1. Rayo vs. CFI of Bulacan, 110 SCRA 460, 1981 FACTS: Sps.
FACTS: Sps. Ramos discovered that a portion of their land
FACTS: During the height of the infamous typhoon Kading, the
NPC, acting through its plant superintendent, Benjamin
Chavez, opened or caused to be opened simultaneously all
the three floodgates of the Angat Dam. The many unfortunate
victims of the man-caused flood filed with the respondent court
eleven complaints for damages against the NPC and Benjamin
Chavez. NPC filed separate answers to each of the
eleven complaints and invoked in each answer a special and
affirmative defense that in the operation of the Angat
Dam, it is performing a purely governmental function.
Hence, it cannot be sued without the express consent
of the State. The respondent court dismissed the case on the
grounds that said defendant performs a purely governmental
function in the operation of the Angat Dam and
cannot therefore be sued for damages in the instant
cases in connection therewith.
ISSUE: Was the NPC performing a governmental function with
respect to the management and operation of the Angat Dam?
RULING: YES. However, it is not necessary to determine
whether NPC performs a governmental function with respect to
the management and operation of the Angat Dam. It is
sufficient to say that the government has organized a private
corporation, put money in it and has allowed itself to sue and
be sued in any court under its charter. As a government owned
and controlled corporation, it has personality of its
own, distinct and separate from that of the government.
Moreover, the charter provision that the NPC can sue and be
sued in any court is without qualification on the cause of action
as the one instituted by the petitioners.
2. Air Transportation Office vs. Spouses Ramos, G.R.
No. 159402, February 23, 2011
(somewhere in Baguio) was being used as part of the runway
and running shoulder of the Loakan Airport which is operated
by ATO. Sometime in 1995, respondents agreed to convey the
subject portion by deed of sale to ATO in consideration of the
amount of Php778,150.00. However, ATO failed to pay despite
repeated verbal and written demands. Thus, an action for
collection against ATO was filed by the respondents before the
RTC. ATO’s primary contention was that the deed of sale was
entered into the performance of governmental functions. RTC
ruled in favor of the respondents. CA affirmed RTC. Hence, the
petition.
ISSUE: Whether ATO could be sued without the State’s
consent.
RULING: SC dismissed the petition for lack of merit.
The State’s immunity from suit does not extend to the
petitioner (ATO) because it is an agency of the State engaged
in an enterprise that is far from being the State’s exclusive
prerogative. The CA thereby correctly appreciated the juridical
character of the ATO as an agency of the Government not
performing a purely governmental or sovereign function, but
was instead involved in the management and maintenance of
the Loakan Airport, an activity that was not the exclusive
prerogative of the State in its sovereign capacity. Hence, the
ATO had no claim to the State’s immunity from suit. The SC
further observes that the doctrine of sovereign immunity
cannot be successfully invoked to defeat a valid claim for
compensation arising from the taking without just
compensation and without the proper expropriation
proceedings being first resorted to of the plaintiff’s property.
Lastly, the issue of whether or not the ATO could be sued
without the States consent has been rendered moot by the
passage of Republic Act No. 9497, otherwise known as the Civil
Aviation Authority Act of 2008. R.A. No. 9497 abolished the
ATO and u nder its Transitory Provisions, R.A. No. 9497
established in place of the ATO the Civil Aviation Authority of
the Philippines (CAAP), which thereby assumed all of the ATOs
powers, duties and rights, assets, real and personal properties,
funds, and revenues. Section 23 of R.A. No. 9497 enumerates
the corporate powers vested in the CAAP, including the power
to sue and be sued, to enter into contracts of every class, kind
and description, to construct, acquire, own, hold, operate,
maintain, administer and lease personal and real properties,
and to settle, under such terms and conditions most
advantageous to it, any claim by or against it. With the CAAP
having legally succeeded the ATO pursuant to R.A. No. 9497,
the obligations that the ATO had incurred by virtue of the deed
of sale with the Ramos spouses might now be enforced against
the CAAP.
3. Municipality of San Fernando vs. Firme 195 SCRA
692, 1991
FACTS: Petitioner Municipality of San Fernando, La
Union, is a municipality corporation. Respondent
Judge Romeo N. Firme is impleaded in his official
capacity as the presiding judge, while private respondents
are heirs of the deceased Laureano Banina, Sr.
On December 16, 1965, a collision occurred involving
a passenger jeep, a gravel and sand truck, and a
dump truck of the Municipality of San Fernando, La
Union which was driven by Alfredo Bislig. Due to
the impact, several passengers of the jeep including
Banina, Sr. died.
The heir of Banina, Sr. instituted a complaint for damages
against the owner and driver of the passenger jeep.
However, the aforesaid defendant filed a third party complaint
against the petitioner and the driver of the dump truck of the
petitioner.
Thereafter, the private respondents amended the complaint
wherein the petitioner and its regular employee
Alfredo Bislig were impleaded for the first time as
defendants. Petitioner filed its answer and raised affirmative
defenses such as lack of cause of action, non-suability of the
state, prescription of cause of action, and the negligence of the
owner and driver of the passenger jeep as the proximate cause
of the collision.
On October 10, 1979, the trial court rendered a decision for the
plaintiffs, and defendants Municipality of san Fernando, La
Union and Alfredo Bislig are ordered to pay jointly and
severally the plaintiffs. The complaint against the driver and
the owner of the passenger jeep was dismissed.
Petitioner filed a motion for reconsideration and for a new trial.
However, respondent judge issued another order denying the
motion for reconsideration of the order for having been filed
out of time. Hence, this petition.
ISSUE: Whether the municipality is liable for the tort
committed by its employee?
RULING: NO. The test of liability of the municipality
depends on whether or not the driver acting in behalf of the
municipality is performing governmental or proprietary
functions. It has already been remarked that municipal
corporations are suable because their charters grant them the
competence to sue and be sued. Nevertheless, they are
generally not liable for torts committed by them in
the discharge of governmental functions and can be held
answerable only if it can be shown that they were acting in a
proprietary capacity. In permitting such entities to be sued,
the state merely gives the claimants the right to show the
defendant was not acting in its governmental capacity when
the injury was inflicted or that the case comes under the
exceptions recognized by law. Failing this, the claimants
cannot recover.
In the case at bar, the driver of the dump truck
of the municipality insists that he was on his way to Naguilan
River to get a load of sand and gravel for the repair of the San
Fernando municipal street.
In the absence of any evidence to the contrary, the regularity
of the performance of official duty is presumed. Hence, the
driver of the dump truck was performing duties or tasks
pertaining to his office. After careful examination of existing
laws and jurisprudence, we arrive at the conclusion that the
municipality cannot be held liable for the torts committed by its
regular employee, who was then engaged in the discharge of
governmental functions. Hence, the death of the passenger,
tragic and deplorable though, it may be imposed on the
municipality no duty to pay the monetary compensation.
