Page 1 of 108

G.R. No. L-24219 June 13, 1968

PHILIPPINE AIR LINES, INC., petitioner,

vs.
CIVIL AERONAUTICS BOARD, and FILIPINAS ORIENT AIRWAYS, INC., respondents.

Original petition for certiorari, to set aside and annul a resolution of the Civil Aeronautics Board — hereinafter referred
to as CAB — granting respondent Filipinas Orient Airways Inc. — hereinafter referred to as Fairways — "provisional
authority to operate scheduled and non-scheduled domestic air services with the use of DC-3 aircrafts", subject to
specified conditions.

Pursuant to Republic Act No. 4147, granting thereto "a franchise to establish, operate and maintain transport services for
the carriage of passengers, mail, industrial flights and cargo by air in and between any and all points and places
throughout the Philippines and other countries", on September 16, 1964, Fairways filed with CAB the corresponding
application for a "certificate of public convenience and necessity", which was Docketed as economic proceedings (EP)
No. 625, and was objected to by herein petitioner, Philippine Air Lines, Inc., hereinafter referred to as PAL.
Subsequently, a CAB hearing officer began to receive evidence on said application. After several hearings before said
officer, or on December 14, 1964, Fairways filed an "urgent petition for provisional authority to operate" under a detailed
"program of implementation" attached to said petition, and for the approval of its bond therefor, as well as the
provisional approval of its "tariff regulations and the conditions of carriage to be printed at the back of the passenger
tickets." Despite PAL's opposition thereto, in a resolution issued on January 5, 1965, CAB granted said urgent petition of
Fairways. The pertinent part of said resolution provides:

Filipinas Orient Airways, Inc., (FAIRWAYS) having presented to the Board evidence showing prima facie its
fitness, willingness and ability to operate the services applied for and the public need for more air transportation
service, and to encourage and develop commercial air transportation, RESOLVED, to grant, as the Board hereby
grants, the said Filipinas Orient Airways, Inc., provisional authority to operate scheduled and non-scheduled
domestic air services with the use of DC-3 aircraft, subject to the following conditions;

1. The term of the provisional authority herein granted shall be until such time as the main application for a
certificate of public convenience and necessity is finally decided or for such period as the Board may at any time
determine;

xxx xxx xxx

A reconsideration of this resolution having been denied, PAL filed the present civil action alleging that, in issuing said
resolution, CAB had acted illegally and in excess of its jurisdiction or with grave abuse of discretion, because:

(1) CAB is not empowered to grant any provisional authority to operate, prior to the submission for decision of
the main application for a certificate of public convenience and necessity;

(2) CAB had no evidence before it that could have justified the granting of the provisional authority complained
of;

(3) PAL was denied due process when CAB granted said authority before the presentation of its evidence on
Fairway's main application; and

(4) In granting said provisional authority, the CAB had prejudged the merits of said application.

The first ground is devoid of merit. Section 10-C(1) of Republic Act No. 776, reading:

(C) The Board shall have the following specific powers and duties:

(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend, revise, alter, modify,
cancel suspend or revoke, in whole or in part, upon petitioner complaint, or upon its own initiative, any
temporary operating permit or Certificate of Public Convenience and Necessity; Provided, however, That in the
case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic of the
Philippines....

explicitly authorizes CAB to issue a "temporary operating permit," and nothing contained, either in said section, or in
Chapter IV of Republic Act No. 776, negates the power to issue said "permit", before the completion of the applicant's
evidence and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary permit
"upon its own initiative," strongly suggests the power to exercise said authority, even before the presentation of said
evidence has begun.
 Page 2 of 108

Moreover, we perceive no cogent reason to depart, in connection with the commercial air transport service, from the
policy of our public service law, which sanctions the issuance of temporary or provisional permits or certificates of
public convenience and necessity, before the submission of a case for decision on the merits.1 The overriding
considerations in both instances are the same, namely, that the service be required by public convenience and necessity,
and, that the applicant is fit, as well as willing and able to render such service properly, in conformity with law and the
pertinent rules, regulations and requirements.2

As regards PAL's second contention, we have no more than PAL's assertion and conclusion regarding the absence of
substantial evidence in support of the finding, in the order complained of, to the effect that Fairways' evidence had
established " prima facie its fitness, willingness and ability to operate the services applied for and the public need for
more transportation service ...". Apart from PAL's assertion being contradicted by the tenor of said order, there is the
legal presumption that official duty has been duly performed.

Such presumption is particularly strong as regards administrative agencies, like the CAB, vested with powers said to be
quasi-judicial in nature, in connection with the enforcement of laws affecting particular fields of activity, the proper
regulation and/or promotion of which requires a technical or special training, aside from a good knowledge and grasp of
the overall conditions, relevant to said field, obtaining in the nation.3 The consequent policy and practice underlying our
Administrative Law is that courts of justice should respect the findings of fact of said administrative agencies, unless
there is absolutely no evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial.4 This,
in turn, is but a recognition of the necessity of permitting the executive department to adjust law enforcement to changing
conditions, without being unduly hampered by the rigidity and the delays often attending ordinary court proceedings or
the enactment of new or amendatory legislations. In the case at bar, petitioner has not satisfactorily shown that the
aforementioned findings of the CAB are lacking in the necessary evidentiary support.

Needless to say, the case of Ang Tibay vs. C.I.R.5 on which petitioner relies, is not in point. Said case refers to the
conditions essential to a valid decision on the merits, from the viewpoint of due process, whereas, in the case at bar, we
are concerned with an interlocutory order prior to the rendition of said decision. In fact, interlocutory orders may
sometimes be issued ex parte, particularly, in administrative proceedings, without previous notice and hearing,
consistently with due process.6 Again, the constitutional provision to the effect that "no decision shall be rendered by any
court of record without expressing therein clearly and distinctly the facts and the law on which it is based", 7applies, not
to such interlocutory orders, but to the determination of the case on the merits.8

Lastly, the provisional nature of the permit granted to Fairways refutes the assertion that it prejudges the merits of
Fairways' application and PAL's opposition thereto. As stated in the questioned order, CAB's findings therein made
reflect its view merely on the prima facie effect of the evidence so far introduced and do not connote a pronouncement or
an advanced expression of opinion on the merits of the case.

WHEREFORE, the petition herein should be, as it is hereby, dismissed, and the writ prayed for, denied, with costs
against petitioner Philippine Air Lines, Inc. It is so ordered.
 Page 3 of 108

G.R. No. 122308 July 8, 1997

PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P. MAPA, petitioners,

vs.
COURT OF APPEALS and TRANS-WORLD AIRLINES INC., respondents.

The main issue in this petition for review under Rule 45 of the Rules of Court is the applicability of Article 28(1) of the
Warsaw Convention,1 which provides as follows:

Art. 28. (1) An action for damages must be brought, at the option of the plaintiff, in the territory of one of the
High Contracting Parties, either before the court of the domicile of the carrier or of his principal place of
business, or where he has a place of business through which the contract has been made, or before the court at
the place of destination.

We are urged by the petitioners to reverse the 31 May 1995 Decision of the Court of Appeals in CA-G.R. CV No.
398962affirming the 24 July 1992 Order of the Regional Trial Court of Quezon City, Branch 102, which dismissed Civil
Case No. Q-91-96203 on the ground of lack of jurisdiction in view of the aforementioned Article 28(1) of the Warsaw
Convention.

The antecedent facts, as summarized by the Court of Appeals, are as follows:

Plaintiffs Cornelio P. Mapa and Purita S. Mapa are respectable members of the society. Mr. Mapa is an
established businessman and currently the Regional General Manager of Akerlund and Rausing, a multinational
packaging material manufacturer based in Manila. He was previously the Senior Vice President of Phimco
Industries, an affiliate company of Swedish Match Company. Mrs. Mapa is a successful businesswoman engaged
in the commercial transactions of high value antique and oriental arts decor items originating from Asian
countries. Carmina S. Mapa is the daughter of plaintiffs Purita and Cornelio and is a graduate of the International
School in Bangkok, Thailand, now presently enrolled at the Boston University where she is majoring in
communication.

Plaintiffs Mapa entered into contract of air transportation with defendant TWA as evidence by TWA ticket Nos.
015:9475:153:304 and 015:9475:153:305, purchased in Bangkok, Thailand. Said TWA tickets are for Los
Angeles-New York-Boston-St. Louis-Chicago. . . .

Domicile of carrier TWA is Kansas City, Missouri, USA. Its principal place of business is Kansas City,
Missouri, USA. TWA's place of business through which the contracts were made is Bangkok, Thailand. The
place of destination is Chicago, USA.

On August 10, 1990, plaintiffs Carmina and Purita left Manila on board PAL flight No. 104 for Los Angeles.
Carmina was to commence schooling and thus was accompanied by Purita to assist her in settling down at the
University.

They arrived Los Angeles on the same date and stayed there until August 14, 1990 when they left for New York
City.

On August 14, 1990, plaintiffs Purita and Carmina S. Mapa arrived at the John F. Kennedy (JFK) Airport, New
York, on TWA Flight No. 904.

On August 27, 1990, plaintiffs Purita and Carmina S. Mapa departed for Boston, taking a connecting flight on
TWA's carrier, TW 0901, from JFK Airport, New York, to Boston's Logan Airport, checking in seven (7) pieces
of luggage at the TWA counter in the JFK Airport. The seven baggages were received by a porter who issued
seven TWA baggage receipts numbered 17-8270, 71, 72, 73, 74, 75, and 76 therefor.

From the entrance gate of the terminal building, plaintiffs Purita and Carmina proceeded to TWA's ticket counter
and presented their confirmed TWA tickets numbered 015:9475:153:304 and 015:9475:153:305 with a 3:00 p.m.
departure time. They were issued their boarding passes and were instructed to proceed to gate 35 for boarding.
At about 2:40 p.m., plaintiffs noticed that there was still no instruction to board the aircraft so they made
inquiries. The TWA ground stewardess informed plaintiffs that they were at the wrong gate because their flight
was boarding at gate 1. Upon hearing this, plaintiffs rushed to gate 1 which was in another building terminal. At
gate 1, they were told by a TWA ground stewardess that flight 901 had just departed. However, they were
consoled that another TWA flight was leaving for Boston after 30 minutes and plaintiffs could use the same
boarding pass for the next flight. At around 3:15 p.m., plaintiffs Purita and Carmina were able to board the next
 Page 4 of 108

flight. However, the plane was not immediately cleared for take off on account of a thunderstorm. The
passengers were instructed to stay inside the aircraft until 6:00 p.m. when the plane finally left for Boston.

Upon arriving in Boston, plaintiffs Purita and Carmina proceeded to the carousel to claim their baggages and
found only three out of the seven they checked in, to wit: one Samsonite on the carousel, another Samsonite
lying on the floor near the carousel and a third baggage, an American Tourister, inside the unclaimed baggage
office. Plaintiffs immediately reported the loss of their four baggages to the TWA Baggage Office at Logan
Airport. TWA's representative confidently assured them that their baggages would be located within 24 hours
and not more than 48 hours.

On September 2, 1990, plaintiffs received a letter from TWA, signed by Mr. J.A. Butler, Customer Relations-
Baggage Service, apologizing for TWA's failure to locate the missing luggage and requesting plaintiffs to
accomplish a passenger property questionnaire to facilitate a further intensive and computerized search for the
lost luggage. Plaintiffs duly accomplished the passenger property questionnaire, taking pains to write down in
detail the contents of each missing baggage. The total value of the lost items amounted to $11,283.79.

On September 20, 1990, plaintiff's counsel wrote TWA thru its General Sales Manager in the Philippines, Daniel
Tuason, with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue corner Paseo de Roxas,
Makati, Metro Manila demanding indemnification for the grave damage and injury suffered by the plaintiffs.

TWA again assured plaintiffs that intensive search was being conducted.

On October 8, 1990, TWA offered to amicably settle the case by giving plaintiffs-appellants two options: (a)
transportation credit for future TWA travel or (b) cash settlement. Five months lapsed without any result on
TWA's intensive search.

On January 3, 1991, plaintiffs-appellant opted for transportation credit for future TWA travel.

On January 11, 1991, TWA disregarded plaintiffs' option and unilaterally declared the payment of $2,560.00 as
constituting full satisfaction of the plaintiffs' claim.

On July 19, 1991, plaintiffs accepted the check for $2,560.00, as partial payment for the actual cost of their lost
baggages and their contents.

Despite demands by plaintiffs, TWA failed and refused without just cause to indemnify and redress plaintiffs for
the grave injury and damages they have suffered.4

Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein petitioners) then filed with the trial court on 1 August
1991 a complaint5 for damages,6 which was docketed as Civil Case No. Q-91-9620. Before a responsive pleading was
filed, the petitioners filed an Amended Complaint.7 They prayed that after due trial private respondent Trans-World
Airlines, Inc. (hereafter, TWA), be ordered to pay them the following amounts: (1) US$8,723.79, or its equivalent in
Philippine currency, representing the cost of the lost luggage and its contents; (2) US$2,949.50, or its equivalent in
Philippine currency, representing the cost of hotel, board and lodging, and communication expenses; (3) P1 million, by
way of moral damages; (4) P1 million, by way of exemplary damages, with legal interest on said amounts from the date
of extrajudicial demand thereof; and (5) P500,000.00 as attorney's fees, costs of the suit, and other expenses of litigation.8

On 26 February 1992, TWA filed its Answer to the Amended Complaint raising, as special and affirmative defense, lack
of jurisdiction of Philippine courts over the action for damages in the pursuant to Article 28(1) of the Warsaw
Convention, the action could only be brought either in Bangkok where the contract was entered into, or in Boston which
was the place of destination, or in Kansas City which is the carrier's domicile and principal place of business.

TWA further alleged that pursuant to the Warsaw Convention and the Notice of Baggage Limitations at the back of the
tickets, its liability to the petitioners is limited to US$9.07 per pound, or US$20.00 per kilo, which is in lieu of actual and
compensatory damages. Even assuming that petitioners' bag weighed the maximum acceptable weight of 70 pounds,
TWA's maximum liability is $640.00 per bag or $2,560.00 for the four pieces of baggage, which the petitioners have
been offered and have accepted. TWA also submitted that it could not be liable for moral and exemplary damages and
attorney's fees because it did not act in a wanton, fraudulent, reckless, oppressive, or malevolent manner.9

On 7 February 1992, the petitioners filed their second Amended Complaint10 to include a claim of US$2,500, or its
equivalent in Philippine Currency, representing the additional replacement cost of the items and personal effects
contained in their lost luggage; and US$4,500 representing the travel expenses, hotel, lodging, food and other expenses
of petitioner Cornelio Mapa, who was constrained to join his family in Boston to extend the necessary assistance in
connection with the lost luggage.
 Page 5 of 108

After the filing of TWA's Answer to the second Amended Complaint,11 and petitioners' Reply thereto, the trial court gave
TWA ten days within which to submit a memorandum in support of its affirmative defenses; after which the incident
would be deemed submitted for resolution.12However, after TWA filed its Memorandum,13 the trial court gave the
petitioners five days within which to file a reply memorandum; and TWA, two days from receipt of the latter to file its
comment thereon.14 The petitioners then filed their Opposition (by way of Reply Memorandum)15 to which TWA filed a
Reply.16 Thereafter, the petitioners submitted a Rejoinder17; TWA, a Surrejoinder.18

On 24 July 1992, the trial court issued an Order19 dismissing the case for lack of jurisdiction in light of Article 28(1) of
the Warsaw Convention. Thus:

It is plaintiffs' theory that the Warsaw Convention does not apply to the instant case because plaintiffs' contract
of transportation does not constitute "international transportation" as defined in said convention. This however is
belied by the Passenger Property Questionnaire which is Annex C of plaintiffs' amended complaint. Page two of
said questionnaire accomplished by plaintiffs under the heading "Your Complete Itinerary" shows that the TWA
tickets issued to the plaintiffs form part of the contract of transportation to be performed from Manila to the
United States. Since the Philippines and the United States are parties to the convention, plaintiffs' contracts of
transportation come within the meaning of International Transportation.

xxx xxx xxx

On the basis of the foregoing, the Court holds that the Warsaw Convention is applicable to the case at bar, even
if the basis of plaintiffs' present action is breach of contract of carriage under the New Civil Code.

The next question to be resolved is whether or not the Court has jurisdiction to try the present case in the light of
the provision of Art. 28(1) above-quoted.

Under Art. 28(1) supra, a complaint for damages against an air carrier can be instituted only in any of the
following places/courts:

(1) The court of the domicile of the carrier;

(2) The court of its principal place of business;

(3) The court where it has a place of business through which the contract had
been made;

(4) The court of the place of destination.

In interpreting the provision of Art. 28(1) of the Warsaw Convention, the Supreme Court in the same case
of Augusto Benedicto Santos vs. Northwest Airlines held:

Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply
divided. While the petitioner cites several cases holding that Article 28(1) refers to venue rather that jurisdiction,
there are later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional.

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon
a court which otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an
action as fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought
his suit in the wrong country may be waived by the failure of the defendant to make a timely objection. In either
case, the court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or agreement
of the parties, whether or not prohibition exists against their alteration.

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue
provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be
brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one
of the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction
other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only
to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in
Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time
when the damage occurred.

xxx xxx xxx

 Page 6 of 108

It has been shown by the defendant that the domicile of the defendant Trans World Airlines, Inc. is Kansas City,
Missouri, its principal place of business is also in Kansas City, Missouri, the carrier's place of business through
which the contracts were made is Bangkok (Annexes A and A-1, Amended Complaint), and the place of
destination was Boston.

The Philippines not being one of the places specified in Art. 28(1) abovequoted where the complaint may be
instituted, this Court therefore, does not have jurisdiction over the present case.

Evidently discontented with the trial court's order, the petitioners appealed to the Court of Appeals, contending that the
lower court erred in not holding that (1) it has jurisdiction over the instant case and (2) the Warsaw Convention is
inapplicable in the instant case because the subject matter of the case is not included within the coverage of the said
convention.20 They claimed that their cause of action could be based on breach of contract of air carriage founded on
Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code governing common carriers or Article 2176 of the
same Code governing tort or quasi-delict.

The appellate court disagreed with the petitioners and affirmed the order of the trial court. It held that the Warsaw
Convention is the law which governs the dispute between the petitioners and TWA because what is involved
is international transportation defined by said Convention in Article I(2). This holding is founded on its determination
that the two TWA tickets for Los Angeles-New York-Boston-St. Louis-Chicago purchased in Bangkok, Thailand, were
issued in conjunction with, and therefore formed part of, the contract of transportation performed from Manila,
Philippines, to the United States.

The respondent court further held that the cause of action of the petitioners arose from the loss of the four checked pieces
of baggage, which then falls under Article 18(1), Chapter III (Liability of the Carrier) of the Warsaw
Conventions.21 Pursuant to Article 24(1) of the Convention, all actions for damages, whether based on tort, code law or
common law, arising from loss of baggage under Article 18 of the Warsaw Convention, can only be brought subject to
the conditions and limits set forth in the Warsaw Convention. Article 28(1) thereof sets forth conditions and limits in that
the action for damages may be instituted only in the territory of one of the High Contracting Parties, before the court of
(1) the domicile of the carrier, (2) the carrier's principal place of business, (3) the place of business through which the
contract has been made, or (4) the place of destination. Since the Philippines is not one of these places, a Philippine
Court, like the RTC, has no jurisdiction over the complaint for damages.

Respondent Court of Appeals likewise held that the petitioners could not claim application of Articles 1733, 1734, 1735,
1755, and 1756 of the New Civil Code on common carriers without taking into consideration Article 1753 of the same
Code, which provides that the law of the country to which the goods are to be transported shall govern the liability of the
common carrier for their loss, destruction, or deterioration. Since the country of ultimate destination is Chicago, the law
of Chicago shall govern the liability of TWA for the loss of the four pieces of baggage. Neither is Article 2176 of the
New Civil Code on torts or quasi-delicts applicable in view of the private international law principle of lex loci
delicti commissi.22 In addition, comformably with Santos III v. Northwest Orient Airlines,23mere allegation of willful
misconduct resulting in a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention.

Failing in their bid to reconsider the decision, the petitioners filed this petition. They aver that respondent Court of
Appeals gravely erred (1) in holding that the Warsaw Convention is applicable to this case and (2) in applying Article
1753 of the Civil Code and the principle of lex loci delicti commissi.24

We resolved to give due course to the petitioner after the filing by TWA of its Comment on the petition and noted
without action for the reasons stated in the resolution of 25 September 1996 petitioners' Reply and Rejoinder. We then
required the parties to submit their respective memoranda. They did in due time.

The petitioners insist that the Warsaw Convention is not applicable to their case because the contracts they had with
TWA did not involve an international transportation. Whether the contracts were of international transportation is to be
solely determined from the TWA tickets issued to them in Bangkok, Thailand, which showed that their itinerary was Los
Angeles-New York-Boston-St. Louis-Chicago. Accordingly, since the place of departure (Los Angeles) and the place of
destination (Chicago) are both within the territory of one High Contracting Party, with no agreed stopping place in a
territory subject to the sovereignty, mandate, suzerainty or authority of another Power, the contracts did not constitute
'international transportation' as defined by the convention. They also claim to be without legal basis the contention of
TWA that their transportation contracts were of international character because of the handwritten notations in the tickets
re "INT'S TKT #079-4402956821-2" and "INT'L TKT #079-4402956819." Notwithstanding such notations, the TWA
tickets, viz., (a) No. 015.9475:153:304 and (b) No. 015:9475:153:305 did not cease to be for the itinerary therein
designated. Besides, it is a fact that petitioners Purita and Carmina Mapa traveled from Manila to Los Angeles via
Philippine Airlines (PAL) by virtue of PAL tickets issued independently of the TWA tickets.

The pitch issue to be resolved under the petitioner's first assigned error is whether the contracts of transportation between
Purita and Carmina Mapa, on the one hand, and TWA, on the other, were contracts of "international transportation"
under the Warsaw Convention. If they were, then we should sustain the trial court and the Court of Appeals in light of
 Page 7 of 108

our ruling in Santos v. Northwest Orient Airlines.25 It appears clear to us that TWA itself, the trial court, and the Court of
Appeals impliedly admit that if the sole basis were the two TWA tickets for Los Angeles-New York-Boston-St. Louis-
Chicago, the contracts cannot be brought within the term "international transportation," as defined in Article I(2) of the
Warsaw Convention. As provided therein, a contract is one of international transportation only if

according to the contract made by the parties, the place of departure and the place of destination, whether or not
there be a break in the transportation or a transshipment, are situated either within the territories of two High
Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place
within a territory subject to the sovereignty, mandate or authority of another power, even though that power is
not a party to this convention.

There are then two categories of international transportation, viz., (1) that where the place of departure and the place of
destination are situated within the territories of two High Contracting Parties regardless of whether or not there be a
break in the transportation or a transshipment; and (2) that where the place of departure and the place of destination are
within the territory of a single High Contracting Party if there is an agreed stopping place within a territory subject to the
sovereignty, mandate, or authority of another power, even though the power is not a party of the Convention.

The High Contracting Parties referred to in the Convention are the signatories thereto and those which subsequently
adhered to it. In the case of the Philippines, the Convention was concurred in by the Senate, through Resolution No. 19,
on 16 May 1950. The Philippine instrument of accession was signed by President Elpidio Quirino on 13 October 1950
and was deposited with the Polish Government on 9 November 1950. The Convention became applicable to the
Philippines on 9 February 1951. Then, on 23 September 1955, President Ramon Magsaysay issued Proclamation No.
201, declaring the Philippines' formal adherence thereto, "to the end that the same and every article and clause thereof
may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof.26

The contracts of transportation in this case are evidenced by the two TWA tickets, No. 015:9475:153:304 and No.
015:9475:153:305, both purchased and issued in Bangkok, Thailand. On the basis alone of the provisions therein, it is
obvious that the place of departure and the place of destination are all in the territory of the United States, or of a single
High Contracting Party. The contracts, therefore, cannot come within the purview of the first category of international
transportation. Neither can it be under the second category since there was NO agreed stopping place within a territory
subject to the sovereignty, mandate, or authority of another power.

The only way to bring the contracts between Purita and Carmina Mapa, on the one hand, and TWA, on the other, within
the first category of "international transportation" is to link them with, or to make them an integral part of, the Manila-
Los Angeles travel of Purita and Carmina through PAL aircraft. The "linkages" which have been pointed out by the
TWA, the trial court, and the Court of Appeals are (1) the handwritten notations, viz., INT'L TKT # 079-4402956821-2
and INT'L TKT # 079-4402956819, on the two TWA tickets; and (2) the entries made by petitioners Purita and Carmina
Mapa in column YOUR COMPLETE ITINERARY in TWA's Passenger Property Questionnaire, wherein they
mentioned their travel from Manila to Los Angeles in flight PR 102.

The alleged "international tickets" mentioned in the notations in conjunction with which the two TWA tickets were
issued were not presented. Clearly then, there is at all no factual basis of the finding that the TWA tickets were issued in
conjunction with the international tickets, which are even, at least as of now, non-existent.

As regards the petitioner's entry in YOUR COMPLETE ITINERARY column of the Passenger Property Questionnaire
wherein they included the Manila-Los Angeles travel, it must be pointed out that this was made on 4 September
199027 by petitioners Purita and Carmina Mapa, and only in connection with their claim for their lost pieces of baggage.
The loss occurred much earlier, or on 27 August 1990. The entry can by no means be considered as a part of, or
supplement to, their contracts of transportation evidenced by the TWA tickets which covered transportation within the
United States only.

It must be underscored that the first category of international transportation under the Warsaw Convention is based on
"the contract made by the parties." TWA does not claim that the Manila-Los Angeles contracts of transportation which
brought Purita and Carmina to Los Angeles were also its contracts. It does not deny the assertion of the petitioners that
those contracts were independent of the TWA tickets issued in Bangkok, Thailand. No evidence was offered that TWA
and PAL had an agreement concerning transportation of passengers from points of departures not served with aircrafts of
one or the other. There could have been no difficulty for such agreement, since TWA admitted without qualification in
paragraph 1 of its Answer28 to the second Amended Complaint the allegation in paragraph 1.1 of the latter29 that TWA
"is a foreign corporation licensed to do business in the Philippines with office address at Ground Floor, Saville Building,
Sen. Gil. J. Puyat Avenue, corner Paseo de Roxas, Makati, Metro Manila."

TWA relies on Article I(3) of the Convention, which provides as follows:

3. A carriage to be performed by several successive air carriers is deemed, for the purposes of
this Convention, to be one undivided carriage, if it has been regarded by the parties as a single
 Page 8 of 108

operation, whether it had been agreed upon under the form of a single contract or of a series of
contracts, and it shall not lose its international character merely because one contract or a series
of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty,
mandate, or authority of the same High Contracting Party.

It also points to Article 15 of the IATA Recommend Practice 1724, which provides: Carriage to be performed by a
several successive carriers under one ticket, or under a ticket and any conjunction ticket issued in connection therewith,
is regarded as a single operation."30

The flaw of respondent's position is the presumption that the parties have "regarded" as an "undivided carriage" or as a
"single operation" the carriage from Manila to Los Angeles through PAL then to New York-Boston-St. Louis-
Chicagothrough TWA. The dismissal then of the second Amended Complaint by the trial court and the Court of Appeals'
affirmance of the dismissal were not based on indubitable facts or grounds, but no inferences without established factual
basis.

TWA should have offered evidence for its affirmative defenses at the preliminary hearing therefor. Section 5 of Rule 16
of the Rules of Court expressly provides:

Sec. 5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal provided for in this rule,
except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon
as if a motion to dismiss had been filed.

Without any further evidence as earlier discussed, the trial court should have denied the affirmative defense of lack of
jurisdiction because it did not appear to be indubitable. Section 3 of Rule 16 of the Rules of Court provides:

Sec. 3. Hearing and order. — After hearing the court may deny or grant the motion or allow amendment of
pleading, or may defer the hearing and determination of the motion until the trial if the ground alleged therein
does not appear to be indubitable.

WHEREFORE, the instant petition is GRANTED and the challenged decision of 31 May 1995 of respondent Court of
Appeals in CA-G.R. CV No. 39896, as well as the Order of 24 July 1992 of the Regional Trial Court of Quezon City,
Branch 102, in Civil Case No. Q-91-9620, is REVERSED and SET ASIDE.

The Regional Trial Court of Quezon City, Branch 102, is hereby DIRECTED to proceed with the pre-trial, if it has not
been terminated, and with the trial on the merits of the case and then to render judgment thereon, taking into account the
foregoing observations on the issue of jurisdiction.

SO ORDERED.
 Page 9 of 108

G.R. No. 180356 February 16, 2010

SOUTH AFRICAN AIRWAYS, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the July 19, 2007 Decision1 and October 30,
2007 Resolution2 of the Court of Tax Appeals (CTA) En Banc in CTA E.B. Case No. 210, entitled South African
Airways v. Commissioner of Internal Revenue. The assailed decision affirmed the Decision dated May 10, 20063 and
Resolution dated August 11, 20064 rendered by the CTA First Division.

The Facts

Petitioner South African Airways is a foreign corporation organized and existing under and by virtue of the laws of the
Republic of South Africa. Its principal office is located at Airways Park, Jones Road, Johannesburg International Airport,
South Africa. In the Philippines, it is an internal air carrier having no landing rights in the country. Petitioner has a
general sales agent in the Philippines, Aerotel Limited Corporation (Aerotel). Aerotel sells passage documents for
compensation or commission for petitioner’s off-line flights for the carriage of passengers and cargo between ports or
points outside the territorial jurisdiction of the Philippines. Petitioner is not registered with the Securities and Exchange
Commission as a corporation, branch office, or partnership. It is not licensed to do business in the Philippines.

For the taxable year 2000, petitioner filed separate quarterly and annual income tax returns for its off-line flights,
summarized as follows:

2.5% Gross
Period Date Filed
Phil. Billings

1st Quarter May 30, 2000 222,531.25

2nd Quarter August 29, 2000 424,046.95
For Passenger PhP
3rd Quarter November 29, 2000 422,466.00
4th Quarter April 16, 2000 453,182.91

Sub-total PhP 1,522,227.11

1st Quarter May 30, 2000 81,531.00

2nd Quarter August 29, 2000 50,169.65
For Cargo PhP
3rd Quarter November 29, 2000 36,383.74
4th Quarter April 16, 2000 37,454.88

Sub-total PhP 205,539.27

TOTAL 1,727,766.38

Thereafter, on February 5, 2003, petitioner filed with the Bureau of Internal Revenue, Revenue District Office No. 47, a
claim for the refund of the amount of PhP 1,727,766.38 as erroneously paid tax on Gross Philippine Billings (GPB) for
the taxable year 2000. Such claim was unheeded. Thus, on April 14, 2003, petitioner filed a Petition for Review with the
CTA for the refund of the abovementioned amount. The case was docketed as CTA Case No. 6656.

On May 10, 2006, the CTA First Division issued a Decision denying the petition for lack of merit. The CTA ruled that
petitioner is a resident foreign corporation engaged in trade or business in the Philippines. It further ruled that petitioner
was not liable to pay tax on its GPB under Section 28(A)(3)(a) of the National Internal Revenue Code (NIRC) of 1997.
 Page 10 of 108

The CTA, however, stated that petitioner is liable to pay a tax of 32% on its income derived from the sales of passage
documents in the Philippines. On this ground, the CTA denied petitioner’s claim for a refund.

Petitioner’s Motion for Reconsideration of the above decision was denied by the CTA First Division in a Resolution
dated August 11, 2006.

Thus, petitioner filed a Petition for Review before the CTA En Banc, reiterating its claim for a refund of its tax payment
on its GPB. This was denied by the CTA in its assailed decision. A subsequent Motion for Reconsideration by petitioner
was also denied in the assailed resolution of the CTA En Banc.

Hence, petitioner went to us.

The Issues

Whether or not petitioner, as an off-line international carrier selling passage documents through an independent sales
agent in the Philippines, is engaged in trade or business in the Philippines subject to the 32% income tax imposed by
Section 28 (A)(1) of the 1997 NIRC.

Whether or not the income derived by petitioner from the sale of passage documents covering petitioner’s off-line flights
is Philippine-source income subject to Philippine income tax.

Whether or not petitioner is entitled to a refund or a tax credit of erroneously paid tax on Gross Philippine Billings for the
taxable year 2000 in the amount of P1,727,766.38.5

The Court’s Ruling

This petition must be denied.

Petitioner Is Subject to Income Tax at the Rate of 32% of Its Taxable Income

Preliminarily, we emphasize that petitioner is claiming that it is exempted from being taxed for its sale of passage
documents in the Philippines. Petitioner, however, failed to sufficiently prove such contention.

In Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation,6 we held, "Since an action for a tax
refund partakes of the nature of an exemption, which cannot be allowed unless granted in the most explicit and
categorical language, it is strictly construed against the claimant who must discharge such burden convincingly."

Petitioner has failed to overcome such burden.

In essence, petitioner calls upon this Court to determine the legal implication of the amendment to Sec. 28(A)(3)(a) of the
1997 NIRC defining GPB. It is petitioner’s contention that, with the new definition of GPB, it is no longer liable under
Sec. 28(A)(3)(a). Further, petitioner argues that because the 2 1/2% tax on GPB is inapplicable to it, it is thereby
excluded from the imposition of any income tax.

Sec. 28(b)(2) of the 1939 NIRC provided:

(2) Resident Corporations. – A corporation organized, authorized, or existing under the laws of a foreign country,
engaged in trade or business within the Philippines, shall be taxable as provided in subsection (a) of this section upon the
total net income received in the preceding taxable year from all sources within the Philippines: Provided, however, that
international carriers shall pay a tax of two and one-half percent on their gross Philippine billings.

This provision was later amended by Sec. 24(B)(2) of the 1977 NIRC, which defined GPB as follows:

"Gross Philippine billings" include gross revenue realized from uplifts anywhere in the world by any international carrier
doing business in the Philippines of passage documents sold therein, whether for passenger, excess baggage or mail,
provided the cargo or mail originates from the Philippines.

In the 1986 and 1993 NIRCs, the definition of GPB was further changed to read:

"Gross Philippine Billings" means gross revenue realized from uplifts of passengers anywhere in the world and excess
baggage, cargo and mail originating from the Philippines, covered by passage documents sold in the Philippines.
 Page 11 of 108

Essentially, prior to the 1997 NIRC, GPB referred to revenues from uplifts anywhere in the world, provided that the
passage documents were sold in the Philippines. Legislature departed from such concept in the 1997 NIRC where GPB is
now defined under Sec. 28(A)(3)(a):

"Gross Philippine Billings" refers to the amount of gross revenue derived from carriage of persons, excess baggage,
cargo and mail originating from the Philippines in a continuous and uninterrupted flight, irrespective of the place of sale
or issue and the place of payment of the ticket or passage document.

Now, it is the place of sale that is irrelevant; as long as the uplifts of passengers and cargo occur to or from the
Philippines, income is included in GPB.

As correctly pointed out by petitioner, inasmuch as it does not maintain flights to or from the Philippines, it is not taxable
under Sec. 28(A)(3)(a) of the 1997 NIRC. This much was also found by the CTA. But petitioner further posits the view
that due to the non-applicability of Sec. 28(A)(3)(a) to it, it is precluded from paying any other income tax for its sale of
passage documents in the Philippines.

Such position is untenable.

In Commissioner of Internal Revenue v. British Overseas Airways Corporation (British Overseas Airways),7 which was
decided under similar factual circumstances, this Court ruled that off-line air carriers having general sales agents in the
Philippines are engaged in or doing business in the Philippines and that their income from sales of passage documents
here is income from within the Philippines. Thus, in that case, we held the off-line air carrier liable for the 32% tax on its
taxable income.

Petitioner argues, however, that because British Overseas Airways was decided under the 1939 NIRC, it does not apply
to the instant case, which must be decided under the 1997 NIRC. Petitioner alleges that the 1939 NIRC taxes resident
foreign corporations, such as itself, on all income from sources within the Philippines. Petitioner’s interpretation of Sec.
28(A)(3)(a) of the 1997 NIRC is that, since it is an international carrier that does not maintain flights to or from the
Philippines, thereby having no GPB as defined, it is exempt from paying any income tax at all. In other words, the
existence of Sec. 28(A)(3)(a) according to petitioner precludes the application of Sec. 28(A)(1) to it.

Its argument has no merit.

First, the difference cited by petitioner between the 1939 and 1997 NIRCs with regard to the taxation of off-line air
carriers is more apparent than real.

We point out that Sec. 28(A)(3)(a) of the 1997 NIRC does not, in any categorical term, exempt all international air
carriers from the coverage of Sec. 28(A)(1) of the 1997 NIRC. Certainly, had legislature’s intentions been to completely
exclude all international air carriers from the application of the general rule under Sec. 28(A)(1), it would have used the
appropriate language to do so; but the legislature did not. Thus, the logical interpretation of such provisions is that, if
Sec. 28(A)(3)(a) is applicable to a taxpayer, then the general rule under Sec. 28(A)(1) would not apply. If, however, Sec.
28(A)(3)(a) does not apply, a resident foreign corporation, whether an international air carrier or not, would be liable for
the tax under Sec. 28(A)(1).

Clearly, no difference exists between British Overseas Airways and the instant case, wherein petitioner claims that the
former case does not apply. Thus, British Overseas Airways applies to the instant case. The findings therein that an off-
line air carrier is doing business in the Philippines and that income from the sale of passage documents here is
Philippine-source income must be upheld.

Petitioner further reiterates its argument that the intention of Congress in amending the definition of GPB is to exempt
off-line air carriers from income tax by citing the pronouncements made by Senator Juan Ponce Enrile during the
deliberations on the provisions of the 1997 NIRC. Such pronouncements, however, are not controlling on this Court. We
said in Espino v. Cleofe:8

A cardinal rule in the interpretation of statutes is that the meaning and intention of the law-making body must be sought,
first of all, in the words of the statute itself, read and considered in their natural, ordinary, commonly-accepted and most
obvious significations, according to good and approved usage and without resorting to forced or subtle construction.
Courts, therefore, as a rule, cannot presume that the law-making body does not know the meaning of words and rules of
grammar. Consequently, the grammatical reading of a statute must be presumed to yield its correct sense. x x x It is also
a well-settled doctrine in this jurisdiction that statements made by individual members of Congress in the consideration
of a bill do not necessarily reflect the sense of that body and are, consequently, not controlling in the interpretation of
law. (Emphasis supplied.)
 Page 12 of 108

Moreover, an examination of the subject provisions of the law would show that petitioner’s interpretation of those
provisions is erroneous.

Sec. 28(A)(1) and (A)(3)(a) provides:

SEC. 28. Rates of Income Tax on Foreign Corporations. -

(A) Tax on Resident Foreign Corporations. -

(1) In General. - Except as otherwise provided in this Code, a corporation organized, authorized, or existing
under the laws of any foreign country, engaged in trade or business within the Philippines, shall be subject to an
income tax equivalent to thirty-five percent (35%) of the taxable income derived in the preceding taxable year
from all sources within the Philippines: provided, That effective January 1, 1998, the rate of income tax shall be
thirty-four percent (34%); effective January 1, 1999, the rate shall be thirty-three percent (33%), and effective
January 1, 2000 and thereafter, the rate shall be thirty-two percent (32%).

xxxx

(3) International Carrier. - An international carrier doing business in the Philippines shall pay a tax of two and
one-half percent (2 1/2%) on its ‘Gross Philippine Billings’ as defined hereunder:

(a) International Air Carrier. – ‘Gross Philippine Billings’ refers to the amount of gross revenue derived from
carriage of persons, excess baggage, cargo and mail originating from the Philippines in a continuous and
uninterrupted flight, irrespective of the place of sale or issue and the place of payment of the ticket or passage
document: Provided, That tickets revalidated, exchanged and/or indorsed to another international airline form
part of the Gross Philippine Billings if the passenger boards a plane in a port or point in the Philippines:
Provided, further, That for a flight which originates from the Philippines, but transshipment of passenger takes
place at any port outside the Philippines on another airline, only the aliquot portion of the cost of the ticket
corresponding to the leg flown from the Philippines to the point of transshipment shall form part of Gross
Philippine Billings.

Sec. 28(A)(1) of the 1997 NIRC is a general rule that resident foreign corporations are liable for 32% tax on all income
from sources within the Philippines. Sec. 28(A)(3) is an exception to this general rule.

An exception is defined as "that which would otherwise be included in the provision from which it is excepted. It is a
clause which exempts something from the operation of a statue by express words."9 Further, "an exception need not be
introduced by the words ‘except’ or ‘unless.’ An exception will be construed as such if it removes something from the
operation of a provision of law."10

In the instant case, the general rule is that resident foreign corporations shall be liable for a 32% income tax on their
income from within the Philippines, except for resident foreign corporations that are international carriers that derive
income "from carriage of persons, excess baggage, cargo and mail originating from the Philippines" which shall be taxed
at 2 1/2% of their Gross Philippine Billings. Petitioner, being an international carrier with no flights originating from the
Philippines, does not fall under the exception. As such, petitioner must fall under the general rule. This principle is
embodied in the Latin maxim, exception firmat regulam in casibus non exceptis, which means, a thing not being
excepted must be regarded as coming within the purview of the general rule.11

To reiterate, the correct interpretation of the above provisions is that, if an international air carrier maintains flights to
and from the Philippines, it shall be taxed at the rate of 2 1/2% of its Gross Philippine Billings, while international air
carriers that do not have flights to and from the Philippines but nonetheless earn income from other activities in the
country will be taxed at the rate of 32% of such income.

As to the denial of petitioner’s claim for refund, the CTA denied the claim on the basis that petitioner is liable for income
tax under Sec. 28(A)(1) of the 1997 NIRC. Thus, petitioner raises the issue of whether the existence of such liability
would preclude their claim for a refund of tax paid on the basis of Sec. 28(A)(3)(a). In answer to petitioner’s motion for
reconsideration, the CTA First Division ruled in its Resolution dated August 11, 2006, thus:

On the fourth argument, petitioner avers that a deficiency tax assessment does not, in any way, disqualify a taxpayer
from claiming a tax refund since a refund claim can proceed independently of a tax assessment and that the assessment
cannot be offset by its claim for refund.

Petitioner’s argument is erroneous. Petitioner premises its argument on the existence of an assessment. In the assailed
Decision, this Court did not, in any way, assess petitioner of any deficiency corporate income tax. The power to make
assessments against taxpayers is lodged with the respondent. For an assessment to be made, respondent must observe the
 Page 13 of 108

formalities provided in Revenue Regulations No. 12-99. This Court merely pointed out that petitioner is liable for the
regular corporate income tax by virtue of Section 28(A)(3) of the Tax Code. Thus, there is no assessment to speak of. 12

Precisely, petitioner questions the offsetting of its payment of the tax under Sec. 28(A)(3)(a) with their liability under
Sec. 28(A)(1), considering that there has not yet been any assessment of their obligation under the latter provision.
Petitioner argues that such offsetting is in the nature of legal compensation, which cannot be applied under the
circumstances present in this case.

Article 1279 of the Civil Code contains the elements of legal compensation, to wit:

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 be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.

And we ruled in Philex Mining Corporation v. Commissioner of Internal Revenue,13 thus:

In several instances prior to the instant case, we have already made the pronouncement that taxes cannot be subject to
compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other.
There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while
taxes are due to the Government in its sovereign capacity. We find no cogent reason to deviate from the aforementioned
distinction.

Prescinding from this premise, in Francia v. Intermediate Appellate Court, we categorically held that taxes cannot be
subject to set-off or compensation, thus:

We have consistently ruled that there can be no off-setting of taxes against the claims that the taxpayer may have against
the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or
greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.

The ruling in Francia has been applied to the subsequent case of Caltex Philippines, Inc. v. Commission on Audit, which
reiterated that:

. . . a taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be the
subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other and a
claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.

Verily, petitioner’s argument is correct that the offsetting of its tax refund with its alleged tax deficiency is unavailing
under Art. 1279 of the Civil Code.

Commissioner of Internal Revenue v. Court of Tax Appeals,14 however, granted the offsetting of a tax refund with a tax
deficiency in this wise:

Further, it is also worth noting that the Court of Tax Appeals erred in denying petitioner’s supplemental motion for
reconsideration alleging bringing to said court’s attention the existence of the deficiency income and business tax
assessment against Citytrust. The fact of such deficiency assessment is intimately related to and inextricably intertwined
with the right of respondent bank to claim for a tax refund for the same year. To award such refund despite the existence
of that deficiency assessment is an absurdity and a polarity in conceptual effects. Herein private respondent cannot be
entitled to refund and at the same time be liable for a tax deficiency assessment for the same year.

The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts stated therein are true and
correct. The deficiency assessment, although not yet final, created a doubt as to and constitutes a challenge against the
truth and accuracy of the facts stated in said return which, by itself and without unquestionable evidence, cannot be the
basis for the grant of the refund.
 Page 14 of 108

Section 82, Chapter IX of the National Internal Revenue Code of 1977, which was the applicable law when the claim of
Citytrust was filed, provides that "(w)hen an assessment is made in case of any list, statement, or return, which in the
opinion of the Commissioner of Internal Revenue was false or fraudulent or contained any understatement or
undervaluation, no tax collected under such assessment shall be recovered by any suits unless it is proved that the said
list, statement, or return was not false nor fraudulent and did not contain any understatement or undervaluation; but this
provision shall not apply to statements or returns made or to be made in good faith regarding annual depreciation of oil or
gas wells and mines."

