Mendoza vs.

De Leon, February 11, 1916

FACTS:

This is an action for damages against the individual members of the municipal council of the
municipality of Villasis, Pangasinan, for the revocation of the lease of an exclusive ferry privilege
duly awarded to the plaintiff. After use of a little more than one year, the plaintiff was forcibly
ejected under and pursuance of a resolution adopted by the defendants, awarding a franchise
for the same ferry to another person.

Municipalities of the Philippine Islands organized under the Municipal Code have both
governmental and corporate or business functions. Of the first class are the adoption of
regulation against fire and disease, preservation of the public peace, maintenance of municipal
prisons, establishment of primary schools and post-offices, etc. Of the latter class are the
establishment of municipal waterworks for the use of the inhabitants, the construction and
maintenance of municipal slaughterhouses, markets, stables, bathing establishments, wharves,
ferries, and fisheries. Act No. 1643 provides that the use of each fishery, fish-breeding ground,
ferry, stable, market, and slaughterhouse belonging to any municipality or township shall be let
to the highest bidder annually or for such longer period not exceeding five years as may have
been previously approved by the provincial board of the province in which the municipality or
township is located.

ISSUE: Whether or Not the members of the municipal council personally liable?

HELD:

Yes. The defendants are jointly and severally liable for the damages

Municipalities of the Philippine Islands organized under the Municipal Code have both
governmental and corporate or business functions. Of the first class are the adoption of
regulation against fire and disease, preservation of the public peace, maintenance of municipal
prisons, establishment of primary schools and post-offices, etc. Of the latter class are the
establishment of municipal waterworks for the use of the inhabitants, the construction and
maintenance of municipal slaughterhouses, markets, stables, bathing establishments, wharves,

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ferries, and fisheries. Act No. 1643 provides that the use of each fishery, fish-breeding ground,
ferry, stable, market, and slaughterhouse belonging to any municipality or township shall be let
to the highest bidder annually or for such longer period not exceeding five years as may have
been previously approved by the provincial board of the province in which the municipality or
township is located. The leasing of a municipal ferry to the highest bidder for a specified period
of time is not a governmental but a corporate function. Such lease when validly entered into,
constitutes a contract with the lessee which the municipality is bound to respect.

Under the provision of municipal code act 1643, the plaintiff had a vested right to the exclusive
operation of the ferry in question for the period of his lease Were the municipality, a part to
this action. It would be patent that a judgement for damages against it for the rescission of the
contract would be proper. Thus it be said is the usual method of exacting damages either ex
contractu or ex delicto arising from the exercise of coporate powers of municipalities.

In administering the patrimonial property of the municipalities, the municipal council occupies
for the most purposes the position of the board of directors of a private corporation. In
disposing the local public utilities if the term may be used, such as the fishing and ferry rights
etc.. they must exercise considerable judgement. THE RULE OF PERSONAL LIABILITY SHOULD
BE WITH MUNICIAPL COUNCILORS IN SUCH MATTER AS IT IS WTH THE DIRECTORS OR
MANAGERS OF ORDINARY PRIVATE CORPORATION.

In the case at bar, there is not a scintilla of evidence that there was any justifiable reason for
forcibly evicting the plaintiff from the ferry which he had leased. On the contrary, the defendant
councilors attempted to justify their action on the ground that the ferry which he was operating
was not the one leased to him; this, in spite of the fact that the vice-president had personally
placed him in possession of it more than a year before, and the fact that he had operated this
ferry for over year, evidently with the knowledge of the defendants. The evidence is so clear
that the ferry of which the plaintiff was dispossessed was the one which he leased that no
reasonable man would entertain any doubt whatever upon the question. Hence, we cannot say
that in rescinding the contract with the plaintiff, thereby making the municipality liable to an
action for damages for no valid reason at all, the defendant councilors were honestly acting for
the interests of the municipality. We are, therefore, of the opinion that the defendants are liable

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jointly and severally for the damages sustained by the plaintiff from the rescission of his
contract of lease of the ferry privilege in question.

Torio vs. Fontanilla, October 23, 1978

Facts:

The Municipal Council of Malasiqui, Pangasinan, passed Resolution No. 159 whereby "it
resolved to manage the 1959 Malasiqui town fiesta celebration on January 21, 22, and 23,
1959." Resolution No. 182 was also passed creating the "1959 Malasiqui 'Town Fiesta Executive
Committee" which in turn organized a sub-committee on entertainment and stage, with Jose
Macaraeg as Chairman. The council appropriated the amount of P100 for the construction of 2
stages, one for the "zarzuela" and another for the “cancionan”. Jose Macaraeg supervised the
construction of the stage.

During the zarzuela, the stage collapsed and Vicente Fontanilla who was at the rear of
the stage was pinned underneath and died. The heirs of Vicente Fontanilla filed a complaint to
recover damages. Named party defendants were the Municipality of Malasiqui, the Municipal
Council of Malasiqui and all the individual members of the Municipal Council in 1959.

Their defense was that the holding of a town fiesta was an exercise of governmental
functions. The councilors contended that they were merely acting as agents of the municipality.
The judge ruled that the defendants exercised due diligence in the construction of the stage.
Also, the collapse of the stage was due to force majeure. Hence, the complaint was dismissed.
The CA reversed and ordered the defendants to pay moral and actual damages.

Issues:

1. WON celebration of a town fiesta an undertaking in the excercise of a municipality's

governmental or public function or is it or a private or proprietary character.
2. WON petitioners are liable.
3. WON the municipal councilors who enacted the ordinance were liable.

Rulings:

1. Governmental
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 Under Philippine laws municipalities are political bodies corporate and as such are endowed
with the faculties of municipal corporations to be exercised by and through their respective
municipal governments in conformity with law, and in their proper corporate name, they may
inter alia sue and be sued, and contract and be contracted with. The powers of a municipality
are twofold in character public, governmental or political on the one hand, and corporate,
private, or proprietary on the other. Governmental powers are those exercised by the
corporation in administering the powers of the state and promoting the public welfare and
they include the legislative, judicial public, and political municipal powers on the other hand are
exercised for the special benefit and advantage of the community and include those which are
ministerial private and corporate.

In Mendoza v. de Leon 1916, the Supreme Court, relying mainly on American

Jurisprudence classified certain activities of the municipality as governmental, e.g.: regulations
against fire, disease, preservation of public peace, maintenance of municipal prisons,
establishment of schools, post-offices, etc. while the following are corporate or proprietary in
character, viz: municipal waterwork, slaughter houses, markets, stables, bathing establishments,
wharves, ferries, and fisheries. Maintenance of parks, golf courses, cemeteries and airports
among others, are also recognized as municipal or city activities of a proprietary character.

If the injury is caused in the course of the performance of a governmental function or duty
no recovery, as a rule, can be had from the municipality unless there is an existing statute on
the matter, nor from its officers, so long as they performed their duties honestly and in good
faith or that they did not act wantonly and maliciously. With respect to proprietary functions,
the settled rule is that a municipal corporation can be held liable to third persons ex contract or
ex delicto. The holding of the town fiesta in 1959 by the municipality of Malsiqui, Pangasinan
was an exercise of a private or proprietary function of the municipality.

