SMART COMMUNICATIONS, INC. ET AL. v. NTC - Digest

SMART COMMUNICATIONS, INC. ET AL. V.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC)
G.R. 151908, August 12, 2003
Facts: Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission
(NTC) issued Memorandum Circular 13-6-2000, promulgating rules and regulations on the billing of
telecommunications services. The Memorandum Circular provided that it shall take effect 15 days after
its publication in a newspaper of general circulation newspaper. Meanwhile, the provisions of the
Memorandum Circular pertaining to the sale and use of prepaid cards and the unit of billing for cellular
mobile telephone service took effect 90 days from the effectivity of the Memorandum Circular.Then the
NTC issued a Memorandum to all cellular mobile telephone service (CMTS) operators which contained
measures to minimize if not totally eliminate the incidence of stealing of cellular phone units. This was
followed by another Memorandum addressed to all public telecommunications entities reminding them
that the validity of all prepaid cards and SIM packs sold and used by subscribers of prepaid cards,
respectively, sold on 7 October 2000 and beyond shall be valid for at least 2 years from the date of first
use.
Petitioners filed with the RTC a petition to declare the circular as unconstitutional with a prayer for the
issuance of a writ of preliminary injunction and and temporary restraining order. A motion to dismiss
was filed by the NTC on the ground of petitioner’s to exhaust administrative remedies. The RTC denied
the motion to dismiss but on certiorari, the CA reversed RTC.
Issue: Whether or not CA gravely erred in holding that petitioners failed to exhaust an available
administrative remedy?
Ruling: Yes.
Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or

administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make rules
and regulations which results in delegated legislation that is within the confines of the granting statute
and the doctrine of non-delegability and separability of powers.
In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency,

a party need not exhaust administrative remedies before going to court. This principle applies only
where the act of the administrative agency concerned was performed pursuant to its quasi-judicial
function, and not when the assailed act pertained to its rule-making or quasi-legislative power. In
Association of Philippine Coconut Dessicators v. Philippine Coconut Authority, 20 it was held:
The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so
strenuously urged by the Solicitor General on behalf of respondent, has obviously no application here.
The resolution in question was issued by the PCA in the exercise of its rule-making or legislative power.
However, only judicial review of decisions of administrative agencies made in the exercise of their quasi-
judicial function is subject to the exhaustion doctrine.
Even assuming arguendo that the principle of exhaustion of administrative remedies apply in this case,
the records reveal that petitioners sufficiently complied with this requirement. Even during the drafting
and deliberation stages leading to the issuance of Memorandum Circular No. 13-6-2000, petitioners
were able to register their protests to the proposed billing guidelines. They submitted their respective
position papers setting forth their objections and submitting proposed schemes for the billing circular. 21
After the same was issued, petitioners wrote successive letters dated July 3, 2000 22 and July 5, 2000, 23
asking for the suspension and reconsideration of the so-called Billing Circular. These letters were not
acted upon until October 6, 2000, when respondent NTC issued the second assailed Memorandum
implementing certain provisions of the Billing Circular. This was taken by petitioners as a clear denial of
the requests contained in their previous letters, thus prompting them to seek judicial relief.
The objective of the doctrine of primary jurisdiction is to guide a court in determining whether it should
refrain from exercising its jurisdiction until after an administrative agency has determined some question
or some aspect of some question arising in the proceeding before the court. It applies where the claim is
originally cognizable in the courts and comes into play whenever enforcement of the claim requires the
resolution of issues which, under a regulatory scheme, has been placed within the special competence
of an administrative body; in such case, the judicial process is suspended pending referral of such issues
to the administrative body for its view.
However, where what is assailed is the validity or constitutionality of a rule or regulation issued by the
administrative agency in the performance of its quasi-legislative function, the regular courts have
jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules issued by
an administrative agency contravenes the law or the constitution is within the jurisdiction of the regular
courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty,
international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in
the courts, including the regional trial courts.

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SMART COMMUNICATIONS, INC. ET AL. V.

NATIONAL TELECOMMUNICATIONS COMMISSION (NTC)

G.R. 151908, August 12, 2003

Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or

In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency,

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