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
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:
Sometime in November 1993, petitioner increased its subscriber rates from
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:
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:
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:
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:
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:
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:
In addition, Section 458 of the same Code specifically mandates:
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.
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:
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:
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:
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.
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:
This policy reaffirms the NTCs mandate set forth in the Memorandum dated August 25, 1989 of Commissioner Jose Luis A. Alcuaz, to wit:
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.
Davide, Jr., Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio Morales, Callejo, Sr., Azcuna, Tinga, and Chico-Nazario*, JJ., concur.
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