Rayo vs. Court of 1st Instance of Bulacan

Factual Background

At about midnight on October 26, 1978, during Typhoon "Kading", the plant superintendent of Angat Dam, Benjamin Chavez, opened simultaneously all three floodgates. The sudden opening precipitated an unprecedented inundation of several towns in Bulacan, the community of Norzagaray being the hardest-hit. About a hundred residents died or were reported to have died and properties "worth million of pesos" were destroyed or washed away according to the petitioners' uncontroverted allegations.

Pleadings and Trial Court Proceedings

The petitioners filed eleven separate complaints for damages in the Court of First Instance of Bulacan, Branch V, docketed as Civil Cases Nos. SM-950, 951, 953, 958, 959, 964, 965, 966, 981, 982 and 983, naming the National Power Corporation and the plant superintendent, Benjamin Chavez, as defendants. The complaints shared a common cause of action. The NPC filed separate answers and asserted as a special and affirmative defense that the operation of the Angat Dam was a "purely governmental function" and that it could not be sued without the express consent of the State.

Preliminary Hearing and Trial Court's Dismissal

The trial court treated the NPC's affirmative defense as a motion to dismiss and conducted a preliminary hearing. The petitioners opposed dismissal and contended that the NPC performed proprietary functions and that under Republic Act No. 6395, section 3(d), the NPC could "sue and be sued in any court." By an order dated December 12, 1979, the trial court dismissed the cases against the NPC. The court held that section 3(d) related only to matters within the scope of corporate powers and not to torts, and that because the NPC performed a purely governmental function in operating the dam, suit might require the express consent of the State.

Motions for Reconsideration and Invocation of Certiorari

The petitioners filed a motion for reconsideration, which the trial court denied in an order dated October 3, 1980; the denial was pro forma. The petitioners then sought review by the Supreme Court through a petition for certiorari under Republic Act No. 5440, filing in October 1980. The Court required respondents to comment; the Solicitor General filed a comment on April 13, 1981 after multiple extensions. The Court ordered simultaneous memoranda; petitioners filed theirs on July 22, 1981. The Solicitor General sought numerous extensions for filing a memorandum and, after repeated denials of late extension motions, the decision proceeded without a memorandum from the Solicitor General.

Issues Presented

The parties agreed that the dismissal order raised two issues: (1) whether the National Power Corporation performed a governmental function with respect to management and operation of the Angat Dam; and (2) whether the NPC's power to "sue and be sued" under its organic charter included the power to be sued for tort.

The Court's Analysis

The Court found the petition meritorious. It held that the characterization of the NPC's functions in operating the Angat Dam need not be resolved by an extended dissertation because the Government had organized the NPC as a corporate entity, invested capital in it and expressly allowed it to "sue and be sued in any court" under Republic Act No. 6395, section 3(d). The Court observed that as a government-owned and controlled corporation the NPC possessed a legal personality distinct and