CASE #1

CASE #2
Tinoco Claims Arbitration (Great Britain v. Costa Rica)

Brief Fact Summary. The Tinoco regime, which was the former government of Costa
Rica, was alleged by Great Britain to have granted oil concession to a British company
that had to be honored by the present regime.

Synopsis of Rule of Law. A government need not conform to a previous constitution if

the government had established itself and maintained a peaceful de facto administration
and non-recognition of the government by other government does not destroy the de
facto status of the government.

Facts. The Tinoco regime that had seized power in Costa Rica by coup was not
recognized by Great Britain and the United States. When the regime was removed, the
new government nullified all Tinoco’c contract including an oil concession to a British
company. The claim of Great Britain (P) was that the contract could not be repudiated
because the Tinoco government was the only government in existence at the time of the
contract was signed. This view was not shared by Costa Rica (D) who claimed that
Great Britain (P) was estopped from enforcing the contract by its non-recognition of the
Tinoco regime. The matter was sent for arbitration.

Issue. Does a government need to conform to a previous constitution if the government

had established itself and maintained a peaceful de facto administration and does non-
recognition of the government by other government destroy the de facto status of the
government?

Held. (Taft, C.J., Arb). No. A government need not conform to a previous constitution if
the government had established itself and maintained a peaceful de facto administration
and non-recognition of the government by other government does not destroy the de
facto status of the government. The non-recognition of the Tinoco regime by Great
Britain did not dispute the de facto existence of that regime. There is no estoppel since
the successor government had not been led by British non-recognition to change its
position.

Discussion. Estoppel was not found by the arbitrator. The evidence of the de facto
status of the Tinoco’s regime was not outweighed by the evidence of non-recognition.
This implies that valid contracts may be formed by unrecognized government.
CASE#3
REPUBLIC OF THE PHILIPPINES, Petitioner v. SANDIGANBAYAN
G.R. No. 104768 July 21, 2003
CARPIO, J.:

Before this Court is a petition for review on certiorari seeking to set aside the
Resolutions of the Sandiganbayan (First Division)1 dated 18 November 1991 and 25
March 1992 in Civil Case No. 0037. The first Resolution dismissed petitioner’s
Amended Complaint and ordered the return of the confiscated items to respondent
Elizabeth Dimaano, while the second Resolution denied petitioner’s Motion for
Reconsideration. Petitioner prays for the grant of the reliefs sought in its Amended
Complaint, or in the alternative, for the remand of this case to the Sandiganbayan (First
Division) for further proceedings allowing petitioner to complete the presentation of its
evidence.

Antecedent Facts

Immediately upon her assumption to office following the successful EDSA Revolution,
then President Corazon C. Aquino issued Executive Order No. 1 ("EO No. 1") creating
the Presidential Commission on Good Government ("PCGG"). EO No. 1 primarily
tasked the PCGG to recover all ill-gotten wealth of former President Ferdinand E.
Marcos, his immediate family, relatives, subordinates and close associates. EO No. 1
vested the PCGG with the power "(a) to conduct investigation as may be necessary in
order to accomplish and carry out the purposes of this order" and the power "(h) to
promulgate such rules and regulations as may be necessary to carry out the purpose of
this order." Accordingly, the PCGG, through its then Chairman Jovito R. Salonga,
created an AFP Anti-Graft Board ("AFP Board") tasked to investigate reports of
unexplained wealth and corrupt practices by AFP personnel, whether in the active
service or retired.

Based on its mandate, the AFP Board investigated various reports of alleged
unexplained wealth of respondent Major General Josephus Q. Ramas ("Ramas"). On
27 July 1987, the AFP Board issued a Resolution on its findings and recommendation
on the reported unexplained wealth of Ramas. The relevant part of the Resolution
reads:

III. FINDINGS and EVALUATION:

Evidence in the record showed that respondent is the owner of a house and lot located
at 15-Yakan St., La Vista, Quezon City. He is also the owner of a house and lot located
in Cebu City. The lot has an area of 3,327 square meters.