Section 2282 of the Charter on Municipal Law of the Revised Administrative Code simply
gives authority to the municipality to celebrate a yearly fiesta but it does not impose upon it a
duty to observe one. Holding a fiesta even if the purpose is to commemorate a religious or
historical event of the town is in essence an act for the special benefit of the community and
not for the general welfare of the public performed in pursuance of a policy of the state. The
mere fact that the celebration, as claimed was not to secure profit or gain but merely to
provide entertainment to the town inhabitants is not a conclusive test. For instance, the
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maintenance of parks is not a source of income for the nonetheless it is private undertaking as
distinguished from the maintenance of public schools, jails, and the like which are for public
service.

There can be no hard and fast rule for purposes of determining the true nature of an
undertaking or function of a municipality; the circumstances of a particular case are to be
considered and will be decisive. The basic element, however beneficial to the public the
undertaking may be, is that it is governmental in essence; otherwise, the function becomes
private or proprietary in character. Easily, no governmental or public policy of the state is
involved in the celebration of a town fiesta.

2. Yes

It follows that under the doctrine of respondent superior, the municipality is to be held
liable for damages for the death of Fontanilla if that was attributable to the negligence of the
municipality's officers, employees, or agents. On this point, the Court of Appeals found and
held that there was negligence. It appeared that the front portion of the stage was not
supported by any braces. The CA also found that the stage was not strong enough
considering that only P100 was appropriate for the construction of two stages and while the
floor of the "zarzuela" stage was of wooden planks, the post and braces used were of bamboo
material. We likewise observe that although the stage was described by the Petitioners as being
supported by 24 posts, nevertheless there were only 4 in front, 4 at the rear, and 5 on each
side. Where were the rest?

The "Midas Extravaganza" which was to be performed during the town fiesta was a
"donation" offered by an association of Malasiqui employees of the Manila Railroad Co. in
Caloocan, and that when the Municipality of Malasiqui accepted the donation of services and
constructed precisely a "zarzuela stage" for the purpose, the participants in the stage show had
the right to expect that the Municipality through its "Committee on entertainment and stage"
would build or put up a stage or platform strong enough to sustain the weight or burden of
the performance and take the necessary measures to insure the personal safety of the
participants.

Lastly, petitioner or appellant Municipality cannot evade ability and/or liability under the
c that it was Jose Macaraeg who constructed the stage. The municipality acting through its
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municipal council appointed Macaraeg as chairman of the subcommittee on entertainment and
in charge of the construction of the "zarzuela" stage. Macaraeg acted merely as an agent of
the Municipality. Under the doctrine of respondent superior mentioned earlier, petitioner is
responsible or liable for the negligence of its agent acting within his assigned tasks.

3. No

We agree with petitioners that the Court of Appeals erred in applying Article 27 of the
Civil Code against the for this particular article covers a case of nonfeasance or non-
performance by a public officer of his official duty; it does not apply to a case of negligence or
misfeasance in carrying out an official duty.

The Court of Appeals in its decision now under review held that the celebration of a
town fiesta by the Municipality of Malasiqui was not a governmental function. We upheld that
ruling. The legal consequence thereof is that the Municipality stands on the same footing as an
ordinary private corporation with the municipal council acting as its board of directors. It is an
elementary principle that a corporation has a personality, separate and distinct from its officers,
directors, or persons composing it and the latter are not as a rule co-responsible in an action
for damages for tort or negligence culpa aquilla committed by the corporation's employees or
agents unless there is a showing of bad faith or gross or wanton negligence on their part.

The ordinary doctrine is that a director, merely by reason of his office, is not personally
liable for the torts of his corporation; he must be shown to have personally voted for or
otherwise participated in them officers of a corporation are not held liable for the negligence of
the corporation merely because of their official relation to it, but because of some wrongful or
negligent act by such officer amounting to a breach of duty which resulted in an injury.

To make an officer of a corporation liable for the negligence of the corporation there
must have been upon his part such a breach of duty as contributed to, or helped to bring
about, the injury; that is to say, he must be a participant in the wrongful act.

On these principles, we absolve the municipal councilors from any liability for the death
of Vicente Fontanilla. The records do not show that said petitioners directly participated in the
defective construction of the "zarzuela" stage or that they personally permitted spectators to
go up the platform.

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Province of Cebu vs. IAC, January 29, 1987

Facts:

 While then incumbent Governor Rene Espina was on official business in Manila, the Vice-
Governor and three (3) members of the Provincial Board enacted Resolution No. 188,
donating to the City of Cebu 210 province. Owned lots all located in the City of Cebu,
with an aggregate area of over 380 hectares, and authorizing the Vice-Governor to sign
the deed of donation on behalf of the province.
 The deed of donation was immediately executed in behalf of the Province of Cebu by
Vice-Governor Almendras and accepted in behalf of the City of Cebu by Mayor Sergio
Osmeña, Jr. The donation was later approved by the Office of the President through
Executive Secretary Juan Cancio.
 According to the questioned deed of donation the lots donated were to be sold by the
City of Cebu to raise funds that would be used to finance its public improvement
projects. The City of Cebu was given a period of one (1) year from August 15, 1964 within
which to dispose of the donated lots.
 Upon his return from Manila, Governor Espina denounced as illegal and immoral the
action of his colleagues in donating practically all the patrimonial property of the
province of Cebu, considering that the latter's income was less than one. fourth (1/4) of
that of the City of Cebu.
 To prevent the sale or disposition of the lots, the officers and members of the Cebu
Mayor's League (in behalf of their respective municipalities) along with some taxpayers,
including Atty. Garcia, filed a case seeking to have the donation declared illegal, null and
void.
 RTC dismissed on the ground that plaintiffs were not the real parties in interest in the
case.
 Meanwhile, Cebu City Mayor Sergio Osmeña, Jr. announced that he would borrow funds
from the Philippine National Bank (PNB) and would use the donated lots as collaterals.
 In July, 1965, the City of Cebu advertised the sale of all the lots remaining unsold.
Thereupon, Governor Espina, apprehensive that the lots would be irretrievably lost by
the Province of Cebu, decided to go to court. He engaged the services of respondent

