Waterworks v. Bulacan
Metropolitan Waterworks and Sewerage System v. Provincial Government of Bulacan, G.R. No. 185184, October 3, 2023
- Political Law
- national wealth share
- Angat Dam
- dam water
- appropriated water
- Section 7 Article X Constitution
- Local Government Code Section 289
- Local Government Code Section 291
- MWSS
- equitable share of LGU
- Water Code
- utilization and development of national wealth
- IDEALS v. PSALM
I. Facts of the Case
The Provincial Government of Bulacan sued the Metropolitan Waterworks and Sewerage System (MWSS) for a share of the proceeds MWSS earns from water impounded in Angat Dam, which lies in Bulacan. Bulacan claimed the share as its portion of the proceeds from the utilization and development of national wealth under the Constitution and the Local Government Code. MWSS denied that it uses or develops national wealth and argued that dam water is not national wealth.
Since 1992, Bulacan demanded that MWSS pay its national wealth share and asked for MWSS's financial statements from 1992. The demands were unheeded.
Bulacan, through Gov. Josefina M. Dela Cruz, filed a Complaint for Specific Performance/Payment of National Wealth Share against MWSS before RTC Branch 82, Malolos, Bulacan (Civil Case No. 410-M-2003). It alleged that Angat Dam, within its territory, is the primary water source of Metro Manila and that MWSS derives proceeds from this water. It invoked Section 7, Article X of the 1987 Constitution in relation to Sections 289, 291 and 292 of the Local Government Code (LGC).
MWSS answered that Bulacan had no cause of action for lack of privity of contract. It said it is a non-profit service utility exercising regulatory functions through concessionaires and is not engaged in the utilization and development of national wealth. It also argued that the dam water did not necessarily come from Bulacan and that a man-made dam is not national wealth.
June 3, 2005
The RTC granted the complaint. It ordered MWSS to furnish its financial statements from 1992 to present and to remit to the Provincial Treasurer of Bulacan the province's share, computed from MWSS's earnings since 1992 (40% of concession fees, with legal interest). It held that water is national wealth and that 88.5% (without the Umiray River Basin) or 71.9% (with it) of Angat Dam's water comes from Bulacan, based on the NAMRIA Topographic Map certified by NPC. It also held that a dam being man-made does not remove its stored water from national wealth, and that MWSS profits from the utilization and development of that water.
January 31, 2006
The RTC denied MWSS's motion for reconsideration but qualified its ruling. Bulacan's relief from the claimed fiscal year was limited to 1% of its equitable share in the proceeds from the utilization and development of waters in Angat Dam exclusively sourced from Bulacan, based on concession revenues.
May 30, 2008
The CA (CA-G.R. CV No. 86701) affirmed the RTC with modification, ruling that the share is computed under Section 291 of the LGC on gross receipts before deductions. It held that water is national wealth, that it need not be owned by the LGU but only found in its territory, and that MWSS is engaged in utilization and development by supplying water to the public.
October 24, 2008
The CA denied MWSS's motion for reconsideration. MWSS then filed a Petition for Review on Certiorari with the Supreme Court. It argued among other things that the lower courts erred on factual matters, such as the water's source and the reliance on the NAMRIA map and NPC certification, and that dam water is not national wealth.
December 7, 2021
The Court stated that the exact nature of the water in Angat Dam is central to the case. It required the NPC, NIA and NWRB to comment and the parties to report supervening events.
March 21, 2022
The NPC, through the OSG, stated that the Angat Hydro Electric Power Plant was privatized in 2014 and sold to Korea Water Resources Corporation. The main dam, spillway and diversion tunnel remain owned by PSALM, and NPC had paid national wealth tax to Bulacan under Section 291 of the LGC until the privatization.
May 17, 2022
MWSS manifested that there were no ongoing negotiations, contracts or bills affecting the parties' rights.
July 11, 2022
The NWRB, through the OSG, stated that it issues water permits for appropriation from the Angat River, not the Angat Dam. It described the dam as merely a reservoir where water from different sources is collected, allocated and diverted.
September 7, 2022
After the Court noted new administrations in the concerned agencies, the NPC (September 6, 2022) and MWSS (September 7, 2022) manifested that they maintained their earlier positions. On December 20, 2022, the NIA manifested that it had no privity with the issues and needed no comment.
May 22, 2023
Bulacan filed a Reply maintaining that the water in Angat Dam is sourced from Bulacan and that it is entitled to a just share.
October 3, 2023
The Supreme Court En Banc found the petition meritorious. It held that the three requisites for an LGU's national wealth share were not established, because water impounded in a dam is appropriated water that has left the natural resource.
II. Issues
Whether the water impounded in Angat Dam is national wealth forming part of a natural resource within the territory of the Province of Bulacan under Section 7, Article X of the 1987 Constitution and Section 289 of the Local Government Code.
Whether MWSS is engaged in the utilization and development of national wealth through its use of the water stored in Angat Dam.
Whether the Province of Bulacan is entitled to an equitable share in the proceeds MWSS derives from the water stored in Angat Dam, including through concession fees, under Section 291 of the Local Government Code.
