs Administrative Order No. 02, series of 1991, as the applicants were seeking permits to operate in areas considered congested under the administrative order.[1] On November 6, 1992, the trial court issued a temporary restraining order and, on November 25, 1992, a writ of preliminary injunction, enjoining the PCA from processing and issuing licenses to Primex Products, Inc., Coco Manila, Superstar (Candelaria) and Superstar (Davao) upon the posting of a bond in the amount of P100,000.00.[2] Subsequently and while the case was pending in the Regional Trial Court, the Governing Board of the PCA issued on March 24, 1993 Resolution No. 018-93, providing for the withdrawal of the Philippine Coconut Authority from all regulation of the coconut product processing industry. While it continues the registration of coconut product processors, the registration would be limited to the monitoring of their volumes of production and administration of quality standards. The full text of the resolution reads: RESOLUTION NO. 018-93 POLICY DECLARATION DEREGULATING

ASSOCIATION OF PHILIPPINE COCONUT DESICCATORS V. PCA

EN BANC

[G.R. No. 110526. February 10, 1998]

ASSOCIATION OF PHILIPPINE COCONUT DESICCATORS, petitioner, vs. PHILIPPINE COCONUT AUTHORITY, respondent. D E C I S I O N MENDOZA, J.: At issue in this case is the validity of a resolution, dated March 24, 1993, of the Philippine Coconut Authority in which it declares that it will no longer require those wishing to engage in coconut processing to apply to it for a license or permit as a condition for engaging in such business. Petitioner Association of Philippine Coconut Desiccators (hereafter referred to as APCD) brought this suit for certiorari and mandamus against respondent Philippine Coconut Authority (PCA) to invalidate the latters Board Resolution No. 018-93 and the certificates of registration issued under it on the ground that the resolution in question is beyond the power of the PCA to adopt, and to compel said administrative agency to comply instead with the mandatory provisions of

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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO

THE ESTABLISHMENT OF NEW COCONUT PROCESSING PLANTS WHEREAS, it is the policy of the State to promote free enterprise unhampered by protective regulations and unnecessary bureaucratic red tapes; WHEREAS, the deregulation of certain sectors of the coconut industry, such as marketing of coconut oils pursuant to Presidential Decree No. 1960, the lifting of export and commodity clearances under Executive Order No. 1016, and relaxation of regulated capacity for the desiccated coconut sector pursuant to Presidential Memorandum of February 11, 1988, has become a centerpiece of the present dispensation; WHEREAS, the issuance of permits or licenses prior to business operation is a form of regulation which is not provided in the charter of nor included among the powers of the PCA; WHEREAS, the Governing Board of PCA has determined to follow and further support the deregulation policy and effort of the government to promote free enterprise; NOW THEREFORE, BE IT RESOLVED AS IT IS HEREBY RESOLVED, that, henceforth, PCA shall no longer require any coconut oil mill, coconut oil refinery, coconut desiccator, coconut product processor/factory, coconut fiber plant or any similar coconut processing plant to apply with PCA and the latter shall no longer issue any form of license or permit as condition prior to establishment or operation of such mills or plants; RESOLVED, FURTHER, that the PCA shall limit itself only to simply registering the aforementioned coconut product processors for the purpose of monitoring their volumes of production, administration of quality standards with the corresponding service fees/charges. ADOPTED this 24th day of March 1993, at Quezon City.[3] The PCA then proceeded to issue certificates of registration to those wishing to operate desiccated coconut processing plants, prompting petitioner to appeal to the Office of the President of the Philippines on April 26, 1993 not to approve the resolution in question. Despite follow-up letters sent on May 25 and June 2, 1993, petitioner received no reply from the Office of the President. The certificates of registration issued in the meantime by the PCA has enabled a number of new coconut mills to operate. Hence this petition. Petitioner alleges: I RESPONDENT PCAS BOARD RESOLUTION NO. 018-93 IS NULL AND VOID FOR BEING AN UNDUE EXERCISE OF LEGISLATIVE POWER BY AN ADMINISTRATIVE BODY. II ASIDE FROM BEING ULTRA-VIRES, BOARD RESOLUTION NO. 018-93 IS WITHOUT ANY BASIS, ARBITRARY, UNREASONABLE AND THEREFORE IN VIOLATION OF SUBSTANTIVE DUE PROCESS OF LAW. III IN PASSING BOARD RESOLUTION NO. 018-93, RESPONDENT PCA VIOLATED THE PROCEDURAL DUE PROCESS REQUIREMENT OF CONSULTATION PROVIDED IN PRESIDENTIAL DECREE NO. 1644, EXECUTIVE ORDER NO.

