Bureau of Telecommunications vs. Aligaen

A suit against government officers or officials who, while claiming to act for the State, violate or invade the personal and property rights of a plaintiff under an assumption of authority which they do not have, is not a suit against the State within the rule of immunity of the State from suit. The Bureau of Telecommunications, under Section 79(b) of Executive Order No. 94, series of 1947, may only establish telecommunications service in places where such service does not exist; in places where service already exists, it must first negotiate with the existing operator for the utilization of existing facilities.

Respondent Jose M. F. Belo was the grantee of a Congressional franchise under Republic Act No. 2957, as amended, to establish, maintain, and operate a telephone system in Roxas City and the province of Capiz, which franchise was confirmed by order of the Public Service Commission dated June 26, 1961. The Bureau of Telecommunications was created pursuant to Executive Order No. 94, series of 1947, and charged with operating and maintaining a telecommunications network throughout the country. The franchise granted to Belo was not exclusive, but contained provisions regarding the government's privilege to use Belo's poles for its telegraph system and a proviso that in the event the Philippine Government should desire to maintain and operate the system for itself, the grantee would surrender his franchise and turn over the system to the Government at cost, less reasonable depreciation.

Respondent Jose M. F. Belo was the grantee of a Congressional franchise under Republic Act No. 2957, as amended, to establish, maintain, and operate a telephone system in Roxas City and the province of Capiz, which franchise was confirmed and given effect by order of the Public Service Commission dated June 26, 1961. Pursuant to that franchise, Belo had put up in Roxas City since July 1961, at a cost of P417,041.27, an automatic telephone system that had been operating and rendering good service with 410 telephones and sufficient reserves for additional lines. The Bureau of Telecommunications, through its officers, was starting to establish, maintain, and operate in the same geographical area of Roxas City another local telephone system that would directly compete with and seriously prejudice Belo's existing system. Belo alleged that the Bureau of Telecommunications was not authorized to establish an additional local telephone system in places where there was no demand for it, that no prior inquiry was made as to the need for another telephone system, and that the Bureau's officials had never attempted to negotiate with him for the use of his facilities in conjunction with the national hook-up of a telephone system.

On August 1, 1969, Belo filed with the Court of First Instance of Capiz a verified petition captioned "Injunction with Preliminary Injunction," naming as respondents the Director of the Bureau of Telecommunications, Leon Cervantes, the Regional Superintendent of Region IV, and Vivencio Alagbay, Chief Operator of the Bureau of Telecommunications in Roxas City. On the same day, Judge Jose A. Aligaen entered an order authorizing the issuance of the writ of preliminary injunction upon Belo's posting of a P5,000 bond, and the writ was issued restraining the respondents from further committing the acts complained of and from constructing another telephone system in Roxas City. On August 5, 1969, Belo filed an urgent motion to declare Alagbay and his agents in contempt of court because they continued the work of installing the new telephone system despite the injunction; this motion was amended on August 9, 1969 to include the Director of the Bureau of Telecommunications and Leon Cervantes. Alagbay filed his opposition alleging that as a mere employee of the Bureau of Telecommunications he had nothing to do with the construction of the telephone exchange, and that it was the International Telegraph and Telephone Philippines, Inc. (ITT) that was working on the project.

The Solicitor General, upon request of the Director of the Bureau of Telecommunications, filed an answer to the petition for injunction, denying the material allegations and setting up special and affirmative defenses: that the trial court did not have jurisdiction over the case because it was a suit against the Government which had not given its consent to be sued; that the court had no jurisdiction to issue the writ of injunction against the Director of the Bureau of Telecommunications whose official residence was beyond the territorial jurisdiction of the court; that the Bureau of Telecommunications had authority to operate its own telecommunications network in the whole country pursuant to Section 1930 of the Revised Administrative Code without need of a legislative franchise; that the Bureau was not prohibited from expanding its telephone system and its operations were not limited to non-commercial activities; that the Bureau had entered into an agreement with ITT for the supply and installation of an expanded telecommunications network project; that it was ITT, not the Bureau, that was actually constructing the telecommunications system in Roxas City; that Belo's franchise was not exclusive; and that Belo's facilities were inadequate or inefficient given that only 410 of 67,800 residents were being served. The respondents also alleged as counterclaim that the writ of preliminary injunction was improvidently issued and was causing damage of P10,000 for every day of delay.

