G.R. No.
104226 August 12, 1993
CONCHITA ROMUALDEZ-YAP, petitioner,
vs.
THE CIVIL SERVICE COMMISSION and THE PHILIPPINE NATIONAL
BANK, respondents.
Estelito P. Mendoza for petitioner.
The Solicitor General for the Civil Service Commission.
Domingo A. Santiago, Jr. for Philippine National Bank.
PADILLA, J.:
This is a special civil action for certiorari under Rule 65 of the Rules of Court,
assailing Resolution No. 92-201 of the respondent Civil Service Commission,
which upheld the petitioner's separation from the Philippine National
Bank(PNB) as a result of the abolition of the Fund Transfer Department
pursuant to a reorganization under Executive Order No. 80, dated 3
December 1986.
Petitioner Conchita Romualdez-Yap started working with the Philippine
National Bank on 20 September 1972 as special assistant with the rank of
Second Assistant Manager assigned to the office of the PNB President. After
several promotions, she was appointed in 1983 Senior Vice President
assigned to the Fund Transfer Department.
Starting 1 April 1986 up to 20 February 1987, petitioner filed several
applications for leave of absence (due to medical reasons) which were duly
approved. While she was on leave, Executive Order No. 80 (Revised Charter
of the PNB) was approved on 3 December 1986. Said executive order
authorized the restructure/reorganization and rehabilitation of PNB. Pursuant
to the reorganization plan, the Fund Transfer Department was abolished and
its functions transferred to the International Department.
Consequently, petitioner was notified of her separation from the service in a
letter dated 30 January 1987, thus:
Pursuant to the Transitory Provision of the 1986 Revised Charter of the
Bank, please be informed that Management has approved your separation
from the service effective February 16, 1986. You shall be entitled to the
regular benefits allowed under existing law. (emphasis supplied)
Please be informed further that under Sec. 37 of the Bank's 1986 Revised
Charter, any officer or employee who feels aggrieved by any matter treated
above may submit his case to the Civil Service
Commission.1
This letter was received by petitioner's secretary at the PNB head office on
16 February 1987.
Petitioner's first recorded appeal to the Civil Service Commission questioning
her separation is a letter dated 4 August 1989. Then CSC Chairman Samilo
N. Barlongay upheld the validity of her separation from the service in a
letter/opinion dated 30 August 1989 (this was allegedly received by petitioner
only on 26 February 1990) stating thus:
xxx xxx xxx
It may be mentioned in this connection, that inasmuch as you did not avail of
the ERIP/Supplementary Retirement Plans adopted by the PNB in 1986, you
have therefore lost your right thereto. Moreover, since you lack the required
number of years of service to entitle you to retirement benefits under existing
laws, you may be entitled to the return of your GSIS personal contributions.
Considering further that you have exhausted all your accumulated leave
credits as you went on leave of absence for the period from April 1, 1986 to
February 20, 1987, there is no legal or valid basis to entitle you to payment of
terminal leave.
Finally, pursuant to Section 16, Article XVIII of the Transitory Provisions of
the 1987 Philippine Constitution, you may be entitled to payment of
separation subject to auditing rules and regulations.2
In her motion for reconsideration with the Civil Service Commission, dated 5
March 1990, questioning Chairman Barlongay's ruling, petitioner claimed:
1. The opinion/ruling was not fully supported by the evidence on record;
2. Errors of law prejudicial to the interest of the movant have been
committed. She argued:
. . . that her separation from the service was illegal and was done in bad faith
considering that her termination on February 16, 1986 was made effective
prior to the effectivity of Executive Order No. 80 on December 3, 1986, which
law authorized the reorganization of the PNB, and even before February 25,
1986, when President Corazon C. Aquino came into power. She further
claims that although the notice of termination was dated January 30, 1987 it
was only served upon her on February 16, 1987 when the new Constitution
which guarantees security of tenure to public employees was already in
effect.3
xxx xxx xxx
. . . the bad faith in her separation from the service in 1987 was evident from
the recent restoration of the Fund Transfer Department as a separate and
distinct unit from the International Department . . . 4
Denying the motion for reconsideration, the Civil Service Commission in its
aforecited Resolution No. 92-201, dated 30 January, 1992, ruled:
Sec. 33 of EO 80 (1986 Revised Charter of the PNB) provides:
Sec. 33. Authority to Reorganize. — In view of reduced operations
contemplated under this charter in pursuance of the national policy
expressed in the "Whereas" clause hereof, a reorganization of the Bank and
a reduction in force are hereby authorized to achieve greater efficiency and
economy in operations, including the adoption of a new staffing pattern to
suit the reduced operations envisioned. The program of reorganization shall
begin immediately after the approval of this Order, and shall be completed
within six (6) months and shall be fully implemented within eighteen (18)
months thereafter." Clearly; as aforequoted, PNB was authorized to undergo
reorganization and to effect a reduction in force to "achieve greater efficiency
and economy in operations". It cannot, be disputed that reduction in force
necessitates, among others, the abolition of positions/offices. The records
show that prior to its reorganization, PNB originally had 7,537 positions which
were reduced to 5,405 after the reorganization. Indeed, 2,132 positions were
abolished, that is, the original positions in PNB were reduced by 28%. This
reduction in force likewise included the senior officer positions, in PNB, which
were reduced, thus:
Positions Incumbents Proposed Position
President 1 1 1
Sr. Exec. VP 1 1 0 On the issue of bad faith as related to the later restoration of the Fund
Exec. VP 3 2 2 Transfer Department, the subject CSC resolution adds:
Senior VP 12 11 7
Vice Pres. 33 27 15
The position of movant Yap (SVP) was one among the original twelve (12)
SVP positions. It was one among the five (5) SVP positions which were
abolished. In fact, the FTD of which she was then the incumbent SVP, was
merged with the International Department to which its functions were
closedly related.
It should be noted that as ruled by the Supreme Court in Dario vs. Mison
(G.R. NO. 81954):
Reorganizations in this jurisdiction have been regarded as valid provided
they are pursued in good faith. As a general rule, a reorganization is carried
out in "good faith" if it is for the purpose of economy or to make bureaucracy
more efficient. In that event, no dismissal or separation actually occurs
because the position itself ceases to exist. And in that case, security of
tenure would not be a Chinese Wall. . . . .
. . . Good faith, as a component of a reorganization under a constitutional
regime is judged from the facts of each case.
In the instant case, therefore, this Commission is inclined to believe that the
reorganization of PNB was done in good faith. For indeed, the reorganization
was pursued to achieve economy. It undertook reduction in force as a means
to streamline the numbers of the workforce. It was incidental that movant
Yap's position was one among those abolished. Movant Yap failed to
substantiate her claim by clear and convincing evidence that the abolition of
her position was a result of her close identification with the previous regime,
being a sister of former First Lady Imelda Romualdez Marcos. This being so,
and pursuant to the presumption of regularity in the performance of official
functions, the abolition of movant Yap's position should be upheld. PNB, in
the instant case, has clearly proved by substantial evidence that its act in
terminating the services of some of its employees was done in good faith. 5
Overruling her imputation of bad faith, i.e. her separation was illegal because
it took effect on 16 February 1986 or even before the promulgation of EO No.
80 on 3 December 1986, the CSC noted that the year "1986" stated in the
notice of her separation from the service was a typographical error. PNB
submitted documents (p. 6 of Resolution No. 92-201) supporting its stand
that the separation actually took effect on 16 February 1987.
xxx xxx xxx
It may be mentioned that the recent restoration of the Fund Transfer
Department, actually was a merger of the Fund Transfer Group, the Foreign
Remittance Development and Coordinating Unit based on board Resolution
No. 60 of March 12, 1991, or after the lapse of over four (4) years from the
date it was abolished in 1987. Moreover, the restoration of the Fund Transfer
Department and other offices in the PNB was primarily caused by the
improved financial capability and present needs of the Bank. This improved
financial condition of the PNB is evident from the 1990 Annual Report it
submitted. It may be further stated that the re-established FTD is headed by
a Vice President, a position much lower in rank than the former department
headed by a Senior Vice President.
Furthermore, it should be noted that granting arguendo that movant Yap's
termination from the service was tainted with bad faith, she however, is now
barred from assailing the same as she did not seasonably assert her right
thereto. Records show that she was separated from PNB on February 16,
1987 and it was only in 1989 or about 2 years thereafter when she brought
this matter to this Commission. By her inaction in questioning her termination
within a period of one year, she is considered to have acquiesced to her
separation from the service and abandoned her right to the position.6
In the present petition before the Court, the following issues are raised:
1. Existence of bad faith in the reorganization of the Philippine National
Bank resulting in the separation from the service of petitioner.
2. Erroneous application of the Dario v. Mison doctrine vis-a-vis PNB's
reorganization.
3. Erroneous application of the one (1) year prescriptive period for quo
warranto proceedings in petitioner's case.
Dario v. Mison7 laid down the requirement of good faith in the reorganization
of a government bureau wherein offices are abolished. It says:
. . . Reorganizations in this jurisdiction have been regarded as valid provided
they are pursued in good faith. As a general rule, a reorganization is carried
out in "good faith" if it is for the purpose of economy or to make bureaucracy
more efficient. In that event, no dismissal (in case of dismissal) or separation
actually occurs because the position itself ceases to exist. And in that case,
security of tenure would not be a Chinese wall. Be that as it may, if the
"abolition," which is nothing else but a separation or removal, is done for
political reasons or purposely to defeat security of tenure, or otherwise not in
good faith, no valid "abolition" takes place and whatever "abolition" is done,
is void ab initio. There is an invalid "abolition" as where there is merely a
change of nomenclature of positions, or where claims of economy are belied
by the existence of ample funds. It is to be stressed that by predisposing a
reorganization to the yardstick of good faith, we are not, as a consequence,
imposing a "cause" for restructuring. Retrenchment in the course of a
reorganization in good faith is still removal "not for cause" if by "cause" we
refer to "grounds" or conditions that call for disciplinary action. Good faith, as
a component of a reorganization under a constitutional regime, is judged
from the facts of each case.
In Petitioner's case, the following instances are cited by her as indicia of bad
faith:
1. The abolished department was later restored and the number of
senior vice presidents was increased.
2. PNB did not follow the prescribed sequence of separation of
employees from the service contained in Rep. Act No. 6656 which is:
Sec. 3. In the separation of personnel pursuant to reorganization, the
following order of removal shall be followed:
(a) Casual employees with less than five (5) years of government
service;
(b) Casual employees with five (5) years or more of government service;
(c) Employees holding temporary appointments; and
(d) Employees holding permanent appointments: Provided, That those
in the same category as enumerated above, who are least qualified in terms
of performance and merit shall be laid off first, length of service
notwithstanding.
3. Petitioner was not extended preference in appointment to the
positions in the new staffing pattern as mandated by Sec. 4 of Rep. Act 6656,
her qualification and fitness for new positions were never evaluated or
considered in violation of Sec. 27 of P.D. 807 which was incorporated as
Sec. 29 Ch. 5 Subtitle A, Book V of the Administrative Code of 1987.
4. Lack of notice and bearing before separation from the service.
5. Petitioner was forced to take a leave of absence and prevented from
reporting for work.
6. There is a discrepancy in the date of her separation from the service
and the effectivity thereof.
7. PNB employees in the Fund Transfer Department identified with her
were reassigned or frozen.
8. She is listed as having resigned instead of being separated or
dismissed which was what actually happened.
9. The dismissal was politically motivated, she being a sister of Mrs.
Imelda Romualdez Marcos, wife of deposed President Ferdinand Marcos.
Executive Order No. 80 conferred upon the PNB the authority to reorganize.
The order was issued by then Pres. Corazon Aquino on 3 December 1986
while she was exercising the powers vested in the President of the
Philippines by the Freedom Constitution. After 3 December 1986, what
remained to be done was the implementation of the reorganization. There is
no doubt as to the legal basis for PNB's reorganization. The real question is:
was it done in good faith, tested by the Dario v. Mison doctrine?
To start with it is almost absurd for petitioner to insist that her termination
from the service was antedated to 16 February 1986. At that time, the
reorganization of PNB had not even been conceived. In most of PNB's
pleadings, it has documented and supported its stand that the year of
petitioner's separation is 1987 not 1986. The antedating of the termination
date, aside from being clearly a typographical error, is a periphernal issue.
The real issue is existence of bad faith consisting of tangible
bureaucratic/management pressures exerted to ease her out of office. Bad
faith has been defined as a state of mind affirmatively operating with furtive
design or with some motive of self interest or ill will or for an ulterior
purpose.8 It is the performance of an act with the knowledge that the actor is
violating the fundamental law or right, even without willful intent to injure or
purposive malice to perpetrate a damnifying harm.9
PNB's reorganization, to repeat, was by virtue of a valid law. At the time of
reorganization, due to the critical financial situation of the bank, departments,
positions and functions were abolished or merged. The abolition of the Fund
Transfer Department (FTD) was deemed necessary. This, to the Court's
mind, was a management prerogative exercised pursuant to a business
judgment. At this point, a distinction can be made in ruling on the validity of a
reorganization between a government bureau or office performing constituent
functions (like the Customs) and a government-owned or controlled
corporation performing ministrant functions (like the PNB).
Constituent function are those which constitute the very bonds of society and
are compulsory in nature; ministrant functions are those undertaken by way
of advancing the general interests of society, and are merely optional.
Commercial or universal banking is, ideally, not a governmental but a private
sector, endeavor. It is an optional function of government.
. . . The principles determining whether or not a government shall exercise
certain of these optional functions are: (1) that a government should do for
the public welfare those things which private capital would not naturally
undertake and (2) that a government should do those things which by its
very, nature it is better equipped to administer for the public welfare than is
any private individual or group of individuals (Malcolm, The Government of
the Philippine Islands, pp. 19-20)
From the above we may infer that, strictly speaking, there are functions
which our government is required to exercise to promote its objectives as
expressed in our Constitution and which are exercised by it as an attribute of
sovereignty, and those which it may exercise to promote merely the welfare,
progress and prosperity of the people. To this latter class belongs the
organization of those corporations owned or controlled by the government to
promote certain aspects of the economic life of our people such as the
National Coconut Corporation. These are what we call government-owned or
controlled corporations which may take on the form of a private enterprise or
one organized with powers and formal characteristics of a private corporation
under the Corporation Law. (Bacani vs. Nacoco, No, L-9657, November 29,
1956, 100 Phil. 468)
But a reorganization whether in a government bureau performing constituent
functions or in a government-owned or controlled corporation performing
ministrant functions must meet a common test, the test of good faith. In this
connection, the philosophy behind PNB's reorganization is spelled out in the
whereas clauses of Executive Order No. 80:
WHEREAS, within the context of the general policy there nevertheless exists
a clear role for direct government-participation in the banking system,
particularly in servicing the requirements of agriculture, small and medium
scale industry, export development, and the government sector.
WHEREAS, in pursuit of this national policy there is need to restructure the
government financial institutions, particularly the Philippine National Bank, to
achieve a more efficient and effective use of available scarce resources, to
improve its viability, and to avoid unfair competition with the private sector,
and
WHEREAS, the reorganization and rehabilitation of the Philippine National
Bank into a similar but stronger and more operationally viable bank is an
important component of the nationalization programs for both the financial
system and the government corporation sector; . . . .
Whether there was a hidden political agenda to persecute petitioner due to
her consanguinial relation to Mrs. Imelda Romualdez Marcos, the widow of
former President Marcos, is not clearly shown. On the other hand, it is
entirely possible that, precisely because of such consanguinial relation,
petitioner may have been the object of deferential, if not special treatment
under the Marcos regime. It is part of the Filipino culture to extend such
deferential, if not special treatment to close relatives of persons in power.
Many times this is carried to unwholesome extremes. But a discontinuance of
such deferential or special treatment in the wake of a change in government
or administration is not bad faith per se. It may be merely putting things in
their proper places.
