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EN BANC

HON. MICHAEL L. RAMA, G.R. No. 197146

IN HIS CAPACITY AS MAYOR
OF CEBU CITY,
METROPOLITAN CEBU WATER
DISTRICT (MCWD),
REPRESENTED BY ITS Present:
GENERAL MANAGER,
ARMANDO PAREDES; THE
BOARD OF DIRECTORS OF SERENO, CJ.,
MCWD, REPRESENTED BY ITS CARPIO,
CHAIR, ELIGIO A. PACANA; VELASCO, JR.,
JOEL MARIS. YU, IN HIS LEONARDO-DE CASTRO,
CAPACITY AS MEMBER OF BRION,
THE MCWD BOARD; AND PERALTA,
THE HONORABLE TOMAS R. BERSAMIN,
OSMENA, IN HIS CAPACITY AS DEL CASTILLO,
CONGRESSIONAL PEREZ,
REPRESENTATIVE OF THE MENDOZA,
SOUTH DISTRICT, CEBU CITY, REYES,
Petitioners, PERLAS-BERNABE,
LEONEN,
- versus - JARDELEZA, and
*CAGUIOA, JJ:

HON. GILBERT P. MOISES, IN

HIS CAPACITY AS PRESIDING Promulgated:
JUDGE OF REGIONAL TRIAL
COURT, BRANCH 18, CEBU December 6, 2016
CITY; AND HON. GWENDOLYN le~~~~
F. GARCIA, IN HER CAPACITY
AS GOVERNOR OF THE
PROVINCE OF CEBU,
Respondents.
x----------------------------------~------------------------------------------------------x

On leave.
.
g,
 "

Decision 2 G.R. No. 197146

DECISION

BERSAMIN, J.:

A law enacted prior to the 1987 Constitution, like a presidential

decree, is presumed to be valid and constitutional on the theory that it was
carefully studied by the Legislative and Executive Departments prior to its
enactment, and determined to be in accord with the Fundamental Law.
However, the presumption of validity and constitutionality is overturned and
the law should be struck down once it becomes inconsistent with the present
Constitution and the later laws.

Antecedents

On May 25, 1973, President Ferdinand E. Marcos issued Presidential

Decree No. 198 (Provincial Water Utilities Act of 1973). By virtue of P. D.
No. 198, Cebu City formed the Metro Cebu Water District (MCWD) in
1974. Thereafter, the Cities of Mandaue, Lapu-Lapu and Talisay, and the
Municipalities of Liloan, Compostela, Consolacion, and Cordova turned
over their waterworks systems and services to the MCWD. Since then, the
MCWD has distributed water and sold water services to said cities and
municipalities. From 1974 to 2002, the Cebu City Mayor appointed all the
members of the MCWD Board of Directors in accordance with Section 3 (b)
of P. D. No. 198, to wit:

Section 3. Definitions. - As used in this Decree, the following

words and terms shall have the meanings herein set forth, unless a
different meaning clearly appears from the context. The definition of a
word or term applies to any of its variants.

(a) Act. This is the Provincial Water Utilities Act of 1973.

(b) Appointing authority. The person empowered to appoint the

members of the board of Directors of a local water district, depending
upon the geographic coverage and population make-up of the particular
district. In the event that more than seventy-five percent of the total
active water service connections of a local water district are within the
boundary of any city or municipality, the appointing authority shall
be the mayor of that city or municipality, as the case may be;
otherwise, the appointing authority shall be the governor of the
province within which the district is located. If portions of more than
one province are included within the boundary of the district, and the
appointing authority is to be the governors then the power to appoint shall
rotate between the governors involved with the initial appointments made
by the governor in whose province the greatest number of service
connections exists. (bold underscoring supplied for emphasis)

"
~
 Decision 3 G.R. No. 197146

In July 2002, Cebu Provincial Governor Pablo L. Garcia wrote to the

MCWD to assert his authority and intention to appoint the members of the
MCWD Board of Directors.' He stated in his letter that since 1996, the
active water service connections in Cebu City had been below 75% of the
total active water service connection of the MCWD; that no other city or
municipality under the MCWD had reached the required percentage of 75%;
and that, accordingly, he, as the Provincial Governor of Cebu, was th e
appointing authority for the members of the MCWD Board of Directors
pursuant to Section 3 (b) of P. D. No. 198.

Later on, the MCWD commenced in the Regional Trial Court in Cebu
City (RTC) its action for declaratory relief seeking to declare Section 3(b) of
P.D. No. 198 unconstitutional; or, should the provision be declared valid, it
should be interpreted to mean that the authority to appoint the members of
the MCWD Board of Directors belonged solely to the Cebu City Mayor. 2

The RTC (Branch 7) dismissed the action for declaratory relief

without any finding and declaration as to the proper appointing authority for
the members of the MCWD Board of Directors should none of the cities and
municipalities reach 75% of the total water service connections in the areas
under the MCWD. 3

In the meanwhile, the terms of two members of the MCWD Board of

Directors ended, resulting in two vacancies. To avoid a vacuum and in the
exigency of the service, Provincial Governor Gwendolyn F. Garcia and Cebu
City Mayor Tomas R. Osmefiajointly appointed Atty. Adelino Sitoy and Leo
Pacana to fill the vacancies. 4 However, the position of Atty. Sitoy was
deemed vacated upon his election as the Municipal Mayor of Cordova, Cebu
in the 2007 elections.