4. Bureau of Printing vs. Bureau of Printing
Employees Association, 1 SCRA 340
FACTS: Bureau of Printing Employees Association filed
a case against herein petitioners Bureau of Printing,
Serafin Salvador, and Mariano Ledesma. The complaint
alleged that Salvador and Ledesma have been engaging in
unfair labor practices by interfering with, or coercing
the employees of the Bureau of Printing, particularly
the members of the complaining association, in the exercise of
their right to self-organization, and by discriminating in regard
to hiring and tenure of their employment in order to discourage
them from pursuing their union activities. Answering the
complaint, Salvador and Ledesma denied the charges, and
contended that the Bureau of Printing has no
juridical personality to sue and be sued.
ISSUE: Can the Bureau of Printing be sued?
RULING: NO. As a government office, without any juridical
capacity, it cannot be sued.
The Bureau of Printing is an instrumentality of the
government; it operates under the direct supervision
of the Executive Secretary. It is designed to meet the
printing needs of the government. It is primarily a service
bureau. It is obviously not engaged in business or occupation
for pecuniary profit. It has no corporate existence.
Its appropriations are provided for in the budget. It is not
subject to the jurisdiction of the Court of Industrial Relations.
Any suit, action or proceeding against the Bureau of Printing
would actually be a suit, action or proceeding against the
government itself. The government cannot be sued without its
consent, much less over its objection.
5. Mobil Philippines vs. Customs Arrastre Service
Division, 18 SCRA 1120, 1966
FACTS: Four cases of rotary drill parts were shipped from
abroad consigned to Mobil Philippines. The Customs Arrastre
later delivered to the broker of the consignee three cases only
of the shipment. Mobil Philippines Exploration Inc. filed suit in
the CFI against the Customs Arrastre Service and the Bureau of
Customs to recover the value of the undelivered
cases plus damages.
The defendants filed a motion to dismiss the complaint on the
ground that not being a person under the law, defendants
cannot be sued.
After the plaintiff opposed the motion, the court dismissed the
complaint on the ground that neither the Customs Arrastre
Service nor the Bureau of Customs is suable.
ISSUE: Can the Customs Arrastre Service or the Bureau of
Customs be sued?
RULING: NO. The Bureau of Customs, acting as part of the
machinery of the national government in the operations of
arrastre service, pursuant to express legislative mandate
and a necessary incident of its prime governmental
function, is immune from suit, there being no statute to the
contrary.
The Bureau of Customs has no personality of its own apart
from that of the government. Its primary function is
governmental, that of assessing and collecting lawful revenues
from imported articles and all other tariff and customs duties,
fees, charges, fines, and penalties. To this function, arrastre is
a necessary incident. Although said arrastre function is
deemed proprietary, it is necessarily an incident of the
primary and governmental function of the Bureau of Customs,
so that engaging in the same does not necessarily render
said Bureau liable to suit. For otherwise, it could not
perform its governmental function without necessarily
exposing itself to suit. Sovereign immunity granted as to the
end should not be denied as to the necessary means to that
end.
6. Merritt vs. Government of the Philippines Islands,
34 Phil. 311
FACTS: Merritt, while riding his motorcycle was hit by an
ambulance owned by the Philippine General Hospital. A
driver employed by the hospital drove it. In order for Merritt
to sue the Philippine government, Act No. 2457 was enacted by
the Philippine Legislature authorizing Merritt to bring suit
against the Government of the Philippine Islands and
authorizing the Attorney-General of said Islands to appear in
said suit. A suit was then filed before the CFI of Manila, which
fixed the responsibility for the collision solely on the ambulance
driver and determined the amount of damages to be
awarded to Merritt. Both parties appealed from the
decision, plaintiff Merritt as to the amount of damages and
defendant in rendering the amount against the government.
ISSUE: Whether or not defendant, Government of the
Philippines, waived its immunity from suit as well as conceded
its liability to the plaintiff when it enacted Act No. 2457
RULING: NO. By consenting to be sued, a state simply
waives its immunity from suit. It does not thereby concede its
liability to the plaintiff, or create any cause of action in his
favor, or extend its liability to any cause not previously
recognized. It merely gives a remedy to enforce a pre-existing
liability and submit itself to the jurisdiction of the court, subject
to its right to interpose any lawful defense.
The Government of the Philippines Islands is only liable, for the
acts of its agents, officers and employees when they act as
special agents. A special agent is one who receives a definite
and fixed order or commission, foreign to the exercise of the
duties of his office if he is a special official. The special agent
acts in representation of the state and being bound to act as an
agent thereof, he executes the trust confided to him. This
concept does not apply to any executive agent who
is an employee of the acting administration and who on his
own responsibility performs the functions which are inherent in
and naturally pertain to his office and which are regulated
by law and the regulations. The responsibility of the state
is limited to that which it contracts through a special agent,
duly empowered by a definite order or commission
to perform some act or charged with some definite purpose
which gives rise to the claim, and not where the claim is
based on acts or omissions imputable to a public official
charged with some administrative or technical office who can
be held to the proper responsibility in the manner laid down by
the law of civil responsibility. The chauffeur of the ambulance
of the General Hospital was not such an agent.
 7. Department of Agriculture vs. NLRC, 227 SCRA
693, 1993
FACTS: The DAR and Sultan Security Agency entered into a
contract for security services to be provided by the latter to the
said governmental entity. Several guards of the agency
assigned to the petitioner’s premises filed a complaint for
underpayment of wages, non-payment of 13th month pay,
uniform allowances, night shift differential pay, holiday
pay, and overtime pay as well as for damages, before the
Regional Arbitration, against the petitioner and the
agency. The Executive Labor arbiter rendered a
decision finding the petitioner and the agency jointly
and severally liable for the payment of the money
claims. The decision became final and executory. The
Labor Arbiter then issued a writ of execution which
resulted in the property of the petitioner being levied. The
petitioner asserts the rule of non-suability of the State.
ISSUE: Can the Department of Agriculture be sued under the
contract entered with the agency?
RULING: YES. The basic postulate under Art. X section 3 of
the Constitution that “the State may not be sued without its
consent” is not absolute for it does not say that the State may
not be sued under any circumstances. On the contrary, as
correctly phrased, the doctrine only conveys “that the State
may not be sued without its consent.” Its import then is that
the State may at times be sued. The State’s consent may be
given either expressly or impliedly. Express consent
may be made through a general law waiving the immunity of
the State from suit which is found in Act 3083, where
the Philippine government “consents and submits to be
sued upon any money claim involving liability arising from
contract, express or implied, which could serve as basis of civil
action between private parties.” Implied consent on the other
hand, is conceded when the State itself commences
litigation, thus opening itself to counterclaim or when it
enters into a contract.
In this situation, the government is deemed to have
descended to the level of the other contracting party and to
have divested itself of its sovereign immunity. The rule relied
upon by the NLRC is not, however, without qualification.
Not all contracts entered into by the government
operate as a waiver of its non-suability. Distinction must still
be made between one which was executed in the exercise of its
sovereign function and another which is done in its proprietary
capacity. In the instant case, the petitioner has not
pretended to have assumed a capacity apart from its being
a governmental entity when it entered into the
questioned contract, not that it could have in fact
performed any act proprietary in character, but be
that as it may, the claims of private respondents
arising from the contract for security services clearly
constitute money claims for which Act 3083 gives the consent
of the state to be sued.
