Smart Communications, Inc. v.

NTC (2003)
Ynares-Santiago, J.
FACTS:

Pursuant to its rule-making and regulatory powers, the National

Telecommunications Commission issued on June 16, 2000 Memorandum
Circular No. 13-6-2000 (the Billing Circular). Promulgating rules and
regulations on the billing of telecommunication services. Among the
provisions are:
o The billing statements shall be received by the subscriber of the
telephone service not later than 30 days from the end of each billing
cycle.
o There shall be no charge for calls that are diverted to a voice mailbox,
voice prompt, recorded message or similar facility excluding the
customers own equipment.
o PTEs shall verify the identification and address of each purchaser of
prepaid SIM cards. Prepaid call cards and SIM cards shall be valid for at
least 2 years from the date of first use. Holders of prepaid SIM cards
shall be given 45 days from the date the prepaid SIM card is fully
consumed but not beyond 2 years and 45 days from date of first use to
replenish the SIM card, otherwise the SIM card shall be rendered
invalid. The validity of an invalid SIM card, however, shall be installed
upon request of the customer at no additional charge except the
presentation of a valid prepaid call card.
o Subscribers shall be updated of the remaining value of their cards
before the start of every call using the cards.
o The unit of billing for the cellular mobile telephone service whether
postpaid or prepaid shall be reduced from 1 minute per pulse to 6
seconds per pulse
The NTC subsequently issued additional Memorandum Circulars.
On October 20, 2000, petitioners Isla Communications and Pilipino Telephone
Corporation filed against the NTC an action for declaration of nullity of the
Billing Circular, with prayer for the issuance of a writ of preliminary injunction
and temporary restraining order.
Islacom and Piltel alleged that the NTC has no jurisdiction to regulate
the sale of consumer goods, as such belongs to the DTI; that the
Circular
is
oppressive,
confiscatory
and
violative
of
the
constitutional prohibition against deprivation of property without
due process of law; that the Circular will result in the impairment of
the viability of the prepaid cellular service by unduly prolonging the
validity and expiration of the prepaid SIM and call cards; and that
the requirements of identification of prepaid card buyers and call
balance announcement are unreasonable.
Smart and Globe later filed a complaint-in-intervention.
The trial court issued a TRO enjoining NTC from implementing the Billing
Circular.

The NTC filed a motion to dismiss on the ground of failure to exhaust

administrative remedies. Denied.
NTC then filed a petition for certiorari and prohibition before the CA. Granted.

ISSUES + RULING:
WoN the case should be dismissed for failure to exhaust administrative remedies.
NO.

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.
The 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.
Quasi-legislative power: 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.
Quasi-judicial power: the power to hear and determine questions of fact to
which the legislative policy is to apply and to decide in accordance with the
standards laid down by the law itself in enforcing and administering the same
law.
Philippine Coconut Dessicators v Philcoa: 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.
Petitioners were able to register their protests to the proposed billing
statements. They submitted their respective position papers setting forth
their objections and submitting proposed schemes for the billing circular.
The letters were not acted upon until the NTC issued a second memorandum
implementing the billing circular. This was a clear denial of the requests in
the letters, thus prompting petitioners to seek judicial relief.

WoN the doctrine of primary jurisdiction applies. NO.

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.
In the case at bar, the issuance by the NTC was pursuant to its quasilegislative or rule-making power. As such, petitioners were justified in
invoking the judicial power of the Regional Trial Court to assail the
constitutionality and validity of the said issuances.
In their complaint before the Regional Trial Court, petitioners averred that the
Circular contravened Civil Code provisions on sales and violated the
constitutional prohibition against the deprivation of property without due
process of law. These are within the competence of the trial court judge.
The issues raised in the complaint do not entail highly technical matters.

DISPOSITION: Petition granted.

