G.R. No.
127937 July 28, 1999
NATIONAL TELECOMMUNICATIONS COMMISSION,
petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE
LONG DISTANCE TELEPHONE COMPANY, respondents.
FACTS:
Assessment Notices: NTC served PLDT with 3
assessment notices and demanded payment for supervision
and regulation fee (based on Section 40 (e) of the Public
Service Act) amounting to 7M and 2 permit fees (Section 40
(f), (g)) amounting to 9M, 12M and 33M due to NTCs
approval of PLDTs participation in the Fiberoptic Interpacific
Cable systems Program.
PLDTs Challenge: PLDT claimed that the assessments
were not reimbursements but will actually be used to raise
revenues for regulatory expenses. PLDT also claimed that
the assessment should have been based on the par values 1
of its outstanding capital stock. Furthermore, NTC really did
not do any supervisory or regulatory activity therefore PLDT
should not have been charged such fees.
NTCs Decision: Denied the protest.
CAs Decision: Modified NTCs ruling. It ordered the NTC to
recompute its assessments of the supervision and regulation
fees (SRF) and permit fees.
ISSUE:
Whether or not the SRF under Section 40 (e) should be
based on the market value of PLDTs outstanding capital
stock and not the par value.
RULING:
A. PLDT v. Public Service Communication:
The basis for computation of the fee to
be charged by NTC on PLDT is the
capital stock subscribed or paid and not,
alternatively, the property and
equipment. The fee is only to be based
on the capital stock subscribed, not the
market value2.
B. It was not the NTC that imposed such
fee but the legislature itself. (See
Doctrine)
1 The nominal value of a bond, share of stock, or a
coupon as indicated in writing on the document or
specified by charter.
2 The amount for which something can be sold on a
given market.
Briefly, capital refers to the value of the property
or assets of a corporation. 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 shares3.
In the case of stock dividends4, it is the
amount that the corporation transfers from its
surplus profit account to its capital account. It is
the same amount that can loosely be termed as
the trust fund of the corporation. The Trust Fund
doctrine considers this subscribed capital as a
trust fund for the payment of the debts of the
corporation, to which the creditors may look for
satisfaction. Until the liquidation of the
corporation, no part of the subscribed capital may
be returned or released to the stockholder (except
in the redemption of redeemable shares) without
violating this principle. Thus, dividends must
never impair the subscribed capital; subscription
commitments cannot be condoned or remitted;
nor can the corporation buy its own shares using
the subscribed capital as the consideration
therefor.
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 PLDTs
capital stock subscribed or paid excluding stock
dividends, premiums, or capital in excess of par.
Neither, however, is the assessment made by the
NTC 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.
C. From the pleadings, the assessment for
SRF made by NTC was computed
based on the outstanding capital stock5
including stock dividends, premium on
issued common shares and premium on
preferred shares converted into
common stock.
3 Relates to the amount of stock for which investors
have expressed an interest.
4 A sum of money paid regularly (typically quarterly)
by a company to its shareholders out of its profits (or
reserves) but in this case, it is paid in the form of
stocks.
 D. There was no record of the actual
capital stock paid but only the
amount as assessed by NTC based
on the market value of the
outstanding capital stock.

Basically, NTC assessed PLDTs floating (outstanding) stock

when it should have assessed the profits from the actual
shares held by the shareholders in the company.

Petition SET ASIDE. NTC to recomputed imposable fees

on PLDT based on capital stock subscribed or paid.

5
The number of shares of capital stock that have been
issued and that are in public hands or are available
for trade by the general public. This is sometimes
known as collection float or float.