Moreover, to grant the refund without determination of the proper assessment and the tax due would inevitably result in
multiplicity of proceedings or suits. If the deficiency assessment should subsequently be upheld, the Government will be
forced to institute anew a proceeding for the recovery of erroneously refunded taxes which recourse must be filed within
the prescriptive period of ten years after discovery of the falsity, fraud or omission in the false or fraudulent return
involved.This would necessarily require and entail additional efforts and expenses on the part of the Government, impose
a burden on and a drain of government funds, and impede or delay the collection of much-needed revenue for
governmental operations.1avvphi1

Thus, to avoid multiplicity of suits and unnecessary difficulties or expenses, it is both logically necessary and legally
appropriate that the issue of the deficiency tax assessment against Citytrust be resolved jointly with its claim for tax
refund, to determine once and for all in a single proceeding the true and correct amount of tax due or refundable.

In fact, as the Court of Tax Appeals itself has heretofore conceded,it would be only just and fair that the taxpayer and the
Government alike be given equal opportunities to avail of remedies under the law to defeat each other’s claim and to
determine all matters of dispute between them in one single case. It is important to note that in determining whether or
not petitioner is entitled to the refund of the amount paid, it would [be] necessary to determine how much the
Government is entitled to collect as taxes. This would necessarily include the determination of the correct liability of the
taxpayer and, certainly, a determination of this case would constitute res judicata on both parties as to all the matters
subject thereof or necessarily involved therein. (Emphasis supplied.)

Sec. 82, Chapter IX of the 1977 Tax Code is now Sec. 72, Chapter XI of the 1997 NIRC. The above pronouncements are,
therefore, still applicable today.

Here, petitioner’s similar tax refund claim assumes that the tax return that it filed was correct. Given, however, the
finding of the CTA that petitioner, although not liable under Sec. 28(A)(3)(a) of the 1997 NIRC, is liable under Sec.
28(A)(1), the correctness of the return filed by petitioner is now put in doubt. As such, we cannot grant the prayer for a
refund.

Be that as it may, this Court is unable to affirm the assailed decision and resolution of the CTA En Banc on the outright
denial of petitioner’s claim for a refund. Even though petitioner is not entitled to a refund due to the question on the
propriety of petitioner’s tax return subject of the instant controversy, it would not be proper to deny such claim without
making a determination of petitioner’s liability under Sec. 28(A)(1).

It must be remembered that the tax under Sec. 28(A)(3)(a) is based on GPB, while Sec. 28(A)(1) is based on taxable
income, that is, gross income less deductions and exemptions, if any. It cannot be assumed that petitioner’s liabilities
under the two provisions would be the same. There is a need to make a determination of petitioner’s liability under Sec.
28(A)(1) to establish whether a tax refund is forthcoming or that a tax deficiency exists. The assailed decision fails to
mention having computed for the tax due under Sec. 28(A)(1) and the records are bereft of any evidence sufficient to
establish petitioner’s taxable income. There is a necessity to receive evidence to establish such amount vis-à-vis the
claim for refund. It is only after such amount is established that a tax refund or deficiency may be correctly pronounced.

WHEREFORE, the assailed July 19, 2007 Decision and October 30, 2007 Resolution of the CTA En Banc in CTA E.B.
Case No. 210 are SET ASIDE. The instant case is REMANDED to the CTA En Banc for further proceedings and
appropriate action, more particularly, the reception of evidence for both parties and the corresponding disposition of
CTA E.B. Case No. 210 not otherwise inconsistent with our judgment in this Decision.

SO ORDERED.
 Page 15 of 108

G.R. No. 178788 : September 29, 2010

UNITED AIRLINES, INC., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, of the
Decision1 dated July 5, 2007 of the Court of Tax Appeals En Banc (CTA En Banc) in C.T.A. EB No. 227 denying
petitioner’s claim for tax refund of P5.03 million.

The undisputed facts are as follows:

Petitioner United Airlines, Inc. is a foreign corporation organized and existing under the laws of the State of Delaware,
U.S.A., engaged in the international airline business.

Petitioner used to be an online international carrier of passenger and cargo, i.e., it used to operate passenger and cargo
flights originating in the Philippines. Upon cessation of its passenger flights in and out of the Philippines beginning
February 21, 1998, petitioner appointed a sales agent in the Philippines -- Aerotel Ltd. Corp., an independent general
sales agent acting as such for several international airline companies.2 Petitioner continued operating cargo flights from
the Philippines until January 31, 2001.3cräläwvirtualibräry

On April 12, 2002, petitioner filed with respondent Commissioner a claim for income tax refund, pursuant to Section
28(A)(3)(a)4 of the National Internal Revenue Code of 1997 (NIRC) in relation to Article 4(7)5 of the Convention
between the Government of the Republic of the Philippines and the Government of the United States of America with
respect to Income Taxes (RP-US Tax Treaty). Petitioner sought to refund the total amount of P15,916,680.69 pertaining
to income taxes paid on gross passenger and cargo revenues for the taxable years 1999 to 2001, which included the
amount of P5,028,813.23 allegedly representing income taxes paid in 1999 on passenger revenue from tickets sold in the
Philippines, the uplifts of which did not originate in the Philippines. Citing the change in definition of Gross Philippine
Billings (GPB) in the NIRC, petitioner argued that since it no longer operated passenger flights originating from the
Philippines beginning February 21, 1998, its passenger revenue for 1999, 2000 and 2001 cannot be considered as income
from sources within the Philippines, and hence should not be subject to Philippine income tax under Article 96 of the RP-
US Tax Treaty.7cräläwvirtualibräry

As no resolution on its claim for refund had yet been made by the respondent and in view of the two (2)-year prescriptive
period (from the time of filing the Final Adjustment Return for the taxable year 1999) which was about to expire on
April 15, 2002, petitioner filed on said date a petition for review with the Court of Tax Appeals
(CTA).8cräläwvirtualibräry
 Page 16 of 108

Petitioner asserted that under the new definition of GPB under the 1997 NIRC and Article 4(7) of the RP-US Tax Treaty,
Philippine tax authorities have jurisdiction to tax only the gross revenue derived by US air and shipping carriers from
outgoing traffic in the Philippines. Since the Bureau of Internal Revenue (BIR) erroneously imposed and collected
income tax in 1999 based on petitioner’s gross passenger revenue, as beginning 1998 petitioner no longer flew passenger
flights to and from the Philippines, petitioner is entitled to a refund of such erroneously collected income tax in the
amount of P5,028,813.23.9cräläwvirtualibräry

In its Decision10 dated May 18, 2006, the CTA’s First Division11 ruled that no excess or erroneously paid tax may be
refunded to petitioner because the income tax on GPB under Section 28(A)(3)(a) of the NIRC applies as well to gross
revenue from carriage of cargoes originating from the Philippines. It agreed that petitioner cannot be taxed on its 1999
passenger revenue from flights originating outside the Philippines. However, in reporting a cargo revenue of P740.33
million in 1999, it was found that petitioner deducted two (2) items from its gross cargo revenue of P2.84 billion: P141.79
million as commission and P1.98 billion as other incentives of its agent. These deductions were erroneous because the
gross revenue referred to in Section 28(A)(3)(a) of the NIRC was total revenue before any deduction of commission and
incentives. Petitioner’s gross cargo revenue in 1999, being P2.84 billion, the GPB tax thereon was P42.54 million and
not P11.1 million, the amount petitioner paid for the reported net cargo revenue of P740.33 million. The CTA First
Division further noted that petitioner even underpaid its taxes on cargo revenue by P31.43 million, which amount was much
higher than the P5.03 million it asked to be refunded.

A motion for reconsideration was filed by petitioner but the First Division denied the same. It held that petitioner’s
claim for tax refund was not offset with its tax liability; that petitioner’s tax deficiency was due to erroneous deductions
from its gross cargo revenue; that it did not make an assessment against petitioner; and that it merely determined if
petitioner was entitled to a refund based on the undisputed facts and whether petitioner had paid the correct amount of
tax.12cräläwvirtualibräry

Petitioner elevated the case to the CTA En Banc which affirmed the decision of the First Division.

Hence, this petition anchored on the following grounds:

I. THE CTA EN BANC GROSSLY ERRED IN DENYING THE PETITIONER’S CLAIM FOR
REFUND OF ERRONEOUSLY PAID INCOME TAX ON GROSS PHILIPPINE BILLINGS [GPB]
BASED ON ITS FINDING THAT PETITIONER’S UNDERPAYMENT OF [P31.43 MILLION] GPB
TAX ON CARGO REVENUES IS A LOT HIGHER THAN THE GPB TAX OF [P5.03 MILLION] ON
PASSENGER REVENUES, WHICH IS THE SUBJECT OF THE INSTANT CLAIM FOR REFUND.
THE DENIAL OF PETITIONER’S CLAIM ON SUCH GROUND CLEARLY AMOUNTS TO AN
OFF-SETTING OF TAX LIABILITIES, CONTRARY TO WELL-SETTLED JURISPRUDENCE.

II. THE DECISION OF THE CTA EN BANC VIOLATED PETITIONER’S RIGHT TO DUE
PROCESS.

III. THE CTA EN BANC ACTED IN EXCESS OF ITS JURISDICTION BY DENYING

PETITIONER’S CLAIM FOR REFUND OF ERRONEOUSLY PAID INCOME TAX ON GROSS
PHILIPPINE BILLINGS BASED ON ITS FINDING THAT PETITIONER UNDERPAID GPB TAX
ON CARGO REVENUES IN THE AMOUNT OF [P31.43 MILLION] FOR THE TAXABLE YEAR
1999.

IV. THE CTA EN BANC HAS NO AUTHORITY UNDER THE LAW TO MAKE ANY
ASSESSMENTS FOR DEFICIENCY TAXES. THE AUTHORITY TO MAKE ASSESSMENTS FOR
DEFICIENCY NATIONAL INTERNAL REVENUE TAXES IS VESTED BY THE 1997 NIRC UPON
RESPONDENT.

V. ANY ASSESSMENT AGAINST PETITIONER FOR DEFICIENCY INCOME TAX FOR THE
TAXABLE YEAR 1999 IS ALREADY BARRED BY PRESCRIPTION.13

The main issue to be resolved is whether the petitioner is entitled to a refund of the amount of P5,028,813.23 it paid as
income tax on its passenger revenues in 1999.

Petitioner argues that its claim for refund of erroneously paid GPB tax on off-line passenger revenues cannot be denied
based on the finding of the CTA that petitioner allegedly underpaid the GPB tax on cargo revenues by P31,431,171.09,
which underpayment is allegedly higher than the GPB tax of P5,028,813.23 on passenger revenues, the amount of the
instant claim. The denial of petitioner’s claim for refund on such ground is tantamount to an offsetting of petitioner’s
claim for refund of erroneously paid GPB against its alleged tax liability. Petitioner thus cites the well-entrenched rule in
taxation cases that internal revenue taxes cannot be the subject of set-off or compensation.14cräläwvirtualibräry
 Page 17 of 108

According to petitioner, the offsetting of the liabilities is very clear in the instant case because the amount of petitioner’s
claim for refund of erroneously paid GPB tax of P5,028,813.23 for the taxable year 1999 is being offset against
petitioner’s alleged deficiency GPB tax liability on cargo revenues for the same year, which was not even the subject of
an investigation nor any valid assessment issued by respondent against the petitioner. Under Section 22815of the NIRC,
the “taxpayer shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the
assessment shall be void.” This administrative process of issuing an assessment is part of procedural due process
enshrined in the 1987 Constitution. Records do not show that petitioner has been assessed by the BIR for any deficiency
GBP tax for 1999, nor was there any finding or investigation being conducted by respondent of any liability of petitioner
for GPB tax for the said taxable period. Clearly, petitioner’s right to due process was violated.16cräläwvirtualibräry

Petitioner further argues that the CTA acted in excess of its jurisdiction because the exclusive appellate jurisdiction of the
CTA covers only decisions or inactions of the respondent in cases involving disputed assessments. The CTA has
effectively assessed petitioner with a P31.43 million tax deficiency when it concluded that petitioner underpaid its GPB
tax on cargo revenue. Since respondent did not issue an assessment for any deficiency tax, the alleged deficiency tax on
its cargo revenue in 1999 cannot be considered a disputed assessment that may be passed upon by the CTA. Petitioner
stresses that the authority to issue an assessment for deficiency internal revenue taxes is vested by law on respondent, not
with the CTA.17cräläwvirtualibräry

Lastly, petitioner argues that any assessment against it for deficiency income tax for taxable year 1999 is barred by
prescription. Petitioner claims that the prescriptive period within which an assessment for deficiency income tax may be
made has prescribed on April 17, 2003, three (3) years after it filed its 1999 tax return.18cräläwvirtualibräry

Respondent Commissioner maintains that the CTA acted within its jurisdiction in denying petitioner’s claim for tax
refund. It points out that the objective of the CTA’s determination of whether petitioner correctly paid its GPB tax for
the taxable year 1999 was to ascertain the latter’s entitlement to the claimed refund and not for the purpose of imposing
any deficiency tax. Hence, petitioner’s arguments regarding the propriety of the CTA’s determination of its deficiency
tax on its GPB for gross cargo revenues for 1999 are clearly misplaced.19cräläwvirtualibräry

The petition has no merit.

As correctly pointed out by petitioner, inasmuch as it ceased operating passenger flights to or from the Philippines in
1998, it is not taxable under Section 28(A)(3)(a) of the NIRC for gross passenger revenues. This much was also found
by the CTA. In South African Airways v. Commissioner of Internal Revenue,20 we ruled that the correct interpretation of
the said provisions is that, if an international air carrier maintains flights to and from the Philippines, it shall be taxed at
the rate of 2½% of its GPB, while international air carriers that do not have flights to and from the Philippines but
nonetheless earn income from other activities in the country will be taxed at the rate of 32% of such income.

Here, the subject of claim for tax refund is the tax paid on passenger revenue for taxable year 1999 at the time when
petitioner was still operating cargo flights originating from the Philippines although it had ceased passenger flight
operations. The CTA found that petitioner had underpaid its GPB tax for 1999 because petitioner had made deductions
from its gross cargo revenues in the income tax return it filed for the taxable year 1999, the amount of underpayment
even greater than the refund sought for erroneously paid GPB tax on passenger revenues for the same taxable
period. Hence, the CTA ruled petitioner is not entitled to a tax refund.

Petitioner’s arguments regarding the propriety of such determination by the CTA are misplaced.

Under Section 72 of the NIRC, the CTA can make a valid finding that petitioner made erroneous deductions on its gross
cargo revenue; that because of the erroneous deductions, petitioner reported a lower cargo revenue and paid a lower
income tax thereon; and that petitioner's underpayment of the income tax on cargo revenue is even higher than the
income tax it paid on passenger revenue subject of the claim for refund, such that the refund cannot be granted.

Section 72 of the NIRC reads:

SEC. 72. Suit to Recover Tax Based on False or Fraudulent Returns. - When an assessment is made
in case of any list, statement or return, which in the opinion of the Commissioner was false or fraudulent
or contained any understatement or undervaluation, no tax collected under such assessment shall be
recovered by any suit, unless it is proved that the said list, statement or return was not false nor
fraudulent and did not contain any understatement or undervaluation; but this provision shall not apply to
statements or returns made or to be made in good faith regarding annual depreciation of oil or gas wells
and mines.

In the afore-cited case of South African Airways, this Court rejected similar arguments on the denial of claim for tax
refund, as follows:
 Page 18 of 108

Precisely, petitioner questions the offsetting of its payment of the tax under Sec. 28(A)(3)(a) with their
liability under Sec. 28(A)(1), considering that there has not yet been any assessment of their obligation
under the latter provision. Petitioner argues that such offsetting is in the nature of legal compensation,
which cannot be applied under the circumstances present in this case.

Article 1279 of the Civil Code contains the elements of legal compensation, to wit:

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 be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.

And we ruled in Philex Mining Corporation v. Commissioner of Internal Revenue, thus:

In several instances prior to the instant case, we have already made the pronouncement
that taxes cannot be subject to compensation for the simple reason that the government
and the taxpayer are not creditors and debtors of each other. There is a material
distinction between a tax and debt. Debts are due to the Government in its corporate
capacity, while taxes are due to the Government in its sovereign capacity. We find no
cogent reason to deviate from the aforementioned distinction.

Prescinding from this premise, in Francia v. Intermediate Appellate Court, we categorically held that
taxes cannot be subject to set-off or compensation, thus:

We have consistently ruled that there can be no off-setting of taxes against the claims
that the taxpayer may have against the government. A person cannot refuse to pay a tax
on the ground that the government owes him an amount equal to or greater than the tax
being collected. The collection of a tax cannot await the results of a lawsuit against the
government.

The ruling in Francia has been applied to the subsequent case of Caltex Philippines, Inc. v. Commission
on Audit, which reiterated that:

. . . a taxpayer may not offset taxes due from the claims that he may have against the
government. Taxes cannot be the subject of compensation because the government and
taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not
such a debt, demand, contract or judgment as is allowed to be set-off.

Verily, petitioner’s argument is correct that the offsetting of its tax refund with its alleged tax deficiency
is unavailing under Art. 1279 of the Civil Code.

Commissioner of Internal Revenue v. Court of Tax Appeals, however, granted the offsetting of a tax
refund with a tax deficiency in this wise:

Further, it is also worth noting that the Court of Tax Appeals erred in denying
petitioner’s supplemental motion for reconsideration alleging bringing to said court’s
attention the existence of the deficiency income and business tax assessment against
Citytrust. The fact of such deficiency assessment is intimately related to and inextricably
intertwined with the right of respondent bank to claim for a tax refund for the same year.
To award such refund despite the existence of that deficiency assessment is an absurdity
and a polarity in conceptual effects. Herein private respondent cannot be entitled to
refund and at the same time be liable for a tax deficiency assessment for the same year.
 Page 19 of 108

The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts stated
therein are true and correct. The deficiency assessment, although not yet final, created a doubt as to and
constitutes a challenge against the truth and accuracy of the facts stated in said return which, by itself
and without unquestionable evidence, cannot be the basis for the grant of the refund.

Section 82, Chapter IX of the National Internal Revenue Code of 1977, which was the applicable law
when the claim of Citytrust was filed, provides that “(w)hen an assessment is made in case of any list,
statement, or return, which in the opinion of the Commissioner of Internal Revenue was false or
fraudulent or contained any understatement or undervaluation, no tax collected under such assessment
shall be recovered by any suits unless it is proved that the said list, statement, or return was not false nor
fraudulent and did not contain any understatement or undervaluation; but this provision shall not apply to
statements or returns made or to be made in good faith regarding annual depreciation of oil or gas wells
and mines.”

Moreover, to grant the refund without determination of the proper assessment and the tax due would
inevitably result in multiplicity of proceedings or suits. If the deficiency assessment should subsequently
be upheld, the Government will be forced to institute anew a proceeding for the recovery of erroneously
refunded taxes which recourse must be filed within the prescriptive period of ten years after discovery of
the falsity, fraud or omission in the false or fraudulent return involved.This would necessarily require
and entail additional efforts and expenses on the part of the Government, impose a burden on and a drain
of government funds, and impede or delay the collection of much-needed revenue for governmental
operations.

Thus, to avoid multiplicity of suits and unnecessary difficulties or expenses, it is both logically necessary
and legally appropriate that the issue of the deficiency tax assessment against Citytrust be resolved
jointly with its claim for tax refund, to determine once and for all in a single proceeding the true and
correct amount of tax due or refundable.

In fact, as the Court of Tax Appeals itself has heretofore conceded, it would be only just and fair that the
taxpayer and the Government alike be given equal opportunities to avail of remedies under the law to
defeat each other’s claim and to determine all matters of dispute between them in one single case. It is
important to note that in determining whether or not petitioner is entitled to the refund of the amount
paid, it would [be] necessary to determine how much the Government is entitled to collect as taxes. This
would necessarily include the determination of the correct liability of the taxpayer and, certainly, a
determination of this case would constitute res judicata on both parties as to all the matters subject
thereof or necessarily involved therein. nad (Emphasis supplied.)

Sec. 82, Chapter IX of the 1977 Tax Code is now Sec. 72, Chapter XI of the 1997
NIRC. The above pronouncements are, therefore, still applicable today.

Here, petitioner’s similar tax refund claim assumes that the tax return that it filed was correct. Given,
however, the finding of the CTA that petitioner, although not liable under Sec. 28(A)(3)(a) of the 1997
NIRC, is liable under Sec. 28(A)(1), the correctness of the return filed by petitioner is now put in doubt.
As such, we cannot grant the prayer for a refund.21 (Additional emphasis supplied.)

In the case at bar, the CTA explained that it merely determined whether petitioner is entitled to a refund
based on the facts. On the assumption that petitioner filed a correct return, it had the right to file a claim
for refund of GPB tax on passenger revenues it paid in 1999 when it was not operating passenger flights
to and from the Philippines. However, upon examination by the CTA, petitioner’s return was found
erroneous as it understated its gross cargo revenue for the same taxable year due to deductions of two (2)
items consisting of commission and other incentives of its agent. Having underpaid the GPB tax due on
its cargo revenues for 1999, petitioner is not entitled to a refund of its GPB tax on its passenger revenue,
the amount of the former being even much higher (P31.43 million) than the tax refund sought (P5.2
million). The CTA therefore correctly denied the claim for tax refund after determining the proper
assessment and the tax due. Obviously, the matter of prescription raised by petitioner is a non-
issue. The prescriptive periods under Sections 20322 and 22223 of the NIRC find no application in this
case.

We must emphasize that tax refunds, like tax exemptions, are construed strictly against the taxpayer and
liberally in favor of the taxing authority.24 In any event, petitioner has not discharged its burden of proof
in establishing the factual basis for its claim for a refund and we find no reason to disturb the ruling of
the CTA. It has been a long-standing policy and practice of the Court to respect the conclusions of
quasi-judicial agencies such as the CTA, a highly specialized body specifically created for the purpose of
reviewing tax cases.25cräläwvirtualibräry
 Page 20 of 108

WHEREFORE, we DENY the petition for lack of merit and AFFIRMthe Decision dated July 5, 2007
of the Court of Tax Appeals En Bancin C.T.A. EB No. 227.

With costs against the petitioner.

SO ORDERED.

G.R. No. 88404 October 18, 1990

PHILIPPINE LONG DISTANCE TELEPHONE CO. [PLDT], petitioner,

vs.
THE NATIONAL TELECOMMUNICATIONS COMMISSION AND CELLCOM, INC., (EXPRESS
TELECOMMUNICATIONS CO., INC. [ETCI]), respondents.

Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by way of certiorari and Prohibition under
Rule 65, two (2) Orders of public respondent National Telecommunications Commission (NTC), namely, the Order of 12
December 1988 granting private respondent Express Telecommunications Co., Inc. (ETCI) provisional authority to
install, operate and maintain a Cellular Mobile Telephone System in Metro-Manila (Phase A) in accordance with
specified conditions, and the Order, dated 8 May 1988, denying reconsideration.

On 22 June 1958, Rep. Act No. 2090, was enacted, otherwise known as "An Act Granting Felix Alberto and Company,
Incorporated, a Franchise to Establish Radio Stations for Domestic and Transoceanic Telecommunications." Felix
Alberto & Co., Inc. (FACI) was the original corporate name, which was changed to ETCI with the amendment of the
Articles of Incorporation in 1964. Much later, "CELLCOM, Inc." was the name sought to be adopted before the
Securities and Exchange Commission, but this was withdrawn and abandoned.

On 13 May 1987, alleging urgent public need, ETCI filed an application with public respondent NTC (docketed as NTC
Case No. 87-89) for the issuance of a Certificate of Public Convenience and Necessity (CPCN) to construct, install,
establish, operate and maintain a Cellular Mobile Telephone System and an Alpha Numeric Paging System in Metro
Manila and in the Southern Luzon regions, with a prayer for provisional authority to operate Phase A of its proposal
within Metro Manila.

PLDT filed an Opposition with a Motion to Dismiss, based primarily on the following grounds: (1) ETCI is not
capacitated or qualified under its legislative franchise to operate a systemwide telephone or network of telephone service
such as the one proposed in its application; (2) ETCI lacks the facilities needed and indispensable to the successful
 Page 21 of 108

operation of the proposed cellular mobile telephone system; (3) PLDT has itself a pending application with NTC, Case
No. 86-86, to install and operate a Cellular Mobile Telephone System for domestic and international service not only in
Manila but also in the provinces and that under the "prior operator" or "protection of investment" doctrine, PLDT has the
priority or preference in the operation of such service; and (4) the provisional authority, if granted, will result in needless,
uneconomical and harmful duplication, among others.

In an Order, dated 12 November 1987, NTC overruled PLDT's Opposition and declared that Rep. Act No. 2090 (1958)
should be liberally construed as to include among the services under said franchise the operation of a cellular mobile
telephone service.

In the same Order, ETCI was required to submit the certificate of registration of its Articles of Incorporation with the
Securities and Exchange Commission, the present capital and ownership structure of the company and such other
evidence, oral or documentary, as may be necessary to prove its legal, financial and technical capabilities as well as the
economic justifications to warrant the setting up of cellular mobile telephone and paging systems. The continuance of the
hearings was also directed.

After evaluating the reconsideration sought by PLDT, the NTC, in October 1988, maintained its ruling that liberally
construed, applicant's franchise carries with it the privilege to operate and maintain a cellular mobile telephone service.

On 12 December 1988, NTC issued the first challenged Order. Opining that "public interest, convenience and necessity
further demand a second cellular mobile telephone service provider and finds PRIMA FACIE evidence showing
applicant's legal, financial and technical capabilities to provide a cellular mobile service using the AMPS system," NTC
granted ETCI provisional authority to install, operate and maintain a cellular mobile telephone system initially in Metro
Manila, Phase A only, subject to the terms and conditions set forth in the same Order. One of the conditions prescribed
(Condition No. 5) was that, within ninety (90) days from date of the acceptance by ETCI of the terms and conditions of
the provisional authority, ETCI and PLDT "shall enter into an interconnection agreement for the provision of adequate
interconnection facilities between applicant's cellular mobile telephone switch and the public switched telephone network
and shall jointly submit such interconnection agreement to the Commission for approval."

In a "Motion to Set Aside the Order" granting provisional authority, PLDT alleged essentially that the interconnection
ordered was in violation of due process and that the grant of provisional authority was jurisdictionally and procedurally
infirm. On 8 May 1989, NTC denied reconsideration and set the date for continuation of the hearings on the main
proceedings. This is the second questioned Order.

PLDT urges us now to annul the NTC Orders of 12 December 1988 and 8 May 1989 and to order ETCI to desist from,
suspend, and/or discontinue any and all acts intended for its implementation.

On 15 June 1989, we resolved to dismiss the petition for its failure to comply fully with the requirements of Circular No.
1-88. Upon satisfactory showing, however, that there was, in fact, such compliance, we reconsidered the order, reinstated
the Petition, and required the respondents NTC and ETCI to submit their respective Comments.

On 27 February 1990, we issued a Temporary Restraining Order enjoining NTC to "Cease and Desist from all or any of
its on-going proceedings and ETCI from continuing any and all acts intended or related to or which will amount to the
implementation/execution of its provisional authority." This was upon PLDT's urgent manifestation that it had been
served an NTC Order, dated 14 February 1990, directing immediate compliance with its Order of 12 December 1988,
"otherwise the Commission shall be constrained to take the necessary measures and bring to bear upon PLDT the full
sanctions provided by law."

We required PLDT to post a bond of P 5M. It has complied, with the statement that it was "post(ing) the same on its
agreement and/or consent to have the same forfeited in favor of Private Respondent ETCI/CELLCOM should the instant
Petition be dismissed for lack of merit." ETCI took exception to the sufficiency of the bond considering its initial
investment of approximately P 225M, but accepted the forfeiture proferred.

ETCI moved to have the TRO lifted, which we denied on 6 March 1990. We stated, however, that the inaugural
ceremony ETCI had scheduled for that day could proceed, as the same was not covered by the TRO.

PLDT relies on the following grounds for the issuance of the Writs prayed for:

1. Respondent NTC's subject order effectively licensed and/or authorized a corporate entity without any
franchise to operate a public utility, legislative or otherwise, to establish and operate a
telecommunications system.

2. The same order validated stock transactions of a public service enterprise contrary to and/or in direct
violation of Section 20(h) of the Public Service Act.
 Page 22 of 108

3. Respondent NTC adjudicated in the same order a controverted matter that was not heard at all in the
proceedings under which it was promulgated.

As correctly pointed out by respondents, this being a special civil action for certiorari and Prohibition, we only need
determine if NTC acted without jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction
in granting provisional authority to ETCI under the NTC questioned Orders of 12 December 1988 and 8 May 1989.

The case was set for oral argument on 21 August 1990 with the parties directed to address, but not limited to, the
following issues: (1) the status and coverage of Rep. Act No. 2090 as a franchise; (2) the transfer of shares of stock of a
corporation holding a CPCN; and (3) the principle and procedure of interconnection. The parties were thereafter required
to submit their respective Memoranda, with which they have complied.

We find no grave abuse of discretion on the part of NTC, upon the following considerations:

1. NTC Jurisdiction

There can be no question that the NTC is the regulatory agency of the national government with jurisdiction over all
telecommunications entities. It is legally clothed with authority and given ample discretion to grant a provisional permit
or authority. In fact, NTC may, on its own initiative, grant such relief even in the absence of a motion from an applicant.

Sec. 3. Provisional Relief. — Upon the filing of an application, complaint or petition or at any stage
thereafter, the Board may grant on motion of the pleaders or on its own initiative, the relief prayed for,
based on the pleading, together with the affidavits and supporting documents attached thereto, without
prejudice to a final decision after completion of the hearing which shall be called within thirty (30) days
from grant of authority asked for. (Rule 15, Rules of Practice and Procedure Before the Board of
Communications (now NTC).

What the NTC granted was such a provisional authority, with a definite expiry period of eighteen (18) months unless
sooner renewed, and which may be revoked, amended or revised by the NTC. It is also limited to Metro Manila only.
What is more, the main proceedings are clearly to continue as stated in the NTC Order of 8 May 1989.

The provisional authority was issued after due hearing, reception of evidence and evaluation thereof, with the hearings
attended by various oppositors, including PLDT. It was granted only after a prima facie showing that ETCI has the
necessary legal, financial and technical capabilities and that public interest, convenience and necessity so demanded.

PLDT argues, however, that a provisional authority is nothing short of a Certificate of Public Convenience and Necessity
(CPCN) and that it is merely a "distinction without a difference." That is not so. Basic differences do exist, which need
not be elaborated on. What should be borne in mind is that provisional authority would be meaningless if the grantee
were not allowed to operate. Moreover, it is clear from the very Order of 12 December 1988 itself that its scope is limited
only to the first phase, out of four, of the proposed nationwide telephone system. The installation and operation of an
alpha numeric paging system was not authorized. The provisional authority is not exclusive. Its lifetime is limited and
may be revoked by the NTC at any time in accordance with law. The initial expenditure of P130M more or less, is
rendered necessary even under a provisional authority to enable ETCI to prove its capability. And as pointed out by the
Solicitor General, on behalf of the NTC, if what had been granted were a CPCN, it would constitute a final order or
award reviewable only by ordinary appeal to the Court of Appeals pursuant to Section 9(3) of BP Blg. 129, and not by
certiorari before this Court.

The final outcome of the application rests within the exclusive prerogative of the NTC. Whether or not a CPCN would
eventually issue would depend on the evidence to be presented during the hearings still to be conducted, and only after a
full evaluation of the proof thus presented.

2. The Coverage of ETCI's Franchise

Rep. Act No. 2090 grants ETCI (formerly FACI) "the right and privilege of constructing, installing, establishing and
operating in the entire Philippines radio stations for reception and transmission of messages on radio stations in the
foreign and domestic public fixed point-to-point and public base, aeronautical and land mobile stations, ... with the
corresponding relay stations for the reception and transmission of wireless messages on radiotelegraphy and/or
radiotelephony ...." PLDT maintains that the scope of the franchise is limited to "radio stations" and excludes telephone
services such as the establishment of the proposed Cellular Mobile Telephone System (CMTS). However, in its Order of
12 November 1987, the NTC construed the technical term "radiotelephony" liberally as to include the operation of a
cellular mobile telephone system. It said:

In resolving the said issue, the Commission takes into consideration the different definitions of the term
"radiotelephony." As defined by the New International Webster Dictionary the term "radiotelephony" is
 Page 23 of 108

defined as a telephone carried on by aid of radiowaves without connecting wires. The International
Telecommunications Union (ITU) defines a "radiotelephone call" as a "telephone call, originating in or
intended on all or part of its route over the radio communications channels of the mobile service or of the
mobile satellite service." From the above definitions, while under Republic Act 2090 a system-wide
telephone or network of telephone service by means of connecting wires may not have been
contemplated, it can be construed liberally that the operation of a cellular mobile telephone service
which carries messages, either voice or record, with the aid of radiowaves or a part of its route carried
over radio communication channels, is one included among the services under said franchise for which a
certificate of public convenience and necessity may be applied for.

The foregoing is the construction given by an administrative agency possessed of the necessary special knowledge,
expertise and experience and deserves great weight and respect (Asturias Sugar Central, Inc. v. Commissioner of
Customs, et al., L-19337, September 30, 1969, 29 SCRA 617). It can only be set aside on proof of gross abuse of
discretion, fraud, or error of law (Tupas Local Chapter No. 979 v. NLRC, et al., L-60532-33, November 5, 1985, 139
SCRA 478). We discern none of those considerations sufficient to warrant judicial intervention.

3. The Status of ETCI Franchise

PLDT alleges that the ETCI franchise had lapsed into nonexistence for failure of the franchise holder to begin and
complete construction of the radio system authorized under the franchise as explicitly required in Section 4 of its
franchise, Rep. Act No. 2090. 1 PLDT also invokes Pres. Decree No. 36, enacted on 2 November 1972, which legislates
the mandatory cancellation or invalidation of all franchises for the operation of communications services, which have not
been availed of or used by the party or parties in whose name they were issued.

However, whether or not ETCI, and before it FACI, in contravention of its franchise, started the first of its radio
telecommunication stations within (2) years from the grant of its franchise and completed the construction within ten (10)
years from said date; and whether or not its franchise had remained unused from the time of its issuance, are questions of
fact beyond the province of this Court, besides the well-settled procedural consideration that factual issues are not
subjects of a special civil action for certiorari (Central Bank of the Philippines vs. Court of Appeals, G.R. No. 41859, 8
March 1989, 171 SCRA 49; Ygay vs. Escareal, G.R. No. 44189, 8 February 1985, 135 SCRA 78; Filipino Merchant's
Insurance Co., Inc. vs. Intermediate Appellate Court, G.R. No. 71640, 27 June 1988, 162 SCRA 669). Moreover, neither
Section 4, Rep. Act No. 2090 nor Pres. Decree No. 36 should be construed as self-executing in working a forfeiture.
Franchise holders should be given an opportunity to be heard, particularly so, where, as in this case, ETCI does not admit
any breach, in consonance with the rudiments of fair play. Thus, the factual situation of this case differs from that
in Angeles Ry Co. vs. City of Los Angeles (92 Pacific Reporter 490) cited by PLDT, where the grantee therein admitted
its failure to complete the conditions of its franchise and yet insisted on a decree of forfeiture.

More importantly, PLDT's allegation partakes of a Collateral attack on a franchise Rep. Act No. 2090), which is not
allowed. A franchise is a property right and cannot be revoked or forfeited without due process of law. The determination
of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is
more properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State
"upon complaint or otherwise" (Sections 1, 2 and 3, Rule 66, Rules of Court), 2 the reason being that the abuse of a
franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct
proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is
primarily a concern of Government.

A ... franchise is ... granted by law, and its ... unlawful exercise is the concern primarily of the
Government. Hence, the latter as a rule is the party called upon to bring the action for such ... unlawful
exercise of franchise. (IV-B V. FRANCISCO, 298 [1963 ed.], citing Cruz vs. Ramos, 84 Phil. 226).

4. ETCI's Stock Transactions

ETCI admits that in 1964, the Albertos, as original owners of more than 40% of the outstanding capital stock sold their
holdings to the Orbes. In 1968, the Albertos re-acquired the shares they had sold to the Orbes. In 1987, the Albertos sold
more than 40% of their shares to Horacio Yalung. Thereafter, the present stockholders acquired their ETCI shares.
Moreover, in 1964, ETCI had increased its capital stock from P40,000.00 to P360,000.00; and in 1987, from
P360,000.00 to P40M.

PLDT contends that the transfers in 1987 of the shares of stock to the new stockholders amount to a
transfer of ETCI's franchise, which needs Congressional approval pursuant to Rep. Act No. 2090, and
since such approval had not been obtained, ETCI's franchise had been invalidated. The provision relied
on reads, in part, as follows:

SECTION 10. The grantee shall not lease, transfer, grant the usufruct of, sell or assign this franchise nor
the rights and privileges acquired thereunder to any person, firm, company, corporation or other
 Page 24 of 108

commercial or legal entity nor merge with any other person, company or corporation organized for the
same purpose, without the approval of the Congress of the Philippines first had. ...

It should be noted, however, that the foregoing provision is, directed to the "grantee" of the franchise, which is the
corporation itself and refers to a sale, lease, or assignment of that franchise. It does not include the transfer or sale of
shares of stock of a corporation by the latter's stockholders.

The sale of shares of stock of a public utility is governed by another law, i.e., Section 20(h) of the Public Service Act
(Commonwealth Act No. 146). Pursuant thereto, the Public Service Commission (now the NTC) is the government
agency vested with the authority to approve the transfer of more than 40% of the subscribed capital stock of a
telecommunications company to a single transferee, thus:

SEC. 20. Acts requiring the approval of the Commission. Subject to established stations and exceptions
and saving provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee
or operator thereof, without the approval and authorization of the Commission previously had

xxx xxx xxx

(h) To sell or register in its books the transfer or sale of shares of its capital stock, if the result of that sale
in itself or in connection with another previous sale, shall be to vest in the transferee more than forty per
centum of the subscribed capital of said public service. Any transfer made in violation of this provision
shall be void and of no effect and shall not be registered in the books of the public service corporation.
Nothing herein contained shall be construed to prevent the holding of shares lawfully acquired. (As
amended by Com. Act No. 454).

In other words, transfers of shares of a public utility corporation need only NTC approval, not Congressional
authorization. What transpired in ETCI were a series of transfers of shares starting in 1964 until 1987. The approval of
the NTC may be deemed to have been met when it authorized the issuance of the provisional authority to ETCI. There
was full disclosure before the NTC of the transfers. In fact, the NTC Order of 12 November 1987 required ETCI to
submit its "present capital and ownership structure." Further, ETCI even filed a Motion before the NTC, dated 8
December 1987, or more than a year prior to the grant of provisional authority, seeking approval of the increase in its
capital stock from P360,000.00 to P40M, and the stock transfers made by its stockholders.

A distinction should be made between shares of stock, which are owned by stockholders, the sale of which requires only
NTC approval, and the franchise itself which is owned by the corporation as the grantee thereof, the sale or transfer of
which requires Congressional sanction. Since stockholders own the shares of stock, they may dispose of the same as they
see fit. They may not, however, transfer or assign the property of a corporation, like its franchise. In other words, even if
the original stockholders had transferred their shares to another group of shareholders, the franchise granted to the
corporation subsists as long as the corporation, as an entity, continues to exist The franchise is not thereby invalidated by
the transfer of the shares. A corporation has a personality separate and distinct from that of each stockholder. It has the
right of continuity or perpetual succession (Corporation Code, Sec. 2).

To all appearances, the stock transfers were not just for the purpose of acquiring the ETCI franchise, considering that, as
heretofore stated, a series of transfers was involved from 1964 to 1987. And, contrary to PLDT's assertion, the franchise
was not the only property of ETCI of meaningful value. The "zero" book value of ETCI assets, as reflected in its balance
sheet, was plausibly explained as due to the accumulated depreciation over the years entered for accounting purposes and
was not reflective of the actual value that those assets would command in the market.

But again, whether ETCI has offended against a provision of its franchise, or has subjected it to misuse or abuse, may
more properly be inquired into in quo warranto proceedings instituted by the State. It is the condition of every franchise
that it is subject to amendment, alteration, or repeal when the common good so requires (1987 Constitution, Article XII,
Section 11).

5. The NTC Interconnection Order

In the provisional authority granted by NTC to ETCI, one of the conditions imposed was that the latter and PLDT were
to enter into an interconnection agreement to be jointly submitted to NTC for approval.

PLDT vehemently opposes interconnection with its own public switched telephone network. It contends: that while
PLDT welcomes interconnections in the furtherance of public interest, only parties who can establish that they have valid
and subsisting legislative franchises are entitled to apply for a CPCN or provisional authority, absent which, NTC has no
jurisdiction to grant them the CPCN or interconnection with PLDT; that the 73 telephone systems operating all over the
Philippines have a viability and feasibility independent of any interconnection with PLDT; that "the NTC is not
empowered to compel such a private raid on PLDT's legitimate income arising out of its gigantic investment;" that "it is
 Page 25 of 108

not public interest, but purely a private and selfish interest which will be served by an interconnection under ETCI's
terms;" and that "to compel PLDT to interconnect merely to give viability to a prospective competitor, which cannot
stand on its own feet, cannot be justified in the name of a non-existent public need" (PLDT Memorandum, pp. 48 and
50).

PLDT cannot justifiably refuse to interconnect.

Rep. Act No. 6849, or the Municipal Telephone Act of 1989, approved on 8 February 1990, mandates interconnection
providing as it does that "all domestic telecommunications carriers or utilities ... shall be interconnected to the public
switch telephone network." Such regulation of the use and ownership of telecommunications systems is in the exercise of
the plenary police power of the State for the promotion of the general welfare. The 1987 Constitution recognizes the
existence of that power when it provides.

SEC. 6. The use of property bears a social function, and all economic agents shall contribute to the
common good. 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 (Article XII).

The interconnection which has been required of PLDT is a form of "intervention" with property rights dictated by "the
objective of government to promote the rapid expansion of telecommunications services in all areas of the Philippines, ...
to maximize the use of telecommunications facilities available, ... in recognition of the vital role of communications in
nation building ... and to ensure that all users of the public telecommunications service have access to all other users of
the service wherever they may be within the Philippines at an acceptable standard of service and at reasonable cost"
(DOTC Circular No. 90-248). Undoubtedly, the encompassing objective is the common good. The NTC, as the
regulatory agency of the State, merely exercised its delegated authority to regulate the use of telecommunications
networks when it decreed interconnection.

The importance and emphasis given to interconnection dates back to Ministry Circular No. 82-81, dated 6 December
1982, providing:

Sec. 1. That the government encourages the provision and operation of public mobile telephone service
within local sub-base stations, particularly, in the highly commercialized areas;

Sec. 5. That, in the event the authority to operate said service be granted to other applicants, other than
the franchise holder, the franchise operator shall be under obligation to enter into an agreement with the
domestic telephone network, under an interconnection agreement;

Department of Transportation and Communication (DOTC) Circular No. 87-188, issued in 1987, also decrees:

12. All public communications carriers shall interconnect their facilities pursuant to comparatively
efficient interconnection (CEI) as defined by the NTC in the interest of economic efficiency.

The sharing of revenue was an additional feature considered in DOTC Circular No. 90-248, dated 14 June 1990, laying
down the "Policy on Interconnection and Revenue Sharing by Public Communications Carriers," thus:

WHEREAS, it is the objective of government to promote the rapid expansion of telecommunications

services in all areas of the Philippines;

WHEREAS, there is a need to maximize the use of telecommunications facilities available and
encourage investment in telecommunications infrastructure by suitably qualified service providers;

WHEREAS, in recognition of the vital role of communications in nation building, there is a need to
ensure that all users of the public telecommunications service have access to all other users of the service
wherever they may be within the Philippines at an acceptable standard of service and at reasonable cost.

WHEREFORE, ... the following Department policies on interconnection and revenue sharing are hereby
promulgated:

1. All facilities offering public telecommunication services shall be interconnected into

the nationwide telecommunications network/s.

xxx xxx xxx

 Page 26 of 108

4. The interconnection of networks shall be effected in a fair and non-discriminatory

manner and within the shortest time-frame practicable.

5. The precise points of interface between service operators shall be as defined by the
NTC; and the apportionment of costs and division of revenues resulting from
interconnection of telecommunications networks shall be as approved and/or prescribed
by the NTC.

xxx xxx xxx

Since then, the NTC, on 12 July 1990, issued Memorandum Circular No. 7-13-90 prescribing the "Rules and Regulations
Governing the Interconnection of Local Telephone Exchanges and Public Calling Offices with the Nationwide
Telecommunications Network/s, the Sharing of Revenue Derived Therefrom, and for Other Purposes."