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826 AND PCA ADMINISTRATIVE ORDER NO. 002, SERIES OF 1991. On the other hand, in addition to answering petitioners arguments, respondent PCA alleges that this petition should be denied on the ground that petitioner has a pending appeal before the Office of the President. Respondent accuses petitioner of forum-shopping in filing this petition and of failing to exhaust available administrative remedies before coming to this Court. Respondent anchors its argument on the general rule that one who brings an action under Rule 65 must show that one has no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law. I. The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so strenuously urged by the Solicitor General on behalf of respondent, has obviously no application here. The resolution in question was issued by the PCA in the exercise of its rule- making or legislative power. However, only judicial review of decisions of administrative agencies made in the exercise of their quasi- judicial function is subject to the exhaustion doctrine. The exhaustion doctrine stands as a bar to an action which is not yet complete[4] and it is clear, in the case at bar, that after its promulgation the resolution of the PCA abandoning regulation of the desiccated coconut industry became effective. To be sure, the PCA is under the direct supervision of the President of the Philippines but there is nothing in P.D. No. 232, P.D. No. 961, P.D. No. 1468 and P.D. No. 1644 defining the powers and functions of the PCA which requires rules and regulations issued by it to be approved by the President before they become effective. In any event, although the APCD has appealed the resolution in question to the Office of the President, considering the fact that two months after they had sent their first letter on April 26, 1993 they still had to hear from the Presidents office, meanwhile respondent PCA was issuing certificates of registration indiscriminately to new coconut millers, we hold that petitioner was justified in filing this case on June 25, 1993.[5] Indeed, after writing the Office of the President on April 26, 1993[6] petitioner sent inquiries to that office not once, but twice, on May 26, 1993[7] and on June 2, 1993,[8] but petitioner did not receive any reply. II. We now turn to the merit of the present petition. The Philippine Coconut Authority was originally created by P.D. No. 232 on June 30, 1973, to take over the powers and functions of the Coconut Coordinating Council, the Philippine Coconut Administration and the Philippine Coconut Research Institute. On June 11, 1978, by P.D. No. 1468, it was made an independent public corporation . . . directly reporting to, and supervised by, the President of the Philippines,[9] and charged with carrying out the States policy to promote the rapid integrated development and growth of the coconut and other palm oil industry in all its aspects and to ensure that the coconut farmers become direct participants in, and beneficiaries of, such development and growth.[10] through a regulatory scheme set up by law.[11] Through this scheme, the government, on August 28, 1982, temporarily prohibited the opening of new coconut processing plants and, four months later, phased out some of the existing ones in view of overproduction in the coconut industry which resulted in cut-throat competition, underselling and smuggling of poor quality products and ultimately in the decline of the export performance of coconut-based commodities. The establishment of new plants could be authorized only upon determination by the PCA of the existence of certain economic conditions and the approval of the President of the Philippines. Thus, Executive Order No. 826, dated August 28, 1982, provided:

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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO

SECTION 1. Prohibition. - Except as herein provided, no government agency or instrumentality shall hereafter authorize, approve or grant any permit or license for the establishment or operation of new desiccated coconut processing plants, including the importation of machinery or equipment for the purpose. In the event of a need to establish a new plant, or expand the capacity, relocate or upgrade the efficiencies of any existing desiccated plant, the Philippine Coconut Authority may, upon proper determination of such need and evaluation of the condition relating to: a. the existing market demand; b. the production capacity prevailing in the country or locality; c. the level and flow of raw materials; and d. other circumstances which may affect the growth or viability of the industry concerned, authorize or grant the application for, the establishment or expansion of capacity, relocation or upgrading of efficiencies of such desiccated coconut processing plant, subject to the approval of the President. On December 6, 1982, a phase-out of some of the existing plants was ordered by the government after finding that a mere freeze in the present capacity of existing plants will not afford a viable solution to the problem considering that the total available limited market is not adequate to support all the existing processing plants, making it imperative to reduce the number of existing processing plants.[12] Accordingly, it was ordered:[13] SECTION 1. The Philippine Coconut Authority is hereby ordered to take such action as may be necessary to reduce the number of existing desiccated coconut processing plants to a level which will insure the survival of the remaining plants. The Authority is hereby directed to determine which of the existing processing plants should be phased out and to enter into appropriate contracts with such plants for the above purpose. It was only on October 23, 1987 when the PCA adopted Resolution No. 058-87, authorizing the establishment and operation of additional DCN plants, in view of the increased demand for desiccated coconut products in the worlds markets, particularly in Germany, the Netherlands and Australia. Even then, the opening of new plants was made subject to such implementing guidelines to be set forth by the Authority and subject to the final approval of the President. The guidelines promulgated by the PCA, as embodied in Administrative Order No. 002, series of 1991, inter alia authorized the opening of new plants in non-congested areas only as declared by the PCA and subject to compliance by applicants with all procedures and requirements for registration under Administrative Order No. 003, series of 1981 and this Order. In addition, as the opening of new plants was premised on the increased global demand for desiccated coconut products, the new entrants were required to submit sworn statements of the names and addresses of prospective foreign buyers. This form of deregulation was approved by President Aquino in her memorandum, dated February 11, 1988, to the PCA. Affirming the regulatory scheme, the President stated in her memorandum: It appears that pursuant to Executive Order No. 826 providing measures for the protection of the Desiccated Coconut Industry, the Philippine Coconut Authority evaluated the conditions relating to: (a) the existing market demands; (b) the production capacity prevailing in the country or locality; (c) the level and flow of raw materials; and (d) other circumstances which may affect the growth or viability of the industry concerned and that

