PUB CORP CASES

1. G.R. No. 61516 March 21, 1989

FLORENTINA A. GUILATCO, petitioner,
vs.
CITY OF DAGUPAN, and the HONORABLE COURT OF APPEALS, respondents.

Nolan R. Evangelista for petitioner.

The City Legal Officer for respondents.

SARMIENTO, J.:

In a civil action 1 for recovery of damages filed by the petitioner Florentina A. Guilatco, the following judgment was rendered against
the respondent City of Dagupan:

xxx

(1) Ordering defendant City of Dagupan to pay plaintiff actual damages in the amount
of P 15,924 (namely P8,054.00 as hospital, medical and other expenses [Exhs. H to
H-60], P 7,420.00 as lost income for one (1) year [Exh. F] and P 450.00 as bonus). P
150,000.00 as moral damages, P 50,000.00 as exemplary damages, and P 3,000.00
as attorney's fees, and litigation expenses, plus costs and to appropriate through its
Sangguniang Panglunsod (City Council) said amounts for said purpose;

(2) Dismissing plaintiffs complaint as against defendant City Engr. Alfredo G.

Tangco; and

(3) Dismissing the counterclaims of defendant City of Dagupan and defendant City
Engr. Alfredo G. Tangco, for lack of merit. 2

The facts found by the trial court are as follows: 3

It would appear from the evidences that on July 25, 1978, herein plaintiff, a Court
Interpreter of Branch III, CFI--Dagupan City, while she was about to board a
motorized tricycle at a sidewalk located at Perez Blvd. (a National Road, under the
control and supervision of the City of Dagupan) accidentally fell into a manhole
located on said sidewalk, thereby causing her right leg to be fractured. As a result
thereof, she had to be hospitalized, operated on, confined, at first at the Pangasinan
Provincial Hospital, from July 25 to August 3, 1978 (or for a period of 16 days). She
also incurred hospitalization, medication and other expenses to the tune of P
8,053.65 (Exh. H to H-60) or a total of P 10,000.00 in all, as other receipts were
either lost or misplaced; during the period of her confinement in said two hospitals,
plaintiff suffered severe or excruciating pain not only on her right leg which was
fractured but also on all parts of her body; the pain has persisted even after her
discharge from the Medical City General Hospital on October 9, 1978, to the present.
Despite her discharge from the Hospital plaintiff is presently still wearing crutches
and the Court has actually observed that she has difficulty in locomotion. From the
 time of the mishap on July 25, 1978 up to the present, plaintiff has not yet reported
for duty as court interpreter, as she has difficulty of locomotion in going up the stairs
of her office, located near the city hall in Dagupan City. She earns at least P 720.00 a
month consisting of her monthly salary and other means of income, but since July
25, 1978 up to the present she has been deprived of said income as she has already
consumed her accrued leaves in the government service. She has lost several
pounds as a result of the accident and she is no longer her former jovial self, she has
been unable to perform her religious, social, and other activities which she used to
do prior to the incident.

Dr. Norberto Felix and Dr. Dominado Manzano of the Provincial Hospital, as well as
Dr. Antonio Sison of the Medical City General Hospital in Mandaluyong Rizal (Exh. I;
see also Exhs. F, G, G-1 to G-19) have confirmed beyond shadow of any doubt the
extent of the fracture and injuries sustained by the plaintiff as a result of the mishap.
On the other hand, Patrolman Claveria, De Asis and Cerezo corroborated the
testimony of the plaintiff regarding the mishap and they have confirmed the existence
of the manhole (Exhs. A, B, C and sub-exhibits) on the sidewalk along Perez Blvd.,
at the time of the incident on July 25, 1978 which was partially covered by a concrete
flower pot by leaving gaping hole about 2 ft. long by 1 1/2 feet wide or 42 cms. wide
by 75 cms. long by 150 cms. deep (see Exhs. D and D-1).

Defendant Alfredo Tangco, City Engineer of Dagupan City and admittedly ex-officio
Highway Engineer, City Engineer of the Public Works and Building Official for
Dagupan City, admitted the existence of said manhole along the sidewalk in Perez
Blvd., admittedly a National Road in front of the Luzon Colleges. He also admitted
that said manhole (there are at least 11 in all in Perez Blvd.) is owned by the National
Government and the sidewalk on which they are found along Perez Blvd. are also
owned by the National Government. But as City Engineer of Dagupan City, he
supervises the maintenance of said manholes or drainage system and sees to it that
they are properly covered, and the job is specifically done by his subordinates, Mr.
Santiago de Vera (Maintenance Foreman) and Engr. Ernesto Solermo also a
maintenance Engineer. In his answer defendant Tangco expressly admitted in par. 7-
1 thereof, that in his capacity as ex-officio Highway Engineer for Dagupan City he
exercises supervision and control over National roads, including the Perez Blvd.
where the incident happened.

On appeal by the respondent City of Dagupan, the appellate court 4 reversed the lower court findings on the
ground that no evidence was presented by the plaintiff- appellee to prove that the City of Dagupan had "control or supervision" over Perez
Boulevard. 5

The city contends that Perez Boulevard, where the fatal drainage hole is located, is a national road that is not under the control or
supervision of the City of Dagupan. Hence, no liability should attach to the city. It submits that it is actually the Ministry of Public Highways
that has control or supervision through the Highway Engineer which, by mere coincidence, is held concurrently by the same person who is
also the City Engineer of Dagupan.

After examination of the findings and conclusions of the trial court and those of the appellate court,
as well as the arguments presented by the parties, we agree with those of the trial court and of the
petitioner. Hence, we grant the petition.

In this review on certiorari, we have simplified the errors assigned by the petitioner to a single issue:
whether or not control or supervision over a national road by the City of Dagupan exists, in effect
binding the city to answer for damages in accordance with article 2189 of the Civil Code.
The liability of public corporations for damages arising from injuries suffered by pedestrians from the
defective condition of roads is expressed in the Civil Code as follows:

Article 2189. Provinces, cities and municipalities shall be liable for damages for the
death of, or injuries suffered by, any person by reason of the defective condition of
roads, streets, bridges, public buildings, and other public works under their control or
supervision.

It is not even necessary for the defective road or street to belong to the province, city or municipality
for liability to attach. The article only requires that either control or supervision is exercised over the
defective road or street. 6

In the case at bar, this control or supervision is provided for in the charter of Dagupan and is
exercised through the City Engineer who has the following duties:

Sec. 22. The City Engineer--His powers, duties and compensation-There shall be a
city engineer, who shall be in charge of the department of Engineering and Public
Works. He shall receive a salary of not exceeding three thousand pesos per annum.
He shall have the following duties:

xxx

(j) He shall have the care and custody of the public system of waterworks and
sewers, and all sources of water supply, and shall control, maintain and regulate the
use of the same, in accordance with the ordinance relating thereto; shall inspect and
regulate the use of all private systems for supplying water to the city and its
inhabitants, and all private sewers, and their connection with the public sewer
system.

xxx

The same charter of Dagupan also provides that the laying out, construction and improvement of
streets, avenues and alleys and sidewalks, and regulation of the use thereof, may be legislated by
the Municipal Board . 7 Thus the charter clearly indicates that the city indeed has supervision and control over the sidewalk where
the open drainage hole is located.

The express provision in the charter holding the city not liable for damages or injuries sustained by
persons or property due to the failure of any city officer to enforce the provisions of the charter, can
not be used to exempt the city, as in the case at bar. 8

The charter only lays down general rules regulating the liability of the city. On the other hand article 2189 applies in particular to the liability
arising from "defective streets, public buildings and other public works." 9

The City Engineer, Mr. Alfredo G. Tangco, admits that he exercises control or supervision over the said road. But the city can not be excused
from liability by the argument that the duty of the City Engineer to supervise or control the said provincial road belongs more to his functions
as an ex-officio Highway Engineer of the Ministry of Public Highway than as a city officer. This is because while he is entitled to an
honorarium from the Ministry of Public Highways, his salary from the city government substantially exceeds the honorarium.

We do not agree.

Alfredo G. Tangco "(i)n his official capacity as City Engineer of Dagupan, as Ex- Officio Highway
Engineer, as Ex-Officio City Engineer of the Bureau of Public Works, and, last but not the least, as
Building Official for Dagupan City, receives the following monthly compensation: P 1,810.66 from
Dagupan City; P 200.00 from the Ministry of Public Highways; P 100.00 from the Bureau of Public
Works and P 500.00 by virtue of P.D. 1096, respectively." 10 This function of supervision over streets, public
buildings, and other public works pertaining to the City Engineer is coursed through a Maintenance Foreman and a Maintenance
Engineer.11 Although these last two officials are employees of the National Government, they are detailed with the City of Dagupan and
hence receive instruction and supervision from the city through the City Engineer.

There is, therefore, no doubt that the City Engineer exercises control or supervision over the public
works in question. Hence, the liability of the city to the petitioner under article 2198 of the Civil Code
is clear.

Be all that as it may, the actual damages awarded to the petitioner in the amount of P 10,000.00
should be reduced to the proven expenses of P 8,053.65 only. The trial court should not have
rounded off the amount. In determining actual damages, the court can not rely on "speculation,
conjecture or guess work" as to the amount. Without the actual proof of loss, the award of actual
damages becomes erroneous. 12

On the other hand, moral damages may be awarded even without proof of pecuniary loss, inasmuch as the determination of the amount is
discretionary on the court.13 Though incapable of pecuniary estimation, moral damages are in the nature of an award to compensate the
claimant for actual injury suffered but which for some reason can not be proven. However, in awarding moral damages, the following should
be taken into consideration:

(1) First, the proximate cause of the injury must be the claimee's acts.14

(2) Second, there must be compensatory or actual damages as satisfactory proof of the factual basis for damages.15

(3) Third, the award of moral damages must be predicated on any of the cases enumerated in the Civil Code. 16

In the case at bar, the physical suffering and mental anguish suffered by the petitioner were proven. Witnesses from the petitioner's place of
work testified to the degeneration in her disposition-from being jovial to depressed. She refrained from attending social and civic activities.17

Nevertheless the award of moral damages at P 150,000.00 is excessive. Her handicap was not
permanent and disabled her only during her treatment which lasted for one year. Though evidence
of moral loss and anguish existed to warrant the award of damages, 18 the moderating hand of the law is called
for. The Court has time and again called attention to the reprehensible propensity of trial judges to award damages without basis,19 resulting
in exhorbitant amounts.20

Although the assessment of the amount is better left to the discretion of the trial court 21 under preceding jurisprudence, the amount of moral
damages should be reduced to P 20,000.00.

As for the award of exemplary damages, the trial court correctly pointed out the basis:

To serve as an example for the public good, it is high time that the Court, through this
case, should serve warning to the city or cities concerned to be more conscious of
their duty and responsibility to their constituents, especially when they are engaged
in construction work or when there are manholes on their sidewalks or streets which
are uncovered, to immediately cover the same, in order to minimize or prevent
accidents to the poor pedestrians. 22

Too often in the zeal to put up "public impact" projects such as beautification drives, the end is more important than the manner in which the
work is carried out. Because of this obsession for showing off, such trivial details as misplaced flower pots betray the careless execution of
the projects, causing public inconvenience and inviting accidents.

Pending appeal by the respondent City of Dagupan from the trial court to the appellate court, the
petitioner was able to secure an order for garnishment of the funds of the City deposited with the
Philippine National Bank, from the then presiding judge, Hon. Willelmo Fortun. This order for
garnishment was revoked subsequently by the succeeding presiding judge, Hon. Romeo D. Magat,
and became the basis for the petitioner's motion for reconsideration which was also denied. 23

We rule that the execution of the judgment of the trial court pending appeal was premature. We do
not find any good reason to justify the issuance of an order of execution even before the expiration
of the time to appeal .24

WHEREFORE, the petition is GRANTED. The assailed decision and resolution of the respondent
Court of Appeals are hereby REVERSED and SET ASIDE and the decision of the trial court, dated
March 12, 1979 and amended on March 13, 1979, is hereby REINSTATED with the indicated
modifications as regards the amounts awarded:

(1) Ordering the defendant City of Dagupan to pay the plaintiff actual damages in the
amount of P 15,924 (namely P 8,054.00 as hospital, medical and other expenses; P
7,420.00 as lost income for one (1) year and P 450.00 as bonus); P 20,000.00 as
moral damages and P 10,000.00 as exemplary damages.

The attorney's fees of P 3,000.00 remain the same.

SO ORDERED.
2. G.R. No. L-52179             April 8, 1991

MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner

vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIÑA, IAUREANO BANIÑA, JR., SOR
MARIETA BANIÑA, MONTANO BANIÑA, ORJA BANIÑA, AND LYDIA R. BANIÑA, respondents.

Mauro C. Cabading, Jr. for petitioner.

Simeon G. Hipol for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory
injunction seeking the nullification or modification of the proceedings and the orders issued by the
respondent Judge Romeo N. Firme, in his capacity as the presiding judge of the Court of First
Instance of La Union, Second Judicial District, Branch IV, Bauang, La Union in Civil Case No. 107-
BG, entitled "Juana Rimando Baniña, et al. vs. Macario Nieveras, et al." dated November 4, 1975;
July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7,
1979; November 7, 1979 and December 3, 1979 and the decision dated October 10, 1979 ordering
defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay, jointly and severally,
the plaintiffs for funeral expenses, actual damages consisting of the loss of earning capacity of the
deceased, attorney's fees and costs of suit and dismissing the complaint against the Estate of
Macario Nieveras and Bernardo Balagot.

The antecedent facts are as follows:

Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and in
accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge Romeo
N. Firme is impleaded in his official capacity as the presiding judge of the Court of First Instance of
La Union, Branch IV, Bauang, La Union. While private respondents Juana Rimando-Baniña,
Laureano Baniña, Jr., Sor Marietta Baniña, Montano Baniña, Orja Baniña and Lydia R. Baniña are
heirs of the deceased Laureano Baniña Sr. and plaintiffs in Civil Case No. 107-Bg before the
aforesaid court.

At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a passenger
jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a gravel and
sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the
Municipality of San Fernando, La Union and driven by Alfredo Bislig. Due to the impact, several
passengers of the jeepney including Laureano Baniña Sr. died as a result of the injuries they
sustained and four (4) others suffered varying degrees of physical injuries.

