Phil. Communications Satellite Corporation vs. Alcuaz

1/20/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180
218 SUPREME COURT REPORTS ANNOTATED

Philippine Communications Satellite Corporation vs.
Alcuaz
*
G.R. No. 84818. December 18, 1989.
PHILIPPINE COMMUNICATIONS SATELLITE

CORPORATION, petitioner, vs. JOSE LUIS A. ALCUAZ,
as NTC Commissioner, and NATIONAL
TELECOMMUNICATIONS COMMISSION, respondents.
Constitutional Law; Legislative Power, Delegation of; Absence

of a fixed standard delegation of power becomes unconstitutional;
Requisites of valid delegation of rate fixing power.—Fundamental
is the rule that delegation of legislative power may be sustained
only upon the ground that some standard for its exercise is
provided and that the legislature in making the delegation has
prescribed the manner of the exercise of the delegated power.
Therefore, when the administrative agency concerned, respondent
NTC in this case, establishes a rate, its act must both be non-
confiscatory and must have been established in the manner
prescribed by the legislature; otherwise, in the absence of a fixed
standard, the delegation of power becomes unconstitutional. In
case of a delegation of rate-fixing power, the only standard which
the legislature is required to prescribe for the guidance of the
administrative authority is that the rate be reasonable and just.
However, it has been held that even in the absence of an express
requirement as to reasonableness, this standard may be implied.
Same; Same; Same; Same; Administrative Law; Powers of
NTC pursuant to EO’s 546 and 196.—Pursuant to Executive
Orders Nos. 546 and 196, respondent NTC is empowered, among
others, to determine and prescribe rates pertinent to the
operation of public service communications which necessarily
include the power to promulgate rules and regulations in
connection therewith. And, under Section 15(g) of Executive
Order No. 546, respondent NTC should be guided by the
requirements of public safety, public interest and reasonable
feasibility of maintaining effective competition of private entities
in communications and broadcasting facilities. Likewise, in
Section 6(d) thereof, which provides for the creation of the
Ministry of Transportation and Communications with control and
supervision over respondent NTC, it is specifically provided that
the national economic viability of the entire network or
components of the communications systems contemplated therein
http://www.central.com.ph/sfsreader/session/000001686b60dcbc36f81ff4003600fb002c009e/t/?o=False 1/19
should be maintained at reasonable rates. We need not go into an

in-depth analysis of the pertinent provisions of the law in order to
conclude that respondent NTC, in the exercise of its rate-fixing
power,
_______________
* EN BANC.
219
VOL. 180, DECEMBER 18, 1989 219
Philippine Communications Satellite Corporation vs. Alcuaz
is limited by the requirements of public safety, public interest,

reasonable feasibility and reasonable rates, which conjointly more
than satisfy the requirements of a valid delegation of legislative
power.
Same; Same; Same; Same; Same; Classification of rate-fixing
power of administrative bodies as to when quasi-judicial or
legislative.—In Vigan Electric Light Co., Inc. vs. Public Service
Commission, we made a categorical classification as to when the
rate-fixing power of administrative bodies is quasi-judicial and
when it is legislative, thus: “Moreover, although the rule-making
power and even the power to fix rates—when such rules and/or
rates are meant to apply to all enterprises of a given kind
throughout the Philippines—may partake of a legislative
character, such is not the nature of the order complained of.
Indeed, the same applies exclusively to petitioner herein. What is
more, it is predicated upon the finding of fact—based upon a
report submitted by the General Auditing Office—that petitioner
is making a profit of more than 12% of its invested capital, which
is denied by petitioner. Obviously, the latter is entitled to cross-
examine the maker of said, report, and to introduce evidence to
disprove the contents thereof and/ or explain or complement the
same, as well as to refute the conclusion drawn therefrom by the
respondent. In other words, in making said finding of fact,
respondent performed a function partaking of a quasijudicial
character, the valid exercise of which demands previous notice
and hearing.”
Same; Same; Same; Same; Same; Due Process; Temporary
rate fixing order is not exempt from the procedural requirements of
notice and hearing.—While respondents may fix a temporary rate
pending final determination of the application of petitioner, such
rate-fixing order, temporary though it may be, is not exempt from
the statutory procedural requirements of notice and hearing, as
well as the requirement of reasonableness. Assuming that such
power is vested in NTC, it may not exercise the same in an

arbitrary and confiscatory manner. Categorizing such an order as
temporary in nature does not perforce entail the applicability of a
different rule of statutory procedure than would otherwise be
applied to any other order on the same matter unless otherwise
provided by the applicable law.
Same; Same; Same; Same; Same; Same; Temporary rate
fixing order becomes final legislative act as to the period during
which it has to remain in force pending the final determination of
the case.—Again, the order requires the new reduced rates to be
made effective on a specified date. It becomes a final legislative
act as to the period during which it has to remain in force pending
the final determination of the
220
case. An order of respondent NTC prescribing reduced rates, even

