Fontanilla v. Maliaman G.R. Nos. L-55963 & 61045 February 27, 1991 Paras, J.

Facts: The National Irrigation Administration (NIA) maintains that it does not perform solely and primarily proprietary functions but is an agency of the government tasked with governmental functions, and is therefore not liable for the tortious act of its driver Hugo Garcia, who was not its special agent. Issue: whether NIA is performing governmental functions and is thus exempt form suit for damages caused by the negligent act of its driver who is not its special agent Held: No. The functions of government have been classified into governmental or constituent and proprietary or ministrant. The former involves the exercise of sovereignty and considered as compulsory; the latter connotes merely the exercise of proprietary functions and thus considered as optional. The functions of providing water supply and sewerage service are regarded as mere optional functions of government even though the service rendered caters to the community as a whole and the goal is for the general interest of society. The NIA was not created for purposes of local government. While it may be true that the NIA was essentially a service agency of the government aimed at promoting public interest and public welfare, such fact does not make the NIA essentially and purely a government-function corporation. NIA was created for the purpose of constructing, improving, rehabilitating, and administering all national irrigation systems in the Philippines, including all communal and pump irrigation projects. Certainly, the state and the community as a whole are largely benefited by the services the agency renders, but these functions are only incidental to the principal aim of the agency, which is the irrigation of lands. The NIA is a government agency with a juridical personality separate and distinct from the government. It is not a mere agency of the government but a corporate body performing proprietary functions. Therefore, it may be held liable for the damages caused by the negligent act of its driver who was not its special agent.

FONTANILLA V. MALIAMAN G.R. No. L-55963, February 27, 1991 Petitioners: Spouses Jose Fontanilla and Virginia Fontanilla Respondents: Hon. Inocencio D. Maliaman and National Irrigation Administration (NIA) FACTS On December 1, 1989, the Court rendered a decision declaring National Irrigation Administration (NIA), a government agency performing proprietary functions. Like an ordinary employer, NIA was held liable for the injuries, resulting in death, of Francisco Fontanilla, son of petitioner spouses Jose and Virginia Fontanilla, caused by the fault and/or negligence of NIAs driver emp loyee Hugo Garcia; and NIA was ordered to pay the petitioners the amounts of P 12,000 for the death of the victim; P3,389 for hospitalization and burial expenses; P30,000 as moral damages; P8,000 as exemplary damages, and attorneys fees of 20% of the total award. The National Irrigation Administration (NIA) maintains, however, that it does not perform solely and primarily proprietary functions, but is an agency of the government tasked with governmental functions, and is therefore not liable for the tortuous act of its driver Garcia, who was not its special agent. For this, they have filed a motion for reconsideration on January 26, 1990. NIA believes this bases this on: PD 552 amended some provisions of RA 3601 (the law which created the NIA) The case of Angat River Irrigation System v. Angat River Workers Union Angat Case: Although the majority opinion declares that the Angat System, like the NIA, exercised a governmental function because the nature of its powers and functions does not show that it was intended to brin g to the Government any special corporate benefit or pecuniary profit, a strong dissenting opinion held that Angat River system is a government entity exercising prop rietary functions. The Angat dissenting opinion: Alegre protested the announced termination of his employment. He argued that although his contract did stipulate that the same would terminate on July 17, 1976, since his services were necessary and desirable in the usual business of his employer, and his employment had lasted for five years, he had acquired the status of regular employee and could not be removed except for valid cause. The employment contract of 1971 was executed when the Labor Code of the Philippines had not yet been promulgated, which came into effect some 3 years after the perfection of the contract. ISSUE

