Bolinao Electronics Corp. vs. Valencia

An administrative investigation into license renewal applications loses its legal basis when the sole ground stated in the notice has been condoned through a validly issued departmental circular; an appropriation condition cannot be vetoed by the President without also vetoing the item to which it relates, and such unconstitutional veto leaves the condition intact, thereby invalidating any expenditure made in violation of it.

Petitioners Bolinao Electronics Corporation, Chronicle Broadcasting Network, Inc. (CBN), and Monserrat Broadcasting System, Inc. owned and operated multiple radio and television stations. They submitted applications to the Department of Public Works and Communications for the renewal of various station licenses that had expired. The Radio Control Division, acting for the Secretary, sent uniform notices of hearing to the petitioners stating that the applications had been received after the expiration of the licenses, in violation of Department Order No. 11 requiring filing two months before expiration. The hearing was called pursuant to Section 3 of Act 3846, as amended, which authorizes the Secretary to disapprove renewals only after a hearing. The sole infraction alleged was the late filing. Petitioners moved to dismiss the investigation on the ground that the Department had, on 24 July 1962, issued a circular to all radio station operators declaring an intention to correct past laxity, enumerating late submission among the irregular practices, and requesting operators to take remedial measures by 10 August 1962. Petitioners had filed their renewal applications before that date. While that controversy was pending, a separate dispute crystallized over television Channel 9. CBN applied for a permit to transfer its Manila station DZXL-TV (operating on Channel 9) to Baguio City; the construction permit issued for the transfer carried the notation “Channel 10 assigned in lieu of Channel 9.” The transfer was later abandoned. Meanwhile, the Philippine Broadcasting Service (PBS), a government entity, obtained a construction permit for a television station on Channel 9 that included a remark that construction should begin after CBN’s permit to transfer was approved. CBN refused to vacate Channel 9, and PBS intervened in the case, claiming a right to operate the channel and seeking damages. The controversy was further complicated by a provision in the General Appropriations Act that prohibited the use of PBS funds for television stations in Luzon where commercial television stations already existed; the President had vetoed that condition, but the veto’s validity was disputed.

• Nature of Action: The petitioners, three domestic corporations engaged in broadcasting, sought to prohibit an investigation being conducted by the respondent public officials in connection with their applications for renewal of radio and television station licenses, to compel the renewal of CBN’s license for Channel 9, and to enjoin interference with their operations.
• The License Renewal Applications and the Investigation: Petitioners filed applications for renewal of various station licenses. The Radio Control Office sent uniform notices of hearing stating that the applications were received after the expiration of the prior licenses, which was characterized as a clear violation of Sections 12 and 14 of Department Order No. 11. The hearing was set for 28 January 1963. Respondents, in ruling on petitioners’ motion to dismiss the investigation, characterized it as the hearing required by Section 3(1) of Act 3846, as amended, before any disapproval of renewal, and declared it an indispensable step in processing applications when summary approval could not be given.
• The July 24, 1962 Circular: Prior to the renewal applications, the Office of the Secretary, through the Radio Regulation Chief and approved by the Undersecretary, issued a circular to all radio station operators listing practices violative of existing radio laws and regulations, including “[l]ate submission of applications for new and renewal licenses.” The circular expressed the intention “to correct whatever laxity which in the past has encouraged this illegal practices, to strictly enforce the radio regulations and to take drastic action against violators of these regulations,” and requested operators to “examine closely your operating practices, permits and licenses and take remedial measures as soon as possible but not later than August 10, 1962.” Petitioners’ renewal applications had all been filed before 10 August 1962—some even before the circular’s issuance on 24 July 1962.
• The Alleged Abandonment of Channel 9: CBN operated television station DZXL-TV in Manila on Channel 9. It later applied for a permit to transfer the station to Baguio City. The construction permit issued by the respondents contained the notation “Channel 10 assigned in lieu of Channel 9.” The planned transfer was ultimately abandoned. Subsequently, a construction permit (No. 793) was issued to the Philippine Broadcasting Service for a television station on Channel 9, containing a remark that “construction of this station shall be begun after DZXL-TV (Channel 9) Manila of Chronicle Broadcasting Network’s permit to transfer is approved.” The respondents later alleged that the clause mentioning CBN’s permit was inserted by personnel after erasing the original words written in the permit. CBN was not a party to the preparation of PBS’s permit. Throughout this period, CBN was allowed by the authorities to continue and did continue operating on Channel 9 even after the approval of its proposed transfer, and it refused to vacate Channel 9.
• The Appropriation Condition and Veto: The General Appropriations Act for fiscal year 1962–1963 contained an item for the Philippine Broadcasting Service’s operation with a proviso and a special provision both stating that “no portion of this appropriation shall be used for the operation of television stations in Luzon or any part of the Philippines where there are television stations.” The President vetoed these conditions, stating that they would render inoperative the television stations currently operated by PBS.
• Intervenor’s Claim: PBS, having been granted the construction permit for Channel 9, alleged an agreement with CBN for the exchange of channels and sought damages for CBN’s refusal to yield the frequency.

