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Prof. Joselito Guianan Chan's The Labor Code of the Philippines, Annotated, Labor Relations, Volume II of a 3-Volume Series 2017 Edition, 5th Revised Edition,
ChanRobles Internet Bar Review : www.chanroblesbar.com DebtKollect Company, Inc. - Debt Collection Firm Intellectual Property Division - Chan Robles Law Firm

CLICK HERE FOR THE LATEST SUPREME COURT JURISPRUDENCE


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EN BANC

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.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

In the late 1940s, John Walson, an appliance dealer in Pennsylvania, suffered a decline in the sale of television (tv) sets because of poor reception of signals in his community. Troubled, he built an antenna on top of a nearby mountain. Using coaxial cable lines, he distributed the tv signals from the antenna to the homes of his customers. Walsons 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 LGUs power.

The antecedent facts are as follows:

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

Sometime in November 1993, petitioner increased its subscriber rates from P88.00 to P180.00 per month. As a result, respondent Mayor wrote petitioner a letter9 threatening to cancel its permit unless it secures the approval of respondent Sangguniang Panlungsod, pursuant to Resolution No. 210.

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

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

"WHEREFORE, as prayed for, the defendants, their representatives, agents, deputies or other persons acting on their behalf or under their instructions, are hereby enjoined from canceling plaintiffs 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 States 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 courts 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;

x x x

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

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

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

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

Appellee increased the service rates from EIGHTY EIGHT PESOS (P88.00) to ONE HUNDRED EIGHTY PESOS (P180.00) (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 PETITIONERS 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. Aquinos assumption of power, she issued E.O. No. 20522 opening the CATV industry to all citizens of the Philippines. It mandated the NTC to grant Certificates of Authority to CATV operators and to issue the necessary implementing rules and regulations.

On September 9, 1997, President Fidel V. Ramos issued E.O. No. 43623 prescribing policy guidelines to govern CATV operation in the Philippines. Cast in more definitive terms, it restated the NTCs 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 NTCs 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. Blacks 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 NTCs 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 petitioners 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.

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 States 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 NTCs 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.42 The principle is frequently expressed in the declaration that municipal authorities, under a general grant of power, cannot adopt ordinances which infringe the spirit of a state law or repugnant to the general policy of the state.43 In every power to pass ordinances given to a municipality, there is an implied restriction that the ordinances shall be consistent with the general law.44 In the language of Justice Isagani Cruz (ret.), this Court, in Magtajas vs. Pryce Properties Corp., Inc.,45 ruled that:

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

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

This basic relationship between the national legislature and the local government units has not been enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. Without meaning to detract from that policy, we here confirm that Congress retains control of the local government units although in significantly reduced degree now than under our previous Constitutions. The power to create still includes the power to destroy. The power to grant still includes the power to withhold or recall. True, there are certain notable innovations in the Constitution, like the direct conferment on the local government units of the power to tax, which cannot now be withdrawn by mere statute. By and large, however, the national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it."

Respondents have an ingenious retort against the above disquisition. Their theory is that the regulatory power of the LGUs is granted by R.A. No. 7160 (the Local Government Code of 1991), a handiwork of the national lawmaking authority. They contend that R.A. No. 7160 repealed E.O. No. 205 (issued by President Aquino). Respondents argument espouses a bad precedent. To say that LGUs exercise the same regulatory power over matters which are peculiarly within the NTCs 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 NTCs regulatory power over CATV operation is continuously recognized.

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

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

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

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

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

"WHEREAS, professionalism and self-regulation among existing operators, through a nationally recognized cable television operators 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 NTCs 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 States 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 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.

Davide, Jr., Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio Morales, Callejo, Sr., Azcuna, Tinga, and Chico-Nazario*, JJ., concur.


Endnotes:

* On leave.

1 Mary Alice Mayer, John Walson: An Oral History, August 1987 (USA).

2 Rollo at 51-56. Per Associate Justice Buenaventura O. Guerrero (retired) and concurred in by Associate Justices Portia Aliño-Hormachuelos and Teodoro P. Regino (retired).

3 Rollo at 58.

4 Entitled "Batangas CATV, Inc. versus The Batangas City Sangguniang Panlungsod and Batangas City Mayor."

5 Rollo at 86-90.

6 Entitled "Batangas CATV, Inc. vs. The Batangas City Sangguniang Panlungsod and the Batangas City Mayor.

7 Rollo at 70-73.

8 Id. at 72.

9 Id. at 84, dated April 26, 1994.

10 Rollo at 89-90.

11 Id. at 56.

12 Id. at 58.

13 Id. at 19.

14 Section 10. Article III of the 1987 Constitution provides that: "No law impairing the obligation of contracts shall be passed."

15 The fourth Whereas Clause of P.D. 1512 reads:

"WHEREAS, because of technological advances in equipment and facilities, CATV systems have acquired a more significant role in the socio-political life of the nation, requiring the exercise of regulatory power by the national government."

16 "Decree Creating an Exclusive Franchise to Construct, Operate and Maintain a Community Antenna Television System in the Philippines in favor of Sining Makulay, Incorporated."

17 Section 10 of P.D. No. 1512.

18 Section 6 of P.D. No. 1512.

19 "Creating a Ministry of Public Works and a Ministry of Transportation and Communications."

20 Created under Article III, Chapter I, Part X of the Integrated Reorganization Plan, as amended.

21 Created under Article IX, id.

22 Dated June 30, 1987.

23 "Prescribing Policy Guidelines to Govern the Operations of Cable Television in the Philippines."

