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TodayisSaturday,October01,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC
G.R.No.166471March22,2011
TAWANGMULTIPURPOSECOOPERATIVEPetitioner,
vs.
LATRINIDADWATERDISTRICT,Respondent.
DECISION
CARPIO,J.:
TheCase
ThisisapetitionforreviewoncertiorariunderRule45oftheRulesofCourt.Thepetition1challengesthe1October
2004Judgment2and6November2004Order3oftheRegionalTrialCourt(RTC),JudicialRegion1,Branch62,La
Trinidad,Benguet,inCivilCaseNo.03CV1878.
TheFacts
Tawang MultiPurpose Cooperative (TMPC) is a cooperative, registered with the Cooperative Development
Authority,andorganizedtoprovidedomesticwaterservicesinBarangayTawang,LaTrinidad,Benguet.
La Trinidad Water District (LTWD) is a local water utility created under Presidential Decree (PD) No. 198, as
amended.Itisauthorizedtosupplywaterfordomestic,industrialandcommercialpurposeswithinthemunicipalityof
LaTrinidad,Benguet.
On9October2000,TMPCfiledwiththeNationalWaterResourcesBoard(NWRB)anapplicationforacertificateof
public convenience (CPC) to operate and maintain a waterworks system in Barangay Tawang. LTWD opposed
TMPCsapplication.LTWDclaimedthat,underSection47ofPDNo.198,asamended,itsfranchiseisexclusive.
Section47statesthat:
Sec.47.ExclusiveFranchise.Nofranchiseshallbegrantedtoanyotherpersonoragencyfordomestic,industrialor
commercialwaterservicewithinthedistrictoranyportionthereofunlessandexcepttotheextentthattheboardof
directorsofsaiddistrictconsentstheretobyresolutiondulyadopted,suchresolution,however,shallbesubjectto
reviewbytheAdministration.
In its Resolution No. 040702 dated 23 July 2002, the NWRB approved TMPCs application for a CPC. In its 15
August2002Decision,4theNWRBheldthatLTWDsfranchisecannotbeexclusivesinceexclusivefranchisesare
unconstitutional and found that TMPC is legally and financially qualified to operate and maintain a waterworks
system.NWRBstatedthat:
WithrespecttoLTWDsopposition,thisBoardobservesthat:
1.Itisasubstantialreproductionofitsoppositiontotheapplicationforwaterpermitspreviouslyfiledbythissame
CPC applicant, under WUC No. 9817 and 9862 which was decided upon by this Board on April 27, 2000. The
issues being raised by Oppositor had been already resolved when this Board said in pertinent portions of its
decision:
"The authority granted to LTWD by virtue of P.D. 198 is not Exclusive. While Barangay Tawang is within their
territorialjurisdiction,thisdoesnotmeanthatallothersareexcludedinengaginginsuchservice,especially,ifthe
districtisnotcapableofsupplyingwaterwithinthearea.ThisBoardhastimeandagainruledthatthe"Exclusive
Franchise"provisionunderP.D.198hasmisledmostwaterdistrictstobelievethatitlikewiseextendstobe[sic]the
waters within their territorial boundaries. Such ideological adherence collides head on with the constitutional
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provisionthat"ALLWATERSANDNATURALRESOURCESBELONGTOTHESTATE".(Sec.2,Art.XII)andthat
"Nofranchise,certificateorauthorizationfortheoperationofpublic[sic]shallbeexclusiveincharacter".
xxxx
Alltheforegoingpremisesallconsidered,andfindingthatApplicantislegallyandfinanciallyqualifiedtooperateand
maintainawaterworkssystemthatthesaidoperationshallredoundtothebenefitofthehomeowners/residentsof
the subdivision, thereby, promoting public service in a proper and suitable manner, the instant application for a
CertificateofPublicConvenienceis,hereby,GRANTED.5
LTWDfiledamotionforreconsideration.Inits18November2002Resolution,6theNWRBdeniedthemotion.
LTWDappealedtotheRTC.
TheRTCsRuling
In its 1 October 2004 Judgment, the RTC set aside the NWRBs 23 July 2002 Resolution and 15 August 2002
DecisionandcancelledTMPCsCPC.TheRTCheldthatSection47isvalid.TheRTCstatedthat:
TheConstitutionusestheterm"exclusiveincharacter".Togiveeffecttothisprovision,areasonable,practicaland
logicalinterpretationshouldbeadoptedwithoutdisregardtotheultimatepurposeoftheConstitution.Whatisthis
ultimate purpose? It is for the state, through its authorized agencies or instrumentalities, to be able to keep and
maintain ultimate control and supervision over the operation of public utilities. Essential part of this control and
supervision is the authority to grant a franchise for the operation of a public utility to any person or entity, and to
amendorrepealanexistingfranchisetoservetherequirementsofpublicinterest.Thus,whatisrepugnanttothe
Constitution is a grant of franchise "exclusive in character" so as to preclude the State itself from granting a
franchisetoanyotherpersonorentitythanthepresentgranteewhenpublicinterestsorequires.Inotherwords,no
franchiseofwhatevernaturecanprecludetheState,throughitsdulyauthorizedagenciesorinstrumentalities,from
granting franchise to any person or entity, or to repeal or amend a franchise already granted. Consequently, the
Constitutiondoesnotnecessarilyprohibitafranchisethatisexclusiveonitsface,meaning,thatthegranteeshallbe
allowedtoexercisethispresentrightorprivilegetotheexclusionofallothers.Nonetheless,thegranteecannotset
upitsexclusivefranchiseagainsttheultimateauthorityoftheState.7
TMPC filed a motion for reconsideration. In its 6 November 2004 Order, the RTC denied the motion. Hence, the
presentpetition.
Issue
TMPCraisesasissuethattheRTCerredinholdingthatSection47ofPDNo.198,asamended,isvalid.
TheCourtsRuling
Thepetitionismeritorious.
Whatcannotbelegallydonedirectlycannotbedoneindirectly.Thisruleisbasicand,toareasonablemind,does
notneedexplanation.Indeed,ifactsthatcannotbelegallydonedirectlycanbedoneindirectly,thenalllawswould
beillusory.
InAlvarezv.PICOPResources,Inc.,8theCourtheldthat,"Whatonecannotdodirectly,hecannotdoindirectly."9In
AkbayanCitizensActionPartyv.Aquino,10quotingAgan,Jr.v.PhilippineInternationalAirTerminalsCo.,Inc.,11the
Courtheldthat,"ThisCourthaslongandconsistentlyadheredtothelegalmaximthatthosethatcannotbedone
directlycannotbedoneindirectly."12InCentralBankEmployeesAssociation,Inc.v.BangkoSentralngPilipinas,13
theCourtheldthat,"Nooneisallowedtodoindirectlywhatheisprohibitedtododirectly."14
ThePresident,CongressandtheCourtcannotcreatedirectlyfranchisesfortheoperationofapublicutilitythatare
exclusive in character. The 1935, 1973 and 1987 Constitutions expressly and clearly prohibit the creation of
franchisesthatareexclusiveincharacter.Section8,ArticleXIIIofthe1935Constitutionstatesthat:
Nofranchise,certificate,oranyotherformofauthorizationfortheoperationofapublicutilityshallbegrantedexcept
tocitizensofthePhilippinesortocorporationsorotherentitiesorganizedunderthelawsofthePhilippines,sixtyper
centum of the capital of which is owned by citizens of the Philippines, nor shall such franchise, certificate or
authorizationbeexclusiveincharacterorforalongerperiodthanfiftyyears.(Empahsissupplied)
Section5,ArticleXIVofthe1973Constitutionstatesthat:
Nofranchise,certificate,oranyotherformofauthorizationfortheoperationofapublicutilityshallbegrantedexcept
tocitizensofthePhilippinesortocorporationsorassociationsorganizedunderthelawsofthePhilippinesatleast
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sixty per centum of the capital of which is owned by such citizens, nor shall such franchise, certificate or
authorizationbeexclusiveincharacterorforalongerperiodthanfiftyyears.(Emphasissupplied)
Section11,ArticleXIIofthe1987Constitutionstatesthat:
Nofranchise,certificate,oranyotherformofauthorizationfortheoperationofapublicutilityshallbegrantedexcept
tocitizensofthePhilippinesortocorporationsorassociationsorganizedunderthelawsofthePhilippines,atleast
sixtypercentumofwhosecapitalisownedbysuchcitizens,norshallsuchfranchise,certificateorauthorization
beexclusiveincharacterorforalongerperiodthanfiftyyears.(Emphasissupplied)
Plain words do not require explanation. The 1935, 1973 and 1987 Constitutions are clear franchises for the
operationofapublicutilitycannotbeexclusiveincharacter.The1935,1973and1987Constitutionsexpresslyand
