CASE DIGEST: SEC v. GMA Network

 

SEC vs. GMA Network, G.R. No. 164026, December 23, 2008

 

FACTS:

On August 19, 1995, the petitioner, GMA NETWORK, INC. filed an application for collective approval of various amendments to its Articles of Incorporation and By-Laws with the respondent Securities and Exchange Commission. The amendments applied for include, among others, the change in the corporate name of petitioner from "Republic Broadcasting System, Inc." to "GMA Network, Inc." as well as the extension of the corporate term for another fifty 50 years from and after June 16, 2000.

Upon such filing, the petitioner had been assessed by the SEC’s Corporate and Legal Department a separate filing fee for the application for extension of corporate term equivalent to 1/10 of 1% of its authorized capital stock plus 20% thereof or an amount of P1,212,200.00.

On October 20, 1995, the petitioner formally protested the assessment amounting to P1,212,200.00 for its application for extension of corporate term. The protest was dismissed by SEC for lack of merit. Hence, GMA filed a petition for review with the CA.

In its petition for review with the Court of Appeals, GMA argued that its application for the extension of its corporate term is akin to an amendment and not to a filing of new articles of incorporation. It further averred that SEC Memorandum Circular No. 2, Series of 1994, which the SEC used as basis for assessing P1,212,200.00 as filing fee for the extension of GMA’s corporate term, is not valid.

The Court of Appeals ruled that Memorandum Circular No. 2, Series of 1994 is legally invalid and ineffective for not having been published in accordance with law. The challenged memorandum circular, according to the appellate court, is not merely an internal or interpretative rule, but affects the public in general. Hence, its publication is required for its effectivity.

The SEC argues that it issued the questioned memorandum circular in the exercise of its delegated legislative power to fix fees and charges. The filing fees required by it are allegedly uniformly imposed on the transacting public and are essential to its supervisory and regulatory functions. The fees are not a form of penalty or sanction and, therefore, require no publication.

ISSUE:

Whether or not the Memorandum Circular in question is ineffective

RULING:

The questioned memorandum circular is invalid as it does not appear from the records that it has been published in the Official Gazette or in a newspaper of general circulation. Executive Order No. 200, which repealed Art. 2 of the Civil Code, provides that "laws shall take effect after fifteen days following the completion of their publication either in the Official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided."

In Tañada v. Tuvera, the Court, expounding on the publication requirement, held:

We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity date is fixed by the legislature.

Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature, or, at present, directly conferred by the Constitution. Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation.

Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and not the public, need not be published. Neither is publication required of the so-called letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties.

The questioned memorandum circular, furthermore, has not been filed with the Office of the National Administrative Register of the University of the Philippines Law Center as required in the Administrative Code of 1987.

The questioned memorandum circular, it should be emphasized, cannot be construed as simply interpretative of R.A. No. 3531. This administrative issuance is an implementation of the mandate of R.A.

No. 3531 and indubitably regulates and affects the public at large. It cannot, therefore, be considered a mere internal rule or regulation, nor an interpretation of the law, but a rule which must be declared ineffective as it was neither published nor filed with the Office of the National Administrative Register.