G.R. No. 95237-38 September 13, 1991 Inasmuch as PD No.

198, as amended, is the

original charter of the petitioner, Tanjay Water
DAVAO CITY WATER DISTRICT, CAGAYAN DE ORO District, and respondent Tarlac Water District
CITY WATER DISTRICT, METRO CEBU WATER and all water districts in the country, they come
DISTRICT, ZAMBOANGA CITY WATER DISTRICT, under the coverage of the Civil Service Law,
LEYTE METRO WATER DISTRICT, BUTUAN CITY rules and regulations. (Sec. 35, Art. VIII and
WATER DISTRICT, CAMARINES NORTE WATER Sec. 37, Art. IX of PD No. 807).
DISTRICT, LAGUNA WATER DISTRICT,
DUMAGUETE CITY WATER DISTRICT, LA UNION As an offshoot of the immediately cited ruling, the CSC.
WATER DISTRICT, BAYBAY WATER DISTRICT, issued Resolution No. 90-575, the dispositive portion of
METRO LINGAYEN WATER DISTRICT, URDANETA which reads:
WATER DISTRICT, COTABATO CITY WATER
DISTRICT, MARAWI WATER DISTRICT, TAGUM NOW THEREFORE, in view of all the foregoing,
WATER DISTRICT, DIGOS WATER DISTRICT, BISLIG the Commission resolved, as it hereby resolves
WATER DISTRICT, and MECAUAYAN WATER to rule that Local Water Districts, being quasi-
DISTRICT,petitioners, public corporations created by law to perform
vs. public services and supply public wants, the
CIVIL SERVICE COMMISSION, and COMMISSION ON matter of hiring and firing of its officers and
AUDIT, respondents. employees should be governed by the Civil
Service Law, rules and regulations. Henceforth,
Rodolfo S. De Jesus for petitioners. all appointments of personnel of the different
Evalyn H. Itaas-Fetalino, Rogelio C. Limare and Daisy B. local water districts in the country shall be
Garcia-Tingzon for CSC. submitted to the Commission for appropriate
action. (Rollo. p. 22).

