EN BANC

[ G.R. No. 176579, June 28, 2011 ]

WILSON P. GAMBOA, PETITIONER, VS. FINANCE SECRETARY
MARGARITO B. TEVES, FINANCE UNDERSECRETARY JOHN P.
SEVILLA, AND COMMISSIONER RICARDO ABCEDE OF THE
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT
(PCGG) IN THEIR CAPACITIES AS CHAIR AND MEMBERS,
RESPECTIVELY, OF THE PRIVATIZATION COUNCIL,
CHAIRMAN ANTHONI SALIM OF FIRST PACIFIC CO., LTD. IN
HIS CAPACITY AS DIRECTOR OF METRO PACIFIC ASSET
HOLDINGS INC., CHAIRMAN MANUEL V. PANGILINAN OF
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY (PLDT)
IN HIS CAPACITY AS MANAGING DIRECTOR OF FIRST
PACIFIC CO., LTD., PRESIDENT NAPOLEON L. NAZARENO OF
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, CHAIR
FE BARIN OF THE SECURITIES EXCHANGE COMMISSION, AND
PRESIDENT FRANCIS LIM OF THE PHILIPPINE STOCK
EXCHANGE, RESPONDENTS. 

PABLITO V. SANIDAD AND ARNO V. SANIDAD, PETITIONERS-

IN-INTERVENTION. 

DECISION

CARPIO, J.: 

The Case

This is an original petition for prohibition, injunction, declaratory relief and

declaration of nullity of the sale of shares of stock of Philippine Telecommunications
Investment Corporation (PTIC) by the government of the Republic of the Philippines
to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First Pacific Company
Limited (First Pacific).

The Antecedents

The facts, according to petitioner Wilson P. Gamboa, a stockholder of Philippine

Long Distance Telephone Company (PLDT), are as follows:[1]
On 28 November 1928, the Philippine Legislature enacted Act No. 3436 which
granted PLDT a franchise and the right to engage in telecommunications business.
In 1969, General Telephone and Electronics Corporation (GTE), an American
company and a major PLDT stockholder, sold 26 percent of the outstanding
common shares of PLDT to PTIC. In 1977, Prime Holdings, Inc. (PHI) was
incorporated by several persons, including Roland Gapud and Jose Campos, Jr.
Subsequently, PHI became the owner of 111,415 shares of stock of PTIC by virtue
of three Deeds of Assignment executed by PTIC stockholders Ramon Cojuangco and
Luis Tirso Rivilla. In 1986, the 111,415 shares of stock of PTIC held by PHI were
sequestered by the Presidential Commission on Good Government (PCGG). The
111,415 PTIC shares, which represent about 46.125 percent of the outstanding
capital stock of PTIC, were later declared by this Court to be owned by the Republic
of the Philippines.[2]

In 1999, First Pacific, a Bermuda-registered, Hong Kong-based investment firm,

acquired the remaining 54 percent of the outstanding capital stock of PTIC. On 20
November 2006, the Inter-Agency Privatization Council (IPC) of the Philippine
Government announced that it would sell the 111,415 PTIC shares, or 46.125
percent of the outstanding capital stock of PTIC, through a public bidding to be
conducted on 4 December 2006. Subsequently, the public bidding was reset to 8
December 2006, and only two bidders, Parallax Venture Fund XXVII (Parallax) and
Pan-Asia Presidio Capital, submitted their bids. Parallax won with a bid of P25.6
billion or US$510 million.

Thereafter, First Pacific announced that it would exercise its right of first refusal as
a PTIC stockholder and buy the 111,415 PTIC shares by matching the bid price of
Parallax. However, First Pacific failed to do so by the 1 February 2007 deadline set
by IPC and instead, yielded its right to PTIC itself which was then given by IPC until
2 March 2007 to buy the PTIC shares. On 14 February 2007, First Pacific, through
its subsidiary, MPAH, entered into a Conditional Sale and Purchase Agreement of
the 111,415 PTIC shares, or 46.125 percent of the outstanding capital stock of
PTIC, with the Philippine Government for the price of P25,217,556,000 or
US$510,580,189. The sale was completed on 28 February 2007.

Since PTIC is a stockholder of PLDT, the sale by the Philippine Government of

46.125 percent of PTIC shares is actually an indirect sale of 12 million shares or
about 6.3 percent of the outstanding common shares of PLDT. With the sale, First
Pacific's common shareholdings in PLDT increased from 30.7 percent to 37
percent, thereby increasing the common shareholdings of foreigners in
PLDT to about 81.47 percent. This violates Section 11, Article XII of the 1987
Philippine Constitution which limits foreign ownership of the capital of a public utility
to not more than 40 percent.[3]

On the other hand, public respondents Finance Secretary Margarito B. Teves,

Undersecretary John P. Sevilla, and PCGG Commissioner Ricardo Abcede allege the
following relevant facts:

On 9 November 1967, PTIC was incorporated and had since engaged in the
business of investment holdings. PTIC held 26,034,263 PLDT common shares, or
13.847 percent of the total PLDT outstanding common shares. PHI, on the other
hand, was incorporated in 1977, and became the owner of 111,415 PTIC shares or
46.125 percent of the outstanding capital stock of PTIC by virtue of three Deeds of
Assignment executed by Ramon Cojuangco and Luis Tirso Rivilla. In 1986, the
111,415 PTIC shares held by PHI were sequestered by the PCGG, and subsequently
declared by this Court as part of the ill-gotten wealth of former President Ferdinand
Marcos. The sequestered PTIC shares were reconveyed to the Republic of the
Philippines in accordance with this Court's decision[4] which became final and
executory on 8 August 2006.

The Philippine Government decided to sell the 111,415 PTIC shares, which
represent 6.4 percent of the outstanding common shares of stock of PLDT, and
designated the Inter-Agency Privatization Council (IPC), composed of the
Department of Finance and the PCGG, as the disposing entity. An invitation to bid
was published in seven different newspapers from 13 to 24 November 2006. On 20
November 2006, a pre-bid conference was held, and the original deadline for
bidding scheduled on 4 December 2006 was reset to 8 December 2006. The
extension was published in nine different newspapers.

During the 8 December 2006 bidding, Parallax Capital Management LP emerged as

the highest bidder with a bid of P25,217,556,000. The government notified First
Pacific, the majority owner of PTIC shares, of the bidding results and gave First
Pacific until 1 February 2007 to exercise its right of first refusal in accordance with
PTIC's Articles of Incorporation. First Pacific announced its intention to match
Parallax's bid.

On 31 January 2007, the House of Representatives (HR) Committee on Good

Government conducted a public hearing on the particulars of the then impending
sale of the 111,415 PTIC shares. Respondents Teves and Sevilla were among those
who attended the public hearing. The HR Committee Report No. 2270 concluded
that: (a) the auction of the government's 111,415 PTIC shares bore due diligence,
transparency and conformity with existing legal procedures; and (b) First Pacific's
intended acquisition of the government's 111,415 PTIC shares resulting in
First Pacific's 100% ownership of PTIC will not violate the 40 percent
constitutional limit on foreign ownership of a public utility since PTIC holds
only 13.847 percent of the total outstanding common shares of PLDT.[5] On
28 February 2007, First Pacific completed the acquisition of the 111,415 shares of
stock of PTIC.

Respondent Manuel V. Pangilinan admits the following facts: (a) the IPC conducted
a public bidding for the sale of 111,415 PTIC shares or 46 percent of the
outstanding capital stock of PTIC (the remaining 54 percent of PTIC shares was
already owned by First Pacific and its affiliates); (b) Parallax offered the highest bid
amounting to P25,217,556,000; (c) pursuant to the right of first refusal in favor of
PTIC and its shareholders granted in PTIC's Articles of Incorporation, MPAH, a First
Pacific affiliate, exercised its right of first refusal by matching the highest bid
offered for PTIC shares on 13 February 2007; and (d) on 28 February 2007, the
sale was consummated when MPAH paid IPC P25,217,556,000 and the government
delivered the certificates for the 111,415 PTIC shares. Respondent Pangilinan
denies the other allegations of facts of petitioner.

On 28 February 2007, petitioner filed the instant petition for prohibition, injunction,
declaratory relief, and declaration of nullity of sale of the 111,415 PTIC shares.
Petitioner claims, among others, that the sale of the 111,415 PTIC shares would
result in an increase in First Pacific's common shareholdings in PLDT from 30.7
percent to 37 percent, and this, combined with Japanese NTT DoCoMo's common
shareholdings in PLDT, would result to a total foreign common shareholdings in
PLDT of 51.56 percent which is over the 40 percent constitutional limit.[6][ ]Petitioner
asserts:

If and when the sale is completed, First Pacific's equity in PLDT will go up from 30.7
percent to 37.0 percent of its common - or voting- stockholdings, x x x. Hence, the
consummation of the sale will put the two largest foreign investors in PLDT - First
Pacific and Japan's NTT DoCoMo, which is the world's largest wireless
telecommunications firm, owning 51.56 percent of PLDT common equity. x x x With
the completion of the sale, data culled from the official website of the New York
Stock Exchange (www.nyse.com) showed that those foreign entities, which own at
least five percent of common equity, will collectively own 81.47 percent of PLDT's
common equity. x x x

x x x as the annual disclosure reports, also referred to as Form 20-K reports x x x

which PLDT submitted to the New York Stock Exchange for the period 2003-2005,
revealed that First Pacific and several other foreign entities breached the
constitutional limit of 40 percent ownership as early as 2003. x x x"[7]

Petitioner raises the following issues: (1) whether the consummation of the then
impending sale of 111,415 PTIC shares to First Pacific violates the constitutional
limit on foreign ownership of a public utility; (2) whether public respondents
committed grave abuse of discretion in allowing the sale of the 111,415 PTIC
shares to First Pacific; and (3) whether the sale of common shares to foreigners in
excess of 40 percent of the entire subscribed common capital stock violates the
constitutional limit on foreign ownership of a public utility.[8]

On 13 August 2007, Pablito V. Sanidad and Arno V. Sanidad filed a Motion for Leave
to Intervene and Admit Attached Petition-in-Intervention. In the Resolution of 28
August 2007, the Court granted the motion and noted the Petition-in-Intervention.

Petitioners-in-intervention "join petitioner Wilson Gamboa x x x in seeking, among

others, to enjoin and/or nullify the sale by respondents of the 111,415 PTIC shares
to First Pacific or assignee." Petitioners-in-intervention claim that, as PLDT
subscribers, they have a "stake in the outcome of the controversy x x x where the
Philippine Government is completing the sale of government owned assets in
[PLDT], unquestionably a public utility, in violation of the nationality restrictions of
the Philippine Constitution."
 The Issue

This Court is not a trier of facts. Factual questions such as those raised by
petitioner,[9] which indisputably demand a thorough examination of the evidence of
the parties, are generally beyond this Court's jurisdiction. Adhering to this well-
settled principle, the Court shall confine the resolution of the instant controversy
solely on the threshold and purely legal issue of whether the term "capital" in
Section 11, Article XII of the Constitution refers to the total common shares only or
to the total outstanding capital stock (combined total of common and non-voting
preferred shares) of PLDT, a public utility.

The Ruling of the Court

The petition is partly meritorious.

Petition for declaratory relief 

treated as petition for mandamus

At the outset, petitioner is faced with a procedural barrier. Among the remedies
petitioner seeks, only the petition for prohibition is within the original jurisdiction of
this court, which however is not exclusive but is concurrent with the Regional Trial
Court and the Court of Appeals. The actions for declaratory relief,[10] injunction, and
annulment of sale are not embraced within the original jurisdiction of the Supreme
Court. On this ground alone, the petition could have been dismissed outright.

While direct resort to this Court may be justified in a petition for prohibition,[11] the
Court shall nevertheless refrain from discussing the grounds in support of the
petition for prohibition since on 28 February 2007, the questioned sale was
consummated when MPAH paid IPC P25,217,556,000 and the government delivered
the certificates for the 111,415 PTIC shares.

However, since the threshold and purely legal issue on the definition of the term
"capital" in Section 11, Article XII of the Constitution has far-reaching implications
to the national economy, the Court treats the petition for declaratory relief as one
for mandamus.[12]

In Salvacion  v. Central Bank of the Philippines,[13] the Court treated the petition for
declaratory relief as one for mandamus considering the grave injustice that would
result in the interpretation of a banking law. In that case, which involved the crime
of rape committed by a foreign tourist against a Filipino minor and the execution of
the final judgment in the civil case for damages on the tourist's dollar deposit with a
local bank, the Court declared Section 113 of Central Bank Circular No. 960,
exempting foreign currency deposits from attachment, garnishment or any other
order or process of any court, inapplicable due to the peculiar circumstances of the
case. The Court held that "injustice would result especially to a citizen aggrieved by
a foreign guest like accused x x x" that would "negate Article 10 of the Civil Code
which provides that `in case of doubt in the interpretation or application of laws, it
is presumed that the lawmaking body intended right and justice to prevail.'" The
Court therefore required respondents Central Bank of the Philippines, the local
bank, and the accused to comply with the writ of execution issued in the civil case
for damages and to release the dollar deposit of the accused to satisfy the
judgment.

In Alliance of Government Workers v. Minister of Labor,[14] the Court similarly

brushed aside the procedural infirmity of the petition for declaratory relief and
treated the same as one for mandamus. In Alliance, the issue was whether the
government unlawfully excluded petitioners, who were government employees,
from the enjoyment of rights to which they were entitled under the law.
Specifically, the question was: "Are the branches, agencies, subdivisions, and
instrumentalities of the Government, including government owned or controlled
corporations included among the four `employers' under Presidential Decree No.
851 which are required to pay their employees x x x a thirteenth (13th) month pay
x x x ?" The Constitutional principle involved therein affected all government
employees, clearly justifying a relaxation of the technical rules of procedure, and
certainly requiring the interpretation of the assailed presidential decree.

In short, it is well-settled that this Court may treat a petition for declaratory relief
as one for mandamus if the issue involved has far-reaching implications. As this
Court held in Salvacion:

The Court has no original and exclusive jurisdiction over a petition for declaratory
relief. However, exceptions to this rule have been recognized. Thus, where
the petition has far-reaching implications and raises questions that should
be resolved, it may be treated as one for mandamus.[15] (Emphasis supplied)

In the present case, petitioner seeks primarily the interpretation of the term
"capital" in Section 11, Article XII of the Constitution. He prays that this Court
declare that the term "capital" refers to common shares only, and that such shares
constitute "the sole basis in determining foreign equity in a public utility." Petitioner
further asks this Court to declare any ruling inconsistent with such interpretation
unconstitutional.

The interpretation of the term "capital" in Section 11, Article XII of the Constitution
has far-reaching implications to the national economy. In fact, a resolution of this
issue will determine whether Filipinos are masters, or second class citizens, in their
own country. What is at stake here is whether Filipinos or foreigners will
have effective control  of the national economy. Indeed, if ever there is a legal
issue that has far-reaching implications to the entire nation, and to future
generations of Filipinos, it is the threshhold legal issue presented in this case.

The Court first encountered the issue on the definition of the term "capital" in
Section 11, Article XII of the Constitution in the case of Fernandez v.
Cojuangco,  docketed as G.R. No. 157360.[16] That case involved the same public
utility (PLDT) and substantially the same private respondents. Despite the
importance and novelty of the constitutional issue raised therein and despite the
fact that the petition involved a purely legal question, the Court declined to resolve
the case on the merits, and instead denied the same for disregarding the hierarchy
of courts.[17] There, petitioner Fernandez assailed on a pure question of law the
Regional Trial Court's Decision of 21 February 2003 via a petition for review under
Rule 45. The Court's Resolution, denying the petition, became final on 21 December
2004.

The instant petition therefore presents the Court with another opportunity to finally
settle this purely legal issue which is of transcendental importance to the national
economy and a fundamental requirement to a faithful adherence to our
Constitution. The Court must forthwith seize such opportunity, not only for the
benefit of the litigants, but more significantly for the benefit of the entire Filipino
people, to ensure, in the words of the Constitution, "a self-reliant and independent
national economy effectively controlled by Filipinos."[18] Besides, in the light of
vague and confusing positions taken by government agencies on this purely legal
issue, present and future foreign investors in this country deserve, as a matter of
basic fairness, a categorical ruling from this Court on the extent of their
participation in the capital of public utilities and other nationalized businesses.

Despite its far-reaching implications to the national economy, this purely legal issue
has remained unresolved for over 75 years since the 1935 Constitution. There is no
reason for this Court to evade this ever recurring fundamental issue and delay
again defining the term "capital," which appears not only in Section 11, Article XII
of the Constitution, but also in Section 2, Article XII on co-production and joint
venture agreements for the development of our natural resources,[19] in Section 7,
Article XII on ownership of private lands,[20] in Section 10, Article XII on the
reservation of certain investments to Filipino citizens,[21] in Section 4(2), Article XIV
on the ownership of educational institutions,[22] and in Section 11(2), Article XVI on
the ownership of advertising companies.[23]

Petitioner has locus standi

There is no dispute that petitioner is a stockholder of PLDT. As such, he has the

right to question the subject sale, which he claims to violate the nationality
requirement prescribed in Section 11, Article XII of the Constitution. If the sale
indeed violates the Constitution, then there is a possibility that PLDT's franchise
could be revoked, a dire consequence directly affecting petitioner's interest as a
stockholder.

More importantly, there is no question that the instant petition raises matters of
transcendental importance to the public. The fundamental and threshold legal issue
in this case, involving the national economy and the economic welfare of the
Filipino people, far outweighs any perceived impediment in the legal personality of
the petitioner to bring this action.

In Chavez v. PCGG,[24] the Court upheld the right of a citizen to bring a suit on

matters of transcendental importance to the public, thus:

In Tañada v. Tuvera, the Court asserted that when the issue concerns a public
right and the object of mandamus is to obtain the enforcement of a public
duty, the people are regarded as the real parties in interest; and because it
is sufficient that petitioner is a citizen and as such is interested in the
execution of the laws, he need not show that he has any legal or special
interest in the result of the action. In the aforesaid case, the petitioners sought
to enforce their right to be informed on matters of public concern, a right then
recognized in Section 6, Article IV of the 1973 Constitution, in connection with the
rule that laws in order to be valid and enforceable must be published in the Official
Gazette or otherwise effectively promulgated. In ruling for the petitioners' legal
standing, the Court declared that the right they sought to be enforced `is a public
right recognized by no less than the fundamental law of the land.'

Legaspi v. Civil Service Commission, while reiterating Tañada, further declared that
`when a mandamus proceeding involves the assertion of a public right, the
requirement of personal interest is satisfied by the mere fact that
petitioner is a citizen and, therefore, part of the general `public' which
possesses the right.'

Further, in Albano v. Reyes, we said that while expenditure of public funds may not
have been involved under the questioned contract for the development,
management and operation of the Manila International Container Terminal, `public
interest [was] definitely involved considering the important role [of the
subject contract] . . . in the economic development of the country and the
magnitude of the financial consideration involved.' We concluded that, as a
consequence, the disclosure provision in the Constitution would constitute sufficient
authority for upholding the petitioner's standing. (Emphasis supplied)

Clearly, since the instant petition, brought by a citizen, involves matters of

transcendental public importance, the petitioner has the requisite locus standi.

Definition of the Term "Capital" in

Section 11, Article XII of the 1987 Constitution

Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution
mandates the Filipinization of public utilities, to wit:

Section 11. No franchise, certificate, or any other form of authorization for

the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of
the Philippines, at least sixty per centum of whose capital is owned by
such citizens; nor shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall any such franchise or
right be granted except under the condition that it shall be subject to amendment,
alteration, or repeal by the Congress when the common good so requires. The State
shall encourage equity participation in public utilities by the general public. The
participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital, and all the
executive and managing officers of such corporation or association must be citizens
of the Philippines. (Emphasis supplied)

The above provision substantially reiterates Section 5, Article XIV of the 1973
Constitution, thus:

Section 5. No franchise, certificate, or any other form of authorization for

the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of
the Philippines at least sixty per centum of the capital of which is owned
by such citizens, nor shall such franchise, certificate, or authorization be exclusive
in character or for a longer period than fifty years. Neither shall any such franchise
or right be granted except under the condition that it shall be subject to
amendment, alteration, or repeal by the National Assembly when the public interest
so requires. The State shall encourage equity participation in public utilities by the
general public. The participation of foreign investors in the governing body of any
public utility enterprise shall be limited to their proportionate share in the capital
thereof. (Emphasis supplied)

The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV
of the 1935 Constitution, viz:

Section 8. No franchise, certificate, or any other form of authorization for

the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or other entities organized under the laws of
the Philippines sixty per centum of the capital of which is owned by
citizens of the Philippines, nor shall such franchise, certificate, or authorization
be exclusive in character or for a longer period than fifty years. No franchise or
right shall be granted to any individual, firm, or corporation, except under the
condition that it shall be subject to amendment, alteration, or repeal by the
Congress when the public interest so requires. (Emphasis supplied)

Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional

Commission, reminds us that the Filipinization provision in the 1987 Constitution is
one of the products of the spirit of nationalism which gripped the 1935
Constitutional Convention.[25] The 1987 Constitution "provides for the Filipinization
of public utilities by requiring that any form of authorization for the operation of
public utilities should be granted only to `citizens of the Philippines or to
corporations or associations organized under the laws of the Philippines at least
sixty per centum of whose capital is owned by such citizens.' The provision is [an
express] recognition of the sensitive and vital position of public utilities
both in the national economy and for national security."[26] The evident
purpose of the citizenship requirement is to prevent aliens from assuming control of
public utilities, which may be inimical to the national interest.[27] This specific
provision explicitly reserves to Filipino citizens control of public utilities, pursuant to
an overriding economic goal of the 1987 Constitution: to "conserve and develop our
patrimony"[28] and ensure "a self-reliant and independent national
economy effectively controlled by Filipinos."[29]
Any citizen or juridical entity desiring to operate a public utility must therefore meet
the minimum nationality requirement prescribed in Section 11, Article XII of the
Constitution. Hence, for a corporation to be granted authority to operate a public
utility, at least 60 percent of its "capital" must be owned by Filipino citizens.

The crux of the controversy is the definition of the term "capital." Does the term
"capital" in Section 11, Article XII of the Constitution refer to common shares or to
the total outstanding capital stock (combined total of common and non-voting
preferred shares)?

Petitioner submits that the 40 percent foreign equity limitation in domestic public
utilities refers only to common shares because such shares are entitled to vote and
it is through voting that control over a corporation is exercised. Petitioner posits
that the term "capital" in Section 11, Article XII of the Constitution refers to "the
ownership of common capital stock subscribed and outstanding, which class of
shares alone, under the corporate set-up of PLDT, can vote and elect members of
the board of directors." It is undisputed that PLDT's non-voting preferred shares are
held mostly by Filipino citizens.[30] This arose from Presidential Decree No. 217,
[31]
 issued on 16 June 1973 by then President Ferdinand Marcos, requiring every
applicant of a PLDT telephone line to subscribe to non-voting preferred shares to
pay for the investment cost of installing the telephone line.[32]

Petitioners-in-intervention basically reiterate petitioner's arguments and adopt

petitioner's definition of the term "capital."[33] Petitioners-in-intervention allege that
"the approximate foreign ownership of common capital stock of PLDT x x x already
amounts to at least 63.54% of the total outstanding common stock," which means
that foreigners exercise significant control over PLDT, patently violating the 40
percent foreign equity limitation in public utilities prescribed by the Constitution.

Respondents, on the other hand, do not offer any definition of the term "capital" in
Section 11, Article XII of the Constitution. More importantly, private respondents
Nazareno and Pangilinan of PLDT do not dispute that more than 40 percent of the
common shares of PLDT are held by foreigners.

In particular, respondent Nazareno's Memorandum, consisting of 73 pages, harps

mainly on the procedural infirmities of the petition and the supposed violation of the
due process rights of the "affected foreign common shareholders." Respondent
Nazareno does not deny petitioner's allegation of foreigners' dominating the
common shareholdings of PLDT. Nazareno stressed mainly that the petition "seeks
to divest foreign common shareholders purportedly exceeding 40% of the
total common shareholdings in PLDT of their ownership over their shares."
Thus, "the foreign natural and juridical PLDT shareholders must be impleaded in
this suit so that they can be heard."[34]Essentially, Nazareno invokes denial of due
process on behalf of the foreign common shareholders.

While Nazareno does not introduce any definition of the term "capital," he states
that "among the factual assertions that need to be established to counter
petitioner's allegations is the uniform interpretation by government
agencies (such as the SEC), institutions and corporations (such as the
Philippine National Oil Company-Energy Development Corporation or
PNOC-EDC) of including both preferred shares and common shares in
"controlling interest" in view of testing compliance with the 40%
constitutional limitation on foreign ownership in public utilities."[35]

Similarly, respondent Manuel V. Pangilinan does not define the term "capital" in
Section 11, Article XII of the Constitution. Neither does he refute petitioner's claim
of foreigners holding more than 40 percent of PLDT's common shares. Instead,
respondent Pangilinan focuses on the procedural flaws of the petition and the
alleged violation of the due process rights of foreigners. Respondent Pangilinan
emphasizes in his Memorandum (1) the absence of this Court's jurisdiction over the
petition; (2) petitioner's lack of standing; (3) mootness of the petition; (4) non-
availability of declaratory relief; and (5) the denial of due process rights. Moreover,
respondent Pangilinan alleges that the issue should be whether "owners of shares in
PLDT as well as owners of shares in companies holding shares in PLDT may be
required to relinquish their shares in PLDT and in those companies without any law
requiring them to surrender their shares and also without notice and trial."

