Maynilad Water Services v. Secretary Of The Department Of Environment
Maynilad Water Services, Inc. v. Secretary of the DENR, et al.; Manila Water Company, Inc. v. Secretary of the DENR, et al.; Metropolitan Waterworks and Sewerage System v. Pollution Adjudication Board, et al., G.R. Nos. 202897, 206823 and 207969, August 6, 2019
- Procedural (Remedial Law)
- Political Law
- Civil Law
- Clean Water Act
- Section 8
- sewerage
- wastewater treatment
- Public Trust Doctrine
- concession agreement
- MWSS
- Maynilad
- Manila Water
- Manila Bay
- exhaustion of administrative remedies
- due process
- fines
- mala prohibita
I. Facts of the Case
Maynilad and Manila Water, the concessionaires of the MWSS, and the MWSS itself were charged by DENR regional offices with failing to provide, install, operate and maintain sewerage and wastewater treatment facilities and connections within the five years required by Section 8 of the Philippine Clean Water Act (R.A. 9275). The DENR Secretary fined them under Section 28 of the Act, and the Court of Appeals upheld the fines. The petitioners argued that their concession agreements, the DPWH's Section 7 duties and MMDA v. Concerned Residents of Manila Bay excused or extended their compliance.
May 6, 2004
The Philippine Clean Water Act of 2004 (R.A. 9275) took effect. Section 8 gave covered entities five years, until May 6, 2009, to connect existing sewage lines and provide sewerage and septage facilities.
April 2, 2009
DENR EMB-Region III filed a complaint before the Pollution Adjudication Board (PAB) against MWSS, Maynilad and Manila Water. It charged them with failing to provide, install, operate and maintain adequate wastewater treatment facilities, which degraded the bodies of water leading to Manila Bay.
April 8 and 21, 2009
The Regional Directors of EMB-NCR and EMB-Region IV-A filed similar complaints. They cited failures to construct sewage treatment plants and connect sewage lines, and Manila Bay water samples showing worsening quality.
The Secretary of Environment and Natural Resources (SENR) issued a Notice of Violation finding insufficient treatment facilities and sewerage connections despite court orders and the lapse of five years. The SENR directed petitioners to attend a technical conference, where all parties were heard.
MWSS claimed compliance. Maynilad and Manila Water invoked the supremacy of their Concession Agreements and argued that Section 7 of the Act (the DPWH national sewerage and septage program) had to be implemented first. They also pointed to other sources of pollution. The EMB Regional Directors countered with laboratory results showing heavily polluted rivers, unconnected sewage lines in Cavite, and insufficient septage facilities in San Juan.
October 7, 2009
In DENR-PAB Case No. NCR-00794-09, the SENR adopted the PAB's recommendation. It found MWSS, Maynilad and Manila Water liable under the Clean Water Act and fined them PhP 29,400,000 jointly and solidarily (May 7 to September 30, 2009), plus PhP 200,000 per day until full compliance. The PAB had rejected the argument that the earlier Concession Agreement prevails over the later law, noting that the parties review the Agreement every five years and should have made its schedule consistent with the law.
December 2, 2009
The SENR denied the separate motions for reconsideration of MWSS and Manila Water. Maynilad's motion was deemed filed out of time, a waiver of its right to be heard. Maynilad's second motion, filed December 9, 2009, was denied outright by the PAB on March 17, 2010.
October 26, 2011
In CA-G.R. SP No. 113374, the Court of Appeals dismissed Maynilad's Rule 43 petition. Its motion for reconsideration was belated, so the SENR Order had become final, and the second motion was a prohibited pleading that did not toll the period. The CA also rejected reliance on MMDA v. Concerned Residents of Manila Bay. Reconsideration was denied July 17, 2012.
August 14, 2012
In CA-G.R. SP No. 112023, the CA dismissed Manila Water's petition. It held Section 8 clear and unambiguous, the compliance period separate from those in the Concession Agreement, and the DPWH's formulation of the national sewerage program not a prerequisite. Reconsideration was denied April 11, 2013.
September 25, 2012
In CA-G.R. SP No. 112041, the CA dismissed MWSS's petition for using the wrong remedy (Rule 43 instead of an appeal to the Office of the President), for failure to exhaust administrative remedies, and for lack of merit. Reconsideration was denied June 17, 2013.
April 4, 2017
Petitioners elevated the cases to the Supreme Court by consolidated petitions for review. The Court required stakeholders, agencies and the concessionaires to submit status reports on compliance. The DPWH reported that the NSSMP Office had yet to be organized.
April 30, 2017
Maynilad reported 20 wastewater treatment facilities and 13% sewerage coverage, up from 9% in 2009. Manila Water reported 38 sewage treatment plants and 1 sewage and septage treatment plant, with Metro Manila coverage of 19% and Rizal 3% in 2016. The Court found that neither concessionaire had reached 20% coverage a decade after the Act took effect.
April 22, 2010
Petitioners and MWSS executed Memoranda of Agreement extending the concession from May 6, 2022 to May 6, 2037. The extension was partly meant to accelerate sewerage projects to comply with the Clean Water Act and the MMDA ruling.
