G.R. No. 232168 - Civil Service Commission vs. Jejomar Erwin S. Binay, Jr. and Gerardo Kangleon San Gabriel

Philippine Telegraph & Telephone Corporation (PT&T) and Smart Communications, Inc. (Smart) are public telecommunication entities subject to regulation by the National Telecommunications Commission (NTC).
The NTC has been regulating the telecommunications industry since 1979, a mandate underscored by Republic Act No. 7925, which empowers the NTC to approve or adopt access charge arrangements between public telecommunication entities (PTEs).

On June 23, 1997, PT&T and Smart entered into an interconnection Agreement covering various telecommunications services—Smart’s Cellular Mobile Telephone System (CMTS), Local Exchange Carrier (LEC), and Paging services with PT&T’s LEC service.
Due to PT&T’s financial difficulties starting in 1999, the parties amended the Agreement on November 28, 2003 to extend the payment period and allow installment settlements.

The amendment provided for an increase in Smart’s access charge to PT&T from P1.00 to P2.00 when PT&T’s unpaid balance reached P4 million, and detailed a reduction scheme for PT&T’s access charge to Smart in phases (from P8.69 to P6.50, and eventually to P4.50 upon full payment).

On April 4, 2005, Smart notified PT&T of an increased access charge effective April 1, 2005, in compliance with the amended Agreement.
Subsequently, on September 2, 2005, PT&T claimed overcharging by Smart on outbound calls to Smart's CMTS and demanded a refund of P12,681,795.13.
PT&T’s contention was backed by reference to a previous NTC resolution involving access charges in a dispute between Smart and Digitel, where certain rates were disallowed for being discriminatory.
PT&T filed a letter-complaint with the NTC on September 15, 2005, alleging that the rates were “discriminatory and not in conformity with those of other carriers.”

After the NTC initiated mediation and directed the filing of pleadings, Smart opted to commence a civil case in the Regional Trial Court (RTC) of Makati City on April 7, 2006, alleging breach of contract by PT&T for non-payment and seeking enforcement of the amended Agreement.
A temporary restraining order (TRO) was issued by the RTC on April 25, 2006, restraining the NTC and PT&T, followed by the RTC’s issuance of a writ of preliminary injunction in favor of Smart.
PT&T raised several defenses in its answer, including lack of jurisdiction, non-observance of the doctrine of primary jurisdiction, exhaustion of administrative remedies, litis pendentia, and res judicata.
The Court of Appeals (CA) upheld the RTC’s jurisdiction over the civil action, emphasizing that the dispute, as a breach of contract challenging the enforcement of the Agreement, did not initially require referral to the NTC under its quasi‑judicial powers regarding access charges.

PT&T argued that the core issue was the validity of the access charge stipulations under the Agreement — a matter within the NTC’s regulatory sphere as provided by RA 7925, Section 18 — and that the RTC’s issuance of the preliminary injunction interfered with the NTC’s quasi-judicial functions.
Smart maintained that the dispute was purely contractual, irrelevantly involving access charge negotiations, and hence should fall solely within the jurisdiction of the RTC.
Additionally, Smart contended that the freedom to contract should protect the terms of their Agreement, asserting that the specialized knowledge of the NTC was unnecessary in enforcing a bilateral contract.

Whether the NTC has primary jurisdiction over questions involving the access charge stipulations in a bilateral interconnection Agreement between public telecommunication entities.
Whether the NTC’s quasi‑judicial authority extends to reviewing and approving the access charge formula even when such formula has been incorporated in a voluntarily negotiated and executed contract.

Whether the RTC exceeded its jurisdiction by issuing a writ of preliminary injunction restraining the NTC from proceeding with its adjudicatory function on the access charges.
Whether the doctrine of primary jurisdiction and the principles of non‑interference dictate that matters involving technical and regulatory issues (such as access charge determinations) should yield to the expertise of the NTC before being adjudicated by regular courts.

Whether the contractual freedom of the parties is absolute, or subject to the state’s regulatory power to ensure affordable telecommunications rates and fair competition.
The extent to which the statutory framework of RA 7925 imposes mandatory review of negotiated terms by the NTC despite the parties’ voluntary contract.