Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
PARAS, J.:
This is a petition for certiorari and prohibition which seeks: (1) to declare Monetary Board Resolution No. 1995, series of
1971, as null and void; (2) to prohibit the Central Bank from collecting the stabilization tax on banana exports shipped
during the period January 1, 1972 to June 30, 1982; and (3) a refund of the amount collected as stabilization tax from the
Central Bank.
The facts of this case as culled from the records are as follows:
Hijo Plantation, Inc., Davao Fruits Corporation, Twin Rivers Plantation, Inc. and Marsman Plantation (Manifestation,
Rollo, P. 18), collectively referred to herein as petitioners, are domestic corporations duly organized and existing under
the laws of the Philippines, all of which are engaged in the production and exportation of bananas in and from Mindanao.
Owing to the difficulty of determining the exchange rate of the peso to the dollar because of the floating rate and the
promulgation of Central Bank Circular No. 289 which imposes an 80% retention scheme on all dollar earners, Congress
passed Republic Act No. 6125 entitled "an act imposing STABILIZATION TAX ON CONSIGNMENTS ABROAD TO
ACCELERATE THE ECONOMIC DEVELOPMENT OF THE PHILIPPINES AND FOR OTHER PURPOSES," approved
and made effective on May 1, 1970 (Comment on Petition, Rollo, p, 32), to eliminate the necessity for said circular and to
stabilize the peso. Among others, it provides as follows:
SECTION 1. There shall be imposed, assessed and collected a stabilization tax on the gross F.O.B.
peso proceeds, based on the rate of exchange prevailing at the time of receipt of such proceeds, whether partial or total,
of any exportation of the following products in accordance with the following schedule:
a. In the case of logs, copra, centrifugal sugar, and copper ore and concentrates:
Ten per centum of the F.O.B. peso proceeds of exports received on or after the date of effectivity of this Act to June
thirty, nineteen hundred seventy one;
Eight per centum of the F.O.B. peso proceeds of exports received from July first, nineteen hundred
seventy-one to June thirty, nineteen hundred seventy-two;
Six per centum of the F.O.B. peso proceeds of exports received from July first, nineteen hundred
seventy two to June thirty, nineteen hundred seventy- three; and
Four per centum of the F.O.B. peso proceeds of exports received from
July first, nineteen hundred seventy-three to June thirty, nineteen hundred seventy-four.
b. In the case of molasses, coconut oil, dessicated coconut, iron ore
and concentrates, chromite ore and concentrates, copra meal or cake, unmanufactured abaca, unmanufactured tobacco,
veneer core and sheets, plywood (including plywood panels faced with plastics), lumber, canned pineapples, and bunker
fuel oil;
Eight per centum of the F.O.B. peso proceeds of exports shipped on or
after the date of effectivity of this Act to June thirty, nineteen hundred seventy-one;
Six per centum of the F.O.B. peso proceeds of exports shipped from
July first, nineteen hundred seventy one to June thirty nineteen hundred seventy- two;
Four per centum of the F.O.B. peso proceeds of exports shipped from
July first, nineteen hundred seventy-two to June thirty nineteen hundred seventy-three; and
Two per centum of the F.O.B. peso proceeds of exports shipped from
July first, nineteen hundred seventy three to June thirty nineteen hundred seventy-four.
Any export product the aggregate annual F.O.B. value of which shall exceed five million United States
dollars in any one calendar year during the effectivity of this Act shall likewise be subject to the rates of
tax in force during the fiscal years following its reaching the said aggregate value. (Emphasis supplied).
During the first nine (9) months of calendar year 1971, the total banana export amounted to an annual aggregate F.O.B.
value of P8,949,000.00 (Answer, Rollo, p. 73) thus exceeding the aggregate F.O.B. value of five million United States
Dollar, bringing it within the ambit of Republic Act No. 6125. Consequently, the banana industry was in a dilemma as to
when the stabilization tax was to become due and collectible from it and under what schedule of Section 1 (b) of
Republic Act 6125 should said tax be collected. Accordingly, petitioners through their counsel, by letter dated November
5, 1971, sought the authoritative pronouncement of the Central Bank (herein referred to as respondent), therein
advancing the opinion that the stabilization tax does not become due and collectible from the petitioners until July 1,
1972 at the rate of 4% of the F.O.B. peso proceeds of the exports shipped from July 1, 1972 to June 30,1973. Replying
by letter dated December 17,1971 (Rollo, p. 11), the Central Bank called attention to Monetary Board Resolution No.
1995 dated December 3, 1971 which clarified that:
1) For exports of bananas shipped during the period from January 1, 1972 to June 30, 1972; the
stabilization tax shall be at the rate of 6%;
2) For exports of bananas shipped during the period from July 1, 1972 to June 30, 1973, the stabilization
tax shall be at the rate of 4%; and
3) For exports of bananas shipped during the period from July 1, 1973, to June 30, 1974, the
stabilization tax shall be at the rate of 2%."
Contending that said Board Resolution No. 1995 was manifestly contrary to the legislative intent, petitioners sought a
reconsideration of said Board Resolution by letter dated December 27, 1971 (Rollo, p. 12) which request for
reconsideration was denied by the respondent, also by letter dated January 20, 1972 (Rollo, p. 24). With the denial of
petitioners' request for reconsideration, respondent thru its agent Bank, Rizal Commercial Banking Corporation has been
collecting from the petitioners who have been forced to pay under protest, such stabilization tax.
Petitioners view respondent's act as a clear violation of the provision of Republic Act No. 6125, and as an act in excess
of its jurisdiction, hence, this petition.
The sole issue in this case is whether or not respondent acted with grave abuse of discretion amounting to lack of
jurisdiction when it issued Monetary Board Resolution No. 1995, series of 1971 which in effect reaffirmed Central Bank
Circular No. 309, enacted pursuant to Monetary Board Resolution No. 1179.
There is here no dispute that the banana industry is liable to pay the stabilization tax prescribed under Republic Act No.
1995, it being the admission of both parties, that the Industry has indeed reached and for the first time in the calendar
year 1971, a total banana export exceeding the aggregate annual F.O.B. value of five million United States dollars. The
crux of the controversy, however, is the manner of implementation of Republic Act No. 6125.
Section 1 of R.A. 6125 clearly provides as follows:
An export product the aggregate annual F.O.B. value of which shall exceed five million US dollars in any
one calendar year during the effectivity of the act shall likewise be subject to the rates of tax in force
during the fiscal year following its reaching the said aggregate value."