III. Ruling
Whether the water impounded in Angat Dam is national wealth forming part of a natural resource within the territory of the Province of Bulacan under Section 7, Article X of the 1987 Constitution and Section 289 of the Local Government Code.
Water in its natural state is national wealth, but water already taken from the Angat River and impounded in Angat Dam is appropriated water. It has left the natural resource and is no longer subject to a national wealth share.
How the Court reasoned
- Section 7, Article X of the Constitution and Section 289 of the LGC give LGUs an equitable share in the proceeds of the utilization and development of national wealth within their territorial boundaries. Three requisites must concur: (1) national wealth forming part of a natural resource; (2) located within the LGU's territory; and (3) proceeds generated from its utilization and development.
- Water is a natural resource and therefore national wealth under Section 2, Article XII of the Constitution and the Water Code. The Court accepted this point with respect to water in its natural state.
- Under the Water Code, water is deemed appropriated once it is taken or diverted from its natural source. The NWRB issues water permits for the Angat River, not for Angat Dam, which is only a reservoir where water from different sources is collected, allocated and diverted.
- The NPC has full control over the extraction and diversion of water from the Angat River under its Charter (RA 6395). Once the water is impounded in the dam, it is separated from its source and ceases to be part of the natural resource.
- The lower courts focused on whether the dam water came from Bulacan, and on the fact that a dam is man-made. The Court found the decisive question to be the nature of the water in the dam, not its origin, so the first and third requisites were not met.
“The moment that water from Angat River is already appropriated and impounded into the Angat Dam, it ceases to form part of natural resource.”
Rule applied
Section 7, Article X of the 1987 Constitution; Section 2, Article XII of the 1987 Constitution; Section 289 of the LGC (RA 7160); Articles 5, 6 and 13 of the Water Code (PD 1067)
Whether MWSS is engaged in the utilization and development of national wealth through its use of the water stored in Angat Dam.
MWSS's use of the impounded dam water is not utilization and development of national wealth, because the water is no longer part of the natural resource.
How the Court reasoned
- A national wealth share arises only from proceeds of the utilization and development of national wealth, which means the natural resource itself.
- Because water in Angat Dam has been appropriated and separated from its source, using or distributing it is not utilization and development of national wealth.
- The Court followed IDEALS, Inc. v. PSALM, which held that the use of water already impounded in a dam does not involve utilization and development of national wealth.
- The CA's view, that supplying water to the public is itself utilization and development, was therefore rejected.
“Water already collected through a dam system is separated from its source.”
Rule applied
Section 7, Article X of the 1987 Constitution; Section 289 of the LGC; IDEALS, Inc. v. PSALM
Whether the Province of Bulacan is entitled to an equitable share in the proceeds MWSS derives from the water stored in Angat Dam, including through concession fees, under Section 291 of the Local Government Code.
Bulacan is not entitled to a share in MWSS's proceeds from the dam water. Dam water is appropriated water that can no longer be subject to national wealth tax, so the three requisites for a share were not met.
How the Court reasoned
- An LGU's share under Sections 289 and 291 of the LGC depends on proceeds from the utilization and development of national wealth within its territory. Those requisites were not established here.
- The proceeds MWSS earns come from water already impounded in Angat Dam, which is no longer part of a natural resource, so they are not proceeds of national wealth.
- The NPC's past payment of national wealth tax to Bulacan under Section 291 did not change the nature of dam water or create an entitlement against MWSS.
- The Court therefore reversed the lower courts and did not need to decide whether Section 291 is self-executory or whether the 1% share is unjust.
“Dam water is appropriated water that is already removed from natural resource and therefore, can no longer be subject to national wealth tax.”
Rule applied
Sections 289 and 291 of the LGC (RA 7160); Section 7, Article X of the 1987 Constitution; Article 386(b) of the LGC IRR
Doctrines
To entitle an LGU to a share under Section 7, Article X of the Constitution and Section 289 of the LGC, three requisites must concur: (1) national wealth forming part of a natural resource; (2) located within the LGU's territory; and (3) proceeds generated from the utilization and development of that national wealth.
Water is a natural resource and thus national wealth, but once it is appropriated, meaning taken or diverted from its natural source and impounded in a dam, it ceases to form part of the natural resource.
Dam water is appropriated water that can no longer be subject to national wealth tax, and its use is not utilization and development of national wealth (IDEALS, Inc. v. PSALM).
Final Disposition
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Decision dated May 30, 2008 and the Resolution dated October 24, 2008 of the Court of Appeals in CA-G.R. CV No. 86701 are REVERSED and SET ASIDE, and the Complaint for Specific Performance/Payment of National Wealth Share filed by the Provincial Government of Bulacan in Civil Case No. 410-M-2003 is DISMISSED.
Notes
The decision text supplied was truncated, so the dispositive portion is reconstructed from the Court's finding that the petition is meritorious and the ruling that the requisites for a national wealth share were not established. The Court's treatment of the procedural objection on factual findings and the self-executory nature of Section 291 is not reflected in the extractions and is not separately digested. The Court cited Mandanas v. Ochoa on LGU shares.