Title
Tawang Multi-purpose Cooperative vs. La Trinidad Water District
Case
G.R. No. 166471
Decision Date
Mar 22, 2011
TMPC sought CPC to operate waterworks in Tawang; LTWD opposed, citing exclusive franchise under PD 198. SC ruled Section 47 unconstitutional, reinstating TMPC’s CPC.

Case Summary (G.R. No. 166471)

Facts and Administrative Determination

TMPC sought authority from the NWRB to operate a waterworks system in Barangay Tawang. LTWD opposed, invoking Section 47 of P.D. No. 198 which conditions the grant of other water service franchises within a district on the consent of the district’s board of directors, subject to review by the Administration (LWUA). The NWRB concluded that LTWD’s franchise could not be exclusive because exclusive franchises are constitutionally prohibited; it found TMPC legally and financially qualified and granted the CPC.

Procedural History Before the RTC

LTWD moved for reconsideration at the NWRB and, after denial, filed an action in the RTC. The RTC set aside the NWRB’s resolution and decision and cancelled TMPC’s CPC, upholding Section 47 as valid. TMPC’s motion for reconsideration before the RTC was denied, prompting the petition for certiorari under Rule 45 to the Supreme Court.

RTC’s Reasoning

The RTC construed the constitutional prohibition against exclusivity as aimed at preventing the State from being barred from granting franchises; it held that a franchise that appears exclusive on its face need not be invalid if it does not operate to preclude the State’s ultimate authority. The RTC therefore treated Section 47 as not repugnant to the Constitution, reasoning that the constitutional proscription does not foreclose the grantee’s right to exercise present privileges to the exclusion of others so long as the State retains ultimate power to amend or revoke.

Issue Presented to the Supreme Court

Whether Section 47 of P.D. No. 198 is constitutionally valid insofar as it effectively permits a local water district’s board of directors and the Local Water Utilities Administration (LWUA) to authorize or withhold consent for the grant of other water-service franchises within a district, and whether such a provision constitutes an unconstitutional grant of exclusivity.

Majority Ruling and Disposition

The Supreme Court granted the petition. It declared Section 47 of P.D. No. 198 unconstitutional and void, set aside the RTC’s 1 October 2004 Judgment and 6 November 2004 Order, and reinstated the NWRB’s 23 July 2002 Resolution and 15 August 2002 Decision granting TMPC’s CPC.

Majority Legal Analysis and Principles Applied

  • Supremacy of the Constitution and non-exclusivity: The Court emphasized the clear constitutional mandate that “no franchise, certificate, or any other form of authorization for the operation of a public utility . . . shall be exclusive in character” (language reproduced from the 1935, 1973, and 1987 Constitutions). Because the decision postdates 1990, the Court applied the 1987 Constitution (Article XII, Section 11) as the operative constitutional standard.
  • Prohibition against indirect circumvention: The Court applied the maxim “what cannot be done directly cannot be done indirectly,” citing prior precedents (e.g., Alvarez v. PICOP Resources, Inc.; Akbayan v. Aquino; Central Bank Employees Assn. v. BSP) to hold that governmental actors cannot evade a constitutional prohibition by delegating the ability to create exclusivity to subordinate bodies.
  • Effect of Section 47: Section 47 was held to vest in the LTWD board and LWUA the authority to permit or withhold the grant of other water-service franchises within a district, thereby creating a mechanism by which exclusive franchises could be made effective indirectly. Because the Constitution absolutely proscribes exclusivity, Section 47’s allowance for such discretion was held irreconcilable with the constitutional command and therefore void.
  • Duty of judicial review: The Court reiterated that when a statute conflicts with the Constitution the statute must yield; courts must declare invalid laws repugnant to the Constitution and apply constitutional supremacy in reviewing administrative and legislative acts.

Precedents and Supporting Authorities Relied Upon by the Majority

The majority anchored its holding on the constitutional provision against exclusive franchises and on a line of cases emphasizing the inability to do indirectly what is constitutionally forbidden directly. It also relied on prior decisions declaring exclusivity disfavored (including Metropolitan Cebu Water District v. Adala) and on general doctrines of constitutional supremacy and judicial review as reflected in several cited authorities.

Dissenting Opinion (Justice Brion) — Core Arguments

  • Acceptance of the constitutional prohibition but different characterization of Section 47: Justice Brion agreed that exclusive franchises are constitutionally prohibited but dissented on the legal question whether Section 47 embodies such a prohibited exclusive franchise. He argued Section 47 regulates, rather than grants, exclusivity because it conditions the grant of subsequent franchises on the local water district’s consent, with review by the LWUA. Under his view, Section 47 does not bar additional franchises; it provides a regulatory process to review and, where appropriate, permit subsequent entrants.
  • Regulatory rationale and police power: The dissent emphasized the State’s legitimate interest in regulating public utilities to protect public investments, avert ruinous competition in poor or remote areas, and ensure reliable water supply. It viewed Section 47 as a measured regulatory mechanism consistent with the government’s police power and not an unconstitutional delegation of exclusive franchise power.
  • Safeguards against abuse: The dissent pointed to procedural and institutional checks — presumption of regularity of public officers, civil-service and anti-graft accountability of water district officials, LWUA oversight and attachment to the Office of the President, and judicial review against grave abuse — as safeguards preventing arbitrary denial of consent.
  • Call to revisit precedent: Justice Brion urged careful delineation between a prohibited exclusive franchise and permissible governmental regulation of franchise grants, and suggested reconsideration of Metropolitan Cebu Water District v. Adala on that basis. He also concluded, in his view,

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