Respondent Pangilinan further asserts that "Section 11, [Article XII of the
Constitution] imposes no nationality requirement on the shareholders of
the utility company as a condition for keeping their shares in the utility
company." According to him, "Section 11 does not authorize taking one person's
property (the shareholder's stock in the utility company) on the basis of another
party's alleged failure to satisfy a requirement that is a condition only for that other
party's retention of another piece of property (the utility company being at least
60% Filipino-owned to keep its franchise)."[36]

The OSG, representing public respondents Secretary Margarito Teves,

Undersecretary John P. Sevilla, Commissioner Ricardo Abcede, and Chairman Fe
Barin, is likewise silent on the definition of the term "capital." In its
Memorandum[37] dated 24 September 2007, the OSG also limits its discussion on
the supposed procedural defects of the petition, i.e. lack of standing, lack of
jurisdiction, non-inclusion of interested parties, and lack of basis for injunction. The
OSG does not present any definition or interpretation of the term "capital" in
Section 11, Article XII of the Constitution. The OSG contends that "the petition
actually partakes of a collateral attack on PLDT's franchise as a public utility," which
in effect requires a "full-blown trial where all the parties in interest are given their
day in court."[38]

Respondent Francisco Ed Lim, impleaded as President and Chief Executive Officer of

the Philippine Stock Exchange (PSE), does not also define the term "capital" and
seeks the dismissal of the petition on the following grounds: (1) failure to state a
cause of action against Lim; (2) the PSE allegedly implemented its rules and
required all listed companies, including PLDT, to make proper and timely
disclosures; and (3) the reliefs prayed for in the petition would adversely impact
the stock market.
In the earlier case of Fernandez v. Cojuangco, petitioner Fernandez who claimed to
be a stockholder of record of PLDT, contended that the term "capital" in the 1987
Constitution refers to shares entitled to vote or the common shares. Fernandez
explained thus:

The forty percent (40%) foreign equity limitation in public utilities prescribed by the
Constitution refers to ownership of shares of stock entitled to vote, i.e., common
shares, considering that it is through voting that control is being exercised. x x x

Obviously, the intent of the framers of the Constitution in imposing limitations and
restrictions on fully nationalized and partially nationalized activities is for Filipino
nationals to be always in control of the corporation undertaking said activities.
Otherwise, if the Trial Court's ruling upholding respondents' arguments were to be
given credence, it would be possible for the ownership structure of a public utility
corporation to be divided into one percent (1%) common stocks and ninety-nine
percent (99%) preferred stocks. Following the Trial Court's ruling adopting
respondents' arguments, the common shares can be owned entirely by foreigners
thus creating an absurd situation wherein foreigners, who are supposed to be
minority shareholders, control the public utility corporation.

xxxx

Thus, the 40% foreign ownership limitation should be interpreted to apply to both
the beneficial ownership and the controlling interest.

xxxx

Clearly, therefore, the forty percent (40%) foreign equity limitation in public utilities
prescribed by the Constitution refers to ownership of shares of stock entitled to
vote, i.e., common shares. Furthermore, ownership of record of shares will not
suffice but it must be shown that the legal and beneficial ownership rests in the
hands of Filipino citizens. Consequently, in the case of petitioner PLDT, since it is
already admitted that the voting interests of foreigners which would gain entry to
petitioner PLDT by the acquisition of SMART shares through the Questioned
Transactions is equivalent to 82.99%, and the nominee arrangements between the
foreign principals and the Filipino owners is likewise admitted, there is, therefore, a
violation of Section 11, Article XII of the Constitution.

Parenthetically, the Opinions dated February 15, 1988 and April 14, 1987 cited by
the Trial Court to support the proposition that the meaning of the word "capital" as
used in Section 11, Article XII of the Constitution allegedly refers to the sum total
of the shares subscribed and paid-in by the shareholder and it allegedly is
immaterial how the stock is classified, whether as common or preferred, cannot
stand in the face of a clear legislative policy as stated in the FIA which took effect in
1991 or way after said opinions were rendered, and as clarified by the above-
quoted Amendments. In this regard, suffice it to state that as between the law and
an opinion rendered by an administrative agency, the law indubitably prevails.
Moreover, said Opinions are merely advisory and cannot prevail over the clear
intent of the framers of the Constitution.

In the same vein, the SEC's construction of Section 11, Article XII of the
Constitution is at best merely advisory for it is the courts that finally determine
what a law means.[39]

On the other hand, respondents therein, Antonio O. Cojuangco, Manuel V.

Pangilinan, Carlos A. Arellano, Helen Y. Dee, Magdangal B. Elma, Mariles Cacho-
Romulo, Fr. Bienvenido F. Nebres, Ray C. Espinosa, Napoleon L. Nazareno, Albert F.
Del Rosario, and Orlando B. Vea, argued that the term "capital" in Section 11,
Article XII of the Constitution includes preferred shares since the Constitution does
not distinguish among classes of stock, thus:

16. The Constitution applies its foreign ownership limitation on the corporation's
"capital," without distinction as to classes of shares. x x x

In this connection, the Corporation Code - which was already in force at the time
the present (1987) Constitution was drafted - defined outstanding capital stock as
follows:

Section 137. Outstanding capital stock defined. - The term "outstanding capital
stock", as used in this Code, means the total shares of stock issued under binding
subscription agreements to subscribers or stockholders, whether or not fully or
partially paid, except treasury shares.

Section 137 of the Corporation Code also does not distinguish between common
and preferred shares, nor exclude either class of shares, in determining the
outstanding capital stock (the "capital") of a corporation. Consequently, petitioner's
suggestion to reckon PLDT's foreign equity only on the basis of PLDT's outstanding
common shares is without legal basis. The language of the Constitution should be
understood in the sense it has in common use.

xxxx

17. But even assuming that resort to the proceedings of the Constitutional
Commission is necessary, there is nothing in the Record of the Constitutional
Commission (Vol. III) - which petitioner misleadingly cited in the Petition x x x -
which supports petitioner's view that only common shares should form the basis for
computing a public utility's foreign equity.

xxxx

18. In addition, the SEC - the government agency primarily responsible for
implementing the Corporation Code, and which also has the responsibility of
ensuring compliance with the Constitution's foreign equity restrictions as regards
nationalized activities x x x - has categorically ruled that both common and
preferred shares are properly considered in determining outstanding capital stock
and the nationality composition thereof.[40]

We agree with petitioner and petitioners-in-intervention. The term "capital" in

Section 11, Article XII of the Constitution refers only to shares of stock entitled to
vote in the election of directors, and thus in the present case only to common
shares,[41] and not to the total outstanding capital stock comprising both common
and non-voting preferred shares.

The Corporation Code of the Philippines[42] classifies shares as common or preferred,

thus:

Sec. 6. Classification of shares. - The shares of stock of stock corporations may be

divided into classes or series of shares, or both, any of which classes or series of
shares may have such rights, privileges or restrictions as may be stated in the
articles of incorporation: Provided, That no share may be deprived of voting
rights except those classified and issued as "preferred" or "redeemable"
shares, unless otherwise provided in this Code: Provided, further, That there
shall always be a class or series of shares which have complete voting rights. Any
or all of the shares or series of shares may have a par value or have no par value
as may be provided for in the articles of incorporation: Provided, however, That
banks, trust companies, insurance companies, public utilities, and building and loan
associations shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given preference in the
distribution of the assets of the corporation in case of liquidation and in the
distribution of dividends, or such other preferences as may be stated in the articles
of incorporation which are not violative of the provisions of this Code: Provided,
That preferred shares of stock may be issued only with a stated par value. The
Board of Directors, where authorized in the articles of incorporation, may fix the
terms and conditions of preferred shares of stock or any series thereof: Provided,
That such terms and conditions shall be effective upon the filing of a certificate
thereof with the Securities and Exchange Commission.

Shares of capital stock issued without par value shall be deemed fully paid and non-
assessable and the holder of such shares shall not be liable to the corporation or to
its creditors in respect thereto: Provided; That shares without par value may not be
issued for a consideration less than the value of five (P5.00) pesos per share:
Provided, further, That the entire consideration received by the corporation for its
no-par value shares shall be treated as capital and shall not be available for
distribution as dividends.

A corporation may, furthermore, classify its shares for the purpose of insuring
compliance with constitutional or legal requirements.

Except as otherwise provided in the articles of incorporation and stated in the

certificate of stock, each share shall be equal in all respects to every other share.
Where the articles of incorporation provide for non-voting shares in the cases
allowed by this Code, the holders of such shares shall nevertheless be entitled to
vote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or other disposition of all or
substantially all of the corporate property;
4. Incurring, creating or increasing bonded indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation with another corporation or other
corporations;
7. Investment of corporate funds in another corporation or business in accordance
with this Code; and
8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary to

approve a particular corporate act as provided in this Code shall be deemed to refer
only to stocks with voting rights.

Indisputably, one of the rights of a stockholder is the right to participate in the

control or management of the corporation.[43] This is exercised through his vote in
the election of directors because it is the board of directors that controls or
manages the corporation.[44] In the absence of provisions in the articles of
incorporation denying voting rights to preferred shares, preferred shares have the
same voting rights as common shares. However, preferred shareholders are often
excluded from any control, that is, deprived of the right to vote in the election of
directors and on other matters, on the theory that the preferred shareholders are
merely investors in the corporation for income in the same manner as bondholders.
[45]
 In fact, under the Corporation Code only preferred or redeemable shares can be
deprived of the right to vote.[46] Common shares cannot be deprived of the right to
vote in any corporate meeting, and any provision in the articles of incorporation
restricting the right of common shareholders to vote is invalid.[47]

Considering that common shares have voting rights which translate to control, as
opposed to preferred shares which usually have no voting rights, the term "capital"
in Section 11, Article XII of the Constitution refers only to common shares.
However, if the preferred shares also have the right to vote in the election of
directors, then the term "capital" shall include such preferred shares because the
right to participate in the control or management of the corporation is exercised
through the right to vote in the election of directors. In short, the term "capital"
in Section 11, Article XII of the Constitution refers only to shares of stock
that can vote in the election of directors. 

This interpretation is consistent with the intent of the framers of the Constitution to
place in the hands of Filipino citizens the control and management of public utilities.
As revealed in the deliberations of the Constitutional Commission, "capital" refers to
the voting stock or controlling interest of a corporation, to wit:
MR. NOLLEDO. In Sections 3, 9 and 15, the Committee stated local or Filipino
equity and foreign equity; namely, 60-40 in Section 3, 60-40 in Section 9 and 2/3-
1/3 in Section 15.

MR. VILLEGAS. That is right.

MR. NOLLEDO. In teaching law, we are always faced with this question: "Where do
we base the equity requirement, is it on the authorized capital stock, on the
subscribed capital stock, or on the paid-up capital stock of a corporation"? Will the
Committee please enlighten me on this?

MR. VILLEGAS. We have just had a long discussion with the members of the team
from the UP Law Center who provided us a draft. The phrase that is contained
here which we adopted from the UP draft is "60 percent of voting stock."

MR. NOLLEDO. That must be based on the subscribed capital stock, because unless
declared delinquent, unpaid capital stock shall be entitled to vote.

MR. VILLEGAS. That is right.

MR. NOLLEDO. Thank you.

With respect to an investment by one corporation in another corporation, say, a

corporation with 60-40 percent equity invests in another corporation which is
permitted by the Corporation Code, does the Committee adopt the grandfather
rule?

MR. VILLEGAS. Yes, that is the understanding of the Committee.

MR. NOLLEDO. Therefore, we need additional Filipino capital?

MR. VILLEGAS. Yes.[48]

xxxx

MR. AZCUNA. May I be clarified as to that portion that was accepted by the
Committee.

MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase
"voting stock or controlling interest."

MR. AZCUNA. Hence, without the Davide amendment, the committee report would
read: "corporations or associations at least sixty percent of whose CAPITAL is
owned by such citizens."

MR. VILLEGAS. Yes.

MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of
the capital to be owned by citizens.

MR. VILLEGAS. That is right.

MR. AZCUNA. But the control can be with the foreigners even if they are
the minority. Let us say 40 percent of the capital is owned by them, but it
is the voting capital, whereas, the Filipinos own the nonvoting shares. So
we can have a situation where the corporation is controlled by foreigners
despite being the minority because they have the voting capital. That is the
anomaly that would result here.

MR. BENGZON. No, the reason we eliminated the word "stock" as stated in
the 1973 and 1935 Constitutions is that according to Commissioner
Rodrigo, there are associations that do not have stocks. That is why we say
"CAPITAL."

MR. AZCUNA. We should not eliminate the phrase "controlling interest."

MR. BENGZON. In the case of stock corporations, it is assumed. [49] (Emphasis

supplied)

Thus, 60 percent of the "capital" assumes, or should result in, "controlling

interest" in the corporation. Reinforcing this interpretation of the term "capital," as
referring to controlling interest or shares entitled to vote, is the definition of a
"Philippine national" in the Foreign Investments Act of 1991,[50] to wit:

SEC. 3. Definitions. - As used in this Act:

a. The term "Philippine national" shall mean a citizen of the Philippines; or a

domestic partnership or association wholly owned by citizens of the Philippines;
or a corporation organized under the laws of the Philippines of which at
least sixty percent (60%) of the capital stock outstanding and entitled to
vote is owned and held by citizens of the Philippines; or a corporation
organized abroad and registered as doing business in the Philippines under the
Corporation Code of which one hundred percent (100%) of the capital stock
outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds
for pension or other employee retirement or separation benefits, where the trustee
is a Philippine national and at least sixty percent (60%) of the fund will accrue to
the benefit of Philippine nationals: Provided, That where a corporation and its non-
Filipino stockholders own stocks in a Securities and Exchange Commission (SEC)
registered enterprise, at least sixty percent (60%) of the capital stock outstanding
and entitled to vote of each of both corporations must be owned and held by
citizens of the Philippines and at least sixty percent (60%) of the members of the
Board of Directors of each of both corporations must be citizens of the Philippines,
in order that the corporation, shall be considered a "Philippine national." (Emphasis
supplied)
In explaining the definition of a "Philippine national," the Implementing Rules and
Regulations of the Foreign Investments Act of 1991 provide:

b. "Philippine national" shall mean a citizen of the Philippines or a domestic

partnership or association wholly owned by the citizens of the Philippines; or a
corporation organized under the laws of the Philippines of which at least
sixty percent [60%] of the capital stock outstanding and entitled to vote is
owned and held by citizens of the Philippines; or a trustee of funds for pension
or other employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty percent [60%] of the fund will accrue to the
benefit of the Philippine nationals; Provided, that where a corporation its non-
Filipino stockholders own stocks in a Securities and Exchange Commission [SEC]
registered enterprise, at least sixty percent [60%] of the capital stock outstanding
and entitled to vote of both corporations must be owned and held by citizens of the
Philippines and at least sixty percent [60%] of the members of the Board of
Directors of each of both corporation must be citizens of the Philippines, in order
that the corporation shall be considered a Philippine national. The control test shall
be applied for this purpose.

Compliance with the required Filipino ownership of a corporation shall be

determined on the basis of outstanding capital stock whether fully paid or
not, but only such stocks which are generally entitled to vote are
considered. 

For stocks to be deemed owned and held by Philippine citizens or

Philippine nationals, mere legal title is not enough to meet the required
Filipino equity. Full beneficial ownership of the stocks, coupled with
appropriate voting rights is essential. Thus, stocks, the voting rights of
which have been assigned or transferred to aliens cannot be considered
held by Philippine citizens or Philippine nationals. 

Individuals or juridical entities not meeting the aforementioned

qualifications are considered as non-Philippine nationals. (Emphasis
supplied)

Mere legal title is insufficient to meet the 60 percent Filipino-owned "capital"

required in the Constitution. Full beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of the voting rights, is required.
The legal and beneficial ownership of 60 percent of the outstanding capital stock
must rest in the hands of Filipino nationals in accordance with the constitutional
mandate. Otherwise, the corporation is "considered as non-Philippine national[s]."

Under Section 10, Article XII of the Constitution, Congress may "reserve to citizens
of the Philippines or to corporations or associations at least sixty per centum of
whose capital is owned by such citizens, or such higher percentage as Congress
may prescribe, certain areas of investments." Thus, in numerous laws Congress has
reserved certain areas of investments to Filipino citizens or to corporations at least
sixty percent of the "capital" of which is owned by Filipino citizens. Some of these
laws are: (1) Regulation of Award of Government Contracts or R.A. No. 5183; (2)
Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna Carta for Micro,
Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping
Development Act or R.A. No. 7471; (5) Domestic Shipping Development Act of
2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No.
10055; and (7) Ship Mortgage Decree or P.D. No. 1521. Hence, the term "capital"
in Section 11, Article XII of the Constitution is also used in the same context in
numerous laws reserving certain areas of investments to Filipino citizens.

To construe broadly the term "capital" as the total outstanding capital stock,
including both common and non-voting preferred shares, grossly contravenes the
intent and letter of the Constitution that the "State shall develop a self-reliant and
independent national economy effectively controlled by Filipinos." A broad
definition unjustifiably disregards who owns the all-important voting stock, which
necessarily equates to control of the public utility.

We shall illustrate the glaring anomaly in giving a broad definition to the term
"capital." Let us assume that a corporation has 100 common shares owned by
foreigners and 1,000,000 non-voting preferred shares owned by Filipinos, with both
classes of share having a par value of one peso (P1.00) per share. Under the broad
definition of the term "capital," such corporation would be considered compliant
with the 40 percent constitutional limit on foreign equity of public utilities since the
overwhelming majority, or more than 99.999 percent, of the total outstanding
capital stock is Filipino owned. This is obviously absurd.

In the example given, only the foreigners holding the common shares have voting
rights in the election of directors, even if they hold only 100 shares. The foreigners,
with a minuscule equity of less than 0.001 percent, exercise control over the public
utility. On the other hand, the Filipinos, holding more than 99.999 percent of the
equity, cannot vote in the election of directors and hence, have no control over the
public utility. This starkly circumvents the intent of the framers of the Constitution,
as well as the clear language of the Constitution, to place the control of public
utilities in the hands of Filipinos. It also renders illusory the State policy of an
independent national economy effectively controlled by Filipinos.

The example given is not theoretical but can be found in the real world, and in fact
exists in the present case.

Holders of PLDT preferred shares are explicitly denied of the right to vote in the
election of directors. PLDT's Articles of Incorporation expressly state that "the
holders of Serial Preferred Stock shall not be entitled to vote at any
meeting of the stockholders for the election of directors or for any other
purpose or otherwise participate in any action taken by the corporation or its
stockholders, or to receive notice of any meeting of stockholders."[51]

On the other hand, holders of common shares are granted the exclusive right to
vote in the election of directors. PLDT's Articles of Incorporation[52] state that "each
holder of Common Capital Stock shall have one vote in respect of each share of
such stock held by him on all matters voted upon by the stockholders, and the
holders of Common Capital Stock shall have the exclusive right to vote for
the election of directors and for all other purposes."[53]

In short, only holders of common shares can vote in the election of directors,
meaning only common shareholders exercise control over PLDT. Conversely,
holders of preferred shares, who have no voting rights in the election of directors,
do not have any control over PLDT. In fact, under PLDT's Articles of Incorporation,
holders of common shares have voting rights for all purposes, while holders of
preferred shares have no voting right for any purpose whatsoever.

It must be stressed, and respondents do not dispute, that foreigners hold a

majority of the common shares of PLDT. In fact, based on PLDT's 2010 General
Information Sheet (GIS),[54] which is a document required to be submitted annually
to the Securities and Exchange Commission,[55] foreigners hold 120,046,690
common shares of PLDT whereas Filipinos hold only 66,750,622 common shares.
[56]
 In other words, foreigners hold 64.27% of the total number of PLDT's common
shares, while Filipinos hold only 35.73%. Since holding a majority of the common
shares equates to control, it is clear that foreigners exercise control over PLDT.
Such amount of control unmistakably exceeds the allowable 40 percent limit on
foreign ownership of public utilities expressly mandated in Section 11, Article XII of
the Constitution.

Moreover, the Dividend Declarations of PLDT for 2009,[57] as submitted to the SEC,
shows that per share the SIP[58] preferred shares earn a pittance in dividends
compared to the common shares. PLDT declared dividends for the common shares
at P70.00 per share, while the declared dividends for the preferred shares
amounted to a measly P1.00 per share.[59] So the preferred shares not only cannot
vote in the election of directors, they also have very little and obviously negligible
dividend earning capacity compared to common shares.

As shown in PLDT's 2010 GIS,[60] as submitted to the SEC, the par value of PLDT
common shares is P5.00 per share, whereas the par value of preferred shares is
P10.00 per share. In other words, preferred shares have twice the par value of
common shares but cannot elect directors and have only 1/70 of the dividends of
common shares. Moreover, 99.44% of the preferred shares are owned by Filipinos
while foreigners own only a minuscule 0.56% of the preferred shares.[61] Worse,
preferred shares constitute 77.85% of the authorized capital stock of PLDT while
common shares constitute only 22.15%.[62] This undeniably shows that beneficial
interest in PLDT is not with the non-voting preferred shares but with the common
shares, blatantly violating the constitutional requirement of 60 percent Filipino
control and Filipino beneficial ownership in a public utility.

The legal and beneficial ownership of 60 percent of the outstanding capital stock
must rest in the hands of Filipinos in accordance with the constitutional mandate.
Full beneficial ownership of 60 percent of the outstanding capital stock, coupled
with 60 percent of the voting rights, is constitutionally required for the State's grant
of authority to operate a public utility. The undisputed fact that the PLDT preferred
shares, 99.44% owned by Filipinos, are non-voting and earn only 1/70 of the
dividends that PLDT common shares earn, grossly violates the constitutional
requirement of 60 percent Filipino control and Filipino beneficial ownership of a
public utility.

In short, Filipinos hold less than 60 percent of the voting stock, and earn
less than 60 percent of the dividends, of PLDT. This directly contravenes the
express command in Section 11, Article XII of the Constitution that "[n]o franchise,
certificate, or any other form of authorization for the operation of a public utility
shall be granted except to x x x corporations x x x organized under the laws of the
Philippines, at least sixty per centum of whose capital is owned by such
citizens x x x."

To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class
of shares exercises the sole right to vote in the election of directors, and thus
exercise control over PLDT; (2) Filipinos own only 35.73% of PLDT's common
shares, constituting a minority of the voting stock, and thus do not exercise control
over PLDT; (3) preferred shares, 99.44% owned by Filipinos, have no voting rights;
(4) preferred shares earn only 1/70 of the dividends that common shares earn;
[63]
 (5) preferred shares have twice the par value of common shares; and (6)
preferred shares constitute 77.85% of the authorized capital stock of PLDT and
common shares only 22.15%. This kind of ownership and control of a public utility
is a mockery of the Constitution.

Incidentally, the fact that PLDT common shares with a par value of P5.00 have a
current stock market value of P2,328.00 per share,[64]while PLDT preferred shares
with a par value of P10.00 per share have a current stock market value ranging
from only P10.92 to P11.06 per share,[65] is a glaring confirmation by the market
that control and beneficial ownership of PLDT rest with the common shares, not
with the preferred shares.

Indisputably, construing the term "capital" in Section 11, Article XII of the
Constitution to include both voting and non-voting shares will result in the abject
surrender of our telecommunications industry to foreigners, amounting to a clear
abdication of the State's constitutional duty to limit control of public utilities to
Filipino citizens. Such an interpretation certainly runs counter to the constitutional
provision reserving certain areas of investment to Filipino citizens, such as the
exploitation of natural resources as well as the ownership of land, educational
institutions and advertising businesses. The Court should never open to foreign
control what the Constitution has expressly reserved to Filipinos for that would be a
betrayal of the Constitution and of the national interest. The Court must perform its
solemn duty to defend and uphold the intent and letter of the Constitution to
ensure, in the words of the Constitution, "a self-reliant and independent national
economy effectively controlled by Filipinos."

Section 11, Article XII of the Constitution, like other provisions of the Constitution
expressly reserving to Filipinos specific areas of investment, such as the
development of natural resources and ownership of land, educational institutions
and advertising business, is self-executing. There is no need for legislation to
implement these self-executing provisions of the Constitution. The rationale why
these constitutional provisions are self-executing was explained in Manila Prince
Hotel v. GSIS,[66] thus:

x x x Hence, unless it is expressly provided that a legislative act is necessary to

enforce a constitutional mandate, the presumption now is that all provisions of the
constitution are self-executing. If the constitutional provisions are treated as
requiring legislation instead of self-executing, the legislature would have the power
to ignore and practically nullify the mandate of the fundamental law. This can be
cataclysmic. That is why the prevailing view is, as it has always been, that --

. . . in case of doubt, the Constitution should be considered self-executing rather

than non-self-executing. . . . Unless the contrary is clearly intended, the
provisions of the Constitution should be considered self-executing, as a
contrary rule would give the legislature discretion to determine when, or
whether, they shall be effective. These provisions would be subordinated to the
will of the lawmaking body, which could make them entirely meaningless by simply
refusing to pass the needed implementing statute. (Emphasis supplied)

In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice
Reynato S. Puno, later Chief Justice, agreed that constitutional provisions are
presumed to be self-executing. Justice Puno stated:

Courts as a rule consider the provisions of the Constitution as self-executing, rather

than as requiring future legislation for their enforcement. The reason is not difficult
to discern. For if they are not treated as self-executing, the mandate of the
fundamental law ratified by the sovereign people can be easily ignored and
nullified by Congress. Suffused with wisdom of the ages is the unyielding
rule that legislative actions may give breath to constitutional rights but
congressional inaction should not suffocate them.