Whether or not NIA is a government agency with a juridical personality separate and distinct from the government, thereby opening it up to the possibility that it may be held liable for the damages caused by its driver, who was not its special agent HELD: YES Reasoning the functions of government have been classified into governmental or constituent and proprietary or ministrant. The former involves the exercise of sovereignty and considered as compulsory; the latter connotes merely the exercise of proprietary functions and thus considered as optional. The National Irrigation Administration was not created for purposes of local government. While it may be true that the NIA was essentially a service agency of the government aimed at promoting public interest and public welfare, such fact does not make the NIA essentially and purely a "government-function" corporation. NIA was created for the purpose of "constructing, improving, rehabilitating, and administering all national irrigation systems in the Philippines, including all communal and pump irrigation projects." Certainly, the state and the community as a whole are largely benefited by the services the agency renders, but these functions are only incidental to the principal aim of the agency, which is the irrigation of lands. NIA is a government agency invested with a corporate personality separate and distinct from the government, thus is governed by the Corporation Law. Section 1 of Republic Act No. 3601 provides: Sec. 1. Name and Domicile A body corporate is hereby created which shall be known as the National Irrigation Administration. . . . which shall be organized immediately after the approval of this Act. It shall have its principal seat of business in the City of Manila and shall have representatives in all provinces, for the proper conduct of its business. (Emphasis for emphasis). Besides, Section 2, subsection b of P.D. 552 provides that: (b) To charge and collect from the beneficiaries of the water from all irrigation systems constructed by or under its administration, such fees or administration charges as may be necessary to cover the cost of operation, maintenance and insurance, and to recover the cost of construction within a reasonable period of time to the extent consistent with government policy; to recover funds or portions thereof expended for the construction and/or rehabilitation of communal irrigation systems which funds shall accrue to a special fund for irrigation development under section 2 hereof; Unpaid irrigation fees or administration charges shall be preferred liens first, upon the land benefited, and then on the crops raised thereon, which liens shall have preference over all other liens except for taxes on the land, and such preferred liens shall not be removed until all fees or administration charges are paid or the property is levied upon and sold by the National Irrigation Administration for the satisfaction thereof. . . . The same section also provides that NIA may sue and be sued in court. It has its own assets and liabilities. It also has corporate powers to be exercised by a Board of Directors. Section 2, subsection (f): . . . and to transact such business, as are directly or indirectly necessary, incidental or conducive to the attainment of the above powers and objectives, including the power to establish and maintain subsidiaries, and in general, to exercise all the powers of a corporation under the Corporation Law, insofar as they are not inconsistent with the provisions of this Act. DISPOSITION: The court concluded that the National Irrigation Administration is a government agency with a juridical personality separate and distinct from the government. It is not a mere agency of the government but a corporate body performing proprietary functions. Therefore, it may be held liable for the damages caused by the negligent act of its driver who was not its special agent. ACCORDINGLY, the Motion for Reconsideration dated January 26, 1990 is DENIED WITH FINALITY. The decision of this Court in G.R. No. 55963 and G.R. No. 61045 dated December 1, 1989 is hereby AFFIRMED. DISSENTING: PADILLA: to say that NIA has opened itself to suit is one thing; to say that it is liable for damages arising from tort committed by its employees, is still another thing. The state or a government agency performing governmental functions may be held liable for tort committed by its employees only when it acts through a special agent. REPUBLIC VS. VILLASOR, ET AL. G.R. No. L-30671 November 28, 1973 Facts: On July 7, 1969, a decision was rendered in Special Proceedings No. 2156-R infavor of respondents P.J. Kiener Co., Ltd., Gavino Unchuan, and InternationalConstruction Corporation and against petitioner confirming the arbitration award in theamount of P1,712,396.40.The award is for the satisfactionof a judgment against thePhlippine Government.On June 24, 1969, respondent Honorable Guillermo Villasor issued an Orderdeclaring thedecision final and executory.Villasor directed the Sheriffs of RizalProvince, Quezon City as well as Manilato execute said decision.The Provincial Sheriffof Rizal served Notices of Garnishment with several Banks,specially on PhilippineVeterans Bank and PNB.The funds of the Armed Forces of the Philippines on deposit with PhilippineVeterans Bank andPNB are public funds duly appropriated and allocated for thepayment of pensions of retirees, pay andallowances of military and civilian personneland for maintenance and operations of the AFP.Petitioner, on certiorari, filed prohibition proceedings against respondent JudgeVillasor for acting in excess of jurisdiction with grave abuse of discretion amounting tolack of jurisdiction in grantingthe issuance of a Writ of Execution against the propertiesof the AFP, hence the notices and garnishment arenull and void. Issue: Is the Writ of Execution issued by Judge Villasor valid? Held: What was done by respondent Judge is not in conformity with the dictates of theConstitution.It isa fundamental postulate of constitutionalism flowing from the juristicconcept of sovereignty that the stateas well as its government is immune from suitunless it gives its consent.A sovereign is exempt from suit,not because of any formalconception or obsolete theory, but on the logical and practical ground that therecan beno legal right as against the authority that makes the law on which the right depends.The State may not be sued without its consent. A corollary, both dictated by logicand soundsense from a basic concept is that public funds cannot be the object of agarnishment proceeding even if theconsent to be sued had been previously granted andthe state liability