August 6, 2019
The Supreme Court denied the petitions and affirmed the CA with modification. It recomputed the fines to include the 10% biennial increase under Section 28, at PhP 921,464,184.00 per concessionaire from May 7, 2009 to promulgation.
II. Issues
Whether petitioners prematurely resorted to Rule 43 petitions before the Court of Appeals instead of appealing the SENR Orders to the Office of the President, in failure to exhaust administrative remedies.
Whether petitioners were deprived of procedural due process in the proceedings before the PAB and the SENR, including because the SENR rather than the PAB imposed the fine.
Whether compliance by government agencies with Section 7 of the Clean Water Act is a condition precedent to petitioners' compliance with Section 8.
Whether the Concession Agreements and their specified completion targets prevail over the five-year compliance period under Section 8 of the Clean Water Act.
Whether MMDA v. Concerned Residents of Manila Bay extended, repealed or otherwise exempted petitioners from the five-year compliance period in Section 8 of the Clean Water Act.
Whether petitioners violated Section 8 of the Clean Water Act and were properly fined under Section 28, including the correct computation of the fines.
III. Ruling
Whether petitioners prematurely resorted to Rule 43 petitions before the Court of Appeals instead of appealing the SENR Orders to the Office of the President, in failure to exhaust administrative remedies.
The proper remedy from the SENR's Orders was an appeal to the Office of the President, so the Rule 43 petitions to the CA were premature. The Court nonetheless resolved the substantive issues because of their transcendental public importance.
How the Court reasoned
- The fines were imposed by the SENR, a department head, under Section 28 of the Clean Water Act, not by the PAB.
- The remedy from a department secretary's decision lies with the Office of the President, so going directly to the CA under Rule 43 skipped a level of administrative review.
- The CA was therefore correct in CA-G.R. SP No. 112041 in holding that MWSS used the wrong remedy and failed to exhaust administrative remedies.
- The same defect applied to the other petitioners.
- Despite these technical defects, the Court decided the substantive issues because of their transcendental public importance.
“Consequently, petitioners prematurely filed a petition for review before the Court of Appeals and failed to exhaust administrative remedies.”
Rule applied
Doctrine of exhaustion of administrative remedies; Section 28 of R.A. 9275; Executive Order No. 292 (Administrative Code of 1987); Rule 43, Rules of Court
Whether petitioners were deprived of procedural due process in the proceedings before the PAB and the SENR, including because the SENR rather than the PAB imposed the fine.
Petitioners were not denied due process. They were notified of the charges, heard in a technical conference, and allowed to file pleadings and seek reconsideration, and the SENR's power to fine was proper.
How the Court reasoned
- Due process in administrative proceedings requires only notice of the charges and a reasonable opportunity to be heard or to seek reconsideration.
- Petitioners received the Notice of Violation, attended the technical conference where all sides were heard, and filed answers, letters and pleadings.
- Any procedural lapse was cured when MWSS, Maynilad and Manila Water all moved for reconsideration of the SENR's Orders.
- Under Section 28, the PAB's role is only to recommend the penalty. The power to impose fines rests with the SENR.
- The SENR adopted and relied on the PAB's technical findings, so the PAB's expertise was not disregarded.
“In any case, whatever procedural lapse that may have transpired during the proceedings before the PAB and the SENR had already been cured when MWSS, Maynilad, and Manila Water all moved for reconsideration of the SENR's Orders.57”
Rule applied
Procedural due process in administrative proceedings; Section 28 of R.A. 9275; Executive Order No. 192; Revised Rules of the PAB
Whether compliance by government agencies with Section 7 of the Clean Water Act is a condition precedent to petitioners' compliance with Section 8.
Section 7 is not a condition precedent to Section 8. The Section 8 duty is mandatory and demandable at once on effectivity of the law, to be performed within five years.
How the Court reasoned
- Section 8 uses the word 'shall' repeatedly and sets a fixed five-year period, which shows an absolute obligation.
- Legislative history supports this: Congress shortened the compliance period from seven to five years.
- Section 7 is not worded as a condition for Section 8, and nothing in either provision or in the IRR says or implies that the DPWH program must come first.
- The Rule 8 provisions of DAO No. 2005-10 do not make Section 7 a condition precedent of Section 8.
- Under the Public Trust Doctrine, the State holds water resources in trust for present and future generations, and concessionaires hold their franchises subject to that trust and to regulation.
“Clearly, Section 7 is not worded as a condition precedent of Section 8 of the Clean Water Act.”
Rule applied
Sections 7 and 8 of R.A. 9275; Rule 8 of DAO No. 2005-10 (IRR); Public Trust Doctrine
Whether the Concession Agreements and their specified completion targets prevail over the five-year compliance period under Section 8 of the Clean Water Act.
The Concession Agreements do not prevail over Section 8. Private contracts cannot alter the law, and the concessionaires' duty to comply with the five-year period is unconditional.
