Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 72807 September 9, 1991
MARILAO WATER CONSUMERS ASSOCIATION,
INC., petitioners,
vs.
INTERMEIATE APPELLATE COURT, MUNICIPALIT! O"
MARILAO, #ULACAN, SANGGUNIANG #A!AN, MARILAO,
#ULACAN, $%& MARILAO WATER ISTRICT, respondents.
Magtanggol C. Gunigundo for petitioner.
Prospero A. Crescini for Marilao Water District.

NAR'ASA, J.(p
Involved in this appeal is the deterination of !hich triburial has
"urisdiction over the dissolution of a !ater district or#ani$ed and
operatin# as a %uasi&public corporation under the provisions of
Presidential Decree No. '(), as aended*
1
the Re#ional Trial
+ourt, or the Securities , -.chan#e +oission.
PD '() authori$es the foration, la/s do!n the po!ers and
functions, and #overns the operation of !ater districts
throu#hout the countr/* it is 0the source of authori$ation and
po!er to for and aintain a 1!ater2 district.0 Once fored, it
sa/s, a district is sub"ect to its provisions and is not under the
"urisdiction of an/ political subdivision.
2
3nder PD '(), !ater districts a/ be created b/ the di4erent
local le#islative bodies b/ the passa#e of a resolution to this
e4ect, sub"ect to the ters of the decree. The priar/ function of
these !ater districts is to sell !ater to residents !ithin their
territor/, under such schedules of rates and char#es as a/ be
deterined b/ their boards.
)
The/ shall ana#e, adinister,
operate and aintain all !atersheds !ithin their territorial
boundaries, safe#uard and protect the use of the !aters therein,
supervise and control structures !ithin their service areas, and
prohibit an/ person fro sellin# or other!ise disposin# of !ater
for public purposes !ithin their service areas !here district
facilities are available to provide such service.
*
The decree speci5es the ters under !hich !ater districts a/
be fored and operate. It prescribes, particularl/ 6
a2 the nae b/ !hich a !ater district shad be 7no!n, !hich shall
be contained in the enablin# resolution, and shall include the
nae of the cit/, unicipalit/, or province, or re#ion thereof,
served b/ said s/ste, follo!ed b/ the !ords, 89ater District*8
+
b2 the nuber and %uali5cations of the ebers of the boards of
directors, !ith the date of e.piration of ter of o:ce for
each*
,
the anner of their selection and initial appointent b/
the head of the local political subdivision*
7
their ters of o:ce
1!hich shall be in sta##ered periods of t!o, four and si.
/ears2*
8
the anner of 5llin# up vacancies in the board*
9
the
copensation and liabilities of ebers of the board.
10
The
resolution shall contain a 0stateent that the district a/ onl/ be
dissolved on the #rounds and under the conditions set forth in
Section ;;0 of the la!, but nothin# in the resolution of foration,
the decree adds, 0shall state or infer that the local le#islative
bod/ has the po!er to dissolve, alter or a4ect the district be/ond
that speci5call/ provided for in this <ct.0
11
The "uridical entities thus created and or#ani$ed under PD '()
are considered %uasi&public corporations, perforin# public
services and suppl/in# public !ants. The/ are authori$ed not
onl/ to 0e.ercise all the po!ers !hich are e.pressl/ #ranted0 b/
said decree, and those 0!hich are necessaril/ iplied fro or
incidental to0 said po!ers, but also 0the po!er of einent
doain, the e.ercise .. 1of !hich2 shall ho!ever be sub"ect to
revie! b/ the <dinistration0 1=93<2. In addition to the po!ers
#ranted in, and sub"ect to such restrictions iposed under, the
<ct, the/ a/ also e.ercise the po!ers, ri#hts and privile#es
#iven to private corporations under e.istin# la!s.
12
The decree also established a #overnent corporation attached
to the O:ce of the President, 7no!n as the =ocal 9ater 3tilities
<dinistration 1=93<2
1)
to function priaril/ as 0a speciali$ed
lendin# institution for the prootion developent and 5nancin#
of local !ater utilities.0 It has the follo!in# speci5c po!ers and
duties*
1*
1'2 prescribe iniu standards and re#ulations
in order to assure acceptable standards of
construction aterials and supplies, aintenance,
operation, personnel trainin#, accountin# and 5scal
practices for local !ater utilities*
1>2 furnish technical assistance and personnel
trainin# pro#ras for local !ater utilities*
1?2 onitor and evaluate local !ater standards*
and
1;2 e4ect s/stes inte#ration, "oint investent and
operations, district anne.ation and deanne.ation
!henever econoicall/ !arranted.
