I.

THE PHILIPPINES AS A STATE

STATE is community of persons, more or less numerous, permanently occupying a

definite portion of territory, independent of external control, and possessing a
government to which a great body of inhabitants render habitual obedience. See:
Collector of Internal Revenue v. Campos Rueda, 42 SCRA23.

STATE is a legal or juristic concept vs NATION is an ethnic or racial concept.

GOVERNMENT is merely an instrumentality of the State through which the will of
the State is implemented and realized.

A. Elements of a State. .

1. People.
Inhabitants [Sec. 2, Art. Ill; Sec. 1, Art. XIII];
Citizens [Preamble; Secs. 1 & 4, Art. II; Sec. 7, Art. Ill]; (iii)
Electors [Sec. 4, Art. VII].

a) As requisite for Statehood: Adequate number for self-sufficiency and

defense; of both sexes for perpetuity.

2. Territory [Art. I; R.A. 3046; R.A. 5446].

a) The National Territory: “The national territory comprises the Philippine

archipelago, with all the islands and waters embraced therein, and all other territories
over which the Philippines has sovereignty or jurisdiction, consisting of its terrestrial,
fluvial and aerial domains, including its territorial sea, the seabed, the subsoil, the insular
shelves, and other submarine areas” [Sec. 1, Art. !].

b) Components: Terrestrial, Fluvial, Maritime and Aerial domains.

c) The Philippine Archipelago: (i) Treaty of Paris, December 10, 1898 (Cession
of the Philippine Islands by Spain to the United States); (ii) Treaty between Spain and US
at Washington, November 7, 1900 (Cagayan, Sulu & Sibuto); (iii) Treaty between US and
Great Britain, January 2, 1930 (Turtle & Mangsee Islands).
d) Other territories over which the Philippines exercises jurisdiction. (i)
Batanes [1935 Constitution]; (ii) Those contemplated in Art. I, 1973 Constitution
[belonging to the Philippines by historic right or legal title]; (iii) PD 1596, June 11, 1978.
e) Archipelago Doctrine: “The waters around, between and connecting the
islands of the archipelago, regardless of their breadth and dimensions, form part of the
internal waters of the Philippines” [2nd sentence, Sec. 1, Art II

Archipelagic doctrine of national territory, based on the principle that an

archipelago, which consists of a number of islands separated by bodies of water, should be
treated as ONE INTEGRAL UNIT.

i) STRAIGHT BASELINE METHOD: Imaginary straight lines are drawn

joining the outermost points of outermost islands of the archipelago, enclosing an
area the ratio of which should not be more than 9:1 (water to land); provided that the
drawing of baselines shall not depart, to any appreciable extent, from the general
configuration of the archipelago. The waters within the baselines shall be considered
internal waters; while the breadth of the territorial sea shall then be measured from
the baselines.

ii) UN Convention on the Law of the Sea [April 30,1982; ratified by the
Philippines in August, 1983] provides (i) Contiguous Zone of 12 miles; (ii) Exclusive
Economic Zone of 200 miles. Although the contiguous zone and most of the exclusive
economic zone may not, technically, be part of the territory of the
.State, nonetheless, the coastal State enjoys preferential rights over the marine
resources found within these zones. See also P.D. 1599, June 11, 1978.

3. Government is The agency or instrumentality through which the will of the State is
formulated, expressed and realized. See U.S. v. Dorr, 2 Phil 332. i)

Government of the Philippines is the corporate governmental

entity through which the functions of government are exercised throughout
the Philippines, including,
save as the contrary appears from the context,
the various arms through which political authority is made effective in the
Philippines, whether pertaining to the autonomous regions,
the provincial, city, municipal or barangay subdivisions or other forms of local
government" [Sec. 2 (1), Administrative Code of 1987].

a) Functions:

i) Traditionally, the functions of government have been classified into

constituent, which are
a. mandatory for the Government to perform because they constitute
the very bonds of society, such as the maintenance of peace and
order, regulation of property and property rights, the administration
of justice, etc; and
b. MINISTRANT, those intended to promote the welfare, progress and
prosperity of the people, and which are merely optional for
Government to perform.

