EN BANC
[G.R. Nos. 55963 & 61045. February 27, 1991.]
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, petitioners, vs. HONORABLE
INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION ADMINISTRATION, respondents.
NATIONAL IRRIGATION ADMINISTRATION, petitioners, vs. SPOUSES JOSE FONTANILLA and
VIRGINIA FONTANILLA, respondents.
RESOLUTION
PARAS, J p:
In its Motion for Reconsideration 1 of the Court's Second Division decision in G.R. No. 55963 and
G.R. No. 61045, the National Irrigation Administration (NIA, for brevity), through the Solicitor
General, maintains that, on the strength of Presidential Decree No. 552 (which amended certain
provisions of Republic Act 3601, the law creating the NIA) and the case of Angat River Irrigation
System, et al. vs. Angat River Workers' Union, et al., 102 Phil. 790 "the NIA does not perform
solely and primarily proprietary functions but is an agency of the government tasked with
governmental functions, and is therefore not liable for the tortious act of its driver Hugo Garcia,
who was not its special agent."
Although the majority opinion in the cited case of Angat System declares that the Angat System
(like the NIA) exercised a governmental function because the nature of the powers and functions
of said agency does not show that it was intended to "bring to the Government any special
corporate benefit or pecuniary profit," there is a strong dissenting opinion penned by then
Associate Justice and later Chief Justice Roberto Concepcion and concurred in by then Associate
Justice J.B.L. Reyes which held the contrary view that the Angat River System is a government
entity exercising proprietary functions. To buttress said stand, the former Chief Justice cited some
authorities which will be useful in the proper resolution of this case.
Quoting from said dissenting opinion which cited McQuillin's The Law of Municipal Corporations,
3rd ed., Vol. 18, pp. 423-424:
"In undertaking to supply water at price, municipality is not performing
governmental function but is engaged in trade, and is liable first as private
company would be for any negligence in laying out of its pipes, in keeping them
in repair, or in furnishing potable water through them. Harvard Furniture Co., Inc.
vs. City of Cambridge, 320 Mass. 227, 68 N.E. (2d) 684."
"Municipality in contracting to provide water supply acts under its proprietary
power and not under its legislative, public or governmental powers. Farmers'
State Bank vs. Conrad, 100 Mont. 415, 47 P. (2d) 853."
In this connection, the opinion is that irrigation districts in the United States are basically identical
to our irrigation systems under Act No. 2152. Because of such similarity, it is found appropriate to
consider certain doctrines from American jurisprudence, which are as follows, to wit:
"An irrigation district is a public quasi corporation, organized, however, to conduct
a business for the private benefit of the owners of land within its limits. They are
members of the corporation, control its affairs, and alone are benefited by its
operations. It is, in the administration of its business, the owner of its system in a
proprietary rather than a public capacity, and must assume and bear the burdens
of proprietary ownership." (Nampa vs. Nampa & M. Irrig. Dist. 19 Idaho, 779, 115
Pac. 979)
". . . the plaintiff sought damages for injuries to crops on his land during 1923,
1924, 1925, and 1926, caused by water seeping, percolating, and escaping from
the defendant's canal. The defendant contended that irrigation districts were
agencies of the state, and were, therefore, not liable for the negligent
construction or operation of their canals or ditches. The court, after a careful
review of the authorities defining an irrigation district, conceded that such a quasi
public corporation possessed some governmental powers and exercised some
governmental functions, but held that the construction and operation of its
irrigation canals and ditches was a proprietary rather than a governmental
function, and hence the district was responsible in damages for the negligent
construction or operation of its canal system." (69 A.L.R., p. 1233)
It may not be amiss to state at this point that the functions of government have been classified
into governmental or constituent and proprietary or ministrant. The former involves the exercise of
sovereignty and considered as compulsory; the latter connotes merely the exercise of proprietary
functions and thus considered as optional. The Solicitor General argues that the reasons
presented by P.D. 552 for the existence of the NIA (the WHEREAS clauses of said decree)
indubitably reveal that the responsibility vested in said agency concerns public welfare and public
benefit, and is therefore an exercise of sovereignty. On the contrary, We agree with the former
Chief Justice Concepcion in saying that the same purpose such as public benefit and public
welfare may be found in the operation of certain enterprises (those engaged in the supply of
electric power, or in supplying telegraphic, telephonic, and radio communication, or in the
production and distribution of prime necessities, etc.) yet it is certain that the functions performed
by such enterprises are basically proprietary in nature. Thus, as held in Holderbaum vs. Hidalgo
County Water Improvement District (297 S.W. 865, aff'd in 11 S.W. [2d] 506) — cited in the
dissenting opinion by Justice Concepcion:
". . . Primarily, a water improvement district is in no better position than a city is
when exercising its purely local powers and duties. Its general purposes are not
essentially public in their nature, but are only incidentally so; those purposes may
be likened to those of a city which is operating a waterworks system, or an
irrigation system. . . . A water improvement district can do nothing, it has and
furnishes no facilities, for the administration of the sovereign government. Its
officers have no power or authority to exercise any of the functions of the general
government, or to enforce any of the laws of the state or any of its other
subdivisions, or collect taxes other than those assessed by the district. They
have no more power or authority than that of the officers of a private corporation
organized for like purposes. As a practical matter, the primary objects and
purposes of such district are of a purely local nature, for the district is created
and operated for the sole benefit of its own members, and an analysis of those
objects and purposes discloses that they directly benefit only the landowners
who reside within and whose lands form a part of the district, to the exclusion of
all other residents therein. It is true, of course, that the state and the general
public are greatly benefited by the proper operation of the district, and to that
extent its objects and accomplishments are public in their nature, but this
characteristic is only incidental to the primary and chief object of the corporation,
which is the irrigation of lands forming a part of the district. It is obvious, then,
that the purposes and duties of such districts do not come within the definition of
public rights, purposes, and duties which would entitle the district to the
exemption raised by the common law as a protection to corporations having a
purely public purpose and performing essentially public duties."
