March 22, 2011
Ponente: Carpio, J.
FACTS
La Trinidad Water District (LTWD) is a local water utility created under P.D. No. 198. It is authorized to supply water for domestic, industrial and commercial purposes within the municipality of La Trinidad, Benguet. Sec. 47* of P.D. No. 198 states that its franchise is exclusive.
In 2000, Tawang Multi-Purpose Cooperative (TMPC), a cooperative registered with the Cooperative Development Authority and organized to provide domestic water services in Barangay Tawang, La Trinidad, Benguet, filed with the National Water Resources Board (NWRB) an application for a certificate of public convenience (CPC) to operate and maintain a waterworks system in Barangay Tawang.
LTWD opposed TMPC's application on the ground of the exclusivity of its franchise.
NWRB: Approved TMPC’s application for a CPC. NWRB held that LTWD’s franchise cannot be exclusive since exclusive franchises are unconstitutional and found that TMPC is legally and financially qualified to operate and maintain a waterworks system.
LTWD appealed to the RTC.
RTC: Reversed NWRB's ruling. What is repugnant to the Constitution is a grant of franchise "exclusive in character" so as to preclude the State itself from granting a franchise to any other person or entity than the present grantee when public interest so requires. However, the Constitution does not necessarily prohibit a franchise that is exclusive on its face, meaning, that the grantee shall be allowed to exercise this present right or privilege to the exclusion of all others.
TMPC filed the present petition to challenge the RTC's ruling.
RULING
Petition granted.
Whether LTWD's franchise is exclusive. – NO.
The President, Congress and the Court cannot create directly franchises for the operation of a public utility that are exclusive in character. The 1935, 1973 and 1987 Constitutions expressly and clearly prohibit the creation of franchises that are exclusive in character.
What cannot be legally done directly cannot be done indirectly. This rule is basic and, to a reasonable mind, does not need explanation. Indeed, if acts that cannot be legally done directly can be done indirectly, then all laws would be illusory.
As applied in this case, the President, Congress and the Court cannot create directly franchises that are exclusive in character when clearly, they are proscribed by the Constitution from doing so.
In case of conflict between the Constitution and a statute, the Constitution always prevails because the Constitution is the basic law to which all other laws must conform to. The duty of the Court is to uphold the Constitution and to declare void all laws that do not conform to it. It is basic that if a law or an administrative rule violates any norm of the Constitution, that issuance is null and void and has no effect. The Constitution is the basic law to which all laws must conform; no act shall be valid if it conflicts with the Constitution.
Granted, Sec. 47 of P.D. No. 198, which vests LTWD's franchise with an exclusive character, is unconstitutional, and therefore void. Section 47 gives the Board of Directors (BOD) of a water district and the LWUA the authority to make an exception to the absolute prohibition in the Constitution. In short, the BOD and the LWUA are given the discretion to create franchises that are exclusive in character. The BOD and the LWUA are not even legislative bodies. The BOD is not a regulatory body but simply a management board of a water district. Indeed, neither the BOD nor the LWUA can be granted the power to create any exception to the absolute prohibition in the Constitution, a power that Congress itself cannot exercise.
DISSENTING OPINION
Brion, J.
Despite its title (i.e., "Exclusive Franchise"), Sec. 47 of P.D. No. 198 does not absolutely prohibit other franchises for water service from being granted to other persons or agencies. It merely requires the consent of the local water district’s Board of Directors before another franchise within the district is granted. Thus, it is a regulation on the grant of any subsequent franchise where the local water district, as original grantee, may grant or refuse its consent. If it consents, the non-exclusive nature of its franchise becomes only too clear. Should it refuse, its action does not remain unchecked as the franchise applicant may ask the LWUA to review the local water district’s refusal. It is thus the LWUA (on the Office of the President in case of further appeal) that grants a subsequent franchise if one will be allowed.
The prerogative of the local water district’s board of directors or the LWUA to give or refuse its consent to the application for a CPC cannot be considered as a constitutional infringement. A government agency’s refusal to consent to the grant of a franchise to another entity, based on reasonable and legitimate grounds, should not be construed as a violation of the constitutional mandate on the non-exclusivity of a franchise where the standards for the grant or refusal are clearly spelled out in the law.
The "exclusivity" espoused in Sec. 47 of P.D. No. 198 is designed to achieve two purposes: First, it aims to protect the government’s investment. Second, it avoids a situation where ruinous competition could compromise the supply of public utilities in poor and remote areas. By requiring a prospective franchise applicant to obtain the consent of the local water district or the LWUA, the law does not thereby grant it an exclusive franchise; it simply gives the water district the opportunity to have a say on the entry of a competitor whose operations can adversely affect its viability and the service it gives to consumers. This is far from an exclusive franchise that allows no other entity, apart from the only grantee, to have a franchise.
The protectionist approach that the law has taken towards local water districts is not per se illegal as the Constitution does not promote a total deregulation in the operation of public utilities and is a proper exercise by the government of its police power.
To say that a legal provision is unconstitutional simply because it enables a grantee, a government instrumentality, to determine the soundness of granting a subsequent franchise in its area is contrary to the government’s inherent right to exercise police power in regulating public utilities for the protection of the public and the utilities themselves.
Justice Brion also noted his hesitation about the effect of SC's ruling in the present case to other previous cases bearing similar factual scenarios, notably Metropolitan Cebu Water District (MCWD) v. Margarita A. Adala. Justice Brion said that thanks to the present ruling, there now exists ample justification to reverse the SC's ruling in Metropolitan, and therein lies the problem: In a legal system that rests heavily on precedents, this manner of reasoning would not only be unfair to the parties; it would also confuse and bewilder the legal community and the general public regarding the interpretation of an important constitutional provision.
JUSTICE CARPIO’S RESPONSE TO THE DISSENTING OPINION
Stated differently, the dissenting opinion holds that (1) President Marcos can violate indirectly the Constitution; (2) the BOD can violate directly the Constitution; (3) the LWUA can violate directly the Constitution; and (4) the Court should allow the violation of the Constitution.
There is no "reasonable and legitimate" ground to violate the Constitution. The Constitution should never be violated by anyone. Right or wrong, the President, Congress, the Court, the BOD and the LWUA have no choice but to follow the Constitution. Any act, however noble its intentions, is void if it violates the Constitution. This rule is basic.
Police power does not include the power to violate the Constitution. Police power is the plenary power vested in Congress to make laws not repugnant to the Constitution. This rule is basic.
DOCTRINE
The President, Congress and the Court cannot create directly
franchises for the operation of a public utility that are exclusive in
character. The 1935, 1973 and 1987 Constitutions expressly and clearly
prohibit the creation of franchises that are exclusive in character.