The value of the property located in Quezon City may be estimated modestly at
₱700,000.00.
The equipment/items and communication facilities which were found in the premises of
Elizabeth Dimaano and were confiscated by elements of the PC Command of Batangas
were all covered by invoice receipt in the name of CAPT. EFREN SALIDO, RSO
Command Coy, MSC, PA. These items could not have been in the possession of
Elizabeth Dimaano if not given for her use by respondent Commanding General of the
Philippine Army.

Aside from the military equipment/items and communications equipment, the raiding
team was also able to confiscate money in the amount of ₱2,870,000.00 and $50,000
US Dollars in the house of Elizabeth Dimaano on 3 March 1986.

Affidavits of members of the Military Security Unit, Military Security Command,

Philippine Army, stationed at Camp Eldridge, Los Baños, Laguna, disclosed that
Elizabeth Dimaano is the mistress of respondent. That respondent usually goes and
stays and sleeps in the alleged house of Elizabeth Dimaano in Barangay Tengga, Itaas,
Batangas City and when he arrives, Elizabeth Dimaano embraces and kisses
respondent. That on February 25, 1986, a person who rode in a car went to the
residence of Elizabeth Dimaano with four (4) attache cases filled with money and owned
by MGen Ramas.

Sworn statement in the record disclosed also that Elizabeth Dimaano had no visible
means of income and is supported by respondent for she was formerly a mere
secretary.

Taking in toto the evidence, Elizabeth Dimaano could not have used the military
equipment/items seized in her house on March 3, 1986 without the consent of
respondent, he being the Commanding General of the Philippine Army. It is also
impossible for Elizabeth Dimaano to claim that she owns the ₱2,870,000.00 and
$50,000 US Dollars for she had no visible source of income.

This money was never declared in the Statement of Assets and Liabilities of
respondent. There was an intention to cover the existence of these money because
these are all ill-gotten and unexplained wealth. Were it not for the affidavits of the
members of the Military Security Unit assigned at Camp Eldridge, Los Baños, Laguna,
the existence and ownership of these money would have never been known.

The Statement of Assets and Liabilities of respondent were also submitted for scrutiny
and analysis by the Board’s consultant. Although the amount of ₱2,870,000.00 and
$50,000 US Dollars were not included, still it was disclosed that respondent has an
unexplained wealth of ₱104,134. 60.

IV. CONCLUSION:

In view of the foregoing, the Board finds that a prima facie case exists against
respondent for ill-gotten and unexplained wealth in the amount of ₱2,974,134.00 and
$50,000 US Dollars.
V. RECOMMENDATION:

Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted

and tried for violation of RA 3019, as amended, otherwise known as "Anti-Graft and
Corrupt Practices Act" and RA 1379, as amended, otherwise known as "The Act for the
Forfeiture of Unlawfully Acquired Property."

Thus, on 1 August 1987, the PCGG filed a petition for forfeiture under Republic Act No.
1379 ("RA No. 1379") against Ramas.

Before Ramas could answer the petition, then Solicitor General Francisco I. Chavez
filed an Amended Complaint naming the Republic of the Philippines ("petitioner"),
represented by the PCGG, as plaintiff and Ramas as defendant. The Amended
Complaint also impleaded Elizabeth Dimaano ("Dimaano") as co-defendant.

The Amended Complaint alleged that Ramas was the Commanding General of the
Philippine Army until 1986. On the other hand, Dimaano was a confidential agent of the
Military Security Unit, Philippine Army, assigned as a clerk-typist at the office of Ramas
from 1 January 1978 to February 1979. The Amended Complaint further alleged that
Ramas "acquired funds, assets and properties manifestly out of proportion to his salary
as an army officer and his other income from legitimately acquired property by taking
undue advantage of his public office and/or using his power, authority and influence as
such officer of the Armed Forces of the Philippines and as a subordinate and close
associate of the deposed President Ferdinand Marcos."