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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO

the result of such evaluation favored the expansion of production and market of desiccated coconut products. In view hereof and the favorable recommendation of the Secretary of Agriculture, the deregulation of the Desiccated Coconut Industry as recommended in Resolution No. 058-87 adopted by the PCA Governing Board on October 28, 1987 (sic) is hereby approved.[14] These measures the restriction in 1982 on entry into the field, the reduction the same year of the number of the existing coconut mills and then the lifting of the restrictions in 1987 were adopted within the framework of regulation as established by law to promote the rapid integrated development and growth of the coconut and other palm oil industry in all its aspects and to ensure that the coconut farmers become direct participants in, and beneficiaries of, such development and growth.[15]Contrary to the assertion in the dissent, the power given to the Philippine Coconut Authority and before it to the Philippine Coconut Administration to formulate and adopt a general program of development for the coconut and other palm oils industry[16] is not a roving commission to adopt any program deemed necessary to promote the development of the coconut and other palm oils industry, but one to be exercised in the context of this regulatory structure. In plain disregard of this legislative purpose, the PCA adopted on March 24, 1993 the questioned resolution which allows not only the indiscriminate opening of new coconut processing plants but the virtual dismantling of the regulatory infrastructure whereby, forsaking controls theretofore placed in its keeping, the PCA limits its function to the innocuous one of monitoring compliance by coconut millers with quality standards and volumes of production. In effect, the PCA would simply be compiling statistical data on these matters, but in case of violations of standards there would be nothing much it would do. The field would be left without an umpire who would retire to the bleachers to become a mere spectator. As the PCA provided in its Resolution No. 018-93: NOW, THEREFORE, BE IT RESOLVED AS IT IS HEREBY RESOLVED, that, henceforth, PCA shall no longer require any coconut oil mill, coconut oil refinery, coconut desiccator, coconut product processor/factory, coconut fiber plant or any similar coconut processing plant to apply with PCA and the latter shall no longer issue any form of license or permit as condition prior to establishment or operation of such mills or plants; RESOLVED, FURTHER, that the PCA shall limit itself only to simply registering the aforementioned coconut product processors for the purpose of monitoring their volumes of production, administration of quality standards with the corresponding service fees/charges. The issue is not whether the PCA has the power to adopt this resolution to carry out its mandate under the law to promote the accelerated growth and development of the coconut and other palm oil industry.[17] The issue rather is whether it can renounce the power to regulate implicit in the law creating it for that is what the resolution in question actually is. Under Art. II, 3(a) of the Revised Coconut Code (P.D. No. 1468), the role of the PCA is To formulate and adopt a general program of development for the coconut and other palm oil industry in all its aspects. By limiting the purpose of registration to merely monitoring volumes of production [and] administration of quality standards of coconut processing plants, the PCA in effect abdicates its role and leaves it almost completely to market forces how the coconut industry will develop. Art. II, 3 of P.D. No. 1468 further requires the PCA:

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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO

(h) To regulate the marketing and the exportation of copra and its by-products by establishing standards for domestic trade and export and, thereafter, to conduct an inspection of all copra and its by-products proposed for export to determine if they conform to the standards established; Instead of determining the qualifications of market players and preventing the entry into the field of those who are unfit, the PCA now relies entirely on competition with all its wastefulness and inefficiency to do the weeding out, in its naive belief in survival of the fittest. The result can very well be a repeat of 1982 when free enterprise degenerated into a free-for-all, resulting in cut-throat competition, underselling, the production of inferior products and the like, which badly affected the foreign trade performance of the coconut industry. Indeed, by repudiating its role in the regulatory scheme, the PCA has put at risk other statutory provisions, particularly those of P.D. No. 1644, to wit: Section 1. The Philippine Coconut Authority shall have full power and authority to regulate the marketing and export of copra, coconut oil and their by-products, in furtherance of the steps being taken to rationalize the coconut oil milling industry. Sec 2. In the exercise of its powers under Section 1 hereof, the Philippine Coconut Authority may initiate and implement such measures as may be necessary to attain the rationalization of the coconut oil milling industry, including, but not limited to, the following measures: (a) Imposition of floor and /or ceiling prices for all exports of copra, coconut oil and their by-products; (b) Prescription of quality standards; (c) Establishment of maximum quantities for particular periods and particular markets; (d) Inspection and survey of export shipments through an independent international superintendent or surveyor. In the exercise of its powers hereunder, the Philippine Coconut Authority shall consult with, and be guided by, the recommendation of the coconut farmers, through corporations owned or controlled by them through the Coconut Industry Investment Fund and the private corporation authorized to be organized under Letter of Instructions No. 926. and the Revised Coconut Code (P.D. No. 1468), Art. II, 3, to wit: (m) Except in respect of entities owned or controlled by the Government or by the coconut farmers under Sections 9 and 10, Article III hereof, the Authority shall have full power and authority to regulate the production, distribution and utilization of all subsidized coconut-based products, and to require the submission of such reports or documents as may be deemed necessary by the Authority to ascertain whether the levy payments and/or subsidy claims are due and correct and whether the subsidized products are distributed among, and utilized by, the consumers authorized by the Authority. The dissent seems to be saying that in the same way that restrictions on entry into the field were imposed in 1982 and then relaxed in 1987, they can be totally lifted now without prejudice to reimposing them in the future should it become necessary to do so. There is really no renunciation of the power to regulate, it is claimed. Trimming down of PCAs function to registration is not an abdication of the power to regulate but is regulation itself. But how can this be done when, under Resolution No. 018-93, the PCA no longer requires a license as condition for the establishment or operation of a plant? If a number of processing firms go to areas which are already congested, the PCA cannot stop them from doing so. If there is