On December 11, 1966, the private respondents instituted a compliant for damages against the
Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger
jeepney, which was docketed Civil Case No. 2183 in the Court of First Instance of La Union, Branch
I, San Fernando, La Union. However, the aforesaid defendants filed a Third Party Complaint against
the petitioner and the driver of a dump truck of petitioner.
Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent judge
and was subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated May 7,
1975, the private respondents amended the complaint wherein the petitioner and its regular
employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed its answer
and raised affirmative defenses such as lack of cause of action, non-suability of the State,
prescription of cause of action and the negligence of the owner and driver of the passenger jeepney
as the proximate cause of the collision.

In the course of the proceedings, the respondent judge issued the following questioned orders, to
wit:

(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot;

(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San
Fernando, La Union and Bislig and setting the hearing on the affirmative defenses only with
respect to the supposed lack of jurisdiction;

(3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion to
Dismiss until the trial;

(4) Order dated February 23, 1977 denying the motion for reconsideration of the order of
July 13, 1976 filed by the Municipality and Bislig for having been filed out of time;

(5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of the
order of July 13, 1976;

(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it appearing
that parties have not yet submitted their respective memoranda despite the court's direction;
and

(7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration and/or
order to recall prosecution witnesses for cross examination.

On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder quoted
as follows:

IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the plaintiffs,
and defendants Municipality of San Fernando, La Union and Alfredo Bislig are ordered to
pay jointly and severally, plaintiffs Juana Rimando-Baniña, Mrs. Priscilla B. Surell, Laureano
Baniña Jr., Sor Marietta Baniña, Mrs. Fe B. Soriano, Montano Baniña, Orja Baniña and Lydia
B. Baniña the sums of P1,500.00 as funeral expenses and P24,744.24 as the lost expected
earnings of the late Laureano Baniña Sr., P30,000.00 as moral damages, and P2,500.00 as
attorney's fees. Costs against said defendants.

The Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo

Balagot.

SO ORDERED. (Rollo, p. 30)

Petitioner filed a motion for reconsideration and for a new trial without prejudice to another motion
which was then pending. However, respondent judge issued another order dated November 7, 1979
denying the motion for reconsideration of the order of September 7, 1979 for having been filed out of
time.

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

Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to
excess of jurisdiction in issuing the aforesaid orders and in rendering a decision. Furthermore,
petitioner asserts that while appeal of the decision maybe available, the same is not the speedy and
adequate remedy in the ordinary course of law.

On the other hand, private respondents controvert the position of the petitioner and allege that the
petition is devoid of merit, utterly lacking the good faith which is indispensable in a petition
for certiorari and prohibition. (Rollo, p. 42.) In addition, the private respondents stress that petitioner
has not considered that every court, including respondent court, has the inherent power to amend
and control its process and orders so as to make them conformable to law and justice. (Rollo, p. 43.)

The controversy boils down to the main issue of whether or not the respondent court committed
grave abuse of discretion when it deferred and failed to resolve the defense of non-suability of the
State amounting to lack of jurisdiction in a motion to dismiss.

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

The respondent judge did not commit grave abuse of discretion when in the exercise of its judgment
it arbitrarily failed to resolve the vital issue of non-suability of the State in the guise of the
municipality. However, said judge acted in excess of his jurisdiction when in his decision dated
October 10, 1979 he held the municipality liable for the quasi-delict committed by its regular
employee.

The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the
Constitution, to wit: "the State may not be sued without its consent."

Stated in simple parlance, the general rule is that the State may not be sued except when it gives
consent to be sued. Consent takes the form of express or implied consent.

Express consent may be embodied in a general law or a special law. The standing consent of the
State to be sued in case of money claims involving liability arising from contracts is found in Act No.
3083. A special law may be passed to enable a person to sue the government for an alleged quasi-
delict, as in Merritt v. Government of the Philippine Islands (34 Phil 311). (see United States of
America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644, 654.)

Consent is implied when the government enters into business contracts, thereby descending to the
level of the other contracting party, and also when the State files a complaint, thus opening itself to a
counterclaim. (Ibid)

Municipal corporations, for example, like provinces and cities, are agencies of the State when they
are engaged in governmental functions and therefore should enjoy the sovereign immunity from suit.
Nevertheless, they are subject to suit even in the performance of such functions because their
charter provided that they can sue and be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39)

A distinction should first be made between suability and liability. "Suability depends on the consent
of the state to be sued, liability on the applicable law and the established facts. The circumstance
that a state is suable does not necessarily mean that it is liable; on the other hand, it can never be
held liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the
state has allowed itself to be sued. When the state does waive its sovereign immunity, it is only
giving the plaintiff the chance to prove, if it can, that the defendant is liable." (United States of
America vs. Guinto, supra, p. 659-660)

Anent the issue of whether or not the municipality is liable for the torts committed by its employee,
the test of liability of the municipality depends on whether or not the driver, acting in behalf of the
municipality, is performing governmental or proprietary functions. As emphasized in the case of
Torio vs. Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA 599, 606), the distinction of
powers becomes important for purposes of determining the liability of the municipality for the acts of
its agents which result in an injury to third persons.

Another statement of the test is given in City of Kokomo vs. Loy, decided by the Supreme Court of
Indiana in 1916, thus:

Municipal corporations exist in a dual capacity, and their functions are twofold. In one they
exercise the right springing from sovereignty, and while in the performance of the duties
pertaining thereto, their acts are political and governmental. Their officers and agents in such
capacity, though elected or appointed by them, are nevertheless public functionaries
performing a public service, and as such they are officers, agents, and servants of the state.
In the other capacity the municipalities exercise a private, proprietary or corporate right,
arising from their existence as legal persons and not as public agencies. Their officers and
agents in the performance of such functions act in behalf of the municipalities in their
corporate or individual capacity, and not for the state or sovereign power." (112 N.E., 994-
995) (Ibid, pp. 605-606.)

It has already been remarked that municipal corporations are suable because their charters grant
them the competence to sue and be sued. Nevertheless, they are generally not liable for torts
committed by them in the discharge of governmental functions and can be held answerable only if it
can be shown that they were acting in a proprietary capacity. In permitting such entities to be sued,
the State merely gives the claimant the right to show that the defendant was not acting in its
governmental capacity when the injury was committed or that the case comes under the exceptions
recognized by law. Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)

In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way to
the Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal
streets." (Rollo, p. 29.)

In the absence of any evidence to the contrary, the regularity of the performance of official duty is
presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that
the driver of the dump truck was performing duties or tasks pertaining to his office.

We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District Engineer,
and the Provincial Treasurer (102 Phil 1186) that "the construction or maintenance of roads in which
the truck and the driver worked at the time of the accident are admittedly governmental activities."
After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the
municipality cannot be held liable for the torts committed by its regular employee, who was then
engaged in the discharge of governmental functions. Hence, the death of the passenger –– tragic
and deplorable though it may be –– imposed on the municipality no duty to pay monetary
compensation.

All premises considered, the Court is convinced that the respondent judge's dereliction in failing to
resolve the issue of non-suability did not amount to grave abuse of discretion. But said judge
exceeded his jurisdiction when it ruled on the issue of liability.

ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby
modified, absolving the petitioner municipality of any liability in favor of private respondents.

SO ORDERED.

3 G.R. No. L-29993 October 23, 1978

LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL DE GUZMAN, ALFONSO R.

MAGSANOC, JESUS MACARANAS, MAXIMO MANANGAN, FIDEL MONTEMAYOR, MELCHOR
VIRAY, RAMON TULAGAN, all Members of the Municipal Council of Malasiqui in 1959,
Malasiqui, Pangasinan, petitioners,
vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO,
NORMA, VIRGINIA, REMEDIOS and ROBERTO, all surnamed FONTANILLA, and THE
HONORABLE COURT OF APPEALS, respondents.

G.R. No. L-30183 October 23, 1978

MUNICIPALITY OF MALASIQUI, petitioner,
vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA, ERNESTO,
NORMA, VIRGINIA, REMEDIOS and ROBERTO, all surnamed FONTANILLA, and the
Honorable COURT OF APPEALS, respondents.

Julian M. Armas, Assistant Provincial Fiscal for petitioners.

Isidro L. Padilla for respondents.

MUÑOZ PALMA, J.:

These Petitions for review present the issue of whether or not the celebration of a town fiesta
authorized by a municipal council under Sec. 2282 of the Municipal Law as embodied in the Revised
Administrative Code is a governmental or a corporate or proprietary function of the municipality.

A resolution of that issue will lead to another, viz the civil liability for damages of the Municipality of
Malasiqui, and the members of the Municipal Council of Malasiqui, province of Pangasinan, for a
death which occurred during the celebration of the town fiesta on January 22, 1959, and which was
attributed to the negligence of the municipality and its council members.
The following facts are not in dispute:

On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan, passed Resolution No. 159
whereby "it resolved to manage the 1959 Malasiqui town fiesta celebration on January 21, 22, and
23, 1959." Resolution No. 182 was also passed creating the "1959 Malasiqui 'Town Fiesta Executive
Committee" which in turn organized a sub-committee on entertainment and stage, with Jose
Macaraeg as Chairman. the council appropriated the amount of P100.00 for the construction of 2
stages, one for the "zarzuela" and another for the cancionan Jose Macaraeg supervised the
construction of the stage and as constructed the stage for the "zarzuela" was "5-½ meters by 8
meters in size, had a wooden floor high at the rear and was supported by 24 bamboo posts — 4 in a
row in front, 4 in the rear and 5 on each side — with bamboo braces."  1

The "zarzuela" entitled "Midas Extravaganza" was donated by an association of Malasiqui

employees of the Manila Railroad Company in Caloocan, Rizal. The troupe arrived in the evening of
January 22 for the performance and one of the members of the group was Vicente Fontanilla. The
program started at about 10:15 o'clock that evening with some speeches, and many persons went
up the stage. The "zarzuela" then began but before the dramatic part of the play was reached, the
stage collapsed and Vicente Fontanilla who was at the rear of the stage was pinned underneath.
Fontanilia was taken to tile San Carlos General Hospital where he died in the afternoon of the
following day.

The heirs of Vicente Fontanilia filed a complaint with the Court of First Instance of Manila on
September 11, 1959 to recover damages. Named party-defendants were the Municipality of
Malasiqui, the Municipal Council of Malasiqui and all the individual members of the Municipal
Council in 1959.

Answering the complaint defendant municipality invoked inter alia the principal defense that as a
legally and duly organized public corporation it performs sovereign functions and the holding of a
town fiesta was an exercise of its governmental functions from which no liability can arise to answer
for the negligence of any of its agents.

The defendant councilors inturn maintained that they merely acted as agents of the municipality in
carrying out the municipal ordinance providing for the management of the town fiesta celebration
and as such they are likewise not liable for damages as the undertaking was not one for profit;
furthermore, they had exercised due care and diligence in implementing the municipal ordinance.  2

After trial, the Presiding Judge, Hon. Gregorio T. Lantin narrowed the issue to whether or not the
defendants exercised due diligence 'm the construction of the stage. From his findings he arrived at
the conclusion that the Executive Committee appointed by the municipal council had exercised due
diligence and care like a good father of the family in selecting a competent man to construct a stage
strong enough for the occasion and that if it collapsed that was due to forces beyond the control of
the committee on entertainment, consequently, the defendants were not liable for damages for the
death of Vicente Fontanilla. The complaint was accordingly dismissed in a decision dated July 10,
1962. 3

The Fontanillas appealed to the Court of Appeals. In a decision Promulgated on October 31, 1968,
the Court of Appeals through its Fourth Division composed at the time of Justices Salvador V.
Esguerra, Nicasio A. Yatco and Eulogio S. Serrano reversed the trial court's decision and ordered all
the defendants-appellees to pay jointly and severally the heirs of Vicente Fontanilla the sums of
P12,000.00 by way of moral and actual damages: P1200.00 its attorney's fees; and the costs.  4
The case is now before Us on various assignments of errors all of which center on the proposition
stated at the sentence of this Opinion and which We repeat:

Is the celebration of a town fiesta an undertaking in the excercise of a municipality's governmental or

public function or is it or a private or proprietary character?

1. Under Philippine laws municipalities are political bodies corporate and as such ag endowed with
the faculties of municipal corporations to be exercised by and through their respective municipal
governments in conformity with law, and in their proper corporate name, they may inter alia sue and
be sued, and contract and be contracted with.  5

The powers of a municipality are twofold in character public, governmental or political on the one
hand, and corporate, private, or proprietary on the other. Governmental powers are those exercised
by the corporation in administering the powers of the state and promoting the public welfare and they
include the legislative, judicial public, and political Municipal powers on the other hand are exercised
for the special benefit and advantage of the community and include those which are ministerial
private and corporate. 6

As to when a certain activity is governmental and when proprietary or private, that is generally a
difficult matter to determine. The evolution of the municipal law in American Jurisprudence, for
instance, has shown that; none of the tests which have evolved and are stated in textbooks have set
down a conclusive principle or rule, so that each case will have to be determined on the basis of
attending circumstances.

In McQuillin on Municipal Corporations, the rule is stated thus: "A municipal corporation proper
has ... a public character as regards the state at large insofar as it is its agent in government, and
private (so-called) insofar as it is to promote local necessities and conveniences for its own
community.  7

Another statement of the test is given in City of Kokomo v. Loy, decided by the Supreme Court of
Indiana in 1916, thus:

Municipal corporations exist in a dual capacity, and their functions are two fold. In
one they exercise the right springing from sovereignty, and while in the performance
of the duties pertaining thereto, their acts are political and governmental Their
officers and agents in such capacity, though elected or appointed by the are
nevertheless public functionaries performing a public service, and as such they are
officers, agents, and servants of the state. In the other capacity the municipalities
exercise a private. proprietary or corporate right, arising from their existence as legal
persons and not as public agencies. Their officers and agents in the performance of
such functions act in behalf of the municipalities in their corporate or in. individual
capacity, and not for the state or sovereign power. (112 N. E 994-995)

In the early Philippine case of Mendoza v. de Leon 1916, the Supreme Court, through Justice Grant
T. Trent, relying mainly on American Jurisprudence classified certain activities of the municipality as
governmental, e.g.: regulations against fire, disease, preservation of public peace, maintenance of
municipal prisons, establishment of schools, post-offices, etc. while the following are corporate or
proprietary in character, viz: municipal waterwork, slaughter houses, markets, stables, bathing
establishments, wharves, ferries, and fisheries.   Maintenance of parks, golf courses, cemeteries and
8

airports among others, are also recognized as municipal or city activities of a proprietary character.  9
2. This distinction of powers becomes important for purposes of determining the liability of the
municipality for the acts of its agents which result in an injury to third persons.

