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Philippine Telegraph & Telephone Corp. vs. Smart Communications, Inc.

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Philippine Telegraph & Telephone Corp. vs. Smart Communications, Inc.

Case Title and Citation

Philippine Telegraph & Telephone Corporation, petitioner, vs. Smart Communications, Inc., respondent.
G.R. No. 189026, November 09, 2016
Supreme Court - Third Division
Ponente: Justice J. Jardeleza

Facts

  • PT&T and Smart entered into an interconnection Agreement dated June 23, 1997 for interconnection of their respective services.
  • Parties amended the Agreement on November 28, 2003 to extend payment terms and adjust access charges: Smart’s access charge to PT&T would increase from ₱1.00 to ₱2.00 once PT&T’s unpaid balance reached ₱4,000,000; PT&T’s access charge to Smart would be reduced from ₱8.69 to ₱6.50, and further to ₱4.50 upon full payment.
  • On April 1, 2005 Smart applied the increased access charge; Smart notified PT&T by letter dated April 4, 2005.
  • On September 2, 2005 PT&T complained to Smart about alleged overcharges on outbound calls and demanded a refund of ₱12,681,795.13.
  • PT&T filed a letter-complaint with the National Telecommunications Commission (NTC) on September 15, 2005 alleging the access charges were discriminatory and not in conformity with charges to other carriers.
  • The NTC conducted mediation and ordered the parties to submit pleadings after mediation failed; the NTC treated the dispute as adversarial and assumed jurisdiction over the issue of access charges.
  • Before pleadings were submitted to the NTC, Smart filed a complaint with the Regional Trial Court (RTC), Makati City, on April 7, 2006 for breach of contract and recovery of unpaid obligations; the RTC granted a temporary restraining order on April 25, 2006 and later issued a writ of preliminary injunction.
  • PT&T moved to dismiss in RTC and filed a petition for certiorari with the Court of Appeals; the Court of Appeals denied the petition. PT&T then filed the present petition for review with the Supreme Court.
  • The Supreme Court resolved whether the NTC has primary jurisdiction over access charge stipulations in bilateral interconnection agreements and whether the RTC could restrain the NTC from reviewing negotiated access charges.

Issues

  1. Does the National Telecommunications Commission (NTC) have primary/quasi-judicial jurisdiction to approve and review access charge arrangements stipulated in a bilateral interconnection agreement between public telecommunication entities?
  2. Can a regular court (here, the Regional Trial Court) restrain the NTC from exercising its statutory authority over access charges by issuing a preliminary injunction against the NTC?

Ruling

  1. Yes - The NTC has primary/quasi-judicial jurisdiction to approve and review access charge arrangements under Section 18 of Republic Act No. 7925.
  2. No - The RTC erred in issuing a preliminary injunction restraining the NTC; the RTC must suspend its proceedings pending final determination by the NTC on the access charge issue.

Reasoning / Ratio Decidendi

  • Statutory basis: Section 18 of Republic Act No. 7925 expressly provides that access charge/revenue sharing arrangements “shall be negotiated between the parties and the agreement between the parties shall be submitted to the Commission” and that the Commission shall ensure equity, reciprocity and fairness when approving interconnection rates. The provision contemplates submission and approval by the NTC and authorizes the NTC to adopt or disapprove formulas based on statutory standards (costs, cross-subsidy, rate of return, public necessity).
  • Nature of NTC function: The approval/review of negotiated access charges is quasi-judicial and requires technical expertise; the NTC must apply guidelines and exercise discretion to determine whether stipulated rates meet statutory standards.
  • Effect on contractual freedom: Because the parties are public telecommunication entities subject to regulation, their freedom to contract is limited by the police power and the regulatory scheme established by RA 7925; negotiated interconnection rates do not fall outside the NTC’s regulatory reach merely because they were bilaterally agreed.
  • Distinction from prior cases: Boiser v. Court of Appeals was distinguished because that dispute did not involve access charges subject to NTC approval; Boiser addressed a contractual pre-disconnection notice issue and did not implicate Section 18 of RA 7925.
  • Doctrine of primary jurisdiction: Where a central question requires the special competence of an administrative agency under a regulatory scheme, courts should suspend judicial proceedings and allow the administrative body to resolve the matter first (San Miguel Properties, Inc. v. Perez). The RTC should have held the civil action in abeyance pending the NTC’s final determination on access charges.
  • Non-interference with coordinate quasi-judicial tribunals: By statute and historical legislative treatment (EO 546 and related provisions), the NTC’s quasi-judicial functions are co-equal with the courts for purposes of adjudication; regular courts may not issue injunctive relief that restrains a quasi-judicial agency in the exercise of its adjudicatory powers absent special authority.

Cited authorities and references relied upon in the source: RA 7925 (Sec. 18, Sec. 4(b), Sec. 5), Executive Order No. 546, PLDT v. National Telecommunications Commission, Boiser v. Court of Appeals, San Miguel Properties, Inc. v. Perez, Iloilo Commercial and Ice Company v. Public Service Commission, and related jurisprudence on primary jurisdiction and non-interference.

Doctrine / Legal Principle

  • The NTC has primary/quasi-judicial jurisdiction to approve, adopt, or disapprove access charge and revenue-sharing arrangements between public telecommunication entities under Section 18 of RA 7925.
  • Bilateral interconnection agreements containing access charge stipulations must be submitted to the NTC for review; negotiated rates do not remove the matter from regulatory oversight.
  • Where an administrative agency has primary jurisdiction over a technical or regulatory question, courts should suspend proceedings (doctrine of primary jurisdiction) until the agency resolves the issue.
  • Regular courts cannot issue injunctive relief that interferes with the adjudicatory functions of a co-equal quasi-judicial agency.

Disposition

  • Petition is PARTIALLY GRANTED.
  • The Decision dated February 18, 2009 and the Resolution dated July 23, 2009 of the Court of Appeals in CA-G.R. SP No. 97737 are SET ASIDE.
  • The writ of preliminary injunction issued by the Regional Trial Court, Branch 146, Makati City is DISSOLVED.
  • The Regional Trial Court, Branch 146, Makati City is DIRECTED TO SUSPEND its proceedings until the National Telecommunications Commission issues a final determination on the issue involving access charges.

Concurring / Dissenting Opinions

  • Justices Peralta (Acting Chairperson), Perez, and Perlas-Bernabe concurred.
  • Chief Justice Velasco, Jr. was noted as on leave.

Significance / Notes

  • Confirms NTC’s central role in regulating interconnection rates and the mandatory submission of access charge arrangements for NTC approval under RA 7925.
  • Limits the ability of parties to rely solely on freedom of contract where public utility regulation and statutory standards apply.
  • Reinforces the doctrine of primary jurisdiction: courts should suspend proceedings when resolution requires agency expertise and uniformity in regulatory interpretation.
  • Reiterates rule of non-interference: regular courts should not enjoin quasi-judicial agencies exercising adjudicatory powers co-equal with courts.
  • Practical implication: civil actions that seek enforcement or collection based on rates subject to NTC review must be held in abeyance pending administrative determination to avoid conflicting rulings and to respect regulatory competence.
Administrative Law Judicial Review Separation of Powers
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