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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO

overproduction, the PCA cannot order a cut back in their production. This is because the licensing system is the mechanism for regulation. Without it the PCA will not be able to regulate coconut plants or mills. In the first whereas clause of the questioned resolution as set out above, the PCA invokes a policy of free enterprise that is unhampered by protective regulations and unnecessary bureaucratic red tape as justification for abolishing the licensing system. There can be no quarrel with the elimination of unnecessary red tape. That is within the power of the PCA to do and indeed it should eliminate red tape. Its success in doing so will be applauded. But free enterprise does not call for removal of protective regulations. Our Constitutions, beginning with the 1935 document, have repudiated laissez-faire as an economic principle.[18] Although the present Constitution enshrines free enterprise as a policy,[19] it nonetheless reserves to the government the power to intervene whenever necessary to promote the general welfare. This is clear from the following provisions of Art. XII of the Constitution which, so far as pertinent, state: Sec. 6. . . . Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands. Sec. 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed. (Emphasis added) At all events, any change in policy must be made by the legislative department of the government. The regulatory system has been set up by law. It is beyond the power of an administrative agency to dismantle it. Indeed, petitioner charges the PCA of seeking to render moot a case filed by some of its members questioning the grant of licenses to certain parties by adopting the resolution in question. It is alleged that members of petitioner complained to the court that the PCA had authorized the establishment and operation of new plants in areas which were already crowded, in violation of its Administrative Order No. 002, series of 1991. In response, the Regional Trial Court issued a writ of preliminary injunction, enjoining the PCA from issuing licenses to the private respondents in that case. These allegations of petitioner have not been denied here. It would thus seem that instead of defending its decision to allow new entrants into the field against petitioners claim that the PCA decision violated the guidelines in Administrative Order No. 002, series of 1991, the PCA adopted the resolution in question to render the case moot. In so doing, the PCA abdicated its function of regulation and left the field to untrammeled competition that is likely to resurrect the evils of cut-throat competition, underselling and overproduction which in 1982 required the temporary closing of the field to new players in order to save the industry. The PCA cannot rely on the memorandum of then President Aquino for authority to adopt the resolution in question. As already stated, what President Aquino approved in 1988 was the establishment and operation of new DCN plants subject to the guidelines to be drawn by the PCA.[20] In the first place, she could not have intended to amend the several laws already mentioned, which set up the regulatory system, by a mere memoranda to the PCA. In the second place, even if that had been her intention, her act would be without effect considering that, when she issued the memorandum in question on February 11, 1988, she was no longer vested with legislative authority.[21]

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WHEREFORE, the petition is GRANTED. PCA Resolution No. 018-93 and all certificates of registration issued under it are hereby declared NULL and VOID for having been issued in excess of the power of the Philippine Coconut Authority to adopt or issue. SO ORDERED. Narvasa, C.J., Regalado, Davide, Jr., Puno, Kapunan, Francisco, Panganiban, and Martinez, JJ., concur. Romero, J., see dissenting opinion. Bellosillo, Melo, Vitug, Quisumbing, and Purisima, JJ., joined Justice Romeros dissenting opinion.

This is a petition for review on certiorari of the decision of the Court of Appeals dated July 22, 1996, in CA-G.R. CV No. 38607, as well as of its resolution of January 23, 1997, denying petitioners motion for reconsideration. The challenged decision reversed the judgment of the Regional Trial Court of Bacolod City, Branch 42 in Civil Case No. 14725. The factual background of this case, as gleaned from the records, is as follows: The Mirasols are sugarland owners and planters. In 19731974, they produced 70,501.08 piculs[1] of sugar, 25,662.36 of which were assigned for export. The following crop year, their acreage planted to the same crop was lower, yielding 65,100 piculs of sugar, with 23,696.40 piculs marked for export. Private respondent Philippine National Bank (PNB) financed the Mirasols sugar production venture for crop years, 1973-1974 and 1974-1975 under a crop loan financing scheme. Under said scheme, the Mirasols signed Credit Agreements, a Chattel Mortgage on Standing Crops, and a Real Estate Mortgage in favor of PNB. The Chattel Mortgage empowered PNB as the petitioners attorney-in-fact to negotiate and to sell the latters sugar in both domestic and export markets and to apply the proceeds to the payment of their obligations to it. Exercising his law-making powers under Martial Law, then President Ferdinand Marcos issued Presidential Decree (P.D.) No. 579[2] in November, 1974. The decree authorized private respondent Philippine Exchange Co., Inc. (PHILEX) to purchase sugar allocated for export to the United States and to other foreign markets. The price and quantity was determined by the Sugar Quota Administration, PNB, the Department of Trade and Industry, and finally, by the Office of the President. The decree further authorized PNB to finance PHILEXs

SPOUSES MIRASOL V. COURT OF APPEALS SECOND DIVISION

[G.R. No. 128448. February 1, 2001]

