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ISSUE: Whether or Not PLDT's Petition

PLDT opposed the grant of a provisional authority to ETCI to build a telephone system, arguing that ETCI's franchise had been invalidated when it failed to exercise it within 10 years and that the transfer of over 40% of ETCI's shares required congressional authorization. The Supreme Court upheld the NTC's denial of PLDT's petition. It ruled that (1) PLDT could not collaterally attack ETCI's franchise and should have filed a quo warranto petition; and (2) the transfer of shares is not equivalent to a transfer of franchise, which only requires NTC approval if over 40% of shares and does not invalidate the franchise.

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30 views2 pages

ISSUE: Whether or Not PLDT's Petition

PLDT opposed the grant of a provisional authority to ETCI to build a telephone system, arguing that ETCI's franchise had been invalidated when it failed to exercise it within 10 years and that the transfer of over 40% of ETCI's shares required congressional authorization. The Supreme Court upheld the NTC's denial of PLDT's petition. It ruled that (1) PLDT could not collaterally attack ETCI's franchise and should have filed a quo warranto petition; and (2) the transfer of shares is not equivalent to a transfer of franchise, which only requires NTC approval if over 40% of shares and does not invalidate the franchise.

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Where Did Macky Gallego
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PLDT v.

NTC
FACTS:
In 1958, Felix Alberto & Co., Inc (FACI)
was granted by Congress a franchise
to build radio stations (later construed
as to include telephony).
FACI later changed its name to Express
Telecommunications Co., Inc. (ETCI).
In 1987, ETCI was granted by the
National
Telecommunications
Commission a provisional authority to
build a telephone system in some parts
of Manila.
Philippine Long Distance Telephone Co.
(PLDT) opposed the said grant as it
avers, among others, that ETCI is not
qualified because its franchise has
already been invalidated when it failed
to exercise it within 10 years from
1958;
that in 1987, the Albertos,
owners of more than 40% of
ETCIs
shares
of
stocks,
transferred said stocks to the
new
stockholders
(Cellcom,
Inc.? not specified in the
case);
that such transfer involving
more than 40% shares of stocks
amounted to a transfer of
franchise which is void because
the authorization of Congress
was not obtained.
The NTC denied PLDT.
PLDT then filed a petition for certiorari
and prohibition against the NTC.
ISSUE: Whether or not PLDTs petition
should prosper.
HELD: No.
1. PLDT cannot attack ETCIs franchise
in a petition for certiorari. It cannot be
collaterally attacked. It should be
directly attacked through a petition for

quo warranto which is the correct


procedure. A franchise is a property
right and cannot be revoked or
forfeited without due process of law.
The determination of the right to the
exercise of a franchise, or whether the
right to enjoy such privilege has been
forfeited by non-user, is more properly
the subject of the prerogative writ
of quo
warranto.Further,
for
any
violation of the franchise, it should be
the government who should be filing a
quo warranto proceeding because it
was the government who granted it in
the first place.
2. The transfer of more than 40% of
the shares of stocks is not tantamount
to a transfer of franchise. There is a
distinction here. There is no need to
obtain authorization of Congress for
the mere transfer of shares of stocks.
Shareholders can transfer their shares
to anyone. The only limitation is that if
the transfer involves more than 40% of
the corporations stocks, it should be
approved by the NTC. The transfer in
this case was shown to have been
approved by the NTC. What requires
authorization from Congress is the
transfer of franchise; and the person
who shall obtain the authorization is
the grantee (ETCI). A distinction should
be made between shares of stock,
which are owned by stockholders, the
sale of which requires only NTC
approval, and the franchise itself which
is owned by the corporation as the
grantee thereof, the sale or transfer of
which requires Congressional sanction.
Since stockholders own the shares of
stock, they may dispose of the same
as they see fit. They may not,
however, transfer or assign the
property of a corporation, like its
franchise. In other words, even if the
original stockholders had transferred
their shares to another group of
shareholders, the franchise granted to
the corporation subsists as long as the
corporation, as an entity, continues to
exist. The franchise is not thereby
invalidated by the transfer of the
shares. A corporation has a personality
separate and distinct from that of each

stockholder. It has the right


continuity or perpetual succession.

of

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