for a temporary period, could be unjust, unreasonable or even
confiscatory, especially if the rates are unreasonably low, since
the utility permanently loses its just revenue during the
prescribed period. In fact, such order is in effect final insofar as
the revenue during the period covered by the order is concerned.
Upon a showing, therefore, that the order requiring a reduced
rate is confiscatory and will unduly deprive petitioner of a
reasonable return upon its property, a declaration of its nullity
becomes indubitable, which brings us to the issue on substantive
due process.
Same; Same; Same; Same; Same; Same; Public Utilities;
Nature and scope of the power of the State to regulate the conduct
and business of public utilities.—The rule is that the power of the
State to regulate the conduct and business of public utilities is
limited by the consideration that it is not the owner of the
property of the utility, or clothed with the general power of
management incident to ownership, since the private right of
ownership to such property remains and is not to be destroyed by
the regulatory power. The power to regulate is not the power to
destroy useful and harmless enterprises, but is the power to
protect, foster, promote, preserve, and control with due regard for
the interests, first and foremost, of the public, then of the utility
and of its patrons. Any regulation, therefore, which operates as an
effective confiscation of private property or constitutes an
arbitrary or unreasonable infringement of property rights is void,
because it is repugnant to the constitutional guaranties of due
process and equal protection of the laws.
Same; Same; Same; Same; Same; Same; Method of

determining reasonableness of the rate fixed.—What is a just and
reasonable rate is not a question of formula but of sound business
judgment based upon the evidence; it is a question of fact calling
for the exercise of discretion, good sense, and a fair, enlightened
and independent judgment. In determining whether a rate is
confiscatory, it is essential also to consider the given situation,
requirements and opportunities of the utility. A method often
employed in determining reasonableness is the fair return upon
the value of the property to the public utility. Competition is also
a very important factor in determining the reasonableness of
rates since a carrier is allowed to make such rates as are
necessary to meet competition.
GUTIERREZ, JR., J., Concurring Opinion:
Constitutional Law; Administrative Law; Administrative

agencies,
221
VOL. 180, DECEMBER 18, 1989 221
in the exercise of quasi-legislative powers should be given

guidelines as to when notices and hearings are essential, as much
more than Congress.—Congress never passes truly important
legislation without holding public hearings. Yet, administrative
officials who are not directly attuned to the public pulse see no
need for hearings. They issue rules and circulars with far
reaching effects on our economy and our nation’s future on the
assumption that the head of an agency knows best what is good
for the people. I believe that in the exercise of quasilegislative
powers, administrative agencies, much, much more than
Congress, should hold hearings and should be given guidelines as
to when notices and hearings are essential even in quasi-
legislation.
Same; Same; Same; Legislative officials, distinguished from
administrative officials.—Senators and Congressmen are directly
elected by the people. Administrative officials are not. If the
members of an administrative body are, as is so often the case,
appointed not on the basis of competence and qualifications but
out of political or personal considerations, it is not only the sense
of personal responsibility to the electorate affected by legislation
which is missing. The expertise and experience needed for the
issuance of sound rules and regulations would also be sorely
lacking.
PETITION to review the order of the National Bureau of

Telecommunications Commission.
The facts are stated in the opinion of the Court.

Rilloraza, Africa, De Ocampo & Africa for petitioner.
Victor de la Serna for respondent Alcuaz.
REGALADO, J.:
This case is posed as one of first impression in the sense

that it involves the public utility services of the petitioner
Philippine Communications Satellite Corporation
(PHILCOMSAT, for short) which is the only one rendering
such services in the Philippines.
The1 petition before us seeks to annul and set aside an
Order issued by respondent Commissioner Jose Luis
Alcuaz of the National Telecommunications Commission
(hereafter, NTC), dated September 2, 1988, which directs
the provisional reduc-
_______________
1 Annex A, Petition; Rollo, 37.
222