Consequently, Governor Garcia commenced an action for declaratory

relief to seek the interpretation of Section 3 (b) of P.D. No. 198 on the proper
appointing authority for the members of the MCWD Board of Directors. 5

It appears that on February 7, 2008, the Cebu Provincial Legal Office,

upon being informed that Mayor Osmefia would be appointing Joel Mari S.
Yu to replace Atty. Sitoy as a member of the MCWD Board of Directors,
formally advised in writing Cynthia A. Barrit, the MCWD Board Secretary,
to defer the submission of the list of nominees to any appointing authority
until the RTC rendered its final ruling on the issue of the proper appointing

Rollo, p. 151.
Id.
Id.
4
Id.
Id. at 152.
a,\
 .
Decision 4 G.R. No. 197146

authority. 6 On February 22, 2008, however, Mayor Osmefia appointed Yu as

a member of the MCWD Board of Directors. 7 Accordingly, on May 20,
2008, the RTC dismissed the action for declaratory relief on the ground that
declaratory relief became improper once there was a breach or violation of
the provision. 8

On June 13, 2008, Governor Garcia filed a complaint to declare the

nullity of the appointment of Yu as a member of the MCWD Board of
Directors (docketed as Civil Case No. CEB-34459), alleging that the
appointment by Mayor Osmefia was illegal; that under Section 3(b) of P.D.
No. 198, it was she as the Provincial Governor of Cebu who was vested with
the authority to appoint members of the MCWD Board of Directors because
the total active water service connections of Cebu City and of the other cities
and municipalities were below 75% of the total water service connections in
the area of the MCWD. 9 She imp leaded Mayor Osmefia, the MCWD, and Yu
as defendants.

In his answer, Mayor Osmefia contended that the authority to appoint

the members of the MCWD Board of Directors solely belonged to him; that
since the creation of the MCWD in 1974, it was the Cebu City Mayor who
had been appointing the members of the MCWD Board of Directors; that the
Province of Cebu had not invested or participated in the creation of the
MCWD; and that Cebu City, being a highly urbanized city (HUC), was
independent from the Province of Cebu under the provisions on local
autonomy of the 1987 Constitution. 10

The RTC (Branch 18), to which the case was raffled, required the
parties to submit their memorandum.

In their joint memorandum, Osmefia and Yu posited that the Province

of Cebu did not participate in the organization of the MCWD; that the words
and sentences of Section 3(b) of P.D. No. 198 should not be read and
understood or interpreted literally; and that the case should be dismissed
because: (1) Section 3(b) of P.D. No. 198 was unconstitutional for being
arbitrary and unreasonable; (2) Governor Garcia had no authority to appoint
any members of the MCWD Board of Directors; and (3) that the Mayor of
the city or municipality having the majority of water connections within the
area under the MCWD had the power to appoint the members of the MCWD
Board of Directors. 11

Id.at 99-100.
Id.at 96.
Id.at 152.
Id.at 85-95.
10
Id.atl02-128.
11
Id.atl64-188.
?1
Decision 5 G.R. No. 197146

On November 16, 2010, the RTC rendered the assailed judgment

declaring the appointment ofYu as illegal and void, 12 holding as follows:

The questioned provision, paragraph (b) of Section 3 of P.O. 198 is

clear enough that it needs no interpretation. It expressly states in
unequivocal terms the appointing authority in the water district's board of
directors --- if more than seventy-five percent of the total active water
service connections of a local water district are within the boundary of
any city or municipality, the appointing authority shall be the mayor of the
city or municipality, as the case may be; otherwise, the appointing
authority shall be the governor of the province within which the district is
located.

It has not been belied by defendants that the active water service
connections of Cebu City in the Metropolitan Cebu Water District
(MCWD), at 61.28%, have gone below the required 75% required by law
for the city mayor to have the authority to appoint members of the board
of directors of the water district. Lacking such percentage requisite, the
appointing power is now vested with the governor of the Province of
Cebu. While it may be true that the governor had not participated in
organizing MCWD and neither did the Province of Cebu invest in
establishing waterworks in the component local governments, the law,
however, does not impose any condition or restriction in transferring the
power to the governor to appoint members of the board of directors when
the percentage falls below 75%. Thus, there is no doubt that when any of
the water district's participating city or municipality could not obtain 75%
of the active water service connections, the governor shall appoint the
members of the board of directors of the water district, whether it is a
participant or not, in its organization.

As to the constitutionality of the questioned provision, the Court

finds that Sec. 3 of P.O. 198 does not violate the Constitution or the Local
Government Code. Vesting the authority in the governor to appoint a
member of the board of directors of a water district is not intruding into
the affairs of the highly urbanized cities and component cities which
comprise the district, and neither is it a threat to their autonomy. It does
not interfere with their powers and functions and neither can it be
considered an exercise of the provincial government's supervisory powers.
At most, it is simply giving the authority to appoint the head of the
government unit (the governor) where all the members of the water district
are geographically located, and only when none of these cities and
municipalities has the required 75% of the active water service
connections. Nevertheless, the issue is not whether the governor took any
part in organizing the water district or has contributed to its formation, but
that by law, she has been made the appointing authority even if she has no
participation or involvement in the cooperative effort of the members of
the water district. This may not be the most expedient and appropriate
solution, but still, it is not illegal. As to why this is so is a question only
our lawmakers could answer.

