Macariola v. Asuncion, A.M. No.

133-J

FACTS
On August 6, 1968 Bernardita R. Macariola charged respondent Judge Elias B. Asuncion of the Court of
First Instance of Leyte, now Associate Justice of the Court of Appeals, with “acts unbecoming a judge when the
latter purchased a property which was previously the subject of litigation on which he rendered decision.
Respondent and his wife were also members of Traders Manufacturing and Fishing Industries Inc. to which their
shares and interests in said property were conveyed.
According to the petitioner, respondent allegedly violated Article 1491, par. 5, of the New Civil Code in
acquiring by purchase a portion of Lot No. 1184-E which was one of those properties involved in in a case decided
by him and that he likewise violated Article 14, par. 1 and 5 of the Code of Commerce, Section 3, par. H, of R.A.
3019, Sec. 12, Rule XVIII of the Civil Service Rules, and Canon 25 of the Canons of Judicial Ethics, by
associating himself with the Traders Manufacturing and Fishing Industries, Inc., as a stockholder and a ranking
officer while he was a judge of the Court of First Instance of Leyte.

ISSUES
Whether or not respondent Judge violated Article 1491, paragraph 5, of the New Civil Code in acquiring
by purchase a portion of Lot No. 1184-E.
Whether or not respondent Judge violated paragraphs 1 and 5, Article 14 of the Code of Commerce when
he associated himself with the Traders Manufacturing and Fishing Industries, Inc.

HELD
NEGATIVE. [The Court] find that there is no merit in the contention of complainant that respondent
Judge Elias B. Asuncion violated Article 1491, paragraph 5, of the New Civil Code in acquiring by purchase a
portion of Lot No. 1184-E which was one of those properties involved in Civil Case No. 3010.
The prohibition in the aforesaid Article applies only to the sale or assignment of the property which is the
subject of litigation to the persons disqualified therein. In the case at bar, when the respondent Judge purchased
on March 6, 1965 a portion of Lot 1184-E, the decision in Civil Case No. 3010 which he rendered on June 8,
1963 was already final because none of the parties therein filed an appeal; hence, the lot in question was no longer
subject of the litigation.
Finally, while it is. true that respondent Judge did not violate paragraph 5, Article 1491 of the New Civil
Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his court, it was, however,
improper for him to have acquired the same. He should be reminded of Canon 3 of the Canons of Judicial Ethics
which requires that: “A judge’s official conduct should be free from the appearance of impropriety, and his
personal behavior, not only upon the bench and in the performance of judicial duties, but also in his everyday life,
should be beyond reproach.”
NEGATIVE. Respondent Judge cannot be held liable under [paragraphs 1 and 5, Article 14 of the Code
of Commerce] because there is no showing that respondent participated or intervened in his official capacity in
the business or transactions of the Traders Manufacturing and Fishing Industries, Inc. In the case at bar, the
business of the corporation in which respondent participated has obviously no relation or connection with his
judicial office. The business of said corporation is not that kind where respondent intervenes or takes part in his
capacity as Judge of the Court of First Instance.
It is [the Court’s] considered view that although [paragraphs 1 and 5, Article 14] is incorporated in the
Code of Commerce which is part of the commercial laws of the Philippines, it, however, partakes of the nature
of a political law as it regulates the relationship between the government and certain public officers and
employees, like justices and judges.
Article 14 of the Code of Commerce partakes more of the nature of an administrative law because it
regulates the conduct of certain public officers and employees with respect to engaging in business: hence,
political in essence. It is significant to note that the present Code of Commerce is the Spanish Code of Commerce
of 1885, with some modifications made by the “Commission de Codificacion de las Provincias de Ultramar,”
which was extended to the Philippines by the Royal Decree of August 6, 1888, and took effect as law in this
jurisdiction on December 1, 1888.
 Upon the transfer of sovereignty from Spain to the United States and later on from the United States to
the Republic of the Philippines, Article 14 of this Code of Commerce must be deemed to have been abrogated
because where there is change of sovereignty, the political laws of the former sovereign, whether compatible or
not with those of the new sovereign, are automatically abrogated, unless they are expressly re-enacted by
affirmative act of the new sovereign.
Likewise, in People vs. Perfecto (43 Phil. 887, 897 [1922]), this Court stated that: “It is a general principle
of the public law that on acquisition of territory the previous political relations of the ceded region are totally
abrogated. ”
There appears no enabling or affirmative act that continued the effectivity of the aforestated provision of
the Code of Commerce after the change of sovereignty from Spain to the United States and then to the Republic
of the Philippines. Consequently, Article 14 of the Code of Commerce has no legal and binding effect and cannot
apply to the respondent, then Judge of the Court of First Instance, now Associate Justice of the Court of Appeals.
 MAGALLONA v. ERMITA, G.R. 187167, August 16, 2011