If the injury is caused in the course of the performance of a governmental function or duty no
recovery, as a rule, can be. had from the municipality unless there is an existing statute on the
matter,  nor from its officers, so long as they performed their duties honestly and in good faith or that
10

they did not act wantonly and maliciously.   In Palafox, et al., v. Province of Ilocos Norte, et
11

al., 1958, a truck driver employed by the provincial government of Ilocos Norte ran over Proceto
Palafox in the course of his work at the construction of a road. The Supreme Court in affirming the
trial court's dismissal of the complaint for damages held that the province could not be made liable
because its employee was in the performance of a governmental function — the construction and
maintenance of roads — and however tragic and deplorable it may be, the death of Palafox imposed
on the province no duty to pay monetary consideration.  12

With respect to proprietary functions, the settled rule is that a municipal corporation can be held
liable to third persons ex contract   or ex delicto. 
13 14

Municipal corporations are subject to be sued upon contracts and in tort. ...

xxx xxx xxx

The rule of law is a general one, that the superior or employer must answer civilly for
the negligence or want of skill of its agent or servant in the course or fine of his
employment, by which another, who is free from contributory fault, is injured.
Municipal corporations under the conditions herein stated, fall within the operation of
this rule of law, and are liable, accordingly, to civil actions for damages when the
requisite elements of liability co-exist. ... (Dillon on Municipal Corporations, 5th ed.
Sec. 1610,1647, cited in Mendoza v. de Leon, supra. 514)

3. Coming to the cam before Us, and applying the general tests given above, We hold that the ho of
the town fiesta in 1959 by the municipality of Malsiqui Pangasinan was an exercise of a private or
proprietary function of the municipality.

Section 2282 of the Chatter on Municipal Law of the Revised Administrative Code provides:

Section 2282. Celebration of fiesta. — fiesta may be held in each municipality not

oftener than once a year upon a date fixed by the municipal council A fiesta s not be
held upon any other date than that lawfully fixed therefor, except when, for weighty
reasons, such as typhoons, foundations, earthquakes, epidemics, or other public
ties, the fiesta cannot be hold in the date fixed in which case it may be held at a later
date in the same year, by resolution of the council.

This provision simply gives authority to the municipality to accelebrate a yearly fiesta but it does not
impose upon it a duty to observe one. Holding a fiesta even if the purpose is to commemorate a
religious or historical event of the town is in essence an act for the special benefit of the community
and not for the general welfare of the public performed in pursuance of a policy of the state. The
mere fact that the celebration, as claimed was not to secure profit or gain but merely to provide
entertainment to the town inhabitants is not a conclusive test. For instance, the maintenance of
parks is not a source of income for the nonetheless it is private undertaking as distinguished from
the maintenance of public schools, jails, and the like which are for public service.
As stated earlier, there can be no hard and fast rule for purposes of determining the true nature of an
undertaking or function of a municipality; the surrounding circumstances of a particular case are to
be considered and will be decisive. The basic element, however beneficial to the public the
undertaking may be, is that it is governmental in essence, otherwise. the function becomes private or
proprietary in character. Easily, no overnmental or public policy of the state is involved in the
celebration of a town fiesta. 
15

4. It follows that under the doctrine of respondent superior, petitioner-municipality is to be held liable
for damages for the death of Vicente Fontanilia if that was at- tributable to the negligence of the
municipality's officers, employees, or agents.

Art. 2176, Civil Code: Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. . .

Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only
for one's own acts or omission, but also for those of persons for whom one is
responsible. . .

On this point, the Court of Appeals found and held that there was negligence.

The trial court gave credence to the testimony of Angel Novado, a witness of the defendants (now
petitioners), that a member of the "extravaganza troupe removed two principal braces located on the
front portion of the stage and u them to hang the screen or "telon", and that when many people went
up the stage the latter collapsed. This testimony was not believed however by respondent appellate
court, and rightly so. According to said defendants, those two braces were "mother" or "principal"
braces located semi-diagonally from the front ends of the stage to the front posts of the ticket booth
located at the rear of the stage and were fastened with a bamboo twine.   That being the case, it
16

becomes incredible that any person in his right mind would remove those principal braces and leave
the front portion of the stage practically unsuported Moreover, if that did happen, there was indeed
negligence as there was lack of suspension over the use of the stage to prevent such an
occurrence.

At any rate, the guitarist who was pointed to by Novado as the person who removed the two bamboo
braces denied having done go. The Court of Appeals said "Amor by himself alone could not have
removed the two braces which must be about ten meters long and fastened them on top of the stags
for the curtain. The stage was only five and a half meters wide. Surely, it, would be impractical and
unwieldy to use a ten meter bamboo pole, much more two poles for the stage curtain.  17

The appellate court also found that the stage was not strong enough considering that only P100.00
was appropriate for the construction of two stages and while the floor of the "zarzuela" stage was of
wooden planks, the Post and braces used were of bamboo material We likewise observe that
although the stage was described by the Petitioners as being supported by "24" posts, nevertheless
there were only 4 in front, 4 at the rear, and 5 on each side. Where were the rest?

The Court of Appeals thus concluded

The court a quo itself attributed the collapse of the stage to the great number of
onlookers who mounted the stage. The municipality and/or its agents had the
necessary means within its command to prevent such an occurrence. Having filed to
take the necessary steps to maintain the safety of the stage for the use of the
participants in the stage presentation prepared in connection with the celebration of
the town fiesta, particularly, in preventing non participants or spectators from
 mounting and accumulating on the stage which was not constructed to meet the
additional weight- the defendant-appellees were negligent and are liable for the
death of Vicente Fontanilla . (pp. 30-31, rollo, L-29993)

The findings of the respondent appellate court that the facts as presented to it establish negligence
as a matter of law and that the Municipality failed to exercise the due diligence of a good father of
the family, will not disturbed by Us in the absence of a clear showing of an abuse of discretion or a
gross misapprehension of facts."  18

Liability rests on negligence which is "the want of such care as a person of ordinary prudence would
exercise under the circumstances of the case."  19

Thus, private respondents argue that the "Midas Extravaganza" which was to be performed during
the town fiesta was a "donation" offered by an association of Malasiqui employees of the Manila
Railroad Co. in Caloocan, and that when the Municipality of Malasiqui accepted the donation of
services and constructed precisely a "zarzuela stage" for the purpose, the participants in the stage
show had the right to expect that the Municipality through its "Committee on entertainment and
stage" would build or put up a stage or platform strong enough to sustain the weight or burden of the
performance and take the necessary measures to insure the personal safety of the
participants.   We agree.
20

Quite relevant to that argument is the American case of Sanders v. City of Long Beach, 1942, which
was an action against the city for injuries sustained from a fall when plaintiff was descending the
steps of the city auditorium. The city was conducting a "Know your City Week" and one of the
features was the showing of a motion picture in the city auditorium to which the general public was
invited and plaintiff Sanders was one of those who attended. In sustaining the award for Damages in
favor of plaintiff, the District Court of Appeal, Second district, California, held inter alia that the "Know
your City Week" was a "proprietary activity" and not a "governmental one" of the city, that defendant
owed to plaintiff, an invitee the duty of exercising ordinary care for her safety, and plaintiff was
entitled to assume that she would not be exposed to a danger (which in this case consisted of lack of
sufficient illumination of the premises) that would come to her through a violation of defendant duty.  21

We can say that the deceased Vicente Fontanilla was similarly situated as Sander The Municipality
of Malasiqui resolved to celebrate the town fiesta in January of 1959; it created a committee in
charge of the entertainment and stage; an association of Malasiqui residents responded to the call
for the festivities and volunteered to present a stage show; Vicente Fontanilla was one of the
participants who like Sanders had the right to expect that he would be exposed to danger on that
occasion.

Lastly, petitioner or appellant Municipality cannot evade ability and/or liability under the c that it was
Jose Macaraeg who constructed the stage. The municipality acting through its municipal council
appointed Macaraeg as chairman of the sub-committee on entertainment and in charge of the
construction of the "zarzuela" stage. Macaraeg acted merely as an agent of the Municipality. Under
the doctrine of respondent superior mentioned earlier, petitioner is responsible or liable for the
negligence of its agent acting within his assigned tasks.  22

... when it is sought to render a municipal corporation liable for the act of servants or agents, a
cardinal inquiry is, whether they are the servants or agents of the corporation. If the corporation
appoints or elects them, can control them in the discharge of their duties, can continue or remove
the can hold them responsible for the manner in which they discharge their trust, and if those duties
relate to the exercise of corporate powers, and are for the benefit of the corporation in its local or
special interest, they may justly be regarded as its agents or servants, and the maxim of respondent
superior applies." ... (Dillon on Municipal Corporations, 5th Ed., Vol IV, p. 2879)

5. The remaining question to be resolved centers on the liability of the municipal councilors who
enacted the ordinance and created the fiesta committee.

The Court of Appeals held the councilors jointly and solidarity liable with the municipality for
damages under Article 27 of the Civil Code which provides that d any person suffering ing material
or moral loss because a public servant or employee refuses or neglects, without just cause to
perform his official duty may file an action for damages and other relief at the latter. 
23

In their Petition for review the municipal councilors allege that the Court of Appeals erred in ruling
that the holding of a town fiesta is not a governmental function and that there was negligence on
their part for not maintaining and supervising the safe use of the stage, in applying Article 27 of the
Civil Code against them and in not holding Jose Macaraeg liable for the collapse of the stage and
the consequent death of Vicente Fontanilla.  24

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

If We are led to set aside the decision of the Court of Appeals insofar as these petitioners are
concerned, it is because of a plain error committed by respondent court which however is not
invoked in petitioners' brief.

In Miguel v. The Court of appeal. et al., the Court, through Justice, now Chief Justice, Fred Ruiz
Castro, held that the Supreme Court is vested with ample authority to review matters not assigned
as errors in an appeal if it finds that their consideration and resolution are indispensable or
necessary in arriving at a just decision in a given case, and that tills is author under Sec. 7, Rule 51
of the Rules of Court.   We believe that this pronouncement can well be applied in the instant case.
25

The Court of Appeals in its decision now under review held that the celebration of a town fiesta by
the Municipality of Malasiqui was not a governmental function. We upheld that ruling. The legal
consequence thereof is that the Municipality stands on the same footing as an ordinary private
corporation with the municipal council acting as its board of directors. It is an elementary principle
that a corporation has a personality, separate and distinct from its officers, directors, or persons
composing it   and the latter are not as a rule co-responsible in an action for damages for tort or
26

negligence culpa aquilla committed by the corporation's employees or agents unless there is a
showing of bad faith or gross or wanton negligence on their part.  27

xxx xxx xxx

The ordinary doctrine is that a director, merely by reason of his office, is not
personally Stable for the torts of his corporation; he Must be shown to have
personally voted for or otherwise participated in them ... Fletcher Encyclopedia
Corporations, Vol 3A Chapt 11, p. 207)

Officers of a corporation 'are not held liable for the negligence of the corporation
merely because of their official relation to it, but because of some wrongful or
negligent act by such officer amounting to a breach of duty which resulted in an injury
 ... To make an officer of a corporation liable for the negligence of the corporation
there must have been upon his part such a breach of duty as contributed to, or
helped to bring about, the injury; that is to say, he must be a participant in the
wrongful act. ... (pp. 207-208, Ibid.)

xxx xxx xxx

Directors who merely employ one to give a fireworks Ambition on the corporate are
not personally liable for the negligent acts of the exhibitor. (p. 211, Ibid.)

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

6. One last point We have to resolve is on the award of attorney's fees by respondent court.
Petitioner-municipality assails the award.

Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and expenses of litigation may be
granted when the court deems it just and equitable. In this case of Vicente Fontanilla, although
respondent appellate court failed to state the grounds for awarding attorney's fees, the records show
however that attempts were made by plaintiffs, now private respondents, to secure an extrajudicial
compensation from the municipality: that the latter gave prorases and assurances of assistance but
failed to comply; and it was only eight month after the incident that the bereaved family of Vicente
Fontanilla was compelled to seek relief from the courts to ventilate what was believed to be a just
cause. 28

We hold, therefore, that there is no error committed in the grant of attorney's fees which after all is a
matter of judicial discretion. The amount of P1,200.00 is fair and reasonable.

PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of Appeals insofar as the
Municipality of Malasiqui is concerned (L-30183), and We absolve the municipal councilors from
liability and SET ASIDE the judgment against them (L-9993).

Without pronouncement as to costs.

SO ORDERED,

4. G.R. No. 71159 November 15, 1989

CITY OF MANILA, and EVANGELINE SUVA, petitioners,

vs.
HON. INTERMEDIATE APPELLATE COURT, IRENE STO. DOMINGO and for and in behalf of
her minor children, VIVENCIO, JR., IRIS, VERGEL and IMELDA, all surnamed STO.
DOMINGO, respondents.

The City Legal Officer for petitioners.

Jose M. Castillo for respondents.

PARAS, J.:

This is a petition for review on certiorari seeking to reverse and set aside: (a) the Decision of the
Intermediate Appellate Court now Court of Appeals   promulgated on May 31, 1984 in AC-G.R. CV
1

No. 00613-R entitled Irene Sto. Domingo et al., v. City Court of Manila et al., modifying the decision
of the then Court of First Instance of Manila, Branch VIII   in Civil Case No. 121921 ordering the
2

defendants (herein petitioners,) to give plaintiffs (herein private respondents) the right to use a burial
lot in the North Cemetery corresponding to the unexpired term of the fully paid lease sued upon, to
search the remains of the late Vivencio Sto. Domingo, Sr. and to bury the same in a substitute lot to
be chosen by the plaintiffs; and (b) the Resolution of the Court of Appeals dated May 28, 1985
denying petitioner's motion for reconsideration.