Alcuaz
tion of the rates which may be charged by petitioner for

certain specified lines of its services by fifteen percent
(15%) with the reservation to make further reductions
later, for being violative of the constitutional prohibition
against undue delegation of legislative power and a denial
of procedural, as well as substantive, due process of law.
2
The antecedental facts as summarized by petitioner are
not in dispute. By virtue of Republic Act No. 5514,
PHILCOMSAT was granted “a franchise to establish,
construct, maintain and operate in the Philippines, at such
places as the grantee may select, station or stations and
associated equipment and facilities for international
satellite communications.” Under this franchise, it was
likewise granted the authority to “construct and operate
such ground facilities as needed to deliver
telecommunications services from the communications
satellite system and ground terminal or terminals.”
Pursuant to said franchise, petitioner puts on record
that it undertook the following activities and established
the following installations:
1. In 1967, PHILCOMSAT established its provisional

earth station in Pinugay, Rizal.
2. In 1968, earth station standard “A” antenna
(Pinugay I) was established. Pinugay I provided
direct satellite communication links with the Pacific
Ocean Region (the United States, Australia,
Canada, Hawaii, Guam, Korea, Thailand, China
[PROC], New Zealand and Brunei) thru the Pacific
Ocean INTELSAT satellite.
3. In 1971, a second earth station standard “A”
antenna (Pinugay II) was established. Pinugay II
provided links with the Indian Ocean Region (major
cities in Europe, Middle East, Africa, and other
Asia Pacific countries operating within the region)
thru the Indian Ocean INTELSAT satellite.
4. In 1983, a third earth station standard “B” antenna
(Pinugay III) was established to temporarily
assume the functions of Pinugay I and then
Pinugay II while they were being refurbished.
Pinugay III now serves as spare or reserved
antenna for possible contingencies.
5. In 1983, PHILCOMSAT constructed and installed a
standard “B” antenna at Clark Air Field, Pampanga
as a television receive-only earth station which
provides the U.S. Military bases with a 24-hour
television service.
_______________
2 Eollo, 6-11,137-139,148-150.
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VOL. 180, DECEMBER 18, 1989 223

Alcuaz
6. In 1989, petitioner completed the installation of a

third standard “A” earth station (Pinugay IV) to
take over 3the links in Pinugay I due to
obsolescence.
By designation of the Republic of the Philippines, the

petitioner is also the sole signatory for the Philippines in
the Agreement and the Operating Agreement relating to
the International Telecommunications Satellite
Organization (IN-TELSAT) of 115 member nations, as well
as in the Convention and the Operating Agreement of the
International Maritime Satellite Organization
(INMARSAT) of 53 member nations, which two global
commercial telecommunications satellite corporations were

collectively established by various states in line with the
principles set forth in Resolution 1721 (XVI) of the General
Assembly of the United Nations.
Since 1968, the petitioner has been leasing its satellite
circuits to:
1. Philippine Long Distance Telephone Company;

2. Philippine Global Communications, Inc.;
3. Eastern Telecommunications Phils., Inc.;
4. Globe Mackay Cable and Radio Corp. ITT; and
5. Capitol Wireless, Inc.
or their predecessors-in-interest. The satellite services thus

provided by petitioner enable said international carriers to
serve the public with indispensable communication
services, such as overseas telephone, telex, facsimile,
telegrams, high speed data, live television in full color, and
television standard conversion from European to American
or vice versa.
Under Section 5 of Republic Act No. 5514, petitioner was
exempt from the jurisdiction of the then Public Service
Commission, now respondent NTC. However, pursuant to
Executive Order No. 196 issued on June 17, 1987,
petitioner was placed under the jurisdiction, control and
regulation of respondent NTC, including all its facilities
and services and the fixing of rates. Implementing said
Executive Order No. 196, respondents required petitioner
to apply for the requisite certificate of public convenience
and necessity covering its facilities and the services it
renders, as well as the corresponding authority to charge
rates
_______________
3 Ibid., 149.
224

Alcuaz
therefor.
Consequently, under date of September 9, 1987, 4
petitioner filed with respondent NTC an application for
authority to continue operating and maintaining the same
facilities it has been continuously operating and
maintaining since 1967, to continue providing the
international satellite communications services it has
likewise been providing since 1967, and to charge the
current rates applied for in rendering such services.

Pending hearing, it also applied for a provisional authority
so that it can continue to operate and maintain the above
mentioned facilities, provide the services and charge
therefor the aforesaid rates therein applied for.
On September 16,1987, petitioner was granted a
provisional authority to continue operating its existing
facilities, to render the services it was then offering, and to
charge the rates it was then charging. This authority 5
was
valid for six (6) months from the date of said order. When
said provisional authority expired on March 17, 1988, it
was extended for another six (6) months, or up to
September 16,1988.
The NTC order now in controversy had further extended
the provisional authority of the petitioner for another six
(6) months, counted from September 16, 1988, but it
directed the petitioner to charge modified reduced rates
through a reduction of fifteen percent (15%) on the present
authorized rates. Respondent Commissioner ordered said
reduction on the following ground:
“The Commission in its on-going review of present service rates

takes note that after an initial evaluation by the Rates Regulation
Division of the Common Carriers Authorization Department of
the financial statements of applicant, there is merit in a
REDUCTION in some of applicant’s rates, subject to further
reductions, should the Commission finds (sic) in its further
evaluation that more reduction should be effected either on the
basis of a 6provisional authorization or in the final consideration of
the case.”
PHILCOMSAT assails the above-quoted order for the

following reasons:
_______________
4 Annex C, Petition; Rollo, 48.