The NTC order to interconnect allows the parties themselves to discuss and agree upon the specific terms and conditions
of the interconnection agreement instead of the NTC itself laying down the standards of interconnection which it can
very well impose. Thus it is that PLDT cannot justifiably claim denial of clue process. It has been heard. It will continue
to be heard in the main proceedings. It will surely heard in the negotiations concerning the interconnection agreement.

As disclosed during the hearing, the interconnection sought by ETCI is by no means a "parasitic dependence" on PLDT.
The ETCI system can operate on its own even without interconnection, but it will be limited to its own subscribers. What
interconnection seeks to accomplish is to enable the system to reach out to the greatest number of people possible in line
with governmental policies laid down. Cellular phones can access PLDT units and vice versa in as wide an area as
attainable. With the broader reach, public interest and convenience will be better served. To be sure, ETCI could provide
no mean competition (although PLDT maintains that it has nothing to fear from the "innocuous interconnection"), and
eat into PLDT's own toll revenue cream PLDT revenue," in its own words), but all for the eventual benefit of all that the
system can reach.

6. Ultimate Considerations

The decisive consideration are public need, public interest, and the common good. Those were the overriding factors
which motivated NTC in granting provisional authority to ETCI. Article II, Section 24 of the 1987 Constitution,
recognizes the vital role of communication and information in nation building. It is likewise a State policy to provide the
environment for the emergence of communications structures suitable to the balanced flow of information into, out of,
and across the country (Article XVI, Section 10, Ibid.). A modern and dependable communications network rendering
efficient and reasonably priced services is also indispensable for accelerated economic recovery and development. To
these public and national interests, public utility companies must bow and yield.

Despite the fact that there is a virtual monopoly of the telephone system in the country at present. service is sadly
inadequate. Customer demands are hardly met, whether fixed or mobile. There is a unanimous cry to hasten the
development of a modern, efficient, satisfactory and continuous telecommunications service not only in Metro Manila
but throughout the archipelago. The need therefor was dramatically emphasized by the destructive earthquake of 16 July
1990. It may be that users of the cellular mobile telephone would initially be limited to a few and to highly
commercialized areas. However, it is a step in the right direction towards the enhancement of the telecommunications
infrastructure, the expansion of telecommunications services in, hopefully, all areas of the country, with chances of
complete disruption of communications minimized. It will thus impact on, the total development of the country's
telecommunications systems and redound to the benefit of even those who may not be able to subscribe to ETCI.

Free competition in the industry may also provide the answer to a much-desired improvement in the quality and delivery
of this type of public utility, to improved technology, fast and handy mobile service, and reduced user dissatisfaction.
After all, neither PLDT nor any other public utility has a constitutional right to a monopoly position in view of the
Constitutional proscription that no franchise certificate or authorization shall be exclusive in character or shall last longer
than fifty (50) years (ibid., Section 11; Article XIV Section 5, 1973 Constitution; Article XIV, Section 8, 1935
Constitution). Additionally, the State is empowered to decide whether public interest demands that monopolies be
regulated or prohibited (1987 Constitution. Article XII, Section 19).

WHEREFORE, finding no grave abuse of discretion, tantamount to lack of or excess of jurisdiction, on the part of the
National Telecommunications Commission in issuing its challenged Orders of 12 December 1988 and 8 May 1989 in
NTC Case No. 87-39, this Petition is DISMISSED for lack of merit. The Temporary Restraining Order heretofore issued
is LIFTED. The bond issued as a condition for the issuance of said restraining Order is declared forfeited in favor of
private respondent Express Telecommunications Co., Inc. Costs against petitioner.

SO ORDERED.
 Page 27 of 108

[G.R. No. L-60987. August 31, 1982.]

SAMUEL BAUTISTA, Petitioner, v. NATIONAL TELECOMMUNICATIONS COMMISSION and

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondents.

Samuel Bautista in his own behalf.

Porferio A. del Pilar & Graciano C. Regala and Eliseo B. Alampay, Jr. for respondent PLDT.

SYNOPSIS

This present action was filed to set aside an order of the National Telecommunications Commission, dated April 14,
1982, provisionally approving, without hearing, the Philippine Long Distance Telephone Company’s (PLDT)
application for a Revised Schedule of the Subscriber Investment Plan. Petitioner claimed that neither the Public
Service Law nor PD No. 217 authorizes the said commission to grant provisional approval of an application for the
increase in the subscriber investment plan; and together with the Solicitor General alleged that there is no necessity
therefor; that the rates are excessive and unreasonable; and that the same would be contrary to the State policy of
encouraging the spreading out of the ownership of public utilities as embodied in Presidential Decree No. 217.
 Page 28 of 108

The Supreme Court, in granting the petition, held that the application filed by the PLDT with the National
Telecommunications Commission is not a fixing and/or determining of rate which the Commission may approve
provisionally and without the necessity of any hearing, but is a request for the approval of its proposed revised
subscriber investment plan which requires a hearing where the public, particularly the petitioner and the Solicitor
General, could air its opposition.

Provisional approval granted to the PLDT was set aside.

SYLLABUS

1. ADMINISTRATIVE LAW; PUBLIC UTILITIES; TELEPHONE SERVICE; BASIC POLICIES OF

TELEPHONE INDUSTRY UNDER PRESIDENTIAL DECREE 217. — In Presidential Decree No. 217,
promulgated on June 16, 1973, the State adopted the basic policies of the telephone industry which, among others,
are: (1) the attainment of efficient telephone service for as wide an area as possible at the lowest reasonable cost to
the subscriber; (2) the capital requirements of telephone utilities obtained from ownership funds shall be raised from
a broad base of investors, involving as large a number of individual investors as may be possible; and (3) in any
subscriber self-financing plan, the amount of subscriber self-financing will, in no case, exceed fifty per centum
(50%) of the cost of the installed telephone line, as may be determined from time to time by the regulatory bodies of
the state.

2. ID.; ID.; ID.; APPLICATION FOR THE APPROVAL OF A REVISED SCHEDULE OF SUBSCRIBER
INVESTMENT PLAN; NECESSITY OF A HEARING TO BE CONDUCTED BY THE NATIONAL
TELECOMMUNICATIONS COMMISSION; CASE AT BAR. — There was the necessity of a hearing by the
Commission before it should have acted on the application of the PLDT for a revised schedule of subscriber
investment plan so that the public could air its opposition, particularly the herein petitioner and the Solicitor General,
representing the government. They should be given the opportunity to substantiate their objection that the fates under
the subscriber investment plan are excessive and unreasonable and, as a consequence, the low income and middle
class group cannot afford to have telephone connections; and, that there is no need to increase the rate because the
applicant is financially sound.

DECISION

RELOVA, J.:

The Philippine Long Distance Telephone Company (PLDT for short) filed on March 22, 1982 an application for the
approval of the Revised Schedule of the Subscriber Investment Plan before the National Telecommunications
Commission, under Case No. 82-27. This was opposed by the herein petitioner alleging that he has a telephone
connection with the PLDT and is an applicant for a business telephone at the 7th Floor, Gutierrez-David Building,
Corner Scout Reyes St. and Panay Avenue, Quezon City; that the increase in the telephone subscriber investment
plan will adversely affect him and others similarly situated; and that inasmuch as the applicant is financially sound
because in 1981 it had an operating income of more than P500 million, aside from the fact that the Development
Bank of the Philippines had invested P400 million with said telephone company, there is no necessity for the
increase in the telephone subscriber investment plan.

The National Telecommunications Commission, thru its Commissioner, Ceferino S. Carreon. on April 14, 1982,
issued an order which, among others, states:jgc:chanrobles.com.ph

"Finding prima facie that applicant’s proposed revised rates for its Subscriber Self-Financing or Subscriber
Investment Plan are just and reasonable and all within the limit provided in P.D. 217, and are in consonance with the
public policies declared in said Decree, this Commission believes that, in the public interest, applicant’s proposed
revised SIP rates in the present case may be, as they are hereby MODIFIED and PROVISIONALLY APPROVED,
as follows:chanrob1es virtual 1aw library

REVISED SIP SCHEDULE

Revised SIP Rates

Service Category Metro Manila Provincial

I. New Installations —
1. PBX/PABX Trunk P6,000.00 P3,000.00
 Page 29 of 108

2. Business Phone:chanrob1es virtual 1aw library

Single line 3,500.00 2,000.00
Partyline 2,000.00 1,500.00.
3. Residential Phone:chanrob1es virtual 1aw library
Single line 2,000.00 1,500.00
Party line 1,000.00 1,000.00.
4. Leased Line 3,500.00 3,500.00
5 Tie Trunk of tie line 2,500.00 2,500.00
6. Outside local 2,500.00 2,500.00

II. Transfers —
1. PBX/PABX P1,500.00 P1,200.002
2. Business Phone:chanrob1es virtual 1aw library
Single line 800.00 600.00
Party line 600.00 500.00
3. Residential Phone:chanrob1es virtual 1aw library
Single line 600.00 500.00
Party line 500.00 300.00
4. Leased line 800.00 800.00
5. Tie trunk or tie line 800.00 800.00
6. Outside local 800.00 800.00

"The foregoing modified revised rates shall be subject to same terms and conditions of applicant’s Subscriber
Investment Plan as originally approved, its amendments thereto and which are not inconsistent with this Order.

"This Order takes effect immediately and may be revoked, revised or amended as the Commission shall deem
fit."cralaw virtua1aw library

As a consequence, petitioner Samuel Bautista filed this Petition for Certiorari to set aside the order dated April 14,
1982 of the National Telecommunications Commission provisionally approving the PLDT’s revised subscriber
investment plan.

It is the position of the herein petitioner that while the National Telecommunications Commission has the authority
and jurisdiction to hear the application of the PLDT for the increase in the subscriber investment plan, neither PD
217 nor the Public Service Law authorized said Commission to grant Provisional approval of an application for the
increase in the subscriber investment plan; that under PD 217, the telephone company cannot charge more than fifty
percent (50%) of the cost of the installed telephone line; that under Section 16(c) of the Public Service Act, it is only
with respect to rates proposed by public services that the National Telecommunications Commission can approve
provisionally; and, that since the Public Service Law or PD 217 has not authorized respondent Commission to grant
provisional approval in an application to increase the amount of subscriber investment plan, the order dated April 14,
1982, is illegal, null and void from the very beginning.

Likewise, the Solicitor General, representing the Republic of the Philippines, opposed the application on the ground
that the rates are excessive and unreasonable; and the low income and middle class group cannot afford to have
telephone connections, "which will thus, run counter to the policy of the State of encouraging the spreading out of
the ownership of public utilities as embodied in PD 217;" and, that since applicant is financially sound there is no
need to increase the rates under the subscriber investment plan.

On the other hand, respondent claimed that the order provisionally approving PLDT’s proposed investment schedule
with modifications or reduction was issued by the respondent commission upon is finding
that:jgc:chanrobles.com.ph

"‘. . . the proposed revised rates for its (PLDT’s) rates Subscriber Self-Financing or Subscriber Investment Plan are
just and reasonable and all within the limits provided in P.D. 217, and are in consonance with the public policies
declared in said Decree’ (Pp-2-3, NTC Order of April 14, 1982, Annex B, Petition). As issued, the said order is
subject to the same terms and conditions of PLDT’s Subscriber Investment Plan as originally approved by the NTC;
and pursuant to these same terms and conditions the amounts chargeable for subscriber investments in the
provisional approval order of April 14, 1982 are in exchange for preferred shares, with assured earnings of 10% per
annum, convertible to common shares after a defined 1-year period at the option of the subscriber, and transferable at
any time to third persons, said shares being regularly listed at the Makati, Manila and Metropolitan Stock Exchanges.

"Through the SIP, PLDT has become one of the companies with the broadest base of ownership in the country. From
the introduction of the SIP in the year 1973 when PLDT had only 15,817 shareholders, the number of shareholders
of PLDT has risen as of December 31, 1981 to 226,817 shareholders of whom 211,756 were Filipinos owning 93%
of the outstanding capital stock, 5,567 were Americans owning 3% of the outstanding capital stock and 9,494 were
of other nationalities owning 4% of the outstanding capital stock."cralaw virtua1aw library
 Page 30 of 108

Section 16 (c) of Commonwealth Act No. 146, as amended, known as the Public Service Law
provides:jgc:chanrobles.com.ph

"To fix and determine individual or joint rates, tolls, charges, classifications, or schedules thereof, as well as
commutation, mileage, kilometerage, and other special rates which shall be imposed, observed and followed
thereafter by any public service: Provided, That the Commission may, in its discretion, approve rates proposed by
public services provisionally and without necessity of any hearing . . ."cralaw virtua1aw library

The application filed by the PLDT with the National Telecommunications Commission, under Case No. 82-27, is not
a fixing and/or determining of rate which the commission may have approved provisionally and without the
necessity of any hearing, It is a request for the approval of its proposed revised subscriber investment plan.

In Presidential Decree No. 217, promulgated on June 16, 1973, the State adopted the basic policies of the telephone
industry which, among others, are: (1) the attainment of efficient telephone service for as wide an area as possible as
the lowest reasonable cost to the subscriber; (2) the capital requirements of telephone utilities obtained from
ownership funds shall be raised from a broad base of investors, involving as large a number of individual investors
as may be possible; and (3) in any subscriber self-financing plan, the amount of subscriber self-financing will, in no
case, exceed fifty per centum (50%) of the cost of the installed telephone line, as may be determined from time to
time by the regulatory bodies of the state.

Thus, there was necessity of a hearing by the Commission before it should have acted on the application of the
PLDT so that the public could air its opposition, particularly the herein petitioner and the Solicitor General,
representing the government. They should be given the opportunity to substantiate their objection that the rates under
the subscriber investment plan are excessive and unreasonable and, as a consequence, the low income and middle
class group cannot afford to have telephone connections; and, that there is no need to increase the rate because the
applicant is financially sound.

ACCORDINGLY, instant petition is granted and the provisional approval granted by the National
Telecommunications Commission in its order, dated April 14, 1982, is hereby set aside.

SO ORDERED.
 Page 31 of 108

G.R. NO. 135992 January 31, 2006

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. and TELECOMMUNICATIONS
TECHNOLOGIES, INC., petitioners,
vs.
INTERNATIONAL COMMUNICATION CORPORATION, Respondent.
AMENDED DECISION
AUSTRIA-MARTINEZ, J.:
On July 23, 2004, the Court promulgated its Decision in the above-captioned case with the following
dispositive portion:
WHEREFORE, the petition for review on certiorari is PARTIALLY GRANTED. The Order of the
National Telecommunications Commissions dated November 10, 1997 in NTC Case No. 96-195 is
AFFIRMED with the following modifications:
Respondent International Communication Corporation, in accordance with Section 27 of NTC MC No.
11-9-93, is required to:
(1) Deposit in escrow in a reputable bank 20% of the investment required for the first two years
of the implementation of the proposed project; and
(2) Post a performance bond equivalent to 10% of the investment required for the first two years
of the approved project but not to exceed P500 Million.
within such period to be determined by the National Telecommunications Commission.
No pronouncement as to costs.
SO ORDERED.1
Respondent now seeks a partial reconsideration of the portion of the Court’s decision requiring it to
make a 20% escrow deposit and to post a 10% performance bond. Respondent claims that Section 27 of
NTC MC No. 11-9-93, which required the foregoing amounts, pertains only to applications filed under
Executive Order No. 109 (E.O. No. 109) and not to applications voluntarily filed. In its Manifestation in
support of the motion for partial reconsideration, respondent attached a letter from Deputy
Commissioner and Officer-in-Charge (OIC), Kathleen G. Heceta, of the National Telecommunications
Commission (NTC), stating thus:
xxx
Please be informed that the escrow deposit and performance bond were required to public
telecommunications entities to ensure that the mandated installation of local exchange lines are installed
within three (3) years pursuant to EO 109 and RA 7925. Since your company has already complied with
its obligation by the installation of more than 300,000 lines in Quezon City, Malabon City and
Valenzuela City in the National Capital Region and Region V in early 1997, the escrow deposit and
performance bond were not required in your subsequent authorizations.2
In a Resolution dated October 4, 2004, the Court required petitioners and the NTC to file their respective
comments on the motion.3
Subsequently, in its Manifestation/Comment filed on January 11, 2005, the Office of the Solicitor
General (OSG), in behalf of the NTC, likewise referred to the same letter of OIC Heceta and declared
that it fully agrees with respondent that the escrow deposit and performance bond are not required in
subsequent authorizations for additional/new areas outside its original roll-out obligation under the
Service Area Scheme of E.O. No. 109.
Petitioners did not file any comment and it was only after the Court issued a show cause and compliance
Resolution on October 19, 2005 that petitioners manifested in their Entry of Special Appearance,
Manifestation and Compliance dated November 25, 2005 that they have no further comments on
respondent’s motion for partial reconsideration.4
The Court has observed in its Decision that Section 27 of NTC MC No. 11-9-93 is silent as to whether
the posting of an escrow deposit and performance bond is a condition sine qua non for the grant of a
provisional authority. The NTC, through the OSG, explicitly clarified, which was not disputed by
petitioners, that the escrow deposit and performance bond are not required in subsequent authorizations
for additional/new areas outside its original roll-out obligation under E.O. No. 109. The OSG agreed
with respondent’s stance that since the provisional authority in this case involves a voluntary application
not covered by the original service areas created by the NTC under E.O. No. 109, then it is not subject to
the posting of an escrow deposit and performance bond as required by E.O. No. 109, but only to the
conditions provided in the provisional authority. Further, the OSG adapted the ratiocination of the Court
of Appeals on this matter, i.e., respondent was not subjected to the foregoing escrow deposit and
performance bond requirement because the landline obligation is already outside its original roll-out
commitment under E.O. No. 109.5
The NTC, being the government agency entrusted with the regulation of activities coming under its
special and technical forte, and possessing the necessary rule-making power to implement its
objectives,6 is in the best position to interpret its own rules, regulations and guidelines. The Court has
consistently yielded and accorded great respect to the interpretation by administrative agencies of their
 Page 32 of 108

own rules unless there is an error of law, abuse of power, lack of jurisdiction or grave abuse of discretion
clearly conflicting with the letter and spirit of the law.7
In City Government of Makati vs. Civil Service Commission,8the Court cited cases where the
interpretation of a particular administrative agency of a certain rule was adhered to, viz.:
As properly noted, CSC was only interpreting its own rules on leave of absence and not a statutory
provision in coming up with this uniform rule. Undoubtedly, the CSC like any other agency has the
power to interpret its own rules and any phrase contained in them with its interpretation
significantly becoming part of the rules themselves. As observed in West Texas Compress &
Warehouse Co. v. Panhandle & S.F. Railing Co. –
xxx
This principle is not new to us. In Geukeko v. Araneta this Court upheld the interpretation of the
Department of Agriculture and Commerce of its own rules of procedure in suspending the period of
appeal even if such action was nowhere stated therein. We said -
xxx
x x x It must be remembered that Lands Administrative Order No. 6 is in the nature of procedural rules
promulgated by the Secretary of Agriculture and Natural Resources pursuant to the power bestowed on
said administrative agency to promulgate rules and regulations necessary for the proper discharge and
management of the functions imposed by law upon said office. x x x x Recognizing the existence of such
rule-making authority, what is the weight of an interpretation given by an administrative agency to its
own rules or regulations? Authorities sustain the doctrine that the interpretation given to a rule or
regulation by those charged with its execution is entitled to the greatest weight by the Court
construing such rule or regulation, and such interpretation will be followed unless it appears to be
clearly unreasonable or arbitrary (42 Am. Jur. 431). It has also been said that:
xxx
The same precept was enunciated in Bagatsing v. Committee on Privatization where we upheld the
action of the Commission on Audit (COA) in validating the sale of Petron Corporation to Aramco
Overseas Corporation on the basis of COA's interpretation of its own circular that set bidding and audit
guidelines on the disposal of government assets –
The COA itself, the agency that adopted the rules on bidding procedure to be followed by government
offices and corporations, had upheld the validity and legality of the questioned bidding. The
interpretation of an agency of its own rules should be given more weight than the interpretation by
that agency of the law it is merely tasked to administer (underscoring supplied).
Given the greater weight accorded to an agency's interpretation of its own rules than to its understanding
of the statute it seeks to implement, we simply cannot set aside the former on the same grounds as we
would overturn the latter. More specifically, in cases where the dispute concerns the interpretation by an
agency of its own rules, we should apply only these standards: "Whether the delegation of power was
valid; whether the regulation was within that delegation; and if so, whether it was a reasonable regulation
under a due process test." An affirmative answer in each of these questions should caution us from
discarding the agency's interpretation of its own rules. (Emphasis supplied)
Thus, the Court holds that the interpretation of the NTC that Section 27 of NTC MC No. 11-9-93
regarding the escrow deposit and performance bond shall pertain only to a local exchange operator’s
original roll-out obligation under E.O. No. 109, and not to roll-out obligations made under subsequent or
voluntary applications outside E.O. No. 109, should be sustained.
IN VIEW THEREOF, respondent’s Motion for Partial Reconsideration is GRANTED. The Court’s
Decision dated July 23, 2004 is AMENDED, the dispositive portion of which should read as follows:
WHEREFORE, the petition for review on certiorari is DENIED. The Order of the National
Telecommunications Commission dated November 10, 1997 in NTC Case No. 96-195 is AFFIRMED.
thereby deleting the order requiring respondent to make a 20% escrow deposit and to post a 10%
performance bond.
SO ORDERED.
 Page 33 of 108

G.R. No. 143964 July 26, 2004

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.

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 law's principal authors, Sen. John Osmeña, 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 government's 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 before the Court clearly precludes the agency's 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

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 Complaint16 with public respondent NTC, praying that NTC order the immediate
interconnection of Smart's and Globe's GSM networks, particularly their respective SMS or texting
 Page 34 of 108

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 Smart's 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 others…despite 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 to grant Smart's 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,
Smart's 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 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 Prohibition25 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 Orderon 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 Decision28 was promulgated by theFormer Special Fifth Division of the Court of
Appeals29affirming 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 NTC's 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 Law34 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
 Page 35 of 108

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 Decisionand 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 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 Globe's 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.

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.38The appellate court in the questioned Decision cited the purported
procedural defect,39 yet chose anyway to rule on the merits as well.

Globe's 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 and novelty42 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 NTC's 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 claim that Globe and Smart need to secure prior authority from the NTC before offering SMS.

The statutory basis for the NTC's 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

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.47Each "telecommunication category"48 established in the PTA is governed by detailed
 Page 36 of 108

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 Osmeña 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 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
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.
 Page 37 of 108

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.
(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 199564 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."

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 Islacom's "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
 Page 38 of 108

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 NTC's 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 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 Orderto that effect was promulgated against Globe and Smart. This fact was admitted by NTC during oral
arguments.67NTC's 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 NTC's 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. NTC's 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 complaint against Globe before NTC for interconnection of
SMS.71 NTC issued a Show Cause Order requiring Globe to answer Smart's 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
 Page 39 of 108

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 NTC's 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.73They 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, NTC's
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, Globe's SMS involves the transmission of data over its CMTS which is
Globe's basic service. SMS is not ordinarily provided by a CMTS operator like Globe, and since
SMS enhances Globe's 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 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 Smart's 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
 Page 40 of 108

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.

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
NTC's disposal of Islacom's initiative and to believe that prior approval was not necessary.

Neither was the matter ever raised during the hearings conducted by NTC on Smart's 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 Globe's 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 Globe's 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 agency's 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 Globe's alleged lack of operational authority without need of hearing, simply by citing the provision of the Public
Service Act90 which enumerates the instances when NTC may act motu proprio. That is Section 17, paragraph (a), which
reads thus:
 Page 41 of 108

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 Smart's 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 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 Globe's authority to
operate SMS was not raised in the Complaint, solely predicated as it was on Globe's refusal to interconnect with Smart.98
 Page 42 of 108

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 Smart's 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 NTC's Show Cause Order.

The records also indicate that the issue of Globe's authority was never raised in the subsequent hearings on Smart's
complaint. Quite noticeably, the respondents themselves have never asserted that the matter of Globe's 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 Globe's 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

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 Smart's 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 NTC's
role will become more crucial than at any time before. If NTC's 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.
 Page 43 of 108

A.M. No. CA-05-20-P September 9, 2005

(Formerly OCA IPI No. 05-81-CA-P)

ASSOCIATE JUSTICE DELILAH VIDALLON-MAGTOLIS, COURT OF APPEALS, Complainant,*

vs.
CIELITO M. SALUD, CLERK IV, COURT OF APPEALS,Respondent.

Cielito Salud, Clerk IV, Mailing Section of the Judicial Records Division, Court of Appeals (CA) stands charged with
the following offenses:

1. Inefficiency and incompetence in the performance of official duties;

2. Conduct grossly prejudicial to the best interest of the service; and

3. Directly or indirectly having financial and material interest in an official transaction, under Section 22, paragraphs (p),
(t) and (u), Rule XIV of the Omnibus Rules Implementing the Civil Service Law.1

The Facts

Melchor Lagua was found guilty of homicide in Criminal Case Nos. 118032-H and 118033-H before the Regional Trial
Court of Pasig City, Branch 163.2 On appeal, the case was assigned to the Sixth Division of the Court of Appeals,
docketed as CA-G.R. CR No. 27423. Lagua, who was then detained at the Bureau of Prisons National Penitentiary in
Muntinlupa City, filed a Very Urgent Petition for Bail. Finding the petition well-taken, the appellate court issued a
Resolution on October 9, 2003, directing him to post a ₱200,000.00 bond.

Lagua’s bond was approved in a Resolution3 dated November 6, 2003, where the appellate court also directed the
issuance of an order of release in favor of Lagua. The resolution was then brought to the Office of the Division Clerk of
Court, Atty. Maria Isabel M. Pattugalan-Madarang, for promulgation.

Irma Del Rosario, Utility Worker, noticed the respondent’s unusual interest in the Lagua case. The respondent had
apparently been making inquiries whether the appellate court had already directed the issuance of an order of release in
the said case and was initially told there was none yet. Due to his persistence, the records of the case were eventually
found.4 Atty. Madarang then directed the typing of the Order of Release Upon Bond,5 and to notify the mailing section
that there were orders requiring personal service.6 At around 4:00 p.m., the respondent then went to Atty. Madarang’s
 Page 44 of 108

office and assisted in arranging and stapling the papers for release. He brought the said resolutions and other papers
himself to the Mailing Section.7

On November 7, 2003, the respondent went to the National Penitentiary to serve the resolution and order of release in the
Lagua case. The respondent left the prison compound at around 2:30 p.m.8

In the meantime, Atty. Madarang received a telephone call from a certain Melissa Melchor, who introduced herself as
Lagua’s relative. It was about 2:00 p.m. The caller asked her how much more they had to give to facilitate Lagua’s
provisional liberty. The caller also told Atty. Madarang that they had sought the help of a certain Rhodora Valdez of the
Regional Trial Court (RTC) of Pasig, where the criminal case originated, but were told that they still had a balance to be
given to Justice Magtolis and Atty. Madarang through the respondent. Atty. Madarang then called the said court and
asked to speak to Ms. Valdez, pretending to be Lagua’s relative.

What transpired thereafter is contained in Atty. Madarang’s Affidavit dated December 8, 2003, as follows:
4. That upon telephone queries made with the office of the Clerk of Court of RTC Pasig, I learned that Rhodora Valdez is
the incumbent Process Server of RTC, [Branch] 163, Pasig City, from which the original case against accused-appellant
Lagua originated. Disguising myself as accused-appellant Lagua’s relative, I dialed [Branch] 163, RTC, Pasig (6314273)
but Rhodora Valdez did not report for work that day, according to Baby (also known as Ester), her officemate (who)
answered my call. She added that Rhodora Valdez has been waiting for us (Lagua’s relatives) to call. Her exact words
were these: "Wala si Rhodora. Meron lang siyang nilakad. Pero kahapon pa nya hinihintay ang tawag nyo. May kulang
pa kayo eh. Kailangan kasing i-en banc sa Court of Appeals ang kaso ni Lagua."
5. That I coordinated with Ms. Cecil Secarro, the Acting Chief of the Mailing Section, to inquire if it was usual/normal
for her to text her process servers on the field for an update of their deliveries, to which she answered in the affirmative.
While she was in the office, she texted Salud for his whereabouts and he replied, that he was on his way back to Quezon
City. That was before 4 p.m., adding that his deliveries were ok.
6. That I got Salud’s mobile phone number from Ms. Secarro and started texting him at about the same time Ms. Secarro
did. I represented myself as Arlyn, Lagua’s relative. Most of his text messages are still stored in my mobile phone. In
fact, I received one text message from him while I was at the office of Justice Magtolis, (the Chairman of the 6th
Division and the ponente of C.R. No. 27423) in the late afternoon of November 7, 2003 while reporting to her this
incident. Those stored in my phone are the following:
1. bkit, C rhodora to. 639204439082. – Nov. 2003, 15:36:15
2. CNO KAMAGANAK AT ANONG PANGALAN MO – 639204439082, 7 Nov 2003 16:14:47
3. SINO K KC NAGHIWALAY N KAMI – 639204439082, 7 Nov 2003 16:40:21
4. TAWAG K S AKIN – 639204439082 – 7 Nov 2003 17:18:47
5. NARELEASE N C MR. LAGUA. NAGKITA N B KAYO – 639204439082-7 Nov 2003 19:44:52
6. Magkano b and binigay nyo sa middle nyo. Puede bang malaman – 639184470111-7 Nov 2003 20:32:05
7. Gud evening. May gusto lng akong malaman. Sana alang makaalam kahit cino. Lito – 639184470111–7 Nov. 2003
19:54:20
8. Cno ang kausap n Rhodora. Pwede bang malaman – 639184470111-7 Nov 2003 20:37:57
9. May landline ka. Tawagan kta bukas nang umaga – 639184470111-7 Nov 2003 20:56:31
10. Wag s Court of Appeal. Txt na lang kta kung saan. – 639184470111-7 Nov 2003 20:52:58
11. Gusto mo bukas nang umaga magkita tyo. 639184470111 – 7 Nov 2003 20:57:10
12. D ba pwede bukas tyo kita. May gusto lang ako malaman – 639184470111 7 Nov 2003 21:02:41
13. D 2ngkol kay rhodora duon sa kasama ko kaninang lalakeng pinsan – 639184470111 – 7 Nov 2003, 21:04:28
14. Ala po ako sa Lunes sa opis. Sa hapon po puede kyo – 639184470111, 7 Nov 2003 21:07:23
15. Kay Melchor Lagua 639184470111 – 7 Nov 2003 21:08:19
16. Kasama ko cya kanina nang lumabas – 639184470111 – 7 Nov. 2003 21:13:05
17. Ano m ba Melchor Lagua – 639184470111 – 7 Nov 2003 21:15:52
18. Between 5 and 5:30 ng hapon. Bkit. 639184470111 – 7 Nov. 2003 21:54:24
19. 3 PM PUWEDE KB – 639004039082 10 Nov 2003 12:09:32
20. Kilala mo b c rhodora. Nagkita na b kayo. Ala naman problema sa kanya. Ok naman 639184470111 – 7 Nov 2003,
21:57:13
21. MAGKITA N LANG TAYO – 639204439082 – 10 Nov. 2003, 12:20:16
22. A, OK, NAGKITA N B KAYO NG KAMAGANAK MO – 639204439082 – 10 Nov 2003 15:12:14
23. D TALAGA AKO DARATING DAHIL WALA AKONG KAILANGAN S IYO. – 639204439082 – 10 Nov 2003
18:36:03
7. That Salud called me up in the morning of November 8, 2003 at around 7:33 but I purposely did not answer him. Why
did he need to call me up?
8. That I personally called up the Bureau of Prisons for the exact time the Order of Release was delivered and when
accused appellant Lagua was released. I learned that the Order of Release was received at 9:15 A.M. and that Lagua was
released between 5-5:30 P.M. of November 7, 2003.
9. That I was able to talk to Rhodora Valdez the following Monday, November 10, 2003. Again, I introduced myself as
Lagua’s relative, Arlyn and told her I only wanted to know how much more we had to pay for Lagua’s release. She
refused to entertain me because according to her, "Hindi ikaw ang kausap ko. Duda ako sa yo. Kung gusto mo, puntahan
mo ako dito bukas, para magkita tayo. Pero lumabas na si Lagua. Itinawag sa akin ni Lito Salud." Then, she [hung] up.
 Page 45 of 108

10. That on Tuesday, November 11, 2003, I brought Salud, accompanied by Ms. Secarro to Justice Magtolis. Out of the
confrontation, we discovered that Salud did not properly serve the copies of the Resolution and Order of Release upon
the accused-appellant and his counsel, Atty. Salvador C. Quimpo of the Quimpo Dingayan-Quimpo and Associates. He
gave them to a certain Art, allegedly Lagua’s relative who he claimed approached him at the Bureau of Prisons in the
morning of November 7, 2003. He told Justice Magtolis that he gave these documents to Art, who promised to take care
of them, even before he could deliver the copy addressed to the Director of Prisons. He never mentioned that this Art was
connected with the office of accused-appellant’s counsel. Because of this information from Salud himself, I did not sign
the Certificate of Service, Annex "C".
11. That several days later, Salud accompanied by Ms. Secarro, came to my office to apologize. But before he could even
say a word, he broke down in [wails]. In between his loud cries, he uttered, "Boss, patawad po, alang-alang sa aking mga
anak."9
On November 11, 2003, Justice Magtolis called the respondent to her office. When confronted, the respondent denied
extorting or receiving money for Lagua’s release, or in any other case. He, however, admitted serving the copies of
resolution and order of release intended for Lagua and his counsel to Art Baluran.10 Justice Magtolis then called the
respondent to a meeting with Clerk of Court Atty. Tessie L. Gatmaitan, who stated that she would transfer the respondent
to another office which has nothing to do with cases.

Justice Magtolis lodged the complaint against the respondent in a Letter dated November 14, 2003, containing, among
others, the following allegations:

The delivery of resolutions/orders to unauthorized persons and "complete strangers" who promised to "take care thereof"
("siya na raw ang bahala") constitutes not only neglect of duty but also conduct prejudicial to the best interest of the
service. Staying for the whole day within the vicinity of the National Bilibid Prisons to the point of failing to fulfill his
other duties for the day constitutes inefficiency and incompetence in the performance of official duties. On the other
hand, the use of my name and that of our Division Clerk of Court to illegally solicit financial or material benefit from
parties with pending cases before this Court is illegal per se.

In view of the foregoing, it is respectfully requested that Cielito Salud be subjected to an administrative investigation and
disciplinary action.11

Attached to the complaint were the following documents to support the charges:
ANNEX "A" - Record of the cases received by Salud on November 6, 2003 for delivery/service the following day,
November 7, 2003. Please note that in each of the 3 cases assigned to him, there are several parties/counsels to be served.
ANNEX "B" - Certificate of Service signed by Salud, attested by the Acting Chief of the Mailing Section and Division
Clerk of Court Ma. Ramona L. Ledesma, showing that the parties/counsel in SP-67586 were served only on November
10, 2003 (not on November 7, 2003).
ANNEX "C" - Certificate of Service for CR-27423, and corresponding Delivery Receipts.
"C-1" - Delivery Receipts for Defense Counsel Salvador Quimpo signed by someone whose signature was identified by
Salud [as] "Art" – a cousin of appellant Melchor Lagua.
"C-2" - Delivery Receipt for the accused-appellant, received by the same "Art" and not served thru the Director of
Prisons.
"C-3" - Delivery Receipt for the OSG, showing that it was delivered/received by the said office on November 10, 2003,
not on November 7, 2003.
"C-4" - Delivery Receipt for the Director of Prisons showing receipt on November 7, 2003.
ANNEX "D" - Record of Resolutions in 3 other cases (SP-80241, SP-65404 and SP-77957) received for service by Salud
on November 10, 2003. The resolutions/processes in these 3 cases were delivered/served to the parties/counsel on
November 10, 2003 together with undelivered resolutions left unserved/undelivered on November 7, 2003.
ANNEX "E" - Certification signed by Salud showing service to parties/counsel in SP-65404 (received by Salud on
November 10, 2003) on November 10, 2003 (same date)
ANNEX "F", "F-1" & "F-2" - Delivery Receipts for parties/counsel in SP-65404, showing service/delivery on November
10, 2003 – in contrast to his minimal delivery/services on November 7, 2003 only in Muntinlupa.
ANNEX "G" - Copy of the resolution dated November 6, 2003 of the 6th Division approving the appellant’s bond and
directing the issuance of an order of release.
ANNEX "H" - Copy of the Order of Release upon Bond, which Salud was supposed to deliver, among others on
November 7, 2003 to the defense counsel, the appellant and the OSG.12
In his counter-affidavit,13 the respondent vehemently denied the charges. He never demanded money from Lagua’s
relative; his name had been used by someone and was, thus, a mere victim of the circumstances. Moreover, the fact that
he immediately released the CA order in question was clear proof that he had no financial interest in the transaction. His
version of the events that occurred that day is as follows:
4.1 That on November 6, 2003 at around 1:38 p.m. the Acting Chief of the Mailing Section gave me an assignment to
deliver the Writ of Habeas Corpus (hearing on November 26, 2003 at RTC, Zamboanga) for CA-G.R. SP No. 80238 for
delivery to NBI, PAO, Quezon City, Muntinlupa;
4.2 That I delivered a copy of the Writ of Habeas Corpus to [the National] Bureau of Investigation (NBI);
 Page 46 of 108

4.3 That while I was at the NBI, I received a text message from my boss, requesting me to return to the office
immediately because there is another notice of resolution coming from Atty. Ledesma which I have to serve to Quezon
City and Las Piñas;
4.4 In compliance with the request, I returned to the Office and arrived at around 3:15 p.m.;
4.5 That when I received the resolution, I read the same and found out that the hearing is still scheduled on December 10,
2003 at 10:30 a.m.;
4.6 That when I was about to leave to deliver the Writ of Habeas Corpus and the Notice of Hearing to the PAO, Quezon
City, my officemate Jun Vicencio told me to wait because Irma, the staff of Atty. Madarang requested me to standby
because I need to deliver the Order of Release to the New Bilibid Prison, Muntinlupa;
4.7 That because of the request I waited until 4:00 p.m.;
4.8 That because its already late, I decided to go to Atty. Madarang’s office to inquire about the Order of Release which I
need to deliver to the New Bilibid Prison, Muntinlupa;
4.9 That Atty. Madarang told me to wait a little while because the order is about to be finished. So I waited.
4.10 That Atty. Madarang gave to me the Order of Release at 4:15 p.m.
4.11 That because I am aware that I may not reach [the] New Bilibid Prison on time, I told Atty. Madarang that I can
deliver it on November 7, 2003, early in the morning. She agreed and told me "THANK YOU" Ikaw na ang bahala;
4.12 That I informed my boss about the Order of Release that was assigned to me and she had it listed in our logbook. I
asked my boss [Cecil Secarro] if I can deliver the Notice of Hearing for SP 67586 and the others on Monday if I cannot
finish delivering them on November 7, 2003. She agreed but told me to be sure that the Order of Release will be served
first and the others be served not later than Monday, November 10, 2003. Thereafter, I went home.
4.13 That on November 7, 2003, I went straight to [the] New Bilibid Prison and arrived there before 8:00 [a.m.]
Unfortunately, all the staff wearing white uniforms and the security guards were falling in line in front of the building of
the New Bilibid Prison. So I could not enter the administration office.
4.14 That while I was standing in front of the building where the administrative office is located, a certain ART
approached me and asked me if I am the personnel of the Court of Appeals who will deliver the Order of Release.
4.15 That I said yes, and he told me his name and said that he is a relative of MELCHOR LAGUA (prisoner) and is
connected with the office of Atty. [Quimpo].
4.16 That at around 9:30 [a.m.] I was able to enter the administrative offices but because there was no staff inside – I
went to the documentation office. The staff in the documentation office told me to submit the Order of Release to the
administrative office. He said that they will prepare the documents of MELCHOR LAGUA (prisoner) but also told me
that the prisoner might be released on Monday yet because the signatories are busy attending the ongoing 98 anniversary
celebration;
4.17 That I returned to the administrative office and was able to find Mr. JUANITO TORRES, Administrative Officer
III, who received the copy for the Director but refused to receive the copy of Mr. LAGUA. He told me to wait for his
staff to receive the copy of Mr. LAGUA;
4.18 That because the staff were not around, I went to the canteen to buy softdrinks to quench my thirst;
4.19 That Mr. ART followed me in the canteen and told me to assist in the release of Mr. LAGUA because there were no
personnel attending to the Order of Release;
4.20 That since my boss told me to insure the release of the prisoner, I waited for my staff to arrive who will attend to the
matter;
4.21 That I delivered the copy of Mr. LAGUA to the staff. But ART told them he can receive the copy of Mr. LAGUA
because he is his relative so, the staff told me to give the copy to ART.
4.22 That I gave the copy of the Order of Release for the accused to ART. ART also told me that he is authorized to
receive the copy for Atty. Quimpo because he is also the representative of the law office. Hence, I also gave the copy for
Atty. Quimpo to ART;
4.23 That I was able to finish my duty at the New Bilibid Prison at around 2:30 [p.m.] and I proceeded to Purok I, 6A
Bayanan, Muntinlupa to serve the Writ of Habeas Corpus in CA-G.R. SP No. 80238;
4.24 That because of [sic] the address of the addressee was incomplete, I found a hard time locating the address of the
addressee and when I found Purok I, 6A, the persons thereat do not know JOEL DE LA PAZ. I asked for their help but
nobody in the place knew JOEL DE LA PAZ;
4.25 That I left Muntinlupa late in the afternoon and due to the lack of time I decided to deliver the other documents on
the next working day which is Monday, November 10, 2003;
4.26 That I delivered the other documents on Monday, November 10, 2003, without any problem;
4.27 That I was surprised when Atty. Madarang later on accused me that I used her name and the name of Justice
Magtolis to demand money from Mr. LAGUA’S relative.14
Considering the gravity of the charges, then Acting Presiding Justice Cancio C. Garcia15 referred the matter to Atty. Elisa
B. Pilar-Longalong, Assistant Clerk of Court, for investigation, report, and recommendation.

The Investigation

The requisite hearings were held from December 12, 2003 to August 4, 2004.

Atty. Madarang affirmed the contents of her Affidavit16dated December 8, 2003. She testified that the respondent later
came to her office along with Ms. Secarro. Amidst his cries, he pleaded, "Boss, patawad po, alang-alang sa aking mga
anak." She replied, "Wait, wala ka namang kasalanan sa akin. Ikaw ang nagpasimuno ng lahat ng ito." The respondent
 Page 47 of 108

repeated, "Boss, patawad po alang alang sa aking mga anak," and Atty. Madarang answered, "Okey lang, pinatawad na
kita. Hindi naman ako galit sa iyo."17

Justice Magtolis testified that Atty. Madarang reported having received a telephone call from the alleged relative of
Lagua. She narrated that she gave the name "Arlyn" to the caller, and, thereafter, exchanged text messages with the
respondent. Justice Magtolis instructed Atty. Madarang to continue communicating with the respondent and, if possible,
to see it through a possible pay-off where a National Bureau of Investigation (NBI) agent would be asked to assist them.
However, the entrapment did not materialize. The respondent thereafter came to her office, where he was asked why he
was unable to serve all the other papers and documents that day.18 He also admitted that he served a copy of the
resolution to the wrong person (Baluran). Justice Magtolis also stated that she threatened to transfer the respondent, and
that the latter vehemently objected, pleaded, and cried saying, "Huwag naman pong pa-transfer." When asked why, the
respondent said that he has children in school and something like, "Dyan po ako kumikita."19

Another witness was Cristy Flores, convicted of three counts of estafa who served time at the Correctional Institute for
Women in Batangas City. She testified that the respondent was introduced to her in December 1998 by a certain Crisanta
Gamil.20 Gamil was also detained at the correctional facility; the respondent had worked on her appeal bond papers and
asked for ₱20,000.00 to facilitate the issuance of the appeal bond.21 The payment was made right in front of her, and the
respondent issued a receipt.22The witness also testified that Gamil told her, "O, at least dyan mo ipalakad ang papel mo.
Okay ′yan, sigurado."23 The respondent visited her in May 1999, as she had asked him to fix her appeal bond. During the
visit, the respondent took the pertinent documents from her.24 The witness also stated that she gave the respondent a
partial payment of ₱7,000.0025 on May 16, 1999 and he issued a receipt.26They then proceeded to the Documents Section
where they secured copies of the court decision, certificate of manifestation and her picture. She made the last payment
of ₱13,000.00 in June 13, 1999, and also issued a receipt. The respondent was also asking for an additional payment of
₱15,000.00, which she was unable to give.

Flores narrated that she introduced another detainee to the respondent, Dalawangbayan, whom the latter was also able to
"help". She stated that according to Dalawangbayan, the respondent asked for ₱200,000.00. She further testified that she
knew the respondent as Joselito M. Salud, and not Cielito Salud.27 After the incident, she wrote a letter to Associate
Justice Conrado Vasquez, Jr. to ask for assistance regarding her appeal bond.

