[15] METRO CEBU WATER V.

ADALA  Petitioner Metropolitan Cebu Water District, a GOCC created pursuant

G.R. No. 168914 | July 4, 2007 | Carpio-Morales, J. | Constitutional to P.D. 1981, opposed the application. It prayed for the denial of
Provisions: Exclusivity respondent’s application on the following grounds:
o Petitioner’s BOD had not consented to the issuance of the franchise
NATURE OF THE CASE: Petition for review on certiorari of a decision of the applied for, such consent being a mandatory condition pursuant to
RTC of Cebu Br. 20 P.D. 198.
Petitioner: METROPOLITAN CEBU WATER DISTRICT (MCWD) o Proposed waterworks would interfere with petitioner’s water supply
Respondent: MARGARITA A. ADALA which it has the right to protect.
o The water needs of the residents in the subject area was already
SUMMARY: Adala filed an application with the NWRB for a certificate of being well served by petitioner.
public convenience (CPC) to operate and maintain waterworks system in  NWRB: dismissed petitioner’s opposition; MR denied.
Cebu City. This was opposed by MCWD because its BOD had not  Petitioner appealed the case to the RTC of Cebu City: denied.
consented to the issuance of the franchise (such consent is a mandatory
condition pursuant to Sec. 47 of P.D. 198). Adala claimed that the term ISSUES AND RATIO:
“franchise” as used in Sec. 47 does not include CPCs; hence, no need for [PROCEDURAL]
the consent of MCWD’s BOD. SC held that the term “franchise” should be
interpreted broadly so as to include, not only authorizations issuing directly 1. WON the petition may be dismissed outright due to the lack of
from Congress in the form of statute (legislative franchise), but also those authorization of Engineer Paredes to sign the verification and
granted by administrative agencies (such as CPCs) to which the power to certification against forum shopping in petitioner’s behalf – YES.
grant franchises has been delegated by Congress. However, the SC ruled Respondent:
that while Sec. 47 of P.D. 198 applies to the issuance of CPCs, the same
provision must be deemed void ab initio for being irreconcilable with Article  Petitioner’s General Manager, Engineer Armando H. Paredes, who filed
XIV, Sec. 5 of the 1973 Constitution (substantially reproduced in Article XII the present petition and signed the accompanying verification and
Sec. 11 of the 1987 Constitution), which prohibits exclusive franchises. certification of nonforum shopping, was not specifically authorized for
that purpose.
DOCTRINE: No franchise, certificate, or any other form of authorization for  Premium Marble Resources v. CA: In the absence of a board resolution
the operation of a public utility shall be granted except to citizens of the authorizing a person to act for and in behalf of a corporation, the action
Philippines or to corporations or associations organized under the laws of filed in its behalf must fail since “the power of the corporation to sue and
the Philippines at least sixty per centum of the capital of which is owned by be sued in any court is lodged with the board of directors that exercises
such citizens, nor shall such franchise, certificate, or authorization be its corporate powers.”
exclusive in character or for a longer period than fifty years (Sec. 5, Art.
XIV of the 1973 Constitution).