However, when the State gives its consent to be sued, it does
not thereby necessarily consent to an unrestricted execution
against it. When the State waives immunity, all it does, in
effect, is to give the other party an opportunity to prove, if it
can, that the state has any liability.
8. Amigable vs. Cuenca, 43 SCRA 460, G.R. No.
26400, August 15, 1974
FACTS: Victoria Amigable, is the registered owner of a lot in
Cebu City. Without prior expropriation or negotiated sale, the
government used a portion of said lot for the construction of
the Mango and Gorordo Avenues. Amigable's counsel wrote to
the President of the Philippines, requesting payment of
theportion of her lot which had been appropriated by
the government. The claim was indorsed tothe Auditor
General, who disallowed it in his 9th Endorsement. Thus,
Amigable filed in thecourt a quo a complaint, against the
Republic of the Philippines and Nicolas Cuenca
(Commissioner of Public Highways) for the recovery of
ownership and possession of her lot.
On July 29, 1959, the court rendered its decision holding that
it had no jurisdiction over the plaintiff's cause of
action for the recovery of possession and ownership of the
lot on the ground that the government cannot be sued without
its consent, that it had neither original nor appellate
jurisdiction to hear and decide plaintiff's claim for
compensatory damages, being a money claim against the
government; and that it had long prescribed, nor did it have
jurisdiction over said claim because the government had
not given its consent to be sued. Accordingly, the
complaint was dismissed.
ISSUE: Can the appellant sue the government?
RULING: Yes. Considering that no annotation in favor of the
government appears at the back of her certificate of title and
that she has not executed any deed of conveyance of any
portion of her lot to the government, the appellant remains the
owner of the whole lot. As registered owner, she could bring an
action to recover possession of the portion of land in question
at anytime because possession is one of the attributes of
ownership. However, since restoration of possession of said
portion by the government is neither convenient nor feasible at
this time because it is now and has been used for road
purposes, the only relief available is for the government
to make due compensation which it could and should have
done years ago. To determine the due compensation for the
land, the basis should be the price or value thereof at the time
of the taking.
As regards the claim for damages, the plaintiff is entitled
thereto in the form of legal interest on the price of the land
from the time it was taken up to the time that payment is
made by the government. In addition, the government should
pay for attorney's fees, the amount of which should be fixed by
the trial court after hearing.
(NOTE: The owner does not need to file the usual claim for
recovery of just compensation with the Commission
on Audit if the government takes over his property and
devotes it to public use without the benefit of expropriation. He
may immediately file a complaint with the proper court for
payment of his property as the arbitrary action of the
government shall be deemed a waiver of its immunity from
suit.) Cruz, pg. 74)
9. EPG Construction vs. Secretary Vigilar, G.R. No.
131544, March 16, 2001
FACTS: The Ministry of Human Settlement, through the BLISS
Development Corporation, initiated a housing project on a
government property along the east bank of the Manggahan
Floodway in Pasig City. The Ministry of Human Settlement
entered into a Memorandum of Agreement (MOA) with the
Ministry of Public Works and Highways, where the latter forged
individual contracts with herein petitioners EPG Construction
Co., Ciper Electrical and Engineering, Septa Construction Co.,
Phil. Plumbing Co., Home Construction Inc., World Builders
Inc., Glass World Inc., Performance Builders Development Co.
and De Leon Araneta Construction Co., for the construction of
one hundred forty-five (145) housing units. The scope of
construction and funding under the written contracts covered
only around 2/3 of each housing unit. By reason of the verbal
request and assurance of then DPWH Undersecretary Aber
Canlas that additional funds would be available and
forthcoming, petitioners agreed to undertake and perform
additional construction for the completion of the housing units,
despite the absence of appropriation and written contracts but
the expenses incurred for the additional contracts were not
issued payment by DPWH. On 14 November 1988, petitioners
sent a demand letter to the DPWH Secretary and submitted
that their claim for payment was favorably recommended by
DPWH Assistant Secretary for Legal Services Dominador
Madamba, who recognized the existence of implied
contracts covering the additional constructions and opined that
payment of petitioners’ money claims should be based
on quantum meruit. The DPWH Auditor interposed no objection
to the payment of the money claims subject to whatever action
the COA may adopt. 30 July 1992, DPWH Secretary Jose De
Jesus requested the Secretary of Budget and Management to
release public funds for the payment of petitioners money
claims. In a Letter of the Undersecretary of Budget and
Management dated 20 December 1994, the amount of
P5,819,316.00 was then released for the payment of
petitioners money claims but respondent, DPWH Secretary
Gregorio Vigilar, denied the subject money claims prompting
herein petitioners to file before the Regional Trial Court for
Mandamus for which the court denied on the Petition.
ISSUE: Whether or not the Principle of State Immunity is
applicable in the case
RULING: NO.  Respondent may not validly invoke the Royal
Prerogative of Dishonesty  and conveniently hide under
the States cloak of invincibility against suit, considering that
this principle yields to certain settled exceptions. True enough,
the rule, in any case, is not absolute for it does not say that
the state may not be sued under any circumstance. The
doctrine of governmental immunity from suit cannot serve as
an instrument for perpetrating an injustice on a citizen.
The instant petition is GRANTED. The assailed decision of the
Regional Trial Court dated 07 November 1997 is REVERSED
AND SET ASIDE.
10. Froilan vs. Pan Oriental Shipping, G.R. No. L-6060,
September 30, 1950
FACTS: Defendant Pan Oriental took possession of the vessel
in question after it had been repossessed by the Shipping
Administration and title thereto reacquired by the government,
following the original purchaser, Fernando Froilan’s, default in
his payment of the unpaid balance and insurance premiums for
the said vessel.
Pan Oriental chartered said vessel and operated the same after
it had repaired the vessel and paid the stipulated initial
payment, thereby exercising its option to purchase, pursuant to
a bareboat charter contract entered between said company and
the Shipping Corporation.
The Cabinet resolved to restore Froilan to his rights under the
original contract of sale on condition that hes hall pay a sum of
money upon delivery of the vessel tohim, that he shall continue
paying the remaining installments due, and that he shall
assume the expenses incurred for the repair and by docking of
the vessel.
However, Pan Oriental protested to this restoration of Froilan’s
rights under the contract of sale, for the reason that when the
vessel was delivered to it, the Shipping Administration had
authority to dispose of said authority to the property, Froilan
having already relinquished whatever rights he may have
thereon.
Consequently, Froilan paid the required cash of P10,000.00 and
as Pan Oriental refused to surrender possession of the vessel,
he filed an action for in the CFI of Manila to recover possession
thereof and have him declared the rightful owner of said
property.
Moreover, the Republic of the Philippines was allowed to
intervene in said civil case praying for the possession of the in
order that the chattel mortgage constituted thereon may be
foreclosed.
ISSUE: Whether or not the Court has jurisdiction over the
intervenor with regard to the counterclaim?