Thus, we have treated as self-executing the provisions in the Bill of Rights on

arrests, searches and seizures, the rights of a person under custodial investigation,
the rights of an accused, and the privilege against self-incrimination. It is
recognized that legislation is unnecessary to enable courts to effectuate
constitutional provisions guaranteeing the fundamental rights of life, liberty and the
protection of property. The same treatment is accorded to constitutional provisions
forbidding the taking or damaging of property for public use without just
compensation. (Emphasis supplied)

Thus, in numerous cases,[67] this Court, even in the absence of implementing

legislation, applied directly the provisions of the 1935, 1973 and 1987 Constitutions
limiting land ownership to Filipinos. In Soriano v. Ong Hoo,[68] this Court ruled:

x x x As the Constitution is silent as to the effects or consequences of a sale by a

citizen of his land to an alien, and as both the citizen and the alien have violated
the law, none of them should have a recourse against the other, and it should only
be the State that should be allowed to intervene and determine what is to be done
with the property subject of the violation. We have said that what the State should
do or could do in such matters is a matter of public policy, entirely beyond the
scope of judicial authority. (Dinglasan, et al. vs. Lee Bun Ting, et al., 6 G. R. No. L-
5996, June 27, 1956.) While the legislature has not definitely decided what
policy should be followed in cases of violations against the constitutional
prohibition, courts of justice cannot go beyond by declaring the disposition
to be null and void as violative of the Constitution. x x x (Emphasis supplied)

To treat Section 11, Article XII of the Constitution as not self-executing would mean
that since the 1935 Constitution, or over the last 75 years, not one of the
constitutional provisions expressly reserving specific areas of investments to
corporations, at least 60 percent of the "capital" of which is owned by Filipinos, was
enforceable. In short, the framers of the 1935, 1973 and 1987 Constitutions
miserably failed to effectively reserve to Filipinos specific areas of investment, like
the operation by corporations of public utilities, the exploitation by corporations of
mineral resources, the ownership by corporations of real estate, and the ownership
of educational institutions. All the legislatures that convened since 1935 also
miserably failed to enact legislations to implement these vital constitutional
provisions that determine who will effectively control the national economy,
Filipinos or foreigners. This Court cannot allow such an absurd interpretation of the
Constitution.

This Court has held that the SEC "has both regulatory and adjudicative
functions."[69] Under its regulatory functions, the SEC can be compelled by
mandamus to perform its statutory duty when it unlawfully neglects to perform the
same. Under its adjudicative or quasi-judicial functions, the SEC can be also be
compelled by mandamus to hear and decide a possible violation of any law it
administers or enforces when it is mandated by law to investigate such violation.

Under Section 17(4)[70] of the Corporation Code, the SEC has the regulatory
function to reject or disapprove the Articles of Incorporation of any corporation
where "the required percentage of ownership of the capital stock to be
owned by citizens of the Philippines has not been complied with as
required by existing laws or the Constitution." Thus, the SEC is the
government agency tasked with the statutory duty to enforce the nationality
requirement prescribed in Section 11, Article XII of the Constitution on the
ownership of public utilities. This Court, in a petition for declaratory relief that is
treated as a petition for mandamus as in the present case, can direct the SEC to
perform its statutory duty under the law, a duty that the SEC has apparently
unlawfully neglected to do based on the 2010 GIS that respondent PLDT submitted
to the SEC.

Under Section 5(m) of the Securities Regulation Code,[71] the SEC is vested with the
"power and function" to "suspend or revoke, after proper notice and hearing,
the franchise or certificate of registration of corporations, partnerships or
associations, upon any of the grounds provided by law." The SEC is
mandated under Section 5(d) of the same Code with the "power and function" to
"investigate x x x the activities of persons to ensure compliance" with the
laws and regulations that SEC administers or enforces. The GIS that all corporations
are required to submit to SEC annually should put the SEC on guard against
violations of the nationality requirement prescribed in the Constitution and existing
laws. This Court can compel the SEC, in a petition for declaratory relief that is
treated as a petition for mandamus as in the present case, to hear and decide a
possible violation of Section 11, Article XII of the Constitution in view of the
ownership structure of PLDT's voting shares, as admitted by respondents and as
stated in PLDT's 2010 GIS that PLDT submitted to SEC.

WHEREFORE, we PARTLY GRANT the petition and rule that the term "capital" in
Section 11, Article XII of the 1987 Constitution refers only to shares of stock
entitled to vote in the election of directors, and thus in the present case only to
common shares, and not to the total outstanding capital stock (common and non-
voting preferred shares). Respondent Chairperson of the Securities and Exchange
Commission is DIRECTED to apply this definition of the term "capital" in
determining the extent of allowable foreign ownership in respondent Philippine Long
Distance Telephone Company, and if there is a violation of Section 11, Article XII of
the Constitution, to impose the appropriate sanctions under the law.

SO ORDERED.

Corona, C.J., Join the dissent of J. Velasco.

Leonardo-De Castro, Brion, Peralta, Bersamin, Del Castillo, Villarama, Jr., Perez,
Mendoza, and Sereno, JJ., concur.
Velasco, Jr., J., I dissent. (please see dissenting opinion.)
Abad, J., see my dissenting opinion.
 EN BANC
[ G.R. No. 206510, September 16, 2014 ]
MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto
Princesa D.D.; MOST REV. DEOGRACIAS S. INIGUEZ, JR.,
Bishop-Emeritus ofCaloocan, FRANCES Q. QUIMPO,
CLEMENTE G. BAUTISTA, JR., Kalikasan-PNE, MARIA
CAROLINA P. ARAULLO, RENATO M. REYES, JR.,
BagongAlyansang Makabayan, HON. NERI JAVIER
COLMENARES, BayanMuna Party-list, ROLAND G. SIMBULAN,
PH.D., Junk VFAMovement, TERESITA R. PEREZ, PH.D., HON.
RAYMOND V. PALATINO, Kabataan Party-list, PETER SJ.
GONZALES, Pamalakaya, GIOVANNI A. TAPANG, PH. D.,
Agham, ELMER C. LABOG, Kilusang Mayo Uno, JOAN MAY E.
SALVADOR, Gabriela, JOSE ENRIQUE A. AFRICA, THERESA A.
CONCEPCION, MARY JOAN A. GUAN, NESTOR T. BAGUINON,
PH.D., A. EDSEL F. TUPAZ, Petitioners, VS. SCOTT H. SWIFT in
his capacity as Commander of the U.S. 7thFleet, MARK A.
RICE  in his capacity as Commanding Officer of the USS
Guardian, PRESIDENT BENIGNO S. AQUINO III in his
capacity as Commander-in-Chief of the Armed Forces of the
Philippines, HON. ALBERT F. DEL ROSARIO, Secretary,
Department of Foreign Affairs, HON. PAQUITO OCHOA,
JR.,  Executive Secretary, Office of the President, HON.
VOLTAIRE T. GAZMIN, Secretary, Department of National
Defense, HON. RAMON JESUS P. PAJE, Secretary,
Department of Environment and Natural Resources, VICE
ADMIRAL JOSE LUIS M. ALANO,  Philippine Navy Flag Officer
in Command, Armed Forces of the Philippines,  ADMIRAL
RODOLFO D. ISORENA, Commandant, Philippine Coast Guard,
COMMODORE ENRICO EFREN EVANGELISTA, Philippine Coast
Guard Palawan, MAJOR GEN. VIRGILIO O.
DOMINGO, Commandant of Armed Forces of the Philippines
Commandand LT. GEN. TERRY G. ROBLING, US  Marine Corps
Forces, Pacific and Balikatan 2013 Exercise Co-Director,
Respondents.

DECISION
VILLARAMA, JR., J.: 

Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the
issuance of a Temporary Environmental Protection Order (TEPO) under Rule 7 of
A.M. No. 09-6-8-SC, otherwise known as the Rules of Procedure for Environmental
Cases (Rules), involving violations of environmental laws and regulations in relation
to the grounding of the US military ship USS Guardian over the Tubbataha Reefs.

Factual Background

The name “Tubbataha” came from the Samal (seafaring people of southern
Philippines) language which means “long reef exposed at low tide.” Tubbataha is
composed of two huge coral atolls – the north atoll and the south atoll – and the
Jessie Beazley Reef, a smaller coral structure about 20 kilometers north of the
atolls. The reefs of Tubbataha and Jessie Beazley are considered part of
Cagayancillo, a remote island municipality of Palawan.[1]

In 1988, Tubbataha was declared a National Marine Park by virtue of Proclamation

No. 306 issued by President Corazon C. Aquino on August 11, 1988. Located in the
middle of Central Sulu Sea, 150 kilometers southeast of Puerto Princesa City,
Tubbataha lies at the heart of the Coral Triangle, the global center of marine
biodiversity.

In 1993, Tubbataha was inscribed by the United Nations Educational Scientific and
Cultural Organization (UNESCO) as a World Heritage Site. It was recognized as one
of the Philippines’ oldest ecosystems, containing excellent examples of pristine reefs
and a high diversity of marine life. The 97,030-hectare protected marine park is
also an important habitat for internationally threatened and endangered marine
species. UNESCO cited Tubbataha’s outstanding universal value as an important
and significant natural habitat for in situ conservation of biological diversity; an
example representing significant on-going ecological and biological processes; and
an area of exceptional natural beauty and aesthetic importance.[2]

On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067,[3] otherwise

known as the “Tubbataha Reefs Natural Park (TRNP) Act of 2009” “to ensure the
protection and conservation of the globally significant economic, biological,
sociocultural, educational and scientific values of the Tubbataha Reefs into
perpetuity for the enjoyment of present and future generations.”  Under the “no-
take” policy, entry into the waters of TRNP is strictly regulated and many human
activities are prohibited and penalized or fined, including fishing, gathering,
destroying and disturbing the resources within the TRNP.  The law likewise created
the Tubbataha Protected Area Management Board (TPAMB) which shall be the sole
policy-making and permit-granting body of the TRNP.

The USS Guardian is an Avenger-class mine countermeasures ship of the US Navy.

In December 2012, the US Embassy in the Philippines requested diplomatic
clearance for the said vessel “to enter and exit the territorial waters of the
Philippines and to arrive at the port of Subic Bay for the purpose of routine ship
replenishment, maintenance, and crew liberty.”[4]  On January 6, 2013, the ship left
Sasebo, Japan for Subic Bay, arriving on January 13, 2013 after a brief stop for fuel
in Okinawa, Japan.

On January 15, 2013, the USS Guardian departed Subic Bay for its next port of call
in Makassar, Indonesia. On January 17, 2013 at 2:20 a.m. while transiting the Sulu
Sea, the ship ran aground on the northwest side of South Shoal of the Tubbataha
Reefs, about 80 miles east-southeast of Palawan. No one was injured in the
incident, and there have been no reports of leaking fuel or oil.

On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift,
expressed regret for the incident in a press statement.[5]Likewise, US Ambassador
to the Philippines Harry K. Thomas, Jr., in a meeting at the Department of Foreign
Affairs (DFA) on February 4, “reiterated his regrets over the grounding incident and
assured Foreign Affairs Secretary Albert F. del Rosario that the United States will
provide appropriate compensation for damage to the reef caused by the ship.”[6] By
March 30, 2013, the US Navy-led salvage team had finished removing the last piece
of the grounded ship from the coral reef.

On April 17, 2013, the above-named petitioners on their behalf and in

representation of their respective sector/organization and others, including minors
or generations yet unborn, filed the present petition against Scott H. Swift in his
capacity as Commander of the US 7thFleet, Mark A. Rice in his capacity as
Commanding Officer of the USS Guardian and Lt. Gen. Terry G. Robling, US Marine
Corps Forces, Pacific and Balikatan 2013 Exercises Co-Director (“US respondents”);
President Benigno S. Aquino III in his capacity as Commander-in-Chief of the
Armed Forces of the Philippines (AFP), DFA Secretary Albert F. Del Rosario,
Executive Secretary Paquito Ochoa, Jr., Secretary Voltaire T. Gazmin (Department
of National Defense), Secretary Jesus P. Paje (Department of Environment and
Natural Resources), Vice-Admiral Jose Luis M. Alano (Philippine Navy Flag Officer in
Command, AFP), Admiral Rodolfo D. Isorena (Philippine Coast Guard
Commandant), Commodore Enrico Efren Evangelista (Philippine Coast Guard-
Palawan), and Major General Virgilio O. Domingo (AFP Commandant), collectively
the “Philippine respondents.”

The Petition

Petitioners claim that the grounding, salvaging and post-salvaging operations of

the USS Guardian cause and continue to cause environmental damage of such
magnitude as to affect the provinces of Palawan, Antique, Aklan, Guimaras, Iloilo,
Negros Occidental, Negros Oriental, Zamboanga del Norte, Basilan, Sulu, and Tawi-
Tawi, which events violate their constitutional rights to a balanced and healthful
ecology. They also seek a directive from this Court for the institution of civil,
administrative and criminal suits for acts committed in violation of environmental
laws and regulations in connection with the grounding incident.

Specifically, petitioners cite the following violations committed by US respondents

under R.A. No. 10067: unauthorized entry (Section 19); non-payment of
conservation fees (Section 21); obstruction of law enforcement officer (Section 30);
damages to the reef (Section 20); and destroying and disturbing resources (Section
26[g]).  Furthermore, petitioners assail certain provisions of the Visiting Forces
Agreement (VFA) which they want this Court to nullify for being unconstitutional.

The numerous reliefs sought in this case are set forth in the final prayer of the
petition, to wit:

1. WHEREFORE, in view of the foregoing, Petitioners respectfully pray that the

Honorable Court:

2. Immediately issue upon the filing of this petition a Temporary Environmental

Protection Order (TEPO) and/or a Writ of Kalikasan, which shall, in particular,

a. Order Respondents and any person acting on their behalf, to cease and
desist all operations over the Guardian grounding incident;

b. Initially demarcating the metes and bounds of the damaged area as

well as an additional buffer zone;

c. Order Respondents to stop all port calls and war games under
‘Balikatan’ because of the absence of clear guidelines, duties, and
liability schemes for breaches of those duties, and require Respondents
to assume responsibility for prior and future environmental damage in
general, and environmental damage under the Visiting Forces
Agreement in particular.

d. Temporarily define and describe allowable activities of ecotourism,

diving, recreation, and limited commercial activities by fisherfolk and
 indigenous communities near or around the TRNP but away from the
damaged site and an additional buffer zone;

3. After summary hearing, issue a Resolution extending the TEPO until further
orders of the Court;

4. After due proceedings, render a Decision which shall include, without

limitation:

a. Order Respondents Secretary of Foreign Affairs, following the

dispositive portion of Nicolas v. Romulo, “to forthwith negotiate with
the United States representatives for the appropriate agreement on
[environmental guidelines and environmental accountability] under
Philippine authorities as provided in Art. V[ ] of the VFA…”

b. Direct Respondents and appropriate agencies to commence

administrative, civil, and criminal proceedings against erring officers
and individuals to the full extent of the law, and to make such
proceedings public;

c. Declare that Philippine authorities may exercise primary and exclusive

criminal jurisdiction over erring U.S. personnelunder the circumstances
of this case;

d. Require Respondents to pay just and reasonable compensation in the

settlement of all meritorious claims for damages caused to the
Tubbataha Reef on terms and conditions no less severe than those
applicable to other States, and damages for personal injury or death, if
such had been the case;

e. Direct Respondents to cooperate in providing for the attendance of

witnesses and in the collection and production of evidence, including
seizure and delivery of objects connected with the offenses related to
the grounding of the Guardian;

f. Require the authorities of the Philippines and the United States to

notify each other of the disposition of all cases, wherever heard,
related to the grounding of the Guardian;

g. Restrain Respondents from proceeding with any purported restoration,

repair, salvage or post salvage plan or plans, including cleanup plans
covering the damaged area of the Tubbataha Reef absent a just
settlement approved by the Honorable Court;

h. Require Respondents to engage in stakeholder and LGU consultations

in accordance with the Local Government Code and R.A. 10067;
 i. Require Respondent US officials and their representatives to place a
deposit to the TRNP Trust Fund defined under Section 17 of RA 10067
as a bona fide gesture towards full reparations;

j. Direct Respondents to undertake measures to rehabilitate the areas

affected by the grounding of the Guardian in light of Respondents’
experience in the Port Royale grounding in 2009, among other similar
grounding incidents;

k. Require Respondents to regularly publish on a quarterly basis and in

the name of transparency and accountability such environmental
damage assessment, valuation, and valuation methods, in all stages of
negotiation;

l. Convene a multisectoral technical working group to provide scientific

and technical support to the TPAMB;

m. Order the Department of Foreign Affairs, Department of National

Defense, and the Department of Environment and Natural Resources
to review the Visiting Forces Agreement and the Mutual Defense
Treaty to consider whether their provisions allow for the exercise of
erga omnes rights to a balanced and healthful ecology and for
damages which follow from any violation of those rights;

n. Narrowly tailor the provisions of the Visiting Forces Agreement for

purposes of protecting the damaged areas of TRNP;

o. Declare the grant of immunity found in Article V (“Criminal

Jurisdiction”) and Article VI of the Visiting Forces Agreement
unconstitutional for violating equal protection and/or for violating the
preemptory norm of nondiscrimination incorporated as part of the law
of the land under Section 2, Article II, of the Philippine Constitution;

p. Allow for continuing discovery measures;

q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all

other respects; and

5. Provide just and equitable environmental rehabilitation measures and such

other reliefs as are just and equitable under the premises.[7] (Underscoring
supplied.)

Since only the Philippine respondents filed their comment[8] to the petition,
petitioners also filed a motion for early resolution and motion to proceed ex
parte against the US respondents.[9]
 Respondents’ Consolidated Comment

In their consolidated comment with opposition to the application for a TEPO and
ocular inspection and production orders, respondents assert that: (1) the grounds
relied upon for the issuance of a TEPO or writ of Kalikasan have become fait
accompli as the salvage operations on the USS Guardian were already completed;
(2) the petition is defective in form and substance; (3) the petition improperly
raises issues involving the VFA between the Republic of the Philippines and the
United States of America; and (4) the determination of the extent of responsibility
of the US Government as regards the damage to the Tubbataha Reefs rests
exclusively with the executive branch.

The Court’s Ruling

As a preliminary matter, there is no dispute on the legal standing of petitioners to

file the present petition.

Locus standi is “a right of appearance in a court of justice on a given

question.”[10] Specifically, it is “a party’s personal and substantial interest in a case
where he has sustained or will sustain direct injury as a result” of the act being
challenged, and “calls for more than just a generalized grievance.”[11] However, the
rule on standing is a procedural matter which this Court has relaxed for non-
traditional plaintiffs like ordinary citizens, taxpayers and legislators when the public
interest so requires, such as when the subject matter of the controversy is of
transcendental importance, of overreaching significance to society, or of paramount
public interest.[12]

In the landmark case of Oposa v. Factoran, Jr.,[13] we recognized the “public right”
of citizens to “a balanced and healthful ecology which, for the first time in our
constitutional history, is solemnly incorporated in the fundamental law.” We
declared that the right to a balanced and healthful ecology need not be written in
the Constitution for it is assumed, like other civil and political rights guaranteed in
the Bill of Rights, to exist from the inception of mankind and it is an issue of
transcendental importance with intergenerational implications. Such right carries
with it the correlative duty to refrain from impairing the environment.[14]

On the novel element in the class suit filed by the petitioners minors in Oposa, this
Court ruled that not only do ordinary citizens have legal standing to sue for the
enforcement of environmental rights, they can do so in representation of their own
and future generations. Thus:
Petitioners minors assert that they represent their generation as well as generations
yet unborn. We find no difficulty in ruling that they can, for themselves, for others
of their generation and for the succeeding generations, file a class suit. Their
personality to sue in behalf of the succeeding generations can only be
based on the concept of intergenerational responsibility insofar as the
right to a balanced and healthful ecology is concerned. Such a right, as
hereinafter expounded, considers the “rhythm and harmony of nature.”Nature
means the created world in its entirety. Such rhythm and harmony indispensably
include, inter alia,  the judicious disposition, utilization, management, renewal and
conservation of the country’s forest, mineral, land, waters, fisheries, wildlife, off-
shore areas and other natural resources to the end that their exploration,
development and utilization be equitably accessible to the present as well as future
generations. Needless to say, every generation has a responsibility to the next to
preserve that rhythm and harmony for the full enjoyment of a balanced and
healthful ecology. Put a little differently, the minors’ assertion of their right to a
sound environment constitutes, at the same time, the performance of their
obligation to ensure the protection of that right for the generations to come.
[15]
 (Emphasis supplied.)

The liberalization of standing first enunciated in Oposa, insofar as it refers to minors

and generations yet unborn, is now enshrined in the Rules which allows the filing of
a citizen suit in environmental cases. The provision on citizen suits in the Rules
“collapses the traditional rule on personal and direct interest, on the principle that
humans are stewards of nature.”[16]

Having settled the issue of locus standi, we shall address the more fundamental
question of whether this Court has jurisdiction over the US respondents who did not
submit any pleading or manifestation in this case.

The immunity of the State from suit, known also as the doctrine of sovereign
immunity or non-suability of the State,[17] is expressly provided in Article XVI of
the 1987 Constitution which states:

Section 3. The State may not be sued without its consent.

In United States of America v. Judge Guinto,[18]we discussed the principle of state
immunity from suit, as follows:

The rule that a state may not be sued without its consent, now expressed in Article
XVI, Section 3, of the 1987 Constitution, is one of the generally accepted principles
of international law that we have adopted as part of the law of our land under
Article II, Section 2. x x x.
Even without such affirmation, we would still be bound by the generally accepted
principles of international law under the doctrine of incorporation. Under this
doctrine, as accepted by the majority of states, such principles are deemed
incorporated in the law of every civilized state as a condition and consequence of its
membership in the society of nations. Upon its admission to such society, the state
is automatically obligated to comply with these principles in its relations with other
states.

As applied to the local state, the doctrine of state immunity is based on the
justification given by Justice Holmes that “there can be no legal right against the
authority which makes the law on which the right depends.”[Kawanakoa v.
Polybank, 205 U.S. 349] There are other practical reasons for the enforcement of
the doctrine. In the case of the foreign state sought to be impleaded in the
local jurisdiction, the added inhibition is expressed in the maxim par in
parem, non habet imperium. All states are sovereign equals and cannot
assert jurisdiction over one another. A contrary disposition would, in the
language of a celebrated case, “unduly vex the peace of nations.” [De Haber
v. Queen of Portugal, 17 Q. B. 171]

While the doctrine appears to prohibit only suits against the state without its
consent, it is also applicable to complaints filed against officials of the state
for acts allegedly performed by them in the discharge of their duties. The
rule is that if the judgment against such officials will require the state itself to
perform an affirmative act to satisfy the same, such as the appropriation of the
amount needed to pay the damages awarded against them, the suit must be
regarded as against the state itself although it has not been formally impleaded.
[Garcia v. Chief of Staff, 16 SCRA 120] In such a situation, the state may move to
dismiss the complaint on the ground that it has been filed without its consent.
[19]
 (Emphasis supplied.)

Under the American Constitution, the doctrine is expressed in the Eleventh

Amendment which reads:

The Judicial power of the United States shall not be construed to extend to any suit
in law or equity, commenced or prosecuted against one of the United States by
Citizens of another State, or by Citizens or Subjects of any Foreign State.
In the case of Minucher v. Court of Appeals,[20] we further expounded on the
immunity of foreign states from the jurisdiction of local courts, as follows:

The precept that a State cannot be sued in the courts of a foreign state is a long-
standing rule of customary international law then closely identified with the
personal immunity of a foreign sovereign from suit and, with the emergence of
democratic states, made to attach not just to the person of the head of state, or his
representative, but also distinctly to the state itself in its sovereign capacity. If the
acts giving rise to a suit are those of a foreign government done by its
foreign agent, although not necessarily a diplomatic personage, but acting
in his official capacity, the complaint could be barred by the immunity of
the foreign sovereign from suit without its consent. Suing a representative of
a state is believed to be, in effect, suing the state itself. The proscription is not
accorded for the benefit of an individual but for the State, in whose service he is,
under the maxim - par in parem, non habet imperium - thatall states are sovereign
equals and cannot assert jurisdiction over one another. The implication, in broad
terms, is that if the judgment against an official would require the state itself to
perform an affirmative act to satisfy the award, such as the appropriation of the
amount needed to pay the damages decreed against him, the suit must be
regarded as being against the state itself, although it has not been formally
impleaded.[21] (Emphasis supplied.)