Due to the restructuring — and this is empirically verifiable — PNB became
once more a viable banking institution. The restoration of the FTD four years
after it was abolished and its functions transferred to the International
Department, can be attributed to the bank's growth after reorganizations,
thereby negating malice or bad faith in that reorganization. The essence of
good faith lies in an honest belief in the validity of one's right.10 It consists of
an honest intention to abstain from taking an unconscionable and
unscrupulous advantage of another, its absence should be established by
convincing evidence. 11
The records also clearly indicate that starting April 1986 to February 1987,
petitioner went on leave of absence for medical reasons. While she was not
reporting to the office, the bank's reorganization got underway. She
continued, however, receiving her salaries, allowances, emoluments,
honoraria and fees up to March 1987. Employees who were affected by the
reorganization had the option to avail of the bank's Separation Benefits
Plan/Early Retirement Plan (SBP/ERIP). Petitioner opted not to avail of such
plan and instead submitted to the result of the bank's ongoing reorganization
and management's discretion. If petitioner had the desire for continued
employment with the bank, she could have asserted it for management's
consideration. There is no proof on record that she affirmatively expressed
willingness to be employed. Since she cannot rebut the CSC finding that her
earliest appeal was made on 4 August 1989, there is no reason for this Court
to hold that she did not sleep on her rights. On the contrary, her present
argument that bad faith existed at the time of the abolition of the FTD
because it was restored four years later is a little too late. Who could have
predicted in 1986 or 1987 that PNB would be able to rise from its financial
crisis and become a viable commercial bank again? The decision to abolish
the FTD at the time it was abolished, to repeat, was a business judgment
made in good faith.
PNB for its part submits that its reorganization was effected in good faith
because —
a) There was not only a perceptible but substantial restructuring of the
PNB hierarchy showing reduction of personnel, consolidation of offices and
abolition of positions.
b) Two thousand one hundred thirty two (2,132) positions were
abolished during the period from February 16, 1986 to January 14, 1987
leaving a lean workforce of five thousand four hundred five (5,405) as of
latter date per B.R. No. 34 hereto attached as Annex "R".
c) The number of senior officers, including Senior Vice Presidents, was
accordingly reduced.
Another issue raised by petitioner is PNB's alleged non-compliance with the
mandate of Sections 2 and 4 of Rep. Act No. 6656. These Sections provide:
Sec. 2. No officer or employee in the career service shall be removed except
for a valid cause and after due notice and hearing. A valid cause for removal
exists when, pursuant to a bona fide reorganization, a position has been
abolished or rendered redundant or there is a need to merge, divide, or
consolidate positions in order to meet the exigencies of the service, or other
lawful causes allowed by the Civil Service Law. The existence of any or
some of the following circumstances may be considered as evidence of bad
faith in the removals made as a result of reorganization, giving to a claim for
reinstatement or reappointment by an aggrieved party.
(a) Where there is a significant increase in the number of positions in the
new staffing pattern of the department or agency concerned;
(b) Where an office is abolished and another performing substantially
the same functions is created;
(c) Where incumbents are replaced by those less qualified in terms of
status of appointment, performance and merit;
(d) Where there is a reclassification of offices in the department or
agency concerned and the reclassified offices perform substantially the same
functions as the original offices;

(e) Where the removal violates the order of separation provided in
Section 3 hereof.
xxx xxx xxx
Sec. 4. Officers and employees holding permanent, appointments shall be
given preference for appointment to the new position in the approved staffing
pattern comparable to their former positions or in case there are not enough
comparable positions, to positions next lower in rank.
No new employees shall be taken in until all permanent officers and
employees have been appointed, including temporary and casual employees
who possess the necessary qualification requirements, among which is the
appropriate civil service eligibility, for permanent appointment to positions in
the approved staffing pattern, in case there are still positions to be filled,
unless such positions are policy-determining, primarily confidential or highly
technical in nature.
In the first place, Rep. Act No. 6656 cannot be invoked by petitioner because
it took effect on 15 June 1987, or after PNB's reorganization had already
been implemented. But assuming, ex gratia argumenti, that it is applicable
here and petitioner must be accorded preferential right to appointment in the
bank, PNB in its rejoinder impressively asserts:
Needless to say, there were various committees that were created in the
implementation of the organizational restructuring of the Bank based on the
foregoing policy guidelines. Each personnel to be retained was evaluated in
terms of relative fitness and merit along with the other personnel of the Bank.
Thus, when then SVP Federico Pascual was chosen to head the
International Department from among other officers of the Bank, including
Ms. Yap, his qualifications far exceeded those of the other candidates for the
position.
We attach hereto as Annexes "G-1" and "G-2" the service records of Mr.
Federico Pascual and Petitioner Ms. Yap, respectively, which clearly show
that the qualifications of Mr. Pascual far exceed those of Petitioner Yap.
Aside from being a lawyer having been a law graduate from the University of
the Philippines, he is also a Bachelor of Arts degree holder from Ateneo de
Manila and a Master of Laws graduate o Columbia Law School. He had
studied Masteral Arts in Public Administration at the London School of
Economics and had undergone extensive seminars since 1974 at the
International Department and had been assigned in several foreign branches
of the Bank. Before he resigned from the Bank, he held the second highest
position of Executive Vice President and served as Acting President of the
Bank before the incumbent president, President Gabriel Singson assumed
his position.
On the other hand, the service record of Petitioner Yap will show that she
only holds a Bachelor of Science in Commerce Degree from Assumption
Convent and has undergone only one seminar on Management and
Leadersbip Training Program. She entered the Bank service in 1972. (Rollo
at pp. 312 to 313)
xxx xxx xxx
The prayer in the petition at bar seeks petitioner's immediate reinstatement to
her former position as senior vice president and head of the Fund Transfer
Department, or reappointment to a position of comparable or equivalent rank
without loss of seniority rights and pay, etc., under the bank's new staffing
pattern.
A person claiming to be entitled to a public office or position usurped or
unlawfully held or exercised by another may bring an action for quo warranto
(Rule 66, Sec. 6, Rules of Court). The petitioner therein must show a clear
legal right to the office allegedly held unlawfully by another. 12
An action for quo warranto should be brought within one (1) year after ouster
from office;13 the failure to institute the same within the reglementary period
constitutes more than a sufficient basis for its dismissal14 since it is not
proper that the title to a public office be subjected to continued
uncertainty . . . 15 An exception to this prescriptive period lies only if the
failure to file the action can be attributed to the acts of a responsible
government officer and not of the dismissed employee.16
Measured by the above jurisprudence, petitioner's action may be said to be
one for quo warranto, seeking reinstatement to her former position which at
present is occupied by another. She cannot invoke De Tavera v. Phil.
Tuberculosis Society, Inc., et. al. 17 and contend that there is no claim of
usurpation of office, and that quo warranto may be availed of to assert one's
right to an office in the situation obtaining in the case at bar.
Santos v. CA, et. al. 18 and Magno v. PNNC Corp. 19 are invoked by
petitioner to illustrate that this action is one for separation without just cause,
hence, the prescriptive period is allegedly four (4) years in accordance with
Article 1146 of the Civil Code. 20 We do not agree. Petitioner's separation
from the service was due to the abolition of her office in implementation of a
valid reorganization. This is not the unjustifiable cause which results in injury
to the rights of a person contemplated by Article 1146. The abolition of the
office was not a whimsical, thoughtless move. It was a thoroughly evaluated
action for streamlining functions based on a rehabilitation plan. 21 At the time
of the abolition of the Fund Transfer Department in 1986, foreign exchange
losses of the bank amounted to P81.1 Million. 22 The head of office was a
Senior Vice President. At the time of restoration of the department in 1991, it
was headed by a vice president (lower in rank) and showed earnings of
P2,620.0 Million. 23 Other departments abolished in 1986 were also
subsequently restored.
Restoring petitioner to her previous position with backwages would be unjust
enrichment to her, considering that she had abandoned or
showed lack of interest in reclaiming the same position when the bank was
not yet fully rehabilitated and she only insisted on reinstatement in August
1989 or two (2) years after her alleged unjustified separation.
To those who feel that their unjustified separation from the service is for a
cause beyond their control, the aforecited Magno case teaches:
. . . while We fully recognize the special protection which the Constitution,
labor laws, and social legislation accord the workingman, We cannot,
however, alter or amend the law on prescription to relieve him of the
consequences of his inaction. Vigilantibus, non dormientibus, jura subveniunt
(Laws come to the assistance of the vigilant, not of the sleeping). His
explanation that he could not have filed the complaint earlier because "he
was prevented to do so beyond his control for the simple reason that private
respondent have (sic) tried to circumvent the law by merely floating" him is
very flimsy and does not even evoke sympathetic consideration, if at all it is
proper and necessary. We note that petitioner herein is not an unlettered
man; he seems to be educated and assertive of his rights and appears to be
familiar with judicial procedures. He filed a motion for extension of time to file
the petition and the petition itself without the assistance of counsel. We
cannot believe that if indeed he had a valid grievance against PNCC he
would not have taken immediate positive steps for its redress.
WHEREFORE, premises considered, the assailed CSC resolution is
AFFIRMED. The petition is DISMISSED for failure to show grave abuse of
discretion on the part of said CSC in rendering the questioned resolution. No
pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Cruz, Feliciano, Bidin, Griño-Aquino, Regalado, Davide, Jr.,
Romero, Nocon, Bellosillo, Melo, Quiason, Puno and Vitug, JJ., concur.
G.R. Nos. L-55963 & 61045 February 27, 1991
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, petitioners,
vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION
ADMINISTRATION, respondents.
NATIONAL IRRIGATION ADMINISTRATION, appellant,
vs.
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.
RESOLUTION
PARAS, J.:
In its Motion for Reconsideration1 of the Court's Second Division decision in
G.R. No. 55963 and G.R. No. 61045, the National Irrigation Administration
(NIA, for brevity), through the Solicitor General, maintains that, on the
strength of Presidential Decree No. 552 (which amended certain provisions
of Republic Act 3601, the law creating the NIA) and the case of Angat River
Irrigation System, et al. vs. Angat River Workers' Union, et al., 102 Phil. 790
"the NIA does not perform solely and primarily proprietary functions but is an
agency of the government tasked with governmental functions, and is
therefore not liable for the tortious act of its driver Hugo Garcia, who was not
its special agent."
Although the majority opinion in the cited case of Angat System declares that
the Angat System (like the NIA) exercised a governmental function because
the nature of the powers and functions of said agency does not show that it
was intended to "bring to the Government any special corporate benefit or
pecuniary profit," there is a strong dissenting opinion penned by then
Associate Justice and later Chief Justice Roberto Concepcion and concurred
in by then Associate Justice J.B.L. Reyes which held the contrary view that
the Angat River System is a government entity exercising proprietary
functions. To buttress said stand, the former Chief Justice cited some
authorities which will be useful in the proper resolution of this case.
Quoting from said dissenting opinion which cited McQuillin's The Law of
Municipal Corporations, 3rd ed., Vol. 18, pp. 423424:

In undertaking to supply water at price, municipality is not performing
governmental function but is engaged in trade, and is liable first as private
company would be for any negligence in laying out of its pipes, in keeping
them in repair, or in furnishing potable water through them. Harvard Furniture
Co., Inc. vs. City of Cambridge, 320 Mass. 227, 68 N.E. (2d) 684.
Municipality in contracting to provide water supply acts under its proprietary
power and not under its legislative, public or governmental powers. Farmers'
State Bank vs. Conrad, 100 Mont. 415,47 P. (2d) 853.
In this connection, the opinion is that irrigation districts in the United States
are basically identical to our irrigation systems under Act No. 2152. Because
of such similarity, it is found appropriate to consider certain doctrines from
American jurisprudence, which are as follows, to wit:
An irrigation district is a public quasi corporation, organized, however, to
conduct a business for the private benefit of the owners of land within its
limits. They are members of the corporation, control its affairs, and alone are
benefited by its operations. It is, in the administration of its business, the
owner of its system in a proprietary rather than a public capacity, and must
assume and bear the burdens of proprietary ownership. (Nampa vs. Nampa
& M. Irrig. Dist. 19 Idaho, 779,115 Pac. 979)
. . . the plaintiff sought damages for injuries to crops on his land during 1923,
1924, 1925, and 1926, caused by water seeping, percolating, and escaping
from the defendant's canal. The defendant contended that irrigation districts
were agencies of the state, and were, therefore, not liable for the negligent
construction or operation of their canals or ditches. The court, after a careful
review of the authorities defining an irrigation district, conceded that such a
quasi public corporation possessed some governmental powers and
exercised some governmental functions, but held that the construction and
operation of its irrigation canals and ditches was a proprietary rather than a
governmental function, and hence the district was responsible in damages
for the negligent construction or operation of its canal system. (69 A.L.R., p.
1233)
It may not be amiss to state at this point that 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 Solicitor General argues that
the reasons presented by P.D. 552 for the existence of the NIA (the
WHEREAS clauses of said decree) indubitably reveal that the responsibility
vested in said agency concerns public welfare and public benefit, and is
therefore an exercise of sovereignty. On the contrary, We agree with the
former Chief Justice Concepcion in saying that the same purpose such as
public benefit and public welfare may be found in the operation of certain
enterprises (those engaged in the supply of electric power, or in supplying
telegraphic, telephonic, and radio communication, or in the production and
distribution of prime necessities, etc.) yet it is certain that the functions
performed by such enterprises are basically proprietary in nature. Thus, as
held in Holderbaum vs. Hidalgo County Water Improvement District (297
S.W. 865, aff'd in 11 S.W. [2d] 506) — cited in the dissenting opinion by
Justice Concepcion:
. . . Primarily, a water improvement district is in no better position than a city
is when exercising its purely local powers and duties. Its general purposes
are not essentially public in their nature, but are only incidentally so; those
purposes may be likened to those of a city which is operating a waterworks
system, or an irrigation system. . . . A water improvement district can do
nothing, it has and furnishes no facilities, for the administration of the
sovereign government. Its officers have no power or authority to exercise any
of the functions of the general government, or to enforce any of the laws of
the state or any of its other subdivisions, or collect taxes other than those
assessed by the district. They have no more power or authority than that of
the officers of a private corporation organized for like purposes. As a
practical matter, the primary objects and purposes of such district are of a
purely local nature, for the district is created and operated for the sole benefit
of its own members, and an analysis of those objects and purposes discloses
that they directly benefit only the landowners who reside within and whose
lands form a part of the district, to the exclusion of all other residents therein.
It is true, of course, that the state and the general public are greatly benefited
by the proper operation of the district, and to that extent its objects and
accomplishments are public in their nature, but this characteristic is only
incidental to the primary and chief object of the corporation, which is the
irrigation of lands forming a part of the district. It is obvious, then, that the
purposes and duties of such districts do not come within the definition of
public rights, purposes, and duties which would entitle the district to the
exemption raised by the common law as a protection to corporations having
a purely public purpose and performing essentially public duties.
Of equal importance is the case of National Waterworks and Sewerage
Authority (NAWASA) vs. NWSA Consolidated Unions, 11 SCRA 766, which
propounds the thesis that "the NAWASA is not an agency performing
governmental functions; rather it performs proprietary functions . . . ." The
functions of providing water supply and sewerage service are regarded as
mere optional functions of government even though the service rendered
caters to the community as a whole and the goal is for the general interest of
society. The business of furnishing water supply and sewerage service, as
held in the case of Metropolitan Water District vs. Court of Industrial
Relations, et al., 91 Phil. 840, "may for all practical purposes be likened to an
industry engaged in by coal companies, gas companies, power plants, ice
plants, and the like." Withal, it has been enunciated that "although the State
may regulate the service and rates of water plants owned and operated by
municipalities, such property is not employed for governmental purposes and
in the ownership and operation thereof the municipality acts in its proprietary
capacity, free from legislative interference." (1 McQuillin, p. 683)
Like the NAWASA, 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.
