Vilas vs City of Manila 42 Phil 935

Facts

Prior to the incorporation of the City of Manila under the Republic Act No. 183, petitioner Vilas is the creditor of the City. After the incorporation, Vilas brought an action to recover the sum of money owed to him by the city. The City of Manila that incurred the debts has changed its sovereignty after the cession of the Philippines to the US by the Treaty of Paris and its contention now is founded on the theory that by virtue of the Act No. 183 its liability has been extinguished.

Issue

Whether or not the change of the sovereignty extinguishes the previous liability of the City of Manila to its creditor?

Held

No. The mere change of sovereignty of a country does not necessarily dissolve the municipal corporation organized under the former sovereign. The new City of Manila is in a legal sense the successor of the old city. Thus the new city is entitled to all property and property rights of the predecessor corporation including its liabilities. The court held that only the governmental functions that are not compatible with the present sovereignty are suspended. Because the new City of Manila retains its character as the predecessor of the old city it is still liable to the creditors of the old City of Manila.