In the same case we also mentioned that in the case of diplomatic immunity, the
privilege is not an immunity from the observance of the law of the territorial
sovereign or from ensuing legal liability; it is, rather, an immunity from the exercise
of territorial jurisdiction.[22]

In United States of America v. Judge Guinto,[23] one of the consolidated cases

therein involved a Filipino employed at Clark Air Base who was arrested following a
buy-bust operation conducted by two officers of the US Air Force, and was
eventually dismissed from his employment when he was charged in court for
violation of R.A. No. 6425. In a complaint for damages filed by the said employee
against the military officers, the latter moved to dismiss the case on the ground
that the suit was against the US Government which had not given its consent. The
RTC denied the motion but on a petition for certiorari and prohibition filed before
this Court, we reversed the RTC and dismissed the complaint. We held that
petitioners US military officers were acting in the exercise of their official functions
when they conducted the buy-bust operation against the complainant and
thereafter testified against him at his trial. It follows that for discharging their
duties as agents of the United States, they cannot be directly impleaded for acts
imputable to their principal, which has not given its consent to be sued.

This traditional rule of State immunity which exempts a State from being sued in
the courts of another State without the former’s consent or waiver has evolved into
a restrictive doctrine which distinguishes sovereign and governmental acts (jure
imperii) from private, commercial and proprietary acts (jure gestionis). Under the
restrictive rule of State immunity, State immunity extends only to acts  jure
imperii.  The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign sovereign, its
commercial activities or economic affairs.[24]

In Shauf v. Court of Appeals,[25] we discussed the limitations of the State immunity

principle, thus:

It is a different matter where the public official is made to account in his

capacity as such for acts contrary to law and injurious to the rights of
plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of
Telecommunications, et al. vs. Aligaen, etc., et al.:  “Inasmuch as the State
authorizes only legal acts by its officers, unauthorized acts of government officials
or officers are not acts of the State, and an action against the officials or officers by
one whose rights have been invaded or violated by such acts, for the protection of
his rights, is not a suit against the State within the rule of immunity of the State
from suit. In the same tenor, it has been said that an action at law or suit in equity
against a State officer or the director of a State department on the ground that,
while claiming to act for the State, he violates or invades the personal and property
rights of the plaintiff, under an unconstitutional act or under an assumption of
authority which he does not have, is not a suit against the State within the
constitutional provision that the State may not be sued without its consent.” The
rationale for this ruling is that the doctrine of state immunity cannot be used as an
instrument for perpetrating an injustice.

xxxx

The aforecited authorities are clear on the matter. They state that the doctrine of
immunity from suit will not apply and may not be invoked where the public
official is being sued in his private and personal capacity as an ordinary
citizen. The cloak of protection afforded the officers and agents of the government
is removed the moment they are sued in their individual capacity. This situation
usually arises where the public official acts without authority or in excess of the
powers vested in him. It is a well-settled principle of law that a public official may
be liable in his personal private capacity for whatever damage he may have
caused by his act done with malice and in bad faith, or beyond the scope of
his authority or jurisdiction.[26] (Emphasis supplied.)

In this case, the US respondents were sued in their official capacity as commanding
officers of the US Navy who had control and supervision over the USS Guardian and
its crew. The alleged act or omission resulting in the unfortunate grounding of
the USS Guardian on the TRNP was committed while they were performing official
military duties. Considering that the satisfaction of a judgment against said officials
will require remedial actions and appropriation of funds by the US government, the
suit is deemed to be one against the US itself. The principle of State immunity
therefore bars the exercise of jurisdiction by this Court over the persons of
respondents Swift, Rice and Robling.

During the deliberations, Senior Associate Justice Antonio T. Carpio took the
position that the conduct of the US in this case, when its warship entered a
restricted area in violation of R.A. No. 10067 and caused damage to the TRNP reef
system, brings the matter within the ambit of Article 31 of the United Nations
Convention on the Law of the Sea (UNCLOS). He explained that while historically,
warships enjoy sovereign immunity from suit as extensions of their flag State, Art.
31 of the UNCLOS creates an exception to this rule in cases where they fail to
comply with the rules and regulations of the coastal State regarding passage
through the latter’s internal waters and the territorial sea.

According to Justice Carpio, although the US to date has not ratified the UNCLOS,
as a matter of long-standing policy the US considers itself bound by customary
international rules on the “traditional uses of the oceans” as codified in UNCLOS, as
can be gleaned from previous declarations by former Presidents Reagan and
Clinton, and the US judiciary in the case of United States v. Royal Caribbean Cruise
Lines, Ltd.[27]

The international law of the sea is generally defined as “a body of treaty rules and
customary norms governing the uses of the sea, the exploitation of its resources,
and the exercise of jurisdiction over maritime regimes. It is a branch of public
international law, regulating the relations of states with respect to the uses of the
oceans.”[28]  The UNCLOS is a multilateral treaty which was opened for signature on
December 10, 1982 at Montego Bay, Jamaica. It was ratified by the Philippines in
1984 but came into force on November 16, 1994 upon the submission of the
60th ratification.

The UNCLOS is a product of international negotiation that seeks to balance State

sovereignty (mare clausum) and the principle of freedom of the high seas (mare
liberum).[29] The freedom to use the world’s marine waters is one of the oldest
customary principles of international law.[30] The UNCLOS gives to the coastal State
sovereign rights in varying degrees over the different zones of the sea which are:
1) internal waters, 2) territorial sea, 3) contiguous zone, 4) exclusive economic
zone, and 5) the high seas. It also gives coastal States more or less jurisdiction
over foreign vessels depending on where the vessel is located.[31]

Insofar as the internal waters and territorial sea is concerned, the Coastal State
exercises sovereignty, subject to the UNCLOS and other rules of international law.
Such sovereignty extends to the air space over the territorial sea as well as to its
bed and subsoil.[32]

In the case of warships,[33] as pointed out by Justice Carpio, they continue to enjoy
sovereign immunity subject to the following exceptions:

Article 30
Non-compliance by warships with the laws and regulations
of the coastal State

If any warship does not comply with the laws and regulations of the coastal State
concerning passage through the territorial sea and disregards any request for
compliance therewith which is made to it, the coastal State may require it to leave
the territorial sea immediately.

Article 31
Responsibility of the flag State for damage caused by a warship
or other government ship operated for non-commercial purposes

The flag State shall bear international responsibility for any loss or damage to the
coastal State resulting from the non-compliance by a warship or other
government ship operated for non-commercial purposes with the laws and
regulations of the coastal State concerning passage through the territorial
sea or with the provisions of this Convention or other rules of international law.

Article 32
Immunities of warships and other government ships
operated for non-commercial purposes

With such exceptions as are contained in subsection A and in articles 30 and 31,
nothing in this Convention affects the immunities of warships and other government
ships operated for non-commercial purposes. (Emphasis supplied.)

A foreign warship’s unauthorized entry into our internal waters with resulting
damage to marine resources is one situation in which the above provisions may
apply.But what if the offending warship is a non-party to the UNCLOS, as in this
case, the US?

An overwhelming majority – over 80% -- of nation states are now members of

UNCLOS, but despite this the US, the world’s leading maritime power, has not
ratified it.
While the Reagan administration was instrumental in UNCLOS' negotiation and
drafting, the U.S. delegation ultimately voted against and refrained from signing it
due to concerns over deep seabed mining technology transfer provisions contained
in Part XI. In a remarkable, multilateral effort to induce U.S. membership, the bulk
of UNCLOS member states cooperated over the succeeding decade to revise the
objectionable provisions. The revisions satisfied the Clinton administration, which
signed the revised Part XI implementing agreement in 1994. In the fall of 1994,
President Clinton transmitted UNCLOS and the Part XI implementing agreement to
the Senate requesting its advice and consent.  Despite consistent support from
President Clinton, each of his successors, and an ideologically diverse array of
stakeholders, the Senate has since withheld the consent required for the President
to internationally bind the United States to UNCLOS.

While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during the
108th and 110th Congresses,  its progress continues to be hamstrung by significant
pockets of political ambivalence over U.S. participation in international institutions.
Most recently, 111th Congress SFRC Chairman Senator John Kerry included “voting
out” UNCLOS for full Senate  consideration among his highest priorities. This did not
occur, and no Senate action has been taken on UNCLOS by the 112th Congress.[34]

Justice Carpio invited our attention to the policy statement given by President
Reagan on March 10, 1983 that the US will “recognize the rights of the other states
in the waters off their coasts, as reflected in the convention [UNCLOS], so long as
the rights and freedom of the United States and others under international law are
recognized by such coastal states”, and President Clinton’s reiteration of the US
policy “to act in a manner consistent with its [UNCLOS] provisions relating to
traditional uses of the oceans and to encourage other countries to do likewise.” 
Since Article 31 relates to the “traditional uses of the oceans,” and “if under its
policy, the US ‘recognize[s] the rights of the other states in the waters off their
coasts,’” Justice Carpio postulates that “there is more reason to expect it to
recognize the rights of other states in their internal waters,  such as the Sulu Sea in
this case.”

As to the non-ratification by the US, Justice Carpio emphasizes that “the US’ refusal
to join the UNCLOS was centered on its disagreement with UNCLOS’ regime of deep
seabed mining (Part XI) which considers the oceans and deep seabed commonly
owned by mankind,” pointing out that such “has nothing to do with its [the US’]
acceptance of customary international rules on navigation.”

It may be mentioned that even the US Navy Judge Advocate General’s Corps
publicly endorses the ratification of the UNCLOS, as shown by the following
statement posted on its official website:
The Convention is in the national interest of the United States because it
establishes stable maritime zones, including a maximum outer limit for territorial
seas; codifies innocent passage, transit passage, and archipelagic sea lanes
passage rights; works against “jurisdictional creep” by preventing coastal nations
from expanding their own maritime zones; and reaffirms sovereign immunity of
warships, auxiliaries and government aircraft.

xxxx

Economically, accession to the Convention would support our national interests by

enhancing the ability of the US to assert its sovereign rights over the resources of
one of the largest continental shelves in the world. Further, it is the Law of the Sea
Convention that first established the concept of a maritime Exclusive Economic
Zone out to 200 nautical miles, and recognized the rights of coastal states to
conserve and manage the natural resources in this Zone.[35]

We fully concur with Justice Carpio’s view that non-membership in the UNCLOS
does not mean that the US will disregard the rights of the Philippines as a Coastal
State over its internal waters and territorial sea. We thus expect the US to bear
“international responsibility” under Art. 31 in connection with the USS
Guardian grounding which adversely affected the Tubbataha reefs. Indeed, it is
difficult to imagine that our long-time ally and trading partner, which has been
actively supporting the country’s efforts to preserve our vital marine resources,
would shirk from its obligation to compensate the damage caused by its warship
while transiting our internal waters. Much less can we comprehend a Government
exercising leadership in international affairs, unwilling to comply with the UNCLOS
directive for all nations to cooperate in the global task to protect and preserve the
marine environment as provided in Article 197, viz:

Article 197
Cooperation on a global or regional basis

States shall cooperate on a global basis and, as appropriate, on a regional basis,

directly or through competent international organizations, in formulating and
elaborating international rules, standards and recommended practices and
procedures consistent with this Convention, for the protection and preservation of
the marine environment, taking into account characteristic regional features.

In fine, the relevance of UNCLOS provisions to the present controversy is beyond

dispute. Although the said treaty upholds the immunity of warships from the
jurisdiction of Coastal States while navigating the latter’s territorial sea, the flag
States shall be required to leave the territorial sea immediately if they flout the
laws and regulations of the Coastal State, and they will be liable for damages
caused by their warships or any other government vessel operated for non-
commercial purposes under Article 31.

Petitioners argue that there is a waiver of immunity from suit found in the VFA.
Likewise, they invoke federal statutes in the US under which agencies of the US
have statutorily waived their immunity to any action. Even under the common law
tort claims, petitioners asseverate that the US respondents are liable for
negligence, trespass and nuisance.

We are not persuaded.

The VFA is an agreement which defines the treatment of United States troops and
personnel visiting the Philippines to promote “common security interests” between
the US and the Philippines in the region. It provides for the guidelines to govern
such visits of military personnel, and further defines the rights of the United States
and the Philippine government in the matter of criminal jurisdiction, movement of
vessel and aircraft, importation and exportation of equipment, materials and
supplies.[36] The invocation of US federal tort laws and even common law is thus
improper considering that it is the VFA which governs disputes involving US military
ships and crew navigating Philippine waters in pursuance of the objectives of the
agreement.

As it is, the waiver of State immunity under the VFA pertains only to criminal
jurisdiction and not to special civil actions such as the present petition for issuance
of a writ of Kalikasan. In fact, it can be inferred from Section 17, Rule 7 of
the Rules that a criminal case against a person charged with a violation of an
environmental law is to be filed separately:

Sec. 17. Institution of separate actions.—The filing of a petition for the issuance of

the writ of kalikasan shall not preclude the filing of separate civil, criminal or
administrative actions.

In any case, it is our considered view thata ruling on the application or non-
application of criminal jurisdiction provisions of the VFA to US personnel who may
be found responsible for the grounding of the USS Guardian, would be premature
and beyond the province of a petition for a writ of Kalikasan. We also find it
unnecessary at this point to determine whether such waiver of State immunity is
indeed absolute. In the same vein, we cannot grant damages which have resulted
from the violation of environmental laws. The Rules allows the recovery of
damages, including the collection of administrative fines under R.A. No. 10067, in a
separate civil suit or that deemed instituted with the criminal action charging the
same violation of an environmental law.[37]

Section 15, Rule 7 enumerates the reliefs which may be granted in a petition for
issuance of a writ of Kalikasan, to wit:

Sec. 15. Judgment.—Within sixty (60) days from the time the petition is submitted
for decision, the court shall render judgment granting or denying the privilege of
the writ of kalikasan.

The reliefs that may be granted under the writ are the following:

(a) Directing respondent to permanently cease and desist from committing acts or
neglecting the performance of a duty in violation of environmental laws resulting in
environmental destruction or damage;

(b) Directing the respondent public official, government agency, private person or
entity to protect, preserve,rehabilitate or restore the environment;

(c) Directing the respondent public official, government agency, private person or
entity to monitor strict compliance with the decision and orders of the court;

(d) Directing the respondent public official, government agency, or private person
or entity to make periodic reports on the execution of the final judgment; and

(e) Such other reliefs which relate to the right of the people to a balanced and
healthful ecology or to the protection,preservation, rehabilitation or restoration of
the environment, except the award of damages to individual petitioners.
(Emphasis supplied.)

We agree with respondents (Philippine officials) in asserting that this petition has
become moot in the sense that the salvage operation sought to be enjoined or
restrained had already been accomplished when petitioners sought recourse from
this Court. But insofar as the directives to Philippine respondents to protect and
rehabilitate the coral reef structure and marine habitat adversely affected by the
grounding incident are concerned, petitioners are entitled to these reliefs
notwithstanding the completion of the removal of the USS Guardianfrom the coral
reef.

However, we are mindful of the fact that the US and Philippine governments both
expressed readiness to negotiate and discuss the matter of compensation for the
damage caused by the USS Guardian. The US Embassy has also declared it is
closely coordinating with local scientists and experts in assessing the extent of the
damage and appropriate methods of rehabilitation.

Exploring avenues for settlement of environmental cases is not proscribed by

the Rules. As can be gleaned from the following provisions, mediation and
settlement are available for the consideration of the parties, and which dispute
resolution methods are encouraged by the court, to wit:

RULE 3

xxxx

Sec. 3. Referral to mediation.–At the start of the pre-trial conference, the court
shall inquire from the parties if they have settled the dispute; otherwise, the court
shall immediately refer the parties or their counsel, if authorized by their clients, to
the Philippine Mediation Center (PMC) unit for purposes of mediation. If not
available, the court shall refer the case to the clerk of court or legal researcher for
mediation.

Mediation must be conducted within a non-extendible period of thirty (30) days

from receipt of notice of referral to mediation.

The mediation report must be submitted within ten (10) days from the expiration of
the 30-day period.

Sec. 4. Preliminary conference.–If mediation fails, the court will schedule the
continuance of the pre-trial. Before the scheduled date of continuance, the court
may refer the case to the branch clerk of court for a preliminary conference for the
following purposes:

(a) To assist the parties in reaching a settlement;

xxxx

Sec. 5. Pre-trial conference; consent decree.–The judge shall put the parties and
their counsels under oath, and they shall remain under oath in all pre-trial
conferences.

The judge shall exert best efforts to persuade the parties to arrive at a settlement
of the dispute. The judge may issue a consent decree approving the agreement
between the parties in accordance with law, morals, public order and public policy
to protect the right of the people to a balanced and healthful ecology.

xxxx

Sec. 10. Efforts to settle.–The court shall endeavor to make the parties to agree to
compromise or settle in accordance with law at any stage of the proceedings before
rendition of judgment. (Underscoring supplied.)

The Court takes judicial notice of a similar incident in 2009 when a guided-missile
cruiser, the USS Port Royal, ran aground about half a mile off the Honolulu Airport
Reef Runway and remained stuck for four days. After spending $6.5 million
restoring the coral reef, the US government was reported to have paid the State of
Hawaii $8.5 million in settlement over coral reef damage caused by the grounding.
[38]

To underscore that the US government is prepared to pay appropriate

compensation for the damage caused by the USS Guardian grounding, the US
Embassy in the Philippines has announced the formation of a US interdisciplinary
scientific team which will “initiate discussions with the Government of the
Philippines to review coral reef rehabilitation options in Tubbataha, based on
assessments by Philippine-based marine scientists.” The US team intends to “help
assess damage and remediation options, in coordination with the Tubbataha
Management Office, appropriate Philippine government entities, non-governmental
organizations, and scientific experts from Philippine universities.”[39]

A rehabilitation or restoration program to be implemented at the cost of the violator

is also a major relief that may be obtained under a judgment rendered in a citizens’
suit under the Rules, viz:

RULE 5

Section 1. Reliefs in a citizen suit.–If warranted, the court may grant to the plaintiff
proper reliefs which shall include the protection, preservation or rehabilitation of the
environment and the payment of attorney’s fees, costs of suit and other litigation
expenses. It may also require the violator to submit a program of rehabilitation or
restoration of the environment, the costs of which shall be borne by the violator, or
to contribute to a special trust fund for that purpose subject to the control of the
court.

In the light of the foregoing, the Court defers to the Executive Branch on the matter
of compensation and rehabilitation measures through diplomatic channels. 
Resolution of these issues impinges on our relations with another State in the
context of common security interests under the VFA. It is settled that “[t]he
conduct of the foreign relations of our government is committed by the Constitution
to the executive and legislative—“the political”--departments of the government,
and the propriety of what may be done in the exercise of this political power is not
subject to judicial inquiry or decision.”[40]

On the other hand, we cannot grant the additional reliefs prayed for in the petition
to order a review of the VFA and to nullify certain immunity provisions thereof.

As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora,[41] the VFA

was duly concurred in by the Philippine Senate and has been recognized as a treaty
by the United States as attested and certified by the duly authorized representative
of the United States government. The VFA being a valid and binding agreement, the
parties are required as a matter of international law to abide by its terms and
provisions.[42]  The present petition under the Rules is not the proper remedy to
assail the constitutionality of its provisions.

WHEREFORE, the petition for the issuance of the privilege of the Writ
of Kalikasan is hereby DENIED.

No pronouncement as to costs.

SO ORDERED.

Carpio, Velasco, Jr., Leonardo-De Castro, Brion, Peralta, Bersamin, Del Castillo,
Perez, Reyes, and Perlas-Bernabe, JJ., concur.
Sereno, C.J., see concurring opinion.
Mendoza, J., on official leave.
Leonen, J., see separate concurring opinion. 
Jardeleza, J., no part.
 FIRST DIVISION
[ G.R. No. 171953, October 21, 2015 ]
NATIONAL HOUSING AUTHORITY, PETITIONER, VS. ERNESTO
ROXAS, RESPONDENT.

DECISION

BERSAMIN, J.: 

The National Housing Authority (NHA), a government-owned and -controlled

corporation created and existing under Presidential Decree No. 757,[1] may sue and
be sued. However, no court should issue a writ of execution upon any monetary
judgment rendered against the NHA unless such monetary judgment is first
submitted to and passed upon by the Commission on Audit (COA).

The Case

Being challenged on appeal by the NHA is the adverse decision promulgated on

February 20, 2006,[2] whereby the Court of Appeals (CA) dismissed the NHA's
petition for certiorari brought to nullify the orders issued in Special Civil Action No.
93-060-MN entitled Ernesto Roxas v. National Housing Authority, et al. by the
Regional Trial Court (RTC), Branch 72, in Malabon City. The first order, dated May
3, 2002, had granted the motion for the issuance of the writ of execution filed by
respondent Ernesto Roxas.[3] The other order, dated January 6, 2003, had denied
the NHA's motion for reconsideration.[4] The NHA had also thereby assailed the writ
of execution consequently issued on February 24, 2003.[5] In its petition
for certiorari, the NHA insisted that the RTC had thereby committed grave abuse of
discretion amounting to lack or excess of jurisdiction.

Antecedents

The NHA is charged, among others, with the development of the Dagat-dagatan
Development Project (project) situated in Navotas, Metro Manila.[6] On December 4,
1985, Roxas applied for commercial lots in the project, particularly Lot 9 and Lot 10
in Block 11, Area 3, Phase III A/B, with an area of 176 square meters, for the use
of his business of buying and selling gravel, sand and cement products.[7] The NHA
approved his application, and issued on December 6, 1985 the order of payment
respecting the lots. On December 27, 1985, the NHA issued the notice of award for
the lots in favor of Roxas,[8] at P1,500.00/square meter.[9] On the basis of the order
of payment and the notice of award, Roxas made his downpayment of P79,200.00.
[10]
 A relocation/reblocking survey resulted in the renumbering of Lot 9 to Lot 5 and
Lot 10 to Lot 6 (subject lots).[11] He completed his payment for the subject lots on
December 20, 1991.

In the meanwhile, the NHA conducted a final subdivision project survey, causing
the increase in the area of the subject lots from 176 to 320 square meters. The
NHA informed Roxas about the increase in the area of the subject lots, and
approved the award of the additional area of 144 square meters to him at
P3,500.00/square meter.[12] Although manifesting his interest in acquiring the
additional area, he appealed for the reduction of the price to Pl,500.00/square
meter,[13] pointing out that Lot 5 and Lot 6 were a substitution unilaterally imposed
by the NHA that resulted in the increase of 144 square meters based on the
technical description, and that although he desired to purchase the increased area,
the purchase must be in accordance with the terms and conditions contained in the
order of payment and notice of award issued to him. After the NHA rejected his
appeal,[14] he commenced in the RTC this action for specific performance and
damages, with prayer for the issuance of a writ of preliminary injunction. He
amended the complaint[15] to compel the NHA to comply with the terms and
conditions of the order of payment and the notice of award.

The NHA countered in its answer[16] that Roxas' prayer to include in the original
contract the increase in lot measurement of 144 square meters was contrary to its
existing rules and regulation; that he could not claim more than what had been
originally awarded to him; and that at the very least, his right in the additional area
was limited only to first refusal.

On July 15, 1994, after trial, the RTC rendered judgment against the NHA,
[17]
 decreeing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff

Ernesto Roxas and against defendant NHA, represented by its General Manager and
its Dagat-dagatan Development Project Manager, as follows:
1. Declaring plaintiff Ernesto Roxas the legal awardee of subject lots 5 and 6 in the
full total area thereof of 320 sq. meters;

2. Ordering defendant NHA, thru its General Manager Robert P.  Balao  and the
project Manager for its  Dagat-dagatan Development Project Evelyn V. Ramos, or
whoever shall be the incumbents of the positions at the time of the enforcement
hereof to execute the corresponding Contract to Sell for the entire area of subject
lots 5 and 6 totaling to 320 sq. meters at the cost of PI,500.00 per sq. meter under
the same terms and conditions as that provided for in the Order of Payment and
Notice of Award (Exhs. B and D), respectively, deducting whatever has already
been paid by plaintiff;

3. Ordering defendant NHA to pay plaintiff P30,000.00 by way of reasonable

Attorney's Fees.

The Writ of Preliminary Injunction issued in this case on January 31, 1994 is hereby
made permanent.

Costs against defendant NHA. 

SO ORDERED.

The NHA appealed in due course, but the CA affirmed the judgment of the RTC,
prompting the NHA to seek to undo the adverse decision of the CA through its
petition for certiorari. On July 5, 2000, however, the Court dismissed the petition
for certiorari. It later denied the NHA's motion for reconsideration.[18]

On July 27, 2001, Roxas filed his motion for the issuance of the writ of execution,
[19]
 which the RTC granted on May 3, 2002.[20] The NHA sought reconsideration, but
its motion was denied on January 6, 2003. Accordingly, on February 24, 2003, the
RTC issued the writ of execution to enforce the final and executory decision of July
15, 1994.[21]

In order to prevent the execution, the NHA brought another petition for certiorari in
the CA, docketed as C.A.-G.R. SP No. 76468, imputing to the RTC grave abuse of
discretion amounting to lack or excess of jurisdiction for ordering the execution of
the judgment.

On February 20, 2006, the CA dismissed the NFIA's petition for certiorari  through
the presently assailed decision because it found that the RTC did not gravely abuse
its discretion amounting to lack or excess of jurisdiction in granting Roxas' motion
for the issuance of the writ of execution and in issuing the writ of execution.[22] The
CA observed that the NHA was a government-owned and -controlled corporation
whose funds were not exempt from garnishment or execution; and ruled that Roxas
did not need to first file his claim in the COA.

