G.R. No. L-23080 October 30, 1965
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner, vs. CITY OF DAVAO and the PUBLIC SERVICE COMMISSION, respondents, ITT PHILIPPINES, INC., intervenor.

FACTS

The Philippine Long Distance Telephone Company (PLDT) holds a special, non-exclusive franchise to operate a telephone system nationwide. In response to the needs of its inhabitants, the Davao City Council passed resolutions to establish a city-owned and operated telephone system. Congress later expressly authorized this system via Republic Act 4354. PLDT challenged the city’s authority to establish such a system. The Court, in a decision dated September 20, 1965, upheld the city’s authority. PLDT filed a motion for reconsideration, raising five main propositions.

ISSUE

The primary issue is whether Davao City has the legal authority to establish and operate its own telephone system, challenged on grounds including the scope of the general welfare clause, the implication of specific regulatory powers, the need for a special legislative franchise, and the economic wisdom of creating a competing system.

RULING

The Supreme Court denied the motion for reconsideration, affirming its prior decision.
1. On the General Welfare Clause and Proprietary Function: The Court held that Davao City’s telephone system, designed to secure peace and order, safeguard health, and provide reliable equipment for emergencies, falls within the purview of the general welfare clause. The fact that the system may also serve a proprietary function does not negate the city’s power to undertake it. The general welfare clause must be liberally interpreted to empower local governments.
2. On Specific Power to Regulate vs. Power to Operate: The Court distinguished the case from People vs. Esguerra, ruling that a specific power to regulate telephone service does not imply a denial of the power to operate such a service. Here, the city is creating a system to be regulated, not prohibiting an existing one.
3. On the Scope of Powers Granted: The Court clarified that its decision was based on the unique factual circumstances of Davao City (e.g., its size and needs) and that the scope of police power varies among municipalities. It rejected the argument that this interpretation grants unlimited powers superior to the State, noting the State’s constitutional power to operate means of communication.
4. On Adequacy of PLDT’s Service: The Court noted that PLDT admitted its system did not cover Davao City’s outlying districts, and therefore it had not adequately provided for the city’s needs.
5. On the Need for a Special Franchise: The Court ruled that the enabling provisions in Davao City’s Charter, reinforced by Republic Act 4354, constitute a sufficient legislative delegation of power for the city to grant itself a franchise to operate a telephone system. No separate, special franchise is required. The Court found PLDT’s view would render the charter provisions useless.
6. On Economic Waste and Competition: The Court stated that competition can be beneficial for public service. PLDT’s own charter specifies its franchise is non-exclusive, reflecting public policy against monopoly. Congress, by enacting Republic Act 4354, has determined that competition in Davao City best serves public welfare.