Petitioners contend that the stabilization tax to be collected from the banana industry does not become due and
collectible until July 1, 1972 at the rate of 4% of the F.O.B. peso proceeds of the export shipped from July 1, 1972 to
June 30,1973. They further contend that respondent gave retroactive effect to the law (RA 6125) by ruling in Monetary
Board Resolution No. 1995 dated December 3, 1 971, that the export stabilization tax on banana industry would start to
accrue on January 1, 1972 at the rate of 6% of the F.O.B. peso proceeds of export shipped from July 1, 1971 to June 30,
1972 (Rollo, pp. 3-4).
Respondent, on the other hand, contends that the aforecited provision of RA 6125 merely prescribes the rates that may
be imposed but does not provide when the tax shall be collected and makes no reference to any definite fixed period
when the tax shall begin to be collected (Rollo, pp. 77-78).
There is merit in this petition.
In the very nature of things, in many cases it becomes impracticable for the legislative department of the Government to
provide general regulations for the various and varying details for the management of a particular department of the
Government. It therefore becomes convenient for the legislative department of the government, by law, in a most general
way, to provide for the conduct, control, and management of the work of the particular department of the government; to
authorize certain persons, in charge of the management and control of such department (United States v. Tupasi Molina,
29 Phil. 119 [19141).
Such is the case in RA 6125, which provided in its Section 6, as follows:
All rules and regulations for the purpose of carrying out the provisions of the act shall be promulgated by
the Central Bank of the Philippines and shall take effect fifteen days after publication in three
newspapers of general circulation throughout the Philippines, one of which shall be in the national
language.
Such regulations have uniformly been held to have the force of law, whenever they are found to be in consonance and in
harmony with the general purposes and objects of the law. Such regulations once established and found to be in
conformity with the general purposes of the law, are just as binding upon all the parties, as if the regulation had been
written in the original law itself (29 Phil. 119, Ibid). Upon the other hand, should the regulation conflict with the law, the
validity of the regulation cannot be sustained (Director of Forestry vs. Muroz 23 SCRA 1183).
Pursuant to the aforecited provision, the Monetary Board issued Resolution No. 1179 which contained the rules and
regulations for the implementation of said provision which Board resolution was subsequently embodied in Central Bank
Circular No. 309, dated August 10, 1970 (duly published in the Official Gazette, Vol. 66, No. 34, August 24, 1940, p.
7855 and in three newspapers of general circulation throughout the Philippines namely, the Manila Times, Manila
Chronicle and Manila Daily Bulletin). Section 3 of Central Bank Circular No. 309, "provides that the stabilization tax shall
begin to apply on January first following the calendar year during which such export products shall have reached the
aggregate annual F.O.B. value of more than $5 million and the applicable tax rates shall be the rates prescribed in
schedule (b) of Section 1 of RA No. 6125 for the fiscal year following the reaching of the said aggregate value." Central
Bank Circular No. 309 was subsequently reaffirmed in Monetary Board Resolution No. 1995 herein assailed by
petitioners for being null and void (Rollo, pp. 97- 98).
In its comment (Rollo, p. 40), respondent argues that the request for authoritative pronouncement of petitioners was
made because there was no express provision in Section 1 of RA 6125 which categorically states, when the stabilization
tax shall begin to accrue on those aggregate annual F.O.B. values exceeding five (5) million United States dollars in any
one calendar year during the effectivity of said act. For which reason, the law itself authorized it under Section 7 to
promulgate rules and regulations to carry out the provisions of said law.
In petitioner's reply (Rollo, p. 154) they argue that since the Banana Exports reached the aggregate annual F.O.B. value
of US $5 million in August 1971, the stabilization tax on banana should be imposed only on July 1, 1972, the fiscal year
following the calendar year during which the industry attained the $5 million mark. Their argument finds support in the
very language of the law and upon congressional record where a clarification on the applicability of the law was
categorically made by the then Senator Aytona who stated that the tax shall be applicable only after the $5 million
aggregate value is reached, making such tax prospective in application and for a period of one year- referring to the
fiscal year (Annex 8, Comment of Respondent; Rollo, p. 60). Clearly such clarification was indicative of the legislative
intent. Further, they argue that respondent bank through the Monetary Board clearly overstepped RA 6125 which
empowered it to promulgate rules and regulations for the purpose of carrying out the provisions of said act, because
while Section 1 of the law authorizes it to levy a stabilization tax on petitioners only in the fiscal year following their
reaching the aggregate annual F.O.B. value of US $5 million, that is, the fiscal year July 1, 1972 to June 30, 1973, at a
tax rate of 4% of the F.O.B. peso proceeds, respondent in gross violation of the law, instead issued Resolution No. 1995
which impose a 6% stabilization tax for the calendar year January 1, 1972 to June 30, 1972, which obviously is in excess
of its jurisdiction. It was further argued that in directing its agent bank to collect the stabilization tax in accordance with
Monetary Board Resolution No. 1995, it acted whimsically and capriciously. (Rollo, p. 155).
It will be observed that while Monetary Board Resolution No. 1995 cannot be said to be the product of grave abuse of
discretion but rather the result of respondent's overzealous desire to carry into effect the provisions of RA 6125, it is
evident that the Board acted beyond its authority under the law and the Constitution. Hence, the petition for certiorari and
prohibition in the case at bar, is proper.
Moreover, there is no dispute that in case of discrepancy between the basic law and a rule or regulation issued to
implement said law, the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of
the basic law (People vs. Lim, 108 Phil. 1091). Rules that subvert the statute cannot be sanctioned (University of Sto.
Tomas v. Board of Tax Appeals, 93 Phil. 376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except for
constitutional officials who can trace their competence to act to the fundamental law itself, a public official must locate to
the statute relied upon a grant of power before he can exercise it. Department zeal may not be permitted to outrun the
authority conferred by statute (Radio Communications of the Philippines, Inc. v. Santiago L-29236, August 21, 1974, 58
SCRA 493; cited in Tayug Rural Bank v. Central Bank, L-46158, November 28,1986,146 SCRA 120,130).
PREMISES CONSIDERED, this petition is hereby GRANTED.
SO ORDERED.
G.R. No. L-46158 November 28, 1986
TAYUG RURAL BANK, plaintiff-appellee,
vs.
CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.
Bengzon, Bengzon, Villaroman & De Vera Law Office for plaintiff-appellee.
Evangelista, Bautista & Valdehuesa Law Office for defendant-appellant.