Issues

The NHA insists that the judgment of the RTC did not lie against it because its
submission to the litigation did not necessarily imply that the Government had
thereby given its consent to liability; and that the money judgment awarded to
Roxas could not be recovered by motion for execution but should have been first
filed in the COA.[23]

Roxas counters that the main relief under the final and executory judgment of the
RTC directed the NHA to execute the contract to sell the subject lots at the rate of
P1,500.00/square meter as provided for in the order of payment and the notice of
award. He claims that the award of attorney's fees in his favor was only incidental
to the main relief of specific performance; and argues that the Government
abandons its sovereign capacity and is treated like any other corporations whenever
it enters into a commercial transaction.[24]

Ruling of the Court

The appeal is partly meritorious.

First of all, the mantle of the State's immunity from suit did not extend to the NHA
despite its being a government-owned and -controlled corporation. Under Section
6(i) of Presidential Decree No. 757, which was its charter, the NHA could sue and
be sued. As such, the NHA was not immune from the suit of Roxas.

And, secondly, for purposes of the implementation of the writ of execution, it is

necessary to distinguish between, on the one hand, the main relief adjudicated in
the judgment of July 15, 1994, which was the decree of specific performance as to
the right of Roxas to acquire the subject lots at Pl,500.00/square meter as stated in
the original agreement between the parties, and, on the other, the secondary relief
for the attorney's fees of P30,000.00 to be paid by the NHA to Roxas.

Section 12 of Presidential Decree No. 757 has authorized the NHA to "determine,
establish and maintain the most feasible and effective program for the management
or disposition of specific housing or resettlement projects undertaken by [it]", and
"[u]nless otherwise decided by the Board, completed housing or resettlement
projects shall be managed and administered by [it]." The execution of the contract
to sell by the NHA conformably with the main relief under the judgment would be in
the ordinary course of the management or disposition of the Dagat-dagatan
Development Project undertaken by the NHA. In other words, the NHA possessed
the legal competence and authority to directly afford the main relief without Roxas
needing to first submit to the COA the contract to sell for review and approval. To
maintain otherwise is to unconstitutionally grant to the COA the power of judicial
review in respect of the decision of a court of law.

However, settling or paying off the secondary relief for the attorney's fees of
£30,000.00, being a monetary obligation of the NHA, would not be in the usual
course of the activities of the NHA under its charter. That such relief was the
consequence of the suit that granted the main relief did not matter. Pursuant to
Section 26 of Presidential Decree No. 1445, Roxas should first bring it to the COA
prior to its enforcement against the NHA.[25] Indeed, Section 26 specifically vested
in the COA the power, authority and duty to examine, audit and settle "all debts
and claims of any sort" due from or owing to the Government, or any of its
subdivisions, agencies, or instrumentalities, including government-owned and
controlled corporations with original charters, viz.:

Section 26. General jurisdiction. The authority and powers of the Commission shall

extend to and comprehend all matters relating to auditing procedures, systems and
controls, the keeping of the general accounts of the Government, the preservation
of vouchers pertaining thereto for a period of ten years, the examination and
inspection of the books, records, and papers relating to those accounts; and the
audit and settlement of the accounts of all persons respecting funds or
property received or held by them in an accountable capacity, as well as
the examination, audit, and settlement of all debts and claims of any sort
due from or owing to the Government or any of its subdivisions, agencies
and instrumentalities. The said jurisdiction extends to all government-
owned or controlled corporations, including their subsidiaries, and other
self-governing boards, commissions, or agencies of the Government, and
as herein prescribed, including nongovernmental entities subsidized by the
government, those funded by donations through the government, those
required to pay levies or government share, and those for which the
government has put up a counterpart fund or those partly funded by the
government, (bold underscoring supplied for emphasis)

As the text of the legal provision plainly shows, the audit jurisdiction of the COA
extends to all government-owned or -controlled corporations, their subsidiaries, and
other self-governing boards, commissions, or agencies of the Government, as well
as to all non-governmental entities subsidized by the Government, or funded by
donations through the Government, or required to pay levies or government share,
or for which the Government has put up a counterpart fund, or those partly funded
by the Government. There is no distinction as to the class of claims. Ubi lex non
distinguish nee nos distinguere debemos.[26] Indeed, a general term or phrase
should not be reduced into parts and one part distinguished from the other so as to
justify its exclusion from the operation of the law. In other words, there should be
no distinction in the application of a statute where none is indicated. Corollary to
this rule is the principle that where the law does not make any exception, the
courts may not exempt something therefrom, unless there is compelling reason to
the contrary.[27]
There is no question that the NHA could sue or be sued, and thus could be held
liable under the judgment rendered against it. But the universal rule remains to be
that the State, although it gives its consent to be sued either by general or special
law, may limit the claimant's action only up to the completion of proceedings
anterior to the stage of execution. In other words, the power of the court ends
when the judgment is rendered because government funds and property may not
be seized pursuant to writs of execution or writs of garnishment to satisfy such
judgments. The functions and public services of the State cannot be allowed to be
paralyzed or disrupted by the diversion of public fund from their legitimate and
specific objects, and as appropriated by law. The rule is based on obvious
considerations of public policy. Indeed, the disbursements of public funds must be
covered by the corresponding appropriation as required by law.[28]

WHEREFORE, the Court PARTLY GRANTS the petition for review on certiorari;

and MODIFIES the writ of execution dated February 24, 2003 by enjoining the
respondent to file his claim for attorney's fees with the Commission on Audit
pursuant to Presidential Decree No. 1445.

SO ORDERED.

Sereno, C.J.,  *Velasco, Leonardo-De Castro, and Perlas-Bernabe, JJ., concur.

 THIRD DIVISION
[ G.R. No. 190289, January 17, 2018 ]
THE CITY OF BACOLOD, HON. MAYOR EVELIO R. LEONARDIA,
ATTY. ALLAN L. ZAMORA AND ARCH. LEMUEL D. REYNALDO,
IN THEIR PERSONAL CAPACITIES AND IN THEIR CAPACITIES
AS OFFICIALS OF THE CITY OF BACOLOD, PETITIONERS, VS.
PHUTURE VISIONS CO., INC., RESPONDENT.

DECISION

VELASCO JR., J.: 

Nature of the Case

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court of the Decision[1] dated February 27, 2009 and the Resolution[2] dated October
27, 2009 of the Court of Appeals (CA) in CA G.R. SP No. 03322. The assailed
rulings reversed the dismissal of respondent's Petition for Mandamus and Damages
with Prayer for Issuance of a Temporary Mandatory Order and/or Writ of
Preliminary Mandatory Injunction (Petition for Mandamus and Damages) by the
Regional Trial Court of Bacolod City, Branch 49.[3]

The Facts

The instant case stems from the Petition for Mandamus and Damages filed by
respondent Phuture Visions Co., Inc. (Phuture) on March 5, 2007 against petitioners
City of Bacolod, Hon. Mayor Evelio R. Leonardia, Atty. Allan L. Zamora (now
deceased) and Arch. Lemuel D. Reynaldo. In the Petition for Mandamus and
Damages, Phuture alleged the following:

Phuture was incorporated in 2004. In May 2005, its Articles of Incorporation (AOI)
was amended to, among others, include the operation of lotto betting stations
and/or other gaming outlets as one of its secondary purposes. Eventually, it applied
with the Philippine Amusement and Gaming Corporation (PAGCOR) for an authority
to operate bingo games at the SM City Bacolod Mall (SM Bacolod), as well as with
SM Prime Holdings (SM Prime) for the lease of a space in the said building. Phuture
was issued a provisional Grant of Authority (GOA) on December 5, 2006 by
PAGCOR, subject to compliance with certain requirements, and received an Award
Notice from SM Prime on January 10, 2007.[4]

Thereafter, Phuture processed, completed and submitted to the Permits and

Licensing Division of the City Mayor of Bacolod City its Application for Permit to
Engage in Business, Trade or Occupation to operate bingo games at SM Bacolod
and paid the fees therefor. It was then issued a claim slip for its permit on February
19, 2007, which was to be claimed on March 16, 2007.[5] In the meantime, Phuture
further amended its AOI on February 27, 2007 to reflect its engagement in bingo
operations as its primary purpose.

Phuture commenced bingo operations at SM Bacolod on March 2, 2007, prior to the

issuance of the actual hard copy of the mayor's permit. However, at around 6:10
a.m. of March 3, 2007, respondent learned that its bingo outlet was padlocked by
agents of the Office of the City Legal Officer and that a copy of a Closure Order
dated March 2, 2007 was posted at the entrance of the bingo outlet.[6]

Phuture claimed that the closure of its bingo outlet at SM Bacolod is tainted with
malice and bad faith and that petitioners did not have the legal authority to shut
down said bingo operations, especially since PAGCOR itself had already issued a
provisional GOA in its favor.

On March 7, 2007, the RTC conducted a summary hearing to determine the

sufficiency of the form and substance of the application for the issuance of a
temporary mandatory order and/or preliminary mandatory injunction to remove the
padlock installed at respondent's place of business at SM Bacolod and allow it to
conduct unhampered bingo operations.[7] In the course of the summary hearing,
specifically on March 9, 2007, petitioners released in open court to respondent's
counsel the hard copy of the Mayor's Permit dated February 19, 2007 which
indicated the kind of business allowed is "Professional Services,
Band/Entertainment. Services." Phuture's counsel, however, refused to receive the
same, protesting that it was not the Mayor's Permit which respondent had applied
for.[8]

On March 19, 2007, petitioners filed their Comment and Answer with Counterclaim,
denying the allegations set forth in the Petition for Mandamus and Damages and
presenting a slightly different set of facts,[9] as follows:

On January 10, 2007, Phuture applied for the renewal of its mayor's permit with
"professional services, band/entertainment services" as its declared line of
business, providing the address of the business as "RH Building, 26 Lacson Street,
Barangay 5" instead of SM Bacolod where respondent's bingo operations was
located.[10]

Upon submission of the requirements on February 19,2007 and while the

application was being processed, Phuture was issued a "claim slip" for it to claim
the actual mayor's permit on March 16, 2007 if the requirements were found to be
in order.[11] However, petitioners found discrepancies in Phuture's submitted
requirements, wherein the application form was notarized earlier than the
amendment of its AOI to reflect the company's primary purpose for bingo
operations. Aside from this, respondent failed to pay the necessary permit
fee/assessment fee under the applicable tax ordinances of the City of Bacolod.[12]

Also, without waiting for the release of the mayor's permit, respondent started the
operation of its bingo outlet at SM Bacolod. This prompted the former City Legal
Officer, Atty. Allan Zamora, to issue a Closure Order dated March 2, 2007, pursuant
to City Tax Ordinance No. 93-001, Series of 1993,[13] which declares unlawful for
any person to operate any business in the City of Bacolod without first obtaining a
permit therefor from the City Mayor and paying the necessary permit fee and other
charges to the City Treasurer.

The Closure Order was presented by petitioners' representative to respondent's

lawyers to negotiate a possible peaceful solution before its implementation.
However, respondent simply ignored the information relayed to them and thus, at
around 6:00 a.m. on March 3, 2007, the Composite Enforcement Unit under the
Office of the City Legal Officer implemented the Closure Order.[14]

Petitioners contended that the claim slip so heavily relied upon by respondent was a
mere oversight or human error of the City Government's employee who processed
the same, who was likewise duped by the tampered entries that respondent's
application was for a permit for bingo operations when, in truth, it was only for the
renewal of a previously-issued permit albeit for a different line of business, i.e.,
"professional services, band/entertainment services."[15]

Ruling of the Regional Trial Court

In a Decision[16] dated March 20, 2007, the RTC denied the prayer for the issuance
of a temporary mandatory order and dismissed the case for lack of merit, to wit:

In view of the foregoing disquisitions, it follows that the prayer for issuance of a
temporary mandatory order prayed for must be denied.

WHEREFORE, in the light of all the foregoing discussions, the instant petition is
ordered DISMISSED for lack of merit, without prejudice to filing an application of a
Mayor's Permit specifically for bingo operation. Respondents' counterclaim is
ordered DISMISSED, without prejudice to filing appropriate action with a court of
competent jurisdiction.

Without pronouncement as to costs. 

SO ORDERED.[17]

Phuture filed an Urgent Motion for Partial Reconsideration on April 2, 2007, but the
same was denied by the RTC in its Order dated September 6, 2007.[18] Thus,
respondent elevated the matter to the CA on appeal.[19]

Ruling of the Court of Appeals

In the assailed Decision dated February 27, 2009, the CA partially granted the
appeal by affirming the trial court's denial of the application for a temporary
mandatory order but reversing the dismissal of the suit for damages and ordering
the case to be reinstated and remanded to the court of origin for further
proceedings. The dispositive portion of the assailed Decision reads:

WHEREFORE, based on the foregoing premises, the appeal is PARTLY GRANTED.

The Decision of Branch 49 of the Regional Trial Court of Bacolod City dated 20
March 2007 and Order dated 06 September 2007, denying the application for a
Temporary Mandatory Order is AFFIRMED. The dismissal of the main action
is REVERSED and is hereby REINSTATED and REMANDED to the court of origin
for further proceedings.

SO ORDERED.[20]

The CA pronounced that the issue of whether the RTC erred in dismissing the
prayer for temporary mandatory order for the removal of the padlock allegedly
installed illegally at respondent's place of business at SM Bacolod, as well as the
prayer ordering petitioners to allow respondent to conduct unhampered bingo
operations during the pendency of the case, had already been rendered moot since,
with the onset of another year, it was necessary to apply for another business
permit with the Mayor's Office.[21]

Nevertheless, the CA proceeded to rule on the issue on whether the closure of

respondent's bingo operations at SM Bacolod was effected in a manner consistent
with law. While it ruled that the Mayor's power to issue licenses and permits is
discretionary, and thus, cannot be compelled by mandamus, it found that
respondent was not given due notice and hearing as to the closure of its business
establishment at SM Bacolod. Based on the CA's finding on the manner by which
the closure of the bingo operations was effected, it concluded that respondent was
denied its proprietary right without due process of law. Accordingly, the CA ordered
the case to be reinstated and remanded to the RTC to determine if damages should
be awarded.[22]

Petitioners timely interposed a Motion for Reconsideration,[23] protesting the CA's

order to remand the case to the RTC for trial on the aspect of damages. The CA,
however, maintained its position, issuing the now assailed Resolution. Aggrieved,
petitioners brought the matter before this Court through the present recourse.

The Petition

Petitioners again limit their argument to the CA's order to remand the case to the
RTC for trial on the aspect of damages. According to petitioners, hearing the action
for damages effectively violates the City's immunity from suit since respondent had
not yet obtained the consent of the City Government of Bacolod to be included in
the claim for damages. They also argue that the other petitioners, the City Mayor
and other officials impleaded, are similarly immune from suit since the acts they
performed were within their  lawful duty and functions.[24] Moreover, petitioners
maintain that they were merely performing governmental or sovereign acts and
exercised their legal rights and duties to implement the provisions of the City
Ordinance.[25] Finally, petitioners contend that the assailed Decision contained
inconsistencies such that the CA declared mandamus to be an inappropriate
remedy, yet allowed the case for damages to prosper.[26]

In its Comment,[27] respondent Phuture argues that the grounds raised by

petitioners should not be considered since these were only invoked for the first time
on appeal. Aside from this, respondent asserts that the case for damages should
proceed since petitioners allegedly caused the illegal closure of its bingo outlet
without proper notice and hearing and with obvious discrimination.

In their Reply to the Comment dated August 26, 2010, petitioners oppose
respondent's arguments, saying that the issues they raised in the instant petition
cannot be considered as having been raised for the first time since they are
intertwined and bear relevance and close relation to the issues resolved by the trial
court. They further reiterate that they cannot be held liable for damages since they
were merely performing governmental or sovereign acts in the issuance of a
mayor's permit. Thus, they argue that whatever damages that respondent may
have incurred belong to the concept of damnum absque injuria for which the law
provides no remedy.[28]

The Issues
Stripped of the verbiage, the sole issue in this case ts whether petitioners can be
made liable to pay respondent damages.

The Court's Ruling

The petition is meritorious.

Petitioners have not given their consent to be sued

The principle of immunity from suit is embodied in Section 3, Article XVI of the
1987 Philippine Constitution which states that "[t]he State cannot be sued without
its consent." The purpose behind this principle is to prevent the loss of
governmental efficiency as a result of the time and energy it would require to
defend itself against lawsuits.[29] The State and its political subdivisions are open to
suit only when they consent to it.

Consent may be express or implied, such as when the government exercises its
proprietary functions, or where such is embodied in a general or special law.[30] In
the present case, respondent sued petitioners for the latter's refusal to issue a
mayor's permit for bingo operations and for closing its business on account of the
lack of such permit. However, while the authority of city mayors to issue or grant
licenses and business permits is granted by the Local Government Code (LGC),
[31]
 which also vests local government units with corporate powers, one of which is
the power to sue and be sued, this Court has held that the power to issue or grant
licenses and business permits is not an exercise of the government's proprietary
function. Instead, it is in an exercise of the police power of the State, ergo a
governmental act. This is clearly elucidated by the Court in Acebedo Optical
Company, Inc. v. The Honorable Court of Appeals:[32]

The Court of Appeals erred in adjudging subject business permit as having been
issued by respondent City Mayor in the performance of proprietary functions of
Iligan City. As hereinabove elaborated upon, the issuance of business licenses
and permits by a municipality or city is essentially regulatory in nature.
The authority, which devolved upon local government units to issue or
grant such licenses or permits, is essentially in the exercise of the police
power of the State within the contemplation of the general welfare clause of the
Local Government Code. (emphasis supplied)

No consent to be sued and be liable for damages can thus be implied from the mere
conferment and exercise of the power to issue business permits and licences.
Accordingly, there is merit in petitioners' argument that they cannot be sued by
respondent since the City's consent had not been secured for this purpose. This is
notwithstanding petitioners' failure to raise this exculpatory defense at the first
instance before the trial court or even before the appellate court.

As this Court has repeatedly held, waiver of immunity from suit, being in derogation
of sovereignty, will not be lightly inferred.[33] Moreover, it deserves mentioning that
the City of Bacolod as a government agency or instrumentality cannot be estopped
by the omission, mistake or error of its officials or agents.[34] Estoppel does not also
lie against the government or any of its agencies arising from unauthorized or
illegal acts of public officers.[35] Hence, we cannot hold petitioners estopped from
invoking their immunity from suit on account of having raised it only for the first
time on appeal. On this score, Justice Barreda's Opinion in Insurance Co. of North
America v. Osaka Shosen Kaisha[36] is particularly illuminating:

x x x [T]he real reason why, from the procedural point of view, a suit against the
state filed without its consent must be dismissed is because, necessarily, any such
complaint cannot state a cause of action, since, as the above decision confirms,
"there can be no legal right as against the authority that makes the law on which
the right depends." x x x

The question that arises now is, may failure to state a cause of action be alleged as
a ground of dismissal for the first-time on appeal? x x x

x x x Indeed, if a complaint suffers from the infirmity of not stating facts sufficient
to constitute a cause of action in the trial court, how could there be a cause of
action in it just because the case is already on appeal? Again, if a complaint should
be dismissed by the trial court because it states no cause of action, how could such
a complaint be the basis of a proceeding on appeal? The answer, I submit, is found
in section 2 of Rule 9 which provides:

xxxx

x x x The requirement that this defense should be raised at the trial is only to give
the plaintiff a chance to cure the defect of his complaint, but if, as in this case, the
lack of consent of the state cannot be cured because it is a matter of judicial notice
that there is no law allowing the present suit, (only Congress that can give such
consent) the reason for the rule cannot obtain, hence it is clear that such non-
suability may be raised even on appeal. After all, the record on appeal can be
examined to find out if the consent of the state is alleged in the complaint.

xxxx

x x x It is plain, however, that as far as the date is concerned, this rule of waiver
cannot apply, for the simple reason that in the case of the state as already stated,
the waiver may not be made by anyone other than Congress, so any appearance in
any form made on its behalf would be ineffective and invalid if not authorized by a
law duly passed by Congress. Besides, the state has to act thru subalterns who are
not always prepared to act in the premises with the necessary capability, and
instances there can be when thru ignorance, negligence or malice, the interest of
the state may not be properly protected because of the erroneous appearance
made on its behalf by a government lawyer or some other officer, hence, as a
matter of public policy, the law must be understood as insulating the state from
such undesirable contingencies and leaving it free to invoke its sovereign attributes
at any time and at any stage of a judicial proceeding, under the principle that the
mistakes and ommissions of its officers do not bind it.

Petitioners are not liable for damages

As to the primary issue of whether petitioners are liable to respondent for damages,
respondent Phuture alleged that petitioners are guilty of surreptitiously padlocking
its SM bingo outlet in a "patently arbitrary, whimsical, capricious, oppressive,
irregular, immoral and shamelessly politically motivated" manner and with clear
discrimination since the majority owners of the company are the sons of petitioner
Mayor Leonardia's political rival, then Congressman Monico Puentevella.[37] Such
contention is clearly but non sequitur, grounded as it is in pure conjecture.

Sticking closely to the facts, it is best to recapitulate that while the CA ruled that
respondent was not given due notice and hearing as to the closure of its business
establishment at SM Bacolod, it nevertheless remanded the issue of the award of
damages to the trial court for further proceedings. Such action would only be an
exercise in futility, as the trial court had already ruled in its September 6, 2007
Decision that respondent Phuture had no right and/or authority to operate bingo
games at SM Bacolod because it did not have a Business Permit and has not paid
assessment for bingo operation. Thus, it held that petitioners acted lawfully in
stopping respondent's bingo operation on March 2, 2007 and closing its
establishment for lack of any business permit.

The trial court further found that the Mayor's Office had already decided and
released a Business Permit for "Professional Services, Band/Entertainment
Services" dated January 19, 2007 to respondent, which cannot reasonably expect
to receive a Mayor's Permit for "Bingo Operations" unless and until it files a new
application for bingo operations, submit the necessary requirements therefor, and
pay the corresponding assessment.[38]

Aside from this, the RTC had also found that respondent's reliance on the GOA
issued by PAGCOR, the SM Award Notice, and the "questionable" Claim Slip and
Application paper tainted with alteration/falsification did not appear to be a right
that is clear and unmistakable. From this, the trial court concluded that the right
being claimed by respondent to operate bingo games at SM Bacolod was, at the
very least, doubtful.[39]

Based on the above observations made by the trial court, it appears that
respondent had no clear and unmistakable legal right to operate its bingo
operations at the onset. Respondent failed to establish that it had duly applied for
the proper permit for bingo operations with the Office of the Mayor and, instead,
merely relied on the questionable claim stub to support its claim. The trial court
also found that the application form submitted by respondent pertained to a
renewal of respondent's business for "Professional Services, Band/Entertainment
Services" located at "RH Bldg., 26th Lacson St." and not at SM Bacolod. These
factual findings by the trial court belie respondent's claim that it had the right to
operate its bingo operations at SM Bacolod.

Certainly, respondent's claim that it had applied for a license for bingo operations is
questionable since, as it had admitted in its Petition for Mandamus and Damages,
the primary purpose in its AOI was only amended to reflect bingo operations on
February 14, 2007 or more than a month after it had supposedly applied for a
license for bingo operations with the Office of the Mayor. It is settled that a judicial
admission is binding on the person who makes it, and absent any showing that it
was made through palpable mistake, no amount of rationalization can offset such
admission.[40] This admission clearly casts doubt on respondent's so-called right to
operate its business of bingo operations.

Petitioners, in ordering the closure of respondent's bingo operations, were

exercising their duty to implement laws and ordinances which include the local
government's authority to issue licenses and permits for business operations in the
city. This authority is granted to them as a delegated exercise of the police power
of the State. It must be emphasized that the nature of bingo operations is a form of
gambling; thus, its operation is a mere privilege which could not only be regulated,
but may also very well be revoked or closed down when public interests so require.
[41]

In this jurisdiction, we adhere to the principle that injury alone does not give
respondent the right to recover damages, but it must also have a right of action for
the legal wrong inflicted by petitioners. In order that the law will give redress for an
act causing damage, there must be damnum et injuria that act must be not only
hurtful, but wrongful. The case of The Orchard Golf & Country Club, Inc., et al. v.
Ernesto V. Yu and Manuel C. Yuhico,[42] citing Spouses Custodio v. Court of Appeals,
[43]
 is instructive, to wit:

x x x [T]he mere fact that the plaintiff suffered losses does not give rise to a right
to recover damages. To warrant the recovery of damages, there must be both a
right of action for a legal wrong inflicted by the defendant, and damage resulting to
the plaintiff therefrom. Wrong without damage, or damage without wrong, does not
constitute a cause of action, since damages are merely part of the remedy allowed
for the injury caused by a breach or wrong.

xxxx

In order that a plaintiff may maintain an action for the injuries of which he
complains, he must establish that such injuries resulted from a breach of duty
which the defendant owed to the plaintiff a concurrence of injury to the plaintiff and
legal responsibility by the person causing it. The underlying basis for the award of
tort damages is the premise that an individual was injured in contemplation of law.
Thus, there must first be the breach of some duty and the imposition of liability for
that breach before damages may be awarded; it is not sufficient to state that there
should be tort liability merely because the plaintiff suffered some pain and
suffering.

xxxx

In other words, in order that the law will give redress for an act causing damage,
that act must be not only hurtful, but wrongful. There must be damnum et injuria.
If, as may happen in many cases, a person sustains actual damage, that is, harm
or loss to his person or property, without sustaining any legal injury, that is, an act
or omission which the law does not deem an injury, the damage is regarded
as damnum absque injuria.