Atty. Salvador Quimpo, Lagua’s counsel, testified that it was Engineer Art Baluran who hired him as counsel of the said
accused. He stated that he gave an oral authorization to Baluran to get the CA resolutions or orders; Baluran was the one
who furnished him a copy of the resolution.28 He called Mr. Baluran to say that an order for Lagua’s release had already
been issued by the appellate court. The witness stated, however, that he had never seen the respondent before.29

The respondent testified that he has been a CA employee since 1991. He admitted that he knew Flores, and met her in
January 1999 when he brought Gamil’s order of release in the Batangas City Jail. He claimed that he was waiting for the
relatives of Gamil as they were the ones who would pay for his fare home, and while waiting, he talked to the
jailguard/warden. Flores then approached him and asked him if he was from the CA. When the respondent answered in
the affirmative, Flores replied that Justice Vasquez was her neighbor in Biñan, Laguna.

The respondent admitted that he was in the Correctional Institute for Women in Mandaluyong City on May 16, 1999, as
he was then visiting Vilma Dalawangbayan. He also saw Flores.30 When asked why he visited Dalawangbayan, the
respondent replied that Flores had written a letter to him (which he dubbed as "maintrigang sulat")31 addressed "Lito
Salud, Mailing Section, Court of Appeals." In the said letter, Flores asked him to help Dalawangbayan, just like he had
helped Gamil. The respondent then showed the letter to then Chief of Office Prudencio B. Aguilar, who told him,
"Puntahan mo yan, Lito at maintriga ′yang sulat na ‘yan, baka tayo mapahamak dyan."32 Thus, he went to the
Correctional Institute in Mandaluyong City to "sort things out" with Dalawangbayan and Gamil. The respondent,
however, stated that he could not find the letter anywhere and had already been lost.33

During his May 16, 1999 visit to the correctional facility, Flores approached him in the visiting hall, and said suddenly,
"Sandali lang, Kuya," then left. He then talked to Dalawangbayan about the "controversial" letter, explaining that his job
in the Court of Appeals was only to remand the records and deliver the Orders for release, just like what he did in
Gamil’s case. 34 He again visited Dalawangbayan on June 13, 199935 as evidenced by the entries in the visitor’s logbook.
He was no longer able to speak to Flores, but made five other such visits to Dalawangbayan in the correctional facility.

The Findings of the Investigating Officer

In her Report dated January 21, 2005, Atty. Longalong found that the respondent was guilty as charged, and made the
following recommendation:

In view of all the foregoing, there is substantial evidence to hold respondent liable for the offenses charged. He is liable
for inefficiency and incompetence in the performance of his official duties and for conduct prejudicial to the best interest
of the service when he admittedly served the copies of the resolution and order of release in the Lagua case intended for
detained appellant and his counsel on Mr. Baluran whom he admitted to have met only on that day, against the rules and
 Page 48 of 108

normal office procedure on personal service. His long stay in the Bureau of Prisons also caused the delay in the service
of other court processes assigned to him for service on that day. He is also liable for having financial or material interest
in an official transaction considering his undue interest in the service of the order of release and actual release of Lagua
to the point of staying almost the whole day in the Bureau of Prisons and the aborted "deal" as can be concluded from the
phone call of Melissa Melchor to Atty. Madarang and subsequent exchange of text messages with Atty. Madarang
disguising as Lagua’s relative. …

RECOMMENDATION:

1. Rule IV, Section 52 of Civil Service Commission Memorandum Circular No. 19, S. 1999, issued pursuant to Book V
of the Administrative Code of 1987, provides that the penalty for the first offense of inefficiency and incompetence in the
performance of official duties, for conduct prejudicial to the best interest of the service and for directly or indirectly
having financial and material interest in any official transaction is suspension for a period of 6 months, 1 day to 1 year.
Pursuant to Section 55 of the same Memorandum Circular, if the respondent is found guilty of 2 or more charges, the
penalty to be imposed should be that corresponding to the most serious charge and the rest shall be considered as
aggravating circumstances. Section 54-c of the same Memorandum Circular provides that the maximum of the penalty
shall be imposed where only aggravating and no mitigating circumstances are present. Since in this case, the penalty is
the same for all 3 offenses, the maximum of the penalty for the first offense which is suspension for 1 year [may be]
imposed on the respondent.

2. Considering that the prescribed penalty for the offense exceeds one month suspension, the case may now be referred to
the Supreme Court for appropriate action, pursuant to Circular No. 30-91 of the Office of the Court Administrator.36

The Ruling of the Court

On the charge of inefficiency, the respondent is clearly administratively liable. After serving Lagua’s copy of the
resolution and order of release to the prison Director, he should have immediately returned to his station or served the
other resolutions and documents for personal service. As an officer of the court, the respondent plays an essential part in
the administration of justice. He is required to live up to the stringent standards of his office, and his conduct must, at all
times, be above reproach and suspicion. He must steer clear of any act which would tend to undermine his integrity, or
erode somehow the people’s faith and trust in the courts.37 As the respondent himself admitted, he stayed on until 2:30
p.m. without any valid reason, despite the fact that he knew he still had to serve several orders and resolutions. As
pointed out by the Investigating Officer, "inefficiency and incompetence in the performance of official duties" is
classified as a grave offense, and is punishable by suspension for six months and one day to one year.38

Indeed, the complainant in administrative proceedings has the burden of proving the allegations in the complaint by
substantial evidence. If a court employee is to be disciplined for a grave offense, the evidence against him must be
competent and derived from direct knowledge; as such, charges based on mere suspicion and speculation cannot be given
credence. Thus, if the complainant fails to substantiate a claim of corruption and bribery, relying on mere conjectures and
suppositions, the administrative complaint must be dismissed for lack of merit.39 However, in administrative
proceedings, the quantum of proof required to establish malfeasance is not proof beyond reasonable doubt but substantial
evidence, i.e., that amount of relevant evidence that a reasonable mind might accept as adequate to support a conclusion,
is required.40 The findings of investigating magistrates on the credibility of witnesses are given great weight by reason of
their unmatched opportunity to see the deportment of the witnesses as they testified.41

To determine the credibility and probative weight of the testimony of a witness, such testimony must be considered in its
entirety and not in truncated parts. To determine which contradicting statements of a witness is to prevail as to the truth,
the other evidence received must be considered.42Thus, while it is true that there is no direct evidence that the respondent
received any money to "facilitate" the release of detained Lagua, the following circumstances must be taken as contrary
to the respondent’s plea of innocence:

First. The respondent admitted that he was the sender of the first three text messages in Atty. Madarang’s cellphone:
"bkit, C rhodora to"; "CNO KAMAGANAK AT ANONG PANGALAN MO"; and "SINO K KC NAGHIWALAY N
KAMI." The respondent’s testimony on the matter is as follows:

Q: In the hearing of December 2, 2003, in the TSN on page 32 onwards …

ATTY. ROSERO:
Is that the testimony of Atty. Madarang, Justice?
JUSTICE MAGTOLIS:
Oo. I will just refer to your admission through your counsel that Cellphone No. 6392044390[8]2 is yours. You admitted
that?
ATTY. ROSERO:
I think we made an admission as to that matter, Justice. We’ll just check the affidavit of Atty. Madarang.
JUSTICE MAGTOLIS:
Here, admitted. Basahin mo.
 Page 49 of 108

ATTY. ROSERO:
Yes, Justice, admitted but not the cellphone number …
JUSTICE MAGTOLIS:
Sige, ulitin natin, 6392044390[9]2.
ATTY. ROSERO:
Yes, admitted. That is his cellphone.
JUSTICE MAGTOLIS:
This cellphone is yours.
Q: Do you also admit that you called Atty. Madarang several times on November 7, 2003?
ATTY. ROSERO:
November 7 is… a Friday. Tumawag ka daw several times kay Atty. Madarang, November 7?
JUSTICE MAGTOLIS:
Texted, I’m sorry I will correct that, texted.
A: Nauna po siyang magtext sa akin, Justice, hindi po ako nagtext sa kanya. Nagtext po siya sa akin sumagot po ako sa
kanya.
Q: There was an exchange several times?
A: Nuong pong text niya sa akin … hindi po several times dahil … kung makita ′nyo po dyan.
JUSTICE MAGTOLIS:
Let me see the affidavit of Atty. Madarang. After this question, may I ask for a continuance?
ATTY. ROSERO:
No objection, Your Honor.
JUSTICE MAGTOLIS:
All these text messages were checked by us with your counsel in the cellphone of Atty. Madarang which were preserved
until we allowed her to erase these. There are exchanges here: 6392044390[8]2, November 7. When she texted she
answered, "Bkit c Rhodora 2" and then second was, "Cnong kamaganak anong pangalan mo?" This is addressed to you,
this is your telephone?

A: Opo.
Q: But the one who answered is Rhodora?
A: Ako po ′yun.
Q: Ikaw ang sumasagot. Why did you say that you are Rhodora?
A: Justice, nung ma-receive ko po ′yong text niya apat na beses ko pong na-receive ang text ni Arlene.
INVESTIGATOR:
Who is Arlene?
A: Atty. Madarang. Arlene, sa text po niya sa akin, "Sir Lito, kamaganak po ito ni Mr. Lagua. Magkano pa po ba ang
kakulangang pera para ibigay ko sa inyo. Si Rhodora ba kasama?" Hindi ko po sinagot yon. Pangalawa, ′yun din po ang
message nya. Ano ito? Sa akin pong kuan, sa pag-iisip ko lang po, bakit dahil si Mr. Art Baluran kamag-anak na, ano
ito? Text pa ulit pa sya ng pangatlo. Nang-iintriga na ′to. Pang-apat, intriga ′to. Text ko nga rin ′to, lokohan lang tayo.
"Bkit si Rhodora ′to" yun po ang sagot ko sa kanya.
Q: So at that time you already knew about Rhodora?
A: Hindi po, dun, duon po sa text niya nakalagay po dun eh, "Si Rhodora kasama ba"? So ikinuan ko po na si Rhodora
′to, dun po sa text nya.
Q: Nakipaglokohan ka?
A: Sa text niya nakalagay dun na "Si Rhodora ba kasama" kaya po ako nakipaglokohan dun.43

As pointed out by the Investigating Officer, the respondent’s claim of "joking around" ("nakipaglokohan") with an
unknown sender of a text message by replying thereto is contrary to a normal person’s reaction. This is made even more
apparent by the fact that the respondent even admitted that he called Atty. Madarang twice, and when asked why, gave a
vague answer, and, when further questioned, even broke down in tears.44

The respondent’s claim that the admission of the text messages as evidence against him constitutes a violation of his
right to privacy is unavailing. Text messages have been classified as "ephemeral electronic communication" under
Section 1(k), Rule 2 of the Rules on Electronic Evidence,45and "shall be proven by the testimony of a person who was a
party to the same or has personal knowledge thereof." Any question as to the admissibility of such messages is now moot
and academic, as the respondent himself, as well as his counsel, already admitted that he was the sender of the first three
messages on Atty. Madarang’s cell phone.

This was also the ruling of the Court in the recent case of Zaldy Nuez v. Elvira Cruz-Apao.46 In that case, the Court, in
finding the respondent therein guilty of dishonesty and grave misconduct, considered text messages addressed to the
complainant asking for a million pesos in exchange for a favorable decision in a case pending before the CA. The Court
had the occasion to state:

… The text messages were properly admitted by the Committee since the same are now covered by Section 1(k), Rule 2
of the Rules on Electronic Evidence, which provides:
 Page 50 of 108

"Ephemeral electronic communication" refers to telephone conversations, text messages … and other electronic forms of
communication the evidence of which is not recorded or retained."

Under Section 2, Rule 11 of the [said rules], "Ephemeral electronic communications shall be proven by the testimony of
a person who was a party to the same or who has personal knowledge thereof … ." In this case, complainant who was the
recipient of the said messages and therefore had personal knowledge thereof testified on their contents and import.
Respondent herself admitted that the cellphone number reflected in complainant’s cellphone from which the messages
originated was hers. Moreover, any doubt respondent may have had as to the admissibility of the text messages had been
laid to rest when she and her counsel signed and attested to the veracity of the text messages between her and
complainant. It is also well to remember that in administrative cases, technical rules of procedure and evidence are not
strictly applied. We have no doubt as to the probative value of the text messages as evidence in determining the guilt or
lack thereof of respondent in this case.

Second. The respondent’s testimony during the hearings held before Investigating Officer Atty. Longalong is replete with
inconsistencies and "loopholes." He claimed that he made inquiries from other CA staff and learned that there was indeed
a deal between someone in the criminal section and a certain Rhodora of the RTC, Pasig. He further claimed that the said
parties wanted to get back at him for "immediately serving" the release order which prevented them from demanding the
balance of the deal from Lagua’s relative. However, this bare claim was not corroborated by any witness. Moreover, the
respondent alleged that two anonymous callers claimed to know something about the case against him; when asked about
it, he stated that he no longer exerted efforts to find out who they were as they did not give out their names:

JUSTICE MAGTOLIS:

Q: On page 5 of your affidavit, you said in paragraph 8 "That I made some inquiry and some personnel of the Court of
Appeals told me that there is indeed a deal between a staff in the Criminal Section and Rhodora of RTC, Pasig. Can you
tell us who is this staff?
A: Ah dito po Justice, hindi po siya nagpakilala, sa telephono po.
INVESTIGATOR:
Sino siya?
A: Hindi po siya … ′yong tawag po niya sa akin sa telepono nang malaman po dito sa CA na ako ay kinasuhan ninyo
tumawag po siya sa Personnel.
JUSTICE MAGTOLIS:
Q: Who is siya?
A: Ay hindi po siya nagpakilala.
INVESTIGATOR:
Lalaki o babae?
A: Una po babae tapos ′yong pangalawa po lalaki.
INVESTIGATOR:
Sinong kinakausap?
A: Ako po.
INVESTIGATOR:
Hinahanap ka?
A: Hinahanap po nila ako.
JUSTICE MAGTOLIS:
Q: What did he tell you? He, lalaki, ano?
A: Sa babae muna po?
Q: Oo, babae’t lalake ba?
A: Opo.
Q: Who was the first caller, the lady or the gentleman?
A: Babae po.
Q: Were you the one who answered the phone?
A: Hindi po.
INVESTIGATOR:
Hinahanap daw siya.
JUSTICE MAGTOLIS:
Q: Hinahanap ka, okay, when you answered the phone, what did you say?
A: Ang sabi ko po sa kanya, "pupuwede mo ba akong matulungan sa paggawa ng affidavit dahil kinasuhan nga ako ni
Justice Magtolis."
Q: But you do not know who you were talking to?
A: Tinanong ko nga po kung sino siya eh tumutulong lang daw siya sa akin dahil ang naririnig niyang tsismis din dyan
eh baka po si Rhodora ang may ka-kuan sa Criminal.
Q: Saan ′yong ka-kuan?
A: Ang may kausap sa Criminal.
Q: Who said "na baka si Rhodora ang may kausap sa Criminal"?
A: ′Yon pong kausap ko sa kabilang linya.
 Page 51 of 108

Q: The name you do not know?

A: Eh tinanong ko naman po kung sino siya ayaw naman po niyang magpakilala. Matutulungan mo ba ako, ibinaba na po
ang telepono.
INVESTIGATOR:
Anonymous caller.
JUSTICE MAGTOLIS:
You are very fond of answering calls. You don’t even know the name.
Q: That anonymous caller told you that there must be some deals between Rhodora and someone from the Criminal
Section?
A: ′Yun din daw po ang naririnig niyang tsismis dyan sa labas.
Q: Tsismis, that was that the caller told you?
A: Opo.
Q: And she wanted to help you?
A: Kaya po sinabi din sa akin na tsismis eh hindi pa po pwedeng …
Q: What did you answer her?
INVESTIGATOR:
Anong sagot mo raw?
JUSTICE MAGTOLIS:
Q: Anong sagot niya sa tulungan kasi nakakarinig siyang tsismis?
INVESTIGATOR:
Q Ano ang sagot mo?
A: Eh iyon nga ang gusto kong malaman, ang katotohanan. Baka naman pupuwede mo akong matulungan. Sino ba ′to?
JUSTICE MAGTOLIS:
Q: Di ba she was the one who offered to help?
A: Ay ayaw daw po naman niyang masabit po ang pangalan niya.
Q: But she was the one who called you?
A: Opo.
Q: Okay. How did your talk end with this girl or lady?
A: Nung pagsalita ko nga pong baka pupuwede akong tulungan, wala na.
Q: How about the man, the gentleman or the boy who called?
A: Same kuan din po ang kanilang kuan e.
JUSTICE MAGTOLIS:
Don’t use kuan.
ATTY. ROSERO:
Sige, Lito, ipaliwanag mo.
A: Same kuento rin po, sinabi niya na ganuon din po na narinig din po niya sa labas.
JUSTICE MAGTOLIS:
Q: Alright, you were not the one who answered the call?
A: Hindi po.
Q: Somebody called you that there’s a phone call?
A: Opo.
Q: When you answered, what was your first word?
A: Hello!
Q: What was the answer at the other end of the line?
A: Hello rin po.
Q: What next?
A: Alam mo, ang sabi po niya sa akin ganito po …
Q: Who was the first one who said something other than hello?
A: Siya po ang nauna.
Q: What did she say, the exact words?
A: Exact words, sa naalala kong sinabi niya "Alam mo, Mr. Salud," Salud po ang kuan niya sa akin, "narinig ko sa labas,
istoryahan dyan sa labas na baka si Rhodora ang may ka-kuan dito sa Criminal." Ang sabi ko po sa kanya "Iyan din ang
itinawag sa akin kahapon. Eh dalawa na kayo eh baka naman pupuwede nyo akong matulungan. Puede ko bang malaman
ang pangalan mo?" Ganun din po, ayaw na pong magsalita ibinaba na [ang] telepono.
Q: Do you know Rhodora?
A: Hindi po.
Q: You never met her?
A: Hindi po.
Q: You never talked to her?
A: Nung pong ipinakiusap nyo sa akin sa telepono po nung tayo po’y …
Q: After the conversation with the lady and that gentleman who called you to offer some help and afterwards did not help
at all, what happened?
A: Wala na po.
Q: Did you not check with Rhodora, "What is this they are talking about that it might be between you and someone in the
Criminal Section?" You never asked her that?
A: Hindi ko na rin po …
 Page 52 of 108

Q: You did not. But I thought you wanted help from those people who can help you?
A: Eh hindi na nga po sila nagbanggit po ng pangalan dahil po sabi ng unang babae ayaw nga rin po niyang sumabit sa
kaso.47
This respondent’s actuation on this matter, if at all true, is again contrary to the normal reaction of one who has been
administratively charged, and wants to clear his name of any wrongdoing.

The respondent also admitted visiting an inmate (Vilma Dalawangbayan) at the correctional facility eight times for no
apparent reason. This admission lends some credence to the testimony of Flores, that she was the one who introduced
him to Dalawangbayan, the person he was visiting. When asked why he frequently visited, he stated that he found her
beautiful ("Maganda po siya, Justice"), and was on the verge of courting her ("Para na nga po akong nanliligaw"). The
Court believes that this allegation was concocted by the respondent as a mere afterthought, to cover up for his misdeeds.

The Investigating Officer also found that the respondent was "high-strung" during his testimony, and this finding must be
accorded respect. Indeed, when the issue is the credibility of witnesses, the function of evaluating it is primarily lodged
in the investigating judge. The rule which concedes due respect, and even finality, to the assessment of the credibility of
witnesses by trial judges in civil and criminal cases where preponderance of evidence and proof beyond reasonable
doubt, respectively, are required, applies a fortioriin administrative cases where the quantum of proof required is only
substantial evidence. The investigating judge is in a better position to pass judgment on the credibility of witnesses,
having personally heard them when they testified, and observed their deportment and manner of testifying.48Thus, the
following findings of Atty. Longalong are well taken:

However, respondent denied receiving ₱20,000 from Gamil and ₱15,000 from Flores and signing "LM Salud" on Flores’
notebooks (Exhibits E-1 and F-1) but admitted visiting Vilma at the Correctional Institute for Women 8 times from May
to August 1999. Respondent’s denial here appears self-serving and incredible considering his admission of going to the
Correctional Institute for Women several times for no valid official reason. Moreover, although Flores is a convict
for estafa, her
testimony on the matter was more consistent and credible. Likewise, respondent admitted seeing Flores at the
Correctional Institute for Women and that Flores mailed her letter to him on May 16, 1999 which he called "maintriga."
He also admitted that he told Flores to seek the help of Justice Vasquez on her case. The foregoing, plus the fact that
Flores eventually wrote Justice Vasquez, confirms the truth of Flores’ testimony on the matter.

With the aforecited admissions by respondent, the substantial evidence presented by the complainant and her witnesses
with their positive and forthright testimonies deserve more credence than respondent’s self-serving denial and
inconsistent and vague testimony. Even the demeanor of complainant and her witnesses give credence to their
testimonies than the nervous and [high-strung] demeanor of respondent during his testimony. Moreover, complainant and
her witnesses, including the superiors of respondent, have no reason or motive whatsoever to testify falsely against him.
Respondent’s defense of denial is inherently a weak defense. It is well settled that denial, to be believed, must be
buttressed by strong evidence of non-culpability, otherwise the denial is purely self-serving and with nil evidentiary
value (People of the Philippines v. Arlee, 323 SCRA 201). Like the defense of alibi, denial crumbles in the light of
positive declarations (People of the Philippines vs. Ricafranca, 323 SCRA 652).

Indeed, the Court is looked upon by people with high respect, a sacred place where litigants are heard, rights and
conflicts settled and justice solemnly dispensed with. Misbehavior within or around the vicinity diminishes its sanctity
and dignity. The conduct and behavior required of every court personnel, from the presiding judge to the lowliest clerk,
must always be beyond reproach and circumscribed with the heavy burden of responsibility. Their conduct must, at all
times, be characterized by, among other things, propriety and decorum so as to earn and keep the public’s respect and
confidence in the judicial service.49Public service requires the utmost integrity and strictest discipline. Thus, a public
servant must exhibit at all times the highest sense of honesty and integrity not only in the performance of his official
duties but in his personal and private dealings with other people.50

While there is no direct evidence to suggest that he actually extorted money to "facilitate" the issuance of the appeal
bond and release order which he himself served, the surrounding circumstances, as well as the inconsistencies in his
testimony, point towards administrative culpability. The respondent’s actuations fall short of the standard required of a
public servant. He is guilty of gross or grave misconduct. Misconduct is a transgression of some established and definite
rule of action, a forbidden act, a dereliction from duty, unlawful behavior, willful in character, improper or wrong
behavior,51 while "gross," has been defined as "out of all measure; beyond allowance; flagrant; shameful; such conduct as
is not to be excused."52 Under the Omnibus Civil Service Rules and Regulations, grave misconduct is punishable by
dismissal from the service even for the first offense, as it is classified as a grave offense. However, considering that the
respondent has not been previously charged nor administratively sanctioned, the Court finds that a penalty of suspension
for one year and six months will serve the purpose of disciplining the respondent.

Court personnel, from the lowliest employee to the clerk of court or any position lower than that of a judge or justice, are
involved in the dispensation of justice, and parties seeking redress from the courts for grievances look upon them as part
of the Judiciary. They serve as sentinels of justice, and any act of impropriety on their part immeasurably affect the honor
 Page 53 of 108

and dignity of the Judiciary and the people’s confidence in it.53 Thus, any conduct which tends to diminish the image of
the Judiciary cannot be countenanced.
IN LIGHT OF ALL THE FOREGOING, respondent Cielito M. Salud is found GUILTY of inefficiency and gross
misconduct. He is SUSPENDED for a period of One (1) Year and Six (6) Months, effective immediately. He is
further DIRECTED to inform the Court as to the date of his receipt of this Decision to determine when his suspension
shall have taken effect.The Office of the Court Administrator is also DIRECTED to conduct a discreet investigation on
the possible involvement of Rhodora Valdez (Utility Worker), and other personnel of the Regional Trial Court of Pasig
City, Branch 163.SO ORDERED.

G.R. No. 138810 September 29, 2004

BATANGAS CATV, INC., petitioner,
vs.
THE COURT OF APPEALS, THE BATANGAS CITY SANGGUNIANG PANLUNGSOD and BATANGAS
CITY MAYOR, respondents.

In the late 1940s, John Walson, an appliance dealer in Pennsylvania, suffered a decline in the sale of television (tv) sets
because of poor reception of signals in his community. Troubled, he built an antenna on top of a nearby mountain. Using
coaxial cable lines, he distributed the tv signals from the antenna to the homes of his customers. Walson’s innovative
idea improved his sales and at the same time gave birth to a new telecommunication system -- the Community Antenna
Television (CATV) or Cable Television.1

This technological breakthrough found its way in our shores and, like in its country of origin, it spawned legal
controversies, especially in the field of regulation. The case at bar is just another occasion to clarify a shady area. Here,
we are tasked to resolve the inquiry -- may a local government unit (LGU) regulate the subscriber rates charged by
CATV operators within its territorial jurisdiction?

This is a petition for review on certiorari filed by Batangas CATV, Inc. (petitioner herein) against the Sangguniang
Panlungsod and the Mayor of Batangas City (respondents herein) assailing the Court of Appeals (1) Decision2 dated
February 12, 1999 and (2) Resolution3 dated May 26, 1999, in CA-G.R. CV No. 52361.4 The Appellate Court reversed
and set aside the Judgment5 dated October 29, 1995 of the Regional Trial Court (RTC), Branch 7, Batangas City in Civil
Case No. 4254,6 holding that neither of the respondents has the power to fix the subscriber rates of CATV operators, such
being outside the scope of the LGU’s power.

The antecedent facts are as follows:

On July 28, 1986, respondent Sangguniang Panlungsodenacted Resolution No. 2107 granting petitioner
a permitto construct, install, and operate a CATV system in Batangas City. Section 8 of the Resolution provides
that petitioner is authorized to charge its subscribers the maximum rates specified therein, "provided, however,
that any increase of rates shall be subject to the approval of the Sangguniang Panlungsod."8

Sometime in November 1993, petitioner increased its subscriber rates from ₱88.00 to ₱180.00 per month. As a result,
respondent Mayor wrote petitioner a letter9threatening to cancel its permit unless it secures the approval of respondent
Sangguniang Panlungsod, pursuant to Resolution No. 210.
 Page 54 of 108

Petitioner then filed with the RTC, Branch 7, Batangas City, a petition for injunction docketed as Civil Case No. 4254. It
alleged that respondent Sangguniang Panlungsod has no authority to regulate the subscriber rates charged by CATV
operators because under Executive Order No. 205, the National Telecommunications Commission (NTC) has the sole
authority to regulate the CATV operation in the Philippines.

On October 29, 1995, the trial court decided in favor of petitioner, thus:

"WHEREFORE, as prayed for, the defendants, their representatives, agents, deputies or other persons acting
on their behalf or under their instructions, are hereby enjoined from canceling plaintiff’s permit to operate a
Cable Antenna Television (CATV) system in the City of Batangas or its environs or in any manner, from
interfering with the authority and power of the National Telecommunications Commission to grant
franchises to operate CATV systems to qualified applicants, and the right of plaintiff in fixing its service
rates which needs no prior approval of the Sangguniang Panlungsod of Batangas City.

The counterclaim of the plaintiff is hereby dismissed. No pronouncement as to costs.

IT IS SO ORDERED."10

The trial court held that the enactment of Resolution No. 210 by respondent violates the State’s deregulation policy as set
forth by then NTC Commissioner Jose Luis A. Alcuaz in his Memorandum dated August 25, 1989. Also, it pointed out
that the sole agency of the government which can regulate CATV operation is the NTC, and that the LGUs cannot
exercise regulatory power over it without appropriate legislation.

Unsatisfied, respondents elevated the case to the Court of Appeals, docketed as CA-G.R. CV No. 52361.

On February 12, 1999, the Appellate Court reversed and set aside the trial court’s Decision, ratiocinating as follows:

"Although the Certificate of Authority to operate a Cable Antenna Television (CATV) System is granted
by the National Telecommunications Commission pursuant to Executive Order No. 205, this does not
preclude the Sangguniang Panlungsod from regulating the operation of the CATV in their locality under
the powers vested upon it by Batas Pambansa Bilang 337, otherwise known as the Local Government
Code of 1983. Section 177 (now Section 457 paragraph 3 (ii) of Republic Act 7160) provides:

‘Section 177. Powers and Duties – The Sangguniang Panlungsod shall:

a) Enact such ordinances as may be necessary to carry into effect and discharge the
responsibilities conferred upon it by law, and such as shall be necessary and proper to provide
for health and safety, comfort and convenience, maintain peace and order, improve the morals,
and promote the prosperity and general welfare of the community and the inhabitants thereof,
and the protection of property therein;

xxx

d) Regulate, fix the license fee for, and tax any business or profession being carried on and
exercised within the territorial jurisdiction of the city, except travel agencies, tourist guides,
tourist transports, hotels, resorts, de luxe restaurants, and tourist inns of international standards
which shall remain under the licensing and regulatory power of the Ministry of Tourism which
shall exercise such authority without infringement on the taxing and regulatory powers of the
city government;’

Under cover of the General Welfare Clause as provided in this section, Local Government Units can perform just
about any power that will benefit their constituencies. Thus, local government units can exercise powers that
are: (1) expressly granted; (2) necessarily implied from the power that is expressly granted; (3) necessary,
appropriate or incidental for its efficient and effective governance; and (4) essential to the promotion of the
general welfare of their inhabitants. (Pimentel, The Local Government Code of 1991, p. 46)

Verily, the regulation of businesses in the locality is expressly provided in the Local Government Code.
The fixing of service rates is lawful under the General Welfare Clause.

Resolution No. 210 granting appellee a permit to construct, install and operate a community antenna television
(CATV) system in Batangas City as quoted earlier in this decision, authorized the grantee to impose charges
which cannot be increased except upon approval of the Sangguniang Bayan. It further provided that in case of
violation by the grantee of the terms and conditions/requirements specifically provided therein, the City shall
have the right to withdraw the franchise.
 Page 55 of 108

Appellee increased the service rates from EIGHTY EIGHT PESOS (₱88.00) to ONE HUNDRED EIGHTY
PESOS (₱180.00) (Records, p. 25) without the approval of appellant. Such act breached Resolution No. 210
which gives appellant the right to withdraw the permit granted to appellee."11

Petitioner filed a motion for reconsideration but was denied.12

Hence, the instant petition for review on certiorari anchored on the following assignments of error:

"I.THE COURT OF APPEALS ERRED IN HOLDING THAT THE GENERAL WELFARE CLAUSE of
the LOCAL GOVERNMENT CODE AUTHORIZES RESPONDENT SANGGUNIANG PANLUNGSOD
TO EXERCISE THE REGULATORY FUNCTION SOLELY LODGED WITH THE NATIONAL
TELECOMMUNICATIONS COMMISSION UNDER EXECUTIVE ORDER NO. 205, INCLUDING
THE AUTHORITY TO FIX AND/OR APPROVE THE SERVICE RATES OF CATV OPERATORS;
AND

II.THE COURT OF APPEALS ERRED IN REVERSING THE DECISION APPEALED FROM AND
DISMISSING PETITIONER’S COMPLAINT."13

Petitioner contends that while Republic Act No. 7160, the Local Government Code of 1991, extends to the LGUs the
general power to perform any act that will benefit their constituents, nonetheless, it does not authorize them to regulate
the CATV operation. Pursuant to E.O. No. 205, only the NTC has the authority to regulate the CATV operation,
including the fixing of subscriber rates.

Respondents counter that the Appellate Court did not commit any reversible error in rendering the assailed
Decision. First, Resolution No. 210 was enacted pursuant to Section 177(c) and (d) of Batas Pambansa Bilang 337, the
Local Government Code of 1983, which authorizes LGUs to regulate businesses. The term "businesses" necessarily
includes the CATV industry. And second, Resolution No. 210 is in the nature of a contract between petitioner and
respondents, it being a grant to the former of a franchise to operate a CATV system. To hold that E.O. No. 205 amended
its terms would violate the constitutional prohibition against impairment of contracts.14

The petition is impressed with merit.

Earlier, we posed the question -- may a local government unit (LGU) regulate the subscriber rates charged by CATV
operators within its territorial jurisdiction? A review of pertinent laws and jurisprudence yields a negative answer.

President Ferdinand E. Marcos was the first one to place the CATV industry under the regulatory power of the national
government.15 On June 11, 1978, he issued Presidential Decree (P.D.) No. 151216 establishing a monopoly of the
industry by granting Sining Makulay, Inc., an exclusive franchise to operate CATV system in any place within the
Philippines. Accordingly, it terminated all franchises, permits or certificates for the operation of CATV system
previously granted by local governments or by any instrumentality or agency of the national government. 17 Likewise, it
prescribed the subscriber rates to be charged by Sining Makulay, Inc. to its customers.18

On July 21, 1979, President Marcos issued Letter of Instruction (LOI) No. 894 vesting upon the Chairman of the Board
of Communications direct supervision over the operations of Sining Makulay, Inc. Three days after, he issued E.O. No.
54619 integrating the Board of Communications20 and the Telecommunications Control Bureau21 to form a single entity to
be known as the "National Telecommunications Commission." Two of its assigned functions are:

"a. Issue Certificate of Public Convenience for the operation of communications utilities and services, radio
communications systems, wire or wireless telephone or telegraph systems, radio and television broadcasting
system and other similar public utilities;

b. Establish, prescribe and regulate areas of operation of particular operators of public service communications;
and determine and prescribe charges or rates pertinent to the operation of such public utility facilities and
services except in cases where charges or rates are established by international bodies or associations of which
the Philippines is a participating member or by bodies recognized by the Philippine Government as the proper
arbiter of such charges or rates;"

Although Sining Makulay Inc.’s exclusive franchise had a life term of 25 years, it was cut short by the advent of the 1986
Revolution. Upon President Corazon C. Aquino’s assumption of power, she issued E.O. No. 20522 opening the CATV
industry to all citizens of the Philippines. It mandated the NTC to grant Certificates of Authority to CATV
operators and to issue the necessary implementing rules and regulations.
 Page 56 of 108

On September 9, 1997, President Fidel V. Ramos issued E.O. No. 43623 prescribing policy guidelines to govern CATV
operation in the Philippines. Cast in more definitive terms, it restated the NTC’s regulatory powers over CATV
operations, thus:

"SECTION 2. The regulation and supervision of the cable television industry in the Philippines shall remain
vested solely with the National Telecommunications Commission (NTC).

SECTION 3. Only persons, associations, partnerships, corporations or cooperatives, granted a Provisional

Authority or Certificate of Authority by the Commission may install, operate and maintain a cable television
system or render cable television service within a service area."

Clearly, it has been more than two decades now since our national government, through the NTC, assumed regulatory
power over the CATV industry. Changes in the political arena did not alter the trend. Instead, subsequent presidential
issuances further reinforced the NTC’s power. Significantly, President Marcos and President Aquino, in the exercise of
their legislative power, issued P.D. No. 1512, E.O. No. 546 and E.O. No. 205. Hence, they have the force and effect of
statutes or laws passed by Congress.24 That the regulatory power stays with the NTC is also clear from President Ramos’
E.O. No. 436 mandating that the regulation and supervision of the CATV industry shall remain vested "solely" in the
NTC. Black’s Law Dictionary defines "sole" as "without another or others."25 The logical conclusion, therefore, is that
in light of the above laws and E.O. No. 436, the NTC exercises regulatory power over CATV operators to the
exclusion of other bodies.

But, lest we be misunderstood, nothing herein should be interpreted as to strip LGUs of their general power to prescribe
regulations under the general welfare clause of the Local Government Code. It must be emphasized that when E.O. No.
436 decrees that the "regulatory power" shall be vested "solely" in the NTC, it pertains to the "regulatory power" over
those matters which are peculiarly within the NTC’s competence, such as, the: (1) determination of rates, (2) issuance of
"certificates of authority, (3) establishment of areas of operation, (4) examination and assessment of the legal, technical
and financial qualifications of applicant operators, (5) granting of permits for the use of frequencies, (6) regulation of
ownership and operation, (7) adjudication of issues arising from its functions, and (8) other similar matters.26 Within
these areas, the NTC reigns supreme as it possesses the exclusive power to regulate -- a power comprising varied acts,
such as "to fix, establish, or control; to adjust by rule, method or established mode; to direct by rule or restriction; or to
subject to governing principles or laws."27

Coincidentally, respondents justify their exercise of regulatory power over petitioner’s CATV operation under the
general welfare clause of the Local Government Code of 1983. The Court of Appeals sustained their stance.

There is no dispute that respondent Sangguniang Panlungsod, like other local legislative bodies, has been empowered to
enact ordinances and approve resolutions under the general welfare clause of B.P. Blg. 337, the Local Government Code
of 1983. That it continues to posses such power is clear under the new law, R.A. No. 7160 (the Local Government Code
of 1991). Section 16 thereof provides:

"SECTION 16. General Welfare. – Every local government unit shall exercise the powers expressly granted,
those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and
effective governance, and those which are essential to the promotion of the general welfare. Within their
respective territorial jurisdictions, local government units shall ensure and support, among others, the
preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced
ecology, encourage and support the development of appropriate and self-reliant, scientific and technological
capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment
among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants."

In addition, Section 458 of the same Code specifically mandates:

"SECTION 458. Powers, Duties, Functions and Compensation. — (a) The Sangguniang Panlungsod, as the
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general
welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the
corporate powers of the city as provided for under Section 22 of this Code, x x x:"

The general welfare clause is the delegation in statutory form of the police power of the State to LGUs.28 Through
this, LGUs may prescribe regulations to protect the lives, health, and property of their constituents and maintain peace
and order within their respective territorial jurisdictions. Accordingly, we have upheld enactments providing, for
instance, the regulation of gambling,29 the occupation of rig drivers,30 the installation and operation of pinball
machines,31 the maintenance and operation of cockpits,32 the exhumation and transfer of corpses from public burial
grounds,33 and the operation of hotels, motels, and lodging houses34 as valid exercises by local legislatures of the police
power under the general welfare clause.
 Page 57 of 108

Like any other enterprise, CATV operation maybe regulated by LGUs under the general welfare clause. This is primarily
because the CATV system commits the indiscretion of crossing public properties. (It uses public properties in order to
reach subscribers.) The physical realities of constructing CATV system – the use of public streets, rights of ways, the
founding of structures, and the parceling of large regions – allow an LGU a certain degree of regulation over CATV
operators.35 This is the same regulation that it exercises over all private enterprises within its territory.

But, while we recognize the LGUs’ power under the general welfare clause, we cannot sustain Resolution No. 210. We
are convinced that respondents strayed from the well recognized limits of its power. The flaws in Resolution No. 210
are: (1) it violates the mandate of existing laws and (2)it violates the State’s deregulation policy over the CATV industry.

I.Resolution No. 210 is an enactment of an LGU acting only as agent of the national legislature. Necessarily, its act must
reflect and conform to the will of its principal. To test its validity, we must apply the particular requisites of a valid
ordinance as laid down by the accepted principles governing municipal corporations.36

Speaking for the Court in the leading case of United States vs. Abendan,37 Justice Moreland said: "An ordinance enacted
by virtue of the general welfare clause is valid, unless it contravenes the fundamental law of the Philippine Islands, or an
Act of the Philippine Legislature, or unless it is against public policy, or is unreasonable, oppressive, partial,
discriminating, or in derogation of common right." In De la Cruz vs. Paraz,38 we laid the general rule "that ordinances
passed by virtue of the implied power found in the general welfare clause must be reasonable, consonant with the general
powers and purposes of the corporation, and not inconsistent with the laws or policy of the State."

The apparent defect in Resolution No. 210 is that it contravenes E.O. No. 205 and E.O. No. 436 insofar as it permits
respondent Sangguniang Panlungsod to usurp a power exclusively vested in the NTC, i.e., the power to fix the subscriber
rates charged by CATV operators. As earlier discussed, the fixing of subscriber rates is definitely one of the matters
within the NTC’s exclusive domain.

In this regard, it is appropriate to stress that where the state legislature has made provision for the regulation of conduct,
it has manifested its intention that the subject matter shall be fully covered by the statute, and that a municipality, under
its general powers, cannot regulate the same conduct.39 In Keller vs. State,40 it was held that: "Where there is no express
power in the charter of a municipality authorizing it to adopt ordinances regulating certain matters which are specifically
covered by a general statute, a municipal ordinance, insofar as it attempts to regulate the subject which is completely
covered by a general statute of the legislature, may be rendered invalid. x x x Where the subject is of statewide concern,
and the legislature has appropriated the field and declared the rule, its declaration is binding throughout the State." A
reason advanced for this view is that such ordinances are in excess of the powers granted to the municipal corporation.41

Since E.O. No. 205, a general law, mandates that the regulation of CATV operations shall be exercised by the NTC, an
LGU cannot enact an ordinance or approve a resolution in violation of the said law.

It is a fundamental principle that municipal ordinances are inferior in status and subordinate to the laws of the state. An
ordinance in conflict with a state law of general character and statewide application is universally held to be invalid. 42The
principle is frequently expressed in the declaration that municipal authorities, under a general grant of power, cannot
adopt ordinances which infringe the spirit of a state law or repugnant to the general policy of the state. 43 In every power
to pass ordinances given to a municipality, there is an implied restriction that the ordinances shall be consistent with the
general law.44 In the language of Justice Isagani Cruz (ret.), this Court, in Magtajas vs. Pryce Properties Corp.,
Inc.,45 ruled that:

"The rationale of the requirement that the ordinances should not contravene a statute is obvious. Municipal
governments are only agents of the national government. Local councils exercise only delegated legislative
powers conferred on them by Congress as the national lawmaking body. The delegate cannot be superior to the
principal or exercise powers higher than those of the latter. It is a heresy to suggest that the local government
units can undo the acts of Congress, from which they have derived their power in the first place, and negate by
mere ordinance the mandate of the statute.

‘Municipal corporations owe their origin to, and derive their powers and rights wholly from the
legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so it
may destroy. As it may destroy, it may abridge and control. Unless there is some constitutional limitation
on the right, the legislature might, by a single act, and if we can suppose it capable of so great a folly and
so great a wrong, sweep from existence all of the municipal corporations in the State, and the corporation
could not prevent it. We know of no limitation on the right so far as to the corporation themselves are
concerned. They are, so to phrase it, the mere tenants at will of the legislature.’

This basic relationship between the national legislature and the local government units has not been enfeebled by
the new provisions in the Constitution strengthening the policy of local autonomy. Without meaning to detract
from that policy, we here confirm that Congress retains control of the local government units although in
significantly reduced degree now than under our previous Constitutions. The power to create still includes the
 Page 58 of 108

power to destroy. The power to grant still includes the power to withhold or recall. True, there are certain notable
innovations in the Constitution, like the direct conferment on the local government units of the power to tax,
which cannot now be withdrawn by mere statute.By and large, however, the national legislature is still the
principal of the local government units, which cannot defy its will or modify or violate it."

Respondents have an ingenious retort against the above disquisition. Their theory is that the regulatory power of the
LGUs is granted by R.A. No. 7160 (the Local Government Code of 1991), a handiwork of the national lawmaking
authority. They contend that R.A. No. 7160 repealed E.O. No. 205 (issued by President Aquino). Respondents’ argument
espouses a bad precedent. To say that LGUs exercise the same regulatory power over matters which are peculiarly within
the NTC’s competence is to promote a scenario of LGUs and the NTC locked in constant clash over the appropriate
regulatory measure on the same subject matter. LGUs must recognize that technical matters concerning CATV
operation are within the exclusive regulatory power of the NTC.

At any rate, we find no basis to conclude that R.A. No. 7160 repealed E.O. No. 205, either expressly or impliedly. It is
noteworthy that R.A. No. 7160 repealing clause, which painstakingly mentions the specific laws or the parts thereof
which are repealed, does not include E.O. No. 205, thus:

"SECTION 534. Repealing Clause. — (a) Batas Pambansa Blg. 337, otherwise known as the Local Government
Code." Executive Order No. 112 (1987), and Executive Order No. 319 (1988) are hereby repealed.

(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions, memoranda and
issuances related to or concerning the barangay are hereby repealed.

(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section 3, a (3) and
b (2) of Republic Act. No. 5447 regarding the Special Education Fund; Presidential Decree No. 144 as amended
by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended; Presidential Decree No. 436
as amended by Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464, 477, 526, 632, 752, and
1136 are hereby repealed and rendered of no force and effect.

(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects.

(e) The following provisions are hereby repealed or amended insofar as they are inconsistent with the provisions
of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704; Section 12 of Presidential Decree No. 87, as
amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree No. 463, as amended; and
Section 16 of Presidential Decree No. 972, as amended, and

(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative
regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby
repealed or modified accordingly."

Neither is there an indication that E.O. No. 205 was impliedly repealed by R.A. No. 7160. It is a settled rule that implied
repeals are not lightly presumed in the absence of a clear and unmistakable showing of such intentions. In Mecano vs.
Commission on Audit,46 we ruled:

"Repeal by implication proceeds on the premise that where a statute of later date clearly reveals an intention on
the part of the legislature to abrogate a prior act on the subject, that intention must be given effect. Hence, before
there can be a repeal, there must be a clear showing on the part of the lawmaker that the intent in enacting the
new law was to abrogate the old one. The intention to repeal must be clear and manifest; otherwise, at least, as a
general rule, the later act is to be construed as a continuation of, and not a substitute for, the first act and will
continue so far as the two acts are the same from the time of the first enactment."