Facts:

In 1961, Congress passed R.A. 3046 demarcating the maritime baselines of the Philippines as an Archepelagic
State pursuant to UNCLOS I of 9158, codifying the sovereignty of State parties over their territorial sea. Then in
1968, it was amended by R.A. 5446, correcting some errors in R.A. 3046 reserving the drawing of baselines
around Sabah.

In 2009, it was again amended by R.A. 9522, to be compliant with the UNCLOS III of 1984. The requirements
complied with are: to shorten one baseline, to optimize the location of some basepoints and classify KIG and
Scarborough Shoal as ‘regime of islands’.

Petitioner now assails the constitutionality of the law for three main reasons:

1. it reduces the Philippine maritime territory under Article 1;

2. it opens the country’s waters to innocent and sea lanes passages hence undermining our sovereignty and
security; and

3. treating KIG and Scarborough as ‘regime of islands’ would weaken our claim over those territories.

Issue: Whether R.A. 9522 is constitutional?

Ruling:

1. UNCLOS III has nothing to do with acquisition or loss of territory. it is just a codified norm that regulates
conduct of States. On the other hand, RA 9522 is a baseline law to mark out basepoints along coasts, serving as
geographic starting points to measure. it merely notices the international community of the scope of our maritime
space.

2. If passages is the issue, domestically, the legislature can enact legislation designating routes within the
archipelagic waters to regulate innocent and sea lanes passages. but in the absence of such, international law
norms operate.

the fact that for archipelagic states, their waters are subject to both passages does not place them in lesser footing
vis a vis continental coastal states. Moreover, RIOP is a customary international law, no modern state can invoke
its sovereignty to forbid such passage.

3. On the KIG issue, RA 9522 merely followed the basepoints mapped by RA 3046 and in fact, it increased the
Phils.’ total maritime space. Moreover, the itself commits the Phils.’ continues claim of sovereignty and
jurisdiction over KIG.

If not, it would be a breach to 2 provisions of the UNCLOS III:

Art. 47 (3): ‘drawing of basepoints shall not depart to any appreciable extent from the general configuration of
the archipelago’.

Art 47 (2): the length of baselines shall not exceed 100 mm.

KIG and SS are far from our baselines, if we draw to include them, we’ll breach the rules: that it should follow
the natural configuration of the archipelago.
 JUSMAG PHILIPPINES vs. NLRC et. al.
G.R. No. 108813, December 15, 1994

FACTS:
Florencio Sacramento, respondent was one of the 74 security assistance support personnel (SASP) working at
JUSMAG-Philippines. He had been with JUSMAG from December 18, 1969, until his dismissal on April 27,
1992. When dismissed, he held the position of Illustrator 2 and was the incumbent President of JUSMAG
Philippines-Filipino Civilian Employees Association (JPFCEA), a labor organization duly registered with the
Department of Labor and Employment. His services were terminated allegedly due to the abolition of his position.
He was also advised that he was under administrative leave until April 27, 1992, although the same was not
charged against his leave.

Sacramento filed a complaint with the Department of Labor and Employment on the ground that he was illegally
suspended and dismissed from service by JUSMAG. He asked for his reinstatement.

JUSMAG then filed a Motion to Dismiss invoking its immunity from suit as an agency of the United States. It
further alleged lack of employer-employee relationship and that it has no juridical personality to sue and be sued.

ISSUE:

Whether JUSMAG Philippines, created pursuant to an agreement between the United States and Philippines, with
primary task of advising and assisting the Philippines on air force and naval matters, can be sued for violation of
Philippine labor laws?

