PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION vs. ALCUAZ FACTS By virtue of RA 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, since 1967, has established its earth stations and antennas to provide direct satellite communication. Since 1968, the petitioner has been leasing its satellite circuits to different telephone, cable, and radio companies. Executive Order No. 196 placed the petitioner under the jurisdiction, control and regulation of respondent NTC, including all its facilities and services and the fixing of rates. 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. Petitioner was granted one-year 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. The NTC order had extended the provisional authority of the petitioner for another six (6) months, 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 ground that the Commission in its on-going review of present service rates takes note that after an initial evaluation 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 find in its further evaluation that more reduction should be effected either on the basis of a provisional authorization or in the final consideration of the case. PHILCOMSAT now assails the order. ISSUE Whether or not the questioned order violates procedural due process for having been issued without prior notice and hearing and the rate reduction it imposes is unjust, unreasonable and confiscatory, thus constitutive of a violation of substantive due process.

HELD The Court finds merit on the petitioners contention that the questioned order violates procedural due process because it was issued without notice to petitioner and without the benefit of a hearing. Petitioner laments that said order was based merely on an "initial evaluation," and that the petitioner had not been given an opportunity to present its side before the order in question was issued. 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. As previously ruled, there is a categorical classification as to when the rate-filing power of administrative bodies is quasi-judicial and when it is legislative. When there is need for cross-examination and introducing evidence to disprove the contents of a report and/or explain or complement the same, the making of said finding of fact, the function performed partake of a quasi-judicial character, the valid exercise of which demands previous notice and hearing. It was enunciated in another case that: 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. 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 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. Further, it is premised on a finding of fact 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 which prompted respondents to impose as much as a fifteen percent (15%) rate reduction. It is reasonable to assume that petitioner could be in a better position to rationalize its rates with regard to the viability of its business requirements. Petitioner was not even afforded the opportunity to cross-examine the inspector who issued the report on which respondent NTC based its order. Petitioner also 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. There is no question that petitioner is a mere grantee of a legislative franchise which is subject to amendment, alteration, 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 power of the State to regulate the conduct and business of public utilities 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 of the public, 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. 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 so low as to be confiscatory, or too high as to be oppressive. Separate Opinions GUTIERREZ, JR., J., concurring: 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 hearings are essential even in quasi-legislation.