PARAS, J.:p
Submitted on May 20, 1977 for decision by this Court is this appeal from the decision dated January 6, 1971 rendered by
the Court of First Instance of Manila, Branch III in Civil Case No. 76920, the decretal portion of which states as follows:
WHEREFORE, judgment is rendered for the plaintiff on the complaint and the defendant is ordered to
further credit the plaintiff the amounts collected as 10% penalty in the sum of P19,335.88 or up to July
15, 1969 and to refrain from collecting the said 10% penalty on the remaining past due loans of plaintiff
with the defendant.
With respect to defendant's counterclaim, judgment is hereby rendered against the plaintiff and the
defendant is ordered to pay the Central Bank of the Philippines the outstanding balance of its past
overdue accounts in the sum of P444,809,45 plus accrued interest at the rate of 1/2 of 1 % per annum
with respect to the promissory notes (Annexes 1 to 1-E of defendant's Answer) and 2-1/2% per annum
with respect to the promissory notes (Annexes 1-f to 1-i of the Answer). From this amount shall be
deducted the sum of P19,335.88 collected as 10% penalty.
The facts of the case based on the parties' stipulation of facts (Record on Appeal p. 67), are as follows:
Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking corporation in Tayug, Pangasinan. During the period from
December 28, 1962 to July 30, 1963, it obtained thirteen (13) loans from Defendant-Appellant, Central Bank of the
Philippines, by way of rediscounting, at the rate of 1/2 of 1% per annum from 1962 to March 28, 1963 and thereafter at
the rate of 2-1/2% per anum. The loans, amounting to P813,000.00 as of July 30, 1963, were all covered by
corresponding promissory notes prescribing the terms and conditions of the aforesaid loans (Record on Appea, pp. 15-
53). As of July 15, 1969, the outstanding balance was P 444,809.45 (Record on Appeal, p. 56).
On December 23, 1964, Appellant, thru the Director of the Department of Loans and Credit, issued Memorandum
Circular No. DLC-8, informing all rural banks that an additional penalty interest rate of ten per cent (10%) per annum
would be assessed on all past due loans beginning January 4, 1965. Said Memorandum Circular was actually enforced
on all rural banks effective July 4, 1965.
On June 27, 1969, Appellee Rural Bank sued Appellant in the Court of First Instance of Manila, Branch III, to recover the
10% penalty imposed by Appellant amounting to P16,874.97, as of September 27, 1968 and to restrain Appellant from
continuing the imposition of the penalty. Appellant filed a counterclaim for the outstanding balance and overdue accounts
of Appellee in the total amount of P444,809.45 plus accrued interest and penalty at 10% per annum on the outstanding
balance until full payment. (Record on Appeal, p. 13). Appellant justified the imposition of the penalty by way of
affirmative and special defenses, stating that it was legally imposed under the provisions of Section 147 and 148 of the
Rules and Regulations Governing Rural Banks promulgated by the Monetary Board on September 5, 1958, under
authority of Section 3 of Republic Act No. 720, as amended (Record on Appeal, p. 8, Affirmative and Special Defenses
Nos. 2 and 3).
In its answer to the counterclaim, Appellee prayed for the dismissal of the counterclaim, denying Appellant's allegations
stating that if Appellee has any unpaid obligations with Appellant, it was due to the latter's fault on account of its flexible
and double standard policy in the granting of rediscounting privileges to Appellee and its subsequent arbitrary and illegal
imposition of the 10% penalty (Record on Appeal, p. 57). In its Memorandum filed on November 11, 1970, Appellee also
asserts that Appellant had no basis to impose the penalty interest inasmuch as the promissory notes covering the loans
executed by Appellee in favor of Appellants do not provide for penalty interest rate of 10% per annum on just due loans
beginning January 4, 1965 (Record on Appeal p. 96).
The lower court, in its Order dated March 3, 1970, stated that "only a legal question has been raised in the pleadings"
and upholding the stand of plaintiff Rural Bank, decided the case in its favor. (Rollo, p. 34).
Appellant appealed the decision of the trial court to the Court of Appeals, for determination of questions of facts and of
law. However, in its decision promulgated April 13, 1977, the Court of Appeals, finding no controverted facts and taking
note of the statement of the lower court in its pre-trial Order dated March 3, 1970 that only a legal question has been
raised in the pleadings, (Record on Appeal, p. 61), ruled that the resolution of the appeal will solely depend on the legal
issue of whether or not the Monetary Board had authority to authorize Appellant Central Bank to impose a penalty rate of
10% per annum on past due loans of rural banks which had failed to pay their accounts on time and ordered the
certification of this case to this Court for proper determination (Rollo, pp. 34-35).
On April 20, 1977, the entire record of the case was forwarded to this Court (Rollo, p. 36). In the resolution of May 20,
1977, the First Division of this Court, ordered the case docketed and as already stated declared the same submitted for
decision (Rollo, p. 38).
In its Brief, Appellant assigns the following errors:
I. THE LOWER COURT ERRED IN HOLDING THAT IT IS BEYOND THE REACH OF
THE MONETARY BOARD TO METE OUT PENALTIES ON PAST DUE LOANS OF
RURAL BANKS ESPECIALLY SINCE NO PENAL CLAUSE HAS BEEN INCLUDED IN
THE PROMISSORY NOTES.
II. THE LOWER COURT ERRED IN HOLDING THAT THE IMPOSITION OF THE
PENALTY IS AN IMPAIRMENT OF THE OBLIGATION OF CONTRACT WITHOUT
DUE PROCESS.
III. THE LOWER COURT ERRED IN NOT FINDING JUDGMENT AGAINST PLAINTIFF
FOR 10% COST OF COLLECTION OF THE PROMISSORY NOTE AS PROVIDED
THEREIN.
It is undisputed that no penal clause has been included in the promissory notes. For this reason, the trial court is of the
view that Memorandum Circular DLC-8 issued on December 23, 1964 prescribing retroactive effect on all past due loans,
impairs the obligation of contract and deprives the plaintiff of its property without due process of law. (Record on Appel,
p. 40).
On the other hand appellant without opposing appellee's right against impairment of contracts, contends that when the
promissory notes were signed by appellee, it was chargeable with knowledge of Sections 147 and 148 of the rules and
regulations authorizing the Central Bank to impose additional reasonable penalties, which became part of the
agreement. (ibid).
Accordingly, the issue is reduced to the sole question as to whether or not the Central Bank can validly impose the 10%
penalty on Appellee's past overdue loans beginning July 4, 1965, by virtue of Memorandum Circular No. DLC-8 dated
December 23, 1964.
The answer is in the negative.