ii) In Romualdez-Yap v. Civil Service Commission, 225 SCRA 285, the

Court declared that a distinction can be made on the validity of the reorganization
 between a government bureau or office performing constituent functions
a. the Bureau of Customs
b. government-owned or -controlled corporation performing ministrant
functions (like the PNB).
c. Commercial or universal banking is, ideally, not a governmental, but a
private sector, endeavor. The test of good faith.]
In Fontanilla v. Maliaman, 194 SCRA 486, the Supreme Court said that the
functions of government are classified into governmental or constituent and
proprietary or ministrant. The former involves the exercise of sovereignty and therefore
compulsory; the latter connotes merely the exercise of proprietary functions and thus
considered as optional.

b) Doctrine of Parens Patriae.

a. Parent of the people.
b. the Government may act as guardian of the rights of people who
may be disadvantaged or suffering from some disability or misfortune.
See Government of the Philippine Islands v. Monte de Piedad, 35 SCRA
738; Cabanas v. Pilapil, 58 SCRA 94.

c) Classification:
De jure having a right or existence as stated by law:
A de jure government is the legal, legitimate government of a state and is so recognized by other
states. In contrast,
a de facto government is in actual possession of authority and control of the state. For example, a
government that has been overthrown and has moved to another state will attain de jure status if other
nations refuse to accept the legitimacy of the revolutionary government.
vs. De facto. See: Co Kim Chan v. Tan Keh, 75 Phil. 113; Lawyers League for a Better
Philippines v. Aquino, supra..

Kinds of de facto government: That which takes possession or control of, or usurps, by
force or by the voice of the majority, the rightful legal government and maintains itself against
the will of the latter; that which is established by the inhabitants of a territory who rise in
insurrection against the parent state; and that which is established by the invading forces of an
enemy who occupy a territory in the course of war. The last is denominated a de facto
government of paramount force.

A PRESIDENTIAL GOVERNMENT, there is separation of executive and legislative powers (the

first is lodged in the President, while the second is vested in Congress); while in a
PARLIAMENTARY GOVERNMENT, there is fusion of both executive and legislative powers in
Parliament, although the actual exercise of the executive powers is vested in a Prime Minister who
is chosen by, and accountable to, Parliament.

A UNITARY GOVERNMENT is a single, centralized government, exercising powers over both

the internal and external affairs of the State; while a
FEDERAL GOVERNMENT consists of autonomous state (local) government units merged into a
single State, with the national government exercising a limited degree of power over the
domestic affairs but generally full direction of the external affairs of the State.

SOVEREIGNTY- The supreme and uncontrollable power inherent in a State by which

that State is governed.
d) Kinds:
LEGAL, which is the power to issue final commands; or
Political, which is the sum total of all the influences which lie behind the law.
INTERNAL, or the supreme power over everything within its territory; or
External, also known as independence, which is freedom from external control.

e) Characteristics: permanence, exclusiveness, comprehensive- ness,

absoluteness, indivisibility, inalienability, imprescriptibility. See Laurel v. Misa, 77 Phil.
856.

f) Effects of change in sovereignty: Political laws are abrogated [People

v. Perfecto, 43 Phil. 887; Macariola v. Asuncion, 114 SCRA 77]; municipal laws remain in
force [Vilas v. City of Manila, 229 US 345].

g) Effects of belligerent occupation: No change in sovereignty. See:

Peralta v. Director of Prisons, 75 Phil. 285; Alcantara v. Director of Prisons, 75 Phil.
749;Ruffyv. Chief of Staff, 75 Phil. 875.

i) However, political laws, except the law on treason, are suspended

[Laurel v. Misa, 77 Phil. 856]; municipal laws remain in force unless repealed by the
belligerent occupant. At the end of the belligerent occupation, when the occupant is
ousted from the territory, the political laws which had been suspended during the
occupation shall automatically become effective again, under the doctrine of jus
postliminium.

h) Dominium v. Imperium: Dominium refers to the capacity to own or

acquire property, including lands held by the State in its proprietary capacity; while
Imperium is the authority possessed by the State embraced in the concept of
sovereignty.