clearlystatethat,"norshallsuchfranchisexxxbeexclusiveincharacter."Thereisnoexception.
Whenthelawisclear,thereisnothingforthecourtstodobuttoapplyit.ThedutyoftheCourtistoapplythelaw
thewayitisworded.InSecurityBankandTrustCompanyv.RegionalTrialCourtofMakati,Branch61,15theCourt
heldthat:
Basicistheruleofstatutoryconstructionthatwhenthelawisclearandunambiguous,thecourtisleftwithno
alternativebuttoapplythesameaccordingtoitsclearlanguage. As we have held in the case of Quijanov.
DevelopmentBankofthePhilippines:
"x x x We cannot see any room for interpretation or construction in the clear and unambiguous language of the
abovequoted provision of law. This Court had steadfastly adhered to the doctrine that its first and
fundamentaldutyistheapplicationofthelawaccordingtoitsexpressterms,interpretationbeingcalledfor
only when such literal application is impossible. No process of interpretation or construction need be resorted to
whereaprovisionoflawperemptorilycallsforapplication.Wherearequirementorconditionismadeinexplicit
andunambiguousterms,nodiscretionislefttothejudiciary.Itmustseetoitthatitsmandateisobeyed."16
(Emphasissupplied)
InRepublicofthePhilippinesv.ExpressTelecommunicationsCo.,Inc.,17theCourtheldthat,"TheConstitutionis
quite emphatic that the operation of a public utility shall not be exclusive."18 In Pilipino Telephone Corporation v.
National Telecommunications Commission,19 the Court held that, "Neither Congress nor the NTC can grant an
exclusive franchise, certificate, or any other form of authorization to operate a public utility."20InNational Power
Corp.v.CourtofAppeals,21theCourtheldthat,"Exclusivityofanypublicfranchisehasnotbeenfavoredbythis
Court such that in most, if not all, grants by the government to private corporations, the interpretation of rights,
privilegesorfranchisesistakenagainstthegrantee."22InRadioCommunicationsofthePhilippines,Inc.v.National
Telecommunications Commission,23 the Court held that, "The Constitution mandates that a franchise cannot be
exclusiveinnature."24
Indeed, the President, Congress and the Court cannot create directly franchises that are exclusive in character.
WhatthePresident,CongressandtheCourtcannotlegallydodirectlytheycannotdoindirectly.Thus,thePresident,
CongressandtheCourtcannotcreateindirectlyfranchisesthatareexclusiveincharacterbyallowingtheBoardof
Directors(BOD)ofawaterdistrictandtheLocalWaterUtilitiesAdministration(LWUA)tocreatefranchisesthatare
exclusiveincharacter.
InPDNo.198,asamended,formerPresidentFerdinandE.Marcos(PresidentMarcos)createdindirectlyfranchises
thatareexclusiveincharacterbyallowingtheBODofLTWDandtheLWUAtocreatedirectlyfranchisesthatare
exclusive in character. Section 47 of PD No. 198, as amended, allows the BOD and the LWUA to create directly
franchisesthatareexclusiveincharacter.Section47states:
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,shallbesubjecttoreviewbytheAdministration.(Emphasissupplied)
IncaseofconflictbetweentheConstitutionandastatute,theConstitutionalwaysprevailsbecausetheConstitution
isthebasiclawtowhichallotherlawsmustconformto.ThedutyoftheCourtistoupholdtheConstitutionandto
declarevoidalllawsthatdonotconformtoit.
In Social Justice Society v. Dangerous Drugs Board,25 the Court held that, "It is basic that if a law or an
administrative rule violates any norm of the Constitution, that issuance is null and void and has no effect. The
Constitution is the basic law to which all laws must conform no act shall be valid if it conflicts with the
Constitution."26InSabiov.Gordon,27theCourtheldthat,"theConstitutionisthehighestlawoftheland.Itisthe
basicandparamountlawtowhichallotherlawsmustconform."28InAtty.Macalintalv.CommissiononElections,29
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the Court held that, "The Constitution is the fundamental and paramount law of the nation to which all other laws
must conform and in accordance with which all private rights must be determined and all public authority
administered.LawsthatdonotconformtotheConstitutionshallbestrickendownforbeingunconstitutional."30In
ManilaPrinceHotelv.GovernmentServiceInsuranceSystem,31theCourtheldthat:
Underthedoctrineofconstitutionalsupremacy,ifalaworcontractviolatesanynormoftheconstitutionthatlaw
or contract whether promulgated by the legislative or by the executive branch or entered into by private
personsforprivatepurposesisnullandvoidandwithoutanyforceandeffect.Thus,sincetheConstitutionis
the fundamental, paramount and supreme law of the nation, it is deemed written in every statute and
contract."32(Emphasissupplied)
Toreiterate,the1935,1973and1987Constitutionsexpresslyprohibitthecreationoffranchisesthatareexclusivein
character. They uniformly command that "nor shall such franchise x x x be exclusive in character." This
constitutionalprohibitionisabsoluteandacceptsnoexception.Ontheotherhand,PDNo.198,asamended,allows
the BOD of LTWD and LWUA to create franchises that are exclusive in character. Section 47 states that, "No
franchiseshallbegrantedtoanyotherpersonoragencyxxxunlessandexcepttotheextentthattheboardof
directors consents thereto x x x subject to review by the Administration." Section 47 creates a glaring
exceptiontotheabsoluteprohibitionintheConstitution.Clearly,itispatentlyunconstitutional.
Section 47 gives the BOD and the LWUA the authority to make an exception to the absolute prohibition in the
Constitution. In short, the BOD and the LWUA are given the discretion to create franchises that are exclusive in
character.TheBODandtheLWUAarenotevenlegislativebodies.TheBODisnotaregulatorybodybutsimplya
managementboardofawaterdistrict.Indeed,neithertheBODnortheLWUAcanbegrantedthepowertocreate
anyexceptiontotheabsoluteprohibitionintheConstitution,apowerthatCongressitselfcannotexercise.
InMetropolitan Cebu Water District v. Adala,33 the Court categorically declared Section 47 void. The Court held
that:
Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the issuance of CPCs for the reasons
discussedabove,thesameprovisionmustbedeemedvoidabinitioforbeingirreconcilablewithArticleXIV,
Section5ofthe1973ConstitutionwhichwasratifiedonJanuary17,1973theconstitutioninforcewhenP.D.
198wasissuedonMay25,1973.Thus,Section5ofArt.XIVofthe1973Constitutionreads:
"SECTION5.Nofranchise,certificate,oranyotherformofauthorizationfortheoperationofapublicutilityshallbe
granted except to citizens of the Philippines or to corporations or associations organized under the laws of the
Philippinesatleastsixtypercentumofthecapitalofwhichisownedbysuchcitizens,norshallsuchfranchise,
certificate,orauthorizationbeexclusiveincharacterorforalongerperiodthanfiftyyears.Neithershallanysuch
franchiseorrightbegrantedexceptundertheconditionthatitshallbesubjecttoamendment,alteration,orrepeal
bytheBatasangPambansawhenthepublicinterestsorequires.TheStateshallencourageequityparticipationin
publicutiltitiesbythegeneralpublic.Theparticipationofforeigninvestorsinthegoverningbodyofanypublicutility
enterpriseshallbelimitedtotheirproportionateshareinthecapitalthereof."
This provision has been substantially reproduced in Article XII Section 11 of the 1987 Constitution, including the
prohibitionagainstexclusivefranchises.
xxxx
SinceSection47ofP.D.198,whichvestsan"exclusivefranchise"uponpublicutilities,isclearlyrepugnant
toArticleXIV,Section5ofthe1973Constitution,itisunconstitutionalandmaynot,therefore,bereliedupon
bypetitionerinsupportofitsoppositionagainstrespondentsapplicationforCPCandthesubsequentgrantthereof
bytheNWRB.
WHEREFORE,Section47ofP.D.198isunconstitutional.34(Emphasissupplied)
ThedissentingopiniondeclaresSection47validandconstitutional.Ineffect,thedissentingopinionholdsthat(1)
President Marcos can create indirectly franchises that are exclusive in character (2) the BOD can create directly