As found by the Court of Appeals and the trial court, the undisputed facts of the case are as follows:

Brought on February 22, 1979 by the widow and children of the late Vivencio Sto.
Domingo, Sr. was this action for damages against the City of Manila; Evangeline
Suva of the City Health Office; Sergio Mallari, officer-in-charge of the North
Cemetery; and Joseph Helmuth, the latter's predecessor as officer-in-charge of the
said burial grounds owned and operated by the City Government of Manila.

Vivencio Sto. Domingo, Sr. deceased husband of plaintiff Irene Sto. Domingo and
father of the litigating minors, died on June 4,1971 and buried on June 6,1971 in Lot
No. 159, Block No. 194 of the North Cemetery which lot was leased by the city to
Irene Sto. Domingo for the period from June 6, 1971 to June 6, 2021 per Official
Receipt No. 61307 dated June 6, 1971 (see Exh. A) with an expiry date of June 6,
2021 (see Exh. A-1). Full payment of the rental therefor of P50.00 is evidenced by
the said receipt which appears to be regular on its face. Apart from the
aforementioned receipt, no other document was executed to embody such lease
over the burial lot in question. In fact, the burial record for Block No. 194 of Manila
North Cemetery (see Exh. 2) in which subject Lot No. 159 is situated does not reflect
the term of duration of the lease thereover in favor of the Sto. Domingos.

Believing in good faith that, in accordance with Administrative Order No. 5, Series of
1975, dated March 6, 1975, of the City Mayor of Manila (See Exh. 1) prescribing
uniform procedure and guidelines in the processing of documents pertaining to and
for the use and disposition of burial lots and plots within the North Cemetery, etc.,
subject Lot No. 159 of Block 194 in which the mortal remains of the late Vivencio Sto.
Domingo were laid to rest, was leased to the bereaved family for five (5) years only,
subject lot was certified on January 25, 1978 as ready for exhumation.

On the basis of such certification, the authorities of the North Cemetery then headed
by defendant Joseph Helmuth authorized the exhumation and removal from subject
burial lot the remains of the late Vivencio Sto. Domingo, Sr., placed the bones and
skull in a bag or sack and kept the same in the depository or bodega of the cemetery
y Subsequently, the same lot in question was rented out to another lessee so that
when the plaintiffs herein went to said lot on All Souls Day in their shock,
consternation and dismay, that the resting place of their dear departed did not
anymore bear the stone marker which they lovingly placed on the tomb. Indignant
 and disgusted over such a sorrowful finding, Irene Sto. Domingo lost no time in
inquiring from the officer-in-charge of the North Cemetery, defendant Sergio Mallari,
and was told that the remains of her late husband had been taken from the burial lot
in question which was given to another lessee.

Irene Sto. Domingo was also informed that she can look for the bones of her
deceased husband in the warehouse of the cemetery where the exhumed remains
from the different burial lots of the North Cemetery are being kept until they are
retrieved by interested parties. But to the bereaved widow, what she was advised to
do was simply unacceptable. According to her, it was just impossible to locate the
remains of her late husband in a depository containing thousands upon thousands of
sacks of human bones. She did not want to run the risk of claiming for the wrong set
of bones. She was even offered another lot but was never appeased. She was too
aggrieved that she came to court for relief even before she could formally present her
claims and demands to the city government and to the other defendants named in
the present complaint. (Decision, Court of Appeals, pp. 2-3; Rollo, pp. 34-55)

The trial court, on August 4, 1981, rendered its Decision, the dispositive portion of which states:

WHEREFORE, judgment is hereby rendered, ordering the defendants to give

plaintiffs the right to make use of another single lot within the North Cemetery for a
period of forty-three (43) years four (4) months and eleven (11) days, corresponding
to the unexpired term of the fully paid lease sued upon; and to search without let up
and with the use of all means humanly possible, for the remains of the late Vivencio
Sto. Domingo, Sr. and thereafter, to bury the same in the substitute lot to be chosen
by the plaintiffs pursuant to this decision.

For want of merit, defendant's counterclaim is DISMISSED.

No pronouncement as to costs.

SO ORDERED. (Rollo, p. 31)

The decision was appealed to the Court of Appeals which on May 31, 1984 rendered a decision
(Rollo, pp. 33-40) modifying the decision appealed from, the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, the decision appealed from is hereby

REVERSED (is hereby modified) and another one is hereby entered:

1. Requiring in full force the defendants to look in earnest for the bones and skull of
the late Vivencio Sto. Domingo, Sr., and to bury the same in the substitute lot
adjudged in favor of plaintiffs hereunder;

2. Ordering defendants to pay plaintiffs-appellants jointly and severally P10,000.00

for breach of contract;

3. Ordering defendants to pay plaintiffs-appellants, jointly and severally, P20,000.00

for moral damages;

4. Ordering defendants to pay plaintiffs-appellants jointly and severally, P20,000.00

for exemplary damages;
 5. Ordering defendants to pay plaintiffs-appellants, jointly and severally, P10,000.00
as and for attorney's fees;

6. Ordering defendants, to pay plaintiffs-appellants, jointly and severally, on the

foregoing amounts legal rate of interest computed from filing hereof until fully paid;
and

7. Ordering defendants, to pay plaintiffs-appellants, jointly and severally, the cost of

suit.

SO ORDERED. (Rollo, p. 40)

The petitioners' motion for reconsideration was likewise denied.

Hence, this instant petition (Rollo, pp. 7-27) filed on July 27, 1985.

The grounds relied upon for this petition are as follows:

THE HONORABLE INTERMEDIATE APPELLATE COURT ERRED IN AWARDING

DAMAGES AGAINST THE PETITIONERS HEREIN, NOTWITHSTANDING THEIR
GOOD FAITH AND THEIR LACK OF KNOWLEDGE OR CONSENT TO THE
REMOVAL OF THE SKELETAL REMAINS OF THE LATE VIVENCIO STO.
DOMINGO, SR. FROM THE SUBJECT BURIAL LOT.

II

THE HON. INTERMEDIATE APPELLATE COURT ERRED IN HOLDING

PETITIONERS HEREIN RESPONSIBLE FOR THE ALLEGED TORTS OF THEIR
SUBORDINATE OFFICIALS AND EMPLOYEES, INSPITE OF THE PROVISIONS
OF SECTION 4 OF THE REPUBLIC ACT NO. 409 (REVISED CHARTER OF
MANILA) AND OTHER APPLICABLE JURISPRUDENCE ON THE SUBJECT
EXEMPTING THE PETITIONERS FROM DAMAGES FROM THE MALFEASANCE
OR MISFEASANCE OF THEIR OFFICIALS AND EMPLOYEES, IF THERE BE ANY
IN THIS CASE. (Brief for Petitioners, Rollo, pp. 93-94)

In the resolution dated November 13, 1985 (,Rollo, p. 84), the petition was given due course.

The pivotal issue of this case is whether or not the operations and functions of a public cemetery are
a governmental, or a corporate or proprietary function of the City of Manila. The resolution of this
issue is essential to the determination of the liability for damages of the petitioner city.

Petitioners alleged in their petition that the North Cemetery is exclusively devoted for public use or
purpose as stated in Sec. 316 of the Compilation of the Ordinances of the City of Manila. They
conclude that since the City is a political subdivision in the performance of its governmental function,
it is immune from tort liability which may be caused by its public officers and subordinate employees.
Further Section 4, Article I of the Revised Charter of Manila exempts the city from liability for
damages or injuries to persons or property arising from the failure of the Mayor, the Municipal Board,
or any other city officer, to enforce the provision of its charter or any other laws, or ordinance, or
from negligence of said Mayor, Municipal Board or any other officers while enforcing or attempting to
enforce said provisions. They allege that the Revised Charter of Manila being a special law cannot
be defeated by the Human Relations provisions of the Civil Code being a general law.

Private respondents on the other hand maintain that the City of Manila entered into a contract of
lease which involve the exercise of proprietary functions with private respondent Irene Sto. Domingo.
The city and its officers therefore can be sued for any-violation of the contract of lease.

Private respondents' contention is well-taken.

Under Philippine laws, the City of Manila is a political body corporate and as such endowed with the
faculties of municipal corporations to be exercised by and through its city government in conformity
with law, and in its proper corporate name. It may sue and be sued, and contract and be contracted
with. Its powers are twofold in character-public, governmental or political on the one hand, and
corporate, private and proprietary on the other. Governmental powers are those exercised in
administering the powers of the state and promoting the public welfare and they include the
legislative, judicial, public and political. Municipal powers on the one hand are exercised for the
special benefit and advantage of the community and include those which are ministerial, private and
corporate. In McQuillin on Municipal Corporation, the rule is stated thus: "A municipal corporation
proper has ... a public character as regards the state at large insofar as it is its agent in government,
and private (so called) insofar as it is to promote local necessities and conveniences for its own
community (Torio v. Fontanilla, 85 SCRA 599 [1978]). In connection with the powers of a municipal
corporation, it may acquire property in its public or governmental capacity, and private or proprietary
capacity. The New Civil Code divides such properties into property for public use and patrimonial
properties (Article 423), and further enumerates the properties for public use as provincial roads, city
streets, municipal streets, the squares, fountains, public waters, promenades, and public works for
public service paid for by said provisions, cities or municipalities, all other property is patrimonial
without prejudice to the provisions of special laws (Article 424; Province of Zamboanga del Norte v.
City of Zamboanga, et al., 22 SCRA 1334 [1968]).

Thus in Torio v. Fontanilla, supra, the Court declared that with respect to proprietary functions the
settled rule is that a municipal corporation can be held liable to third persons ex
contractu (Municipality of Moncada v. Cajuigan, et al., 21 Phil. 184 (1912) or ex delicto (Mendoza v.
de Leon, 33 Phil. 508 (1916).

The Court further stressed:

Municipal corporations are subject to be sued upon contracts and in tort....

xxx xxx xxx

The rule of law is a general one, that the superior or employer must answer civilly for
the negligence or want of skill of its agent or servant in the course or line of his
employment, by which another who is free from contributory fault, is injured.
Municipal corporations under the conditions herein stated, fall within tile operation of
this rule of law, and are liable accordingly, to civil actions for damages when the
requisite elements of liability co-exist. ... (Emphasis supplied)

The Court added:

... while the following are corporate or proprietary in character, viz: municipal
waterworks, slaughter houses, markets, stables, bathing establishments, wharves,
 ferries and fisheries. Maintenance of parks, golf courses, cemeteries and airports
among others, are also recognized as municipal or city activities of a proprietary
character. (Dept. of Treasury v. City of Evansvulle, Sup. Ct. of Indiana, 60 N.E. 2nd
952, 954 cited in Torio v. Fontanilla, supra) (Emphasis supplied)

Under the foregoing considerations and in the absence of a special law, the North Cemetery is a
patrimonial property of the City of Manila which was created by resolution of the Municipal Board of
August 27, 1903 and January 7, 1904 (Petition, Rollo pp. 20-21 Compilation of the Ordinances of the
City of Manila). The administration and government of the cemetery are under the City Health Officer
(Ibid., Sec. 3189), the order and police of the cemetery (Ibid., See. 319), the opening of graves,
niches, or tombs, the exhuming of remains, and the purification of the same (Ibid., Sec. 327) are
under the charge and responsibility of the superintendent of the cemetery. The City of Manila
furthermore prescribes the procedure and guidelines for the use and dispositions of burial lots and
plots within the North Cemetery through Administrative Order No. 5, s. 1975 (Rollo, p. 44). With the
acts of dominion, there is, therefore no doubt that the North Cemetery is within the class of property
which the City of Manila owns in its proprietary or private character. Furthermore, there is no dispute
that the burial lot was leased in favor of the private respondents. Hence, obligations arising from
contracts have the force of law between the contracting parties. Thus a lease contract executed by
the lessor and lessee remains as the law between them. (Henson v. Intermediate Appellate Court,
148 SCRA 11 [1 987]). Therefore, a breach of contractual provision entitles the other party to
damages even if no penalty for such breach is prescribed in the contract. (Boysaw v. Interphil
Promotions, Inc., 148 SCRA 635 [1987]).

Noteworthy are the findings of the Court of Appeals as to the harrowing experience of private
respondents and their wounded feelings upon discovery that the remains of their loved one were
exhumed without their knowledge and consent, as said Court declared:

It has been fully established that the appellants, in spite or perhaps because, of their
lowly station in life have found great consolation in their bereavement from the loss of
their family head, by visiting his grave on special or even ordinary occasions, but
particularly on All Saints Day, in keeping with the deep, beautiful and Catholic Filipino
tradition of revering the memory of their dead. It would have been but fair and
equitable that they were notified of the intention of the city government to transfer the
skeletal remains of the late Vivencio Sto. Domingo to give them an opportunity to
demand the faithful fulfillment of their contract, or at least to prepare and make
provisions for said transfer in order that they would not lose track of the remains of
their beloved dead, as what has actually happened on this case. We understand fully
what the family of the deceased must have felt when on All Saints Day of 1978, they
found a new marker on the grave they were to visit, only to be told to locate their
beloved dead among thousands of skeletal remains which to them was desecration
and an impossible task. Even the lower court recognized this when it stated in its
decision thus:

All things considered, even as the Court commiserates with plaintiffs

for the unfortunate happening complained of and untimely
desecration of the resting place and remains of their deceased dearly
beloved, it finds the reliefs prayed for by them lacking in legal and
factual basis. Under the aforementioned facts and circumstances, the
most that plaintiffs ran ask for is the replacement of subject lot with
another lot of equal size and similar location in the North Cemetery
which substitute lot plaintiffs can make use of without paying any
rental to the city government for a period of forty-three (43) years,
 four (4) months and eleven (11) days corresponding to the unexpired
portion of the term of the lease sued upon as of January 25, 1978
when the remains of the late Vivencio Sto. Domingo, Sr. were
prematurely removed from the disputed lot; and to require the
defendants to look in earnest for the bones and skull of the late
Vivencio Sto. Domingo Sr. and to bury the same in the substitute lot
adjudged in favor of plaintiffs hereunder. (Decision, Intermediate
Appellate Court, p. 7, Rollo, p. 39)

As regards the issue of the validity of the contract of lease of grave lot No. 159, Block No. 195 of the
North Cemetery for 50 years beginning from June 6, 1971 to June 6, 2021 as clearly stated in the
receipt duly signed by the deputy treasurer of the City of Manila and sealed by the city government,
there is nothing in the record that justifies the reversal of the conclusion of both the trial court and the
Intermediate Appellate Court to the effect that the receipt is in itself a contract of lease. (Decision,
Intermediate Appellate Court, p. 3, Rollo, pp. 5-6).

