G.R. No. 165993 September 30, 2008
Merida Water District, et al., Petitioners, vs. Francisco Bacarro, et al., Respondents.

FACTS

Petitioners, the Merida Water District (MWD) and its officials, implemented a water rate increase via Resolution No. 006-02, charging P90 for the first ten cubic meters. This followed a public hearing and a subsequent letter from the Local Water Utilities Administration (LWUA) confirming the proposed rates. Respondents, consumers of MWD, filed a Petition for Injunction before the Regional Trial Court (RTC) to enjoin the collection, alleging the increase violated the agreement from the public hearing and Letter of Instructions No. 700 by exceeding a 60% hike and lacking a proper hearing for the specific P90 rate.
Petitioners moved to dismiss, arguing the RTC lacked jurisdiction and respondents failed to exhaust administrative remedies under Presidential Decree No. 198, as amended. They contended that disputes over water rates must first be appealed to the National Water Resources Board (NWRB). The RTC denied the motion, ruling exhaustion was unnecessary due to alleged violations of legal requisites for notice, hearing, and LOI No. 700. The Court of Appeals affirmed the RTC’s orders.

ISSUE

The primary issues were: (1) whether the RTC had jurisdiction over the petition, and (2) whether respondents’ recourse to the RTC was proper despite not exhausting administrative remedies.

RULING

The Supreme Court reversed the lower courts, ruling the RTC had no jurisdiction and the doctrine of exhaustion of administrative remedies applied. The legal logic is anchored on the statutory framework governing water districts. Presidential Decree No. 1479 provides a specific administrative review process: after a local water district establishes rates, the LWUA reviews them for compliance, and a concessionaire may appeal the LWUA’s action to the NWRB, with a further appeal to the Office of the President. This scheme grants the NWRB quasi-judicial authority over rate disputes, making its jurisdiction primary.
The Court clarified that the NWRB’s original jurisdiction under the Water Code (P.D. No. 1067) over water utilization disputes does not conflict with this specific review process for rate-setting. Since the core allegation involved the legality of the rate increase implementation—a matter squarely within the NWRB’s review authority under P.D. No. 1479—the RTC should have deferred to this administrative machinery. None of the recognized exceptions to the exhaustion doctrine were present. Respondents’ claim of due process violation was unfounded as a public hearing was admittedly conducted. Thus, respondents were obligated to first pursue the appeal to the NWRB before seeking judicial relief.