FACTS: 1 “Declaring A National Policy Favoring Local Operation And Control Of Water Systems;
 Respondent Margarita Adala filed an application with the National Water Authorizing The Formation Of Local Water Districts And Providing For The Government And
Resources Board (NWRB) for the issuance of a Certificate of Public Administration Of Such Districts; Chartering A National Administration To Facilitate
Convenience (CPC) to operate and maintain waterworks system in Improvement Of Local Water Utilities; Granting Said Administration Such Powers As Are
sitios San Vicente, Fatima, and Sambag in Barangay Bulacao, Cebu Necessary To Optimize Public Service From Water Utility Operation, And For Other
City. Purposes.”
 ABS-CBN Broadcasting Corp. v. CA: For such officers to be deemed and
fully clothed by the corporation to exercise a power of the Board, the
latter must specially authorize them to do so. 2.b. WON the term “franchise” as used in Sec. 47 of P.D. 198, as amended
 It is not disputed that there is a board resolution authorizing Engineer means a franchise granted by Congress through legislation only or does it
Paredes to file cases in behalf of petitioner. However, the board also include in its meaning a certificate of public convenience issued by the
resolution is invalid and ineffective for being a roving authority and not a NWRB for the maintenance of waterworks system or water supply service –
specific resolution pursuant to the ruling in ABSCBN. INCLUDES CERTIFICATE OF PUBLIC CONVENIENCE. However, after a
long discussion that the term “franchise” as used Sec. 47 of P.D. 198
Court: includes CPC, SC held that Sec. 47 of P.D. 198 is unconstitutional for
violating the prohibition against exclusive franchises.
 That the subject board resolution does not authorize Engineer Paredes
to file the instant petition in particular but “expropriation and other Petitioner:
cases” does not, by itself, render the authorization invalid or ineffective.
 While the questioned resolution sufficiently identifies the kind of cases  In support of its contention that the consent of the BOD is a condition
which Engineer Paredes may file in petitioner’s behalf, the same does sine qua non, it cited Sec. 47 of P.D. 198:
not authorize him for the specific act of signing verifications and Sec. 47. Exclusive Franchise. — No franchise shall be granted to
certifications against forum shopping. It merely authorizes Engineer any other person or agency for domestic, industrial or commercial
Paredes to file cases in behalf of the corporation. There is no mention water service within the district or any portion thereof unless and
of signing verifications and certifications against forum shopping, or, for except to the extent that the board of directors of said district
that matter, any document of whatever nature. consents thereto by resolution duly adopted, such resolution,
 A board resolution purporting to authorize a person to sign documents however, shall be subject to review by the Administration.
in behalf of the corporation must explicitly vest such authority.
 There being no such consent on the part of the BOD, respondent’s
 BPI Leasing Corp. v. CA: Corporations have no powers except those
application for CPC should be denied.
expressly conferred upon them by the Corporation Code and those that
 “Franchise” should be broadly interpreted, such that the prohibition
are implied by or are incidental to its existence. These powers are
against its grant to other entities without the consent of the district’s
exercised through their board of directors and/or duly authorized officers
board of directors extends to the issuance of CPCs. A contrary
and agents. Hence, physical acts can be performed only by natural
reading, petitioner adds, would result in absurd consequences, for it
persons duly authorized for the purpose by corporate bylaws or by
would mean that Congress’ power to grant franchises for the operation
specific act of the board of directors. There must be a resolution issued
of waterworks systems cannot be exercised without the consent of
by the board of directors that specifically authorizes him to institute the
water districts.
petition and execute the certification, for it is only then that his actions
can be legally binding.
Respondent:
 Rule 13, Section 2 of the Rules of Court merely defines filing as “the act
of presenting the pleading or other paper to the clerk of court.” Since the  Prohibition only applies to franchises in the strict sense — those granted
signing of verifications and certifications against forum shopping is not by Congress by means of statute — and does not extend to CPCs
integral to the act of filing, this may not be deemed as necessarily granted by agencies such as the NWRB.
included in an authorization merely to file cases.  A CPC is formal written authority issued by quasijudicial bodies for the
operation and maintenance of a public utility for which a franchise is not
2.a. WON the consent of the BOD of the Metro Cebu Water District is a required by law and a CPC issued by this Board is an authority to
operate and maintain a waterworks system or water supply service.
condition sine qua non to the grant of certificate of public convenience by the
 A franchise is privilege or authority to operate appropriate private
NWRB upon operators of waterworks within the service area of the water
property for public use vested by Congress through legislation.
district – NO, because Sec. 47 of P.D 198 was deemed unconstitutional.
 A CPC is different from a franchise and Sec. 47 of P.D. 198 refers only
to franchise. Accordingly, the possession of franchise by a water district
 does not bar the issuance of a CPC for an area covered by the water
district.
BUT!!!
Court:
 While the prohibition in Sec. 47 of P.D. 198 applies to the issuance of
 Sided with petitioner’s position that an overly strict construction of the CPCs for the reasons discussed above, the same provision must be
term “franchise” would lead to an absurd result. deemed void ab initio for being irreconcilable with Article XIV, Section 5
 If franchises, in this context, were strictly understood to mean an of the 1973 Constitution (the constitution in force when P.D. 198 was
authorization issuing directly from the legislature, it would follow that, issued, See Notes.)
while Congress cannot issue franchises for operating waterworks  Article XIV, Sec. 5 of the 1973 Constitution has been substantially
systems without the water district’s consent, the NWRB may keep on reproduced in Article XII Sec.11 of the 1987 Constitution, including the
issuing CPCs authorizing the very same act even without such consent. prohibition against exclusive franchises.
In effect, not only would the NWRB be subject to less constraints than  Water districts fall under the term “public utility.” Since Sec. 47 of P.D.
Congress in issuing franchises. The exclusive character of the franchise 198, which vests an “exclusive franchise” upon public utilities, is clearly
provided for by Sect. 47 would be illusory. repugnant to Art. XIV, Section 5 of the 1973 Constitution, it is
 PAL v. Civil Aeronautics Board: Construed the term “franchise” broadly unconstitutional and may not, therefore, be relied upon by petitioner in
so as to include, not only authorizations issuing directly from Congress support of its opposition against respondent’s application for CPC and
in the form of statute, but also those granted by administrative agencies the subsequent grant thereof by the NWRB.
to which the power to grant franchises has been delegated by
Congress. “Congress has granted certain administrative agencies the
power to grant licenses for, or to authorize the operation of certain RULING: Section 47 of P.D. 198 is unconstitutional. The Petition is thus, in
public utilities. xxx It is generally recognized that a franchise may be light of the foregoing discussions, DISMISSED.
derived indirectly from the state through a duly designated agency, and
to this extent, the power to grant franchises has frequently been
delegated, even to agencies other than those of a legislative nature. In NOTES:
pursuance of this, it has been held that privileges conferred by grant by
local authorities as agents for the state constitute as much a legislative SECTION 6. Formation of District. — This Act is the source of
franchise as though the grant had been made by an act of the authorization and power to form and maintain a district. Once formed, a
Legislature.” district is subject to the provisions of this Act and not under the jurisdiction of
 The legislative authority intended to delegate its power to issue any political subdivision. For purposes of this Act, a district shall be
franchises in the case of water districts is clear from the fact that, considered as a quasi public corporation performing public service and
pursuant to the procedure outlined in P.D. 198, it no longer plays a supplying public wants. As such, a district shall exercise the powers, rights
direct role in authorizing the formation and maintenance of water and privileges given to private corporations under existing laws, in addition
districts, it having vested the same to local legislative bodies and the to the powers granted in, and subject to such restrictions imposed, under
Local Water Utilities Administration (LWUA), as shown in Secs. 6 and & this Act. To form a district, the legislative body of any city, municipality
of P.D. 198. (See Notes) or province shall enact a resolution containing the following:
 According to Secs. 6 & 7 of P.D. 198, once a district is “duly formed and
existing” after following the above procedure, it acquires the “exclusive (a) The name of the local water district, which shall include the name of the
franchise” referred to in Section 47. P.D. 198 itself gives the name city, municipality, or province, or region thereof, served by said system,
“franchise” to an authorization that does not proceed directly from the followed by the words “Water District.”
legislature.
 It would thus be incongruous to adopt in this instance the strict (b) A description of the boundary of the district. In the case of a city or
interpretation proffered by respondent and exclude from the scope of municipality, such boundary may include all lands within the city or
the term “franchise” the CPCs issued by the NWRB. municipality. A district may include one or more municipalities, cities or
provinces, or portions thereof: Provided, That such municipalities, cities or 75% of the total active service connections are situated shall pass an initial
provinces, or portions thereof, cover a contiguous area. resolution to be concurred in by the other cities, municipalities or provinces.