As previously stated, E.O. No. 436 (issued by President Ramos) vests upon the NTC the power to regulate the CATV
operation in this country. So also Memorandum Circular No. 8-9-95, the Implementing Rules and Regulations of R.A.
No. 7925 (the "Public Telecommunications Policy Act of the Philippines"). This shows that the NTC’s regulatory power
over CATV operation is continuously recognized.

It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably destructive
confrontation, courts must exert every effort to reconcile them, remembering that both laws deserve a becoming respect
as the handiwork of coordinate branches of the government.47 On the assumption of a conflict between E.O. No. 205 and
R.A. No. 7160, the proper action is not to uphold one and annul the other but to give effect to both by harmonizing them
if possible. This recourse finds application here. Thus, we hold that the NTC, under E.O. No. 205, has exclusive
jurisdiction over matters affecting CATV operation, including specifically the fixing of subscriber rates, but nothing
herein precludes LGUs from exercising its general power, under R.A. No. 7160, to prescribe regulations to promote the
 Page 59 of 108

health, morals, peace, education, good order or safety and general welfare of their constituents. In effect, both laws
become equally effective and mutually complementary.

The grant of regulatory power to the NTC is easily understandable. CATV system is not a mere local concern. The
complexities that characterize this new technology demand that it be regulated by a specialized agency. This is
particularly true in the area of rate-fixing. Rate fixing involves a series of technical operations.48 Consequently, on the
hands of the regulatory body lies the ample discretion in the choice of such rational processes as might be appropriate to
the solution of its highly complicated and technical problems. Considering that the CATV industry is so technical a field,
we believe that the NTC, a specialized agency, is in a better position than the LGU, to regulate it. Notably, in United
States vs. Southwestern Cable Co.,49 the US Supreme Court affirmed the Federal Communications Commission’s
(FCC’s) jurisdiction over CATV operation. The Court held that the FCC’s authority over cable systems assures the
preservation of the local broadcast service and an equitable distribution of broadcast services among the various regions
of the country.

II.Resolution No. 210 violated the State’s deregulation policy.

Deregulation is the reduction of government regulation of business to permit freer markets and competition. 50Oftentimes,
the State, through its regulatory agencies, carries out a policy of deregulation to attain certain objectives or to address
certain problems. In the field of telecommunications, it is recognized that many areas in the Philippines are still
"unserved" or "underserved." Thus, to encourage private sectors to venture in this field and be partners of the government
in stimulating the growth and development of telecommunications, the State promoted the policy of deregulation.

In the United States, the country where CATV originated, the Congress observed, when it adopted the
Telecommunications Act of 1996, that there was a need to provide a pro-competitive, deregulatory national policy
framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information
technologies and services to all Americans by opening all telecommunications markets to competition. The FCC has
adopted regulations to implement the requirements of the 1996 Act and the intent of the Congress.

Our country follows the same policy. The fifth Whereas Clause of E.O. No. 436 states:

"WHEREAS, professionalism and self-regulation among existing operators, through a nationally recognized
cable television operator’s association, have enhanced the growth of the cable television industry and must
therefore be maintained along with minimal reasonable government regulations;"

This policy reaffirms the NTC’s mandate set forth in the Memorandum dated August 25, 1989 of Commissioner Jose
Luis A. Alcuaz, to wit:

"In line with the purpose and objective of MC 4-08-88, Cable Television System or Community Antenna
Television (CATV) is made part of the broadcast media to promote the orderly growth of the Cable Television
Industry it being in its developing stage. Being part of the Broadcast Media, the service rates of CATV are
likewise considered deregulated in accordance with MC 06-2-81 dated 25 February 1981, the implementing
guidelines for the authorization and operation of Radio and Television Broadcasting stations/systems.

Further, the Commission will issue Provisional Authority to existing CATV operators to authorize their
operations for a period of ninety (90) days until such time that the Commission can issue the regular Certificate
of Authority."

When the State declared a policy of deregulation, the LGUs are bound to follow. To rule otherwise is to render the
State’s policy ineffective. Being mere creatures of the State, LGUs cannot defeat national policies through enactments of
contrary measures. Verily, in the case at bar, petitioner may increase its subscriber rates without respondents’ approval.

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

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

We are not convinced.

There is no law specifically authorizing the LGUs to grant franchises to operate CATV system. Whatever authority the
LGUs had before, the same had been withdrawn when President Marcos issued P.D. No. 1512 "terminating all
 Page 60 of 108

franchises, permits or certificates for the operation of CATV system previously granted by local governments." Today,
pursuant to Section 3 of E.O. No. 436, "only persons, associations, partnerships, corporations or cooperatives granted a
Provisional Authority or Certificate of Authority by the NTC may install, operate and maintain a cable television system
or render cable television service within a service area." It is clear that in the absence of constitutional or legislative
authorization, municipalities have no power to grant franchises.53 Consequently, the protection of the constitutional
provision as to impairment of the obligation of a contract does not extend to privileges, franchises and grants given by a
municipality in excess of its powers, or ultra vires.54

One last word. The devolution of powers to the LGUs, pursuant to the Constitutional mandate of ensuring their
autonomy, has bred jurisdictional tension between said LGUs and the State. LGUs must be reminded that they merely
form part of the whole. Thus, when the Drafters of the 1987 Constitution enunciated the policy of ensuring the autonomy
of local governments,55 it was never their intention to create an imperium in imperio and install an intra-sovereign
political subdivision independent of a single sovereign state.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals dated February 12, 1999 as
well as its Resolution dated May 26, 1999 in CA-G.R. CV No. 52461, are hereby REVERSED. The RTC Decision in
Civil Case No. 4254 is AFFIRMED.

No pronouncement as to costs.SO ORDERED.

 Page 61 of 108

G.R. No. 135535 February 14, 2005

ZOOMZAT, INC., petitioner,

vs.
THE PEOPLE OF THE PHILIPPINES, ROMULO S. RODRIGUEZ, JR., AVELINO C. CANOSA, ROLANDO
G. CHAVEZ, CEFERINO C. GARCIA, DEMOCRITO C. LAGO, ANTONIO F. LUGOD, WAYNE T.
MILITANTE, JOHNNY L. MOTOOMULL, JR., FLORENTINO S. OCAMPO, EDUARDO L. REMEGOSO,
CLEOFAS B. SALUGSUGAN, RAFAEL T. BERDELAO, and WINFREDO T. MILITANTE, JR.,respondents.

Assailed in this petition for review on certiorari is the Resolution1 dated June 17, 1998 of the Sandiganbayan in Crim.
Case No. 22026 approving the withdrawal of the Information charging herein respondents, all members of
the Sangguniang Panlungsod of Gingoog City, of violation of Section 3(e), R.A. No. 3019, otherwise known as the Anti-
Graft and Corrupt Practices Act, and its Resolution2 dated September 9, 1998, denying petitioner Zoomzat, Inc.’s motion
for reconsideration.

The factual antecedents are as follows:

Petitioner Zoomzat, Inc. alleged that on December 20, 1991, the Sangguniang Panlungsod of Gingoog City passed
Resolution No. 2613 which resolved "to express the willingness of the City of Gingoog to allow Zoomzat to install and
operate a cable TV system." Thereupon, petitioner applied for a mayor’s permit but the same was not acted upon by the
mayor’s office.

Subsequently, or on April 6, 1993, respondents enacted Ordinance No. 194 which granted a franchise to Gingoog
Spacelink Cable TV, Inc. to operate a cable television for a period of ten (10) years, subject to automatic renewal.

Hence, on July 30, 1993, petitioner filed a complaint with the Office of the Ombudsman against herein respondents for
violation of Section 3(e), R.A. No. 3019. The complaint alleged that in enacting Ordinance No. 19, the respondents gave
unwarranted benefits, advantage or preference to Spacelink, to the prejudice of petitioner who was a prior grantee-
applicant by virtue of Resolution No. 261.

On December 20, 1994, Graft Investigation Officer I Virginia Tehano-Ang, recommended the indictment of the
respondents under Section 3(e), R.A. No. 3019,5 which recommendation was affirmed on review by Special Prosecution
Officer II Rolando Ines.6

Accordingly, a criminal information for violation of Section 3(e), R.A. No. 3019, was filed against the respondents
before the Sandiganbayan. The case was docketed as Crim. Case No. 22026.

However, upon directive by the Sandiganbayan to restudy the instant case, Special Prosecution Officer II Antonio
Manzano recommended the dismissal of the case and the Information withdrawn for lack of probable cause.7 On further
investigation, Special Prosecution Officer III Victor Pascual also recommended that the case be dismissed for
insufficiency of evidence.8

Consequently, on June 17, 1998, the Sandiganbayan issued the now assailed resolution approving the dismissal of the
case and ordering the withdrawal of the Information against the respondents. On September 9, 1998, the Sandiganbayan
denied petitioner’s motion for reconsideration.

Hence, the instant petition.

Petitioner assails the findings of Special Prosecutor Pascual that under Executive Order No. 205,9 it is the National
Telecommunications Commission (NTC), and not the local government unit, that has the power and authority to allow or
disallow the operation of cable television. It argues that while the NTC has the authority to grant the franchise to operate
a cable television, this power is not exclusive because under the Local Government Code, the city council also has the
power to grant permits, licenses and franchises in aid of the local government unit’s regulatory or revenue raising
powers.

Petitioner also contends that the grant of exclusive franchise to Spacelink for a period of ten (10) years subject to
automatic renewal, contravenes Section 2 of Executive Order No. 205, which provides that "a certificate of authority to
operate a CATV by the Commission shall be on a non-exclusive basis and for a period not to exceed 15 years." Thus, in
 Page 62 of 108

awarding an exclusive franchise, the petitioner asserts that respondents gave Spacelink undue or unwarranted advantage
and preference because it stifled business competition. It claims that, even assuming the lack of actual damage or injury,
the fact remains that respondents extended undue favor and advantage to Spacelink, which makes them liable under
Section 3(e) of R.A. No. 3019.

The petition is bereft of merit.

Respondents were charged with violation of Section 3(e), R.A. No. 3019, which states:

Section 3. Corrupt practices of public officers. – In addition to acts or omissions of public officers already penalized by
existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:

(e) Causing any undue injury to any party, including the Government, or giving any private party any unwarranted
benefits, advantage or preference in the discharge of his official, administrative or judicial functions through manifest
partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers and employees of
offices or government corporations charged with the grant of licenses or permits or other concessions. (Emphasis ours)

Thus, for one to be held liable under Section 3(e), R.A. No. 3019, he must be an officer or employee of offices or
government corporations charged with the grant of licenses or permits or other concessions.

Executive Order No. 205 clearly provides that only the NTC could grant certificates of authority to cable television
operators and issue the necessary implementing rules and regulations. Likewise, Executive Order No. 436,10 vests with
the NTC the regulation and supervision of cable television industry in the Philippines.

Our pronouncement in Batangas CATV, Inc. v. Court of Appeals,11 is pertinent:

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

It is clear that in the absence of constitutional or legislative authorization, municipalities have no power to grant
franchises. Consequently, the protection of the constitutional provision as to impairment of the obligation of a contract
does not extend to privileges, franchises and grants given by a municipality in excess of its powers, or ultra vires.

It is undisputed that respondents were not employees of NTC. Instead, they were charged in their official capacity as
members of the Sangguniang Panlungsod of Gingoog City. As such, they cannot be charged with violation of Section
3(e), R.A. No. 3019 for enacting Ordinance No. 19 which granted Spacelink a franchise to operate a cable television.

Petitioner, however, insists that while the NTC is the licensing and regulatory body, nonetheless, the actual operations of
cable television entails other activities, which may be regulated by the local government unit pursuant to the general
welfare clause or subject to its revenue generating powers.

Again, this issue has been discussed in Batangas CATV, Inc. v. Court of Appeals,12 thus:

But, lest we be misunderstood, nothing herein should be interpreted as to strip LGUs of their general power to prescribe
regulations under the general welfare clause of the Local Government Code. It must be emphasized that when E.O. No.
436 decrees that the "regulatory power" shall be vested "solely" in the NTC, it pertains to the "regulatory power" over
those matters, which are peculiarly within the NTC’s competence …

There is no dispute that respondent Sangguniang Panlungsod, like other local legislative bodies, has been empowered to
enact ordinances and approve resolutions under the general welfare clause of B.P. Blg. 337, the Local Government Code
of 1983. That it continues to possess such power is clear under the new law, R.A. No. 7160 (the Local Government Code
of 1991).

Indeed, under the general welfare clause of the Local Government Code, the local government unit can regulate the
operation of cable television but only when it encroaches on public properties, such as the use of public streets, rights of
ways, the founding of structures, and the parceling of large regions.13 Beyond these parameters, its acts, such as the grant
of the franchise to Spacelink, would be ultra vires.
 Page 63 of 108

Plainly, the Sangguniang Panlungsod of Gingoog City overstepped the bounds of its authority when it usurped the
powers of the NTC with the enactment of Ordinance No. 19. Being a void legislative act, Ordinance No. 19 did not
confer any right nor vest any privilege to Spacelink. As such, petitioner could not claim to have been prejudiced or
suffered injury thereby. Incidentally, petitioner’s claim of undue injury becomes even more baseless with the finding that
Spacelink did not commence to operate despite the grant to it of a franchise under Ordinance No. 19.

In addition, petitioner could not impute manifest partiality, evident bad faith or gross inexcusable negligence on the part
of the respondents when they enacted Ordinance No. 19. A perfunctory reading of Resolution No. 261 shows that
the Sangguniang Panlungsod did not grant a franchise to it but merely expressed its willingness to allow the petitioner to
install and operate a cable television. Had respondents intended otherwise, they would have couched the resolution in
more concrete, specific and categorical terms. In contrast, Ordinance No. 19 clearly and unequivocally granted a
franchise to Spacelink, specifically stating therein its terms and conditions. Not being a bona fide franchise holder,
petitioner could not claim prior right on the strength of Resolution No. 261.

WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed Resolution of the Sandiganbayan dated
June 17, 1998, approving the withdrawal of the Information against the respondents and the dismissal of Crim. Case No.
22026, for violation of Section 3(e), R.A. No. 3019, and the Resolution dated September 9, 1998, denying
reconsideration thereof, are AFFIRMED.

SO ORDERED.
 Page 64 of 108

A.M. No. P-11-2979 November 18, 2014

[formerly OCA IPI No. 10-3352-P]

ELLA M. BARTOLOME, Complainant,

vs.
ROSALIE B. MARANAN, COURT STENOGRAPHER III, REGIONAL TRIAL COURT, BRANCH 20, IMUS,
CAVITE,Respondent.

DECISION

PER CURIAM:

This administrative matter started through the sworn affidavit complaint1 in the vernacular, dated December 16, 2009,
that Ella M. Bartolome (complainant) filed against Rosalie B. Maranan [respondent, Court Stenographer III, Regional
Trial Court (RTC), Branch 20, Imus, Cavite], charging her with extortion, graft and corruption, gross misconduct and
conduct unbecoming of a court employee.

The complainant alleged that the respondent asked money from her in the amount of ₱200,000.00, which was later
reduced to ₱160,000.00, to facilitate the filing of her case for annulment of marriage. She further alleged that the
respondent undertook to have the case decided in her favor without the need of court appearances during the proceedings
of the case. For a clear and complete picture of the accusations against the respondent, we quote verbatim the pertinent
portions of the complainant’s narration of the incidents that gave rise to the filing of the present administrative complaint
–

xxxx

2. Na noong October 21, 2009 nakilala ko si ROSALIE MARANAN na isang stenographer sa Regional
Trial Court ng Imus, Cavite. Nasabihan ko siya ng aking kagustuhan na magsampa ng annulment of
marriage case. Agad niya akong inalok at pinangakuan na kaya niyang ipasok ang aking annulment case
sa RTC, Br. 20, Imus, Cavite kung saan siya nagtratrabaho. Noong una ang hinihingi niya sa akin ay
halagang TWO HUNDRED THOUSAND PESOS (₱200,000.00) pero humingi ako sakanya ng discount
at pumayag siya sa ONE HUNDRED SIXTY THOUSAND PESOS (₱160,000.00). Ako po ay
naengganyo na magtiwala sa kanya dahil nangako siya na siya na ang bahala sa lahat. May kausap na
daw siyang abogado na pipirma sa petisyon koat di ko na daw kailangan pang umappear sa korte. Sinabi
niya na malakas daw siya sa judge at sa fiscal at siya lang daw ang pinapayagan na magpasok ng mga
aaregluhin na kaso sa kanilang korte. Sinabi niya din na kasama na sa ₱160,000.00 ang para sa judge at
sa fiscal kaya siguradong maaaprubahan ang aking annulment case sa mabilis na panahon. Kasama po ng
Affidavit Complaint na ito ang transcript at ang SIM Carday aking ipadadala kapag ako ay makasigurado
na ang Korte Suprema ay poprotektahan ang mga ebidensya laban kay MARANAN sapagkat rito lahat
nakatagon (sic) ang mga text messages at nakarecord lahat ng calls nitong si ROSALIE MARANAN sa
akin na nagpapatunay ng panghihingi niya sa akin ng pera at pangako na aaregluhin niya ang aking
annulment of marriage case. Ang cellphone number po na nagaappear dito sa SIM ay kay ROSALINA
MARANAN, ang numero niya ay 09175775982. Maaaring nagpalit na ng numero ang inirereklamo ko
kung kaya’t maganda rin na ipag-utos ang pag-alam ng detalye mula sa Globe Telecoms kung saan post-
paid subscriber ang may-ari ng numero na iyan. [Emphasis supplied]

To put an end to the respondent’s extortion activities, the complainant decided to report the matter to the police
authorities. During the entrapment operation conducted by police officers of Imus Police Station, the respondent was
apprehended inside the premises of the RTC, Branch 20, Imus, Cavite, in the act of receiving the money from the
complainant.
 Page 65 of 108

In support of her allegations, the complainant attached to her affidavit-complaint the transcribed electronic
communications (text messages) between her and the respondent;2 a copy of an Electronic Psychiatric History form
given to her by the respondent for her to accomplish in filing the petition for annulment of marriage;3 a copy of the Imus
Police Station Blotter showing that the respondent was apprehended during the entrapment operation conducted by police
officers of Imus Police Station on November 11, 2009 at 2:40 p.m.;4 and a versatile compact disc (VCD) containing the
video taken during the entrapment operation conducted against the respondent.5

The Court, in a 1st Indorsement6 dated March 19, 2010, required the respondent to comment onthe complaint against her.

In her Comment dated May 27, 2010,7 the respondent denied the accusations against her. She alleged her belief that
Bartolome is a fictitious name as the affidavit-complaint does not indicate the complainant’s exact address. She asserted
that her detention at Imus Police Station does not prove her culpability since no actual criminal charges were filed against
her. She claimed that the lapse of six (6) months from the time of the alleged incident indicates that the complaint is pure
and simple harassment orchestrated by a lawyer or litigant who has a grudge against her and who wants to
publiclybesmirch her reputation. In support of her defense, the respondent mentioned that even Judge Fernando L.
Felicen (Judge Felicen), Presiding Judge of RTC, Branch 20, Imus, Cavite interceded for her release from detention.

On July 29, 2010, the complainant sent a letter to the Office of the Court Administrator (OCA),8 without indicating her
address, alleging that she has to constantly change residence because unidentified persons had been seen in their
neighborhood asking questions about her. She has also been receiving text messages from the respondent telling her that
her complaint would only be dismissed because she knows people in the Supreme Court. The respondent also threatened
retaliation against her after the case is terminated. The complainant further claimed that the pieces of evidence she
submitted are sufficient to prove the respondent’s anomalous activities, and prayed for the immediate resolution of her
complaint.

Based on the complainant’s pleadings and evidence, the OCA, (through then Deputy Court Administrator Nimfa C.
Vilches and OCA Chief of Legal Office Wilhelmina D. Geronga) submitted its Report to the Court dated May 9,
2011,9 finding enough evidence to prove the respondent’s involvement in anomalous activities and recommending that –

1) OCA IPI No. 10-3352-P be RE-DOCKETED as a regular administrative matter;

2) respondent Rosalie B. Maranan, Court Stenographer III, Regional Trial Court, Branch20, Imus, Cavite, be
found GUILTY of Grave Misconduct and Conduct Prejudicial to the Best Interest of the Service; and

3) respondent Maranan be immediately DISMISSED from the service with forfeiture of retirement benefits
except her accrued leave credits, and withperpetual disqualification from employment in any government
agencies or instrumentalities, including government owned and controlled corporations.

In a Resolution dated September 5, 2011,10 the Court required the parties to manifest whether they were willing to submit
their case for resolution on the basis of the pleadingsfiled. The respondent filed her Manifestation dated November 17,
201111 submitting the case for resolution by the Court. She reiterated her complete innocence and "vigorous" and
"vehement" denial ofthe allegations against her. She insisted that the present complaint against her is plain and simple
harassment and a vexatious suit by the complainant who either has a grudge against her or must have been used by
another person with a grudge against her. All she did was tosecure the services of a lawyer at the complainant’s request;
this act, she claimed, does not constitute graft and corruption, gross misconduct, conduct unbecoming of a court
employee and extortion.

The complainant did not respond to our September 5, 2011 Resolution as it was returned unserved on her.
Wenevertheless considered the case submitted for resolution considering her letter of July 16, 2010 praying for the
immediate resolution of her complaint.

In our Internal Resolution dated December 7, 2011,12 we resolved to refer the complaint to the OCA for evaluation,
report and recommendation.

The OCA responded through its Memorandum of July 16, 2012,13 finding that the pieces of evidence on record establish
the guilt of the respondent on the charges of Gross Misconduct and Conduct Prejudicial to the Best Interest of the Service
filed against her. It recommended that the respondent be found guilty of the offenses charged and be dismissed from the
service, with forfeiture of retirement benefits except her accrued leave credits and with perpetual disqualification from
employment in any government agency.

The Court fully agrees with the OCA’s recommendation.

The respondent’s bare denial cannot overcome the evidence supporting the complainant’s accusation that she demanded
money on the promise that she would facilitate the annulment of her (complainant’s) marriage. The respondent’s actions
 Page 66 of 108

from the time the complainant started communicating with her on October 21, 2009 and thereafter through a series of
messages they exchanged via SMS,14until the entrapment operation on November 11, 2009, showed that the complaint is
indeed meritorious. The respondent’s text messages sent to the complainant corroborate that she promised to expedite –
in exchange for a monetary consideration of ₱160,000.00 and that she would provide the lawyer who would file the
annulment case – the complainant’s annulment case once it is filed:15

21/19/09 8:40pm
Sino po to
21/10/09 8:53pm
Sino nagrefer sayo sakin ano pangalan?
21/10/09 8:54pm
San mo nakuha # ko
21/10/09 9:05pm
Ako rin magbibigay lawyer sayo
21/10/09 9:13pm
D kaba tlaga makakatawag ngayon
21/10/09 9:18pm
Ako n lang tatawag sayo kc mahirap ang txt lang
21/10/09 9:24pm
Tawag n lng ako ha
21/10/09 9:49pm
Natitiwala ako sayo ha dahil hindi lahat pinagbibigyan namin. Sally n lang tawag mo sakin nagtataka lng kc ako
kanina kc buong buong buo yung txt ng name ko e.
21/10/09 9:51pm
Ay sorry mali pala sabi ko sayo 160k pala singil namin
22/10/09 10:05am
Gud am. Ano pwede k bukas
22/10/09 10:25am
ls txt bak naghihintay po kme
22/10/09 10:51am
Bukas lng available si atty
22/10/09 10:56am
Sana kung makakagawa ka daw paraan bukas kahit 40k n lng muna down tapos 3pm bukas
22/10/09 11:04am
Ok pero d kita pilipilit ha nasayopa din and decision yan ang sakin lng kc nagmamadali k at tsaka yun ang free
time ng lawyer ha
22/10/09 11:11am
Ella pakihusto mo n daw pala 50k at ibabayad daw mua sa psychiatrist at osg kahit sa susunod n lng daw yung sa
kanya
22/10/09 1:09pm
The complainant described the respondent as an influence peddler in the courts of Imus, Cavite who acts as a conduit to
judges, prosecutors and private law practitioners.

In her comment to the complaint,the respondent admitted that "she suggested to the complainant the name of a lawyer
friend, Atty. Renante C. Bihasa (Atty. Bihasa), and forwarded to her the cell phone number of this lawyer so that
theycould discuss the case." While she was in detention at Imus Police Station, she called Atty. Bihasa, who told her that
he was on his way and assured her that he had already asked his lawyer friends to assist her. Atty. Bihasa arrived at about
five o’clock in the afternoon. As it was already beyond office hours, she was told by Atty. Bihasa of the possibility that
she would be detained pending investigation. Atty. Bihasa returned the following day and was joined by Judge Felicen
and her officemates. Judge Feliceninterceded in her behalf that she begiven permission by the police officers to leave her
detention in order to take a bath and change clothes. She was granted permission, with the full guaranty of Judge Felicen
that she would return.16

In an affidavit17 dated May 28, 2010, Atty. Bihasa corroborated the respondent’s allegations. In his affidavit, he narrated
that upon receiving a call from the respondent that she was being detained, he immediately called up two (2) of his
lawyer friends based at Imus, Atty. Wilfredo P. Saquilayan and Atty. Jose Emmanuel Montoya, to assist the respondent.
As he arrived at Imus Police Station at around past four o’clock in the afternoon, he told the respondent of the probability
of her detention until formal charges were filed against her. According to him, "[he] took it upon [himself] to assist[the
respondent] on that date and accompanied her while the police officers of Imus PNP were doing their routine work on
suspects."

Atty. Bihasa further narrated thaton the next day at about five o’clock in the afternoon, he went backto Imus Police
Station to wait for the complainant. After a few hours, the respondent’s co-workers, including Judge Felicen arrived.
They waited for the complainant until seven o’clock in the evening but she failed to come. Only the complainant’s
 Page 67 of 108

lawyer arrived who informed the police investigator that the complainant cannot come out of fear because of the death
threats she received.18

The concern that Atty. Bihasa and Judge Felicen showed to the respondent while under detention at Imus PNP Station
gives rise to the suspicion that they have knowledge and tolerate the respondent’s anomalous activities. The respondent’s
text messages to the complainant support this suspicion:19

At tsaka alam mo naman nakailang appointment n tayo sa abogado hiyang hiya nga ako kahapon e
7/11/09 3:13pm
Tawagan ko muna si judge kung pwede pa kami tumanggap hanggang wed
7/11/09 3:15pm
Try ko lng
7/11/09 3:25pm
Hanggang Tuesday na lg tayo after nun nxt year na. Yan ang sabi
7/11/09 3:28pm
Sayang kc ang haba n ng time mo dp natuloy sabi ko naman sayo e kapag inabot ng naghigpit dn pwede none
appearance. Yun nagan nagpatulong sakin kahapon lng tumawag yun d sana nagka sabay n kayo
7/11/09 3:59pm
Ok po mit po tayo bukas 10 am sinabi ko napo kay atty. Tnx po. See you po
Ephemeral electronic communications are now admissible evidence, subject to certain conditions. "Ephemeral electronic
communication" refers to telephone conversations, text messages, chatroom sessions, streaming audio, streaming video,
and other electronic forms of communication the evidence of which is not recorded or retained. 20 It may be proven by the
testimony of a person who was a party to the communications or has personal knowledge thereof.21 In the present case,
we have no doubt regarding the probative value of the text messages as evidence in considering the present case. The
complainant, who was the recipient of the text messages and who therefore has personal knowledge of these text
messages, identified the respondent as the sender through cellphone number 09175775982. The respondent herself
admitted that her conversations with the complainant had been thru SMS messaging and thatthe cellphone number
reflected in the complainant’s cellphone from which the text messages originated was hers. She confirmed that it was her
cellphone number during the entrapment operation the Imus Cavite Police conducted22

Sally:
Halika dito sa office, sa clerk of court. Pupunta ka ngayon? O sige, sige, pupunta ka ngaun? Ah sige OK,
salamat! Ang number ko …
Lalaki:
Ibigay ko sa kanya?
Sally:
Oo, ang number ko ay 09175775982, ok thank you.
The complainant submitted two (2) copies of the VCD23containing pictures taken during the entrapment conducted by the
Imus Cavite Police on November 11, 2009.24

Under Section 1, Rule 11 of A.M. No. 01-7-01-SC, audio, photographic and video evidence of events, acts or
transactions shall be admissible provided it shall be shown, presented or displayed to the court and shall be identified,
explained or authenticated by the person who made the recording or by some other person competent to testify on the
accuracy thereof.

We viewed the VCD and the video showed the actual entrapment operation. The complainant herself certified that the
video and text messages are evidence of her complaint against the respondent, "Sapat at malinaw ang lahat ng ebidensya
na kasama ng aking reklamo na nagpapatunay na totoo lahat ang nakasaad sa aking reklamo. Kitang kita sa video at sa
mga text messages niya ang kanyang modus operandi at paggamit niya ng pwesto sa gobyerno upang makapanghingi ng
malaking pera sa mga inosenteng tao." It is also well to remember that in administrative cases, technical rules of
procedure and evidence are not strictly applied.25 A.M. No. 01-7-01-SC specifically provides that these rules shall be
liberally construed to assist the parties in obtaining a just, expeditious and inexpensive determination of cases.

The Court totally agrees with the OCA’s finding that the respondent is guilty of grave misconduct and conduct
prejudicial to the best interest of the service. The respondent’s assertion that Bartolome is a fictitious name because the
complainant has not stated in her complaint her exact address is preposterous in light of the evidence of direct personal
and text message contacts between them. In the absence of supporting evidence, the claim that the complaint against her
is pure and simple harassment orchestrated by persons with grudge against her, is mere conjectural allegation.

As a public servant, nothing less than the highest sense of honesty and integrity is expected of the respondent at all
times.26 She should be the personification of the principle that public office is a public trust.27 The respondent
unfortunately fell extremely short of the standards that should have governed her life as a public servant. By soliciting
money from the complainant, she committed a crimeand an act of serious impropriety that tarnished the honor and
dignity of the judiciary and deeply affected the people’s confidence in it. She committed an ultimate betrayal of the duty
to uphold the dignity and authority of the judiciary by peddling influence to litigants, thereby creating the impression that
 Page 68 of 108

decision can be bought and sold.28 The Court has never wavered in its vigilance in eradicating the socalled "bad-eggs" in
the judiciary.29 We have been resolute in our drive to discipline and, if warranted, to remove from the service errant
magistrates, employees and even Justices of higher collegiate appellate courts for any infraction that gives the Judiciary a
bad name. To stress our earnestness in this pursuit, we have, in fact, been unflinching in imposing discipline on errant
personnel or in purging the ranks of those undeserving to remain in the service.30

WHEREFORE, the Court finds respondent Rosalie B. Maranan, Court Stenographer Ill, Regional Trial Court, Branch
20, Imus, Cavite, GUILTY of Grave Misconduct and Conduct Prejudicial to the Best Interest of the Service and is
accordingly DISMISSED from the service, with prejudice to re-employment in any government agency including
government-owned or controlled corporations. Her retirement benefits, except accrued leave credits are ordered
forfeited.1âwphi1 This decision shall be immediately executory.

The Court further Resolves to REQUIRE Judge Fernando L. Felicen, Regional Trial Court, Branch 20, Imus, Cavite and
Atty. Renante C. Bihasa, to file their Comments on their alleged participation in the anomalous activities of the
respondent, within fifteen ( 15) days from notice. This directive is without prejudice to the investigation of all or selected
employees and officials of the Branch, who may have participated in anomalous transactions relating to annulment of
marriage.

The Office of the Court Administrator is hereby directed to submit to this Court, within thirty (30) days, a list of the
annulment of marriage decisions of Judge Fernando L. Felicen for the past ten (10) years, indicating therein the
judgments made and the names of participating lawyers and prosecutors.

The Office of the Chief Attorney shall analyze the submitted data, including the records of and the proceedings in the
listed cases, and recommend to the Court the actions it should take in the event a pattern of corruption involving
annulment of marriage cases emerges. The Office of the Chief Attorney is given ninety (90) days from receipt of the
Office of the Court Administrator's list, within which to submit its recommendations to the Court.

The Office of the Court Administrator shall likewise refer this administrative case and its records to the Ombudsman for
whatever action it may take within its jurisdiction.

SO ORDERED.
 Page 69 of 108

G.R. No. 168338 February 15, 2008

FRANCISCO CHAVEZ, petitioner,

vs.
RAUL M. GONZALES, in his capacity as the Secretary of the Department of Justice; and NATIONAL
TELECOMMUNICATIONS COMMISSION (NTC),respondents.

The Case

This is a petition for the writs of certiorari and prohibition to set aside "acts, issuances, and orders" of respondents
Secretary of Justice Raul M. Gonzalez (respondent Gonzales) and the National Telecommunications Commission (NTC),
particularly an NTC "press release" dated 11 June 2005, warning radio and television stations against airing taped
conversations allegedly between President Gloria Macapagal-Arroyo and Commission on Elections (COMELEC)
Commissioner Virgilio Garcillano (Garcillano)1 under pain of suspension or revocation of their airwave licenses.

The Facts

On 24 June 2004, Congress, acting as national board of canvassers, proclaimed President Arroyo winner in the 2004
presidential elections.2 President Arroyo received a total of 12,905,808 votes, 1,123,576 more than the votes of her
nearest rival, Fernando Poe, Jr. Sometime before 6 June 2005, the radio station dzMM aired the Garci Tapes where the
parties to the conversation discussed "rigging" the results of the 2004 elections to favor President Arroyo. On 6 June
2005, Presidential spokesperson Ignacio Bunye (Bunye) held a press conference in Malacañang Palace, where he played
before the presidential press corps two compact disc recordings of conversations between a woman and a man. Bunye
identified the woman in both recordings as President Arroyo but claimed that the contents of the second compact disc
had been "spliced" to make it appear that President Arroyo was talking to Garcillano.

However, on 9 June 2005, Bunye backtracked and stated that the woman's voice in the compact discs was not President
Arroyo’s after all.3 Meanwhile, other individuals went public, claiming possession of the genuine copy of the Garci
Tapes.4 Respondent Gonzalez ordered the National Bureau of Investigation to investigate media organizations which
aired the Garci Tapes for possible violation of Republic Act No. 4200 or the Anti-Wiretapping Law.

On 11 June 2005, the NTC issued a press release warning radio and television stations that airing the Garci Tapes is a
"cause for the suspension, revocation and/or cancellation of the licenses or authorizations" issued to them.5 On 14 June
2005, NTC officers met with officers of the broadcasters group, Kapisanan ng mga Broadcasters sa Pilipinas (KBP), to
dispel fears of censorship. The NTC and KBP issued a joint press statement expressing commitment to press freedom.6
 Page 70 of 108

On 21 June 2005, petitioner Francisco I. Chavez (petitioner), as citizen, filed this petition to nullify the "acts, issuances,
and orders" of the NTC and respondent Gonzalez (respondents) on the following grounds: (1) respondents’ conduct
violated freedom of expression and the right of the people to information on matters of public concern under Section 7,
Article III of the Constitution, and (2) the NTC acted ultra vires when it warned radio and television stations against
airing the Garci Tapes.

In their Comment to the petition, respondents raised threshold objections that (1) petitioner has no standing to litigate and
(2) the petition fails to meet the case or controversy requirement in constitutional adjudication. On the merits,
respondents claim that (1) the NTC's press release of 11 June 2005 is a mere "fair warning," not censorship, cautioning
radio and television networks on the lack of authentication of the Garci Tapes and of the consequences of airing false or
fraudulent material, and (2) the NTC did not act ultra vires in issuing the warning to radio and television stations.

In his Reply, petitioner belied respondents' claim on his lack of standing to litigate, contending that his status as a citizen
asserting the enforcement of a public right vested him with sufficient interest to maintain this suit. Petitioner also
contests respondents' claim that the NTC press release of 11 June 2005 is a mere warning as it already prejudged the
Garci Tapes as inauthentic and violative of the Anti-Wiretapping Law, making it a "cleverly disguised x x x gag order."

ISSUE

The principal issue for resolution is whether the NTC warning embodied in the press release of 11 June 2005 constitutes
an impermissible prior restraint on freedom of expression.

I vote to (1) grant the petition, (2) declare the NTC warning, embodied in its press release dated 11 June 2005, an
unconstitutional prior restraint on protected expression, and (3) enjoin the NTC from enforcing the same.

1. Standing to File Petition

Petitioner has standing to file this petition. When the issue involves freedom of expression, as in the present case, any
citizen has the right to bring suit to question the constitutionality of a government action in violation of freedom of
expression, whether or not the government action is directed at such citizen. The government action may chill into
silence those to whom the action is directed. Any citizen must be allowed to take up the cudgels for those who have been
cowed into inaction because freedom of expression is a vital public right that must be defended by everyone and anyone.

Freedom of expression, being fundamental to the preservation of a free, open and democratic society, is
of transcendental importance that must be defended by every patriotic citizen at the earliest opportunity. We have held
that any concerned citizen has standing to raise an issue of transcendental importance to the nation,7 and petitioner in
this present petition raises such issue.

2. Overview of Freedom of Expression, Prior Restraint and Subsequent Punishment

Freedom of expression is the foundation of a free, open and democratic society. Freedom of expression is an
indispensable condition8 to the exercise of almost all other civil and political rights. No society can remain free, open and
democratic without freedom of expression. Freedom of expression guarantees full, spirited, and even contentious
discussion of all social, economic and political issues. To survive, a free and democratic society must zealously
safeguard freedom of expression.

Freedom of expression allows citizens to expose and check abuses of public officials. Freedom of expression allows
citizens to make informed choices of candidates for public office. Freedom of expression crystallizes important public
policy issues, and allows citizens to participate in the discussion and resolution of such issues. Freedom of expression
allows the competition of ideas, the clash of claims and counterclaims, from which the truth will likely emerge. Freedom
of expression allows the airing of social grievances, mitigating sudden eruptions of violence from marginalized groups
who otherwise would not be heard by government. Freedom of expression provides a civilized way of engagement
among political, ideological, religious or ethnic opponents for if one cannot use his tongue to argue, he might use his fist
instead.

Freedom of expression is the freedom to disseminate ideas and beliefs, whether competing, conforming or otherwise. It is
the freedom to express to others what one likes or dislikes, as it is the freedom of others to express to one and all what
they favor or disfavor. It is the free expression for the ideas we love, as well as the free expression for the ideas we
hate.9 Indeed, the function of freedom of expression is to stir disputes:

[I]t may indeed best serve its high purpose when it induces a condition of unrest, creates dissatisfaction with
conditions as they are, or even stirs people to anger. Speech is often provocative and challenging. It may strike at
prejudices and preconceptions and have profound unsettling effects as it presses for acceptance of an idea.10
 Page 71 of 108

Section 4, Article III of the Constitution prohibits the enactment of any law curtailing freedom of expression:

No law shall be passed abridging the freedom of speech, of expression, or the press, or the right of the people
peaceably to assemble and petition the government for redress of grievances.

Thus, the rule is that expression is not subject to any prior restraint or censorship because the Constitution commands
that freedom of expression shall not be abridged. Over time, however, courts have carved out narrow and well defined
exceptions to this rule out of necessity.

The exceptions, when expression may be subject to prior restraint, apply in this jurisdiction to only four categories of
expression, namely: pornography,11 false or misleading advertisement,12 advocacy of imminent lawless action,13and
danger to national security.14 All other expression is not subject to prior restraint. As stated in Turner Broadcasting
System v. Federal Communication Commission,"[T]he First Amendment (Free Speech Clause), subject only to narrow
and well understood exceptions, does not countenance governmental control over the content of messages expressed by
private individuals."15

Expression not subject to prior restraint is protected expression or high-value expression. Any content-based prior
restraint on protected expression is unconstitutional without exception. A protected expression means what it says – it
is absolutely protected from censorship. Thus, there can be no prior restraint on public debates on the amendment or
repeal of existing laws, on the ratification of treaties, on the imposition of new tax measures, or on proposed amendments
to the Constitution.

Prior restraint on expression is content-based if the restraint is aimed at the message or idea of the expression. Courts will
subject to strict scrutiny content-based restraint. If the content-based prior restraint is directed at protected expression,
courts will strike down the restraint as unconstitutional because there can be no content-based prior restraint on protected
expression. The analysis thus turns on whether the prior restraint is content-based, and if so, whether such restraint is
directed at protected expression, that is, those not falling under any of the recognized categories of unprotected
expression.

If the prior restraint is not aimed at the message or idea of the expression, it is content-neutral even if it burdens
expression. A content-neutral restraint is a restraint which regulates the time, place or manner of the expression in public
places16 without any restraint on the content of the expression. Courts will subject content-neutral restraints to
intermediate scrutiny.17

An example of a content-neutral restraint is a permit specifying the date, time and route of a rally passing through busy
public streets. A content-neutral prior restraint on protected expression which does not touch on the content of the
expression enjoys the presumption of validity and is thus enforceable subject to appeal to the courts.18 Courts will uphold
time, place or manner restraints if they are content-neutral, narrowly tailored to serve a significant government interest,
and leave open ample alternative channels of expression.19

In content-neutral prior restraint on protected speech, there should be no prior restraint on the content of the expression
itself. Thus, submission of movies or pre-taped television programs to a government review board is constitutional only
if the review is for classification and not for censoring any part of the content of the submitted materials. 20However,
failure to submit such materials to the review board may be penalized without regard to the content of the
materials.21 The review board has no power to reject the airing of the submitted materials. The review board’s power is
only to classify the materials, whether for general patronage, for adults only, or for some other classification. The power
to classify expressions applies only to movies and pre-taped television programs22 but not to live television programs.
Any classification of live television programs necessarily entails prior restraint on expression.

Expression that may be subject to prior restraint is unprotected expression or low-value expression. By definition, prior
restraint on unprotected expression is content-based23 since the restraint is imposed because of the content itself. In this
jurisdiction, there are currently only four categories of unprotected expression that may be subject to prior restraint. This
Court recognized false or misleading advertisement as unprotected expression only in October 2007.24

Only unprotected expression may be subject to prior restraint. However, any such prior restraint on unprotected
expression must hurdle a high barrier. First, such prior restraint is presumed unconstitutional. Second, the government
bears a heavy burden of proving the constitutionality of the prior restraint.25

Courts will subject to strict scrutiny any government action imposing prior restraint on unprotected expression. 26 The
government action will be sustained if there is a compelling State interest, and prior restraint is necessary to protect such
State interest. In such a case, the prior restraint shall be narrowly drawn - only to the extent necessary to protect or attain
the compelling State interest.
 Page 72 of 108

Prior restraint is a more severe restriction on freedom of expression than subsequent punishment. Although subsequent
punishment also deters expression, still the ideas are disseminated to the public. Prior restraint prevents even the
dissemination of ideas to the public.

While there can be no prior restraint on protected expression, such expression may be subject to subsequent
punishment,27 either civilly or criminally. Thus, the publication of election surveys cannot be subject to prior
restraint,28 but an aggrieved person can sue for redress of injury if the survey turns out to be fabricated. Also, while
Article 201 (2)(b)(3) of the Revised Penal Code punishing "shows which offend any race or religion" cannot be used to
justify prior restraint on religious expression, this provision can be invoked to justify subsequent punishment of the
perpetrator of such offensive shows.29

Similarly, if the unprotected expression does not warrant prior restraint, the same expression may still be subject to
subsequent punishment, civilly or criminally. Libel falls under this class of unprotected expression. However, if the
expression cannot be subject to the lesser restriction of subsequent punishment, logically it cannot also be subject to the
more severe restriction of prior restraint. Thus, since profane language or "hate speech" against a religious minority is not
subject to subsequent punishment in this jurisdiction,30 such expression cannot be subject to prior restraint.

If the unprotected expression warrants prior restraint, necessarily the same expression is subject to subsequent
punishment. There must be a law punishing criminally the unprotected expression before prior restraint on such
expression can be justified. The legislature must punish the unprotected expression because it creates a substantive evil
that the State must prevent. Otherwise, there will be no legal basis for imposing a prior restraint on such expression.

The prevailing test in this jurisdiction to determine the constitutionality of government action imposing prior restraint on
three categories of unprotected expression – pornography,31 advocacy of imminent lawless action, and danger to national
security - is the clear and present danger test.32 The expression restrained must present a clear and present danger of
bringing about a substantive evil that the State has a right and duty to prevent, and such danger must be grave and
imminent.33

Prior restraint on unprotected expression takes many forms - it may be a law, administrative regulation, or impermissible
pressures like threats of revoking licenses or withholding of benefits.34 The impermissible pressures need not be
embodied in a government agency regulation, but may emanate from policies, advisories or conduct of officials of
government agencies.

3. Government Action in the Present Case

The government action in the present case is a warning by the NTC that the airing or broadcasting of the Garci Tapes
by radio and television stations is a "cause for the suspension, revocation and/or cancellation of the licenses or
authorizations" issued to radio and television stations. The NTC warning, embodied in a press release, relies on two
grounds. First, the airing of the Garci Tapes "is a continuing violation of the Anti-Wiretapping Law and the conditions of
the Provisional Authority and/or Certificate of Authority issued to radio and TV stations." Second, the Garci Tapes have
not been authenticated, and subsequent investigation may establish that the tapes contain false information or willful
misrepresentation.