HELD:

No It is apparent that when JUSMAG took the services of private respondent, it was performing a governmental
function on behalf of the United States pursuant to the Military Assistance Agreement dated March 21, 1947.
Hence, we agree with petitioner that the suit is, in effect, one against the United States Government, albeit it was
not impleaded in the complaint. Considering that the United States has not waived or consented to the suit, the
complaint against JUSMAG cannot not prosper.

In this jurisdiction, we recognize and adopt the generally accepted principles of international law as part of the
law of the land. Immunity of State from suit is one of these universally recognized principles. In international
law, "immunity" is commonly understood as an exemption of the state and its organs from the judicial jurisdiction
of another state. This is anchored on the principle of the sovereign equality of states under which one state cannot
assert jurisdiction over another in violation of the maxim par in parem non habet imperium (an equal has no power
over an equal).

Under the traditional rule of State immunity, a state cannot be sued in the courts of another State, without its
consent or waiver. However, in Santos, et al., vs. Santos, et al., we recognized an exception to the doctrine of
immunity from suit by a state, thus:

Nevertheless, if, where and when the state or its government 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 accrue and rights and obligations arise therefrom, and if the law granting the authority to
enter into such contract does not provide for or name the officer against whom action may be brought in the event
of a breach thereof, the state itself may be sued, even without its consent, because by entering into a contract, the
sovereign state has descended to the level of the citizen and its consent to be sued is implied from the very act of
entering into such contract.
China National Machinery v. Santamaria

Facts: On 14 September 2002, petitioner China National Machinery & Equipment Corp. (Group) (CNMEG),
represented by its chairperson, Ren Hongbin, entered into a Memorandum of Understanding with the North Luzon
Railways Corporation (Northrail), represented by its president, Jose L. Cortes, Jr. for the conduct of a feasibility
study on a possible railway line from Manila to San Fernando, La Union (the Northrail Project).

On 30 August 2003, the Export Import Bank of China (EXIM Bank) and the Department of Finance of the
Philippines (DOF) entered into a Memorandum of Understanding (Aug 30 MOU), wherein China agreed to extend
Preferential Buyer’s Credit to the Philippine government to finance the Northrail Project.3 The Chinese
government designated EXIM Bank as the lender, while the Philippine government named the DOF as the
borrower. Under the Aug 30 MOU, EXIM Bank agreed to extend an amount not exceeding USD 400,000,000 in
favor of the DOF, payable in 20 years, with a 5-year grace period, and at the rate of 3% per annum.

On 1 October 2003, the Chinese Ambassador to the Philippines, Wang Chungui (Amb. Wang), wrote a letter to
DOF Secretary Jose Isidro Camacho (Sec. Camacho) informing him of CNMEG’s designation as the Prime
Contractor for the Northrail Project.
On 30 December 2003, Northrail and CNMEG executed a Contract Agreement for the construction of Section I,
Phase I of the North Luzon Railway System from Caloocan to Malolos on a turnkey basis (the Contract
Agreement).7 The contract price for the Northrail Project was pegged at USD 421,050,000.
On 26 February 2004, the Philippine government and EXIM Bank entered into a counterpart financial agreement
– Buyer Credit Loan Agreement No. BLA 04055 (the Loan Agreement). In the Loan Agreement, EXIM Bank
agreed to extend Preferential Buyer’s Credit in the amount of USD 400,000,000 in favor of the Philippine
government in order to finance the construction of Phase I of the Northrail Project.

On 13 February 2006, respondents filed a Complaint for Annulment of Contract and Injunction with Urgent
Motion for Summary Hearing to Determine the Existence of Facts and Circumstances Justifying the Issuance of
Writs of Preliminary Prohibitory and Mandatory Injunction and/or TRO against CNMEG, the Office of the
Executive Secretary, the DOF, the Department of Budget and Management, the National Economic Development
Authority and Northrail. The case was filed before the Regional Trial Court, National Capital Judicial Region,
Makati City, Branch 145 (RTC Br. 145). In the Complaint, respondents alleged that the Contract Agreement and
the Loan Agreement were void for being contrary to (a) the Constitution; (b) Republic Act No. 9184 (R.A. No.
9184), otherwise known as the Government Procurement Reform Act; (c) Presidential Decree No. 1445,
otherwise known as the Government Auditing Code; and (d) Executive Order No. 292, otherwise known as the
Administrative Code.
On 15 May 2007, RTC Br. 145 issued an Omnibus Order denying CNMEG’s Motion to Dismiss and setting the
case for summary hearing to determine whether the injunctive reliefs prayed for should be issued. CNMEG then
filed a Motion for Reconsideration, which was denied by the trial court in an Order dated 10 March 2008. Thus,
CNMEG filed before the CA a Petition for Certiorari with Prayer for the Issuance of TRO and/or Writ of
Preliminary Injunction dated 4 April 2008.