However, on May 16, 1990, in G.R. No. 85760,

entitled "Metro Iloilo Water District v. National Labor
MEDIALDEA, J.:p Relations Commission, et al.," the Third Division of this
Court ruled in a minute resolution:
Whether or not the Local Water Districts formed and
created pursuant to the provisions of Presidential Decree xxx xxx xxx
No. 198, as amended, are government-owned or
controlled corporations with original charter falling under Considering that PD 198 is a general legislation
the Civil Service Law and/or covered by the visitorial empowering and/or authorizing government
power of the Commission on Audit is the issue which the agencies and entities to create water districts,
petitioners entreat this Court, en banc, to shed light on. said PD 198 cannot be considered as the
charter itself creating the Water District. Public
Petitioners are among the more than five hundred (500) respondent NLRC did not commit any grave
water districts existing throughout the country formed abuse of discretion in holding that the operative
pursuant to the provisions of Presidential Decree No. act, that created the Metro Iloilo Water District
198, as amended by Presidential Decrees Nos. 768 and was the resolution of the Sangguniang
1479, otherwise known as the "Provincial Water Utilities Panglunsod of Iloilo City. Hence, the employees
Act of 1973." of Water Districts are not covered by Civil
Service Laws as the latter do (sic) not have
Presidential Decree No. 198 was issued by the then original charters.
President Ferdinand E. Marcos by virtue of his legislative
power under Proclamation No. 1081. It authorized the In adherence to the just cited ruling, the CSC suspended
different local legislative bodies to form and create their the implementation of Resolution No. 90-575 by issuing
respective water districts through a resolution they will Resolution No. 90-770 which reads:
pass subject to the guidelines, rules and regulations
therein laid down. The decree further created and xxx xxx xxx
formed the "Local Water Utilities Administration"
(LWUA), a national agency attached to the National NOW, THEREFORE, in view of all the foregoing,
Economic and Development Authority (NEDA), and the Commission resolved to rule, as it hereby
granted with regulatory power necessary to optimize rules, that the implementation of CSC.
public service from water utilities operations. Resolution No. 575 dated June 27, 1990 be
deferred in the meantime pending clarification
The respondents, on the other hand, are the Civil from the Supreme Court are regards its
Service Commission (CSC) and the Commission on conflicting decisions in the cases of Tanjay
Audit (COA), both government agencies and Water District v. Gabaton and Metro Iloilo Water
represented in this case by the Solicitor General. District v. National Labor Relations
Commission. (p. 26, Rollo)
On April 17, 1989, this Court ruled in the case of Tanjay
Water District v. Gabaton, et al. (G.R. No. 63742, 172 In the meanwhile, there exists a divergence of opinions
SCRA 253): between COA on one hand, and the (LWUA), on the
other hand, with respect to the authority of COA to audit
Significantly, Article IX (B), Section 2(1) of the the different water districts.
1987 Constitution provides that the Civil Service
embraces all branches, subdivisions, COA opined that the audit of the water districts is simply
instrumentalities, and agencies of the an act of discharging the visitorial power vested in them
government, including government-owned and by law (letter of COA to LWUA dated August 13, 1985,
controlled corporations with original charters. pp. 29-30, Rollo).
On the other hand, LWUA maintained that only those went onto effect in 25 May 1973, and which
water districts with subsidies from the government fall provides as follows:
within the COA's jurisdiction and only to the extent of the
amount of such subsidies, pursuant to the provision of Exemption from Civil Service. — The
the Government Auditing Code of the Phils. district and its employees, being
engaged in a proprietary function, are
It is to be observed that just like the question of whether hereby exempt from the provisions of
the employees of the water districts falls under the the Civil Service Law. Collective
coverage of the Civil Service Law, the conflict between Bargaining shall be available only to
the water districts and the COA is also dependent on the personnel below supervisory
final determination of whether or not water districts are levels: Provided, however, That the total
government-owned or controlled corporations with of all salaries, wages emoluments,
original charter. The reason behind this is Sec. 2(1), benefits or other compensation paid to
Article IX-D of the 1987 constitution which reads: all employees in any month shall not
exceed fifty percent (50%) of average
Sec. 2(1) The Commission on Audit shall have net monthy revenue. Said net revenue
the power, authority, and duty to examine, audit, representing income from water sales
and settle all accounts pertaining to the revenue and sewerage service charges, less pro-
and receipts of, and expenditures or uses of rata share of debt service and expenses
funds and property, owned or held in trust by, or for fuel or energy for pumping during the
pertaining to the Government, or any of its preceding fiscal year.
subdivisions, agencies or
instrumentalities, including government-owned The Labor Arbiter failed to take into accout the
or controlled corporations with original charters, provisions of Presidential Decree No. 1479,
and on a post audit basis. (emphasis supplied) which went into effect on 11 June 1978, P.D. No.
1479, wiped away Section 25 of PD 198 quoted
Petitioners' main argument is that they are private above, and Section 26 of PD 198 was
corporations without original charter, hence they are renumbered as Section 25 in the following
outside the jurisdiction of respondents CSC and COA. manner:
Reliance is made on the Metro Iloilo case which
declared petitioners as quasi-public corporations created Section 26 of the same decree PD 198 is hereby
by virtue of PD 198, a general legislation which cannot amended to read as Section 25 as follows:
be considered as the charter itself creating the water
districts. Holding on to this ruling, petitioners contend Section 25. Authorization. — The district may
that they are private corporations which are only exercise all the powers which are expressly
regarded as quasi-public or semi-public because they granted by this Title or which are necessarily
serve public interest and convenience and that since PD implied from or incidental to the powers and
198 is a general legislation, the operative act which purposes herein stated. For the purpose of
created a water district is not the said decree but the carrying out the objectives of this Act, a district is
resolution of the sanggunian concerned. hereby granted the power of eminent domain,
the exercise thereof shall, however, be subject
After a fair consideration of the parties' arguments to review by the Administration.
coupled with a careful study of the applicable laws as
well as the constitutional provisions involved, We rule Thus, Section 25 of PD 198 exempting the
against the petitioners and reiterate Our ruling in Tanjay employees of water districts from the application
case declaring water districts government-owned or of the Civil Service Law was removed from the
controlled corporations with original charter. statute books:

As early as Baguio Water District v. Trajano, et al., (G.R. xxx xxx xxx
No. 65428, February 20, 1984, 127 SCRA 730), We
already ruled that a water district is a corporation created
We grant the petition for the following reasons:
pursuant to a special law — P.D. No. 198, as amended,
and as such its officers and employees are covered by
the Civil Service Law. 1. Section 25 of PD No. 198 was repealed by
Section 3 of PD No. 1479; Section 26 of PD No.
198 was amended ro read as Sec. 25 by Sec. 4
In another case (Hagonoy Water District v. NLRC, G.R.
of PD No. 1479. The amendatory decree took
No. 81490, August 31, 1988, 165 SCRA 272), We ruled
effect on June 11, 1978.
once again that local water districts are quasi-public
corporations whose employees belong to the Civil
Service. The Court's pronoucement in this case, as xxx xxx xxx
extensively quoted in the Tanjay case, supra, partly
reads: 3. The BWD is a corporation created pursuant to
a special law — PD No. 198, as amended. As
"The only question here is whether or not local such its officers and employees are part of the
water districts are governmkent owned or Civil Service (Sec. 1, Art. XII-B, [1973]
controlled corporations whose employees are Constitution; PD No. 868).
subject to the provisions of the Civil Service
Law. The Labor Arbiter asserted jurisdiction over Ascertained from a consideration of the whole statute,
the alleged illegal dismissal of private PD 198 is a special law applicable only to the different
respondent Villanueva by relying on Section 25 water districts created pursuant thereto. In all its
of Presidential decree No. 198, known as the essential terms, it is obvious that it pertains to a special
Provincial Water Utilities Act of 1973" which purpose which is intended to meet a particular set of
conditions and cirmcumstances. The fact that said
decree generally applies to all water districts throughout or province, or region thereof, served by said
the country does not change the fact that PD 198 is a system, followed by the words "Water District."
special law. Accordingly, this Court's resolution in Metro
Iloilo case declaring PD 198 as a general legislation is It also prescribes for the numbers and qualifications of
hereby abandoned. the members of the Board of Directors:

By "government-owned or controlled corporation with Sec. 8. Number and Qualification. — The Board
original charter," We mean government owned or of Directors of a district shall be composed of
controlled corporation created by a special law and not five citizens of the Philippines who are of voting
under the Corporation Code of the Philippines. Thus, in age and residents within the district. One
the case of Lumanta v. NLRC (G.R. No. 82819, February member shall be a representative of civic-
8, 1989, 170 SCRA 79, 82), We held: oriented service clubs, one member of
representative of professional associations, one
The Court, in National Service Corporation member a representative of business,
(NASECO) v. National Labor Relations commercial or financial organizations, one
Commission, G.R. No 69870, promulgated on 29 member a representative of educational
November 1988, quoting extensively from the institutions and one member a representative of
deliberations of 1986 Constitutional Commission women's organization. No public official shall
in respect of the intent and meaning of the new serve as director. Provided, however, that if the
phrase "with original character," in effect held district has availed of the financial assistance of
that government-owned and controlled the Administration, the Administration may
corporations with original charter refer to appoint any of its personnel to sit in the board of
corporations chartered by special law as directors with all the rights and privileges
distinguished from corporations organized under appertaining to a regular member for such
our general incorporation statute — the period as the indebtedness remains unpaid in
Corporations Code. In NASECO, the company which case the board shall be composed of six
involved had been organized under the general members; (as amended by PDs Nos. 768 and
incorporation statute and was a sbusidiary of the 1479).
National Investment Development Corporation
(NIDC) which in turn was a subsidiary of the the manner of their appointment and nominations;
Philippine National Bank, a bank chartered by a
special statute. Thus, government-owned or Sec. 9. Appointment. — Board members shall
controlled corporations like NASECO are
be appointed by the appointing authority. Said
effectively, excluded from the scope of the Civil
appointments shall be made from a list of
Service. (emphasis supplied) nominees, if any, submitted pursuant to Section
10. If no nominations are submitted, the
From the foregoing pronouncement, it is clear that what appointing authority shall appoint any qualified
has been excluded from the coverage of the CSC are person of the category to the vacant position;
those corporations created pursuant to the Corporation
Code. Significantly, petitioners are not created under the Sec.10. Nominations. — On or before October 1
said code, but on the contrary, they were created of each even numbered year, the secretary of
pursuant to a special law and are governed primarily by
the district shall contact each known
its provision.
organization, association, or institution being
represented by the director whose term will
No consideration may thus be given to petitioners' expire on December 31 and solicit nominations
contention that the operative act which created the water from these organizations to fill the position for
districts are the resolutions of the respective local the ensuing term. One nomination may be
sanggunians and that consequently, PD 198, as submitted in writing by each such organization to
amended, cannot be considered as their charter. the Secretary of the district on or before
November 1 of such year: This list of nominees
It is to be noted that PD 198, as amended is the source shall be transmitted by the Secretary of the
of authorization and power to form and maintain a district to the office of the appointing authority on
district. Section 6 of said decree provides: or before November 15 of such year and he
shall make his appointment from the list
Sec. 6. Formation of District. — This Act is the submitted on or before December 15. In the
source of authorization and power to form and event the appointing authority fails to make his
maintain a district. Once formed, a district is appointments on or before December 15,
subject to the provisions of this Act and not selection shall be made from said list of
under the jurisdiction of any political subdivision, nominees by majority vote of the seated
.... directors of the district constituting a quorum.
Initial nominations for all five seats of the board
Moreover, it must be observed that PD 198, contains all shall be solicited by the legislative body or
bodies at the time of adoption of the resolution
the essential terms necessary to constitute a charter
forming the district. Thirty days thereafter, a list
creating a juridical person. For example, Section 6(a)
of nominees shall be submitted to the provincial
provides for the name that will be used by a water
governor in the event the resolution forming the
district, thus:
district is by a provincial board, or the mayor of
the city or municipality in the event the resolution
Sec. 6. . . . To form a district, the legislative body forming the adoption of the district is by the city
of any city, municipality or province shall enact a or municipal board of councilors, who shall
resolution containing the following: select the initial directors therefrom within 15
days after receipt of such nominations;
a) The name of the local water district, which
shall include the name of the city, municipality,
their terms of office: resolution cannot be considered as its charter, the same
being intended only to implement the provisions of said
Sec. 11. Term of Office. — Of the five initial decree. In passing a resolution forming a water district,
directors of each newly formed district, two shall the local sanggunian is entrusted with no authority or
be appointed for a maximum term of two years, discretion to grant a charter for the creation of a private
two for a maximum term of four years, and one corporation. It is merely given the authority for the
for a maximum term of six years. Terms of office formation of a water district, on a local option basis, to
of all directors in a given district shall be such be exercised under and in pursuance of PD 198.
that the term of at least one director, but not
more then two, shall expire on December 31 of More than the aforequoted provisions, what is of
each even-numbered year. Regular terms of important interest in the case at bar is Section 3, par. (b)
office after the initial terms shall be for six years of the same decree which reads:
commencing on January 1 of odd-numbered
