US vs Ruiz Rulings: Yes.

The Supreme Court held that the contract relates to the exercise of its
Facts: This is a petition to review, set aside certain orders and restrain perpetually the
proceedings done by Hon. Ruiz for lack of jurisdiction on the part of the trial court.
sovereign functions. In this case the projects are an integral part of the naval base
which is devoted to the defense of both the United States and the Philippines,
indisputably a function of the government of the highest order, they are not utilized
for nor dedicated to commercial or business purposes.

The United States of America had a naval base in Subic, Zambales. The base was one The restrictive application of state immunity is proper only when the proceedings
of those provided in the Military Bases Agreement between the Philippines and the arise out of commercial transactions of the foreign sovereign. Its commercial
United States. Sometime in May, 1972, the United States invited the submission of activities of economic affairs. A state may be descended to the level of an individual
bids for a couple of repair projects. Eligio de Guzman land Co., Inc. responded to the and can thus be deemed to have tacitly given its consent to be sued. Only when it
invitation and submitted bids. Subsequent thereto, the company received from the enters into business contracts.
US two telegrams requesting it to confirm its price proposals and for the name of its
Sanders vs Veridiano II
bonding company. The company construed this as an acceptance of its offer so they
complied with the requests. The company received a letter which was signed by
William I. Collins of Department of the Navy of the United States, also one of the
Facts: Petitioner Sanders was then the special services director of the U.S. Naval
petitioners herein informing that the company did not qualify to receive an award for
Station (NAVSTA) in Olongapo City. Petitioner Moreau was the commanding officer of
the projects because of its previous unsatisfactory performance rating in repairs, and
the Subic Naval Base, which includes the said station. Private respondents were
that the projects were awarded to third parties. For this reason, a suit for specific
American citizens with permanent address in the Phil and were both game room
performance was filed by him against the US.
attendants of the NAVSTA.

Issues: Whether or not the US naval base in bidding for said contracts exercise
Herein respondents were then advised that there employment was changed from
governmental functions to be able to invoke state immunity.
permanent full time to permanent part-time. They filed a case of the US Dept. of
Defense then was gave a recommendation for their reinstatement. The controversy
of the case was when Sanders sent a letter to Moreau that he disagrees with the
Discussions: The traditional role of the state immunity exempts a state from being
recommendation. Because of the letters private respondents filed a case with CFI of
sued in the courts of another state without its consent or waiver. This rule is
Zambales, the plaintiffs claim that the letters contains libelous content and has
necessary consequence of the principle of independence and equality of states.
caused them the prejudgment of the grievance proceedings.
However, the rules of international law are not petrified; they are continually and
evolving and because the activities of states have multiplied. It has been necessary to
distinguish them between sovereign and governmental acts (jure imperii) and
The lower court ruled that the defendants acted maliciously and in bad faith. Motion
private, commercial and proprietary acts (jure gestionis). The result is that State
to lift the default order and motion for reconsideration of the denial on the motion to
immunity now extends only to acts jure imperil. The restrictive application of State
dismiss which was subsequently denied by the respondent court.
immunity is now the rule in the United States, the United Kingdom and other states
in western Europe.

Petition for certiorari, prohibition and preliminary injunction

Issue: Whether or not the respondent court acted with grave abuse of discretion the private respondent’s type of employment even before the grievance proceedings
amounting to lack of jurisdiction had even commenced.

Wether or not petitioners were acting officially or only in their private capacities
when they did the acts where they are sued for damages.
Ruiz vs Cabahug

Ratio:

1. Since the facts lead to that the petitioners are acting in the discharge of their
official duties, the petitioners are being sued as gov’t. Officials of USA. If the trial
will proceed damages will not be on the petitioner’s personal capacity but of the
petitioner’s principal. The USA government. thus making the action a suit against
that government without its consent. The government of the United States has
not given its consent to be sued for the official acts of the petitioners, who
cannot satisfy any judgment that may be rendered against them

