Title
Smart Communications, Inc. vs. National Telecommunications Commission
Case
G.R. No. 151908
Decision Date
Aug 12, 2003
Telecom companies challenged NTC's billing rules, claiming jurisdiction issues and constitutional violations; Supreme Court ruled RTC had jurisdiction, remanded for further proceedings.

Case Summary (G.R. No. 163586)

Applicable Law and Institutional Authority

The NTC acted pursuant to its rule‑making and regulatory powers. The Supreme Court evaluated the validity of administrative rules under the Constitution (including judicial review powers) and the general principle that administrative agencies’ rules must conform to and remain within the scope of the enabling statute and the Constitution. The Court applied doctrines governing quasi‑legislative (rulemaking) versus quasi‑judicial (adjudicatory) functions of administrative agencies, and the related doctrines of exhaustion of administrative remedies and primary jurisdiction.

NTC Memorandum Circular No. 13‑6‑2000: Principal Provisions

MC No. 13‑6‑2000 (the “Billing Circular”) promulgated rules on telecommunications billing, including: (1) billing statements must be received by subscribers within 30 days after each billing cycle; late statements trigger a specified grace period during which the PTE may not disconnect service; (2) no charge for calls diverted to voice mailbox, voice prompt, recorded message or similar facility (excluding customer equipment); (3) verification of identification and address for purchasers of prepaid SIM cards; prepaid call cards and SIM cards valid at least two years from first use; holders given 45 days after consumption (but not beyond 2 years + 45 days from first use) to replenish or become invalid, with revalidation available on customer request at no additional charge except presentation of valid prepaid call card; (4) subscribers must be updated on remaining card value before every call; and (5) billing unit reduced from one minute per pulse to six seconds per pulse, with authorized rates per minute divided by ten.

Effectivity and Subsequent NTC Memoranda

The Billing Circular provided a general effectivity 15 days after newspaper publication and transmission to the UP Law Center. It was published June 22, 2000. Provisions on prepaid cards and billing unit reduction took effect 90 days from the Circular’s effectivity. On August 30, 2000, the NTC issued a Memorandum to CMTS operators directing strict compliance with identification requirements, dealer compliance, refusal of service for stolen or misregistered handsets, information sharing on stolen units, and registration of existing prepaid customers. On October 6, 2000, the NTC issued another Memorandum reminding PTEs that prepaid cards and SIM packs sold on or after October 7, 2000 shall be valid for at least two years from first use, and that the six‑second billing pulse would be effective October 7, 2000.

Petitioners’ Complaint and Allegations

On October 20, 2000 Islacom and Piltel filed suit in RTC Quezon City (Civil Case No. Q‑00‑42221) seeking declaration of nullity of MC No. 13‑6‑2000 and the October 6, 2000 Memorandum, and prayed for temporary restraining order and preliminary injunction. Allegations included lack of NTC jurisdiction to regulate sale of consumer goods (arguing the Department of Trade and Industry has jurisdiction under the Consumer Act), that the Circular was oppressive and confiscatory and violated the constitutional prohibition against deprivation of property without due process, that the Circular would unduly prolong prepaid card validity and impair viability of prepaid service, and that identification and balance‑announcement requirements were unreasonable. Globe and Smart later moved to intervene and were permitted.

RTC Orders: Temporary Restraining Order and Preliminary Injunction

The RTC issued a temporary restraining order on October 27, 2000 enjoining NTC from implementing the Billing Circular and October 6 Memorandum. After hearing, on November 20, 2000 the RTC denied defendants’ motion to dismiss and granted the plaintiffs’ application for a writ of preliminary injunction enjoining implementation of the challenged issuances, subject to a P500,000 bond. The defendants’ motion for reconsideration was denied on February 1, 2001.

Court of Appeals Proceedings and Ruling

NTC filed a special civil action for certiorari and prohibition with the Court of Appeals. On October 9, 2001 the CA granted the petition, annulling and setting aside the RTC’s orders denying the motion to dismiss and granting the preliminary injunction; it dismissed the complaint without prejudice to any referral of grievances to the NTC. Motions for reconsideration were denied by CA resolution dated January 10, 2002.

Grounds for Supreme Court Review

Petitioners Smart and Piltel sought review raising four principal assignments: that the CA erred in holding the NTC, not the regular courts, had jurisdiction; that petitioners failed to exhaust administrative remedies; that the Billing Circular is unconstitutional and contrary to law and public policy; and that petitioners had demonstrated a clear and positive right warranting preliminary injunction. Globe and Islacom raised complementary errors: that doctrines of primary jurisdiction and exhaustion do not apply to pure legal nullification of administrative rules; that the questions are purely legal; that administrative remedies were exhausted and denial would cause grave irreparable injury; and that they had clear rights to injunctive relief.

Consolidation and Procedural Posture at the Supreme Court

The two petitions were consolidated. The Supreme Court gave the petitions due course and required memoranda. Upon consideration, the Court found merit in the petitions and proceeded to resolve jurisdictional and procedural questions bearing on the proper forum for challenging the Billing Circular.

Distinction Between Quasi‑Legislative and Quasi‑Judicial Powers

The Court reiterated controlling principles: administrative agencies exercise both quasi‑legislative (rule‑making) and quasi‑judicial (adjudicatory) powers. Quasi‑legislative power produces delegated legislation (rules and regulations) that must be within the statutory grant, germane to the enabling statute’s objects and purposes, and conform to constitutional and statutory limits. Quasi‑judicial power involves fact‑finding, hearings, weighing evidence and deciding specific factual disputes under standards prescribed by law.

Application of Exhaustion and Primary Jurisdiction Doctrines

The Court clarified that the doctrines of exhaustion of administrative remedies and primary jurisdiction are applicable principally where the administrative act being challenged is quasi‑judicial or where resolution requires specialized factual

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