DIGEST/NORIZA JEAN DAGA/SANTIAGO C. DIVINAGRACIA VS. CONSOLIDATED BROADCASTING SYSTEM, INC. AND PEOPLE'S BROADCASTING SERVICE, INC.

SANTIAGO C. DIVINAGRACIA, PETITIONER,

VS.

CONSOLIDATED BROADCASTING SYSTEM, INC. AND PEOPLE'S BROADCASTING SERVICE, INC., RESPONDENTS.

G.R. No. 162272, April 07, 2009

Facts:

            Respondents Consolidated Broadcasting System, Inc. (CBS) and People's Broadcasting Service, Inc. (PBS) were incorporated in 1961 and 1965, respectively. Both are involved in the operation of radio broadcasting services in the Philippines, they being the grantees of legislative franchises. 

            After the enactment of R.A. No. 7477 and R.A. No. 7582, which contains a common provision predicated on the "constitutional mandate to democratize ownership of public utilities, “the NTC issued four (4) Provisional Authorities to PBS and six (6) Provisional Authorities to CBS, allowing them to install, operate and maintain various AM and FM broadcast stations in various locations throughout the nation.

            Petitioner Santiago Divinagracia filed two complaints with the NTC lodged against PBS and CBS.  He alleged that he was "the actual and beneficial owner of Twelve percent (12%) of the shares of stock" of PBS and CBS separately, and that despite the provisions in R.A. No. 7477 and R.A. No. 7582 mandating the public offering of at least 30% of the common stocks of PBS and CBS, both entities had failed to make such offering. 

            NTC issued a consolidated decision dismissing both complaints ruling that the complaints actually constituted collateral attacks on the legislative franchises of PBS and CBS since the sole issue for determination was whether the franchisees had violated the mandate to democratize ownership in their respective legislative franchises. The NTC ruled that it was not competent to render a ruling on that issue, the same being more properly the subject of an action for quo warranto to be commenced by the Solicitor General in the name of the Republic of the Philippines, pursuant to Rule 66 of the Rules of Court.

            After the NTC had denied Divinagracia's motion for reconsideration, he filed a petition for review under Rule 43 of the Rules of Court with the Court of Appeals. The CA rendered a decision upholding the NTC. The appellate court agreed with the earlier conclusion that the complaints were indeed a collateral attack on the legislative franchises of CBS and PBS and that a quo warranto action was the proper mode to thresh out the issues raised in the complaints.  Hence, this petition.

 

Issue:

            Whether or not NTC has the power to cancel Provisional Authorities and Certificates of Public Convenience (CPC) it issued to legislative franchise- holders.

 

Ruling:

             Broadcast and television stations are required to obtain a legislative franchise, a requirement imposed by the Radio Control Act and affirmed by the ruling in Associated Broadcasting. After securing their legislative franchises, stations are required to obtain CPCs from the NTC before they can operate their radio or television broadcasting systems. Such requirement while traceable also to the Radio Control Act, currently finds its basis in E.O. No. 546, the law establishing the NTC.  NTC is vested with the power to issue CPCs to broadcast stations, it is not expressly vested with the power to cancel such CPCs, or otherwise empowered to prevent broadcast stations with duly issued franchises and CPCs from operating radio or television stations.

            The special civil action of quo warranto is a prerogative writ by which the Government can call upon any person to show by what warrant he holds a public office or exercises a public franchise.  It is settled that "the determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State `upon complaint or otherwise,' the reason being that the abuse of a franchise is a public wrong and not a private injury." A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of Government.  Quo warranto is specifically available as a remedy if it is thought that a government corporation has offended against its corporate charter or misused its franchise.

            The authority of the franchisee to engage in broadcast operations is derived in the legislative mandate. To cancel the provisional authority or the CPC is, in effect, to cancel the franchise or otherwise prevent its exercise. By law, the NTC is incapacitated to frustrate such mandate by unduly withholding or canceling the provisional authority or the CPC for reasons other than the orderly administration of the frequencies in the radio spectrum.

            The licensing authority of the NTC is not on equal footing with the franchising authority of the State through Congress. The issuance of licenses by the NTC implements the legislative franchises established by Congress, in the same manner that the executive branch implements the laws of Congress rather than creates its own laws. And similar to the inability of the executive branch to prevent the implementation of laws by Congress, the NTC cannot, without clear and proper delegation by Congress, prevent the exercise of a legislative franchise by withholding or canceling the licenses of the franchisee.