GMA NETWORK, INC., PETITIONER, VS. CENTRAL CATV, INC., RESPONDENT.

GMA Network versus Central CATV

The Case

This is a petition for review on certiorari brought by GMA Network, Incorporated against Central CATV, Incorporated, arising from a complaint filed with the National Telecommunications Commission to stop a cable television operator from soliciting and airing commercial advertisements. The case matters because it forces the Court to separate two executive orders of very different legal character — one that is a law, and one that is a mere executive issuance — and to decide whether a cable operator's sale of advertising infringes on the television and broadcast markets. It is a staple for questions on delegated rule-making power, the hierarchy of executive orders, the must-carry rule, and the demurrer to evidence in administrative proceedings.

Procedural History

GMA Network, together with several broadcasters, filed a complaint with the National Telecommunications Commission against Central CATV, invoking Section 2 of Executive Order Number 205. After GMA rested its case, Central CATV moved to dismiss by demurrer to evidence. The Commission granted the demurrer and dismissed the complaint, holding that Executive Order Number 436 clarified Executive Order Number 205 by allowing cable operators to carry advertisements with the consent of their program providers, and that the second paragraph of Section 3 of Executive Order Number 436 effectively amended the must-carry provisions of the Commission's Memorandum Circular Number 4-08-88. GMA's motion for reconsideration was denied, so it elevated the matter to the Court of Appeals, which affirmed the Commission in its decision of November 2006 and its resolution of February 2007. GMA then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Sometime in February 2000, GMA Network and several other broadcasters filed a complaint with the National Telecommunications Commission against Central CATV, asking that the cable operator be stopped from soliciting and showing advertisements in its cable television system. They anchored the complaint on Section 2 of Executive Order Number 205, which limits a cable operator's authority so that it shall not infringe on the television and broadcast markets. GMA argued that the phrase television and broadcast markets includes the commercial or advertising market.

Central CATV admitted that it aired commercial advertisements on its cable network, but answered that Section 3 of Executive Order Number 436, issued by President Fidel Ramos in September 1997, expressly allowed cable television providers to carry advertisements and similar paid segments, provided there is consent from their program providers.

After GMA presented and offered its evidence, Central CATV filed a motion to dismiss by demurrer to evidence, claiming that the evidence failed to show how its acts of soliciting and showing advertisements infringed on the television and broadcast market. The Commission granted the demurrer, and in doing so also considered certifications attached to the demurrer which showed that the program providers had consented. GMA objected, but the Commission ruled that as an administrative body it was not bound by the strict application of technical rules.

Issues

• Whether or not the Court of Appeals erred in affirming the order of the National Telecommunications Commission which granted the respondent's motion to dismiss by demurrer to evidence.
• Whether or not the respondent is prohibited from showing advertisements under Section 2 of Executive Order Number 205, in relation to the second paragraph of Section 3 of Executive Order Number 436.

Applicable Provisions

Section 2 of Executive Order Number 205 provides:

Sec. 2. A Certificate of Authority to operate Cable Antenna Television (CATV) system shall be granted by the Commission on a non-exclusive basis and for a period not to exceed fifteen (15) years, renewable for another similar period: Provided, That such certificate shall be subject to the limitation that the authority to operate shall not infringe on the television and broadcast markets.

This is the law on which GMA rested its complaint, and the provision whose meaning the Court had to fix.

The second paragraph of Section 3 of Executive Order Number 436 provides:

Cable television service may carry advertisements and other similar paid segments for which the cable television operator may charge and collect reasonable fees; Provided, that no cable television operator shall infringe on broadcast television markets by inserting advertisements in the programs it carries or retransmits without the consent of the program provider concerned.

This is the executive issuance on which Central CATV relied, and the Court had to determine its true character and effect.

Section 1 of Rule 33 of the Rules of Court provides:

Section 1. Demurrer to evidence. — After the plaintiff has completed the presentation of his evidence, the defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. If his motion is denied he shall have the right to present evidence. If the motion is granted but on appeal the order of dismissal is reversed he shall be deemed to have waived the right to present evidence.

This rule governs the procedural issue, applied suppletorily to the Commission's proceedings.

Section 6.2.1 of Memorandum Circular Number 4-08-88 provides:

6.2.1 A cable TV system operating in a community which is within the Grade A or Grade B contours of an authorized TV broadcast station or stations must carry the TV signals of these stations.

This is the must-carry rule, which the Court held is the true measure of the non-infringement limitation in the law.

Ruling

On the first issue, the Court held that a demurrer to evidence is available before the Commission, and that the tribunal resolves it on the plaintiff's evidence and the law, excluding the defendant's evidence. The Commission properly considered the insufficiency of GMA's evidence, but it erred when it went further and considered the certifications attached to the demurrer. The Court stressed that relaxing procedural rules for administrative bodies cannot violate fundamental evidentiary rules and due process, and that having chosen to consider the respondent's evidence, the Commission should have allowed the respondent to present it formally so that GMA could object and cross-examine.

On the second issue, the Court held that the Commission and the Court of Appeals proceeded from a wrong premise: they treated both executive orders as statutes. Executive Order Number 205, issued by President Corazon Aquino on June 30, 1987, before the first Congress convened, was issued in the exercise of legislative powers and is a law. Executive Order Number 436, issued by President Ramos in the exercise purely of executive power, is not a law and cannot amend the earlier law or the circular.

The Court then held that the circular alone resolves the dispute. The phrase television and broadcast markets refers to the audience or viewer market, not the commercial or advertising market. The must-carry rule, requiring cable operators to carry broadcast signals in full without deletion or alteration, sufficiently implements the non-infringement limitation. Hence, the respondent's act of showing advertisements does not constitute infringement under Section 2 of Executive Order Number 205. The Court found no need to pass upon the validity of Section 3 of Executive Order Number 436.

Doctrine

• An executive order issued by the President in the exercise of legislative powers, before the first Congress convened under the 1987 Constitution, has the force of a law; an executive order issued purely in the exercise of executive power is not a law and cannot amend a statute or a valid implementing rule.
• Implementing rules and regulations validly issued pursuant to a delegated rule-making power partake of the nature of a statute, have the force and effect of law, and enjoy the presumption of constitutionality and legality until set aside by a competent court.
• In a demurrer to evidence, the tribunal considers only the plaintiff's evidence and the law; the defendant's evidence may not be considered, and doing so violates due process even in administrative proceedings.
• The phrase television and broadcast markets in Section 2 of Executive Order Number 205 means the audience or viewer market, not the commercial or advertising market; showing advertisements by a cable operator, absent infringement of the must-carry rule, is not prohibited.

Disposition

The Supreme Court denied GMA Network's petition, affirmed the Court of Appeals, and ordered costs against GMA Network.

Remember This

Memorize the line that Executive Order Number 205 is a law while Executive Order Number 436 is a mere executive issuance that cannot amend it, and that television and broadcast markets means viewers, not advertisers. Examiners use this case for delegated legislation, the hierarchy of executive issuances, the must-carry rule, and the scope of a demurrer to evidence before administrative agencies.