Zoomzat, Inc. vs. People of the Philippines

Members of a Sangguniang Panlungsod cannot be held liable under Section 3(e) of R.A. No. 3019 for enacting an ordinance granting a cable television franchise, because the authority to grant such franchises belongs exclusively to the NTC under Executive Order No. 205 and Executive Order No. 436, rendering the ordinance ultra vires and incapable of conferring any right, privilege, or injury.

Petitioner Zoomzat, Inc. sought to install and operate a cable television system in Gingoog City. Respondents were all members of the Sangguniang Panlungsod of Gingoog City, charged in their official capacity with enacting local legislation. The regulatory framework governing cable television operations in the Philippines is embodied in Executive Order No. 205, which vests the National Telecommunications Commission (NTC) with the power to grant certificates of authority to cable television operators, and Executive Order No. 436, which places the regulation and supervision of the cable television industry solely in the NTC. These issuances operated against the backdrop of Presidential Decree No. 1512, which terminated all franchises, permits, or certificates for CATV operation previously granted by local governments.

On December 20, 1991, the Sangguniang Panlungsod of Gingoog City passed Resolution No. 261, which resolved "to express the willingness of the City of Gingoog to allow Zoomzat to install and operate a cable TV system." Thereupon, petitioner Zoomzat, Inc. applied for a mayor's permit, but the same was not acted upon by the mayor's office. On April 6, 1993, respondents — all members of the Sangguniang Panlungsod — enacted Ordinance No. 19, which granted a franchise to Gingoog Spacelink Cable TV, Inc. to operate a cable television for a period of ten years, subject to automatic renewal.

On July 30, 1993, petitioner filed a complaint with the Office of the Ombudsman against respondents for violation of Section 3(e) of R.A. No. 3019, alleging that in enacting Ordinance No. 19, respondents gave unwarranted benefits, advantage, or preference to Spacelink, to the prejudice of petitioner, who claimed to be a prior grantee-applicant by virtue of Resolution No. 261. A criminal information was eventually filed before the Sandiganbayan, docketed as Crim. Case No. 22026. Upon the Sandiganbayan's directive to restudy the case, however, the prosecuting officers successively recommended dismissal for lack of probable cause and insufficiency of evidence. The Sandiganbayan approved the withdrawal of the Information on June 17, 1998, and denied petitioner's motion for reconsideration on September 9, 1998.

Petitioner maintained that the NTC's authority to grant franchises to operate cable television was not exclusive, because under the Local Government Code, the city council also possessed the power to grant permits, licenses, and franchises in aid of the local government unit's regulatory or revenue-raising powers. Petitioner further argued that the grant of an exclusive franchise to Spacelink for ten years with automatic renewal contravened Section 2 of Executive Order No. 205, which required that certificates of authority be non-exclusive and for a period not exceeding fifteen years, and that even absent actual damage, respondents' extension of undue favor to Spacelink rendered them liable under Section 3(e) of R.A. No. 3019.

• NTC Authority Not Exclusive: Petitioner argued that while the NTC has the authority to grant franchises to operate cable television, this power is not exclusive because under the Local Government Code, the city council also has the power to grant permits, licenses, and franchises in aid of the local government unit's regulatory or revenue-raising powers.
• Violation of E.O. No. 205: Petitioner contended that the grant of an exclusive franchise to Spacelink for ten years subject to automatic renewal contravenes Section 2 of Executive Order No. 205, which provides that a certificate of authority to operate a CATV by the Commission shall be on a non-exclusive basis and for a period not to exceed fifteen years.
• Unwarranted Preference: Petitioner asserted that in awarding an exclusive franchise, respondents gave Spacelink undue or unwarranted advantage and preference because it stifled business competition, and that even assuming the lack of actual damage or injury, the fact remains that respondents extended undue favor and advantage to Spacelink, making them liable under Section 3(e) of R.A. No. 3019.