franchises that are exclusive in character (3) the LWUA can create directly franchises that are exclusive in
characterand(4)theCourtshouldallowthecreationoffranchisesthatareexclusiveincharacter.
Stateddifferently,thedissentingopinionholdsthat(1)PresidentMarcoscanviolateindirectlytheConstitution(2)
theBODcanviolatedirectlytheConstitution(3)theLWUAcanviolatedirectlytheConstitutionand(4)theCourt
shouldallowtheviolationoftheConstitution.
The dissenting opinion states that the BOD and the LWUA can create franchises that are exclusive in character
"based on reasonable and legitimate grounds," and such creation "should not be construed as a violation of the
constitutionalmandateonthenonexclusivityofafranchise"becauseit"merelyreferstoregulation"whichispartof
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"thegovernmentsinherentrighttoexercisepolicepowerinregulatingpublicutilities"andthattheirviolationofthe
Constitution"wouldcarrywithitthelegalpresumptionthatpublicofficersregularlyperformtheirofficialfunctions."
Thedissentingopinionstatesthat:
To begin with, a government agencys refusal to grant a franchise to another entity, based on reasonable and
legitimategrounds,shouldnotbeconstruedasaviolationoftheconstitutionalmandateonthenonexclusivityofa
franchisethismerelyreferstoregulation,whichtheConstitutiondoesnotprohibit.Tosaythatalegalprovisionis
unconstitutional simply because it enables a government instrumentality to determine the propriety of granting a
franchiseiscontrarytothegovernmentsinherentrighttoexercisepolicepowerinregulatingpublicutilitiesforthe
protectionofthepublicandtheutilitiesthemselves.TherefusalofthelocalwaterdistrictortheLWUAtoconsentto
the grant of other franchises would carry with it the legal presumption that public officers regularly perform their
officialfunctions.
The dissenting opinion states two "reasonable and legitimate grounds" for the creation of exclusive franchise: (1)
protection of "the governments investment,"35 and (2) avoidance of "a situation where ruinous competition could
compromisethesupplyofpublicutilitiesinpoorandremoteareas."36
Thereisno"reasonableandlegitimate"groundtoviolatetheConstitution.TheConstitutionshouldneverbeviolated
byanyone.Rightorwrong,thePresident,Congress,theCourt,theBODandtheLWUAhavenochoicebuttofollow
theConstitution.Anyact,howevernobleitsintentions,isvoidifitviolatestheConstitution.Thisruleisbasic.
InSocialJusticeSociety,37theCourtheldthat,"Inthedischargeoftheirdefinedfunctions,thethreedepartments
ofgovernmenthavenochoicebuttoyieldobediencetothecommandsoftheConstitution.Whateverlimits
itimposesmustbeobserved."38InSabio,39theCourtheldthat,"theConstitutionisthehighestlawoftheland.It
isthebasicandparamountlawtowhichxxxallpersons,includingthehighestofficialsoftheland,must
defer.Noactshallbevalid,howevernobleitsintentions,ifitconflictswiththeConstitution."40InBengzonv.
Drilon,41theCourtheldthat,"thethreebranchesofgovernmentmustdischargetheirrespectivefunctionswithinthe
limitsofauthorityconferredbytheConstitution."42InMutucv.CommissiononElections,43theCourtheldthat,"The
threedepartmentsofgovernmentinthedischargeofthefunctionswithwhichitis[sic]entrustedhaveno
choice but to yield obedience to [the Constitutions] commands. Whatever limits it imposes must be
observed."44
Police power does not include the power to violate the Constitution. Police power is the plenary power vested in
CongresstomakelawsnotrepugnanttotheConstitution.Thisruleisbasic.
InMetropolitanManilaDevelopmentAuthorityv.VironTransportationCo.,Inc.,45theCourtheldthat,"Policepower
is the plenary power vested in the legislature to make, ordain, and establish wholesome and reasonable laws,
statutesandordinances,notrepugnanttotheConstitution."46InCarlosSuperdrugCorp.v.DepartmentofSocial
Welfare and Development,47 the Court held that, police power "is the power vested in the legislature by the
constitutiontomake,ordain,andestablishallmannerofwholesomeandreasonablelaws,statutes,andordinances
xxxnot repugnant to the constitution."48 In Metropolitan Manila Development Authority v. Garin,49 the Court
held that, "police power, as an inherent attribute of sovereignty, is the power vested by the Constitution in the
legislaturetomake,ordain,andestablishallmannerofwholesomeandreasonablelaws,statutesandordinancesx
xxnotrepugnanttotheConstitution."50
ThereisnoquestionthattheeffectofSection47isthecreationoffranchisesthatareexclusiveincharacter.Section
47expresslyallowstheBODandtheLWUAtocreatefranchisesthatareexclusiveincharacter.
The dissenting opinion explains why the BOD and the LWUA should be allowed to create franchises that are
exclusive in character to protect "the governments investment" and to avoid "a situation where ruinous
competition could compromise the supply of public utilities in poor and remote areas." The dissenting opinion
declaresthattheseare"reasonableandlegitimategrounds."Thedissentingopinionalsostatesthat,"Therefusalof
the local water district or the LWUA to consent to the grant of other franchises would carry with it the legal
presumptionthatpublicofficersregularlyperformtheirofficialfunctions."
Whentheeffectofalawisunconstitutional,itisvoid.InSabio,51theCourtheldthat,"Astatutemaybedeclared
unconstitutionalbecause it is not within the legislative power to enact or it creates or establishes methods or
forms that infringe constitutional principles or its purpose or effect violates the Constitution or its basic
principles."52TheeffectofSection47violatestheConstitution,thus,itisvoid.
In Strategic Alliance Development Corporation v. Radstock Securities Limited,53 the Court held that, "This Court
mustperformitsdutytodefendandupholdtheConstitution."54InBengzon,55theCourtheldthat,"TheConstitution
expresslyconfersonthejudiciarythepowertomaintaininviolatewhatitdecrees."56InMutuc,57theCourtheldthat:
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TheconceptoftheConstitutionasthefundamentallaw,settingforththecriterionforthevalidityofanypublicact
whetherproceedingfromthehighestofficialorthelowestfunctionary,isapostulateofoursystemofgovernment.
Thatistomanifestfealtytotheruleoflaw,withpriorityaccordedtothatwhichoccupiesthetopmostrunginthelegal
hierarchy.Thethreedepartmentsofgovernmentinthedischargeofthefunctionswithwhichitis[sic]entrustedhave
nochoicebuttoyieldobediencetoitscommands.Whateverlimitsitimposesmustbeobserved.Congressinthe
enactmentofstatutesmusteverbeonguardlesttherestrictionsonitsauthority,whethersubstantiveorformal,be
transcended.ThePresidencyintheexecutionofthelawscannotignoreordisregardwhatitordains.Initstaskof
applying the law to the facts as found in deciding cases, the judiciary is called upon to maintain inviolate what is
decreed by the fundamental law. Even its power of judicial review to pass upon the validity of the acts of the
coordinatebranchesinthecourseofadjudicationisalogicalcorollaryofthisbasicprinciplethattheConstitutionis
paramount. It overrides any governmental measure that fails to live up to its mandates. Thereby there is a
recognitionofitsbeingthesupremelaw.58
SustainingtheRTCsrulingwouldmakeadangerousprecedent.ItwillallowCongresstodoindirectlywhatitcannot
do directly. In order to circumvent the constitutional prohibition on franchises that are exclusive in character, all
Congress has to do is to create a law allowing the BOD and the LWUA to create franchises that are exclusive in
character,asinthepresentcase.
WHEREFORE, we GRANT the petition. We DECLARE Section 47 of Presidential Decree No. 198
UNCONSTITUTIONAL.WeSETASIDEthe1October2004Judgmentand6November2004OrderoftheRegional
TrialCourt,JudicialRegion1,Branch62,LaTrinidad,Benguet,inCivilCaseNo.03CV1878andREINSTATEthe
23July2002Resolutionand15August2002DecisionoftheNationalWaterResourcesBoard.
SOORDERED.
ANTONIOT.CARPIO
AssociateJustice
WECONCUR:
RENATOC.CORONA
ChiefJustice
CONCHITACARPIOMORALES
AssociateJustice