years. Directors may be removed for cause only, Sec. 3(b). Appointing authority. — The person
subject to review and approval of the empowered to appoint the members of the
Administration; (as amended by PD 768). Board of Directors of a local water district,
depending upon the geographic coverage and
the manner of filling up vacancies: population make-up of the particular district. In
the event that more than seventy-five percent of
Sec. 12. Vacancies. — In the event of a vacancy the total active water service connections of a
in the board of directors occurring more than six local water districts are within the boundary of
months before expiration of any director's term, any city or municipality, the appointing authority
the remaining directors shall within 30 days, shall be the mayor of that city or municipality, as
serve notice to or request the secretary of the the case may be; otherwise, the appointing
district for nominations and within 30 days, authority shall be the governor of the province
thereafter a list of nominees shall be submitted within which the district is located: Provided,
to the appointing authority for his appointment of That if the existing waterworks system in the city
a replacement director from the list of nominees. or municipality established as a water district
In the absence of such nominations, the under this Decree is operated and managed by
appointing authority shall make such the province, initial appointment shall be
appointment. If within 30 days after submission extended by the governor of the province.
to him of a list of nominees the appointing Subsequent appointments shall be as specified
authority fails to make an appointment, the herein.
vacancy shall be filled from such list by a
majority vote of the remaining members of the If portions of more than one province are
Board of Directors constituting a quorum. included within the boundary of the district, and
Vacancies occurring within the last six months of the appointing authority is to be the governors
an unexpired term shall also be filled by the then the power to appoint shall rotate between
Board in the above manner. The director thus the governors involved with the initial
appointed shall serve the unexpired term only; appointments made by the governor in whose
(as amended by PD 768). province the greatest number of service
connections exists (as amended by PD 768).
and the compensation and personal liability of the
members of the Board of Directors: The above-quoted section definitely sets to naught
petitioners' contention that they are private corporations.
Sec. 13. Compensation. — Each director shall It is clear therefrom that the power to appoint the
receive a per diem, to be determined by the members who will comprise the Board of Directors
board, for each meeting of the board actually belongs to the local executives of the local subdivision
attended by him, but no director shag receive units where such districts are located. In contrast, the
per diems in any given month in excess of the members of the Board of Directors or trustees of a
equivalent of the total per diems of four meetings private corporation are elected from among the members
in any given month. No director shall receive and stockholders thereof. It would not be amiss to
other compensation for services to the district. emphasize at this point that a private corporation is
created for the private purpose, benefit, aim and end of
its members or stockholders. Necessarily, said members
Any per diem in excess of P50.00 shall be
subject to approval of the Administration (as or stockholders should be given a free hand to choose
amended by PD 768). those who will compose the governing body of their
corporation. But this is not the case here and this clearly
indicates that petitioners are definitely not private
Sec. 14. Personal Liability. — No director may corporations.
be held to be personally liable for any action of
the district.
The foregoing disquisition notwithstanding, We are,
however, not unaware of the serious repercussion this
Noteworthy, the above quoted provisions of PD 198, as may bring to the thousands of water districts' employees
amended, are similar to those which are actually throughout the country who stand to be affected
contained in other corporate charters. The conclusion is because they do not have the necessary civil service
inescapable that the said decree is in truth and in fact eligibilities. As these employees are equally protected by
the charter of the different water districts for it clearly the constitutional guarantee to security of tenure, We
defines the latter's primary purpose and its basic find it necessary to rule for the protection of such right
organizational set-up. In other words, PD 198, as which cannot be impaired by a subsequent ruling of this
amended, is the very law which gives a water district Court. Thus, those employees who have already
juridical personality. While it is true that a resolution of a acquired their permanent employment status at the time
local sanggunian is still necessary for the final creation of the promulgation of this decision cannot be removed
of a district, this Court is of the opinion that said
by the mere reason that they lack the necessary civil the purposes of (a) acquiring, installing,
service eligibilities. improving, maintaining and operating
water supply and distribution systems
ACCORDINGLY, the petition is hereby DISMISSED. for domestic, industrial, municipal and
Petitioners are declared "government-owned or agricultural uses for residents and lands
controlled corporations with original charter" which fall within the boundaries of such districts,
under the jurisdiction of the public respondents CSC and (b) providing, maintaining and operating
COA. wastewater collection, treatment and
disposal facilities, and (c) conducting
such other functions and operations
SO ORDERED.
incidental to water resource
development, utilization and disposal
Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras, within such districts, as are necessary or
Padilla, Griño-Aquino, Regalado and Davide, Jr., JJ., incidental to said purpose.
concur.
Gutierrez, Jr., Feliciano and Sarmiento, JJ., are on
Sec. 6. Formation of District. — This Act
leave.
is the source of authorization and power
to form and maintain a district. For
purposes of this Act, a district shall be
considered as a quasi-public
corporationperforming public service
and supplying public wants. As such, a
district shall exercise the powers, rights
and privileges given to private
Separate Opinions corporations under existing laws, in
addition to the powers granted in, and
subject to such restrictions imposed,
under this Act.