7
 Garcia in filing and prosecuting the case in his behalf and in behalf of the Province of
Cebu.
 Sometime in 1972, the Provincial Board passed a resolution authorizing the Provincial
Attorney, Alfredo G. Baguia, to enter his appearance for the Province of Cebu and for
the incumbent Governor, Vice-Governor and members of the Provincial Board in this
case.
 On June 25, 1974, a compromise agreement was reached between the province of Cebu
and the city of Cebu. On July 15, 1974, the court approved the compromise agreement
and a decision was rendered on its basis.
 For services rendered in Civil Case no. 238-BC, CFI of Cebu, respondent Pablo P. Garcia
filed through counsel a Notice of Attorney's Lien, praying that his statement of claim of
attorney's lien in said case be entered upon the records thereof, pursuant to Section 37,
Rule 138 of the Rules of Court.
 To said notice, petitioner Province of Cebu filed through counsel, its opposition dated
April 23, 1975, stating that the payment of attorney's fees and reimbursement of
incidental expenses are not allowed by law and settled jurisprudence to be paid by the
Province.
 RTC: Declared that Atty. Garcia is entitled to recover attorney's fees on the basis of
quantum meruit and fixing the amount thereof at P30,000.00.
 Both parties appealed from the decision to the Court of Appeals. In the case of private
respondent, however, he appealed only from that portion of the decision which fixed his
attorney's fees at P30,000.00 instead of at 30% of the value of the properties involved in
the litigation as stated in his original claim
 IAC: Affirmed RTC that Garcia is entitled to recover attorney's fees but fixing the amount
of such fees at 5% of the market value of the properties involved in the litigation as of
the date of the filing of the claim in 1975. The dispositive portion of the decision reads:
 Both parties went to the Supreme Court with private respondent questioning the fixing
of his attorney's fees at 5% instead of 30% (haha mukhang pera c Pabling Garcia) of the
value of the properties in litigations as prayed for in his claims. However, the private
respondent later withdrew his petition in G.R. No. 72818 (tired na daw sha hinuwat sa
decision kay 10 years before nadecision sa RTC nya nag IAC pa gyud cya. Unsa nlang
kaha sa SC? Feeling niya wanmelyon years pa before madecisionan sa SC)

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  Hence, only the petition of the Province of Cebu is pending before this Court.
 The petitioner anchors its opposition to private respondent's claim for compensation on
the grounds that the employment of claimant as counsel for the Province of Cebu by
then Governor Rene Espina was unauthorized and violative of Section 1681 to 1683 in
relation to Section 1679 of the Revised Administrative Code and that the claim for
attorney's fees is beyond the purview of Section 37, Rule 138 of the Rules of Court.
 It is argued that Governor Espina was not authorized by the Provincial Board, through a
board resolution, to employ Atty. Pablo P. Garcia as counsel of the Province of Cebu.

Issue:

WON Garcia should be given compensation

Held:

Yes.

General Rule: Collaboration of a private law firm with the fiscal and the municipal attorney is
not allowed. Section 1683 of the Revised Administrative Code provides:

Section 1683. Duty of fiscal to represent provinces and provincial subdivisions in litigation. —
The provincial fiscal shall represent the province and any municipality, or municipal district
thereof in any court, except in cases whereof original jurisdiction is vested in the Supreme
Court or in cases where the municipality, or municipal district in question is a party adverse to
the provincial government or to some other municipality, or municipal district in the same
province. When the interests of a provincial government and of any political division thereof
are opposed, the provincial fiscal shall act on behalf of the province.

When the provincial fiscal is disqualified to serve any municipality or other political subdivision
of a province, a special attorney may be employed by its council

The above provision, complemented by Section 3 of the Local Autonomy Law, is clear in
providing that only the provincial fiscal and the municipal attorney can represent a province or
municipality in its lawsuits. The provision is mandatory. The municipality's authority to employ a
private lawyer is expressly limited only to situations where the provincial fiscal is disqualified to
represent it as when he represents the province against a municipality.

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The lawmaker, in requiring that the local government should be represented in its court cases
by a government lawyer, like its municipal attorney and the provincial fiscal intended that the
local government should not be burdened with the expenses of hiring a private lawyer.

However, every rule is not without an exception Indeed, equity, as well as the exceptional
situation facing us in the case at bar, require a departure from the established rule.

In the case at bar are such that the rule cannot be applied. The Provincial Board would never
have given such authorization.

In the present case, the controversy involved an intramural fight between the Provincial
Governor on one hand and the members of the Provincial Board on the other hand. Obviously
it is unthinkable for the Provincial Board to adopt a resolution authorizing the Governor to
employ Atty. Garcia to act as counsel for the Province of Cebu for the purpose of filing and
prosecuting a case against the members to the same Provincial Board. According to the
claimant Atty. Garcia, how can Governor Espina be expected to secure authority from the
Provincial Board to employ claimant as counsel for the Province of Cebu when the very officials
from whom authority is to be sought are the same officials to be sued. A situation obtains,
therefore, where the Provincial Governor, in behalf of the Province of Cebu, seeks redress
against the very members of the body, that is, the Provincial Board, which, under the law, is to
provide it with legal assistance. A strict application of the provisions of the Revise Administrative
Code on the matter would deprive the plaintiffs in the court below of redress for a valid
grievance. The provincial board authorization required by law to secure the services of special
counsel becomes an impossibility. The decision of the respondent court is grounded in equity
— a correction applied to law, where on account of the general comprehensiveness of the law,
particular exceptions not being provided against, something is wanting to render it perfect.

It is also argued that the employment of claimant was violative of sections 1681 to 1683 of the
Revised Administrative Code because the Provincial Fiscal who was the only competent official
to file this case was not disqualified to act for the Province of Cebu.

Respondent counsel's representation of the Province of Cebu became necessary because of

the Provincial Board's failure or refusal to direct the bringing of the action to recover the
properties it had donated to the City of Cebu. The Board more effectively disqualified the
Provincial Fiscal from representing the Province of Cebu when it directed the Fiscal to appear
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for its members in Civil Case No. R-8669 filed by Atty. Garcia, and others, to defend its
actuation in passing and approving Provincial Board Resolution No. 186. Neither could a
prosecutor be designated by the Department of Justice. Malacañang had already approved the
questioned donation

Anent the question of liability for respondent counsel's services, the general rule that an
attorney cannot recover his fees from one who did not employ him or authorize his
employment, is subject to its own exception.

Until the contrary is clearly shown an attorney is presumed to be acting under authority of the
litigant whom he purports to represent. Such acquiescence in the employment of an attorney
as occurred in this case is tantamount to ratification. The act of the successor provincial board
and provincial officials in allowing respondent Atty. Pablo P. Garcia to continue as counsel and
in joining him in the suit led the counsel to believe his services were still necessary.

DOCTRINE OF IMPLIED MUNICIPAL LIABILITY:

"that a municipality may become obligated upon an implied contract to pay the reasonable
value of the benefits accepted or appropriated by it as to which it has the general power to
contract. The doctrine of implied municipal liability has been said to apply to all cases where
money or other property of a party is received under such circumstances that the general law,
independent of express contract implies an obligation upon the municipality to do justice with
respect to the same."

The obligation of a municipal corporation upon the doctrine of an implied contract does not
connote an enforceable obligation. Some specific principle or situation of which equity takes
cognizance must be the foundation of the claim. The principle of liability rests upon the theory
that the obligation implied by law to pay does not originate in the unlawful contract, but arises
from considerations outside it. The measure of recovery is the benefit received by the
municipal corporation. The amount of the loan, the value of the property or services, or the
compensation specified in the contract, is not the measure. If the price named in the invalid
contract is shown to be entirely fair and reasonable not only in view of the labor done, but also
in reference to the benefits conferred, it may be taken as the true measure of recovery.

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The petitioner cannot set up the plea that the contract was ultra vires and still retain benefits
thereunder. Having regarded the contract as valid for purposes of reaping some benefits, the
petitioner is estopped to question its validity for the purposes of denying answerability.

