G.R. No.

189026, November 09, 2016

PHILIPPINE TELEGRAPH TELEPHONE CORP., Petitioner, v. SMART

FACTS
Petitioner Philippine Telegraph & Telephone Corporation (PT&T) and respondent Smart
Communications, Inc. (Smart) entered into an Agreement2 for the interconnection of
their telecommunication facilities. The Agreement provided for the interconnection of
Smart's Cellular Mobile Telephone System (CMTS), Local Exchange Carrier (LEC) and
Paging services with PT&T's LEC service. Starting 1999, however, PT&T had difficulty
meeting its financial obligations to Smart.3 Thus, the parties amended the Agreement,
which extended the payment period and allowed PT&T to settle its obligations on
installment basis. The amended Agreement also specified that Smart's access charge to
PT&T would increase from P1.00 to P2.00 once PT&T's unpaid balance reaches P4
Million and that PT&T's access charge to Smart would be reduced from P8.69 to P6.50.
Upon full payment, PT&T's access charge would be further reduced to P4.50.4

On April 4, 2005, Smart sent a letter informing PT&T that it increased the access charge
from P1.00 to P2.00 starting April 1, 2005 in accordance with the amended Agreement.
However, on September 2, 2005, PT&T sent a letter to Smart claiming that the latter
overcharged PT&T on outbound calls to Smart's CMTS.5 PT&T cited the NTC resolution in
a separate dispute between Smart and Digitel, where the NTC ultimately disallowed the
access charges imposed by Smart for being discriminatory and less favorable than
terms offered to other public telecommunication entities (PTEs). Accordingly, PT&T
demanded a refund of P12,681,795.13 from Smart.6

PT&T filed a complaint with the NTC raising that the access charges imposed by Smart
were "discriminatory and not in conformity with those of other carriers."7 

NTC ordered Smart and PT&T to attend mediation conferences, but the mediation
failed, the NTC directed them to file their pleadings. But before they could submit,
Smart filed a complaint with the Makati (RTC) against PT&T alleging that PT&T was in
breach of its contractual obligation when it failed to pay its outstanding debt and denied
its liability to Smart. 

Smart also asked the RTC to issue a TRO against the NTC and PT&T, which the RTC
granted.

PT&T sought for the dismissal of the civil case for lack of jurisdiction, non-observance of
the doctrine of primary jurisdiction, exhaustion of administrative remedies, litis
pendentia and res judicata. It also prayed for the restraining order be set aside.

RTC issued a writ of preliminary injunction in favor of Smart. The RTC reasoned that
allowing the NTC to proceed and adjudicate access charges would violate Smart's
contractual rights.

PT&T petitioned with the CA. The CA found that the RTC had jurisdiction over the case
because it involved an action for specific performance, i.e., PT&T's compliance with the
Agreement, and is therefore incapable of pecuniary estimation. And insofar as the
dispute involved an alleged breach of contract, there was no need to refer the matter to
the NTC because it had no jurisdiction over breach of contract cases.16

CA denied the MR, PT&T then filed this petition for review17 

For PT&T, NTC has primary jurisdiction over the determination of access charges. PT&T
characterizes the NTC case as one involving the validity of interconnection rates, as
opposed to one involving purely a breach of contract and claim for damages cognizable
by the RTC. PT&T adds that the writ of preliminary injunction issued by the RTC
against NTC constitutes interference with a co-equal body.

For Smart, RTC has jurisdiction as the dispute was purely contractual. It alleges that
NTC has no jurisdiction over bilateral interconnection agreements voluntarily negotiated
and entered into by PTEs. chanroblesvirtuallawlibrar

Smart believes that its complaint before the RTC is one which is incapable of pecuniary
estimation and, accordingly, falls within its jurisdiction. For Smart, because it is seeking
to enforce the Agreement, the regular courts, not the NTC, have jurisdiction

Issues:

1. Whether or not NTC has jurisdiction - YES

Ruling:

The fact that the interconnection agreement between Smart and PT&T involved access
charges warrants a more nuanced analysis, thus, requires NTC’s intervention.

