Metropolitan Cebu Water District vs. Adala

Section 47 of P.D. 198, which grants water districts an "exclusive franchise," is unconstitutional because it is irreconcilable with the constitutional prohibition against exclusive franchises, certificates, or authorizations for the operation of public utilities.

Respondent Margarita A. Adala filed an application with the NWRB for a CPC to operate a waterworks system in Sitios San Vicente, Fatima, and Sambag in Barangay Bulacao, Cebu City. Petitioner Metropolitan Cebu Water District (MCWD), a government-owned and controlled corporation created pursuant to P.D. 198, opposed the application, invoking Section 47 of the same decree which mandates that no franchise shall be granted within a water district without the consent of its board of directors.

• Application and Opposition: Respondent applied for a CPC with the NWRB to operate a waterworks system in specific sitios within Barangay Bulacao, Cebu City. Petitioner MCWD opposed the application on the grounds that its Board of Directors had not consented to the franchise—a requirement under Section 47 of P.D. 198—the proposed waterworks would interfere with petitioner's water supply, and the area was already adequately served.
• Agency Ruling: After hearing and an ocular inspection, the NWRB dismissed petitioner's opposition and granted respondent a CPC for five years with approved water rates, finding respondent legally and financially qualified.
• Lower Court Affirmation: Petitioner's motion for reconsideration was denied by the NWRB. On appeal, the RTC of Cebu City affirmed the NWRB ruling in toto and denied petitioner's subsequent motion for reconsideration.
• Procedural Infirmity: The Petition for Review on Certiorari filed before the Supreme Court was signed by petitioner's General Manager, Engineer Armando H. Paredes, pursuant to Board Resolution No. 015-2004. The resolution authorized the General Manager "to file in behalf of the Metropolitan Cebu Water District expropriation and other cases." It did not explicitly mention signing verifications or certifications against forum shopping.

• Consent as Condition Sine Qua Non: Petitioner argued that the consent of its Board of Directors is a mandatory prerequisite for the NWRB to grant a CPC within its service area pursuant to Section 47 of P.D. 198.
• Broad Interpretation of Franchise: Petitioner contended that the term "franchise" in Section 47 of P.D. 198 should be broadly interpreted to include CPCs. A strict interpretation limiting "franchise" to legislative grants would lead to absurdity, as it would allow the NWRB to issue CPCs without the district's consent while requiring such consent for congressional franchises.
• Validity of Board Authorization: Petitioner implicitly defended the validity of its General Manager's authority by presenting Board Resolution No. 015-2004, which authorized the filing of "expropriation and other cases."

• Lack of Specific Authority: Respondent argued that the petition should be dismissed outright because the General Manager was not specifically authorized to sign the verification and certification against forum shopping, citing Premium Marble Resources v. Court of Appeals and ABS-CBN Broadcasting Corporation v. Court of Appeals.
• Roving Authority: Respondent contended that the board resolution was an invalid roving authority because it did not specifically authorize the General Manager for the particular act of signing the certification against forum shopping.
• Strict Interpretation of Franchise: Respondent proffered that the prohibition in Section 47 applies only to franchises in the strict sense—those granted by Congress through legislation—and does not extend to CPCs issued by administrative agencies like the NWRB.

• Authority to Sign Certification: Whether a board resolution authorizing a corporate officer to file cases on behalf of the corporation sufficiently authorizes said officer to sign the verification and certification against forum shopping.
• Scope of Franchise: Whether the term "franchise" in Section 47 of P.D. 198 includes a Certificate of Public Convenience issued by the NWRB.
• Constitutionality of Exclusive Franchise: Whether Section 47 of P.D. 198, granting an "exclusive franchise" to water districts, is constitutional.