12
Id. at 73-80.
<4
 Decision 6 G.R. No. 197146

All presumptions are indulged in favor of constitutionality, one

who attacks a statute, alleging constitutionality must prove its invalidity
beyond a reasonable doubt, that a law may work hardship does not render
it unconstitutional, that if any reasonable basis may be conceived which
supports the statute, it will be upheld and the challenger must negate all
possible bases, that the courts are not concerned with the wisdom, justice,
policy or expediency of a statute, and that a liberal interpretation of the
constitution in favour of the constitutionality of legislation should be
adopted.

Notably, among the admissions found in the Answer for defendants

Yu and MCWD states: "xx x with respect to the two (2) vacancies in the
Board of MCWD and that joint appointment was made by the plaintiff and
defendant Mayor Osmena to Atty. Adelina Sitoy and Mr. Eligio Pacana. "
The Court surmises from this statement that as early as the previous
appointments (of Mr. Pacana and Atty. Sitoy) defendants have already
recognized the appointing authority of the governor for members of the
MCWD board of directors, considering Cebu City's failure to reach the
75% benchmark on active water service connections.

In sum, the Court has not been able to find any constitutional
infirmity in the questioned provision (Sec. 3) of Presidential Decree No.
198. The fundamental criterion is that all reasonable doubts should be
resolved in favor of the constitutionality of a statute. Every law has in its
favor the presumption of constitutionality. For a law to be nullified, there
must be shown that there is a clear and unequivocal breach of the
Constitution. The ground for nullity must be clear and beyond reasonable
doubt. Those who seek to declare the law, or parts thereof,
unconstitutional, must clearly establish the basis therefore. Otherwise, the
arguments fall short.

Based on the grounds raised by defendants to challenge the

constitutionality of Section 3 of P.D. 198, the Court finds that defendants
have failed to overcome the presumption of constitutionality of the law. As
to whether the questioned section constitutes a wise legislation,
considering the issues being raised by petitioners, is for Congress to
determine.

WHEREFORE, Judgment is hereby rendered in favour of plaintiff

and against defendants, finding the appointment of defendant Joel Mari S.
Yu as member of the Metropolitan Cebu Water District (MCWD) as
illegal, null and void. 13

Mayor Osmefia and Yu jointly moved for reconsideration, 14 but the

RTC denied their motion. 15

13
Id. at 78-80.
14
Id. at 189-221.
15
Id. at 81-84.
~
Decision 7 G.R. No. 197146

Issues

Hence, the petitioners have instituted this special civil action for
certiorari, 16 contending that:

I.
THE RESPONDENT COURT ABDICATED ITS
CONSTITUTIONAL DUTY IN REFUSING TO DELVE ON THE
ISSUE OF CONSTITUTIONALITY.

II.
THE JUDGMENT IS VOID ON ITS FACE BECAUSE OF CLEAR
CONSTITUTIONAL VIOLATIONS APPARENT BY A MERE
READING OF THE DECREE.

III.
THE JUDGMENT VIOLATES DUE PROCESS AND THE EQUAL
PROTECTION CLAUSE OF THE CONSTITUTION. 17

Ruling of the Court

The petition for certiorari is granted.

1.
Preliminary Matter:
Yu's expiration of term did not
render case moot and academic

We note that respondent Yu's term as a member of the MCWD Board

of Directors expired on December 31, 2012. 18 However, this fact does not
justify the dismissal of the petition on the ground of its being rendered moot
and academic. The case should still be decided, despite the intervening
developments that could have rendered the case moot and academic, because
public interest is involved, and because the issue is capable of repetition yet
evading review. 19

For sure, the appointment by the proper official of the individuals to

manage the system of water distribution and service for the consumers
residing in the concerned cities and municipalities involves the interest of
their populations and the general public affected by the services of the
MCWD as a public utility. Moreover, the question on the proper appointing

16
Id. at 3-72.
17
Id. at 22.
18
Id. at 96.
19
Davidv. Macapagal-Arroyo, GR. No. I7I397, May 3, 3006, 489 SCRA 160, 214-215.

14
 Decision 8 G.R. No. 197146

authority for the members of the MCWD Board of Directors should none of
the cities and municipalities have at least 75% of the water consumers will
not be definitively resolved with finality if we dismiss the petition on the
ground of mootness. It is notable that the two cases for declaratory relief
filed for the purpose of determining the proper appointing authority were
dismissed without any definitive declaration or ultimate determination of the
merits of the issue. The issue festers. Hence, the Court needs to decide it
now, not later.

