EN BANC

[G.R. No. 168914. July 4, 2007.]

METROPOLITAN CEBU WATER DISTRICT (MCWD) , petitioner, vs .

MARGARITA A. ADALA , respondent.

DECISION

CARPIO-MORALES , J : p

The Decision of the Regional Trial Court (RTC) of Cebu dated February 10, 2005,
which a rmed in toto the Decision of the National Water Resources Board (NWRB) dated
September 22, 2003 in favor of Margarita A. Adala, respondent, is being challenged in the
present petition for review on certiorari.
Respondent led on October 24, 2002 an application with the NWRB for the
issuance of a Certi cate of Public Convenience (CPC) to operate and maintain waterworks
system in sitios San Vicente, Fatima, and Sambag in Barangay Bulacao, Cebu City.
At the initial hearing of December 16, 2002 during which respondent submitted
proof of compliance with jurisdictional requirements of notice and publication, herein
petitioner Metropolitan Cebu Water District, a government-owned and controlled
corporation created pursuant to P.D. 198 1 which took effect upon its issuance by then
President Marcos on May 25, 1973, as amended, appeared through its lawyers to oppose
the application.
While petitioner led a formal opposition by mail, a copy thereof had not, on
December 16, 2002, yet been received by the NWRB, the day of the hearing. Counsel for
respondent, who received a copy of petitioner's Opposition dated December 12, 2002
earlier that morning, volunteered to give a copy thereof to the hearing officer. 2
In its Opposition, petitioner prayed for the denial of respondent's application on the
following grounds: (1) petitioner's Board of Directors had not consented to the issuance of
the franchise applied for, such consent being a mandatory condition pursuant to P.D. 198,
(2) the proposed waterworks would interfere with petitioner's water supply which it has
the right to protect, and (3) the water needs of the residents in the subject area was
already being well served by petitioner.
After hearing and an ocular inspection of the area, the NWRB, by Decision dated
September 22, 2003, dismissed petitioner's Opposition "for lack of merit and/or failure to
state the cause of action" 3 and ruled in favor of respondent as follows:
PREMISES ALL CONSIDERED, and nding that Applicant is legally and
nancially quali ed to operate and maintain the subject waterworks system, and
that said operation shall redound to the bene t of the of the [ sic] consumers of
Sitio's San Vicente, Fatima and Sambag at Bulacao Pardo, Cebu City, thereby
promoting public service in a proper and suitable manner, the instant application
for a Certi cate of Public Convenience (CPC) is, hereby, GRANTED for a period of
ve (5) years with authority to charge the proposed rates herein set effective upon
approval as follows: ScTaEA

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 Consumption Blocks Proposed Rates

0-10 cu. m. P125.00 (min. charge)

11-20 cu. m. 13.50 per cu. m.
21-30 cu. m. 14.50 per cu. m.
31-40 cu. m. 35.00 per cu. m.
41-50 cu. m. 37.00 per cu. m.
51-60 cu. m. 38.00 per cu. m.
61-70 cu. m. 40.00 per cu. m.
71-100 cu. m. 45.00 per cu. m.
Over 100 cu. m. 50.00 per cu. m.

The Rules and Regulations, hereto, attached for the operation of the
waterworks system should be strictly complied with.

Since the average production is below average day demand, it is

recommended to construct another well or increase the well horsepower from 1.5-
3.00 Hp to satisfy the water requirement of the consumers.

Moreover, the rates herein approved should be posted by GRANTEE at

conspicuous places within the area serviced by it, within seven (7) calendar days
from notice of this Decision.