It !as pursuant to the fore#oin# rules and nors that the Marilao
9ater District !as fored b/ Resolution of the San##unian#
@a/an of the Municipalit/ of Marilao dated Septeber '), '()>,
!hich resolution !as thereafter for!arded to the =93< and 0dul/
5led0 b/ it on October ;, '()> after ascertainin# that it
confored to the re%uireents of the la!.
1+
The clai !as thereafter ade that the creation of the Marilao
9ater District in the anner aforestated !as defective and
ille#al. The clai !as ade b/ a non&stoc7, non&pro5t
corporation 7no!n as the Marilao 9ater +onsuers <ssociation,
Inc., in a petition dated Deceber '>, '()? 5led !ith the
Re#ional Trial +ourt at Malolos, @ulacan. Ipleaded as
respondents !ere the Marilao 9ater District, as !ell as the
Municipalit/ of Marilao, @ulacan* its San##unian# @a/an* and
Ma/or Nicanor V. A3I==-RMO. The petition pra/ed for the
dissolution of the !ater district on the basis chieB/ of the
follo!in# alle#ations, to !itC
'2 there had been no real, but onl/ a 0farcical0 public hearin#
prior to the creation of the 9ater District*
>2 not onl/ !as the !ater!or7s s/ste turned over to the 9ater
District !ithout copensation. but a subsid/ !as ille#all/
authori$ed for it*
?2 the 9ater District !as bein# run !ith 0ne#li#ence, apath/,
indi4erence and isana#eent,0 and !as not providin#
ade%uate and e:cient service to the counit/, but this
not!ithstandin#, the consuers !ere bein# billed in full and
threatened !ith disconnection for failure to pa/ bills on tie* in
fact, one of the consuers !ho coplained had his !ater service
cut o4*
;2 the consuers !ere conse%uentl/ 0forced to or#ani$e
theselves into a corporation last October ?, '()? ... for the
purpose of deandin# ade%uate and su:cient suppl/ of !ater
and e:cient ana#eent of the !ater!or7s in Marilao,
@ulacan.
1,
<ctin# on the coplaint, particularl/ on the application for
teporar/ restrainin# order and preliinar/ in"unction set out
therein, the Trial +ourt issued an Order on Deceber >>, '()?
settin# the application for preliinar/ hearin#, re%uirin# the
respondents to ans!er the petition and restrainin# the until
further orders fro collectin# an/ !ater bill, disconnectin# an/
!ater service, transferrin# an/ propert/ of the !ater!or7s, or
disbursin# an/ aount in favor of an/ person. The order !as
odi5ed on Danuar/ E, '(); to allo! the respondents to pa/ the
district8s outstandin# obli#ations to Meralco, b/ !a/ of e.ception
to the restrainin# order.
On Danuar/ '?, '(); the Marilao 9ater District 5led its <ns!er
!ith +opulsor/ +ounterclai, den/in# the aterial alle#ations
of the petition and assertin# as a:rative defenses 1a2 the
+ourt8s lac7 of "urisdiction of the sub"ect atter, and 1b2 the
failure of the petition to state a cause of action. The ans!er
alle#ed that the atter of the !ater district8s dissolution fell
under the ori#inal and e.clusive "urisdiction of the Securities ,
-.chan#e +oission 1S-+2* and the atter of the propriet/ of
!ater rates, !ithin the priar/ adinistrative "urisdiction of the
=93< and the %uasi&"udicial "urisdiction of the National 9ater
Resources +ouncil. On the sae date, Marilao 9ater District 5led
a otion for adission of its third&part/ coplaint a#ainst the
o:cers and directors of the petitioner corporation, it bein#
claied that the/ had insti#ated the 5lin# of the petition sipl/
because one of the !as a political adversar/ of the respondent
Ma/or.
