Metropolitan Cebu Water District (MCWD) v. Margarita A.
Adala the authority to bind the corporation and was specific enough as to the acts they were
[G.R. No. 168914, July 4, 2007, J. Carpio-Morales, En Banc]
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 MR 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 MR.
ISSUES
WON the petition maybe dismissed outright for failure to comply with the procedural grounds –
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
1 in the absence of a board resolution authorizing a person to act for and in behalf of a corporation, the
action 􀀽led in its behalf must fail since "the power of the corporation to sue and be sued in any court is
lodged with the board of directors that exercises its corporate powers."
2 "[f]or such o􀀽cers to be deemed fully clothed by the corporation to exercise a power of the Board, the
latter must specially authorize them to do so."
empowered to do.
However, the Board Resolution does not authorize Engr Paredes for the specific act of signing
verifications and certifications against forum shopping.
WON the application for CPC should be denied on the ground of lack of
consent of the Board of Directors – 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 disctrict’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. N o franchise, certi􀀽cate, 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 􀀽fty
years .

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