GUERZON V CA
FACTS
Petitioner executed with Basic Landoil Energy Corp (later acquired by Shell) a
Service Station Lease and Dealers Sales Contract. Respondent Bureau of
Energy Utilization (BEU) approved the latter contract and issued a Certificate of
Authority in Petitioners favor. After the contract, respondent Shell wrote Guerzon
informing him that they are not renewing the contract. A copy of said letter was
furnished to BEU. Thereafter, BEU issued an order directing petitioner to vacate the
premises and to show cause in writing why no administrative order and/or criminal
proceedings shall be instituted for his violations. Shell was able to secure the
possession of the gas station. Guerzon then filed with the RTC a complaint but such
was dismissed for lack of jurisdiction to annuk the order of a quasi-judicial body of
equivalent category as the RTC.
ISSUES W/N the BEU has the authority to order petitioner to vacate the premises.
RULING
NO. The power of an administrative agency has only such powers as are expressly
granted (here PD 1206) to it by law and those that are necessarily implied in the
exercise thereof. Said PD states that after notice and hearing, it can impose and
collect a fine and failure to pay the fine or to cease and discontinue the violation of
the law (i.e. illegal trading in petroleum products) shall be sufficient reason for
suspension, closure or stoppage of operations. Nowhere in the order is it stated that
petitioner engaged inillegal trading or any other violation of BP 33. It merely made a
vague reference to violation of BEU laws, rules and regulation. The BEU (like its
predecessor, the Oil Industry Commission) has no power to decide contractual

disputes between gasonline dealers and oil companies. It cannot order petitioner to
vacate the premises as this is an appropriate case in the vicil courts for unlawful
detainer. Assuming arguendo that it did had the authority, it still failed to comply
with the requirement of notice and hearing.
NOTE: Nevertheless,petitioner could not require that possession be given to him as
the contract was not renewed.

ANTIPOLO
REALTY
CORPORATION,
petitioner,
vs.
THE NATIONAL HOUSING AUTHORITY, HON. G.V. TOBIAS, in his capacity as
General Manager of the National Housing Authority, THE HON. JACOBO C.
CLAVE, in his capacity as Presidential Executive Assistant and VIRGILIO A.
YUSON, respondents.
By virtue of a Contract to Sell dated 18 August 1970, Jose Hernando acquired
prospective and beneficial ownership over Lot. No. 15, Block IV of the Ponderosa
Heights Subdivision in Antipolo, Rizal, from the petitioner Antipolo Realty
Corporation.
On 28 August 1974, Mr. Hernando transferred his rights over Lot No. 15 to private
respondent Virgilio Yuson. The transfer was embodied in a Deed of Assignment and
Substitution of Obligor (Delegacion), executed with the consent of Antipolo Realty,
in which Mr. Yuson assumed the performance of the vendee's obligations under the
original contract, including payment of his predecessor's installments in arrears.
However, for failure of Antipolo Realty to develop the subdivision project in
accordance with its undertaking under Clause 17 of the Contract to Sell, Mr. Yuson
paid only the arrearages pertaining to the period up to, and including, the month of
August 1972 and stopped all monthly installment payments falling due thereafter
Clause 17 reads:

Clause 17. SUBDIVISION BEAUTIFICATION. To insure the beauty of

the subdivision in line with the modern trend of urban development,
the SELLER hereby obligates itself to provide the subdivision with:
a) Concrete curbs and gutters
b) Underground drainage system
c) Asphalt paved roads
d) Independent water system
e) Electrical installation with concrete posts.
f) Landscaping and concrete sidewall
g) Developed park or amphi-theatre
h) 24-hour security guard service.
These improvements shall be complete within a period of two (2) years
from date of this contract. Failure by the SELLER shall permit the
BUYER to suspend his monthly installments without any penalties or
interest charges until such time that such improvements shall have
been completed. 1
On 14 October 1976, the president of Antipolo Realty sent a notice to private
respondent Yuson advising that the required improvements in the subdivision had
already been completed, and requesting resumption of payment of the monthly
installments on Lot No. 15. For his part, Mr. Yuson replied that he would conform
with the request as soon as he was able to verify the truth of the representation in
the notice.
Mr. Yuson refused to pay the September 1972-October 1976 monthly installments
but agreed to pay the post October 1976 installments. Antipolo Realty responded by
rescinding the Contract to Sell, and claiming the forfeiture of all installment
payments previously made by Mr. Yuson
Aggrieved by the rescission of the Contract to Sell, Mr. Yuson brought his dispute
with Antipolo Realty before public respondent NHA through a letter-complaint dated
10 May 1977 which complaint was docketed in NHA as Case No. 2123.
Antipolo Realty filed a Motion to Dismiss which was heard on 2 September 1977.
Antipolo Realty, without presenting any evidence, moved for the consolidation of