We must not lose sight of the fact that the 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.
Thus,
b) . . . Judicial actions for the collection of unpaid irrigation fees or
charges, drainage fees or other charges which the National Irrigation
Administration is authorized to impose and collect, shall henceforth be
governed by the provisions of the Rules of Court of the Philippines for similar
actions, the provisions of other laws to the contrary notwithstanding.
xxx xxx xxx
(e) ....
xxx xxx xxx
All actions for the recovery of compensation and damages against the
National Irrigation Administration under paragraphs (1), (2), and (3) hereof,
shall be filed with a competent court within five (5) years from the date of
entry of the land or destruction of the improvements or crops, after which
period, the right of possession and/or ownership of the National Irrigation
Administration shall be considered vested and absolute. All other actions for
the recovery of compensation and damages to private property and
improvements occasioned by the construction, operation and maintenance of
irrigation facilities and other hydraulic structures under the administration of
the National Irrigation Administration, which have accrued ten (10) or more
years prior to the approval of this decree are deemed to have prescribed and
are barred forever.
It has its own assets and liabilities. It also has corporate powers to be
exercised by a Board of Directors. To quote Section 2, subsection (f):
(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. (Emphasis supplied).
On the basis of the foregoing considerations, We conclude that the National
Irrigation Administration is a government agency with a juridical personality
separate and distinct from the government. It is not a mere agency of the
government but a corporate body performing proprietary functions.
Therefore, it may be held liable for the damages caused by the negligent act
of its driver who was not its special agent.
ACCORDINGLY, the Motion for Reconsideration dated January 26, 1990 is
DENIED WITH FINALITY. The decision of this Court in G.R. No. 55963 and
G.R. No. 61045 dated December 1, 1989 is hereby AFFIRMED.
Gancayco, Bidin, Sarmiento, Griño-Aquino, Medialdea and Regalado, JJ.,
concur.
Gutierrez, Jr., Fernan, C.J. and Melencio-Herrera, JJ., concur in the result.
, J., concur in the result and in Mr. Justice Feliciano's concurrence.
Separate Opinions
FELICIANO, J., concurring:
I agree with the result reached by my distinguished brother in the Court, Mr.
Justice Edgardo L. Paras, both in the Decision of the Court's Second Division
dated 1 December 1989 (179 SCRA 685 [1989]) and in the present
Resolution on the motion for reconsideration, which has been referred to the
Court En Banc.
I agree, in other words, that the National Irrigation Administration (NIA) is
liable for the acts of its employee Hugo Garcia which resulted in injury to the
spouses Jose Fontanilla and Virginia Fontanilla. However, I reach this result
through a slightly different route which is traced below.
In the original decision of the Court's Second Division, it is stated that:
Certain functions and activities, which can be performed only by the
Government, are more or less generally agreed to be "governmental" in
character, and so the State is immune from tort liability. On the other hand, a
service which night as well be provided by a private corporation, and
particularly when it collects revenues from it, the function is considered a
"proprietary" one, as to which there may be liability for the torts of agents
within the scope of their employment.
The original Decision and the Resolution on the motion for reconsideration
hold that the NIA is "an agency of the government exercising proprietary
functions."
I would respectfully submit that the liability of an agency or instrumentality of
the Government for torts of its employees under Article 2180, 6th paragraph,
of the Civil Code is not contingent upon the technical characterization of the
functions or activities carried out by that agency or instrumentality as
"governmental," on the one hand, or "proprietary," upon the other.
In the first place, it is merely commonplace to note that governments in our
day and age do not restrict themselves to the original basic and primitive
functions of repelling invasion by a foreign enemy, maintaining peace and
order in society and protecting the physical integrity or the food supplies of its
citizens or inhabitants, but instead assumed and carry out all kinds of
activities which they may determine to redound to the general interest and
benefit of the population. Thus, the classical laissez-faire concept of a state,
which prevailed during the 19th century, has today been replaced by the
concept of the welfare state. Moreover, activities which in other states more
economically advanced than our own have been undertaken by private
enterprise, are here still being carried out by the Government or, more
generally, the public sector in view of the inadequacy of private capital and
private entrepreneurial spirit.
Secondly, under Section 2(l) of Article IX of the Constitution, whether or not a
government owned or controlled corporation or entity forms part of the
Government and is embraced within the civil service depends, not upon the
"governmental," as distinguished from "proprietary," nature of the activities
performed by such entity or corporation, but rather upon whether or not the
corporation or entity is possessed of an "original charter." Thus, it appears to
me that the framers of the 1987 Constitution had given up the notion of trying
to distinguish between "governmental" and "proprietary" functions for
purposes of determining whether employees of a particular agency or
instrumentality should be governed by the Civil Service Law and Regulations
or, alternatively, by the Labor Code and its Implementing Regulations
administered by the National Labor Relations Commission and the
Department of Labor and Employment.
Article 2180 of the Civil Code provides in part as follows:
xxx xxx xxx
Employers shall be liable for the damage caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or entity.
The State is responsible in like manner when it acts through a special agent;
but not when the damage has been caused by the official to whom the task
done properly pertains, in which case what is provided in Article 2176 shall
be applicable.
xxx xxx xxx
(Emphasis supplied)
My basic submission that the term "State" as used above properly refers to
the "Government of the Republic of the Philippines." This latter term is
defined in Section 2 of the Revised Administrative Code of 1987 in the
following manner:
The Government of the Republic of the Philippines refers to the corporate
governmental entity through which the functions of government are exercised
throughout the Philippines, including save as the contrary appears from the
context, the various arms through which political authority is made effective
in the Philippines, whether pertaining to the autonomous regions, the
provincial, city, municipal or barangay subdivisions or other forms of local
government. (Emphasis supplied)
In other words, the term "State" as used in Article 2180 of the Civil Code
refers to that juridical person that is constituted b the Government of the
Republic of the Philippines and logically does not include agencies,
instrumentalities or other entities which their enabling laws have invested
with juridical personality separate and distinct from that of the Republic of the
Philippines.
It should be noted in this connection, that in Merritt v. Government of the
Philippine Islands (34 Phil. 311 [1960]), the Court said:
It is therefore evident that the State (the Government of the Philippine
Islands) is only liable, according to the above quoted decisions of the
Supreme Court of Spain, for acts of its agents, officers and employees when
they act as special agents within the meaning of paragraph 5 of Article 1903
[of the Civil Code of Spain of 1889] and that the chauffeur of the ambulance
of the General Hospital was not such an agent. (Emphasis supplied;
parentheses in the original; 34 Phil. at 323)
Clearly, Mr. Justice Trent considered "the State" and "the Government of the
Philippine Islands" as equivalent terms. The decision of the Supreme Court
of Spain dated 7 January 1898 which the Court in Merritt cited, read in part
as follows:
That the obligation to indemnify for damages, which a third person causes to
another by his fault or negligence is based, as is evidenced by the same Law
3, title 15, Partida 7, on that the person obligated, by his own fault or
negligence, takes part in the act or omission of the third party who caused
the damage. It follows therefrom that the State, by virtue of such provisions
of law, is not responsible for the damages suffered by private individual in
consequence of acts performed by its employees in the discharge of the
functions pertaining to their office, because neither fault nor even negligence
can be presumed on the part of the State in the organization of branches of
the public service and in the appointment of its agents; on the contrary, we
must presuppose all foresight humanly possible on its part in order that each
branch of service serves the general weal and that of private persons
interested in its operation. Between these latter and the State, therefore, no
relations of a Private nature governed by the civil law can arise except in a
case where the state acts as a [juridical] person capable of acquiring rights
and contracting obligation (Emphases and brackets supplied)
The term "juridical" person was translated (by Mr. Justice Trent?) as "judicial"
person. This appears plain error for the judgment of 7 January 1898 in fact
read:
. . . entre los cuales y el Estado, por tanto, no pueden surgir relaciones de
orden privado regidas por el derecho civil, salvo el caso de que el mismo
Estado obre como persona juridica capaz de adquirir derechos y contraer
obligaciones:
xxx xxx xxx
(Emphasis supplied; 83 Jurisprudencia Civil 36 [1898])
Thus, the decision of the Supreme Court of Spain itself recognized that
between private persons and the State, relations of a private nature
governed by the Civil Code can arise where the State acts as or through the
medium of a separate juridical person that is capable of acquiring lights and
entering into obligations.
In the present case, there is no question that the NIA has juridical personality
separate and distinct from that of the Government of the Republic of the
Philippines which owns all NIA's capital and assets. In other words, the NIA
is not part of the "State" or of the "Government of the Republic of the
Philippines"; it follows, I respectfully submit, that the NIA should not be
regarded as part of the State for purposes of application of Article 2180 of the
Civil Code.
What I have outlined above is in fact very close to the position taken by Mr.
Justice Paras in the Resolution on the motion for reconsideration. For he has
rightly stressed that the NIA has clearly been invested with a distinct legal
personality and thus with capacity to sue and be sued. Judicial actions may
be brought by the NIA for the collection of unpaid irrigation fees, drainage
fees or other charges which the NIA is authorized to impose and collect,
under the provisions of the Rules of Court. Correlatively, actions against the
NIA for the recovery of compensation and damages are expressly allowed
and prescribe in either five (5) or ten (10) years depending upon the subject
matter thereof. The State itself has determined, in other words, that the NIA
shall not be covered by the general immunity from suit without its consent
pertaining to the State.
Finally, the Resolution underscores the fact that under Section 2(f) of the NIA
charter, the NIA is generally authorized "to exercise all the powers of a
corporation under the Corporation Law, insofar as they are not inconsistent
with the provisions of [the NIA charter]." Since the NIA has been vested with
an the powers of a corporate person, it seems only reasonable to believe that
it is at the same time subjected to all the ordinary liabilities of a corporate
person: one of those liabilities is the vicarious liability of an employer under
Article 2180 of the Civil Code, 6th paragraph, for injurious acts done by its
employees within the scope of their assigned tasks.
I suggest then that the investing of an agency or instrumentality of the
Government with separate juridical personality is not a matter of "form" as
suggested by my equally distinguished brother in the Court, Mr. Justice
Padilla, in his dissenting opinion. The effect of the foregoing provisions of its
charter may be seen to be clearly a matter of "substance": to render the NIA
both suable and liable on the same causes of action which may be asserted
against any corporate entity that is a separate juridical person.
It seems also relevant to point out that the Philippine General Hospital
(PGH), the agency or instrumentality involved in the Merritt case, did not (in
contrast with the NIA) have legal personality separate and distinct from that
of the Philippine Government at the time that Merritt was decided. The PGH
was established under Act No. 1688 of the Philippine Commission as a
division of the Bureau of Health, a non-incorporated entity. Later, it was
removed from the administrative jurisdiction of the Bureau of Health and
made into an independent bureau under the supervision of the Department of
the Interior. Still later, the PGH was placed under the Department of
Instruction and subsequently, under the Office of the President. In 1947, by
virtue of Executive Order No. 94, the PGH was made a part of the University
of the Philippines, itself a separate corporate entity. Clearly, therefore, at the
time Merritt was decided, the PGH was part and parcel of the Government of
the Republic of the Philippines as defined by the Revised Administrative
Code of 1917.
For all the foregoing, I vote to DENY the motion for reconsideration and to
AFFIRM the Decision dated 1 December 1989 in G.R. Nos. 55963 and
61045.
Narvasa and Cruz, JJ., concur.
PADILLA, J., dissenting:
On 1 December 1989, this Court, through its Second Division, rendered a
decision declaring petitioner National Irrigation Administration (NIA, for
brevity) a government agency performing proprietary functions. Like an
ordinary employer, NIA was held liable for the injuries, resulting in death, of
Francisco Fontanilla, caused by the fault and/or negligence of NIA's driver
employee Hugo Garcia; and NIA was ordered to pay petitioner spouses
Fontanilla, the victim's parents, the amounts of P12,000.00 for the death of
the victim; P3,389.00 for hospitalization and burial expenses; P30,000.00 as
moral damages; P8,000.00 as exemplary damages, and attorney's fees of
20% of the total award.
Assailing the said decision of this Court, NIA filed the present Motion for
Reconsideration, alleging that NIA does not perform solely or primarily
proprietary functions but is an agency of the government tasked with
governmental functions; thus, it may not be held liable for damages for
injuries caused by its employee to a third person. Citing PD 552, NIA argues
that its functions and responsibilities directly concern public benefit and
public welfare.
To start with, NIA is an agency of the government with an original charter.1
Section 1 of Republic Act 3601 provides:
Sec. 1. Name and domicile. –– A body corporate is hereby created which
shall be known as the National Irrigation Administration, hereinafter called
the NIA for short, 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.
NIA's said charter confers upon it a separate juridical personality to exercise
all the powers of a corporation under the Corporation Law, insofar as they
are not inconsistent with said charter.2
Under PD 552 amending NIA's original charter, it is made clear that said
agency was created primarily for the purpose of undertaking integrated
irrigation projects, by the construction of multiple-purpose water resource
projects to increase agricultural production for the financial upliftment of the
people. In relation to its purpose, NIA has the power and authority to
undertake concomitant projects, such as, flood control, drainage, land
reclamation, hydraulic power development, domestic water supply, road or
highway construction, reforestation and projects to maintain ecological
balance, in coordination with other agencies concerned. Thus —
WHEREAS, the enunciation policy is for a comprehensive development,
utilization and conservation of water resources of the Philippines, and in
pursuit of its policy, one of the primary objectives of the National Irrigation
Administration is to effectuate an economic means of achieving the optimal
and diversified utilization and control of water by undertaking integrated
litigation projects.
WHEREAS, the National Irrigation Administration assumes as its primary
responsibility, the implementation of the irrigation integrated program of the
government and the attainment of the "Irrigation Age", as envisioned under
Republic Act No. 3601;
WHEREAS, an effective means of implementing multiple-purpose projects in
line with program-oriented and comprehensive water resources development
necessitates broader powers and authority of the NIA to undertake
concomitant projects such as flood control, drainage, land reclamation,
hydraulic power development, domestic water supply, road or highway
construction, reforestation, and projects to maintain ecological balance, in
coordination with the agencies concerned;
WHEREAS, the construction of multiple-purpose water resources projects
involves substantial investment of government funds to increase agricultural
production for the financial upliftment of the People for them to be able to
assume and comply with their obligations and responsibilities to the
government.
NIA is thus maintained and operated by the government in the performance
of its governmental function of providing the Filipino people, particularly, the
farmers nationwide, improved irrigation systems to increase the country's
agricultural production. Only the government has the capacity and facilities to
successfully undertake a project or venture of such magnitude. That the NIA
is empowered to charge minimal fees from all the beneficiaries of the
irrigation systems that it establishes and operates, does not change the
nature of the function or purpose for which it was created. The fees that are
collected by NIA are used to cover the cost of operation, maintenance,
insurance, cost of construction, and the rehabilitation of irrigation systems.3
Such monetary charges do not constitute monetary gain or profit to NIA, but
are merely reimbursements of the operational cost of the agency's projects.
It cannot be denied that public service is the thrust in the creation of NIA in
contrast to a business venture or proprietary enterprise for monetary gain.
That the NIA is also empowered to enter into transactions in order to acquire
real and personal properties, appurtenant rights, easements, privileges in the
development of its projects4 and enter into other business transactions, does
not mean that it performs proprietary functions, for it is expressly provided in
its charter that the business transactions it may enter into are only those
which are directly or indirectly necessary, incidental or conducive to the
attain-judgment of its purposes and objectives.5
Furthermore, the fact that its charter treats the NIA as incorporated under the
Corporation Law, and confers upon it a separate juridical personality, is not
the test in determining whether it is performing a governmental or proprietary
function. The spirit, intent or purpose behind its creation determines its true
character. It has been held that were the nature of the duties imposed on an
agency and performed by it does not reveal that it was intended to bring any
special corporate benefit or pecuniary profit to the government, said agency
is deemed to be exercising a governmental function.6
After having established that the NIA is a government agency, with an
original charter, possessed of juridical personality under the Corporation
Law, and performing governmental functions, it is equally important to
determine whether (1) the sovereign immunity of the state from suit is
enjoyed, or has been waived by NIA and (2) the NIA is liable for damages
arising from tort committed by its employees.