PRESBITEROJ.VELASCO,JR.
AssociateJustice

ANTONIOEDUARDOB.NACHURA
AssociateJustice

TERESITAJ.LEONARDODECASTRO
AssociateJustice

ARTUROD.BRION
AssociateJustice

DIOSDADOM.PERALTA
AssociateJustice

LUCASP.BERSAMIN
AssociateJustice

MARIANOC.DELCASTILLO
AssociateJustice

ROBERTOA.ABAD
AssociateJustice

MARTINS.VILLARAMA,JR.
AssociateJustice

JOSEPORTUGALPEREZ
AssociateJustice

JOSEC.MENDOZA
AssociateJustice

MARIALOURDESP.A.SERENO
AssociateJustice
CERTIFICATION
PursuanttoSection13,ArticleVIIIoftheConstitution,IcertifythattheconclusionsintheaboveDecisionhadbeen
reachedinconsultationbeforethecasewasassignedtothewriteroftheopinionoftheCourt.
RENATOC.CORONA
ChiefJustice

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Footnotes
1Rollo,pp.919.
2Id.at2240.PennedbyJudgeFernandoP.Cabato.
3Id.at4144.
4Id.at4549.
5Id.at4749.
6Id.at5052.
7Id.at35.
8G.R.Nos.162243,164516and171875,3December2009,606SCRA444.
9Id.at485.
10G.R.No.170516,16July2008,558SCRA468.
11450Phil.744(2003).
12Supranote10at540.
13487Phil.531(2004).
14Id.at579.
15G.R.No.113926,23October1996,263SCRA483.
16Id.at488.
17424Phil.372(2002).
18Id.at400.
19457Phil.101(2003).
20Id.at117.
21345Phil.9(1997).
22Id.at34.
23234Phil.443(1987).
24Id.at451.
25G.R.Nos.157870,158633and161658,3November2008,570SCRA410.
26Id.at422423.
27G.R.No.174340,17October2006,504SCRA704.
28Id.at731.
29453Phil.586(2003).
30Id.at631.
31335Phil.82(1997).
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32Id.at101.
33G.R.No.168914,4July2007,526SCRA465.
34Id.at479482.
35Id.at13.
36Id.
37Supranote25.
38Id.at423.
39Supranote27.
40Id.at731.
41G.R.No.103524,15April1992,208SCRA133.
42Id.at142.
43146Phil.798(1970).
44Id.at806.
45G.R.Nos.170656and170657,15August2007,530SCRA341.
46Id.at362.
47G.R.No.166494,29June2007,526SCRA130.
48Id.at144.
49496Phil.83(2005)
50Id.at9192.
51Supranote27.
52Id.at730.
53G.R.Nos.178158and180428,4December2009,607SCRA413.
54Id.at528.
55Supranote41.
56Id.at142.
57Supranote43.
58Id.at806807.
TheLawphilProjectArellanoLawFoundation

DISSENTINGOPINION
BRION,J.:
Idissent.