2. It is abundantly clear in the present case that the acts for which the petitioners
are sued by are acts in the discharge of their official duties. Sanders, as director of the
special services department of NAVSTA had supervision of its personnel and matters
relating to their work and employment. As for Moreau, what he is claimed to have
done was write the Chief of Naval Personnel for concurrence with the conversion of

US vs Guinto

Facts: The case involves the doctrine of state immunity. The United States of America
was not impleaded in the case at bar but has moved to dismiss on the ground that
they are in effect suits against it to which it has not consented.
 The private respondents are suing several officers of the US Air Force in Clark Air
Base in connection with the bidding conducted by them for contracts for barber
services in the said base. Among those who submitted their bids were private
respondents Roberto T. Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar.
The Bidding was won by Ramon Dizon over the objection of the private
respondents who claimed that he had made a bid for 4 facilities, including the Civil
Engineering Area which was not included in the invitation to bid.
allegedly performed by them in the discharge of their duties. The rule is that if the
judgment against such officials will require the state itself to perform an affirmative
act to satisfy the same, the suit must be regarded as against the state although it has
not been formally impleaded. When the government enters into a contract, it is
deemed to have descended to the level of the other contracting party and divested of
its sovereign immunity from suit with its implied consent.

The private respondents filed a complaint in the court below to compel Rulings:
Philippine Area Exchange (PHAX) and the individual petitioners to cancel the award to
The court finds the barbershops subject to the concessions granted by the US
Dizon, to conduct a rebidding for the barbershop concessions and to allow the private
government to be commercial enterprises operated by private persons. They are not
respondents by a writ of preliminary injunction to continue operating the concessions
agencies of the United States Armed Forces nor are their facilities demandable as a
pending litigation.
matter of right by the American servicemen. These establishments provide for the
The petitioners filed a motion to dismiss and opposition to the petition for grooming needs of their customers. This being the case, the petitioners cannot plead
preliminary injunction on the ground that the action was in effect a suit against USA any immunity from the complaint filed by the private respondents in the court below.
which had not waived its non-suability, but trial court denied the application for a
Petitioners states they have acted in the discharge of their official functions as
writ of preliminary injunction.
officers or agents of the United States. They are sought to be held answerable for
personal torts in which the United States itself is not involved. If found liable, they
and they alone must satisfy the judgment.
Issues: Whether or not the action was in effect a suit against United States of
America. The Court would have directly resolved the claims against the defendants, except for
the paucity of the record in the case at hand. The evidence of the alleged irregularity
Whether or not the petitioners were immune from suit under the RP-US Bases
in the grant of the barbershop concessions is not before the Court. The respondent
Treaty for acts done by them in the performance of their official duties.
court will have to receive that evidence first, so it can later determine on the basis
thereof if the plaintiffs are entitled to the relief they seek. Accordingly, this case must
also be remanded to the court below for further proceedings.
Discussions: The rule that a state may not be sued without its consent, is one of the
generally accepted principles of international law that we have adopted as part of the
law of our land.
The Holy See vs Rosario
Even without such affirmation, we would still be bound by the generally
accepted principles of international law under the doctrine of incorporation. Under
this doctrine, as accepted by the majority of states, such principles are deemed FACTS:
incorporated in the law of every civilized state as a condition and consequence of its
This petition arose from a controversy over a parcel of land, Lot 5-A, located in the
membership in the society of nations. Upon its admission to such society, the state is
Municipality of Parañaque, Metro Manila and registered in the name of petitioner.
automatically obligated to comply with these principles in its relations with other
Said Lot 5-A is contiguous to Lots 5-B and 5-D registered in the name of the Philippine
states.
Realty Corporation (PRC). The three lots were sold to Ramon Licup, through Msgr.
While the doctrine appears to prohibit only suits against the state without its Domingo A. Cirilos, Jr., acting as agent to the sellers. Later, Licup assigned his rights to
consent, it is also applicable to complaints filed against officials of the states for acts the sale to private respondent, Starbright Enterprises.
The squatters refused to vacate the lots sold to private respondent so a dispute arose
as to who of the parties has the responsibility of evicting and clearing the land of
squatters occurred. Complicating the relations of the parties was the sale by
petitioner of Lot 5-A to Tropicana Properties and Development Corporation
(Tropicana).
Private respondent filed a complaint for annulment of the sale of the three parcels of
land, and specific performance and damages against petitioner, represented by the
Papal Nuncio, and three other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the
PRC and Tropicana.
ISSUE: WON the petitioner Holy See is immune from suit.
HELD: YES.
The logical question is whether the foreign state is engaged in the activity in the
regular course of business. If the foreign state is not engaged regularly in a business
or trade, the particular act or transaction must then be tested by its nature. If the act
is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure
imperii, especially when it is not undertaken for gain or profit.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The
donation was made not for commercial purpose, but for the use of petitioner to
construct thereon the official place of residence of the Papal Nuncio. The right of a
foreign sovereign to acquire property, real or personal, in a receiving state, necessary
for the creation and maintenance of its diplomatic mission, is recognized in the 1961
Vienna Convention on Diplomatic Relations.