For incorporated agencies of the government, the test of its suability is found
in its charter. The simple rule is that it is suable if its charter says so, and this
is true regardless of the functions it is performing.7 The charter of the NIA
provides that it may sue and be sued, thus, consent of the state for NIA to be
sued has been given,8 so that the rule, on immunity from suit normally
extended to government agencies performing governmental functions is no
longer available to NIA. By waiving that immunity from suit in its charter, it
would appear that NIA has opened itself to suits based on causes of action
arising from law, contracts, quasi-contracts, delicts, and even quasi-delicts.
But to say that NIA has opened itself to suit is one thing; to say that it is liable
for damages arising from tort committed by its employees, is still another
thing.
As discussed in the now assailed decision, pursuant to the provisions of
substantive law on quasi-delict, whoever by his act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the
damage caused.9 The obligation imposed by the foregoing rule is
demandable not only for one's own acts or omissions, but also for those of
persons for whom one is responsible, such that an employer is held liable for
damages caused by its employees who were acting within the scope of their
assigned tasks.10
But the state or a government agency performing governmental functions
may be held liable for tort committed by its employees only when it acts
through a special agent.11
This is not the first time this Court is confronted with a situation akin to the
one at bar. In Merritt vs. Government of the Phil. Islands,12 the plaintiff was
hit by an ambulance of the Philippine General Hospital, while operated by its
regular driver. Since the Philippine government was immune from suit, Act
No. 2457 was approved by the Philippine legislature which authorized Merritt
to sue the Philippine government in the CFI in order to fix the responsibility
for the collision and to determine the amount or extent of the damages.
In due course, it was determined that the ambulance operated by the
General Hospital's regular driver was responsible for the mishap. The
damages sustained by Merritt as a result of the accident was likewise
quantified by the trial court and ultimately increased by the Supreme Court.
But then the crucial question remained thus —
Did the defendant, in enacting the above quoted Act, simply waive its
immunity from suit or did it also concede its liability to the plaintiff? If only the
former, then it cannot be held that no Act created any new cause of action in
favor of the plaintiff or extended the defendant's liability to any case not
previously recognized.
The Court answered its own query thus —
In the United States the rule that the state is not liable for the torts committed
by its officers or agents whom it employs, except when expressly made so by
legislative enactment, is well settled. "The Government," says Justice Story,
"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. (Claussen vs. City of Luverne 103 Minn 491 citing U.S.
vs. Kirkpatrick 9 Wheat, 720; 6 L.Ed., 199; and Beers vs. State, 20 How.,
527; 15 L.Ed., 991.)
xxx xxx xxx
. . . we will now examine the substantive law touching the defendant's liability
for the negligent acts of its officers, agents, and employees. Paragraph 5 of
article 1903 of the Civil Code reads:
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 Supreme Court of Spain in defining the scope of this paragraph said:
That the obligation to indemnify for damages which a third person causes to
another by his fault or negligence is based, as is evidenced by the same Law
3, Title 15, Partida 7, on that the person obligated, by his own fault or
negligence, takes part in the act or omission of the third party who caused
the damage. It follows therefrom that the state, by virtue of such provisions of
law, is not responsible for the damages suffered by private individuals in
consequence of acts performed by its employees in the discharge of the
functions pertaining to their office, because neither fault nor even negligence
can be presumed on the part of the state organization of branches of the
public service and in the appointment of its agents; on the contrary, we must
presuppose all foresight humanly possible on its part in order that each
branch of service serves the general weal and that of private persons
interested in its operation. Between these latter and the state, therefore, no
relations of a private nature governed by the civil law can arise except in a
case where the state acts as a judicial person capable of acquiring rights and
contracting obligations. (Supreme Court of Spain, January 7, 1988; 83 Jur.
Civ. 24.)
The dispositive part of the Merritt decision states:
For the foregoing reasons, the judgment appealed from must be reversed,
without costs in this instance. Whether the Government intends to make itself
legally liable for the amount of damages above set forth, which the plaintiff
has sustained by reason of the negligent acts of one of its employees, by
legislative enactment and by appropriating sufficient funds therefor, we are
not called upon to determine. This matter rests solely with the Legislature
and not with the courts.
This Court in the now assailed decision found that NIA was negligent in the
supervision of its driver Hugo Garcia who bumped petitioner-spouses' son,
causing the death of the latter —
It should be emphasized that the accident happened along the Marikina
National Road within the city limits of San Jose City, an urban area.
Considering the fact that the victim was thrown 50 meters away from the
point of impact, there is a strong indication that driver Garcia was driving at a
high speed. This is confirmed by the fact that the pick-up suffered substantial
and heavy damage as above-described and the fact that the NIA group was
then "in a hurry to reach the campsite as early as possible", as shown by
their not stopping to find out what they bumped as would have been their
normal and initial reaction.
Evidently, there was negligence in the supervision of the driver for the reason
that they were traveling at a high speed within the city limits and yet the
supervisor of the group, Ely Salonga, failed to caution and make the driver
observe the proper and allowed speed limit within the City. Under the
situation, such negligence is further aggravated by their desire to reach their
destination without even checking whether or not the vehicle suffered
damage from the object it bumped, thus showing imprudence and
recklessness on the part of both the driver and the supervisor in the
group.13
There is thus no doubt that NIA should be held responsible for the negligent
acts of its regular driver, resulting in the death of petitioner-spouses' son,
except that under Article 2180, par. 6 in relation to Article 2176 of the Civil
Code, the state is not liable for tort save when it acts through a special agent,
and Hugo Garcia was not a special agent but NIA's regular driver.
Under the circumstances, and in order not to perpetuate a cruel injustice, I
believe that this Court, while granting the Solicitor General's motion for
reconsideration, should recommend to Congress the enactment of the
appropriate legislation to compensate the petitioner-spouses, parents of the
victim Francisco Fontanilla, and to appropriate the necessary funds therefor,
which could be equal to the amount of damages already determined by this
Court.
During the deliberations of this case, it was suggested that the term "State"
as used in Article 2180, par. 6 of the Civil Code14 could be limited to the
State proper and not construed to include incorporated entities even if
performing governmental functions, such as the NIA. The intended effect of
this suggestion would be to render only the State, meaning, the government
of the Republic of the Philippines and its unincorporated agencies, such as
government bureaus, exempt from liability for tort committed by their officials
and employees, except their special agents, but incorporated governmental
entities, even if performing governmental (as distinguished from business
functions) will be liable for the tort committed by their officials and
employees.
I am of the considered opinion that the aforestated suggestion is untenable
because it would lay stress on form rather than substance. To me, the test
should still be whether the governmental entity performs governmental and,
therefore, sovereign functions, regardless of whether it is incorporated or not.
If the government agency performs governmental and, therefore, sovereign
functions, such as the NIA, it is within the context of the term "State" as used
in Art. 2180, par. 6 of the Civil Code and may not, as a consequence, be held
liable for tort committed by its officials and employees, except when they are
"special agents."
From the ruling of this Court in Manila Hotel Employees Asso. vs. Manila
Hotel,15 which states that by "engaging in a particular business thru the
instrumentality of a corporation, the government divests itself pro hoc vice of
its sovereign character, so as to render the corporation subject to the rules
governing private corporations," it can be reasonably inferred that it is the
business character of the corporation and not its corporate form which
divests it of the immunity (and, similarly, exemption from liability for tort
committed by its employees) which its owner-sovereign enjoys. In the case of
Prisco vs.
CIR,16 the suability and liability under labor laws of the Price Stabilization
Corporation was based not really on its corporate form but on its abdication
of sovereign prerogatives by its descent to the level of an ordinary business
operation.17

In an advisory opinion of the Supreme Court of the State of Michigan with
respect to the creation of the state housing authority, it was held that a state
agency intended to take measures to promote construction of housing,
performs a proper governmental function, and that the grant of corporate
powers to such an agency makes it a quasi-corporation only but it remains
an instrumentality of the state. Such quasi-corporations are described as
bodies of citizens who have no personal nor private interests to be
subserved, but are simply required by the state to do some public work. The
state merely clothes one of its agencies or instrumentalities with such
corporate powers. It is neither a private corporation but a class of artificial
entity.18 The NIA qualifies as a quasi-corporation, retaining at all times the
attributes and prerogatives of the sovereign State which entirely owns and
operates it.
FOR THE FOREGOING REASONS, I vote to GRANT the Motion for
Reconsideration and to SET ASIDE the decision of this Court dated 1
December 1989, subject to the recommendation to Congress as earlier
stated.
Separate Opinions
FELICIANO, J., concurring:
I agree with the result reached by my distinguished brother in the Court, Mr.
Justice Edgardo L. Paras, both in the Decision of the Court's Second Division
dated 1 December 1989 (179 SCRA 685 [1989]) and in the present
Resolution on the motion for reconsideration, which has been referred to the
Court En Banc.
I agree, in other words, that the National Irrigation Administration (NIA) is
liable for the acts of its employee Hugo Garcia which resulted in injury to the
spouses Jose Fontanilla and Virginia Fontanilla. However, I reach this result
through a slightly different route which is traced below.
In the original decision of the Court's Second Division, it is stated that:
Certain functions and activities, which can be performed only by the
Government, are more or less generally agreed to be "governmental" in
character, and so the State is immune from tort liability. On the other hand, a
service which night as well be provided by a private corporation, and
particularly when it collects revenues from it, the function is considered a
"proprietary" one, as to which there may be liability for the torts of agents
within the scope of their employment.
The original Decision and the Resolution on the motion for reconsideration
hold that the NIA is "an agency of the government exercising proprietary
functions."
I would respectfully submit that the liability of an agency or instrumentality of
the Government for torts of its employees under Article 2180, 6th paragraph,
of the Civil Code is not contingent upon the technical characterization of the
functions or activities carried out by that agency or instrumentality as
"governmental," on the one hand, or "proprietary," upon the other.
In the first place, it is merely commonplace to note that governments in our
day and age do not restrict themselves to the original basic and primitive
functions of repelling invasion by a foreign enemy, maintaining peace and
order in society and protecting the physical integrity or the food supplies of its
citizens or inhabitants, but instead assumed and carry out all kinds of
activities which they may determine to redound to the general interest and
benefit of the population. Thus, the classical laissez-faire concept of a state,
which prevailed during the 19th century, has today been replaced by the
concept of the welfare state. Moreover, activities which in other states more
economically advanced than our own have been undertaken by private
enterprise, are here still being carried out by the Government or, more
generally, the public sector in view of the inadequacy of private capital and
private entrepreneurial spirit.
Secondly, under Section 2(l) of Article IX of the Constitution, whether or not a
government owned or controlled corporation or entity forms part of the
Government and is embraced within the civil service depends, not upon the
"governmental," as distinguished from "proprietary," nature of the activities
performed by such entity or corporation, but rather upon whether or not the
corporation or entity is possessed of an "original charter." Thus, it appears to
me that the framers of the 1987 Constitution had given up the notion of trying
to distinguish between "governmental" and "proprietary" functions for
purposes of determining whether employees of a particular agency or
instrumentality should be governed by the Civil Service Law and Regulations
or, alternatively, by the Labor Code and its Implementing Regulations
administered by the National Labor Relations Commission and the
Department of Labor and Employment.
Article 2180 of the Civil Code provides in part as follows:

xxx xxx xxx
Employers shall be liable for the damage caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or entity.
The State is responsible in like manner when it acts through a special agent;
but not when the damage has been caused by the official to whom the task
done properly pertains, in which case what is provided in Article 2176 shall
be applicable.
xxx xxx xxx
(Emphasis supplied)
My basic submission that the term "State" as used above properly refers to
the "Government of the Republic of the Philippines." This latter term is
defined in Section 2 of the Revised Administrative Code of 1987 in the
following manner:
The Government of the Republic of the Philippines refers to the corporate
governmental entity through which the functions of government are exercised
throughout the Philippines, including save as the contrary appears from the
context, the various arms through which political authority is made effective
in the Philippines, whether pertaining to the autonomous regions, the
provincial, city, municipal or barangay subdivisions or other forms of local
government. (Emphasis supplied)
In other words, the term "State" as used in Article 2180 of the Civil Code
refers to that juridical person that is constituted b the Government of the
Republic of the Philippines and logically does not include agencies,
instrumentalities or other entities which their enabling laws have invested
with juridical personality separate and distinct from that of the Republic of the
Philippines.
It should be noted in this connection, that in Merritt v. Government of the
Philippine Islands (34 Phil. 311 [1960]), the Court said:
It is therefore evident that the State (the Government of the Philippine
Islands) is only liable, according to the above quoted decisions of the
Supreme Court of Spain, for acts of its agents, officers and employees when
they act as special agents within the meaning of paragraph 5 of Article 1903
[of the Civil Code of Spain of 1889] and that the chauffeur of the ambulance
of the General Hospital was not such an agent. (Emphasis supplied;
parentheses in the original; 34 Phil. at 323)
Clearly, Mr. Justice Trent considered "the State" and "the Government of the
Philippine Islands" as equivalent terms. The decision of the Supreme Court
of Spain dated 7 January 1898 which the Court in Merritt cited, read in part
as follows:
That the obligation to indemnify for damages, which a third person causes to
another by his fault or negligence is based, as is evidenced by the same Law
3, title 15, Partida 7, on that the person obligated, by his own fault or
negligence, takes part in the act or omission of the third party who caused
the damage. It follows therefrom that the State, by virtue of such provisions
of law, is not responsible for the damages suffered by private individual in
consequence of acts performed by its employees in the discharge of the
functions pertaining to their office, because neither fault nor even negligence
can be presumed on the part of the State in the organization of branches of
the public service and in the appointment of its agents; on the contrary, we
must presuppose all foresight humanly possible on its part in order that each
branch of service serves the general weal and that of private persons
interested in its operation. Between these latter and the State, therefore, no
relations of a Private nature governed by the civil law can arise except in a
case where the state acts as a [juridical] person capable of acquiring rights
and contracting obligation (Emphases and brackets supplied)
The term "juridical" person was translated (by Mr. Justice Trent?) as "judicial"
person. This appears plain error for the judgment of 7 January 1898 in fact
read:
. . . entre los cuales y el Estado, por tanto, no pueden surgir relaciones de
orden privado regidas por el derecho civil, salvo el caso de que el mismo
Estado obre como persona juridica capaz de adquirir derechos y contraer
obligaciones:
xxx xxx xxx
(Emphasis supplied; 83 Jurisprudencia Civil 36 [1898])
Thus, the decision of the Supreme Court of Spain itself recognized that
between private persons and the State, relations of a private nature
governed by the Civil Code can arise where the State acts as or through the
medium of a separate juridical person that is capable of acquiring lights and
entering into obligations.
In the present case, there is no question that the NIA has juridical personality
separate and distinct from that of the Government of the Republic of the
Philippines which owns all NIA's capital and assets. In other words, the NIA
is not part of the "State" or of the "Government of the Republic of the
Philippines"; it follows, I respectfully submit, that the NIA should not be
regarded as part of the State for purposes of application of Article 2180 of the
Civil Code.
What I have outlined above is in fact very close to the position taken by Mr.
Justice Paras in the Resolution on the motion for reconsideration. For he has
rightly stressed that the NIA has clearly been invested with a distinct legal
personality and thus with capacity to sue and be sued. Judicial actions may
be brought by the NIA for the collection of unpaid irrigation fees, drainage
fees or other charges which the NIA is authorized to impose and collect,
under the provisions of the Rules of Court. Correlatively, actions against the
NIA for the recovery of compensation and damages are expressly allowed
and prescribe in either five (5) or ten (10) years depending upon the subject
matter thereof. The State itself has determined, in other words, that the NIA
shall not be covered by the general immunity from suit without its consent
pertaining to the State.