BIDIN, J., dissenting:

xxx xxx xxx
I regret I have to register my dissent in this case. I agree
Sec. 7. Filing of Resolution.— A certifted
with the main ponencia that P.D. 198, as amended,
copy of the resolution or resolutions
authorizes the different local legislative bodies
forming a district shall be forwarded to
(Sanggunian) to form and create their respective water
the office of the Secretary of the
districts through a Resolution which they will pass
Administration. If found by the
subject to the guidelines, rules and regulations therein
Administration to conform to the
laid down. The issue, therefore, to be resolved is
requirements of Section 6 and the policy
whether the local water districts so created are
objectives in Section 2, the resolution
government-owned or controlled corporations with
shall be duly filed. The district shall be
original charters embraced by the Civil Service as
deemed duly formed and existing upon
contemplated by Art. IX-B, Sec. 2[1] of the 1987
the date of such filing. A certified copy of
Constitution.
said resolution showing the filing stamp
of the Administration shall be maintained
P.D. 198 is a general legislation which authorizes the in the office of the district. Upon such
formation of water districts. However, the operative act filing, the local government or
which creates a water district is not said decree but the governments concerned shall lose
resolution of the Sanggunian concerned forming and ownership, supervision and control or
maintaining a local water district. Thus, Section 2 of P.D. any right whatsoever over the district
198, among others, provides: except as provided herein. (Emphasis
supplied)
Sec. 2. Declaration of Policy — . . . To
encourage the formulation of such local water It is apparent that insofar as the formation of
districts and the transfer thereto of existing water local water districts are concerned, P.D. 198 is
supply and waste water disposal facilities, this not an original charter but a general act
Decree provides by general act the authority for authorizing the formation of water districts on
the formation thereof, on a local option basis. . . . local option basis (Sec. 2, P.D. 198) similar to
(Emphasis supplied) the Corporation Code. What is chartered, formed
and created under P.D. 198 as a government
Implementing the above policy, Title II of P.D. 198 corporation is the "Local Water Utilities
provides: Administration" attached to the Office of the
President as follows:
TITLE II. LOCAL WATER DISTRICT LAW
CHAPTER I. — Title Sec. 49. Charter. — There is hereby
chartered, created and formed a
Sec. 4. Title. — The provisions of this government corporation to be known as
Title shall be known and referred to as the "Local Water Utilities Administration
the "Local Water District Law." which is hereby attached to the Office of
the President. The provisions of this title
CHAPTER II. Purpose and Formation shall be and constitute the charter of the
Administration.
Sec. 5. Purpose. — Local water districts
may be formed pursuant to this Title for
On the other hand, local water districts are Sec. 4. Title. — The provisions
formed by resolutions of the respective of this Title shall be known and
Provincial, City and Municipal councils (Sec. 7, referred to as the "Local Water
P.D. 198) filed with the Local Water Utilities District Law."
Administration, a government corporation
chartered under Section 49, P.D. 198 and CHAPTER II. Purpose and
attached to the Office of the President. Formation
Consequently, without the requisite resolution of
the Sanggunian concerned forming the water Sec. 5. Purpose. — Local water
district having been filed with the Local Water districts may be formed
Utility Administration, no water district is formed. pursuant to this Title for the
What gives the water districts juridical
purposes of (a) acquiring,
personality is the resolution of the respective
installing, improving,
Sanggunian forming the district and filed with the maintaining and operating water
Local Water Utilities Administration. Once supply and distribution systems
formed, a water district is subject to the
for domestic, industrial,
provisions of P.D. 198 and no longer under the
municipal and agricultural uses
jurisdiction of any political administration which
for residents and lands within
shall thereafter lose ownership, supervision and
the boundaries of such districts,
control over the district (Sec. 7, PD 198). (b) providing, maintaining and
operating wastewater collection,
In view of the foregoing, I vote to Grant the treatment and disposal facilities,
petition and to declare petitioners as quasi- and (c) conducting such other
public corporations performing public service functions and operations
without original charters and therefore not incidental to water resource
embraced by the Civil Service. development, utilization and
disposal within such districts, as
are necessary or incidental to
said purpose.
Separate Opinions
Sec. 6. Formation of District.
BIDIN, J., dissenting: — This Act is the source of
authorization and power to form
and maintain a district. For
I regret I have to register my dissent in this case.
I agree with the main ponencia that P.D. 198, as purposes of this Act, a district
shall be considered as a quasi-
amended, authorizes the different local
public corporation performing
legislative bodies (Sanggunian) to form and
public service and supplying
create their respective water districts through a
public wants. As such, a district
Resolution which they will pass subject to the
shall exercise the powers, rights
guidelines, rules and regulations therein laid
and privileges given to private
down. The issue, therefore, to be resolved is
corporations under existing
whether the local water districts so created are
laws, in addition to the powers
government-owned or controlled corporations
granted in, and subject to such
with original charters embraced by the Civil
restrictions imposed, under this
Service as contemplated by Art. IX-B, Sec. 2[1]
of the 1987 Constitution. Act.