Under the doctrine of respondent superior, (Torio v. Fontanilla, supra), petitioner City of Manila is
liable for the tortious act committed by its agents who failed to verify and check the duration of the
contract of lease. The contention of the petitioner-city that the lease is covered by Administrative
Order No. 5, series of 1975 dated March 6, 1975 of the City of Manila for five (5) years only
beginning from June 6, 1971 is not meritorious for the said administrative order covers new leases.
When subject lot was certified on January 25, 1978 as ready for exhumation, the lease contract for
fifty (50) years was still in full force and effect.

PREMISES CONSIDERED, the Decision of the Intermediate Appellate Court is hereby AFFIRMED.

SO ORDERED.

5. G.R. No. 72841 January 29, 1987

PROVINCE OF CEBU, petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT and ATTY. PABLO P.
GARCIA, respondents.

GUTIERREZ, JR., J.:

This is a petition to review the decision of the respondent Intermediate Appellate Court in A.C. G.R.
CV No. 66502 entitled "Governor Rene Espina, et. at v. Mayor Sergio Osmeña, Jr., et. al, Atty. Pablo
P. Garcia v. Province of Cebu" 1 affirming with modification the order of the Court of First Instance of Cebu, Branch VII, granting
respondent Pablo P. Garcia's claim for compensation for services rendered as counsel in behalf of the respondent Province of Cebu.

The facts of the case are not in dispute. On February 4, 1964, while then incumbent Governor Rene
Espina was on official business in Manila, the Vice-Governor, Priscillano Almendras and three (3)
members of the Provincial Board enacted Resolution No. 188, donating to the City of Cebu 210
province. owned lots all located in the City of Cebu, with an aggregate area of over 380 hectares,
and authorizing the Vice-Governor to sign the deed of donation on behalf of the province. The deed
of donation was immediately executed in behalf of the Province of Cebu by Vice-Governor
Almendras and accepted in behalf of the City of Cebu by Mayor Sergio Osmeña, Jr. The document
of donation was prepared and notarized by a private lawyer. The donation was later approved by the
Office of the President through Executive Secretary Juan Cancio.

According to the questioned deed of donation the lots donated were to be sold by the City of Cebu to
raise funds that would be used to finance its public improvement projects. The City of Cebu was
given a period of one (1) year from August 15, 1964 within which to dispose of the donated lots.

Upon his return from Manila, Governor Espina denounced as Legal and immoral the action of his
colleagues in donating practically all the patrimonial property of the province of Cebu, considering
that the latter's income was less than one. fourth (1/4) of that of the City of Cebu.

To prevent the sale or disposition of the lots, the officers and members of the Cebu Mayor's League
(in behalf of their respective municipalities) along with some taxpayers, including Atty. Garcia, filed a
case seeking to have the donation declared illegal, null and void. It was alleged in the complaint that
the plaintiffs were filing it for and in behalf of the Province of Cebu in the nature of a derivative suit.
Named defendants in the suit were the City of Cebu, City Mayor Sergio Osmeña, Jr. and the Cebu
provincial officials responsible for the donation of the province-owned lots. The case was docketed
as Civil Case No. R-8669 of the Court of First Instance of Cebu and assigned to Branch VI thereof.

Defendants City of Cebu and City Mayor Osmeña, Jr. filed a motion to dismiss the case on the
ground that plaintiffs did not have the legal capacity to sue.

Subsequently, in an order, dated May, 1965, the court dismissed Case No. R-8669 on the ground
that plaintiffs were not the real parties in interest in the case. Plaintiffs filed a motion for
reconsideration of the order of dismissal. This motion was denied by the Court.

Meanwhile, Cebu City Mayor Sergio Osmeña, Jr. announced that he would borrow funds from the
Philippine National Bank (PNB) and would use the donated lots as collaterals. In July, 1965, the City
of Cebu advertised the sale of an the lots remaining unsold. Thereupon, Governor Espina,
apprehensive that the lots would be irretrievably lost by the Province of Cebu, decided to go to court.
He engaged the services of respondent Garcia in filing and prosecuting the case in his behalf and in
behalf of the Province of Cebu.

Garcia filed the complaint for the annulment of the deed of donation with an application for the
issuance of a writ of preliminary injunction, which application was granted on the same day, August
6, 1965.

The complaint was later amended to implead Cebu City Mayor Carlos P. Cuizon as additional
defendant in view of Fiscal Numeriano Capangpangan's manifestation stating that on September 9,
1965, Sergio Osmeña, Jr. filed his certificate of Candidacy for senator, his position/office having
been assumed by City Mayor Carlos P. Cuizon.

Sometime in 1972, the Provincial Board passed a resolution authorizing the Provincial Attorney,
Alfredo G. Baguia, to enter his appearance for the Province of Cebu and for the incumbent
Governor, Vice-Governor and members of the Provincial Board in this case.

On January 30, 1973, Alfredo G. Baguia, Provincial Attorney of the Province of Cebu, entered his
appearance as additional counsel for the Province of Cebu and as counsel for Governor Osmundo
Rama, Vice-Governor Salutario Fernandez and Board Members Leonardo Enad, Guillermo Legazpi,
and Rizalina Migallos.
On January 31, 1973, Atty. Baguia filed a complaint in intervention stating that intervenors Province
of Cebu and Provincial Board of Cebu were joining or uniting with original plaintiff, former Governor
of Cebu, Rene Espina. They adopted his causes of action, claims, and position stated in the original
complaint filed before the court on August 6, 1965.

On June 25, 1974, a compromise agreement was reached between the province of Cebu and the
city of Cebu. On July 15, 1974, the court approved the compromise agreement and a decision was
rendered on its basis.

On December 4, 1974, the court issued an order directing the issuance of a writ of execution to
implement the decision dated July 15, 1974, to wit:

1. Ordering the City of Cebu to return and deliver to the Province of Cebu all the lots
enumerated in the second paragraph hereof;

2. Ordering the Province of Cebu to pay the amount of One Million Five Hundred
Thousand Pesos (P1,500,000.00) to the City of Cebu for and in consideration of the
return by the latter to the former of the aforesaid lots;

3. Declaring the retention by the City of Cebu of the eleven (11) lots mentioned in
paragraph No. 1 of the compromise agreement, namely, Lot Nos. 1141, 1261, 1268,
1269, 1272, 1273, 917, 646-A, 646A-4-0 and 10107-C;

4. Ordering the City of Cebu or the City Treasurer to turn over to the Province of
Cebu the amount of P187948.93 mentioned in Annex "A" of the defendants
manifestation dated October 21, 1974;

5. Declaring the City of Cebu and an its present and past officers completely free
from liabilities to third persons in connection with the aforementioned lots, which
liabilities if any, shall be assumed by the Province of Cebu;

6. Ordering the Register of Deeds of the City of Cebu to cancel the certification of
titles in the name of the City of Cebu covering the lots enumerated in the second
paragraph of this order and to issue new ones in lieu thereof in the name of the
Province of Cebu.

For services rendered in Civil Case no. 238-BC, CFI of Cebu, respondent Pablo P. Garcia filed
through counsel a Notice of Attorney's Lien, dated April 14, 1975, praying that his statement of claim
of attorney's lien in said case be entered upon the records thereof, pursuant to Section 37, Rule 138
of the Rules of Court.

To said notice, petitioner Province of Cebu filed through counsel, its opposition dated April 23, 1975,
stating that the payment of attorney's fees and reimbursement of incidental expenses are not
allowed by law and settled jurisprudence to be paid by the Province. A rejoinder to this opposition
was filed by private respondent Garcia.

After hearing, the Court of First Instance of Cebu, then presided over by Judge Alfredo Marigomen,
rendered judgment dated May 30, 1979, in favor of private respondent and against petitioner
Province of Cebu, declaring that the former is entitled to recover attorney's fees on the basis of
quantum meruit and fixing the amount thereof at P30,000.00.
Both parties appealed from the decision to the Court of Appeals. In the case of private respondent,
however, he appealed only from that portion of the decision which fixed his attorney's fees at
P30,000.00 instead of at 30% of the value of the properties involved in the litigation as stated in his
original claim

On October 18, 1985, the Intermediate Appellate Court rendered a decision affirming the findings
and conclusions of the trial court that the private respondent is entitled to recover attorney's fees but
fixing the amount of such fees at 5% of the market value of the properties involved in the litigation as
of the date of the filing of the claim in 1975. The dispositive portion of the decision reads:

WHEREFORE, except for the aforementioned modification that the compensation for
the services rendered by the Claimant Atty. Pablo P. Garcia is fixed at five percent
(5%) of the total fair market value of the lots in question, the order appealed from is
hereby affirmed in all other respects.

Both parties went to the Supreme Court with private respondent questioning the fixing of his
attorney's fees at 5% instead of 30% of the value of the properties in litigations as prayed for in his
claims. However, the private respondent later withdrew his petition in G.R. No. 72818 with the
following explanation:

That after a long and serious reflection and reassessment of his position and
intended course of action and, after seeking the views of his friends, petitioner has
come to the definite conclusion that prosecuting his appeal would only result in
further delay in the final disposition of his claim (it has been pending for the last 10
years 4 in the CFI and 6 in the Court of Appeals, later Intermediate Appellate Court)
and that it would be more prudent and practicable to accept in full the decision of the
Intermediate Appellate Court.

Hence, only the petition of the Province of Cebu is pending before this Court.

The matter of representation of a municipality by a private attorney has been settled in Ramos v.
Court of Appeals (108 SCRA 728). Collaboration of a private law firm with the fiscal and the
municipal attorney is not allowed. Section 1683 of the Revised Administrative Code provides:

.Section 1683. Duty of fiscal to represent provinces and provincial subdivisions in

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

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

The above provision, complemented by Section 3 of the Local Autonomy Law, is clear in providing
that only the provincial fiscal and the municipal attorney can represent a province or municipality in
its lawsuits. The provision is mandatory. The municipality's authority to employ a private lawyer is
expressly limited only to situations where the provincial fiscal is disqualified to represent it (De Guia
v. The Auditor General 44 SCRA 169; Municipality of Bocaue, et. al. v. Manotok, 93 Phil. 173;
Enriquez, Sr., v. Honorable Gimenez, 107 Phil. 932) as when he represents the province against a
municipality.

The lawmaker, in requiring that the local government should be represented in its court cases by a
government lawyer, like its municipal attorney and the provincial fiscal intended that the local
government should not be burdened with the expenses of hiring a private lawyer. The lawmaker also
assumed that the interests of the municipal corporation would be best protected if a government
lawyer handles its litigations. It is to be expected that the municipal attorney and the fiscal would be
faithful and dedicated to the corporation's interests, and that, as civil service employees, they could
be held accountable for any misconduct or dereliction of duty (See Ramos v. Court of Appeals,
supra).

However, every rule is not without an exception, Ibi quid generaliter conceditur; inest haec exceptio,
si non aliquid sit contra jus fasque (Where anything is granted generally, this exception is implied;
that nothing shall be contrary to law and right). Indeed, equity, as well as the exceptional situation
facing us in the case at bar, require a departure from the established rule.

The petitioner anchors its opposition to private respondent's claim for compensation on the grounds
that the employment of claimant as counsel for the Province of Cebu by then Governor Rene Espina
was unauthorized and violative of Section 1681 to 1683 in relation to Section 1679 of the Revised
Administrative Code and that the claim for attorney's fees is beyond the purview of Section 37, Rule
138 of the Rules of Court.

It is argued that Governor Espina was not authorized by the Provincial Board, through a board
resolution, to employ Atty. Pablo P. Garcia as counsel of the Province of Cebu.

Admittedly, this is so.

However, the circumstances obtaining in the case at bar are such that the rule cannot be applied.
The Provincial Board would never have given such authorization. The decision of the respondent
court elucidates the matter thus:

... The provisions of Sections 1681 to 1683 of the Revised Administrative Code
contemplate a normal situation where the adverse party of the province is a third
person as in the case of Enriquez v. Auditor General, 107 Phil 932. In the present
case, the controversy involved an intramural fight between the Provincial Governor
on one hand and the members of the Provincial Board on the other hand. Obviously
it is unthinkable for the Provincial Board to adopt a resolution authorizing the
Governor to employ Atty. Garcia to act as counsel for the Province of Cebu for the
purpose of filing and prosecuting a case against the members to the same Provincial
Board According to the claimant Atty. Garcia, how can Governor Espina be expected
to secure authority from the Provincial Board to employ claimant as counsel for the
Province of Cebu when the very officials from whom authority is to be sought are the
same officials to be sued, It is simply impossible that the Vice-Governor and the
members of the Provincial Board would pass a resolution authorizing Governor
Espina to hire a lawyer to file a suit against themselves.

xxx xxx xxx

Under Section 2102 of the Revised Administrative Code it is the Provincial Board
upon whom is vested the authority "to direct, in its discretion, the bringing or defense
of civil suits on behalf of the Provincial Governor ___." Considering that the members
 of the Provincial Board are the very ones involved in this case, they cannot be
expected to directed the Provincial Fiscal the filing of the suit on behalf of the
provincial government against themselves. Moreover, as argued by the claimant,
even if the Provincial Fiscal should side with the Governor in the bringing of this suit,
the Provincial Board whose members are made defendants in this case, can simply
frustrate his efforts by directing him to dismiss the case or by refusing to appropriate
funds for the expenses of the litigation.

... Consequently, there could have been no occasion for the exercise by the
Provincial Fiscal of his powers and duties since the members of the Provincial Board
would not have directed him to file a suit against them.