• Applicability of Section 3(e), R.A. No. 3019: Whether members of the Sangguniang Panlungsod of Gingoog City, who are not employees of the NTC, can be held liable under Section 3(e) of R.A. No. 3019 for enacting an ordinance granting a cable television franchise.
• Authority to Grant Cable TV Franchises: Whether the Sangguniang Panlungsod had the authority to grant a cable television franchise, or whether such power belongs exclusively to the NTC under Executive Order No. 205 and Executive Order No. 436.
• Existence of Undue Injury or Unwarranted Preference: Whether petitioner suffered undue injury or was given cause to claim unwarranted preference in favor of Spacelink, given that Resolution No. 261 merely expressed willingness and that Spacelink never commenced operations.

• Applicability of Section 3(e), R.A. No. 3019: No. Section 3(e) of R.A. No. 3019 applies to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions; respondents, being members of the Sangguniang Panlungsod and not NTC employees, fall outside the provision's scope.
• Authority to Grant Cable TV Franchises: No. Executive Order No. 205 and Executive Order No. 436 vest solely in the NTC the power to grant certificates of authority to operate cable television; the Sangguniang Panlungsod's enactment of Ordinance No. 19 was ultra vires.
• Existence of Undue Injury or Unwarranted Preference: No. Resolution No. 261 merely expressed willingness and did not grant a franchise, so petitioner had no prior right; the void ordinance conferred no privilege on Spacelink, and Spacelink never commenced operations, negating any injury.

• Applicability of Section 3(e), R.A. No. 3019: The Court examined the text of Section 3(e) of R.A. No. 3019, which expressly states that the provision applies to "officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions." Executive Order No. 205 clearly provides that only the NTC could grant certificates of authority to cable television operators and issue the necessary implementing rules and regulations. Executive Order No. 436 likewise vests the regulation and supervision of the cable television industry in the NTC. Since respondents were not NTC employees but members of the Sangguniang Panlungsod acting in their official capacity, they cannot be charged with violation of Section 3(e) for enacting Ordinance No. 19.

• Authority to Grant Cable TV Franchises: Citing Batangas CATV, Inc. vs. Court of Appeals, the Court reiterated that there is no law specifically authorizing local government units to grant franchises to operate CATV systems. Whatever authority LGUs previously had was withdrawn by Presidential Decree No. 1512, which terminated all franchises, permits, or certificates for CATV operation previously granted by local governments. The Court acknowledged that LGUs retain general welfare powers under the Local Government Code to regulate cable television operations when they encroach on public properties — such as the use of public streets, rights of way, the founding of structures, and the parceling of large regions — but beyond these parameters, the grant of a franchise is ultra vires. Ordinance No. 19, being a void legislative act, did not confer any right or vest any privilege on Spacelink.

• Existence of Undue Injury or Unwarranted Preference: The Court found that petitioner could not claim to have been prejudiced or suffered injury from a void ordinance that conferred no rights. Petitioner's claim of undue injury was further undermined by the finding that Spacelink never commenced operations despite the grant of a franchise. As to manifest partiality, evident bad faith, or gross inexcusable negligence, the Court noted that Resolution No. 261 merely expressed the Sangguniang Panlungsod's willingness to allow petitioner to install and operate a cable television system; it did not grant a franchise. Had respondents intended to grant a franchise, they would have couched the resolution in more concrete, specific, and categorical terms. In contrast, Ordinance No. 19 clearly and unequivocally granted a franchise to Spacelink with specific terms and conditions. Petitioner, not being a bona fide franchise holder, could not claim a prior right on the strength of Resolution No. 261.