How the Court reasoned
- The Agreements themselves require compliance with Philippine laws.
- Freedom of contract is subject to reasonable legislative regulation for public welfare, so the later and mandatory Clean Water Act governs.
- The parties review the Agreement every five years and should have aligned its schedule with the law.
- The concessionaires charged consumers Sewerage and Environmental Charges, which carried a legal duty to actually install the sewerage connections.
- The April 22, 2010 Memoranda of Agreement extending the concession to 2037 cannot change the statutory deadline, because a private contract cannot prevail over public welfare and trust.
“Petitioners simply cannot alter the law and court instruction by mere stipulation in their private contract.”
Rule applied
Section 8 of R.A. 9275; non-impairment and police power limits on freedom of contract (Province of Rizal v. Executive Secretary); Concession Agreements, Sections 6.8, 16.3, 16.11
Whether MMDA v. Concerned Residents of Manila Bay extended, repealed or otherwise exempted petitioners from the five-year compliance period in Section 8 of the Clean Water Act.
MMDA v. Concerned Residents of Manila Bay did not extend, repeal or nullify the five-year period in Section 8, and it did not exempt petitioners from compliance.
How the Court reasoned
- The MMDA case was a continuing mandamus directing agencies to clean up Manila Bay, and it did not set a new compliance deadline for Section 8.
- Section 8 was enacted by Congress, and only Congress can amend or repeal it.
- The Court does not engage in judicial legislation and has no power to amend or repeal Section 8.
- The MMDA case therefore could not have impliedly repealed Section 8 or nullified the SENR Orders.
- The 2037 timetable in the private MOAs cannot be read into the MMDA ruling.
“the Court does not dabble in judicial legislation133 and is without power to amend or repeal Section 8 of the Clean Water Act.”
Rule applied
Section 8 of R.A. 9275; separation of powers (no judicial legislation); MMDA v. Concerned Residents of Manila Bay
Whether petitioners violated Section 8 of the Clean Water Act and were properly fined under Section 28, including the correct computation of the fines.
Petitioners violated Section 8 and were properly fined under Section 28. The fines are modified to add the omitted 10% biennial increase and are recomputed at PhP 921,464,184.00 per concessionaire, with MWSS solidarily liable.
How the Court reasoned
- The EMB Regional Directors found a lack of treatment facilities and sewerage systems in areas such as San Juan, Valenzuela, Cavite and Meycauayan, and MWSS offered no evidence to refute them.
- The PAB and the SENR gave these findings full credence. Administrative findings supported by substantial evidence are accorded great respect and finality.
- The concessionaires' own reports showed sewerage coverage of under 20% a decade after the Act took effect.
- Violations of environmental laws like the Clean Water Act are mala prohibita, so the refusal of customers to connect is irrelevant to Section 8 liability.
- Section 28 provides for a fine that increases by 10% every two years, which the SENR omitted, so the Court recomputed the fines.
- MWSS is solidarily liable with its concessionaires.
“It is thus established that Section 8 of the Clean Water Act demands unconditional compliance, and petitioners were utterly remiss in that duty.”
Rule applied
Sections 8 and 28 of R.A. 9275; substantial evidence rule; IRR of the Clean Water Act, Sections 8.1, 8.3, 8.4, 8.5
Doctrines
Public Trust Doctrine: The State is trustee of water resources for present and future generations, and concessionaires hold their franchises subject to that trust and to State regulation.
Section 8 of the Clean Water Act is mandatory and demandable at once upon effectivity of the law, to be performed within five years. It is not conditioned on the DPWH's performance under Section 7.
A private contract, such as a concession agreement, cannot alter or prevail over a law enacted for public welfare. Freedom of contract is subject to reasonable legislative regulation.
Under Section 28 of the Clean Water Act, the PAB's role in imposing fines is merely recommendatory, and the power to impose fines rests with the Secretary of the DENR. The remedy from the Secretary's decision is an appeal to the Office of the President.
Due process in administrative proceedings requires only notice and a reasonable opportunity to be heard. Any defect is cured by the filing of a motion for reconsideration.
Violations of environmental laws such as the Clean Water Act are mala prohibita, so good faith or customer refusal to connect is not a defense.
The Supreme Court does not engage in judicial legislation and cannot amend or repeal a statutory deadline. MMDA v. Concerned Residents of Manila Bay did not extend the Section 8 compliance period.
Final Disposition
WHEREFORE, the petitions are DENIED. The decisions of the Court of Appeals in CA-G.R. SP Nos. 113374, 112023 and 112041 are AFFIRMED with MODIFICATION: the fines under Section 28 of the Clean Water Act are recomputed to include the 10% biennial increase, at PhP 921,464,184.00 per concessionaire from May 7, 2009 to the date of promulgation, with MWSS solidarily liable with its concessionaires.
Notes
The decision was penned by Justice Hernando, sitting en banc. The Court resolved the substantive issues despite the technical defects (wrong remedy and failure to exhaust administrative remedies) because of their transcendental public importance. The fines omitted by the SENR (the 10% biennial increase) were corrected by the Court.