A situation obtains, therefore, where the Provincial Governor, in behalf of the Province of Cebu,
seeks redress against the very members of the body, that is, the Provincial Board, which, under the
law, is to provide it with legal assistance. A strict application of the provisions of the Revise
Administrative Code on the matter would deprive the plaintiffs in the court below of redress for a
valid grievance. The provincial board authorization required by law to secure the services of special
counsel becomes an impossibility. The decision of the respondent court is grounded in equity — a
correction applied to law, where on account of the general comprehensiveness of the law, particular
exceptions not being provided against, something is wanting to render it perfect.

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

Respondent counsel's representation of the Province of Cebu became necessary because of the
Provincial Board's failure or refusal to direct the bringing of the action to recover the properties it had
donated to the City of Cebu. The Board more effectively disqualified the Provincial Fiscal from
representing the Province of Cebu when it directed the Fiscal to appear for its members in Civil Case
No. R-8669 filed by Atty. Garcia, and others, to defend its actuation in passing and approving
Provincial Board Resolution No. 186. The answer of the Provincial Fiscal on behalf of the Vice-
Governor and the Provincial Board members filed in Civil Case No. R-8669; (Exhibit "K") upholds the
validity and legality of the donation. How then could the Provincial Fiscal represent the Province of
Cebu in the suit to recover the properties in question? How could Governor Espina be represented
by the Provincial Fiscal or seek authorization from the Provincial Board to employ special
counsel? Nemo tenetur ad impossibile (The law obliges no one to perform an impossibility). Neither
lwphl@itç 

could a prosecutor be designated by the Department of Justice. Malacañang had already approved
the questioned donation

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

Until the contrary is clearly shown an attorney is presumed to be acting under authority of the litigant
whom he purports to represent (Azotes v. Blanco, 78 Phil. 739) His authority to appear for and
represent petitioner in litigation, not having been questioned in the lower court, it will be presumed
on appeal that counsel was properly authorized to file the complaint and appear for his client.
(Republic v. Philippine Resources Development Corporation, 102 Phil. 960) Even where an attorney
is employed by an unauthorized person to represent a client, the latter will be bound where it has
knowledge of the fact that it is being represented by an attorney in a particular litigation and takes no
prompt measure to repudiate the assumed authority. Such acquiescence in the employment of an
attorney as occurred in this case is tantamount to ratification (Tan Lua v. O' Brien, 55 Phil. 53). The
act of the successor provincial board and provincial officials in allowing respondent Atty. Pablo P.
Garcia to continue as counsel and in joining him in the suit led the counsel to believe his services
were still necessary.

We apply a rule in the law of municipal corporations: "that a municipality may become obligated
upon an implied contract to pay the reasonable value of the benefits accepted or appropriated by it
as to which it has the general power to contract. The doctrine of implied municipal liability has been
said to apply to all cases where money or other property of a party is received under such
circumstances that the general law, independent of express contract implies an obligation upon the
municipality to do justice with respect to the same." (38 Am Jur. Sec. 515, p. 193):

The obligation of a municipal corporation upon the doctrine of an implied contract

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

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

The trial court discussed the services of respondent Garcia as follows:

... Thus because of his effort in the filing of this case and in securing the issuance of
the injunction preventing the City of Cebu and Sergio Osmeña, Jr., from selling or
disposing the lots to third parties, on the part of the members of the Provincial Board
from extending the date of the automatic reversion beyond August 15, 1965, on the
part of the Register of Deeds — from effecting the transfer of title of any of the
donated lots to any vendee or transferee, the disposition of these lots by the City of
Cebu to third parties was frustrated and thus: saved these lots for their eventual
recovery by the province of Cebu.

Actually it was Governor Espina who filed the case against Cebu City and Mayor Osmeña. Garcia
just happened to be the lawyer, Still Atty. Garcia is entitled to compensation. To deny private
respondent compensation for his professional services would amount to a deprivation of property
without due process of law (Cristobal v. Employees' Compensation Commission, 103 SCRA 329).

The petitioner alleges that although they do not deny Atty. Garcia's services for Governor Espina
(who ceased to be such Governor of Cebu on September 13, 1969) and the original plaintiffs in the
case, "it cannot be said with candor and fairness that were it not for his services the lots would have
already been lost to the province forever, because the donation itself he was trying to enjoin and
annul in said case was subject to a reversion clause under which lots remaining undisposed of by
the City as of August 15, 1965 automatically reverted to the province and only about 17 lots were
disposed of by August 15, 1965." We quote respondent counsel's comment with approval:

xxx xxx xxx

 While it is true that the donation was subject to a reversion clause, the same clause
gave the Provincial Board the discretion to extend the period of reversion beyond
August 15, 1965 (see paragraph 3 of donation).

With the known predisposition of the majority of the members of the Provincial Board,
there would have been no impediment to the extension of the reversion date to
beyond August 15, 1965. Once the date of reversion is extended, the disposition of
an the donated lots would be only a matter of course.

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

The factual findings and applicable law in this petition are accurately discussed in the exhaustive
and well-written Order of then Trial Judge, now Court of Appeals Justice Alfredo Marigomen We
agree with his determination of reasonable fees for the private lawyer on the basis of quantum
meruit. The trial court fixed the compensation at P30,000.00 and ordered reimbursement of actual
expenses in the amount of P289.43.

WHEREFORE, the questioned October 18, 1985 decision of the Intermediate Appellate Court is set
aside. The Order of the Trial Court dated May 30, 1979 is REINSTATED.

SO ORDERED.

6. G.R. No. 102918. March 30, 1993.

JOSE V. NESSIA, petitioner, vs. JESUS M. FERMIN and MUNICIPALITY OF VICTORIAS,

NEGROS OCCIDENTAL, respondents.

Christine V . Nessia in for petitioner.

Rolando Magbanua Antiquiera for Jesus Fermin.

DECISION

BELLOSILLO, J.:

Article 27 of the Civil Code accords judicial relief to "[a]ny person suffering material or moral loss
because a public servant or employee refuses or neglects, without just cause, to perform his official
duty." This the trial court 1 applied in finding respondent Jesus M. Fermin, Mayor of Victorias,
Negros Occidental, liable for damages for maliciously refusing to act on the vouchers of petitioner
Jose V. Nessia covering the latter's claim for reim-bursement of travel expense allowances. The
Court of Appeals 2 however ruled that evidence as well as the complaint itself did not establish
unjust inaction, hence, it reversed the court a quo and dismissed the case for lack of cause of action.
Considering the disparity in the findings and conclusions of the lower courts, the version of the
appellate court cannot readily be accepted, hence, We are constrained to scrutinize them more
judiciously.
This recourse originated from the complaint filed against respondents Jesus M. Fermin and the
Municipality of Victorias, Negros Occidental, by petitioner Jose V. Nessia for recovery of damages
and reimbursement of expenses incurred in the performance of his official duties as the then Deputy
Municipal Assessor of Victorias. The complaint theorized that Fermin deliberately ignored and
caused the non-payment of the vouchers in question because Nessia defied the former's request to
all municipal officials to register and vote in Victorias in the 1980 local elections.

In his answer with counterclaim, Fermin disputed the allegations in the complaint and countered that
the claims of Nessia could not be approved because they exceeded the budgetary appropriations
therefor.

On its part, Victorias concurred with the arguments of Fermin, and added that plaintiff Nessia was
blamable for his predicament because he neither gave Fermin the justification for drawing funds in
excess of the budgetary appropriations nor amended his vouchers to conform thereto.

Issues having been joined, the parties presented their evidence, except for Victorias which was
declared in default for non-appearance at the pre-trial conference. 3 On 24 April 1987, judgment was
rendered by the trial court in favor of Nessia. 4 On the basis of the evidence, the trial court found that
Fermin maliciously refused to act on plaintiffs vouchers, bolstered by his inaction on Nessia's follow-
up letters inquiring on the status thereof.

The court ruled that the vouchers were received by the secretary of Fermin thereby negating his
contention that the vouchers were not received by him. But even if the vouchers never reached him,
the trial court nevertheless held Mayor Fermin answerable because he should have made inquiries
into their whereabouts upon receipt of Nessia's follow-up letters. In view of the foregoing, and the
admission of Fermin at the trial that he did nothing on the vouchers, the court of origin awarded
damages to Nessia, although less than what he prayed for.

Both Nessia and Fermin elevated the case to the Court of Appeals, Nessia praying for an increase in
the award of moral and exemplary damages, and Fermin seeking exoneration from liability.

The Municipality of Victorias did not appeal.

On 19 July 1991, respondent appellate court dismissed Nessia's complaint on the ground of lack of
cause of action because the complaint itself as well as Nessia's own testimony admitted that Fermin
acted on the vouchers as may be drawn from the allegations that Fermin denied/refused the claims.

On the basis of its own findings, the Court of Appeals held that the real "situation before us is one in
which plaintiff-appellant accuses defendant-appellant of failing to act on vouchers which are not
shown to have been received by the latter; and even if received, could not be approved for payment
because they were submitted late and were not supported by an appropriation."

Nessia now comes to Us on appeal under Rule 45 of the Rules of Court raising four (4) issues,
namely: (1) whether respondent court may reverse the decision of the trial court which has become
final and executory as against Victorias for failure to appeal therefrom; (2) whether respondent
appellate court may grant affirmative relief to Victorias which did not appeal the trial court's decision;
(3) whether respondent court erred in exonerating Fermin from malicious refusal to act on
petitioner's claims; and, (4) whether respondent court erred in exonerating Fermin and Victorias from
liabilities, which may be summarized into whether Fermin maliciously refused to act on the vouchers,
hence, liable under Art. 27, and whether the dismissal of the complaint by respondent court absolved
Victorias from liability, even though it did not appeal the decision of the trial court.
Before disposing of the merits of the case, We first resolve the issue raised by the Office of the
Solicitor General that the assailed decision attached to the petition is not a certified true copy as
required in Circular 1-88, par. 3, hence, the petition should have been dismissed. The allegation is
erroneous because the challenged decision, Annex "A" of the petition, 5 is actually certified by Atty.
Leandro D. Rebong, a Division Clerk of Court of respondent Court of Appeals.

On the first question, We are inclined to sustain the trial court primarily because its appraisal of
conflicting testimonies is afforded greater weight and respect. Likewise, finding no error in its
appreciation of the contradictory testimonies relating to the dispute on the receipt of the vouchers,
the determination of the trial court that they were actually received should be followed.
Consequently, as between the findings of the Court of Appeals drawn simply from the reading of the
records and the transcript of stenographic notes, and the determination of the trial court which heard
the case, the opinion of the latter deserves greater acceptance, even if both conclusions are
supported by evidence.

The claim that the name inscribed on the lower left portion of the transmittal letter does not appear to
be the customary signature of the Mayor's secretary does not convincingly show that she did not
receive the vouchers, nor was it convincingly shown that the signature purportedly hers was not
actually her handwriting. Since proof of the receipt of the vouchers has not been confuted, the
secretary should have indicated on the letter she received that the enclosures therein were not so
enclosed or attached, otherwise, it could be presumed that they were actually enclosed or attached
thereto, and properly received by the addressee. Moreover, the version favoring receipt of the
vouchers carries the presumption of regularity in official acts, more so that the handwritten name of
the secretary, which closely resembles her signature, immediately follows the list of enclosures.

As regards the alleged response of Fermin to Nessia, i.e., 'Basta indi lang ako 'mag-approve sang
vouchers mo", the same should have been interpreted in Ilonggo as "refusal to approve or
disapprove" considering that Nessia testified on it to clarify an earlier statement that "I presented him
my vouchers but he did not act on it (sic)." 6

In Roque v. Baun We held 7 —

"If the decision of the Court of Appeals on the controversial matter suffers, as it does, from some
ambiguity, the doubt should be resolved to sustain the trial court in the light of the familiar and
accepted rule that 'the judge who tries a case in the court below, has vastly superior advantage for
the ascertainment of truth and the detection of falsehood over an appellate court sitting as a court of
review. The appellate court can merely follow with the eye, the cold words of the witness as
transcribed upon the record, knowing at the same time, from actual experience, that more or less, of
what the witness actually did say, is always lost in the process of transcribing. But the main difficulty
does not lie here. There is an inherent impossibility of determining with any degree of accuracy what
credit is justly due to a witness from merely reading the words spoken by him, even if there was no
doubt as to the identity of the words' (Moran, Comments on the Rules of Court)."

It is further contended that Nessia may not claim relief under Art. 27 because his theory of unjust
inaction is incompatible with his allegations in the complaint that Fermin denied/refused the
vouchers. In support of this view, the cases of Sta. Ana v. Maliwa 8 and Cunanan v. Amparo 9 were
cited, where We ruled that a pleader is not allowed to contradict his own pleading.

We do not agree, however, that the allegations in the complaint alluded to, i.e., "plaintiff presented
the said claims to the defendant Mayor Jesus Fermin, but refused and continued to refuse the
payments thereof' and "defendants refused and continue to refuse to pay," should be construed as
admission of the act of disapproval of the claims. Refusal to pay is not inferred solely from
disapproval of claims but from inaction thereon as well. Accordingly, the said allegations cannot be
considered as contradictory to Nessia's theory of unjust inaction.

On the defense of lack of appropriation, while it is true that Fermin may not be compelled by
mandamus to approve vouchers because they exceeded the budgetary appropriations, he may,
nevertheless, be held liable for damages under Art. 27 for malicious inaction because he did not act
on the vouchers. This provision against official inaction finds its ally in Sec. 3, par. (f), of R.A. 3019,
as amended, otherwise known as the "Anti-Graft and Corrupt Practices Act," which criminalizes
"[n]eglecting or refusing, after due demand or request, without sufficient justification, to act within a
reasonable time on any matter pending before him for the purpose of . . . discriminating against any
interested party."

It is apparent that public officials are called upon to act expeditiously on matters pending before
them. For only in acting thereon either by signifying approval or disapproval may the plaintiff
continue on to the next step of the bureaucratic process. On the other hand, official inaction brings to
a standstill the administrative process and the plaintiff is left in the darkness of uncertainty. In this
regard, official "inaction" cannot be equated with "disapproval."