xxx xxx xxx

P.D. 198 is a general legislation which
authorizes the formation of water districts.
However, the operative act which creates a Sec. 7. Filing of Resolution.— A
water district is not said decree but the certifted copy of the resolution
resolution of the Sanggunian concerned forming or resolutions forming a district
and maintaining a local water district. Thus, shall be forwarded to the office
Section 2 of P.D. 198, among others, provides: of the Secretary of the
Administration. If found by the
Sec. 2. Declaration of Policy — . . . To Administration to conform to the
requirements of Section 6 and
encourage the formulation of such local
the policy objectives in Section
water districts and the transfer thereto of
2, the resolution shall be duly
existing water supply and waste water
filed. The district shall be
disposal facilities, this Decree provides
by general act the authority for the deemed duly formed and
formation thereof, on a local option existing upon the date of such
filing. A certified copy of said
basis. . . . (Emphasis supplied)
resolution showing the filing
stamp of the Administration
Implementing the above policy, Title II of P.D. shall be maintained in the office
198 provides: of the district. Upon such filing,
the local government or
TITLE II. LOCAL WATER DISTRICT governments concerned shall
LAW lose ownership, supervision and
CHAPTER I. — Title control or any right whatsoever
over the district except as
provided herein. (Emphasis
supplied)
 It is apparent that insofar as the RESOLUTION
formation of local water districts are
concerned, P.D. 198 is not an original
charter but a general act authorizing the
formation of water districts on local FELICIANO, J.:
option basis (Sec. 2, P.D. 198) similar to
the Corporation Code. What is
chartered, formed and created under The present Petition for certiorari seeks to annul and set
P.D. 198 as a government corporation is aside the Decision of the National Labor Relations
the "Local Water Utilities Administration" Commission rendered on 18 March 1988 in NLRC-NCR
attached to the Office of the President Case No. 00- 0301035-87, entitled "Luz Lumanta, et al.,
as follows: versus Food Terminal Incorporated." The Decision
affirmed an order of the Labor Arbiter dated 31 August
1987 dismissing petitioners' complaint for lack of
Sec. 49. Charter. — There is
Jurisdiction.
hereby chartered, created and
formed a government
corporation to be known as the On 20 March 1987, petitioner Luz Lumanta, joined by
"Local Water Utilities fifty-four (54) other retrenched employees, filed a
Administration which is hereby complaint for unpaid 'd retrenchment or separation pay
attached to the Office of the against private respondent Food Terminal, Inc. ("FTI")
President. The provisions of this with the Department of Labor and Employment. The
title shall be and constitute the complaint was later amended to include charges of
charter of the Administration. underpayment of wages and non-payment of emergency
cost of living allowances (ECOLA).
On the other hand, local water districts
are formed by resolutions of the Private respondent FTI moved to dismiss the complaint
respective Provincial, City and Municipal on the ground of lack of jurisdiction. It argued that being
councils (Sec. 7, P.D. 198) filed with the a government-owned and controlled corporation, its
Local Water Utilities Administration, a employees are governed by the Civil Service Law not by
government corporation chartered under the Labor Code, and that claims arising from
Section 49, P.D. 198 and attached to the employment fall within the jurisdiction of the Civil Service
Office of the President. Consequently, Commission and not the Department of Labor and
without the requisite resolution of the Employment.
Sanggunian concerned forming the
water district having been filed with the The petitioners opposed the Motion to Dismiss
Local Water Utility Administration, no contending that although FTI is a corporation owned and
water district is formed. What gives the controlled by the government, it has still the marks of a
water districts juridical personality is the private corporation: it directly hires its employees without
resolution of the respective Sanggunian seeking approval from the Civil Service Commission and
forming the district and filed with the its personnel are covered by the Social Security System
Local Water Utilities Administration. and not the Government Service Insurance System.
Once formed, a water district is subject Petitioners also argued that being a government-owned
to the provisions of P.D. 198 and no and controlled corporation without original charter,
longer under the jurisdiction of any private respondent FTl clearly falls outside the scope of
political administration which shall the civil service as marked out in Section 2 (1), Article IX
thereafter lose ownership, supervision of the 1987 Constitution.
and control over the district (Sec. 7, PD
198). On 31 August 1987, Labor Arbiter Isabel P. Oritiguerra
issued an Order, 1 the dispositive part of which read:
In view of the foregoing, I vote to Grant
the petition and to declare petitioners as On account of the above findings the
quasi-public corporations performing instant case is governed by the Civil
public service without original charters Service Law. The case at bar lies
and therefore not embraced by the Civil outside the jurisdictional competence of
Service. this Office.