After hearing on the motion to declare Alagbay in contempt, the lower court, in its order of September 3, 1969, held Alagbay and the men working under him, even if working under the guise of being workers of ITT, liable for contempt of court, but imposed no penalty because they had stopped working, declaring that they would be arrested and confined in jail should they resume the work of erecting telephone poles and connecting telephone cables and wires. At the same time, the lower court denied the motion for dissolution of the injunction. In refusing to dissolve the writ, the lower court took into consideration that Belo would suffer great and irreparable injury considering his tremendous investment, time, and efforts in putting up telephone service in Roxas City. The lower court's order authorizing the issuance of the writ stated that it had not been shown that Belo was remiss in his operation under his franchise, that the establishment of another local telephone system in the same geographical area would result in direct competition contrary to the franchise, and that the continuance of the acts complained of would work serious and irreparable loss and injury to Belo unless restrained.

• State Immunity from Suit: Petitioners argued that the Bureau of Telecommunications is an entity of the Government of the Republic of the Philippines, created pursuant to Executive Order No. 94, series of 1947, and charged with the governmental function of operating and maintaining a telecommunications network in the entire length and breadth of the country, and that the action against the Director of the Bureau of Telecommunications and his subordinates was tantamount to a suit against the Government which cannot be done without the consent of the Government.

• Territorial Jurisdiction: Petitioners argued that the office of petitioner Director of the Bureau of Telecommunications is in Manila, and that of petitioner Regional Superintendent of Region IV is in Iloilo City, both outside the territorial jurisdiction of respondent court, hence their actions could not be controlled or enjoined by respondent court.

• Lack of Cause of Action: Petitioners maintained that respondent Belo's petition for injunction before respondent court states no cause of action, and respondent court committed a grave abuse of discretion in issuing the orders and the writ of preliminary injunction.

• Refusal to Dissolve Injunction: Petitioners contended that respondent court committed a grave abuse of discretion when it refused to dissolve the writ of preliminary injunction in spite of petitioners' offer to put up a counterbond of P20,000, although the Government is exempt from filing a bond.

• Unauthorized Acts of Government Officers: Respondent Belo argued that even if petitioners are officers of the Government, their act of establishing a local telephone system in Roxas City is without authority of law and violates his rights, hence the action for the redress of injuries that he suffered or would suffer is not a suit against the State.

• Jurisdiction to Issue Injunction: Respondent Belo contended that the Court of First Instance has power to issue the writ of injunction under Section 44 of the Judiciary Act of 1948; that the respondents in the lower court were joined as respondents because they were necessary to a complete determination of the questions involved and were the ones responsible for the project of establishing a new telephone system in Roxas City; and that their acts, violative of Belo's rights, were committed or being pursued in Roxas City which is within the territorial jurisdiction of the court.

• State Immunity from Suit: Whether the suit against the officers of the Bureau of Telecommunications is a suit against the State which cannot be maintained without the Government's consent.

• Territorial Jurisdiction: Whether the Court of First Instance of Capiz had jurisdiction to issue the writ of injunction against the Director of the Bureau of Telecommunications and the Regional Superintendent whose official residences were outside the territorial jurisdiction of the court.

• Cause of Action and Grave Abuse of Discretion in Issuing the Writ: Whether respondent Belo's petition stated a cause of action and whether respondent court committed grave abuse of discretion in issuing the writ of preliminary injunction.

• Refusal to Dissolve the Injunction: Whether respondent court committed grave abuse of discretion in refusing to dissolve the writ of preliminary injunction despite petitioners' offer to put up a counterbond.

• State Immunity from Suit: No. The suit commenced by respondent Belo against the petitioners cannot be considered a suit against the State. Unauthorized acts of government officials or officers are not acts of the State, and an action against such officials by one whose rights have been invaded for the protection of his rights is not a suit against the State within the rule of immunity of the State from suit.

• Territorial Jurisdiction: Yes. The Court of First Instance of Capiz had jurisdiction to issue the writ of injunction. Since the acts to be restrained were being done in Roxas City, within the territorial jurisdiction of respondent court, the latter had jurisdiction to restrain said acts even if the office of respondent Director of the Bureau of Telecommunications is in Manila and that of respondent Regional Superintendent of Region IV is in Iloilo City.

• Cause of Action and Grave Abuse of Discretion in Issuing the Writ: No. The petition filed with the respondent lower court clearly alleged the legal right of Belo, the violation of that right by the unauthorized acts of petitioners, and the injury that would be caused to Belo. Respondent court did not act whimsically or capriciously in issuing the writ of preliminary injunction.