The Amended Complaint also alleged that the AFP Board, after a previous inquiry,
found reasonable ground to believe that respondents have violated RA No. 1379.6 The
Amended Complaint prayed for, among others, the forfeiture of respondents’ properties,
funds and equipment in favor of the State.

Ramas filed an Answer with Special and/or Affirmative Defenses and Compulsory
Counterclaim to the Amended Complaint. In his Answer, Ramas contended that his
property consisted only of a residential house at La Vista Subdivision, Quezon City,
valued at ₱700,000, which was not out of proportion to his salary and other legitimate
income. He denied ownership of any mansion in Cebu City and the cash,
communications equipment and other items confiscated from the house of Dimaano.

Dimaano filed her own Answer to the Amended Complaint. Admitting her employment
as a clerk-typist in the office of Ramas from January-November 1978 only, Dimaano
claimed ownership of the monies, communications equipment, jewelry and land titles
taken from her house by the Philippine Constabulary raiding team.

After termination of the pre-trial, the court set the case for trial on the merits on 9-11
November 1988.
On 9 November 1988, petitioner asked for a deferment of the hearing due to its lack of
preparation for trial and the absence of witnesses and vital documents to support its
case. The court reset the hearing to 17 and 18 April 1989.

On 13 April 1989, petitioner filed a motion for leave to amend the complaint in order "to
charge the delinquent properties with being subject to forfeiture as having been
unlawfully acquired by defendant Dimaano alone x x x."

Nevertheless, in an order dated 17 April 1989, the Sandiganbayan proceeded with

petitioner’s presentation of evidence on the ground that the motion for leave to amend
complaint did not state when petitioner would file the amended complaint. The
Sandiganbayan further stated that the subject matter of the amended complaint was on
its face vague and not related to the existing complaint. The Sandiganbayan also held
that due to the time that the case had been pending in court, petitioner should proceed
to present its evidence.

After presenting only three witnesses, petitioner asked for a postponement of the trial.

On 28 September 1989, during the continuation of the trial, petitioner manifested its
inability to proceed to trial because of the absence of other witnesses or lack of further
evidence to present. Instead, petitioner reiterated its motion to amend the complaint to
conform to the evidence already presented or to change the averments to show that
Dimaano alone unlawfully acquired the monies or properties subject of the forfeiture.

The Sandiganbayan noted that petitioner had already delayed the case for over a year
mainly because of its many postponements. Moreover, petitioner would want the case
to revert to its preliminary stage when in fact the case had long been ready for trial. The
Sandiganbayan ordered petitioner to prepare for presentation of its additional evidence,
if any.

During the trial on 23 March 1990, petitioner again admitted its inability to present
further evidence. Giving petitioner one more chance to present further evidence or to
amend the complaint to conform to its evidence, the Sandiganbayan reset the trial to 18
May 1990. The Sandiganbayan, however, hinted that the re-setting was without
prejudice to any action that private respondents might take under the circumstances.

However, on 18 May 1990, petitioner again expressed its inability to proceed to trial
because it had no further evidence to present. Again, in the interest of justice, the
Sandiganbayan granted petitioner 60 days within which to file an appropriate pleading.
The Sandiganbayan, however, warned petitioner that failure to act would constrain the
court to take drastic action.

Private respondents then filed their motions to dismiss based on Republic v. Migrino.9
The Court held in Migrino that the PCGG does not have jurisdiction to investigate and
prosecute military officers by reason of mere position held without a showing that they
are "subordinates" of former President Marcos.

On 18 November 1991, the Sandiganbayan rendered a resolution, the dispositive

portion of which states:

WHEREFORE, judgment is hereby rendered dismissing the Amended Complaint,

without pronouncement as to costs. The counterclaims are likewise dismissed for lack
of merit, but the confiscated sum of money, communications equipment, jewelry and
land titles are ordered returned to Elizabeth Dimaano.