SO ORDERED. 4

Its motion for reconsideration having been denied by the NWRB by Resolution of
May 17, 2004, petitioner appealed the case to the RTC of Cebu City. As mentioned early on,
the RTC denied the appeal and upheld the Decision of the NWRB by Decision dated
February 10, 2005. And the RTC denied too petitioner's motion for reconsideration by
Order of May 13, 2005.
Hence, the present petition for review raising the following questions of law:
i. WHETHER OR NOT THE CONSENT OF THE BOARD OF DIRECTORS OF THE
WATER DISTRICT IS A CONDITION SINE QUA NON TO THE GRANT OF
CERTIFICATE OF PUBLIC CONVENIENCE BY THE NATIONAL WATER
RESOURCES BOARD UPON OPERATORS OF WATERWORKS WITHIN THE
SERVICE AREA OF THE WATER DISTRICT?

ii. WHETHER THE TERM FRANCHISE AS USED IN SECTION 47 OF

PRESIDENTIAL DECREE 198, AS AMENDED MEANS A FRANCHISE
GRANTED BY CONGRESS THROUGH LEGISLATION ONLY OR DOES IT
ALSO INCLUDE IN ITS MEANING A CERTIFICATE OF PUBLIC
CONVENIENCE ISSUED BY THE NATIONAL WATER RESOURCES BOARD
FOR THE MAINTENANCE OF WATERWORKS SYSTEM OR WATER SUPPLY
SERVICE? 5

Before discussing these substantive issues, a resolution of the procedural grounds

raised by respondent for the outright denial of the petition is in order.
By respondent's claim, petitioner's General Manager, Engineer Armando H. Paredes,
who led the present petition and signed the accompanying veri cation and certi cation
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 of non-forum shopping, was not speci cally authorized for that purpose. Respondent cites
Premium Marble Resources v. Court of Appeals 6 where this Court held that, in the absence
of a board resolution authorizing a person to act for and in behalf of a corporation, the
action led in its behalf must fail since "the power of the corporation to sue and be sued in
any court is lodged with the board of directors that exercises its corporate powers."
Respondent likewise cites ABS-CBN Broadcasting Corporation v. Court of Appeals 7
where this Court held that "[f]or such o cers to be deemed fully clothed by the
corporation to exercise a power of the Board, the latter must specially authorize them to
do so." (Emphasis supplied by respondent)
That there is a board resolution authorizing Engineer Paredes to le cases in behalf
of petitioner is not disputed. Attached to the petition is petitioner's Board of Director's
Resolution No. 015-2004, the relevant portion of which states:
RESOLVE[D], AS IT IS HEREBY RESOLVED, to authorize the General
Manager, ENGR. ARMANDO H. PAREDES, t o file in behalf of the
Metropolitan Cebu Water District expropriation and other cases and to
a rm and con rm above-stated authority with respect to previous cases led by
MCWD.
xxx xxx xxx 8 (Emphasis and underscoring supplied)

To respondent, however, the board resolution is invalid and ineffective for being a
roving authority and not a specific resolution pursuant to the ruling in ABS-CBN. SADECI

That the subject board resolution does not authorize Engineer Paredes to le the
instant petition in particular but "expropriation and other cases" does not, by itself , render
the authorization invalid or ineffective.
In BA Savings Bank v. Sia , 9 the therein board resolution, couched in words similar to
the questioned resolution, authorized persons to represent the corporation, not for a
specific case, but for a general class of cases. Significantly, the Court upheld its validity:
In the present case, the corporation's board of directors issued a
Resolution speci cally authorizing its lawyers "to act as their agents in
any action or proceeding before the Supreme Court, the Court of
Appeals, or any other tribunal or agency [;] and to sign, execute and deliver in
connection therewith the necessary pleadings, motions, veri cation, a davit of
merit, certificate of non-forum shopping and other instruments necessary for such
action and proceeding." The Resolution was su cient to vest such
persons with the authority to bind the corporation and was speci c
enough as to the acts they were empowered to do . (Emphasis and
underscoring supplied, italics in the original)