• Refusal to Dissolve the Injunction: No. The mere filing of a counterbond does not necessarily warrant the dissolution of the writ of preliminary injunction. The court is called upon to exercise its discretion in weighing the relative damages that may be suffered by the parties, and the respondent court properly considered that Belo would suffer great and irreparable injury.

• State Immunity from Suit: The Court sustained the stand of respondent Belo, holding that the suit cannot be considered a suit against the State. The Court examined the provisions of the franchise granted to Belo under Republic Act No. 2957 and the powers and duties of the Bureau of Telecommunications under Section 79 of Executive Order No. 94, series of 1947. The Bureau of Telecommunications is empowered to establish telecommunications service in places where such service does not exist, but in places where such service already exists it may only negotiate for, operate, and maintain a telecommunication system by utilizing such existing facilities under such terms, conditions, or arrangements as may be agreed upon with their owners or operators. Since Belo had already established and was operating an automatic telephone system in Roxas City since July 1961, and the Bureau of Telecommunications took steps to establish another local telephone system without having made any negotiation with Belo, the officers of the Bureau attempted to establish a local telephone system in violation of law and the rights of Belo. The Court cited the principle that an action against a State officer who, while claiming to act for the State, violates or invades the personal and property rights of the plaintiff under an assumption of authority which he does not have, is not a suit against the State.

• Territorial Jurisdiction: The Court found merit in the contention of respondent Belo. The rulings in the cases relied upon by petitioners — Acosta vs. Alvendia, Samar Mining Co. vs. Arnado, and Alhambra Cigar and Cigarette Co. vs. The National Administrator of Regional Office No. 2 — are to the effect that the court of first instance has no jurisdiction to restrain by injunction acts committed outside the territorial boundaries of their respective provinces or districts. In the instant case, the acts relative to the establishment of a local telephone system by petitioners were being done within the territorial boundaries of the province or district of respondent court, and so said court had jurisdiction to restrain them by injunction. The Court cited Gonzales vs. Secretary of Public Works, wherein the Court of First Instance of Davao had jurisdiction to entertain a case the main purpose of which was to prevent the enforcement of a decision of the Secretary of Public Works who was in Manila, because the acts sought to be restrained were to be performed within the territorial boundaries of the province of Davao.

• Cause of Action and Grave Abuse of Discretion in Issuing the Writ: The Court defined a cause of action as "an act or omission of one party in violation of the legal right or rights of the other," with essential elements being the legal right of the plaintiff, the correlative obligation of the defendant, and the act or omission of the defendant in violation of said legal right. The petition filed with the respondent lower court clearly alleged: (1) the legal right of Belo to establish and operate a telephone system in Roxas City as authorized by a legislative franchise and the certificate of public convenience issued by the Public Service Commission; (2) the violation of Belo's right by the unauthorized or illegal acts of petitioners in taking steps to install another telephone system without previously having negotiated or entered into any arrangement with Belo as required by law; and (3) the injury that would be caused to Belo by the acts of petitioners. The Court found that respondent court had acted in accordance with Section 3, Rule 58 of the Rules of Court, having found that Belo was entitled to the relief demanded and that the continuance of the acts complained of would render the judgment ineffectual. The Court also addressed petitioners' argument that the Bureau of Telecommunications has the power to establish a telephone system in Roxas City, conceding that power but noting that it is subject to the limitation that in cities, towns, or provinces where telephone systems are already in operation, it should utilize such existing facilities under terms and conditions agreed upon with the owners or operators. The Court cited Republic vs. Philippine Long Distance Telephone Co. for the proposition that the Bureau of Telecommunications may resort to condemnation proceedings where unreasonable terms are exacted. The Court noted that the respondent court did not enjoin the Bureau from working on its telephone exchange and turnkey installation project in relation to its nationwide telecommunications expansion project, but only enjoined petitioners from establishing, maintaining, and operating another local telephone system in Roxas City.

• Refusal to Dissolve the Injunction: The Court held that under Section 6 of Rule 58 of the Rules of Court, a preliminary injunction may be dissolved if it appears after hearing that although the plaintiff is entitled to the injunction, the continuance thereof would cause great damage to the defendant while the plaintiff can be fully compensated for such damages as he may suffer, and the defendant files a bond. The court is called upon to exercise its discretion in determining or weighing the relative damages that may be suffered by the parties. In the case at bar, the respondent court took into consideration that Belo would suffer great and irreparable injury considering his tremendous investment, time, and efforts in putting up telephone service in Roxas City. The Court held that an injunction issued to stop an unauthorized act should not be dissolved by the mere filing of a counterbond, otherwise the counterbond would become the vehicle of the commission or continuance of an unauthorized or illegal act which the injunction precisely is intended to prevent.