RULING: Yes. The Supreme Court held that the government
impliedly allowed itself to be sued when it filed a complaint in
intervention for the purpose of asserting claim for affirmative
relief against the plaintiff to the recovery of the vessel.
It is a settled rule that when the government enters into a
contract, for the State is then deem to have divested itself of
the mantle of sovereign immunity and descended to the level
of the ordinary individual. Having done so, it becomes subject
to judicial action and processes.
In the case at bar, the state as plaintiff may avail itself of the
different forms of actions open to private litigants. The
immunity of the state from suits does not deprive it of the right
to sue private parties in its own courts.  Philippines) be sued?
In short, by taking the initiative in an action against a private
party, the state surrenders its privileged position and comes
down to the level of the defendant. The latter automatically
acquires, within certain limits, the right to set up whatever
claims and other defenses he might have against the state.
11. Lim vs. Brownell, 107 Phil. 345, G.R. No. L-8587
FACTS: The property in dispute consists of four parcels of land
situated in Tondo,City of Manila. The lands were,after the last
world war, found by the Alien Property Custodian of the United
States to be registered in the name of Asaichi Kagawa, national
of an enemy country, Japan. On August 3, 1948,the Philippine
Alien Property Administrator (PAPA) and the President of the
Philippines, executed two formal agreements, whereby the said
Administrator transferred all the said four lots to the Republic
of the Philippines under the Trading with the Enemy Act.
On November 15, 1948 the latter's son Benito E. Lim filed a
formal notice of claim to the property with the PAPA On the
theory that the lots in question still belonged to Arsenia
Enriquez. That they were mortgaged by her to the Mercantile
Bank of China Asaichi Kagawa, who, by means of threat and
intimidation succeeded in preventing Arsenia Enriquez from
exercising her right of redemption
On March 7, 1950, the claim was disallowed by the PAPA. On
November 13, 1950, the claimant Benito E. Lim filed a
complaint in the Court of First Instance of Manila against the
PAPA (later substituted by the Attorney General of the United
States) for the recovery of the property in question with back
rents. The complaint was later amended to include Asaichi
Kagawa as defendant.
ISSUE: Whether or not lntervenor-Appellee (Republic of the
RULING: The order appealed is affirmed, but revoked insofar
as it dismisses the complaint with respect to Lots 3 and 4, as to
which the case is hereby remanded to the court below for
further proceedings.
Ratio Decidendi: No suit or claim for the return of said
properties pursuant to Section 9 or 32 (a) of the Trading with
the Enemy Act was filed by Plaintiff within two years from the
date of vesting, the "later" date and the last on which suit
could be brought.
Considering the law applicable there is no denying that an
action against the Alien Property Custodian, or the Attorney
General of the United States as his successor, involving vested
property under the Trading with the Enemy Act located in the
Philippines, is in substance an action against the United States.
The immunity of the state from suit, however, cannot be
invoked where the action, as in the present case, is instituted
by a person who is neither an enemy or ally of an enemy for
the purpose of establishing his right, title or interest in vested
property, and of recovering his ownership and possession.
Congressional consent to such suit has expressly been given by
the United States.
12. United States vs. Ruiz, 136 SCRA 487
FACTS: Petitioner invited the submission of bids for
repair of its wharves and shoreline in the Subic Bay Area.
Eligion and Co. responded to the invitation and submitted bids.
Said company was requested by telegram to confirm its price
proposals and for the name of its bonding company, and from
which it complied. Later, the United States, through its agents,
informed said company that it was not qualified to receive an
award at the project for the poorly completed projects it
awarded to third parties. The company sued petitioner for
specific performance and if no longer possible, for damages. It
also asked for a writ of preliminary injunction to restrain the
defendants from entering into contracts with others.
The United States entered a special appearance for
the purpose only of questioning the jurisdiction of the court
over the subject matter of the complaint and the persons of the
defendants, the subject matter of the complaint being
acts and omissions of the individual defendants as
agents of the defendant United States of America, a foreign
sovereign which has not given its consent to this suit or any
other suit for the cause of action asserted in the complaint.
US filed a motion to dismiss and opposed the writ. The trial
court denied the motion and issued a writ.
ISSUE: Whether the US may be sued?
RULING: No. The traditional rule of State immunity exempts a
State from being sued in the courts of another State without its
consent or waiver. This rule is a necessary
consequence of the principles of independence and
equality of States. However, the rules of International Law are
not petrified; they are constantly developing and evolving. And
because the activities of states have multiplied, it has been
necessary to distinguish them — between sovereign and
governmental acts (jureimperii) and private, commercial and
proprietary acts (jure gestionis). The result is that State
immunity now extends only to acts jure imperii. The restrictive
application of State immunity is now the rule in the
United States, the United Kingdom and other states in western
Europe. (See Coquia and Defensor-Santiago, Public
International Law, pp. 207-209 [1984].)
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. Stated differently, a state may be said to have
descended to the level of an individual and can be thus deemed
to have tacitly given its consent to be sued only when the
contract relates to the exercise of its sovereign functions. In
this case, the projects are an integral part of the naval base
which is devoted to the defense of both the US and
the Philippines, undisputed a function of the government of
the highest order, they are not utilized for nor dedicated
to commercial or business purposes. The correct test
for the application of State immunity is not the
conclusion of a contract by a State but the legal nature of the
act is shown in Syquia vs. Lopez, 84 Phil. 312
(1949). In that case the plaintiffs leased three apartment
buildings to the United States of America for the use of its
military officials. The plaintiffs sued to recover possession of
the premises on the ground that the term of the leases had
expired, they also asked for increased rentals until the
apartments shall have been vacated.
 13. Holy See vs. Rosario, G.R. No. 101949, December
1, 1994
FACTS: Lot 5-A is registered under the name of the petitioner
The Holy See. This lot is contiguous to lots 5-B and 5-D
registered in the name of Philippine Realty Corporation (PRC).
These three lots were sold through an agent Msgr.
Domingo Cirilos Jr. to Ramon Licup. Licup assigned his
rights to private respondent Starbright Sales Ent. Inc. (SSEI).
Due to refusal of the squatters to vacate the lots, a dispute
arose as to who of the parties has the responsibility
of eviction and clearing the land. SSEI insists that petitioner
should clear the property of the squatters. Petitioner refused
and proposed that either SSEI undertake the eviction or that
the earnest money be returned. Msgr. Cirilos returned the
P100,000.00 earnest money, and the property was sold to
Tropicana Properties and Development Corporation
(Tropicana).
SSEI filed suit for annulment of sale, specific performance and
damages against Msgr. Cirilos, PRC, and Tropicana.
The petitioner and Msgr. Cirilos moved to dismiss for lack of
jurisdiction based on sovereign immunity from suit. It was
denied on the ground that petitioner “shed off its sovereign
immunity by entering into the business contract” in question.
A motion for reconsideration was also denied. Hence, this
special civil action for certiorari.
ISSUE: Did the Holy See properly invoke sovereign immunity
for its non- suability?
RULING: YES. In the case at bar, lot 5-A was acquired as a
donation from the archdiocese of Manila for the site of its
mission or the Apostolic Nuniciature in the Philippines.