24 Miners Association of the Philippines vs. Factoran, G.R. No. 98332, January 16, 1995, 240 SCRA 100.

25 Sixth Edition at 1391.

26 See National Telecommunications Commission Practices & Procedures Manual, April 27,1992; PLDT vs. National Telecommunication Commission, G.R. No. 94374, February 21, 1995, 241 SCRA 486.

27 Blacks Law Dictionary, Sixth Edition at 1286.

28 US vs. Salaveria, 39 Phil. 102 (1918).

29 Id.

30 People vs. Felisarta, G.R. No. 15346, June 29, 1962, 5 SCRA 389.

31 Miranda vs. City of Manila, G.R. Nos. L-17252 & L-17276, May 31, 1961, 2 SCRA 613.

32 Chief of the Philippine Constabulary vs. Sabungan Bagong Silang, Inc., G.R. No. L-22609, February 28, 1966, 16 SCRA 336; Chief of P.C. vs. Judge of CFI of Rizal, G.R. Nos. L-22308 & L-22343-4, March 31, 1966, 16 SCRA 607.

33 Viray vs. City of Caloocan, G.R. No. L-23118, July 26, 1967, 20 SCRA 791.

34 Ermita-Malate Hotel and Motel Operators Association, Inc. vs. City Mayor of Manila G.R. No. L-24693, July 31, 1967, 20 SCRA 849.

35 See New York State Commission on Cable Television vs. Federal Communication Commission.

36 According to Elliot, a municipal ordinance, to be valid: 1) must not contravene the Constitution or any statute; 2) must not be unfair or oppressive; 3) must not be partial or discriminatory; 4) must not prohibit but may regulate trade; 5) must not be unreasonable; and 6) must be general and consistent with public policy. The Solicitor General vs. The Metropolitan Manila Authority, G.R. No. 102782, December 11, 1991, 204 SCRA 837.

Though designated as resolution, Resolution No. 210 is actually an ordinance as it concerns a subject that is inherently legislative in character, 37 Am. Jur. p. 667. Dillon comments, thus: "A resolution concerning a subject which is inherently legislative in its character and for which an ordinance is required, will, if adopted with all the formalities required in the case of an ordinance, be regarded as an ordinance and given effect accordingly. The substance, and not the form, of the corporate act is what governs. Dillon, Municipal Corporations, 5th ed., Vol. II, pp. 594-897.

37 24 Phil 165 (1913).

38 G.R. No. L-41053, February 27, 1976, 69 SCRA 556.

39 56 Sm Jur 2d 375 citing Birmingham vs. Allen, 251 Ala 198, 36 So 2d 297; Ex parte Daniels, 183 Cal 636, 192 P442, 21 ALR 1172; Thrower vs. Atlanta, 124 Ga 1, 52 SE 76.

40 46 Ariz 106, 47 P2d 442.

41 56 Sm Jur 2d 375 citing Savannah vs. Hussey, 21 Ga 80; Corvallis vs. Carlile, 10 Or 139; Judy vs. Lashley, 50 W Va 628, 41 SE 197.

42 56 Am Jur 2d 374 citing West Chicago Street R.Co. vs. Illinois, 201 US 506, 50 L Ed 845, 26 S Ct 518; Ex parte Byrd, 84 Ala 17,4 So 397; Mclaughlin vs. Retherford, 207 Ark 1094, 184 SW2d 461.

43 56 Am Jur 2d 374 citing Sims vs. Alabama Water Co., 205 Ala 378, 87 So 688, 28 ALR 461; Abbot vs. Los Angeles, 53 Cal 2d 674, 3 Cal Rptr 158, 349 P2d 974, 82 ALR 2d 385; Phillips vs. Denver, 19 Colo 179, 34 P 902; Miami Beach vs. Texas Co., 141 Fla 616, 194 So 368, 128 ALR 350.

44 Johnson vs. Philadelphia, 94 Miss 34, 47 So 526, see also Kraus vs. Cleveland, 135 Ohio St 43, 13 Ohio Ops 323, 19 NE2d 159.

45 G.R. No. 111097, July 20, 1994, 234 SCRA 255.

46 G.R. No. 103982, December 11, 1992, 216 SCRA 500.

47 Magtajas vs. Pryce Properties, Corp. Inc., supra.

48 Republic vs. Medina, L-32068, October 4, 1971, 41 SCRA 643.

49 392 U.S. 157 (1968).

50 Blacks Law Dictionary, Sixth Ed. at 443.

51 Carolina-Virginia Coastal Highway vs. Coastal Turnpike Authority, 237 NC 52, 74 SE2d 310; Othello vs. Harder, 46 Wash 2d 747, 284 P2d 1099.

52 Laramie County vs. Albany County, 92 US 307, 23 Led 552; People ex rel. Raymond Community High School Dist. vs. Bartlett, 304 Ill 283, 136 NE 654.

53 36 Am Jur 2d 11.

54 36 Am Jur 2d 7 citing Grand Trunk W.R. Co. vs. South Bend, 227 US 544, 57 L ed 633, 33 S Ct. 303; Murray vs. Pocatello, 226 US 318, 57 Led 239, 33 S Ct 107; Home Tel. & Tel. Co. vs. Los Angeles, 211 US 265, 53 L ed 176, 29 S Ct 50; Birmingham & P.M. Street R. Co. vs. Birmingham Street R. Co. 79 Ala 465; Westminster Water Co. vs. Westminster, 98 Md 551, 56 A 990; Elizabeth City vs. Bank, 150 NC 407, 64 SE 189; State ex rel. Webster vs. Superior, Ct.67 Wash 37, 120 P 861.

55 Section 25, Article II of the 1987 Constitution.




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