the appellate court dismissed the Petition for Certiorari. Subsequently, CNMEG filed a Motion for
Reconsideration, which was denied by the CA in a Resolution dated 5 December 2008.
Petitioners Argument: Petitioner claims that the EXIM Bank extended financial assistance to Northrail because
the bank was mandated by the Chinese government, and not because of any motivation to do business in the
Philippines, it is clear from the foregoing provisions that the Northrail Project was a purely commercial
transaction.

Respondents Argument: respondents alleged that the Contract Agreement and the Loan Agreement were void for
being contrary to (a) the Constitution; (b) Republic Act No. 9184 (R.A. No. 9184), otherwise known as the
Government Procurement Reform Act; (c) Presidential Decree No. 1445, otherwise known as the Government
Auditing Code; and (d) Executive Order No. 292, otherwise known as the Administrative Code.
Issues: Whether or not petitioner CNMEG is an agent of the sovereign People’s Republic of China.
Whether or not the Northrail contracts are products of an executive agreement between two sovereign states.

Ruling: The instant Petition is DENIED. Petitioner China National Machinery & Equipment Corp. (Group)
is not entitled to immunity from suit, and the Contract Agreement is not an executive agreement. CNMEG’s
prayer for the issuance of a TRO and/or Writ of Preliminary Injunction is DENIED for being moot and academic.

The Court explained the doctrine of sovereign immunity in Holy See v. Rosario, to wit:
There are two conflicting concepts of sovereign immunity, each widely held and firmly established. According
to the classical or absolute theory, a sovereign cannot, without its consent, be made a respondent in the courts of
another sovereign. According to the newer or restrictive theory, the immunity of the sovereign is recognized only
with regard to public acts or acts jure imperii of a state, but not with regard to private acts or acts jure gestionis.
(Emphasis supplied; citations omitted.)
As it stands now, the application of the doctrine of immunity from suit has been restricted to sovereign or
governmental activities (jure imperii). The mantle of state immunity cannot be extended to commercial, private
and proprietary acts (jure gestionis).

Since the Philippines adheres to the restrictive theory, it is crucial to ascertain the legal nature of the act involved
– whether the entity claiming immunity performs governmental, as opposed to proprietary, functions. As held in
United States of America v. Ruiz

Admittedly, the Loan Agreement was entered into between EXIM Bank and the Philippine government, while
the Contract Agreement was between Northrail and CNMEG. Although the Contract Agreement is silent on the
classification of the legal nature of the transaction, the foregoing provisions of the Loan Agreement, which is an
inextricable part of the entire undertaking, nonetheless reveal the intention of the parties to the Northrail Project
to classify the whole venture as commercial or proprietary in character.

