EN BANC
[G.R. No. L-12892. April 30, 1960. ]
THE CITY OF CEBU, Plaintiff-Appellee, v. THE NATIONAL WATERWORKS and SEWERAGE AUTHORITY, Defendant-Appellant.
Ramon Duterte, Quirico del Mar, and Asst. City Fiscal Rafael Ybañez for Appellee.
Actg. Solicitor General Guillermo E. Torres and Govt. Corporate Counsel Juan C. Jimenez for Appellant.
SYLLABUS
1. CONSTITUTIONAL LAW; MUNICIPAL WATER SYSTEM AS PATRIMONIAL PROPERTY OF MUNICIPALITIES; TRANSFER TO NATIONAL WATERWORKS AND SEWERAGE AUTHORITY BY LEGISLATION. — The term "public works for public service" must be interpreted, following the principle of ejusdem generis, in the concept of the preceding words "provincial roads, city streets, municipal streets, the squares, fountains, public waters and promenades" — under Article 424 of the New Civil Code — which are used freely by all, without distinction. Hence, if the public works is not for such free public service, it is not within the purview of the first paragraph, but of the second paragraph of Article 424, and, consequently, patrimonial in character. A municipal water system designed to supply water to the inhabitants for profit is a corporate function of the municipality (Mendoza v. De Leon, 33 Phil., 508, citing Omaha Water Co. v. Omaha 12 L.R.A., [N.S. ] 736; 77 C.C.A. 267; 147 Fed. 1; Jodson v. Borough of Winsted, 80 Conn. 834; 15 L.R.A., [N.S. ], 91). Hence, the Osmeña Waterworks System, which is open to the public only upon payment of rental, is a patrimonial property of the City of Cebu, and not one for public use.
2. ID.; ID.; ID.; PAYMENT OF JUST COMPENSATION ESSENTIAL. — The transfer of the Osmeña Waterworks System to another government agency is not a valid exercise of the police power of the State, because while the power to enact laws intended to promote public order, safety, health, morals and general welfare of society is inherent in every sovereign state (Churchill v. Rafferty, 32 Phil., 580), such power is not without limitations, notable among which is the constitutional prohibition against the taking of private property for public use without just compensation. (Art. III, Sec. 1, Philippine Constitution.) The provision in Section 8 of Republic Act No. 1383 that the properties and assets of government-owned waterworks and sewerage systems are transferred to the National Waterworks and Sewerage Authority "in payment for an equal value of the assets" of the latter, does not constitute sufficient compliance with the said constitutional provision.
3. ID.; ID.; ID.; ID.; ESSENTIAL REQUISITE IN THE EXERCISE OF EMINENT DOMAIN. — One of the essential requisites to the lawful exercise of the right of eminent domain is the payment to the owner of the condemned property of just compensation to be ascertained according to law (Western Union Tel. Co. v. Lousville, etc. R. Co. 270 III. 399; 110 NE 583, Ann. Case 1917B, 760; II Cooley’s Constitutional Limitations, p. 1110).
2. ID.; ID.; ID.; PAYMENT OF JUST COMPENSATION ESSENTIAL. — The transfer of the Osmeña Waterworks System to another government agency is not a valid exercise of the police power of the State, because while the power to enact laws intended to promote public order, safety, health, morals and general welfare of society is inherent in every sovereign state (Churchill v. Rafferty, 32 Phil., 580), such power is not without limitations, notable among which is the constitutional prohibition against the taking of private property for public use without just compensation. (Art. III, Sec. 1, Philippine Constitution.) The provision in Section 8 of Republic Act No. 1383 that the properties and assets of government-owned waterworks and sewerage systems are transferred to the National Waterworks and Sewerage Authority "in payment for an equal value of the assets" of the latter, does not constitute sufficient compliance with the said constitutional provision.
3. ID.; ID.; ID.; ID.; ESSENTIAL REQUISITE IN THE EXERCISE OF EMINENT DOMAIN. — One of the essential requisites to the lawful exercise of the right of eminent domain is the payment to the owner of the condemned property of just compensation to be ascertained according to law (Western Union Tel. Co. v. Lousville, etc. R. Co. 270 III. 399; 110 NE 583, Ann. Case 1917B, 760; II Cooley’s Constitutional Limitations, p. 1110).
D E C I S I O N
BARRERA, J.:
To prevent the National Waterworks and Sewerage Authority (NAWASA), created under Republic Act No. 1383, from taking over the ownership, control, supervision, and jurisdiction over the Osmeña Waterworks System, pursuant to the provisions of Section 8 of the said Act, the City of Cebu filed an action for declaratory relief in the Court of First Instance of Cebu, naming the NAWASA as defendant, praying for a clear interpretation of the provisions of said R. A. No. 1383; a declaration of the rights and obligations of the parties thereunder; and a declaration that the statute or any part thereof, in so far as it deprives the plaintiff of its property rights in the Osmeña Waterworks System without due process of law and just compensation, is unconstitutional.
