1B Consti Digests
METROPOLITAN CEBU WATER DISTRICT (MCWD)
v.
MARGARITA A. ADALA
July 4, 2007
Related Article: Article XIV, Section 5 of the 1973
Constitution
G.R. No. 168914 Ponente: CARPIO-
MORALES, J
Tickler: Issuance of a Certificate of Public
Convenience (CPC), Public Utility
“[Doctrine of the Case]"
Noscitur a Sociis
A "public utility" is a business or service engaged in
regularly supplying the public with some commodity or
service of public consequence such as electricity,
gas, water, transportation, telephone or telegraph
service.
Facts
Respondent filed an application with the National
Water Resources Board (NWRB) for the issuance of a
Certificate of Public Convenience (CPC) to operate
and maintain waterworks system in sitios San Vicente,
Fatima, and Sambag in Baragay Bulacao, Cebu City.
At the initial hearing, respondent submitted proof of
compliance with jurisdiction requirements of notice and
publication. Petitioner which a GOCC pursuant to PD
198, opposed the application. It appeared through its
lawyers.
Petitioner filed a formal opposition by mail. NWRB had
not yet received a copy. The counsel who received a
copy volunteered to give a copy to the hearing officer.
In its Opposition, Petitioner prayed for the denial of
respondent’s application because:
1) petitioner’s Board of Directors did not
consent to the issuance of the franchise;
2) proposed waterworks would interfere with
petitioner’s water supply; and
3) the water needs of the residents were
already well served by petitioner.
The NWRB conducted a hearing and an ocular
inspection. IT dismissed petitioner’s Opposition.
Petitioner’s Motion for Reconsideration was likewise
denied. It appealed to the RTC of Cebu City which
denied the same and upheld the decision of the
NWRB. The RTC also denied petitioner’s Motion for
Reconsideration.
Atty. Buko Dela Cruz
Issues
1. WON the petition maybe dismissed outright for
failure to comply with the procedural grounds
2. WON the application for CPC should be denied
on the ground of lack of consent of the Board of
Directors
Ruling
1. YES, Engr Paredes was not specifically
authorized to sign the verification and certification
against forum shopping in petitioner’s behalf.
Respondent claims that petitioner’s General Manager,
Engr. Paredes, who filed the petition and signed the
verification and certification of non-forum shopping,
was not specifically authorized for that purpose.
Respondent cites Premium Marble Resources v CA1
and ABS-CBN Broadcasting Corporation v CA2.
Engr Paredes was authorized by board resolution to
file cases on petitioner’s behalf. The Board of Director’s
Resolution No. 015-2004 was attached to the petition.
It authorized Eng. Paredes to “file in behalf of the
Metropolitan Cebu Water District expropriation and
other cases”.
Respondent argues that the board resolution was
invalid for being roving authority and not a specific
resolution.
BA Savings Bank v. Sia – Board resolution was
couched in words similar to the subject resolution. The
Court upheld its validity. The Resolution was sufficient
to vest such persons with the authority to bind the
corporation and was specific enough as to the acts
they were empowered to do.
However, the Board Resolution does not authorize
Engr Paredes for the specific act of signing
verifications and certifications against forum
shopping.
2. Yes.
PD 198, Sec. 47. Exclusive Franchise. — No franchise
shall be granted to any other person or agency for
domestic, industrial or commercial water service within
the district or any portion thereof unless and except to
the extent that the board of directors of said district
consents thereto by resolution duly adopted, such
resolution, however, shall be subject to review by the
Administration.

Petitioner contends that “franchise” should be broadly
interpreted, such that the prohibition against its grant to
other entities without the consent of the district’s board
of director extends to the issuance of the CPCs.
Respondent proffers that the same prohibition only
applies to franchises in the strict sense – those granted
by Congress by means of statute – and does not
extend to CPCs granted by agencies. It quotes the
NWRB Resolution dated May 17, 2004. It distinguished
a franchise from a CPC.
A CPC is formal written authority issued by
quasi-judicial bodies for the operation and
maintenance of a public utility for which a
franchise is not required by law and a CPC
issued by this Board is an authority to operate
and maintain a waterworks system or water
supply service. On the other hand, a franchise
is privilege or authority to operate appropriate
private property for public use vested by
Congress through legislation. Clearly,
therefore, a CPC is different from a franchise
and Section 47 of Presidential Decree 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.
Philippine Airlines, Inc v Civil Aeronautics Board -
construed the term "franchise" broadly so as to include,
not only authorizations issuing directly from Congress
in the form of statute, but also those granted by
administrative agencies to which the power to grant
franchises has been delegated by Congress
That the legislative authority — in this instance, then
President Marcos — intended to delegate its power to
issue franchises in the case of water districts is clear
from the fact that, pursuant to the procedure outlined in
P.D. 198, it no longer plays a direct role in authorizing
the formation and maintenance of water districts, it
having vested the same to local legislative bodies and
the Local Water Utilities Administration (LWUA).
Nonetheless, while the prohibition in Section 47 of P.D.
198 applies to the issuance of CPCs for the reasons
discussed above, the same provision must be deemed
void ab initio for being irreconcilable with Article XIV
Section 5 of the 1973 Constitution. It reads:
SECTION 5. No franchise, certificate, or any other form
of authorization for the operation of a public 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
franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years .
Atty. Buko Dela Cruz
1B Consti Digests
This provision has been substantially reproduced in
Article XII Section 11 of the 1987 Constitution,
including the prohibition against exclusive franchises.
In view of the purposes for which they are established,
water districts fall under the term "public utility" as
defined in the case of National Power Corporation v.
Court of Appeals:
A "public utility" is a business or service engaged in
regularly supplying the public with some commodity or
service of public consequence such as electricity, gas,
water, transportation, telephone or telegraph service. .
It bears noting, moreover, that as early as 1933, the
Court held that a particular water district — the
Metropolitan Water District — is a public utility. The
ruling in National Waterworks and Sewerage Authority
v. NWSA Consolidated Unions is also instructive: We
agree with petitioner that the NAWASA is a public utility
because its primary function is to construct, maintain
and operate water reservoirs and waterworks for the
purpose of supplying water to the inhabitants, as well
as consolidate and centralize all water supplies and
drainage systems in the Philippines. .
Since Section 47 of P.D. 198, which vests an
"exclusive franchise" upon public utilities, is clearly
repugnant to Article XIV, Section 5 of the 1973
Constitution, it is unconstitutional and may not,
therefore, be relied upon by petitioner in support of its
opposition against respondent's application for CPC
and the subsequent grant thereof by the NWRB.
➢ SECTION 47 of PD 198 is unconstitutional
Disposition
Wherefore, Section 47 of P.D. 198 is unconstitutional.
The Petition is thus, in light of the foregoing
discussions, DISMISSED.
SO ORDERED
Opinion/s (Optional)