Finally, the Resolution underscores the fact that under Section 2(f) of the NIA
charter, the NIA is generally authorized "to exercise all the powers of a
corporation under the Corporation Law, insofar as they are not inconsistent
with the provisions of [the NIA charter]." Since the NIA has been vested with
an the powers of a corporate person, it seems only reasonable to believe that
it is at the same time subjected to all the ordinary liabilities of a corporate
person: one of those liabilities is the vicarious liability of an employer under
Article 2180 of the Civil Code, 6th paragraph, for injurious acts done by its
employees within the scope of their assigned tasks.
I suggest then that the investing of an agency or instrumentality of the
Government with separate juridical personality is not a matter of "form" as
suggested by my equally distinguished brother in the Court, Mr. Justice
Padilla, in his dissenting opinion. The effect of the foregoing provisions of its
charter may be seen to be clearly a matter of "substance": to render the NIA
both suable and liable on the same causes of action which may be asserted
against any corporate entity that is a separate juridical person.
It seems also relevant to point out that the Philippine General Hospital
(PGH), the agency or instrumentality involved in the Merritt case, did not (in
contrast with the NIA) have legal personality separate and distinct from that
of the Philippine Government at the time that Merritt was decided. The PGH
was established under Act No. 1688 of the Philippine Commission as a
division of the Bureau of Health, a non-incorporated entity. Later, it was
removed from the administrative jurisdiction of the Bureau of Health and
made into an independent bureau under the supervision of the Department of
the Interior. Still later, the PGH was placed under the Department of
Instruction and subsequently, under the Office of the President. In 1947, by
virtue of Executive Order No. 94, the PGH was made a part of the University
of the Philippines, itself a separate corporate entity. Clearly, therefore, at the
time Merritt was decided, the PGH was part and parcel of the Government of
the Republic of the Philippines as defined by the Revised Administrative
Code of 1917.
For all the foregoing, I vote to DENY the motion for reconsideration and to
AFFIRM the Decision dated 1 December 1989 in G.R. Nos. 55963 and
61045.
Narvasa and Cruz, JJ., concur.
PADILLA, J., dissenting:
On 1 December 1989, this Court, through its Second Division, rendered a
decision declaring petitioner National Irrigation Administration (NIA, for
brevity) a government agency performing proprietary functions. Like an
ordinary employer, NIA was held liable for the injuries, resulting in death, of
Francisco Fontanilla, caused by the fault and/or negligence of NIA's driver
employee Hugo Garcia; and NIA was ordered to pay petitioner spouses
Fontanilla, the victim's parents, the amounts of P12,000.00 for the death of
the victim; P3,389.00 for hospitalization and burial expenses; P30,000.00 as
moral damages; P8,000.00 as exemplary damages, and attorney's fees of
20% of the total award.
Assailing the said decision of this Court, NIA filed the present Motion for
Reconsideration, alleging that NIA does not perform solely or primarily
proprietary functions but is an agency of the government tasked with
governmental functions; thus, it may not be held liable for damages for
injuries caused by its employee to a third person. Citing PD 552, NIA argues
that its functions and responsibilities directly concern public benefit and
public welfare.
To start with, NIA is an agency of the government with an original charter.1
Section 1 of Republic Act 3601 provides:
Sec. 1. Name and domicile. –– A body corporate is hereby created which
shall be known as the National Irrigation Administration, hereinafter called
the NIA for short, 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.
NIA's said charter confers upon it a separate juridical personality to exercise
all the powers of a corporation under the Corporation Law, insofar as they
are not inconsistent with said charter.2
Under PD 552 amending NIA's original charter, it is made clear that said
agency was created primarily for the purpose of undertaking integrated
irrigation projects, by the construction of multiple-purpose water resource
projects to increase agricultural production for the financial upliftment of the
people. In relation to its purpose, NIA has the power and authority to
undertake concomitant projects, such as, flood control, drainage, land
reclamation, hydraulic power development, domestic water supply, road or
highway construction, reforestation and projects to maintain ecological
balance, in coordination with other agencies concerned. Thus —
WHEREAS, the enunciation policy is for a comprehensive development,
utilization and conservation of water resources of the Philippines, and in
pursuit of its policy, one of the primary objectives of the National Irrigation
Administration is to effectuate an economic means of achieving the optimal
and diversified utilization and control of water by undertaking integrated
litigation projects.
WHEREAS, the National Irrigation Administration assumes as its primary
responsibility, the implementation of the irrigation integrated program of the
government and the attainment of the "Irrigation Age", as envisioned under
Republic Act No. 3601;
WHEREAS, an effective means of implementing multiple-purpose projects in
line with program-oriented and comprehensive water resources development
necessitates broader powers and authority of the NIA to undertake
concomitant projects such as flood control, drainage, land reclamation,
hydraulic power development, domestic water supply, road or highway
construction, reforestation, and projects to maintain ecological balance, in
coordination with the agencies concerned;
WHEREAS, the construction of multiple-purpose water resources projects
involves substantial investment of government funds to increase agricultural
production for the financial upliftment of the People for them to be able to
assume and comply with their obligations and responsibilities to the
government.
NIA is thus maintained and operated by the government in the performance
of its governmental function of providing the Filipino people, particularly, the
farmers nationwide, improved irrigation systems to increase the country's
agricultural production. Only the government has the capacity and facilities to
successfully undertake a project or venture of such magnitude. That the NIA
is empowered to charge minimal fees from all the beneficiaries of the
irrigation systems that it establishes and operates, does not change the
nature of the function or purpose for which it was created. The fees that are
collected by NIA are used to cover the cost of operation, maintenance,
insurance, cost of construction, and the rehabilitation of irrigation systems.3
Such monetary charges do not constitute monetary gain or profit to NIA, but
are merely reimbursements of the operational cost of the agency's projects.
It cannot be denied that public service is the thrust in the creation of NIA in
contrast to a business venture or proprietary enterprise for monetary gain.
That the NIA is also empowered to enter into transactions in order to acquire
real and personal properties, appurtenant rights, easements, privileges in the
development of its projects4 and enter into other business transactions, does
not mean that it performs proprietary functions, for it is expressly provided in
its charter that the business transactions it may enter into are only those
which are directly or indirectly necessary, incidental or conducive to the
attain-judgment of its purposes and objectives.5
Furthermore, the fact that its charter treats the NIA as incorporated under the
Corporation Law, and confers upon it a separate juridical personality, is not
the test in determining whether it is performing a governmental or proprietary
function. The spirit, intent or purpose behind its creation determines its true
character. It has been held that were the nature of the duties imposed on an
agency and performed by it does not reveal that it was intended to bring any
special corporate benefit or pecuniary profit to the government, said agency
is deemed to be exercising a governmental function.6
After having established that the NIA is a government agency, with an
original charter, possessed of juridical personality under the Corporation
Law, and performing governmental functions, it is equally important to
determine whether (1) the sovereign immunity of the state from suit is
enjoyed, or has been waived by NIA and (2) the NIA is liable for damages
arising from tort committed by its employees.
For incorporated agencies of the government, the test of its suability is found
in its charter. The simple rule is that it is suable if its charter says so, and this
is true regardless of the functions it is performing.7 The charter of the NIA
provides that it may sue and be sued, thus, consent of the state for NIA to be
sued has been given,8 so that the rule, on immunity from suit normally
extended to government agencies performing governmental functions is no
longer available to NIA. By waiving that immunity from suit in its charter, it
would appear that NIA has opened itself to suits based on causes of action
arising from law, contracts, quasi-contracts, delicts, and even quasi-delicts.
But to say that NIA has opened itself to suit is one thing; to say that it is liable
for damages arising from tort committed by its employees, is still another
thing.
As discussed in the now assailed decision, pursuant to the provisions of
substantive law on quasi-delict, whoever by his act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the
damage caused.9 The obligation imposed by the foregoing rule is
demandable not only for one's own acts or omissions, but also for those of
persons for whom one is responsible, such that an employer is held liable for
damages caused by its employees who were acting within the scope of their
assigned tasks.10
But the state or a government agency performing governmental functions
may be held liable for tort committed by its employees only when it acts
through a special agent.11
This is not the first time this Court is confronted with a situation akin to the
one at bar. In Merritt vs. Government of the Phil. Islands,12 the plaintiff was
hit by an ambulance of the Philippine General Hospital, while operated by its
regular driver. Since the Philippine government was immune from suit, Act
No. 2457 was approved by the Philippine legislature which authorized Merritt
to sue the Philippine government in the CFI in order to fix the responsibility
for the collision and to determine the amount or extent of the damages.
In due course, it was determined that the ambulance operated by the
General Hospital's regular driver was responsible for the mishap. The
damages sustained by Merritt as a result of the accident was likewise
quantified by the trial court and ultimately increased by the Supreme Court.
But then the crucial question remained thus —
Did the defendant, in enacting the above quoted Act, simply waive its
immunity from suit or did it also concede its liability to the plaintiff? If only the
former, then it cannot be held that no Act created any new cause of action in
favor of the plaintiff or extended the defendant's liability to any case not
previously recognized.
The Court answered its own query thus —
In the United States the rule that the state is not liable for the torts committed
by its officers or agents whom it employs, except when expressly made so by
legislative enactment, is well settled. "The Government," says Justice Story,
"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. (Claussen vs. City of Luverne 103 Minn 491 citing U.S.
vs. Kirkpatrick 9 Wheat, 720; 6 L.Ed., 199; and Beers vs. State, 20 How.,
527; 15 L.Ed., 991.)
xxx xxx xxx
. . . we will now examine the substantive law touching the defendant's liability
for the negligent acts of its officers, agents, and employees. Paragraph 5 of
article 1903 of the Civil Code reads:
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 Supreme Court of Spain in defining the scope of this paragraph said:
That the obligation to indemnify for damages which a third person causes to
another by his fault or negligence is based, as is evidenced by the same Law
3, Title 15, Partida 7, on that the person obligated, by his own fault or
negligence, takes part in the act or omission of the third party who caused
the damage. It follows therefrom that the state, by virtue of such provisions of
law, is not responsible for the damages suffered by private individuals in
consequence of acts performed by its employees in the discharge of the
functions pertaining to their office, because neither fault nor even negligence
can be presumed on the part of the state organization of branches of the
public service and in the appointment of its agents; on the contrary, we must
presuppose all foresight humanly possible on its part in order that each
branch of service serves the general weal and that of private persons
interested in its operation. Between these latter and the state, therefore, no
relations of a private nature governed by the civil law can arise except in a
case where the state acts as a judicial person capable of acquiring rights and
contracting obligations. (Supreme Court of Spain, January 7, 1988; 83 Jur.
Civ. 24.)
The dispositive part of the Merritt decision states:
For the foregoing reasons, the judgment appealed from must be reversed,
without costs in this instance. Whether the Government intends to make itself
legally liable for the amount of damages above set forth, which the plaintiff
has sustained by reason of the negligent acts of one of its employees, by
legislative enactment and by appropriating sufficient funds therefor, we are
not called upon to determine. This matter rests solely with the Legislature
and not with the courts.
This Court in the now assailed decision found that NIA was negligent in the
supervision of its driver Hugo Garcia who bumped petitioner-spouses' son,
causing the death of the latter —
It should be emphasized that the accident happened along the Marikina
National Road within the city limits of San Jose City, an urban area.
Considering the fact that the victim was thrown 50 meters away from the
point of impact, there is a strong indication that driver Garcia was driving at a
high speed. This is confirmed by the fact that the pick-up suffered substantial
and heavy damage as above-described and the fact that the NIA group was
then "in a hurry to reach the campsite as early as possible", as shown by
their not stopping to find out what they bumped as would have been their
normal and initial reaction.
Evidently, there was negligence in the supervision of the driver for the reason
that they were traveling at a high speed within the city limits and yet the
supervisor of the group, Ely Salonga, failed to caution and make the driver
observe the proper and allowed speed limit within the City. Under the
situation, such negligence is further aggravated by their desire to reach their
destination without even checking whether or not the vehicle suffered
damage from the object it bumped, thus showing imprudence and
recklessness on the part of both the driver and the supervisor in the group.13
There is thus no doubt that NIA should be held responsible for the negligent
acts of its regular driver, resulting in the death of petitioner-spouses' son,
except that under Article 2180, par. 6 in relation to Article 2176 of the Civil
Code, the state is not liable for tort save when it acts through a special agent,
and Hugo Garcia was not a special agent but NIA's regular driver.
Under the circumstances, and in order not to perpetuate a cruel injustice, I
believe that this Court, while granting the Solicitor General's motion for
reconsideration, should recommend to Congress the enactment of the
appropriate legislation to compensate the petitioner-spouses, parents of the
victim Francisco Fontanilla, and to appropriate the necessary funds therefor,
which could be equal to the amount of damages already determined by this
Court.
During the deliberations of this case, it was suggested that the term "State"
as used in Article 2180, par. 6 of the Civil Code14 could be limited to the
State proper and not construed to include incorporated entities even if
performing governmental functions, such as the NIA. The intended effect of
this suggestion would be to render only the State, meaning, the government
of the Republic of the Philippines and its unincorporated agencies, such as
government bureaus, exempt from liability for tort committed by their officials
and employees, except their special agents, but incorporated governmental
entities, even if performing governmental (as distinguished from business
functions) will be liable for the tort committed by their officials and
employees.
I am of the considered opinion that the aforestated suggestion is untenable
because it would lay stress on form rather than substance. To me, the test
should still be whether the governmental entity performs governmental and,
therefore, sovereign functions, regardless of whether it is incorporated or not.
If the government agency performs governmental and, therefore, sovereign
functions, such as the NIA, it is within the context of the term "State" as used
in Art. 2180, par. 6 of the Civil Code and may not, as a consequence, be held
liable for tort committed by its officials and employees, except when they are
"special agents."
From the ruling of this Court in Manila Hotel Employees Asso. vs. Manila
Hotel,15 which states that by "engaging in a particular business thru the
instrumentality of a corporation, the government divests itself pro hoc vice of
its sovereign character, so as to render the corporation subject to the rules
governing private corporations," it can be reasonably inferred that it is the
business character of the corporation and not its corporate form which
divests it of the immunity (and, similarly, exemption from liability for tort
committed by its employees) which its owner-sovereign enjoys. In the case of
Prisco vs. CIR,16 the suability and liability under labor laws of the Price
Stabilization Corporation was based not really on its corporate form but on its
abdication of sovereign prerogatives by its descent to the level of an ordinary
business operation.17
In an advisory opinion of the Supreme Court of the State of Michigan with
respect to the creation of the state housing authority, it was held that a state
agency intended to take measures to promote construction of housing,
performs a proper governmental function, and that the grant of corporate
powers to such an agency makes it a quasi-corporation only but it remains
an instrumentality of the state. Such quasi-corporations are described as
bodies of citizens who have no personal nor private interests to be
subserved, but are simply required by the state to do some public work. The
state merely clothes one of its agencies or instrumentalities with such
corporate powers. It is neither a private corporation but a class of artificial
entity.18 The NIA qualifies as a quasi-corporation, retaining at all times the
attributes and prerogatives of the sovereign State which entirely owns and
operates it.
FOR THE FOREGOING REASONS, I vote to GRANT the Motion for
Reconsideration and to SET ASIDE the decision of this Court dated 1
December 1989, subject to the recommendation to Congress as earlier
stated.
G.R. No. L-9959 December 13, 1916
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, represented by the
Treasurer of the Philippine Islands, plaintiff-appellee,
vs.
EL MONTE DE PIEDAD Y CAJA DE AHORRAS DE MANILA, defendant-
appellant.
William A. Kincaid and Thomas L. Hartigan for appellant.
Attorney-General Avanceña for appellee.
