5. Republic vs PLDT Co.

26 SCRA 620

G.R. No. L-18841 January 27, 1969 REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, defendant-appellant.

FACTS: PLDT, and the RCA Communications, Inc., entered into an agreement whereby telephone
messages, coming from the United States and received by RCA's domestic station, could
automatically be transferred to the lines of PLDT; and vice-versa, for calls collected by the PLDT
for transmission from the Philippines to the United States. The contracting parties agreed to
divide the tolls, as follows: 25% to PLDT and 75% to RCA which was later amended to 50-50
basis.

the Bureau of Telecommunications set up its own Government Telephone System by utilizing its
own appropriation and equipment and by renting trunk lines of the PLDT to enable government
offices to call private parties. Its application for the use of these trunk lines was in the usual form
of applications for telephone service, containing a statement, above the signature of the
applicant, that the latter will abide by the rules and regulations of the PLDT which are on file
with the Public Service Commission. One of the many rules prohibits the public use of the
service furnished the telephone subscriber for his private use.

The Bureau has extended its services to the general public using the same trunk lines owned by,
and rented from, the PLDT, and prescribing its own schedule of rates.

The Bureau entered into an agreement with RCA for a joint overseas telephone service whereby
the Bureau would convey overseas calls received by RCA's station to and from local residents.
PLDT complained to the Bureau that it was violating the conditions that they had used the trunk
lines not for government offices only but also to serve the general public; which is in direct
competition of PLDT. The Bureau did not respond, thus PLDT severed the lines.

Republic commenced a suit against PLDT praying in its complaint for the judgment commanding
PLDT to execute a contract with the Bureau for the use of its telephone system throughout the
Philippines. the lower court rendered judgment that it could not compel the PLDT to enter into
an agreement with the Bureau because the parties were not in agreement.

ISSUE:

1. Whether or not PLDT can be compelled to enter into a contract with the Bureau of
Telecommunications
2. Whether or not the Public Service commission has jurisdiction in the expropriation of
public utilities

HELD:

1. Yes. the Republic may, in the exercise of the sovereign power of eminent domain,
require the telephone company to permit interconnection of the government telephone
system and that of the PLDT, as the needs of the government service may require,
subject to the payment of just compensation to be determined by the court. The power
of eminent domain results in the taking or appropriation of title to, and possession of,
the expropriated property; but no cogent reason appears why the said power may not
be availed of to impose only a burden upon the owner of condemned property, without
loss of title and possession. It is unquestionable that real property may, through
expropriation, be subjected to an easement of right of way. The use of the PLDT's lines
and services to allow inter-service connection between both telephone systems is not
much different. In either case private property is subjected to a burden for public use
and benefit. If, under section 6, Article XIII, of the Constitution, the State may, in the
interest of national welfare, transfer utilities to public ownership upon payment of just
compensation, there is no reason why the State may not require a public utility to
render services in the general interest, provided just compensation is paid therefor.
 Ultimately, the beneficiary of the interconnecting service would be the users of both
telephone systems, so that the condemnation would be for public use.

The Republic's cause of action to compel the PLDT to execute a contract with the former,
through the Bureau, for the use of the facilities of defendant's telephone system throughout the
Philippines under such terms and conditions as the court might consider reasonable, is
predicated upon the radio telephonic isolation of Bureau's facilities from the outside World if
the severance of the interconnection were to be carried out by the PLDT, thereby preventing the
Bureau of Telecommunications from properly discharging its functions, to the prejudice of the
general public. Save for the prayer to compel the PLDT to enter into a contract (and the prayer is
no essential part of the pleading), the averments make out a case for compulsory rendering of
inter-connecting services by the telephone company upon such terms and conditions as the
court may determine to be just. And since the lower court found that both parties "are
practically at one that defendant (PLDT) is entitled to reasonable compensation from plaintiff for
the reasonable use of the former's telephone facilities" the lower court should have proceeded
to treat the case as one of condemnation of such services independently of contract and
proceeded to determine the just and reasonable compensation for the same, instead of
dismissing the petition.

2.No. The plea that the court of first instance had no jurisdiction to entertain the petition and
that the proper forum for the action was the Public Service Commission, under the law, the
Public Service Commission has no authority to pass upon actions for the taking of private
property under the sovereign right of eminent domain. Furthermore, while the defendant
telephone company is a public utility corporation whose franchise, equipment and other
properties are under the jurisdiction, supervision and control of the Public Service Commission,
yet the plaintiff's telecommunications network is a public service owned by the Republic and
operated by an instrumentality of the National Government, hence, exempt under Section 14 of
the Public Service Act, from such jurisdiction, supervision and control. The Bureau of
Telecommunications was created in pursuance of a state policy reorganizing the government
offices and the determination of state policy is not vested in the Commission.

Considering, however, that the PLDT franchise is non-exclusive; that it is well-known that
defendant PLDT is unable to adequately cope with the current demands for telephone service,
as shown by the number of pending applications therefor; and that the PLDT's right to just
compensation for the services rendered to the Government telephone system and its users is
herein recognized and preserved, the objections of defendant-appellant are without merit. To
uphold the PLDT's contention is to subordinate the needs of the general public to the right of
the PLDT to derive profit from the future expansion of its services under its non-exclusive
franchise.

WHEREFORE, the decision of the Court of First Instance, now under appeal, is affirmed, except
in so far as it dismisses the petition of the Republic of the Philippines to compel the Philippine
Long Distance Telephone Company to continue servicing the Government telephone system
upon such terms, and for a compensation, that the trial court may determine to be just,
including the period elapsed from the filing of the original complaint or petition. And for this
purpose, the records are ordered returned to the court of origin for further hearings and other
proceedings not inconsistent with this opinion. No costs.