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TRANSPORTATION (II & III) II. FRANCHISE AND LICENSING REQUIREMENT A…

- - - - MCWD v. ADALA
        
        HONTIVEROS-BARAQUEL v. TRB
        (Toll Regulatory Board)
        
        ASSOCIATED BROADCASTING v. NTC
        
        DIVINAGRACIA v. CONSOLIDATED BROADCASTING SYSTEM, INC.
        
        ABS-CBN v. NTC
        
        BATANGAS CATV v. CA
        
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        LEGISLATIVE FRANCHISE MUST BE IN THE FORM PRESCRIBED BY LAW
        A legislative franchise granting broadcasting entities the privilege to broadcast their programs through television and radio stations in the country must be in the form of a duly enacted law
        
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        SIR: Internet has the same level of significance as Print (Newspapers) [Case that sounds like ---r/wino]
        
        SIR: If I were ABS-CBN, I should have decided like this.
        I would cite for example, all the statements of the President and the statements of various members of the congress.
        
        PSC WAS VESTED WITH JD OVER PUBLIC SERVICES
        The Public Service Commission (PSC) was vested with jurisdiction over "public services", including over "wire or wireless broadcasting station. It did not include radio companies, except with respect to the fixing of rates.
        
        DUAL FRANCHISE/LICENSE TO BE UNDERSTOOD IN CONTEXT OF SEPARATION OF POWERS
        Dual franchise/license regime for broadcast media should be understood in context of separation of powers.
        
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        ANY PERSON/ENTERPRISE WHICH WISHES TO OPERATE A BROADCAST RADIO/TELVISION STATION IN PH HAS TO SECURE BOTH...
        Any person or enterprise which wishes to operate a broadcast radio or television station in PH has to secure:
        
        A FRANCHISE
        A legislative franchise in the form of a law passed by Congress; and
        
        A LICENSE TO OPERATE
        Thereafter, a license to operate from the NTC
        
        CPC v. FRANCHISE
        A franchise is distinguished from a Certificate of Public Convenience in that the former is a grant or privilege from the sovereign power, while the latter is a form of regulation through the administrative agencies.
        
        A FRANCHISE IS MERELY A PRIVILEGE
        Today, a franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to regulation by the state itself by virtue of its police power through its administrative agencies.
        
        IT IS SUBJECT TO REGULATION BY THE STATE ITSELF THROUGH POLICE POWER
        
        THE REQUIREMENTS OF A CONGRESSIONAL FRANCHISE AND A CPC MAY CO-EXIST
        The requirement of a congressional franchise for the operation of radio and television stations exists alongside the requirement of a CPC.
        
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        HISTORY: A FRANCHISE STARTED OUT AS A ROYAL PRIVILEGE OR A BRANCH OF THE KING'S PREROGATIVE
        A franchise started out as a royal privilege or a branch of the King's prerogative, subsisting in the hands of a subject.
        
        SINCE A FRANCHISE IS MERELY A PRIVILEGE NOW, IT IS SUBJECT TO REGULATION BY THE STATE ITSELF THROUGH POLICE POWER
        Today, a franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to regulation by the state itself by virtue of its police power through its administrative agencies.
        
        CONGRESS DOES NOT HAVE SOLE AUTHORITY TO GRANT FRANCHISES FOR THE OPERATION OF PUBLIC UTILITIES
        Noting that Congress does not have the sole authority to grant franchises for the operation of public utilities.
        
        THUS, THERE IS NO INFRINGEMENT OF THE LEGISLATIVE'S PREROGATIVES UPON EXERCISE OF QUASI-LEGISLATIVE POWERS
        No legislative prerogative, power, or privilege has been impaired. Hence, legislators have no standing to file the instant petition, for they are only allowed to sue to question the validity of any official action when it infringes on their prerogatives as members of Congress
        
        ADMINISTRATIVE AGENCIES MAY MODIFY/AMEND/IMPOSE ADDITIONAL CONDITIONS ON THE FRANCHISE OF PNCC
        Pursuant to Section 3 of P.D. 1113 and Section 6 of P.D. 1894, TRB is also empowered to modify, amend, and impose additional conditions on the franchise of PNCC in an appropriate contract, particularly when public interest calls for it
        
        POWER TO GRANT FRANCHISE IS NOT EXCLUSIVELY EXERCISED BY CONGRESS
        First, the power to grant franchises or issue authorizations for the operation of a public utility is not exclusively exercised by Congress.
        
        THE PRESIDENT ACTS THROUGH ALTER EGOS
        Second, except where the situation falls within that special class that demands the exclusive and personal exercise by the President of constitutionally vested power, the President acts through alter egos whose acts are as if the Chief Executive's own.
        
        WHEN A FRANCHISEE UNDERTAKES PROJECTS UNDER ITS FRANCHISE, THERE IS NO NEED FOR A PUBLIC BIDDING
        Where, in the instant case, a franchisee undertakes the tollway projects of construction, rehabilitation and expansion of the tollways under its franchise, there is no need for a public bidding
        
        CPC vs FRANCHISE
        A CPC is formal written authority issued by quasi-judicial bodies for the operation and maintenance of a public utility for which a franchise is not required by law.
        A franchise is privilege or authority to operate appropriate private property for public use vested by Congress through legislation.
        