CONCLUSION:

We have carefully reviewed the records of this case and conclude that 30% or even 5% of
properties already worth (P120,000,000.00) in 1979 as compensation for the private
respondent's services is simply out of the question. The case handled by Atty. Garcia was
decided on the basis of a compromise agreement where he no longer participated. The
decision was rendered after pre-trial and without any hearing on the merits. (haha wa man diay
shay gamit)

The determination of reasonable fees for the private lawyer on the basis of quantum meruit.
We agree with the amount fixed by RTC at P30,000.00 and ordered reimbursement of actual
expenses in the amount of P289.43.

Jimenez vs. City of Manila, May 29, 1987

PARAS, J.:

FACTS:

The evidence of the plaintiff (petitioner herein) shows that in the morning of August 15, 1974
he, together with his neighbors, went to Sta. Ana public market to buy "bagoong" at the time
when the public market was flooded with ankle deep rainwater.

After purchasing the "bagoong" he turned around to return home but he stepped on an
uncovered opening which could not be seen because of the dirty rainwater, causing a dirty and
rusty four- inch nail, stuck inside the uncovered opening, to pierce the left leg of plaintiff-

12
petitioner penetrating to a depth of about one and a half inches. After administering first aid
treatment at a nearby drugstore, his companions helped him hobble home. He felt ill and
developed fever and he had to be carried to Dr. Juanita Mascardo. Despite the medicine
administered to him by the latter, his left leg swelled with great pain. He was then rushed to the
Veterans Memorial Hospital where he had to be confined for twenty (20) days due to high
fever and severe pain. His injury prevented him from attending to the school buses he is
operating.

Petitioner sued for damages the City of Manila and the Asiatic Integrated Corporation under
whose administration the Sta. Ana Public Market had been placed by virtue of a Management
and Operating Contract (Rollo, p. 47).

In its defense, City of Manila argued that it cannot be held liable for the injuries because under
the Management and Operating contract, Asiatic Integrated Corporation assumed all
responsibility for damages which may be suffered by 3rd persons for any cause attributed to it.
It also raised that it cannot be held liable under Art. 1, Sec. 4 of RA 409 (Charter of City of
Manila) which provides:

The City shall not be liable or held for damages or injuries to persons or property
arising from the failure of the Mayor, the Municipal Board, or any other City
Officer, to enforce the provisions of this chapter, or any other law or ordinance, or
from negligence of said Mayor, Municipal Board, or any other officers while
enforcing or attempting to enforce said provisions.

The lower court decided in favor of respondents, the dispositive portion of the decision
reading:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiff
dismissing the complaint with costs against the plaintiff. For lack of sufficient evidence, the
counterclaims of the defendants are likewise dismissed. (Decision, Civil Case No. 96390, Rollo,
p. 42).

As above stated, on appeal, the Intermediate Appellate Court held the Asiatic Integrated
Corporation liable for damages but absolved respondent City of Manila.

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Hence this petition.

ISSUES:

1. WON Sta. Ana Public Market is under the control and supervision of the City of Manila?

2. WON the City of Manila is liable for damages for the injuries sustained by Jimenez?

HELD:

1. YES, Sta. Ana Public Market, despite the Management and Operating Contract between
the City of Manila and Asiatic Integrated Corporation remained under the control and
supervision of City of Manila.

The Supreme Court in the case of City of Manila vs Teotico ruled that RA 409 (Charter of
Manila) establishes a general rule regulating the liability of the City of Manila for damages or
injury to persons or property arising from failure of city officers to enforce the provisions of the
Charter while Art. 2189 of the Civil Code constitutes a particular prescription making LGUs liable
for damages by reason or defective road conditions, bridges, public buildings and other public
works under their control or supervision. In the same suit, the Court also clarified that it is not
necessary under Art. 2189 that the defective public works belong to the LGU; what is required is
that the LGU has either “control or supervision” over the public work in question.

IN THE CASE AT BAR, the fact of supervision and control of the City of Manila over the
public market was admitted by Mayor Ramon Bagatsing in his letter to the Sec. of Finance
Cesar Virata stating that the “City retains the power of supervision and control over its public
markets and talipapas under the terms of the contract”. The City also employed a market
master for the Sta. Ana Public Market whose primary duty is to take direct supervision and
control of the market, more specifically, to check the safety of the place of the public.

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2. YES, the City of Manila is liable for the damages sustained by Jimenez. As a defense against
liability on the basis of quasi-delict, one must have exercised diligence of a good father of the
family. It is the duty of the City of Manila to exercise reasonable care to keep the public market
reasonably safe for people frequenting the place for their marketing needs.

IN THE CASE AT BAR, the evidence indicates that long before the petitioner fell into the
opening, it was already uncovered and 5 months after the incident happened, the opening was
still uncovered. There was also no showing that the practice of the vendors of removing the
iron grills during floods has ever been prohibited by the City of Manila. Neither was it shown
that any sign has been placed to warn the passerby of the impending danger.

Jimenez had the right to assume that there were no openings in the middle of
passageways and if any, that they were adequately covered. It appears evident that the City of
Manila is liable for damages under Art. 2189 of the Civil Code having retained control and
supervision of the public market and as a tortfeasor under Art. 2176 of the Civil Code on quasi-
delict.

PREMISES CONSIDERED, the decision of the Court of Appeals is hereby MODIFIED, making the
City of Manila and the Asiatic Integrated Corporation solidarily liable to pay the plaintiff P221.90
actual medical expenses, P900.00 for the amount paid for the operation and management of
the school bus, P20,000.00 as moral damages due to pain, sufferings and sleepless nights and
P10,000.00 as attorney's fees.

SO ORDERED.

Municipality of San Fernando vs. Hon. Firme, April 08, 1991

In the case at bar, the respondent judge deferred the resolution of the defense of non-suability
of the State amounting to lack of jurisdiction until trial. However, said respondent judge failed
to resolve such defense, proceeded with the trial and thereafter rendered a decision against
the municipality and its driver.

FACTS:

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 This is a petition for certiorari with prayer for the issuance of a writ of preliminary
mandatory injunction seeking the nullification or modification of the proceedings and the
orders of the Court of First Instance of La Union, ordering defendants Municipality of San
Fernando, La Union and Alfredo Bislig to pay, jointly and severally, the plaintiffs for
funeral expenses, actual damages consisting of the loss of earning capacity of the
deceased, attorney's fees and costs of suit and dismissing the complaint against the
Estate of Macario Nieveras and Bernardo Balagot.
 At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a
passenger jeepney driven by Bernardo Balagot and owned by the Estate of Macario
Nieveras, a gravel and sand truck driven by Jose Manandeg and owned by Tanquilino
Velasquez and a dump truck of the Municipality of San Fernando, La Union and driven
by Alfredo Bislig. Due to the impact, SEVERAL PASSENGERS of the jeepney including
Laureano Baniña Sr. DIED as a result of the injuries they sustained and four (4) others
suffered varying degrees of physical injuries.
 On December 11, 1966, the private respondents instituted a complaint for damages
against the Estate of Macario Nieveras and Bernardo Balagot, owner and driver,
respectively, of the passenger jeepney, which was docketed Civil Case No. 2183 in the
Court of First Instance of La Union, Branch I, San Fernando, La Union. However, the
AFORESAID DEFENDANTS filed a Third Party Complaint AGAINST THE PETITIONER and
the driver of a dump truck of petitioner.