In Baldivia v. Lota, We dismissed on appeal the petition to compel by mandamus approval of certain
vouchers, even though the disapproval was politically motivated, on the basis that respondent Mayor
was bound to disapprove vouchers not supported by appropriations. 10 In the penultimate
paragraph, We made the following pronouncement:

"Indeed, respondent could have, and should have, either included the claim of petitioners herein in
the general budget he is bound to submit, pursuant to section 2295 of the Revised Administrative
Code, or prepared a special budget for said claim, and urged the municipal council to appropriate
the sum necessary therefor. In any event, if the municipal mayor fails or refuses to make the
necessary appropriation, petitioners may bring an action against the municipality for the recovery of
what is due them and after securing a judgment therefor, seek a writ of mandamus against the
municipal council and the municipal mayor to compel the enactment and approval of the
appropriation ordinance necessary therefor (19 R.C.L. 1951-1052; 34 Am. Jur., 950-951; 35 Am.
Jur., 21)."

This is precisely what the petitioner did; he filed a collection case to establish his claim against
Fermin and the Municipality of Victorias, which Nessia satisfactorily proved.

As regards the second question, it is settled that a non-appellant cannot, on appeal, seek an
affirmative relief. We ruled in Medida v. Court of Appeals 11 that —

"[A]n appellee who has not himself appealed cannot obtain from the appellate court any affirmative
relief other than the ones granted in the decision of the court below (Alba vs. Santander, et al. 160
SCRA 8[1988]). He cannot impugn the correctness of a judgment not appealed from by him. He
cannot assign such errors as are designed to have the judgment modified. All that said appellee can
do is to make a counter-assignment of errors or to argue on issues raised at the trial only for the
purpose of sustaining the judgment in his favor, even on grounds not included in the decision of the
court a quo nor raised in the appellant's assignment of errors or arguments (Aparri vs. Court of
Appeals, et al., 13 SCRA 611 [1965]; Carbonel vs. Court of Appeals, et al., 147 SCRA 565 [1987];
Dizon, Jr. vs. National Labor Relations Commission, et al., 181 SCRA 472 [1990])."

That the decision of respondent court essentially exonerated the Municipality of Victorias from
liability is a mere consequence of the dismissal of the case for lack of cause of action, although
erroneously. In any case, this matter has become irrelevant considering the conclusion herein
reached.

Incidentally, in his memorandum, counsel for private respondent insinuates that the lower courts
may have overlooked that 6 April 1980, the alleged date when Nessia supposedly went to Fermin's
office and told the latter to go to court instead, was a Sunday. This is not correct, for it is apparent
from the transcript of stenographic notes that the date is actually 16 April 1980, a Wednesday.
Indeed, such allusion that is intended merely to gain undue advantage over the opponent does not
square well with the sporting tenets of fair play.

WHEREFORE, the petition is GRANTED and the assailed decision of 19 July 1991 of respondent
Court of Appeals as well as its 19 November 1991 Resolution denying Nessia's motion for
reconsideration are SET ASIDE, and the decision of 24 April 1987 of the Regional Trial Court,
Branch LXI, Kabankalan, Negros Occidental, 12 is REINSTATED and AFFIRMED.

SO ORDERED.

7. G.R. No. L-32162 September 28, 1984

THE PASAY CITY GOVERNMENT, THE CITY MAYOR OF DEFENDANT PASAY CITY
GOVERNMENT, THE MEMBERS OF THE MUNICIPAL BOARD OF PASAY ClTY and THE CITY
TREASURER OF PASAY CITY GOVERNMENT, petitioners-appellants,
vs.
THE HONORABLE COURT OF FIRST INSTANCE OF MANILA, BRANCH X and VICENTE DAVID
ISIP (doing business under the firm name V.D. ISIP SONS & ASSOCIATES), respondents-
appellees.

Enrico R Castro for petitioners-appellants.

Lorenzo D. Fuggan and F. V. Castillo for respondents-appellees.

MAKASIAR, J., Chairman:

This is a petition for review on certiorari of the order rendered by the Court of First Instance of
Manila, Branch X, presided by Honorable Judge Jose L. Moya on July 23, 1969, the dispositive
portion of which is as follows:

WHEREFORE, the motions for reconsideration, dated July 21 and July 22, 1969, are
denied and it is ordered once more that the writ of execution as well as of
garnishment already issued be enforced by taking possession of the amount of
P613,096.00 from the deposits of the Pasay City government in the branch of the
Philippine National Bank in Pasay City and delivering them to the plaintiff.

SO ORDERED (p. 78, rec.).

on the ground, among others, that:

xxx xxx xxx

 It is further argued that under the compromise, the plaintiff is required to submit a
performance bond upon the approval thereof and that he has not yet done so. At the
hearing of the motion of June 21, it was in the amount of P60,000.00 which was
thereafter increased to P100,000.00 to make it equal to 20% of the cost of the next
stage of the construction to be undertaken by the plaintiff. This is a sufficient
compliance. Since the work is to be undertaken by stages, it would be unreasonable
to compel the plaintiff to submit a performance bond equal to the cost of the entire
project, it not being known when the City of Pasay shall have the funds for the
completion thereof and it claim it does not even have money to pay for the phase of
the work finished years ago. Besides, there is nothing in the compromise which
makes the submission of the bond a condition precedent to the payment of
P613,096.00 to the plaintiff (p. 76, rec.).

On August 12, 1964, respondent-appellee V.D. Isip, Sons & Associates represented by Vicente
David Isip entered into a contract with the City of Pasay represented by the then Mayor Pablo
Cuneta. The contract entitled "Contract and Agreement" was for the construction of a new Pasay
City Hall at F.B. Harrison St., Pasay City. Pertinent provision of the said contract is as follows:

xxx xxx xxx

Whereas one of the conditions set forth in the proposal is that the Contractor shag
start the construction of the Pasay City Hall Building as per plans and specifications
by stages advancing the necessary amount needed for each stage of work and the
Party of the First Part (Pasay City) to reimburse the amount spent on the work
accomplished by the Contractor before proceeding on the next stage ... ...

xxx xxx xxx

2. That the work shall be done in stages to be determined by the City Engineer
considering structural and functional criteria and consistent with funds immediately
available for the purpose;

3. That the Contractor shall advance the necessary amount needed for each stage of
work; Provided that the Contractor, shall before starting each stage of work, inform
the First Party in writing as to the amount necessary to be advanced by the former; ...
...

4. That the Party of the First Part shall reimburse the Contractor the cost of the work
completed as estimated by the City Engineer for back stage of work before the
Contractor proceed to the next stage; ... ... (pp. 33-34, rec.).

Pursuant to the aforesaid contract, the respondent-appellee proceeded with the construction of the
new Pasay City Hall building as per duly approved plans and specifications. The respondent-
appellee accomplished under various stages of construction the amount of work (including supplies
and materials) equivalent to an estimated value of ONE MILLION SEVEN HUNDRED THIRTEEN
THOUSAND NINETY-SIX PESOS (P1,713,096.00) of the total contract price of FOUR MILLION
NINE HUNDRED FOURTEEN THOUSAND FIVE HUNDRED 80/100 PESOS (P4,914,500.80).

The appellants paid only the total amount of ONE MILLION ONE HUNDRED THOUSAND PESOS
(P1,100,000.00) to the respondent-appellee leaving an amount of SIX HUNDRED THIRTEEN
THOUSAND NINETY SIX PESOS (P613,096.00) immediately due from the petitioner-appellants to
the respondent-appellee.
Notwithstanding demands for payment thereof, the petitioner-appellants failed to remit the aforesaid
amount of P613,096.00 to the respondent-appellee.

On May 16, 1968, respondent appellee filed an action for specific performance with damages
against herein petitioners-appellants before the respondent Court.

On May 23, 1968, the appellants filed a motion for the amendment of the complaint and for bin of
particulars (p. 9, Appellant's Brief; p. 159, rec.). This was denied by the respondent Court. The
appellants later filed a motion for reconsideration. This was likewise denied. On August 10, 1968, the
appellants filed their answer.

The parties arrived at a draft of amicable agreement which was submitted to the Municipal Board of
Pasay City for its consideration. Protracted pre-trial hearings and conferences were held where the
respondent Court suggested and advised that "under the principle of quantum meruit, the plaintiff is
forthwith entitled to at least that which is due to him for defendants under the contract and that public
interest must perforce require the continuity of construction of a public work project, instead of
delaying its immediate completion by litigating upon technical grounds which would undoubtedly
redound to public detriment (p. 40, rec.).

On February 25, 1969, the Municipal Board of Pasay enacted Ordinance No. 1012 which approved
the Compromise Agreement and also authorized and empowered the incumbent City Mayor Jovito
Claudio to represent the appellant Pasay City Government, subject to the final approval of the
respondent Court herein.

On March 12, 1969, the respondent Court approved the said Compromise Agreement including a
Manifestation and Addendum thereto. Relevant provisions of the said compromise agreement are as
follows:

1. That the contract and agreement, Annex "A" here of dated August 12, 1964 ... is
hereby formally confirmed and officially approved by the parties hereto, subject to the
following changes and/or modification only:

xxx xxx xxx

B. That immediately upon final approval hereof by this Honorable

Court, the plaintiff contractor will submit and file in favor of Pasay City
Government a new performance bond in the amount required by
pertinent law, rules and regulations, in proportion to the remaining
value or cost of the unfinished work of the construction as per
approved plans and specification

xxx xxx xxx

D. That if and when warranted by the finances and income of the

Pasay City Government and subject to the pertinent and applicable
government auditing and accounting rules and procedure, the plaintiff
contractor shall without delay finish and complete the construction as
per attached plans and specifications ... within a period of one (1)
year from the date of final approval of this compromise agreement by
this Honorable Court, provided, however that in any case or event the
construction herein contemplated shall not extend beyond one and a
 half (1 1/2) years from the date of the final approval hereof by this
Honorable Court;

xxx xxx xxx

2. That within a reasonable period of time, at least ninety (90) days from the final
approval of this Compromise Agreement by this Honorable Court, the defendant
Pasay City Government shall pay and remit the amount of SIX HUNDRED
THIRTEEN THOUSAND NINETY-SIX PESOS (P613,096.00) ... to the plaintiff
contractor, who, in turn, immediately upon receipt thereof, shall be bound and
obliged to commence and start the construction work corresponding to the next stage
thereof;

3. That within a similar period, the defendant Pasay City Government shall pay and
remit to plaintiff contractor an amount equivalent to three (3%) per cent of the above
mentioned amount of SIX HUNDRED THIRTEEN THOUSAND NINETY-SIX PESOS
(P613,096.00), for and as adverse attorney's fees in this case;

4. That any and all other of plaintiff contractor in its complaint relative to and arising
out of the contract, Annex "A" hereof, are hereby waived and relinquished and the
case against the defendants City Mayor, Jovito 0. Claudio, City Treasurer and
Members of the Municipal Board of Pasay City, either in their official or personal
capacities, are hereby likewise waived, relinquished and dismissed with prejudice;

5. That any willful, gross, deliberate and wanton violation and/or avoidance of the
terms and conditions of this Compromise Agreement by either of the parties herein
shall, with due notice, forthwith entitle the aggrieved party to an immediate execution
hereof and to the necessary and corresponding reliefs and remedies therefor (pp. 43-
46, rec.).

On April 10, 1969, the appellants filed an urgent motion seeking a declaration of legality of the
original contract and agreement dated August 4, 1964 from the respondent Court. On May 10, 1969,
the respondent Court issued an order declaring that the original contract is legal and valid (p. 59,
rec.).

On June 21, 1969, at the instance of the appellee, the respondent Court granted an order of
execution pursuant to which a writ of execution dated June 25, 1969 was issued.

On July 9, 1969, an application for and notice of garnishment were made and effected upon the
funds of appellant Pasay City Government with the Philippine National Bank (p. 61, rec.).

On July 11, 1969, the appellant filed an urgent motion to set aside the respondent Court's order of
June 21, 1969 and to quash the writ of execution issued pursuant thereto upon the following
grounds: 1) that the execution sought was then still premature, the period of 90 days stipulated not
having elapsed as yet; 2) that the obligations of the parties under the Compromise Agreement were
reciprocal and the appellee not having put up a new performance bond in the sufficient amount
equivalent to 20% of the remaining cost of construction as per agreement, the appellants cannot be
obliged to pay the sum due appellee as yet; 3) that the Sheriff has no power or authority to levy or
garnish on execution the general funds, especially more so, the trust funds of the defendant Pasay
City (pp. 6366, rec.).
On July 19, 1969, the respondent Court issued an order stating that inasmuch as the defendant has
not yet paid the plaintiff as of this date then "the writ of execution and of garnishment are declared to
be again in full force and effect ..." (p. 67, rec.).

On July 22, 1969, the appellants filed a motion for reconsideration on three grounds, to wit:

1. That the same is not supported by the facts and pertinent law, rule and regulation
on the matter;

2. That the funds of the defendant Pasay City Government which were garnished by
the City Sheriff are by law exempt from execution and/or garnishment; and

3. That plaintiff's claim may not as yet be enforceable by ex- execution" (pp. 68-71,
rec.).

On July 22, 1969, the respondent Court denied and rejected the appellants' motion for
reconsideration. The respondent Court ordered the enforcement of the garnishment already issued
to the City Sheriff for Pasay by taking possession of the amount of P613,096.00 from the deposits of
appellant Pasay City Government with the Philippine National Bank, Pasay City Branch and
delivering the same to the plaintiff.

On July 23, 1969, the respondent Court issued an order, the pertinent provision of which is now
being questioned by the appellants in this petition for review on certiorari, to wit:

It is further argued that under the compromise, the plaintiff is required to submit a
performance bond upon the approval thereof and that he has not yet done so. At the
hearing of the motion of June 21, it was shown that the plaintiff has submitted a
performance bond in the amount of P60,000.00 which was thereafter increased to
P100,000.00 to make it equal to 20% of the cost of the next stage of the construction
to be undertaken by the plaintiff. This is a sufficient compliance. Since the work is to
be undertaken by stages, it would be unreasonable to compel the plaintiff to submit a
performance bond equal to the cost of the entire project, it not being known when the
City of Pasay shall have the funds for the completion thereof and it claims it does not
even have money to pay for the phase of the work finished years ago. Besides, there
is nothing in the compromise which makes the submission of the bond a condition
precedent to the payment of P613,096.00 to the plaintiff (p. 76, rec.).