Thus, piecing together the content and tenor of the Contract Agreement, the Memorandum of Understanding
dated 14 September 2002, Amb. Wang’s letter dated 1 October 2003, and the Loan Agreement would reveal the
desire of CNMEG to construct the Luzon Railways in pursuit of a purely commercial activity performed in the
ordinary course of its business.
 G.R. No. L-46930 June 10, 1988
DALE SANDERS, AND A.S. MOREAU, JR vs. HON. REGINO T. VERIDIANO II
FACTS: Petitioner Sanders was the special services director of the U.S. Naval Station. Petitioner Moreau was
the commanding officer of the Subic Naval Base. Private respondent Rossi is an American citizen with permanent
residence in the Philippines. Private respondent Rossi and Wyer were both employed as game room attendants in
the special services department of the NAVSTA.
On October 3, 1975, the private respondents were advised that their employment had been converted from
permanent full-time to permanent part-time. They instituted grievance proceedings to the rules and regulations of
the U.S. Department of Defense. The hearing officer recommended for reinstatement of their permanent full-time
status.
However, in a letter addressed to petitioner Moreau, Sanders disagreed with the hearing officer's report. The letter
contained the statements that: a ) "Mr. Rossi tends to alienate most co-workers and supervisors;" b) "Messrs.
Rossi and Wyers have proven, according to their immediate supervisors, to be difficult employees to supervise;"
and c) "even though the grievants were under oath not to discuss the case with anyone, (they) placed the records
in public places where others not involved in the case could hear."
Before the start of the grievance hearings, a-letter from petitioner Moreau was sent to the Chief of Naval Personnel
explaining the change of the private respondent's employment status. So, private respondent filed for damages
alleging that the letters contained libelous imputations and that the prejudgment of the grievance proceedings was
an invasion of their personal and proprietary rights.
However, petitioners argued that the acts complained of were performed by them in the discharge of their official
duties and that, consequently, the court had no jurisdiction over them under the doctrine of state immunity.
However, the motion was denied on the main ground that the petitioners had not presented any evidence that their
acts were official in nature.
ISSUE: Whether or not the petitioners were performing their official duties?
RULING: Yes. Sanders, as director of the special services department of NAVSTA, undoubtedly had supervision
over its personnel, including the private respondents. Given the official character of the letters, the petitioners
were being sued as officers of the United States government because they have acted on behalf of that government
and within the scope of their authority. Thus, it is that government and not the petitioners personally that is
responsible for their acts.
It is stressed at the outset that the mere allegation that a government functionary is being sued in his personal
capacity will not automatically remove him from the protection of the law of public officers and, if appropriate,
the doctrine of state immunity. By the same token, the mere invocation of official character will not suffice to
insulate him from suability and liability for an act imputed to him as a personal tort committed without or in
excess of his authority. These well-settled principles are applicable not only to the officers of the local state but
also where the person sued in its courts pertains to the government of a foreign state, as in the present case.
Assuming that the trial can proceed and it is proved that the claimants have a right to the payment of damages,
such award will have to be satisfied not by the petitioners in their personal capacities but by the United States
government as their principal. This will require that government to perform an affirmative act to satisfy the
judgment, viz, the appropriation of the necessary amount to cover the damages awarded, thus making the action
a suit against that government without its consent.
The practical justification for the doctrine, as Holmes put it, is that "there can be no legal right against the authority
which makes the law on which the right depends. In the case of foreign states, the rule is derived from the principle
of the sovereign equality of states which wisely admonishes that par in parem non habet imperium and that a
contrary attitude would "unduly vex the peace of nations." 17 Our adherence to this precept is formally expressed
in Article II, Section 2, of our Constitution, where we reiterate from our previous charters that the Philippines
"adopts the generally accepted principles of international law as part of the law of the land. WHEREFORE, the
petition is GRANTED.
 Merritt vs Government of the Philippine Islands

FACTS: Merrit was riding a motorcycle along Padre Faura Street when he was bumped by the ambulance of the
General Hospital. Merrit sustained severe injuries rendering him unable to return to work. The legislature later
enacted Act 2457 authorizing Merritt to file a suit against the Government in order to fix the responsibility for
the collision between his motorcycle and the ambulance of the General Hospital, and to determine the amount of
the damages, if any, to which he is entitled. After trial, the lower court held that the collision was due to the
negligence of the driver of the ambulance. It then determined the amount of damages and ordered the government
to pay the same.

ISSUES:

1. Did the Government, in enacting the Act 2457, simply waive its immunity from suit or did it also concede its
liability to the plaintiff?

2. Is the Government liable for the negligent act of the driver of the ambulance?

HELD:

1. By consenting to be sued a state simply waives its immunity from suit. It does not thereby concede its liability
to plaintiff, or create any cause of action in his favor, or extend its liability to any cause not previously recognized.
It merely gives a remedy to enforce a preexisting liability and submits itself to the jurisdiction of the court, subject
to its right to interpose any lawful defense.