Nonetheless, while the questioned resolution su ciently identi es the kind of cases
which Engineer Paredes may le in petitioner's behalf, the same does not authorize him for
the speci c act of signing veri cations and certi cations against forum shopping . For it
merely authorizes Engineer Paredes to file cases in behalf of the corporation. There is no
mention of signing veri cations and certi cations against forum shopping, or, for that
matter, any document of whatever nature.
A board resolution purporting to authorize a person to sign documents in behalf of
the corporation must explicitly vest such authority. BPI Leasing Corporation v. Court of
Appeals 1 0 so instructs:
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 Corporations have no powers except those expressly conferred upon them
by the Corporation Code and those that are implied by or are incidental to its
existence. These powers are exercised through their board of directors
a n d/ or duly authorized o cers and agents. Hence, physical acts, like
the signing of documents , can be performed only by natural persons
duly authorized for the purpose by corporate bylaws or by speci c act
of the board of directors .
The records are bereft of the authority of BLC's [BPI Leasing
Corporation] counsel to institute the present petition a n d to sign the
certi cation of non-forum shopping . While said counsel may be the counsel
of record for BLC, the representation does not vest upon him the authority to
execute the certi cation on behalf of his client. There must be a resolution
issued by the board of directors that specifically authorizes him to
institute the petition and execute the certi cation , for it is only then
that his actions can be legally binding upon BLC . (Emphasis, italics and
underscoring supplied)

It bears noting, moreover, that Rule 13 Section 2 of the Rules of Court merely defines
filing as "the act of presenting the pleading or other paper to the clerk of court." Since the
signing of veri cations and certi cations against forum shopping is not integral to the act
of ling, this may not be deemed as necessarily included in an authorization merely to le
cases.
Engineer Paredes not having been speci cally authorized to sign the veri cation and
certi cation against forum shopping in petitioner's behalf, the instant petition may be
dismissed outright.
Technicality aside, the petition just the same merits dismissal.
In support of its contention that the consent of its Board of Directors is a condition
sine qua non for the grant of the CPC applied for by respondent, petitioner cites Section 47
of P.D. 198 1 1 which states:
Sec. 47. Exclusive Franchise . — N o 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 and except to the extent that the
board of directors of said district consents thereto by resolution duly adopted,
such resolution, however, shall be subject to review by the Administration.
(Emphasis and underscoring supplied)

There being no such consent on the part of its board of directors, petitioner
concludes that respondent's application for CPC should be denied.
Both parties' arguments center, in the main, on the scope of the word "franchise" as
used in the above-quoted provision. AcDHCS

Petitioner contends that "franchise" should be broadly interpreted, such that the
prohibition against its grant to other entities without the consent of the district's board of
directors extends to the issuance of CPCs. A contrary reading, petitioner adds, would
result in absurd consequences, for it would mean that Congress' power to grant franchises
for the operation of waterworks systems cannot be exercised without the consent of
water districts.
Respondent, on the other hand, proffers that the same prohibition only applies to
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 franchises in the strict sense — those granted by Congress by means of statute — and
does not extend to CPCs granted by agencies such as the NWRB.
Respondent quotes the NWRB Resolution dated May 17, 2004 which distinguished a
franchise from a CPC, thus:
A CPC is formal written authority issued by quasi-judicial bodies for the
operation and maintenance of a public utility for which a franchise is not required
by law and a CPC issued by this Board is an authority to operate and maintain a
waterworks system or water supply service. On the other hand, a franchise is
privilege or authority to operate appropriate private property for public use vested
by Congress through legislation. Clearly, therefore, a CPC is different from a
franchise and Section 47 of Presidential Decree 198 refers only to
franchise. Accordingly, the possession of franchise by a water district
does not bar the issuance of a CPC for an area covered by the water
district . (Emphasis and underscoring supplied by respondent)

Petitioner's position that an overly strict construction of the term "franchise" as used
in Section 47 of P.D. 198 would lead to an absurd result impresses. If franchises, in this
context, were strictly understood to mean an authorization issuing directly from the
legislature, it would follow that, while Congress cannot issue franchises for operating
waterworks systems without the water district's consent, the NWRB may keep on issuing
CPCs authorizing the very same act even without such consent. In effect, not only would
the NWRB be subject to less constraints than Congress in issuing franchises. The
exclusive character of the franchise provided for by Section 47 would be illusory.
Moreover, this Court, in Philippine Airlines, Inc. v. Civil Aeronautics Board, 1 2 has
construed the term "franchise" broadly so as to include, not only authorizations issuing
directly from Congress in the form of statute, but also those granted by administrative
agencies to which the power to grant franchises has been delegated by Congress, to wit:
Congress has granted certain administrative agencies the power
to grant licenses for, or to authorize the operation of certain public
utilities . With the growing complexity of modern life, the multiplication of the
subjects of governmental regulation, and the increased di culty of administering
the laws, there is a constantly growing tendency towards the delegation of greater
powers by the legislature, and towards the approval of the practice by the courts.
It is generally recognized that a franchise may be derived indirectly
from the state through a duly designated agency, and to this extent, the
power to grant franchises has frequently been delegated, even to
agencies other than those of a legislative nature. In pursuance of this,
it has been held that privileges conferred by grant by local authorities
as agents for the state constitute as much a legislative franchise as
though the grant had been made by an act of the Legislature . 1 3