• Authority to Sign Certification: The petition was dismissible on procedural grounds. A board resolution authorizing an officer to file cases does not necessarily include the authority to sign verifications and certifications against forum shopping. Because the signing of such documents is not integral to the act of filing under Rule 13, Section 2 of the Rules of Court, the authority to sign must be explicitly vested by the board of directors.
• Scope of Franchise: The term "franchise" in Section 47 of P.D. 198 was interpreted broadly to include CPCs. A strict interpretation limiting the term to legislative franchises would render the exclusivity provision illusory, as the NWRB could issue CPCs without the district's consent while Congress could not issue franchises without it. Consistent with Philippine Airlines, Inc. v. Civil Aeronautics Board, a franchise may be derived indirectly from the state through a duly designated administrative agency.
• Constitutionality of Exclusive Franchise: Section 47 of P.D. 198 was declared void ab initio for being irreconcilable with Article XIV, Section 5 of the 1973 Constitution, which explicitly prohibits exclusive franchises, certificates, or authorizations for the operation of a public utility. Water districts fall under the definition of "public utility" as they regularly supply the public with water, a commodity of public consequence. The constitutional prohibition against exclusive franchises was substantially reproduced in Article XII, Section 11 of the 1987 Constitution.

• Prohibition against Exclusive Franchises — The Constitution prohibits the grant of exclusive franchises, certificates, or any other form of authorization for the operation of a public utility. Applied to strike down Section 47 of P.D. 198, which vested an "exclusive franchise" upon water districts, as such a grant is clearly repugnant to the constitutional mandate.
• Specific Authority to Sign Certification against Forum Shopping — A board resolution purporting to authorize a person to sign documents in behalf of a corporation must explicitly vest such authority. The power to file cases does not automatically include the power to sign verifications and certifications against forum shopping, as the latter is not integral to the physical act of filing pleadings.
• Broad Definition of Franchise — A franchise may be derived indirectly from the state through a duly designated agency. Privileges conferred by grant of local or administrative 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.

• "A board resolution purporting to authorize a person to sign documents in behalf of the corporation must explicitly vest such authority."
• "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, 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."

• Philippine Airlines, Inc. v. Civil Aeronautics Board, 270 SCRA 538 (1997) — Followed. Construed the term "franchise" broadly to include authorizations granted by administrative agencies to which the power to grant franchises has been delegated by Congress.
• BPI Leasing Corporation v. Court of Appeals, 416 SCRA 4 (2003) — Followed. Required a specific board resolution authorizing counsel to institute a petition and execute the certification against forum shopping for such actions to be binding upon the corporation.
• BA Savings Bank v. Sia, 391 Phil. 370 (2000) — Distinguished. Upheld a general board resolution authorizing lawyers to act as agents in "any action or proceeding" and sign certifications against forum shopping, but distinguished from the present case where the resolution only authorized the General Manager to "file" cases without explicit mention of signing documents.
• National Power Corporation v. Court of Appeals, 279 SCRA 506 (1997) — Followed. Defined a "public utility" as a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as water.
• National Waterworks and Sewerage Authority v. NWSA Consolidated Unions, 120 Phil. 736 (1964) — Followed. Affirmed that an entity whose primary function is to construct, maintain, and operate waterworks for supplying water to inhabitants is a public utility.

• Section 47, Presidential Decree No. 198 — Provided that no franchise shall be granted to any person or agency for water service within a water district unless the board of directors of the district consents by resolution. Declared unconstitutional for granting an exclusive franchise in violation of the Constitution.
• Article XIV, Section 5, 1973 Constitution — Prohibits the grant of exclusive franchises, certificates, or authorizations for the operation of a public utility. Served as the primary basis for nullifying Section 47 of P.D. 198, which was in force when the decree was issued.
• Article XII, Section 11, 1987 Constitution — Substantially reproduces the 1973 Constitution's prohibition against exclusive franchises for public utilities.
• Rule 13, Section 2, Rules of Court — Defines "filing" as the act of presenting the pleading or other paper to the clerk of court. Used to distinguish the physical act of filing from the signing of verifications and certifications against forum shopping.

Reynato S. Puno (CJ, on official leave), Leonardo A. Quisumbing (on leave), Angelina Sandoval-Gutierrez (on leave), Consuelo Ynares-Santiago, Antonio T. Carpio, Ma. Alicia Austria-Martinez, Renato C. Corona, Adolfo S. Azcuna, Minita V. Chico-Nazario, Dante O. Tinga, Cancio C. Garcia, Presbitero J. Velasco, Jr., Antonio Eduardo B. Nachura.