Memorandum Circular No. DLC-8 issued by the Director of Appellant's Department of Loans and Credit on December
23, 1964, reads as follows:
Pursuant to Monetary Board Resolution No. 1813 dated December 18, 1964, and in consonance with
Section 147 and 148 of the Rules and Regulations Governing Rural Banks concerning the responsibility
of a rural bank to remit immediately to the Central Bank payments received on papers rediscounted with
the latter including the loan value of rediscounted papers as they mature, and to liquidate fully its
maturing loan obligations with the Central Bank, personal checks, for purposes of repayment, shall
considered only after such personal checks shall have been honored at clearing.
In addition, rural banks which shall default in their loan obligations, thus incurring past due accounts with
the Central Bank, shall be assessed an additional penalty interest rate of ten per cent (10%) per annum
on such past due accounts with the Central Bank over and above the customary interest rate(s) at which
such loans were originally secured from the Central Bank. (Record on Appeal, p. 135).
The above-quoted Memorandum Circular was issued on the basis of Sections 147 and 148 of the Rules and Regulations
Governing Rural Banks of the Philippines approved on September 5, 1958, which provide:
Section 147. Duty of Rural Bank to turn over payment received for papers discounted or used for
collateral. — A Rural Bank receiving any payment on account of papers discounted or used for collateral
must turn the same over to the creditor bank before the close of the banking day next following the
receipt of payment, as long as the aggregate discounting on loan amount is not fully paid, unless the
Rural Bank substitutes the same with another eligible paper with at least the same or earlier maturity
and the same or greater value.
A Rural Bank failing to comply with the provisions of the preceding paragraph shall ipso facto lose its
right to the rediscounting or loan period, without prejudice to the Central Bank imposing additional
reasonable penalties, including curtailment or withdrawal of financial assistance.
Sec. 148. Default and other violations of obligation by Rural Bank, effect. — A Rural Bank becomes in
default upon the expiration of the maturity period of its note, or that of the papers discounted or used as
collateral, without the necessity of demand.
A Rural Bank incurring default, or in any other manner, violating any of the stipulations in its note, shall
suffer the consequences provided in the second paragraph of the preceding section. (Record on Appeal,
p. 136.)
The "Rules and Regulations Governing Rural Banks" was published in the Official Gazette, 55 O.G., on June 13, 1959,
pp. 5186-5289. It is by virtue of these same Rules that Rural Banks re-discount their loan papers with the Central Bank
at 2-1/2% interest per annum and in turn lend the money to the public at 12% interest per annum (Defendant's Reply to
Plaintiff's Memorandum, Record on Appeal, p. 130).
Appellant maintains that it is pursuant to Section 3 of R.A. No. 720, as amended, that the Monetary Board has adopted
the set of Rules and Regulations Governing Rural Banks. It reads:
SEC. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines shall
formulate the necessary rules and regulations governing the establishment and operatives of Rural
Banks for the purpose of providing adequate credit facilities to small farmers and merchants, or to
cooperatives of such farmers or merchants and to supervise the operation of such banks.
The specific provision under the law claimed as basis for Sections 147 and 148 of the Rules and Regulations Governing
Rural Banks, that is, on Appellant's authority to extend loans to Rural Banks by way of rediscounting is Section 13 of
R.A. 720, as amended, which provides:
SEC. 13. In an emergency or when a financial crisis is imminent the Central Bank may give a loan to any
Rural Bank against assets of the Rural Bank which may be considered acceptable by a concurrent vote
of at least, five members of the Monetary Board.
In normal times, the Central Bank may re-discount against papers evidencing a loan granted by a Rural
Bank to any of its customers which can be liquefied within a period of two hundred and seventy days:
PROVIDED, HOWEVER, That for the purpose of implementing a nationwide program of agricultural and
industrial development, Rural Banks are hereby authorized under such terms and conditions as the
Central Bank shall prescribe to borrow on a medium or long term basis, funds that the Central Bank or
any other government financing institutions shall borrow from the International Bank for Reconstruction
and Development or other international or foreign lending institutions for the specific purpose of
financing the above stated agricultural and industrial program. Repayment of loans obtained by the
Central Bank of the Philippines or any other government financing institution from said foreign lending
institutions under this section shall be guaranteed by the Republic of the Philippines.
As to the supervising authority of the Monetary Board of the Central Bank over Rural Banks, the same is spelled-out
under Section 10 of R.A. 720, as follows:
SEC. 10. The power to supervise the operation of any Rural Bank by the Monetary Board of the Central
Bank as herein indicated, shall consist in placing limits to the maximum credit allowed any individual
borrower; in prescribing the interest rate; in determining the loan period and loan procedure; in indicating
the manner in which technical assistance shall be extended to Rural Banks; in imposing a uniform
accounting system and manner of keeping the accounts and records of the Rural Banks; in undertaking
regular credit examination of the Rural Banks: in instituting periodic surveys of loan and lending
procedures, audits, test check of cash and other transactions of the Rural Banks; in conducting training
courses for personnel of Rural Banks; and, in general in supervising the business operation of the Rural
Banks.
Nowhere in any of the above-quoted pertinent provisions of R.A. 720 nor in any other provision of R.A. 720 for that
matter, is the monetary Board authorized to mete out on rural banks an additional penalty rate on their past due accounts
with Appellant. As correctly stated by the trial court, while the Monetary Board possesses broad supervisory powers,
nonetheless, the retroactive imposition of administrative penalties cannot be taken as a measure supervisory in
character. (Record on Appeal, p. 141).
Administrative rules and regulations have the force and effect of law (Valerio v. Hon. Secretary of Agriculture and Natural
Resources, 7 SCRA 719; Commissioner of Civil Service v. Cruz, 15 SCRA 638; R.B. Industrial Development Company,
Ltd. v. Enage, 24 SCRA 365; Director of Forestry v. Munoz, 23 SCRA 1183; Gonzalo Sy v. Central Bank of the
Philippines, 70 SCRA 570).
There are, however, limitations to the rule-making power of administrative agencies. A rule shaped out by jurisprudence
is that when Congress authorizes promulgation of administrative rules and regulations to implement given legislation, all
that is required is that the regulation be not in contradiction with it, but conform to the standards that the law prescribes
(Director of Forestry v. Munoz, 23 SCRA 1183). The rule delineating the extent of the binding force to be given to
administrative rules and regulations was explained by the Court in Teoxon v. Member of the Board of Administrators (33
SCRA 588), thus: "The recognition of the power of administrative officials to promulgate rules in the implementation of
the statute, as necessarily limited to what is provided for in the legislative enactment, may be found as early as 1908 in
the case of United States v. Barrias (11 Phil. 327) in 1914 U.S. v. Tupasi Molina (29 Phil. 119), in 1936 People v.