WHEREFORE, premises considered

this case is hereby directed to be
G.R. No. 82819 February 8, 1989 DISMISSED for lack of jurisdiction of
this Office to hear and decide the case.
LUZ LUMANTA, ET AL., petitioners,
vs. SO ORDERED.
NATIONAL LABOR RELATIONS COMMISSION and
FOOD TERMINAL, INC., respondents. On 18 March 1988, the public respondent National Labor
Relations Commission affirmed on appeal the order of
J. S. Torregoza and Associates for petitioners. the Labor Arbiter and dismissed the petitioners' appeal
for lack of merit.
The Solicitor General for public respondent.
Hence this Petition for Certiorari.
The Government Corporate Counsel for Food Terminal,
Inc. The only question raised in the present Petition is
whether or not a labor law claim against a government-
owned and controlled corporation, such as private
respondent FTI, falls within the jurisdiction of the disputed, that FTl is not hundred percent (100%)
Department of Labor and Employment. government-owned and that it has some private
shareholders.
In refusing to take cognizance of petitioners' complaint
against private respondent, the Labor Arbiter and the We conclude that because respondent FTI is
National Labor Relations Commission relied chiefly on government-owned and controlled corporation without
this Court's ruling in National Housing Authority v. original charter, it is the Department of Labor and
Juco, 2which held that "there should no longer be any Employment, and not the Civil Service Commission,
question at this time that employees of government- which has jurisdiction over the dispute arising from
owned or controlled corporations are governed by the employment of the petitioners with private respondent
civil service law and civil service rules and regulations. FTI, and that consequently, the terms and conditions of
such employment are governed by the Labor Code and
Juco was decided under the 1973 Constitution, Article II- not by the Civil Service Rules and Regulations.
B, Section 1 (1) of which provided:
Public respondent National Labor Relations Commission
The civil service embraces every acted without or in excess of its jurisdiction in dismissing
branch, agency, subdivision, and petitioners complaint.
instrumentality of the Government,
including every government-owned or ACCORDINGLY, the Petition for certiorari is hereby
controlled corporation. GRANTED and the Decision of public respondent Labor
Arbiter dated 31 August 1987 and the Decision of public
The 1987 Constitution which took effect on 2 February respondent Commission dated 18 March 1988, both in
1987, has on this point a notably different provision NLRC-NCR Case No. 00-03-01035-87 are hereby SET
which reads: ASIDE. The case is hereby REMANDED to the Labor
Arbiter for further appropriate proceedings.
The civil service embraces all branches,
subdivisions, instrumentalities, and Fernan, C.J., Gutierrez, Jr., Bidin, and Cortes, JJ.,
agencies of the Government, including concur.
government-owned or controlled
corporations with original
charter. (Article IX-B, Section 2 [1]).
Footnotes
The Court, in National Service Corporation (NASECO) v.
National Labor Relations Commission, G.R. No. 69870, 1 Rollo, p. 18.
promulgated on 29 November 1988, 3 quoting
extensively from the deliberations 4 of the 1986
2 134 SCRA 172 (1985).
Constitutional Commission in respect of the intent and
meaning of the new phrase "with original charter," in
effect held that government-owned and controlled 3 Consolidated with Eugenia C. Credo v.
corporations with original charter refer to corporations National labor Relations Commission,
chartered by special law as distinguished from G.R. No. 70295.
corporations organized under our general incorporation
statute-the Corporation Code. In NASECO, the company 4 Record of the Constitutional
involved had been organized under the general Commission, Volume I, pp. 583-585;
incorporation statute and was a subsidiary of the Deliberations were held on 15 July
National Investment Development Corporation (NIDC) 1986.
which in turn was a subsidiary of the Philippine National
Bank, a bank chartered by a special statute. Thus, 5 The public respondents overlooked
government-owned or controlled corporations like the fact that even in thiscase which they
NASECO are effectively excluded from the scope of the had chiefly relied upon in throwing out
Civil Service. petitioners' complaint, the Court made it
clear that its decision "refers [only] to
It is the 1987 Constitution, and not the case law corporations claimed as government
embodied in Juco, 5 which applies in the case at bar, owned or controlled entity. It does not
under the principle that jurisdiction is determined as of cover cases involving private firms taken
the time of the filing of the complaint. 6 At the time the over by the government in foreclosure or
complaint against private respondent FTI was filed (i.e., similar proceedings." (134 SCRA at 172
20 March 1987), and at the time the decisions of the [1985])
respondent Labor Arbiter and National Labor Relations
Commission were rendered (i.e., 31 August 1987 and 18 6 Lee v. Municipal Trial Court of Legaspi
March 1988, respectively), the 1987 Constitution had City, Branch L 145 SCRA 408 (1986);
already come into effect. latter of Instruction No. 1013, People v. Mariano, 71 SCRA 600
dated 19 April 1980, included Food Terminal, Inc. in the (1976); Laperal v. Cruz, 63 SCRA 329
category of "government-owned or controlled (1975); People v. Fontanilla, 23 SCRA
corporations." 7 Since then, FTI served as the marketing 1227 (1968); and Rilloraza v. Arciaga,
arm of the National Grains Authority (now known as the 21 SCRA 717 (1967).
National Food Authority). The pleadings show that FTI
was previously a privately owned enterprise, created and 7 Rollo, p. 18.
organized under the general incorporation law, with the
corporate name "Greater Manila Food Terminal Market,
8 Rollo, p. 69.
Inc." 8 The record does not indicate the precise amount
of the capital stock of FM that is owned by the
government; the petitioners' claim, and this has not been
PNOC-ENERGY DEVELOPMENT CORPORATION dismissal illegal and ordered reinstatement of private
vs. NLRC Case Digest respondents to their previous positions without loss of
PNOC-ENERGY DEVELOPMENT CORPORATION seniority rights and privileges but without back wages.
vs. NLRC Petitioner's appeal to NLRC was rejected and decision of
222 SCRA 831
Labor Arbiter affirmed with the modification that strike
Facts: In November, 1987, while holding the position leader Felix Laquio be suspended from work without
of Geothermal Construction Secretary, Engineering pay for 6 mos. Three days after receipt by petitioner of
and Construction Department, at Tongonan NLR decision private respondents filed a writ of
Geothermal Project, Ormoc City, Manuel S. Pineda execution of said decision with Executive Labor Arbiter,
decided to run for councilor of the Municipality of
Kananga, Leyte, in the local elections scheduled in
the same was granted. Hight Court initially issued TRO
January, 1988, and filed the corresponding certificate against the writ of execution but on 7/17/1990 affirmed
of candidacy for the position. Objection to Pineda’s the NLRC decision and lifted TRO. After receipt by
being a candidate while retaining his job in the PNOC- petitioner of SC decision the 27 employees were
EDC was shortly thereafter registered by Mayor Arturo reinstated and after the 6 mo. suspension Laquio was
Cornejos of Kananga, Leyte.
reinstated. On April 17, private respondents filed a
Section 66 of the Election Code provides among others motion to compel the immediate reinstatement of
that officers and employees of GOCCs are considered Laquio and payment of their back wages from 3/6/1991
as ipso facto resigned upon the filing of their certificate up the day of actual reinstatement and to other private
of candidacy. respondents from 3/2/1989 to 4/15/1991. Petitioner
It was the argument of Pineda that PNOC-EDC was not
appealed the NLRC decision but same was denied.
created through a special law, it is not covered by the ISSUE:
Civil Service Law and, therefore, not contemplated
under Section 66 of the Election Code. 1. Does NLRC have jurisdiction over the issues? 2. Did
the NLRC commit grave abuse of discretion amounting
Issue: Whether or not an employee in a government-
owned or controlled corporation without an original to lack or excess of jurisdiction when it ordered
charter falls within the scope of Section 66 of the payment of salaries of private respondents during the
Omnibus Election Code. effectivity of the restraining order in GR 95219-20?