i) Jurisdiction

i) Territorial: power of the State over persons and things within its
territory. EXEMPT ARE: (a) Foreign states, heads of state, diplomatic representatives,
and consuls to a certain degree; (b) Foreign state property, including embassies,
consulates, and public vessels engaged in noncommercial activities; (c) Acts of state; (d)
Foreign merchant vessels exercising the rights of innocent passage or involuntary entry,
such as arrival under stress; (e) Foreign armies passing through or stationed in its
territory with its permission; and (f) Such other persons or property, including
organizations like
the United Nations, over which it may, by agreement, waive jurisdiction. See:
Convention on Privileges and Immunities of the United Nations; Convention on Privileges
and Immunities of Specialized Agencies of the United Nations; World Health
Organization v. Aquino, 48 SCRA 242; Southeast Asian Fisheries Development Center v.
NLRC, 206 SCRA 283.

ii) Personal: power of the State over its nationals, which may be
exercised by the State even if the individual is outside the territory of the State.

iii) Extraterritorial: power exercised by the State beyond its territory in

the following cases: (a) Assertion of its personal jurisdiction over its nationals abroad; or
the exercise of its rights to punish certain offenses committed outside its territory
against its national interests even if the offenders are nonresident aliens; (b) By virtue of
its relations with other states or territories, as when it establishes a colonial
protectorate, or a condominium, or administers a trust territory, or occupies enemy
territory in the course of war; (c) When the local state waives its jurisdiction over persons
and things within its territory, as when a foreign army stationed therein remains under
the jurisdiction of the sending state; (d) By the principle of exterritoriality, as illustrated
by the immunities of the head of state in a foreign country; (e) Through enjoyment of
easements or servitudes, such as the easement of innocent passage or arrival under
stress; (f) The exercise of jurisdiction by the state in the high seas over its vessels; over
pirates; in the exercise of the right to visit and search; and under the doctrine of hot
pursuit; (g) The exercise of limited jurisdiction over the contiguous zone and the
patrimonial sea, to prevent infringement of its customs, fiscal, immigration or sanitary
regulations.

B. State Immunity from Suit. “The State cannot be sued without its consent” [Sec.
3, Art. XVI].

1. Basis: There can be no legal right against the authority which makes the
law on which the right depends [Republic v. Villasor, 54 SCRA 83], However, it
may be sued if it gives consent, whether express or implied. The doctrine is also
known as the Royal Prerogative of Dishonesty.

2. Immunity is enjoyed by other States, consonant with the public international

law principle of par in parem non habet imperium. The Head of State, who is deemed the
personification of the State, is inviolable, and thus, enjoys immunity from suit.

a) The State’s diplomatic agents, including consuls to a certain extent, are also
exempt from the jurisdiction of local courts and administrative tribunals. [See PUBLIC
INTERNATIONAL LAW, infra.].
 i) A foreign agent, operating within a territory, can be cloaked with
immunity from suit but only as long as it can be established that he is acting within the
directives of the sending State. The cloak of protection is removed the moment the
foreign agent is sued in his individual capacity, as when he is sought to be made liable
for whatever damage he may have caused by his act done with malice or in bad faith or
beyond the scope of his authority or jurisdiction. In Minucherv. Court of Appeals, G.R.
No. 142396, February 11, 2003, it was sufficiently established that respondent Arthur
Scalzo an agent of the US Drug Enforcement Agency, was tasked to conduct surveillance
on suspected drug activities within the country, and having ascertained the target, to
inform the local law enforcers who would then be expected to make the arrest. In
conducting this surveillance and later, acting as the poseur- buyer during the buy-bust
operation, and then becoming a principal witness in the criminal case against Minucher,
Scalzo can hardly be said to have acted beyond the scope of his official functions or
duties. He should, therefore, be accorded diplomatic immunity.

b) The United Nations, as well as its organs and specialized agencies, are
likewise beyond the jurisdiction of local courts [Convention on Privileges and Immunities
of the United Nations; Convention on Privileges and Immunities of Specialized Agencies
of the United Nations; World Health Organization v. Aquino, supra.].

i) In Lasco v. UNRFNRE (United Nations Revolving Fund for Natural

Resources Exploration), 241 SCRA 681, the Supreme Court upheld the diplomatic
immunity of private respondent as established by the letter of the Department of
Foreign Affairs recognizing and confirming such immunity in accordance with the 1946
Convention on the Privileges and Immunities of the UN of which the Philippines is a
signatory.