The records of this case are hereby remanded and referred to the Hon. Ombudsman,
who has primary jurisdiction over the forfeiture cases under R.A. No. 1379, for such
appropriate action as the evidence warrants. This case is also referred to the
Commissioner of the Bureau of Internal Revenue for a determination of any tax liability
of respondent Elizabeth Dimaano in connection herewith.

SO ORDERED.

On 4 December 1991, petitioner filed its Motion for Reconsideration.

In answer to the Motion for Reconsideration, private respondents filed a Joint

Comment/Opposition to which petitioner filed its Reply on 10 January 1992.

On 25 March 1992, the Sandiganbayan rendered a Resolution denying the Motion for
Reconsideration.

Ruling of the Sandiganbayan

The Sandiganbayan dismissed the Amended Complaint on the following grounds:

(1.) The actions taken by the PCGG are not in accordance with the rulings of the
Supreme Court in Cruz, Jr. v. Sandiganbayan10 and Republic v. Migrino11 which
involve the same issues.

(2.) No previous inquiry similar to preliminary investigations in criminal cases was

conducted against Ramas and Dimaano.

(3.) The evidence adduced against Ramas does not constitute a prima facie case
against him.

(4.) There was an illegal search and seizure of the items confiscated.

The Issues
Petitioner raises the following issues:

A. RESPONDENT COURT SERIOUSLY ERRED IN CONCLUDING THAT

PETITIONER’S EVIDENCE CANNOT MAKE A CASE FOR FORFEITURE AND THAT
THERE WAS NO SHOWING OF CONSPIRACY, COLLUSION OR RELATIONSHIP BY
CONSANGUINITY OR AFFINITY BY AND BETWEEN RESPONDENT RAMAS AND
RESPONDENT DIMAANO NOTWITHSTANDING THE FACT THAT SUCH
CONCLUSIONS WERE CLEARLY UNFOUNDED AND PREMATURE, HAVING BEEN
RENDERED PRIOR TO THE COMPLETION OF THE PRESENTATION OF THE
EVIDENCE OF THE PETITIONER.

B. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING THAT THE ACTIONS

TAKEN BY THE PETITIONER, INCLUDING THE FILING OF THE ORIGINAL
COMPLAINT AND THE AMENDED COMPLAINT, SHOULD BE STRUCK OUT IN LINE
WITH THE RULINGS OF THE SUPREME COURT IN CRUZ, JR. v.
SANDIGANBAYAN, 194 SCRA 474 AND REPUBLIC v. MIGRINO, 189 SCRA 289,
NOTWITHSTANDING THE FACT THAT:

1. The cases of Cruz, Jr. v. Sandiganbayan, supra, and Republic v. Migrino, supra, are
clearly not applicable to this case;

2. Any procedural defect in the institution of the complaint in Civil Case No. 0037 was
cured and/or waived by respondents with the filing of their respective answers with
counterclaim; and

3. The separate motions to dismiss were evidently improper considering that they were
filed after commencement of the presentation of the evidence of the petitioner and even
before the latter was allowed to formally offer its evidence and rest its case;

C. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING THAT THE ARTICLES

AND THINGS SUCH AS SUMS OF MONEY, COMMUNICATIONS EQUIPMENT,
JEWELRY AND LAND TITLES CONFISCATED FROM THE HOUSE OF
RESPONDENT DIMAANO WERE ILLEGALLY SEIZED AND THEREFORE
EXCLUDED AS EVIDENCE.

The Court’s Ruling

First Issue: PCGG’s Jurisdiction to Investigate Private Respondents

This case involves a revisiting of an old issue already decided by this Court in Cruz, Jr.
v. Sandiganbayan13 and Republic v. Migrino.

The primary issue for resolution is whether the PCGG has the jurisdiction to investigate
and cause the filing of a forfeiture petition against Ramas and Dimaano for unexplained
wealth under RA No. 1379.
We hold that PCGG has no such jurisdiction.