2.
First Issue:
RTC explained its holding of the
assailed provision as valid and constitutional
but it thereby erred nonetheless

The petitioners take the RTC to task for not explaining why it held
Section 3(b) of P.D. No. 198 to be not violative of the constitutional
provision on local autonomy and HUCs, and why it only opined that the
question of constitutionality of the provision should be left to Congress; that
it did not determine whether the requisites for raising the constitutional issue
had been met; that it did not discuss the reasons for holding that the issue
about Section 3(b) of P.D. No. 198 was a political question; that no political
question was involved because what was being inquired into was not the
wisdom of the provision but its validity; and that because it did not perform
its constitutional duty of reviewing the provision, its judgment was void. 20

The petitioners are mistaken on the first issue. The records show that
the RTC, which indisputably had the power and the duty to determine and
decide the issue of the constitutionality of Section 3(b) of P.D. No. 198,21
fully discharged its duty. In its assailed decision of November 16, 2010, the
RTC ruled as follows:

As to the constitutionality of the questioned provision, the Court

finds that Sec. 3 of P.D. 198 does not violate the Constitution or the Local
Government Code. Vesting the authority in the governor to appoint a
member of the board of directors of a water district is not intruding into
the affairs of the highly urbanized cities and component cities which
comprise the district, and neither is it a threat to their autonomy. It does
not interfere with their powers and functions and neither can it be
considered an exercise of the provincial government's supervisory powers.
At most, it is simply giving the authority to appoint the head of the
government unit (the governor) where all the members of the water district
are geographically located, and only when none of these cities and
municipalities has the required 75% of the active water service
connections. Nevertheless, the issue is not whether the governor took any
20
Rollo, pp. 22-41.
21
Mirasol v. Court of Appeals, G.R. No. 128448, February 1, 2001, 351 SCRA 44, 51-52; Ynot v.
Intermediate Appellate Court, No. L-74457, March 20, 1987, 148 SCRA 659, 665-666.

S?J
 Decision 9 G.R. No. 197146

part in organizing the water district or has contributed to its formation, but
that by law, she has been made the appointing authority even if she has no
participation or involvement in the cooperative effort of the members of
the water district. This may not be the most expedient and appropriate
solution, but still, it is not illegal. As to why this is so is a question only
our lawmakers could answer.

All presumptions are indulged in favor of constitutionality; one

who attacks a statute, alleging constitutionality must prove its invalidity
beyond a reasonable doubt; that a law may work hardship does not render
it unconstitutional; that if any reasonable basis may be conceived which
supports the statute, it will be upheld and the challenger must negate all
possible bases; that the courts are not concerned with the wisdom, justice,
policy or expediency of a statute; and that a liberal interpretation of the
constitution in favor of the constitutionality of legislation should be
adopted.

xx xx

In sum, the Court has not been able to find any constitutional
infirmity in the questioned provision (Sec. 3) of Presidential Decree No.
198. The fundamental criterion is that all reasonable doubts should be
resolved in favor of the constitutionality of a statute. Every law has in its
favor the presumption of constitutionality. For a law to be nullified, there
must be shown that there is a clear and unequivocal breach of the
Constitution. The ground for nullity must be clear and beyond reasonable
doubt. Those who seek to declare the law, or parts thereof,
unconstitutional, must clearly establish the basis therefore. Otherwise, the
arguments fall short. 22

Nonetheless, the petitioners rightly contend that the RTC improperly

regarded the matter about Section 3(b) of P.D. No. 198 as a political
question; hence, not justiciable. It was not.

Political questions refer to "those questions which, under the

Constitution, are to be decided by the people in their sovereign capacity; or
in regard to which full discretionary authority has been delegated to the
legislature or executive branch of the government." 23 They are "neatly
associated with the wisdom" of a particular act. 24

The difference between the political and the justiciable questions has
been noted in Sanidad v. Commission on Elections, 25 as follows:

xx x The implementing Presidential Decree Nos. 991, 1031, and 1033,

which commonly purport to have the force and effect of legislation are
assailed as invalid, thus the issue of the validity of said Decrees is
plainly a justiciable one, within the competence of this Court to pass

22
Supra note 13, at 79-80.
23
Estrada v. Desierto, G.R. Nos. 146710-15, March 2, 2001, 353 SCRA 452, 459.
24
Sanidad v. Commission on Elections, No. L-44640, October 12, 1976, 73 SCRA 333, 360.
2s Id.

~
 ,

Decision 10 G.R. No. 197146

upon. Section 2 (2), Article X of the new Constitution provides: "All cases
involving the constitutionality of a treaty, executive agreement, or law
may shall be heard and decided by the Supreme Court en bane and no
treaty, executive agreement, or law may be declared unconstitutional
without the concurrence of at least ten Members .... " The Supreme Court
has the last word in the construction not only of treaties and statutes, but
also of the Constitution itself. The amending, like all other powers
organized in the Constitution, is in form a delegated and hence a limited
power, so that the Supreme Court is vested with that authority to
determine whether that power has been discharged within its limits.
(Emphasis supplied)

The petitioners have averred the unconstitutionality or invalidity of

Section3 (b) of P.D. No 198 based on the provision's arbitrariness in denying
substantive due process and equal protection to the affected local
government units (LGUs). Such issue, being justiciable, comes within the
power of judicial review. As such, the RTC skirted its duty of judicial review
by improperly relying on the political question doctrine. It should have
instead adhered to the pronouncement in Estrada v. Desierto, 26 to wit:

To a great degree, the 1987 Constitution has narrowed the reach of the
political question doctrine when it expanded the power of judicial review
of this court not only to settle actual controversies involving rights which
are legally demandable and enforceable but also to determine whether or
not there has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of government.
Heretofore, the judiciary has focused on the "thou shalt not's" of the
Constitution directed against the exercise of its jurisdiction. With the new
provision, however, courts are given a greater prerogative to determine
what it can do to prevent grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of
government. Clearly, the new provision did not just grant the Court power
of doing nothing. x x x (Italics omitted)