Santos(63 Phil. 300), in 1951 Chinese Flour Importers Ass. v. Price Stabilization Board (89 Phil. 439), and in
1962 Victorias Milling Co., Inc. v. Social Security Commission (4 SCRA 627). The Court held in the same case that "A
rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the
statute granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate
wisdom ...." On the other hand, "administrative interpretation of the law is at best merely advisory, for it is the courts that
finally determine what the law means." Indeed, it cannot be otherwise as the Constitution limits the authority of the
President, in whom all executive power resides, to take care that the laws be faithfully executed. No lesser
administrative, executive office, or agency then can, contrary to the express language of the Constitution, assert for itself
a more extensive prerogative. Necessarily, it is bound to observe the constitutional mandate. There must be strict
compliance with the legislative enactment. The rule has prevailed over the years, the latest restatement of which was
made by the Court in the case of Bautista v. Junio (L-50908, January 31, 1984, 127 SCRA 342).
In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law
prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law (People v. Lim, 108
Phil. 1091). Rules that subvert the statute cannot be sanctioned (University of St. Tomas v. Board of Tax Appeals, 93
Phil. 376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except for constitutional officials who can trace their
competence to act to the fundamental law itself, a public official must locate in the statute relied upon a grant of power
before he can exercise it. Department zeal may not be permitted to outrun the authority conferred by statute (Radio
Communications of the Philippines, Inc. v. Santiago, L-29236, August 21, 1974, 58 SCRA 493).
When promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, the rules
and regulations partake of the nature of a statute, and compliance therewith may be enforced by a penal sanction
provided in the law (Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil. 555; People v. Maceren, L-32166,
October 18, 1977, 79 SCRA 462; Daza v. Republic, L-43276, September 28, 1984, 132 SCRA 267). Conversely, the rule
is likewise clear. Hence an administrative agency cannot impose a penalty not so provided in the law authorizing the
promulgation of the rules and regulations, much less one that is applied retroactively.
The records show that DLC Form No. 11 (Folder of Exhibits, p. 16) was revised December 23, 1964 to include the penal
clause, as follows:
In the event that this note becomes past due, the undersigned shall pay a penalty at the rate of _____
per cent ( ) per annum on such past due account over and above the interest rate at which such loan
was originally secured from the Central Bank.
Such clause was not a part of the promissory notes executed by Appellee to secure its loans. Appellant inserted the
clause in the revised DLC Form No. 11 to make it a part of the contractual obligation of rural banks securing loans from
the Central Bank, after December 23, 1964. Thus, while there is now a basis for the imposition of the 10% penalty rate
on overdue accounts of rural banks, there was none during the period that Appellee contracted its loans from Appellant,
the last of which loan was on July 30, 1963. Surely, the rule cannot be given retroactive effect.
Finally, on March 31, 1970, the Monetary Board in its Resolution No. 475 effective April 1, 1970, revoked its Resolution
No. 1813, dated December 18, 1964 imposing the questioned 10% per annum penalty rate on past due loans of rural
banks and amended sub-paragraph (a), Section 10 of the existing guidelines governing rural banks' applications for a
loan or rediscount, dated May 7, 1969 (Folder of Exhibits, p. 19). As stated by the trial court, this move on the part of the
Monetary Board clearly shows an admission that it has no power to impose the 10% penalty interest through its rules
and regulations but only through the terms and conditions of the promissory notes executed by the borrowing rural
banks. Appellant evidently hoped that the defect could be adequately accomplished by the revision of DLC Form No. 11.
The contention that Appellant is entitled to the 10% cost of collection in case of suit and should therefore, have been
awarded the same by the court below, is well taken. It is provided in all the promissory notes signed by Appellee that in
case of suit for the collection of the amount of the note or any unpaid balance thereof, the Appellee Rural Bank shall pay
the Central Bank of the Philippines a sum equivalent to ten (10%) per cent of the amount unpaid not in any case less
than five hundred (P500.00) pesos as attorney's fees and costs of suit and collection. Thus, Appellee cannot be allowed
to come to Court seeking redress for an wrong done against it and then be allowed to renege on its corresponding
obligations.
PREMISES CONSIDERED, the decision of the trial court is hereby AFFIRMED with modification that Appellee Rural
Bank is ordered to pay a sum equivalent to 10% of the outstanding balance of its past overdue accounts, but not in any
case less than P500.00 as attorney's fees and costs of suit and collection.
SO ORDERED.
G.R. No. L-23004 June 30, 1965
MAKATI STOCK EXCHANGE, INC., petitioner,
vs.
SECURITIES AND EXCHANGE COMMISSION and MANILA STOCK EXCHANGE, respondents.
Hermenegildo B. Reyes for petitioner.
Office of the Solicitor General for respondent Securities and Exchange Commission.
Norberto J. Quisumbing and Emma Quisumbing-Fernando for respondent Manila Stock Exchange.
BENGZON, C.J.:
This is a review of the resolution of the Securities and Exchange Commission which would deny the Makati Stock
Exchange, Inc., permission to operate a stock exchange unless it agreed not to list for trading on its board, securities
already listed in the Manila Stock Exchange.
Objecting to the requirement, Makati Stock Exchange, Inc. contends that the Commission has no power to impose it and
that, anyway, it is illegal, discriminatory and unjust.
Under the law, no stock exchange may do business in the Philippines unless it is previously registered with the
Commission by filing a statement containing the information described in Sec. 17 of the Securities Act (Commonwealth
Act 83, as amended).
It is assumed that the Commission may permit registration if the section is complied with; if not, it may refuse. And there
is now no question that the section has been complied with, or would be complied with, except that the Makati Stock
Exchange, upon challenging this particular requirement of the Commission (rule against double listing) may be deemed
to have shown inability or refusal to abide by its rules, and thereby to have given ground for denying registration. [Sec.
17 (a) (1) and (d)].
Such rule provides: "... nor shall a security already listed in any securities exchange be listed anew in any other
securities exchange ... ."
The objection of Makati Stock Exchange, Inc., to this rule is understandable. There is actually only one securities
exchange — The Manila Stock Exchange — that has been operating alone for the past 25 years; and all — or
presumably all — available or worthwhile securities for trading in the market are now listed there. In effect, the
Commission permits the Makati Stock Exchange, Inc., to deal only with other securities. Which is tantamount to
permitting a store to open provided it sells only those goods not sold in other stores. And if there's only one existing
store, 1 the result is a monopoly.