2. Under the Civil Code, the state is liable when it acts through a special agent, but not when the damage should
have been caused by the official to whom properly it pertained to do the act performed. A special agent is one
who receives a definite and fixed order or commission, foreign to the exercise of the duties of his office if he is a
special official. This concept does not apply to any executive agent who is an employee of the acting
administration and who on his own responsibility performs the functions which are inherent in and naturally
pertain to his office and which are regulated by law and the regulations. The driver of the ambulance of the
General Hospital was not a special agent; thus the Government is not liable. (Merritt vs Government of the
Philippine Islands, G.R. No. L-11154, March 21 1916, 34 Phil. 311)
 Republic v. Purisima, G.R. No. L-36084, 31 August 1977

FACTS: The jurisdictional issues raised by Solicitor General Estelito P. Mendoza on behalf of the Republic of
the Philippines in this certiorari and prohibition proceeding arose from the failure of respondent Judge Amante P.
Purisima of the Court of First Instance of Manila to apply the well-known and of-reiterated doctrine of the non-
suability of a State, including its offices and agencies, from suit without its consent. It was so alleged in a motion
to dismiss filed by defendant Rice and Corn Administration in a pending civil suit in the sala of respondent Judge
for the collection of a money claim arising from an alleged breach of contract, the plaintiff being private
respondent Yellow Ball Freight Lines, Inc.

ISSUE: Can an agreement between the Rice and Corn Administration and Yellow Ball Freight Lines, Inc. operate
as a waiver of the national government from suit?

HELD: NO.

The consent to be sued, to be effective must come from the State thru a statute, not through any agreement made
by counsel for the Rice and Corn Administration.Apparently respondent Judge was misled by the terms of the
contract between the private respondent, plaintiff in his sala, and defendant Rice and Corn Administration which,
according to him, anticipated the case of a breach of contract within the parties and the suits that may thereafter
arise. The consent, to be effective though, must come from the State acting through a duly enacted statute as
pointed out by Justice Bengzon in Mobil. Thus, whatever counsel for defendant Rice and Corn Administration
agreed to had no binding force on the government. That was clearly beyond the scope of his authority.
 VICTORIA AMIGABLE vs. NICOLAS CUENCA G.R. No. L-26400 February 29, 1972

FACTS: Victoria Amigable is the is the registered owner of a lot which, without prior expropriation proceedings
or negotiated sale, was used by the government. Amigable's counsel wrote the President of the Philippines
requesting payment of the portion of her lot which had been expropriated by the government.

Amigable later filed a case against Cuenca, the Commissioner of Public Highways, for recovery of ownership
and possession of the said lot. She also sought payment for comlensatory damages, moral damages and attorney's
fees.

The defendant said that the case was premature, barred by prescription, and the government did not give its
consent to be sued.

ISSUE: W/N the appellant may properly sue the government.

HELD: Where the government takes away property from a private landowner for public use without going through
the legal process of expropriation or negotiated sale, the aggrieved party may properly maintain a suit against the
government without violating the doctrine of governmental immunity from suit.

The doctrine of immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen. The
only relief available is for the government to make due compensation which it could and should have done years
ago. To determine just compensation of the land, the basis should be the price or value at the time of the taking.
 Froilan vs Pan Oriental Shipping
waiver of sovereign immunity

Facts:

Plaintiff, Fernando Froilan filed a complaint against the defendant-appellant, Pan Oriental Shipping Co., alleging
that he purchased from the Shipping Commission the vessel for P200,000, paying P50,000 down and agreeing to
pay the balance in instalments. To secure the payment of the balance of the purchase price, he executed a chattel
mortgage of said vessel in favor of the Shipping Commission. For various reasons, among them the non-payment
of the installments, the Shipping Commission tool possession of said vessel and considered the contract of sale
cancelled. The Shipping Commission chartered and delivered said vessel to the defendant-appellant Pan Oriental
Shipping Co. subject to the approval of the President of the Philippines. Plaintiff appealed the action of the
Shipping Commission to the President of the Philippines and, in its meeting the Cabinet restored him to all his
rights under his original contract with the Shipping Commission. Plaintiff had repeatedly demanded from the Pan
Oriental Shipping Co. the possession of the vessel in question but the latter refused to do so.