3.
Second Issue:
Section 3(b) of P.D. 198 is already superseded

The petitioners argue that the MCWD became a water district by the
pooling of the water utilities belonging to several HU Cs and municipalities;
that the active water connections in the MCWD have been distributed as
follows: Cebu City: 61.28%; Mandaue City: 16%; Lapulapu City: 6.8%;
Tali say City and the Municipalities of Liloan, Consolacion, Compostela, and
Cordova: 16.92%; that Section 3 (b) of P.D. No. 198 was unconstitutional on
its face for being unreasonable and arbitrary because the determination of
who would exercise the power to appoint the members of the MCWD Board
of Directors was thereby made to depend on the shifting number of water
users in the water district's component LGUs; that the provision on the
26
Supra note 24.

SJ,
Decision 11 G.R. No. 197146

authority of the Provincial Governor to appoint in cases where the water

connections of any of the water district's cities or municipalities were below
75% was arbitrary for not distinguishing whether or not the province had
contributed any waterworks to the water district; that the provision did not
consider whether a city or municipality comprised the majority or more of
the water consumers; that the provision was irrational as it gave the
Provincial Governor the power to appoint regardless of whether the province
had participated in the organization of the water district or not; that in a
democracy, the principle that if power or authority was conferred through
determination of numerical figures then the numerical superiority or the rule
of the majority should apply; that the rule of the majority was being applied
in electing government leaders as well as in choosing the leaders in the
private sector; that the provision violated the rule of the majority; that at the
time of the filing of this case, the majority of MCWD water service
connections were in Cebu City (61.28% ); and that the appointing power
should necessarily remain in the City Mayor of Cebu City because the
appointing power was based on the number of water service connections.

The petitioners asseverate that the provision or any part of P.D. No.
198 did not state any reason for departing from the rule of the majority; that
the provision failed reasonableness as a standard of substantive due process;
that the appointing authority should be the mayor of the city or municipality
having the majority of the water connections; that if such majority could not
be attained, there must be a power sharing scheme among those having the
largest number of water connections conformably with the rule of the
majority; that the temporary alternative was the Board of Directors
themselves, who, under Section 10 of P.D. No. 198, could appoint upon
failure of the appointing authority to do so; that the assailed provision was
void on its face for violating the constitutional provision on local autonomy
and independence of HUCs under Article X of the 1987 Constitution; that
the provision unduly interfered with the internal affairs of Cebu City, and
diminished the autonomy of the LGUs; that the provision undermined the
independence of HUCs; that both the Office of the Government Corporate
Counsel and the Office of the Solicitor General have opined that because
Cebu City was an HUC, the City Mayor of Cebu City should retain the right
to appoint the members of the MCWD Board of Directors; that the chief
executive of the LGU having the majority of water consumers was in the
best position to exercise the discretion of choosing the most competent
persons who could best serve the constituents; that because the largest
number of water consumers were in Cebu City, any intrusion on the City
Mayor's power to appoint would violate its independence and autonomy;
that the Province of Cebu could not exercise powers that affected the
constituents of HUCs; that providing water to constituents was the sole
responsibility of the concerned LGU; that the water utility of the LGU was a
patrimonial property that was not for public use; that as such, the operation,
ownership and management of the public utility should belong to the LGU;

())
 >

Decision 12 G.R. No. 197146

and that the operation of the water utilities involved the private rights of the
LGUs that could not be amended or altered by a statute. 27

The Court opines that Section 3(b) of P.D. No. 198 should be partially
struck down for being repugnant to the local autonomy granted by the 1987
Constitution to LGUs, and for being inconsistent with R.A. No. 7160 (1991
Local Government Code) and related laws on local governments.

P.D. No. 198 - issued by President Marcos in the exercise of his

legislative power during the period of Martial Law proclaimed under the
1973 Constitution - relevantly provided:

MALA CANANG
Manila

PRESIDENTIAL DECREE No. 198 May 25, 1973

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
OPERATIONS, AND FOR OTHER PURPOSES

WHEREAS, one of the pre-requisites to the orderly and well-

balanced growth of urban areas is an effective system of local utilities, the
absence of which is recognized as a deterrent to economic growth, a
hazard to public health and an irritant to the spirit and well-being of the
citizenry;

WHEREAS, domestic water systems and sanitary sewers are two

of the most basic and essential elements of local utility system, which,
with a few exceptions, do not exist in provincial areas in the Philippines;

WHEREAS, existing domestic water utilities are not meeting the

needs of the communities they serve; water quality is unsatisfactory;
pressure is inadequate; and reliability of service is poor; in fact, many
persons receive no piped water service whatsoever;

WHEREAS, conditions of service continue to worsen for two

apparent reasons, namely: (1) that key element of existing systems are
deteriorating faster than they are being maintained or replaced, and (2) that
they are not being expanded at a rate sufficient to match population
growth; and

27
Id. at 41-59.

fl
Decision 13 G.R. No. 197146

WHEREAS, local water utilities should be locally-controlled and

managed, as well as have support on the national level in the area of
technical advisory services and financing;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of

the Philippines, by virtue of the powers vested in my by the Constitution,
as Commander-in-Chief of all the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081 dated September 21, 1972 and General
Order No. 1 dated September 22, 1972, as amended, do hereby decree,
order and make as part of the law of the land the following measure:

TITLE I

PRELIMINARY PROVISIONS

Section 1. Title. - This Decree shall be known and referred to as

the "Provincial Water Utilities Act of 1973."