        THE POWER TO GRANT FRANCHISES HAS BEEN FREQUENTLY DELEGATED, EVEN TO AGENCIES NOT LEGISLATIVE IN NATURE
        It is generally recognized that a franchise may be derived indirectly from the state through a duly designated agency, and to this extent, the power to grant franchises has frequently been delegated, even to agencies other than those of a legislative nature.
        PRIVILEGES CONFERRED BY GRANT BY LOCAL AUTHORITIES CONSTITUTE AS MUCH A LEGISLATIVE FRANCHISE
        In pursuance of this, it has been held that privileges conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature.
        (MCWD v. Adala)
        
        CPC FORM OF REGULATION THROUGH ADMIN AGENCIES
        LEGISLATIVE FRANCHISE GRANT THROUGH SOVEREIGN POWER
        (Associated Broadcasting v. NTC)
        
        SCOPE OF THE TERM "FRANCHISE" COVERS FRANCHISE GRANTED BY CONGRESS AND ADMINISTRATIVE
        In previous cases, SC has construed “franchise” broadly to include authorizations from Congress AND administrative agencies to which the power to grant franchises has been delegated by Congres
        
        A franchise may be derived indirectly from the state through a duly designated agency"
        (PAL v. CAB)
      - A LEGISLATIVE FRANCHISE IS NOT INDISPENSABLE FOR DOMESTIC OR AIR TRANSPORT OPERATORS
        There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an
        indispensable requirement for an entity to operate as a domestic air transport operator
        (PAL v. Civil Aeronautics Board)
        
        THE WORD "NECESSITY" DOES NOT MODIFY THE NATURE OF A CERTIFICATE OF PUBLIC CONVENIENCE
        The use of the word "necessity", in conjunction with "public convenience" in a certificate of authorization to a public service entity to operate, does not in any way modify the nature of such certification, or the requirements for the issuance of the same. It is the law which determines the requisites for the issuance of such certification, and not the title indicating the certificate.
      - AUTHORITY TO GRANT A CPC/N IS NOT SEPARATE AND DISTINCT FROM THE AUTHORITY TO GRANT A FRANCHISE TO OPERATE A PUBLIC UTILITY
        Authority to grant a CPC/N is not separate and distinct from the authority to grant a franchise to operate a public utility.
      - GRANTING POWER TO AN ADMIN AGENCY TO ISSUE PERMITS IS A DELEGATION
        Congress, by giving the CAB the power to issue permits for the operation of domestic transport services, has delegated to the said body the authority to determine the capability and competence of a prospective domestic air transport operator to engage in such venture.
    - - LEGISLATIVE FRANCHISES ARE NOT REQUIRED FOR EVERY PUBLIC UTILITY...
        : Franchises issued by Congress are not required before each and every public utility may operate.
        (Albano v. Reyes)
        
        ...BECAUSE CERTAIN ADMIN AGENCIES ARE GRANTED POWER TO GRANT LICENSES OR TO AUTHORIZE CERTAIN PUBLIC UTILITIES
        The law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities.
        (Albano v. Reyes)
      - CONGRESSIONAL FRANCHISE MAY STILL BE REQUIRED FOR SELECT PUBLIC UTILITIES
        While the Court said in this case that a congressional franchise is not required before “each and every public utility may operate”, such requirement is still applicable in select public utilities.
        (Associated Communications v. NTC)
- - - - EXPRESS INVESTMENTS v. BAYAN TELECOMMUNICATIONS
        
        ROY V. HERBOSA
        
        TATAD v. HON. GARCIA
        
        OPERATION vs OWNERSHIP
        In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment used to serve the public.
        
        FRANCHISE REQUIRED TO OPERATE AS PUBLIC UTILITY
        The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to serve the public as a public utility unless the operator has a franchise.
        
        OPERATION OF A RAIL SYSTEM AS A PUBLIC UTILITY INCLUDES
        
        TRANSPORTATION
        
        LOADING & UNLOADING
        
        MOVEMENT OF TRAINS
        The operation of a rail system as a public utility includes the transportation of passengers from one point to another point, their loading and unloading at designated places and the movement of the trains at pre-scheduled times.
        
        Private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with the public and the public will have no right to demand any services from it.
        
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        ONE MAY OWN wo OPERATING IT AS A
        PUBLIC UTILITY
        ONE MAY OPERATE wo OWNING
        The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities used to serve the public.
        
        WHO MAY DEVOTE PROPRTY TO SERVE PUBLIC
        
        OWNER
        
        PERSON IN CONTROL, ALBEIT NON-OWNER
        The devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof.
        
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        OWNERSHIP DEFINED
        Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely subjected to his will
        in everything not prohibited by law or the concurrence with the rights of another
        (Tolentino, II Commentaries and Jurisprudence on the Civil Code of the Philippines 45 [1992]).
        
