Title
Supreme Court
Metropolitan Waterworks and Sewerage System, represented by Diosdado Jose M. Allado, vs. Provincial Government of Bulacan, represented by Josefina M. Dela Cruz
Case
G.R. No. 185184
Decision Date
Oct 3, 2023
Bulacan Province sought a share of proceeds from Angat Dam's water utilization by MWSS, claiming it as national wealth. Courts ruled water is a natural resource, entitling Bulacan to a share under the Local Government Code.

Case Summary (G.R. No. 268672)

Background and Lower Courts’ Decisions

The Provincial Government of Bulacan filed a complaint against MWSS claiming entitlement to a share of national wealth pursuant to the constitutional and statutory right granted to local government units (LGUs) to equitably share in proceeds derived from the utilization and development of natural resources within their territories. Angat Dam, although man-made, holds water that Bulacan claims as within its area, thus forming part of “national wealth.” Bulacan demanded payment of its national wealth share dating back to 1992, supported by Section 7, Article X of the Constitution, and Sections 289, 291, and 292 of the Local Government Code.

The Regional Trial Court (RTC) ruled in favor of Bulacan, ordering MWSS to furnish financial documents and remit a share of proceeds based on 1% of concession fees subject to computation. The Court of Appeals (CA) affirmed the RTC’s decision with modification on the formula for remittance under Section 291 of the Local Government Code.

Petitioner’s Arguments Before the Supreme Court

MWSS contended that:

  • Bulacan lacked cause of action against MWSS as there was no privity or contractual relationship imposing such obligation.
  • Angat Dam is a man-made structure and its waters no longer constituted “national wealth” or natural resource as contemplated by law.
  • Water in the dam is appropriated water, i.e., diverted from natural sources, thus separated from natural resource classification and is not subject to equitable sharing under Article X, Section 7.
  • MWSS is a non-profit service utility performing regulatory and operational functions; it does not engage in the utilization and development of national wealth for profit nor does it derive income from concession fees since these are allocated primarily for debt servicing and operational expenses.
  • No ordinance was passed by Bulacan’s Sangguniang Panlalawigan authorizing imposition or collection of such share; hence, the constitutional provision is not self-executory.
  • The proposed 1% share would be inequitable and unjust, impacting MWSS’s operations and consumer welfare.

Respondent’s Position

Bulacan insisted that:

  • A substantial portion of water in Angat Dam is sourced, located, and stored within its territorial jurisdiction, supported by certifications and NAMRIA maps.
  • MWSS is engaged in utilization and development of national wealth through the operation and maintenance of the dam and waterworks system.
  • The constitutional and statutory provisions impose mandatory remittance of an equitable share regardless of MWSS’s profit orientation.
  • The obligation to pay such share is applicable to all government instrumentalities and government-owned or controlled corporations utilizing national wealth within their respective areas.

Supreme Court’s Criteria for Entitlement Under Section 7, Article X of the 1987 Constitution

The Court en banc examined the constitutional provision granting LGUs an equitable share in the proceeds from the utilization and development of national wealth within their jurisdiction, applying the following requisites:

  1. The existence of national wealth constituting a natural resource.
  2. The natural resource must be situated within the LGU’s territory.
  3. Proceeds must have been generated from the utilization and development of said national wealth.

It emphasized that the term “national wealth” is synonymous with natural resources as defined under Article XII, Section 2 of the Constitution and the Implementing Rules and Regulations of the Local Government Code, encompassing waters, lands of public domain, minerals, and other natural resources.

Nature of Water in Angat Dam — Appropriated Water Excluded From National Wealth

The Court confirmed through jurisprudence, particularly IDEALS, Inc. v. PSALM (2012), that water ceases to be a natural resource, and thus part of national wealth, once it is appropriated—that is, taken or diverted from natural sources and impounded in artificial structures such as dams. Angat Dam water is a reservoir of appropriated water, which no longer forms part of the natural resource category due to its removal from its natural source (Angat River and others). This is consistent with the Water Code’s definition of appropriation and water rights.

The Court cited Department of Justice Opinions consolidating this legal principle that appropriation designates the point at which water is no longer a “natural resource” subject to nationality restrictions or natural wealth sharing but becomes an ordinary commercial commodity.

MWSS’s Role and Function — Non-Utilization and Non-Development of National Wealth

The Court recognized that MWSS’s chartered powers and functions relate to the operation, maintenance, and regulation of waterworks and sewerage systems as essential public services—not as an entity engaged in exploiting or commercially developing natural resources for profit. MWSS does not generate profit from the concession fees it collects; these monies primarily cover debt servicing, operating expenses, and system improvements. The Court distinguished “utilization and development” under Article X, Section 7 as activities involving exploitation or commercial ventures that generate proceeds or income, which does not describe MWSS’s operations.

This interpretation aligns with its mandate as a government instrumentality vested with corporate powers performing public functions, as opposed to a profit-oriented government-owned or controlled corporation (GOCC).

Location and Origin of Water in Angat Dam — No Exclusive Localization in Bulacan

The Court questioned the evidentiary basis for the claim that 71.9% to 88.5% of the water in Angat Dam originates from Bulacan, finding the National Power Corporation (NPC) certification relied upon by lower courts to be inadmissible hearsay unsupported by testimony or formal proof of authenticity under the rules of evidence.

Moreover, the watershed supplying Angat Dam spans multiple provinces including Quezon, Nueva Ecija, and Rizal. Watershed land area does not equate to volumetric water flow or exclusive source. Thus, the water stored cannot be unequivocally deemed situated solely or mainly within Bulacan’s jurisdiction.

Impact of Allowing Equitable Share Claim — Public Interest and Fiscal Autonomy Considerations

The Court recognized that granting Bulacan an equitable share from MWSS’s proceeds would impose an additional financial burden, likely prompting increases in concession fees paid by MWSS’s concessionaires and ultimately translating to higher water rates for consumers. This would affect public welfare and the affordability of an essential service.

MWSS already remits dividends to the national government under Republic Act No. 7656, meaning additional remittances to LGUs could jeopardize operational viability and service continuity. The Court warned against creating precedents encouraging multiple LGUs to claim shares from singular water sources, destabilizing the regulatory and economic framework.

Holding and Disposition

The Supreme Court en banc granted the petition, reversed, and set aside the decisions of the Court of Appeals and the Regional Trial Court. It dismissed Bulacan’s complaint for specific performance and payment of national wealth share for lack of merit, holding:

  • Dam water in Angat Dam is appropriated water, no longer a natural resource or part of national wealth subject to local government equitable sharing under Article X, Section 7.
  • MWSS is not engaged in utilization and development of national wealth and consequently owes no share of proceeds.
  • The NPC, as holder of water rights and controller of water appropriation, had been the entity liable for national wealth tax, duly paid to Bulacan in the past.
  • Bulacan failed to prove that the source of water in Angat Dam is exclusively within its territory or that MWSS’s activities generate proceeds subject to sharing.
  • The equitable share claim, if allowed, threatens essential public services and consumer welfare by increasing concession fees and water rates.

Concurring Opinions — Agreement With the Result and Emphasis on Public Service Nature of MWSS

Chief Justice Alexander G. Gesmundo, Justice Alfredo Benjamin S. Caguioa, and other members concurred, emphasizing:

  • Water appropriated and impounded in Angat Dam ceases to be natural resource and national wealth.
  • MWSS operates as a public-service government instrumentality performing regulatory functions, not profit-generating ex

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