Metropolitan Cebu Water District v. Adala
NEW DOCTRINEFacts
1. The Antecedents: Respondent Margarita A. Adala applied with the National Water Resources Board (NWRB) for a Certificate of Public Convenience (CPC) to operate a waterworks system in specific barangays of Cebu City. Petitioner Metropolitan Cebu Water District (MCWD), a government-owned and controlled corporation, opposed the application, arguing that its Board of Directors had not consented to the issuance of a franchise, that the proposed waterworks would interfere with its supply, and that it already adequately served the area. 2. Procedural History: The NWRB, after a hearing and ocular inspection, dismissed MCWD's opposition and granted Adala's application for a CPC, setting rates and requiring compliance with regulations. MCWD's motion for reconsideration was denied. MCWD then appealed to the Regional Trial Court (RTC) of Cebu, which affirmed the NWRB's decision. The RTC also denied MCWD's subsequent motion for reconsideration. 3. The Petition: MCWD filed a petition for review on certiorari with the Supreme Court, raising two questions of law: whether the consent of the MCWD Board of Directors is a prerequisite for the NWRB to grant a CPC, and whether the term "franchise" in P.D. 198 includes CPCs issued by the NWRB. The petition also addressed a procedural issue regarding the authority of MCWD's General Manager to file the petition and sign the verification and certification of non-forum shopping.
Issue(s)
Whether the petition should be dismissed on the ground that the General Manager who signed the verification and certification against forum shopping was not specifically authorized by the Board of Directors. Whether the consent of the Board of Directors of a Water District is a condition sine qua non for the grant of a Certificate of Public Convenience by the National Water Resources Board upon operators of waterworks within the service area of the Water District. Whether the term "franchise" as used in Section 47 of Presidential Decree 198, as amended, means a franchise granted by Congress only, or if it also includes a Certificate of Public Convenience issued by the National Water Resources Board; and the constitutionality of Section 47 of P.D. 198.
Ruling
The petition is dismissed. Section 47 of P.D. 198 is declared unconstitutional.
Ratio Decidendi
On the procedural issue of authorization: The Court held that while the Board Resolution No. 015-2004 authorized the General Manager to file "expropriation and other cases," it did not specifically authorize him to sign verifications and certifications against forum shopping. The Court cited BPI Leasing Corporation v. Court of Appeals, emphasizing that physical acts, like the signing of documents, require specific authorization from the board of directors. Since the signing of verifications and certifications against forum shopping is not integral to the act of filing, it cannot be deemed as necessarily included in a general authorization to file cases. Therefore, the petition could be dismissed on this technicality. On the substantive issue of "franchise" and consent: The Court found that the term "franchise" in Section 47 of P.D. 198 should be interpreted broadly to include authorizations granted by administrative agencies like the NWRB, not just those emanating directly from Congress. This interpretation was supported by Philippine Airlines, Inc. v. Civil Aeronautics Board, which held that a franchise can be derived indirectly from the state through a duly designated agency. The Court reasoned that a strict interpretation would lead to an absurd result where the NWRB could issue CPCs without consent, while Congress could not issue franchises without it, rendering the exclusivity provision of Section 47 illusory. The Court noted that P.D. 198 itself, by vesting the power to form and maintain water districts in local legislative bodies and the Administration, implicitly gives the name "franchise" to authorizations that do not proceed directly from the legislature. On the issue of the definition of "franchise" and the constitutionality of Section 47 of P.D. 198: Despite interpreting "franchise" broadly, the Court declared Section 47 of P.D. 198 unconstitutional. This was because the provision, by granting an "exclusive franchise" to water districts, contravened Article XIV, Section 5 of the 1973 Constitution (and its counterpart in the 1987 Constitution), which prohibits exclusive franchises for public utilities. The Court established that water districts are "public utilities" based on their function of supplying water to the public, citing National Power Corporation v. Court of Appeals and National Waterworks and Sewerage Authority v. NWSA Consolidated Unions. Therefore, the prohibition against exclusive franchises applied, rendering Section 47 void ab initio.
Main Doctrine
Section 47 of P.D. 198, which grants an exclusive franchise to water districts, is unconstitutional for being repugnant to Article XIV, Section 5 of the 1973 Constitution, which prohibits exclusive franchises for public utilities.