SAN FRANCISCO INN v. SPCWD

SAN FRANCISCO INN, hereto represented by its authorized representative, LEODINO M. CARANDANG, vs SAN PABLO CITY WATER DISTRICT, represented by its General Manager ROGER F. BORJA and the SPCWD INVESTIGATING BOARD

G.R. No. 204639

February 15, 2017

Facts:

The petitioner [SFI] is a hotel business establishment situated at Brgy. San Francisco Calihan, San Pablo City. In 1996, petitioner caused the construction of two (2) deep-well pumps for the use of its business. The pumps, which have a production capacity of four (4) liters per second each, bear the following specification[s]: size of casing [-] 2.0"; size of column pipe-1.5"; pump setting- 60 feet; and motor HP rating-1.5 HP.

The respondent [SPCWD] is a local water utility organized under Resolution No. 309, approved by the Municipal Board of the City of San Pablo, on December 17, 1973, absorbing the former San Pablo Waterworks System and its facilities. Its operation is under the National Water Resources Board, formerly Council (NWRB), which is the national agency vested with authority to control and regulate the utilization, exploitation, development, conservation and operation of water resources pursuant to Presidential Decree No. 1067, otherwise known as the "Water Code of the Philippines" (Water Code) and Presidential Decree No. 198, the "Local Water Utilities Administration Law". The respondent [SPCWD] is managed by a Board of Directors.

In 1977, the respondent [SPCWD] promulgated the Rules Governing Groundwater Pumping and Spring Development within the Territorial Jurisdiction of the San Pablo City Water District. These rules were approved by the NWRB in its 88th meeting held on January 23, 1978. There was an invitation to all deep-well users in San Pablo City to a meeting regarding the legality of the imposition of production assessment fees. The meeting was held on February 19, 1998, where deep-well users attended, including the petitioners but there was no concrete agreement was reached during the meeting except for the deep-well users to submit their position paper. On March 26, 1998, the deep-well users submitted their position paper opposing the imposition of the production assessment fees. While other deep-well users eventually paid production assessment fees and signed the MOA on the same, petitioner did not agree and refused to sign the MOA, the respondent created an Investigating Board to investigate petitioner for failure to secure water permit. The Investigating Board directed petitioner to show cause why no cease and desist order be issued for operating a deep well without a permit then the petitioner submitted a Manifestation and Motion asking for any specific complaint against it in regard of its operation. The Investigating [Board] set the incident for hearing on October 2, 2001, but the petitioner did not appear, prompting the Investigating Board to consider the matter submitted for resolution. On April 9, 2002, the Investigating Board came out with its Report and Resolution recommending to the respondent's Board of Directors to issue a cease and desist order against the petitioner for operating a deep well without a permit, and to demand payment of the equivalent value of the consumption or underground water "from October 1999 up to the present". The above Report and Resolution has not yet been acted upon by the respondent's Board of Directors up to this time.

Before the Regional Trial Court, the petitioner filed a Motion for Reconsideration on May 14, 2002, on the following grounds: a) the authority of the respondent has already been questioned in the action for injunction; b) that the respondent has not shown proof that the extraction/drawing of water by the petitioner had caused injury upon the respondent's financial condition; and c) the petitioner had already filed a water permit application which is pending before the NWRB. The RTC dismissed the petition. Respondent SPWCD appealed the RTC Decision before the CA. The CA, in its Decision dated September 14, 2011, declared "valid the imposition of production charges/fees by respondent SPCWD on commercial and industrial users/operators of deep wells in San Pablo City, and upholds the right of [respondent] SPCWD to demand payment of production charges/fees in accordance with existing rates from [SFI] and for the latter to pay interest thereon from its imposition starting in 1998. The CA affirmed the petition.

Issue:

Whether or not the CA erred in upholding the right of SPCWD to impose production assessment in the clear absence of any findings/proof to support compliance that SFI's use of ground water is injuring or reducing SPCWD's financial condition and impairing its ground water source, pursuant to Section 39 of PD 198 and Section 11 of the Rules.

Held:

Yes. Section 39 of PD 198 Production Assessment. - In the event the board of a district finds, after notice and hearing, that production of ground water by other entities within the district for commercial or industrial uses in (sic) injuring or reducing the district's financial condition, the board may adopt and levy a ground water production assessment to compensate for such loss. In connection therewith, the district may require necessary reports by the operator of any commercial or industrial well. Failure to pay said assessment shall constitute an invasion of the waters of the district and shall entitle this district to an injunction and damages pursuant to Section 32 of this Title.

Section 11 of the Rules: Section 11 - Production Assessment - In the event the Board of Directors of the District, finds, after notice and hearing, that production of ground water by other entities within the District for commercial or industrial uses is adversely affecting the District's financial condition and is impairing its ground water source, the Board may adopt and levy a ground water production assessment or impose special charges at fixed rates to compensate for such loss. In connection therewith the District may require commercial or industrial appropriators to install metering devices acceptable to the District to measure the actual abstraction or appropriation of water and which devices shall be regularly inspected by the District.

Under the law and the Rules, the requirements that must be complied with before a water district entity may impose production assessment on the production of ground water by commercial or industrial operators/users are:

1. A prior notice and hearing; and
2. A resolution by the Board of Directors of the water district entity: (i) finding that the production of ground water by such operators/users within the district is injuring or reducing the water district entity's financial condition and is impairing its ground water source; and (ii) adopting and levying a ground water production assessment at fixed rates to compensate for such loss.