The other respondents also 5led their ans!er throu#h the
Provincial Fiscal of @ulacan, settin# up the sae a:rative
defense of lac7 of "urisdiction on the part of the Trial +ourt* and
failure of the petition to state a cause of action since it aditted
that it !as b/ resolution of the Marilao San##unian# @a/an that
the Marilao 9ater District !as constituted.
The petitioner 6 the Marilao +onsuers <ssociation 5led a repl/,
and an ans!er to the counterclai, on Danuar/ >E, '();. It
averred that since the Marilao 9ater District had not been
or#ani$ed under the +orporation +ode, the S-+ had no
"urisdiction over a proceedin# for its dissolution* and that under
Section ;F of PD '(), the proceedin# to deterine if the
dissolution of the !ater district is for the best interest of the
people, is !ithin the copetence of a re#ular court of "ustice, and
neither the =93< nor the National 9ater Resources +ouncil is
copetent to ta7e co#ni$ance of the atter of dissolution of the
!ater district and recover/ of its !ater!or7s s/ste, or the
e.orbitant rates iposed b/ it. The +onsuers <ssociation also
opposed adission of the third&part/ coplaint on the #round
that its individual o:cers are not personall/ aenable to suit for
acts of the corporation,
17
!hich has a personalit/ distinct fro
theirs.
The Trial +ourt found for the respondents. It disissed the
+onsuers <ssociation8s suit b/ Order handed do!n on Dune ),
'(); !hich pertinentl/ reads as follo!sC
<fter a consideration of the ar#uents raised b/
the herein parties, the +ourt is ore inclined to
ta7e the position of the respondents that the
Securities and -.chan#e +oission has the
e.clusive and ori#inal "urisdiction over this case.
9G-R-FOR-, the instant petition, the third&part/
coplaint, and the copulsor/ counterclai 5led
herein are hereb/ DISMISS-D, for lac7 of
"urisdiction.
Its otion for reconsideration havin# been denied, b/ Order
dated Septeber >H, '();, the +onsuers <ssociation 5led !ith
this +ourt a petition for revie! on certiorari, !hich !as doc7eted
as A.R. No. E)I;>. The case !as ho!ever referred to the
Interediate <ppellate +ourt b/ this +ourt8s Second Division, in a
Resolution dated Noveber '(, '();, !here it !as doc7eted as
<+&A.R. S.P. No. H;)E>.
@ut there in the Interediate <ppellate +ourt, the +onsuers
<ssociation8s cause also et !ith failure. The <ppellate +ourt, in
its Decision proul#ated on Septeber 'H, '()F, ruled that its
cause could not prosper because 6
'2 it had availed of the !ron# reed/, i.e., the special civil action
of certiorari* the Order of Dune ), '(); bein# a 5nal order in the
sense that it 0left nothin# else to be done in the case the proper
reed/ !as appeal under Rule ;' of the Rules of +ourt and not a
certiorari suit under Rule EF* and
>2 even if the certiorari action be treated as an appeal, it !as ';
unerrin#l/ clear that the controvers/ ... falls !ithin the
copetence of the S-+ in virtue of P.D. (H>&<
18
9hich provides
that said a#enc/ 0shall have ori#inal and e.clusive "urisdiction to
hear and decide cases involvin#C
a2 ... ... ...
b2 +ontroversies arisin# out of intra&corporate or
partnership relations, bet!een and aon#
stoc7holders, ebers or associates* bet!een an/
or all of the and the corporation, partnership or
association of !hich the/ are stoc7holders,
ebers or associates, respectivel/* and bet!een
such corporation, partnership or association and
the state insofar as it concerns their individual
franchise or ri#ht to e.ist as such entit/ ...
The <ppellate +ourt subse%uentl/ denied the petitioner8s otion
for reconsideration, b/ Resolution dated Noveber ;, '()F.
Gence, the petition for revie! on certiorari at bar, in !hich
reversal of the <ppellate Tribunal8s decision is sou#ht, the
petitioner insistin# that the reed/ resorted to b/ it !as correct
but isunderstood b/ the I.<.+. and that the la! does indeed
vest e.clusive "urisdiction over the sub"ect atter of the case in
the Re#ional Trial +ourt, not the Securities and -.chan#e
+oission.
