GR 166471; (March, 2011) (Digest)
G.R. No. 166471 ; March 22, 2011
TAWANG MULTI-PURPOSE COOPERATIVE, Petitioner, vs. LA TRINIDAD WATER DISTRICT, Respondent.
FACTS
Petitioner Tawang Multi-Purpose Cooperative (TMPC), a cooperative registered to provide domestic water services in Barangay Tawang, La Trinidad, Benguet, filed an application with the National Water Resources Board (NWRB) for a Certificate of Public Convenience (CPC) to operate a waterworks system. Respondent La Trinidad Water District (LTWD), a local water utility created under Presidential Decree No. 198 (as amended), opposed the application. LTWD invoked Section 47 of P.D. No. 198, which grants it an “Exclusive Franchise,” stating that no other franchise for water service shall be granted within its district unless its board of directors consents. The NWRB granted TMPC’s CPC, ruling that LTWD’s franchise cannot be exclusive as exclusive franchises are unconstitutional, and that TMPC was qualified to operate. LTWD appealed to the Regional Trial Court (RTC). The RTC set aside the NWRB’s decision and cancelled TMPC’s CPC, holding that Section 47 of P.D. No. 198 is valid. It interpreted that a franchise exclusive on its face is not prohibited, so long as it does not preclude the State’s ultimate authority to grant, amend, or repeal franchises. TMPC filed the present petition.
ISSUE
Whether the Regional Trial Court erred in holding that Section 47 of Presidential Decree No. 198, as amended, which grants an “Exclusive Franchise” to water districts, is valid.
RULING
The petition is meritorious. The Supreme Court reversed the RTC’s decision and reinstated the NWRB’s grant of the CPC to TMPC. The Court ruled that Section 47 of P.D. No. 198, as amended, is unconstitutional. The 1987 Constitution , specifically Section 11, Article XII, explicitly provides that no franchise for the operation of a public utility shall be “exclusive in character.” This constitutional prohibition is clear, absolute, and admits of no exception. The Court emphasized that what cannot be done directly (grant an exclusive franchise) cannot be done indirectly. Since the Constitution directly prohibits exclusive franchises, the legislature (or the President, via decree) cannot indirectly create one by allowing a grantee, such as a water district, to veto the grant of a franchise to another entity through its consent. Section 47 effectively grants LTWD a veto power, making its franchise exclusive in character and operation, which is precisely what the Constitution forbids. The Court affirmed its prior ruling in De Jesus v. Commission on Audit ( G.R. No. 149154 , June 10, 2003), which declared Section 47 of P.D. No. 198 unconstitutional. Therefore, LTWD cannot rely on its “exclusive franchise” to oppose TMPC’s application.