adjudged.The universal rule that wherethe State gives its consent tobe sued by private parties either by general or special law, it may limitclaimants actiononly up to the completion of proceedings anterior to the stage of execution and thatthepower of the Courts ends when the judgment is rendered, since the government fundsand properties maynot be seized under writs of execution or garnishment to satisfy suchjudgments, is based on obviousconsiderations of public policy.Disbursements of publicfunds must be covered by the correspondingappropriation as required by law.Thefunctions and public services rendered by the State cannot be allowedto be paralyzedor disrupted by the diversion of public funds from their legitimate and specific objects,asappropriated by law Republic vs. Villasor (Consti1) Republic of the Philippines, petitioner, vs. Hon. Guillermo P. Villasor, as Judge of the Court of First Instance of Cebu, Branch I, the Provincial Sheriff of Rizal, the Sheriff of the City of Manila, the Clerk of Court of First Instance of Cebu, P.J. Kiener Co., Ltd., Gavino Unchuan, and International Construction Corporation, respondents.

November 28, 1973 Fernando, J:

Facts: The decision that was rendered in favor of respondents P.J. Kiener Co., Ltd, Gavino Unchuan and International Construction Corporation was declared final and executory by Respondent Hon. Guillermo P. Villasor. Pursuant to the said declaration, the corresponding Alias Writ of Execution was issued. And for the strength of this writ, the provincial sheriff served notices of garnishment with several banks, specially on the 'monies due the Armed Forces of the Philippines in the form of deposits; the Philippines Veterans Bank received the same notice of garnishment. The funds of the AFP on deposit with the banks are public funds duly appropriated and allocated for the payment of pensions of retireees, pay and allowances of military and civillian personnel and for maintenance and operations of AFP. Petitioner filed a petition against Villasor for acting in excess jurisdiction amounting to lack of jurisdiction in granting the issuance of a Writ of Execution against the properties of AFP, hence the notices and garnishments are null and void. Issue: Whether or not the Writ of Execution issued by respondent Judge Villasor is valid. Held: No Ratio: What was done by respondent Judge is not in conformity with the dictates of the Constitution. It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the state and its government is immune from suit unless it gives its consent. A sovereign is exempt from suit not because of any formal conception or obsolete theory but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends. REPUBLIC VS. VILLASOR G.R. No. L-30671, November 28 1973, 54 SCRA 84

FACTS: On July 3, 1961, a decision was rendered in Special Proceedings No. 2156-R in favor of respondents P. J. Kiener Co., Ltd., Gavino Unchuan, and International Construction Corporation, and against the petitioner herein, confirming the arbitration award subject of Special Proceedings.

On June 24, 1969, respondent Honorable Guillermo P. Villasor, issued an Order declaring the aforestated decision of July 3, 1961 final and executory, directing the Sheriffs of Rizal Province, Quezon City [as well as] Manila to execute the said decision. Pursuant to the said Order, the corresponding Alias Writ of Execution was issued. On the strength of the afore-mentioned Alias Writ of Execution, the respondent Provincial Sheriff of Rizal served notices of garnishmentwith several Banks, specially on the `monies due the Armed Forces of the Philippines in the form of deposits, sufficient to cover the amount mentioned in the said Writ of Execution; the Philippine Veterans Bank received the same notice of garnishment. The funds of the Armed Forces of the Philippines on deposit with the Banks, particularly, with the Philippine Veterans Bank and the Philippine National Bank [or] their branches are public funds duly appropriated and allocated for the payment of pensions of retirees, pay and allowances of military and civilian personnel and for maintenance and operations of the Armed Forces of the Philippines. Petitioner then alleged that respondent Judge, Honorable