The PCGG created the AFP Board to investigate the unexplained wealth and corrupt
practices of AFP personnel, whether in the active service or retired.15 The PCGG
tasked the AFP Board to make the necessary recommendations to appropriate
government agencies on the action to be taken based on its findings.16 The PCGG
gave this task to the AFP Board pursuant to the PCGG’s power under Section 3 of EO
No. 1 "to conduct investigation as may be necessary in order to accomplish and to carry
out the purposes of this order." EO No. 1 gave the PCGG specific responsibilities, to wit:

SEC. 2. The Commission shall be charged with the task of assisting the President in
regard to the following matters:

(a) The recovery of all ill-gotten wealth accumulated by former President Ferdinand E.
Marcos, his immediate family, relatives, subordinates and close associates, whether
located in the Philippines or abroad, including the takeover and sequestration of all
business enterprises and entities owned or controlled by them, during his
administration, directly or through nominees, by taking undue advantage of their public
office and/ or using their powers, authority, influence, connections or relationship.

(b) The investigation of such cases of graft and corruption as the President may assign
to the Commission from time to time.

x x x.

The PCGG, through the AFP Board, can only investigate the unexplained wealth and
corrupt practices of AFP personnel who fall under either of the two categories
mentioned in Section 2 of EO No. 1. These are: (1) AFP personnel who have
accumulated ill-gotten wealth during the administration of former President Marcos by
being the latter’s immediate family, relative, subordinate or close associate, taking
undue advantage of their public office or using their powers, influence x x x; or (2) AFP
personnel involved in other cases of graft and corruption provided the President assigns
their cases to the PCGG.

Petitioner, however, does not claim that the President assigned Ramas’ case to the
PCGG. Therefore, Ramas’ case should fall under the first category of AFP personnel
before the PCGG could exercise its jurisdiction over him. Petitioner argues that Ramas
was undoubtedly a subordinate of former President Marcos because of his position as
the Commanding General of the Philippine Army. Petitioner claims that Ramas’ position
enabled him to receive orders directly from his commander-in-chief, undeniably making
him a subordinate of former President Marcos.

We hold that Ramas was not a "subordinate" of former President Marcos in the sense
contemplated under EO No. 1 and its amendments.
Mere position held by a military officer does not automatically make him a "subordinate"
as this term is used in EO Nos. 1, 2, 14 and 14-A absent a showing that he enjoyed
close association with former President Marcos. Migrino discussed this issue in this
wise:

A close reading of EO No. 1 and related executive orders will readily show what is
contemplated within the term ‘subordinate.’ The Whereas Clauses of EO No. 1 express
the urgent need to recover the ill-gotten wealth amassed by former President Ferdinand
E. Marcos, his immediate family, relatives, and close associates both here and abroad.

EO No. 2 freezes ‘all assets and properties in the Philippines in which former President
Marcos and/or his wife, Mrs. Imelda Marcos, their close relatives, subordinates,
business associates, dummies, agents, or nominees have any interest or participation.’

Applying the rule in statutory construction known as ejusdem generis that is-

‘[W]here general words follow an enumeration of persons or things by words of a

particular and specific meaning, such general words are not to be construed in their
widest extent, but are to be held as applying only to persons or things of the same kind
or class as those specifically mentioned [Smith, Bell & Co, Ltd. vs. Register of Deeds of
Davao, 96 Phil. 53, 58, citing Black on Interpretation of Laws, 2nd Ed., 203].’

