Case Summary (G.R. No. L-18841)
Key Dates
- July 1, 1947: Creation of the Bureau of Telecommunications (Executive Order No. 94)
- 1933–1947: PLDT–RCA interconnection agreements (revenue‐sharing amended from 25/75 to 50/50)
- February 2, 1956: PLDT gave 24-month notice to terminate RCA agreement (effective February 2, 1958)
- February 2, 1958: Provisional joint overseas service inaugurated between Bureau and RCA
- March 5, 1958: Formal Bureau–RCA overseas telephone service agreement
- April 12, 1958: PLDT disconnected rented trunk lines; Republic filed suit same day
- April 14, 1958: Trial court issued preliminary injunction ordering immediate reconnection
- January 27, 1969: Supreme Court decision
Applicable Law
- 1935 Philippine Constitution (governing date of decision)
- Executive Order No. 94 (reorganizing and defining Bureau powers)
- Civil Code of the Philippines, Articles 1306, 1336–1337 (freedom of contract)
- Public Service Act, Sections 13–14 (jurisdiction over public utilities)
- PLDT legislative franchise (Act 3426, as amended by Commonwealth Act 407), Sections 14, 19
Factual Background
The Bureau of Telecommunications, an arm of the Republic, was empowered in 1947 to establish and operate wire and radio telecommunication services, set equitable rates, and enter into interconnection arrangements. PLDT, a non-exclusive franchisee since Act 3426, operated a nationwide telephone system. Since 1933, PLDT and RCA had interchanged overseas calls under revenue-sharing agreements, amended over time. The Bureau rented PLDT trunk lines to serve government offices and, from 1948 onward, the general public—issuing its own rate schedule. In early 1958 the Bureau and RCA commenced a joint overseas service. On April 7, 1958, PLDT objected to public use of its rented trunk lines by the Bureau and threatened severance; when the Bureau did not desist, PLDT disconnected the lines on April 12, 1958, isolating most international voice traffic.
Procedural Posture
On April 12, 1958, the Republic sued PLDT in the Court of First Instance of Manila, seeking (a) an order compelling PLDT to execute an interconnection contract on reasonable terms; and (b) a preliminary injunction restoring and preserving existing connections. The trial court granted the injunction on April 14, 1958, but, after hearing, dismissed both the complaint and PLDT’s counterclaims, while making the injunction permanent. Both parties appealed.
Issues Presented
- Whether the Republic may compel PLDT to enter an interconnection contract.
- Whether the Bureau of Telecommunications was authorized to operate a commercial telephone service.
- Whether PLDT was justified in severing the trunk lines.
- Whether PLDT is entitled to compensation for use of its poles by the Bureau.
Power to Compel Interconnection vs. Eminent Domain
The Court affirmed that contractual freedom prohibits coercing parties into an agreement on essential terms (Civil Code Arts. 1306, 1336–1337). Nevertheless, the sovereign power of eminent domain may impose an easement-type burden—interconnection—on a public utility, with just compensation, for public use. Article XIII, Section 6 of the 1935 Constitution permits transfer or burdening of utilities in the national interest. Executive Order 94 authorizes negotiation but does not preclude resort to condemnation if terms are unreasonable. The Republic’s petition, though lacking an agreed contract, sufficiently alleges public prejudice from isolation and thus supports compulsory interconnection subject to judicial determination of just compensation.
Jurisdiction to Resolve Condemnation
Actions to impose eminent domain burdens lie in the regular courts, not before the Public Service Commission (PSC). The Bureau’s network, being government-owned, is exempt from PSC supervision under Public Service Act Section 14.
Authority for Bureau’s Commercial Operations
Executive Order 94, Sections 79(b) and (c), empowers the Bureau to “operate and maintain wire-telephone or radio-telephone communication service throughout the Philippines” and to set rates, without limiting service to government offices. Prior statements by Bureau officials cannot fetter statutorily granted authority; government operations remain lawful despite earlier misrepresentations, since the State is not estopped by its agents’ errors.
Competition and Contract Misuse
Actual demand for telephone service far exceeds supply (PLDT had 20,000 pending applications; Bureau had 5,000). PLDT’s franchise is expressly non-excl
Case Syllabus (G.R. No. L-18841)
Parties and Legal Framework
- Plaintiff-Appellant: Republic of the Philippines, acting through its Bureau of Telecommunications, created by Executive Order No. 94 (1 July 1947), with powers to operate, maintain, negotiate interconnection, and prescribe rates for wire- and radio-telephone services throughout the Philippines.
- Defendant-Appellant: Philippine Long Distance Telephone Company (PLDT), a public service corporation with legislative franchise (Act 3426, as amended by Commonwealth Act 407) to install, operate, and maintain telephone and electrical transmission services domestically and internationally.
- Third Entity (non-party): RCA Communications, Inc., holder by assignment of franchises (Acts 2178 and 3180) to operate domestic long-distance wireless and radio-telephone/telegraphic services.
Factual Background
- 1933 Agreement: PLDT and RCA interconnect overseas calls, sharing tolls (initially 25% PLDT–75% RCA; amended in 1941 to 30–70; in 1947 to 50–50). Either party may terminate on 24 months’ notice.
- 2 February 1956: PLDT notifies RCA of contract termination effective 2 February 1958.
- 1947–48: Bureau of Telecommunications establishes Government Telephone System (GTS) by renting PLDT trunk lines to serve government offices and—since 1948—the general public, charging its own rates under PLDT’s filed rules.
- 2 February 1958: Bureau and RCA begin a joint provisional overseas telephone operation under a provisional arrangement.
- 7 April 1958: PLDT complains that Bureau uses rented trunk lines for general public, violating PBX interconnection conditions, and threatens disconnection if practices continue.
- 12 April 1958 (midnight): PLDT severs 78 trunk lines, isolating the Philippines (except U.S.) from international telephone services; Bureau had 5,000 installed lines and 5,000 pending applications, PLDT had 60,000 lines and 20,000 pending applications.
- Pre-disconnection negotiations: 8 January 1958 Bureau proposes formal interconnection with call-based payment; PLDT counters (37½% share revised to 33⅓% on 9 February 1964) subject to PSC jurisdiction—no agreement reached.
Procedural History
- 12 April 1958: Republic files Civil Case No. 35805 in the CFI of Manila, praying (a) for writ of preliminary injunction to restore severed connections, and (b) for judgment compelling PLDT to execute an interconnection contract on reasonable terms fixed by the court.
- 14 April 1958: CFI issues preliminary mandatory