G.R. No. 72807 - Marilao Water Consumers Association, Inc. vs. Intermediate Appellate Court

The creation, organization, and operation of water districts are governed by Presidential Decree No. 198 (PD 198), which sets forth the powers, functions, and the method of formation of these quasi-public corporations.
PD 198 details the procedures for forming water districts by local legislative bodies, including requirements for naming, board composition, terms of office, and mechanisms for dissolution.
Unlike corporations organized under the Corporation Code, water districts are chartered by resolutions filed with the Local Water Utilities Administration (LWUA), not the Securities and Exchange Commission (SEC).

The Marilao Water District was established by a resolution of the Sangguniang Bayan of the Municipality of Marilao on September 18, 1982, and the resolution was duly filed with the LWUA on October 4, 1982.
The district was organized to provide water service to residents, fix rates, manage watersheds, and exercise other powers as enumerated in PD 198.

The Marilao Water Consumers Association, Inc. claimed that the creation of the water district was illegal and defective.

It alleged that only a “farcical” public hearing was conducted prior to the district’s formation.
The waterworks system was turned over to the district without adequate compensation, and an illegal subsidy was authorized.
The district was criticized for being run with “negligence, apathy, indifference and mismanagement” while still billing consumers in full and even disconnecting service for non-payment.

The consumers organized themselves into a corporate entity to demand better service and proper management of the waterworks.

A petition for the dissolution of the water district was filed by the Consumers Association on December 12, 1983, with the Regional Trial Court at Malolos, Bulacan.
The trial court, addressing a temporary restraining order and a preliminary injunction, issued orders to restrain respondents from disbursements, disconnections, and other acts until further notice.
In its Answer with Compulsory Counterclaim filed on January 13, 1984, the Marilao Water District contended that the matter of dissolution fell under the exclusive jurisdiction of the SEC, while also invoking that certain rate-setting issues were within the primary administrative jurisdiction of the LWUA and the quasi-judicial competency of the National Water Resources Council.
Other respondents (the Municipality, the Sangguniang Bayan, and the Mayor) similarly asserted the lack of jurisdiction of the Regional Trial Court and the need to defer to the SEC.
The trial court dismissed the Consumers Association’s suit on June 8, 1984 for lack of jurisdiction, a decision reaffirmed upon a motion for reconsideration.
The Consumers Association subsequently elevated the issue to the Intermediate Appellate Court, which ruled against the petition on two grounds: improper remedy (special civil action of certiorari instead of a proper appeal) and that the controversy fell within SEC’s competence.
The controversy then reached the Supreme Court, which scrutinized both the jurisdictional issue and the propriety of the remedy employed.

The proper venue for dissolution proceedings was the SEC, given the characteristics shared with corporations under PD mechanisms.
Issues related to water rates and waterworks management fell respectively under the LWUA and the National Water Resources Council, not the court.

Water districts, though quasi-public, are distinctly different from traditional corporations because they lack stockholders or members.
Dissolution proceedings should be initiated in a Regional Trial Court as provided under Section 45 of PD 198, which mandates a resolution by the board, approval by the Sangguniang Bayan, and subsequent filing with the LWUA.
The petition filed was indeed the proper remedy under the specific statutory scheme governing water districts.

Whether the proceedings for dissolving the Marilao Water District fall under the exclusive jurisdiction of the SEC or are within the general jurisdiction of the Regional Trial Court.

Whether the Consumers Association’s resort to a special civil action of certiorari was appropriate, or if an ordinary appeal under the Rules of Court should have been pursued in light of the trial court’s final order.

Whether the prescribed steps (asset transfer, creditor consent, and a court declaration of public interest) for dissolving a water district under PD 198 were triggered or applicable given the circumstances surrounding the Marilao Water District.

Whether the SEC has oversight over the dissolution of water districts, or if this matter is rightly reserved for the LWUA and adjudicated by a regular court.