The subsequent disposal was made because the squatters
living thereon made it impossible for petitioner to use it for the
purpose of the donation. Petitioner did not sell lot 5-A for
profit or gain.
There are two conflicting concepts of sovereign immunity, each
widely held and firmly established. According to the classical or
absolute theory, a sovereign cannot, without its consent, be
made a respondent in the courts of another sovereign.
According to the newer or restrictive theory, the immunity of
the sovereign is recognized only with regard to public acts or
acts jure imperii of a state, but not with regard to private acts
or acts jure gestionis (United States of America v. Ruiz, 136
SCRA 487 [1987]; Coquia and Defensor-Santiago, Public
International Law 194 [1984]).
The restrictive theory, which is intended to be a solution to the
host of problems involving the issue of sovereign
immunity, has created problems of its own. Legal treatises
and the decisions in countries which follow the restrictive
theory have difficulty in characterizing whether a contract of a
sovereign state with a private party is an act jure gestionis or
an act jure imperii.
The restrictive theory came about because of the entry of
sovereign states into purely commercial activities remotely
connected with the discharge of governmental functions.
This is particularly true with respect to the
Communist states which took control of nationalized
business activities and international trading.
This Court has considered the following transactions by a
foreign state with private parties as acts jure imperii: (1) the
lease by a foreign government of apartment buildings for use
of its military officers (Syquia v. Lopez, 84 Phil. 312 [1949];
(2) the conduct of public bidding for the repair of a wharf at a
United States Naval Station (United States of America v. Ruiz,
supra.); and (3) the change of employment status of base
employees (Sanders v. Veridiano, 162 SCRA 88 [1988]).
 14. China National Machinery & Equipment
Corporation (GROUP) vs. Sta. Maria, 665 SCRA
189, G.R. No. 185572; February 7, 2012
FACTS: On 14 September 2002, petitioner China National
Machinery & Equipment Corp. (CNMEG), represented by its
chairperson, Ren Hongbin, entered into a Memorandum of
Understanding with the North Luzon Railways Corporation for
the conduct of a feasibility study on a possible railway line from
Manila to San Fernando, La Union.
On 30 August 2003, the Export Import Bank of China (EXIM
Bank) and the Department of Finance of the Philippines (DOF)
entered into a Memorandum of Understanding, wherein China
agreed to extend Preferential Buyer’s Credit to the Philippine
government to finance the Northrail Project. The Chinese
government designated EXIM Bank as the lender, while the
Philippine government named the DOF as the borrower. Under
the Aug 30 MOU, EXIM Bank agreed to extend an amount not
exceeding USD 400,000,000 in favor of the DOF, payable in 20
years, with a 5-year grace period, and at the rate of 3% per
annum.
On 1 October 2003, the Chinese Ambassador to the Philippines,
Wang Chungui, wrote a letter to DOF Secretary Jose Isidro
Camacho informing him of CNMEG’s designation as the Prime
Contractor for the Northrail Project. On 30 December 2003,
Northrail and CNMEG executed a Contract Agreement for the
construction of Section I, Phase I of the North Luzon Railway
System from Caloocan to Malolos on a turnkey basis (the
Contract Agreement). The contract price for the Northrail
Project was pegged at USD 421,050,000.
On 26 February 2004, the Philippine government and EXIM
Bank entered into a counterpart financial agreement, the Buyer
Credit Loan Agreement. In the Loan Agreement, EXIM Bank
agreed to extend Preferential Buyer’s Credit in the amount of
USD 400,000,000 in favor of the Philippine government in
order to finance the construction of Phase I of the Northrail
Project.
ISSUE: Whether the Contract Agreement is an executive
agreement.
RULING: Under the Vienna Convention on the Law of Treaties
defines a treaty as, “An international agreement concluded
between States in written form and governed by international
law, whether embodied in a single instrument or in two or
more related instruments and whatever its particular
designation.” The Court held that an executive agreement is
similar to a treaty, except that the former (a) does not require
legislative concurrence; (b) is usually less formal; and (c) deals
with a narrower range of subject matters.
Despite these differences, to be considered an executive
agreement, the following three requisites provided under the
Vienna Convention must nevertheless concur: (a) the
agreement must be between states; (b) it must be written; and
(c) it must governed by international law. The first and the
third requisites do not obtain in the case at bar.
The Contract Agreement was not concluded between the
Philippines and China, but between Northrail and CNMEG. By
the terms of the Contract Agreement, Northrail is a
government-owned or -controlled corporation, while CNMEG is
a corporation duly organized and created under the laws of the
People’s Republic of China. Thus, both Northrail and CNMEG
entered into the Contract Agreement as entities with
personalities distinct and separate from the Philippine and
Chinese governments, respectively.
Neither can it be said that CNMEG acted as agent of the
Chinese government. As previously discussed, the fact that
Amb. Wang, in his letter dated 1 October 2003, described
CNMEG as a "state corporation" and declared its designation as
the Primary Contractor in the Northrail Project did not mean it
was to perform sovereign functions on behalf of China. That
label was only descriptive of its nature as a state-owned
corporation, and did not preclude it from engaging in purely
commercial or proprietary ventures.
It is therefore clear from the foregoing reasons that the
Contract Agreement does not partake of the nature of an
executive agreement. It is merely an ordinary commercial
contract that can be questioned before the local courts.
15. Republic of Indonesia vs. Vinzon, G.R. 154705,
June 26, 2003
FACTS: Petitioner, Republic of Indonesia, represented by its
Counsellor, Siti Partinah, entered into a Maintenance
Agreement in August 1995 with respondent James Vinzon, sole
proprietor of Vinzon Trade and Services. The maintenance
agreement includes the following specific equipments: air
conditioning units, generator sets, electrical facilities, water
heaters and water motor pumps. The agreement shall be
effective for 4 years and will renew itself automatically unless
cancelled by either party by giving thirty days prior written
notice from the date of expiry.
The new Minister Counselor allegedly found respondent's work
and services unsatisfactory and not in compliance with the
standards set in the Agreement. Hence, the Indonesian
Embassy terminated the agreement in a letter dated August
31, 2000. Petitioners claim, moreover, that they had earlier
verbally informed respondent of their decision to terminate the
agreement.
On the other hand, respondents claim that the termination was
unlawful and arbitrary. Respondent cites various circumstances
which purportedly negated petitioners alleged dissatisfaction
over respondents services: (a) in July 2000, Minister Counsellor
Kasim still requested respondent to assign to the embassy an
additional full-time worker to assist one of his other workers;
(b) in August 2000, Minister Counsellor Kasim asked
respondent to donate a prize, which the latter did, on the
occasion of the Indonesian Independence Day golf tournament;
and (c) in a letter dated August 22, 2000, petitioner
Ambassador Soeratmin thanked respondent for sponsoring a
prize and expressed his hope that the cordial relations happily
existing between them will continue to prosper and be
strengthened in the coming years.
Respondent filed a Motion to Dismissed alleging that the
Republic of Indonesia, as a foreign state, has sovereign
immunity from suit and cannot be sued as party-defendant in
the Philippines.
