Civil Law

Republic of the Philippines vs Judge Perfecto Palacio

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G.R. No. L-20322 – 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 Perfecto Palacio of the Court of First Instance of 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 Philippine National Bank (such fund were generated from the installment payments ISU received). The Republic of the Philippines through the Solicitor General interposed an objection.

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.

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