The first paragraph of Section 18 of RA 7925 mandates that any agreement pertaining
to access charges must be submitted to the NTC for approval; in case the parties fail to
agree, the matter shall be resolved by the NTC.

The NTC is certainly the approving authority on matters pertaining to either the access
charge formula or revenue-sharing arrangement.

Conspicuously, neither Smart nor PT&T claims that the access charges in the
Agreement have been submitted to, much less approved, by the NTC.

The second paragraph of Section 18 enumerates the guidelines to be considered by the

The proceeding under Section 18 is quasi-judicial in nature. The NTC correctly treated
the dispute as adversarial and gave both Smart and PT&T the opportunity to be heard.

As for the Preliminary Injunction

Under Rule 58, Section 2 of the 1997 Rules of Civil Procedure, the court where the
action is pending may grant the provisional remedy of preliminary injunction. Generally,
trial courts have the ancillary jurisdiction to issue writs of preliminary injunction in
cases falling within its jurisdiction, including civil actions that are incapable of pecuniary
estimation41 and claims for sum of money exceeding P400,000.00,42 among others.

Exceptions:
1. when Congress, in the exercise of its power to apportion jurisdiction,43 restricts
the authority of regular courts to issue injunctive reliefs. For example, the Labor
Code prohibits any court from issuing injunctions in cases involving or arising
from labor disputes.44 
2. Republic Act No. 897545 (RA 8975) provides that no court, other than the
Supreme Court, may issue provisional injunctive reliefs which would adversely
affect the expeditious implementation and completion of government
infrastructure projects.46 
3. courts could not interfere with the judgments, orders, or decrees of a
court of concurrent or coordinate jurisdiction.47 This rule of non-
interference applies not only to courts of law having equal rank but also
to quasi-judicial agencies statutorily at par with such courts. 48

The NTC was created pursuant to Executive Order No. 54649 (EO 546). It assumed the
functions formerly assigned to the Board of Communications and the
Telecommunications Control Bureau and was placed under the administrative
supervision of the Ministry of Public Works. Meanwhile, the Board of Communications
previously exercised the authority which originally pertained to the Public Service
Commission (PSC).

Section 16 of EO 546 provides that, with respect to the NTC's quasi-judicial functions,
its decisions shall be appealable in the same manner as the decisions of the Board of
Communications had been appealed. The rulings and decisions of the Board were, in
turn, appealable in the same manner as the rulings and decisions of the PSC.52 Under
Section 35 of the Public Service Act, the Supreme Court had jurisdiction to review any
order, ruling, or decision of the PSC.53 In Iloilo Commercial and Ice Company v. Public
Service Commission,54 we categorically held that courts of first instance have no power
to issue a restraining order directed to the PSC.

x x x In the absence of a specific delegation of jurisdiction to Courts of First

The above ruling was modified by BP Blg. 129, granting the CA exclusive appellate
jurisdiction over "all final judgments, resolutions, orders or awards of Regional Trial
Courts and quasi-judicial agencies, instrumentalities, boards or commission" except
those falling within the appellate jurisdiction of the Supreme Court in accordance with
the Constitution and the Labor Code.57 In this regard, Rule 43 of the Rules of Court
provides that an appeal from any award, judgment or resolution of or authorized by a
quasi-judicial agency in the exercise of its quasi-judicial functions, including the NTC,
shall be through a petition for review with the Court of Appeals.58
In view of the legislative history of the NTC, it is clear that Congress intended NTC, in
respect of its quasi-judicial or adjudicatory functions, to be co-equal with regional trial
courts. Hence, the RTC cannot interfere with the NTC's exercise of its quasi-judicial
powers without breaching the rule of non-interference with tribunals of concurrent or
coordinate jurisdiction. In this case, the NTC was already in the process of resolving the
issue of whether the access charges stipulated in the Agreement were fair and equitable
pursuant to its mandate under RA 7925 when the RTC issued the assailed writ of
preliminary injunction. Mediation conferences had been conducted and, failing to arrive
at a settlement, the NTC had ordered the parties to submit their respective pleadings.
Simply put, the NTC had already assumed jurisdiction over the issue involving access
charges. Undeniably, the RTC exceeded its jurisdiction when it restrained the
NTC from exercising its statutory authority over the dispute.