5 Annex B, id., ibid., 41.
6 Rollo, 37.
225
VOL. 180, DECEMBER 18, 1989 225

Alcuaz
1. The enabling act (Executive Order No. 546) of

respondent NTC empowering it to fix rates for public
service communications does not provide the necessary
standards constitutionally required, hence there is an
undue delegation of legislative power, particularly the
adjudicatory powers of NTC;
2. Assuming arguendo that the rate-fixing power was

properly and constitutionally conferred, the same was
exercised in an unconstitutional manner, hence it is ultra
vires, in that (a) the questioned order violates procedural
due process for having been issued without prior notice and
hearing; and (b) the rate reduction it imposes is unjust,
unreasonable and confiscatory, thus constitutive of a
violation of substantive due process.
I. Petitioner asseverates that nowhere in the provisions
of Executive Order No. 546, providing for the creation of
respondent NTC and granting its rate-fixing powers, nor of
Executive Order No. 196, placing petitioner under the
jurisdiction of respondent NTC, can it be inferred that
respondent NTC is guided by any standard in the exercise
of its rate-fixing and adjudicatory powers. While petitioner
in its petition-in-chief raised the issue of undue delegation
of legislative power, it subsequently clarified its said
submission to mean that the order mandating a reduction
of certain rates is undue delegation not of legislative but of
quasi-judicial power to respondent NTC, the exercise of
which allegedly requires an express conferment by the
legislative body.
Whichever way it is presented, petitioner is in effect
questioning the constitutionality of Executive Orders Nos.
546 and 196 on the ground that the same do not fix a
standard for the exercise of the power therein conferred.
We hold otherwise.
Fundamental is the rule that delegation of legislative
power may be sustained only upon the ground that some
standard for its exercise is provided and that the
legislature in making the delegation has prescribed the
manner of the exercise of the delegated power. Therefore,
when the administrative agency concerned, respondent
NTC in this case, establishes a rate, its act must both be
non-confiscatory and must have been established in the
manner prescribed by the legislature; otherwise, in the
absence of a fixed standard, the delegation of power
becomes unconstitutional. In case of a delegation of rate-
fixing power, the
226

Alcuaz
only standard which the legislature is required to prescribe

for the guidance of the administrative authority is that the
rate be reasonable and just. However, it has been held that
even in the absence of an express requirement 7
as to
reasonableness, this standard may be implied.
It becomes important then to ascertain the nature of the

power delegated to respondent NTC and the manner
required by the statute for the lawful exercise thereof.
Pursuant to Executive Orders Nos. 546 and 196,
respondent NTC is empowered, among others, to determine
and prescribe rates pertinent to the operation of public
service communications which necessarily include the
power to promulgate rules and regulations in connection
therewith. And, under Section 15(g) of Executive Order No.
546, respondent NTC should be guided by the requirements
of public safety, public interest and reasonable feasibility of
maintaining effective competition of private entities in
communications and broadcasting facilities. Likewise, in
Section 6(d) thereof, which provides for the creation of the
Ministry of Transportation and Communications with
control and supervision over respondent NTC, it is
specifically provided that the national economic viability of
the entire network or components of the communications
systems contemplated therein should be maintained at
reasonable rates. We need not go into an in-depth analysis
of the pertinent provisions of the law in order to conclude
that respondent NTC, in the exercise of its rate-fixing
power, is limited by the requirements of public safety,
public interest, reasonable feasibility and reasonable rates,
which conjointly more than satisfy the requirements of a
valid delegation of legislative power.
II. On another tack, petitioner submits that the
questioned order violates procedural due process because it
was issued motu proprio, without notice to petitioner and
without the benefit of a hearing. Petitioner laments that
said order was based merely on an “initial evaluation,”
which is a unilateral evaluation, but had petitioner been
given an opportunity to present its side before the order in
question was issued, the confiscatory nature of the rate
reduction and the consequent deterioration of the public
service could have been shown and demonstrated to
respon-
_______________
7 42 Am. Jur. 357-358.
227
VOL. 180, DECEMBER 18, 1989 227