In its answer, NAWASA contended that as the System had always been under the control and operation of the National Government, its transfer to the defendant NAWASA was within the competence of Congress to do; that even assuming that the said System belonged to plaintiff, it was public property and therefore, within the absolute control of Congress; and that granting that it was patrimonial property, there was proper and just compensation provided for in Republic Act No. 1383 for its transfer to NAWASA.
After due trial, the lower court rendered judgment which was later amended, declaring Republic Act No. 1383 unconstitutional "in so far as it vests in defendant authority (NAWASA) ownership over the Osmeña Waterworks System without just compensation as required by the Constitution, without prejudice to granting positive coercive relief upon proper showing that defendant insists upon taking ownership of the Osmeña Waterworks System," at the same time upholding the defendant’s right of control, jurisdiction and supervision over the said System. The question as to what acts of the NAWASA would constitute acts of ownership or dominion and what would be considered as an exercise of jurisdiction, supervision and control was left open for future determination.
From this decision the present appeal has been interposed by the defendant NAWASA.
The facts as found by the lower court and upon which its decision was based, are as follows:jgc:chanrobles.com.ph
"By an Act of 27 December 1910, the now defunct Philippine Legislature authorized the Municipality of Cebu, Province of Cebu, Philippines, to incur an indebtedness of $125,000.00 in money of the United States, and to issue bonds covering the amount of the said indebtedness in gold coin of the United States, for the purpose of providing funds for the construction of sewer and drainage facilities, to secure a sufficient supply of water and necessary buildings for primary schools, and for other purposes (Act No. 2009). The Act provided that the proceeds of the sale of the bond issue should be placed by the Treasurer of the Philippines to the credit of the municipality, to be drawn therefrom by appropriations by the Municipal Council of Cebu. It exclusively charged the municipality with the obligation of reimbursing the same from its current revenues. (Sections 4 and 7, Act No. 2009). The bonds which were to mature in 1941 were expressly declared exempt from taxes by the government of the United States or by the government of the Philippine Islands, and its political or municipal subdivisions, or by any state or territory of the United States. (Sec. 1, Act No. 2009).
"Pursuant to the statute, the Municipality of Cebu floated the bond issue and invested part of the proceeds of the sale thereof in the construction of a waterworks system to supply water to its inhabitants. The system came to be known as the Osmeña Waterworks System in honor of the illustrious son of Cebu, former President Sergio Osmeña, Sr., who was then the Speaker of the National Assembly that approved Act No. 2009. Since its establishment, the System has been supplying the inhabitants of the municipality of Ceb
In its answer, NAWASA contended that as the System had always been under the control and operation of the National Government, its transfer to the defendant NAWASA was within the competence of Congress to do; that even assuming that the said System belonged to plaintiff, it was public property and therefore, within the absolute control of Congress; and that granting that it was patrimonial property, there was proper and just compensation provided for in Republic Act No. 1383 for its transfer to NAWASA.
After due trial, the lower court rendered judgment which was later amended, declaring Republic Act No. 1383 unconstitutional "in so far as it vests in defendant authority (NAWASA) ownership over the Osmeña Waterworks System without just compensation as required by the Constitution, without prejudice to granting positive coercive relief upon proper showing that defendant insists upon taking ownership of the Osmeña Waterworks System," at the same time upholding the defendant’s right of control, jurisdiction and supervision over the said System. The question as to what acts of the NAWASA would constitute acts of ownership or dominion and what would be considered as an exercise of jurisdiction, supervision and control was left open for future determination.
From this decision the present appeal has been interposed by the defendant NAWASA.
The facts as found by the lower court and upon which its decision was based, are as follows:jgc:chanrobles.com.ph
"By an Act of 27 December 1910, the now defunct Philippine Legislature authorized the Municipality of Cebu, Province of Cebu, Philippines, to incur an indebtedness of $125,000.00 in money of the United States, and to issue bonds covering the amount of the said indebtedness in gold coin of the United States, for the purpose of providing funds for the construction of sewer and drainage facilities, to secure a sufficient supply of water and necessary buildings for primary schools, and for other purposes (Act No. 2009). The Act provided that the proceeds of the sale of the bond issue should be placed by the Treasurer of the Philippines to the credit of the municipality, to be drawn therefrom by appropriations by the Municipal Council of Cebu. It exclusively charged the municipality with the obligation of reimbursing the same from its current revenues. (Sections 4 and 7, Act No. 2009). The bonds which were to mature in 1941 were expressly declared exempt from taxes by the government of the United States or by the government of the Philippine Islands, and its political or municipal subdivisions, or by any state or territory of the United States. (Sec. 1, Act No. 2009).
"Pursuant to the statute, the Municipality of Cebu floated the bond issue and invested part of the proceeds of the sale thereof in the construction of a waterworks system to supply water to its inhabitants. The system came to be known as the Osmeña Waterworks System in honor of the illustrious son of Cebu, former President Sergio Osmeña, Sr., who was then the Speaker of the National Assembly that approved Act No. 2009. Since its establishment, the System has been supplying the inhabitants of the municipality of Ceb