(c) A statement completely transferring any and all waterworks and/or

sewerage facilities managed, operated by or under the control of such city,
municipality or province to such district upon the filing of resolution forming SECTION 7. Filing of Resolution. — A certified copy of the resolution or
the district. resolutions forming a district shall be forwarded to the office of the
Secretary of Administration. If found by the Administration to conform
(d) A statement identifying the purpose for which the district is formed, which to the requirements of Section 6 and the policy objectives in Section 2,
shall include those purposes outlined in Section 5 above. the resolution shall be duly filed. The district shall be deemed duly
formed and existing upon the date of such filing. A certified copy of said
(e) The names of the initial directors of the district with the date of expiration resolution showing the stamp of the Administration shall be maintained in the
of the term of office for each which shall be on the 31st of December of first, office of the district. Upon such filing, the local government or governments
second, or third even numbered year after assuming office, as set forth in concerned shall lose ownership, supervision and control or any right
Section 11 hereof. whatsoever over the district except as provided herein.
(f) A statement that the district may only be dissolved on the grounds and
under the conditions set forth in Section 45 of this Title.
SECTION 5., ART. XIV of the 1973 CONSTITUTION. No franchise,
(g) A statement acknowledging the powers, rights and obligations as set certificate, or any other form of authorization for the operation of a public
forth in Section 25 of this Title. utility shall be granted except to citizens of the Philippines or to corporations
or associations organized under the laws of the Philippines at least sixty per
centum of the capital of which is owned by such citizens, nor shall such
Nothing in the resolution of formation shall state or infer that the local franchise, certificate, or authorization be exclusive in character or for a
legislative body has the power to dissolve, alter or affect the district beyond longer period than fifty years. Neither shall any such franchise or right be
that specifically provided for in this Act. granted except under the condition that it shall be subject to amendment,
alteration, or repeal by the Batasang Pambansa when the public interest so
requires. The State shall encourage equity participation in public utilities by
the general public. The participation of foreign investors in the governing
If two or more cities, municipalities or provinces, or any combination thereof, body of any public utility enterprise shall be limited to their proportionate
desire to form a single district, a similar resolution shall be adopted in each share in the capital thereof.”
city, municipality and province; or the city, municipality or province in which