The Supreme Court ruled that Securities and Exchange Commission (SEC) Memorandum Circular No. 2, Series of 1994, which imposed new fees and charges, is invalid because it was not published in the Official Gazette or a newspaper of general circulation, nor filed with the Office of the National Administrative Register. This decision emphasizes that administrative rules and regulations that affect the public must comply with publication and filing requirements to be effective, ensuring transparency and due process.

From Corporate Extension to Circular Deficiencies: A Filing Fee Fight

This case revolves around GMA Network, Inc.’s application for the extension of its corporate term and the corresponding filing fees assessed by the SEC. GMA contested the legality of the assessed fees, arguing that the SEC’s basis for the assessment, Memorandum Circular No. 2, Series of 1994, was invalid. The core legal question is whether the SEC’s memorandum circular, which was used to determine the filing fee for the extension of GMA’s corporate term, is valid and effective despite not being published or filed with the National Administrative Register.

The SEC argued that the circular was issued in the exercise of its delegated legislative power to fix fees and charges, essential to its regulatory functions, and thus did not require publication. GMA countered that SEC Memorandum Circular No. 1, Series of 1986, which specifically addresses filing fees for amended articles of incorporation extending corporate terms, should apply. This circular provided for lower fees. Moreover, GMA contended that even if Memorandum Circular No. 2, Series of 1994, applied, it was ineffective due to the lack of publication and filing.

The Court of Appeals sided with GMA, declaring Memorandum Circular No. 2, Series of 1994, invalid for not complying with publication requirements. The Supreme Court affirmed this decision, emphasizing the importance of publication and filing for the effectivity of administrative rules and regulations that affect the public. The Court referenced Republic Act No. 3531 (R.A. No. 3531), which stipulates that the SEC is entitled to collect the same fees for filing amended articles of incorporation extending corporate existence as it does for filing original articles of incorporation.

However, the Supreme Court highlighted that the pivotal issue was not merely the applicable fee rate but the validity of the memorandum circular imposing those fees. The Court emphasized that Executive Order No. 200 mandates that laws take effect fifteen days after publication in the Official Gazette or a newspaper of general circulation, unless otherwise provided. Citing the landmark case of Tañada v. Tuvera, the Court reiterated the principle that all statutes, including administrative rules and regulations implementing existing law pursuant to a valid delegation, must be published to be effective. The Court clarified that only interpretative regulations and internal rules are exempt from this requirement.

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.

Furthermore, the Court noted that the questioned memorandum circular had not been filed with the Office of the National Administrative Register of the University of the Philippines Law Center, as required by the Administrative Code of 1987. This underscored the SEC’s non-compliance with essential procedural requirements for the validity of administrative issuances. The Court reinforced its stance by citing Philsa International Placement and Services Corp. v. Secretary of Labor and Employment, where a similar memorandum circular was struck down for lack of publication and filing.

The Supreme Court rejected the SEC’s argument that the memorandum circular was merely interpretative of R.A. No. 3531. It explained that the circular implemented the mandate of R.A. No. 3531 and directly affected the public, making it a rule that required publication and filing to be effective. The Court contrasted this with interpretative rules, which are designed to clarify existing laws without creating new obligations or affecting public rights.

The Court also found the SEC’s assessment of P1,212,200.00 to be unreasonable, characterizing it as an imposition rather than a just and fair fee for the service provided. Rate-fixing, though delegated to the SEC, must adhere to due process and reasonableness. The Court implied that the excessive fee could be viewed as an arbitrary infringement on GMA’s property rights, further supporting the decision to invalidate the memorandum circular.

FAQs

What was the key issue in this case?	The key issue was whether SEC Memorandum Circular No. 2, Series of 1994, was valid despite not being published or filed with the National Administrative Register. The circular was used to assess filing fees for the extension of GMA’s corporate term.
What did the Supreme Court rule?	The Supreme Court ruled that the SEC memorandum circular was invalid due to the lack of publication and filing, as required by law. This means the SEC could not legally impose the fees outlined in the circular.
Why is publication important for administrative rules?	Publication ensures transparency and allows the public to be informed of the rules and regulations that govern their actions. It is a fundamental requirement of due process.
What is the effect of not filing a rule with the National Administrative Register?	Failing to file a rule with the National Administrative Register renders it ineffective. This is because the filing requirement ensures that all administrative rules are centrally recorded and accessible to the public.
What is the difference between an interpretative rule and an implementing rule?	An interpretative rule clarifies existing laws without creating new obligations, while an implementing rule puts existing laws into effect and often imposes new requirements. Only implementing rules require publication.
What is the significance of the Tañada v. Tuvera case?	Tañada v. Tuvera established the principle that all laws, including administrative rules and regulations, must be published to be effective. It is a cornerstone of Philippine administrative law.
What was R.A. No. 3531?	R.A. No. 3531 is a law that amended the Corporation Law, specifying that the SEC could collect the same fees for filing amended articles of incorporation to extend corporate existence as for filing original articles of incorporation.
Did the Supreme Court find the filing fee to be reasonable?	No, the Supreme Court implied that the assessed filing fee of P1,212,200.00 was excessively unreasonable. It was viewed as an imposition rather than a fair fee for the service provided.

This case serves as a crucial reminder to administrative agencies that the power to issue rules and regulations is not absolute. Compliance with publication and filing requirements is essential to ensure the validity and enforceability of these rules, protecting the rights of the public and fostering transparency in governance.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: SECURITIES AND EXCHANGE COMMISSION VS. GMA NETWORK, INC., G.R. No. 164026, December 23, 2008