Tawang Multi-Purpose Cooperative v. La Trinidad Water District
REITERATIONFacts
The Antecedents: TMPC, a registered cooperative organized to provide domestic water services in Barangay Tawang, La Trinidad, filed with the National Water Resources Board an application for a certificate of public convenience on 2000-10-09. La Trinidad Water District opposed the application relying on Section 47 of Presidential Decree No. 198, as amended, which it construed to grant an exclusive franchise. The NWRB approved TMPC's application by Resolution No. 04-0702 dated 2002-07-23 and in a Decision dated 2002-08-15, holding that exclusive franchises are unconstitutional and that TMPC was qualified to operate the waterworks system. LTWD moved for reconsideration which the NWRB denied by resolution dated 2002-11-18. Procedural History: LTWD appealed the NWRB decision to the Regional Trial Court, Judicial Region 1, Branch 62, La Trinidad, Benguet, which, in its 2004-10-01 Judgment, set aside the NWRB rulings and cancelled TMPC's certificate of public convenience, finding Section 47 valid. The RTC denied TMPC's motion for reconsideration by Order dated 2004-11-06. TMPC filed a petition for review on certiorari under Rule 45 of the Rules of Court before the Supreme Court. The Petition: TMPC contended that the RTC erred in upholding the validity of Section 47 of PD No. 198; it maintained that Section 47 permits the creation of exclusive franchises in violation of the constitutional prohibition that "no franchise... be exclusive in character," and thus the RTC should have deferred to the NWRB's grant of the CPC.
Issue(s)
Whether the Regional Trial Court erred in holding that Section 47 of Presidential Decree No. 198, as amended, is valid and constitutional. Whether the creation of exclusive franchises for the operation of public utilities can be effected indirectly through administrative instruments such as the board of directors of a water district or the Local Water Utilities Administration. Whether the National Water Resources Board's grant of a certificate of public convenience to TMPC should be reinstated despite the RTC's cancellation of the certificate.
Ruling
The petition is GRANTED. Section 47 of Presidential Decree No. 198 is DECLARED UNCONSTITUTIONAL. The 2004-10-01 Judgment and 2004-11-06 Order of the Regional Trial Court are SET ASIDE, and the NWRB's 2002-07-23 Resolution and 2002-08-15 Decision granting TMPC's CPC are REINSTATED.
Ratio Decidendi
On Whether the RTC erred in upholding Section 47: The Court held that franchises for public utilities cannot be exclusive in character as explicitly provided in the 1935, 1973 and 1987 Constitutions, citing Article XIII, Section 8 of the 1935 Constitution, Article XIV, Section 5 of the 1973 Constitution, and Article XII, Section 11 of the 1987 Constitution which uniformly state that "nor shall such franchise... be exclusive in character." The Court applied the maxim "What cannot be legally done directly cannot be done indirectly," citing Alvarez v. PICOP Resources, Inc., and related precedents, to conclude that allowing administrative bodies to create exclusivity would permit indirectly what the Constitution prohibits directly. Applying Metropolitan Cebu Water District v. Adala, the Court reiterated that Section 47, which vests power in the board of directors and the LWUA to consent to or deny other franchises, is repugnant to the constitutional prohibition and must be deemed void. The Court emphasized constitutional supremacy and the duty of courts to invalidate statutes and provisions that conflict with the Constitution, relying on Social Justice Society v. Dangerous Drugs Board and Sabio v. Gordon. The Court rejected the RTC's interpretation that the Constitution permits an "exclusive on its face" franchise provided the State retains ultimate authority, finding that such an interpretation would permit circumvention of the constitutional mandate and set a dangerous precedent allowing indirect exclusivity. On Whether exclusive franchises can be created indirectly by administrative bodies: The Court reasoned that the President, Congress and the Court cannot create exclusive franchises directly, and therefore they cannot allow others to do so indirectly; it applied the legal maxim established in Alvarez v. PICOP Resources, Inc., and reinforced in Akbayan Citizens Action Party v. Aquino and Agan, Jr. v. Philippine International Air Terminals Co., Inc., to bar indirect means of achieving exclusivity. The Court examined Section 47 of PD No. 198 and found that it effectively authorizes the board of directors and the Local Water Utilities Administration to permit exclusivity by withholding consent to other franchises, thus functioning as an exception to the constitutional prohibition. The Court held that Section 47's delegation of discretion to a non-legislative, non-regulatory management board to create exceptions to the Constitution's ban is impermissible; it relied on Metropolitan Cebu Water District v. Adala which had earlier declared Section 47 void ab initio. The Court cautioned that sustaining the RTC's position would allow Congress to accomplish indirectly what it is prohibited from doing directly, thereby undermining constitutional commands. Finally, the Court held that police power does not permit violation of the Constitution, applying precedent from Metropolitan Manila Development Authority v. Viron Transportation Co., Inc. and others to limit regulatory discretion. On Reinstatement of NWRB's grant of CPC: Having declared Section 47 unconstitutional and finding no defect in the NWRB's determination that TMPC was legally and financially qualified, the Court concluded that the NWRB's grant of the certificate of public convenience must be reinstated. The Court applied principles of judicial review and constitutional supremacy, citing Quijano v. Development Bank of the Philippines and Security Bank and Trust Company v. RTC of Makati for the proposition that clear statutory language and constitutional mandates must be applied as written. The Court noted that the NWRB had correctly concluded that exclusivity is unconstitutional and that TMPC met the qualifications to operate; accordingly, the Court set aside the RTC's cancellation and restored the NWRB's decision. The Court thereby vindicated the administrative grant rather than validating Section 47's purported exclusivity.
Main Doctrine
Franchises for the operation of public utilities cannot be exclusive in character; Section 47 of Presidential Decree No. 198 is unconstitutional for permitting the creation of exclusive franchises indirectly.