Specifically, the NTC press release contains the following categorical warning:

Taking into consideration the country’s unusual situation, and in order not to unnecessarily aggravate the same,
the NTC warns all radio stations and television networks owners/operators that the conditions of the
authorizations and permits issued to them by Government like the Provisional Authority and/or Certificate of
Authority explicitly provides that said companies shall not use its stations for the broadcasting or telecasting of
false information or willful misrepresentation. Relative thereto, it has come to the attention of the Commission
that certain personalities are in possession of alleged taped conversation which they claim, (sic) involve the
President of the Philippines and a Commissioner of the COMELEC regarding their supposed violation of
election laws. These personalities have admitted that the taped conversations are product of illegal wiretapping
operations.

Considering that these taped conversations have not been duly authenticated nor could it be said at this time that
the tapes contain an accurate or truthful representation of what was recorded therein, (sic) it is the position of
the Commission that the continuous airing or broadcast of the said taped conversations by radio and
television stations is a continuing violation of the Anti-Wiretapping Law and the conditions of the
Provisional Authority and/or Certificate of Authority issued to these radio and television stations. If it has
been (sic) subsequently established that the said tapes are false and/or fraudulent after a prosecution or
appropriate investigation, the concerned radio and television companies are hereby warned that their
broadcast/airing of such false information and/or willful misrepresentation shall be just cause for the
suspension, revocation and/or cancellation of the licenses or authorizations issued to the said
companies. (Boldfacing and underscoring supplied)
 Page 73 of 108

The NTC does not claim that the public airing of the Garci Tapes constitutes unprotected expression that may be subject
to prior restraint. The NTC does not specify what substantive evil the State seeks to prevent in imposing prior restraint on
the airing of the Garci Tapes. The NTC does not claim that the public airing of the Garci Tapes constitutes a clear and
present danger of a substantive evil, of grave and imminent character, that the State has a right and duty to prevent.

The NTC did not conduct any hearing in reaching its conclusion that the airing of the Garci Tapes constitutes a
continuing violation of the Anti-Wiretapping Law. At the time of issuance of the NTC press release, and even up to now,
the parties to the conversations in the Garci Tapes have not complained that the wire-tapping was without their consent,
an essential element for violation of the Anti-Wiretapping Law.35 It was even the Office of the President, through the
Press Secretary, that played and released to media the Garci Tapes containing the alleged "spliced" conversation between
President Arroyo and Commissioner Garcillano. There is also the issue of whether a wireless cellular phone conversation
is covered by the Anti-Wiretapping Law.

Clearly, the NTC has no factual or legal basis in claiming that the airing of the Garci Tapes constitutes a violation of the
Anti-Wiretapping Law. The radio and television stations were not even given an opportunity to be heard by the NTC.
The NTC did not observe basic due process as mandated in Ang Tibay v. Court of Industrial Relations.36

The NTC claims that the Garci Tapes, "after a prosecution or the appropriate investigation," may constitute "false
information and/or willful misrepresentation." However, the NTC does not claim that such possible false information or
willful misrepresentation constitutes misleading commercial advertisement. In the United States, false or deceptive
commercial speech is categorized as unprotected expression that may be subject to prior restraint. Recently, this Court
upheld the constitutionality of Section 6 of the Milk Code requiring the submission to a government screening committee
of advertising materials for infant formula milk to prevent false or deceptive claims to the public. 37 There is, however, no
claim here by respondents that the Garci Tapes constitute false or misleading commercial advertisement.

The NTC concedes that the Garci Tapes have not been authenticated as accurate or truthful. The NTC also concedes that
only "after a prosecution or appropriate investigation" can it be established that the Garci Tapes constitute "false
information and/or willful misrepresentation." Clearly, the NTC admits that it does not even know if the Garci Tapes
contain false information or willful misrepresentation.

4. Nature of Prior Restraint in the Present Case

The NTC action restraining the airing of the Garci Tapes is a content-based prior restraint because it is directed at the
message of the Garci Tapes. The NTC’s claim that the Garci Tapes might contain "false information and/or willful
misrepresentation," and thus should not be publicly aired, is an admission that the restraint is content-based.

5. Nature of Expression in the Present Case

The public airing of the Garci Tapes is a protected expression because it does not fall under any of the four existing
categories of unprotected expression recognized in this jurisdiction. The airing of the Garci Tapes is essentially a
political expression because it exposes that a presidential candidate had allegedly improper conversations with a
COMELEC Commissioner right after the close of voting in the last presidential elections.

Obviously, the content of the Garci Tapes affects gravely the sanctity of the ballot. Public discussion on the sanctity of
the ballot is indisputably a protected expression that cannot be subject to prior restraint. Public discussion on the
credibility of the electoral process is one of the highest political expressions of any electorate, and thus deserves the
utmost protection. If ever there is a hierarchy of protected expressions, political expression would occupy the highest
rank,38 and among different kinds of political expression, the subject of fair and honest elections would be at the top. In
any event, public discussion on all political issues should always remain uninhibited, robust and wide open.

The rule, which recognizes no exception, is that there can be no content-based prior restraint on protected expression.
On this ground alone, the NTC press release is unconstitutional.Of course, if the courts determine that the subject
matter of a wiretapping, illegal or not, endangers the security of the State, the public airing of the tape becomes
unprotected expression that may be subject to prior restraint. However, there is no claim here by respondents that the
subject matter of the Garci Tapes involves national security and publicly airing the tapes would endanger the security of
the State.39

The alleged violation of the Anti-Wiretapping Law is not in itself a ground to impose a prior restraint on the airing of the
Garci Tapes because the Constitution expressly prohibits the enactment of any law, and that includes anti-wiretapping
laws, curtailing freedom of expression.40 The only exceptions to this rule are the four recognized categories of
unprotected expression. However, the content of the Garci Tapes does not fall under any of these categories of
unprotected expression.
 Page 74 of 108

The airing of the Garci Tapes does not violate the right to privacy because the content of the Garci Tapes is a matter of
important public concern. The Constitution guarantees the people’s right to information on matters of public
concern.41 The remedy of any person aggrieved by the public airing of the Garci Tapes is to file a complaint for violation
of the Anti-Wiretapping Law after the commission of the crime. Subsequent punishment, absent a lawful defense, is the
remedy available in case of violation of the Anti-Wiretapping Law.

The present case involves a prior restraint on protected expression. Prior restraint on protected expression differs
significantly from subsequent punishment of protected expression. While there can be no prior restraint on protected
expression, there can be subsequent punishment for protected expression under libel, tort or other laws. In the present
case, the NTC action seeks prior restraint on the airing of the Garci Tapes, not punishment of personnel of radio and
television stations for actual violation of the Anti-Wiretapping Law.

6. Only the Courts May Impose Content-Based Prior Restraint

The NTC has no power to impose content-based prior restraint on expression. The charter of the NTC does not vest NTC
with any content-based censorship power over radio and television stations.

In the present case, the airing of the Garci Tapes is a protected expression that can never be subject to prior restraint.
However, even assuming for the sake of argument that the airing of the Garci Tapes constitutes unprotected expression,
only the courts have the power to adjudicate on the factual and legal issue of whether the airing of the Garci Tapes
presents a clear and present danger of bringing about a substantive evil that the State has a right and duty to prevent, so
as to justify the prior restraint.

Any order imposing prior restraint on unprotected expressionrequires prior adjudication by the courts on whether the
prior restraint is constitutional. This is a necessary consequence from the presumption of invalidity of any prior restraint
on unprotected expression. Unless ruled by the courts as a valid prior restraint, government agencies cannot implement
outright such prior restraint because such restraint is presumed unconstitutional at inception.

As an agency that allocates frequencies or airwaves, the NTC may regulate the bandwidth position, transmitter wattage,
and location of radio and television stations, but not the content of the broadcasts. Such content-neutral prior restraint
may make operating radio and television stations more costly. However, such content-neutral restraint does not restrict
the content of the broadcast.

7. Government Failed to Overcome Presumption of Invalidity

Assuming that the airing of the Garci Tapes constitutes unprotected expression, the NTC action imposing prior restraint
on the airing is presumed unconstitutional. The Government bears a heavy burden to prove that the NTC action is
constitutional. The Government has failed to meet this burden.

In their Comment, respondents did not invoke any compelling State interest to impose prior restraint on the public airing
of the Garci Tapes. The respondents claim that they merely "fairly warned" radio and television stations to observe the
Anti-Wiretapping Law and pertinent NTC circulars on program standards. Respondents have not explained how and why
the observance by radio and television stations of the Anti-Wiretapping Law and pertinent NTC circulars constitutes a
compelling State interest justifying prior restraint on the public airing of the Garci Tapes.

Violation of the Anti-Wiretapping Law, like the violation of any criminal statute, can always be subject to criminal
prosecution after the violation is committed. Respondents have not explained why there is a need in the present case to
impose prior restraint just to prevent a possible future violation of the Anti-Wiretapping Law. Respondents have not
explained how the violation of the Anti-Wiretapping Law, or of the pertinent NTC circulars, can incite imminent lawless
behavior or endanger the security of the State. To allow such restraint is to allow prior restraint on all future broadcasts
that may possibly violate any of the existing criminal statutes. That would be the dawn of sweeping and endless
censorship on broadcast media.

8. The NTC Warning is a Classic Form of Prior Restraint

The NTC press release threatening to suspend or cancel the airwave permits of radio and television stations constitutes
impermissible pressure amounting to prior restraint on protected expression. Whether the threat is made in an order,
regulation, advisory or press release, the chilling effect is the same: the threat freezes radio and television stations into
deafening silence. Radio and television stations that have invested substantial sums in capital equipment and market
development suddenly face suspension or cancellation of their permits. The NTC threat is thus real and potent.

In Burgos v. Chief of Staff,42 this Court ruled that the closure of the We Forum newspapers under a general warrant "is in
the nature of a previous restraint or censorship abhorrent to the freedom of the press guaranteed under the fundamental
 Page 75 of 108

law." The NTC warning to radio and television stations not to air the Garci Tapes or else their permits will be suspended
or cancelled has the same effect – a prior restraint on constitutionally protected expression.

In the recent case of David v. Macapagal-Arroyo,43 this Court declared unconstitutional government threats to close
down mass media establishments that refused to comply with government prescribed "standards" on news reporting
following the declaration of a State of National Emergency by President Arroyo on 24 February 2006. The Court
described these threats in this manner:

Thereafter, a wave of warning[s] came from government officials. Presidential Chief of Staff Michael
Defensor was quoted as saying that such raid was "meant to show a 'strong presence,' to tell media outlets not to
connive or do anything that would help the rebels in bringing down this government." Director General Lomibao
further stated that "if they do not follow the standards — and the standards are if they would contribute to
instability in the government, or if they do not subscribe to what is in General Order No. 5 and Proc. No. 1017 —
we will recommend a 'takeover.'" National Telecommunications Commissioner Ronald Solis urged television
and radio networks to "cooperate" with the government for the duration of the state of national
emergency. He warned that his agency will not hesitate to recommend the closure of any broadcast outfit
that violates rules set out for media coverage during times when the national security is
threatened.44 (Emphasis supplied)

The Court struck down this "wave of warning[s]" as impermissible restraint on freedom of expression. The Court ruled
that "the imposition of standards on media or any form of prior restraint on the press, as well as the warrantless search of
the Tribune offices and whimsical seizure of its articles for publication and other materials, are declared
UNCONSTITUTIONAL."45

The history of press freedom has been a constant struggle against the censor whose weapon is the suspension or
cancellation of licenses to publish or broadcast. The NTC warning resurrects the weapon of the censor. The NTC
warning is a classic form of prior restraint on protected expression, which in the words of Near v. Minnesota is "the
essence of censorship."46 Long before the American Declaration of Independence in 1776, William Blackstone had
already written in his Commentaries on the Law of England, "The liberty of the press x x x consists in laying no previous
restraints upon publication x x x."47

Although couched in a press release and not in an administrative regulation, the NTC threat to suspend or cancel permits
remains real and effective, for without airwaves or frequencies, radio and television stations will fall silent and die. The
NTC press release does not seek to advance a legitimate regulatory objective, but to suppress through coercion
information on a matter of vital public concern.

9. Conclusion

In sum, the NTC press release constitutes an unconstitutional prior restraint on protected expression. There can be no
content-based prior restraint on protected expression. This rule has no exception.

I therefore vote to (1) grant the petition, (2) declare the NTC warning, embodied in its press release dated 11 June 2005,
an unconstitutional prior restraint on protected expression, and (3) enjoin the NTC from enforcing the same.
 Page 76 of 108

G.R. No. 170338 December 23, 2008

VIRGILIO O. GARCILLANO, petitioner,

vs.
THE HOUSE OF REPRESENTATIVES COMMITTEES ON PUBLIC INFORMATION, PUBLIC ORDER
AND SAFETY, NATIONAL DEFENSE AND SECURITY, INFORMATION AND COMMUNICATIONS
TECHNOLOGY, and SUFFRAGE AND ELECTORAL REFORMS, respondents.

x----------------------x

G.R. No. 179275 December 23, 2008

SANTIAGO JAVIER RANADA and OSWALDO D. AGCAOILI,petitioners,

vs.
THE SENATE OF THE REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE SENATE PRESIDENT
THE HONORABLE MANUEL VILLAR, respondents.

x----------------------x

MAJ. LINDSAY REX SAGGE, petitioner-in-intervention

x----------------------x
 Page 77 of 108

AQUILINO Q. PIMENTEL, JR., BENIGNO NOYNOY C. AQUINO, RODOLFO G. BIAZON, PANFILO M.

LACSON, LOREN B. LEGARDA, M.A. JAMBY A.S. MADRIGAL, and ANTONIO F.
TRILLANES, respondents-intervenors

DECISION

NACHURA, J.:

More than three years ago, tapes ostensibly containing a wiretapped conversation purportedly between the President of
the Philippines and a high-ranking official of the Commission on Elections (COMELEC) surfaced. They captured
unprecedented public attention and thrust the country into a controversy that placed the legitimacy of the present
administration on the line, and resulted in the near-collapse of the Arroyo government. The tapes, notoriously referred to
as the "Hello Garci" tapes, allegedly contained the President’s instructions to COMELEC Commissioner Virgilio
Garcillano to manipulate in her favor results of the 2004 presidential elections. These recordings were to become the
subject of heated legislative hearings conducted separately by committees of both Houses of Congress.1

In the House of Representatives (House), on June 8, 2005, then Minority Floor Leader Francis G. Escudero delivered a
privilege speech, "Tale of Two Tapes," and set in motion a congressional investigation jointly conducted by the
Committees on Public Information, Public Order and Safety, National Defense and Security, Information and
Communications Technology, and Suffrage and Electoral Reforms (respondent House Committees). During the inquiry,
several versions of the wiretapped conversation emerged. But on July 5, 2005, National Bureau of Investigation (NBI)
Director Reynaldo Wycoco, Atty. Alan Paguia and the lawyer of former NBI Deputy Director Samuel Ong submitted to
the respondent House Committees seven alleged "original" tape recordings of the supposed three-hour taped
conversation. After prolonged and impassioned debate by the committee members on the admissibility and authenticity
of the recordings, the tapes were eventually played in the chambers of the House.2

On August 3, 2005, the respondent House Committees decided to suspend the hearings indefinitely. Nevertheless, they
decided to prepare committee reports based on the said recordings and the testimonies of the resource persons. 3

Alarmed by these developments, petitioner Virgilio O. Garcillano (Garcillano) filed with this Court a Petition for
Prohibition and Injunction, with Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction 4docketed
as G.R. No. 170338. He prayed that the respondent House Committees be restrained from using these tape recordings of
the "illegally obtained" wiretapped conversations in their committee reports and for any other purpose. He further
implored that the said recordings and any reference thereto be ordered stricken off the records of the inquiry, and the
respondent House Committees directed to desist from further using the recordings in any of the House proceedings.5

Without reaching its denouement, the House discussion and debates on the "Garci tapes" abruptly stopped.

After more than two years of quiescence, Senator Panfilo Lacson roused the slumbering issue with a privilege speech,
"The Lighthouse That Brought Darkness." In his discourse, Senator Lacson promised to provide the public "the whole
unvarnished truth – the what’s, when’s, where’s, who’s and why’s" of the alleged wiretap, and sought an inquiry into the
perceived willingness of telecommunications providers to participate in nefarious wiretapping activities.

On motion of Senator Francis Pangilinan, Senator Lacson’s speech was referred to the Senate Committee on National
Defense and Security, chaired by Senator Rodolfo Biazon, who had previously filed two bills6 seeking to regulate the
sale, purchase and use of wiretapping equipment and to prohibit the Armed Forces of the Philippines (AFP) from
performing electoral duties.7

In the Senate’s plenary session the following day, a lengthy debate ensued when Senator Richard Gordon aired his
concern on the possible transgression of Republic Act (R.A.) No. 42008 if the body were to conduct a legislative inquiry
on the matter. On August 28, 2007, Senator Miriam Defensor-Santiago delivered a privilege speech, articulating her
considered view that the Constitution absolutely bans the use, possession, replay or communication of the contents of the
"Hello Garci" tapes. However, she recommended a legislative investigation into the role of the Intelligence Service of the
AFP (ISAFP), the Philippine National Police or other government entities in the alleged illegal wiretapping of public
officials.9

On September 6, 2007, petitioners Santiago Ranada and Oswaldo Agcaoili, retired justices of the Court of Appeals, filed
before this Court a Petition for Prohibition with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of
Preliminary Injunction,10 docketed as G.R. No. 179275, seeking to bar the Senate from conducting its scheduled
legislative inquiry. They argued in the main that the intended legislative inquiry violates R.A. No. 4200 and Section 3,
Article III of the Constitution.11

As the Court did not issue an injunctive writ, the Senate proceeded with its public hearings on the "Hello Garci" tapes on
September 7,12 1713 and October 1,14 2007.
 Page 78 of 108

Intervening as respondents,15 Senators Aquilino Q. Pimentel, Jr., Benigno Noynoy C. Aquino, Rodolfo G. Biazon,
Panfilo M. Lacson, Loren B. Legarda, M.A. Jamby A.S. Madrigal and Antonio F. Trillanes filed their Comment16 on the
petition on September 25, 2007.

The Court subsequently heard the case on oral argument.17

On October 26, 2007, Maj. Lindsay Rex Sagge, a member of the ISAFP and one of the resource persons summoned by
the Senate to appear and testify at its hearings, moved to intervene as petitioner in G.R. No. 179275.18

On November 20, 2007, the Court resolved to consolidate G.R. Nos. 170338 and 179275.19

It may be noted that while both petitions involve the "Hello Garci" recordings, they have different objectives–the first is
poised at preventing the playing of the tapes in the House and their subsequent inclusion in the committee reports, and
the second seeks to prohibit and stop the conduct of the Senate inquiry on the wiretapped conversation.

The Court dismisses the first petition, G.R. No. 170338, and grants the second, G.R. No. 179275.

-I-

Before delving into the merits of the case, the Court shall first resolve the issue on the parties’ standing, argued at length
in their pleadings.

In Tolentino v. COMELEC,20 we explained that "‘[l]egal standing’ or locus standi refers to a personal and substantial
interest in a case such that the party has sustained or will sustain direct injury because of the challenged governmental act
x x x," thus,

generally, a party will be allowed to litigate only when (1) he can show that he has personally suffered some
actual or threatened injury because of the allegedly illegal conduct of the government; (2) the injury is fairly
traceable to the challenged action; and (3) the injury is likely to be redressed by a favorable action.21

The gist of the question of standing is whether a party has "alleged such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so
largely depends for illumination of difficult constitutional questions."22

However, considering that locus standi is a mere procedural technicality, the Court, in recent cases, has relaxed the
stringent direct injury test. David v. Macapagal-Arroyo23articulates that a "liberal policy has been observed, allowing
ordinary citizens, members of Congress, and civic organizations to prosecute actions involving the constitutionality or
validity of laws, regulations and rulings."24 The fairly recent Chavez v. Gonzales25 even permitted a non-member of the
broadcast media, who failed to allege a personal stake in the outcome of the controversy, to challenge the acts of the
Secretary of Justice and the National Telecommunications Commission. The majority, in the said case, echoed the
current policy that "this Court has repeatedly and consistently refused to wield procedural barriers as impediments to its
addressing and resolving serious legal questions that greatly impact on public interest, in keeping with the Court’s duty
under the 1987 Constitution to determine whether or not other branches of government have kept themselves within the
limits of the Constitution and the laws, and that they have not abused the discretion given to them."26

In G.R. No. 170338, petitioner Garcillano justifies his standing to initiate the petition by alleging that he is the person
alluded to in the "Hello Garci" tapes. Further, his was publicly identified by the members of the respondent committees
as one of the voices in the recordings.27Obviously, therefore, petitioner Garcillano stands to be directly injured by the
House committees’ actions and charges of electoral fraud. The Court recognizes his standing to institute the petition for
prohibition.

In G.R. No. 179275, petitioners Ranada and Agcaoili justify their standing by alleging that they are concerned citizens,
taxpayers, and members of the IBP. They are of the firm conviction that any attempt to use the "Hello Garci" tapes will
further divide the country. They wish to see the legal and proper use of public funds that will necessarily be defrayed in
the ensuing public hearings. They are worried by the continuous violation of the laws and individual rights, and the
blatant attempt to abuse constitutional processes through the conduct of legislative inquiries purportedly in aid of
legislation.28

Intervenor Sagge alleges violation of his right to due process considering that he is summoned to attend the Senate
hearings without being apprised not only of his rights therein through the publication of the Senate Rules of Procedure
Governing Inquiries in Aid of Legislation, but also of the intended legislation which underpins the investigation. He
further intervenes as a taxpayer bewailing the useless and wasteful expenditure of public funds involved in the conduct of
the questioned hearings.29
 Page 79 of 108

Given that petitioners Ranada and Agcaoili allege an interest in the execution of the laws and that intervenor Sagge
asserts his constitutional right to due process,30 they satisfy the requisite personal stake in the outcome of the controversy
by merely being citizens of the Republic.

Following the Court’s ruling in Francisco, Jr. v. The House of Representatives,31 we find sufficient petitioners Ranada’s
and Agcaoili’s and intervenor Sagge’s allegation that the continuous conduct by the Senate of the questioned legislative
inquiry will necessarily involve the expenditure of public funds.32 It should be noted that in Francisco, rights personal to
then Chief Justice Hilario G. Davide, Jr. had been injured by the alleged unconstitutional acts of the House of
Representatives, yet the Court granted standing to the petitioners therein for, as in this case, they invariably invoked the
vindication of their own rights–as taxpayers, members of Congress, citizens, individually or in a class suit, and members
of the bar and of the legal profession–which were also supposedly violated by the therein assailed unconstitutional acts.33

Likewise, a reading of the petition in G.R. No. 179275 shows that the petitioners and intervenor Sagge advance
constitutional issues which deserve the attention of this Court in view of their seriousness, novelty and weight as
precedents. The issues are of transcendental and paramount importance not only to the public but also to the Bench and
the Bar, and should be resolved for the guidance of all.34

Thus, in the exercise of its sound discretion and given the liberal attitude it has shown in prior cases climaxing in the
more recent case of Chavez, the Court recognizes the legal standing of petitioners Ranada and Agcaoili and intervenor
Sagge.

- II -

The Court, however, dismisses G.R. No. 170338 for being moot and academic. Repeatedly stressed in our prior decisions
is the principle that the exercise by this Court of judicial power is limited to the determination and resolution of actual
cases and controversies.35 By actual cases, we mean existing conflicts appropriate or ripe for judicial determination, not
conjectural or anticipatory, for otherwise the decision of the Court will amount to an advisory opinion. The power of
judicial inquiry does not extend to hypothetical questions because any attempt at abstraction could only lead to dialectics
and barren legal questions and to sterile conclusions unrelated to actualities.36 Neither will the Court determine a moot
question in a case in which no practical relief can be granted. A case becomes moot when its purpose has become
stale.37 It is unnecessary to indulge in academic discussion of a case presenting a moot question as a judgment thereon
cannot have any practical legal effect or, in the nature of things, cannot be enforced.38

In G.R. No. 170338, petitioner Garcillano implores from the Court, as aforementioned, the issuance of an injunctive writ
to prohibit the respondent House Committees from playing the tape recordings and from including the same in their
committee report. He likewise prays that the said tapes be stricken off the records of the House proceedings. But the
Court notes that the recordings were already played in the House and heard by its members.39 There is also the widely
publicized fact that the committee reports on the "Hello Garci" inquiry were completed and submitted to the House in
plenary by the respondent committees.40 Having been overtaken by these events, the Garcillano petition has to be
dismissed for being moot and academic. After all, prohibition is a preventive remedy to restrain the doing of an act about
to be done, and not intended to provide a remedy for an act already accomplished.41

- III -

As to the petition in G.R. No. 179275, the Court grants the same. The Senate cannot be allowed to continue with the
conduct of the questioned legislative inquiry without duly published rules of procedure, in clear derogation of the
constitutional requirement.

Section 21, Article VI of the 1987 Constitution explicitly provides that "[t]he Senate or the House of Representatives, or
any of its respective committees may conduct inquiries in aid of legislation in accordance with its duly published rules of
procedure." The requisite of publication of the rules is intended to satisfy the basic requirements of due
process.42Publication is indeed imperative, for it will be the height of injustice to punish or otherwise burden a citizen for
the transgression of a law or rule of which he had no notice whatsoever, not even a constructive one.43 What constitutes
publication is set forth in Article 2 of the Civil Code, which provides that "[l]aws shall take effect after 15 days following
the completion of their publication either in the Official Gazette, or in a newspaper of general circulation in the
Philippines."44

The respondents in G.R. No. 179275 admit in their pleadings and even on oral argument that the Senate Rules of
Procedure Governing Inquiries in Aid of Legislation had been published in newspapers of general circulation only in
1995 and in 2006.45 With respect to the present Senate of the 14th Congress, however, of which the term of half of its
members commenced on June 30, 2007, no effort was undertaken for the publication of these rules when they first
opened their session.

Recently, the Court had occasion to rule on this very same question. In Neri v. Senate Committee on Accountability of
Public Officers and Investigations,46 we said:
 Page 80 of 108

Fourth, we find merit in the argument of the OSG that respondent Committees likewise violated Section 21 of
Article VI of the Constitution, requiring that the inquiry be in accordance with the "duly published rules of
procedure." We quote the OSG’s explanation:

The phrase "duly published rules of procedure" requires the Senate of every Congress to publish its rules
of procedure governing inquiries in aid of legislation because every Senate is distinct from the one
before it or after it. Since Senatorial elections are held every three (3) years for one-half of the Senate’s
membership, the composition of the Senate also changes by the end of each term. Each Senate may thus
enact a different set of rules as it may deem fit. Not having published its Rules of Procedure, the
subject hearings in aid of legislation conducted by the 14th Senate, are therefore, procedurally
infirm.

Justice Antonio T. Carpio, in his Dissenting and Concurring Opinion, reinforces this ruling with the following
rationalization:

The present Senate under the 1987 Constitution is no longer a continuing legislative body. The present Senate
has twenty-four members, twelve of whom are elected every three years for a term of six years each. Thus, the
term of twelve Senators expires every three years, leaving less than a majority of Senators to continue into the
next Congress. The 1987 Constitution, like the 1935 Constitution, requires a majority of Senators to "constitute
a quorum to do business." Applying the same reasoning in Arnault v. Nazareno, the Senate under the 1987
Constitution is not a continuing body because less than majority of the Senators continue into the next Congress.
The consequence is that the Rules of Procedure must be republished by the Senate after every expiry of the term
of twelve Senators.47

The subject was explained with greater lucidity in our Resolution48 (On the Motion for Reconsideration) in the same
case, viz.:

On the nature of the Senate as a "continuing body," this Court sees fit to issue a clarification. Certainly, there is
no debate that the Senate as an institution is "continuing," as it is not dissolved as an entity with each national
election or change in the composition of its members. However, in the conduct of its day-to-day business the
Senate of each Congress acts separately and independently of the Senate of the Congress before it. The Rules of
the Senate itself confirms this when it states:

RULE XLIV
UNFINISHED BUSINESS

SEC. 123. Unfinished business at the end of the session shall be taken up at the next session in the same
status.

All pending matters and proceedings shall terminate upon the expiration of one (1) Congress, but
may be taken by the succeeding Congress as if present for the first time.

Undeniably from the foregoing, all pending matters and proceedings, i.e., unpassed bills and even legislative
investigations, of the Senate of a particular Congress are considered terminated upon the expiration of that
Congress and it is merely optional on the Senate of the succeeding Congress to take up such unfinished
matters, not in the same status, but as if presented for the first time. The logic and practicality of such a rule is
readily apparent considering that the Senate of the succeeding Congress (which will typically have a different
composition as that of the previous Congress) should not be bound by the acts and deliberations of the Senate of
which they had no part. If the Senate is a continuing body even with respect to the conduct of its business, then
pending matters will not be deemed terminated with the expiration of one Congress but will, as a matter of
course, continue into the next Congress with the same status.

This dichotomy of the continuity of the Senate as an institution and of the opposite nature of the conduct of its
business is reflected in its Rules. The Rules of the Senate (i.e. the Senate’s main rules of procedure) states:

RULE LI
AMENDMENTS TO, OR REVISIONS OF, THE RULES

SEC. 136. At the start of each session in which the Senators elected in the preceding elections shall
begin their term of office, the President may endorse the Rules to the appropriate committee for
amendment or revision.
 Page 81 of 108

The Rules may also be amended by means of a motion which should be presented at least one day before
its consideration, and the vote of the majority of the Senators present in the session shall be required for
its approval.

RULE LII
DATE OF TAKING EFFECT

SEC. 137. These Rules shall take effect on the date of their adoption and shall remain in force until they
are amended or repealed.

Section 136 of the Senate Rules quoted above takes into account the new composition of the Senate after an
election and the possibility of the amendment or revision of the Rules at the start of each session in which the
newly elected Senators shall begin their term.

However, it is evident that the Senate has determined that its main rules are intended to be valid from the date of
their adoption until they are amended or repealed. Such language is conspicuously absent from the Rules.
The Rules simply state "(t)hese Rules shall take effect seven (7) days after publication in two (2) newspapers of
general circulation." The latter does not explicitly provide for the continued effectivity of such rules until they
are amended or repealed. In view of the difference in the language of the two sets of Senate rules, it cannot be
presumed that the Rules (on legislative inquiries) would continue into the next Congress. The Senate of the next
Congress may easily adopt different rules for its legislative inquiries which come within the rule on unfinished
business.

The language of Section 21, Article VI of the Constitution requiring that the inquiry be conducted in accordance
with the duly published rules of procedure is categorical. It is incumbent upon the Senate to publish the rules for
its legislative inquiries in each Congress or otherwise make the published rules clearly state that the same shall
be effective in subsequent Congresses or until they are amended or repealed to sufficiently put public on notice.

If it was the intention of the Senate for its present rules on legislative inquiries to be effective even in the next
Congress, it could have easily adopted the same language it had used in its main rules regarding effectivity.

Respondents justify their non-observance of the constitutionally mandated publication by arguing that the rules have
never been amended since 1995 and, despite that, they are published in booklet form available to anyone for free, and
accessible to the public at the Senate’s internet web page.49

The Court does not agree. The absence of any amendment to the rules cannot justify the Senate’s defiance of the clear
and unambiguous language of Section 21, Article VI of the Constitution. The organic law instructs, without more, that
the Senate or its committees may conduct inquiries in aid of legislation only in accordance with duly published rules of
procedure, and does not make any distinction whether or not these rules have undergone amendments or revision. The
constitutional mandate to publish the said rules prevails over any custom, practice or tradition followed by the Senate.

Justice Carpio’s response to the same argument raised by the respondents is illuminating:

The publication of the Rules of Procedure in the website of the Senate, or in pamphlet form available at the
Senate, is not sufficient under the Tañada v. Tuvera ruling which requires publication either in the Official
Gazette or in a newspaper of general circulation. The Rules of Procedure even provide that the rules "shall take
effect seven (7) days after publication in two (2) newspapers of general circulation," precluding any other form
of publication. Publication in accordance with Tañada is mandatory to comply with the due process requirement
because the Rules of Procedure put a person’s liberty at risk. A person who violates the Rules of
Procedure could be arrested and detained by the Senate.

The invocation by the respondents of the provisions of R.A. No. 8792,50 otherwise known as the Electronic Commerce
Act of 2000, to support their claim of valid publication through the internet is all the more incorrect. R.A. 8792 considers
an electronic data message or an electronic document as the functional equivalent of a written document only
for evidentiary purposes.51 In other words, the law merely recognizes the admissibility in evidence (for their being the
original) of electronic data messages and/or electronic documents.52 It does not make the internet a medium for
publishing laws, rules and regulations.

Given this discussion, the respondent Senate Committees, therefore, could not, in violation of the Constitution, use its
unpublished rules in the legislative inquiry subject of these consolidated cases. The conduct of inquiries in aid of
legislation by the Senate has to be deferred until it shall have caused the publication of the rules, because it can do so
only "in accordance with its duly published rules of procedure."
 Page 82 of 108

Very recently, the Senate caused the publication of the Senate Rules of Procedure Governing Inquiries in Aid of
Legislation in the October 31, 2008 issues of Manila Bulletinand Malaya. While we take judicial notice of this fact, the
recent publication does not cure the infirmity of the inquiry sought to be prohibited by the instant petitions. Insofar as the
consolidated cases are concerned, the legislative investigation subject thereof still could not be undertaken by the
respondent Senate Committees, because no published rules governed it, in clear contravention of the Constitution.

With the foregoing disquisition, the Court finds it unnecessary to discuss the other issues raised in the consolidated
petitions.

WHEREFORE, the petition in G.R. No. 170338 is DISMISSED, and the petition in G.R. No. 179275 is GRANTED. Let
a writ of prohibition be issued enjoining the Senate of the Republic of the Philippines and/or any of its committees from
conducting any inquiry in aid of legislation centered on the "Hello Garci" tapes.

SO ORDERED.

G.R. No. 170491 April 4, 2007

NATIONAL POWER CORPORATION, Petitioner,
vs.
HON. RAMON G. CODILLA, JR., Presiding Judge, RTC of Cebu, Br. 19, BANGPAI SHIPPING COMPANY,
and WALLEM SHIPPING, INCORPORATED, Respondents.
Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, assailing the Decision 1 of
the Court of Appeals in CA-G.R. CEB-SP No. 00848, dated 9 November 2005, which dismissed the Petition for
Certiorari filed by the National Power Corporation seeking to set aside the Order2 issued by the Regional Trial Court
(RTC) of Cebu, Branch 19 dated 16 November 2004, denying admission and excluding from the records plaintiff’s
(herein petitioner) Exhibits "A", "C", "D", "E", "H" and its sub-markings, "I", "J", and its sub-markings, "K", "L", "M"
 Page 83 of 108

and its sub-markings, "N" and its sub-markings, "O", "P" and its sub-markings, "Q" and its sub-markings, "R" and "S"
and its sub-markings.

On 20 April 1996, M/V Dibena Win, a vessel of foreign registry owned and operated by private respondent Bangpai
Shipping, Co., allegedly bumped and damaged petitioner’s Power Barge 209 which was then moored at the Cebu
International Port. Thus, on 26 April 1996, petitioner filed before the Cebu RTC a complaint for damages against private
respondent Bangpai Shipping Co., for the alleged damages caused on petitioner’s power barges.

Thereafter, petitioner filed an Amended Complaint dated 8 July 1996 impleading herein private respondent Wallem
Shipping, Inc., as additional defendant, contending that the latter is a ship agent of Bangpai Shipping Co. On 18
September 1996, Wallem Shipping, Inc. filed a Motion to Dismiss which was subsequently denied by public respondent
Judge in an Order dated 20 October 1998. Bangpai Shipping Co. likewise filed a Motion to Dismiss which was also
denied by public respondent Judge in an Order issued on 24 January 2003.

Petitioner, after adducing evidence during the trial of the case, filed a formal offer of evidence before the lower court on
2 February 2004 consisting of Exhibits "A" to "V" together with the sub-marked portions thereof. Consequently, private
respondents Bangpai Shipping Co. and Wallem Shipping, Inc. filed their respective objections to petitioner’s formal offer
of evidence.

On 16 November 2004, public respondent judge issued the assailed order denying the admission and excluding from the
records petitioner’s Exhibits "A", "C", "D", "E", "H" and its sub-markings, "I", "J" and its sub-markings, "K", "L", "M"
and its sub-markings, "N" and its sub-markings, "O", "P" and its sub-markings, "Q" and its sub-markings, "R" and "S"
and its sub-markings. According to the court a quo:

The Court finds merit in the objections raised and the motion to strike out filed respectively by the defendants. The
record shows that the plaintiff has been given every opportunity to present the originals of the Xerox or photocopies of
the documents it offered. It never produced the originals. The plaintiff attempted to justify the admission of the
photocopies by contending that "the photocopies offered are equivalent to the original of the document" on the basis of
the Electronic Evidence (Comment to Defendant Wallem Philippines’ Objections and Motion to Strike). But as rightly
pointed out in defendant Wallem’s Reply to the Comment of Plaintiff, the Xerox copies do not constitute the electronic
evidence defined in Section 1 of Rule 2 of the Rules on Electronic Evidence as follows:

"(h) "Electronic document" refers to information or the representation of information, data, figures, symbols or other
models of written expression, described or however represented, by which a right is established or an obligation
extinguished, or by which a fact may be proved and affirmed, which is received, recorded, transmitted, stored, processed,
retrieved or produced electronically. It includes digitally signed documents and any printout, readable by sight or other
means which accurately reflects the electronic data message or electronic document. For the purpose of these Rules, the
term "electronic document" may be used interchangeably with "electronic data message".

The information in those Xerox or photocopies was not received, recorded, retrieved or produced electronically.
Moreover, such electronic evidence must be authenticated (Sections 1 and 2, Rule 5, Rules on Electronic Evidence),
which the plaintiff failed to do. Finally, the required Affidavit to prove the admissibility and evidentiary weight of the
alleged electronic evidence (Sec. 1, Rule 9, Ibid) was not executed, much less presented in evidence.

The Xerox or photocopies offered should, therefore, be stricken off the record. Aside from their being not properly
identified by any competent witness, the loss of the principals thereof was not established by any competent proof.

xxxx

WHEREFORE, plaintiff’s Exhibits "A", "C", "D", "E", "H" and its sub-markings, "I", "J", and its sub-markings, "K",
"L", "M" and its sub-markings, "N" and its sub-markings, "O", "P" and its sub-markings, "Q" and its sub-markings, and
"R" are hereby DENIED admission and excluded from the records. However, these excluded evidence should be
attached to the records of this case to enable the appellate court to pass upon them should an appeal be taken from the
decision on the merits to be rendered upon the termination of the trial of this case.

Exhibits "S" and its sub-markings are also DENIED admission for lack of proper identification since the witness who
brought these pictures expressly admitted that he was not present when the photos were taken and had not knowledge
when the same where taken.3

Upon denial of petitioner’s Motion for Reconsideration in an Order dated 20 April 2005, petitioner filed a Petition
for Certiorari under Rule 65 of the Rules of Civil Procedure before the Court of Appeals maintaining that public
respondent Judge acted with grave abuse of discretion amounting to lack or excess of jurisdiction in denying the
admission of its Exhibits "A", "C", "D", "E", "H" and its sub-markings, "I", "J" and its sub-markings, "K", "L", "M" and
 Page 84 of 108

its sub-markings, "N" and its sub-markings, "O", "P" and its sub-markings, "Q" and its sub-markings, "R", and "S" and
its sub-markings.

On 9 November 2005, the appellate court issued a Decision dismissing petitioner’s petition for certiorari, the pertinent
portions of which elucidate:

After a judicious scrutiny of the record of the case on hand, together with the rules and jurisprudence which are
applicable in the premises, we have come up with a finding that the petition for certiorari filed in this case is not
meritorious.

It appears that there is no sufficient showing by the petitioner that the respondent judge acted with grave abuse of
discretion in issuing the assailed orders in Civil Case No. CEB-18662. As what our jurisprudence tells us, grave abuse of
discretion is meant such capricious and whimsical exercise of judgment as would be equivalent to lack of jurisdiction x x
x.

In the case at bench, what has been shown to the contrary by the totality of the record on hand is that the respondent
judge acted correctly and within the pale of his sound discretion in issuing the assailed order, dated November 16, 2004,
in Civil Case No. CEB-18662.

Indeed, it appears that the pieces of petitioner’s documentary evidence which were denied admission by the respondent
judge were not properly identified by any competent witness. As pointed out by the respondent Bangpai Shipping
Company in its comment on the petition filed in this case which reproduces some excerpts of the testimonies in the
court a quo of Atty. Marianito De Los Santos, Engr. Nestor Enriquez, Jr. and Mr. Rodulfo I. Pagaling, the said witnesses
did not have personal knowledge of and participation in the preparation and making of the pieces of documentary
evidence denied admission by respondent judge x x x. In other words, there was lack of proper identification of said
pieces of documentary evidence. x x x.

Then another ground for denying admission of petitioner’s Exhibits A, C, D, E, H, I, J, K, L, M, N, O, P, Q, R, and S by

the respondent judge is that said pieces of documentary evidence were merely photocopies of purported documents or
papers. There is no gainsaying the fact that the respondent judge acted within the pale of his discretion when he denied
admission of said documentary evidence. Section 3 of Rule 130 of the Rules of Court of the Philippines is very explicit
in providing that, when the subject of inquiry are the contents of documents, no evidence shall be admissible other than
the original documents themselves, except in certain cases specifically so enumerated therein, and the petitioner has not
shown that the non-presentation or non-production of its original documentary pieces of evidence falls under such
exceptions. As aptly pointed out by the respondent judge in the order issued by him on November 16, 2004:

"x x x The record shows that the plaintiff (petitioner herein) has been given every opportunity to present the originals of
the Xerox or photocopies of the documents it offered. It never produced said originals."

So, the petitioner has only itself to blame for the respondent judge’s denial of admission of its aforementioned
documentary evidence.

Of course, the petitioner tries to contend that the photocopies of documents offered by it are equivalent to the original
documents that it sought to offer in evidence, based on the Rules on Electronic Evidence which were in force and effect
since August 1, 2001. However, such a contention is devoid of merit. The pieces of documentary evidence offered by the
petitioner in Civil Case CEB-18662 which were denied admission by the respondent judge do not actually constitute as
electronic evidence as defined in the Rules on Electronic Evidence. The informations therein were not received, retrieved
or produced electronically. The petitioner has not adequately established that its documentary evidence were electronic
evidence. it has not properly authenticated such evidence as electronic documents, assuming arguendo that they are.
Lastly, the petitioner has not properly established by affidavit pursuant to Rule 9 of the Rules on Electronic Evidence the
admissibility and evidentiary weight of said documentary evidence.

Thus, by any legal yardstick, it is manifest that the respondent judge did not commit grave abuse of discretion in denying
admission of the aforementioned documentary evidence of petitioner.

But even if it be granted just for the sake of argument that the respondent judge committed an error in denying the
aforementioned documentary evidence of the petitioner, still the petition for certiorari filed in this case must fail. Such
error would at most be only an error of law and not an error of jurisdiction. In Lee vs. People, 393 SCRA 397, the
Supreme Court of the Philippines said that certiorari will not lie in case of an error of law. x x x.

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the petition filed in
this case and AFFIRMING the assailed orders issued by respondent judge in Civil Case No. CEB-18662.4

Aggrieved by the aforequoted decision, petitioner filed the instant petition.

 Page 85 of 108

The focal point of this entire controversy is petitioner’s obstinate contention that the photocopies it offered as formal
evidence before the trial court are the functional equivalent of their original based on its inimitable interpretation of the
Rules on Electronic Evidence.

Petitioner insists that, contrary to the rulings of both the trial court and the appellate court, the photocopies it presented as
documentary evidence actually constitute electronic evidence based on its own premise that an "electronic document" as
defined under Section 1(h), Rule 2 of the Rules on Electronic Evidence is not limited to information that is received,
recorded, retrieved or produced electronically. Rather, petitioner maintains that an "electronic document" can also refer
to other modes of written expression that is produced electronically, such as photocopies, as included in the section’s
catch-all proviso: "any print-out or output, readable by sight or other means".

We do not agree.