Considering that respondent had no legal right to operate the bingo operations at
the outset, then it is not entitled to the damages which it is demanding from
petitioners.

WHEREFORE, the petition is hereby GRANTED. The Decision dated February 27,

2009 and the Resolution dated October 27, 2009 of the Court of Appeals in CA-G.R.
SP No. 03322 are hereby ANNULLED and SET ASIDE. The Decision dated March
20, 2007 of the Regional Trial Court of Bacolod City, Branch 49 is
hereby REINSTATED.
SO ORDERED.
 THIRD DIVISION
[ G.R. No. 198008, February 04, 2019 ]
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE
REGIONAL EXECUTIVE DIRECTOR, REGION X, DEPARTMENT
OF PUBLIC WORKS AND HIGHWAYS, PETITIONER, VS.
BENJOHN FETALVERO, RESPONDENT.

DECISION

LEONEN, J.: 

Money claims against the government cannot be the subject of writs of execution
absent any showing that they have been brought before the Commission on Audit,
under this Court's Administrative Circular No. 10-2000[1] and Commission on Audit
Circular No. 2001-002.[2]

This is a Petition for Review on Certiorari[3] praying that the July 29, 2011
Decision[4] of the Court of Appeals be reversed, and that the September 22,
2009[5] and April 23, 2010[6] Orders of the Regional Trial Court be annulled.
[7]
 Further, it is prayed that a temporary restraining order be issued to enjoin the
trial court from implementing the assailed Orders. The Court of Appeals affirmed
the trial court Orders, which granted the Motion for the Issuance of an Order for a
Writ of Garnishment filed by Benjohn Fetalvero (Fetalvero).[8]

Fetalvero owned a 2,787-square meter parcel of land in Iligan City, Lanao del
Norte. The lot was covered by Transfer Certificate of Title (TCT) No. T-25,233 (a.f.).
[9]

In 1999, the Department of Public Works and Highways, Region X took 569 square
meters from Fetalvero's property to be used in its flood control project. Fetalvero
stated that the project's construction on that portion of land rendered the remaining
part useless, so he demanded payment for the entire area at P15,000.00 per
square meter. However, under Presidential Administrative Order No. 50, series of
1999, the just compensation Fetalvero was entitled to was only P2,500.00 per
square meter, or a total of P1,422,500.00, plus 10% thereof. The rate was based
on the Bureau of Internal Revenue zonal valuation in 1999, when the property was
taken. Despite negotiations, the parties failed to agree on the amount of just
compensation.[10]

On February 13, 2008, the Republic of the Philippines (Republic), through the Office
of the Solicitor General, filed before the Regional Trial Court a Complaint[11] for
expropriation against Fetalvero.[12] It prayed "for the determination and payment of
the just compensation and the entry of a judgment of condemnation of the 569
square meters portion of [Fetalvero's] property."[13] The case, docketed as Civil
Case No. 7118, was raffled to Branch 3 under Presiding Judge Albert B. Abragan
(Judge Abragan).[14]

Subsequently, the Office of the Solicitor General sent a letter[15] dated April 10,
2008 to Atty. Earnest Anthony L. Lorea (Atty. Lorea), the Legal Staff Chief of the
Department of Public Works and Highways, Region X. In its letter, the Office of the
Solicitor General deputized Atty. Lorea to assist it in Civil Case No. 7118, as his
authority was "subject to the reservation contained in the Notice of Appearance
filed by [the] Solicitor General[.]"[16]

On April 16, 2008, the Office of the Solicitor General filed before the trial court a
Notice of Appearance[17] dated April 10, 2008. It entered its appearance as counsel
for the Republic in Civil Case No. 7118, and informed the trial court that it
authorized Atty. Lorea to appear on its behalf. It emphasized that since it
"retain[ed] supervision and control of the representation in [the] case and [had] to
approve withdrawal of the case, non-appeal[,] or other actions which appear to
compromise the interest of the Gove1nment, only notices of orders, resolutions,
and decisions served on him will bind the [Republic]."[18]

On June 27, 2008, the trial court issued an Order[19] and referred the case to the
Philippine Mediation Center for mediation.[20]

On September 1, 2008, the parties entered into a Compromise Agreement, which

read:

UNDERSIGNED PARTIES:                                                     

Regional Executive Director, Region 10, DPWH

-And-

Benjohn Fetalvero                                            

AGREE as follows:

1. That the area involved is 1,428 square meters.

2. That the price per square meter is Nine Thousand Five Hundred Pesos (PHP
9,500.00) per square meter or a total of Thirteen Million Five Hundred
Sixty[-]Six Thousand & 00/100 (PHP 13,566,000.00) which latter is the
amount to be paid in full b[y] the plaintiff to the defendant not later than
September, 2009.

3. After September, 2009, it will earn interest at 12% per annum until fully
paid.
 4. Expenses for documentation and transfer to the account of Plaintiff.

IN WITNESS WHEREOF, the parties hereto have mutually and voluntarily agreed to
the above stipulations and sign this Agreement at PMC Iligan City, on this 1st day of
September, 2008 for the consideration and approval of the Honorable Court.

  (Sgd) illegible..  
Atty. Ernest Lorea  (Sgd) Benjohn Fetalvero
Plaintiff/Complainant Defendant
   
        Assisted by:  
   
Atty. GERARDO D. PAGUIO ERWIN TRACY E. DACUP 
Mediator Mediation Staff Asst. II
Mediation Supervisor/Coordinator[21]

Fetalvero filed before the trial court a motion to approve the Compromise
Agreement and for the issuance of judgment.[22]

On October 17, 2008, the trial court issued an Order[23] approving the Compromise
Agreement. On November 6, 2008, the Republic received a copy of the Order.[24]

In a letter dated May 13, 2009, Jaime A. Pacanan, Assistant Secretary and Central
Right of Way Committee Chair of the Department of Public Works and Highways,
Manila, requested advice from the Office of the Solicitor General regarding the
Compromise Agreement's legality.[25]

In its letter[26] dated June 4, 2009, the Office of the Solicitor General replied that
the government cannot be bound by the Compromise Agreement since it was not
submitted to its office for review, which is a condition under the deputation letter
and the Notice of Appearance. Thus, it was improper for the Department of Public
Works and Highways to directly submit the Compromise Agreement to the trial
court for judgment. Further, the Compromise Agreement failed to state how it
arrived at the just compensation of P9,500.00 per square meter.[27]

Meanwhile, Fetalvero filed on July 20, 2009 a Motion for the Issuance of an Order
for a Writ of Garnishment for the satisfaction of the trial court's October 17, 2008
Order.[28] He alleged that Sheriff Sandor B. Bantuas served a Writ of Execution to
Atty. Lorea on June 2, 2009 and June 24, 2009. Both times, the latter ignored it
and refused to comply with and satisfy the trial court's judgment. It was, therefore,
necessary and just that the court issue a Writ of Garnishment in his favor.[29]

The Republic opposed the Motion, arguing that since the Compromise Agreement
was not legally binding, "it cannot be the subject of a valid writ of execution or
garnishment."[30] Moreover, the government still owns its funds and properties that
were in official depositaries; thus, these cannot be garnished or levied.[31]
In its September 22, 2009 Order,[32] the trial court granted Fetalvero's Motion. It
held:

From the arguments of both defendant-movant and the plaintiff, the court is more
inclined to agree with the observation of defendant-movant considering that the
record reveals that the Office of the Solicitor General was duly furnished copy of the
judgment of the court approving the Compromise Agreement dated October 17,
2008. Despite the lapse of almost a year, the Office of the Solicitor General never
lift[ed] a finger to question the validity of said Compromise Agreement. The OSG is
now precluded from questioning the validity of the compromise agreement. It
should be noted that judgment based on compromise agreement is immediately
executory. Hence, the plaintiff cannot now question the validity of the said
judgment without transgressing the doctrine of immutability of judgment.[33]

The trial court further held that since the Office of the Solicitor General received a
copy of the trial court's October 17, 2008 Order, the judgment was valid and
binding on the Republic. Further, government funds in official depositaries remain
government funds only if there was no appropriation by law. The trial court found
that funds were already appropriated under SAA-SR 2009-05-001538 of the
Department of Public Works and Highways "for payment of the road-rights-of-
way."[34] Hence, Fetalvero's Motion should be granted.[35]

The dispositive portion of the trial court's September 22, 2009 Order read:

WHEREFORE, finding the motion to be well-founded the same is hereby granted.

The Sheriff of this Court may now proceed with the garnishment of plaintiff's funds
intended for the payment of road-rights-of-way under SAA-SR 2009-05-001538 of
the DPWH Main and/or Regional Office, as prayed for.

SO ORDERED.[36]

The Republic moved for reconsideration, but its Motion was denied by the trial court
in its April 23, 2010 Order.[37]

The Republic, through the Regional Executive Director of the Department of Public
Works and Highways, Region X, filed before the Court of Appeals a Petition for
Certiorari[38] against Fetalvero and Judge Abragan.[39] It again contended that the
Compromise Agreement was not binding on the Republic since it was not submitted
to the Office of the Solicitor General for review, and the basis for the amount of just
compensation was not stated in it.[40] It insisted that "government funds and
properties may not be seized under writs of execution or garnishment to satisfy
court judgments."[41]

On July 29, 2011, the Court of Appeals rendered a Decision,[42] denying the Petition
for lack of merit.[43] It found that the Office of the Solicitor General received a copy
of the trial court's October 17, 2008 Order, but did not file any pleading or action to
assail it. If the Office of the Solicitor General wanted to question the Compromise
Agreement's validity, it should have raised the matter immediately, not when the
Order was about to be executed.[44] The Court of Appeals added:

As adverted to, records show that the OSG was served a copy of the Order dated
October 17, 2008 which approved the compromise agreement. Hence, it was
binding upon it. To rule otherwise would create havoc and absurdity in our
procedural system wherein no judgment based on compromise would ever be final
and executory despite the OSG's receipt of the same on the basis merely that the
OSG did not previously receive a copy of the said compromise subject of the said
decision and/or order.[45]

The Court of Appeals further held that public funds may be seized or garnished if
they were "already allocated by law specifically for the satisfaction of the money
judgment against the government."[46]

The dispositive pm1ion of the Court of Appeals Decision read:

WHEREFORE, premises considered, the instant petition for certiorari is DENIED for

lack of merit. The assailed Orders dated September 22, 2009 and April 23, 2010
are AFFIRMED in toto.

SO ORDERED.[47] (Emphasis in the original)

On October 6, 2011, the Republic, through the Office of the Solicitor General, filed
before this Court a Petition for Review on Certiorari[48]against Fetalvero. It prayed
that the July 29, 2011 Decision of the Court of Appeals be reversed and set aside.
[49]
 Respondent submitted his Comment[50] dated February 8, 2012, while petitioner
submitted its Reply[51] dated July 17, 2012.

In its January 28, 2013 Resolution,[52] this Court gave due course to the Petition and
informed the parties to submit their respective memoranda. Petitioner submitted its
Memorandum[53] dated April 29, 2013, while respondent submitted his
Memorandum[54] on May 6, 2013.

Petitioner asserts that the Court of Appeals erred in dismissing its Petition "on a
purely technical ground."[55] It argues that the Court of Appeals should have
disposed the case based on its merit since it involves a substantial amount of public
funds. Petitioner reiterates that the Compromise Agreement is void since it was
entered into contrary to the reservation in the deputation letter and the Notice of
Appearance. The Compromise Agreement was directly submitted to the trial court
without the Office of the Solicitor General's prior review and approval.[56]

Petitioner avers that the just compensation is grossly disadvantageous to the

government. The actual market value of properties in Mahayahay, Iligan City is
P500.00 to P1,000.00 per square meter in 2003. However, the just compensation
for respondent's property in the Compromise Agreement is P9,500.00 per square
meter. Since the property was expropriated in 1999, petitioner argues that the just
compensation should have been lower than the properties' selling price in 2003.
Moreover, the Compromise Agreement does not indicate how the parties arrived at
the just compensation.[57]

Finally, petitioner contends that despite the approval of the allocation under SAA-
SR 2009-05-001538 and the partial payment of the just compensation to
respondent, it can still question the Compromise Agreement's validity. Assuming
that respondent proves that he has a claim, he cannot seize government funds by
virtue of a writ of execution or garnishment. He must first file it before the
Commission on Audit under Commonwealth Act No. 327, as amended by Section 26
of Presidential Decree No. 1445.[58]

On the other hand, respondent notes that the Compromise Agreement had been
approved by the trial court on October 17, 2008. Thus, it had already attained
finality by the time petitioner questioned its validity in June 2009. Respondent also
points out that petitioner did not even avail of the remedies under the Rules of
Court. It did not file an appeal, a motion for new trial, a petition for relief, or a
petition to annul the trial court Orders.[59] Instead, it filed a petition for certiorari to
"indirectly annul"[60] the judgments.

Respondent adds that the Court of Appeals correctly denied the Petition for
Certiorari, since petitioner failed to show that Judge Abragan, in issuing the assailed
Orders, committed grave abuse of discretion:[61]

The issuance of the said orders which granted the motion for issuance of an order
of writ of garnishment was not only proper, it was imperative as well because the
order/judgment of the court dated October 17, 2008 approving the compromise
agreement has long become final and executory, there being no motion for
reconsideration or any appellate action taken by the petitioner in respect of the said
order despite its receipt of the same on November 6, 2008. It is well established
that a compromise agreement may be enforced by a writ of execution.[62]

Lastly, respondent states that he was issued a Release of Funds to Cover Payment
of Right-of-Way Claims for Region X under SARO No. BMB-A-10-0018567 on
September 23, 2010 in the amount of P898,266.30, and a Disbursement Voucher in
the same amount as partial payment or satisfaction of the court order in Civil Case
No. 7118 on November 22, 2010.[63]

The issues for this Court's resolution are:

First, whether or not the Compromise Agreement is void for not having being
submitted to the Office of the Solicitor General for review;

Second, whether or not the Compromise Agreement is void since the amount of just
compensation is allegedly grossly disadvantageous to the government; and

Finally, whether or not government funds may be seized under a writ of execution
or a writ of garnishment in satisfaction of court judgments.

Petitioner claims that the Compromise Agreement is void because: (1) it was not
submitted to the Office of the Solicitor General for review; and (2) the amount of
just compensation was grossly disproportionate to the property's actual market
value, and its computation was not in the Compromise Agreement.

Petitioner's contentions are partly meritorious.

On petitioner's first claim, this Court takes this opportunity to reiterate our ruling
in Republic of the Philippines v. Viaje, et al.,[64] which clarified the role of a
deputized counsel in relation to the Office of the Solicitor General:

The power of the OSG to deputize legal officers of government departments,

bureaus, agencies and offices to assist it in representing the government is well
settled. The Administrative Code of 1987 explicitly states that the OSG shall have
the power to "deputize legal officers of government departments, bureaus, agencies
and offices to assist the Solicitor General and appear or represent the Government
in cases involving their respective offices, brought before the courts and exercise
supervision and control over such legal officers with respect to such cases." But it is
likewise settled that the OSG's deputized counsel is "no more than the 'surrogate'
of the Solicitor General in any particular proceeding" and the latter remains the
principal counsel entitled to be furnished copies of all court orders, notices, and
decisions. . . . The appearance of the deputized counsel did not divest the OSG of
control over the case and did not make the deputized special attorney the counsel
of record.[65] (Citations omitted)

Here, the Office of the Solicitor General, as the principal counsel, is shown in both
the deputation letter addressed to Atty. Lorea and the Notice of Appearance filed
before the trial court.

The deputation letter read:

  RE: Civil Case No. 7118

  Regional Trial Court, Br. 03, Iligan City
REPUBLIC OF THE 
PHILIPPINES, Rep. by the 
REGIONAL EXECUTIVE 
DIRECTOR, REGION X, 
DEPT. OF PUBLIC WORKS 
AND HIGHWAYS (Plaintiffs) 
 vs. BENJOHN FETALVERO
(Defendant).
x=============================x

Sir:

Pursuant to Section 35(7), E.O. No. 292 and Section 11(e), P.D. No. 1275, you are
hereby deputized to assist the Solicitor General in the above-captioned case.

Please be informed that your authority is subject to the reservation contained in the
Notice of Appearance filed by [the] Solicitor General in this case that only notices of
orders, resolutions, and decisions served on him will bind the Government, the
entity, agency and/or official represented.

Upon promulgation of judgment, please submit immediately your report and

recommendation to our Office for evaluation.[66](Emphasis supplied)

Meanwhile, the Notice of Appearance stated:

NOTICE OF APPEARANCE

The Branch Clerk of Court

RTC, Iligan City

G R E E T I N G S:

Please enter the appearance of the Office of the Solicitor General as counsel for the
Republic of the Philippines in the above-entitled case, and cause all notices of
hearings, orders, resolutions, decisions, and other processes to be served upon the
said Office at 134 Amorsolo St., Legaspi Village, Makati City.

Atty. Earnest Anthony L. Lorea, Chief, Legal Staff, Department of Public Works and
Highways (DPWH), Region 10, Bulua, Cagayan de Oro City has been authorized to
appear in this case and, therefore, should also be furnished notices of hearings,
orders[,] resolutions, decisions, and other processes. However, as the Solicitor
General retains supervision and control of the representation in this case and has to
approve withdrawal of the case, non-appeal or other actions which appear to
compromise the interest of the Government, only notices of orders, resolutions,
and decisions served on him will bind the party represented.

Adverse parties are likewise requested to furnish both the Solicitor General and the
Prosecutor with copies of their pleadings and motions.[67]  (Emphasis supplied)

In South Pacific Sugar Corporation, et al. v. Court of Appeals, et al.,[68] this Court

explained that:
[The] reservation to "approve the withdrawal of the case, the non-appeal, or other
actions which appear to compromise the interest of the government" was meant to
protect the interest of the government in case the deputized  . . . counsel acted in
any manner prejudicial to government.[69] (Emphasis supplied, citation omitted)

When Atty. Lorea entered into mediation, he only did so on behalf of the principal
counsel, the Solicitor General. Mediation necessarily involves bargaining of the
parties' interests, and a compromise agreement is one (1) of its consequences.
Under the reservation in the Notice of Appearance, Atty. Lorea must submit the
resulting Compromise Agreement to then Solicitor General Agnes VST
Devanadera[70] for review and approval, especially since the amount respondent
claims is significantly larger than what he was allegedly only entitled to get.
Without the Solicitor General's positive action on the Compromise Agreement, it
cannot be given any effect and cannot bind the Solicitor General's client, the
government.

Nonetheless, despite the lack of the Solicitor General's approval, this Court holds
that the government is still bound by the Compromise Agreement due to laches.

The Solicitor General is assumed to have known of the Compromise Agreement

since, as principal counsel, she was furnished a copy of the trial court's June 27,
2008 Order, which referred the case to mediation. Even if she did not know that
Atty. Lorea signed a Compromise Agreement, she was later informed of it through
the copy of the trial court's October 17, 2008 Order, which approved the
Compromise Agreement. The Solicitor General received the October 17, 2008 Order
on November 6, 2008; yet, she filed no appeal or motion to contest the Order or
the Compromise Agreement's validity.

Thus, based on the deputation letter, which stated that "only notices of orders,
resolutions, and decisions served on [the Office of the Solicitor General] will bind
the [g]overnment, the entity, agency[,] and/or official represented[,]"[71] and the
Notice of Appearance, which stated that "only notices of orders, resolutions, and
decisions served on [the Office of the Solicitor General] will bind the party
represented[,]"[72] the Solicitor General's receipt of the October 17, 2008 Order
bound petitioner to the trial court's judgment.

In Viaje, et al., only the Office of the Solicitor General was furnished copies of court
notices despite its request that the trial court also furnish its deputized counsel with
court notices.[73] This Court held:

It would have been more prudent for the RTC to have furnished the deputized
counsel of its notices. All the same, doing so does not necessarily clear the OSG
from its obligation to oversee the efficient handling of the case. And even if the
deputized counsel was served with copies of the courts notices, orders and
decisions, these will not be binding until they are actually received by theOSG. More
so in this case where the OSG's Notice of Appearance and its Letter deputizing the
LRA even contained the caveat that it is only notices of orders, resolutions and
decisions served on the OSG that will bind the Republic, the entity, agency and/or
official represented. In fact, the proper basis for computing a reglementary period
and for determining whether a decision had attained finality is service on the
OSG.  As was stated in National Power Corporation v. National Labor Relations
Commission:

The underlying justification for compelling service of pleadings, orders, notices and
decisions on the OSG as principal counsel is one and the same. As the lawyer for
the government or the government corporation involved, the OSG is entitled to the
service of said pleadings and decisions, whether the case is before the courts or
before a quasi-judicial agency such as respondent commission. Needless to say, a
uniform rule for all cases handled by the OSG simplifies procedure, prevents
confusion and thus facilitates the orderly administration of justice.[74] (Emphasis
supplied, citations omitted)

In Republic of the Philippines v. Intermediate Appellate Court,[75]  the government

failed to oppose the petition for reconstitution. This is despite receiving copies of
the petition and its annexes through the Registrar of Deeds, Director of Lands,
Solicitor General, and the Provincial Fiscal, and even after judgment on the
compromise agreement.[76] This Court held:

Thereafter, when judgment was rendered based on the compromise agreement

without awaiting the report and recommendation of the Land Registration
Administration and the verification of the Registrar of Deeds concerned, its failure
to file a motion to set aside the judgment of the court after due notice likewise
proves that no interest of the government was prejudiced by such judgment.[77]

The Solicitor General could have contested the June 27, 2008 and October 17, 2008
Orders, but she did not. There was no explanation of her inaction in any of the
pleadings. By the time petitioner filed a Petition for Certiorari, estoppel by laches
has already set in.

In addition, petitioner only resorted to a petition or certiorari when it failed to

appeal the case within the reglementary period. In Nippon Paint Employees Union-
Olalia v. Court of Appeals:[78]

It is elementary in remedial law that the use of an erroneous mode of appeal is

cause for dismissal of the petition for certiorariand it has been repeatedly stressed
that a petition for certiorari is not a substitute for a lost appeal. This is due to the
nature of a Rule 65 petition for certiorari which lies only where there is "no appeal,"
and "no plain, speedy and adequate remedy in the ordinary course of law." As
previously ruled by this Court:

. . . We have time and again reminded members of the bench and bar that a special
civil action for certiorari under Rule 65 lies only when "there is no appeal nor plain,
speedy and adequate remedy in the ordinary course of law." Certiorari can not be
allowed when a party to a case fails to appeal a judgment despite the availability of
that remedy, certiorari not being a substitute for lost appeal. The remedies of
appeal and certiorari  are mutually exclusive and not alternative or successive.
[79]
 (Emphasis in the original, citations omitted)

Petitioner's second claim is a question of fact improper in a petition for review

under Rule 45. In DST Movers Corporation v. People's General Insurance
Corporation:[80]

A Rule 45 petition pertains to questions of law and not to factual issues. Rule 45,
Section 1 of the 1997 Rules of Civil Procedure is unequivocal:

SECTION 1. Filing of Petition with Supreme Court. — A party desiring to appeal by

certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by
law, may file with the Supreme Court a verified petition for review on certiorari. The
petition shall raise only questions of law which must be distinctly set forth.

This court's Decision in Cheesman v. Intermediate Appellate Court distinguished

questions of law from questions of fact:

As distinguished from a question of law — which exists "when the doubt or

difference arises as to what the law is on a certain state of facts" — "there is a
question of fact when the doubt or difference arises as to the truth or the falsehood
of alleged facts;" or when the "query necessarily invites calibration of the whole
evidence considering mainly the credibility of witnesses, existence and relevancy of
specific surrounding circumstances, their relation to each other and to the whole
and the probabilities of the situation."

Seeking recourse from this court through a petition for review on certiorari under
Rule 45 bears significantly on the manner by which this court shall treat findings of
fact and evidentiary matters. As a general rule, it becomes improper for this court
to consider factual issues: the findings of fact of the trial court, as affirmed on
appeal by the Court of Appeals, are conclusive on this court. "The reason behind
the rule is that [this] Court is not a trier of facts and it is not its duty to review,
evaluate, and weigh the probative value of the evidence adduced before the lower
courts."[81] (Citations omitted)

Moreover, this Court held in Gadrinab v. Salamanca, et al.:[82]

A judgment on compromise agreement is a judgment on the merits. It has the

effect of res judicata,  and is immediately final and executory unless set aside
because of falsity or vices of consent. The doctrine of immutability of judgments
bars courts from modifying decisions that have already attained finality, even if the
purpose of the modification is to correct errors of fact or law.[83] (Emphasis in the
original)

II

The general rule is that government funds cannot be seized by virtue of writs of
execution or garnishment.[84] This doctrine has been explained in Commissioner of
Public Highways v. San Diego:[85]

The universal rule that where the State gives its consent to be sued by private
parties either by general or special law, it may limit claimant's action "only up to
the completion of proceedings anterior to the stage of execution" and that the
power of the Courts ends when the judgment is rendered, since government funds
and properties may not be seized under writs of execution or garnishment to satisfy
such judgments, is based on obvious considerations of public policy. Disbursements
of public funds must be covered by the corresponding appropriation as required by
law. The functions and public services rendered by the State cannot be allowed to
be paralyzed or disrupted by the diversion of public funds from their legitimate and
specific objects, as appropriated by law.[86]

Simply put, "no money can be taken out of the treasury without an
appropriation[.]"[87] Here, the trial court already found that:

[T]here is an appropriation intended by law for payment of road-rights-of-way.