c) Even other international organizations or international agencies may be

immune from the jurisdiction of local courts and local administrative tribunals. i)

In SEAFDEC (Southeast Asia Fisheries Development

i)
Center) v. NLRC, 241 SCRA 580, and SEAFDEC v. Acosta, G.R. Nos. 97468-70.
September 02, 1993, it was held that SEAFDEC, as an international agency,
enjoys diplomatic immunity. It was established through an international
agreement to which the Philippines became a signatory on January 16, 1968.
The purpose of the Center is to contribute to the promotion of fisheries
development in Southeast Asia by mutual cooperation among the member
governments of the Center. The invocation by private respondents of the
doctrine of estoppel is unavailing, because estoppel does not confer
jurisdiction
38 Constitutional La*

on a tribunal that has none over a cause of action. The Tijam v. Sibonghanoy, 23 SCRA
29, ruling cannot apply to parties which enjoy foreign and diplomatic immunity
[SEAFDEC-Aquaculture v. NLRC, 206 SCRA 283].
The doctrine of promissory estoppel prevents one party from
withdrawing a promise made to a second party if the latter has
reasonably relied on that promise
Estoppel is a legal principle that precludes a person from
alleging facts that are contrary to previous claims or
actions. In other words, estoppel prevents someone from
arguing something contrary to a claim made or act
performed by that person previously.
For example, if a mother states that a child is not hers,
estoppel could prevent her from later trying to claim child
support payments from the child's father.
ii) In Callado v. IRRI, 244 SCRA 210, the Court upheld anew the
constitutionality of Sec. 3, P.D. 1620, which provides that the International Rice
Research Institute (IRRI) shall enjoy immunity from any penal, civil and administrative
proceedings, except insofar as that immunity has been expressly waived by the Director
General of the Institute or his authorized representative. Citing International Catholic
Migration Commission v. Calleja (and Kapisanan ng Manggagawa at TAC sa IRRI v.
Secretary of Labor), 190 SCRA 120, the Court stated that the letter of the Acting
Secretary of Foreign Affairs to the Secretary of Labor and Employment constituted a
categorical recognition by the Executive Branch of the Government that IRRI enjoys
immunities accorded to international organizations, a determination held to be a
political question conclusive upon the Courts in order not to embarrass a political
department of the government.

3. Test to determine if suit is against the State: On the assumption that

decision is rendered against the public officer or agency impleaded, will the
enforcement thereof require an affirmative act from the State, such as the
appropriation of the needed amount to satisfy the judgment? If so, then it is a suit
against the State. See: Sanders v. Veridiano, 162 SCRA 88; Republic v. Feliciano,
148 SCRA 424.

a) In Tan v. Director of Forestry, 125 SCRA 302, the Supreme Court said that
State immunity from suit may be invoked as long as the suit really affects the property,
rights or interests of the State and not merely those of the officers nominally made
party defendants. In this case, the Court said that the promotion of public welfare and
the protection of the inhabitants near the public forest are property rights and interests
of the State. In Veterans Manpower and Protective Services, Inc. v. Court of Appeals, 214
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SCRA 286, the suit for damages filed against the PC Chief and the PC-SUSIA would
require an affirmative act of appropriation should damages be awarded, and is,
therefore, a suit against the State.

4. Suits against Government Agencies

a) Incorporated: If the charter provides that the agency can sue and be sued,
then suit will lie, including one for tort. The provision in the charter constitutes express
consent on the part of the State to be sued. See: PNB v. CIR, 81 SCRA 314; Rayo v. CFI of
Bulacan, 110 SCRA 460; SSS v. Court of Appeals, 120 SCRA 707.