TRENT, J.:
About $400,000, were subscribed and paid into the treasury of the Philippine
Islands by the inhabitants of the Spanish Dominions of the relief of those
damaged by the earthquake which took place in the Philippine Islands on
June 3, 1863. Subsequent thereto and on October 6 of that year, a central
relief board was appointed, by authority of the King of Spain, to distribute the
moneys thus voluntarily contributed. After a thorough investigation and
consideration, the relief board allotted $365,703.50 to the various sufferers
named in its resolution, dated September 22, 1866, and, by order of the
Governor-General of the Philippine Islands, a list of these allotments,
together with the names of those entitled thereto, was published in the
Official Gazette of Manila dated April 7, 1870. There was later distributed,
inaccordance with the above-mentioned allotments, the sum of $30,299.65,
leaving a balance of S365,403.85 for distribution. Upon the petition of the
governing body of the Monte de Piedad, dated February 1, 1833, the
Philippine Government, by order dated the 1st of that month, directed its
treasurer to turn over to the Monte de Piedad the sum of $80,000 of the relief
fund in installments of $20,000 each. These amounts were received on the
following dates: February 15, March 12, April 14, and June 2, 1883, and are
still in the possession of the Monte de Piedad. On account of various
petitions of the persons, and heirs of others to whom the above-mentioned
allotments were made by the central relief board for the payment of those
amounts, the Philippine Islands to bring suit against the Monte de Piedad a
recover, "through the Attorney-General and in representation of the
Government of the Philippine Islands," the $80.000, together with interest, for
the benefit of those persons or their heirs appearing in the list of names
published in the Official Gazette instituted on May 3, 1912, by the
Government of the Philippine Islands, represented by the Insular Treasurer,
and after due trial, judgment was entered in favor of the plaintiff for the sum
of $80,000 gold or its equivalent in Philippine currency, together with legal
interest from February 28, 1912, and the costs of the cause. The defendant
appealed and makes the following assignment of errors:
1. The court erred in not finding that the eighty thousand dollars
($80,000), give to the Monte de Piedad y Caja de Ahorros, were so given as
a donation subject to one condition, to wit: the return of such sum of money
to the Spanish Government of these Islands, within eight days following the
day when claimed, in case the Supreme Government of Spain should not
approve the action taken by the former government.
2. The court erred in not having decreed that this donation had been
cleared; said eighty thousand dollars ($80,000) being at present the
exclusive property of the appellant the Monte de Piedad y Caja de Ahorros.
3. That the court erred in stating that the Government of the Philippine
Islands has subrogated the Spanish Government in its rights, as regards an
important sum of money resulting from a national subscription opened by
reason of the earthquake of June 3, 1863, in these Island.
4. That the court erred in not declaring that Act Numbered 2109,
passed by the Philippine Legislature on January 30, 1912, is unconstitutional.
5. That the court erred in holding in its decision that there is no title for
the prescription of this suit brought by the Insular Government against the
Monte de Piedad y Caja de Ahorros for the reimbursement of the eighty
thousand dollars ($80,000) given to it by the late Spanish Government of
these Islands.
6. That the court erred in sentencing the Monte de Piedad y Caja de
Ahorros to reimburse the Philippine Government in the sum of eighty
thousand dollars ($80,000) gold coin, or the equivalent thereof in the present
legal tender currency in circulation, with legal interest thereon from February
28th, 1912, and the costs of this suit.
In the royal order of June 29, 1879, the Governor-General of the Philippine
Islands was directed to inform the home Government in what manner the
indemnity might be paid to which, by virtue of the resolutions of the relief
board, the persons who suffered damage by the earthquake might be
entitled, in order to perform the sacred obligation which the Government of
Spain had assumed toward the donors.
The next pertinent document in order is the defendant's petition, dated
February 1, 1883, addressed to the Governor-General of the Philippine
Islands, which reads:
Board of Directors of the Monte de Piedad of Manila Presidencia.
Excellency: The Board of Directors of the Monte de Piedad y Caja de
Ahorros of Manila informs your Excellency, First: That the funds which it has
up to the present been able to dispose of have been exhausted in loans on
jewelry, and there only remains the sum of one thousand and odd pesos,
which will be expended between to-day and day after tomorrow. Second:
That, to maintain the credit of the establishment, which would be greatly
injured were its operations suspended, it is necessary to procure money.
Third: That your Excellency has proposed to His Majesty's Government to
apply to the funds of the Monte de Piedad a part of the funds held in the
treasury derived form the national subscription for the relief of the distress
caused by the earthquake of 1863. Fourth: That in the public treasury there is
held at the disposal of the central earthquake relief board over $1090,000
which was deposited in the said treasury by order of your general
Government, it having been transferred thereto from the Spanish-Filipino
Bank where it had been held. fifth: That in the straightened circumstances of
the moment, your Excellency can, to avert impending disaster to the Monte
de Piedad, order that, out of that sum of one hundred thousand pesos held in
the Treasury at the disposal of the central relief board, there be transferred to
the Monte de Piedad the sum of $80,000, there to be held under the same
conditions as at present in the Treasury, to wit, at the disposal of the Relief
Board. Sixth: That should this transfer not be approved for any reason, either
because of the failure of His Majesty's Government to approve the proposal
made by your Excellency relative to the application to the needs of the Monte
de Piedad of a pat of the subscription intended to believe the distress caused
by the earthquake of 1863, or for any other reason, the board of directors of
the Monte de Piedad obligates itself to return any sums which it may have
received on account of the eighty thousand pesos, or the whole thereof,
should it have received the same, by securing a loan from whichever bank or
banks may lend it the money at the cheapest rate upon the security of
pawned jewelry. — This is an urgent measure to save the Monte de Piedad
in the present crisis and the board of directors trusts to secure your
Excellency's entire cooperation and that of the other officials who have take
part in the transaction.
The Governor-General's resolution on the foregoing petition is as follows:
GENERAL GOVERNMENT OF THE PHILIPPINES.
MANILA, February 1, 1883.
In view of the foregoing petition addressed to me by the board of directors of
the Monte de Piedad of this city, in which it is stated that the funds which the
said institution counted upon are nearly all invested in loans on jewelry and
that the small account remaining will scarcely suffice to cover the
transactions of the next two days, for which reason it entreats the general
Government that, in pursuance of its telegraphic advice to H. M.
Government, the latter direct that there be turned over to said Monte de
Piedad $80,000 out of the funds in the public treasury obtained from the
national subscription for the relief of the distress caused by the earthquake of
1863, said board obligating itself to return this sum should H. M.
Government, for any reason, not approve the said proposal, and for this
purpose it will procure funds by means of loans raised on pawned jewelry; it
stated further that if the aid so solicited is not furnished, it will be compelled
to suspend operations, which would seriously injure the credit of so
beneficient an institution; and in view of the report upon the matter made by
the Intendencia General de Hacienda; and considering the fact that the
public treasury has on hand a much greater sum from the source mentioned
than that solicited; and considering that this general Government has
submitted for the determination of H. M. Government that the balance which,
after strictly applying the proceeds obtained from the subscription referred to,
may remain as a surplus should be delivered to the Monte de Piedad, either
as a donation, or as a loan upon the security of the credit of the institution,
believing that in so doing the wishes of the donors would be faithfully
interpreted inasmuch as those wishes were no other than to relieve distress,
an act of charity which is exercised in the highest degree by the Monte de
Piedad, for it liberates needy person from the pernicious effects of usury; and
Considering that the lofty purposes that brought about the creation of the
pious institution referred to would be frustrated, and that the great and
laudable work of its establishment, and that the great and laudable and
valuable if the aid it urgently seeks is not granted, since the suspension of its
operations would seriously and regrettably damage the ever-growing credit of
the Monte de Piedad; and
Considering that if such a thing would at any time cause deep distress in the
public mind, it might be said that at the present juncture it would assume the
nature of a disturbance of public order because of the extreme poverty of the
poorer classes resulting from the late calamities, and because it is the only
institution which can mitigate the effects of such poverty; and
Considering that no reasonable objection can be made to granting the
request herein contained, for the funds in question are sufficiently secured in
the unlikely event that H> M. Government does not approve the
recommendation mentioned, this general Government, in the exercise of the
extraordinary powers conferred upon it and in conformity with the report of
the Intendencia de Hacienda, resolves as follows:
First. Authority is hereby given to deliver to the Monte de Piedad, out of the
sum held in the public treasury of these Islands obtained from the national
subscription opened by reason of the earthquakes of 1863, amounts up to
the sum $80,000, as its needs may require, in installments of $20,000.
Second. The board of directors of the Monte de Piedad is solemnly bound to
return, within eight days after demand, the sums it may have so received, if
H. M. Government does not approve this resolution.
Third. The Intendencia General de Hacienda shall forthwith, and in
preference to all other work, proceed to prepare the necessary papers so
that with the least possible delay the payment referred to may be made and
the danger that menaces the Monte de Piedad of having to suspend its
operations may be averted.
H. M. Government shall be advised hereof.lawphi1.net
(Signed) P. DE RIVERA.
By the royal order of December 3, 1892, the Governor-General of the
Philippine Islands was ordered to "inform this ministerio what is the total sum
available at the present time, taking into consideration the sums delivered to
the Monte de Piedad pursuant to the decree issued by your general
Government on February 1, 1883," and after the rights of the claimants,
whose names were published in the Official Gazette of Manila on April 7,
1870, and their heirs had been established, as therein provided, as such
persons "have an unquestionable right to be paid the donations assigned to
them therein, your general Government shall convoke them all within a
reasonable period and shall pay their shares to such as shall identify
themselves, without regard to their financial status," and finally "that when all
the proceedings and operations herein mentioned have been concluded and
the Government can consider itself free from all kinds of claims on the part of
those interested in the distribution of the funds deposited in the vaults of the
Treasury, such action may be taken as the circumstances shall require, after
first consulting the relief board and your general Government and taking
account of what sums have been delivered to the Monte de Piedad and
those that were expended in 1888 to relieve public calamities," and "in order
that all the points in connection with the proceedings had as a result of the
earthquake be clearly understood, it is indispensable that the offices
hereinbefore mentioned comply with the provisions contained in paragraphs
2 and 3 of the royal order of June 25, 1879." On receipt of this Finance order
by the Governor-General, the Department of Finance was called upon for a
report in reference to the $80,000 turned over to the defendant, and that
Department's report to the Governor-General dated June 28, 1893, reads:
Intendencia General de Hacienda de Filipinas (General Treasury of the
Philippines) — Excellency. — By Royal Order No. 1044 of December 3, last,
it is provided that the persons who sustained losses by the earthquakes that
occurred in your capital in the year 1863 shall be paid the amounts allotted to
them out of the sums sent from Spain for this purpose, with observance of
the rules specified in the said royal order, one of them being that before
making the payment to the interested parties the assets shall be reduced to
money. These assets, during the long period of time that has elapsed since
they were turned over to the Treasury of the Philippine Islands, were used to
cover the general needs of the appropriation, a part besides being invested
in the relief of charitable institutions and another part to meet pressing needs
occasioned by public calamities. On January 30, last, your Excellency was
please to order the fulfillment of that sovereign mandate and referred the
same to this Intendencia for its information and the purposes desired (that is,
for compliance with its directions and, as aforesaid, one of these being the
liquidation, recovery, and deposit with the Treasury of the sums paid out of
that fund and which were expended in a different way from that intended by
the donors) and this Intendencia believed the moment had arrived to claim
from the board of directors of the Monte de Piedad y Caja de Ahorros the
sum of 80,000 pesos which, by decree of your general Government of the
date of February 1, 1883, was loaned to it out of the said funds, the (Monte
de Piedad) obligating itself to return the same within the period of eight days
if H. M. Government did not approve the delivery. On this Intendencia's
demanding from the Monte de Piedad the eighty thousand pesos, thus
complying with the provisions of the Royal Order, it was to be supposed that
no objection to its return would be made by the Monte de Piedad for, when it
received the loan, it formally engaged itself to return it; and, besides, it was
indisputable that the moment to do so had arrived, inasmuch as H. M.
Government, in ordering that the assets of the earthquake relief fund should
he collected, makes express mention of the 80,000 pesos loaned to the
Monte de Piedad, without doubt considering as sufficient the period of ten
years during which it has been using this large sum which lawfully belongs to
their persons. This Intendencia also supposed that the Monte de Piedad no
longer needed the amount of that loan, inasmuch as, far from investing it in
beneficient transactions, it had turned the whole amount into the voluntary
deposit funds bearing 5 per cent interests, the result of this operation being
that the debtor loaned to the creditor on interest what the former had
gratuitously received. But the Monte de Piedad, instead of fulfilling the
promise it made on receiving the sum, after repeated demands refused to
return the money on the ground that only your Excellency, and not the
Intendencia (Treasury), is entitled to order the reimbursement, taking no
account of the fact that this Intendencia was acting in the discharge of a
sovereign command, the fulfillment of which your Excellency was pleased to
order; and on the further ground that the sum of 80,000 pesos which it
received from the fund intended for the earthquake victims was not received
as a loan, but as a donation, this in the opinion of this Intendencia,
erroneously interpreting both the last royal order which directed the
apportionment of the amount of the subscription raised in the year 1863 and
the superior decree which granted the loan, inasmuch as in this letter no
donation is made to the Monte de Piedad of the 80,000 pesos, but simply a
loan; besides, no donation whatever could be made of funds derived from a
private subscription raised for a specific purpose, which funds are already
distributed and the names of the beneficiaries have been published in the
Gaceta, there being lacking only the mere material act of the delivery, which
has been unduly delayed. In view of the unexpected reply made by the
Monte de Piedad, and believing it useless to insist further in the matter of the
claim for the aforementioned loan, or to argue in support thereof, this
Intendencia believes the intervention of your Excellency necessary in this
matter, if the royal Order No. 1044 of December 3, last, is to be complied
with, and for this purpose I beg your Excellency kindly to order the Monte de
Piedad to reimburse within the period of eight days the 80,000 which it owes,
and that you give this Intendencia power to carry out the provisions of the
said royal order. I must call to the attention of your Excellency that the said
pious establishment, during the last few days and after demand was made
upon it, has endorsed to the Spanish-Filipino Bank nearly the whole of the
sum which it had on deposit in the general deposit funds.
The record in the case under consideration fails to disclose any further
definite action taken by either the Philippine Government or the Spanish
Government in regard to the $80,000 turned over to the Monte de Piedad.
In the defendant's general ledger the following entries appear: "Public
Treasury: February 15, 1883, $20,000; March 12, 1883, $20,000; April 14,
1883, $20,000; June 2, 1883, $20,000, total $80,000." The book entry for this
total is as follows: "To the public Treasury derived from the subscription for
the earthquake of 1863, $80,000 received from general Treasury as a
returnable loan, and without interest." The account was carried in this
manner until January 1, 1899, when it was closed by transferring the amount
to an account called "Sagrada Mitra," which latter account was a loan of
$15,000 made to the defendant by the Archbishop of Manila, without interest,
thereby placing the "Sagrada Mitra" account at $95,000 instead of $15,000.
The above-mentioned journal entry for January 1, 1899, reads: "Sagrada
Mitra and subscription, balance of these two account which on this date are
united in accordance with an order of the Exmo. Sr. Presidente of the Council
transmitted verbally to the Presidente Gerente of these institutions, $95,000."
On March 16, 1902, the Philippine government called upon the defendant for
information concerning the status of the $80,000 and received the following
reply:
MANILA, March 31, 1902.
To the Attorney-General of the Department of Justice of the Philippine
Islands.