Defendant [respondent here] even called the attention of the court of the existence
of SAA-SR 2009-05-001538 of the DPWH Main and/or Regional Office appertaining
to the fund intended for payment of the road-rights-of-way.[88]

Even petitioner admitted in its Memorandum "the approval of allocation for

payment of road right of way projects within Region 10 under SAA-SR 2009-
001538[.]"[89] Since there is an existing appropriation for the payment of just
compensation, and this Court already settled that petitioner is bound by the
Compromise Agreement, respondent is legally entitled to his money claim.
However, he still has to go through the appropriate procedure for making a claim
against the Government.

In Atty. Roxas v. Republic Real Estate Corporation,[90]  this Court elaborated on the
proper process of raising money claims against the government. In that case, the
trial court issued a writ of execution over the government funds for payment of land
reclaimed by Republic Real Estate Corporation. This Court held:

The case is premature. The money claim against the Republic should have been
first brought before the Commission on Audit.
The Writ of Execution and Sheriff De Jesus' Notice [of Execution] violate this Court's
Administrative Circular No. 10-2000 and Commission on Audit Circular No. 2001-
002, which govern the issuance of writs of execution to satisfy money judgments
against government.

Administrative Circular No. 10-2000 dated October 25, 2000 orders all judges of
lower courts to observe utmost caution, prudence, and judiciousness in the
issuance of writs of execution to satisfy money judgments against government
agencies. This Court has emphasized that:
....

. . . it is settled jurisprudence that upon determination of State liability, the

prosecution, enforcement or satisfaction thereof must still be pursued in
accordance with the rules and procedures laid down in P[residential] D[ecree] No.
1445, otherwise known as the Government Auditing Code of the Philippines
(Department of Agriculture v. NLRC, 227 SCRA 693, 701-02 [1993] citing Republic
vs. Villasor, 54 SCRA 84 [1973]). All money claims against the Government must
first be filed with the Commission on Audit which must act upon it within sixty
days.  Rejection of the claim will authorize the claimant to elevate the matter to the
Supreme Court on certiorari and in effect sue the State thereby (P[residential]
D[ecree] [No.] 1445, Sections 49-50).

For its part, Commission on Audit Circular No. 2001-002 dated July 31, 2001
requires the following to observe this Court's Administrative Circular No. 10-2000:
department heads; bureau, agency, and office chiefs; managing heads of
government-owned and/or controlled corporations; local chief executives; assistant
commissioners, directors, officers-in-charge, and auditors of the Commission on
Audit; and all others concerned.

Chapter 4, Section 11 of Executive Order No. 292 gives the Commission on Audit
the power and mandate to settle all government accounts. Thus, the finding that
government is liable in a suit to which it consented does not translate to
enforcement of the judgment by execution.

As a rule, public funds may not be disbursed absent an appropriation of law or

other specific statutory authority. Commonwealth Act No. 327, as amended by
Presidential Decree No. 1445, requires that all money claims against government
must first be filed before the Commission on Audit, which, in turn, must act upon
them within 60 days.

Only when the Commission on Audit rejects the claim can the claimant elevate the
matter to this Court on certiorari and, in effect, sue the state. Carabao, Inc. v.
Agricultural Productivity Commission has settled that "claimants have to prosecute
their money claims against the Government under Commonwealth Act 327 . . . and
that the conditions provided in Commonwealth Act 327 for filing money claims
against the Government must be strictly observed."
In Star Special Watchman and Detective Agency, Inc. v. Puerto Princesa City:

Under Commonwealth Act No. 327, as amended by Section 26 of P.D. No. 1445, it
is the C[ommission] o[n] A[udit] which has primary jurisdiction to examine, audit
and settle "all debts and claims of any sort" due from or owing the Government or
any of its subdivisions, agencies and instrumentalities, including government-owned
or controlled corporations and their subsidiaries[.]

[Republic Real Estate Corporation's] procedural shortcut must be rejected. Any

allowance or disallowance of its money claims is for the Commission on Audit to
decide, subject only to [Republic Real Estate Corporation's] remedy of appeal via a
petition for certiorari  before this Court.[91] (Emphasis in the original, citations
omitted)

Here, as in Atty. Roxas, respondent failed to show that he first raised his claim
before the Commission on Audit. Without this necessary procedural step,
respondent's money claim cannot be entertained by the courts through a writ of
execution.

III

Under Article III, Section 9 of the 1987 Constitution, "[p]rivate property shall not
be taken for public use without just compensation."[92]

This Court notes that for almost 20 years now, petitioner had been enjoying the use
of respondent's property without paying the full amount of just compensation under
the Compromise Agreement. Respondent had been deprived of his property for
almost two (2) decades. In keeping with substantial justice, this Court imposes the
payment of legal interest on the remaining just compensation due to respondent.
Consistent with this Court's ruling in Nacar v. Gallery Frames,[93]  this Court imposes
interest at the rate of twelve percent (12%) per annum from the time of taking
until June 30, 2013, and six percent (6%) per annum from July 1, 2013 until fully
paid.[94]

Thus, respondent's money claim under the Compromise Agreement should be

adjusted to reflect the interest rates imposed by this Court.

WHEREFORE, premises considered, the Petition is PARTLY GRANTED. The Court

of Appeals July 29, 2011 Decision in CA-G.R. SP No. 03710-MIN
is REVERSED and SET ASIDE, insofar as it affirmed the September 22, 2009 and
April 23, 2010 Orders of the Regional Trial Court in granting respondent Benjohn
Fetalvero's Motion for the Issuance of an Order for a Writ of Garnishment. This is
without prejudice to his filing of adjusted money claim before the Commission on
Audit.
The remaining just compensation due to Benjohn Fetalvero under the Compromise
Agreement is subject to interest at the rate of twelve percent (12%) per annum
from the time of taking until June 30, 2013, and six percent (6%) per annum from
July 1, 2013 until the allowance of the money claim by the Commission on Audit.

SO ORDERED.

Peralta, (Chairperson), A. Reyes, Jr., Hernando, and Carandang,* JJ., concur.

 FIRST DIVISION
[ G.R. No. 166518, June 16, 2009 ]
NATIONAL HOUSING AUTHORITY, PETITIONER, VS. HEIRS
OF ISIDRO GUIVELONDO, REGIONAL TRIAL COURT OF CEBU
CITY, BRANCH 19, AND THE COURT OF APPEALS,
RESPONDENTS. 

DECISION

PUNO, J.: 

Before us is a petition for review on certiorari under Rule 45 seeking the reversal of

the Decision[1] of the Court of Appeals (CA) in CA G.R. SP No. 85807 affirming the
omnibus order[2] of the Regional Trial Court (RTC), Branch 19, Cebu City, and the
order[3] denying the reconsideration thereof.

This case is an offshoot of G.R. No. 154411, promulgated on June 19, 2003,
entitled National Housing Authority (NHA) v. Heirs of Guivelondo, in which
we resolved once and for all the validity of the order of expropriation issued by the
RTC of Cebu City, Branch 11, condemning the properties of respondents located in
Barangay Carreta, Cebu City at P11,200.00 per square meter and the propriety of
the garnishment against petitioner's funds and personal properties for the payment
of just compensation to respondents. Pending the final resolution of G.R. No.
154411, a writ of execution was issued on January 14, 2001 by the RTC, Branch 11
in the amount of P104,641,600.00, as computed from respondents' 9,343 square
meters of land valued at P11,200.00 each. Pursuant to said writ of execution, the
court sheriff of RTC, Branch 11, Mr. Pascual Abordo, commenced levy and
garnishment upon NHA properties, which included bank deposits in various banks.
Hence, on June 16, 2001, the Philippine National Bank (PNB) and the Land Bank of
the Philippines (LBP) released the amount of P24,305,774.82 to respondents,
bringing the balance of the unsatisfied just compensation to P80,335,825.18. On
December 26, 2001, petitioner's account with the Philippine Veterans' Bank (PVB)
was garnished in the amount of P24,305,774.82, which then brought the computed
balance of unpaid just compensation to P80,299,506.72, though the PVB had yet to
release said amount to respondents. On July 10, 2003, the Development Bank of
the Philippines (DBP) released the garnished amount of P78,754,907.07, further
bringing down the balance to P1,544,299.65. Subsequently, on July 31, 2003, upon
the release by the LBP of the garnished amount of P1,474,299.65, the payment of
respondents' just compensation seemed to have been fully satisfied, save for the
release of the earlier garnished amount of P24,305.774.82. Finally, on August 28,
2003, the amount of P36,318.46 was remitted to respondents by the PVB,
prompting Sheriff Abordo to issue a notice of lifting or discharge of
levy/garnishment to the PNB, LBP, DBP, PVB and to the General Manager/Property
Custodian of NHA.

On October 8, 2003, Sheriff Abordo received a letter from respondents' counsel

requesting the former for the listing of the garnished and released accounts of
petitioner. In his reply letter dated October 9, 2003, Sheriff Abordo summarized
said garnishments and revealed that there was an unsatisfied amount of
P70,300.00. Hence, in his progress report to the RTC, Branch 11, dated October 14,
2003, Sheriff Abordo informed the court to wit:

Further, undersigned Sheriff respectfully informs the Honorable Court that when he
prepared his aforesaid Reply Letter and made a reconciliation of the garnished and
released accounts of plaintiff, he discovered that he inaccurately reflected in his
Progress Report dated July 14, 2003 a balance of P80,229,206.72 where it should
have been P80,299,206.72 which, as stated in the same report "was arrived at
after deducting from the total just compensation of P104,641,600.00 the
garnished and released money deposits of NHA with PNB and Landbank in
the amount of P24,305,774.82 and the garnished but not yet released
/claimed money deposit of NHA with" Philippine Veterans Bank in the amount
of P36,618.46. In other words, by mathematical computation: P104,641,600.00 -
P24,305,774.82 - P36,618.36 = P80,299,206.72 and not P80,229,206.72. The
balance reflected in the undersigned Sheriff's Progress Report dated July 14, 2003
is short by P70,000.00, hence, this did not result to over satisfaction of the
judgment of the Honorable Court.

Futhermore, undersigned Sheriff respectfully informs the Honorable Court that the
amount released by Philippine Veterans Bank is only P36,318.46 albeit its letter
dated December 26, 2001 stated an amount of P36,618.46 (short by P300).
[4]
 (emphases in the original)

On November 6, 2003, seeking to claim the unsatisfied amount of P70,300.00,

respondents filed with the RTC a motion for the issuance of an alias writ of
execution. On November 12, 2003, respondents likewise filed a motion for payment
of interest anchored on the premise that petitioner made piecemeal payments of
the judgment amount, causing a 32-month delay in the full satisfaction thereof
which entitled respondents to the payment of a legal interest of 12% per annum.
To simplify matters, respondents confined their claim to the interest for the
principal amount of P80,335,825.18 reckoned from October 31, 2000, the date the
entry of judgment was issued, to July 2003, when the last garnishment took place,
without including the P70,300.00 yet to be satisfied in the said principal amount.

Pursuant to a motion for inhibition filed by petitioner on August 4, 2003, the case
was re-raffled to the RTC, Branch 19, which ordered petitioner to file its
comment/opposition to both motions. After hearing the case, the RTC, Branch 19
issued an omnibus order dated February 16, 2004, disposing of the issues as
follows:

WHEREFORE, on the Motion for Issuance of an Alias Writ of [E]xecution, the same
is GRANTED. Let an Alias Writ of Execution issue to satisfy the shortage amount of
Php70,300.00.

Defendants' Motion for Payment of Interest is likewise GRANTED. Plaintiff is hereby

directed to pay the defendants within five (5) days from receipt hereof the amount
of Php25,695,746.15 representing interest of 12% p.a. for thirty two (32) months
of the unsatisfied portion of the just compensation in the amount of
Php80,299,206.72. Plaintiff is futher directed to pay interest of 12% p.a. on the 
Php25,695,746.15 interest from the date the five-day period given by the Court
expired until the same is paid.

xxx

SO ORDERED.[5]

On February 24, 2004, petitioner filed a motion for reconsideration which was
denied by the RTC, Branch 19 in an order dated July 27, 2004. Aggrieved,
petitioner filed a petition for review on certiorari with the CA which was denied for
lack of merit in a decision dated December 16, 2004, ratiocinating thus:

We now come to the question on whether respondent judge was correct in imposing
interest of 12% per annum for the delay in payment of just compensation by
petitioner sans an explicit pronouncement for such provision in the decision. We
rule in the affirmative on the following reasons:

1) A judgment is not confined to what appears on the face of the decision but also
those necessarily included therein or necessary thereto. Where a legal provision
exists providing for legal interest, the same not only constitute judicial notice, but
by operation of law, becomes inherent in every decision.

2) The imposition of interest at the time the decision was rendered would be purely
conjectural and speculative considering that delay in the payment could only be
ascertained at the time following after the rendition of the decision. The remedy for
any delay may be ventilated during the execution stage as in this case. Delay takes
the nature of a supervening event between the rendition of the decision and its due
execution, and the judge may take cognizance of it not only for the purpose of
expediency but also to prevent multiplicity of suits. At any rate, the judge is now
familiar with the history and development of the case, and it is he who can give the
most prudent assessment over an issue such as that of delay and the concomitant
damages for the delay.

xxx

Conversely, [w]e also find nothing irregular in issuance of the alias writ of execution
by respondent judge covering the deficiency in the actual judgment amount. The
rule is that the execution must conform substantially to that ordained or decreed in
the dispositive part of the decision. Therefore, upon report of the sheriff of a
deficiency in the execution of the judgment amount, an alias writ of execution
covering said deficiency is proper.[6]

Hence, petitioner filed the instant petition for review, where it argues that the CA
gravely erred in affirming the RTC when it granted respondents' motion for issuance
of an alias writ of execution and motion for payment of interest, considering that
expropriation proceedings have already been terminated and that the order to pay
respondents just compensation was silent on the payment of interest.

We deny the petition.

As a side issue, petitioner points out that the CA erred in ruling that RTC, Branch 19
had jurisdiction over the case, as petitioner was allegedly not notified of 1) the
Order dated October 16, 2003 where the Presiding Judge of Branch 11 inhibited
himself from handling the expropriation, 2) the Order of the Executive Judge of the
RTC approving such inhibition, and 3) the Order re-raffling the case to RTC, Branch
11. We are not convinced. In the first place, it was petitioner which filed a Motion
for Inhibition against the presiding judge of RTC, Branch 11, Hon. Isaias Dicdican, a
move that precipitated the re-raffling of the case to Branch 19 of the same RTC.
Hence, petitioner cannot deny that it had knowledge of moves to have the case
handled by another branch. Assuming arguendo that petitioner honestly believed
that the case was still pending with Branch 11, petitioner still cannot claim that it
had no knowledge of the proceedings in Branch 19. It is well to remember that the
court frowns upon the undesirable practice of a party submitting his case for
decision and then accepting the judgment only if favorable, and attacking it for lack
of jurisdiction when adverse.[7] While jurisdiction of a tribunal may be challenged at
any time, sound public policy bars petitioner from doing so after having procured
that jurisdiction himself, speculating on the fortunes of litigation.[8]In the instant
case, the fact remains that petitioner filed motions with Branch 19 and even sought
relief therefrom when it opposed the two motions subject of this petition. As such,
it is estopped from attacking the jurisdiction of RTC, Branch 19 in the instant case.

Petitioner likewise contends that the trial court erred in exercising jurisdiction in
resolving the two motions as the subject thereof constituted new, independent,
separate, and substantial matters which are foreign to the expropriation case which
had already been terminated.[9]Petitioner's contention is untenable.

It is well-settled that the jurisdiction of the court to execute its judgment continues
even after the judgment had become final for the purpose of enforcement of
judgment.[10] The present case is no exception. Therefore, notwithstanding the final
resolution on the validity of the expropriation made by this Court on June 19, 2003
in G.R. No. 154411, the RTC, Branch 19 can still rule on the motions for the
issuance of an alias writ of execution and payment of interest. As the CA correctly
stated: "...the duty of the court does not end with the tender of the decision. Equal
is the duty of the court to enforce said decision to the fullest of its intent, tenor and
mandate. To sustain a contrary view would not only trivialize the decision, but
would also render it meaningless; the justice sought by the aggrieved party and
supposedly conferred by the court turned inutile."[11]

On the issue of payment of interest, we find petitioner's theory implausible.

Petitioner insists that the payment of interest to respondents is not proper since
nowhere in the records-from the orders of the RTC all the way to this Court-does it
state that respondents are entitled to damages.[12] As such, petitioner asserts that
respondents had already waived its right to claim interest. We are not persuaded.

In support of its argument, petitioner cites Dalmacio Urtula v. Republic of the

Philippines,[13] which ruled that:

xxx
Urtula's dilemma lies in his mistaken concept of the nature of the interest that he
failed to claim in the expropriation case and which he now claims in this separate
case. Said interest is not contractual, nor based on delict or quasi-delict, but one
that --

runs as a matter of law and follows as a matter of course from the right of the
landowner to be placed in as good a position as money can accomplish, as of the
date of the taking (30 C.J.S. 230).

Understood as such, Urtula, as defendant in the expropriation case, could have

raised the matter of interest before the trial court even if there had been no actual
taking yet by the Republic and the said court could have included the payment of
interest in its judgment but conditioned upon the actual taking, because the rate of
interest upon the amount of just compensation (6%) is a known factor, and it can
reasonably be expected that at some future time, the expropriator would take
possession of the property, though the date be not fixed. In this way, multiple suits
would be avoided. Moreover, nothing prevented appellee from calling the attention
of the appellate courts (even by motion to reconsider before judgment became
final) to the subsequent taking of possession by the condemnor, and asking for
allowance of interest on the indemnity, since that followed the taking as a matter of
course, and raised no issue requiring remand of the records to the Court of origin.

As the issue of interest could have been raised in the former case but was not
raised, res judicata blocks the recovery of interest in the present case. It is settled
that a former judgment constitutes a bar, as between the parties, not only as to
matters expressly adjudged, but all matters that could have been adjudged at the
time. It follows that interest upon the unrecoverable interest, which plaintiff also
seeks, cannot, likewise, be granted.

It is not amiss to note that Section 3 of Rule 67 of the Revised Rules of Court, in
fact, directs the defendant in an expropriation case to "present in a single motion to
dismiss or  for other appropriate relief, all  of his objections and defenses . . ." and if
not so presented "are waived." As it is, the judgment allowing the collection of
interest, now under appeal in effect amends the final judgment in the expropriation
case, a procedure abhorrent to orderly judicial proceedings.[14] (citations omitted)

Unfortunately for petitioner, the abovequoted doctrine is not applicable to the

instant case for the simple reason that respondents herein do not ask for interest as
part of the judgment in an expropriation case, but for interest which is imposed due
to the delay in the payment of a money judgment. As stated above, the former is
imposed in order to place the owner in a position as good as (but not better than)
the position he was in before the taking occurred, while the latter is considered as
legal interest, to be computed at 12% per annum from such finality until its
satisfaction,[15] because the interim period is deemed to be equivalent to a
forebearance of credit.[16] Consequently, the award of the former needs to be stated
in the judgment, while the award of the latter need not.[17] Moreover, the former is
computed from the date of possession or filing of the complaint for expropriation,
[18]
 the latter is merely computed from the time the judgment becomes final and
executory.[19] Therefore, we find no patent error in the imposition of interest on
petitioner.

As to the issue of the validity of the alias writ of execution, we affirm the finding of
the CA that there was no irregularity in the issuance thereof. [20] The rule is that a
writ of execution must conform substantially to every essential particular of the
judgment promulgated.[21] An execution which is not in harmony with the judgment
is bereft of validity; it must conform particularly to that ordained in the dispositive
portion of the decision.[22]  In the case at bar, the sheriff himself discovered a
deficiency in the execution of the judgment in the amount of P70,300.00.
Therefore, upon report of the same by the sheriff, an alias writ of execution
covering said deficiency is only proper to preserve the tenor of the judgment and to
ensure the faithful execution thereof.

IN VIEW WHEREOF, the instant petition is DENIED. The decision of the Court of
Appeals is AFFIRMED.

SO ORDERED.

Carpio, Corona, Leonardo-De Castro, and Bersamin, JJ., concur.

G.R. Nos. 166309-10             March 9, 2007

REPUBLIC OF THE PHILIPPINES, represented by the COMMISSIONER OF

CUSTOMS, Petitioner, 
vs.
UNIMEX MICRO-ELECTRONICS GmBH, Respondent.

DECISION

CORONA, J.:

This is an appeal by certiorari under Rule 45 of the Rules of Court seeking to nullify
and set aside the decision of the Court of Appeals (CA) dated August 30, 20041 and
its amended decision of November 30, 20042 in CA-G.R. SP No. 75359 and CA-G.R.
SP No. 75366.

The antecedent facts follow.

Sometime in April 1985, respondent Unimex Micro-Electronics GmBH (Unimex)

shipped a 40-foot container and 171 cartons of Atari game computer cartridges,
duplicators, expanders, remote controllers, parts and accessories to Handyware
Phils., Inc. (Handyware). Don Tim Shipping Corporation transported the goods with
Evergreen Marine Corporation as shipping agent.

After the shipment arrived in the Port of Manila on July 9, 1985, the Bureau of
Customs (BOC) agents discovered that it did not tally with the description
appearing on the cargo manifest. As a result, BOC instituted seizure proceedings
against Handyware and later issued a warrant of seizure and detention against the
shipment.
On June 5, 1987, the Collector of Customs issued a default order against
Handyware for failing to appear in the seizure proceedings. After an ex
parte hearing, the Collector of Customs forfeited the goods in favor of the
government.

Subsequently, on June 15, 1987, respondent Unimex (as shipper and owner of the
goods) filed a motion to intervene in the seizure proceedings. The Collector of
Customs granted the motion but later on declared the June 5, 1987 default order
against Handyware as final and executory, thus affirming the goods’ forfeiture in
favor of the government.

Respondent filed a petition for review against petitioner Commissioner of Customs

(BOC Commissioner) in the Court of Tax Appeals (CTA). This case was docketed as
CTA Case No. 4317.3

In a decision4 dated June 15, 1992, the CTA reversed the forfeiture decree and
ordered the release of the subject shipment to respondent subject to the payment
of customs duties. The CTA decision became final and executory on July 20, 1992.
The decision read:

WHEREFORE, the decree of forfeiture of [petitioner] Commissioner of Customs is

hereby reversed and the subject shipment is hereby ordered released to
[respondent] subject to the condition that the correct duties, taxes, fees and other
charges thereon be paid to the Bureau of Customs based on the actual quality and
condition of the shipments at the time of the filing of the corresponding import
entry in compliance with this decision and further subject to the presentation of
Central Bank Release Certificate.5

Unfortunately, however, respondent’s counsel failed to secure a writ of execution to

enforce the CTA decision. Instead, it filed separate claims for damages against Don
Tim Shipping Corporation and Evergreen Marine Corporation6 but both cases were
dismissed.

On September 5, 2001, respondent filed in the CTA a petition for the revival of its
June 15, 1992 decision. It prayed for the immediate release by BOC of its shipment
or, in the alternative, payment of the shipment’s value plus damages. The BOC
Commissioner failed to file his answer, hence, he was declared in default.

During the ex parte presentation of respondent’s evidence, BOC informed the court

that the subject shipment could no longer be found at its warehouses.

In its decision of September 19, 2002,7 the CTA declared that its June 15, 1992
decision could no longer be executed due to the loss of respondent’s shipment so it
ordered the BOC Commissioner to pay respondent the commercial value of the
goods based on the prevailing exchange rate at the time of their importation. The
dispositive portion of the decision read:

WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED.

Accordingly, [petitioner] is ORDERED to PAY [respondent] the amount of
₱8,675,200.22 representing the commercial value of the shipment at the time of
importation subject, however, to the payment of the proper taxes, duties, fees and
other charges thereon. The payment shall be taken from the sale or sales of the
goods or properties seized or forfeited by the Bureau of Customs.8

The BOC Commissioner and respondent filed their respective motions for
reconsideration (MRs) of the above decision.

In his MR, the BOC Commissioner argued that the CTA altered its June 15, 1992
decision by converting it from an action for specific performance into a money
judgment.9 On the other hand, respondent contended that the exchange rate
prevailing at the time of actual payment should apply. It also argued that the CTA
erred in not imposing legal interest on BOC’s obligation.

The CTA denied both MRs. The BOC Commissioner and the respondent then filed
separate petitions in the CA. The BOC Commissioner’s appeal was docketed as CA-
G.R. SP No. 75359 and respondent’s as CA-G.R. SP No. 75366. The CA consolidated
the two cases.

On August 30, 2004, the CA dismissed the BOC Commissioner’s appeal and granted
respondent’s.