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Constitutional Law 39

i) Municipal corporations are agencies of the State when they are

engaged in governmental functions and, therefore, should enjoy the sovereign immunity
from suit. However, they are subject to suit even in the performance of such functions
because their respective charters provide that they can sue and be sued [Municipality of
San Fernando, La Union v. Judge Firme, 195 SCRA 692]. One of the corporate powers of
local government units, as enumerated in Sec. 22, Local Government Code, is the power
to sue and be sued.

ii) In National Irrigation Administration v. Court of Appeals, 214 SCRA

35, the Supreme Court reiterated that NIAis a corporate body performing proprietary
functions, whose charter, P.D. 552, provides that it may sue and be sued.

iii) In Philippine National Railways v. Intermediate Appellate Court, 217

SCRA 401, it was held that although the charter of PNR is silent on whether it may sue or
be sued, it had already been ruled in Malong v. PNR, 185 SCRA 63, that the PNR “is not
performing any governmental function” and may, therefore, be sued.

b) Unincorporated: Inquire into principal functions of the agency:

i) If governmental: NO suit without consent [Sanders v. Veridiano, supra.; Bureau of

Printing v. Bureau of Printing Employees Association, 1 SCRA 340]. In the Veterans
Manpower case, the Court said that the PC Chief and PC-SUSIA are instrumentalities of
the national government exercising primarily governmental functions (regulating the
organization and operation of private detective, watchmen or security guard agencies),
and thus may not be sued without consent. In Farolan
v. Court of Tax Appeals, 217 SCRA 298, the Supreme Court said that the Bureau of
Customs, being an unincorporated agency without a separate juridical personality,
enjoys immunity from suit. It is invested with an inherent power of sovereignty, namely
the power of taxation; it performs governmental functions. In Mobil Philippines
Exploration v. Customs Arrastre Service, 18 SCRA 1120, it was held that the Customs
Arrastre Service is merely an adjunct of the Bureau of Customs. A suit against it is,
therefore, a suit against the Bureau of Customs, an unincorporated agency performing
primarily governmental functions. [NOTE: Even in the exercise of proprietary functions
incidental to its primarily governmental functions, an unincorporated agency still cannot
be sued without its consent.]

ia) But in Department of Agriculture v. NLRC, 227 SCRA 693, because

of the express consent contained in Act No. 3038 (where the Philippine Government
“consents and submits to be sued upon any money

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Constitutional Law 40

claim involving liability arising from contract, express or implied, which could serve as a
basis of civil action between private parties”), the Department of Agriculture could be
sued on the contract for security services entered into by it (subject to prior filing of the
claim with the Commission on Audit), despite it being an unincorporated agency
performing primarily governmental functions.

ii) If proprietary: suit will lie^ because when the State engages in
principally proprietary functions, then it descends to the level of a private individual,
and may, therefore, be vulnerable to suit. See: National Airports Corporation v.
Teodoro, 91 Phil. 207; Civil Aeronautics Administration v. Court of Appeals, 167 SCRA 28.

5. Suit against Public Officers. The doctrine of State immunity also applies to
complaints filed against officials of the State for acts performed by them in the
discharge of their duties within the scope of their authority. Thus, in the Veterans
Manpower case, the suit against the PC Chief and PC-SUSIA was dismissed for being a
suit against the state, since it was a suit against public officers in the discharge of official
functions which are governmental in character. Likewise, in Larkins v. NLRC, 241 SCRA
598, it was noted that the private respondents were dismissed from their employment
by Lt. Col. Frankhauser acting for and in behalf of the US government which, by right of
sovereign power, operated and maintained the dormitories at the Clark Air Base for
USAF members.

a) In Sanders v. Veridiano, 162 SCRA 88, the Supreme Court spoke of a

number of well-recognized exceptions when a public officer may be sued without the
prior consent of the State, viz: (1) to compel him to do an act required by law;
(2) to restrain him from enforcing an act claimed to be unconstitutional; (3) to compel
the payment of damages from an already appropriated assurance fund or to refund tax
over-payments from a fund already available for the purpose; (4) to secure a judgment
that the officer impleaded may satisfy by himself without the State having to do a
positive act to assist him; and (5) where the government itself has violated its own laws,
because the doctrine of state immunity “cannot be used to perpetrate an injustice”.

b) The unauthorized acts of government officials are not acts of state; thus,
the public officer may be sued and held personally liable in damages for such acts [Shauf
v. Court of Appeals, 191 SCRA 713], Where a public officer has committed an ultra vires
act, or where there is a showing of bad faith, malice or gross negligence, the officer can
be held personally accountable, even if such acts are claimed to have been performed in
connection with

