Municipality of Compostela, Cebu v. National Waterworks and Sewerage Authority
REITERATIONFacts
The Antecedents: The Municipality of Compostela secured a P30,000 loan in 1940 for the construction of a waterworks system, which was completed in December 1940 and began operation in January 1941. The municipality paid P8,889.29 in interest and P192.10 in principal on the loan, with the remaining balance assumed by the National Government. In March 1956, the National Waterworks and Sewerage Authority (NAWASA), acting under Republic Act No. 1383, assumed administration, operation, and maintenance of the waterworks system without the municipality's consent. Procedural History: The Municipality of Compostela filed an action on October 25, 1960, to recover ownership, possession, operation, jurisdiction, supervision, and control over the waterworks system. The Court of First Instance of Cebu rendered a judgment declaring the municipality as the true, lawful, and exclusive owner and possessor, ordering NAWASA to restore the system upon payment of P8,000.00 for improvements, and ordering the municipality to pay NAWASA P8,000.00 for improvements introduced by NAWASA. The Petition: NAWASA appealed the decision of the Court of First Instance.
Issue(s)
Whether NAWASA could validly assume administration of the waterworks system under Republic Act No. 1383. Whether the waterworks system constituted patrimonial property of the Municipality of Compostela. Whether the National Government could appropriate the waterworks system without just compensation and due process. Whether the Municipality of Compostela had the authority to fix and collect fees for water supplied by its system.
Ruling
The Supreme Court affirmed the decision of the Court of First Instance of Cebu, with costs against appellant NAWASA.
Ratio Decidendi
On the validity of NAWASA's assumption of administration under Republic Act No. 1383: The Court reiterated its rulings in previous cases, such as City of Baguio vs. NAWASA, City of Cebu vs. NAWASA, Naguilian vs. NAWASA, and La Carlota vs. NAWASA. These cases established that the National Government cannot appropriate the patrimonial property of municipal corporations without just compensation and due process of law. Consequently, the National Government, through NAWASA, cannot assume the power of administration over such property if it is based on an unlawful appropriation. The Court emphasized that such administration cannot be assumed by operation of law without appropriating the title to the property, especially when the property or its income is commingled with other properties of the National Government or other municipal corporations, allowing its use for the benefit of another entity or the State itself. On whether the waterworks system constituted patrimonial property: The Court found that the waterworks system was constructed by the Municipality of Compostela using funds obtained through a loan secured by the municipality. This indicated that the municipality became the owner of the system, subject to its obligation to repay the loan. The subsequent condonation of the loan by the National Government did not alter the ownership status; it merely extinguished the municipality's debt. Therefore, the waterworks system was considered patrimonial property of the municipality, not property of the National Government. On the appropriation of patrimonial property without just compensation and due process: The Court held that the National Government's act of appropriating the patrimonial property of a municipal corporation without just compensation and due process is unconstitutional. This principle, established in prior jurisprudence, was applied to the present case, preventing NAWASA from validly taking over the waterworks system without adhering to these constitutional requirements. The assumption of administration by NAWASA was deemed an unlawful appropriation. On the authority to fix and collect fees: The Court affirmed the municipality's authority to fix and collect fees for the water supplied by its system. This authority is deducible from Sections 2317 and 2308(f) of the Revised Administrative Code, as well as Section 2 of Republic Act No. 2264. These provisions grant municipalities the power to establish and operate public utilities and to collect revenues therefrom.
Main Doctrine
The National Government cannot appropriate the patrimonial property of municipal corporations without just compensation and due process of law, nor can it assume administration of such property without appropriating title, especially if its use or income is commingled with other properties for the benefit of another entity.