Turnin# 5rst to the ad"ective issue, it is %uite evident that the
Order of the Trial +ourt of Dune ), '();, disissin# the action of
the +onsuers <ssociation, is reall/ a 5nal order* it 5nall/
disposed of the proceedin# and left nothin# ore to be done b/
the +ourt on the erits. No!, the 5rl/ settled principle is that
the reed/ a#ainst such a fnal order is the ordinar/ reed/ of
an appeal, either solel/ on %uestions of la! 6 in !hich case the
appeal a/ be ta7en onl/ to the Supree +ourt 6 or %uestions
of fact and la! 6 in !hich event the appeal should be brou#ht to
the +ourt of <ppeals. The e.traordinar/ reed/ of a special civil
action of certiorari or prohibition is not the appropriate recourse
because precisel/, one of the conditions for availin# of it is that
there should be 0no appeal, nor an/ plain, speed/ and ade%uate
reed/ in the ordinar/ course of la!.
19
< resort to the latter
instead of the forer !ould ordinaril/ be fatal, unless it should
appear in a #iven case that appeal !ould other!ise be an
ine:cacious or inade%uate reed/.
20
In holdin# that Marilao 9ater District had resorted to the !ron#
reed/ a#ainst the Trial +ourt8s order disissin# its suit, i.e., the
special civil action of certiorari, instead of an appeal, the
Interediate <ppellate +ourt %uite overloo7ed the fact, not
seriousl/ disputed b/ the Marilao 9ater District and its co&
respondents, that the forer had in fact availed of the reed/ of
appeal b/ certiorari under Rule ;F of the Rules of +ourt, as
re%uired b/ para#raph >F of the Interi Rules , Auidelines of this
+ourt, ipleentin# Batas Pambansa Bilang 129* that before
doin# so, it had 5rst as7ed for and been #ranted an e.tension of
thirt/ 1?H2 da/s !ithin !hich to 5le a petition for revie! on
certiorari* but that subse%uentl/, b/ Resolution of this +ourt8s
Second Division dated Noveber '(, '();, the case !as referred
to the Interediate <ppellate +ourt, evidentl/ because it !as felt
that certain factual issues had /et to be deterined. In an/ case,
all thin#s considered, the +ourt is not prepared to have the case
at bar 5nall/ deterined on this procedural issue.
The "uridical entities 7no!n as !ater districts created b/ PD '(),
althou#h considered as %uasi&public corporations and authori$ed
to e.ercise the po!ers, ri#hts and privile#es #iven to private
corporations under e.istin# la!s
21
are entirel/ distinct fro
corporations or#ani$ed under the +orporation +ode, PD (H>&<, as
aended. The +orporation +ode has nothin# !hatever to do !ith
their foration and or#ani$ation, all the ters and conditions for
their or#ani$ation and operation bein# particularl/ spelled out in
PD '(). The resolutions creatin# the, their charters, in other
!ords, are 5led not !ith the Securities and -.chan#e +oission
but !ith the =93<. It is these resolutions ua charters, and not
articles of incorporation dra!n up under the +orporation +ode,
!hich set forth the nae of the !ater districts, the nuber of
their directors, the anner of their selection and replaceent,
their po!ers, etc. The S-+ !hich is char#ed !ith enforceent of
the +orporation +ode as re#ards corporations, partnerships and
associations fored or operatin# under its provisions, has no
po!er of supervision or control over the activities of !ater
districts. More particularl/, the S-+ has no po!er of oversi#ht
over such activities of !ater districts as sellin# !ater, fulin# the
rates and char#es therefor
22
or the ana#eent, adinistration,
operation and aintenance of !atersheds !ithin their territorial
boundaries, or the safe#uardin# and protection of the use of the
!aters therein, or the supervision and control of structures !ithin
the service areas of the district, and the prohibition of an/ person
fro sellin# or other!ise disposin# of !ater for public purposes
!ithin their service areas !here district facilities are available to
provide such service.
2)
That function of supervision or control
over !ater districts is entrusted to the =ocal 9ater 3tilities
<dinistration.
2*
+onse%uentl/, as re#ards the activities of !ater
districts "ust entioned, the S-+ obviousl/ can have no clai to
an/ e.pertise.
