Fontanilla vs.

Maliaman

FACTS

On December 1, 1989, the Court rendered a decision declaring National

Irrigation Administration (NIA), a government agency performing proprietary
functions. Like an ordinary employer, NIA was held liable for the injuries,
resulting in death, of Francisco Fontanilla, son of petitioner spouses Jose and
Virginia Fontanilla, caused by the fault and/or negligence of NIA’s driver
employee Hugo Garcia; and NIA was ordered to pay the petitioners the
amounts of P 12,000 for the death of the victim; P3,389 for hospitalization and
burial expenses; P30,000 as moral damages; P8,000 as exemplary damages,
and attorney’s fees of 20% of the total award.

The National Irrigation Administration (NIA) maintains, however, that it does

not perform solely and primarily proprietary functions, but is an agency of the
government tasked with governmental functions, and is therefore not liable for
the tortuous act of its driver Garcia, who was not its special agent. For this,
they have filed a motion for reconsideration on January 26, 1990.

NIA believes this bases this on:

PD 552 – amended some provisions

of RA 3601 (the law which created the NIA)

The case of Angat River Irrigation

System v. Angat River Workers’ Union

Angat Case: Although the majority opinion declares that the Angat System, like
the NIA, exercised a governmental function because the nature of its powers
and functions does not show that it was intended to “bring to the Government
any special corporate benefit or pecuniary profit”, a strong dissenting opinion
held that Angat River system is a government entity exercising proprietary
functions.

The Angat dissenting opinion:

Alegre protested the announced termination of his employment. He argued that

although his contract did stipulate that the same would terminate on July 17,
1976, since his services were necessary and desirable in the usual business of
his employer, and his employment had lasted for five years, he had acquired
the status of regular employee and could not be removed except for valid cause.

The employment contract of 1971 was executed when the Labor Code of the
Philippines had not yet been promulgated, which came into effect some 3 years
after the perfection of the contract.

ISSUE

Whether or not NIA is a government agency with a juridical personality

separate and distinct from the government, thereby opening it up to the
possibility that it may be held liable for the damages caused by its driver, who
was not its special agent.

HELD: YES

Reasoning the functions of government have been classified into governmental

or constituent and proprietary or ministrant. The former involves the exercise
of sovereignty and considered as compulsory; the latter connotes merely the
exercise of proprietary functions and thus considered as optional.

The National Irrigation Administration was not created for purposes of local
government. While it may be true that the NIA was essentially a service agency
of the government aimed at promoting public interest and public welfare, such
fact does not make the NIA essentially and purely a “government-function”
corporation. NIA was created for the purpose of “constructing, improving,
rehabilitating, and administering all national irrigation systems in the
Philippines, including all communal and pump irrigation projects.” Certainly,
the state and the community as a whole are largely benefited by the services
the agency renders, but these functions are only incidental to the principal aim
of the agency, which is the irrigation of lands.