It is not farfetched to assert — as petitioner does 2 that for all practical purposes, the Commission's order or resolution
would make it impossible for the Makati Stock Exchange to operate. So, its "permission" amounted to a "prohibition."
Apparently, the Commission acted "in the public interest." 3 Hence, it is pertinent to inquire whether the Commission may
"in the public interest" prohibit (or make impossible) the establishment of another stock exchange (besides the Manila
Stock Exchange), on the ground that the operation of two or more exchanges adversely affects the public interest.
At first glance, the answer should be in the negative, because the law itself contemplated, and, therefore, tacitly
permitted or tolerated at least, the operation of two or more exchanges.
Wherever two or more exchanges exist, the Commission, by order, shall require and enforce uniformity of
trading regulations in and/or between said exchanges. [Emphasis Ours] (Sec. 28b-13, Securities Act.)
In fact, as admitted by respondents, there were five stock exchanges in Manila, before the Pacific War (p. 10, brief),
when the Securities Act was approved or amended. (Respondent Commission even admits that dual listing was
practiced then.) So if the existence of more than one exchange were contrary to public interest, it is strange that the
Congress having from time to time enacted legislation amending the Securities Act, 4 has not barred multiplicity of
exchanges.
Forgetting for the moment the monopolistic aspect of the Commission's resolution, let us examine the authority of the
Commission to promulgate and implement the rule in question.
It is fundamental that an administrative officer has only such powers as are expressly granted to him by the statute, and
those necessarily implied in the exercise thereof.
In its brief and its resolution now subject to review, the Commission cites no provision expressly supporting its rule.
Nevertheless, it suggests that the power is "necessary for the execution of the functions vested in it"; but it makes no
explanation, perhaps relying on the reasons advanced in support of its position that trading of the same securities in two
or more stock exchanges, fails to give protection to the investors, besides contravening public interest. (Of this, we shall
treat later) .
On the legality of its rule, the Commission's argument is that: (a) it was approved by the Department Head — before the
War; and (b) it is not in conflict with the provisions of the Securities Act. In our opinion, the approval of the
Department, 5 by itself, adds no weight in a judicial litigation; and the test is not whether the Act forbids the Commission
from imposing a prohibition, but whether it empowers the Commission to prohibit. No specific portion of the statute has
been cited to uphold this power. It is not found in sec. 28 (of the Securities Act), which is entitled "Powers (of the
Commission) with Respect to Exchanges and Securities." 6
According to many court precedents, the general power to "regulate" which the Commission has (Sec. 33) does not
imply authority to prohibit." 7
The Manila Stock Exchange, obviously the beneficiary of the disputed rule, contends that the power may be inferred from
the express power of the Commission to suspend trading in a security, under said sec. 28 which reads partly:
And if in its opinion, the public interest so requires, summarily to suspend trading in any registered security on
any securities exchange ... . (Sec. 28[3], Securities Act.)
However, the Commission has not acted — nor claimed to have acted — in pursuance of such authority, for the simple
reason that suspension under it may only be for ten days. Indeed, this section, if applicable, precisely argues against the
position of the Commission because the "suspension," if it is, and as applied to Makati Stock Exchange, continues for an
indefinite period, if not forever; whereas this Section 28 authorizes suspension for ten days only. Besides, the
suspension of trading in the security should not be on one exchange only, but on all exchanges; bearing in mind that
suspension should be ordered "for the protection of investors" (first par., sec. 28) in all exchanges, naturally, and if "the
public interest so requires" [sec. 28(3)].
This brings up the Commission's principal conclusions underlying its determination viz.: (a) that the establishment of
another exchange in the environs of Manila would be inimical to the public interest; and (b) that double or multiple listing
of securities should be prohibited for the "protection of the investors."
(a) Public Interest — Having already adverted to this aspect of the matter, and the emerging monopoly of the Manila
Stock Exchange, we may, at this juncture, emphasize that by restricting free competition in the marketing of stocks, and
depriving the public of the advantages thereof the Commission all but permits what the law punishes as monopolies as
"crimes against public interest." 8
"A stock exchange is essentially monopolistic," the Commission states in its resolution (p. 14-a, Appendix, Brief for
Petitioner). This reveals the basic foundation of the Commission's process of reasoning. And yet, a few pages
afterwards, it recalls the benefits to be derived "from the existence of two or more exchanges," and the desirability of "a
healthy and fair competition in the securities market," even as it expresses the belief that "a fair field of competition
among stock exchanges should be encouraged only to resolve, paradoxically enough, that Manila Stock Exchange shall,
in effect, continue to be the only stock exchange in Manila or in the Philippines.
"Double listing of a security," explains the Commission, "divides the sellers and the buyers, thus destroying the essence
of a stock exchange as a two-way auction market for the securities, where all the buyers and sellers in one geographical
area converge in one defined place, and the bidders compete with each other to purchase the security at the lowest
possible price and those seeking to sell it compete with each other to get the highest price therefor. In this sense, a stock
exchange is essentially monopolistic."
Inconclusive premises, for sure. For it is debatable whether the buyer of stock may get the lowest price where all the
sellers assemble in only one place. The price there, in one sale, will tend to fix the price for the succeeding, sales,
and he has no chance to get a lower price except at another stock exchange. Therefore, the arrangement desired by the
Commission may, at most, be beneficial to sellers of stock — not to buyers — although what applies to buyers should
obtain equally as to sellers (looking for higher prices). Besides, there is the brokerage fee which must be considered. Not
to mention the personality of the broker.
(b) Protection of investors. — At any rate, supposing the arrangement contemplated is beneficial to investors (as the
Commission says), it is to be doubted whether it is "necessary" for their "protection" within the purview of the Securities
Act. As the purpose of the Act is to give adequate and effective protection to the investing public against fraudulent
representations, or false promises and the imposition of worthless ventures, 9 it is hard to see how the proposed
concentration of the market has a necessary bearing to the prevention of deceptive devices or unlawful practices. For it
is not mere semantics to declare that acts for the protection of investors are necessarily beneficial to them; but not
everything beneficial to them is necessary for their protection.
And yet, the Commission realizes that if there were two or more exchanges "the same security may sell for more in one
exchange and sell for less in the other. Variance in price of the same security would be the rule ... ." Needless to add, the
brokerage rates will also differ.
This, precisely, strengthens the objection to the Commission's ruling. Such difference in prices and rates gives the buyer
of shares alternative options, with the opportunity to invest at lower expense; and the seller, to dispose at higher prices.