• State Immunity from Suit (Doctrine of Non-Suitability of the State) — The State may not be sued without its consent. However, an action at law or suit in equity against a State officer or the director of a State department on the ground that, while claiming to act for the State, he violates or invades the personal and property rights of the plaintiff, under an unconstitutional act or under an assumption of authority which he does not have, is not a suit against the State within the constitutional provision that the State may not be sued without its consent. The Court applied this doctrine by holding that the officers of the Bureau of Telecommunications attempted to establish a local telephone system in Roxas City in violation of law and the rights of Belo, and since the State authorizes only legal acts by its officers, unauthorized acts of government officials or officers are not acts of the State.

• Territorial Jurisdiction of Courts of First Instance over Injunction — Pursuant to Section 44(h) of the Judiciary Act and Section 2, Rule 60 of the Rules of Court, courts of first instance have jurisdiction to control or restrain acts committed or about to be committed within the territorial boundaries of their respective provinces and districts by means of the writ of injunction. It does not matter that some of the respondents against whom the injunctive order was issued had their official residences outside the territorial jurisdiction of the trial court, so long as the acts sought to be restrained are being performed within the territorial boundaries of the court's jurisdiction.

• Cause of Action — A cause of action is "an act or omission of one party in violation of the legal right or rights of the other," and its essential elements are: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. The Court applied this definition to find that Belo's petition stated a cause of action because it alleged his legal right under the franchise, the violation of that right by petitioners' unauthorized acts, and the injury that would result.

• Non-Exclusive Franchise and Injunction Against Illegal Competition — Although a franchise is not exclusive so as to prevent the grant of a similar franchise to another or to prevent competition on the part of a person or entity duly authorized in that regard, such a franchise has been regarded or characterized as exclusive against one who carries a competing operation without due authorization or in violation of the law governing the matter. The owner of a franchise which is not exclusive is entitled to relief by injunction against competition which is illegal or is carried on by one not authorized in that regard, in the case either of actual or of threatened injury from such competition.

• Dissolution of Preliminary Injunction — Under Section 6 of Rule 58 of the Rules of Court, a preliminary injunction may be dissolved if it appears after hearing that although the plaintiff is entitled to the injunction, the continuance thereof would cause great damage to the defendant while the plaintiff can be fully compensated for such damages as he may suffer, and the defendant files a bond. The court exercises its discretion in weighing the relative damages that may be suffered by the parties. An injunction issued to stop an unauthorized act should not be dissolved by the mere filing of a counterbond, otherwise the counterbond would become the vehicle of the commission or continuance of an unauthorized or illegal act which the injunction precisely is intended to prevent.

• "Inasmuch as the State authorizes only legal acts by its officers, unauthorized acts of government officials or officers are not acts of the State, and an action against the officials or officers by one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a suit against the State within the rule of immunity of the State from suit." — This passage articulates the controlling doctrine on state immunity from suit as applied to unauthorized acts of government officers, and is the ratio decidendi for the first issue.

• "It does not matter that some of the respondents in the trial court, against whom the injunctive order was issued, had their official residences outside the territorial jurisdiction of the trial court." — This passage states the rule on territorial jurisdiction for injunctions, holding that the location of the acts to be restrained, not the residence of the respondents, determines the court's jurisdiction.

• "The Bureau of Telecommunications may take steps to improve the telephone service in any locality in the Philippines, but in so doing it must first enter into negotiation or arrangement with the operator or owner of the existing telephone system. We believe that the intention of the executive order, precisely, is to avoid a competition which would prove ruinous or disadvantageous to both the government and the private operator." — This passage defines the limitation on the Bureau of Telecommunications' power under Section 79(b) of Executive Order No. 94 and explains the policy behind the requirement of prior negotiation with existing operators.

• "An injunction issued to stop an unauthorized act should not be dissolved by the mere filing of a counterbond, otherwise, the counterbond would come the vehicle of the commission or continuance of an unauthorized or illegal act which the injunction precisely is intended to prevent." — This passage states the rule on dissolution of preliminary injunctions, emphasizing that the filing of a counterbond does not automatically warrant dissolution.