In CA-G.R. SP No. 75359, the CA held that the BOC Commissioner was liable for the
value of the subject shipment as the same was lost while in its custody. On the
other hand, in CA-G.R. SP No. 75366, it ruled that the CTA erred in using as basis
the prevailing peso-dollar exchange rate at the time of the importation instead of
the prevailing rate at the time of actual payment pursuant to RA 4100.10 It added
that respondent was also entitled to legal interest. According to the CA:

…Considering that the BOC was grossly negligent in handling the subject shipment,
this Court finds Unimex entitled to legal interests. Accordingly, the actual damages
thus awarded shall be subject to 6% interest per annum.

Be that as it may, such interest shall accrue only from the date of the CTA Decision
on 19 September 2002 since it is from that the quantification of Unimex’s damages
have been reasonably ascertained…

xxx xxx xxx

Finally, Unimex is likewise entitled to 12% interest per annum in lieu of 6% per
annum from the time this Decision becomes final and executory until fully paid, in
as much as the interim period is equivalent to a forbearance of credit.

xxx xxx xxx

WHEREFORE, the appealed Decision, dated 19 September 2002, is

hereby AFFIRMED WITH MODIFICATION in that the Bureau of Customs is
adjudged liable to Unimex for the value of the subject shipment in the amount of
$466,885.54. The Bureau of Customs’ liability may be paid in Philippine currency,
computed at the exchange rate prevailing at the time of actual payment with legal
interest thereon at the rate of 6% per annum from 19 September 2002 up to its
finality. Upon finality of this Decision, the rate of legal interest shall be 12% per
annum until the value of the subject shipment is fully paid.11

The BOC Commissioner and respondent again filed their respective MRs of the
above decision. The Commissioner insisted that the BOC was not liable to
respondent. On the other hand, respondent’s MR sought payment of the goods’
value in euros, not in US dollars.12 It also demanded that the 6% legal interest be
reckoned from the date of its judicial demand on June 15, 1987.

On November 30, 2004, the CA denied the BOC Commissioner’s MR and granted
respondent’s. Accordingly, the decretal portion of its amended decision read:

WHEREFORE, the appealed Decision, dated 19 September 2002, is

hereby AFFIRMED WITH MODIFICATION in that the Bureau of Customs is adjudged
liable to Unimex for the value of the subject shipment in the amount of Euro
669,982.565. The Bureau of Custom’s liability [may be] paid in the Philippine
currency, computed at the exchange rate prevailing at the time of actual payment
with legal interests thereon at the rate of 6% per annum from 15 June 1987 up to
the finality of this Decision. In lieu of the 6% interest, the rate of legal interest shall
be 12% per annum upon finality of this Decision until the value of the subject
shipment is fully paid.13

The Republic of the Philippines, represented by the BOC Commissioner, now comes
to us via this petition assailing the CTA decision on the following grounds: (1) the
June 15, 1992 CTA judgment could not be altered after it became final and
executory; (2) laches has already set in, hence, respondent’s case (reviving the
June 15, 1992 CTA judgment) should have been dismissed outright; (3) the legal
interest imposed was erroneous and (4) the government funds cannot be charged
with respondent’s claim without a corresponding appropriation.

Modification of a Final And Executory Judgment

In support of its first argument, petitioner contends that once a judgment becomes
final and executory, it becomes immutable and unalterable, thus the CTA erred in
changing the tenor of its June 15, 1992 decision by ordering it to instead pay the
value of the goods.14

We disagree.

Indeed, the general rule is that once a decision becomes final and executory, it
cannot be altered or modified. However, this rule is not absolute. In some
cases,15 we held that where facts or events transpire after a decision has become
executory, which facts constitute a supervening cause rendering the final judgment
unenforceable, said judgment may be modified. Also, a final judgment may be
altered when its execution becomes impossible or unjust.

In the case at bar, parties do not dispute the fact that after the June 15, 1992 CTA
decision became final and executory, respondent’s goods were inexplicably lost
while under the BOC’s custody. Certainly, this fact presented a supervening event
warranting the modification of the CTA decision. Even if the CTA had maintained its
original decision, still petitioner would have been unable to comply with it for the
obvious reason that there was nothing more to deliver to respondent.

Laches Did Not Set in to Frustrate Respondent’s Petition to Revive The

June 15, 1992 CTA Decision

Regarding petitioner’s second argument, we hold that it cannot impugn

respondent’s claim on the basis of laches. Laches is the failure or negligence to
assert a right within a reasonable time, giving rise to a presumption that a party
has abandoned it or declined to assert it.16 It is not a mere question of lapse or
passage of time but is principally a question of the inequity or unfairness of
permitting a right or claim to be asserted.17

It is clear from the records that respondent was not guilty of negligence or
omission. Neither did it abandon its claim against petitioner. We agree with the CTA
(as later affirmed by the CA) that:

There was never negligence or omission to assert its right within a reasonable
period of time on the part of [respondent]. In fact, from the moment it intervened
in the proceedings before the Bureau of Customs up to the present time,
[respondent] is diligently trying to fight for what it believes is right. [Respondent]
may have failed to secure a writ of execution with this court when the [CTA
decision] became final and executory due to wrong legal advice, yet it does not
mean that it was sleeping on its right for it filed a case against the shipping agent
and/or the sub-agent. Therefore, there [was never] an occasion wherein petitioner
had abandoned or declined to assert its right. 18

The rule is that the findings of fact by the lower court,19 if affirmed by the CA, are
conclusive on us.20 Absent any reason that compels us to deviate from the rule, as
in this case, we shall not disturb such findings.

Moreover, the doctrine of laches is based upon grounds of public policy and equity.
It is invoked to discourage stale claims but is entirely addressed to the sound
discretion of the court.21 Since it is an equitable doctrine, its application is likewise
controlled by reasonable considerations. Thus, the better rule is that courts, under
the principle of equity, should not be bound by the doctrine of laches if wrong or
injustice will result.22

Given the attendant circumstances, laches cannot stall respondent’s right to recover
what is due to it especially where BOC’s negligence in the safekeeping of the goods
appears indubitable. There is no denying that BOC exhibited gross carelessness and
ineptitude in the performance of its duty as it could not even explain why or how
the goods vanished while in its custody. With this, it is difficult to exonerate
petitioner from liability; otherwise, we would countenance a wrong and exacerbate
respondent’s loss which to this day has remained unrecompensed.

More importantly, laches never set in because respondent filed its petition for
revival of judgment within the period set by the Rules. In particular, Rule 39,
Section 6 states:

SEC. 6. Execution by motion or by independent action. – A final and executory

judgment or order may be executed on motion within five (5) years from the date
of its entry. After the lapse of such time, and before it is barred by the statute of
limitations, a judgment may be enforced by action. The revived judgment may also
be enforced by motion within five (5) years from the date of its entry and thereafter
by action before it is barred by the statute of limitations.

Furthermore, Article 1144 of the Civil Code, an action "upon a judgment" may be
brought within ten (10) years from the time the right of action accrues.

The CTA judgment sought to be revived became final and executory on July 20,
199223 and was accordingly entered into the book of judgments on the same date.
On the other hand, the petition to revive said judgment was filed on September 5,
2001. Clearly, the filing of the petition for the revival of judgment was well within
the reglementary period provided by law.

Legal Interest May Be Imposed for Use of Money or as Compensatory

Damages
Petitioner likewise argues that the CA erred in imposing the 6% p.a. legal interest.
According to petitioner, the obligation to pay legal interest only arises by virtue of a
contract or on account of damages due to delay or failure to pay the principal on
which the interest is exacted. It added that since the June 15, 1992 CTA decision
did not involve a monetary award but merely the release of the goods to
respondent, there was no basis for the computation and/or imposition of the 6%
p.a. legal interest.

We agree with petitioner.

Interest may be paid only either as compensation for the use of money (monetary
interest)24 or as damages (compensatory interest).25 We quote in agreement the
CTA’s disquisition in its decision dated September 19, 2002:

Interest may be paid either as compensation for the use of money (monetary
interest) referred to in Article 1956 of the New Civil Code or as damages
(compensatory interest) under Article 2209 above cited. As clearly provided in
[Article 2209], interest is demandable if: a) there is monetary obligation and b)
debtor incurs delay.

This case does not involve a monetary obligation to be covered by Article 2209.
There is no dispute that this case was originally filed questioning the seizure of the
shipment by the Bureau of Customs. Our decision subject of this action for revival
[of judgment] did not refer to any monetary obligation by [petitioner] towards the
[respondent]. In fact, if there was any monetary obligation mentioned, it referred
to the obligation of [respondent] to pay the correct taxes, duties, fees and other
charges before the release of the goods can be had. In one case, the Supreme
Court held:

"In a comprehensive sense, the term "debt" embraces not merely money due by
contract, but whatever one is bound to render to another, either for contract or the
requirement of the law, such as tax where the law imposes personal liability
therefor."

Therefore, the government was never a debtor to the petitioner in order that
[Article] 2209 could apply. Nor was it in default for there was no monetary
obligation to pay in the first place. There is default when after demand is made
either judicially or extrajudicially. In other words, for interest to be demandable
under Article 2209, there should be a monetary obligation and the debtor was in
default…
In the instant case, [petitioner] was never under monetary obligation to
[respondent], no demand can be made either judicially or extrajudicially. Parallel
thereto, there could be no default… 26

No doubt, the present case does not fall within the first situation. Neither can it be
considered as one involving interest based on damages under the second situation.

More importantly, interest is not chargeable against petitioner except when it has
expressly stipulated to pay it or when interest is allowed by the legislature or in
eminent domain cases where damages sustained by the owner take the form of
interest at the legal rate.27 Consequently, the CA’s imposition of the 12% p.a. legal
interest upon the finality of the decision of this case until the value of the goods is
fully paid (as forbearance of credit) is likewise bereft of any legal anchor.

Government Liability For Actual Damages

Finally, petitioner argues that a money judgment or any charge against the
government requires a corresponding appropriation and cannot be decreed by mere
judicial order.

Although it may be gainsaid that the satisfaction of respondent’s demand will

ultimately fall on the government, and that, under the political doctrine of "state
immunity," it cannot be held liable for governmental acts (jus imperii),28 we still
hold that petitioner cannot escape its liability. The circumstances of this case
warrant its exclusion from the purview of the state immunity doctrine.

As previously discussed, the Court cannot turn a blind eye to BOC’s ineptitude and
gross negligence in the safekeeping of respondent’s goods. We are not likewise
unaware of its lackadaisical attitude in failing to provide a cogent explanation on
the goods’ disappearance, considering that they were in its custody and that they
were in fact the subject of litigation. The situation does not allow us to reject
respondent’s claim on the mere invocation of the doctrine of state immunity.
Succinctly, the doctrine must be fairly observed and the State should not avail itself
of this prerogative to take undue advantage of parties that may have legitimate
claims against it.29

In Department of Health v. C.V. Canchela & Associates,30 we enunciated that this

Court, as the staunch guardian of the people’s rights and welfare, cannot sanction
an injustice so patent in its face, and allow itself to be an instrument in the
perpetration thereof. Over time, courts have recognized with almost pedantic
adherence that what is inconvenient and contrary to reason is not allowed in
law.31 Justice and equity now demand that the State’s cloak of invincibility against
suit and liability be shredded.
Accordingly, we agree with the lower courts’ directive that, upon payment of the
necessary customs duties by respondent, petitioner’s "payment shall be taken from
the sale or sales of goods or properties seized or forfeited by the Bureau of
Customs."32

WHEREFORE, the assailed decisions of the Court of Appeals in CA-G.R. SP Nos.

75359 and 75366 are hereby AFFIRMED with MODIFICATION. Petitioner
Republic of the Philippines, represented by the Commissioner of the Bureau of
Customs, upon payment of the necessary customs duties by respondent Unimex
Micro-Electronics GmBH, is hereby ordered to pay respondent the value of the
subject shipment in the amount of Euro 669,982.565. Petitioner’s liability may be
paid in Philippine currency, computed at the exchange rate prevailing at the time of
actual payment.

SO ORDERED.

RENATO C. CORONA
Associate Justice

WE CONCUR:
 SECOND DIVISION
[ G.R. NO. 129406, March 06, 2006 ]
REPUBLIC OF THE PHILIPPINES REPRESENTED BY THE
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT
(PCGG), PETITIONER, VS. SANDIGANBAYAN (SECOND
DIVISION) AND ROBERTO S. BENEDICTO, RESPONDENTS 

DECISION

GARCIA, J.: 

Before the Court is this petition for certiorari under Rule 65 of the Rules of Court to
nullify and set aside the March 28, 1995[1] and March 13, 1997[2] Resolutions of the
Sandiganbayan, Second Division, in Civil Case No. 0034, insofar as said resolutions
ordered the Presidential Commission on Good Government (PCGG) to pay private
respondent Roberto S. Benedicto or his corporations the value of 227 shares of
stock of the Negros Occidental Golf and Country Club, Inc. (NOGCCI) at
P150,000.00 per share, registered in the name of said private respondent or his
corporations.

The facts:

Civil Case No. 0034 entitled Republic of the Philippines, plaintiff, v. Roberto S.

Benedicto, et al., defendants, is a complaint for reconveyance, reversion,
accounting, reconstitution and damages. The case is one of several suits involving
ill-gotten or unexplained wealth that petitioner Republic, through the PCGG, filed
with the Sandiganbayan against private respondent Roberto S. Benedicto and
others pursuant to Executive Order (EO) No. 14,[3] series of 1986.

Pursuant to its mandate under EO No. 1,[4] series of 1986, the PCGG issued writs
placing under sequestration all business enterprises, entities and other properties,
real and personal, owned or registered in the name of private respondent
Benedicto, or of corporations in which he appeared to have controlling or majority
interest. Among the properties thus sequestered and taken over by PCGG fiscal
agents were the 227 shares in NOGCCI owned by private respondent Benedicto and
registered in his name or under the names of corporations he owned or controlled.

Following the sequestration process, PCGG representatives sat as members of the

Board of Directors of NOGCCI, which passed, sometime in October 1986, a
resolution effecting a corporate policy change. The change consisted of assessing
a monthly membership due of P150.00 for each NOGCCI share. Prior to this
resolution, an investor purchasing more than one NOGCCI share was exempt from
paying monthly membership due for the second and subsequent shares that he/she
owned.

Subsequently, on March 29, 1987, the NOGCCI Board passed another resolution,
this time increasing the monthly membership due from P150.00 to P250.00 for
each share.

As sequestrator of the 227 shares of stock in question, PCGG did not pay the
corresponding monthly membership due thereon totaling P2,959,471.00. On
account thereof, the 227 sequestered shares were declared delinquent to be
disposed of in an auction sale.

Apprised of the above development and evidently to prevent the projected auction
sale of the same shares, PCGG filed a complaint for injunction with the Regional
Trial Court (RTC) of Bacolod City, thereat docketed as Civil Case No. 5348. The
complaint, however, was dismissed, paving the way for the auction sale for the
delinquent 227 shares of stock. On August 5, 1989, an auction sale was conducted.

On November 3, 1990, petitioner Republic and private respondent Benedicto

entered into a Compromise Agreement in Civil Case No. 0034. The agreement
contained a general release clause[5] whereunder petitioner Republic agreed and
bound itself to lift the sequestration on the 227 NOGCCI shares, among other
Benedicto's properties, petitioner Republic acknowledging that it was within private
respondent Benedicto's capacity to acquire the same shares out of his income from
business and the exercise of his profession.[6] Implied in this undertaking is the
recognition by petitioner Republic that the subject shares of stock could not have
been ill-gotten.

In a decision dated October 2, 1992, the Sandiganbayan approved the Compromise

Agreement and accordingly rendered judgment in accordance with its terms.
In the process of implementing the Compromise Agreement, either of the parties
would, from time to time, move for a ruling by the Sandiganbayan on the proper
manner of implementing or interpreting a specific provision therein.

On February 22, 1994, Benedicto filed in Civil Case No. 0034 a "Motion for Release
from Sequestration and Return of Sequestered Shares/Dividends" praying, inter
alia, that his NOGCCI shares of stock be specifically released from sequestration
and returned, delivered or paid to him as part of the parties' Compromise
Agreement in that case. In a Resolution[7] promulgated on December 6, 1994, the
Sandiganbayan granted Benedicto's aforementioned motion but placed the subject
shares under the custody of its Clerk of Court, thus:

WHEREFORE, in the light of the foregoing, the said "Motion for Release From
Sequestration and Return of Sequestered Shares/Dividends" is hereby GRANTED
and it is directed that said shares/dividends be delivered/placed under the custody
of the Clerk of Court, Sandiganbayan, Manila subject to this Court's disposition.

On March 28, 1995, the Sandiganbayan came out with the herein first assailed
Resolution,[8] which clarified its aforementioned December 6, 1994 Resolution and
directed the immediate implementation thereof by requiring PCGG, among other
things:

(b) To deliver to the Clerk of Court the 227 sequestered shares of [NOGCCI]
registered in the name of nominees of ROBERTO S. BENEDICTO free from all liens
and encumbrances, or in default thereof, to pay their value at P150,000.00
per share which can be deducted from [the Republic's] cash share in the
Compromise Agreement. [Words in bracket added] (Emphasis Supplied).

Owing to PCGG's failure to comply with the above directive, Benedicto filed in Civil
Case No. 0034 a Motion for Compliance dated July 25, 1995, followed by an Ex-
Parte Motion for Early Resolution dated February 12, 1996. Acting thereon, the
Sandiganbayan promulgated yet another Resolution[9] on February 23, 1996,
dispositively reading:

WHEREFORE, finding merit in the instant motion for early resolution and
considering that, indeed, the PCGG has not shown any justifiable ground as to why
it has not complied with its obligation as set forth in the Order of December 6, 1994
up to this date and which Order was issued pursuant to the Compromise Agreement
and has already become final and executory, accordingly, the Presidential
Commission on Good Government is hereby given a final extension of fifteen (15)
days from receipt hereof within which to comply with the Order of December 6,
1994 as stated hereinabove.
On April 1, 1996, PCGG filed a Manifestation with Motion for Reconsideration,
[10]
 praying for the setting aside of the Resolution of February 23, 1996. On April 11,
1996, private respondent Benedicto filed a Motion to Enforce Judgment Levy.
Resolving these two motions, the Sandiganbayan, in its second assailed
Resolution [11] dated March 13, 1997, denied that portion of the
PCGG's Manifestation with Motion for Reconsideration concerning the subject 227
NOGCCI shares and granted Benedicto's Motion to Enforce Judgment Levy.

Hence, the Republic's present recourse on the sole issue of whether or not the
public respondent Sandiganbayan, Second Division, gravely abused its discretion in
holding that the PCGG is at fault for not paying the membership dues on the 227
sequestered NOGCCI shares of stock, a failing which eventually led to the
foreclosure sale thereof.

The petition lacks merit.

To begin with, PCGG itself does not dispute its being considered as a receiver
insofar as the sequestered 227 NOGCCI shares of stock are concerned.[12] PCGG
also acknowledges that as such receiver, one of its functions is to pay outstanding
debts pertaining to the sequestered entity or property,[13] in this case the 227
NOGCCI shares in question. It contends, however, that membership dues owing to
a golf club cannot be considered as an outstanding debt for which PCGG, as
receiver, must pay. It also claims to have exercised due diligence to prevent the
loss through delinquency sale of the subject NOGCCI shares, specifically inviting
attention to the injunctive suit, i.e., Civil Case No. 5348, it filed before the RTC of
Bacolod City to enjoin the foreclosure sale of the shares.

The filing of the injunction complaint adverted to, without more, cannot plausibly
tilt the balance in favor of PCGG. To the mind of the Court, such filing is a case of
acting too little and too late. It cannot be over-emphasized that it behooved the
PCGG's fiscal agents to preserve, like a responsible father of the family, the value of
the shares of stock under their administration. But far from acting as such father,
what the fiscal agents did under the premises was to allow the element of
delinquency to set in before acting by embarking on a tedious process of going to
court after the auction sale had been announced and scheduled.

The PCGG's posture that to the owner of the sequestered shares rests the burden of
paying the membership dues is untenable. For one, it lost sight of the reality that
such dues are basically obligations attached to the shares, which, in the final
analysis, shall be made liable, thru delinquency sale in case of default in payment of
the dues. For another, the PCGG as sequestrator-receiver of such shares is, as
stressed earlier, duty bound to preserve the value of such shares. Needless to
state, adopting timely measures to obviate the loss of those shares forms part of
such duty and due diligence.

The Sandiganbayan, to be sure, cannot plausibly be faulted for finding the PCGG
liable for the loss of the 227 NOGCCI shares. There can be no quibbling, as indeed
the graft court so declared in its assailed and related resolutions respecting the
NOGCCI shares of stock, that PCGG's fiscal agents, while sitting in the NOGCCI
Board of Directors agreed to the amendment of the rule pertaining to membership
dues. Hence, it is not amiss to state, as did the Sandiganbayan, that the PCGG-
designated fiscal agents, no less, had a direct hand in the loss of the sequestered
shares through delinquency and their eventual sale through public auction. While
perhaps anti-climactic to so mention it at this stage, the unfortunate loss of the
shares ought not to have come to pass had those fiscal agents prudently not agreed
to the passage of the NOGCCI board resolutions charging membership dues on
shares without playing representatives.

Given the circumstances leading to the auction sale of the subject NOGCCI shares,
PCGG's lament about public respondent Sandiganbayan having erred or, worse still,
having gravely abused its discretion in its determination as to who is at fault for the
loss of the shares in question can hardly be given cogency.

For sure, even if the Sandiganbayan were wrong in its findings, which does not
seem to be in this case, it is a well-settled rule of jurisprudence that certiorari will
issue only to correct errors of jurisdiction, not errors of judgment. Corollarily, errors
of procedure or mistakes in the court's findings and conclusions are beyond the
corrective hand of certiorari.[14] The extraordinary writ of certiorari may be availed
only upon a showing, in the minimum, that the respondent tribunal or officer
exercising judicial or quasi-judicial functions has acted without or in excess of its or
his jurisdiction, or with grave abuse of discretion.[15]

The term "grave abuse of discretion" connotes capricious and whimsical exercise of
judgment as is equivalent to excess, or a lack of jurisdiction.[16] The abuse must be
so patent and gross as to amount to an evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law, or to act at all in contemplation of law as
where the power is exercised in an arbitrary and despotic manner by reason of
passion or hostility.[17] Sadly, this is completely absent in the present case. For, at
bottom, the assailed resolutions of the Sandiganbayan did no more than to direct
PCGG to comply with its part of the bargain under the compromise agreement it
freely entered into with private respondent Benedicto. Simply put, the assailed
resolutions of the Sandiganbayan have firm basis in fact and in law.

Lest it be overlooked, the issue of liability for the shares in question had, as both
public and private respondents asserted, long become final and executory.
Petitioner's narration of facts in its present petition is even misleading as it
conveniently fails to make reference to two (2) resolutions issued by the
Sandiganbayan. We refer to that court's resolutions of December 6, 1994[18] and
February 23, 1996[19] as well as several intervening pleadings which served as basis
for the decisions reached therein. As it were, the present petition questions only
and focuses on the March 28, 1995[20] and March 13, 1997[21] resolutions, which
merely reiterated and clarified the graft court's underlying resolution of December
6, 1994. And to place matters in the proper perspective, PCGG's failure to comply
with the December 6, 1994 resolution prompted the issuance of the clarificatory
and/or reiteratory resolutions aforementioned.

In a last-ditch attempt to escape liability, petitioner Republic, through the PCGG,

invokes state immunity from suit.[22] As argued, the order for it to pay the value of
the delinquent shares would fix monetary liability on a government agency, thus
necessitating the appropriation of public funds to satisfy the judgment claim.[23] But,
as private respondent Benedicto correctly countered, the PCGG fails to take stock of
one of the exceptions to the state immunity principle,  i.e.,  when the government
itself is the suitor, as in Civil Case No. 0034. Where, as here, the State itself is no
less the plaintiff in the main case, immunity from suit cannot be effectively invoked.
[24]
 For, as jurisprudence teaches, when the State, through its duly authorized
officers, takes the initiative in a suit against a private party, it thereby descends to
the level of a private individual and thus opens itself to whatever counterclaims or
defenses the latter may have against it.[25] Petitioner Republic's act of filing its
complaint in Civil Case No. 0034 constitutes a waiver of its immunity from suit.
Being itself the plaintiff in that case, petitioner Republic cannot set up its immunity
against private respondent Benedicto's prayers in the same case.

In fact, by entering into a Compromise Agreement with private respondent

Benedicto, petitioner Republic thereby stripped itself of its immunity from suit and
placed itself in the same level of its adversary. When the State enters into 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, 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. Its consent to be sued is implied from
the very act of entering into such contract,[26] breach of which on its part gives the
corresponding right to the other party to the agreement.

Finally, it is apropos to stress that the Compromise Agreement in Civil Case No.
0034 envisaged the immediate recovery of alleged ill-gotten wealth without further
litigation by the government, and buying peace on the part of the aging Benedicto.
[27] 
Sadly, that stated objective has come to naught as not only had the litigation
continued to ensue, but, worse, private respondent Benedicto passed away on May
15, 2000,[28] with the trial of Civil Case No. 0034 still in swing, so much so that the
late Benedicto had to be substituted by the administratrix of his estate.[29]

WHEREFORE, the instant petition is hereby DISMISSED.

SO ORDERED.

Puno, (Chairperson), Sandoval-Gutierrez,  and Corona, JJ., concur.

Azcuna, J.,  in the result.