SPOUSES ALEJANDRO MIRASOL and LILIA E. MIRASOL, petitioners, vs. THE COURT OF APPEALS, PHILIPPINE NATIONAL BANK, and PHILIPPINE EXCHANGE CO., INC., respondents. DECISION
QUISUMBING, J.:

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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO purchases. Finally, the decree directed that whatever profit PHILEX might realize from sales of sugar abroad was to be remitted to a special fund of the national government, after commissions, overhead expenses and liabilities had been deducted. The government offices and entities tasked by existing laws and administrative regulations to oversee the sugar export pegged the purchase price of export sugar in crop years 1973-1974 and 1974-1975 at P180.00 per picul. PNB continued to finance the sugar production of the Mirasols for crop years 1975-1976 and 1976-1977. These crop loans and similar obligations were secured by real estate mortgages over several properties of the Mirasols and chattel mortgages over standing crops. Believing that the proceeds of their sugar sales to PNB, if properly accounted for, were more than enough to pay their obligations, petitioners asked PNB for an accounting of the proceeds of the sale of their export sugar. PNB ignored the request. Meanwhile, petitioners continued to avail of other loans from PNB and to make unfunded withdrawals from their current accounts with said bank. PNB then asked petitioners to settle their due and demandable accounts. As a result of these demands for payment, petitioners on August 4, 1977, conveyed to PNB real properties valued at P1,410,466.00 by way of dacion en pago, leaving an unpaid overdrawn account ofP1,513,347.78. On August 10, 1982, the balance of outstanding sugar crop and other loans owed by petitioners to PNB stood at P15,964,252.93. Despite demands, the Mirasols failed to settle said due and demandable accounts. PNB then proceeded to extrajudicially foreclose the mortgaged properties. After applying the proceeds of the auction sale of the mortgaged realties, PNB still had a deficiency claim of P12,551,252.93. Petitioners continued to ask PNB to account for the proceeds of the sale of their export sugar for crop years 19731974 and 1974-1975, insisting that said proceeds, if properly liquidated, could offset their outstanding obligations with the bank. PNB remained adamant in its stance that under P.D. No. 579, there was nothing to account since under said law, all earnings from the export sales of sugar pertained to the National Government and were subject to the disposition of the President of the Philippines for public purposes. On August 9, 1979, the Mirasols filed a suit for accounting, specific performance, and damages against PNB with the Regional Trial Court of Bacolod City, docketed as Civil Case No. 14725. On June 16, 1987, the complaint was amended to implead PHILEX as party-defendant. The parties agreed at pre-trial to limit the issues to the following:

1. The constitutionality and/or legality of Presidential Decrees numbered 338, 579, and 1192; 2. The determination of the total amount allegedly due the plaintiffs from the defendants corresponding to the allege(d) unliquidated cost price of export sugar during crop years 1973-1974 and 1974-1975.[3]
After trial on the merits, the trial court decided as follows:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered in favor of the plaintiffs

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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO

and against the defendants Philippine National Bank (PNB) and Philippine Exchange Co., Inc. (PHILEX):
(1)Declaring Presidential Decree 579 enacted on November 12, 1974 and all circulars, as well as policies, orders and other issuances issued in furtherance thereof, unconstitutional and therefore, NULL and VOID being in gross violation of the Bill of Rights; (2) Ordering defendants PNB and PHILEX to pay, jointly and severally, plaintiffs the whole amount corresponding to the residue of the unliquidated actual cost price of 25,662 piculs in export sugar for crop year 1973-1974 at an average price of P300.00 per picul, deducting therefrom however, the amount of P180.00 already paid in advance plus the allowable deductions in service fees and other charges; (3) And also, for the same defendants to pay, jointly and severally, same plaintiffs the whole amount corresponding to the unpaid actual price of 14,596 piculs of export sugar for crop year 1974-1975 at an average rate of P214.14 per picul minus however, the sum of P180.00 per picul already paid by the defendants in advance and the allowable deducting (sic) in service fees and other charges.

moral damages and the amount of P50,000.00 as attorneys fees, plus the costs of this litigation.

SO ORDERED.[4]
The same was, however, modified by a Resolution of the trial court dated May 14, 1992, which added the following paragraph:

This decision should however, be interpreted without prejudice to whatever benefits that may have accrued in favor of the plaintiffs with the passage and approval of Republic Act 7202 otherwise known as the Sugar Restitution Law, authorizing the restitution of losses suffered by the plaintiffs from Crop year 1974-1975 to Crop year 1984-1985 occasioned by the actuations of government-owned and controlled agencies. (Underscoring in the original). SO ORDERED.[5]
The Mirasols then filed an appeal with the respondent court, docketed as CA-G.R. CV No. 38607, faulting the trial court for not nullifying the dacion en pago and the mortgage contracts, as well as the foreclosure of their mortgaged properties. Also faulted was the trial courts failure to award them the full money claims and damages sought from both PNB and PHILEX. On July 22, 1996, the Court of Appeals reversed the trial court as follows:

The unliquidated amount of money due the plaintiffs but withheld by the defendants, shall earn the legal rate of interest at 12% per annum computed from the date this action was instituted until fully paid; and, finally
(4) Directing the defendants PNB and PHILEX to pay, jointly and severally, plaintiffs the sum of P50,000.00 in