By virtue of a court order dated May 7, 1975, the private respondents amended the
complaint wherein the petitioner and its regular employee, Alfredo Bislig were
impleaded for the first time as defendants.

Petitioner filed its answer and raised affirmative defenses such as lack of cause of action,
NON-SUABILITY OF THE STATE, prescription of cause of action and the negligence of
the owner and driver of the passenger jeepney as the proximate cause of the collision.

Note that, in the course of proceedings, the respondent judge issued several orders, one
of which DEFERRED the resolution of NON-SUABILITY of the State in San Fernando’s
Motion to Dismiss until the trial

16
 The trial court rendered a decision for the plaintiffs, and defendants Municipality of San
Fernando, La Union and Alfredo Bislig are ordered to pay jointly and severally. The
Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo
Balagot.

Respondent judge issued another order dated November 7, 1979 denying the motion for
reconsideration of the order of September 7, 1979 for having been filed out of time.

Finally, the respondent judge issued an order dated December 3, 1979 providing that if
defendants municipality and Bislig further wish to pursue the matter disposed of in the
order of July 26, 1979, such should be elevated to a higher court in accordance with the
Rules of Court. Hence, this petition.

ISSUE:

1. WON the respondent court committed grave abuse of discretion when it deferred and
failed to resolve the defense of non-suability of the State amounting to lack of
jurisdiction in a motion to dismiss.
2. WON the respondent court committed grave abuse when it ruled on the liability of the
municipality

HELD: Although the respondent judge's dereliction in failing to resolve the issue of non-
suability did not amount to grave abuse of discretion, said judge exceeded his jurisdiction when
it ruled on the issue of liability.

 The RESPONDENT JUDGE DID NOT COMMIT GRAVE ABUSE OF DISCRETION when in
the exercise of its judgment it arbitrarily failed to resolve the vital issue of non-suability of
the State in the guise of the municipality.

However, said judge acted in excess of his jurisdiction when in his decision HE HELD THE
MUNICIPALITY LIABLE for the quasi-delict committed by its regular employee.

17
 DISCUSSION ON NONSUABILITY
The doctrine of non-suability of the State is expressly provided for in Article XVI, Section
3 of the Constitution, to wit: "the State may not be sued without its consent."Stated in
simple parlance, the general rule is that the State may not be sued except when it gives
consent to be sued. Consent takes the form of express or implied consent.

EXPRESS CONSENT may be embodied in a GENERAL LAW OR A SPECIAL LAW. The

standing consent of the State to be sued IN CASE OF MONEY CLAIMS involving liability
ARISING FROM CONTRACTS is found in Act No. 3083. A special law may be passed to
enable a person to sue the government for an alleged quasi-delict. Consent is IMPLIED
when the government ENTERS INTO BUSINESS CONTRACTS, thereby descending to the
level of the other contracting party, AND also when the State FILES A COMPLAINT, thus
opening itself to a counterclaim.

Municipal corporations, for example, like provinces and cities, ARE AGENCIES OF THE
STATE WHEN THEY ARE ENGAGED IN GOVERNMENTAL FUNCTIONS and therefore
should enjoy the sovereign immunity from suit. Nevertheless, they are SUBJECT TO SUIT
even in the performance of such functions because THEIR CHARTER PROVIDED THAT
THEY CAN SUE AND BE SUED.

 DISTINGUISHING SUABILITY AND LIABILITY

"SUABILITY depends on the CONSENT of the state to be sued

LIABILITY depends on the APPLICABLE LAW and the established FACTS. Liability is not
conceded by the mere fact that the state has allowed itself to be sued. When the state
does waive its sovereign immunity, it is only giving the plaintiff the chance to prove, if it
can, that the defendant is liable.

The circumstance that a state is suable does not necessarily mean that it is liable
On the other hand, it CAN NEVER BE HELD LIABLE if it does not first consent to be sued.

 LIABILITY OF MUNICIPALITY:

18
 The TEST OF LIABILITY of the municipality depends on whether or not the DRIVER,
acting in behalf of the municipality, is PERFORMING GOVERNMENTAL or PROPRIETARY
FUNCTIONS. The distinction of powers becomes important for purposes of determining
the liability of the municipality for the acts of its agents which result in an injury to third
persons.

It has already been remarked that municipal corporations are suable because their
charters grant them the competence to sue and be sued. In permitting such entities to
be sued, the State merely gives the claimant the right to show that the defendant was
not acting in its governmental capacity when the injury was committed or that the case
comes under the exceptions recognized by law. Failing this, the claimant cannot recover.

On the other hand, municipal corporations are generally NOT LIABLE for torts
committed by them in the discharge of governmental functions and can be held
answerable only if it can be shown that they were acting in a proprietary capacity

In the case at bar, the driver of the dump truck of the municipality insists that "he was on
his way to the Naguilian river to get a load of sand and gravel FOR THE REPAIR OF SAN
FERNANDO'S MUNICIPAL STREETS. In the ABSENCE of any evidence to the contrary, the
REGULARITY OF THE PERFORMANCE OF OFFICIAL DUTY IS PRESUMED pursuant to
Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that the driver of
the dump truck was performing duties or tasks pertaining to his office.

"The construction or maintenance of roads in which the truck and the driver worked at
the time of the accident are admittedly governmental activities." Palafox, et. al. vs.
Province of Ilocos Norte

The MUNICIPALITY CANNOT BE HELD LIABLE for the torts committed by its regular
employee, who was then engaged in the DISCHARGE OF GOVERNMENTAL
FUNCTIONS. Hence, the death of the passenger –– tragic and deplorable though it may
be –– imposed on the municipality no duty to pay monetary compensation.

City of Caloocan vs. Hon. Allarde, September 10, 2003

19
Facts:

Sometime in 1972, Marcial Samson, City Mayor of Caloocan City, through Ordinance No. 1749,
abolished the position of Assistant City Administrator and 17 other positions from the plantilla
of the local government of Caloocan. Then Assistant City Administrator Delfina Hernandez
Santiago and the 17 affected employees of the City Government assailed the legality of the
abolition before the then Court of First Instance (CFI) of Caloocan City, Branch 33.

In 1973, the CFI declared the abolition illegal and ordered the reinstatement of all the dismissed
employees and the payment of their back salaries and other emoluments. The City
Government of Caloocan appealed to the Court of Appeals. Respondent Santiago and her co-
parties moved for the dismissal of the appeal for being dilatory and frivolous but the appellate
court denied their motion. Thus, they elevated the case on certiorari before this Court,
docketed as G.R. No. L-39288-89, Heirs of Abelardo Palomique, et al. vs. Marcial Samson, et al.
In our Resolution dated January 31, 1985, we held that the appellate court "erred in not
dismissing the appeal," and "that the appeal of the City Government of Caloocan was frivolous
and dilatory." In due time, the resolution lapsed into finality and entry of judgment was made
on February 27, 1985.