[T]he term "subordinate" as used in EO Nos. 1 & 2 refers to one who enjoys a close
association with former President Marcos and/or his wife, similar to the immediate
family member, relative, and close associate in EO No. 1 and the close relative,
business associate, dummy, agent, or nominee in EO No. 2.

xxx

It does not suffice, as in this case, that the respondent is or was a government official or
employee during the administration of former President Marcos. There must be a prima
facie showing that the respondent unlawfully accumulated wealth by virtue of his close
association or relation with former Pres. Marcos and/or his wife. (Emphasis supplied)

Ramas’ position alone as Commanding General of the Philippine Army with the rank of
Major General19 does not suffice to make him a "subordinate" of former President
Marcos for purposes of EO No. 1 and its amendments. The PCGG has to provide a
prima facie showing that Ramas was a close associate of former President Marcos, in
the same manner that business associates, dummies, agents or nominees of former
President Marcos were close to him. Such close association is manifested either by
Ramas’ complicity with former President Marcos in the accumulation of ill-gotten wealth
by the deposed President or by former President Marcos’ acquiescence in Ramas’ own
accumulation of ill-gotten wealth if any.

This, the PCGG failed to do.

Petitioner’s attempt to differentiate the instant case from Migrino does not convince us.
Petitioner argues that unlike in Migrino, the AFP Board Resolution in the instant case
states that the AFP Board conducted the investigation pursuant to EO Nos. 1, 2, 14 and
14-A in relation to RA No. 1379. Petitioner asserts that there is a presumption that the
PCGG was acting within its jurisdiction of investigating crony-related cases of graft and
corruption and that Ramas was truly a subordinate of the former President. However,
the same AFP Board Resolution belies this contention. Although the Resolution begins
with such statement, it ends with the following recommendation:

V. RECOMMENDATION:

Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted

and tried for violation of RA 3019, as amended, otherwise known as "Anti-Graft and
Corrupt Practices Act" and RA 1379, as amended, otherwise known as "The Act for the
Forfeiture of Unlawfully Acquired Property."20

Thus, although the PCGG sought to investigate and prosecute private respondents
under EO Nos. 1, 2, 14 and 14-A, the result yielded a finding of violation of Republic
Acts Nos. 3019 and 1379 without any relation to EO Nos. 1, 2, 14 and 14-A. This
absence of relation to EO No. 1 and its amendments proves fatal to petitioner’s case.
EO No. 1 created the PCGG for a specific and limited purpose, and necessarily its
powers must be construed to address such specific and limited purpose.

Moreover, the resolution of the AFP Board and even the Amended Complaint do not
show that the properties Ramas allegedly owned were accumulated by him in his
capacity as a "subordinate" of his commander-in-chief. Petitioner merely enumerated
the properties Ramas allegedly owned and suggested that these properties were
disproportionate to his salary and other legitimate income without showing that Ramas
amassed them because of his close association with former President Marcos.
Petitioner, in fact, admits that the AFP Board resolution does not contain a finding that
Ramas accumulated his wealth because of his close association with former President
Marcos, thus:

10. While it is true that the resolution of the Anti-Graft Board of the New Armed Forces
of the Philippines did not categorically find a prima facie evidence showing that
respondent Ramas unlawfully accumulated wealth by virtue of his close association or
relation with former President Marcos and/or his wife, it is submitted that such omission
was not fatal. The resolution of the Anti-Graft Board should be read in the context of the
law creating the same and the objective of the investigation which was, as stated in the
above, pursuant to Republic Act Nos. 3019 and 1379 in relation to Executive Order Nos.
1, 2, 14 and 14-a;21 (Emphasis supplied)

Such omission is fatal. Petitioner forgets that it is precisely a prima facie showing that
the ill-gotten wealth was accumulated by a "subordinate" of former President Marcos
that vests jurisdiction on PCGG. EO No. 122 clearly premises the creation of the PCGG
on the urgent need to recover all ill-gotten wealth amassed by former President Marcos,
his immediate family, relatives, subordinates and close associates. Therefore, to say
that such omission was not fatal is clearly contrary to the intent behind the creation of
the PCGG.