SIR: In reply to your courteous letter of the 16th inst., in which you request
information from this office as to when and for what purpose the Spanish
Government delivered to the Monte de Piedad eighty thousand pesos
obtained from the subscription opened in connection with the earthquake of
1863, as well as any other information that might be useful for the report
which your office is called upon to furnish, I must state to your department
that the books kept in these Pious Institutions, and which have been
consulted for the purpose, show that on the 15th of February, 1883, they
received as a reimbursable loan and without interest, twenty thousand pesos,
which they deposited with their own funds. On the same account and on
each of the dates of March 12, April 14 and June 2 of the said year, 1883,
they also received and turned into their funds a like sum of twenty thousand
pesos, making a total of eighty thousand pesos. — (Signed) Emilio Moreta.
I hereby certify that the foregoing is a literal copy of that found in the letter
book No. 2 of those Pious Institutions.
Manila, November 19, 1913
(Sgd.) EMILIO LAZCANOTEGUI,
Secretary

(Sgd.) O. K. EMILIO MORETA,
Managing Director.
The foregoing documentary evidence shows the nature of the transactions
which took place between the Government of Spain and the Philippine
Government on the one side and the Monte de Piedad on the other,
concerning the $80,000. The Monte de Piedad, after setting forth in its
petition to the Governor-General its financial condition and its absolute
necessity for more working capital, asked that out of the sum of $100,000
held in the Treasury of the Philippine Islands, at the disposal of the central
relief board, there be transferred to it the sum of $80,000 to be held under
the same conditions, to wit, "at the disposal of the relief board." The Monte
de Piedad agreed that if the transfer of these funds should not be approved
by the Government of Spain, the same would be returned forthwith. It did not
ask that the $80,000 be given to it as a donation. The Governor-General,
after reciting the substance of the petition, stated that "this general
Government has submitted for the determination of H. M. Government that
the balance which, after strictly applying the proceeds obtained from the
subscription referred to, may remain as a surplus, should be delivered to the
Monte de Piedad, either as a donation, or as a loan upon the security of the
credit of the institution," and "considering that no reasonable objection can be
made to granting the request herein contained," directed the transfer of the
$80,000 to be made with the understanding that "the Board of Directors of
the Monte de Piedad is solemnly bound to return, within eight days after
demand, the sums it may have so received, if H. M. Government does not
approve this resolution." It will be noted that the first and only time the word
"donation" was used in connection with the $80,000 appears in this
resolution of the Governor-General. It may be inferred from the royal orders
that the Madrid Government did tacitly approve of the transfer of the $80,000
to the Monte de Piedad as a loan without interest, but that Government
certainly did not approve such transfer as a donation for the reason that the
Governor-General was directed by the royal order of December 3, 1892, to
inform the Madrid Government of the total available sum of the earthquake
fund, "taking into consideration the sums delivered to the Monte de Piedad
pursuant to the decree issued by your general Government on February 1,
1883." This language, nothing else appearing, might admit of the
interpretation that the Madrid Government did not intend that the Governor-
General of the Philippine Islands should include the $80,000 in the total
available sum, but when considered in connection with the report of the
Department of Finance there can be no doubt that it was so intended. That
report refers expressly to the royal order of December 3d, and sets forth in
detail the action taken in order to secure the return of the $80,000. The
Department of Finance, acting under the orders of the Governor-General,
understood that the $80,000 was transferred to the Monte de Piedad well
knew that it received this sum as a loan interest." The amount was thus
carried in its books until January, 1899, when it was transferred to the
account of the "Sagrada Mitra" and was thereafter known as the "Sagrada
Mitra and subscription account." Furthermore, the Monte de Piedad
recognized and considered as late as March 31, 1902, that it received the
$80,000 "as a returnable loan, and without interest." Therefore, there cannot
be the slightest doubt the fact that the Monte de Piedad received the $80,000
as a mere loan or deposit and not as a donation. Consequently, the first
alleged error is entirely without foundation.
Counsel for the defendant, in support of their third assignment of error, say in
their principal brief that:
The Spanish nation was professedly Roman Catholic and its King enjoyed
the distinction of being deputy ex officio of the Holy See and Apostolic Vicar-
General of the Indies, and as such it was his duty to protect all pious works
and charitable institutions in his kingdoms, especially those of the Indies;
among the latter was the Monte de Piedad of the Philippines, of which said
King and his deputy the Governor-General of the Philippines, as royal vice-
patron, were, in a special and peculiar manner, the protectors; the latter, as a
result of the cession of the Philippine Islands, Implicitly renounced this high
office and tacitly returned it to the Holy See, now represented by the
Archbishop of Manila; the national subscription in question was a kind of
foundation or pious work, for a charitable purpose in these Islands; and the
entire subscription not being needed for its original purpose, the royal vice-
patron, with the consent of the King, gave the surplus thereof to an
analogous purpose; the fulfillment of all these things involved, in the majority,
if not in all cases, faithful compliance with the duty imposed upon him by the
Holy See, when it conferred upon him the royal patronage of the Indies, a
thing that touched him very closely in his conscience and religion; the
cessionary Government though Christian, was not Roman Catholic and
prided itself on its policy of non-interference in religious matters, and
inveterately maintained a complete separation between the ecclesiastical
and civil powers.
In view of these circumstances it must be quite clear that, even without the
express provisions of the Treaty of Paris, which apparently expressly exclude
such an idea, it did not befit the honor of either of the contracting parties to
subrogate to the American Government in lieu of the Spanish Government
anything respecting the disposition of the funds delivered by the latter to the
Monte de Piedad. The same reasons that induced the Spanish Government
to take over such things would result in great inconvenience to the American
Government in attempting to do so. The question was such a delicate one,
for the reason that it affected the conscience, deeply religious, of the King of
Spain, that it cannot be believed that it was ever his intention to confide the
exercise thereof to a Government like the American. (U. S. vs. Arredondo, 6
Pet. [U. S.], 711.)
It is thus seen that the American Government did not subrogate the Spanish
Government or rather, the King of Spain, in this regard; and as the condition
annexed to the donation was lawful and possible of fulfillment at the time the
contract was made, but became impossible of fulfillment by the cession
made by the Spanish Government in these Islands, compliance therewith is
excused and the contract has been cleared thereof.
The contention of counsel, as thus stated, in untenable for two reason, (1)
because such contention is based upon the erroneous theory that the sum in
question was a donation to the Monte de Piedad and not a loan, and (2)
because the charity founded by the donations for the earthquake sufferers is
not and never was intended to be an ecclesiastical pious work. The first
proposition has already been decided adversely to the defendant's
contention. As to the second, the record shows clearly that the fund was
given by the donors for a specific and definite purpose — the relief of the
earthquake sufferers — and for no other purpose. The money was turned
over to the Spanish Government to be devoted to that purpose. The Spanish
Government remitted the money to the Philippine Government to be
distributed among the suffers. All officials, including the King of Spain and the
Governor-General of the Philippine Islands, who took part in the disposal of
the fund, acted in their purely civil, official capacity, and the fact that they
might have belonged to a certain church had nothing to do with their acts in
this matter. The church, as such, had nothing to do with the fund in any way
whatever until the $80,000 reached the coffers of the Monte de Piedad (an
institution under the control of the church) as a loan or deposit. If the charity
in question had been founded as an ecclesiastical pious work, the King of
Spain and the Governor-General, in their capacities as vicar-general of the
Indies and as royal vice-patron, respectively, would have disposed of the
fund as such and not in their civil capacities, and such functions could not
have been transferred to the present Philippine Government, because the
right to so act would have arisen out of the special agreement between the
Government of Spain and the Holy See, based on the union of the church
and state which was completely separated with the change of sovereignty.
And in their supplemental brief counsel say:
By the conceded facts the money in question is part of a charitable
subscription. The donors were persons in Spain, the trustee was the Spanish
Government, the donees, the cestuis que trustent, were certain persons in
the Philippine Islands. The whole matter is one of trusteeship. This is
undisputed and indisputable. It follows that the Spanish Government at no
time was the owner of the fund. Not being the owner of the fund it could not
transfer the ownership. Whether or not it could transfer its trusteeship it
certainly never has expressly done so and the general terms of property
transfer in the Treaty of Paris are wholly insufficient for such a purpose even
could Spain have transferred its trusteeship without the consent of the
donors and even could the United States, as a Government, have accepted
such a trust under any power granted to it by the thirteen original States in
the Constitution, which is more than doubtful. It follows further that this
Government is not a proper party to the action. The only persons who could
claim to be damaged by this payment to the Monte, if it was unlawful, are the
donors or the cestuis que trustent, and this Government is neither.
If "the whole matter is one of trusteeship," and it being true that the Spanish
Government could not, as counsel say, transfer the ownership of the fund to
the Monte de Piedad, the question arises, who may sue to recover this loan?
It needs no argument to show that the Spanish or Philippine Government, as
trustee, could maintain an action for this purpose had there been no change
of sovereignty and if the right of action has not prescribed. But those
governments were something more than mere common law trustees of the
fund. In order to determine their exact status with reference to this fund, it is
necessary to examine the law in force at the time there transactions took
place, which are the law of June 20, 1894, the royal decree of April 27. 1875,
and the instructions promulgated on the latter date. These legal provisions
were applicable to the Philippine Islands (Benedicto vs. De la Rama, 3 Phil.
Rep., 34)
The funds collected as a result of the national subscription opened in Spain
by royal order of the Spanish Government and which were remitted to the
Philippine Government to be distributed among the earthquake sufferers by
the Central Relief Board constituted, under article 1 of the law of June 20,
1894, and article 2 of the instructions of April 27, 1875, a special charity of a
temporary nature as distinguished from a permanent public charitable
institution. As the Spanish Government initiated the creation of the fund and
as the donors turned their contributions over to that Government, it became
the duty of the latter, under article 7 of the instructions, to exercise
supervision and control over the moneys thus collected to the end that the
will of the donors should be carried out. The relief board had no power
whatever to dispose of the funds confided to its charge for other purposes
than to distribute them among the sufferers, because paragraph 3 of article
11 of the instructions conferred the power upon the secretary of the interior of
Spain, and no other, to dispose of the surplus funds, should there be any, by
assigning them to some other charitable purpose or institution. The secretary
could not dispose of any of the funds in this manner so long as they were
necessary for the specific purpose for which they were contributed. The
secretary had the power, under the law above mentioned to appoint and
totally or partially change the personnel of the relief board and to authorize
the board to defend the rights of the charity in the courts. The authority of the
board consisted only in carrying out the will of the donors as directed by the
Government whose duty it was to watch over the acts of the board and to
see that the funds were applied to the purposes for which they were
contributed .The secretary of the interior, as the representative of His
Majesty's Government, exercised these powers and duties through the
Governor-General of the Philippine Islands. The Governments of Spain and
of the Philippine Islands in complying with their duties conferred upon them
by law, acted in their governmental capacities in attempting to carry out the
intention of the contributors. It will this be seen that those governments were
something more, as we have said, than mere trustees of the fund.
It is further contended that the obligation on the part of the Monte de Piedad
to return the $80,000 to the Government, even considering it a loan, was
wiped out on the change of sovereignty, or inn other words, the present
Philippine Government cannot maintain this action for that reason. This
contention, if true, "must result from settled principles of rigid law," as it
cannot rest upon any title to the fund in the Monte de Piedad acquired prior
to such change. While the obligation to return the $80,000 to the Spanish
Government was still pending, war between the United States and Spain
ensued. Under the Treaty of Paris of December 10, 1898, the Archipelago,
known as the Philippine Islands, was ceded to the United States, the latter
agreeing to pay Spain the sum of $20,000,000. Under the first paragraph of
the eighth article, Spain relinquished to the United States "all buildings,
wharves, barracks, forts, structures, public highways, and other immovable
property which, in conformity with law, belonged to the public domain, and as
such belonged to the crown of Spain." As the $80,000 were not included
therein, it is said that the right to recover this amount did not, therefore, pass
to the present sovereign. This, in our opinion, does not follow as a necessary
consequence, as the right to recover does not rest upon the proposition that
the $80,000 must be "other immovable property" mentioned in article 8 of the
treaty, but upon contractual obligations incurred before the Philippine Islands
were ceded to the United States. We will not inquire what effect his cession
had upon the law of June 20, 1849, the royal decree of April 27, 1875, and
the instructions promulgated on the latter date. In Vilas vs. Manila (220 U. S.,
345), the court said:
That there is a total abrogation of the former political relations of the
inhabitants of the ceded region is obvious. That all laws theretofore in force
which are in conflict with the political character, constitution, or institutions of
the substituted sovereign, lose their force, is also plain. (Alvarez y Sanchez
vs. United States, 216 U. S., 167.) But it is equally settled in the same public
law that the great body of municipal law which regulates private and
domestic rights continues in force until abrogated or changed by the new
ruler.
If the above-mentioned legal provisions are in conflict with the political
character, constitution or institutions of the new sovereign, they became
inoperative or lost their force upon the cession of the Philippine Islands to the
United States, but if they are among "that great body of municipal law which
regulates private and domestic rights," they continued in force and are still in
force unless they have been repealed by the present Government. That they
fall within the latter class is clear from their very nature and character. They
are laws which are not political in any sense of the word. They conferred
upon the Spanish Government the right and duty to supervise, regulate, and
to some extent control charities and charitable institutions. The present
sovereign, in exempting "provident institutions, savings banks, etc.," all of
which are in the nature of charitable institutions, from taxation, placed such
institutions, in so far as the investment in securities are concerned, under the
general supervision of the Insular Treasurer (paragraph 4 of section 111 of
Act No. 1189; see also Act No. 701).
Furthermore, upon the cession of the Philippine Islands the prerogatives of
he crown of Spain devolved upon he United States. In Magill vs. Brown (16
Fed. Cas., 408), quoted with approval in Mormon Charch vs. United States
(136 U. S.,1, 57), the court said:
The Revolution devolved on the State all the transcendent power of
Parliament, and the prerogative of the crown, and gave their Acts the same
force and effect.
In Fontain vs. Ravenel (17 Hw., 369, 384), Mr. Justice McLean, delivering the
opinion of the court in a charity case, said:
When this country achieved its independence, the prerogatives of the crown
devolved upon the people of the States. And this power still remains with
them except so fact as they have delegated a portion of it to the Federal
Government. The sovereign will is made known to us by legislative
enactment. The State as a sovereign, is the parens patriae.
Chancelor Kent says:
In this country, the legislature or government of the State, as parens patriae,
has the right to enforce all charities of public nature, by virtue of its general
superintending authority over the public interests, where no other person is
entrusted with it. (4 Kent Com., 508, note.)
The Supreme Court of the United States in Mormon Church vs. United
States, supra, after approving also the last quotations, said:
This prerogative of parens patriae is inherent in the supreme power of every
State, whether that power is lodged in a royal person or in the legislature,
and has no affinity to those arbitrary powers which are sometimes exerted by
irresponsible monarchs to the great detriment of the people and the
destruction of their liberties. On the contrary, it is a most beneficient
functions, and often necessary to be exercised in the interest of humanity,
and for the prevention of injury to those who cannot protect themselves.
The court in the same case, after quoting from Sohier vs. Mass. General
Hospital (3 Cush., 483, 497), wherein the latter court held that it is deemed
indispensible that there should be a power in the legislature to authorize the
same of the estates of in facts, idiots, insane persons, and persons not
known, or not in being, who cannot act for themselves, said:
These remarks in reference to in facts, insane persons and person not
known, or not in being, apply to the beneficiaries of charities, who are often in
capable of vindicating their rights, and justly look for protection to the
sovereign authority, acting as parens patriae. They show that this beneficient
functions has not ceased t exist under the change of government from a
monarchy to a republic; but that it now resides in the legislative department,
ready to be called into exercise whenever required for the purposes of justice
and right, and is a clearly capable of being exercised in cases of charities as
in any other cases whatever.