The 0Provincial 9ater 3tilities <ct of '(I?0 has a speci5c
provision #overnin# dissolution of !ater districts created
thereunder This is Section ;F of PD '()
2+
readin# as follo!sC
S-+. ;F. Dissolution. 6 < district a/ be dissolved
b/ resolution of its board of directors 5led in the
anner of 5lin# the resolution forin# the districtC
Provided, ho!ever, That prior to the adoption of
an/ such resolutionC 1'2 another public entit/ has
ac%uired the assets of the district and has
assued all obli#ations and liabilities attached
thereto* 1>2 all bondholders and other creditors
have been noti5ed and the/ consent to said
transfer and dissolution* and 1?2 a court of
copetent "urisdiction has found that said transfer
and dissolution are in the best interest of the
public.
3nder this provision, it is the =93< !hich is the adinistrative
bod/ involved in the voluntar/ dissolution of a !ater district* it is
!ith it that the resolution of dissolution is 5led, not the Securities
and -.chan#e +oission. <nd this provision is evidentl/ %uite
distinct and di4erent fro those on dissolution of corporations
0fored or or#ani$ed under the provisions of .. 1the +orporation2
+ode0 set out in Sections ''I to '>', inclusive, of said +ode,
under !hich dissolution a/ be voluntar/ 1b/ vote of the
stoc7holders or ebers2, #enerall/ e4ected b/ the 5lin# of the
correspondin# resolution !ith the Securities and -.chan#e
+oission, or involuntar/, coenced b/ the 5lin# of a veri5ed
coplaint also !ith the S-+.
<ll these ar#ue a#ainst concedin# "urisdiction in the Securities
and -.chan#e +oission over proceedin#s for the dissolution
of !ater districts. For althou#h described as %uasipublic
corporations, and #ranted the sae po!ers as private
corporations, !ater districts are not reall/ corporations. The/
have no incorporators, stoc7holders or ebers, !ho have the
ri#ht to vote for directors, or aend the articles of incorporation
or b/&la!s, or pass resolutions, or other!ise perfor such other
acts as are authori$ed to stoc7holders or ebers of
corporations b/ the +orporation +ode. In a !ord, there can be no
such thin# as a relation of corporation and stoc7holders or
ebers in a !ater district for the siple reason that in the
latter there are no stoc7holders or ebers. @et!een the !ater
district and those !ho are recipients of its !ater services there
e.ists not the relationship of corporation&and&stoc7holder, but
that of a service a#enc/ and users or custoers. There can
therefore be no such thin# in a !ater district as 0intra&corporate
or partnership relations, bet!een and aon# stoc7holders,
ebers or associates 1or2 bet!een an/ or all of the and the
corporation, partnership or association of !hich the/ are
stoc7holders, ebers or associates, respectivel/,0 !ithin the
conteplation of Section F of the +orporation +ode so as to brin#
controversies involvin# the !ithin the copetence and
co#ni$ance of the S-+.
There can be even less debate about the fact that the S-+ has no
"urisdiction over the co&respondents of the Marilao 9ater District
6 the Municipalit/ of Marilao, its San##unian# @a/an and its
Ma/or 6 !ho are accused of a 0conspirac/0 !ith the !ater
district in respect of the anoalies described in the +onsuer
<ssociations8 petition.
2,
The controvers/, therefore, bet!een the +onsuers <ssociation,
on the one hand, and Marilao District and its co&respondents, on
the other, is not !ithin the "urisdiction of the S-+.
In their ans!er !ith counterclai in the proceedin#s a uo, the
respondents advocated the theor/ that the case falls !ithin the
"urisdiction of the =93< andJor the National 9ater Resources
+ouncil.
The =93< does not appear to have an/ ad"udicator/ functions. It
is, as alread/ pointed out, 0priaril/ a speciali$ed lendin#
institution for the prootion, developent and 5nancin# of local
!ater utilities,
27
!ith po!er to prescribe iniu standards and
re#ulations re#ardin# aintenance, operation, personnel
trainin#, accountin# and 5scal practices for local !ater utilities,
to furnish technical assistance and personnel trainin# pro#ras
therefor* onitor and evaluate local !ater standards* and e4ect
s/stes inte#ration, "oint investent and operations, district
anne.ation and deanne.ation !henever econoicall/
!arranted.