ISSUE: Whether or not Court of Appeals erred in sustaining
the trial court's decision that petitioners have waived their
immunity from suit?
RULING: Yes, because the the Maintenance Agreement was
entered into by the Republic of Indonesia in the discharge of its
governmental functions.
It’s a settled rule that the mere entering into a contract by a
foreign State with a private party cannot be construed as the
ultimate test of whether or not it is an act jure imperii or jure
gestionis. Such act is only the start of the inquiry.
In the case at bar, there is no dispute that the establishment of
a diplomatic mission is an act jure imperii. A sovereign State
does not merely establish a diplomatic mission and leave it at
that; the establishment of a diplomatic mission encompasses
its maintenance and upkeep. Hence, the State may enter into
contracts with private entities to maintain the premises,
furnishings and equipment of the embassy and the living
quarters of its agents and officials. It is therefore clear that
petitioner Republic of Indonesia was acting in pursuit of a
sovereign activity when it entered into a contract with
respondent for the upkeep or maintenance of the air
conditioning units, generator sets, electrical facilities, water
heaters, and water motor pumps of the Indonesian Embassy
and the official residence of the Indonesian ambassador. In
such a case, it cannot be deemed to have waived its immunity
from suit.
As to the paragraph in the agreement relied upon by
respondent, the Solicitor General states that it “was not a
waiver of their immunity from suit but a mere stipulation that
in the event they do waive their immunity, Philippine laws shall
govern the resolution of any legal action arising out of the
agreement and the proper court in Makati City shall be the
agreed venue thereof.”
“The mere entering into a contract by a foreign state with a
private party cannot be construed as the ultimate test of
whether or not it is an act juri imperii or juri gestionis. Such act
is only the start of the inquiry. There is no dispute that the
establishment of a diplomatic mission is an act juri imperii. The
state may enter into contracts with private entities to maintain
the premises, furnishings and equipment of the embassy. The
Republic of Indonesia is acting in pursuit of a sovereign activity
when it entered into a contract with the respondent. The
maintenance agreement was entered into by the Republic of
Indonesia in the discharge of its governmental functions. It
cannot be deemed to have waived its immunity from suit.”
16. Minucher vs. Court of Appeals, G.R. No. 142396,
February 11, 2003
FACTS: Khosrow Minucher was an Iranian National who came
to the Philippines in to study and later became a refugee of the
United Nations after the Iranian government he was
working for was deposed.  reversed the trial court’s decision and sustained
On the other hand, Arthur Arthur Scalzo was a special agent of
the United States Drug Enforcement Administration. He
conducts surveillance operations on suspected drug dealers in
the Philippines and believes to be the source of prohibited
drugs shipped to the US and make the actual arrest.
Khosrow Minucher and one Abbas Torabian were charged for
violation of Section 4 of Republic Act No. 6425, otherwise also
known as the "Dangerous Drugs Act of 1972," before the
Regional Trial Court, Branch 151, of Pasig City, such criminal
charge was followed by a buy-bust operation conducted by the
Philippine police narcotic agents where Scalzo was a witness for
the prosecution.They were acquitted later on.
On 03 August 1988, Minucher filed Civil Case No. 88-45691
before the Regional Trial Court (RTC), Branch 19, of Manila for
damages on account of what he claimed to have been
trumped-up charges of drug trafficking made by Arthur Scalzo.
In his complaint, he said that during the buy-bust operation
wherein he was arrested without any warrant, some of his
valuable were missing. He averred that his arrest as a heroine
trafficker was well publicized and that when he got arrested, he
was not given any food or water for 3 days.
Scalzo, in his defense, asserted his diplomatic immunity as
evidenced a Diplomatic Note. He contended that it was
recognized by the US Government pursuant to the Vienna
Convention on Diplomatic Relations and the Philippine
government itself thru its Executive Department and
Department of Foreign Affairs.
The trial court decided in favor of Minucher citing that even if
Scalzo was a diplomatic agent, he
should be still held liable of the crime since he committed it out
side his official duties. On appeal, the Court of Appeals
Scalzo’s defense that he was sufficiently clothed with
Diplomatic immunity during his term of duty and thereby
immune from the criminal and civil jurisdiction of the
“Receiving State” pursuant to the terms of the Vienna
Convention.
ISSUE: Whether or not Arthur Scalzo is indeed entitled to
diplomatic immunity from civil suit conformably with the Vienna
Convention on Diplomatic Relations
RULING: A foreign agent, operating within a territory, can be
cloaked with immunity from suit but only as long as it can be
established that he is acting within the directives of the sending
state. The consent of the host state is an indispensable
requirement of basic courtesy between the two sovereigns.
In the instant case, the official exchanges of communication
between agencies of the government of the two countries,
certifications from officials of both the Philippine Department of
Foreign Affairs and the United States Embassy, as well as the
participation of members of the Philippine Narcotics Command
in the "buy-bust operation" conducted at the residence of
Minucher at the behest of Scalzo, may be inadequate to
support the "diplomatic status" of the latter but they give
enough indication that the Philippine government has given
its imprimatur, if not consent, to the activities within Philippine
territory of agent Scalzo of the United States Drug Enforcement
Agency. The job description of Scalzo has tasked him to
conduct surveillance on suspected drug suppliers and, after
having ascertained the target, to inform local law enforcers
who would then be expected to make the arrest. In conducting
surveillance activities on Minucher, later acting as the poseur-
buyer during the buy-bust operation, and then becoming a
principal witness in the criminal case against Minucher, Scalzo
hardly can be said to have acted beyond the scope of his
official function or duties.
All told, this Court is constrained to rule that respondent Arthur
Scalzo, an agent of the United States Drug Enforcement
Agency allowed by the Philippine government to conduct
activities in the country to help contain the problem on the
drug traffic, is entitled to the defense of state immunity from
suit.
17. Lasco vs. UNRFNRE, G.R. No. 109095-109107,
February 23, 1995
FACTS: Petitioners were dismissed from their employment with
private respondent, the United Nations Revolving Fund for
Natural Resources Exploration (UNRFNRE), which is a special
fund and subsidiary organ of the United Nations. The UNRFNRE
is involved in a joint project of the Philippine Government and
the United Nations for exploration work in Dinagat Island.
Petitioners filed a complaint for illegal dismissal and damages
before the NLRC, respondent Labor Arbiter issued an order
dismissing the complaints on the ground that private
respondent was protected by diplomatic immunity. The
dismissal was based on the letter of the Foreign Office which
confirmed that private respondent, being a special fund
administered by the United Nations, was covered by the 1946
Convention on the Privileges and Immunities of the United
Nations of which the Philippine Government was an original
signatory. Petitioners filed the instant petition for certiorari
without first seeking a reconsideration of the NLRC resolution.
Petitioners argued that the acts of mining exploration and
exploitation are outside the official functions of an international
agency protected by diplomatic immunity. Even assuming that
private respondent was entitled to diplomatic immunity,
petitioners insisted that private respondent waived it when it
engaged in exploration work and entered into a contract of
employment with petitioners.