In 1986, the City Government of Caloocan paid respondent Santiago P75,083.37 in partial
payment of her backwages, thereby leaving a balance of P530,761.91. Her co-parties were paid
in full.3 In 1987, the City of Caloocan appropriated funds for her unpaid back salaries. This was
included in Supplemental Budget No. 3 for the fiscal year 1987. Surprisingly, however, the City
later refused to release the money to respondent Santiago.

Respondent Santiago exerted effort for the execution of the remainder of the money judgment
but she met stiff opposition from the City Government of Caloocan. On February 12, 1991,
Judge Mauro T. Allarde, RTC of Caloocan City, Branch 123, issued a writ of execution for the
payment of the remainder of respondent Santiago’s back salaries and other emoluments.4

For the second time, the City Government of Caloocan went up to the Court of Appeals and
filed a petition for certiorari, prohibition and injunction to stop the trial court from enforcing the
writ of execution. The CA dismissed the petition and affirmed the order of issuance of the writ
of execution.5 One of the issues raised and resolved therein was the extent to which back

20
salaries and emoluments were due to respondent Santiago. The appellate court held that she
was entitled to her salaries from October, 1983 to December, 1986.

And for the second time, the City Government of Caloocan appealed to this Court in G.R. No.
98366, City Government of Caloocan vs. Court of Appeals, et al. The petition was dismissed,
through our Resolution of May 16, 1991, for having been filed late and for failure to show any
reversible error on the part of the Court of Appeals. The resolution subsequently attained
finality and the corresponding entry of judgment was made on July 29, 1991.

On motion of private respondent Santiago, Judge Mauro T. Allarde ordered the issuance of an
alias writ of execution on March 3, 1992. The City Government of Caloocan moved to
reconsider the order, insisting in the main that respondent Santiago was not entitled to
backwages from 1983 to 1986. The court a quo denied the motion and forthwith issued the
alias writ of execution. Unfazed, the City Government of Caloocan filed a motion to quash the
writ, maintaining that the money judgment sought to be enforced should not have included
salaries and allowances for the years 1983-1986. The trial court likewise denied the motion.

On July 27, 1992, Sheriff Alberto A. Castillo levied and sold at public auction one of the motor
vehicles of the City Government of Caloocan, with plate no. SBH-165, for P100,000. The
proceeds of the sale were turned over to respondent Santiago in partial satisfaction of her
claim, thereby leaving a balance of P439,377.14, inclusive of interest. Petitioners filed a motion
questioning the validity of the auction sale of the vehicle with plate no. SBH-165, and a
supplemental motion maintaining that the properties of the municipality were exempt from
execution. In his Order dated October 1, 1992, Judge Allarde denied both motions and directed
the sheriff to levy and schedule at public auction three more vehicles of the City of Caloocan.

All the vehicles, including that previously sold in the auction sale, were owned by the City and
assigned for the use of herein petitioner Norma Abracia, Division Superintendent of Caloocan
City, and other officials of the Division of City Schools.

Meanwhile, the City Government of Caloocan sought clarification from the Civil Service
Commission (CSC) on whether respondent Santiago was considered to have rendered services
from 1983-1986 as to be entitled to backwages for that period. In its Resolution No. 91-1124, the
CSC ruled in the negative.

21
On November 22, 1991, private respondent Santiago challenged the CSC resolution before this
Court in G.R. No. 102625, Santiago vs. Sto. Tomas, et al. On July 8, 1993, we initially dismissed
the petition for lack of merit; however, we reconsidered the dismissal of the petition in our
Resolution dated August 1, 1995, this time ruling in favor of respondent Santiago.

On October 5, 1992, the City Council of Caloocan passed Ordinance No. 0134, Series of 1992,
which included the amount of P439,377.14 claimed by respondent Santiago as back salaries,
plus interest.7 Pursuant to the subject ordinance, Judge Allarde issued an order dated
November 10, 1992.

Then Caloocan Mayor Macario A. Asistio, Jr., however, refused to sign the check intended as
payment for respondent Santiago’s claims. This, despite the fact that he was one of the
signatories of the ordinance authorizing such payment. On April 29, 1993, Judge Allarde issued
another order directing the Acting City Mayor of Caloocan, Reynaldo O. Malonzo, to sign the
check which had been pending before the Office of the Mayor since December 11, 1992. Acting
City Mayor Malonzo informed the trial court that "he could not comply with the order since the
subject check was not formally turned over to him by the City Mayor" who went on official
leave of absence on April 15, 1993, and that "he doubted whether he had authority to sign the
same.

Thus, in an order dated May 7, 1993, Judge Allarde ordered Sheriff Alberto A. Castillo to
immediately garnish the funds of the City Government of Caloocan corresponding to the claim
of respondent Santiago.9 On the same day, Sheriff Alberto A. Castillo served a copy of the
Notice of Garnishment on the Philippine National Bank (PNB), Sangandaan Branch, Caloocan
City. When PNB immediately notified the City of Caloocan of the Notice of Garnishment, the
City Treasurer sent a letter-advice informing PNB that the order of garnishment was "illegal,"
with a warning that it would hold PNB liable for any damages which may be caused by the
withholding of the funds of the city. PNB opted to comply with the order of Judge Allarde and
released to the Sheriff a manager’s check amounting to P439,378. After 21 long years, the claim
of private respondent Santiago was finally settled in full.

On June 4, 1993, however, while the instant petition was pending, the City Government of
Caloocan filed yet another motion with this Court, a Motion to Declare in Contempt of Court;
to Set Aside the Garnishment and Administrative Complaint against Judge Allarde, respondent

22
Santiago and PNB. Subsequently, the City Government of Caloocan filed a Supplemental
Petition formally impleading PNB as a party-respondent in this case.

The instant petition for certiorari is directed this time against the validity of the garnishment of
the funds of the City of Caloocan, as well as the validity of the levy and sale of the motor
vehicles belonging to the City of Caloocan. More specifically, petitioners insist that Judge
Allarde gravely abused his discretion.

Issue:

WON the garnishment of the public funds of the City of Caloocan is valid.

Held:

Yes.

The rule is and has always been that all government funds deposited in the PNB or any other
official depositary of the Philippine Government by any of its agencies or instrumentalities,
whether by general or special deposit, remain government funds and may not be subject to
garnishment or levy, in the absence of a corresponding appropriation as required by law:11

Even though the rule as to immunity of a state from suit is relaxed, the power of the courts
ends when the judgment is rendered. Although the liability of the state has been judicially
ascertained, the state is at liberty to determine for itself whether to pay the judgment or not,
and execution cannot issue on a judgment against the state. Such statutes do not authorize a
seizure of state property to satisfy judgments recovered, and only convey an implication that
the legislature will recognize such judgment as final and make provision for the satisfaction
thereof.12

The rule is based on obvious considerations of public policy. The functions and public services
rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of
public funds from their legitimate and specific objects, as appropriated by law.13

However, the rule is not absolute and admits of a well-defined exception, that is, when there is
a corresponding appropriation as required by law. Otherwise stated, the rule on the immunity

23
of public funds from seizure or garnishment does not apply where the funds sought to be
levied under execution are already allocated by law specifically for the satisfaction of the money
judgment against the government. In such a case, the monetary judgment may be legally
enforced by judicial processes.