• Republic vs. Philippine Long Distance Telephone Co., G.R. No. L-18841, January 27, 1969, 26 SCRA 620 — Cited as controlling authority for the proposition that the Bureau of Telecommunications, under Section 79(b) of Executive Order No. 94, may operate and maintain wire telephone or radio telephone communications throughout the Philippines by utilizing existing facilities under terms agreed upon with present owners or operators, but nothing in that section excludes resort to condemnation proceedings where unreasonable or unthinking terms and conditions are exacted.

• Gonzales vs. Secretary of Public Works, G.R. No. L-21988, September 30, 1966, 18 SCRA 296 — Cited as controlling authority for the rule that a Court of First Instance has jurisdiction to entertain a case and issue injunctive orders where the acts sought to be restrained are to be performed within the territorial boundaries of the province, even if the respondent official is based outside the territorial jurisdiction.

• Acosta vs. Alvendia, G.R. No. L-14598, October 31, 1960 — Cited as authority for the rule that courts of first instance have jurisdiction to control or restrain acts committed or about to be committed within the territorial boundaries of their respective provinces and districts by means of the writ of injunction, pursuant to Section 44(h) of the Judiciary Act and Section 2, Rule 60 of the Rules of Court.

• Samar Mining Co., Inc. vs. Arnado, G.R. No. L-17709, June 30, 1961, 2 SCRA 782 — Cited as authority for the rule that the court of first instance has no jurisdiction to restrain by injunction acts committed outside the territorial boundaries of their respective provinces or districts.

• Alhambra Cigar and Cigarette Co. vs. The National Administrator of Regional Office No. 2, G.R. No. L-20491, August 31, 1965, 14 SCRA 1019 — Cited as authority for the same rule regarding territorial limits on the injunctive power of courts of first instance.

• Ma-ao Sugar Central Co. vs. Barrios, 79 Phil. 666, 667 — Cited as authority for the definition of a cause of action and its essential elements.

• Section 79, Executive Order No. 94, series of 1947 — Defines the powers and duties of the Bureau of Telecommunications. Paragraph (a) empowers the Bureau to operate and maintain existing wire-telegraph and radio telegraph offices, stations, and facilities, and those to be established to restore pre-war telecommunication service, as well as additional offices or stations to provide telecommunications service in places requiring such service. Paragraph (b) empowers the Bureau to investigate, consolidate, negotiate for, operate, and maintain wire-telephone or radio telecommunications service throughout the Philippines by utilizing such existing facilities in cities, towns, and provinces as may be found feasible and under such terms and conditions or arrangements with the present owners or operators thereof as may be agreed upon to the satisfaction of all concerned. The Court held that this provision was intended to protect operators of telephone systems already existing and duly authorized by law to operate, and that the Bureau must first enter into negotiation or arrangement with the existing operator before improving telephone service in any locality.

• Republic Act No. 2957, as amended — The Congressional franchise granted to respondent Belo to establish, maintain, and operate a telephone system in Roxas City and the province of Capiz. Section 1 grants the right and privilege to construct, maintain, and operate a telephone system; Section 12 provides that the rights granted shall not be exclusive; Section 17 grants the Philippine Government the privilege of using the poles of the grantee for its telegraph system; Section 18 provides that in the event the Philippine Government should desire to maintain and operate for itself the system and enterprise herein authorized, the grantee shall surrender his franchise and turn over to the Government said system and all serviceable equipment therein, at cost, less reasonable depreciation.

• Section 3, Rule 58, Rules of Court — Governs the issuance of preliminary injunctions. The Court found that respondent court acted in accordance with this provision when it issued the writ of preliminary injunction, having found that Belo was entitled to the relief demanded and that the continuance of the acts complained of would work serious and irreparable loss and injury to him unless restrained.

• Section 6, Rule 58, Rules of Court — Governs the dissolution of preliminary injunctions. The provision allows dissolution if it appears after hearing that although the plaintiff is entitled to the injunction, the continuance thereof would cause great damage to the defendant while the plaintiff can be fully compensated for such damages as he may suffer, and the defendant files a bond. The Court held that the court is called upon to exercise its discretion in weighing the relative damages that may be suffered by the parties.

• Section 44, Judiciary Act of 1948 — Cited by respondent Belo as the statutory basis for the Court of First Instance's power to issue the writ of injunction.

• Section 1930, Revised Administrative Code — Cited by petitioners as the basis for the Bureau of Telecommunications' authority to operate its own telecommunications network in the whole country without need of a legislative franchise.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Fernando, Teehankee, Barredo, and Villamor, JJ., concurred. Castro, J., was on leave.