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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO

WHEREFORE, this Court renders judgment REVERSING the appealed Decision and entering the following verdict: 1. Declaring the dacion en pago and the foreclosure of the mortgaged properties valid; 2. Ordering the PNB to render an accounting of the sugar account of the Mirasol[s] specifically stating the indebtedness of the latter to the former and the proceeds of Mirasols 1973-1974 and 1974-1975 sugar production sold pursuant to and in accordance with P.D. 579 and the issuances therefrom; 3. Ordering the PNB to recompute in accordance with RA 7202 Mirasols indebtedness to it crediting to the latter payments already made as well as the auction price of their foreclosed real estate and stipulated value of their properties ceded to PNB in the dacon (sic) en pago; 4. Whatever the result of the recomputation of Mirasols account, the outstanding balance or the excess payment shall be governed by the pertinent provisions of RA 7202. SO ORDERED.[6]

On August 28, 1996, petitioners moved for reconsideration, which the appellate court denied on January 23, 1997. Hence, the instant petition, with petitioners submitting the following issues for our resolution:

1. Whether the Trial Court has jurisdiction to declare a statute unconstitutional without notice to the Solicitor General where the parties have agreed to submit such issue for the resolution of the Trial Court. 2. Whether PD 579 and subsequent issuances[7] thereof are unconstitutional. 3. Whether the Honorable Court of Appeals committed manifest error in not applying the doctrine of piercing the corporate veil between respondents PNB and PHILEX. 4. Whether the Honorable Court of Appeals committed manifest error in upholding the validity of the foreclosure on petitioners property and in upholding the validity of the dacion en pagoin this case. 5. Whether the Honorable Court of Appeals committed manifest error in not awarding damages to petitioners grounds relied upon the allowance of the petition. (Underscored in the original)[8]

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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO On the first issue. It is settled that Regional Trial Courts have the authority and jurisdiction to consider the constitutionality of a statute, presidential decree, or executive order.[9] The Constitution vests the power of judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation not only in this Court, but in all Regional Trial Courts.[10] In J.M. Tuason and Co. v. Court of Appeals, 3 SCRA 696 (1961) we held: Petitioners argue that the Court of Appeals erred in finding that it was improper for the trial court to have declared P.D. No. 579[12] unconstitutional, since petitioners had not complied with Rule 64, Section 3, of the Rules of Court. Petitioners contend that said Rule specifically refers only to actions for declaratory relief and not to an ordinary action for accounting, specific performance, and damages. Petitioners contentions are bereft of merit. Rule 64, Section 3 of the Rules of Court provides:

Plainly, the Constitution contemplates that the inferior courts should have jurisdiction in cases involving constitutionality of any treaty or law, for it speaks of appellate review of final judgments of inferior courts in cases where such constitutionality happens to be in issue.[11]
Furthermore, B.P. Blg. 129 grants Regional Trial Courts the authority to rule on the conformity of laws or treaties with the Constitution, thus:

SEC. 3. Notice to Solicitor General. In any action which involves the validity of a statute, or executive order or regulation, the Solicitor General shall be notified by the party attacking the statute, executive order, or regulation, and shall be entitled to be heard upon such question.
This should be read in relation to Section 1 [c] of P.D. No. 478, which states in part:
[13]

SECTION 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: (1) In all civil actions in which the subject of the litigations is incapable of pecuniary estimation;
The pivotal issue, which we must address, is whether it was proper for the trial court to have exercised judicial review.

SECTION 1. Functions and Organizations (1) The Office of the Solicitor General shallhave the following specific powers and functions:
xxx

[c] Appear in any court in any action involving the validity of any treaty, law, executive order or proclamation, rule or regulation when in his judgment his intervention is necessary or when requested by the court.
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TELECOMMUNICATIONS PRACTICE ATTY. AQUINO It is basic legal construction that where words of command such as shall, must, or ought are employed, they are generally and ordinarily regarded as mandatory.[14] Thus, where, as in Rule 64, Section 3 of the Rules of Court, the word shall is used, a mandatory duty is imposed, which the courts ought to enforce. The purpose of the mandatory notice in Rule 64, Section 3 is to enable the Solicitor General to decide whether or not his intervention in the action assailing the validity of a law or treaty is necessary. To deny the Solicitor General such notice would be tantamount to depriving him of his day in court. We must stress that, contrary to petitioners stand, the mandatory notice requirement is not limited to actions involving declaratory relief and similar remedies. The rule itself provides that such notice is required in any action and not just actions involving declaratory relief. Where there is no ambiguity in the words used in the rule, there is no room for construction.[15] In all actions assailing the validity of a statute, treaty, presidential decree, order, or proclamation, notice to the Solicitor General is mandatory. In this case, the Solicitor General was never notified about Civil Case No. 14725. Nor did the trial court ever require him to appear in person or by a representative or to file any pleading or memorandum on the constitutionality of the assailed decree. Hence, the Court of Appeals did not err in holding that lack of the required notice made it improper for the trial court to pass upon the constitutional validity of the questioned presidential decrees. As regards the second issue, petitioners contend that P.D. No. 579 and its implementing issuances are void for violating the due process clause and the prohibition against the taking of private property without just compensation. Petitioners now ask this Court to exercise its power of judicial review. Jurisprudence has laid down the following requisites for the exercise of this power: First, there must be before the Court an actual case calling for the exercise of judicial review. Second, the question before the Court must be ripe for adjudication. Third, the person challenging the validity of the act must have standing to challenge. Fourth, the question of constitutionality must have been raised at the earliest opportunity, and lastly, the issue of constitutionality must be the very lis mota of the case. [16] As a rule, the courts will not resolve the constitutionality of a law, if the controversy can be settled on other grounds.[17] The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid, absent a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers. This means that the measure had first been carefully studied by the legislative and executive departments and found to be in accord with the Constitution before it was finally enacted and approved.[18] The present case was instituted primarily for accounting and specific performance. The Court of Appeals correctly ruled that PNBs obligation to render an accounting is an issue, which can be determined, without having to rule on the constitutionality of P.D. No. 579. In fact there is nothing in P.D. No. 579, which is applicable to PNBs intransigence in refusing to give an accounting. The governing law should be the law on agency, it being undisputed that PNB acted as petitioners agent. In other words, the requisite that the constitutionality of the law in question be the very lis mota of NATIONAL TELECOMMUNICATIONS COMMISSIONS CASES | 53