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Lest this Dissent be misunderstood, I shall clarify at the outset that I do not dispute the majority position that an
exclusivefranchiseisforbiddenbytheConstitution.TheprohibitionisinanexpresswordsoftheConstitutionand
cannotbedisputed.
MymisgivingarisesfromthemajoritysfailuretoproperlyresolvetheissueofwhetherornotSection47ofP.D.No.
198 embodies a prohibited exclusive franchise. I believe that the Court must carefully examine and analyze the
applicationoftheconstitutionalcommandtoSection47andexplaintheexactlegalbasisforitsconclusion.Wemust
determinewhatanexclusivefranchisereallymeanstoavoidoverextendingtheprohibitiontounintendedareas.In
theprocess,wemustdeterminewhethergovernmentinsteadofthegrantofanexclusivefranchisecanregulate
the grant of subsequent franchises. In the present case, I take the view that the law can so allow in order to
efficientlyandeffectivelyprovideitscitizenswiththemostbasicutility.
RespondentLaTrinidadWaterDistrict(LTWD)isalocalwaterutilitycreatedunderPresidentialDecree(P.D.) No.
198.1 It is a governmentowned and controlled corporation2 authorized by law to supply water for domestic,
industrial,andcommercialpurposeswithintheMunicipalityofLaTrinidad.Ontheotherhand,thepetitionerTawang
MultiPurpose Cooperative (TMPC) is an applicant for a certificate of public convenience (CPC) to operate and
maintainawaterworkssysteminBarangayTawangintheMunicipalityofLaTrinidad.
TheRTCruledthataCPCinfavorofTMPCcannotbeissuedwithoutthelatterhavingappliedfortheconsentofthe
localwaterdistrictinaccordancewithSection47ofP.D.No.198.Ineffect,theRTCruledthatSection47doesnot
involvethegrantofanexclusivefranchise.Thus,theTMPCfiledthepresentpetitionforreviewoncertiorariunder
Rule45oftheRulesofCourt,questioningthevalidityofSection47ofP.D.No.198,whichprovides:
Sec.47.ExclusiveFranchiseNofranchiseshallbegrantedtoanyotherpersonoragencyfordomestic,industrial,
orcommercialwaterservicewithinthedistrictoranyportionthereofunlessandexcepttotheextentthattheboard
ofdirectorsofsaiddistrictconsentstheretobyresolutiondulyadopted,suchresolution,however,shallbesubjectto
reviewbytheAdministration.3[Emphasissupplied]
Theinvalidityofexclusivefranchisesisnotindispute
Ireiteratethat,contrarytothemajoritysstatements,Idonotdisputethatboththe1973andthe1987Constitutions
clearlymandatethatnofranchisecertificate,oranyotherformofauthorization,fortheoperationofapublicutility
shallbeexclusiveincharacter.IfullysupportthepositionthatthelegislativeentitythatenactedSection47ofP.D.
198(inthiscase,formerPresidentFerdinandE.Marcosintheexerciseofhismartiallawlegislativepowers)must
comply with Article XIV, Section 5 of the 1973 Constitution4 (the Constitution in force when P.D. No. 198 was
enacted).Thisconstitutionalprovisionhasbeencarriedovertothe1987ConstitutionasArticleXII,Section11and
states:
Nofranchise,certificate,oranyotherformofauthorizationfortheoperationofapublicutilityshallbegrantedexcept
tocitizensofthePhilippinesortocorporationsorassociationsorganizedunderthelawsofthePhilippines,atleast
sixty per centum of whose capital is owned by such citizens nor shall such franchise, certificate, or
authorizationbeexclusiveincharacterorforalongerperiodthanfiftyyears.Neithershallanysuchfranchiseor
right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the
Congresswhenthecommongoodsorequires.TheStateshallencourageequityparticipationinpublicutilitiesby
thegeneralpublic.Theparticipationofforeigninvestorsinthegoverningbodyofanypublicutilityenterpriseshallbe
limitedtotheirproportionateshareinitscapital,andalltheexecutiveandmanagingofficersofsuchcorporationor
associationmustbecitizensofthePhilippines.
ForthemajoritytocharacterizetheDissentasanargumentforthegrantofexclusivefranchisesbyformerPresident
Marcos,bythewaterdistrictsboardofdirectors,bytheLWUA,andbythisCourtwouldbetomisreadtheDissent
andblurtheissuesthatitraises.5
Section47ofP.D.198doesnotviolateSection5,ArticleXIVofthe1973Constitution
The majority insists that Section 47 of P.D. 198 indirectly grants an exclusive franchise in favor of local water
districts. In their reading, the law "allows the board of directors of a water district and the Local Water Utilities
Administrator(LWUA)tocreatefranchisesthatareexclusiveincharacter."6Idisagree,asthemajorityopiniondoes
notatallspecifyandisunclearonhowanyfranchisecanbeindirectlyexclusive.Whatthelawallowsismerelythe
regulation of the grant of subsequent franchises so that the government through governmentowned and
controlledcorporationscanprotectitselfandthegeneralpublicitservesintheoperationofpublicutilities.
Anexclusivefranchise,initsplainestmeaning,signifiesthatnootherentity,apartfromthegrantee,couldbegivena
franchise.Section47ofP.D.No.198,byitsclearterms,doesnotprovideforanexclusivefranchiseinstatingthat:
Sec.47.ExclusiveFranchiseNofranchiseshallbegrantedtoanyotherpersonoragencyfordomestic,industrial,
orcommercialwaterservicewithinthedistrictoranyportionthereofunlessandexcepttotheextentthattheboard
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ofdirectorsofsaiddistrictconsentstheretobyresolutiondulyadopted,suchresolution,however,shallbesubjectto
reviewbytheAdministration.7
Despite its title, the assailed provision does not absolutely prohibit other franchises for water service from being
grantedtootherpersonsoragencies.ItmerelyrequirestheconsentofthelocalwaterdistrictsBoardofDirectors
before another franchise within the district is granted. Thus, it is a regulation on the grant of any subsequent
franchisewherethelocalwaterdistrict,asoriginalgrantee,maygrantorrefuseitsconsent.Ifitconsents,thenon
exclusivenatureofitsfranchisebecomesonlytooclear.Shoulditrefuse,itsactiondoesnotremainuncheckedas
the franchise applicant may ask the LWUA to review the local water districts refusal. It is thus the LWUA (on the
OfficeofthePresidentincaseoffurtherappeal)thatgrantsasubsequentfranchiseifonewillbeallowed.
Underthisarrangement,IsubmitthattheprerogativeofthelocalwaterdistrictsboardofdirectorsortheLWUAto
give or refuse its consent to the application for a CPC cannot be considered as a constitutional infringement. A
government agencys refusal to consent to the grant of a franchise to another entity, based on reasonable and
legitimategrounds,shouldnotbeconstruedasaviolationoftheconstitutionalmandateonthenonexclusivityofa
franchisewherethestandardsforthegrantorrefusalareclearlyspelledoutinthelaw.Effectively,whatthelawand
the State (acting through its own agency or a governmentowned or controlled corporation) thereby undertake is
merelyanactofregulationthattheConstitutiondoesnotprohibit.Tosaythatalegalprovisionisunconstitutional
simply because it enables a grantee, a government instrumentality, to determine the soundness of granting a
subsequentfranchiseinitsareaiscontrarytothegovernmentsinherentrighttoexercisepolicepowerinregulating
publicutilitiesfortheprotectionofthepublicandtheutilitiesthemselves.8
It should also be noted that even after the Marcos regime, constitutional experts have taken the view that the
governmentcanandshouldtakeastrongactivepartinensuringpublicaccesstobasicutilities.Thedeliberationsof
the Constitutional Commission for the 1987 Constitution (which contains the same provision found in the 1973
Constitution on the nonexclusivity of public utility franchises) regarding monopolies regulated by the state may
guide,thoughnotnecessarilybind,us:
MR.DAVIDE:Iftheideaisreallytopromotetheprivatesector,maywenotprovideherethatthegovernmentcan,in
nocase,practicemonopolyexceptincertainareas?
MR. VILLEGAS. No, because in the economic field, there are definitely areas where the State can intervene and
canactuallygetinvolvedinmonopoliesforthepublicgood.
MR.DAVIDE.Yes,wehaveprovisionshereallowingsuchamonopolyintimesofnationalemergency.
MR.VILLEGAS.Noteveninemergencyforthecontinuingwelfareofconsumers.
MR. MONSOD. May we just make a distinction? As we know, there are natural monopolies or what we call
"structural monopolies." Structural monopolies are monopolies not by the nature of their activities, like electric
power,forexample,butbythenatureofthemarket.Theremaybeinstanceswhenthemarkethasnotdevelopedto
suchextentthatitwillonlyallow,say,onesteelcompany.Structuralmonopolyisnotbythenatureofthebusiness
itself.ItispossibleunderthesecircumstancesthattheStatemaybetheappropriatevehicleforsuchamonopoly.9
If, indeed, the Constitutional Commission in discussing the nonexclusivity clause had accepted the merits of
government monopolies, should this Court consider unconstitutional a provision that allows a lesser degree of
regulationi.e., a government agency giving its consent to the application of a CPC with the protection of the
viabilityofthegovernmentagencyandpublicgoodasthestandardsofitsaction?
SafeguardsagainstabuseofauthoritybythewaterdistrictsboardofdirectorsandtheLWUA
The refusal of the local water district or the LWUA to consent to other franchises would carry with it the legal
presumption that public officers regularly perform their official functions.10 If, on the other hand, the officers,
directorsortrusteesofthelocalwaterdistrictsandtheLWUAactarbitrarilyandunjustifiablyrefusetheirconsentto
anapplicantofafranchise,theymaybeheldliablefortheiractions.Thelocalwaterdistricts11andtheLWUA12are
governmentownedandcontrolledcorporations(GOCCs).Thedirectorsofthelocalwaterdistrictsandthetrustees
oftheLWUAaregovernmentemployeessubjecttocivilservicelawsandantigraftlaws.13Moreover,theLWUAis
attached to the Office of the President14 which has the authority to review its acts. Should these acts in the
Executive Department constitute grave abuse of discretion, the Courts may strike them down under its broad
powersofreview.15
Any abuse of authority that the local water districts may be feared to commit is balanced by the control that the
governmentexertsintheircreationandoperations.Thegovernmentcreatesandorganizeslocalwaterdistrictsin
accordancewithaspecificlaw,P.D.No.198.16Thereisnoprivatepartyinvolvedasacoownerinthecreationof
local water districts. Prior to the local water districts creation, the national or local government directly owns and
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controlsalltheirassets.Thegovernmentscontroloverthemisfurtherassertedthroughtheirboardofdirectors,who
areappointedbythemunicipalorcitymayororbytheprovincialgovernor.Thedirectorsarenotcoownersofthe
local water district but, like other water district personnel, are government employees subject to civil service laws
andantigraftlaws.17Underthissetup,thecontrolthatexistsoverthegrantoffranchises,whichoriginallybelongs
totheState,simplyremainedandismaintainedwiththeStateactingthroughthelocalgovernmentunitsandthe
governmentownedandcontrolledcorporationsunderthem.
Becauseofthegovernmentsextensivefinancialsupporttotheseentities,itispartofthelawspolicytoscrutinize
theirexpendituresandoutlays.Section20ofP.D.No.198statesthatthelocalwaterdistrictsaresubjecttoannual
auditsperformedbyindependentauditorsandconductedbytheLWUA.18Section41ofP.D.No.198evenlimitsthe
authorityoftheboardofdirectorsoflocalwaterdistrictsinthemannerinwhichitcandisposeoftheirincome:(1)as
payment for obligations and essential current operating expenses (2) as a reserve for debt service, and for
operationsandmaintenancetobeusedduringperiodsofcalamities,forcemajeureorunforeseeneventsand(3)as
areserveexclusivelyfortheexpansionandimprovementoftheirfacilities.Inthismanner,thelawensuresthattheir
officers or directors do not profit from local water districts and that the operations thereof would be focused on
improvingpublicservice.Thepossibilitythattheofficerswouldrefusetheirconsenttoanotherfranchiseapplicant
forreasonsofpersonalgainis,thus,eliminated.
PublicpolicybehindSection47ofP.D.No.198
Without a clear showing that the Constitution was violated by the enactment of Section 47 of P.D. 198, the Court