Alcuaz
dents. Petitioner argues that the function involved in the

rate fixing-power of NTC is adjudicatory and hence quasi-
judicial, not quasi-legislative; thus, notice and hearing are
necessary and the absence thereof results in a violation of

due process.
Respondents admit that the application of a policy like
the fixing of rates as exercised by administrative bodies is
quasijudicial rather than quasi-legislative: that where the
function of the administrative agency is legislative, notice
and hearing are not required, but where an order applies to
a named person, as in 8 the instant case, the function
involved is adjudicatory. Nonetheless, they insist that
under the facts obtaining the order in question need not be
preceded by a hearing, not because it was issued pursuant
to respondent NTC’s legislative function but because the
assailed order is merely interlocutory, it being an incident
in the ongoing proceedings on petitioner’s application for a
certificate of public convenience; and that petitioner is not
the only primary source of data or information since
respondent is currently engaged in a continuing review of
the rates charged.
We find merit in petitioner’s contention.
In Vigan 9 Electric Light Co., Inc. vs. Public Service
Commission, we made a categorical classification as to
when the ratefixing power of administrative bodies is
quasi-judicial and when it is legislative, thus:
“Moreover, although the rule-making power and even the power

to fix rates—when such rules and/or rates are meant to apply to
all enterprises of a given kind throughout the Philippines—may
partake of a legislative character, such is not the nature of the
order complained of. Indeed, the same applies exclusively to
petitioner herein. What is more, it is predicated upon the finding
of fact—based upon a report submitted by the General Auditing
Office—that petitioner is making a profit of more than 12% of its
invested capital, which is denied by petitioner. Obviously, the
latter is entitled to cross-examine the maker of said report, and to
introduce evidence to disprove the contents thereof and/or explain
or complement the same, as well as to refute the conclusion drawn
therefrom by the respondent. In other words, in making said
finding of fact, respondent performed a function partaking of a
quasi-judicial character, the valid exercise of which demands
_______________
8 Memorandum for Private Respondents, 9-10; Rollo, 181-182.

9 10 SCRA 46 (1964).
228

previous notice and hearing.”
This rule was further explained in the subsequent case 10

of
The Central Bank of the Philippines vs. Cloribel, et al. to
wit:
“It is also clear from the authorities that where the function of the
administrative body is legislative, notice of hearing is not
required by due process of law (See Oppenheimer, Administrative
Law, 2 Md. L.R. 185, 204, supra, where it is said: ‘If the nature of
the administrative agency is essentially legislative, the
requirements of notice and hearing are not necessary. The
validity of a rule of future action which affects a group, if vested
rights of liberty or property are not involved, is not determined
according to the same rules which apply in the case of the direct
application of a policy to a specific individual’) x x x It is said in 73
C.J.S. Public Administrative Bodies and Procedure, sec. 130,
pages 452 and 453: ‘Aside from statute, the necessity of notice and
hearing in an administrative proceeding depends on the character
of the proceeding and the circumstances involved. In so far as
generalization is possible in view of the great variety of
administrative proceedings, it may be stated as a general rule
that notice and hearing are not essential to the validity of
administrative action where the administrative body acts in the
exercise of executive, administrative, or legislative functions; but
where a public administrative body acts in a judicial or quasi-
judicial matter, and its acts are particular and immediate rather
than general and prospective, the person whose rights or property 11
may be affected by the action is entitled to notice and hearing.”
The order in question which was issued by respondent

Alcuaz no doubt contains all the attributes of a quasi-
judicial adjudication. Foremost is the fact that said order
pertains exclusively to petitioner and to no other. Further,
it is premised on a finding of fact, although patently
superficial, that there is merit in a reduction of some of the
rates charged—based on an initial evaluation of
petitioner’s financial statements—without affording
petitioner the benefit of an explanation as to what
particular aspect or aspects of the financial statements
warranted a corresponding rate reduction. No
rationalization was offered nor were the attending
contingencies, if any, discussed, which
_______________
10 44 SCRA 307 (1972).