Section 2. Declaration of Policy - The creation, operation,

maintenance and expansion of reliable and economically viable and sound
water supply and wastewater disposal system for population centers of the
Philippines is hereby declared to be an objective of national policy of high
priority. For purpose of achieving said objective, the formulation and
operation of independent, locally controlled public water districts is found
and declared to be the most feasible and favored institutional structure. To
this end, it is hereby declared to be in the national interest that said
districts be formed and that local water supply and wastewater disposal
systems be operated by and through such districts to the greatest extent
practicable. To encourage the formulation of such local water districts and
the transfer thereto to existing water supply and wastewater disposal
facilities, this Decree provides the general act the authority for the
formation thereof, on a local option basis. It is likewise declared
appropriate, necessary and advisable that all funding requirements for such
local water systems, other than those provided by local revenues, should
be channeled through and administered by an institution on the national
level, which institution shall be responsible for and have authority to
promulgate and enforce certain rules and regulations to achieve national
goals and the objective of providing public waterworks services to the
greatest number at least cost, to effect system integration or joint
investments and operations whenever economically warranted and to
assure the maintenance of uniform standards, training of personnel and the
adoption of sound operating and accounting procedures.

Section 3. Definitions. - As used in this Decree, the following

words and terms shall have the meanings herein set forth, unless a
different meaning clearly appears from the context. The definition of a
word or term applies to any of its variants.

(a) Act. This Provincial Water Utilities Act of 1973.

(b) Appointing authority. The person empowered to appoint the

members of the Board of Directors of a local water district, depending
upon the geographic coverage and population make-up of the particular
district. In the event that more than seventy-five percent of the total
active water service connections of a local water district are within the

/;
 Decision 14 GR. No. 197146

boundary of any city or municipality, the appointing authority shall

be the mayor of that city or municipality, as the case may be;
otherwise, the appointing authority shall be the governor of the
province within which the district is located. If portions of more than
one province are included within the boundary of the district, and the
appointing authority is to be the governors then the power to appoint shall
rotate between the governors involved with the initial appointments made
by the governor in whose province the greatest number of service
connections exists. (Emphasis supplied)

xx xx

The enactment of P.D. No. 198 on May 25, 1973 was prior to the
enactment on December 22, 1979 of Batas Pambansa Blg. 51 (An Act
Providing for the Elective or Appointive Positions in Various Local
Governments and for Other Purposes) and antedated as well the effectivity
of the 1991 Local Government Code on January 1, 1992. At the time of the
enactment of P.D. No. 198, Cebu City was still a component city of Cebu
Province. Section 328 of B.P. Blg. 51 reclassified the cities of the Philippines
based on well-defined criteria. Cebu City thus became an HUC, which
immediately meant that its inhabitants were ineligible to vote for the
officials of Cebu Province. In accordance with Section 12 of Article X of the
1987 Constitution, cities that are highly urbanized, as determined by law,
and component cities whose charters prohibit their voters from voting for
provincial elective officials, shall be independent of the province, but the
voters of component cities within a province, whose charters contain no such
prohibition, shall not be deprived of their right to vote for elective provincial
officials. Later on, Cebu City, already an HUC, was further effectively
rendered independent from Cebu Province pursuant to Section 29 of the
1991 Local Government Code, viz.:

Section 29. Provincial Relations with Component Cities and

Municipalities. - The province, through the governor, shall ensure that
every component city and municipality within its territorial jurisdiction
acts within the scope of its prescribed powers and functions. Highly
urbanized cities and independent component cities shall be
independent of the province. (Emphasis supplied)

Hence, all matters relating to its administration, powers and functions

were exercised through its local executives led by the City Mayor, subject to
the President's retained power of general supervision over provinces, HUCs,
and independent component cities pursuant to and in accordance with

28
Sec. 3. Cities. - xx xx
Until cities are reclassified into highly urbanized and component c1t1es in accordance with the
standards established in the Local Government Code as provided for in Article XI, Sec. 4 (I) of the
Constitution, any city now existing with an annual regular income derived from infrastructure and
general funds of not less than forty million pesos (F40,000,000.00) at the time of the approval of this
Act shall be classified as a highly urbanized city. All other cities shall be considered components of
the provinces where they are geographically located.
xx xx

J
Decision 15 G.R. No. 197146

Section 25 29 of the 1991 Local Government Code, a law enacted for the
purpose of strengthening the autonomy of the LGUs in accordance with the
1987 Constitution.