cannotinvalidateitwithoutinfringingongovernmentpolicy,especiallywhenCongresshadnotseenfittorepealthe
lawandwhenthelawappearstobebasedonsoundpublicpolicy.P.D.No.198requiresanapplicanttofirstobtain
theconsentofthelocalwaterdistrictandtheLWUAforimportantreasons.First,itaimstoprotectthegovernments
investment.Second,itavoidsasituationwhereruinouscompetitioncouldcompromisethesupplyofpublicutilitiesin
poorandremoteareas.
Afirstreasonthegovernmentseekstoprioritizelocalwaterdistrictsistheprotectionofitsinvestmentsitpoursits
scarce financial resources into these water districts. The law primarily establishes the LWUA as a specialized
lendinginstitutionforthepromotion,developmentandfinancingofwaterutilities.19Section73ofP.D.No.198also
authorizestheLWUAtocontractloansandcredits,andincurindebtednesswithforeigngovernmentsorinternational
financial institutions for the accomplishment of its objectives. Moreover, the President of the Philippines is
empowerednotonlytonegotiateorcontractwithforeigngovernmentsorinternationalfinancialinstitutionsonbehalf
of the LWUA he or she may also absolutely and unconditionally guarantee, in the name of the Republic of the
Philippines,thepaymentoftheloans.Inaddition,thelawprovidesthattheGeneralAppropriationsActshallinclude
anoutlaytomeetthefinancialrequirementsofnonviablelocalwaterdistrictsorthespecialprojectsoflocalwater
districts.20
The law also adopts a policy to keep the operations of local water districts economically secure and viable. The
"whereas"clausesofthelawexplaintheneedtoestablishlocalwaterdistricts:thelackofwaterutilitiesinprovincial
areas and the poor quality of the water found in some areas. The law sought to solve these problems by
encouraging the creation of local water districts that the national government would support through technical
advisory services and financing.21 These local water districts are heavily regulated and depend on government
supportfortheirsubsistence.Ifaprivateentityprovidesstiffcompetitionagainstalocalwaterdistrict,causesitto
closedownand,thereafter,choosestodiscontinueitsbusiness,theproblemoffindingareplacementwatersupplier
forapoor,remoteareawillrecur.Notonlydoesthereorganizationofalocalwaterdistrictdrainlimitedpublicfunds
the residents of these farflung areas would have to endure the absence of water supply during the considerable
timeitwouldtaketofindanalternativewatersupply.
Thus, as a matter of foresight, Section 47 of P.D. No. 198 and other provisions within the law aim to avert the
negative effects of competition on the financial stability of local water districts. These sections work hand in hand
with Section 47 of P.D. No. 198. Section 31 of P.D. No. 198, which is very similar to Section 47 of P.D. No. 198,
directly prohibits persons from selling or disposing water for public purposes within the service area of the local
waterdistrict:
Section31.ProtectionofWatersandFacilitiesofDistrict.Adistrictshallhavetherightto:
xxxx
(c)Prohibitanyperson,firmorcorporationfromvendingselling,orotherwisedisposingofwaterforpublicpurposes
withintheserviceareaofthedistrictwheredistrictfacilitiesareavailabletoprovidesuchservice,orfixtermsand
conditionsbypermitforsuchsaleordispositionofwater.
Thus,Section47ofP.D.No.198providesthatbeforeapersonorentityisallowedtoprovidewaterserviceswhere
thelocalwaterdistrictsfacilitiesarealreadyavailable,onemustaskfortheconsentoftheboardofdirectorsofthe
localwaterdistrict,whoseactiononthemattermaybereviewedbytheLWUA.
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EvenafteraCPCisgrantedandtheentitybecomesqualifiedtoprovidewaterservices,Section39ofP.D.No.198
still allows a local water district to charge other entities producing water for commercial or industrial uses with a
productionassessment,tocompensateforfinancialreversesbroughtaboutbytheoperationsofthewaterprovider
failuretopaythisassessmentresultsinliabilityfordamagesand/ortheissuanceofanorderofinjunction.
Section 39. Production Assessment.In the event the board of a district finds, after notice and hearing, that
production of ground water by other entities within the district for commercial or industrial uses i[s] injuring or
reducingthedistrictsfinancialcondition,theboardmayadoptandlevyagroundwaterproductionassessmentto
compensateforsuchloss.Inconnectiontherewith,thedistrictmayrequirenecessaryreportsbytheoperatorofany
commercialorindustrialwell.Failuretopaysaidassessmentshallconstituteaninvasionofthewatersofthedistrict
andshallentitlethisdistricttoaninjunctionanddamagespursuanttoSection[31]ofthisTitle.
From these, it can be seen that Article XIV, Section 5 of the 1973 Constitution and P.D. No. 198 share the same
purpose of seeking to ensure regular water supply to the whole country, particularly to the remote areas. By
requiringaprospectivefranchiseapplicanttoobtaintheconsentofthelocalwaterdistrictortheLWUA,thelawdoes
not thereby grant it an exclusive franchise it simply gives the water district the opportunity to have a say on the
entryofacompetitorwhoseoperationscanadverselyaffectitsviabilityandtheserviceitgivestoconsumers.Thisis
farfromanexclusivefranchisethatallowsnootherentity,apartfromtheonlygrantee,tohaveafranchise.Section
47ofP.D.No.198doesnotbarotherfranchiseapplicantsitmerelyregulatesthegrantofsubsequentfranchisesto
ensurethatthemarketisnottoosaturatedtothepointofadverselyaffectingexistinggovernmentwatersuppliers,
allwiththeendofensuringthepublicthewatersupplyitneeds.
RevisitingMetropolitanCebuWaterDistrict(MCWD)v.MargaritaA.Adala
Basedontheforegoingdiscussion,IsubmitthatthereexistsamplejustificationtoreverseourrulinginMetropolitan
CebuWaterDistrict(MCWD)v.MargaritaA.Adala.22Asinthepresentponencia,therewasnodiscussioninMetro
Cebu Water District of what constitutes a grant of an exclusive franchise as opposed to a valid regulation of
franchisesbythegovernmentorhowthequestionedprovisionviolatedtheconstitutionalmandateagainstexclusive
franchises.Itwassimplypresumedthattherewasaviolation.ItisworthnotingthattheCourtdisposedoftheissue
injustoneparagraphthatstated:
SinceSection47ofP.D.198,whichvestsan"exclusivefranchise"uponpublicutilities,isclearlyrepugnanttoArticle
XIV,Section5ofthe1973Constitution,itisunconstitutionalandmaynot,therefore,berelieduponby[MCWD]in
supportofitsoppositionagainst[Adalas]applicationforCPCandthesubsequentgrantthereofbytheNWRB.23
Inalegalsystemthatrestsheavilyonprecedents,thismannerofreasoningwouldnotonlybeunfairtothepartiesit
would also confuse and bewilder the legal community and the general public regarding the interpretation of an
important constitutional provision. This kind of approach should always be subject to our continuing review and
examination.
In reversing a previous ruling issued by the Court, we are not unmindful of the legal maxim stare decisis et non
quietamovere(literally,tostandbythedecisionanddisturbnotwhatissettled).Thismaximisaveryconvenient
practice that the conclusion reached in one case can be applied to subsequent cases where the facts are
substantially the same, even though the parties are different. However, the doctrine is not set in stone the Court
may wisely set it aside upon a showing that circumstances attendant in a particular case override the benefits
broughtaboutbystaredecisis.24
In our Resolution in de Castro v. Judicial and Bar Council,25 we explained why stare decisis is not considered
inflexiblewithrespecttothisCourt:
The Court, as the highest court of the land, may be guided but is not controlled by precedent. Thus, the Court,
especiallywithanewmembership,isnotobligedtofollowblindlyaparticulardecisionthatitdetermines,afterre
examination,tocallforarectification.Theadherencetoprecedentsisstrictandrigidinacommonlawsettinglike
the United Kingdom, where judges make law as binding as an Act of Parliament. But ours is not a common law
systemhencejudicialprecedentsarenotalwaysstrictlyandrigidlyfollowed.Ajudicialpronouncementinanearlier
decisionmaybefollowedasaprecedentinsubsequentcaseonlywhenitsreasoningandjustificationarerelevant,
andtheCourtinthelattercaseacceptssuchreasoningandjustificationtobeapplicableinthecase.Theapplication
oftheprecedentisforthesakeofconvenienceandstability.
For the intervenors to insist that Valenzuela ought not to be disobeyed, or abandoned, or reversed, and that its
wisdomshouldguide,ifnotcontrol,theCourtinthiscaseis,therefore,devoidofrationalityandfoundation.They
seemtoconvenientlyforgetthattheConstitutionitselfrecognizestheinnateauthorityoftheCourtenbanctomodify
orreverseadoctrineorprincipleoflawlaiddowninanydecisionrenderedenbancorindivision.
Thus, this Court had seen it fit to overturn or abandon the rulings set in its previous decisions. In Philippine
GuardiansBrotherhood,Inc.v.CommissiononElections,26wereversedourearlierrulinginPhilippineMinesSafety
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EnvironmentAssociationv.CommissiononElections.27AndinDeCastro,28wereexaminedourdecisioninInre
appointmentsofHon.ValenzuelaandHon.Vallarta29althoughthereexaminationfailedforlackofthenecessary
supportingvotes.
During the deliberations of the present case, a respected colleague hesitated at the idea of overturning a former
ruling that has declared a law unconstitutional on the ground that this Court, once it declares a law null, cannot
breathelifeintoitsalreadydeadprovisions.Itraisesfearsthatthepeopleandtheotherbranchesofgovernmentwill
nottreattheCourtsdeclarationsofnullityoflawsseriously.30
WecannotholdthattheCourtisempoweredtoreverseitsestablisheddoctrinesbutispowerlesstoreviewlawsthat
havebeendeclaredvoidnojustificationsimplyexistsforsuchdistinctions.Inreversingitsdecisions,thisCourts
primaryconsiderationistoarriveatajustandjudiciousrulingandavoidingtheilleffectsofapreviousruling.Itisby
pursuing such objectives that this Court earns the respect of the people and the other branches of government.
Precisely,thisCourthastakenacontraryviewinKilosbayan,Inc.v.Morato,31whenitnotedthattheUSSupreme
CourtdeclaredtheLegalTenderActsvoidinHepburnv.Griswold,32butsubsequentlydeclaredthesestatutesas
validinKnoxv.Lee.33WelaudedtheAmericanjuristswhovotedforthevalidityoftheLegalTenderActs,whichhad
beenformerlydeclaredvoid,andnotedthatachangeofcompositionintheCourtcouldprovethemeansofundoing
anerroneousdecision.34
In all, Section 47 of P.D. No. 198 does not violate the constitutional proscription against exclusive franchises as
other persons and entities may still obtain franchises for water utilities within the district upon the consent of the
local water district or upon a favorable finding by the LWUA, which, in turn, is accountable to the Office of the
President.Bygrantingthisprivilegetolocalwaterdistricts,thelawdoesnotseektofavorprivateinterestsasthese
districts are GOCCs whose profits are exclusively for public use and whose expenditures the law subjects to the
strictest scrutiny. The restrictions applied to other private persons or entities are intended to protect the
governments considerable investment in local water districts and to promote its policy of prioritizing local water
districtsasameansofprovidingwaterutilitiesthroughoutthecountry.Theprotectionistapproachthatthelawhas
takentowardslocalwaterdistrictsisnotperseillegalastheConstitutiondoesnotpromoteatotalderegulationin
theoperationofpublicutilitiesandisaproperexercisebythegovernmentofitspolicepower.
Thus,theTMPCshouldhavefirstsoughttheconsentofLTWDsBoardofDirectors,asdirectedunderSection47of
P.D.No.198.HadtheBoardofDirectorsrefusedtogiveitsconsent,thisactionmaystillbereviewedbytheLWUA,
theentitymostabletodeterminethefinancialandtechnicalcapacityofLTWDinordertodecidewhetheranother
waterserviceproviderisneededinthemunicipality.Accordingly,itismyviewthatTMPCsCPCisinvalidasitwas
issuedwithoutnoticetotheLTWDsBoardofDirectors.
ARTUROD.BRION
AssociateJustice

