MERIDA WATER DISTRICT, G.R. NO.

165993
members of the Board of Directors, Lourdes Quinte, Romulo Pales,
ITS BOARD OF DIRECTORS,
NAMELY: SUSANO TOREJAS, Carmelita de los Angeles, and Villafranca Rosal; and General Manager,
JR., LOURDES QUINTE,
ROMULO PALES, Nilo C. Lucero. On October 10, 2001, Merida Water District conducted a
CARMELITA DE LOS Present: public hearing for the purpose of increasing the water rate.[5]
ANGELES, VILLAFRANCA
ROSAL, AND MWD GENERAL PUNO, C.J., Chairperson,
MANAGER NILO C. LUCERO, CARPIO, On March 7, 2002, Merida Water District received a letter from the
Petitioners, AZCUNA,
Local Water Utilities Administration (LWUA).[6] The letter stated that
REYES,* and
- versus - LEONARDO-DE CASTRO, JJ. on March 5, 2002, the LWUA Board of Trustees, per Board Resolution No.
63, series of 2002, confirmed Merida Water Districts proposed water
FRANCISCO BACARRO,
VICTORINO DOMANILLO, rates.[7] Attached to the letter was the Rate Schedule of Approved Water
PATRICK BACOL, CARLITO
BARRERA, RUSTICA Rates containing a progressive increase of water rates over a certain
MENDOLA, JOSE DELIO period.[8]
HERMOSO, CHARITO Promulgated:
TOLORIO, MA. VICTORIA
MAINGQUE, ELMER GO, AND On September 3, 2002, Merida Water District approved Resolution
GERARDO BIOCO, No. 006-02, implementing a water rate increase of P90 for the first ten cubic
Respondents. SEPTEMBER 30, 2008
meters of water consumption.[9] Thereafter, petitioners issued notices of
x-----------------------------------------------------------------------------------------
x disconnection to concessionaires who refused to pay the water rate increase
and did not render service to those who opted to pay the increased rate on
DECISION
installment basis.[10]
PUNO, C.J.:
On February 13, 2003, respondents, consumers of Merida Water

District, filed a Petition for Injunction, etc.[11] against petitioners before the
This Petition for Review on Certiorari seeks to set aside the Decision[1]
RTC. Respondents sought to enjoin the petitioners from collecting payment
and Resolution[2] of the Court of Appeals (CA), dated January 30,
of P90 for the first ten cubic meters of water consumption. Respondents
2004 and September 16, 2004, respectively, in CA-G.R. SP No.77141,
alleged that the imposed rate was contrary to the rate increase agreed upon
which affirmed the Orders[3] of the Regional Trial Court (RTC) in favor of
during the public hearing. Respondents claimed that petitioners violated
respondents.
Letter of Instructions (LOI) No. 700 by: (1) implementing a water rate
Petitioners are Merida Water District, a government-owned and
increase exceeding 60% of the previous rate; and (2) failing to conduct a
controlled corporation[4] that operates the water utility services in
public hearing for the imposed rate of P90.[12]
the municipality of Merida, Leyte; its Chairman, Susano Torejas, Jr.;
 On February 26, 2003, petitioners filed a Motion to Dismiss, At the outset, it must be clarified that the case at bar concerns a

alleging that respondents petition lacked a cause of action as they failed to local water districts establishment of a rate increase. As can be gleaned

exhaust administrative remedies under Presidential Decree (P.D.) No. 198, from the material averments in the complaint below, respondents

the Provincial Water Utilities Act of 1973, as amended by P.D. Nos. 768 allegations, that petitioners committed a patently illegal act by

and 1479.[13] On the same date, respondents questioned the legality of the implementing a water rate increase beyond that prescribed by LOI No. 700

water rate increase before the National Water Resources Board (NWRB).[14] and that petitioners violated due process in implementing a rate not agreed

upon during the public hearing, point to the conclusion that this controversy
In its Order[15] dated March 3, 2003, the RTC denied petitioners
arose from the determination of the rate itself.
motion to dismiss. The RTC held there was no need to exhaust

administrative remedies, because petitioners: (1) failed to comply with the P.D. No. 198 as amended by P.D. No. 1479 provides for the

legal requisites of hearing and notice; and (2) violated LOI No. 700 for administrative remedies regarding a review of water rates, to determine

prescribing a water rate increase of almost 100% from the previous rate. whether a local water district complied with the legal requirements in

Petitioners Motion for Reconsideration[16] was denied on March 31, establishing such rates:

2003.[17] SEC. 11. The last paragraph of Section 63 of the same

decree is hereby amended to read as follows:
On April 15, 2003, petitioners filed a Petition The rates or charges established by such
[18] local district, after hearing shall have been
for Certiorari with the CA, assailing the trial court orders for lack of
conducted for the purpose, shall be subject
jurisdiction. The CA affirmed the orders, upholding the RTCs jurisdiction to review by the Administration to
establish compliance with the abovestated
and the propriety of respondents recourse to the trial court notwithstanding provisions. Said review of rates or charges
shall be executory and enforceable after the
the rule on the exhaustion of administrative remedies. Petitioners filed a lapse of seven calendar days from posting
thereof in a public place in the locality of
Motion for Reconsideration,[19] which the CA denied. the water district, without prejudice to an
appeal being taken therefrom by a water
concessionaire to the [NWRB] whose
Petitioners reiterate their arguments before this Court, alleging the decision thereon shall be appealable to the
Office of the President. An appeal to the
impropriety of the respondents recourse to the trial court considering their
[NWRB] shall be perfected within thirty
failure to exhaust administrative remedies. Thus, the sole issue for days after the expiration of the seven-day
period of posting. The [NWRB] shall
resolution is whether respondents recourse to the trial court is proper despite decide on appeal within thirty days from
perfection.[20]
their failure to exhaust administrative remedies.
 (f) Ensure that the water rates are not abruptly increased
beyond the water users ability to pay, seeing to it that each
increase if warranted, does not exceed 60% of the current
After LWUA reviews the rates established by a local water district, a water rate.[23]
concessionaire may appeal the same to the NWRB. The NWRBs decision

may then be appealed to the Office of the President. The non-observance of the doctrine of exhaustion has been upheld in cases

when the patent illegality of the assailed act is clear, undisputed, and more
Respondents failed to exhaust administrative remedies by their
importantly, evident outright.[24] In these cases, the assailed act did not
failure to appeal to the NWRB. Non-exhaustion of administrative remedies
require the consideration of the existence and relevancy of specific
renders the action premature.[21] The Court has consistently reiterated the
surrounding circumstances and their relation to each other for the Court to
rationale behind the doctrine of exhaustion of administrative remedies:
conclude that the act was indeed patently illegal. In the case at bar, certain
One of the reasons for the doctrine of exhaustion is the
separation of powers, which enjoins upon the Judiciary a facts need to be resolved first, to determine whether petitioners increase of
becoming policy of non-interference with matters coming
primarily (albeit not exclusively) within the competence of the water rate is a patently illegal act.
the other departments. The theory is that the administrative
authorities are in a better position to resolve questions
addressed to their particular expertise and that errors The determination of the current rate from which to compute the
committed by subordinates in their resolution may be
allowable increase of 60% is a question of fact that cannot be properly
rectified by their superiors if given a chance to do so It
may be added that strict enforcement of the rule could also threshed out before this Court. The NWRB must be given an opportunity to
relieve the courts of a considerable number of avoidable
cases which otherwise would burden their heavily loaded make a factual finding with respect to this question. This Court accords the
dockets.[22]
factual findings of administrative agencies with utmost consideration

because of the special knowledge and expertise gained by these quasi-

Respondents justify their failure to observe the administrative
judicial tribunals from handling specific matters falling under their
process due to the following grounds: (1) that petitioners increase of the
jurisdiction.[25]Considering that the LWUA confirmed the Rate Schedule of
water rate is patently illegal; and (2) a denial of due process.
Approved Water Rates for Merida Water District, a schedule that contains

We are not convinced. different rates that gradually increase, the determination of whether the

computation of the percentage increase complies with the 60% limitation is

The argument of patent illegality is without merit. The first
a factual matter best left to the competence of the NWRB.
paragraph of LOI No. 700 provides that the LWUA shall:
The argument of denial of due process deserves scant consideration. The determine whether the establishment of the rates complies with the

non-observance of the doctrine of exhaustion has been recognized in cases law.[29] Thus, compliance with the public hearing requirement means that

where the party seeking outright judicial intervention was denied the the rates presented in the hearing should be the same rates submitted to the

opportunity to be heard in administrative proceedings. [26] In the case at bar, LWUA for review and approval. Considering that there was no finding

respondents were not denied the opportunity to be heard, as Merida Water with regard to this question of fact, whether the rates presented in the

District conducted a public hearing on October 10, 2001 regarding the hearing were the same rates approved by the LWUA, the NWRB must be

increase of water rates. given the opportunity to resolve this matter.

The allegation of a denial of due process actually involves the question of IN VIEW WHEREOF, the petition is GRANTED. The Decision and

whether the public hearing on October 10, 2001 complied with the legal Resolution of the Court of Appeals in CA-G.R. SP No.77141 dated January

requirement of conducting a public hearing prior to increasing water 30, 2004 and September 16, 2004, respectively, are REVERSED and SET

rates. The fifth paragraph of LOI No. 700 requires the water district ASIDE.

concerned to conduct a public hearing prior to any increase in water

SO ORDERED.
rates.[27] The third paragraph of LOI No. 744 requires the LWUA and water

districts to prepare a system of public consultation through hearings when

considering increases in water rates.[28] Furthermore, Section 63 of P.D.

No. 198, as amended by P.D. No. 1479 requires the following:

The rates or charges established by such local district, after

hearing shall have been conducted for the purpose, shall be
subject to review by the Administration to establish
compliance with the abovestated provisions. Said review
of rates or charges shall be executory and enforceable after
the lapse of seven calendar days from posting thereof in a
public place in the locality of the water district x x x.

When a local water district increases water rates, the law requires the

district concerned to conduct a public hearing regarding these rates. The

same rates are subject to review by the LWUA, which is tasked to