TELECOMMUNICATIONS PRACTICE ATTY. AQUINO the case is absent. Thus we cannot rule on the constitutionality of P.D. No. 579. Petitioners further contend that the passage of R.A. No. 7202[19] rendered P.D. No. 579 unconstitutional, since R.A. No. 7202 affirms that under P.D. 579, the due process clause of the Constitution and the right of the sugar planters not to be deprived of their property without just compensation were violated. A perusal of the text of R.A. No. 7202 shows that the repealing clause of said law merely reads:

1. PNB and PHILEX are separate juridical persons and there is no reason to pierce the veil of corporate personality. Both existed by virtue of separate organic acts. They had separate operations and different purposes and powers.[22]
Findings of fact by the Court of Appeals are conclusive and binding upon this Court unless said findings are not supported by the evidence.[23] Our jurisdiction in a petition for review under Rule 45 of the Rules of Court is limited only to reviewing questions of law and factual issues are not within its province.[24] In view of the aforequoted finding of fact, no manifest error is chargeable to the respondent court for refusing to pierce the veil of corporate fiction. On the fourth issue, the appellate court found that there were two sets of accounts between petitioners and PNB, namely:

SEC. 10. All laws, acts, executive orders and circulars in conflict herewith are hereby repealed or modified accordingly.
The settled rule of statutory construction is that repeals by implication are not favored.[20] R.A. No. 7202 cannot be deemed to have repealed P.D. No. 579. In addition, the power to declare a law unconstitutional does not lie with the legislature, but with the courts.[21] Assuming arguendo that R.A. No. 7202 did indeed repeal P.D. No. 579, said repeal is not a legislative declaration finding the earlier law unconstitutional. To resolve the third issue, petitioners ask us to apply the doctrine of piercing the veil of corporate fiction with respect to PNB and PHILEX. Petitioners submit that PHILEX was a wholly-owned subsidiary of PNB prior to the latters privatization. We note, however, that the appellate court made the following finding of fact:

1. The accounts relative to the loan financing scheme entered into by the Mirasols with PNB (PNBs Brief, p. 16) On the question of how much the PNB lent the Mirasols for crop years 1973-1974 and 1974-1975, the evidence recited by the lower court in its decision was deficient. We are offered (sic) PNB the amount of FIFTEEN MILLION NINE HUNDRED SIXTY FOUR THOUSAND TWO HUNDRED FIFTY TWO PESOS and NINETY THREE Centavos (Ps15,964,252.93) but this is the alleged balance the Mirasols owe PNB covering the years 1975 to 1982.

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2. The account relative to the Mirasols current account Numbers 5186 and 5177 involving the amount of THREE MILLION FOUR HUNDRED THOUSAND Pesos (P3,400,000.00) PNB claims against the Mirasols. (PNBs Brief, p. 17) In regard to the first set of accounts, besides the proceeds from PNBs sale of sugar (involving the defendant PHILEX in relation to the export portion of the stock), the PNB foreclosed the Mirasols mortgaged properties realizing therefrom in 1982 THREE MILLION FOUR HUNDRED THIRTEEN THOUSAND Pesos (P3,413,000.00), the PNB itself having acquired the properties as the highest bidder. As to the second set of accounts, PNB proposed, and the Mirasols accepted, a dacion en pago scheme by which the Mirasols conveyed to PNB pieces of property valued at ONE MILLION FOUR HUNDRED TEN THOUSAND FOUR HUNDRED SIXTY-SIX Pesos (Ps1,410,466.00) (PNBs Brief, pp. 16-17).[25]
Petitioners now claim that the dacion en pago and the foreclosure of their mortgaged properties were void for want of consideration. Petitioners insist that the loans granted them by PNB from 1975 to 1982 had been fully paid by virtue of legal compensation. Hence, the foreclosure was invalid and of no effect, since the mortgages were already fully discharged. It is also averred that they agreed to the dacion only by virtue of a martial law Arrest, Search, and Seizure Order (ASSO).