In People vs. Cogswell (113 Cal. 129, 130), it was urged that the plaintiff was
not the real party in interest; that the Attorney-General had no power to
institute the action; and that there must be an allegation and proof of a
distinct right of the people as a whole, as distinguished from the rights of
individuals, before an action could be brought by the Attorney-General in the
name of the people. The court, in overruling these contentions, held that it
was not only the right but the duty of the Attorney-General to prosecute the
action, which related to charities, and approved the following quotation from
Attorney-General vs. Compton (1 Younge & C. C., 417):
Where property affected by a trust for public purposes is in the hands of
those who hold it devoted to that trust, it is the privilege of the public that the
crown should be entitled to intervene by its officers for the purpose of
asserting, on behalf on the public generally, the public interest and the public
right, which, probably, no individual could be found effectually to assert, even
if the interest were such as to allow it. (2 Knet's Commentaries, 10th ed.,
359; Lewin on Trusts, sec. 732.)
It is further urged, as above indicated, that "the only persons who could claim
to be damaged by this payment to the Monte, if it was unlawful, are the
donors or the cestuis que trustent, and this Government is neither.
Consequently, the plaintiff is not the proper party to bring the action." The
earthquake fund was the result or the accumulation of a great number of
small contributions. The names of the contributors do not appear in the
record. Their whereabouts are unknown. They parted with the title to their
respective contributions. The beneficiaries, consisting of the original sufferers
and their heirs, could have been ascertained. They are quite numerous also.
And no doubt a large number of the original sufferers have died, leaving
various heirs. It would be impracticable for them to institute an action or
actions either individually or collectively to recover the $80,000. The only
course that can be satisfactorily pursued is for the Government to again
assume control of the fund and devote it to the object for which it was
originally destined.
The impracticability of pursuing a different course, however, is not the true
ground upon which the right of the Government to maintain the action rests.
The true ground is that the money being given to a charity became, in a
measure, public property, only applicable, it is true, to the specific purposes
to which it was intended to be devoted, but within those limits consecrated to
the public use, and became part of the public resources for promoting the
happiness and welfare of the Philippine Government. (Mormon Church vs. U.
S., supra.) To deny the Government's right to maintain this action would be
contrary to sound public policy, as tending to discourage the prompt exercise
of similar acts of humanity and Christian benevolence in like instances in the
future.
As to the question raised in the fourth assignment of error relating to the
constitutionality of Act No. 2109, little need be said for the reason that we
have just held that the present Philippine Government is the proper party to
the action. The Act is only a manifestation on the part of the Philippine
Government to exercise the power or right which it undoubtedly had. The Act
is not, as contended by counsel, in conflict with the fifth section of the Act of
Congress of July 1, 1902, because it does not take property without due
process of law. In fact, the defendant is not the owner of the $80,000, but
holds it as a loan subject to the disposal of the central relief board. Therefor,
there can be nothing in the Act which transcends the power of the Philippine
Legislature.
In Vilas vs. Manila, supra, the plaintiff was a creditor of the city of Manila as it
existed before the cession of the Philippine Islands to the United States by
the Treaty of Paris of December 10, 1898. The action was brought upon the
theory that the city, under its present charter from the Government of the
Philippine Islands, was the same juristic person, and liable upon the
obligations of the old city. This court held that the present municipality is a
totally different corporate entity and in no way liable for the debts of the
Spanish municipality. The Supreme Court of the United States, in reversing
this judgment and in holding the city liable for the old debt, said:
The juristic identity of the corporation has been in no wise affected, and, in
law, the present city is, in every legal sense, the successor of the old. As
such it is entitled to the property and property rights of the predecessor
corporation, and is, in law, subject to all of its liabilities.
In support of the fifth assignment of error counsel for the defendant argue
that as the Monte de Piedad declined to return the $80,000 when ordered to
do so by the Department of Finance in June, 1893, the plaintiff's right of
action had prescribed at the time this suit was instituted on May 3, 1912,
citing and relying upon article 1961, 1964 and 1969 of the Civil Code. While
on the other hand, the Attorney-General contends that the right of action had
not prescribed (a) because the defense of prescription cannot be set up
against the Philippine Government, (b) because the right of action to recover
a deposit or trust funds does not prescribe, and (c) even if the defense of
prescription could be interposed against the Government and if the action
had, in fact, prescribed, the same was revived by Act No. 2109.
The material facts relating to this question are these: The Monte de Piedad
received the $80,000 in 1883 "to be held under the same conditions as at
present in the treasury, to wit, at the disposal of the relief board." In
compliance with the provisions of the royal order of December 3, 1892, the
Department of Finance called upon the Monte de Piedad in June, 1893, to
return the $80,000. The Monte declined to comply with this order upon the
ground that only the Governor-General of the Philippine Islands and not the
Department of Finance had the right to order the reimbursement. The
amount was carried on the books of the Monte as a returnable loan until
January 1, 1899, when it was transferred to the account of the "Sagrada
Mitra." On March 31, 1902, the Monte, through its legal representative, stated
in writing that the amount in question was received as a reimbursable loan,
without interest. Act No. 2109 became effective January 30, 1912, and the
action was instituted on May 3rd of that year.
Counsel for the defendant treat the question of prescription as if the action
was one between individuals or corporations wherein the plaintiff is seeking
to recover an ordinary loan. Upon this theory June, 1893, cannot be taken as
the date when the statute of limitations began to run, for the reason that the
defendant acknowledged in writing on March 31, 1902, that the $80,000 were
received as a loan, thereby in effect admitting that it still owed the amount.
(Section 50, Code of Civil Procedure.) But if counsels' theory is the correct
one the action may have prescribed on May 3, 1912, because more than ten
full years had elapsed after March 31, 1902. (Sections 38 and 43, Code of
Civil Procedure.)
Is the Philippine Government bound by the statute of limitations? The
Supreme Court of the United States in U. S. vs. Nashville, Chattanooga & St.
Louis Railway Co. (118 U. S., 120, 125), said:
It is settled beyond doubt or controversy — upon the foundation of the great
principle of public policy, applicable to all governments alike, which forbids
that the public interests should be prejudiced by the negligence of the officers
or agents to whose care they are confided — that the United States,
asserting rights vested in it as a sovereign government, is not bound by any
statute of limitations, unless Congress has clearly manifested its intention
that it should be so bound. (Lindsey vs. Miller, 6 Pet. 666; U. S. vs. Knight,
14 Pet., 301; Gibson vs. Chouteau, 13 Wall., 92; U. S. vs. Thompson, 98 U.
S., 486; Fink vs. O'Neil, 106 U. S., 272, 281.)
In Gibson vs. Choteau, supra, the court said:
It is a matter of common knowledge that statutes of limitation do not run
against the State. That no laches can be imputed to the King, and that no
time can bar his rights, was the maxim of the common laws, and was
founded on the principle of public policy, that as he was occupied with the
cares of government he ought not to suffer from the negligence of his officer
and servants. The principle is applicable to all governments, which must
necessarily act through numerous agents, and is essential to a preservation
of the interests and property of the public. It is upon this principle that in this
country the statutes of a State prescribing periods within which rights must
be prosecuted are not held to embrace the State itself, unless it is expressly
designated or the mischiefs to be remedied are of such a nature that it must
necessarily be included. As legislation of a State can only apply to persons
and thing over which the State has jurisdiction, the United States are also
necessarily excluded from the operation of such statutes.
In 25 Cyc., 1006, the rule, supported by numerous authorities, is stated as
follows:
In the absence of express statutory provision to the contrary, statute of
limitations do not as a general rule run against the sovereign or government,
whether state or federal. But the rule is otherwise where the mischiefs to be
remedied are of such a nature that the state must necessarily be included,
where the state goes into business in concert or in competition with her
citizens, or where a party seeks to enforces his private rights by suit in the
name of the state or government, so that the latter is only a nominal party.
In the instant case the Philippine Government is not a mere nominal party
because it, in bringing and prosecuting this action, is exercising its sovereign
functions or powers and is seeking to carry out a trust developed upon it
when the Philippine Islands were ceded to the United States. The United
States having in 1852, purchased as trustee for the Chickasaw Indians under
treaty with that tribe, certain bonds of the State of Tennessee, the right of
action of the Government on the coupons of such bonds could not be barred
by the statute of limitations of Tennessee, either while it held them in trust for
the Indians, or since it became the owner of such coupons. (U. S. vs.
Nashville, etc., R. Co., supra.) So where lands are held in trust by the state
and the beneficiaries have no right to sue, a statute does not run against the
State's right of action for trespass on the trust lands. (Greene Tp. vs.
Campbell, 16 Ohio St., 11; see also Atty.-Gen. vs. Midland R. Co., 3 Ont.,
511 [following Reg. vs. Williams, 39 U. C. Q. B., 397].)
These principles being based "upon the foundation of the great principle of
public policy" are, in the very nature of things, applicable to the Philippine
Government.
Counsel in their argument in support of the sixth and last assignments of
error do not question the amount of the judgment nor do they question the
correctness of the judgment in so far as it allows interest, and directs its
payment in gold coin or in the equivalent in Philippine currency.
For the foregoing reasons the judgment appealed from is affirmed, with costs
against the appellant. So ordered.
Torres, Johnson and Araullo, JJ., concur.
Moreland, J., did not sign.
G.R. No. L-25843 July 25, 1974
MELCHORA CABANAS, plaintiff-appellee,
vs.
FRANCISCO PILAPIL, defendant-appellant.
Seno, Mendoza & Associates for plaintiff-appellee.
Emilio Benitez, Jr. for defendant-appellant.
FERNANDO, J.:p
The disputants in this appeal from a question of law from a lower court
decision are the mother and the uncle of a minor beneficiary of the proceeds
of an insurance policy issued on the life of her deceased father. The dispute
centers as to who of them should be entitled to act as trustee thereof. The
lower court applying the appropriate Civil Code provisions decided in favor of
the mother, the plaintiff in this case. Defendant uncle appealed. As noted, the
lower court acted the way it did following the specific mandate of the law. In
addition, it must have taken into account the principle that in cases of this
nature the welfare of the child is the paramount consideration. It is not an
unreasonable assumption that between a mother and an uncle, the former is
likely to lavish more care on and pay greater attention to her. This is all the
more likely considering that the child is with the mother. There are no
circumstances then that did militate against what conforms to the natural
order of things, even if the language of the law were not as clear. It is not to
be lost sight of either that the judiciary pursuant to its role as an agency of
the State as parens patriae, with an even greater stress on family unity under
the present Constitution, did weigh in the balance the opposing claims and
did come to the conclusion that the welfare of the child called for the mother
to be entrusted with such responsibility. We have to affirm.
The appealed decision made clear: "There is no controversy as to the facts.
"1 The insured, Florentino Pilapil had a child, Millian Pilapil, with a married
woman, the plaintiff, Melchora Cabanas. She was ten years old at the time
the complaint was filed on October 10, 1964. The defendant, Francisco
Pilapil, is the brother of the deceased. The deceased insured himself and
instituted as beneficiary, his child, with his brother to act as trustee during her
minority. Upon his death, the proceeds were paid to him. Hence this
complaint by the mother, with whom the child is living, seeking the delivery of
such sum. She filed the bond required by the Civil Code. Defendant would
justify his claim to the retention of the amount in question by invoking the
terms of the insurance policy.2
After trial duly had, the lower court in a decision of May 10, 1965, rendered
judgment ordering the defendant to deliver the proceeds of the policy in
question to plaintiff. Its main reliance was on Articles 320 and 321 of the Civil
Code. The former provides: "The father, or in his absence the mother, is the
legal administrator of the property pertaining to the child under parental
authority. If the property is worth more than two thousand pesos, the father or
mother shall give a bond subject to the approval of the Court of First
Instance."3 The latter states: "The property which the unemancipated child
has acquired or may acquire with his work or industry, or by any lucrative
title, belongs to the child in ownership, and in usufruct to the father or mother
under whom he is under parental authority and whose company he lives; ...4
Conformity to such explicit codal norm is apparent in this portion of the
appealed decision: "The insurance proceeds belong to the beneficiary. The
beneficiary is a minor under the custody and parental authority of the plaintiff,
her mother. The said minor lives with plaintiff or lives in the company of the
plaintiff. The said minor acquired this property by lucrative title. Said property,
therefore, belongs to the minor child in ownership, and in usufruct to the
plaintiff, her mother. Since under our law the usufructuary is entitled to
possession, the plaintiff is entitled to possession of the insurance proceeds.
The trust, insofar as it is in conflict with the above quoted provision of law, is
pro tanto null and void. In order, however, to protect the rights of the minor,
Millian Pilapil, the plaintiff should file an additional bond in the guardianship
proceedings, Sp. Proc. No. 2418-R of this Court to raise her bond therein to
the total amount of P5,000.00."5
It is very clear, therefore, considering the above, that unless the applicability
of the two cited Civil Code provisions can be disputed, the decision must
stand. There is no ambiguity in the language employed. The words are rather
clear. Their meaning is unequivocal. Time and time again, this Court has left
no doubt that where codal or statutory norms are cast in categorical
language, the task before it is not one of interpretation but of application.6 So
it must be in this case. So it was in the appealed decision.
1. It would take more than just two paragraphs as found in the brief for
the defendant-appellant7 to blunt the force of legal commands that speak so
plainly and so unqualifiedly. Even if it were a question of policy, the
conclusion will remain unaltered. What is paramount, as mentioned at the
outset, is the welfare of the child. It is in consonance with such primordial end
that Articles 320 and 321 have been worded. There is recognition in the law
of the deep ties that bind parent and child. In the event that there is less than
full measure of concern for the offspring, the protection is supplied by the
bond required. With the added circumstance that the child stays with the
mother, not the uncle, without any evidence of lack of maternal care, the
decision arrived at can stand the test of the strictest scrutiny. It is further
fortified by the assumption, both logical and natural, that infidelity to the trust
imposed by the deceased is much less in the case of a mother than in the
case of an uncle. Manresa, commenting on Article 159 of the Civil Code of
Spain, the source of Article 320 of the Civil Code, was of that view: Thus "El
derecho y la obligacion de administrar el Patrimonio de los hijos es una
consecuencia natural y lógica de la patria potestad y de la presunción de que
nadie cuidará de los bienes de acquéllos con mas cariño y solicitude que los
padres. En nuestro Derecho antiguo puede decirse que se hallaba
reconocida de una manera indirecta aquelia doctrina, y asi se desprende de
la sentencia del Tribunal Supremeo de 30 de diciembre de 1864, que se
refiere a la ley 24, tit. XIII de la Partida 5. De la propia suerte aceptan en
general dicho principio los Codigos extranjeros, con las limitaciones y
requisitos de que trataremos mis adelante."8
2. The appealed decision is supported by another cogent consideration.
It is buttressed by its adherence to the concept that the judiciary, as an
agency of the State acting as parens patriae, is called upon whenever a
pending suit of litigation affects one who is a minor to accord priority to his
best interest. It may happen, as it did occur here, that family relations may
press their respective claims. It would be more in consonance not only with
the natural order of things but the tradition of the country for a parent to be
preferred. it could have been different if the conflict were between father and
mother. Such is not the case at all. It is a mother asserting priority. Certainly
the judiciary as the instrumentality of the State in its role of parens patriae,
cannot remain insensible to the validity of her plea. In a recent case,9 there
is this quotation from an opinion of the United States Supreme Court: "This
prerogative of parens patriae is inherent in the supreme power of every
State, whether that power is lodged in a royal person or in the legislature,
and has no affinity to those arbitrary powers which are sometimes exerted by
irresponsible monarchs to the great detriment of the people and the
destruction of their liberties." What is more, there is this constitutional
provision vitalizing this concept. It reads: "The State shall strengthen the
family as a basic social institution." 10 If, as the Constitution so wisely
dictates, it is the family as a unit that has to be strengthened, it does not
admit of doubt that even if a stronger case were presented for the uncle, still
deference to a constitutional mandate would have led the lower court to
decide as it did.
WHEREFORE, the decision of May 10, 1965 is affirmed. Costs against
defendant-appellant.
Zaldivar (Chairman), Antonio, Fernandez and Aquino, JJ., concur.
Barredo, J., took no part.