11 Citing Albert vs. Public Service Commission, 120 A. 2d. 346,350-351.
229
VOL. 180, DECEMBER 18, 1989 229

Alcuaz
prompted respondents to impose as much as a fifteen

percent (15%) rate reduction. It is not far-fetched to assume
that petitioner could be in a better position to rationalize
its rates vis-a-vis the viability of its business requirements.
The rates it charges result from an exhaustive and detailed
study it conducts of the multi-faceted intricacies attendant
to a public service undertaking of such nature and
magnitude. We are, therefore, inclined to lend greater
credence to petitioner’s ratiocination that an immediate
reduction in its rates would adversely affect its operations
and the quality of its service to the public considering the
maintenance requirements, the projects it still has to
undertake and the financial outlay involved. Notably,
petitioner was not even afforded the opportunity to cross-
examine the inspector who issued the report on which
respondent NTC based its questioned order.
At any rate, there remains the categorical admission
made by respondent NTC that the questioned order was
issued pursuant to its quasi-judicial functions. It, however,
insists that notice and hearing are not necessary since the
assailed order is merely incidental to the entire
proceedings and, therefore, temporary in nature. This
postulate is bereft of merit.
While respondents may fix a temporary rate pending
final determination of the application of petitioner, such
rate-fixing order, temporary though it may be, is not
exempt from the statutory procedural requirements of
notice and hearing, as well as the requirement of
reasonableness. Assuming that such power is vested in
NTC, it may not exercise the same in an arbitrary and
confiscatory manner. Categorizing such an order as
temporary in nature does not perforce entail the
applicability of a different rule of statutory procedure than
would otherwise be applied to any other order on the same
matter unless otherwise provided by the applicable law. In
the case at bar, the applicable statutory provision is
Section 16(c) of the Public Service Act which provides:
“Section 16. Proceedings of the Commission, upon notice and

hearing.—The Commission shall have power, upon proper notice
and hearing in accordance with the rules and provisions of this
Act, subject to the limitations and exceptions mentioned and
saving provisions to the contrary:
230

Alcuaz
xxx
(c) To fix and determine individual or joint rates, x x x which

shall be imposed, observed and followed thereafter by any public
service; x x x.”
There is no reason to assume that the aforesaid provision

does not apply to respondent NTC, there being no limiting,
excepting, or saving provisions to the contrary in Executive
Orders Nos. 546 and 196.
It is thus clear that with regard to rate-fixing,
respondent has no authority to make such order without
first giving petitioner a hearing, whether the order be
temporary or permanent, and it is immaterial whether the
same is made upon a complaint, a summary investigation,
or upon the commission’s own motion as in the present
case. That such a hearing is required is evident in
respondents’ order of September 16, 1987 in NTC Case No.
87-94 which granted PHILCOMSAT a provisional
authority “to continue operating its existing facilities, to
render the services it presently offers, and to charge the
rates as reduced by them” under the condition that
“(s)ubject to hearing and the final consideration of the
merit of this application, the 12Commission may modify,
revise or amend the rates x x x.”
While it may be true that for purposes of rate-fixing
respondents may have other sources of information or data,
still, since a hearing is essential, respondent NTC should
act solely on the basis of the evidence before it and not on
knowledge or information otherwise acquired by it but
which is not offered in evidence or, even if so adduced,
petitioner was given no opportunity to controvert.
Again, the order requires the new reduced rates to be
made effective on a specified date. It becomes a final
legislative act as to the period during which it has to
remain13
in force pending the final determination of the
case. An order of respondent NTC prescribing reduced
rates, even for a temporary period, could be unjust,
unreasonable or even confiscatory, especially if the rates
are unreasonably low, since the utility permanently loses
its just
_______________
12 Rollo, 44.
13 William A. Predergast, et. al. vs. New York Tel. Co., 67 L. Ed. 853,
858.
231
VOL. 180, DECEMBER 18, 1989 231

Alcuaz
revenue during the prescribed period. In fact, such order is

in effect final insofar as the revenue during the period
covered by the order is concerned. Upon a showing,
therefore, that the order requiring a reduced rate is
confiscatory, and will unduly deprive petitioner of a
reasonable return upon its property, a declaration of its
nullity becomes inductible, which brings us to the issue on
substantive due process.
III. Petitioner contends that the rate reduction is
confiscatory in that its implementation would virtually
result in a cessation of its operations and eventual closure
of business. On the other hand, respondents assert that
since petitioner is operating its communications satellite
facilities through a legislative franchise, as such grantee it
has no vested right therein. What it has is merely a
privilege or license which may be revoked at will by the
State at any time without necessarily violating any vested
property right of herein petitioner. While petitioner
concedes this thesis of respondent, it counters that the
withdrawal of such privilege should nevertheless be neither
whimsical nor arbitrary, but it must be fair and reasonable.
There is no question that petitioner is a mere grantee of
a legislative franchise which is subject to amendment,
alteration,
14
or repeal by Congress when the common good so
requires. Apparently, therefore, such grant cannot be
unilaterally revoked absent a showing that the termination
of the operation of said utility is required by the common
good.
The rule is that the power of the State to regulate the
conduct and business of public utilities is limited by the
consideration that it is not the owner of the property of the
utility, or clothed with the general power of management
incident to ownership, since the private right of ownership
to such property remains and is not to be destroyed by the
regulatory power. The power to regulate is not the power to
destroy useful and harmless enterprises, but is the power
to protect, foster, promote, preserve, and control with due
regard for the interest, first and foremost, of the public,
then of the utility and of its patrons. Any regulation,
therefore, which operates as an effective confiscation of
private property or constitutes an arbitrary or
unreasonable infringement of property rights is void,
because it is repugnant to the
_______________
14 Sec. 11, Art. XII, 1987 Constitution.
232