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Constitutional Law 41

official duties [Wylie v. Rarang, 209 SCRA 357]. Thus, the PCGG or any of its members,
may be held civilly liable (for the sale of an aircraft to Fuller Aircraft, which was void) if
they did not act with good faith and within the scope of their authority in the
performance of official duties [Republic v. Sandiganbayan, G.R. No. 142476, March 20,
2001]. Likewise, in U.S. v. Reyes, 219 SCRA 192, petitioner Bradford, Activity Exchange
Manager at JUSMAG Headquarters, was held personally liable, inasmuch as the search
of respondent Montoya at the JUSMAG parking lot (which subjected respondent to
embarrassment) was held to be beyond the scope and even beyond the Manager’s
official functions. Similarly, in Republic v. Hon. Edilberto Sandoval, 220 SCRA 124, even as
the Supreme Court dismissed the suit against the Republic of the Philippines, the action
for damages against the military personnel and the policemen responsible for the 1989
Mendiola massacre was upheld, inasmuch as the initial findings of the Davide Commission
(tasked by President Aquino to investigate the incident) showed that there was, at least,
negligence on their part when they fired their guns.

c) Where the public official is sued in his personal capacity, the doctrine of
state immunity will not apply, even if the acts complained of were committed while the
public official was occupying a'public position. In Lansang v. Court of Appeals, G.R. No.
102667, February 23, 2000, the petitioner was sued for allegedly “personal motives” in
ordering the ejectment of the General Assembly of the Blind, Inc. (GABI) from the Rizal
Park; thus, the case was not deemed a suit against the State.

6. Need for consent. In order that suit may lie against the state, there must be
consent, either express or implied. Where no consent is shown, state immunity from suit
may be invoked as a defense by the courts sua sponte at any stage of the proceedings,
because waiver of immunity, being in derogation of sovereignty, will not be inferred
lightly and must be construed in strictissimi juris. Accordingly, the complaint (or
counterclaim) against the State must allege the existence of such consent (and where the
same is found), otherwise, the complaint may be dismissed [Republic v. Feliciano, 148
SCRA 424].

a) Express consent. Express consent can be given only by an act of the

legislative body [Republic v. Feliciano, supra.], in a general or a special law. i)

i) General Law. An example of a general law granting

consent is CA327, as amended by PD 1445, which requires that all money
claims against the government must first be filed with the Commission on
Audit before suit is instituted in court. See: Sayson v. Singzon, 54 SCRA 282.
The Department

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Constitutional Law 42

of Agriculture may be sued for money claims based on a contract entered into in its
governmental capacity, because of the express consent contained in Act No. 3038,
provided that the claim be first brought to the Commission on Audit in accordance with
CA 327, as amended [Department of Agriculture v. NLRC, 227 SCRA 693].

ia) But in Amigable v. Cuenca, 43 SCRA 360, an action for the recovery
of the value of the property taken by the government and converted into a public street
without payment of just compensation was allowed, despite the failure of the property
owner to file his claim with the Auditor General. Invoking Ministerio
v. City of Cebu, 40 SCRA 464, the Supreme Court said that suit may lie because the
doctrine of State immunity cannot be used to perpetrate an injustice. This ruling was
reiterated in De los Santos v. Intermediate Appellate Court, 223 SCRA 11, where it was
held that the “public respondents’ belief that the property is public, even if buttressed by
statements of other public officials, is no reason for the unjust taking of petitioner’s
property”; after all, the TCT was in the name of the petitioner. See also Republic v.
Sandiganbayan, 204 SCRA 212.

ib) In EPG Construction v. Secretary Vigilar, G.R. No. 131544, March 16,
2001, the ruling in Ministerio was invoked when the respondent DPWH Secretary denied
the money claims of petitioners even after the DPWH Auditor interposed no objection to
the payment and the DBM had ordered the release of the amount under a corresponding
Advise of Allotment it issued. Where in Ministerio, the Court said that the doctrine cannot
serve as an instrument for perpetrating an injustice on a citizen, in this case the Supreme
Court declared that it is just as important, if not more so, that there be fidelity to legal
norms on the part of officialdom if the rule of law were to be maintained.

