National Telecommunications Commission vs. Court of Appeals

The supervision and regulation fee under Section 40(e) of the Public Service Act, as amended by Republic Act No. 3792, must be computed on the basis of the capital stock subscribed or paid — not on market value of outstanding capital stock, and not on par value excluding stock dividends, premiums, or capital in excess of par.

The National Telecommunications Commission (NTC) is the regulatory body empowered to impose supervision and regulation fees, permit fees, and other charges on public service entities under the Public Service Act (PSA), as amended by Republic Act No. 3792. The Philippine Long Distance Telephone Company (PLDT) is a public telecommunications carrier subject to NTC's regulatory authority. Section 40(e) of the PSA authorizes the NTC to charge annual supervision and regulation fees computed at ₱0.50 per ₱100.00 of the capital stock subscribed or paid by the public service entity. The proper interpretation of "capital stock subscribed or paid" — whether it refers to market value, par value, or the actual amount received by the corporation — was the central question, previously touched upon in PLDT vs. PSC, 66 SCRA 341 (1975).

Sometime in 1988, the National Telecommunications Commission served on the Philippine Long Distance Telephone Company several assessment notices and demands for payment. The first was for ₱7,495,161.00 as supervision and regulation fee under Section 40(e) of the Public Service Act for the year 1988, computed at ₱0.50 per ₱100.00 of PLDT's outstanding capital stock as of December 31, 1987, which then consisted of serial preferred stock amounting to ₱1,277,934,390.00 and common stock of ₱221,097,785.00, or a total of ₱1,499,032,175.00. The second assessment was for ₱9.0 million as permit fee under Section 40(f) for the approval of PLDT's increase of its authorized capital stock from ₱2.7 billion to ₱4.5 billion. The third and fourth assessments, amounting to ₱12,261,600.00 and ₱33,472,030.00, were permit fees under Section 40(g) in connection with NTC's decisions in NTC Cases Nos. 86-13 and 87-008, respectively, approving PLDT's equity participation in the Fiber Optic Interpacific Cable systems and X-5 Service Improvement and Expansion Program.

PLDT challenged these assessments through letter-protests dated February 23, 1988 and July 14, 1988, and position papers dated November 8, 1990 and March 12, 1991. PLDT theorized, among other things, that the assessments were being made to raise revenues and not as mere reimbursements for actual regulatory expenses, in violation of the doctrine in PLDT vs. PSC, 66 SCRA 341 (1975); that the assessment under Section 40(e) should only have been on the basis of the par values of its outstanding capital stock; and that the NTC had no authority to compel payment of the assessed fees under Section 40(f) for the increase of its authorized capital stock, since the NTC did not render any supervisory or regulatory activity and incurred no expenses in relation thereto.

On September 29, 1993, the NTC rendered a Decision in NTC Case No. 90-223 denying PLDT's protest and directing the Common Carrier Authorization Department to update its assessments and collections on PLDT and all public telecommunications carriers in accordance with Sections 40(e), (f), and (g) of the Revised NTC Schedule of Fees and Charges. PLDT's Motion for Reconsideration was denied by the NTC in an Order dated May 3, 1994. PLDT then appealed to the Court of Appeals, which, on October 30, 1996, modified the NTC disposition by ordering recomputation of the supervision and regulation fee under Section 40(e) based on the par value of the capital stock subscribed or paid, excluding stock dividends, premiums, or capital in excess of par, and recomputation of the permit fee under Section 40(f) at ₱0.50 per ₱100.00 regardless of any regulatory service or expense incurred by the NTC.

The NTC moved for partial reconsideration of the Court of Appeals' decision, contesting the basis of the assessment under Section 40(e) — i.e., par value of the subscribed capital stock — and the fee of ₱0.50 for the issuance or increase of capital stock under Section 40(f). The Court of Appeals denied the motion by its Resolution dated January 27, 1997, prompting the NTC to elevate the matter to the Supreme Court. The records before the Court did not disclose the actual capital paid or the amount of capital stock for which PLDT received actual payments; the only other item available was the amount assessed by the NTC from PLDT, which had been based on the market value of the outstanding capital stock on given dates.

• Basis of Computation under Section 40(e): Petitioner NTC argued that the supervision and regulation fee under Section 40(e) should be based on the market value of PLDT's outstanding capital stock, inclusive of stock dividends and premium, and not on the par value of PLDT's capital stock excluding stock dividends and premium, as contended by PLDT and as held by the Court of Appeals.

• Revenue vs. Reimbursement: Respondent PLDT argued that the assessments were being made to raise revenues and not as mere reimbursements for actual regulatory expenses, in violation of the doctrine in PLDT vs. PSC, 66 SCRA 341 (1975).
• Par Value as Basis: Respondent PLDT maintained that the assessment under Section 40(e) should only have been on the basis of the par values of its outstanding capital stock.
• No Authority for Section 40(f) Fees: Respondent PLDT contended that the NTC had no authority to compel payment of the assessed fees under Section 40(f) for the increase of its authorized capital stock, since the NTC did not render any supervisory or regulatory activity and incurred no expenses in relation thereto.

• Basis of Computation: Whether the Court of Appeals erred in holding that the computation of supervision and regulation fees under Section 40(e) of the Public Service Act should be based on the par value of the subscribed capital stock.

• Basis of Computation: Yes. The Court of Appeals erred. The proper basis for the computation of the fee under Section 40(e) is "the capital stock subscribed or paid" — not market value, and not par value excluding stock dividends, premiums, or capital in excess of par. Both the NTC's market-value basis and the Court of Appeals' par-value basis were deviations from the explicit language of the statute.