Alcuaz
constitutional guaranties
15
of due process and equal
protection of the laws.
Hence, the inherent power and authority of the State, or
its authorized agent, to regulate the rates charged by
public utilities should be subject always to the requirement
that the rates so fixed shall be reasonable and just. A
commission has no power to fix rates which are
unreasonable or to regulate them arbitrarily. This basic
requirement of reasonableness comprehends such rates
which must not be 16so low as to be confiscatory, or too high
as to be oppressive.
What is a just and reasonable rate is not a question of
formula but
17
of sound business judgment based upon the
evidence; it is a question of fact calling for the exercise of
discretion, good sense, 18
and a fair, enlightened and
independent judgment. In determining whether a rate is
confiscatory, it is essential also to consider the given
situation, requirements and opportunities of the utility. A
method often employed in determining reasonableness is
the fair return upon the value of the property to the public
utility. Competition is also a very important factor in
determining the reasonableness of rates since a carrier is
allowed to 19 make such rates as are necessary to meet
competition.
A cursory perusal of the assailed order reveals that the
rate reduction is solely and primarily based on the initial
evaluation made on the financial statements of petitioner,
contrary to respondent NTC’s allegation that it has several
other sources of information without, however, divulging
such sources. Furthermore, it did not as much as make an
attempt to elaborate on how it arrived at the prescribed
rates. It just perfunctorily declared that based on the
financial statements, there is merit for a rate reduction
without any elucidation on what implications and
conclusions were necessarily inferred by it from said
statements. Nor did it deign to explain how the data
reflected in the financial
_______________
15 73 C.J.S 1005.
16 Op. cit., 1010.
17 State Public Utilities Commission ex. rel. City of Springfield vs.
Springfield Gas & Electric Co., 125 N.E. 891.
18 73 C.J.S. 1010.
19 Manila Railroad Co. vs. A.L.Ammen Transportation Co. Inc., 48 Phil.
900 (1926).
233
VOL. 180, DECEMBER 18, 1989 233

Alcuaz
statements influenced its decision to impose a rate

reduction.
On the other hand, petitioner may likely suffer a severe
drawback, with the consequent detriment to the public
service, should the order of respondent NTC turn out to be
unreasonable and improvident. The business in which
petitioner is engaged is unique in that its machinery and
equipment have always to be taken in relation to the
equipment on the other end of the transmission
arrangement. Any lack, aging, acquisition, rehabilitation,
or refurbishment of machinery and equipment necessarily
entails a major adjustment or innovation on the business of
petitioner. As pointed out by petitioner, any change in the
sending end abroad has to be matched with the
corresponding change in the receiving end in the
Philippines. Conversely, any change in the receiving end
abroad has to be matched with the corresponding change in
the sending end in the Philippines. An inability on the part
of petitioner to meet the variegations demanded by
technology could result in a deterioration or total failure of
the service of satellite communications.
At present, petitioner is engaged in several projects
aimed at refurbishing, rehabilitating, and renewing its
machinery and equipment in order to keep up with the
continuing changes of the times and to maintain its
facilities at a competitive level with the technological
advances abroad. These projected undertakings were
formulated on the premise that rates are maintained at
their present or at reasonable levels. Hence, an undue
reduction thereof may practically lead to a cessation of its
business. While we concede the primacy of the public
interest in an adequate and efficient service, the same is
not necessarily to be equated with reduced rates.
Reasonableness in the rates assumes that the same is fair
to both the public utility and the consumer.
Consequently, we hold that the challenged order,
particularly on the issue of rates provided therein, being
violative of the due process clause is void and should be
nullified. Respondents should now proceed, as they should
heretofore have done, with the hearing and determination
of petitioner’s pending application for a certificate of public
convenience and necessity and in which proceeding the
subject of rates involved in the present controversy, as well
as other matters involved in said application, may be duly
adjudicated with reasonable dispatch and with due
observance of our pronouncements herein.
234

Alcuaz
WHEREFORE, the writ prayed for is GRANTED and the

order of respondents, dated September 2, 1988, in NTC
Case No. 87-94 is hereby SET ASIDE. The temporary
restraining order issued under our resolution of September
13, 1988, as specifically directed against the aforesaid order
of respondents on the matter of existing rates on
petitioner’s present authorized services, is hereby made
permanent.
SO ORDERED.
Fernan, (C.J.), Narvasa, Melencio-Herrera, Cruz,

Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortés,
Griño-Aquino and Medialdea, JJ., concur.
Gutierrez, Jr.,J., Please see concurring opinion.
Padilla, J., No part in the deliberations.
GUTIERREZ, JR., J., Concurring Opinion:
I concur in the ponencia of Justice Regalado and join him

in the erudite and thorough discussion of the respondent’s
authority. However, I have reservations about our
continuing to abide by the dictum that in the exercise of
quasi-legislative power, notice and hearing are not
required. I believe that this doctrine is ripe for re-
examination.
Senators and Congressmen are directly elected by the
people. Administrative officials are not. If the members of
an administrative body are, as is so often the case,
appointed not on the basis of competence and qualifications
but out of political or personal considerations, it is not only
the sense of personal responsibility to the electorate
affected by legislation which is missing. The expertise and
experience needed for the issuance of sound rules and
regulations would also be sorely lacking.
Congress never passes truly important legislation
without holding public hearings. Yet, administrative
officials who are not directly attuned to the public pulse see
no need for hearings. They issue rules and circulars with
far reaching effects on our economy and our nation’s future
on the assumption that the head of an agency knows best
what is good for the people. I believe that in the exercise of
quasi-legislative powers, administrative agencies, much,
much more than Congress, should hold hearings and
should be given guidelines as to when notices and
235
VOL. 180, DECEMBER 18, 1989 235

Fecundo vs. Berjamen
hearings are essential even in quasi-legislation.

Writ granted. Order set aside.
Note.—The three day notice required by the rules is

intended not for the benefit of the movant but to avoid
surprise upon the adverse party and to give the latter time
to study and meet the arguments of the motion (E & G
Mercantile, Inc. vs. IAC [now Court of Appeals], 142 SCRA
385).
——o0o——
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1/20/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 180

218 SUPREME COURT REPORTS ANNOTATED

PHILIPPINE COMMUNICATIONS SATELLITE

Constitutional Law; Legislative Power, Delegation of; Absence

should be maintained at reasonable rates. We need not go into an

VOL. 180, DECEMBER 18, 1989 219

Philippine Communications Satellite Corporation vs. Alcuaz

is limited by the requirements of public safety, public interest,

power is vested in NTC, it may not exercise the same in an

220 SUPREME COURT REPORTS ANNOTATED

Philippine Communications Satellite Corporation vs. Alcuaz

case. An order of respondent NTC prescribing reduced rates, even

Same; Same; Same; Same; Same; Same; Method of

GUTIERREZ, JR., J., Concurring Opinion:

Constitutional Law; Administrative Law; Administrative

VOL. 180, DECEMBER 18, 1989 221

Philippine Communications Satellite Corporation vs. Alcuaz

in the exercise of quasi-legislative powers should be given

PETITION to review the order of the National Bureau of

The facts are stated in the opinion of the Court.

This case is posed as one of first impression in the sense

1 Annex A, Petition; Rollo, 37.

222 SUPREME COURT REPORTS ANNOTATED

tion of the rates which may be charged by petitioner for

1. In 1967, PHILCOMSAT established its provisional

VOL. 180, DECEMBER 18, 1989 223

6. In 1989, petitioner completed the installation of a

By designation of the Republic of the Philippines, the

commercial telecommunications satellite corporations were

1. Philippine Long Distance Telephone Company;

or their predecessors-in-interest. The satellite services thus

224 SUPREME COURT REPORTS ANNOTATED

current rates applied for in rendering such services.

“The Commission in its on-going review of present service rates

PHILCOMSAT assails the above-quoted order for the

4 Annex C, Petition; Rollo, 48.

VOL. 180, DECEMBER 18, 1989 225

1. The enabling act (Executive Order No. 546) of

2. Assuming arguendo that the rate-fixing power was

226 SUPREME COURT REPORTS ANNOTATED

only standard which the legislature is required to prescribe

It becomes important then to ascertain the nature of the

7 42 Am. Jur. 357-358.

VOL. 180, DECEMBER 18, 1989 227

dents. Petitioner argues that the function involved in the

necessary and the absence thereof results in a violation of

“Moreover, although the rule-making power and even the power

8 Memorandum for Private Respondents, 9-10; Rollo, 181-182.

228 SUPREME COURT REPORTS ANNOTATED

previous notice and hearing.”

This rule was further explained in the subsequent case 10

The order in question which was issued by respondent

10 44 SCRA 307 (1972).

VOL. 180, DECEMBER 18, 1989 229

prompted respondents to impose as much as a fifteen

“Section 16. Proceedings of the Commission, upon notice and

230 SUPREME COURT REPORTS ANNOTATED

(c) To fix and determine individual or joint rates, x x x which

There is no reason to assume that the aforesaid provision

VOL. 180, DECEMBER 18, 1989 231