Private respondent alleged that respondent Labor Arbiter had
no jurisdiction over its personality since it enjoyed diplomatic
immunity.
ISSUE: Whether an international organization is entitled to
diplomatic immunity is a "political question" and such
determination by the executive branch is conclusive on
the courts and quasi-judicial agencies.
RULING: As a matter of state policy as expressed in the
Constitution, the Philippine Government adopts the generally
accepted principles of international law (1987 Constitution, Art.
II, Sec. 2). Being a member of the United Nations and a party
to the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations, the Philippine
Government adheres to the doctrine of immunity granted to
the United Nations and its specialized agencies. Both treaties
have the force and effect of law. Our courts can only assume
jurisdiction over private respondent if it expressly waived its
immunity, which is not so in the case at bench (Convention on
the Privileges and Immunities of the Specialized Agencies of
the United Nations, Art. III, Sec. 4).Private respondent is not
engaged in a commercial venture in the Philippines. Its
presence here is by virtue of a joint project entered into by the
Philippine Government and the United Nations for mineral
exploration in Dinagat Island. Its mission is not to exploit our
natural resources and gain peculiarly thereby but to help
improve the quality of life of the people, including that of
petitioners. This is not to say that petitioner have no recourse.
Section 31 of the Convention on the Privileges and Immunities
of the Specialized Agencies of the United Nations states that
"each specialized agency shall make a provision for appropriate
modes of settlement of: (a) disputes arising out of contracts or
other disputes of private character to which the specialized
agency is a party."
18. Republic vs. Villasor, 54 SCRA 83
FACTS: A decision was rendered in a Special Proceeding
against the Republic of the Philippines thereby confirming the
arbitration award of P1,712,396.40 in favor of respondent
corporation. After the decision became final and
executory, respondent judge issued an order directing the
sheriff to execute the said decision, and the corresponding alias
writ of execution was thus issued.
Hence the sheriff served notices of garnishment with several
banks especially the monies due to the AFP in the
form of deposits sufficient to cover the amount mentioned in
the writ. PNB and Philippine Veterans Bank received such
notice. As certified by the AFP Comptroller, these funds of
the AFP with the said banks are public funds for the
pensions, pay, and allowances of its military and civilian
personnel.
The petitioner, in this certiorari and prohibition proceedings,
challenges the validity of the Order issued by Judge Villasor
declaring the decision final and executory and subsequently
issuing an alias writ of execution directed against the funds
of the AFP in pursuance thereof.
ISSUE: May the writs of execution and notices of garnishment
be sued against public funds?
RULING: NO. Although the State may give its consent to be
sued by private parties, there is corollary that public funds
cannot be the object of garnishment proceedings even if
the consent to be sued has been previously granted
and the state’s liability has been adjudged.
Thus in the case of Commission of Public Highways vs. San
Diego, such a well-settled doctrine was restated in the opinion
of Justice Teehankee. 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 the government funds and
properties may not be seized under writs of execution
or garnishment to satisfy such judgment, is based on
obvious considerations of public policy. Disbursement of
public funds must be covered by the corresponding
appropriations as required by law. The functions and public
services rendered by the State cannot be allowed to be
paralyzed or disrupted by diversion of public funds from
their legitimate and specific object is appropriated by
law.
19. Municipality of Makati vs. Court of Appeals, 190
SCRA 206, 1990
FACTS: An expropriation proceeding was initiated by
petitioner Municipality of Makati against private
respondent Admiral Finance Creditors Consortium Inc.,
Home Building System and Reality Corp., and Arceli P. Jo
involving a parcel of land and improvements thereon located at
San Antonio Village, Makati.
An action for eminent domain was filed. Attached to the
petitioner’s complaint was a certification that a bank account
had been opened with the PNB. After the decision has become
final and executory, a writ of execution was issued and a notice
of garnishment was served upon the manager of PNB
where the petitioner had bank accounts. However, the
sheriff was informed that a hold code was placed on the
account of the petitioner.
The petitioner contended that its funds at the PNB cocked
neither be garnished nor levied upon execution for to do so
would result in the disbursement of public funds without the
proper appropriation required under the law.
In a petition with the Court of Appeals, petitioner alleges for
the first time that it has actually two accounts with
the PNB, one exclusively for the expropriation of the
subject property with the outstanding balance of P99, 743.
94. The other account was for the obligations and other
purposes of the municipal government with a balance
of P170,098,421.72.
ISSUE: Whether the bank account of a municipality may be
levied on execution to satisfy a money judgment against it
absent showing that the municipal council has passed an
ordinance appropriating from its public funds an amount
corresponding to the balance due to the RTC decision?
RULING: YES. Since the first PNB account was specifically
opened for expropriation proceedings it has initiated over the
subject property, there is no objection to the garnishment or
levy under execution of funds therein amounting to
P4,965,506.40, the funds garnished in excess of P99,743.94,
which are public funds earmarked for the municipal
government. Other statutory obligations are exempted from
execution without the proper appropriation required under the
law.
The funds deposited in the 2nd PNB account are public funds of
the municipal government. The rule is well-settled that public
funds are not subject to levy and execution, unless
otherwise provided by the statute. More particularly, the
properties of a municipality, whether real or personal, which
are necessary for public use cannot be attached and sold on
execution sale to satisfy a money judgment against the
municipality. Municipal revenues derived from taxes, licenses
and market fees, and which are intended primarily and
exclusively for the purpose of financing governmental activities
and functions of the municipality are exempt from execution.
The foregoing rule finds application in the case at bar.
This is not to say that private respondents are left with no legal
recourse. When a municipality fails or refuses without
justifiable reason to effect payment of a final money judgment
rendered against it, the claimant may avail of the remedy of
mandamus in order to compel the enactment and approval of
the necessary appropriation ordinance and the corresponding
disbursement of municipal funds. The court will not
condone petitioner’s blatant refusal to settle its obligation
arising from an expropriation proceeding it has in fact initiated.
Within the context of the state’s inherent power of eminent
domain, just compensation means not only the correct
determination of the amount to be paid to the owner of the
land but also the payment of the land within a reasonable time
from its taking. The state’s power of eminent domain should be
exercised within the bounds of fair play and justice. In the
case at bar, considering that valuable property has been taken,
the compensation to be paid is fixed, and the municipal has
had more than reasonable time to pay full
compensation.
20. University of the Philippines vs. Dizon, G.R. No.
171182, August 23, 2012
FACTS: University of the Philippines (UP) entered into a
General Construction Agreement with respondent Stern
Builders Corporation (Stern Builders) for the construction and
renovation of the buildings in the campus of the UP in Los Bas.
UP was able to pay its first and second billing. However, the
third billing worth P273,729.47 was not paid due to its
disallowance by the Commission on Audit (COA). Thus, Stern
Builders sued the UP to collect the unpaid balance.
On November 28, 2001, the RTC rendered its decision ordering
UP to pay Stern Builders. Then on January 16, 2002, the UP
filed its motion for reconsideration. The RTC denied the motion.