Case No. 2123 with several other cases filed against it by other subdivision lot
buyers, then pending before the NHA. In an Order issued on 7 February 1978, the
NHA denied the motion to dismiss and scheduled Case No. 2123 for hearing.
After hearing, the NHA rendered a decision on 9 March 1978 ordering the
reinstatement of the Contract to Sell.
Antipolo Realty filed a Motion for Reconsideration asserting: (a) that it had been
denied due process of law since it had not been served with notice of the scheduled
hearing; and (b) that the jurisdiction to hear and decide Mr. Yuson's complaint was
lodged in the regular courts, not in the NHA, since that complaint involved the
interpretation and application of the Contract to Sell.
ISSUE:
Whether or not that the jurisdiction to hear and decide Mr. Yuson's complaint was
lodged in the regular courts, not in the NHA, since that complaint involved the
interpretation and application of the Contract to Sell?
HELD
It is by now commonplace learning that many administrative agencies exercise and
perform adjudicatory powers and functions, though to a limited extent only. Limited
delegation of judicial or quasi-judicial authority to administrative agencies (e.g., the
Securities and Exchange Commission and the National Labor Relations Commission)
is well recognized in our jurisdiction, 7 basically because the need for special
competence and experience has been recognized as essential in the resolution of
questions of complex or specialized character and because of a companion
recognition that the dockets of our regular courts have remained crowded and
clogged
Presidential Decree No. 1344 12 clarified and spelled out the quasi-judicial
dimensions of the grant of regulatory authority to the NHA in the following quite
specific terms:
SECTION 1. In the exercise of its functions to regulate the real estate
trade and business and in addition to its powers provided for in
Presidential Decree No. 957, the National Housing Authority shall have
exclusive jurisdiction to hear and decide cases of the following nature:
A. Unsound real estate business practices:

B. Claims involving refund and any other claims filed by sub- division
lot or condominium unit buyer against the project owner, developer,
dealer, broker or salesman; and
C. Cases involving specific performance of contractual and statutory
obligations filed by buyers of subdivision lots or condominium units
against the owner, developer, dealer, broker or salesman. (emphasis
supplied.)
The substantive provisions being applied and enforced by the NHA in the instant
case are found in Section 23 of Presidential Decree No. 957 which reads:
Sec. 23. Non-Forfeiture of Payments. No installment payment made
by a buyer in a subdivision or condominium project for the lot or unit
he contracted to buy shall be forfeited in favor of the owner or
developer when the buyer, after due notice to the owner or developer,
desists from further payment due to the failure of the owner or
developer to develop the subdivision or condominium project
according to the approved plans and within the time limit for
complying with the same. Such buyer may, at his option, be
reimbursed the total amount paid including amortization and interests
but excluding delinquency interests, with interest thereon at the legal
rate. (emphasis supplied.)
Having failed to comply with its contractual obligation to complete certain specified
improvements in the subdivision within the specified period of two years from the
date of the execution of the Contract to Sell, petitioner was not entitled to exercise
its options under Clause 7 of the Contract. Hence, petitioner could neither rescind
the Contract to Sell nor treat the installment payments made by the private
respondent as forfeited in its favor. Indeed, under the general Civil Law, 13 in view
of petitioner's breach of its contract with private respondent, it is the latter who is
vested with the option either to rescind the contract and receive reimbursement of
an installment payments (with legal interest) made for the purchase of the
subdivision lot in question, or to suspend payment of further purchase installments
until such time as the petitioner had fulfilled its obligations to the buyer. The NHA
was therefore correct in holding that private respondent's prior installment
payments could not be forfeited in favor of petitioner.
Neither did the NHA commit any abuse, let alone a grave abuse of discretion or act
in excess of its jurisdiction when it ordered the reinstatement of the Contract to Sell
between the parties. Such reinstatement is no more than a logical consequence of
the NHA's correct ruling, just noted, that the petitioner was not entitled to rescind
the Contract to Sell. There is, in any case, no question that under Presidential
Decree No. 957, the NHA was legally empowered to determine and protect the

rights of contracting parties under the law administered by it and under the
respective agreements, as well as to ensure that their obligations thereunder are
faithfully performed.