Guillermo P. Villasor, acted in excess of jurisdiction [or] with grave abuse of discretion amounting to lack of jurisdiction in granting the issuance of an alias writ of execution against the properties of the Armed Forces of the Philippines, hence, the Alias Writ of Execution and notices of garnishment issued pursuant thereto are null and void." In the answer filed by respondents, the facts set forth were admitted with the only qualification being that the total award was in the amount of P2,372,331.40.

ISSUE: Whether or not the notices of garnishment are null and void. HELD: The Republic of the Philippines did right in filing this certiorari and prohibition proceeding. What was done by respondent Judge is not in conformity with the dictates of the Constitution. It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the state as well as its government is immune from suit unless it gives its consent. It is readily understandable why it must be so. In the classic formulation of Holmes: "A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends." Sociological jurisprudence supplies an answer not dissimilar. This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is therein expressly provided: "The State may not be sued without its consent." A corollary, both dictated by logic and sound sense from such a basic concept is that public funds cannot be the object of a garnishment proceeding even if the consent to be sued had been previously granted and the state liability adjudged. MUNICIPALITY of SAN MIGUEL vs. FERNANDEZ Facts: In Civil Case No. 604-B, entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal Government of San Miguel, Bulacan, et al.", the then CFI rendered judgment holding herein petitioner municipality liable to private respondents. The court ordered the partial revocation of the Deed of Donation signed by the deceased Carlos Imperio in favor of the Municipality of San Miguel Bulacan insofar as Lots Nos. 1, 2, 3, 4 and 5, Block 11 of Subdivision Plan Psd-20831 are concerned. It also ordered to execute the corresponding Deed of Reconveyance over the aforementioned five lots in favor of the private respondents, and to pay them rentals it has collected from the occupants for their use and occupation of the premises from 1970 up to and including 1975 plus interest. Petitioner filed a Motion to Quash the writ of execution on the ground that the municipality's property or funds are all public funds exempt from execution. he said motion to quash was, however, denied by the respondent judge and the alias writ of execution stands in full force and effect. Respondent judge ordered petitioners to comply with the money judgment. When the treasurers (provincial and municipal) failed to comply with the order, respondent judge issued an order for their arrest and that they will be release only upon compliance thereof. Hence, the present petition. Issue: Whether the funds of the Municipality of San Miguel, Bulacan, in the hands of the provincial and municipal treasurers of Bulacan and San Miguel, respectively, are public funds which are exempt from execution for the satisfaction of the money judgment in Civil Case No. 604-B. Held: Well settled is the rule that public funds are not subject to levy and execution. The reason for this was explained in the case of Municipality of Paoay vs. Manaois, "that they are held in trust for the people, intended and used for the accomplishment of the purposes for which municipal corporations are created, and that to subject said properties and public funds to execution would materially impede, even defeat and in some instances destroy said purpose." Likeise, in Tantoco vs. Municipal Council of Iloilo, it was held that "it is the settled doctrine of the law that not only the public property but also the taxes and public revenues of such corporations Cannot be seized under execution against them, either in the treasury or when in transit to it. Judgments rendered for taxes, and the proceeds of such judgments in the hands of officers of the law, are not subject to execution unless so declared by statute." Thus, it is clear that all the funds of petitioner municipality in the possession of the Municipal Treasurer of San Miguel, as well as those in the possession of the Provincial Treasurer of Bulacan, are also public funds and as such they are exempt from execution. Besides, PD No. 477, known as "The Decree on Local Fiscal Administration", Section 2 (a), provides: Fundamental Principles. Local government financial affairs, transactions, and operations shall be governed by the fundamental principles set forth hereunder: (a) No money shall be paid out of the treasury except in pursuance of a lawful appropriation or other specific statutory authority. Otherwise stated, there must be a corresponding appropriation in the form of an ordinance duly passed by the Sangguniang Bayan before any money of the municipality may be paid out. In the case at bar, it has not been shown that the SB has passed an ordinance to this effect. enforcement of money judgment: (a) By levying on all the property of the debtor, whether real or personal, not otherwise exempt from execution, or only on such part of the property as is sufficient to satisfy the judgment and accruing cost, if he has more than sufficient property for the purpose; (b) By selling the property levied upon; (c) By paying the judgment-creditor so much of the proceeds as will satisfy the judgment and accruing costs; and (d) By delivering to the judgment-debtor the excess, if any, unless otherwise, directed by judgment or order of the court. The foregoing has not been followed in the case at bar. ACCORDINGLY, the petition is granted and the orders of respondent judge are SET ASIDE; and respondents are hereby enjoined from implementing the writ of execution. MUNICIPALITY OF MAKATI vs. CA Facts: Petitioner Municipality of Makati initiated an expropriation proceeding against private respondent Admiral Finance Creditors Consortium, Home Building System & Realty Corporation and one Arceli P. Jo, involving a parcel of land and improvements located in Makati City. It appears that the action for eminent domain was filed. Attached to petitioner's complaint was a certification that a