Footnotes
1Entitled"DeclaringaNationalPolicyFavoringLocalOperationandControlofWaterSystemsAuthorizing

theFormationofLocalWaterDistrictsandProvidingfortheGovernmentandAdministrationofsuchDistricts
Chartering a National Administration to Facilitate Improvement of Local Water Utilities Granting said
AdministrationsuchPowersasareNecessarytoOptimizePublicServicefromWaterUtilityOperations,and
forotherPurposes,"promulgatedMay25,1973,asamendedbyP.D.No.1479.
2BaguioWaterDistrictv.Trajano,GRNL65428,February20,1984,127SCRA730.
3Supranote1,at28.
4Sec.5,Art.XIVofthe1973Constitutionprovides:

Nofranchise,certificate,oranyotherformofauthorizationfortheoperationofapublicutilityshallbe
grantedexcepttocitizensofthePhilippinesortocorporationsorassociationsorganizedunderthelaws
ofthePhilippinesatleastsixtypercentumofthecapitalofwhichisownedbysuchcitizens,norshall
such franchise, certificate or authorization be exclusive in character or for a longer period than
fiftyyears.Neithershallanysuchfranchiseorrightbegrantedexceptundertheconditionthatitshall
besubjecttoamendment,alterationorrepealinbytheBatasangPambansawhenthepublicinterest
sorequires.TheStateshallencourageequityparticipationinpublicutilitiesbythegeneralpublic.The
participationofforeigninvestorsinthegoverningbodyofanypublicutilityenterpriseshallbelimitedto
theirproportionateshareinthecapitalthereof.
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5Ponencia,p.11.
6Ponencia,p.8.
7Supranote1.
8KilusangMayoUnoLaborCenterv.Garcia,Jr.,G.R.No.115381,December23,1994,239SCRA386,412.
9RecordoftheConstitutionalCommission,volume3,262263,
10FirstUnitedConstructorsCorporationv.PoroPointManagementCorporation(PPMC),G.R.No.178799,

January19,2009,576SCRA311,321Gatmaitanv.Gonzales,G.R.No.149226,June26,2006,492SCRA
591,604andPAMECAWoodTreatmentPlant,Inc.v.CourtofAppeals,369Phil.544,555(1999).
11 Davao City Water District v. Civil Service Commission, G.R. Nos. 9523738, September 13, 1991, 201

