G.R. No. L-21070 - Republic Telephone Co., Inc. vs. Philippine Long Distance Telephone Co., Inc.

Republic Telephone Co., Inc. (RETELCO), Philippine Long Distance Telephone Co., Inc. (PLDT), and Caltex (Philippines) Inc. (CALTEX) are the principal parties.
Pursuant to a contract between PLDT and CALTEX, PLDT agreed to establish and construct communication facilities linking the CALTEX refinery in Bauan, Batangas with CALTEX’s head office at Padre Faura, Manila.
The system became operational on January 28, 1953.

RETELCO was granted a certificate of public convenience and necessity by the Public Service Commission (PSC) to operate a local telephone service in Batangas (initially in the municipality and later in Bauan).
By arrangement between RETELCO and PLDT, RETELCO’s local telephone system in Batangas was interconnected on a long-distance basis with PLDT’s system in Manila and elsewhere in the country.

In May 1960, RETELCO filed a complaint with the PSC alleging that PLDT was illegally operating a telephone connection between CALTEX’s main office and its refinery.
The PSC, in its decision, found PLDT in violation of Section 20(b) of the Public Service Law (Commonwealth Act 146, as amended) for establishing, constructing, maintaining, and/or operating an extension of the service without prior approval.
Although the installations had been in full operation since January 27, 1953—a fact known to RETELCO when seeking its own certificate—the PSC ruled that PLDT’s unauthorized extension service was unlawful.
The PSC ordered PLDT to file an application for the proper certificate within 15 days and imposed a daily fine of P10.00 from January 27, 1953 until such application was filed.

CALTEX’s main office in Manila possessed a private automatic branch exchange (PABX) linked via trunk lines to PLDT’s central office, from which the connection extended to CALTEX’s refinery in Bauan.
The system consisted of equipment such as a main distributing frame, two-position monotype switchboards, storage batteries, and a battery charger.
The telephone network featured 20 two-way trunk lines divided into groups, along with additional one-way outgoing trunks.

The report clarified that the telephone system in Bauan was not merely an internal extension of CALTEX’s lines:

It handled 188 telephones both within the refinery compound and in adjacent housing areas.
After office hours and during specific time periods, calls from Bauan were routed through PLDT’s “09 switchboard,” facilitating connectivity with Manila and other areas.

The system thereby operated, in part, as a toll station of PLDT, providing service to the public and not exclusively linking CALTEX’s two offices.

The disputed telephone connection was a leased private line, merely an extension of CALTEX’s existing service.
The lease predated RETELCO’s certificate, and the certificate was non-exclusive, thereby not proscribing services that already existed.
Enforcing a requirement for a separate certificate would impair contractual obligations and be unfair.
The installation, involving merely two pairs of wires, was a minor or limited addition and not subject to the extensive approval process mandated by Section 20(b).

The extension did not violate any territorial restriction in its certificate for Manila service.
The imposition of the fine was barred by prescription under Section 28 of the Public Service Law.

The PSC erred by not ordering the discontinuance of the unauthorized service, as it gave unauthorized competition to an exclusive operator in Batangas.
However, the PSC defended its decision on the grounds of maximizing public interest, noting that the certificate granted to RETELCO did not confer exclusive rights in Bauan.

Whether PLDT’s installation and operation of the telephone system in the CALTEX refinery without securing prior PSC approval violated Section 20(b) of the Public Service Law and the conditions of its certificate to operate in Manila.
Whether the telephone system in question constitutes a “general extension” of service subject to PSC regulation versus a mere private leased line or internal extension.
Whether the PSC had the authority to impose a daily fine for operating the disputed service without prior authorization.
Whether the argument that the violation had prescribed under Section 28 of the Public Service Law is valid, given the timing of its discovery and subsequent actions.
Whether the determination to continue the operation of the system (instead of ordering its discontinuance) was justified on public interest grounds, taking into account RETELCO’s position and rights as an authorized operator in Batangas.