• Lack of Basis for Investigation: Petitioners maintained that the investigation was without legal basis because the only ground stated—late filing of renewal applications—had been condoned by the Department’s own circular of 24 July 1962, which gave operators until 10 August 1962 to correct past violations. Their applications had been filed within the condonation period, extinguishing the infraction.
• No Abandonment of Channel 9: CBN argued that there was no express or implied abandonment or renunciation of its right to operate on Channel 9. The notation “Channel 10 assigned in lieu of Channel 9” on its construction permit for the Baguio transfer merely signified that Channel 10 would be assigned only upon the final transfer to Baguio, a plan later abandoned. The continuance of its Channel 9 operations, with the knowledge and consent of the regulatory authority, negated any abandonment.

• Validity of the Investigation: Respondents contended that the hearing was a mandatory step under Section 3(1) of Act 3846 for the processing of renewal applications where the violation of filing deadlines was apparent. They claimed they had no authority to condone or pardon violations of radio control regulations, and that the circular could not operate to deprive them of the power to investigate and act on late applications.
• Abandonment and Renunciation of Channel 9: Respondents relied on the statement “Channel 10 assigned in lieu of Channel 9” in CBN’s construction permit and on the remark in PBS’s permit that construction would begin after CBN’s transfer permit was approved. They argued that upon approval of the request to transfer, CBN had effectively renounced Channel 9.
• Right of PBS to Channel 9 and Damages: The intervenor PBS claimed that the exchange of channels was based on an agreement with CBN, and that CBN’s continued occupation of Channel 9 caused it injury for which damages were due.

• Validity of Investigation: Whether the administrative investigation into petitioners’ license renewal applications, founded solely on the late filing of those applications, retained any legal basis after the issuance of the July 24, 1962 circular granting operators a period to correct past violations.
• Abandonment of Channel 9: Whether CBN abandoned or renounced its right to operate television Channel 9 in favor of the Philippine Broadcasting Service.
• PBS Operation and Damages: Whether the Philippine Broadcasting Service can legally operate Channel 9 and is entitled to damages for CBN’s refusal to relinquish its operations.

• Validity of Investigation: The investigation was bereft of legal basis. The lone reason given—late filing of the renewal applications—was no longer tenable because the circular of 24 July 1962, approved by the Undersecretary ostensibly acting for the Secretary, gave station operators until 10 August 1962 to correct past practices, including late submission of renewal applications. Petitioners’ applications were all filed before that deadline. In legal effect, the violation ceased to exist, and the raison d’être for the investigation disappeared. The respondents’ claim that they lacked authority to condone violations was rejected: Section 3(m) of Act 3846, as amended, expressly grants the Department Secretary the discretion to bring criminal actions, confiscate apparatus, suspend or revoke licenses, refuse renewal, or simply reprimand and warn offenders. The circular, being a warning and an admonition to correct past laxity, fell squarely within the power to reprimand and warn. Moreover, respondents could not assert the illegality of a circular they themselves had issued to evade its consequences.
• Abandonment of Channel 9: No abandonment or renunciation was established. The admission that there was no express agreement to that effect was fatal. The notation “Channel 10 assigned in lieu of Channel 9” on CBN’s construction permit did not, by itself, constitute an agreement with the radio control authority; it was explained that the assignment of Channel 10 was intended to take effect only upon the final transfer to Baguio, a transfer that was later abandoned. The remark on PBS’s construction permit was an alteration by respondents’ personnel after erasing original text and, insofar as CBN was concerned, was an inter alios acta that could not bind it. Crucially, CBN was allowed to continue, and did continue, operating on Channel 9 after the approval of its proposed transfer—a fact that conclusively negated any intent to abandon.
• PBS Operation and Damages: PBS failed to prove the existence of any agreement with CBN for the exchange of channels; thus, no right of PBS was violated by CBN’s refusal to vacate Channel 9. Even assuming a right existed, PBS could not be entitled to damages or reimbursement. The appropriation for the operation of PBS contained a valid condition—twice expressed in the general provisions—that no portion of the fund shall be used for television stations in Luzon where television stations already exist. The President’s veto of those conditions was unconstitutional. Under Article VI, Section 20 of the Constitution, the executive cannot veto a condition or restriction in an appropriation bill without also vetoing the item to which it relates. The unconstitutional veto produced no effect, and the restriction therefore remained in force. Any expenditure by PBS for the installation or operation of a television station in Manila, where commercial stations were already operating, was made in violation of the condition and was consequently null and void.