ic) In Santiago v. Republic, 87 SCRA 294, an action for the revocation of

a donation because of the failure of the defendant to comply with stipulated conditions
was allowed, inasmuch as the action did not involve a money claim.

ri) Special Law. See: Merritt v. Government of the Philippines Islands, 34

Phil. 311. This form of consent must be embodied in a statute and cannot be given by a
mere counsel [Republic v. Purisima, 78 SCRA 470].

iia) By virtue of P.D. 1620, the grant of immunity to IRRI is clear and
unequivocal, and an express waiver by its Director General is the only way by which it may
relinquish or abandon this immunity [Callado v. IRRI, supra.].

b) Implied Consent

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Constitutional Law 43

i) When the State commences litigation, it becomes vulnerable to a

counterclaim [See: Froilan v. Pan Oriental Shipping, G.R. No. L-6060, Sept. 30, 1950].
Intervention by the State would constitute commencement of litigation, except when
the State intervenes not for the purpose of asking for any affirmative relief, but only for
the purpose of resisting the claim precisely because of immunity from suit [Lim v.
Brownell, 107 Phil. 345],

ii) When the State enters into a business contract. See: U.S. v. Ruiz, 136
SCRA 487, where the Supreme Court distinguished between contracts entered into by
the State in jure imperii (sovereign acts) and in jure gestionis (commercial or proprietary
acts). Where the contract is in pursuit of a sovereign activity, there is no waiver of
immunity, and no implied consent may be derived therefrom.

iia) In U. S. v. Ruiz, it was held that the contract for the repair of
wharves was a contract in jus imperii, because the wharves were to be used in national
defense, a governmental function. In JUSMAG Phil. v. NLRC, 239 SCRA 224, the
engagement of the services of private respondent was held to be performance of a
governmental function by JUSMAG, on behalf of the United States. Accordingly,
JUSMAG may not be sued under such a contract. In Republic of Indonesia v. Vinzon, G.R.
No. 154705, June 26, 2003, it was held that contracts entered into by a sovereign state in
connection with the establishment of a diplomatic mission, including contracts for the
upkeep or maintenance of air conditioning units, generator sets, electrical facilities,
water heaters and water motor pumps of the embassy and the Ambassador’s residence,
are contracts in jure imperii. The fact that the contract contains a provision that any
legal action arising out of the agreement shall be settled according to the laws of the
Philippines and by a specified court of the Philippines does not necessarily mean a
waiver of the state’s sovereign immunity from suit.

iib) Conversely, in U.S. v. Guinto, 182 SCRA 644, the contract bidded
out for barbershop facilities in the Clark Field US Air Force Base was deemed
commercial. Similarly, in a companion case, U.S. v. Rodrigo, a contract for restaurant
services within the Camp John Hay Air Station was likewise held commercial in
character.

iic) Note, however, that in Republic v. Sandiganbayan, 204 SCRA 212,

the Court held that even if, in exercising the power of eminent domain, the State
exercises a power jus imperii, as distinguished from its proprietary right of jus gestionis,
where property has been taken without just compensation being paid, the defense of
immunity from suit cannot be set up in an action for payment by the owner. See
Amigable v. Cuenca, 43 SCRA 360.

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44 ' Constitutional Law

iid) In Republic (PCGG) v. Sandiganbayan, G.R. No. 129406, March 6, 2006, 227
shares in Negros Occidental Golf and Country Club, Inc. (NOGCCI) owned and registered
in the name of private respondent Benedicto were sequestered and taken over by PCGG
fiscal agents. In a suit for payment of dues of the sequestered shares, PCGG raised,
among others, the defense of immunity from suit. The Supreme Court held that by
entering into a Compromise Agreement with Benedicto, the Republic stripped itself of its
immunity and placed itself in the same level as its adversary. When the State enters into
a contract through its officers or agents, in furtherance of a legitimate aim and purpose
and pursuant to constitutional legislative authority, whereby mutual or reciprocal
benefits accruse and rights and obligations arise therefrom, the State may be sued even
without its express consent, precisely because by entering into a contract, the sovereign
descends to the level of the citizen.