Article X of the 1987 Constitution guarantees and promotes the

administrative and fiscal autonomy of the LGUs. 30 The foregoing statutory
enactments enunciate and implement the local autonomy provisions
explicitly recognized under the 1987 Constitution. To conform with the
guarantees of the Constitution in favor of the autonomy of the LGUs,
therefore, it becomes the duty of the Court to declare and pronounce Section
3(b) of P.D. No. 198 as already partially unconstitutional. We note that this
pronouncement is also advocated by the National Government, as shown in
the comment of the Solicitor General. 31

In Navarro v. Ermita, 32 the Court has pointed out that the central
policy considerations in the creation of local government units are economic
viability, efficient administration, and capability to deliver basic services to
their constituents. These considerations must be given importance as they
ensure the success of local autonomy. It is accepted that the LGUs, more
than the National Government itself, know the needs of their constituents,
and cater to such needs based on the particular circumstances of their
localities. Where a particular law or statute affecting the LGU s infringes on
their autonomy, and on their rights and powers to efficiently and effectively
address the needs of their constituents, we should lean in favor of their
autonomy, their rights and their powers.

29
Sec. 25. National Supervision over Local Government Units.-
(a) Consistent with the basic policy on local autonomy, the President shall exercise general
supervision over local government units to ensure that their acts are within the scope of their prescribed
powers and functions.
The President shall exercise supervisory authority directly over provinces, highly urbanized
cities, and independent component cities; through the province with respect to component cities and
municipalities; and through the city and municipality with respect to barangays.
xx xx
30
The pertinent provisions of Article X on this are:
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
Sec. 3. The Congress shall enact a local government code which shall provide for a more
responsive and accountable local government structure instituted through a system of
decentralization with effective mechanisms of recall, initiative, and referendum, allocate among
the different local government units their powers, responsibilities, and resources, and provide for
the qualifications, election, appointment and removal, term, salaries, powers and functions and
duties of local officials, and all other matters relating to the organization and operation of the local
units.
Sec. 5. Each local government unit shall have the power to create its own sources of revenues
and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may
provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall
accrue exclusively to the local governments.
Sec. 6. Local government units shall have a just share, as determined by law, in the national
taxes which shall be automatically released to them.
Sec. 7. Local governments shall be entitled to an equitable share in the proceeds of the
utilization and development of the national wealth within their respective areas, in the manner
provided by law, including sharing the same with the inhabitants by way of direct benefits.
31
Rollo, pp. 272-304.
32
G.R. No. 180050, April 12, 2011, 648 SCRA 400, 436.

5'
 Decision 16 G.R. No. 197146

Water and its efficient supply are among the primary concerns of
every LGU. Issues that tend to reduce or diminish the authority of the
boards of directors to manage the water districts are imbued with public
interest. Bearing this in mind, and recalling that the MCWD had been
established from the erstwhile Osmefia Waterworks Systems (OWS) without
any investment or contribution of funds and material from the Province of
Cebu towards the creation and maintenance of OWS and the MCWD, 33 and
considering that it had always been the City Mayor of the City of Cebu who
appointed the members of the MCWD Board of Directors regardless of the
percentage of the water subscribers, our pronouncement herein rests on firm
ground.

4.
Third Issue:
Section 3(b) of P.D. 198 is unconstitutional
for violating the Due Process Clause and the
Equal Protection Clause

The petitioners assert that Section 3(b) of P.D. No. 198, being unfair,
violated substantive due process; that Governor Garcia could not determine
the water needs of each of the LGUs within the MCWD; that the provision
allowed inequality of treatment of the cities and municipalities in relation to
the province, and thus violated the Equal Protection Clause of the
Constitution; that the provision unduly deprived Cebu City of the power to
determine the membership in the MCWD Board of Directors despite Cebu
City having the majority of the water service connections; that the Province
of Cebu was given unreasonable and unwarranted benefit despite Cebu City
being independent from the Province of Cebu; that Section 3(b) of P.D. No.
198 did not distinguish whether the province contributed any resource to the
water district or not; that under the provision, if two or more provinces
contributed to the water district, they were not subject to the 75%
requirement to avail of the power of appointment, indicating that the power
to appoint devolved only in the provinces; that this violated the guarantee of
equality of treatment in favor of the participating LGUs; that the provision
created a privileged class (the provinces) without any justification in reason;
and that "the classification is not germane to the purpose of the law and is
not based on substantial distinctions that make real differences." 34

Substantive due process "requires that the law itself, not merely the
procedures by which the law would be enforced, is fair, reasonable, and
just." 35 It demands the intrinsic validity of the law in interfering with the
rights of the person to life, liberty or property. In short, to be determined is
33
Rollo, pp. I 09-110.
34
Id. at 59-64.
35
Corona v. United Harbor Pilots Association, GR. No. 111953, December 12, 1997, 283 SCRA 31, 39-
40.

.i
 Decision 17 GR. No. 197146

whether the law has a valid governmental objective, like the interest of the
public as against that of a particular class. 36

On the other hand, the principle of equal protection enshrined in the

Constitution does not require the territorial uniformity of laws. According to
Tiu v. Court of Appeals ,37 the fundamental right of equal protection of the
law is not absolute, but subject to reasonable classification. Classification, to
be valid, must: (1) rest on substantial distinctions; (2) be germane to the
purpose of the law; (3) not be limited to existing conditions only; and (4)
apply equally to all members of the same class.

We opine that although Section 3(b) of P.D. No. 198 provided for
substantial distinction and was germane to the purpose of P.D. No. 198 when
it was enacted in 1973, the intervening reclassification of the City of Cebu
into an HUC and the subsequent enactment of the 1991 Local Government
Code rendered the continued application of Section 3(b) in disregard of the
reclassification unreasonable and unfair. Clearly, the assailed provision no
longer provided for substantial distinction because, firstly, it ignored that the
MCWD was built without the participation of the provincial government;
secondly, it failed to consider that the MCWD existed to serve the
community that represents the needs of the majority of the active water
service connections; and, thirdly, the main objective of the decree was to
improve the water service while keeping up with the needs of the growing
population.