bank account (Account No. S/A 265-537154-3) had been opened with the PNB under petitioner's name containing the sum of P417,510 made pursuant to the provisions of PD No. 42. After due hearing, respondent RTC judge rendered a decision fixing the appraised value of the property at P5,291,666, and ordering petitioner to pay this amount minus the advanced payment of P338,160 which was earlier released to private respondent. Petitioner contended that its funds at the PNB Buendia Branch could neither be garnished nor levied upon execution, for to do so would result in the disbursement of public funds without the proper appropriation required under the law. Upon appeal, it was disclosed for the first time that petitioner has two bank accounts with PNB. Issue: Whether or not public funds may be garnished or levied upon execution. NO Held: The funds deposited in the second PNB Account are public funds of the municipal government. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided for by statute. The properties of a municipality, whether real or personal, which are necessary for public use cannot be attached and sold at execution sale to satisfy a money judgment against the municipality. Municipal revenues derived from taxes, licenses and market fees, and which are intended primarily and exclusively for the purpose of financing the governmental activities and functions of the municipality, are exempt from execution. Absent a showing that the municipal council of Makati has passed an ordinance appropriatingfrom its public funds an amount corresponding to the balance due, no levy under execution may be validly effected on the public funds of petitioner deposited in the second bank account. Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a municipality fails or refuses, without justifiable reason, to effect payment of a final money judgment rendered against it, the claimant may avail of the remedy of mandamus in order to compel the enactment and approval of the necessary appropriation ordinance, and the corresponding disbursement of municipal funds therefor. This Court will not condone petitioner's blatant refusal to settle its legal obligation arising from expropriation proceedings it had in fact initiated. It cannot be overemphasized that, within the context of the State's inherent power of eminent domain, just compensation means not only the correct determination of the amount to be paid to the owner of the land but also the payment of the land within a reasonable time from its taking. The State's power of eminent domain should be exercised within the bounds of fair play and justice. In the case at bar, considering that valuable property has been taken, the compensation to be paid fixed and the municipality is in full possession and utilizing the property for public purpose, for 3 years, the Court finds that the municipality has had more than reasonable time to pay full compensation. The Court Resolved to ORDER petitioner Municipality of Makati to immediately pay Philippine Savings Bank, Inc. and private respondent. The order of respondent RTC is SET ASIDE and the TRO issued by the Court is MADE PERMANENT. Ministerio vs. CFI