Held: Yes. If a corporation’s capital stock is owned by RULING:

the Government, or it is operated and managed by
officers charged with the mission of fulfilling the public 1. Yes, through jurisdiction by estoppel. It is well settled
objectives for which it has been organized, it is a rule that GOCC's, of which petitioner is a water district
government-owned or controlled corporation even if with an original charter, are covered by the provisions
organized under the Corporation Code and not under of the Civil Service Law and Civil Service Rules and
a special statute. Employees thereof, even if not
covered by the Civil Service but by the Labor Code, are Regulations. Jurisdiction over the strike and dismissal of
nonetheless “employees in government-owned or private respondents is therefore lodged not with the
controlled corporation,” and come within the letter of NLRC but with the CSC. However, petitioner never
Section 66 of the Omnibus Election Code, declaring raised the issue with the Labor Arbiter, NLRC or this curt
them ipso facto resigned from their office upon the filing in GR 95219-20. Indeed, petitioner participated in
of their certificate of candidacy.
http://pinoycasedigest.blogspot.com/2012/10/pnoc-energy- actions with ELA and the NLRC. It is now only, when the
development-corporation-vs.html NLRC ordered payment of back wages that petitioner
raises the issue of lack of jurisdiction. It is unfair for a
party who has voluntarily invoked the jurisdiction of a
LABOR LAW tribunal on a matter to secure an affirmative relief and
to repudiate the same afterwards to escape a penalty
Zamboanga Water District vs. Buat et al. GR 104389, (Ocheda v. CA, 214 SCRA 629, Royales vs. IAC 127 SCRA
May 27, 1994 470, Tijam v. Sibonghanoy 23 SCRA 29). Petitioner is
thus estopped from assailing the jurisdiction of the
NLRC. 2. No, the NLRC was correct to say that private
FACTS: respondents should have been reinstated on 3/21/1989
and back wages from that date to 4/15/1991 including
A strike in March 1987 participated by herein private
the effectivity of the TRO in GR 95219-20. Laquio should
respondents resulted in the latters separation from
have been reinstated on 3/6/1991 and back wages paid
employment. Herein petition filed with the Labor
from said date up to actual reinstatement based on RA
Arbiter, a complaint to declare the strike illegal, this was
6715 which amended Art. 223 (3) of PD 442 which
followed by Zamboanga Utilities Labor Union (ZULU) to
provides that decision of Labor Arbiters on dismissed or
which herein respondents were members, a complaint
separated employee insofar as reinstatement is
for illegal dismissal and unpaid wages before the Labor
concerned is immediately executory, EVEN PENDING
Arbiter. The two cases were consolidated and heard
APPEAL. The issuance of said TRO in GR 95219-20 DID
together and on 4/19/1988 a consolidated decision by
NOT NULLIFY the rights of private respondents to their
the Labor arbiter declared both the strike and the
reinstatement and collection of back wages during the
effectivity of the order but merely suspended its
implementation pending validity determination of the
NLRC resolutions. A finding of this Court that private
respondents were not entitled to reinstatement would
mean they had no right to collect back wages. But since
the court affirmed the NLRC decision, respondents,
being ordered reinstated, are entitled to their back
wages. Petition dismissed.

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anga-Water-District-v-Buat-Gr-104389