In order to shed light to the issue of whether or not the photocopies are indeed electronic documents as contemplated in
Republic Act No. 8792 or the Implementing Rules and Regulations of the Electronic Commerce Act, as well as the Rules
on Electronic Evidence, we shall enumerate the following documents offered as evidence by the petitioner, to wit:

1. Exhibit "A" is a photocopy of a letter manually signed by a certain Jose C. Troyo, with "RECEIVED" stamped
thereon, together with a handwritten date;
2. Exhibit "C" is a photocopy of a list of estimated cost of damages of petitioner’s power barges 207 and 209
prepared by Hopewell Mobile Power Systems Corporation and manually signed by Messrs. Rex Malaluan and
Virgilio Asprer;
3. Exhibit "D" is a photocopy of a letter manually signed by a certain Nestor G. Enriquez, Jr., with "RECEIVED"
stamped thereon, together with a handwritten notation of the date it was received;
4. Exhibit "E" is a photocopy of a Standard Marine Protest Form which was filled up and accomplished by Rex
Joel C. Malaluan in his own handwriting and signed by him. Portions of the Jurat were handwritten, and
manually signed by the Notary Public;
5. Exhibit "H" is a photocopy of a letter manually signed by Mr. Nestor G. Enriquez, Jr. with "RECEIVED"
stamped thereon, together with a handwritten notation of the date it was received;
6. Exhibit "I" is a photocopy of a computation of the estimated energy loss allegedly suffered by petitioner which
was manually signed by Mr. Nestor G. Enriquez, Jr.;
7. Exhibit "J" is a photocopy of a letter containing the breakdown of the cost estimate, manually signed by Mr.
Nestor G. Enriquez, Jr., with "RECEIVED" stamped thereon, together with a handwritten notation of the date it
was received, and other handwritten notations;
8. Exhibit "K" is a photocopy of the Subpoena Duces Tecum Ad Testificandum written using a manual
typewriter, signed manually by Atty. Ofelia Polo-De Los Reyes, with a handwritten notation when it was
received by the party;
9. Exhibit "L" is a photocopy of a portion of the electricity supply and operation and maintenance agreement
between petitioner and Hopewell, containing handwritten notations and every page containing three unidentified
manually placed signatures;
10. Exhibit "M" is a photocopy of the Notice of Termination with attachments addressed to Rex Joel C.
Malaluan, manually signed by Jaime S. Patinio, with a handwritten notation of the date it was received. The sub-
markings also contain manual signatures and/or handwritten notations;
11. Exhibit "N" is a photocopy of a letter of termination with attachments addressed to VIrgilio Asprer and
manually signed by Jaime S. Patino. The sub-markings contain manual signatures and/or handwritten notations;
12. Exhibit "O" is the same photocopied document marked as Annex C;
13. Exhibit "P" is a photocopy of an incident report manually signed by Messrs. Malaluan and Bautista and by
the Notary Public, with other handwritten notations;
14. Exhibit "Q" is a photocopy of a letter manually signed by Virgilio Asprer and by a Notary Public, together
with other handwritten notations.
On the other hand, an "electronic document" refers to information or the representation of information, data, figures,
symbols or other models of written expression, described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed, which is received, recorded, transmitted, stored,
processed, retrieved or produced electronically.5 It includes digitally signed documents and any printout, readable by
sight or other means which accurately reflects the electronic data message or electronic document.6

The rules use the word "information" to define an electronic document received, recorded, transmitted, stored, processed,
retrieved or produced electronically. This would suggest that an electronic document is relevant only in terms of the
information contained therein, similar to any other document which is presented in evidence as proof of its
contents.7 However, what differentiates an electronic document from a paper-based document is the manner by which the
information is processed; clearly, the information contained in an electronic document is received, recorded, transmitted,
stored, processed, retrieved or produced electronically.

A perusal of the information contained in the photocopies submitted by petitioner will reveal that not all of the contents
therein, such as the signatures of the persons who purportedly signed the documents, may be recorded or produced
 Page 86 of 108

electronically. By no stretch of the imagination can a person’s signature affixed manually be considered as information
electronically received, recorded, transmitted, stored, processed, retrieved or produced. Hence, the argument of petitioner
that since these paper printouts were produced through an electronic process, then these photocopies are electronic
documents as defined in the Rules on Electronic Evidence is obviously an erroneous, if not preposterous, interpretation
of the law. Having thus declared that the offered photocopies are not tantamount to electronic documents, it is
consequential that the same may not be considered as the functional equivalent of their original as decreed in the law.

Furthermore, no error can be ascribed to the court a quo in denying admission and excluding from the records
petitioner’s Exhibits "A", "C", "D", "E", "H" and its sub-markings, "I", "J" and its sub-markings, "K", "L", "M" and its
sub-markings, "N" and its sub-markings, "O", "P" and its sub-markings, "Q" and its sub-markings, and "R". The trial
court was correct in rejecting these photocopies as they violate the best evidence rule and are therefore of no probative
value being incompetent pieces of evidence. Before the onset of liberal rules of discovery, and modern technique of
electronic copying, the best evidence rule was designed to guard against incomplete or fraudulent proof and the
introduction of altered copies and the withholding of the originals.8 But the modern justification for the rule has
expanded from the prevention of fraud to a recognition that writings occupy a central position in the law.9 The
importance of the precise terms of writings in the world of legal relations, the fallibility of the human memory as reliable
evidence of the terms, and the hazards of inaccurate or incomplete duplicate are the concerns addressed by the best
evidence rule.10

Moreover, as mandated under Section 2, Rule 130 of the Rules of Court:

"SECTION 2. Original writing must be produced; exceptions. — There can be no evidence of a writing the contents of
which is the subject of inquiry, other than the original writing itself, except in the following cases:
(a) When the original has been lost, destroyed, or cannot be produced in court;
(b) When the original is in the possession of the party against whom the evidence is offered, and the latter fails to
produce it after reasonable notice;
(c) When the original is a record or other document in the custody of a public officer;
(d) When the original has been recorded in an existing record a certified copy of which is made evidence by law;
(e) When the original consists of numerous accounts or other documents which cannot be examined in court
without great loss of time and the fact sought to be established from them is only the general result of the whole."
When the original document has been lost or destroyed, or cannot be produced in court, the offeror, upon proof of its
execution or existence and the cause of its unavailability without bad faith on his part, may prove its contents by a copy,
or by a recital of its contents in some authentic document, or by the testimony of witnesses in the order stated.11 The
offeror of secondary evidence is burdened to prove the predicates thereof: (a) the loss or destruction of the original
without bad faith on the part of the proponent/offeror which can be shown by circumstantial evidence of routine practices
of destruction of documents;12 (b) the proponent must prove by a fair preponderance of evidence as to raise a reasonable
inference of the loss or destruction of the original copy; and (c) it must be shown that a diligent and bona fide but
unsuccessful search has been made for the document in the proper place or places.13 However, in the case at bar, though
petitioner insisted in offering the photocopies as documentary evidence, it failed to establish that such offer was made in
accordance with the exceptions as enumerated under the abovequoted rule. Accordingly, we find no error in the Order of
the court a quo denying admissibility of the photocopies offered by petitioner as documentary evidence.

Finally, it perplexes this Court why petitioner continued to obdurately disregard the opportunities given by the trial court
for it to present the originals of the photocopies it presented yet comes before us now praying that it be allowed to
present the originals of the exhibits that were denied admission or in case the same are lost, to lay the predicate for the
admission of secondary evidence. Had petitioner presented the originals of the documents to the court instead of the
photocopies it obstinately offered as evidence, or at the very least laid the predicate for the admission of said
photocopies, this controversy would not have unnecessarily been brought before the appellate court and finally to this
Court for adjudication. Had it not been for petitioner’s intransigence, the merits of petitioner’s complaint for damages
would have been decided upon by the trial court long ago. As aptly articulated by the Court of Appeals, petitioner has
only itself to blame for the respondent judge’s denial of admission of its aforementioned documentary evidence and
consequently, the denial of its prayer to be given another opportunity to present the originals of the documents that were
denied admission nor to lay the predicate for the admission of secondary evidence in case the same has been lost.

WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision of the Court of Appeals in
CA-G.R. CEB-SP No. 00848, dated 9 November 2005 is hereby AFFIRMED. Costs against petitioner.SO ORDERED

G.R. No. 202666 September 29, 2014

 Page 87 of 108

RHONDA AVE S. VIVARES and SPS. MARGARITA and DAVID SUZARA, Petitioners,
vs.
ST. THERESA'S COLLEGE, MYLENE RHEZA T. ESCUDERO, and JOHN DOES, Respondents.

DECISION

VELASCO, JR., J.:

The individual's desire for privacy is never absolute, since participation in society is an equally powerful desire. Thus
each individual is continually engaged in a personal adjustment process in which he balances the desire for privacy with
the desire for disclosure and communication of himself to others, in light of the environmental conditions and social
norms set by the society in which he lives.

- Alan Westin, Privacy and Freedom (1967)

The Case

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, in relation to Section 19 of A.M.
No. 08-1-16-SC,1 otherwise known as the "Rule on the Writ of Habeas Data." Petitioners herein assail the July 27, 2012
Decision2 of the Regional Trial Court, Branch 14 in Cebu City (RTC) in SP. Proc. No. 19251-CEB, which dismissed
their habeas data petition.

The Facts

Nenita Julia V. Daluz (Julia) and Julienne Vida Suzara (Julienne), both minors, were, during the period material,
graduating high school students at St. Theresa's College (STC), Cebu City. Sometime in January 2012, while changing
into their swimsuits for a beach party they were about to attend, Julia and Julienne, along with several others, took digital
pictures of themselves clad only in their undergarments. These pictures were then uploaded by Angela Lindsay Tan
(Angela) on her Facebook3 profile.

Back at the school, Mylene Rheza T. Escudero (Escudero), a computer teacher at STC’s high school department, learned
from her students that some seniors at STC posted pictures online, depicting themselves from the waist up, dressed only
in brassieres. Escudero then asked her students if they knew who the girls in the photos are. In turn, they readily
identified Julia, Julienne, and Chloe Lourdes Taboada (Chloe), among others.

Using STC’s computers, Escudero’s students logged in to their respective personal Facebook accounts and showed her
photos of the identified students, which include: (a) Julia and Julienne drinking hard liquor and smoking cigarettes inside
a bar; and (b) Julia and Julienne along the streets of Cebu wearing articles of clothing that show virtually the entirety of
their black brassieres. What is more, Escudero’s students claimed that there were times when access to or the availability
of the identified students’ photos was not confined to the girls’ Facebook friends,4 but were, in fact, viewable by any
Facebook user.5

Upon discovery, Escudero reported the matter and, through one of her student’s Facebook page, showed the photosto
Kristine Rose Tigol (Tigol), STC’s Discipline-in-Charge, for appropriate action. Thereafter, following an investigation,
STC found the identified students to have deported themselves in a manner proscribed by the school’s Student
Handbook, to wit:

1. Possession of alcoholic drinks outside the school campus;

2. Engaging in immoral, indecent, obscene or lewd acts;

3. Smoking and drinking alcoholicbeverages in public places;

4. Apparel that exposes the underwear;

5. Clothing that advocates unhealthy behaviour; depicts obscenity; contains sexually suggestive messages,
language or symbols; and 6. Posing and uploading pictures on the Internet that entail ample body exposure.

On March 1, 2012, Julia, Julienne, Angela, and the other students in the pictures in question, reported, as required, to the
office of Sr. Celeste Ma. Purisima Pe (Sr. Purisima), STC’s high school principal and ICM6 Directress. They claimed that
during the meeting, they were castigated and verbally abused by the STC officials present in the conference, including
Assistant Principal Mussolini S. Yap (Yap), Roswinda Jumiller, and Tigol. What is more, Sr. Purisima informed their
parents the following day that, as part of their penalty, they are barred from joining the commencement exercises
scheduled on March 30, 2012.
 Page 88 of 108

A week before graduation, or on March 23, 2012, Angela’s mother, Dr. Armenia M. Tan (Tan), filed a Petition for
Injunction and Damages before the RTC of Cebu City against STC, et al., docketed as Civil Case No. CEB-38594.7 In it,
Tan prayed that defendants therein be enjoined from implementing the sanction that precluded Angela from joining the
commencement exercises.

On March 25, 2012,petitioner Rhonda Ave Vivares (Vivares), the mother of Julia, joined the fray as an intervenor. On
March 28, 2012, defendants inCivil Case No. CEB-38594 filed their memorandum, containing printed copies of the
photographs in issue as annexes. That same day, the RTC issued a temporary restraining order (TRO) allowing the
students to attend the graduation ceremony, to which STC filed a motion for reconsideration.

Despite the issuance of the TRO,STC, nevertheless, barred the sanctioned students from participating in the graduation
rites, arguing that, on the date of the commencement exercises, its adverted motion for reconsideration on the issuance
ofthe TRO remained unresolved.

Thereafter, petitioners filed before the RTC a Petition for the Issuance of a Writ of Habeas Data, docketed as SP. Proc.
No. 19251-CEB8 on the basis of the following considerations:

1. The photos of their children in their undergarments (e.g., bra) were taken for posterity before they changed
into their swimsuits on the occasion of a birthday beach party;

2. The privacy setting of their children’s Facebook accounts was set at "Friends Only." They, thus, have a
reasonable expectation of privacy which must be respected.

3. Respondents, being involved in the field of education, knew or ought to have known of laws that safeguard the
right to privacy. Corollarily, respondents knew or ought to have known that the girls, whose privacy has been
invaded, are the victims in this case, and not the offenders. Worse, after viewing the photos, the minors were
called "immoral" and were punished outright;

4. The photos accessed belong to the girls and, thus, cannot be used and reproduced without their consent.
Escudero, however, violated their rights by saving digital copies of the photos and by subsequently showing
them to STC’s officials. Thus, the Facebook accounts of petitioners’ children were intruded upon;

5. The intrusion into the Facebook accounts, as well as the copying of information, data, and digital images
happened at STC’s Computer Laboratory; and

6. All the data and digital images that were extracted were boldly broadcasted by respondents through their
memorandum submitted to the RTC in connection with Civil Case No. CEB-38594. To petitioners, the interplay
of the foregoing constitutes an invasion of their children’s privacy and, thus, prayed that: (a) a writ of habeas
databe issued; (b) respondents be ordered to surrender and deposit with the court all soft and printed copies of the
subjectdata before or at the preliminary hearing; and (c) after trial, judgment be rendered declaring all
information, data, and digital images accessed, saved or stored, reproduced, spread and used, to have been
illegally obtained inviolation of the children’s right to privacy.

Finding the petition sufficient in form and substance, the RTC, through an Order dated July 5, 2012, issued the writ of
habeas data. Through the same Order, herein respondents were directed to file their verified written return, together with
the supporting affidavits, within five (5) working days from service of the writ.

In time, respondents complied with the RTC’s directive and filed their verified written return, laying down the following
grounds for the denial of the petition, viz: (a) petitioners are not the proper parties to file the petition; (b) petitioners are
engaging in forum shopping; (c) the instant case is not one where a writ of habeas data may issue;and (d) there can be no
violation of their right to privacy as there is no reasonable expectation of privacy on Facebook.

Ruling of the Regional Trial Court

On July 27, 2012, the RTC rendered a Decision dismissing the petition for habeas data. The dispositive portion of the
Decision pertinently states:

WHEREFORE, in view of the foregoing premises, the Petition is hereby DISMISSED.

The parties and media must observe the aforestated confidentiality.

xxxx

SO ORDERED.9
 Page 89 of 108

To the trial court, petitioners failed to prove the existence of an actual or threatened violation of the minors’ right to
privacy, one of the preconditions for the issuance of the writ of habeas data. Moreover, the court a quoheld that the
photos, having been uploaded on Facebook without restrictions as to who may view them, lost their privacy in some way.
Besides, the RTC noted, STC gathered the photographs through legal means and for a legal purpose, that is, the
implementation of the school’s policies and rules on discipline.

Not satisfied with the outcome, petitioners now come before this Court pursuant to Section 19 of the Rule on Habeas
Data.10

The Issues

The main issue to be threshed out inthis case is whether or not a writ of habeas datashould be issued given the factual
milieu. Crucial in resolving the controversy, however, is the pivotal point of whether or not there was indeed an actual or
threatened violation of the right to privacy in the life, liberty, or security of the minors involved in this case.

Our Ruling

We find no merit in the petition.

Procedural issues concerning the availability of the Writ of Habeas Data

The writ of habeas datais a remedy available to any person whose right to privacy in life, liberty or security is violated or
threatened by an unlawful act or omission of a public official or employee, or of a private individual or entity engaged in
the gathering, collecting or storing of data or information regarding the person, family, home and correspondence of the
aggrieved party.11 It is an independent and summary remedy designed to protect the image, privacy, honor, information,
and freedom of information of an individual, and to provide a forum to enforce one’s right to the truth and to
informational privacy. It seeks to protect a person’s right to control information regarding oneself, particularly in
instances in which such information is being collected through unlawful means in order to achieve unlawful ends. 12

In developing the writ of habeas data, the Court aimed to protect an individual’s right to informational privacy, among
others. A comparative law scholar has, in fact, defined habeas dataas "a procedure designed to safeguard individual
freedom from abuse in the information age."13 The writ, however, will not issue on the basis merely of an alleged
unauthorized access to information about a person.Availment of the writ requires the existence of a nexus between the
right to privacy on the one hand, and the right to life, liberty or security on the other.14 Thus, the existence of a person’s
right to informational privacy and a showing, at least by substantial evidence, of an actual or threatened violation of the
right to privacy in life, liberty or security of the victim are indispensable before the privilege of the writ may be
extended.15

Without an actionable entitlement in the first place to the right to informational privacy, a habeas datapetition will not
prosper. Viewed from the perspective of the case at bar,this requisite begs this question: given the nature of an online
social network (OSN)––(1) that it facilitates and promotes real-time interaction among millions, if not billions, of users,
sans the spatial barriers,16 bridging the gap created by physical space; and (2) that any information uploaded in OSNs
leavesan indelible trace in the provider’s databases, which are outside the control of the end-users––is there a right to
informational privacy in OSN activities of its users? Before addressing this point, We must first resolve the procedural
issues in this case.

a. The writ of habeas data is not only confined to cases of extralegal killings and enforced disappearances

Contrary to respondents’ submission, the Writ of Habeas Datawas not enacted solely for the purpose of complementing
the Writ of Amparoin cases of extralegal killings and enforced disappearances.

Section 2 of the Rule on the Writ of Habeas Data provides:

Sec. 2. Who May File. – Any aggrieved party may file a petition for the writ of habeas data. However, in cases of
extralegal killings and enforced disappearances, the petition may be filed by:
(a) Any member of the immediate family of the aggrieved party, namely: the spouse, children and parents; or
(b) Any ascendant, descendant or collateral relative of the aggrieved party within the fourth civil degreeof
consanguinity or affinity, in default of those mentioned in the preceding paragraph. (emphasis supplied)
Had the framers of the Rule intended to narrow the operation of the writ only to cases of extralegal killings or enforced
disappearances, the above underscored portion of Section 2, reflecting a variance of habeas data situations, would not
have been made.

Habeas data, to stress, was designed "to safeguard individual freedom from abuse in the information age." 17 As such, it is
erroneous to limit its applicability to extralegal killings and enforced disappearances only. In fact, the annotations to the
 Page 90 of 108

Rule preparedby the Committee on the Revision of the Rules of Court, after explaining that the Writ of Habeas Data
complements the Writ of Amparo, pointed out that:

The writ of habeas data, however, can be availed of as an independent remedy to enforce one’s right to privacy, more
specifically the right to informational privacy. The remedies against the violation of such right can include the updating,
rectification, suppression or destruction of the database or information or files in possession or in control of
respondents.18 (emphasis Ours) Clearly then, the privilege of the Writ of Habeas Datamay also be availed of in cases
outside of extralegal killings and enforced disappearances.

b. Meaning of "engaged" in the gathering, collecting or storing of data or information

Respondents’ contention that the habeas data writ may not issue against STC, it not being an entity engaged in the
gathering, collecting or storing of data or information regarding the person, family, home and correspondence of the
aggrieved party, while valid to a point, is, nonetheless, erroneous.

To be sure, nothing in the Rule would suggest that the habeas data protection shall be available only against abuses of a
person or entity engaged in the businessof gathering, storing, and collecting of data. As provided under Section 1 of the
Rule:

Section 1. Habeas Data. – The writ of habeas datais a remedy available to any person whose right to privacy in life,
liberty or security is violated or threatened by an unlawful act or omission of a public official or employee, or of a private
individual or entity engaged in the gathering, collecting or storing of data or information regarding the person, family,
home and correspondence of the aggrieved party. (emphasis Ours)

The provision, when taken in its proper context, as a whole, irresistibly conveys the idea that habeas data is a protection
against unlawful acts or omissions of public officials and of private individuals or entities engaged in gathering,
collecting, or storing data about the aggrieved party and his or her correspondences, or about his or her family. Such
individual or entity need not be in the business of collecting or storing data.

To "engage" in something is different from undertaking a business endeavour. To "engage" means "to do or take part in
something."19 It does not necessarily mean that the activity must be done in pursuit of a business. What matters is that the
person or entity must be gathering, collecting or storing said data or information about the aggrieved party or his or her
family. Whether such undertaking carries the element of regularity, as when one pursues a business, and is in the nature
of a personal endeavour, for any other reason or even for no reason at all, is immaterial and such will not prevent the writ
from getting to said person or entity.

To agree with respondents’ above argument, would mean unduly limiting the reach of the writ to a very small group, i.e.,
private persons and entities whose business is data gathering and storage, and in the process decreasing the effectiveness
of the writ asan instrument designed to protect a right which is easily violated in view of rapid advancements in the
information and communications technology––a right which a great majority of the users of technology themselves are
not capable of protecting.

Having resolved the procedural aspect of the case, We now proceed to the core of the controversy.

The right to informational privacy on Facebook

a. The Right to Informational Privacy

The concept of privacyhas, through time, greatly evolved, with technological advancements having an influential part
therein. This evolution was briefly recounted in former Chief Justice Reynato S. Puno’s speech, The Common Right to
Privacy,20 where he explained the three strands of the right to privacy, viz: (1) locational or situational privacy; 21 (2)
informational privacy; and (3) decisional privacy.22 Of the three, what is relevant to the case at bar is the right to
informational privacy––usually defined as the right of individuals to control information about themselves.23

With the availability of numerous avenues for information gathering and data sharing nowadays, not to mention each
system’s inherent vulnerability to attacks and intrusions, there is more reason that every individual’s right to control said
flow of information should be protected and that each individual should have at least a reasonable expectation of privacy
in cyberspace. Several commentators regarding privacy and social networking sites, however, all agree that given the
millions of OSN users, "[i]n this [Social Networking] environment, privacy is no longer grounded in reasonable
expectations, but rather in some theoretical protocol better known as wishful thinking."24

It is due to this notion that the Court saw the pressing need to provide for judicial remedies that would allow a summary
hearing of the unlawful use of data or information and to remedy possible violations of the right to privacy. 25 In the same
vein, the South African High Court, in its Decision in the landmark case, H v. W,26 promulgated on January30, 2013,
 Page 91 of 108

recognized that "[t]he law has to take into account the changing realities not only technologically but also socially or else
it will lose credibility in the eyes of the people. x x x It is imperative that the courts respond appropriately to changing
times, acting cautiously and with wisdom." Consistent with this, the Court, by developing what may be viewed as the
Philippine model of the writ of habeas data, in effect, recognized that, generally speaking, having an expectation of
informational privacy is not necessarily incompatible with engaging in cyberspace activities, including those that occur
in OSNs.

The question now though is up to whatextent is the right to privacy protected in OSNs? Bear in mind that informational
privacy involves personal information. At the same time, the very purpose of OSNs is socializing––sharing a myriad of
information,27 some of which would have otherwise remained personal.

b. Facebook’s Privacy Tools: a response to the clamor for privacy in OSN activities

Briefly, the purpose of an OSN is precisely to give users the ability to interact and to stay connected to other members of
the same or different social media platform through the sharing of statuses, photos, videos, among others, depending on
the services provided by the site. It is akin to having a room filled with millions of personal bulletin boards or "walls,"
the contents of which are under the control of each and every user. In his or her bulletin board, a user/owner can post
anything––from text, to pictures, to music and videos––access to which would depend on whether he or she allows one,
some or all of the other users to see his or her posts. Since gaining popularity, the OSN phenomenon has paved the way
to the creation of various social networking sites, includingthe one involved in the case at bar, www.facebook.com
(Facebook), which, according to its developers, people use "to stay connected with friends and family, to discover what’s
going on in the world, and to share and express what matters to them."28

Facebook connections are established through the process of "friending" another user. By sending a "friend request," the
user invites another to connect their accounts so that they can view any and all "Public" and "Friends Only" posts of the
other.Once the request is accepted, the link is established and both users are permitted to view the other user’s "Public"
or "Friends Only" posts, among others. "Friending," therefore, allows the user to form or maintain one-to-one
relationships with other users, whereby the user gives his or her "Facebook friend" access to his or her profile and shares
certain information to the latter.29

To address concerns about privacy,30 but without defeating its purpose, Facebook was armed with different privacy tools
designed to regulate the accessibility of a user’s profile31 as well as information uploaded by the user. In H v. W,32 the
South Gauteng High Court recognized this ability of the users to "customize their privacy settings," but did so with this
caveat: "Facebook states in its policies that, although it makes every effort to protect a user’s information, these privacy
settings are not foolproof."33

For instance, a Facebook user canregulate the visibility and accessibility of digital images(photos), posted on his or her
personal bulletin or "wall," except for the user’sprofile picture and ID, by selecting his or her desired privacy setting:

(a) Public - the default setting; every Facebook user can view the photo;
(b) Friends of Friends - only the user’s Facebook friends and their friends can view the photo;
(b) Friends - only the user’s Facebook friends can view the photo;
(c) Custom - the photo is made visible only to particular friends and/or networks of the Facebook user; and
(d) Only Me - the digital image can be viewed only by the user.
The foregoing are privacy tools, available to Facebook users, designed to set up barriers to broaden or limit the visibility
of his or her specific profile content, statuses, and photos, among others, from another user’s point of view. In other
words, Facebook extends its users an avenue to make the availability of their Facebook activities reflect their choice as to
"when and to what extent to disclose facts about [themselves] – and to put others in the position of receiving such
confidences."34 Ideally, the selected setting will be based on one’s desire to interact with others, coupled with the
opposing need to withhold certain information as well as to regulate the spreading of his or her personal information.
Needless to say, as the privacy setting becomes more limiting, fewer Facebook users can view that user’s particular post.

STC did not violate petitioners’ daughters’ right to privacy

Without these privacy settings, respondents’ contention that there is no reasonable expectation of privacy in Facebook
would, in context, be correct. However, such is not the case. It is through the availability of said privacy tools that many
OSN users are said to have a subjective expectation that only those to whomthey grant access to their profile will view
the information they post or upload thereto.35

This, however, does not mean thatany Facebook user automatically has a protected expectation of privacy inall of his or
her Facebook activities.

Before one can have an expectation of privacy in his or her OSN activity, it is first necessary that said user, in this case
the children of petitioners,manifest the intention to keepcertain posts private, through the employment of measures to
prevent access thereto or to limit its visibility.36And this intention can materialize in cyberspace through the utilization of
 Page 92 of 108

the OSN’s privacy tools. In other words, utilization of these privacy tools is the manifestation,in cyber world, of the
user’s invocation of his or her right to informational privacy.37

Therefore, a Facebook user who opts to make use of a privacy tool to grant or deny access to his or her post orprofile
detail should not be denied the informational privacy right which necessarily accompanies said choice. 38Otherwise, using
these privacy tools would be a feckless exercise, such that if, for instance, a user uploads a photo or any personal
information to his or her Facebook page and sets its privacy level at "Only Me" or a custom list so that only the user or a
chosen few can view it, said photo would still be deemed public by the courts as if the user never chose to limit the
photo’s visibility and accessibility. Such position, if adopted, will not only strip these privacy tools of their function but it
would also disregard the very intention of the user to keep said photo or information within the confines of his or her
private space.

We must now determine the extent that the images in question were visible to other Facebook users and whether the
disclosure was confidential in nature. In other words, did the minors limit the disclosure of the photos such that the
images were kept within their zones of privacy? This determination is necessary in resolving the issue of whether the
minors carved out a zone of privacy when the photos were uploaded to Facebook so that the images will be protected
against unauthorized access and disclosure.

Petitioners, in support of their thesis about their children’s privacy right being violated, insist that Escudero intruded
upon their children’s Facebook accounts, downloaded copies ofthe pictures and showed said photos to Tigol. To them,
this was a breach of the minors’ privacy since their Facebook accounts, allegedly, were under "very private" or "Only
Friends" setting safeguarded with a password.39Ultimately, they posit that their children’s disclosure was only limited
since their profiles were not open to public viewing. Therefore, according to them, people who are not their Facebook
friends, including respondents, are barred from accessing said post without their knowledge and consent. Aspetitioner’s
children testified, it was Angelawho uploaded the subjectphotos which were only viewable by the five of
them,40 although who these five are do not appear on the records.

Escudero, on the other hand, stated in her affidavit41 that "my students showed me some pictures of girls cladin
brassieres. This student [sic] of mine informed me that these are senior high school [students] of STC, who are their
friends in [F]acebook. x x x They then said [that] there are still many other photos posted on the Facebook accounts of
these girls. At the computer lab, these students then logged into their Facebook account [sic], and accessed from there the
various photographs x x x. They even told me that there had been times when these photos were ‘public’ i.e., not
confined to their friends in Facebook."

In this regard, We cannot give muchweight to the minors’ testimonies for one key reason: failure to question the
students’ act of showing the photos to Tigol disproves their allegation that the photos were viewable only by the five of
them. Without any evidence to corroborate their statement that the images were visible only to the five of them, and
without their challenging Escudero’s claim that the other students were able to view the photos, their statements are, at
best, self-serving, thus deserving scant consideration.42

It is well to note that not one of petitioners disputed Escudero’s sworn account that her students, who are the minors’
Facebook "friends," showed her the photos using their own Facebook accounts. This only goes to show that no special
means to be able to viewthe allegedly private posts were ever resorted to by Escudero’s students,43 and that it is
reasonable to assume, therefore, that the photos were, in reality, viewable either by (1) their Facebook friends, or (2) by
the public at large.

Considering that the default setting for Facebook posts is"Public," it can be surmised that the photographs in question
were viewable to everyone on Facebook, absent any proof that petitioners’ children positively limited the disclosure of
the photograph. If suchwere the case, they cannot invoke the protection attached to the right to informational privacy.
The ensuing pronouncement in US v. Gines-Perez44 is most instructive:

[A] person who places a photograph on the Internet precisely intends to forsake and renounce all privacy rights to such
imagery, particularly under circumstances suchas here, where the Defendant did not employ protective measures or
devices that would have controlled access to the Web page or the photograph itself.45

Also, United States v. Maxwell46 held that "[t]he more open the method of transmission is, the less privacy one can
reasonably expect. Messages sent to the public at large inthe chat room or e-mail that is forwarded from correspondent to
correspondent loses any semblance of privacy."

That the photos are viewable by "friends only" does not necessarily bolster the petitioners’ contention. In this regard, the
cyber community is agreed that the digital images under this setting still remain to be outside the confines of the zones of
privacy in view of the following:

(1) Facebook "allows the world to be more open and connected by giving its users the tools to interact and share
in any conceivable way;"47
 Page 93 of 108

(2) A good number of Facebook users "befriend" other users who are total strangers;48

(3) The sheer number of "Friends" one user has, usually by the hundreds; and

(4) A user’s Facebook friend can "share"49 the former’s post, or "tag"50 others who are not Facebook friends with
the former, despite its being visible only tohis or her own Facebook friends.

It is well to emphasize at this point that setting a post’s or profile detail’s privacy to "Friends" is no assurance that it can
no longer be viewed by another user who is not Facebook friends with the source of the content. The user’s own
Facebook friend can share said content or tag his or her own Facebook friend thereto, regardless of whether the user
tagged by the latter is Facebook friends or not with the former. Also, when the post is shared or when a person is tagged,
the respective Facebook friends of the person who shared the post or who was tagged can view the post, the privacy
setting of which was set at "Friends."

To illustrate, suppose A has 100 Facebook friends and B has 200. A and B are not Facebook friends. If C, A’s Facebook
friend, tags B in A’s post, which is set at "Friends," the initial audience of 100 (A’s own Facebook friends) is
dramatically increased to 300 (A’s 100 friends plus B’s 200 friends or the public, depending upon B’s privacy setting).
As a result, the audience who can view the post is effectively expanded––and to a very large extent.

This, along with its other features and uses, is confirmation of Facebook’s proclivity towards user interaction and
socialization rather than seclusion or privacy, as it encourages broadcasting of individual user posts. In fact, it has been
said that OSNs have facilitated their users’ self-tribute, thereby resulting into the "democratization of fame."51 Thus, it is
suggested, that a profile, or even a post, with visibility set at "Friends Only" cannot easily, more so automatically, be said
to be "very private," contrary to petitioners’ argument.

As applied, even assuming that the photos in issue are visible only to the sanctioned students’ Facebook friends,
respondent STC can hardly be taken to task for the perceived privacy invasion since it was the minors’ Facebook friends
who showed the pictures to Tigol. Respondents were mere recipients of what were posted. They did not resort to any
unlawful means of gathering the information as it was voluntarily given to them by persons who had legitimate access to
the said posts. Clearly, the fault, if any, lies with the friends of the minors. Curiously enough, however, neither the
minors nor their parents imputed any violation of privacy against the students who showed the images to Escudero.

Furthermore, petitioners failed to prove their contention that respondents reproduced and broadcasted the photographs. In
fact, what petitioners attributed to respondents as an act of offensive disclosure was no more than the actuality that
respondents appended said photographs in their memorandum submitted to the trial court in connection with Civil Case
No. CEB-38594.52 These are not tantamount to a violation of the minor’s informational privacy rights, contrary to
petitioners’ assertion.

In sum, there can be no quibbling that the images in question, or to be more precise, the photos of minor students scantily
clad, are personal in nature, likely to affect, if indiscriminately circulated, the reputation of the minors enrolled in a
conservative institution. However, the records are bereft of any evidence, other than bare assertions that they utilized
Facebook’s privacy settings to make the photos visible only to them or to a select few. Without proof that they placed the
photographs subject of this case within the ambit of their protected zone of privacy, they cannot now insist that they have
an expectation of privacy with respect to the photographs in question.

Had it been proved that the access tothe pictures posted were limited to the original uploader, through the "Me Only"
privacy setting, or that the user’s contact list has been screened to limit access to a select few, through the "Custom"
setting, the result may have been different, for in such instances, the intention to limit access to the particular post,
instead of being broadcasted to the public at large or all the user’s friends en masse, becomes more manifest and
palpable.

On Cyber Responsibility

It has been said that "the best filter is the one between your children’s ears." 53 This means that self-regulation on the part
of OSN users and internet consumers ingeneral is the best means of avoiding privacy rights violations. 54 As a cyberspace
communitymember, one has to be proactive in protecting his or her own privacy.55 It is in this regard that many OSN
users, especially minors, fail.Responsible social networking or observance of the "netiquettes"56 on the part of teenagers
has been the concern of many due to the widespreadnotion that teenagers can sometimes go too far since they generally
lack the people skills or general wisdom to conduct themselves sensibly in a public forum.57

Respondent STC is clearly aware of this and incorporating lessons on good cyber citizenship in its curriculum to educate
its students on proper online conduct may be mosttimely. Too, it is not only STC but a number of schools and
organizations have already deemed it important to include digital literacy and good cyber citizenshipin their respective
programs and curricula in view of the risks that the children are exposed to every time they participate in online
 Page 94 of 108

activities.58 Furthermore, considering the complexity of the cyber world and its pervasiveness,as well as the dangers that
these children are wittingly or unwittingly exposed to in view of their unsupervised activities in cyberspace, the
participation of the parents in disciplining and educating their children about being a good digital citizen is encouraged
by these institutions and organizations. In fact, it is believed that "to limit such risks, there’s no substitute for parental
involvement and supervision."59

As such, STC cannot be faulted for being steadfast in its duty of teaching its students to beresponsible in their dealings
and activities in cyberspace, particularly in OSNs, whenit enforced the disciplinary actions specified in the Student
Handbook, absenta showing that, in the process, it violated the students’ rights.

OSN users should be aware of the risks that they expose themselves to whenever they engage incyberspace
activities.1âwphi1 Accordingly, they should be cautious enough to control their privacy and to exercise sound discretion
regarding how much information about themselves they are willing to give up. Internet consumers ought to be aware
that, by entering or uploading any kind of data or information online, they are automatically and inevitably making it
permanently available online, the perpetuation of which is outside the ambit of their control. Furthermore, and more
importantly, information, otherwise private, voluntarily surrendered by them can be opened, read, or copied by third
parties who may or may not be allowed access to such.

It is, thus, incumbent upon internet users to exercise due diligence in their online dealings and activities and must not be
negligent in protecting their rights. Equity serves the vigilant. Demanding relief from the courts, as here, requires that
claimants themselves take utmost care in safeguarding a right which they allege to have been violated. These are
indispensable. We cannot afford protection to persons if they themselves did nothing to place the matter within the
confines of their private zone. OSN users must be mindful enough to learn the use of privacy tools, to use them if they
desire to keep the information private, and to keep track of changes in the available privacy settings, such as those of
Facebook, especially because Facebook is notorious for changing these settings and the site's layout often.

In finding that respondent STC and its officials did not violate the minors' privacy rights, We find no cogent reason to
disturb the findings and case disposition of the court a quo.

In light of the foregoing, the Court need not belabor the other assigned errors.

WHEREFORE, premises considered, the petition is hereby DENIED. The Decision dated July 27, 2012 of the Regional
Trial Court, Branch 14 in Cebu City in SP. Proc. No. 19251-CEB is hereby AFFIRMED.

No pronouncement as to costs.

SO ORDERED.
 Page 95 of 108

G.R. No. 200148 June 4, 2014

RAMON A. SYHUNLIONG, Petitioner,

vs.
TERESITA D. RIVERA, Respondent.

For review is the instant Petition1 filed by Ramon A. Syhunliong (Syhunliong) seeking the reversal of the
Decision2 rendered on July 11, 2011 and Resolution3 issued on January 6, 2012 by the Court of Appeals (CA) in CA-
G.R. SP No. 110335. The CA set aside the Orders dated December 4, 20084 and June 18, 20095 of the Regional Trial
Court (RTC) of Quezon City, Branch 84, which denied the Motion to Dismiss/Quash on Jurisdictional
Challenge6(Motion to Quash) filed by the herein respondent, Teresita D. Rivera (Rivera), in Criminal Case No. Q-07-
147802, an action for libel.

Antecedents

Syhunliong and Rivera are respectively the private complainant and defendant in Criminal Case No. Q-07-147802.
Syhunliong is the President of BANFF Realty and Development Corporation (BANFF) and likewise owns interests in
construction, restaurant and hospital businesses. On the other hand, Rivera used to be the Accounting Manager of
BANFF. She was hired in September of 2002 with a monthly salary of Php 30,000.00.

About three years after, Rivera, citing personal and family matters, tendered her resignation to be effective on February
3, 2006. However, Rivera actually continued working for BANFF until March of the same year to complete the turn over
of papers under her custody to Jennifer Lumapas (Lumapas), who succeeded her.

Sometime in April of 2006, Rivera called Lumapas to request for the payment of her remaining salaries, benefits and
incentives. Lumapas informed Rivera that her benefits would be paid, but the check representing her salaries was still
unsigned, and her incentives were put on hold by Syhunliong.7

On April 6, 2006, at around 11:55 a.m., Rivera sent the following text message to one of BANFF’s official cellular
phones held by Lumapas:

I am expecting that[.] [G]rabe talagasufferings ko dyan hanggang pagkuha nglast pay ko. I don’t deserve this [because] I
did my job when I [was] still there. God bless ras[.]8 [S]ana yung pagsimba niya, alam niya real meaning.9(Italics ours)

Minutes later, Rivera once again texted another message, which reads:

Kailangan release niya lahat [nang] makukuha ko diyanincluding incentive up to the last datena nandyan ako para di na
kami abot sa labor.10 (Italics ours)

Subsequently, on December of 2006, Rivera filed before the National Labor Relations Commission a complaint against
Syhunliong for underpaid salaries, 13th to 16th month and incentive pay, gratuities and tax refund in the total sum of Php
698,150.48.11

On April 16, 2007,12 pending the resolution of the aforecited labor case, Syhunliong instituted against Rivera a complaint
for libel, the origin of the instant petition. The information, dated June 21, 2007, charged Rivera with the following:

That on or about the 6th day of April, 2006, in Quezon City, Philippines, the said accused, with malicious intent of
impeaching the honor, virtue, character and reputation of one RAMON A. SYHUNGLIONG [sic] and with evident intent
of exposing the complainant to public dishonor, discredit, contempt and ridicule, did then and there willfully, unlawfully,
feloniously and maliciously publish in the form of text messages and/or caused to be publish[ed] the following
defamatory statements through the company’s cellular phone, to wit:

xxxx

that with the said text message, the said accused meant and intended to convey as in fact she did mean and convey,
malicious and offensive insinuations and imputations that tends [sic] to destroy the good name and reputation of Ramon
 Page 96 of 108

Syhunliong, with no good or justifiable motive but solely for the purpose of maligning and besmirching the good name,
honor, character and reputation of the said complainant and to expose it, as in fact [he] was exposed to public hatred,
contempt and ridicule, to the damage and prejudice of said offended party.

CONTRARY TO LAW.13

Rivera filed a Motion to Quash14 the aforequoted information. She argued that the text message, which was the subject of
the libel complaint, merely reflected the undue stress she had suffered due to the delay in the release of her unpaid
salaries, benefits and incentives. Further, the facts charged in the information did not constitute the crime of libel as the
elements of malice and the making of defamatory imputation for public consumption were wanting. Her text message
was not prompted by ill will or spite, but was merely sent as part of her duty to defend her own interests.

During the arraignment on October 11, 2007, Rivera entered a plea of not guilty.15

The Orders of the RTC

On December 4, 2008, the RTC issued an Order16 denying Rivera’s Motion to Quash on these grounds:

[T]he grounds raised by [Rivera] in the motion to quash [are] evidentiary in nature[,] which can only be threshed out in a
full blown hearing to determine if said [t]ext message falls squarely within the parameters of "Privileged
Communication" or the elements of Article 353 of the Revised Penal Code [are] not fully established by the
Prosecution’s evidence.

The Rule on Criminal Procedure in the prosecution of any felony or offense requires only the existence of probable cause
in order to indict an accused of the crime charged. x x x [P]robable cause was established seasonably during the
preliminary investigation. [Rivera] should have participated during the preliminary investigation or filed a Motion for re-
investigation [if] she was not accorded such right and raised these grounds, before she enter[ed] her plea during
arraignment.

The Supreme Court ruled that "[i]t should be noted that the libelous material [or text] must be viewed as a whole. In
order to ascertain the meaning of [the] published article [or text message], the whole of the article must be considered,
each phrase must be construed in the light of the entire publication."

The Supreme Court held that "writing [or texting] to a person other than the person defamed is sufficient to constitute
publication, for the person to whom the letter [text message] is addressed is a third person in relation to its writer and the
person defamed therein. In this case, the wife of the complainant[,] who received the unsealed letter[,] is held a third
person to whom the publication is made.[ ]17 (Citations omitted)

The RTC thereafter issued an Order18 on June 18, 2009 denying Rivera’s motion for reconsideration to the foregoing.
Citing Lu Chu Sing and Lu Tian Chiong v. Lu Tiong Gui,19 the RTC explained that the privileged character of a
communication merely does away with the presumption of malice. However, the plaintiff is not precluded from proving
the existence of such malice. The RTC once again concurred with the Public Prosecutor’s finding that there was probable
cause to indict Rivera for having ascribed to Syhunliong the possession of a vice or defect, or for having committed an
act, tending to cause dishonor or discredit to the latter’s name.

Rivera challenged the orders issued by the RTC through a Petition for Certiorari20 filed before the CA. Quoting Article
354 of the Revised Penal Code (RPC), she emphasized that "every defamatory imputation is presumed to be malicious,
even if it be true, if no good intention and justifiable motive for making it is shown," except in "a private communication
made by any person to another in the performance of any legal, moral or social duty."21 Citing Brillante v. Court of
Appeals,22 Rivera enumerated the requisites, compliance with which would make a statement fall within the purview of a
qualified privileged communication, viz: (1) the person who made the communication had a legal, moral, or social duty
to make the communication, or at least, had an interest to protect, which interest may either be his own or of the one [for]
whom it is made; (2) the communication is addressed to an officer or a board, or superior, having some interest or duty in
the matter, and who has the power to furnish the protection sought; and (3) the statements in the communication are
made in good faith and without malice.23 Rivera likewise stressed that under Sections 3(a)24and 9,25 Rule 11726 of the
Rules of Court, an accused may move to quash the information even after arraignment if the facts charged therein do not
constitute an offense. She thus concluded that the text message she sent to Lumapas was in the nature of a qualified
privileged communication, it being merely an expression of her legitimate grievances over the delay in the release of her
unpaid salaries and other entitlements. Rivera texted Lumapas because the latter was in the best position to help expedite
the release of the checks. Rivera had no intent to injure anyone’s reputation. Lastly, Rivera labeled as erroneous the
RTC’s declaration regarding the necessity of a full blown trial since facts sufficient for the resolution of the case were
allegedly already extant in the records. The CA Ruling
 Page 97 of 108

On July 11, 2011, the CA rendered the herein assailed Decision27 directing the dismissal of the information for libel filed
against Rivera. The CA favorably considered her argument that when the facts in an information fail to charge an
offense, the said ground can be invoked by the accused in a motion to quash filed even after arraignment. The CA
likewise explained that:

The focal issue to the parties in the present case is whether the facts charged in the information[,]as well as the
undeniable facts appearing on the record[,] show that an offense of libel has been committed. Our criminal law
convincingly provide us with a definition of libel – It is a public and malicious imputation of a crime, or of a vice or
defect ... or any act, omission, condition, status or circumstance tending to cause the dishonor, discredit or contempt of ...
a person. x x x.