In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the
civil and administrative jurisdiction of the receiving state over any real action relating
to private immovable property situated in the territory of the receiving state which
the envoy holds on behalf of the sending state for the purposes of the mission. If this
immunity is provided for a diplomatic envoy, with all the more reason should
immunity be recognized as regards the sovereign itself, which in this case is the Holy
See.
GTZ vs CA
FACTS: The governments of the Federal Republic of Germany and the Republic of the
Philippines ratified an Agreement concerning Technical Co-operation (Agreement) in
Bonn, West Germany. The Agreement affirmed the countries’ common interest in
promoting the technical and economic development of their States, and recognized
the benefits to be derived by both States from closer technical co-operation," and
allowed for the conclusion of "arrangements concerning individual projects of
technical co-operation." While the Agreement provided for a limited term of effective
of five (5) years, it nonetheless was stated that "the Agreement shall be tacitly
extended for successive periods of one year unless either of the two Contracting
Parties denounces it in writing three months prior to its expiry," and that even upon
the Agreement’s expiry, its provisions would "continue to apply to any projects
agreed until their completion." On 10 December 1999, the Philippine government,
through then Foreign Affairs Secretary Domingo Siazon, and the German
government, agreed to an Arrangement in furtherance of the 1971 Agreement, which
affirmed the common commitment of both governments to promote jointly a project
called Social Health Insurance Networking and Empowerment (SHINE) which was
designed to "enable Philippine families especially poor ones and to maintain their
health and secure health care of sustainable quality." The Republic of Germany
assigned the GTZ as the implementing corporation for the program while the
Philippines designated the Department of Health and the Philippine Health Insurance
Corporation (PHILHEALTH). Private respondents were engaged as contract employees
hired by GTZ to work for SHINE. But in September of 1999, Anne Nicolay (Nicolay), a
Belgian national, assumed the post of SHINE Project Manager. Private respondents'
had a misunderstanding with the Project Manager of SHINE. It was claimed that
SHINE under Nicolay had veered away from its original purpose to facilitate the
development of social health insurance by shoring up the national health insurance
program and strengthening local initiatives, as Nicolay had refused to support local
partners and new initiatives on the premise that community and local government
unit schemes were not sustainable a philosophy that supposedly betrayed Nicolay’s
lack of understanding of the purpose of the project. This lead to an exchange of
letters which was interpreted to be the resignation of the private respondents.
Private respondents then filed a complaint for illegal dismissal to the labor arbiter.
GTZ, through counsel, filed a Motion to Dismiss, on the ground that the Labor Arbiter
had no jurisdiction over the case, as its acts were undertaken in the discharge of the
governmental functions and sovereign acts of the Government of the Federal
Republic of Germany. This was opposed by private respondents with the arguments
that GTZ had failed to secure a certification that it was immune from suit from the
Department of Foreign Affairs, and that it was GTZ and not the German government
which had implemented the SHINE Project and entered into the contracts of
employment. The Labor Arbiter issued an Order denying the Motion to Dismiss. The
Order cited, among others, that GTZ was a private corporation which entered into an
employment contract; and that GTZ had failed to secure from the DFA a certification
as to its diplomatic status. GTZ did not file a motion for reconsideration to the Labor
Arbiters Decision or elevate said decision for appeal to the NLRC. Instead, GTZ opted
to assail the decision by way of a special civil action for certiorari filed with the Court
of Appeals. The Court of Appeals promulgated a Resolution dismissing GTZs petition,
finding that judicial recourse at this stage of the case is uncalled for, the appropriate
remedy of the petitioners being an appeal to the NLRC. Thus, the present petition for
review under Rule 45, assailing the decision and resolutions of the Court of Appeals
and of the Labor Arbiter.
ISSUE: 1. WON GTZ can invoke State immunity from suit.
HELD: NO, GTZ cannot invoke State immunity from suit even if their activities
performed pertaining to SHINE project are government in nature. The principle of
state immunity from suit, whether a local state or a foreign state, is reflected in
Section 9, Article XVI of the Constitution, which states that the State may not be sued
without its consent. In this case, GTZ’s counsel described GTZ as the implementing
agency of the Government of the Federal Republic of Germany, however it does not
automatically mean that it has the ability to invoke State immunity from suit. They
had failed to adduce evidence, a certification from Department of Foreign Affairs
which could have been their factual basis for its claim of immunity. At the same time,
it appears that GTZ was actually organized not through a legislative public charter,
but under private law, in the same way that Philippine corporations can be organized
under the Corporation Code even if fully owned by the Philippine government. The
apparent equivalent under Philippine law is that of a corporation organized under the
Corporation Code but owned by the Philippine government, or a government-owned
or controlled corporation (GOCC) without original charter. And it bears notice that
Section 36 of the Corporate Code states that every corporation incorporated under
this Code has the power and capacity to sue and be sued in its corporate name. The
Court is thus holds and so rules that GTZ consistently has been unable to establish
with satisfaction that it enjoys the immunity from suit generally enjoyed by its parent
country, the Federal Republic of Germany. The nature of the acts performed by the
entity invoking immunity remains the most important barometer for testing whether
the privilege of State immunity from suit should apply. At the same time, our
Constitution stipulates that a State immunity from suit is conditional on its
withholding of consent; hence, the laws and circumstances pertaining to the creation
and legal personality of an instrumentality or agency invoking immunity remain
relevant. Consent to be sued, as exhibited in this decision, is often conferred by the