Plaintiff, prayed that, upon the approval of the bond accompanying his complaint, a writ of replevin be issued for
the seizure of said vessel with all its equipment and appurtenances, and that after hearing, he be adjudged to have
the rightful possession thereof . The lower court issued the writ of replevin prayed for by Froilan and by virtue
thereof the Pan Oriental Shipping Co. was divested of its possession of said vessel.

Pan Oriental protested to this restoration of Plaintiff ‘s rights under the contract of sale, for the reason that when
the vessel was delivered to it, the Shipping Administration had authority to dispose of said authority to the
property, Plaintiff having already relinquished whatever rights he may have thereon. Plaintiff paid the required
cash of P10,000.00 and as Pan Oriental refused to surrender possession of the vessel, he filed an action to recover
possession thereof and have him declared the rightful owner of said property. The Republic of the Philippines
was allowed to intervene in said civil case praying for the possession of the in order that the chattel mortgage
constituted thereon may be foreclosed.

Issues:

Whether or not the Court has jurisdiction over the intervenor with regard to the counterclaim.

Discussions:

When the government enters into a contract, for the State is then deem to have divested itself of the mantle of
sovereign immunity and descended to the level of the ordinary individual. Having done so, it becomes subject to
judicial action and processes.

Rulings:

Yes. The Supreme Court held that the government impliedly allowed itself to be sued when it filed a complaint
in intervention for the purpose of asserting claim for affirmative relief against the plaintiff to the recovery of the
vessel. The immunity of the state from suits does not deprive it of the right to sue private parties in its own courts.
The state as plaintiff may avail itself of the different forms of actions open to private litigants. In short, by taking
the initiative in an action against a private party, the state surrenders its privileged position and comes down to
the level of the defendant. The latter automatically acquires, within certain limits, the right to set up whatever
claims and other defenses he might have against the state.
 Republic vs Villasor
government funds are not subject to garnishment

Facts:

The case was filed by the Republic of the Philippines requesting to nullify the ruling of The Court of First Instance
in Cebu in garnishing the public funds allocated for the Arm Forces of the Philippines.

A decision was rendered in Special Proceedings in favor of respondents P. J. Kiener Co., Ltd., Gavino Unchuan,
and International Construction Corporation, and against the petitioner herein, confirming the arbitration award in
the amount of P1,712,396.40, subject of Special Proceedings. The respondent Honorable Guillermo P. Villasor,
issued an Order declaring the said decision final and executory, directing the Sheriffs of Rizal Province, Quezon
City and Manila to execute the said decision. The corresponding Alia Writ of Execution was issued. On the
strength of the aforementioned Alias Writ of Execution, the Provincial Sheriff of Rizal served Notices of
Garnishment with several Banks. The funds of the Armed Forces of the Philippines on deposit with Philippine
Veterans Bank and PNB are public funds duly appropriated and allocated for the payment of pensions of retirees,
pay and allowances of military and civilian personnel and for maintenance and operations of the AFP.

Petitioner, filed prohibition proceedings against respondent Judge Villasor for acting in excess of jurisdiction with
grave abuse of discretion amounting to lack of jurisdiction in granting the issuance of a Writ of Execution against
the properties of the AFP, hence the notices and garnishment are null and void.

Issues:

Whether or not the state can be sued without its consent.

Whether or not the notice of garnishment issued by Judge Villasor is valid.

Discussions:

The provision of Sec 3 Article XVI declares that “the State may not be sued without its consent”. This provision
is merely a recognition of the sovereign character of the State and express an affirmation of the unwritten rule
insulating it from the jurisdiction of the courts of justice. Another justification is the practical consideration that
the demands and inconveniences of litigation will divert time and resources of the State from the more pressing
matters demanding its attention, to the prejudice of the public welfare.
As a general rule, whether the money is deposited by way of general or special deposit, they remain government
funds and are not subject to garnishment. An exception of the rule is a law or ordinance that has been enacted
appropriating a specific amount to pay a valid government obligation.
 GAUDENCIO RAYO VS COURT OF FIRST INSTANCE BULACAN
G.R. NO. L-55273-83
DECEMBER 19, 1981

FACTS: On October 26, 1978, typhoon “Kading” struck Bulacan. Due to this, the National Power Corporation
(NPC), through its plant superintendent Benjamin Chavez, simultaneously opened 3 floodgates of Angat Dam.