7. Scope of Consent. Consent to be sued does not include consent to the

execution of judgment against it.

a) Such execution will require another waiver, because the power of the
court ends when the judgment is rendered, since government funds and properties may
not be seized under writs of execution or garnishment, unless such disbursement is
covered by the corresponding appropriation as required by law [Republic v. Villasor, 54
SCRA 84; Department of Agriculture v. NLRC, 227 SCRA 693]. Thus, in Larkins v. NLRC, 241
SCRA 598, considering that the employer of private respondents was not Lt. Col.
Frankhauser or the petitioner but the U.S. Government which, by right of sovereign
power, operated and maintained the dormitories at the Clark Air Base for USAF
members, the awards (of monetary claims to the private respondents) will have to be
satisfied by the U.S. Government. Without its consent the properties of the U.S.
Government may not be subject to execution.

b) But funds belonging to government corporations (whose charters provide

that they can sue and be sued) that are deposited with a bank are not exempt from
garnishment [Philippine National Bank v. Pabalan, 83 SCRA 595; Rizal Commercial Bank
v. De Castro, 168 SCRA 49]. In National Housing Authority
v. Heirs of Quivelondo, G.R. No. 154411, June 19, 2003, it was held that if the funds
belong to a public corporation or a government- owned or controlled corporation which
is clothed with a personality of its own, then the funds are not exempt from
garnishment. This is so because when the government enters into commercial business,
it abandons its sovereign capacity and is to be treated like any other corporation. NHA is
one such corporation; thus, its funds are not exempt from garnishment or execution.

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i) However, in Municipality of San Miguel, Bulacan v. Fernandez,

130 SCRA 56, it was held that funds of a municipality (although it is an incorporated
agency whose charter provides that it can sue and be sued) are public in character and
may not be garnished unless there is a corresponding appropriation ordinance duly
passed by the Sangguniang Bayan. Thus, in City of Caloocan v. Allarde, G.R. No. 107271,
September 10, 2003, the rule was reiterated that all government funds deposited with
any official depositary bank of the Philippine Government by any of its agencies or
instrumentalities, whether by general or special deposit, remain government funds and
may not be subject to garnishment or levy in the absence of a corresponding
appropriation as required by law. In this case, the City of Caloocan had already
approved and passed Ordinance No. 0134, Series of 1992, allocating the amount of
P439.377.14 for respondent Santiago’s back salaries plus interest. Thus, this case fell
squarely within the exception, and the amount may therefore be garnished.

ia) Be that as it may, in Municipality of Makati v. Court of Appeals,

190 SCRA 206, it was held that where the municipality fails or refuses, without
justifiable reason, to effect payment of a final money judgment rendered against it, the
claimant may avail of the remedy of mandamus in order to compel the enactment and
approval of the necessary appropriation ordinance and the corresponding disbursement
of municipal funds to satisfy the money judgment.

c) In Pacific Products v. Ong, 181 SCRA 536, the Supreme Court said that by
the process of garnishment, the plaintiff virtually sues the garnishee for a debt due from
the defendant. The debtor-stranger becomes a forced intervenor; when served with the
writ of attachment, he becomes a party to the action. Money in the hands of
government agency (engaged in governmental functions), even if due to a third party, is
not liable to creditors of the third party through garnishment. To allow this would be to
allow a suit against the State without the latter’s consent.

8. Suability not equated with outright liability. Liability will have to be

determined by the Court on the basis of the evidence and the applicable law.

a) In Merritt v. Government of the Philippine Islands, supra., while consent to

be sued was granted through a special law, the government was held not liable for
damages, because under the attendant circumstances the government was not acting
through a special agent.

. b) In Fontanilla v. Maliaman, 194 SCRA 486, the Supreme Court said that the
National Irrigation Administration is a government agency with a

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juridical personality separate and distinct from the government; it is a corporate body performing
proprietary functions. Thus, the NIA may be held liable for damages caused by the negligent act of its
driver who was not a special agent. This was reiterated in National Irrigation Administration v. Court of
Appeals, 214 SCRA 35.

OUTLINE / REVIEWER IN POLITICAL LAW