The Whereas Clauses of P.D. No. 198 essentially state the raison
d'etre of its enactment, to wit:

WHEREAS, existing domestic water utilities are not meeting the needs
of the communities they serve; water quality is unsatisfactory; pressure
is inadequate; and reliability of service is poor; in fact, many persons
receive no piped water service whatsoever;

WHEREAS, conditions of service continue to worsen for two apparent

reasons, namely: (1) that key element of existing systems are deteriorating
faster than they are being maintained or replaced, and (2) that they are
not being expanded at a rate sufficient to match population growth;
and

WHEREAS, local water utilities should be locally-controlled and

managed, as well as have support on the national level in the area of
technical advisory services and financing; (bold emphasis supplied)

Verily, the decree was enacted to provide adequate, quality and

reliable water and waste-water services to meet the needs of the local
communities and their growing populations. The needs of the communities
36
See ABAKADA GURO Partylist v. Hon. Ermita, G..R. No. 169056, September 1, 2005, 469 SCRA I.
37
G.R. No. 127410, January 20, 1999, 301SCRA278,289.

Q
 Decision 18 GR. No. 197146

served were paramount. Hence, we deem it to be inconsistent with the true.

objectives of the decree to still leave to the provincial governor the
appointing authority if the provincial governor had administrative
supervision only over municipalities and component cities accounting for
16.92% of the active water service connection in the MCWD. In
comparison, the City of Cebu had 61.28% 38 of the active service water
connections; Mandaue, another HUC, 16%; and Lapu Lapu City, another
HUC, 6.8%. There is no denying that the MCWD has been primarily serving
the needs of Cebu City. Although it is impermissible to inquire into why the
decree set 75% as the marker for determining the proper appointing
authority, the provision has meanwhile become unfair for ignoring the needs
and circumstances of Cebu City as the LGU accounting for the majority of
the active water service connections, and whose constituency stood to be the
most affected by the decisions made by the MCWD's Board of Directors.
Indeed, the classification has truly ceased to be germane or related to the
main objective for the enactment of P.D. No. 198 in 1973.

Grave abuse of discretion means either that the judicial or quasi-

judicial power was exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, or that the respondent judge, tribunal or board
evaded a positive duty, or virtually refused to perform the duty enjoined or
to act in contemplation of law, such as when such judge, tribunal or board
exercising judicial or quasi-judicial powers acted in a capricious or
whimsical manner as to be equivalent to lack of jurisdiction. Mere abuse of
discretion is not enough to warrant the issuance of the writ. The abuse of
discretion must be grave. 39

Under the foregoing circumstances, therefore, the RTC gravely abused

its discretion in upholding Section 3(b) of P.D. No. 198. It thereby utterly
disregarded the clear policies favoring local autonomy enshrined in the 1987
Constitution and effected by the 1991 Local Government Code and related
subsequent statutory enactments, and for being violative of the Due Process
Clause and the Equal Protection Clause of the 1987 Constitution.

WHEREFORE, we GRANT the petition for certiorari; ANNUL and

SET ASIDE the decision rendered in Civil Case No. CEB-34459 on
November 16, 2010 by the Regional Trial Court, Branch 18, in Cebu City;
and DECLARE as UNCONSTITUTIONAL Section 3(b) of Presidential
Decree No. 198 to the extent that it applies to highly urbanized cities like the
City of Cebu and to component cities with charters expressly providing for
their voters not to be eligible to vote for the officials of the provinces to
which they belong for being in violation of the express policy of the 1987
Constitution on local autonomy, the 1991 Local Government Code and

38
Rollo,pp.97-101.
39
See De las Santos v. Metropolitan Bank and Trust Corporation, G.R. No. 153852, October 24, 2012,
684 SCRA 410, 422-423.

9
Decision 19 GR. No. 197146

subsequent statutory enactments, and for being also in violation of the Due
Process Clause and the Equal Protection Clause.

ACCORDINGLY, the Mayor of the the City of Cebu is declared to

be the appointing authority of the Members of the Board of Directors of the
Metro Cebu Water District.

No pronouncement on costs of suit.

SO ORDERED.

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice

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ANTONIO T. CARPIO J. VELASCO, JR.
Associate Justice Ass6ciate Justice

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TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION
Associate Justice Associate Justice
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MARIANO C. DEL CASTILLO
Associate Justice
 Decision 20 G.R. No. 197146

JOSEC NDOZA

IENVENIDO L. REYES
Associate Justice
ESTEL4~S-BERNABE
Associate Justice

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. M~.V.F.L FRANCIS W. JARDELEZA . .....
Associate Justice Associate Justice :f Dt"" J o/1 ~W
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(On Leave)
ALFREDO BENJAMIN S. CAGUIOA
Associate Justice

CERTIFICATION

I certify that the conclusions in the above Decision had been reached
in consultation before the case was assigned to the writer of the opinion of
the court.

MARIA LOURDES P.A. SERENO

Chief Justice

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