very same statute or general law creating the instrumentality or agency
Merritt vs Government of the Phil Islands
Facts:
The case is an appeal by both parties from a judgment of the Court of First
Instance of the city of Manila in favor of the plaintiff for the sum of P14,741, together
with the costs of the cause.
Prior to this appeal, Plaintiff E. Meritt, a contractor, had a collision with the
General Hospital Ambulance which turned suddenly and unexpectedly without having
sounded any whistle or horn. Merrit was severely injured. His condition had
undergone depreciation and his efficiency as a contractor was affected. The plaintiff
is seeking a certain amount for permanent injuries and the loss of wages during he
was incapacitated from pursuing his occupation. In order for Merritt to recover
damages, he sought to sue the government which later authorized the plaintiff to
bring suit against the GPI and authorizing the Attorney- General to appear in said suit.
On this appeal, Counsel for the plaintiff insists that the trial court erred:
“in limiting the general damages which the plaintiff suffered to P5,000, instead of
P25,000 as claimed in the complaint,” and
“in limiting the time when plaintiff was entirely disabled to two months and twenty-
one days and fixing the damage accordingly in the sum of P2,666, instead of P6,000
as claimed by plaintiff in his complaint.”
On the other hand, the Attorney-General on behalf of the defendant urges that the
trial court erred:
in finding that the collision between the plaintiff’s motorcycle and the ambulance of
the General Hospital was due to the negligence of the chauffeur, who is an alleged
agent or employee of the Government;
in holding that the Government of the Philippine Islands is liable for the damages
sustained by the plaintiff as a result of the collision, even if it be true that the collision
was due to the negligence of the chauffeur; and
in rendering judgment against the defendant for the sum of P14,741.
Issues:
Whether or not the Government is legally liable to the plaintiff by allowing a
lawsuit to commence against it.
Whether or not the ambulance driver is considered as an employee of the
government.
Discussions:
The waiver of immunity of the State does not mean concession of its liability.
When the State allows itself to be sued, all it does in effect is to give the other party
an opportunity to prove, if it can, that the State is liable.
Art. 1903, Par. 5 of the Civil Code reads that “The state is liable in this sense when it
acts through a special agent, but not when the damage should have been caused by
the official to whom properly it pertained to do the act performed, in which case the
provisions of the preceding article shall be applicable. The responsibility of the state
is limited to that which it contracts through a special agent, duly empowered by a
definite order or commission to perform some act or charged with some definite
purpose which gives rise to the claim.
Rulings:
By consenting to be sued a state simply waives its immunity from suit. It does not
thereby concede its liability to plaintiff, or create any cause of action in his favor, or
extend its liability to any cause not previously recognized. It merely gives a remedy to
enforce a pre-existing liability and submits itself to the jurisdiction of the court,
subject to its right to interpose any lawful defense.
In the case at bar, the ambulance driver was not a special agent nor was a
government officer acting as a special agent. Hence, there can be no liability from the
government. As stated by Justice Story of United States “The Government does not
undertake to guarantee to any person the fidelity of the officers or agents whom it
employs, since that would involve it in all its operations in endless embarrassments,
difficulties and losses, which would be subversive of the public interest.”
Republic vs Villasor
Facts: The case was filed by the Republic of the Philippines requesting to nullify the
ruling of The Court of First Instance in Cebu in garnishing the public funds allocated
for the Arm Forces of the Philippines.
A decision was rendered in Special Proceedings in favor of respondents P. J. Kiener
Co., Ltd., Gavino Unchuan, and International Construction Corporation, and against
the petitioner herein, confirming the arbitration award in the amount of
P1,712,396.40, subject of Special Proceedings. The respondent Honorable Guillermo
P. Villasor, issued an Order declaring the said decision final and executory, directing
the Sheriffs of Rizal Province, Quezon City and Manila to execute the said decision.
The corresponding Alia Writ of Execution was issued. On the strength of the
aforementioned Alias Writ of Execution, the Provincial Sheriff of Rizal served Notices
of Garnishment with several Banks. The funds of the Armed Forces of the Philippines
on deposit with Philippine Veterans Bank and PNB 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 AFP.
Petitioner, filed prohibition proceedings against respondent Judge Villasor for acting
in excess of jurisdiction with grave abuse of discretion amounting to lack of
jurisdiction in granting the issuance of a Writ of Execution against the properties of
the AFP, hence the notices and garnishment are null and void.
Issues: Whether or not the state can be sued without its consent.
Whether or not the notice of garnishment issued by Judge Villasor is valid.
Discussions:
The provision of Sec 3 Article XVI declares that “the State may not be sued
without its consent”. This provision is merely a recognition of the sovereign character
of the State and express an affirmation of the unwritten rule insulating it from the not be validly made the subject of a writ of execution or garnishment.
jurisdiction of the courts of justice. Another justification is the practical consideration
The University of the Philippines (UP) entered into a General
that the demands and inconveniences of litigation will divert time and resources of
the State from the more pressing matters demanding its attention, to the prejudice Construction Agreement with respondent Stern Builders Corporation (Stern
of the public welfare.
Builders) for the construction of the extension building and the renovation of the
As a general rule, whether the money is deposited by way of general or special College of Arts and Sciences Building in the campus of the University of the
deposit, they remain government funds and are not subject to garnishment. An
exception of the rule is a law or ordinance that has been enacted appropriating a Philippines in Los Baños (UPLB). In the course of the implementation of the
specific amount to pay a valid government obligation.
contract, Stern Builders submitted three progress billings corresponding to the