Consequently, for the investors' benefit (protection is not the word), quality of listing 10 should be permitted, nay,
encouraged, and other exchanges allowed to operate. The circumstance that some people "made a lot of money due to
the difference in prices of securities traded in the stock exchanges of Manila before the war" as the Commission noted,
furnishes no sufficient reason to let one exchange corner the market. If there was undue manipulation or unfair
advantage in exchange trading the Commission should have other means to correct the specific abuses.
Granted that, as the Commission observes, "what the country needs is not another" market for securities already listed
on the Manila Stock Exchange, but "one that would focus its attention and energies on the listing of new securities and
thus effectively help in raising capital sorely needed by our ... unlisted industries and enterprises."
Nonetheless, we discover no legal authority for it to shore up (and stifle) free enterprise and individual liberty along
channels leading to that economic desideratum. 11
The Legislature has specified the conditions under which a stock exchange may legally obtain a permit (sec. 17,
Securities Act); it is not for the Commission to impose others. If the existence of two competing exchanges jeopardizes
public interest — which is doubtful — let the Congress speak. 12 Undoubtedly, the opinion and recommendation of the
Commission will be given weight by the Legislature, in judging whether or not to restrict individual enterprise and
business opportunities. But until otherwise directed by law, the operation of exchanges should not be so regulated as
practically to create a monopoly by preventing the establishment of other stock exchanges and thereby contravening:
(a) the organizers' (Makati's) Constitutional right to equality before the law;
(b) their guaranteed civil liberty to pursue any lawful employment or trade; and
(c) the investor's right to choose where to buy or to sell, and his privilege to select the brokers in his
employment. 13
And no extended elucidation is needed to conclude that for a licensing officer to deny license solely on the basis of what
he believes is best for the economy of the country may amount to regimentation or, in this instance, the exercise of
undelegated legislative powers and discretion.
Thus, it has been held that where the licensing statute does not expressly or impliedly authorize the officer in charge,
he may not refuse to grant a license simply on the ground that a sufficient number of licenses to serve the needs of the
public have already been issued. (53 C.J.S. p. 636.)
Concerning res judicata. — Calling attention to the Commission's order of May 27, 1963, which Makati Stock did not
appeal, the Manila Stock Exchange pleads the doctrine of res judicata. 14 (The order now reviewed is dated May 7,
1964.)
It appears that when Makati Stock Exchange, Inc. presented its articles of incorporation to the Commission, the latter,
after making some inquiries, issued on May 27, 1963, an order reading as follows.
Let the certificate of incorporation of the MAKATI STOCK EXCHANGE be issued, and if the organizers thereof
are willing to abide by the foregoing conditions, they may file the proper application for the registration and
licensing of the said Exchange.
In that order, the Commission advanced the opinion that "it would permit the establishment and operation of the
proposed Makati Stock Exchange, provided ... it shall not list for trading on its board, securities already listed in the
Manila Stock Exchange ... ."
Admittedly, Makati Stock Exchange, Inc. has not appealed from that order of May 27, 1963. Now, Manila Stock insists
on res judicata.
Why should Makati have appealed? It got the certificate of incorporation which it wanted. The condition or proviso
mentioned would only apply if and when it subsequently filed the application for registration as stock exchange. It had not
yet applied. It was not the time to question the condition; 15 Makati was still exploring the convenience of soliciting the
permit to operate subject to that condition. And it could have logically thought that, since the condition did not affect its
articles of incorporation, it should not appeal the order (of May 27, 1963) which after all, granted the certificate of
incorporation (corporate existence) it wanted at that time.
And when the Makati Stock Exchange finally found that it could not successfully operate with the condition attached, it
took the issue by the horns, and expressing its desire for registration and license, it requested that the condition (against
double listing) be dispensed with. The order of the Commission denying, such request is dated May 7, 1964, and is now
under, review.
Indeed, there can be no valid objection to the discussion of this issue of double listing now, 16 because even if the Makati
Stock Exchange, Inc. may be held to have accepted the permission to operate with the condition against double
listing (for having failed to appeal the order of May 27, 1963), still it was not precluded from afterwards contesting 17 the
validity of such condition or rule:
(1) An agreement (which shall not be construed as a waiver of any constitutional right or any right to contest the validity
of any rule or regulation) to comply and to enforce so far as is within its powers, compliance by its members, with the
provisions of this Act, and any amendment thereto, and any rule or regulation made or to be made thereunder. (See. 17-
a-1, Securities Act [Emphasis Ours].)
Surely, this petition for review has suitably been coursed. And making reasonable allowances for the presumption of
regularity and validity of administrative action, we feel constrained to reach the conclusion that the respondent
Commission possesses no power to impose the condition of the rule, which, additionally, results in discrimination and
violation of constitutional rights.
ACCORDINGLY, the license of the petition to operate a stock exchange is approved without such condition. Costs shall
be paid by the Manila Stock Exchange. So ordered.
Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ.,
concur.
Barrera, J., is on leave.
PADILLA, J.:
Private respondent Juan A. Alegre's wife, Dr. Jimena Alegre, sent two (2) RUSH telegrams through petitioner RCPI's
facilities in Taft Ave., Manila at 9:00 in the morning of 17 March 1989 to his sister and brother-in-law in Valencia, Bohol
and another sister-in-law in Espiritu, Ilocos Norte, with the following identical texts:
MANONG POLING DIED INTERMENT TUESDAY 1
Both telegrams did not reach their destinations on the expected dates. Private respondent filed a letter-complaint against
the RCPI with the National Telecommunications Commission (NTC) for poor service, with a request for the imposition of
the appropriate punitive sanction against the company.
Taking cognizance of the complaint, NTC directed RCPI to answer the complaint and set the initial hearing of the case to
2 May 1989. After two (2) resettings, RCPI moved to dismiss the case on the following grounds:
1. Juan Alegre is not the real party in interest;
2. NTC has no jurisdiction over the case;
3. the continued hearing of the case violates its constitutional right to due process of law. 2
RCPI likewise moved for deferment of scheduled hearings until final determination of its motion to dismiss.
On 15 June 1989, NTC proceeded with the hearing and received evidence for private respondent Juan Alegre. On 3
October 1989, RCPI's motion to dismiss was denied, thus:
The herein complainant is the husband of the sender of the "rush" telegram that respondent allegedly
failed to deliver in a manner respondent bound itself to undertake, so his legal interest in this
administrative case cannot be seriously called in question. As regards the issue of jurisdiction, the
authority of the Commission to hear and decide this case stems from its power of control and
supervision over the operation of public communication utilities as conferred upon it by law.