• Basis of Computation: The law — Section 40(e) of the Public Service Act, as amended by Republic Act No. 3792 — is clear and categorical, leaving no room for construction but only for application. The statute provides that the fee is based on "the capital stock subscribed or paid." This Court's ruling in PLDT vs. PSC, 66 SCRA 341 (1975), had already established that the basis for computation is "the capital stock subscribed or paid and not, alternatively, the property and equipment." Just as that ruling rejected "the value of the property and equipment" as the proper basis, so too must the Court disallow the idea of computing the fee on "the par value of [PLDT's] capital stock subscribed or paid excluding stock dividends, premiums, or capital in excess of par," as the Court of Appeals held. Neither, however, is the NTC's assessment based on the market value of the subscribed or paid-in capital stock acceptable, since it is itself a deviation from the explicit language of the law. The term "capital" refers to the value of the property or assets of a corporation. The capital subscribed is the total amount of capital that subscribers or shareholders have agreed to take and pay for, which need not necessarily be, and can be more than, the par value of the shares. It is the amount that the corporation receives, inclusive of premiums if any, in consideration of the original issuance of the shares. In the case of stock dividends, it is the amount that the corporation transfers from its surplus profit account to its capital account. The Court noted that the actual capital paid or the amount of capital stock paid and for which PLDT received actual payments were not disclosed or extant in the records, and ordered the NTC to recompute the fee strictly on the basis of capital stock subscribed or paid.

• Statutory Construction — When the Law is Clear — Where the language of the statute is clear and categorical, there is no room for construction; the law calls only for application. The Court applied this principle by holding that Section 40(e) of the Public Service Act explicitly provides that the fee is based on "the capital stock subscribed or paid," and neither market value nor par value (excluding stock dividends and premiums) is the proper basis.

• Trust Fund Doctrine — Subscribed capital is considered a trust fund for the payment of the debts of the corporation, to which creditors may look for satisfaction. Until liquidation, no part of the subscribed capital may be returned or released to the stockholder (except in redemption of redeemable shares) without violating this principle. Dividends must never impair the subscribed capital; subscription commitments cannot be condoned or remitted; nor can the corporation buy its own shares using subscribed capital as consideration. The Court invoked this doctrine to explain the nature of "capital subscribed" and to underscore that the amount the corporation receives in consideration of the original issuance of shares — inclusive of premiums — is what constitutes the subscribed capital.

• Capital Stock Subscribed or Paid — "Capital subscribed" is the total amount of capital that subscribers or shareholders have agreed to take and pay for, which need not necessarily be, and can be more than, the par value of the shares. It is the amount that the corporation receives, inclusive of premiums if any, in consideration of the original issuance of the shares. In the case of stock dividends, it is the amount that the corporation transfers from its surplus profit account to its capital account. The Court applied this definition to reject both the NTC's market-value basis and the Court of Appeals' par-value basis for computing the supervision and regulation fee.

• "The law in point is clear and categorical. There is no room for construction. It simply calls for application. To repeat, the fee in question is based on the capital stock subscribed or paid, nothing less nothing more." — This passage states the ratio decidendi: the statute's plain language controls, and the fee must be computed strictly on the basis of capital stock subscribed or paid.

• "In the same way that the Court in PLDT vs. PSC has rejected the 'value of the property and equipment' as being the proper basis for the fee imposed by Section 40(e) of the Public Service Act, as amended by Republic Act No. 3792, so also must the Court disallow the idea of computing the fee on 'the par value of [PLDT's] capital stock subscribed or paid excluding stock dividends, premiums, or capital in excess of par.' Neither, however, is the assessment made by the National Telecommunications Commission on the basis of the market value of the subscribed or paid-in capital stock acceptable since it is itself a deviation from the explicit language of the law." — This passage articulates the Court's rejection of both parties' proposed bases and reaffirms the controlling precedent.

• "The capital subscribed is the total amount of the capital that persons (subscribers or shareholders) have agreed to take and pay for, which need not necessarily be, and can be more than, the par value of the shares. In fine, it is the amount that the corporation receives, inclusive of the premiums if any, in consideration of the original issuance of the shares." — This passage provides the canonical definition of "capital subscribed" as applied in this case, distinguishing it from both par value and market value.

• Philippine Long Distance Telephone Company vs. Public Service Commission, 66 SCRA 341 (1975) — Controlling precedent. The Court reaffirmed its holding that the basis for computation of the fee under Section 40(e) is "the capital stock subscribed or paid and not, alternatively, the property and equipment." This case was applied to reject both the NTC's market-value basis and the Court of Appeals' par-value basis as deviations from the statutory language.

• Section 40(e), Public Service Act, as amended by Republic Act No. 3792 — Authorizes the NTC to charge annual supervision and regulation fees computed at ₱0.50 per ₱100.00 of the capital stock subscribed or paid by the public service entity. The Court held that the provision's plain language — "capital stock subscribed or paid" — is the exclusive basis for computation, rejecting both market value and par value as substitutes.

• Section 40(f), Public Service Act, as amended by Republic Act No. 3792 — Authorizes permit fees for the approval of increase of authorized capital stock, computed at ₱0.50 per ₱100.00. The Court of Appeals had modified the NTC's disposition to require recomputation under this section regardless of any regulatory service or expense incurred; the Supreme Court set aside the CA's decision in its entirety.

• Section 122, Corporation Code — Cited in connection with the Trust Fund Doctrine, which treats subscribed capital as a trust fund for the payment of corporate debts and prohibits its return to stockholders except in lawful redemption.

Romero, Vitug, and Gonzaga-Reyes, JJ., concurred. Panganiban, J., took no part, having been former counsel of a party.