GR No 84818
December 1989
Facts
Petitioner PHILCOMSAT was given a franchise by virtue of RA No. 5514 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.” Formerly, petitioner was exempt from the jurisdiction of the National Telecommunications Commission (NTC). Thereafter, EO No 196 abolished the exemption of PHILCOMSAT from the jurisdiction of the NTC. With that, respondent NTC requires petitioner to apply for the requisite certificate of public convenience and necessity as well as the corresponding authority to charge rates.
Petitioner filed before the NTC an application for authority to continue operating and to maintain the facilities it has been continuously operating. Respondent issued an Order giving petitioner a provisional authority of six months to operate, render services, and charge rates. When the six-month period expired, respondent extended it for another six months but directed petitioner to charge a 15% reduction on the present authorized rates. Hence, this petition.
Petitioner was questioning the validity of the said Order for being unconstitutional since it violated procedural process for having been issued without notice and hearing even if the rate fixing power is adjudicatory which follows that it is quasi-judicial and not quasi-legislation. Moreover, the Order also violates substantive due process since the rate reduction is unjust, unreasonable, and confiscatory. It is confiscatory in the sense that the rate reduction will result to the cessation of the operation of the business.
On the other hand, respondent contends that since the function of the administrative agency is legislative, notice and hearing are not required. More so, the Order in question need not be preceded by hearing since it is merely incidental to petitioner’s application for certificate of public convenience and petitioner is not the only source of data and information.
Issue
- Whether or not the NTC Order is unconstitutional for violating procedural due process?
- Whether or not the NTC Order is unconstitutional for violating substantive due process?
Held
First Issue
Yes. In the The Central Bank of the Philippines vs. Cloribel, et al., the Supreme Court reiterates 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, if 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 may be affected by the action is entitled to notice and hearing.
In this case, the Supreme Court ruled that the Order issued by the NTC contains all the attributes of quasi-judicial adjudication since it pertains exclusively to petitioner and is premised on a finding of fact. It is thus clear that with regard to rate-fixing, respondent has no authority to make such order without first giving petitioner a notice and 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. Moreover, even if respondents have other data with regards to rate-fixing, hearing is still essential and the NTC should act based upon evidence and not on knowledge acquired by it which is not offered in evidence.
Therefore, the Order is unconstitutional for violating procedural due process.
Second Issue
Yes. The State has the inherent power to regulate the conduct and business of public utilities and such power is the power to protect, foster, promote, preserve, and control with due regard for the interest of the public, then of the utility and of its patrons. However, the power has limitations. Any regulation 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.
In this case, reasonable rates must not be so low as to be confiscatory, or too high as to be oppressive. Reasonable rates should contemplate the reasonableness the fair return upon the value of the property to the public utility. The Court agreed with the petitioner that the rates are confiscatory since the undue reduction thereof may practically lead to a cessation of its business.
Since the undue reduction of the rates were found to be confiscatory, the Court provides that the Order is unconstitutional for violating substantive due process.
Summary
- If the order was made by an administrative body in the exercise of executive, administrative, or legislative functions; notice and hearing can be dispensed with.
- If the order was made by an administrative body in the exercise of judicial or quasi-judicial functions, notice and hearing CANNOT be dispensed with.