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TAWANG MULTI-PURPOSE COOPERATIVE v. LA TRINIDAD WATER DISTRICT

FACTS:

Tawang Multi-Purpose Cooperative (TMPC) is a cooperative registered with the Cooperative Development Authority. It is tasked to provide domestic water services in Barangay Tawang, La Trinidad, Benguet. On the other hand, La Trinidad Water District (LTWD) is a local water utility created under Presidential Decree (PD) No. 198, as amended, and is authorized to supply water for domestic, industrial, and commercial purposes within the municipality of La Trinidad, Benguet.

TMPC filed an application for a certificate of public convenience (CPC) with the National Water Resources Board (NWRB) to operate and maintain a waterworks system in Barangay Tawang. However, LTWD opposed TMPC's application, claiming that their franchise is exclusive under Section 47 of PD No. 198, as amended. The said provision states that no franchise shall be granted to any other person or agency for domestic, industrial, or commercial water service within the district or any portion thereof unless the LTWD consents and the resolution is subject to review by the Administration.

The NWRB approved TMPC's application for a CPC in its Resolution No. 04-0702 and held that LTWD's franchise cannot be exclusive as it goes against the constitution. LTWD filed a motion for reconsideration, which the NWRB denied. LTWD then appealed to the Regional Trial Court (RTC).

In its ruling, the RTC set aside the NWRB's resolution and decision and cancelled TMPC's CPC. The RTC held that Section 47 of PD No. 198, as amended, is valid as it supports the ultimate purpose of the Constitution, which is for the state to have control and supervision over public utilities. TMPC filed a motion for reconsideration, which the RTC denied. Hence, the present petition. The issue raised by TMPC is whether the RTC erred in holding that Section 47 is valid.

ISSUES:

  1. Whether acts that cannot be legally done directly can be done indirectly.

  2. Whether franchises for the operation of a public utility can be exclusive in character.

  3. Whether section 47 of PD No. 198, as amended, allowing the creation of franchises that are exclusive in character is constitutional.

  4. Whether the Board of Directors (BOD) and the Local Water Utilities Administration (LWUA) have the authority to create such franchises.

  5. Whether the constitutional prohibition against exclusive franchises prevails over the provisions of PD No. 198.

  6. Can the President, the Board of Directors (BOD), and the Local Water Utilities Administration (LWUA) violate the Constitution indirectly or directly?

  7. Should the Court allow the creation of franchises that are exclusive in character?

  8. Whether Section 47 of Presidential Decree No. 198 violates the Constitution or its basic principles.

  9. Whether sustaining the Regional Trial Court's ruling would create a dangerous precedent.

RULING:

  1. The Court held that acts that cannot be legally done directly cannot be done indirectly. The rule is basic and undisputed.

  2. The Court ruled that franchises for the operation of a public utility cannot be exclusive in character. The 1935, 1973, and 1987 Constitutions expressly and clearly prohibit the creation of franchises that are exclusive in character. Thus, the President, Congress, and the Court cannot create indirectly franchises that are exclusive in character by allowing the Board of Directors (BOD) of a water district and the Local Water Utilities Administration (LWUA) to create franchises that are exclusive in character.

  3. The Supreme Court held that section 47 of PD No. 198, as amended, allowing the creation of franchises that are exclusive in character, is unconstitutional. The Court declared that the constitutional prohibition against exclusive franchises, as stated in the 1935, 1973, and 1987 Constitutions, is absolute and admits no exception. The BOD and the LWUA are not authorized to make exceptions to this prohibition, and even Congress does not have the power to do so. Therefore, section 47 is void ab initio.

  4. No, the President, the BOD, and the LWUA cannot violate the Constitution, whether indirectly or directly.

  5. No, the Court should not allow the creation of franchises that are exclusive in character.

  6. Section 47 of Presidential Decree No. 198 is declared unconstitutional.

  7. The petition is granted, and the 1 October 2004 Judgment and 6 November 2004 Order of the Regional Trial Court are set aside. The 23 July 2002 Resolution and 15 August 2002 Decision of the National Water Resources Board are reinstated.

PRINCIPLES:

  • Acts that cannot be legally done directly cannot be done indirectly.

  • Franchises for the operation of a public utility cannot be exclusive in character.

  • The Constitution is the highest law of the land to which all other laws must conform. If a law or administrative rule contradicts the Constitution, it is null and void.

  • The prohibition against exclusive franchises, as stated in the Constitution, is absolute and admits no exception.

  • Any law or contract that violates the Constitution is null and void.

  • The Constitution should never be violated by anyone. Any act, no matter how noble its intentions, is void if it conflicts with the Constitution.

  • The three branches of government have no choice but to yield obedience to the commands of the Constitution and must discharge their respective functions within the limits of authority conferred by the Constitution.

  • Police power is the plenary power vested in Congress to make laws not repugnant to the Constitution.

  • When the effect of a law is unconstitutional, it is void. A statute may be declared unconstitutional if it is not within the legislative power to enact, if it creates or establishes methods or forms that infringe constitutional principles, or if its purpose or effect violates the Constitution or its basic principles.

  • The Constitution is the fundamental law, setting forth the criterion for the validity of any public act. All branches of government must yield obedience to its commands. Congress must be vigilant in not exceeding its authority, the Presidency must execute the laws as ordained, and the judiciary must maintain inviolate what is decreed by the fundamental law.

  • The Constitution overrides any governmental measure that fails to live up to its mandates. It is the supreme law, and the power of judicial review to pass upon the validity of acts of the coordinate branches is a logical corollary of this basic principle.

  • Sustaining a ruling that allows Congress to circumvent the constitutional prohibition on exclusive franchises would create a dangerous precedent.