In the instant case, the City Council of Caloocan already approved and passed Ordinance No.
0134, Series of 1992, allocating the amount of P439,377.14 for respondent Santiago’s back
salaries plus interest. Thus this case fell squarely within the exception. For all intents and
purposes, Ordinance No. 0134, Series of 1992, was the "corresponding appropriation as
required by law." The sum indicated in the ordinance for Santiago were deemed automatically
segregated from the other budgetary allocations of the City of Caloocan and earmarked solely
for the City’s monetary obligation to her. The judgment of the trial court could then be validly
enforced against such funds.

Similarly, we cannot agree with petitioner’s argument that the appropriation ordinance of the
City Council did not authorize PNB to release the funds because only the City Mayor could
authorize the release thereof. A valid appropriation of public funds lifts its exemption from
execution. Here, the appropriation passed by the City Council of Caloocan providing for the
payment of backwages to respondent was duly approved and signed by both the council and
then Mayor Macario Asistio, Jr. The mayor’s signature approving the budget ordinance was his
assent to the appropriation of funds for respondent Santiago’s backwages. If he did not agree
with such allocation, he could have vetoed the item pursuant to Section 55 of the Local
Government Code.18 There was no such veto.

In view of the foregoing discourse, we dismiss petitioners’ unfounded assertion, probably made
more out of sheer ignorance of prevailing jurisprudence than a deliberate attempt to mislead
us, that the rule that "public funds (are) beyond the reach of levy and garnishment is not
qualified by any condition."19

WHEREFORE, the petition is hereby DISMISSED for utter lack of merit. The assailed orders of
the trial court dated October 1, 1992, October 8, 1992 and May 7, 1993, respectively, are
AFFIRMED.

24
Spouses Jayme vs. Apostol, November 27, 2008

MAY a municipal mayor be held solidarily liable for the negligent acts of the driver assigned to
him, which resulted in the death of a minor pedestrian?

FACTS : On February 5, 1989, Mayor Miguel of Koronadal, South Cotabato was on board the
Isuzu pick-up truck driven by Fidel Lozano, an employee of the Municipality of Koronadal. The
pick-up truck was registered under the name of Rodrigo Apostol, but it was then in the
possession of Ernesto Simbulan. Driver Lozano borrowed the pick-up truck from Simbulan to
bring Mayor Miguel to Buayan Airport at General Santos City to catch his Manila flight.

The pick-up truck accidentally hit Marvin C. Jayme, a minor, who was then crossing the
National Highway in Poblacion, Polomolok, South Cotabato. The intensity of the collision sent
Marvin some fifty (50) meters away from the point of impact, a clear indication that Lozano was
driving at a very high speed at the time of the accident. Marvin expired six (6) days after the
accident.

Petitioners spouses Buenaventura and Rosario Jayme, the parents of Marvin, filed a complaint
for damages with the RTC against respondents, praying that all respondents be held solidarily
liable for their loss. They pointed out that that proximate cause of Marvin's death was Lozano's
negligent and reckless operation of the vehicle. In their respective Answers, Apostol and
Simbulan averred that Lozano took the pick-up truck without their consent. Likewise, Miguel
and Lozano pointed out that Marvin's sudden sprint across the highway made it impossible to
avoid the accident. Yet, Mayor Miguel denied being on board the vehicle when it hit Marvin

RTC rendered judgment in favor of spouses Jayme. CA reversed the order holding that Mayor
Miguel should not be held liable for damages for the death of Marvin Jayme.

ISSUES : 1) WON Mayor Miguel be held solidarily liable with his driver.

2) WON Municipality of Koronadal be held responsible for the acts of its driver
employee.
25
RULING:

Mayor Miguel is not liable. The doctrine of vicarious liability or imputed liability finds no
application in the present case.

To make the employee liable under paragraphs 5 and 6 of Article 2180, it must be established
that the injurious or tortuous act was committed at the time the employee was performing his
functions. Furthermore, the employer-employee relationship cannot be assumed.

In resolving the present controversy, it is imperative to find out if Mayor Miguel is, indeed, the
employer of Lozano and therefore liable for the negligent acts of the latter. To determine the
existence of an employment relationship, We rely on the four-fold test. This involves: (1) the
employer's power of selection; (2) payment of wages or other remuneration; (3) the employer's
right to control the method of doing the work; and (4) the employer's right of suspension or
dismissal.

Applying the foregoing test, the CA correctly held that it was the Municipality of Koronadal
which was the lawful employer of Lozano at the time of the accident. It is uncontested that
Lozano was employed as a driver by the municipality. That he was subsequently assigned to
Mayor Miguel during the time of the accident is of no moment.

Even assuming arguendo that Mayor Miguel had authority to give instructions or directions to
Lozano, he still cannot be held liable. Mere giving of directions to the driver does not establish
that the passenger has control over the vehicle. Neither does it render one the employer of the
driver. Significantly, no negligence may be imputed against a fellow employee although the
person may have the right to control the manner of the vehicle's operation. In the absence of
an employer-employee relationship establishing vicarious liability, the driver's negligence
should not be attributed to a fellow employee who only happens to be an occupant of the
vehicle.

Municipality of Koronadal is, likewise, not liable.

As correctly held by the trial court, the true and lawful employer of Lozano is the Municipality
of Koronadal. Unfortunately for Spouses Jayme, the municipality may not be sued because it is
an agency of the State engaged in governmental functions and, hence, immune from suit.

26
It has already been remarked that municipal corporations are suable because their charters
grant them the competence to sue and be sued. Nevertheless, they are generally not liable for
torts committed by them in the discharge of governmental functions and can only be held
answerable only if it can be shown that they were acting in proprietary capacity. In permitting
such entities to be sued, the State merely gives the claimant the right to show that the
defendant was not acting in governmental capacity when the injury was committed or that the
case comes under the exceptions recognized by law. Failing this, the claimant cannot recover.

The accidental death of Marvin Jayme is a tragic loss for his parents. However, justice demands
that only those liable under our laws be held accountable for Marvin's demise. Justice cannot
sway in favor of petitioners simply to assuage their pain and loss. The law on the matter is clear:
only the negligent driver, the driver's employer, and the registered owner of the vehicle are
liable for the death of a third person resulting from the negligent operation of the vehicle.

WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED.

SO ORDERED.

Osmeña vs. COA, May 31, 2011

Facts:

The City of Cebu was to play host to the 1994 Palarong Pambansa (Palaro). In preparation for
the games, the City engaged the services of WT Construction, Inc. (WTCI) and Dakay
Construction and Development Company (DCDC) to construct and renovate the Cebu City
Sports Complex. Osmeña , then city mayor, was authorized by the Sangguniang
Panlungsod (Sanggunian) of Cebu to represent the City and to execute the construction
contracts.

While the construction was being undertaken, Osmeña issued a total of 20 Change/Extra Work
Orders to WTCI, amounting to P35,418,142.42 (about 83% of the original contract price), and to
DCDC, amounting to P15,744,525.24 (about 31% of the original contract price). These
Change/Extra Work Orders were not covered by any Supplemental Agreement, nor was there
a prior authorization from the Sanggunian. Nevertheless, the work proceeded on account of

27
the extreme urgency and need to have a suitable venue for the Palaro.[4] The Palaro was
successfully held at the Cebu City Sports Complex during the first six months of 1994.