Of equal importance is the case of National Waterworks and Sewerage Authority (NAWASA) vs.
NWSA Consolidated Unions, 11 SCRA 766, which propounds the thesis that "the NAWASA is not
an agency performing governmental functions; rather it performs proprietary functions . . .." The
functions of providing water supply and sewerage service are regarded as mere optional
functions of government even though the service rendered caters to the community as a whole
and the goal is for the general interest of society. The business of furnishing water supply and
sewerage service, as held in the case of Metropolitan Water District vs. Court of Industrial
Relations, et al., 91 Phil. 840, "may for all practical purposes be likened to an industry engaged in
by coal companies, gas companies, power plants, ice plants, and the like." Withal, it has been
enunciated that "although the State may regulate the service and rates of water plants owned and
operated by municipalities, such property is not employed for governmental purposes and in the
ownership and operation thereof the municipality acts in its proprietary capacity, free from
legislative interference." (1 McQuillin, p. 683)
Like the NAWASA, the National Irrigation Administration was not created for purposes of local
government. While it may be true that the NIA was essentially a service agency of the
government aimed at promoting public interest and public welfare, such fact does not make the
NIA essentially and purely a "government-function" corporation. NIA was created for the purpose
of "constructing, improving, rehabilitating, and administering all national irrigation systems in the
Philippines, including all communal and pump irrigation projects." Certainly, the state and the
community as a whole are largely benefited by the services the agency renders, but these
functions are only incidental to the principal aim of the agency, which is the irrigation of lands.
We must not lose sight of the fact that the NIA is a government agency invested with a corporate
personality separate and distinct from the government, thus is governed by the Corporation Law.
Section 1 of Republic Act No. 3601 provides:
"Section 1. Name and Domicile — A body corporate is hereby created which
shall be known as the National Irrigation Administration. . . . which shall be
organized immediately after the approval of this Act. It shall have its principal
seat of business in the City of Manila and shall have representatives in all
provinces, for the proper conduct of its business." (Emphasis supplied).
Besides, Section 2, subsection b of P.D. 552 provides that:
"(b) To charge and collect from the beneficiaries of the water from all
irrigation systems constructed by or under its administration, such fees or
administration charges as may be necessary to cover the cost of operation,
maintenance and insurance, and to recover the cost of construction within a
reasonable period of time to the extent consistent with government policy; to
recover funds or portions thereof expended for the construction and/or
rehabilitation of communal irrigation systems which funds shall accrue to a
special fund for irrigation development under section 2 hereof;
Unpaid irrigation fees or administration charges shall be preferred liens first,
upon the land benefited, and then on the crops raised thereon, which liens shall
have preference over all other liens except for taxes on the land, and such
preferred liens shall not be removed until all fees or administration charges are
paid or the property is levied upon and sold by the National Irrigation
Administration for the satisfaction thereof. . . ."
The same section also provides that NIA may sue and be sued in court. Thus,
"b) . . . Judicial actions for the collection of unpaid irrigation fees or charges,
drainage fees or other charges which the National Irrigation Administration is
authorized to impose and collect, shall henceforth be governed by the provisions
of the Rules of Court of the Philippines for similar actions, the provisions of other
laws to the contrary notwithstanding."
xxx xxx xxx
"(e) ...
xxx xxx xxx
xxx xxx xxx
All actions for the recovery of compensation and damages against the National
Irrigation Administration under paragraphs (1), (2), and (3) hereof, shall be filed
with a competent court within five (5) years from the date of entry of the land or
destruction of the improvements or crops, after which period, the right of
possession and/or ownership of the National Irrigation Administration shall be
considered vested and absolute. All other actions for the recovery of
compensation and damages to private property and improvements occasioned
by the construction, operation and maintenance of irrigation facilities and other
hydraulic structures under the administration of the National Irrigation
Administration, which have accrued ten (10) or more years prior to the approval
of this decree are deemed to have prescribed and are barred forever."
It has its own assets and liabilities. It also has corporate powers to be exercised by a Board of
Directors. To quote Section 2, subsection (f):
"(f) . . . and to transact such business, as are directly or indirectly necessary,
incidental or conducive to the attainment of the above powers and objectives,
including the power to establish and maintain subsidiaries, and in general, to
exercise all the powers of a corporation under the Corporation Law, insofar as
they are not inconsistent with the provisions of this Act." (Emphasis supplied).
On the basis of the foregoing considerations, We conclude that the National Irrigation
Administration is a government agency with a juridical personality separate and distinct from the
government. It is not a mere agency of the government but a corporate body performing
proprietary functions. Therefore, it may be held liable for the damages caused by the negligent
act of its driver who was not its special agent.
ACCORDINGLY, the Motion for Reconsideration dated January 26, 1990 is DENIED WITH
FINALITY. The decision of this Court in G.R. No. 55963 and G.R. No. 61045 dated December 1,
1989 is hereby AFFIRMED.
Gancayco, Bidin, Sarmiento, Griño-Aquino, Medialdea and Regalado, JJ ., concur.
Fernan, C .J ., Melencio-Herrera and Gutierrez, Jr., JJ ., concur in the result.
Footnotes
1. This motion was referred to the court en banc per resolution dated May 9, 1990.