work accomplished, but the UP paid only two of the billings. The third billing
Rulings:
was not paid due to its disallowance by the Commission on Audit (COA). Despite
It is a fundamental postulate of constitutionalism flowing from the juristic
the lifting of the disallowance, the UP failed to pay the billing, prompting Stern
concept of sovereignty that the state as well as its government is immune from suit
unless it gives its consent. A sovereign is exempt from suit, not because of any formal Builders to sue the UP and officials to collect the unpaid billing and to recover
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 various damages.
depends. A continued adherence to the doctrine of non-suability is not to be Meanwhile, the sheriff served notices of garnishment on the UP’s
deplored for as against the inconvenience that may cause private parties, the loss of
government efficiency and the obstacle to the performance of its multifarious depository banks, namely: Land Bank of the Philippines (Buendia Branch) and
functions are far greater is such a fundamental principle were abandoned and the
the Development Bank of the Philippines (DBP), Commonwealth Branch. The
availability of judicial remedy were not thus restricted.
UP assailed said garnishment of funds. Stern Builders and dela Cruz, meanwhile,
What was done by respondent Judge is not in conformity with the dictates of
the Constitution. From a logical and sound sense from the basic concept of the non- again sought the release of the garnished funds.
suability of the State, 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. Disbursements of public funds must be covered by the corresponding ISSUE: Whether or not the funds of UP are subject to garnishment
appropriation as required by law. 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.
HELD:Despite its establishment as a body corporate, the UP remains to be a