Thereafter, WTCI and DCDC demanded payment for the extra work they performed in the
construction and renovation of the sports complex. A Sanggunian member, Councilor
Augustus Young, sponsored a resolution authorizing Osmeña to execute the supplemental
agreements with WTCI and DCDC to cover the extra work performed, but the
other Sanggunian members refused to pass the resolution. Thus, the extra work completed by
WTCI and DCDC was not covered by the necessary appropriation to effect payment,
prompting them to file two separate collection cases before the Regional Trial Court (RTC)
of Cebu City (Civil Case Nos. CEB-17004[5] and CEB-17155[6]). The RTC found the claims
meritorious, and ordered the City to pay for the extra work performed. The RTC likewise
awarded damages, litigation expenses and attorneys fees in the amount of P2,514,255.40 to
WTCI[7] and P102,015.00 to DCDC.[8] The decisions in favor of WTCI and DCDC were affirmed
on appeal, subject to certain modifications as to the amounts due, and have become final. To
satisfy the judgment debts, the Sanggunian finally passed the required appropriation
ordinances.

During post-audit, the City Auditor issued two notices disallowing the payment of litigation
expenses, damages, and attorneys fees to WTCI and DCDC.[9] The City Auditor held Osmeña ,
the members of the Sanggunian, and the City Administrator liable for the P2,514,255.40
and P102,015.00 awarded to WTCI and DCDC, respectively, as damages, attorneys fees, and
interest charges. These amounts, the City Auditor concluded, were unnecessary expenses for
which the public officers should be held liable in their personal capacities pursuant to the law.

Osmeña and the members of the Sanggunian sought reconsideration of the disallowance with
the COA Regional Office, which, through a 2nd Indorsement dated April 30, 2003,[10] modified
the City Auditors Decision by absolving the members of the sanggunian from any liability. It
declared that the payment of the amounts awarded as damages and attorneys fees should
solely be Osmeña’s liability, as it was him who ordered the change or extra work orders without
the supplemental agreement required by law, or the prior authorization from the Sanggunian.
The Sanggunian members cannot be held liable for refusing to enact the necessary ordinance
appropriating funds for the judgment award because they are supposed to exercise their own

28
judgment and discretion in the performance of their functions; they cannot be mere rubber
stamps of the city mayor.

The COA Regional Offices Decision was sustained by the COAs National Director for Legal and
Adjudication (Local Sector) in a Decision dated January 16, 2004.[11] Osmeña filed an appeal
against this Decision.

On May 6, 2008, the COA issued the assailed Decision which affirmed the notices of
disallowance.[12] Osmeña received a copy of the Decision on May 23, 2008.Eighteen days
after or on June 10, 2008, Osmeña filed a motion for reconsideration of the May 6, 2008 COA
Decision.

The COA denied Osmeña’s motion via a Resolution dated June 8, 2009.[13]

Osmeña pleads that his petition be given due course for the resolution of the important issues
he raised. The damages and interest charges were awarded on account of the delay in the
payment of the extra work done by WTCI and DCDC, which delay Osmeña attributes to the
refusal of the Sanggunian to appropriate the necessary amounts. Although Osmeña
acknowledges the legal necessity for a supplemental agreement for any extra work exceeding
25% of the original contract price, he justifies the immediate execution of the extra work he
ordered (notwithstanding the lack of the supplemental agreement) on the basis of the extreme
urgency to have the construction and repairs on the sports complex completed in time for the
holding of the Palaro. He claims that the contractors themselves did not want to embarrass the
City and, thus, proceeded to perform the extra work even without the supplemental
agreement.

Osmeña also points out that the City was already adjudged liable for the principal sum due for
the extra work orders and had already benefitted from the extra work orders by accepting and
using the sports complex for the Palaro. For these reasons, he claims that all consequences of
the liability imposed, including the payment of damages and interest charges, should also be
shouldered by the City and not by him.

Issue:

29
WON Osmeña is personally liable for payment of the amounts awarded as damages and
attorney’s fees since it was him who ordered the change or extra work orders without the
supplemental agreement required by law, or the prior authorization from the Sanggunian.

Held:

No.

Section 103 of PD 1445 declares that [e]xpenditures of government funds or uses of

government property in violation of law or regulations shall be a personal liability of the official
or employee found to be directly responsible therefor. Notably, the public officials personal
liability arises only if the expenditure of government funds was made in violation of law. In this
case, the damages were paid to WTCI and DCDC pursuant to final judgments rendered against
the City for its unreasonable delay in paying its obligations. The COA, however, declared that
the judgments, in the first place, would not be rendered against the City had it not been for the
change and extra work orders that Osmeña made which (a) it considered as unnecessary, (b)
were without the Sanggunians approval, and (c) were not covered by a supplemental
agreement.

The term unnecessary, when used in reference to expenditure of funds or uses of property, is
relative. In Dr. Teresita L. Salva, etc. v. Guillermo N. Carague, etc., et al.,[19]we ruled that
[c]ircumstances of time and place, behavioural and ecological factors, as well as political, social
and economic conditions, would influence any such determination. x x x [T]ransactions under
audit are to be judged on the basis of not only the standards of legality but also those of
regularity, necessity, reasonableness and moderation. The 10-page letter of City Administrator
Juan Saul F. Montecillo to the Sanggunian explained in detail the reasons for each change and
extra work order; most of which were made to address security and safety concerns that may
arise not only during the holding of the Palaro, but also in other events and activities that may
later be held in the sports complex. Comparing this with the COAs general and unsubstantiated
declarations that the expenses were not essential[20] and not dictated by the demands of good
government,[21] we find that the expenses incurred for change and extra work orders were
necessary and justified.

Reviewing the facts of the case, we find that the prevailing circumstances at the time the
change and extra work orders were executed and completed indicate that the City
30
of Cebu tacitly approved these orders, rendering a supplemental agreement or authorization
from the Sanggunian unnecessary.

The RTC Decision in fact mentioned that the Project Post Completion Report and Acceptance
was approved by an authorized representative of the City of Cebu on September 21,
1994.[23] [a]s the projects had been completed, accepted and used by the [City of Cebu], the
RTC ruled that there is no necessity of [executing] a supplemental agreement.[24] Indeed, as
we declared in Mario R. Melchor v. COA,[25] a supplemental agreement to cover change or
extra work orders is not always mandatory, since the law adopts the permissive word
may. Despite its initial refusal, the Sanggunian was eventually compelled to enact the
appropriation ordinance in order to satisfy the RTC judgments. Belated as it may be, the
enactment of the appropriation ordinance, nonetheless, constitutes as sufficient compliance
with the requirements of the law. It serves as a confirmatory act signifying
the Sanggunians ratification of all the change and extra work orders issued by Osmeña

WHEREFORE, in light of the foregoing, we hereby GRANT the petitioners Petition

for Certiorari filed under Rule 64 of the Rules of Court. The respondents Decision of May 6,
2008 and Resolution of June 8, 2009 are SET ASIDE.

31