SCRA593,602seealsoFelicianov.CommissiononAudit,464Phil.439,453464(2004).
12Section49ofP.D.No.198.
13Engr.Felicianov.CommissiononAudit,supranote10,at462463.
14Section49ofP.D.No.198.
15CONSTITUTION,ArticleVII,Section1.
16 Francisco, Pepito, "Provincial Water Utilities Act of 1973, as amended," 2008 ed., pp. 2526, citing the

LWUAWaterDistrictPrimer.Thestepstobeundertakenforthecreationofadulyorganizedwaterdistricts
areasfollows:
(1)LWUAconductspreliminarytalksandconsultationwithinterestedlocalgovernmententities.
(2)Thelocalgovernmentconductspublichearingstoarriveataconsensusonwhethertoformawater
districtornot.
(3)Thelocallegislativebody(theSangguniangBayan/LungsodorSangguniangPanlalawigan,asthe
case may be) secures nominations for candidates for the water district board of directors from
business,civic,professional,educationandwomensectorsofthecommunityconcerned.
(4)TheSangguniansecretarycollatesallnominationsandforwardsthesametotheappointing
authority.
(5)TheMayororGovernorappointsthedirectors.
(6)Thelocallegislativebodydeliberatesandenactsaresolutiontoformawaterdistrictstatingtherein
thenamesandtermsofofficeofthedulyappointedboardofdirectors.
(7)MayororGovernorapprovestheresolution,submitsthesametoLWUA.
(8) LWUA reviews the resolution to determine compliance with Presidential Decree No. 198, as
amended(ProvincialWaterUtilitiesActof1973)andLWUArequirements.
17Engr.Felicianov.CommissiononAudit,supranote10,at462463.
18Ibid.
19Section50ofP.D.198.
20Sections76and77ofP.D.No.198.
21 WHEREAS, domestic water systems and sanitary sewers are two of the most basic and essential

elements of local utility system, which, with a few exceptions, do not exist in provincial areas in the
Philippines
WHEREAS,existingdomesticwaterutilitiesarenotmeetingtheneedsofthecommunitiestheyserve
waterqualityisunsatisfactorypressureisinadequateandreliabilityofserviceispoorinfact,many
personsreceivenopipedwaterservicewhatsoever
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xxxx
WHEREAS,localwaterutilitiesshouldbelocallycontrolledandmanaged,aswellashavesupporton
thenationallevelintheareaoftechnicaladvisoryservicesandfinancing[.]
22G.R.No.168914,July4,2007,526SCRA465.
23Ibid.
24PhilippineGuardiansBrotherhood,Inc.v.CommissiononElections,G.R.No.190529,April29,2010.
25 G.R. Nos. 191002, 191032, 191057, 191149, 191342 and 191420, and A.M. No. 1025SC, April 20,

2010,citingLimketkaiSonsMilling,Inc.v.CourtofAppeals,G.R.No.118509,September5,1996,261SCRA
464,467.
26Supranote23.
27G.R.No.177548,ResolutiondatedMay10,2007.
28Supranote24.
29358Phil.896(1998).
30JusticeAbadsDissentingOpinion,p.2.
31320Phil.171,181182(1995).
328Wall.603(1869).
3312Wall.457(1871).
34Supranote30.TheCourtdeclaredthat:

HistoryhasvindicatedtheoverrulingoftheHepburncasebythenewmajority.TheLegalTenderCases
provedtobetheCourtsmeansofsalvationfromwhatChiefJusticeHugheslaterdescribedasoneof
theCourts"selfinflictedwounds."
TheLawphilProjectArellanoLawFoundation

CONCURRINGOPINION
ABAD,J.:
OnOctober9,2000petitionerTawangMultiPurposeCooperative(TMPC),aregisteredcooperativeestablishedby
BarangayTawang,LaTrinidadresidentsforthepurposeofoperatingadomesticdrinkingwaterservice,appliedwith
the National Water Resources Board (the Board) for a Certificate of Public Convenience (CPC) to maintain and
operateawaterworkssystemwithinitsbarangay.
ButrespondentLaTrinidadWaterDistrict(LTWD),agovernmentownedcorporation1thatsuppliedwaterwithinLa
Trinidad for domestic, industrial, and commercial purposes, opposed the application. LTWD claimed that its
franchise was exclusive in that its charter provides that no separate franchise can be granted within its area of
operationwithoutitspriorwrittenconsent.Still,theBoardgrantedTMPCsapplicationonJuly23,2002,resultingin
theissuanceofafiveyearCPCinitsfavor.
LTWD contested the grant before the Regional Trial Court (RTC) of La Trinidad which, after hearing, rendered
judgment setting aside the Boards decision and canceling the CPC it issued to TMPC. The RTC denied TMPCs
motionforreconsideration,promptingthelattertocometothisCourtonpetitionforreview.
The Court has previously held in Metropolitan Cebu Water District v. Adala2 that Section 473 of P.D. 198,4 is
unconstitutionalforbeingcontrarytoArticleXIV,Section5ofthe1973ConstitutionandArticleXII,Section11ofthe
1987 Constitution. Some in the Court would, however, have its above ruling reexamined based on the view that
Section47doesnotactuallyprovideforanexclusivefranchisewhichwouldviolatetheConstitution.
TheCourtsconclusionandrulingintheAdalacaseread:
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G.R. No. 166471

SinceSection47ofP.D.198,whichvestsan"exclusivefranchise"uponpublicutilities,isclearlyrepugnanttoArticle
XIV,Section5ofthe1973Constitution,itisunconstitutionalandmaynot,therefore,berelieduponbypetitionerin
supportofitsoppositionagainstrespondentsapplicationforCPCandthesubsequentgrantthereofbytheNWRB.
WHEREFORE,Section47ofP.D.198isunconstitutional.
Paragraph2,Article7oftheNewCivilCodeprovidesthat"whenthecourtsdeclaredalawtobeinconsistentwith
theConstitution,theformershallbevoidandthelattershallgovern."
SincetheCourt,exercisingitsConstitutionalpowerofjudicialreview,hasdeclaredSection47ofP.D.198voidand
unconstitutional, such section ceased to become law from the beginning. The Supreme Courts power of review
doesnotpermitittorewriteP.D.198inasubsequentcaseandbreathelifetoitsdeadprovisions.OnlyCongress
can.
Besides,suchcourseofactionisunwise.TheCourtwillbeestablishingadoctrinewherebypeopleandtheother
branchesofgovernmentwillnotneedtotreattheCourtsdeclarationofnullityoflawtooseriously.Theycanclaim
anexcuseforcontinuingtoenforcesuchlawsinceeventheCourtconcedesthatitcaninanothercasechangeits
mindregardingitsnullity.
I fully subscribe to the majority opinion, penned by Justice Antonio T. Carpio that there exists no justification for
abandoningtheCourtspreviousrulingonthematter.
IvotetoGRANTTMPCspetitionforreviewandSETASIDEthedecisionofthetrialcourt.
ROBERTOA.ABAD
AssociateJustice

Footnotes
1CreatedpursuanttoPresidentialDecree(P.D.)198,alsoknownastheProvincialWaterUtilitiesActof1973.
2G.R.No.168914,July4,2007,526SCRA465.
3 Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency for domestic,

industrialorcommercialwaterservicewithinthedistrictoranyportionthereofunlessandexcepttotheextent
that the board of directors of said district consents thereto by resolution duly adopted, such resolution,
however,shallbesubjecttoreviewbytheAdministration.
4 "Declaring a National Policy Favoring Local Operation and Control of Water Systems Authorizing the

Formation of Local Water Districts and Providing for the Government and Administration of such Districts
Chartering a National Administration to Facilitate Improvement of Local Water Utilities Granting said
AdministrationsuchPowersasAreNecessarytoOptimizePublicServicefromWaterUtilityOperations,and
forOtherPurposes."ThistookeffectuponitsissuancebythenPresidentMarcosonMay25,1973.
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