28
The =93< has %uasi&"udicial po!er onl/ as re#ards
rates or char#es 5.ed b/ !ater districts, !hich it a/ revie! to
establish copliance !ith the provisions of PD '(), !ithout
pre"udice to appeal bein# ta7en therefro b/ a !ater
concessionaire to the National 9ater Resources +ouncil !hose
decision thereon shall be appealable to the O:ce of the
President.
29
The rates or char#es established b/ respondent
Marilao 9ater District do not appear to be at issue in the
controvers/ at bar.
The National 9ater Resources +ouncil, on the other hand, is
conferred 0ori#inal "urisdiction over all disputes relatin# to
appropriation, utili$ation, e.ploitation, developent, control,
conservation and protection of !aters !ithin the eanin# and
conte.t of the provisions of ...0 1the +ode b/ !hich said +ouncil
!as created, Presidential Decree No. 'HEI, other!ise 7no!n as
the 9ater +ode of the Philippines2*
)0
and its decision on !ater
ri#hts controversies a/ be appealed to the +ourt of First
Instance of the province !here the sub"ect atter of the
controvers/ is situated.
)1
It also has authorit/ to revie!
%uestions of anne.ations and deanne.ations 1addition to or
e.clusion fro the district of territor/2. <#ain it does not appear
that the case at bar is a !ater ri#hts controvers/ or one involvin#
anne.ation or deanne.ation.
9hat essentiall/ is sou#ht b/ the +onsuers <ssociation is the
dissolution of the Marilao 9ater District, on the #round that its
foration !as ille#al and invalid* the !ater!or7s s/ste had
been turned over to it !ithout copensation and a subsid/
ille#all/ authori$ed for it* and the 9ater District !as bein# run
!ith 0ne#li#ence, apath/, indi4erence and isana#eent,0 and
!as not providin# ade%uate and e:cient service to the
counit/.
)2
No!, as alread/ above stated, the dissolution of a !ater district is
#overned b/ Section ;F of PD '(), as aended, statin# that it
0a/ be dissolved b/ resolution of its board of directors 5led in
t!e manner of fling t!e resolution forming t!e district"# sub"ect
to enuerated pre&re%uisites.
))
The procedure for dissolution
thus consists of the follo!in# stepsC
'2 the initiation b/ the board of directors of the !ater
district motu proprio or at the relation of an interested part/, of
proceedin#s for the dissolution of the !ater district, includin#C
a2 the ascertainent b/ said board that 6
'2 another public entit/ has ac%uired the assets of the district
and has assued all obli#ations and liabilities attached thereto*
and
>2 all bondholders and other creditors have been noti5ed and
consent to said transfer and dissolution*
b2 the coenceent b/ the !ater district in a court of
copetent "urisdiction of a proceedin# to obtain a declaration
that 0said transfer and dissolution are in the best interest of the
public*
>2 after copliance !ith the fore#oin# re%uisites, the adoption b/
the board of directors of the !ater district of a resolution
dissolvin# the !ater district and its subission to the
San##unian# @a/an concerned for approval*
?2 subission of the resolution of the San##unian# @a/an
dissolvin# the !ater district to the head of the local #overnent
concerned for approval, and ultiatel/ to the =93< for 5nal
approval and 5lin#.
The +onsuer <ssociation8s action therefore is, in 5ne, in the
nature of a andaus suit, see7in# to copel the board of
directors of the Marilao 9ater District, and its alle#ed co&
conspirators, the San##unian# @a/an and the Ma/or of Marilao to
#o throu#h the process above described for the dissolution of the
!ater district. In this sense, and indeed, ta7in# account of the
nature of the proceedin#s for dissolution "ust described, it sees
plain that the case does not fall !ithin the liited "urisdiction of
the S-+., but !ithin the #eneral "urisdiction of Re#ional Trial
+ourts.
9G-R-FOR-, the Decision of the Interediate <ppellate +ourt of
Septeber 'H, '()F 6 a:rin# that of the Re#ional Trial +ourt
of Dune ), '(); 6 is R-V-RS-D and S-T <SID-, and the case is
reanded to the Re#ional Trial +ourt for further proceedin#s and
ad"udication in accordance !ith la!. No costs.
SO ORD-R-D.
Cru$ and Medialdea" %%." concur.
Gri&o'Auino" %." too( no part.