That the legislative authority — in this instance, then President Marcos 1 4 — intended
to delegate its power to issue franchises in the case of water districts is clear from the
fact that, pursuant to the procedure outlined in P.D. 198, it no longer plays a direct role in
authorizing the formation and maintenance of water districts, it having vested the same to
local legislative bodies and the Local Water Utilities Administration (LWUA).
Sections 6 and 7 of P.D. 198, as amended, state:
SECTION 6. Formation of District. — This Act is the source of
authorization and power to form and maintain a district . Once formed, a
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 district is subject to the provisions of this Act and not under the jurisdiction of any
political subdivision. For purposes of this Act, a district shall be considered as a
quasi-public corporation performing public service and supplying public wants.
As such, a district shall exercise the powers, rights and privileges given to private
corporations under existing laws, in addition to the powers granted in, and subject
to such restrictions imposed, under this Act. To form a district, the legislative
body of any city, municipality or province shall enact a resolution
containing the following:

(a) The name of the local water district, which shall include the name
of the city, municipality, or province, or region thereof, served by said system,
followed by the words "Water District". DIETHS

(b) A description of the boundary of the district. In the case of a city or

municipality, such boundary may include all lands within the city or municipality.
A district may include one or more municipalities, cities or provinces, or portions
thereof: Provided, That such municipalities, cities or provinces, or portions thereof,
cover a contiguous area.

(c) A statement completely transferring any and all waterworks and/or

sewerage facilities managed, operated by or under the control of such city,
municipality or province to such district upon the ling of resolution forming the
district.
(d) A statement identifying the purpose for which the district is formed,
which shall include those purposes outlined in Section 5 above.
(e) The names of the initial directors of the district with the date of
expiration of the term of o ce for each which shall be on the 31st of December
of rst, second, or third even-numbered year after assuming o ce, as set forth in
Section 11 hereof.
(f) A statement that the district may only be dissolved on the grounds
and under the conditions set forth in Section 45 of this Title.
(g) A statement acknowledging the powers, rights and obligations as
set forth in Section 25 of this Title.
Nothing in the resolution of formation shall state or infer that the local
legislative body has the power to dissolve, alter or affect the district beyond that
specifically provided for in this Act.
If two or more cities, municipalities or provinces, or any combination
thereof, desire to form a single district, a similar resolution shall be adopted in
each city, municipality and province; or the city, municipality or province in which
75% of the total active service connections are situated shall pass an initial
resolution to be concurred in by the other cities, municipalities or provinces.
SECTION 7. Filing of Resolution. — A certi ed copy of the
resolution or resolutions forming a district shall be forwarded to the
o ce of the Secretary of Administration. If found by the Administration
to conform to the requirements of Section 6 and the policy objectives in
Section 2, the resolution shall be duly led. The district shall be
deemed duly formed and existing upon the date of such ling . A certi ed
copy of said resolution showing the stamp of the Administration shall be
maintained in the o ce of the district. Upon such ling, the local government or
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 governments concerned shall lose ownership, supervision and control or any right
whatsoever over the district except as provided herein. (Emphasis and
underscoring supplied)