        BENEFICIAL OWNER/OWNERSHIP MEANS ANY PERSON WHO DIRECLTY OR INDIRECTLY, HAS OR SHARES VOTING POWER AND/OR INVESTMENT RETURNS OR POWER
        As defined in the IRR of the Securities Regulation Code, beneficial owner/ownership means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power (which includes the power to vote or direct the voting of such security) and/or investment returns or power (which includes the power to dispose of, or direct the disposition of such security.)
        
        GENERALLY, COMMON SHARES, AND NOT PREFERRED SHARES HAVE VOTING RIGHTS
        Considering that common shares have voting rights which translate to control as opposed to preferred shares which usually have no voting rights, the term "capital" in Section 11, Article XII of the Constitution refers only to common shares.
        
        BUT PREFERRED SHARES MAY INCLUDE VOTING RIGHTS
        However, if the preferred shares also have the right to vote in the election of directors, then the term "capital" shall include such preferred shares because the right to participate in the control or management of the corporation is exercised through the right to vote in the election of directors.
        
        VOTING RIGHTS ARE CENTRIC
        In short, the term "capital" in Section 11, Article XII of the Constitution refers only to shares of stock that can vote in the election of directors.
        
        2 STEPS TO DETERMINE IF THE CONVERSION OF DEBT TO EQUITY IN EXCESS OF 40% OF OCS VIOLATES CONSTITUTIONAL LIMIT ON FOREIGN OWNERSHIP
        Applying this, two steps must be followed in order to determine whether the conversion of debt to equity in excess of 40% of the outstanding capital stock violates the constitutional limit on foreign ownership of a public utility:
        
        IDENTIFY CLASS OF SHARES THE DEBT SHALL BE CONVERTED TO (IF THEY GRANT VOTING RIGHTS)
        First, identify into which class of shares the debt shall be converted, whether common shares, preferred shares that have the right to vote in the election of directors or non-voting preferred shares;
        
        DETERMINE NUMBER OF SHARES WITH VOTING RIGHT HELD BY FOREIGN ENTITIES PRIOR TO CONVERSION
        Second, determine the number of shares with voting right held by foreign entities prior to conversion.
        
        If upon conversion, the total number of shares held by foreign entities exceeds 40% of the capital stock with voting rights, the constitutional limit on foreign ownership is violated. Otherwise, the conversion shall be respected.
      - "CAPITAL" IN SEC. 11 OF ART. XII OF THE CONSTI REFERS ONLY TO SHARES OF STOCK ENTITLED TO VOTE IN ELECTING DIRECTORS
        The term “capital” in Section 11 Article XII of the Constitution refers only to shares of stock entitled to vote in the election of directors.
        
        "CAPITAL" IN SEC. 11 REFERS TO COMMON SHARES ONLY, AND NOT TO TOTAL OUTSTANDING CAPITAL STOCK (Common + Non-voting preferred shares)
        
        RATIO: TO PREVENT ALIENS FROM ASSUMING CONTROL OF PUBLIC UTILITIES
        The evident purpose of the citizenship requirement is to prevent aliens from assuming control of public utilities, which may be inimical to the national interest.
        
        SEC. 11 OF ART. XII RESERVES PUBLIC UTILITIES TO FILIPINO CITIZENS
        The provision explicitly reserves to Filipino citizens control of public utilities, pursuant to an overriding economic goal of the 1987 Constitution: to conserve and develop out patrimony and ensure a self-reliant and independent national economy effectively controlled by Filipinos
        
        PREFERRED SHARES USUALLY DON'T HAVE VOTING POWER
        Preferred shares usually don’t have voting power and so they are not considered part of the capital contemplated in Sec 11 Art XII. But if the articles of incorporation grant voting power to preferred shares, then these shares are considered part of the capital.
        
        MERE LEGAL TITLE IS NOT ENOUGH.
        For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity.
        
        FULL BENEFICIAL OWNERSHIP OF STOCKS, COUPLED WITH VOTING RIGHTS IS ESSENTIAL
        Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential.
        
        IF THE VOTING RIGHTS OF STOCKS ARE TRANSFERRED TO ALIENS, PHILIPPINE CITIZENS/NATIONALS CANNOT BE CONSIDERED HELD BY FILIPINOS
        Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals.
        
        INDIVIDUALS OR JURIDICAL ENTITIES ARE CONSIDERED NON-PHILIPPINE NATIONALS
        Individual or juridical entities not meeting these qualifications are considered as non-Philippine nationals.
    - - PUBLIC UTILITES CAN ONLY BE OPERATED BY FILIPINO CITIZENS OR CORPORATIONS OR ASSOCIATIONS AT LEAST 60 % OF CAPITAL STOCK IS OWNED BY FILIPINOS
        BUT the Corporation Law, with respect to the operation of public utilities, which can only be operated by Filipino citizens or corporations or associations at least 60 per centum of the capital stock is owned by Filipino citizens must be subject to and conditioned by the Anti-Dummy Law.
- - - - SIR: Always look at the law. Do not presume that general principles (immediately) apply.