The opening of the floodgates caused several towns to be inundated (the town of Norzagaray was the most affected
one). It resulted to a hundred deaths and damage to properties that were worth over a million pesos.

Petitioners (victims) filed a complaint for damages against NPC, including plant superintendent Benjamin
Chavez.

Respondent filed counterclaims and put up a special and affirmative defense that “in the operation of the Angat
Dam,” it is “performing a purely governmental function”, hence it “cannot be sued without the express consent
of the State.”

Petitioners oppose the defense, contending that the NPC is not performing governmental but merely proprietary
functions and that under its own organic act, Section 3 (d) of Republic Act No. 6395, it can sue and be sued in
any court.

CFI dropped the NPC from the complaint and left Chavez as the sole party-defendant.

CFI RULING: Upon a motion for reconsideration, the CFI ruled that petitioners’ reliance on Sec. 3 of RA 6395
is not tenable since the same refer to such matters that are only within the scope of the other corporate powers of
said defendant and not matters of tort as in the instant cases.

Being an agency performing a purely governmental function in the operation of the Angat Dam, said defendant
was not given any right to commit wrongs upon individuals. To sue said defendant for tort may require the express
consent of the State. PETITION DISMISSED.

ISSUES:

Whether respondent National Power Corporation performs a governmental function with respect to the
management and operation of the Angat Dam; and
Whether the power of respondent National Power Corporation to sue and be sued under its organic charter
includes the power to be sued for tort.
HELD: SC reversed the CFI decision and GRANTED petitioners to reinstate their complaint against the NPC.

It is sufficient to say that the government has organized a private corporation, put money in it and has allowed it
to sue and be sued in any court under its charter. (R.A. No. 6395). As a government owned and controlled
corporation, it has a personality of its own, distinct and separate from that of the Government. Moreover, the
charter provision that the NPC can “sue and be sued in any court” is without qualification on the cause of action
and accordingly it can include a tort claim such as the one instituted by the petitioners.
 Farolan vs CTA

Facts:

S/S Pacific Hawk vessel with Registry No. 170 arrived on January 30, 1972 at the Port of Manila carrying among
others, 80 bales of screen net consigned to Baging BuhayTrading (Baging Buhay). The import was classified
under Tariff Heading no. 39.06-B of theTariff and Customs Code at 35% ad valorem. Bagong Buhay paid the
duties and taxesdue in the amount of P11,350.00. The Office of the Collector of Customs ordered a re-examination
of the shipment upon hearing the information that the shipment consisted of mosquito net made of nylon under
Tariff Heading No. 62.02 of the Tariff and Customs Code. Upon re-examination, it turns out that the shipment
was undervalued in quantity and value as previously declared. Thus the Collector of Customs forfeited the
shipment in favor of the government. Private respondent filed a petition on August 20, 1976 for the release of the
questioned goods which the Court denied. On June 2,1986, 64 bales out of the 80 bales were released to Bagong
Buhay after several motion. The sixteen remaining bales were missing. The respondent claims that of the 143,454
yards released, only 116,950 yards were in good condition and the rest were in bad condition. Thus, respondents
demands that the Bureau of Customs be ordered to pay for damages for the 43,050 yards itactually lost.

Issue:

Whether or not the Collector of Customs may be held liable for the 43,050 yards actually lost by the private
respondent.

Held:

Bureau of Customs cannot be held liable for actual damages that the private respondent sustained with regard to
its goods. Otherwise, to permit private respondent’s claim to prosper would violate the doctrine of
sovereignimmunity. Since it demands that the Commissioner of Customs be ordered to pay for actual damages it
sustained, for which ultimately liability will fall on the government, it is obvious that this case has been converted
technically into a suit against the state.

On this point, the political doctrine that “state may not be sued without its consent,” categorically applies. As an
unincorporated government agency without any separate judicial personality of its own, the Bureau of Customs
enjoys immunity from suit. Alongwith the Bureau of Internal Revenue, it is invested with an inherent power of
sovereignty, namely taxation. As an agency, the Bureau of Customs performs the governmental function of
collecting revenues which is defined not a proprietary function. Thus private respondents claim for damages
against the Commissioner of Customs must fails.