FACTS: Petitioners as plaintiffs in a complaint filed with the Court of First Instance of Cebu, dated April 13, 1966, sought the payment of just compensation for a registered lot, containing an area of 1045 square meters, alleging that in 1927 the National Government through its authorized representatives took physical and material possession of it and used it for the widening of the Gorordo Avenue, a national road, Cebu City, without paying just compensation and without any agreement, either written or verbal. There was an allegation of repeated demands for the payment of its price or return of its possession, but defendants Public Highway Commissioner and the Auditor General refused to restore its possession. It was further alleged that on August 25, 1965, the appraisal committee of the City of Cebu approved Resolution No. 90, appraising the reasonable and just price of Lot No. 647-B at P50.00 per square meter or a total price of P52,250.00. Thereafter, the complaint was amended on June 30, 1966 in the sense that the remedy prayed for was in the alternative, either the restoration of possession or the payment of the just compensation. In the answer filed by defendants, now respondents, through the then Solicitor General, now Associate Justice, Antonio P. Barredo, the principal defense relied upon was that the suit in reality was one against the government and therefore should be dismissed, no consent having been shown. Then on July 11, 1969, the parties submitted a stipulation of facts to this effect: "That the plaintiffs are the registered owners of Lot 647-B of theBanilad estate described in the Survey plan RS-600 GLRO Record No. 5988 and more particularly described in Transfer Certificate of Title No. RT-5963 containing an area of 1,045 square meters; That the National Government in 1927 took possession of Lot 647-B Banilad estate, and used the same for the widening of Gorordo Avenue; That the Appraisal Committee of Cebu City approved Resolution No. 90, Series of 1965 fixing the price of Lot No. 647-B at P50.00 per square meter; That Lot No. 647-B is still in the possession of the National Government the same being utilized as part of the Gorordo Avenue, Cebu City, and that the National Government has not as yet paid the value of the land which is being utilized for public use." The lower court dismissed the complaint on January 30, 1969 stating that the case is undoubtedly against the National Government and there is now showing that the Government has not consented to be sued in this case. The petitioners appealed by certiorari to review the decision and contended that they are entitled for just compensation under the Art III, Sec. 1 (2) of the Constitution. ISSUE: Whether or not, the decision of the CFI of Cebu to dismiss the complaint by reason Government immunity from suit correct? HELD: NO. The doctrine of governmental immunity from suit cannot be an instrument for perpetrating an injustice on a citizen. If there were an observance of proceduralregularity, petitioners would not be in sad plaint they are now. It is unthinkable then that precisely there was a failure on what the law requires and the petitioners has the right to demand from the Government what is due to them. The Supreme Court decided that the lower courts decision of dismissing the complaint is reversed and the case remanded to the lower court for proceedings in accordance with law. G.R. No. L-31635 August 31, 1971ANGEL MINISTERIO and ASUNCIONSADAYA vs.THE COURT OF FIRST INSTANCEOF CEBU, Fourth Branch, Presidedby the Honorable, Judge JOSE C.BORROMEO, THE PUBLICHIGHWAY COMMISSIONER, and THE AUDITOR GENERAL

FACTS:Petitioners sought the payment of justcompensation for a registered lot alleging thatin 1927 the National Government through itsauthorized representatives took physical andm a t e r i a l p o s s e s s i o n o f i t a n d u s e d i t f o r t h e w i d e n i n g o f a n a t i o n a l r o a d , w i t h o u t p a y i n g just compensation and without any agreement,e i t h e r w r i t t e n o r v e r b a l . T h e r e w a s a n a l l e g a t i o n o f r e p e a t e d d e m a n d s f o r t h e payment of its price or return of its possession,but defendants Public Highway Commissionerand the Auditor General refused to restore itspossession.ISSUE: WON the defendants are immune fromsuit.HELD: NO.W h e r e the judgment in such a casew o u l d r e s u l t n o t o n l y i n t h e r e c o v e r y o f possession of the p r o p e r t y i n f a v o r o f s a i d citizen but also in a charge against or financiall i a b i l i t y t o t h e G o v e r n m e n t , t h e n t h e s u i t s h o u l d b e r e g a r d e d a s o n e a g a i n s t t h e government itself, and, consequently, it cannotprosper or be validly entertained by the courtsexcept with the consent of said Government.Inasmuch as the State authorizes onlylegal acts by its officers, unauthorized actsof government officials or officers are notacts of the State , and an action against theofficials or officers by one whose rights havebeen invaded or violated by such acts, for theprotection of his rights, is not a suit against theState within the rule of immunity of the Statefrom suit.