It bears noting that once a district is "duly formed and existing" after following the
above procedure, it acquires the "exclusive franchise" referred to in Section 47. Thus, P.D.
198 itself, in harmony with Philippine Airlines, Inc. v. Civil Aeronautics Board, 1 5 gives the
name "franchise" to an authorization that does not proceed directly from the legislature.
It would thus be incongruous to adopt in this instance the strict interpretation
proffered by respondent and exclude from the scope of the term "franchise" the CPCs
issued by the NWRB. 1 6
Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the
issuance of CPCs for the reasons discussed above, the same provision must be
deemed void ab initio for being irreconcilable with Article XIV Section 5 of the
1973 Constitution which was rati ed on January 17, 1973 — the constitution in force
when P.D. 198 was issued on May 25, 1973. Thus, Section 5 of Art. XIV of the 1973
Constitution reads:
SECTION 5. N o franchise, certi cate, or any other form of
authorization for the operation of a public utility shall be granted except to
citizens of the Philippines or to corporations or associations organized under the
laws of the Philippines at least sixty per centum of the capital of which is owned
by such citizens, nor shall such franchise, certi cate, or authorization be
exclusive in character or for a longer period than fty years . Neither shall
any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Batasang Pambansa when the
public interest so requires. The State shall encourage equity participation in public
utilities by the general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be limited to their
proportionate share in the capital thereof. (Emphasis and underscoring supplied)
HCETDS

This provision has been substantially reproduced in Article XII Section 11 of the 1987
Constitution , including the prohibition against exclusive franchises. 1 7
In view of the purposes for which they are established, 1 8 water districts fall under
the term "public utility" as de ned in the case of National Power Corporation v. Court of
Appeals: 1 9
A "public utility" is a business or service engaged in regularly supplying
the public with some commodity or service of public consequence such as
electricity, gas, water , transportation, telephone or telegraph service. . . .
(Emphasis and underscoring supplied)

It bears noting, moreover, that as early as 1933, the Court held that a particular
water district — the Metropolitan Water District — is a public utility. 2 0
The ruling in National Waterworks and Sewerage Authority v. NWSA Consolidated
Unions 2 1 is also instructive:
We agree with petitioner that the NAWASA is a public utility because its
primary function is to construct, maintain and operate water reservoirs
and waterworks for the purpose of supplying water to the inhabitants ,
as well as consolidate and centralize all water supplies and drainage systems in
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 the Philippines. . . . (Emphasis supplied)

Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public
utilities, is clearly repugnant to Article XIV, Section 5 of the 1973 Constitution, 2 2 it is
unconstitutional and may not, therefore, be relied upon by petitioner in support of its
opposition against respondent's application for CPC and the subsequent grant thereof by
the NWRB.
WHEREFORE, Section 47 of P.D. 198 is unconstitutional. The Petition is thus, in light
of the foregoing discussions, DISMISSED.
SO ORDERED.
Puno, C.J., Ynares-Santiago, Carpio, Austria-Martinez, Corona, Azcuna, Tinga, Chico-
Nazario, Garcia, Velasco, Jr. and Nachura, JJ., concur.
Quisumbing, J., is on official leave.
Sandoval-Gutierrez, J., is on leave.

Footnotes

1. "DECLARING A NATIONAL POLICY FAVORING LOCAL OPERATION AND CONTROL OF

WATER SYSTEMS; AUTHORIZING THE FORMATION OF LOCAL WATER DISTRICTS AND
PROVIDING FOR THE GOVERNMENT AND ADMINISTRATION OF SUCH DISTRICTS;
CHARTERING A NATIONAL ADMINISTRATION TO FACILITATE IMPROVEMENT OF
LOCAL WATER UTILITIES; GRANTING SAID ADMINISTRATION SUCH POWERS AS ARE
NECESSARY TO OPTIMIZE PUBLIC SERVICE FROM WATER UTILITY OPERATION, AND
FOR OTHER PURPOSES."
2. TSN, December 16, 2002, p. 3.
3. Rollo, p. 24.
4. Id. at 25.
5. Id. at 7.
6. G.R. No. 96551, November 4, 1996, 264 SCRA 11, 17.
7. G.R. No. 128690, January 21, 1999, 301 SCRA 572, 594.

8. Rollo, p. 15.
9. 391 PHIL. 370, 377 (2000).
10. G.R. No. 127624, November 18, 2003, 416 SCRA 4, 10-11.
11. As amended by P.D. 768 and P.D. 1479.
12. G.R. No. 119528, March 26, 1997, 270 SCRA 538.