• Doctrine on Executive Veto of Appropriation Conditions — The President’s item-veto power does not extend to striking out conditions or restrictions attached to an appropriation item without vetoing the item itself. An attempt to veto only the condition is unconstitutional and produces no legal effect; the condition remains part of the law and renders any expenditure made in contravention of it illegal and not subject to reimbursement. (Applied to invalidate PBS’s expenditures and claim for damages.)
• Condonation of Regulatory Violations by Administrative Circular — When the regulatory agency issues a circular giving a defined period to correct enumerated past violations, operators who comply within the period are deemed to have had those infractions condoned. The violation is legally extinguished, removing the factual and legal predicate for an investigation or disapproval of a renewal application based solely on that infraction. (Applied to nullify the investigation of petitioners.)
• No Abandonment Without Express Agreement and Contrary Conduct — Abandonment of a right to a station frequency is not presumed from ambiguous notations on construction permits, especially where the permittee was not a party to the document, no express agreement to renounce exists, and the permittee continues operations on the frequency with the authority’s permission. (Applied to uphold CBN’s continued right to Channel 9.)

• “It seems clear that the foregoing circular sustains petitioners’ contention that the previous non-observance by station operators of radio laws and regulations of the Radio Control Office regarding filing of petitions for renewal, among others, was condoned if the necessary steps were taken to correct their records and practices before August 10, 1962.” — This passage establishes the condonation effect of the circular, forming the core ratio for invalidating the investigation.
• “If the veto is unconstitutional, it follows that the same produced no effect whatsoever, and the restriction imposed by the appropriation bill, therefore, remains.” — This excerpt encapsulates the ruling on the veto’s nullity and the continuing vitality of the appropriation condition, which barred PBS’s recovery.
• “The lone reason given for the investigation of petitioners’ applications, i.e., late filing thereof, is therefore no longer tenable. The violation, in legal effect, ceased to exist and, hence, there is no reason nor need for the present investigation.” — The language captures the decisive consequence of the condonation.

• State v. Holder, 23 So. 643, 76 Miss. 158 — Recognized as the leading authority that the executive’s veto power does not carry with it the power to strike out conditions or restrictions on an appropriation. Followed and applied to declare the President’s veto of the conditions unconstitutional.
• Fairfield v. Porter, 214 P. 319; Com. v. Dodson, 11 S.E. 2d 120; State ex rel. Wisconsin Tel. Co. v. Henry, 260 N.W. 486 — Cited as subsequent American cases adhering to the rule in State v. Holder, reinforcing the Court’s conclusion.
• Fergus v. Russel, 110 N.E. 130; Strong v. People, 220 P. 999; Wood v. State Administrative Board, 238 N.E.; Lukens v. Nye, 105 P. 393 — Cited for the principle that an unconstitutional veto produces no effect, undergirding the conclusion that the condition remained operative.

• Section 3(1), Act 3846, as amended by Republic Act 584 — Empowers the Secretary of Public Works and Communications to approve or disapprove applications for renewal of station licenses, provided that no renewal application shall be disapproved without a hearing. The investigation was purportedly conducted under this authority, but the Court found the sole ground for potential disapproval extinguished.
• Section 3(m), Act 3846, as amended — Grants the Secretary discretion to bring criminal action against violators, confiscate apparatus, suspend or revoke licenses, refuse renewal, or simply reprimand and warn offenders. The circular was held valid as an exercise of the power to reprimand and warn.
• Sections 12 and 14, Department Order No. 11 — Prescribe the requirement of a station license for operation and the deadline for filing renewal applications (two months before expiration). The alleged violation of these provisions was the stated basis for the investigation but was deemed condoned.
• Article VI, Section 20, 1935 Constitution — Provides that the President shall have the power to veto any particular item or items of an appropriation bill, but that the veto shall not affect the item or items to which he does not object. The Court applied this provision to hold that the President cannot veto a condition or restriction without vetoing the item itself.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Regala, and Makalintal, JJ., concurred. Dizon, J., took no part.