“chartered institution” performing a legitimate government function. The UP

UP vs Dizon
is a government instrumentality, performing the State’s constitutional mandate

of promoting quality and accessible education. As a government instrumentality,

The funds of the UP are government funds that are public of character which
the UP administers special funds sourced from the fees and income enumerated
could
under Act No. 1870 and Section 1 of Executive Order No. 714, and from the
yearly appropriations, to achieve the purposes laid down by Section 2 of Act 1870, 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.
as expanded in Republic Act No. 9500. All the funds going into the possession

of the UP, including any interest accruing from the deposit of such funds in any
NIA believes this bases this on:
banking institution, constitute a “special trust fund,” the disbursement of which

should always be aligned with the UP’s mission and purpose, and should always
PD 552 – amended some provisions
be subject to auditing by the COA.

The funds of the UP are government funds that are public in character.
of RA 3601 (the law which created the NIA)
They include the income accruing from the use of real property ceded to the UP

that may be spent only for the attainment of its institutional objectives. Hence,
The case of Angat River Irrigation
the funds subject of this action could not be validly made the subject of writ of

execution or garnishment. The adverse judgment rendered against the UP in a suit

System v. Angat River Workers’ Union
to which it had impliedly consented was not immediately enforceable by execution

against the UP, because suability of the State did not necessarily mean its liability.
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
Fortanilla vs Maliama functions does not show that it was intended to “bring to the Government any
special corporate benefit or pecuniary profit”, a strong dissenting opinion held that
Angat River system is a government entity exercising proprietary functions.
FACTS

On December 1, 1989, the Court rendered a decision declaring National Irrigation The Angat dissenting opinion:
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
Alegre protested the announced termination of his employment. He argued that
and/or negligence of NIA’s driver employee Hugo Garcia; and NIA was ordered to pay
although his contract did stipulate that the same would terminate on July 17, 1976,
the petitioners the amounts of P 12,000 for the death of the victim; P3,389 for
since his services were necessary and desirable in the usual business of his employer,
hospitalization and burial expenses; P30,000 as moral damages; P8,000 as exemplary
and his employment had lasted for five years, he had acquired the status of regular
damages, and attorney’s fees of 20% of the total award.
employee and could not be removed except for valid cause.

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
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, 1989is hereby AFFIRMED.