Besides, the filing of a motion to dismiss is not allowed by the rules (Section 1, Rule 12, Rules of
Practice and Procedures). Following, however, the liberal construction of the rules, respondent (sic)
motion shall be treated as its answer or be passed upon after the conclusion of the hearing on the
merits. . . . 3
Hearings resumed in the absence of petitioner RCPI which was, however, duly notified thereof. On 27 November 1989,
NTC disposed of the controversy in the following manner:
WHEREFORE, in view of all the foregoing, the Commission finds respondent administratively liable for
deficient and inadequate service defined under Section 19(a) of C.A. 146 and hereby imposes the
penalty of FINE payable within thirty (30) days from receipt hereof in the aggregate amount of ONE
THOUSAND PESOS (P1,000.00) for:
1. Rush Telegram sent to Valencia, Bohol on March 17, 1989 and received on March 21, 1989
3 days x P200.00 per day = P600.00
2. Rush Telegram sent to Espiritu, Ilocos Norte on March 17, 1989 and received on March 20, 1989
2 days x P200.00 per day = P400.00
Total = P1,000.00
ENTERED. November 27, 1989. 4
A motion for reconsideration by RCPI reiterating averments in its earlier motion to dismiss was denied for lack of
merit; 5 hence, this petition for review invoking C.A. 146 Sec. 19(a) which limits the jurisdiction of the Public Service
Commission (precursor of the NTC) to the fixing of rates. RCPI submits that its position finds support in two (2) decided
cases 6 identical with the present one. Then Justice (later Chief Justice) Fernando writing for the Court stated:
. . . There can be no justification then for the Public Service Commission imposing the fines for these two
petitions. The law cannot be any clearer. The only power it possessed over radio companies, as noted
was the (sic ) fix rates. It could not take to task a radio company for negligence or misfeasance. It was
bereft of such competence. It was not vested within such authority. . . .
The Public Service Commission having been abolished by virtue of a Presidential Decree, as set forth at
the outset, and a new Board of Communications having been created to take its place, nothing said in its
decision has reference to whatever powers are now lodged in the latter body. . . . . . . (Footnotes
omitted)
Two (2) later cases, 7 adhering to the above tenet ruled:
Even assuming that the respondent Board of Communications has the power of jurisdiction over
petitioner in the exercise of its supervision to insure adequate public service, petitioner cannot be
subjected to payment of fine under sec. 21 of the Public Service Act, because this provision of the law
subjects to a fine every public service that violates or falls (sic) to comply with the terms and conditions
of any certificate or any orders, decisions and regulations of the Commission. . . . .
The Office of the Solicitor General now claims that the cited cases are no longer applicable, that the power and authority
of the NTC to impose fines is incidental to its power to regulate public service utilities and to supervise
telecommunications facilities, which are now clearly defined in Section 15, Executive Order No. 546 dated 23 July 1979:
thus:
Functions of the Commission. The Commission shall exercise the following functions:
xxx xxx xxx
b. Establish, prescribe and regulate the areas of operation of particular operators of the public service
communications;
xxx xxx xxx
h. Supervise and inspect the operation of radio stations and telecommunications facilities.
Regulatory administrative agencies necessarily impose sanctions, adds the Office of the Solicitor General. RCPI was
fined based on the finding of the NTC that it failed to undertake adequate service in delivering two (2) rush telegrams.
NTC takes the view that its power of supervision was broadened by E. O. No. 546, and that this development
superseded the ruling in RCPI vs. Francisco Santiago and companion cases.
The issues of due process and real parties in interest do not have to be discussed in this case. This decision will dwell on
the primary question of jurisdiction of the NTC to administratively impose fines on a telegraph company which fails to
render adequate service to a consumer.
E. O. 546, it will be observed, is couched in general terms. The NTC stepped "into the shoes" of the Board of
Communications which exercised powers pursuant to the Public Service Act. The power to impose fines should therefore
be read in the light of the Francisco Santiago case because subsequent legislation did not grant additional powers to the
Board of Communications. The Board in other words, did not possess the power to impose administrative fines on public
services rendering deficient service to customers, ergo its successor cannot arrogate unto itself such power, in the
absence of legislation. It is true that the decision in RCPI vs. Board of Communications seems to have modified
the Santiago ruling in that the later case held that the Board of Communications can impose fines if the public service
entity violates or fails to comply with the terms and conditions of any certificate or any order, decision or regulation of the
Commission. But can private respondent's complaint be similarly treated when the complaint seeks redress of a
grievance against the company? 8 NTC has no jurisdiction to impose a fine. Globe Wireless Ltd. vs.Public Service
Commission (G. R. No. L-27250, 21 January 1987, 147 SCRA 269) says so categorically.
Verily, Section 13 of Commonwealth Act No. 146, as amended, otherwise known as the Public Service
Act, vested in the Public Service Commission jurisdiction, supervision and control over all public services
and their franchises, equipment and other properties.
xxx xxx xxx
The act complained of consisted in petitioner having allegedly failed to deliver the telegraphic message
of private respondent to the addressee in Madrid, Spain. Obviously, such imputed negligence has
nothing whatsoever to do with the subject matter of the very limited jurisdiction of the Commission over
petitioner.
Moreover, under Section 21 of C. A. 146, as amended, the Commission was empowered to impose an
administrative fine in cases of violation of or failure by a public service to comply with the terms and
conditions of any certificate or any orders, decisions or regulations of the Commission. Petitioner
operated under a legislative franchise, so there were no terms nor conditions of any certificate issued by
the Commission to violate. Neither was there any order, decision or regulation from the Commission
applicable to petitioner that the latter had allegedly violated, disobeyed, defied or disregarded.
No substantial change has been brought about by Executive Order No. 546 invoked by the Solicitor General's Office to
bolster NTC's jurisdiction. The Executive Order is not an explicit grant of power to impose administrative fines on public
service utilities, including telegraphic agencies, which have failed to render adequate service to consumers. Neither has
it expanded the coverage of the supervisory and regulatory power of the agency. There appears to be no alternative but
to reiterate the settled doctrine in administrative law that:
Too basic in administrative law to need citation of jurisprudence is the rule that jurisdiction and powers of
administrative agencies, like respondent Commission, are limited to those expressly granted or
necessarily implied from those granted in the legislation creating such body; and any order without or
beyond such jurisdiction is void and ineffective . . . (Globe Wireless case, supra).
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE for lack of jurisdiction of the NTC to render it.
The temporary restraining order issued on 18 June 1990 is made PERMANENT without prejudice, however, to the filing
by the party aggrieved by the conduct of RCPI, of the proper action in the proper forum. No costs.
SO ORDERED.