On July 23, 1969, the appellants Med their notice of appeal from the orders of the respondent Court
dated June 21, July 19 and July 23, 1969 (p. 2, rec.).

On July 24, 1969, the appellants filed their manifestation and petition to suspend the writ of
execution and garnishment (pp. 80-82, rec.).

On July 25, 1969, the appellants filed their manifestation and withdrawal of notice of appeal On July
28, 1969, the respondent Court approved said withdrawal (p. 85, rec.).

On August 22, 1969, the appellants filed an amended notice of appeal (pp. 86-87, rec.) and a record
on appeal which were duly approved as per order of the respondent Court dated January 7, 1970
and a notice of transmittal dated May 29, 1970 (p. 89, rec.).
On October 23, 1969, the plaintiff, Vicente David Isip, in the original complaint for specific
performance filed an urgent motion for permit to serve a supplemental complaint seeking rescission
of the original contract titled Contract and Agreement and of the Compromise Agreement and
claiming damages in the sum of P672,653.91 alleging the violations of the defendants specially the
Pasay City Government in complying with its obligations incumbent upon it in the compromise
agreement and in view of the rights granted to the plaintiff in paragraph 5 of the resolutory clause of
the compromise agreement.

On June 5, 1970, the Supreme Court resolved to require the petitioner-appellants to file a petition for
review on certiorari (p. 6, rec.).

On June 29, 1970, the defendants filed their cautionary answer to the supplemental complaint
alleging that the Court has no jurisdiction over the subject of the present supplemental complaint;
that the cause of action is already barred by prior judgment; that the principle of res judicata applies;
that plaintiff's supplemental complaint states no cause of action and that the present claim of plaintiff
has been paid, waived, abandoned and extinguished.

On July 14, 1970, the appellants filed their petition for review on certiorari (pp. 11-24, rec.). This was
denied for lack of merit by the Supreme Court.

On August 14, 1970, the respondent Court set for pre-trial the supplemental complaint.

On October 16, 1970, the Supreme Court granted the petitioner's motion for reconsideration and
their petition for review on certiorari was given due course (p. 102, rec.).

On July 21, 1971, the appellees filed their brief praying that the petition for review on certiorari be
dismissed since the issues involved in the supplemental complaint are prejudicial to the present
petition for review (p. 179, rec.). On December 6, 1971, the appellants filed their manifestation and
petition alleging that the supplemental complaint is not prejudicial to the present petition for review
(p. 199-201, rec.).

The two purposes of a compromise agreement are enunciated in Article 2028 of the New Civil Code,
to wit:

A. 2028. A compromise is a contract where by the parties,by making reciprocal

concessions, avoid a litigation or put an end to one already commenced.

The first purpose — "to avoid a litigation" — occurs when there is a threat of an impending litigation.
At this point, no case has yet reached the courts. The moment a case has been filed in court then
the second purpose — "to put an end to one already commenced" — applies.

In the herein case, We are concerned with the second purpose. The latter purpose is given effect in
Article 2037 of the New Civil Code which reads:

Article 2037. A compromise has upon the parties the effect and authority of res
judicata; but there shall be no execution except in compliance with a judicial
compromise.

A compromise agreement not contrary to law, public order, public policy, morals or good customs is
a valid contract which is the law between the parties themselves (Municipal Board of Cabanatuan
City vs. Samahang Magsasaka, Inc., 62 SCRA 435). A judgment on a compromise is a final and
executory (Samonte vs. Samonte, 64 SCRA 524). It is immediately executory (Pamintuan vs. Muños
et al., L-26331, 22 SCRA 1109 [March 15, 1968]) in the absence of a motion to set the same aside
on the ground of fraud, mistake or duress (Cadano vs. Cadano L-34998, 49 SCRA 33 [January 11,
1973]).

In fact in the herein case before Us, execution has already been issued. Considering this in the light
of Article 2041 of the New Civil Code, to wit:

Art. 2041. If one of the parties fails or refuses to abide by the compromise, the other
party may either enforce the compromise or regard it as rescinded and insist upon
his original demand.,

it is obvious that the respondent-appellee did not only succeed in enforcing the compromise but said
plaintiff-appellee likewise wants to rescind the said compromise. It is clear from the language of the
law, specifically Article 2041 of the New Civil Code that one of the parties to a compromise has two
options: 1) to enforce the compromise; or 2) to rescind the same and insist upon his original
demand. The respondent-appellee in the case herein before Us wants to avail of both of these
options. This can not be done. The respondent-appellee cannot ask for rescission of the
compromise agreement after it has already enjoyed the first option of enforcing the compromise by
asking for a writ of execution resulting thereby in the garnishment of the Pasay City funds deposited
with the Philippine National Bank which eventually was delivered to the respondent-appellee.

Upon the issuance of the writ of execution, the petitioner-appellants moved for its quashal alleging
among other things the exemption of the government from execution. This move on the part of the
petitioner-appellant is at first glance laudable for "all government funds deposited with the Philippine
National Bank by any agency or instrumentality of the government, whether by way of general or
special deposit, remain government funds and may not be subject to garnishment or levy
(Commissioner of Public Highways vs. San Diego, L-30098, 31 SCRA 616 [Feb. 18, 1970]). But,
inasmuch as an ordinance has already been enacted expressly appropriating the amount of
P613,096.00 of payment to the respondent-appellee, then the herein case is covered by the
exception to the general nile stated in the case of Republic vs. Palacio (L-20322, 23 SCRA 899 [May
29,1968]), to wit:

Judgments against a State in cases where it has consented to be sued, generally

operate merely to liquidate and establish plaintiff's claim in the absence of express
provision; otherwise they cannot be enforced by processes of the law; and it is for the
legislature to provide for the payment in such manner as it sees fit.

Hence, the respondent Court was correct in refusing to quash the writ of execution it has issued.

Having established that the compromise agreement was final and immediately executory, and in fact
was already enforced, the respondent Court was in error when it still entertained the supplemental
complaint filed by the respondent-appellee for by then the respondent Court had no more jurisdiction
over the subject matter. When a decision has become final and executory, the court no longer has
the power and jurisdiction to alter, amend or revoke, and its only power thereof is to order its
execution (Ocampo vs. Caluag, L-21113, 19 SCRA 791 [April 27, 1967]).

After the perfection of an appeal, the trial court loses jurisdiction over its judgment and cannot vacate
the same Alama vs. Abbas, L-19616, 18 SCRA 679 [Nov. 29, 1966]; Commissioner of Immigration
vs. Romero, L-19782, 10 SCRA 216 [Jan. 31, 1964]; Valdez vs. CFI, etc., L-3366 [April 27, 1951]
cited in Cabungcal vs. Fernandez, L-16520, 10 SCRA 731 [April 30, 1964]; Government vs.
Mendoza, 51 Phil. 403; Ayllon vs. Siojo, 26 Phil. 195).
Moreover, supplemental pleadings are meant to supply deficiencies in aid of original pleading, not to
entirely substitute the latter (British Traders' Insurance Co., Ltd. vs. Commissioner of Internal
Revenue, L-20501, 13 SCRA 719, 728 [April 30, 1965]). Here, the respondent-appellee originally
asked for specific performance which was later settled through a compromise agreement. After this,
the respondent-appellee asked for rescission of both the contract and agreement and the
compromise agreement using a supplemental complaint. It is clear that the supplemental complaint
We have before Us is not only to "supply deficiencies in aid of original pleading but is also meant as
an entirely new "substitute" to the latter. A supplemental complaint must be consistent with and in
aid of, the cause of action set forth in the original complaint and a new and independent cause of
action cannot be set up by such complaint (Bishop vs. Taylor, 210 App. Div. 1, 205 NVS 653),
especially where judgment has already been obtained by him in the original action (Anadarko First
National Bank vs. Anadarko First National Bank, 39 0kl. 225, 134 Phil. 866).

WE find no error in the order of the respondent Court dated July 23, 1969. From the reading of the
premises and provisions of the contract and agreement which was "formally confirmed and officially
approved by the parties" in the compromise agreement later entered into by the same parties,
subject only to the enumerated changes and/or modifications, it is obvious that the contracting
parties envisioned a stage by stage construction (on the part of the respondent-appellee) and
payment (on the part of the defendant-appellant). This is manifested in the contract and agreement,
to quote:

xxx xxx xxx

WHEREAS, one of the conditions set forth in the proposal is that the Contractor shag
start the construction of the Pasay City Hall building as per plans and specifications
by stages advancing the necessary amount needed for each stage of work and the
Party of the First Part to reimburse the amount spent on the work accomplished by
the Contractor before proceeding on the next stage; Provided, the First Party shall
supply the cement needed;

xxx xxx xxx

2. That the work shall be done in stages to be determined by the City Engineer
considering structural and functional criteria and consistent with funds immediately
available for the purpose;

3. That the Contractor shall advance the necessary amount needed for each stage of
work; Provided that the Contractor shalt before starting each stage of work, inform
the First Party in writing as to the amount necessary to be advanced by the former; ...

4. That the Party of the First Part shall reimburse the Contractor the cost of the work
completed as estimated by the City Engineer for each stage of work before the
Contractor proceed to the next stage; (pp. 33-34, rec.).

And sub-paragraph H of paragraph 1 and paragraph 2 of the compromise agreement also reiterated
the stage by stage construction and payment as follows:

H. That detailed, separate reports on the progress of the construction work during
each stage shall regularly be submitted to the City Enginer and the City Mayor;

xxx xxx xxx

 2. That within a reasonable period ,at least ninety(90) days from the final approval of
this Compromise Agreement by this Honorable Court, the defendant Pasay City
Government shall pay and remit the amount of SIX HUNDRED THIRTEEN
THOUSAND NINETY-SIX PESOS (P 613,096.00) ... ... to the plaintiff contractor,
who, in turn, immediately upon receipt thereof, shall be bound and obliged to
commence and start the construction work corresponding to the next stage
thereof; ... ... (p. 45, rec.).

Sub-paragraph B of paragraph 1 of the Compromise Agreement, to wit:

B. That immediately upon final approval hereof by this Honorable Court, the plaintiff
contractor will submit and file in favor of Pasay City Government a new performance
bond in the amount required by pertinent law, rules and regulations, in proportion to
the regular value or cost of the unfinished work of the construction as per approved
plans and specifications ... (p. 4, rec.),

read together with the stage-by-stage construction and payment approach, would inevitably lead to
the conclusion that the parties to the compromise contemplated a divisible obligation necessitating
therefore a performance bond "in proportion to" the uncompleted work.

What is crucial in sub-paragraph B of paragraph 1 of the compromise agreement are the words "in
proportion." If the parties really intended the legal rate of 20% performance bond to refer to the
whole unfinished work, then the provision should have required the plaintiff contractor to submit and
file a new performance bond to cover the remaining value cost of the unfinished work of the
construction. Using the words in proportion then significantly changed the meaning of the paragraph
to ultimately mean a performance bond equal to 20% of the next stage of work to be done.

And, We note that in the Contract and Agreement, the respondent-appellee was allowed to file a
performance bond of P222,250.00 which is but 5% of the total bid of P4,914,500.80. A security bond
was likewise filed with an amount of P97,290.00. The sum total of bond then filed was P320,540.00
which is just 6.5% of the total Ibid. It is rather curious why all of a sudden the petitioners-appellants
are insisting on a 20% performance bond of the entire unfinished work when they were quite content
with a bond just 5% of the entire work. For Us to allow the petitioners-appellants to adamantly stick
to the 20% performance bond would be tantamount to allowing them to evade their obligation in the
compromise agreement. This cannot be allowed. The bond of a contractor for a public work should
not be extended beyond the reasonable intent as gathered from the purpose and language of the
instrument construed in connection with the proposals, plans and specifications, and contract (John
L. Roper Lumber Co. vs. Lawson, 195 NC 840, 143 SE 847,67 ALR 984).

The premium of the bond will be sizeable and will eat up the profit of the contractor, who is faced
with the fluctuation of prices of materials due to inflation and devaluation. Right now, many
contractors cannot proceed with the implementation of their contracts because of the extraordinary
rise in cost of materials and labor. No contractor would be willing to bid for public works contracts
under the oppressive interpretation by petitioners-appellants.

Again, the respondent Court was correct in ruling that the submission of the bond was not a
condition precedent to the payment of P613,096.00 to the plaintiff. Nowhere in the Contract and
Agreement nor in the Compromise Agreement could be found the fact that payment by the
petitioners- appellants of the amount of P613,096.00 was dependent upon the submission by the
respondent-appellee of the performance bond. It cannot be argued that reciprocal obligation was
created in the Compromise Agreement, for the obligation to pay on the part of the petitioners-
appellants was established several years ago when the respondent-appellee finished some of the
stages of construction. And, this argument is already moot and academic, for the amount of
P613,096.00 has already been collected through execution and garnishment upon the funds of
Pasay City with the Philippine National Bank.

Inasmuch as the parties in the herein case have agreed in the Compromise Agreement, to wit:

3. That within a similar period the defendant Pasay City Government shall pay and
remit to plaintiff contractor an amount equivalent to three (3%) percent of the above
mentioned amount of SIX HUNDRED THIRTEEN NINETY SIX PESOS
(P613,096.00), for and as adverse attorney's fees in this case; ... (p. 45, rec.).

WE hereby grant the amount of P 18,392.78 which is 3% of P613,096.00 as attorney's fees in favor
of the respondent-appellee.

WHEREFORE, THE ORDER OF THE RESPONDENT COURT DATED JULY 23, 1969 IS HEREBY
AFFIRMED AND THE PETITIONERS-APPELLANTS ARE HEREBY DIRECTED TO PAY
ATTORNEY'S FEES IN THE AMOUNT OF EIGHTEEN THOUSAND THREE HUNDRED NINETY-
TWO AND 78/100 (P18,392.78) PESOS. COSTS AGAINST PETITIONERS-APPELLANTS.

SO ORDERED.