Municipality of San Juan v. National Waterworks
REITERATIONFacts
The Antecedents: The Municipality of San Juan constructed its waterworks system, known as San Juan Waterworks, partly with insular aid and partly with local and loan funds. It operated this system with a certificate of public convenience. In December 1955, the National Waterworks and Sewerage Authority (NAWASA), invoking Republic Act No. 1383, assumed control over the waterworks system. At the time of takeover, the system was valued at P101,030.02. Procedural History: The Municipality of San Juan filed an action against NAWASA, seeking a declaration of unconstitutionality of Republic Act No. 1383 on the grounds that it deprived the municipality of its property without due process of law and just compensation. The municipality also sought judgment for NAWASA to relinquish possession, ownership, control, supervision, operation, and administration of the waterworks, and to render an accounting of funds derived from its operation since December 1955. The Court of First Instance of Lipa City rendered a decision in favor of the plaintiff, declaring it the owner of the San Juan Waterworks System and ordering NAWASA to render an accounting, or alternatively, to pay the municipality the value of the system if it wished to retain ownership and operation. The Petition: NAWASA appealed the decision of the Court of First Instance, arguing that the transfer of the waterworks system involved only the possession, administration, and control, not ownership, and that this was a valid exercise of police power. NAWASA did not question the wisdom of previous Supreme Court rulings declaring Republic Act No. 1383 unconstitutional.
Issue(s)
Whether the transfer of possession, administration, and control of a municipal waterworks system to NAWASA under Republic Act No. 1383 constitutes a valid exercise of police power or an unconstitutional taking of patrimonial property without just compensation.
Ruling
The Supreme Court affirmed the decision of the Court of First Instance of Lipa City, with modifications. The Court declared Republic Act No. 1383 unconstitutional as it pertains to the transfer of ownership of local waterworks systems without due process and just compensation. The decision specified a period for NAWASA to exercise its option to purchase the waterworks system.
Ratio Decidendi
On the Sole Issue: The Supreme Court held that the provisions of Republic Act No. 1383 providing for the transfer of local waterworks systems to NAWASA are unconstitutional. Reaffirming the rulings in City of Baguio vs. NAWASA and Municipality of La Carlota vs. NAWASA, the Court stated that the National Government cannot appropriate the patrimonial property of municipal corporations without just compensation. The Court specifically rejected the argument that the transfer of 'possession, administration, and control' is a mere exercise of police power, ruling that ownership is nothing without the inherent rights of control and enjoyment. When an owner is deprived of the beneficial use of its property by its being diverted to public use, there is a 'taking' within the constitutional sense. Furthermore, citing Municipality of Compostela vs. NAWASA, the Court noted that the administration of such property cannot be assumed if the income derived from it will be commingled with other funds, potentially benefiting other entities at the expense of the true owner. Consequently, NAWASA must either return the system and account for the profits or pay the stipulated value of P101,030.02 within a six-month window to acquire legal title.
Main Doctrine
Republic Act No. 1383 is unconstitutional insofar as it provides for the transfer of ownership of local waterworks systems belonging to municipal corporations to the National Government without due process of law and just compensation. The State cannot appropriate patrimonial property of municipal corporations without these constitutional safeguards.