We find petitioners arguments unpersuasive. Both the lower court and the appellate court found that the Mirasols admitted that they were indebted to PNB in the sum stated in the latters counterclaim.[26] Petitioners nonetheless insist that the same can be offset by the unliquidated amounts owed them by PNB for crop years 1973-74 and 1974-75. Petitioners argument has no basis in law. For legal compensation to take place, the requirements set forth in Articles 1278 and 1279 of the Civil Code must be present. Said articles read as follows:

Art. 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other. Art. 1279. In order that compensation may be proper, it is necessary: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts are due; (4) That they be liquidated and demandable;

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(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.
In the present case, set-off or compensation cannot take place between the parties because: First, neither of the parties are mutually creditors and debtors of each other. Under P.D. No. 579, neither PNB nor PHILEX could retain any difference claimed by the Mirasols in the price of sugar sold by the two firms. P.D. No. 579 prescribed where the profits from the sales are to be paid, to wit:

trial court, affirmed by the appellate court, are conclusive upon this Court.[29] On the fifth issue, the trial court awarded petitioners P50,000.00 in moral damages and P50,000.00 in attorneys fees. Petitioners now theorize that it was error for the Court of Appeals to have deleted these awards, considering that the appellate court found PNB breached its duty as an agent to render an accounting to petitioners. An agents failure to render an accounting to his principal is contrary to Article 1891 of the Civil Code.[30] The erring agent is liable for damages under Article 1170 of the Civil Code, which states:

SECTION 7. x x x After deducting its commission of two and one-half (2-1/2%) percent of gross sales, the balance of the proceeds of sugar trading operations for every crop year shall be set aside by the Philippine Exchange Company, Inc,. as profits which shall be paid to a special fund of the National Government subject to the disposition of the President for public purposes.
Thus, as correctly found by the Court of Appeals, there was nothing with which PNB was supposed to have off-set Mirasols admitted indebtedness.[27] Second, compensation cannot take place where one claim, as in the instant case, is still the subject of litigation, as the same cannot be deemed liquidated.[28] With respect to the duress allegedly employed by PNB, which impugned petitioners consent to the dacion en pago, both the trial court and the Court of Appeals found that there was no evidence to support said claim. Factual findings of the

Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.
Article 1170 of the Civil Code, however, must be construed in relation to Article 2217 of said Code which reads:

Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendants wrongful act or omission.
Moral damages are explicitly authorized in breaches of contract where the defendant acted fraudulently or in bad NATIONAL TELECOMMUNICATIONS COMMISSIONS CASES | 56

TELECOMMUNICATIONS PRACTICE ATTY. AQUINO faith.[31] Good faith, however, is always presumed and any person who seeks to be awarded damages due to the acts of another has the burden of proving that the latter acted in bad faith, with malice, or with ill motive. In the instant case, petitioners have failed to show malice or bad faith[32] on the part of PNB in failing to render an accounting. Absent such showing, moral damages cannot be awarded. Nor can we restore the award of attorneys fees and costs of suit in favor of petitioners. Under Article 2208 (5) of the Civil Code, attorneys fees are allowed in the absence of stipulation only if the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just, and demandable claim. As earlier stated, petitioners have not proven bad faith on the part of PNB and PHILEX. WHEREFORE, the instant petition is DENIED and the assailed decision of the respondent court in CA-G.R. CV 38607 AFFIRMED. Costs against petitioners. SO ORDERED. Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
Ynares-Santiago, Carpio, and Azcuna, JJ . ABS-CBN BROADCASTING CORPORATION, CENTRAL CATV, INC., PILIPINO CABLE Promulgated: CORPORATION and PHILIPPINE HOME CABLE HOLDINGS, INC., Respondents. September 23, 2005 x --------------------------------------------------------------------------------- ------- x 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 damages[1] 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 97[2] 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 petitioners 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

GMA V. ABS-CBN
GMA NETWORK, INC., G.R. No. 160703 Petitioner, Present: Davide, (Chairman), - versus - Quisumbing, Jr., C.J.

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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 GMAs 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 GMAs signal transmission happened mostly during the showing of plaintiff GMAs 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;

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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] 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 Counterclaims[5] 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 Counterclaims[6] contending that GMA had no cause of action against it and that the complaint failed to state any. GMA opposed the motion to dismiss[7] and filed a Reply to the answer of Home Cable[8] 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 resolution[10] 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 plaintiffs 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 plaintiffs 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

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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 PETITIONERS COMPLAINT FOR DAMAGES AND IN DISMISSING THE CASE FOR LACK OF JURISDICTION. B THE TRIAL COURT ERRED IN RULING THAT PETITIONERS 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. GMAs 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 petitioners 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 NTCs 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;

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... 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[.] In 1987, Executive Order No. 205[14] 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[15] 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 NTCs 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 GMAs 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, GMAs 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 petitioners allegations of market control and manipulation. In Industrial Enterprises, Inc. v. Court of Appeals,[19] the Court held that:

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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 petitioners 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 petitioners 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. 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, petitioners 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, isAFFIRMED. SO ORDERED.

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