13. Supra at 549-550.

14. P.D. 198, which was issued on May 25, 1973 — a few months after the ratification of
the 1973 Constitution on January 17, 1973 — states that it was issued "by virtue of the
powers vested in [President Marcos] by the Constitution, as Commander-in-Chief of all
the Armed Forces of the Philippines, and pursuant to Proclamation No. 1081 dated
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 September 21, 1972 and General Order No. 1 dated September 22, 1972, as amended".
The legislative power of the President was recognized by the Court in Aquino, Jr. v.
COMELEC (G.R. No. L-40004. January 31, 1975) as flowing from his martial law powers
and from Article XVII, Section 3 (2) of the 1973 Constitution. The same power was only
brought to clearer relief in 1976 by Amendment No. 6 to the same Constitution.
(BERNAS, THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES 607
[1996].)

15. Supra.
16. The authority of the NWRB to issue CPCs proceeds from P.D. 1067, issued on
December 31, 1976 and entitled "A DECREE INSTITUTING A WATER CODE, THEREBY
REVISING AND CONSOLIDATING THE LAWS GOVERNING THE OWNERSHIP,
APPROPRIATION, UTILIZATION, EXPLOITATION, DEVELOPMENT, CONSERVATION AND
PROTECTION OF WATER RESOURCES." Article 3 of this Decree charges the National
Water Resources Council, later renamed the National Water Resources Board pursuant to
E.O. No. 124-A dated July 22, 1987, with the function of regulating the "utilization,
exploitation, development, conservation and protection of water resources." Article 16 of
the same law provides:

Any person who desires to obtain a water permit shall file an application with the
[National Water Resources Council] who shall make known said application to the public
for any protests. TaSEHD

In determining whether to grant or deny an application, the Council shall consider the
following: protests filed, if any; prior permits granted; the availability of water; the water
supply needed for beneficial use; possible adverse effects; land-use economics; and
other relevant factors.
Upon approval of an application, a water permit shall be issued and recorded.
17. SECTION 11. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the Philippines or to
corporations or associations organized under the laws of the Philippines at least sixty
per centum of whose capital is owned by such citizens, nor shall such franchise,
certificate, or authorization be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except under the condition
that it shall be subject to amendment, alteration, or repeal by the Congress when the
common good so requires. The State shall encourage equity participation in public
utilities by the general public. The participation of foreign investors in the governing
body of any public utility enterprise shall be limited to their proportionate share in its
capital, and all the executive and managing officers of such corporation or association
must be citizens of the Philippines. (Underscoring supplied)
18. Sec. 5 of P.D. 198 states: "Purpose. — Local water districts may be formed pursuant to
this Title for the purposes of (a) acquiring, installing, improving, maintaining and
operating water supply and distribution systems for domestic, industrial, municipal and
agricultural uses for residents and lands within the boundaries of such districts, (b)
providing, maintaining and operating water collection, treatment and disposal facilities,
and (c) conducting such other functions and operations incidental to water resource
development, utilization and disposal within such districts, as are necessary or incidental
to said purpose."
19. G.R. No. 112702, September 26, 1997; 279 SCRA 506, 523.

20. Metropolitan Water District v. Public Service Commission, 58 Phil. 397, 399 (1933).
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 21. 120 Phil. 736, 745 (1964).
22. Parenthetically, Article XIV Section 8 of the 1935 Constitution already contained the
same prohibition against exclusive franchises found in Article XIV Section 5 of the 1973
Constitution. Thus, Article XIV Section 8 of the 1935 Constitution states:

SEC. 8. No franchise, certificate, or any other form of authorization for the operation of a
public utility shall be granted except to citizens of the Philippines or to corporations or
other entities organized under the laws of the Philippines sixty per centum of the capital
of which is owned by citizens of the Philippines, nor shall such franchise, certificate, or
authorization be exclusive in character or for a longer period than fifty years. No
franchise or right shall be granted to any individual, firm, or corporation, except under the
condition that it shall be subject to amendment, alteration, or repeal by the Congress
when the public interest so requires. (Emphasis and underscoring supplied)

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