• Ultra Vres Acts of Local Government Units — A municipal ordinance enacted beyond the powers conferred on the local legislative body is ultra vires and void, conferring no rights and vesting no privileges. The Court applied this principle to Ordinance No. 19, holding that because the Sangguniang Panlungsod lacked authority to grant cable television franchises — such power belonging exclusively to the NTC — the ordinance was void and could not prejudice petitioner or benefit Spacelink.
• Scope of Section 3(e), R.A. No. 3019 — Section 3(e) of the Anti-Graft and Corrupt Practices Act applies to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions. Liability requires that the accused be such an officer or employee, and that the act be attended by manifest partiality, evident bad faith, or gross inexcusable negligence, causing undue injury or giving unwarranted benefits. The Court held that respondents, as Sangguniang Panlungsod members, were not officers charged with the grant of licenses or permits within the meaning of the provision.
• LGU General Welfare Powers vs. NTC Regulatory Authority — Local government units retain general welfare powers to regulate activities that encroach on public properties, such as the use of public streets, rights of way, the founding of structures, and the parceling of large regions. However, the regulatory power over cable television operations — specifically the grant of franchises and certificates of authority — is vested solely in the NTC pursuant to Executive Order No. 205 and Executive Order No. 436.

• "There is no law specifically authorizing the LGUs to grant franchises to operate CATV system. Whatever authority the LGUs had before, the same had been withdrawn when President Marcos issued P.D. No. 1512 'terminating all franchises, permits or certificates for the operation of CATV system previously granted by local governments.'" — This passage, quoted from Batangas CATV, Inc. vs. Court of Appeals, establishes the legal basis for the Court's conclusion that the Sangguniang Panlungsod lacked authority to grant the cable television franchise, rendering Ordinance No. 19 ultra vires.
• "Being a void legislative act, Ordinance No. 19 did not confer any right nor vest any privilege to Spacelink. As such, petitioner could not claim to have been prejudiced or suffered injury thereby." — This statement articulates the ratio decidendi connecting the ultra vires character of the ordinance to the absence of injury or prejudice to petitioner, defeating the Section 3(e) charge.
• "Not being a bona fide franchise holder, petitioner could not claim prior right on the strength of Resolution No. 261." — This passage resolves the issue of whether petitioner possessed a prior right that was violated by the grant to Spacelink, distinguishing a mere expression of willingness from an actual franchise grant.

• Batangas CATV, Inc. vs. Court of Appeals, G.R. No. 138810, September 29, 2004 — Controlling precedent. The Court relied on this case for two propositions: first, that no law authorizes LGUs to grant CATV franchises, and that prior LGU authority was withdrawn by P.D. No. 1512; second, that LGUs retain general welfare regulatory powers but only as to matters encroaching on public properties, while regulatory power over cable television is vested solely in the NTC.

• Section 3(e), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Penalizes public officers who cause undue injury to any party or give unwarranted benefits, advantage, or preference through manifest partiality, evident bad faith, or gross inexcusable negligence. The Court applied the proviso that the provision applies to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions, holding that respondents, as Sangguniang Panlungsod members, did not fall within this category.
• Executive Order No. 205 — Regulates the operation of cable antenna television (CATV) systems in the Philippines. Section 2 provides that a certificate of authority to operate a CATV by the Commission shall be on a non-exclusive basis and for a period not to exceed fifteen years. The Court cited this issuance to establish that only the NTC could grant certificates of authority to cable television operators.
• Executive Order No. 436 — Prescribes policy guidelines governing the operations of cable television in the Philippines, vesting regulation and supervision of the cable television industry solely in the NTC. The Court relied on this to confirm that the Sangguniang Panlungsod's grant of a franchise was ultra vires.
• Presidential Decree No. 1512 — Terminated all franchises, permits, or certificates for the operation of CATV systems previously granted by local governments. Cited through Batangas CATV, Inc. vs. Court of Appeals as the legal basis for withdrawing whatever authority LGUs previously had to grant CATV franchises.
• Republic Act No. 7160 (Local Government Code of 1991) — Cited for the general welfare clause empowering local government units to enact ordinances and approve resolutions. The Court clarified that this power does not extend to granting cable television franchises, which belongs exclusively to the NTC.

Chief Justice Davide, Jr. (Chairman), and Justices Quisumbing, Carpio, and Azcuna concurred.