The first procedural requisite in the determination of the existence of libel is whether there is a defamatory imputation.
The history of the law on libel abounds in examples of utterances or statements that are not necessarily considered
libelous because they are a [sic] mere expression[s] of an [sic] opinion[s] of a [sic] person[s] in connection with a [sic]
plea[s] or grievance[s]. Libel is inherently a limitation on the liberty of speech and press freedom, and must be construed
in a manner that does not trench upon constitutionally protected freedoms.

x x x There can be libel only if the words used are calculated to induce the hearer or reader to suppose and understand
them as impeaching the honesty, virtue or reputation of another. The question is not what the writer or speaker meant by
his words but what they convey to those who heard or read them.

xxxx

We can break up the text message of [Rivera] to [Lumapas] into three parts. The utterance is mercifully short so that it
could not be difficult to infer the whole sense and understanding of the message from the standpoint of Lumapas to
whom the message was conveyed. In context, [Rivera] was seeking payment of her wage claims consequent to her
resignation and receiving [BANFF’s] response through Lumapas. [Rivera] retorted with three things in her message to
Lumapas – (1) that she suffered a lot in collecting her last pay from [BANFF] Grabe talaga sufferings ko dyan hanggang
pagkuha ng lastpay ko.[;] (2) that she does not deserve to suffer this way [because she] did [her] job when [she was] still
there[;] and (3) turning to [Syhunliong] himself [she] said – God bless ras[.] [S]ana yung pagsimba niya, alam niya real
meaning.

If libel is to be understood as an imputation of a crime, vice or defect to another, there can be no libel in the first two of
the three statements which announced only the sufferings, albeit undeserved[,] of [Rivera]. The proposition gets to be
dicey in the third statement because now she makes a distinct reference to [Syhunliong][,] [b]ut is the imputation
defamatory? We hesitate to reach this conclusion, and all doubts in criminal law, we are basically taught, must be
resolved in favor of the accused. To articulate the legal wisdom, [Rivera] has the right to express an opinion in a matter
in which she has an undeniable interest.

[Rivera said] in the last part of the text that [Syhunliong] should understand the real meaning of the masswhen he goes to
attend it. It is in this tail end of the message that [Syhunliong] is mentioned. But what is conveyed by the words ["]sana
alam niya real meaning?[ ] Does it impute a crime, vice or defect in [Syhunliong], either directly or by way of innuendo?
But the innuendo can only be explanatory of a libelous imputation and cannot alter the sense of the words claimed to be
libelous. If the publication is not actionable per se, an innuendo cannot make it so, and if the publication is actionable per
se, the innuendo would not even be necessary.

We hold that the text message is not actionable libel. It does not serve to cast a shadow on [Syhunliong’s]character and
integrity[,] there being no direct and personal imputation of a venality to him. At best, the statement that [Syhunliong]
should understand the meaning of the mass suggests that [Syhunliong] should be more compassionate and caring to the
employee. But is being the converse of compassionate and caring suggestive of a vice or defect in the person alluded to?
We do not think so. Otherwise, even courts should be exposed to contempt and ridicule for reaching at times decisions in
favor of capital and against labor. x x x To follow the intent of the message as ordinarily conveyed by the words and the
context in which they are said, it can only suggest the intention of [Rivera] to describe [Syhunliong] as strict and selfish.
But[,] there are legitimate reasons why a person who acts in the interest of the employer may appear strict and selfish to
the other side. One may have to be so to protect the interest of his company and, indeed, the outcome of the labor case
vindicates the stand of [Syhunliong] against giving [Rivera] the claims she sought after.

A responsible officer whose decisions may affect the fortunes of others and who is faced with criticism such as in this
case should not be so onion-skinned as to react through the criminal law. Instead, he should use methods of discussion
and persuasion to dispel the misgivings over his decisions. He should, in particular, explain through the same source that
told him of the comment why [BANFF]cannot satisfy all [of Rivera’s] claims.

x x x The matter contained in the text message is privileged communication under Article 354 of the Revised Penal Code
which [negates] the existence of malice in – a private communication made by any person to another in the performance
of any legal, [moral] or social duty. x x x It was Lumapas who told her of the stand of [Syhunliong] on the matter of her
 Page 98 of 108

wage claims, and her reaction through the text message may be deemed a part of her duty to seek redress of her
grievances through the same source. She was speaking in response to duty and not out of an intent to injure the reputation
of the person who claims to be defamed. There was no unnecessary publicity of the message beyond the necessity of
conveying it to the party concerned.28 (Citations omitted and italics supplied)

The CA denied Syhunliong’s motion for reconsideration to the above through the herein assailed Resolution29 dated
January 6, 2012.

Issues and Arguments of the Parties

Undaunted, Syhunliong now presents to this Court the issues of whether or not: (a) the trial court’s denial of a motion to
quash information may be validly assailed through a special civil action for certiorari; (b) Rivera may validly question
the denial of her motion to quash before the CA after voluntarily allowing herself to be arraigned even during the
pendency of such motion to quash; (c) the CA may validly review on certiorari what was, at best, an error of judgment
made by the RTC; (d) the CA correctly ruled that the facts charged in the information do not constitute the offense of
libel; and (e) the CA committed reversible error in ordering the outright dismissal of Criminal Case No. Q-07-147802 on
the putative ground that the allegedly libelous text messages were privileged communication.30

In support of the petition, Syhunliong cites Soriano, et al. v. People, et al.31 where the Court declared that in assailing the
denial of a motion to quash an information, the accused should not file a special civil action for certiorari. Instead, the
accused should enter a plea, go to trial sans prejudice to present the special defenses he or she had invoked in the motion
to quash, and if an adverse decision is rendered, file an appeal therefrom.

Syhunliong further avers that Rivera was arraigned on October 11, 2007. Section 1, Rule 117 of the Rules of Court
clearly provides that the accused may only be allowed to file a motion to quash at any time before entering a plea. In
Rivera’s case, she had already voluntarily entered a plea;

hence, it was tantamount to an effective abandonment of her motion to quash.

It is also Syhunliong’s argument that the CA improperly arrogated unto itself the power to review the Public Prosecutor
and RTC’s uniform finding of the existence of probable cause. Even if it were to be assumed that the RTC erred in its
disposition, it was a mistake of judgment and not of jurisdiction.

Syhunliong also refutes the CA’s finding that the facts charged in the information did not constitute the crime of libel.
The text message was apparently an indictment of his personality and character since it portrayed him as a hypocrite.

Lastly, Syhunliong invokes People v. Judge Gomez32 which enunciated the doctrine that in a libel case, the privileged
nature of a communication is not a ground for a motion to quash, but is merely a matter of defense to be proven during
the trial.

In Rivera’s Comment,33 she reiterates the arguments in the Motion to Quash filed with the RTC. Additionally, she
contends that the RTC no longer had jurisdiction to take cognizance of Syhunliong’s complaint. The text message was
sent on April 6, 2006.Per Syhunliong’s narration in the instant petition, his complaint was filed on August 18,
2007,34 beyond the one year prescriptive period for instituting actions for libel provided for in Articles 9035 and 9136 of
the RPC.

Further, the ground that the facts charged in the information did not constitute an offense can be raised even after
arraignment and is broad enough to cover within its ambit lack of probable cause. This, the court can re-assess in the
exercise of its inherent power of judicial review.

Rivera also laments that she was deprived of due process and of the opportunity to submit countervailing evidence during
preliminary investigation.

Our Ruling

There is no merit in the instant petition.

Prescription had set in.

Syhunliong raised five issues before this Court, but the Court’s resolution of the same would be a superfluity in the light
of Rivera’s unrefuted averment that prescription had set in before the complaint for libel was instituted.

In Romualdez v. Hon. Marcelo,37 the Court, partially quoting People v. Moran,38 stressed the reason behind and the
character of prescription of penal offenses, to wit:
 Page 99 of 108

"Here the State is the grantor, surrendering by act of grace its rights to prosecute, and declaring the offense to be no
longer the subject of prosecution. The statute is not a statute of process, to be scantily and grudgingly applied, but an
amnesty, declaring that after a certain time oblivion shall be cast over the offence; x x x that from henceforth[,] he may
cease to preserve the proofs of his innocence, for the proofs of his guilt are blotted out. Hence[,] it is that statutes of
limitation are to be liberally construed in favor of the defendant, not only because such liberality of construction belongs
to all acts of amnesty and grace, but because the very existence of the statute, is a recognition and notification by the
legislature of the fact that time, while it gradually wears out proofs of innocence, has assigned to it fixed and positive
periods in which it destroys proofs of guilt. Independently of these views, it must be remembered that delay in instituting
prosecutions is not only productive of expense to the State, but of peril to public justice in the attenuation and distortion,
even by mere natural lapse of memory, of testimony. It is the policy of the law that prosecutions should be prompt, and
that statutes, enforcing such promptitude should be vigorously maintained. They are not merely acts of grace, but checks
imposed by the State upon itself, to exact vigilant activity from its subalterns, and to secure for criminal trials the best
evidence that can be obtained."

Indeed, there is no reason why we should deny petitioner the benefits accruing from the liberal construction of
prescriptive laws on criminal statutes. Prescription emanates from the liberality of the State. x x x Any doubt on this
matter must be resolved in favor of the grantee thereof, the accused.39 (Italics supplied)

In the case at bar, it is extant in the records that Syhunliong filed his complaint against Rivera more than one year after
the allegedly libelous message was sent to Lumapas. Whether the date of the filing of the complaint is April 16, 2007 or
August 18, 2007,40 it would not alter the fact that its institution was made beyond the prescriptive period provided for in
Article 90 of the RPC. The Court finds no persuasive reason why Rivera should be deprived of the benefits accruing
from the prescription of the crime ascribed to her.

People v. Castro,41 on the other hand, is instructive anent the effect in criminal proceedings of the failure of an accused to
raise prescription as a ground in a motion to quash an information, viz:

Does the failure of the accused to move to quash before pleading constitute a waiver to raise the question of prescription
at a later stage of the case?

A case in point is People vs. Moran, 44 Phil., 387. x x x [T]he court ruled that the crime had already prescribed holding
that this defense can not [b]e deemed waived even if the case had been decided by the lower court and was pending
appeal in the Supreme Court. The philosophy behind this ruling was aptly stated as follows: "Although the general rule is
that the defense of prescription is not available unless expressly set up in the lower court, as in that case it is presumed to
have been waived and cannot be taken advantage of thereafter, yet this rule is not always of absolute application in
criminal cases, such as that in which prescription of the crime is expressly provided by law, for the State not having then
the right to prosecute, or continue prosecuting, nor to punish, or continue punishing, the offense, or to continue holding
the defendant subject to its action through the imposition of the penalty, the court must so declare."

And elaborating on this proposition, the Court went on to state as follows:

"As prescription of the crime is the loss by the State of the right to prosecute and punish the same, it is absolutely
indisputable that from the moment the State has lost or waived such right, the defendant may, at any stage of the
proceeding, demand and ask that the same be finally dismissed and he be acquitted from the complaint, and such petition
is proper and effective even if the court taking cognizance of the case has already rendered judgment and said judgment
is merely in suspense, pending the resolution of a motion for a reconsideration and new trial, and this is the more so since
in such a case there is not yet any final and irrevocable judgment."

The ruling above adverted to squarely applies to the present case. Here, the rule provides that the plea of prescription
should be set up before arraignment, or before the accused pleads to the charge, as otherwise the defense would be
deemed waived; but, as was well said in the Moran case, this rule is not of absolute application, especially when it
conflicts with a substantive provisions of the law, such as that which refers to prescription of crimes. Since, under the
Constitution, the Supreme Court has only the power to promulgate rules concerning pleadings, practice and procedure,
and the admission to the practice of law, and cannot cover substantive rights (section 13, article VIII, of the
Constitution), the rule we are considering cannot be interpreted or given such scope or extent that would come into
conflict or defeat an express provision of our substantive law. One of such provisions is article 89of the Revised Penal
Code which provides that the prescription of crime has the effect of totally extinguishing the criminal liability. And so
we hold that the ruling laid down in the Moran case still holds good even if it were laid down before the adoption of the
present Rules of Court.42 (Italics supplied)

While Castro is an old jurisprudence, it still finds application in the case at bench in view of Section 9, Rule 117 of the
Rules of Court, which in essence partially provides that the defense of extinction of criminal action or liability, e.g.,
prescription, is not deemed waived even if the accused had not raised the same in a motion to quash. In Rivera’s case, the
issue of prescription is raised in her comment to the instant petition before this Court. Syhunliong does not specifically
refute Rivera’s averment, thus, it is deemed admitted.
 Page 100 of 108

In sum, even if the Court were to sustain Syhunliong’s stance that Rivera availed of the wrong remedy when she resorted
to filing a petition for certiorari before the CA to assail the RTC orders denying the motion to quash, the result would
only prove circuitous. Even if the trial proceeds and an adverse decision is rendered against Rivera, she can appeal the
same, but the CA and this Court would still be compelled to order the dismissal of the information on account of
prescription of the crime.1âwphi1

Prescription of the crime is already a compelling reason for this Court to order the dismissal of the libel information, but
the Court still stresses that the text message which Rivera sent to Lumapas falls within the purview of a qualified
privileged communication.

"The rule on privileged communication means that a communication made in good faith on any subject matter in which
the communicator has an interest, or concerning which he has a duty, is privileged if made to a person having a
corresponding duty."43

In order to prove that a statement falls within the purview of a qualified privileged communication under Article 354, No.
1, the following requisites must concur: (1) the person who made the communication had a legal, moral, or social duty to
make the communication, or at least, had an interest to protect, which interest may either be his own or of the one to
whom it is made; (2) the communication is addressed to an officer or a board, or superior, having some interest or duty in
the matter, and who has the power to furnish the protection sought; and (3) the statements in the communication are
made in good faith and without malice.44

In the case at bar, it was Lumapas who informed Rivera of either the delay or denial of the latter's claims for payment of
salaries, benefits and incentives by Syhunliong. Rivera expressed through the subject text message her grievances to
Lumapas. At that time, Lumapas was the best person, who could help expedite the release of Rivera's claims.

Prescinding from the above, the Court thus finds no error in the CA' s declaration that Rivera's text message falls within
the ambit of a qualified privileged communication since she "was speaking in response to duty [to protect her own
interest] and not out of an intent to injure the reputation"45 of Syhunliong. Besides, "[t]here was no unnecessary publicity
of the message beyond [that] of conveying it to the party concerned."46

IN VIEW OF THE FOREGOING, the petition is DENIED. The Decision rendered on July 11, 2011 and Resolution
issued on January 6, 2012 by the Court of Appeals in CA-G.R. SP No. 110335 ordering the Regional Trial Court of
Quezon City, Branch 84, to dismiss the information for libel filed by Ramon A. Syhunliong against Teresita D. Rivera
are AFFIRMED.

SO ORDERED.
 Page 101 of 108

G.R. No. 205875 June 30, 2015

LIBERTY BROADCASTING NETWORK, INC., now known as WI-TRIBE TELECOMS, INC., Petitioner,
vs.
ATLOCOM WIRELESS SYSTEM, INC., Respondent.

x-----------------------x

G.R. No. 208916

NATIONAL TELECOMMUNICATIONS COMMISSION,Petitioner,

vs.
ATLOCOM WIRELESS SYSTEM, INC., Respondent.

DECISION

VILLARAMA, JR., J.:

The consolidated petitions before us assail the Decision1dated June 29, 2012 and Resolution2 dated February 18, 2013 of
the Court of Appeals (CA) in CA-G.R. SP No. 119868. The CA reversed and set aside the Orders3dated December 9,
2010 and March 21, 2011 of the Regional Trial Court (RTC) of Quezon City, Branch 95 denying the application for a
writ of Prohibitory or mandatory injunction in Civil Case No. Q-09-65566.

Antecedent Facts

Atlocom Wireless System, Inc. (Atlocom) is a grantee of a legislative franchise under Republic Act (R.A.) No. 8605.4 On
October 8, 2003, the National Telecommunications Commission (NTC) issued an Order5 in NTC Case No. 98-158
relative to the application of Atlocom for a Certificate of Public Convenience (CPC), as follows:

WHEREFORE, it appearing that applicant is financially and technically capable of undertaking the proposed project and
that the operation thereof will promote the interest of the people in Metro Manila, in a proper and suitable manner, the
Commission hereby grants to herein applicant ATLOCOM WIRELESS SYSTEM, INC. a Provisional Authority (PA) to
install, operate and maintain a Multi-Point Multi-Channel Distribution System [MMDS] in METRO MANILA, subject
to the assignment of frequency by the Frequency Management Division of t his Commission and to the following –
CONDITIONS

As stated in the above order, the PA shall be valid for a period of eighteen (18)months, or until April 8, 2005. In a
letter7 dated April 5, 2004, Atlocom thru its counsel requested for "an extension of time of the allocation of the above-
enumerated frequencies and for the period for the construction and installation of the radio stations in the condition no. 2
of the Order." Earlier, Atlocom filed an Application for Permit to Import8 the necessary equipment. Atlocom followed up
its application for extension of PA through a letter9 dated June 2, 2005 addressed to Deputy Commissioner Jorge V.
Sarmiento. Subsequently, Atlocom filed a Motion for Extension of Provisional Authority10 in NTC Case No. 98-158 on
March 3, 2005. On August 23, 2005, NTC issued Memorandum Circular No. (MC) 06-08-200511re-allocating the
following bands for broadband wireless access for fixed, nomadic and mobile networks:

• 450-470 Mhz
• 1900 - 1910.MHz
• 1980-1990 MHz
 Page 102 of 108

• 2400 - 2483 MHz

• 2500 - 2700 MHz
• 3400-3600 MHz
• 5150-5350 MHz
• 5470-5850 MHz
• 10150 - 10650 MHz
On December 23, 2008, NTC denied Atlocom's motion for extension of PA, citing the re-allocation of MMDS
frequencies for Broadband Wireless Access in accordance with MC 06-08-2005 and the unavailability of other
alternative frequencies.12

On September 8, 2009, Atlocom filed in the RTC a Petition13 to enjoin the implementation of MC 06-08-2005 and
reinstate the frequencies of Atlocom. It was further prayed that after hearing the court render judgment declaring the said
issuance as null and void because NTC unlawfully deprived Atlocom of the right to its assigned frequencies without
notice and hearing. The case was docketed as Civil Case No. Q-09-65566.

Liberty Broadcasting Network, Inc. (LBNI), also a grantee of a legislative franchise (R.A. No. 1553, as amended by R.A.
No. 4154) for radio and television broadcasting, as well as radio stations for international and domestic communications
of all types and services, and holder of a Certificate of Public Convenience and Necessity (CPCN) to operate a radio
communications network, was allowed to intervene in the case, joining the defendant NTC in opposing Atlocom's
claims. Pursuant to MC 06-08-2005, frequency bands 2535-2545 MHz and 2565-2595 MHz were re-allocated and
assigned to LBNI, which covered the 2572-2596 MHz being claimed by Atlocom as allegedly assigned to it.

Per Certification14 dated October 22, 2003 issued by Alvin N. Blanco, Chief, Broadcast Services Division of NTC, the
following frequencies were "identified" for Atlocom's MMDS (Metro Manila) system: -

C3 2572 - 2578 Mhz

D3 2578 - 2584 Mhz
C4 2584 - 2590 Mhz
D4 2590 - 2596 Mhz
On December 9, 2010, the RTC, after due hearing, issued an Order denying Atlocom's application for a writ of
preliminary prohibitory or mandatory injunction. Atlocom filed a motion for reconsideration but it was likewise denied
by the RTC under Order dated March 21, 2011.

In a petition for certiorari filed before the CA, Atlocom questioned the validity of the aforesaid orders of the RTC.

In its Resolution15 dated August 12, 2011, the CA denied Atlocom's prayer for the issuance of a writ of preliminary
prohibitory injunction and its alternative prayer for a provisional mandatory injunction.

However, in its Decision dated June 29, 2012, the CA ruled in favor of Atlocom and reversed the RTC's denial of
application for preliminary injunction. The fallo of the decision reads:

WHEREFORE, premises considered, the petition is GRANTED.

The assailed Orders dated December 9, 2010 and March 21, 2011 of the

Regional Trial Court (RTC) of Quezon City,. Branch 95 are hereby REVERSED and SET ASIDE. The plea for the
issuance of a Preliminary Prohibitory Injunction is GRANTED. Let therefore a writ of preliminary prohibitory injunction
issue enjoining Respondent NTC from il_I1plementing Memorandum Circular No. 06-08-2005, insofar as the
frequencies ranging from 2572-2596 Mhz are concerned and for its Co-Respondent LBNI from using the said
frequencies during the pendency of Civil Case No. Q-09-65566 pending before Branch 95 of the Regional Trial Court of
Quezon City upon the posting of a bond in the amount of Php 200,000.00 to answer for all damages which they may
sustain by reason of the injunction if the RTC should finally decide that petitioner is not entitled thereto. The alternative
plea for a writ of Preliminary Mandatory Injunction is DENIED.

SO ORDERED.16

LBNI filed a Motion for Reconsideration with Ad Cautelam Offer to File Counter-Bond and Addendum to Motion for
Reconsideration with Ad Cautelam Offer to File Counter-Bond. NTC also filed a Motion for Reconsideration and
Supplemental Motion for Reconsideration. The CA denied these motions.

LBNI filed its petition (G.R. No. 205875) in this Court on April 22, 2013. Acting on LBNI's motion for the issuance of a
temporary restraining order (TRO) and/or writ of preliminary injunction, we issued a TRO enjoining the implementation
of the writ of preliminary injunction issued by the CA, conditioned upon LBNI's posting of a cash bond in the sum of
₱300,000.00.
 Page 103 of 108

On April 18, 2013, NTC filed its separate petition (G.R. No. 208916) for review from the same CA Decision and
Resolution. We ordered the consolidation of the two cases as they arose from the same factual setting, involve the same
parties and raise identical issues.

Issues

The main issues to be resolved are: (1) whether Atlocom complied with the requisites for issuance of a writ of
preliminary injunction; and (2) whether LBNI's motion to file counter-bond was correctly denied by the CA.

Specifically, LBNI asserts that the CA erred: (1) in finding that the NTC did not observe due process when it issued MC
06-08-2005 and basing such conclusion on a mistaken notion that the grant of PA is tantamount to a frequency
assignment; (2) in failing to recognize that Atlocom has not sufficiently established its claim that it had been assigned the
2572-2596 frequency bands by the NTC; (3) in granting the provisional injunctive writ that in effect pre-judged the civil
case pending in the RTC; and (4) in denying LBNI's motion to file counter-bond on the basis of a technical conclusion it
is not qualified to make in the first place.

NTC faults the CA in finding that Atlocom's right to due process was violated because it was not notified of the hearing
prior to the issuance of MC 06-08-2005, and concluding that Atlocom has a clear and unmistakable property right over
the 2572-2596 frequency range.

Our Ruling

The petitions are meritorious.

A preliminary injunction is defined as "[a]n order granted at any stage of an action prior to the judgment or final order,
requiring a party or a court, agency or a person to refrain from a particular act or acts."17 It may be a prohibitory
injunction, which requires a party to refrain from doing a particular act, or a mandatory injunction, which commands a
party to perform a positive act to correct a wrong in the past.18 It is a provisional remedy that a party may resort to in
order to preserve and protect certain rights and interests during the pendency of an action.19

Section 3, Rule 58 of the Rules of Court provides:

SEC. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be granted when it is
established:

(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an
act or acts, either for a limited period or perpetually;

(b) That the commission, continuance or nonperformance of the act or acts complained of during the litigation
would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of
the action or proceeding, and tending to render the judgment ineffectual.

The following requisites must be proved before a writ of preliminary injunction will issue: (1) The applicant must have a
clear and unmistakable right to be protected, that is, a right in esse; (2) There is a material and substantial invasion of
such right; (3) There is an urgent need for the writ to prevent irreparable injury to the applicant; and ( 4) No other
ordinary, speedy, and adequate remedy exists to prevent the infliction of irreparable injury.20

The grant or denial of a writ of preliminary injunction is discretionary upon the trial court because the assessment and
evaluation of evidence towards that end involve findings of fact left to the said court for its conclusive determination. For
this reason, the grant or denial of a writ of preliminary injunction shall not be disturbed unless it was issued with grave
abuse of discretion amounting to lack or in excess of jurisdiction.21

In denying Atlocom's application for a writ of preliminary injunction, the RTC held that Atlocom failed to demonstrate a
clear and unmistakable legal right thereto, as evidence showed Atlocom has no more right to be protected considering
that its PA had already expired and its application for extension was subsequently denied by the NTC. As to the claim of
violation of right to due process, the R TC found that prior to the issuance of MC 06-08-2005, NTC published a notice of
public hearing in The Manila Times, a newspaper of general circulation, and at the said hearing the participants were
given opportunity to be heard through oral arguments and submission of position papers. Atlocom's alternative plea for a
writ of mandatory injunction was likewise denied. According to the RTC, ordering the NTC to reinstate Atlocom' s
 Page 104 of 108

frequencies would create an impression that the court had pre-judged the main case by nullifying MC 06-08-2005 as
prayed for by Atlocom in its petition.

However, the CA rendered a contrary ruling. The CA underscored the fact that NTC failed to act upon Atlocom's motion
for extension for more than three years, and concluded that because of NTC's inordinate delay or refusal to renew the PA
granted to Atlocom, the latter was deprived of its right to use the frequencies "granted to it by" the PA. The CA thus
held:

In deciding whether to grant an injunction, a court must consider established principles of equity and all the
circumstances of the test for issuing an injunction is whether the facts show a necessity for the intervention of equity in
order to protect rights cognizable in equity. Here, there are factual and legal justification for issuance of the writ of
injunction. To reiterate to the point of being pedantic, petitioner's right to its frequencies is covered by a provisional
authority. The provisional authority was withdrawn by MC No. 06-08-2005 without the Respondent NTC acting on
petitioner's plea for previous extensions. The propriety for the issuance of MC No. 06-08-2005 is placed in issue on the
ground of fairness. Petitioner as the rightful grantee thereof has the right, in the meantime, to enjoin its implementation.

We are not unaware of Our Resolution promulgated on August 12, 2011 denying petitioner's plea for the ancillary
remedy of both prohibitory and/or mandatory injunction. Indeed, as of said date, the denial of petitioner's prayer is
appropriate. We have now the complete facts of the case and, as the legal consequence of Our declaration that the RTC
committed grave abuse of discretion in issuing the assailed orders, We consider it proper to enjoin the Respondent NTC
from implementing Memorandum Circular No. 06-08-2005, but insofar as the frequencies ranging from 2572-2596 Mhz
are involved and for its Co-Respondent LBNI from using the aforestated frequencies. This is not to preempt the RTC of
whatever judgment it may thereafter issue with respect to the merits of the case before it but is issued in order to maintain
the status quo in view of petitioner's claim of a breach of due process and a continuing violation of its right over the
aforestated frequencies.22

The CA explained that since it is only through a frequency that Atlocom can provide adequate broadcast service to the
public, the withdrawal of frequency assignment without observance of due process defeats its legislative grant and
reduces Atlocom to a mere repository of transmitters and equipment devoid of any purpose or value. It cited the
following provisions of R.A. No. 8605:

SEC. 3. Prior Approval of the National Telecommunications Commission. - The grantee shall secure from the National
Telecommunications Commission, hereinafter referred to as the Commission, the appropriate permits and licenses for the
construction and operation of its stations, transmitters or facilities and shall not use any frequency in the radio and
television spectrum without having been authorized by the Commission. The Commission, however, shall not
unreasonably withhold or delay the grant of any such authority.

The radio spectrum is a finite resource that is a part of the national patrimony and the use thereof is a privilege conferred
upon the grantee by the State and may be withdrawn anytime, after due process.

On the withdrawal of the frequencies previously identified for Atlocom, the CA insisted that NTC did not observe due
process, viz.:

While it is true that there was a publication of a Notice of Public Hearing on June 21, 2005 before the issuance of
Memorandum Circular No. 06-08-2005 on August 23, 2005, the fact is, the publication or notice was a general one and
was not meant to dispose of petitioner's previous requests for an extension of its provisional authority and/or application
for permit to purchase equipment. The order which dealt with these requests was the Order dated December 23, 2008,
which was issued almost four (4) years after the filing of the first request on April 5, 2004 and almost three (3) years
from the issuance of Memorandum Circular No. 06-08-2005. Withal and subject to whatever proof it may submit to the
RTC regarding the delay, the Respondent NTC should have first acted on petitioner's requests for extension before
setting for public hearing the re-allocation of the frequencies.23

We do not concur with the CA in holding that NTC's inaction or delay on Atlocom' s application for extension of PA had
violated the latter's right to due process because it resulted in depriving Atlocom of the use of frequencies which were re-
allocated through the issuance of MC 06-08-2005. Such declaration rather conveys an inaccurate picture of the regulatory
process for public broadcasting and telecommunications services.

Under existing laws and regulations, it is clear that a frequency assignment is not automatically included in the PA
granted by the NTC to an applicant for a CPC. Thus, the Order dated October 8, 2003 expressly provided that the PA
granted to Atlocom, valid for 18 months, is subject to several conditions, foremost of which is the assignment of
frequency by the Frequency Management Division (FMD).

While Atlocom presented a Certification24 dated October 22, 2003 issued by Alvin N. Blanco, Chief of NTC's Broadcast
Division, stating that certain frequencies were "identified" for Atlocom's MMDS (Metro Manila) covering 2572-2596
frequency bands, there is no document evidencing that these frequencies were actually assigned to Atlocom by the FMD.
 Page 105 of 108

There is likewise nothing in the records to suggest that NTC "unreasonably" withheld or delayed authority to use such
frequencies identified for Atlocom.

Atlocom blamed NTC's three-year delay in resolving the motion for extension of PA for its inability to use the
frequencies identified for its MMDS, as these were eventually re-allocated in 2005 under MC 06-08-2005. But as
Atlocom was fully aware, Section 6 of R.A. No. 8605 provides that the Government may at anytime withdraw the
frequency after due process. Records showed that a notice was duly published and a public hearing was actually
conducted on July 12, 2005 by NTC on the proposed Memo Circular: Frequency Band Allocations for Broadcast
Wireless Access. Saidevent was attended by representatives of the different broadcasting and telecommunication
companies, including Atlocom.25 The position papers and feedback submitted by various companies in connection with
the proposed memorandum circular on wireless broadband access were all presented as evidence in the RTC.26 We have
held that the essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an
opportunity to explain one's side.27 The requirements of due process were thus satisfied by the NTC in the re-allocation
of frequency.

Contrary to the CA's pronouncement, the re-allocation of frequency cannot be conditioned on resolution of any pending
request for extension of PA previously granted. Even entities with unexpired PA cannot claim a vested right on a specific
frequency assignment. This proceeds from the nature of its franchise which is not solely for commercial purposes but one
imbued with public interest. As earlier quoted, Atlocom's franchise (R.A. No. 8605) declared the use of radio spectrum
as a mere privilege conferred upon the grantee by the State that may be withdrawn anytime provided that due process is
observed. It further emphasized that the radio spectrum is a finite resource and its use and distribution should be aligned
with existing laws and policies.

R.A. No. 7925 likewise recognizes the vital role of telecommunications to national development and security and
provides that the radio frequency shall be managed and directed to serve the public interest. Being a limited resource, the
law mandates a periodic review of frequency allocation.

SEC. 4. Declaration of National Policy. - Telecommunications is essential to the economic development, integrity and
security of the Philippines, and as such shall be developed and administered as to safeguard, enrich and strengthen the
economic, cultural, social and political fabric of the Philippines. The growth and development of telecommunications
services shall be pursued in accordance with the following policies:

c) The radio frequency spectrum is a scarce public resource that shall be administered in the public interest and in
accordance with international agreements and conventions to which the Philippines is a party and granted to the best
qualified. The government shall allocate the spectrum to service providers who will use it efficiently and effectively to
meet public demand for telecommunications service and may avail of new and cost effective technologies in the use of
methods for its utilization;

SEC. 15. Radio Frequency Spectrum. - The radio frequency spectrum allocation and assignment shall be subject to
periodic review. The use thereof shall be subject to reasonable spectrum user fees. Where demand for specific
frequencies exceed availability, the Commission shall hold open tenders for the same and ensure wider access to this
limited resource.

As a grantee of PA, Atlocom can only invoke the condition in MC 06-08-2005 that "[t]he transfer of previously
authorized persons or entities operating radio stations within the above listed radio frequency bands shall be governed by
Rule 603 of MC 3-3-96."28Said rule states:

603. TRANSFER OF AFFECTED AUTHORIZED RADIO FREQUENCY USER

a. The commission shall allocate available radio frequencies for assignment to those affected by the reallocation
as a result of the review of the radio spectrum pursuant to Rule 601.

b. The cost of the transfer to new radio frequencies of affected authorized users shall be borne by the new
assignees to the radio frequency channel/band where the radio frequencies of the previously authorized users fall
within.

c. When the transfer to a new set of radio frequencies would require additional radio links, the cost of these links
shall also be taken into consideration.

d. The manner and the cost of the transfer shall be negotiated in good faith between the affected authorized users
and the assignees within 90 days from receipt of notice of relocation.
 Page 106 of 108

e. The Commission shall extend all the necessary assistance to all affected authorized users and shall mandate
settlement if the parties fail to come to an agreement within 90 days from receipt of notice of relocation or when
warranted under the circumstances.

f. Other means/mode of transmission comparable in quality to the existing facility shall be taken into
consideration in the negotiation for the transfer.

g. Transfer of radio frequency assignment shall only take effect upon activation of service by relocated party
using its newly assigned or relocated frequency as agreed or mandated.

Considering that Atlocom has not even launched its MMDS network nor constructed radio stations, it is doubtful whether
Atlocom can exercise the foregoing rights of an affected frequency user. Neither can Atlocom attribute its non-
operational state to the delayed action on its motion for extension of PA. Among the conditions of its PA is the
commencement of the construction and installation of its station within six months from issuance of the order granting it
the provisional authority and its complete three months thereafter. Perusal of the motion for extension reveals that
Atlocom at the time .was still in the process of identifying and finalizing arrangements with its potential investors for the
establishment of a nationwide MMDS network coverage.

Based on its evaluation, the NTC found that: (1) Atlocom filed an application for Permit to Purchase MMDS transmitter
on February 9, 2005, but no permit of any kind was issued to it; (2) In the clarificatory hearing held on September 4,
2006, concerns were raised regarding reports of foreign equity on Atlocom's capital structure and status of band allocated
for MMDS within the 2.5-2.7 Ghz band; and (3) On June 21, 2008, Atlocom is requesting for an allocation of a Digital
Terrestrial TV frequency (Ch 14-20 & Ch 21-51) in replacement for their MMDS frequency, but the NTC thru FMD
denied such request because the proposed frequency band for DTT service is not yet approved/allocated. With the re-
allocation of MMDS frequency bands for the Broadband Wireless Access under MC 06-8-2005, and the aforesaid
findings, the NTC en bane decided not to grant the extension sought by Atlocom.

A right to be protected by injunction, means a right clearly founded on or granted by law or is enforceable as a matter of
law.29 An injunction is not a remedy to protect or enforce contingent, abstract, or future rights; it will not issue to protect
a right not in esse, and which may never arise, or to restrain an act which does not give rise to a cause of action.30

From the evidence on record, no clear, actual and existing right to the subject frequencies or to the extension of PA had
been shown by Atlocom. Accordingly, no grave abuse of discretion was committed by the RTC in denying Atlocom's
application for a writ of preliminary injunction to restrain the implementation of MC 06-08-2005 insofar as the use of the
re-allocated frequencies claimed by Atlocom. The CA thus seriously erred in reversing the RTC and holding that
Atlocom was entitled to injunctive relief due to alleged violation of its right by the NTC.

A writ of preliminary injunction being an extraordinary event, one deemed as a strong arm of equity or a transcendent
remedy, it must be granted only in the face of actual and existing substantial rights. In the absence of the same, and
where facts are shown to be wanting in bringing the matter within the conditions for its issuance, the ancillary writ must
be struck down for having been rendered in grave abuse of discretion.31

Pursuant to Section 6,32 Rule 5 8 of the 1997 Rules of Civil Procedure, a preliminary injunction may be dissolved if it
appears after hearing that although the applicant is entitled to the injunction or restraining order, the issuance or
continuance thereof, as the case may be, would cause irreparable damage to the party or person enjoined while the
applicant can be fully compensated for such damages as he may suffer, and the former files a bond in an amount fixed by
the court on condition that he will pay all damages which the applicant may suffer by the denial or the dissolution of the
injunction or restraining order. Two conditions must concur: first, the court, in the exercise of its discretion, finds that the
continuance of the injunction would cause great damage to the defendant, while the plaintiff can be fully compensated
for such damages as he may suffer; second, the defendant files a counterbond.33

In denying LBNI's offer to file counterbond, the CA relied on the Affidavit34 executed by Rene Rosales, Atlocom's
technical consultant, to refute the earlier Affidavit35submitted by LBNI, which was executed by its Director for Network
Engineering, Edwin C. Mabitazan. Mabitazan stated that the injunction issued by the CA will result in reducing LBNI's
usable bandwidth from 40 Mhz to only 15 Mhz, which is inadequate to serve LBNI's thousands of subscribers.
Mabitazan's opinion should have been given more weight in view of his intimate knowledge of LBNI' s operations and
technical requirements. Moreover, it should be stressed that LBNI's business projections were based on its existing
technical capability which stands to be greatly diminished once the frequency bands re-assigned to it will be reduced as a
result of the CA's injunction order. The possibility of irreparable damage is indeed present, not only in terms of financial
losses -the total investment by LBNI has already reached billions of pesos - but on the reputation of LBNI as a new
player in the telecommunications industry for reliability and dependability of its services. In contrast, whatever damage
Atlocom stands to suffer should the injunction be dissolved, can be fully compensated considering that it has not
constructed stations nor launched any network service. No single document was submitted by Atlocom to show it had
actually complied with the conditions of its PA and invested in the establishment of MMDS network, which never
materialized.
 Page 107 of 108

In gross abuse of discretion, the CA brushed aside evidence presented by LBNI in support of its offer to file counter-
bond, stating that these were submitted only after the appellate court had rendered its decision granting Atlocom's prayer
for preliminary injunction. The CA failed to consider the fact that it was Atlocom which misled the courts and the NTC
in claiming that the subject frequencies had been assigned to it. The matter was raised by NTC and LBNI only in their
motions for reconsideration because it was only at that time when their inquiry from FMD disclosed that said office had
not actually granted a frequency assignment to Atlocom. Thus, NTC in its Supplemental Motion for Reconsideration,
submitted a Certification36 dated August 2, 2012 issued by the FMD Chief, Pricilla F. Demition, together with attached
documents, setting forth the sam facts relativ to Atlocom's non-operational state. Atlocom countered that said evidence
was just an afterthought because the absence of frequency assignment was not mentioned by Engr. Demition when she
testified before the RTC on January 14, 2009 during the hearing on the application for writ of preliminary injunction.
Atlocom, however never disputed the findings of the FMD.

The pertinent portions of the FMD Certification are herein reproduced:

2. In a memo addressed to the Chief, Broadcast Services Division dated January 10, 2006 (copy attached as
Annex "B"); signed by then Deputy Commissioner Jorge V. Sarmiento, an inquiry was made to the Broadcast
Services Division (BSD) regarding the status of usage of the frequency assignments granted to broadcast
companies for MMDS use and to provide information thru the FMD of the latest related information to include
among others permits/licenses issued to their favor; such information was needed in view of the re-allocation of
the band in use for BW A (MC No. 06-08-2005);

3. In a memo dated January 12, 2006 (copy attached as Annex "C") in compliance to the January 10, 2006
Memo, BSD's report shows under the column Latest Permits/License issued, that the latest permit or license
issued for A TLOCOM was only its PA dated 10.08.03;

4. In a memo addressed to the Records Verification Committee dated 06 September 2006 (copy attached as
Annex "D") signed by then Commissioner Ronald Olivar Solis, citing a memo dated 21 September 2005 from
then DOTC Secretary Leonardo R. Mendoza and Office Order No. 71-08-2006, the Records Verification
Committee was directed to verify the status of several radio frequency bands therein listed, and to submit its
report to include, among others, SUF payments, latest permits, and licenses issued and photocopies of the same;

5. The Records Verification Committee reported in a memo dated 08 September 2006 (copy attached as Annex
"E"), that with respect to Atlocom Wireless System, Inc., no record on file was found as to station location,
frequency, license/permit no., radio station license or permit to purchase and possess;

6. In a memo addressed to the Acting Chief BSD dated 07 January 2008 by then FMD Acting Chief Engr.
Joselito C. Leynes (copy attached as Annex "F") [w]ith reference to the 03 January 2008 indorsement letter from
BSD (copy attached as Annex "G) regarding the request of Atlocom Wireless System, Inc. for an allocation of a
Digital Television (DTT) frequency (copy attached

as Annex "H"), the BSD was informed of the following for guidance:

"that the proposed frequency band from Channel 14-20 and Channel 21-51 is not yet been finally
allocated/approved for the purpose ofDTT operation. Further, in the event that said frequency band re-
allocation is approved, only broadcasting company with existing TV station/s and/or authority to operate
is entitled for application/issuance of a DTT frequency channel."

7. A Memo addressed to the Chief, Frequency Management Division dated 27 July 2012 (copy attached as
Annex "I") Chief, BSD in connection with the "certification" issued to Atlocom Wireless System, Inc clarifies
the following:

"that the frequencies stated in the subject certification were simply identified as candidate frequencies
for the MMDS service under NTC Case No. 98-158, subject to final frequency assignment by the
Frequency Management Division (FMD) of this Commission." and

"Furthermore inasmuch as frequency assignments covering the band 2500-2700 Mhz are issued by the
Frequency Management Division (FMD), the undersigned is of the view that the determination of the
assignment of the subject frequencies to Atlocom Wireless, or to any other entity, can best be certified
by the Frequency Management Division (FMD)"

8. As per NTC Office Order No. 59-07-2003 dated July 30, 2003 (copy attached as Annex "J), all requests,
applications requiring clearance and/or new radio frequency assignments, except for frequencies that have been
pre-allocated and/or decentralized, shall be cleared with the Office of the Commissioner thru the Frequency
Management Division:
 Page 108 of 108

"Henceforth, except for frequencies that have been pre-allocated and/or decentralized, all requests
applications requiring clearance and/or new radio frequency assignment shall be cleared with the Office
of the Commissioner thru the Frequency Management Division."

9. No records/documents were however found at the Frequency Management Division showing frequency
assignment clearance for the use of ATLOCOM's MMDS system.

In light of all the foregoing established facts, we hold that the CA gravely abused its discretion when it issued a writ of
preliminary injunction against the implementation of MC 06-08-2005 in the absence of a clear legal right on the part of
Atlocom, and subsequently denying LBNI' s offer to file counter bond despite compliance with the requisites provided in
Section 6 of Rule 58. However, with our ruling that the writ of preliminary injunction was improperly issued, hence, null
and void, the matter of allowing LBNI to post a counter-bond has been rendered moot.

A final note. In its Memorandum,37 Atlocom argues that LBNI is part of mass media and its franchise violates Article
XVI, Section 11 (1) of the Constitution38 because it is not wholly-owned by Filipino citizens.39

Unless properly raised and the very /is mota of the case, we do not pass upon constitutional issues. The resolution of the
constitutional issues must be absolutely necessary for the determination of the case.40 In the spirit of deference to the acts
of other constitutional departments and organs, issues before this Court should address only the narrowest issues
necessary to determine whether the reliefs prayed for can be granted. As in this case, reliefs can be determined on
procedural issues.

The main issue presented in this case is the validity of Atlocom' s application for a writ of preliminary injunction against
the NTC.1âwphi1 This issue can be resolved without passing upon the constitutionality of LBNI' s franchise. The
resolution of the issue on LBNI's eligibility thus has no bearing on whether Atlocom has the right to be granted a
frequency allocation for Broadband Wireless Access by the NTC. The constitutional issue raised by the respondent may
be raised and resolved in proper cases when necessary in the future.

WHEREFORE, the petitions are GRANTED. The Decision dated June 29, 2012 and Resolution dated February 18, 2013
of the Court of Appeals in CA-G.R. SP No. 119868 are REVERSED and SET ASIDE. Consequently, the writ of
preliminary injunction issued in said case, if any, is hereby declared NULL and VOID.

The Orders dated December 9, 2010 and March 21, 2011 of the Regional Trial Court of Quezon City, Branch 95 in Q-
09-65566 are hereby REINSTATED and UPHELD.

The Temporary Restraining Order issued by this Court on April 30, 2013 is hereby made PERMANENT.

No pronouncement as to costs.

SO ORDERED.