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G.R. No. L-9596 February 11, 1916 EN BANC Trent, J.

MARCOS MENDOZA, plaintiff-appellee, vs. FRANCISCO DE LEON, ET AL., defendants-


appellants.

FACTS: Action for damages against the individual members of the municipal council of the
municipality of Villasis, Pangasinan, for the revocation of the lease of an exclusive ferry privilege
duly awarded to the plaintiff under the provisions of Act No. 1643 of the Philippine Commission.
After use of a little more than one year, the plaintiff was forcibly ejected under and pursuance of
a resolution adopted by the herein defendants, awarding a franchise for the same ferry to
another person.

ISSUE: Are the members of the municipal council personally liable?

RATIONALE:

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

A municipality is not exempt from liability for the negligent performance of its corporate or
proprietary or business functions. In the administration of its patrimonial property, it is to be
regarded as a private corporation or individual so far as its liability to third persons on contract
or in tort is concerned. Its contracts, validly entered into, may be enforced and damages may be
collected from it for the torts of its officers or agents within the scope of their employment in
precisely the same manner and to the same extent as those of private corporations or
individuals. As to such matters the principles of respondeat superior applies. It is for these
purposes that the municipality is made liable to suits in the courts. Municipal corporations are
subject to be sued upon contracts and in tort.

The rule of law is a general one, that the superior or employer must answer civilly of the
negligence or want of skill of his 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 the operation of this rule of law, and are liable, accordingly,
to civil actions for damages when the requisite elements of liability coexist. To create such
liability, it is fundamentally necessary that the act done which is injurious to others must be
within the scope of the corporate powers as prescribed by charter or positive enactment (the
extent of which powers all persons are bound, at their peril, know); in other words, it must not be
ultra vires in the sense that it is not within the power or authority of the corporation to act in
reference to it under any circumstances.

Under the provisions of Municipal Code and Act No. 1634, the plaintiff had a vested right to the
exclusive operation of the ferry in question for the period of his lease. Were the municipality a
party to this action, it would be patent that a judgment for damages against it for the rescission
of the contract would be proper. This, be it said, is the usual method of exacting damages, either
ex contractu or ex delicto arising from the exercise of corporate powers of municipalities.
In administering the patrimonial property of municipalities, the municipal council occupies, for
most purposes, the position of a board of directors of a private corporation. In disposing of the
local public utilities, if the term may be used, such as the fishing and ferry rights, etc., they must
exercise considerable judgment. It required some considerable amount of business acumen to
compel performance on the part of lessees of these privileges in accordance with the terms of
their leases and in a manner which will not cause the property to deteriorate. Questions must
continually arise which are not expressly provided for in contracts and which must be settled, if
possible, in a manner that will preserve the just claims of the municipality. The rule of personal
liability should be with municipal councilors in such matters as it is with the directors or
managers of an ordinary private corporation.

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

DISPOSITIVE: Judgment appealed from is affirmed.


De Los Santos vs. IAC (Consti1)

Emiliano R. De Los Santos, Spouses Norma A. Padilla and Isidoro L. Padilla and the Heirs of Francisco 
Dayrit, petitioners, vs. The Hon. Intermediate Appellate Court, Hon. Judge Cicerro C. Jurado and 
Edilberto Cadiente, respondents.

Topic: Sovereignty ­ Suits not against the State ­ Expropriation 

Facts: 

Petitioners are co­owners of a parcel of land in Barrio Wawa, Binangonan, Rizal (area: 19,061 sq m)

Petitioners allege that in October 1981, without their knowledge or consent, Lorenzo Cadiente, a private 
contractor and the Provincial Engineer of Rizal constructed a road 9 meters wide and 128.70 meters long 
occupying 1,165 sq m of their parcel of land

Aside from the road, an artificial creek 23.20 meters wide and 128.69 meters long was also constructed, 
occupying an area of 2,906 sq m of their property

Constructed in a zigzag manner, the creak meandered through their property

Petitioners files two cases which were later consolidated

Solicitor General filed a motion to dismiss both cases several grounds, including that both cases were in 
reality suits against the state which could not be maintained without the State's consent

The lower court dismissed the petition; petitioners elevated the case to the SC on certiorari, which 
referred the cases back to the IAC

IAC ruled: the two actions cannot be maintained because they are suits against the State without consent

Case was again elevated to the SC on certiorari

 Issue:

Whether or not the consolidated actions, as suits against the State, can be maintained

Holding: Yes.

The doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an 
injustice on a citizen; it cannot serve as defense by the State against an action for payment by the owner
The respondent government officials executed a shortcut in appropriating petitioners' property for public 
use; no expropriation proceedings had been undertaken prior to the construction of the projects

Damages may be awarded the petitioners in the form of legal interest on the price of the land to be 
reckoned from the time of the unlawful taking Petition granted. Civil Cases remanded to the lower court 
for trial on the merits after the Republic of the Philippines shall have been impleaded as defendant in both
cases.

Republic vs Judge Perfecto Palacio


38 SCRA 899 – Civil Law – Torts and Damages – Liability of the State for acts of special
agents

In April 1960, a certain Ildefenso Ortiz sued the Irrigation Service Unit (ISU) which was
under the Department of Public Works because ISU, without the consent of Ortiz,
encroached upon his land by allegedly inducing the Handong Irrigation Assoc. to do so.
The basis of the suit was that ISU, though created by the government, is engaged in
private business (selling of irrigation pumps/construction materials in installment) and
being such has opened itself to suit thereby waiving immunity from suit. Judge Palacio
of CFI Camarines Sur ruled in favor of Ortiz so did the Court of Appeals. The CA also
ordered the issuance of the order of garnishment against the deposit/trust funds in ISU’s
account in the PNB (such fund were generated from the installment payments ISU
received).

ISSUE: Whether or not such deposits may be garnished.

HELD:
No. ISU’s activity of selling irrigation pumps is not intended to earn profit or financial
gain. It is actually just to replenish the funds used in purchasing said irrigation pumps
(the original funds were from FTA from US). The CA ruled that ISU, by selling irrigation
pumps is engaged in private business, hence it waived its immunity from suit and had
also ordered the garnishment of ISU’s deposits in PNB. But then again, as based in
Merritt vs Insular Government, the waiver of said immunity does not make the
government liable. This would only lead to a disbursement of fund without any proper
appropriation as required by law. There is also no showing that the ISU’s alleged
inducement of Handong is authorized by the State hence the government cannot be
liable under Article 2180 of the Civil Code.
Malipol vs. Tan

G.R. No. L-27730 January 21, 1974

Facts: Pantaleon Malijan was walking with his companion Leonardo Amante when he
was hit by a gasoline tanker, got thrown to the ground and was ran over by the tanker’s
right wheel that got detached. Although he was brought to the hospital, Malijan died that
night from "possible traumatic cerebral hemorrhage due to vehicular accident."

The gasoline tanker at that time was driven by Ernesto Labsan and was used and
owned by Lily Lim Tan for her gasoline business. The mother and minor siblings of
Malijan filed a complaint for damages against Tan and Labsan. The trial court ruled that
Labsan was primarily liable to pay the damages, and in case he would not be able to do
so, Tan would be subsidiarily liable.

Issue: Whether the trial court erred in ruling Labsan as primarily liable for damages, and
Tan as subsidiarily liable.

Held: The court ruled that the trial court correctly denied the motion to set aside order of
default and for new trial; however, the trial court erred in holding Tan subsidiarily liable.

The action was based on quasi-delict and not to demand civil liability arising from a
crime, since the complaint makes no mention of a crime. Under Article 2180 of the Civil
Code, the liability of the owners and managers of an establishment or enterprise for
damages caused by their employees is primary and direct, not subsidiary.
Therefore, the employer, Lily Lim Tan, must be held primarily and directly, not
subsidiarily, liable for damages awarded in the decision of the lower court, without
prejudice to the right to demand reimbursement from damages from Ernesto Labsan for
whatever she would have to pay the relatives of the deceased.

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