The denial of the said motion was served upon
Atty. Felimon Nolasco (Atty.Nolasco) of the UPLB Legal Office
on May 17, 2002. Notably, Atty. Nolasco was not the counsel of
record of the UP but the OLS inDiliman, Quezon City.
Thereafter, the UP filed a notice of appeal on June 3, 2002.
However, the RTC denied due course to the notice of appeal for
having been filed out of time. On October 4, 2002, upon
motion of Stern Builders, the RTC issued the writ of execution.
On appeal, both the CA and the High Court denied UPs petition.
The denial became final and executory. Hence, Stern Builders
filed in the RTC its motion for execution despite their previous
motion having already been granted and despite the writ of
execution having already issued. On June 11, 2003, the RTC
granted another motion for execution filed on May 9, 2003
(although the RTC had already issued the writ of execution on
October 4, 2002). Consequently, the sheriff served notices of
garnishment to the UPs depositary banks and the RTC ordered
the release of the funds.
Aggrieved, UP elevated the matter to the CA. The CA sustained
the RTC. Hence, this petition.
ISSUE:
I. Was UP's funds validly garnished?
II. Has the UP's appeal dated June 3, 2002 been filed out of
time?
RULING:
UP's funds, being government funds, are not subject to
garnishment. (Garnishment of public funds; suability vs.
liability of the State)
Despite its establishment as a body corporate, the UP remains
to be a "chartered institution" performing a legitimate
government function. Irrefragably, the UP is a government
instrumentality, performing the States constitutional mandate
of promoting quality and accessible education. As a
government instrumentality, the UP administers special funds
sourced from the fees and income enumerated under Act No.
1870 and Section 1 of Executive Order No. 714, and from the
yearly appropriations, to achieve the purposes laid down by
Section 2 of Act 1870, as expanded in Republic Act No. 9500.
All the funds going into the possession of the UP, including any
interest accruing from the deposit of such funds in any banking
institution, constitute a "special trust fund," the disbursement
of which should always be aligned with the UPs mission and
purpose, and should always be subject to auditing by the COA.
The funds of the UP are government funds that are public in
character. They include the income accruing from the use of
real property ceded to the UP that may be spent only for the
attainment of its institutional objectives.
A marked distinction exists between suability of the State and
its liability. As the Court succinctly stated in Municipality of San
Fernando, La Union v. Firme: A distinction should first be made
between suability and liability. "Suability depends on the
consent of the state to be sued, liability on the applicable law
and the established facts. The circumstance that a state is
suable does not necessarily mean that it is liable; on the other
hand, it can never be held liable if it does not first consent to
be sued. Liability is not conceded by the mere fact that the
state has allowed itself to be sued. When the state does waive
its sovereign immunity, it is only giving the plaintiff the chance
to prove, if it can, that the defendant is liable.
The Constitution strictly mandated that "no money shall be
paid out of the Treasury except in pursuance of an
appropriation made by law." The execution of the monetary
judgment against the UP was within the primary jurisdiction of
the COA. It was of no moment that a final and executory
decision already validated the claim against the UP.
The period of appeal did not start without effective
service of decision upon counsel of record. (The doctrine
of immutability of a final judgment; service of
judgments; fresh-period rule; computation of time)
At stake in the UPs plea for equity was the return of the
amount of P16,370,191.74 illegally garnished from its trust
funds. Obstructing the plea is the finality of the judgment
based on the supposed tardiness of UPs appeal, which the RTC
declared on September 26, 2002. It is true that a decision that
has attained finality becomes immutable and unalterable, and
cannot be modified in any respect, even if the modification is
meant to correct erroneous conclusions of fact and law, and
whether the modification is made by the court that rendered it
or by this Court as the highest court of the land. But the
doctrine of immutability of a final judgment has not been
absolute, and has admitted several exceptions, among them:
(a) the correction of clerical errors; (b) the so-called nunc pro
tunc entries that cause no prejudice to any party; (c) void
judgments; and (d) whenever circumstances transpire after the
finality of the decision that render its execution unjust and
inequitable. We rule that the UPs plea for equity warrants the
Courts exercise of the exceptional power to disregard the
declaration of finality of the judgment of the RTC for being in
clear violation of the UPs right to due process.
Firstly, the service of the denial of the motion for
reconsideration upon Atty. Nolasco of the UPLB Legal Office
was invalid and ineffectual because he was admittedly not the
counsel of record of the UP. Verily, the service of the denial of
the motion for reconsideration could only be validly made upon
the OLS in Diliman, and no other. It is settled that where a
party has appeared by counsel, service must be made upon
such counsel. This is clear enough from Section 2, second
paragraph, of Rule 13, Rules of Court, which explicitly states
that: "If any party has appeared by counsel, service upon him
shall be made upon his counsel or one of them, unless service
upon the party himself is ordered by the court. Where one
counsel appears for several parties, he shall only be entitled to
one copy of any paper served upon him by the opposite side."
Secondly, even assuming that the service upon Atty. Nolasco
was valid and effective, such that the remaining period for the
UP to take a timely appeal would end by May 23, 2002, it
would still not be correct to find that the judgment of the RTC
became final and immutable thereafter due to the notice of
appeal being filed too late on June 3, 2002. In so declaring the
judgment of the RTC as final against the UP, the CA and the
RTC applied the rule contained in the second paragraph of
Section 3, Rule 41 of the Rules of Court to the effect that the
filing of a motion for reconsideration interrupted the running of
the period for filing the appeal; and that the period resumed
upon notice of the denial of the motion for reconsideration. For
that reason, the CA and the RTC might not be taken to task for
strictly adhering to the rule then prevailing.

However, equity calls for the retroactive application in the UPs

favor of the fresh-period rule that the Court first announced in
mid-September of 2005 through its ruling in Neypes v. Court of
Appeals, viz: "to standardize the appeal periods provided in the
Rules and to afford litigants fair opportunity to appeal their
cases, the Court deems it practical to allow a fresh period of 15
days within which to file the notice of appeal in the Regional
Trial Court, counted from receipt of the order dismissing a
motion for a new trial or motion for reconsideration." The
retroactive application of the fresh-period rule, a procedural
law that aims "to regiment or make the appeal period uniform,
to be counted from receipt of the order denying the motion for
new trial, motion for reconsideration (whether full or partial) or
any final order or resolution," is impervious to any serious
challenge. This is because there are no vested rights in rules of
procedure.

Consequently, even if the reckoning started from May 17,

2002, when Atty. Nolasco received the denial, the UPs filing on
June 3, 2002 of the notice of appeal was not tardy within the
context of the fresh-period rule. For the UP, the fresh period of
15-days counted from service of the denial of the motion for
reconsideration would end on June 1, 2002, which was a
Saturday. Hence, the UP had until the next working day, or
June 3, 2002, a Monday, within which to appeal, conformably
with Section 1 of Rule 22, Rules of Court, which holds that: "If
the last day of the period, as thus computed, falls on a
Saturday, a Sunday, or a legal holiday in the place where the
court sits, the time shall not run until the next working
day. GRANTED.