In Cruz, Jr. v. Sandiganbayan,23 the Court outlined the cases that fall under the
jurisdiction of the PCGG pursuant to EO Nos. 1, 2,24 14,25 14-A:26

A careful reading of Sections 2(a) and 3 of Executive Order No. 1 in relation with
Sections 1, 2 and 3 of Executive Order No. 14, shows what the authority of the
respondent PCGG to investigate and prosecute covers:

(a) the investigation and prosecution of the civil action for the recovery of ill-gotten
wealth under Republic Act No. 1379, accumulated by former President Marcos, his
immediate family, relatives, subordinates and close associates, whether located in the
Philippines or abroad, including the take-over or sequestration of all business
enterprises and entities owned or controlled by them, during his administration, directly
or through his nominees, by taking undue advantage of their public office and/or using
their powers, authority and influence, connections or relationships; and

(b) the investigation and prosecution of such offenses committed in the acquisition of
said ill-gotten wealth as contemplated under Section 2(a) of Executive Order No. 1.

However, other violations of the Anti-Graft and Corrupt Practices Act not otherwise
falling under the foregoing categories, require a previous authority of the President for
the respondent PCGG to investigate and prosecute in accordance with Section 2 (b) of
Executive Order No. 1. Otherwise, jurisdiction over such cases is vested in the
Ombudsman and other duly authorized investigating agencies such as the provincial
and city prosecutors, their assistants, the Chief State Prosecutor and his assistants and
the state prosecutors. (Emphasis supplied)

The proper government agencies, and not the PCGG, should investigate and prosecute
forfeiture petitions not falling under EO No. 1 and its amendments. The preliminary
investigation of unexplained wealth amassed on or before 25 February 1986 falls under
the jurisdiction of the Ombudsman, while the authority to file the corresponding forfeiture
petition rests with the Solicitor General.27 The Ombudsman Act or Republic Act No.
6770 ("RA No. 6770") vests in the Ombudsman the power to conduct preliminary
investigation and to file forfeiture proceedings involving unexplained wealth amassed
after 25 February 1986.

After the pronouncements of the Court in Cruz, the PCGG still pursued this case despite
the absence of a prima facie finding that Ramas was a "subordinate" of former
President Marcos. The petition for forfeiture filed with the Sandiganbayan should be
dismissed for lack of authority by the PCGG to investigate respondents since there is no
prima facie showing that EO No. 1 and its amendments apply to respondents. The AFP
Board Resolution and even the Amended Complaint state that there are violations of RA
Nos. 3019 and 1379. Thus, the PCGG should have recommended Ramas’ case to the
Ombudsman who has jurisdiction to conduct the preliminary investigation of ordinary
unexplained wealth and graft cases. As stated in Migrino:

[But] in view of the patent lack of authority of the PCGG to investigate and cause the
prosecution of private respondent for violation of Rep. Acts Nos. 3019 and 1379, the
PCGG must also be enjoined from proceeding with the case, without prejudice to any
action that may be taken by the proper prosecutory agency. The rule of law mandates
that an agency of government be allowed to exercise only the powers granted to it.

Petitioner’s argument that private respondents have waived any defect in the filing of
the forfeiture petition by submitting their respective Answers with counterclaim deserves
no merit as well.

Petitioner has no jurisdiction over private respondents. Thus, there is no jurisdiction to

waive in the first place. The PCGG cannot exercise investigative or prosecutorial
powers never granted to it. PCGG’s powers are specific and limited. Unless given
additional assignment by the President, PCGG’s sole task is only to recover the ill-
gotten wealth of the Marcoses, their relatives and cronies. Without these elements, the
PCGG cannot claim jurisdiction over a case.

Private respondents questioned the authority and jurisdiction of the PCGG to investigate
and prosecute their cases by filing their Motion to Dismiss as soon as they learned of
the pronouncement of the Court in Migrino. This case was decided on 30 August 1990,
which explains why private respondents only filed their Motion to Dismiss on 8 October
1990. Nevertheless, we have held that the parties may raise lack of jurisdiction at any
stage of the proceeding.30 Thus, we hold that there was no waiver of jurisdiction in this
case. Jurisdiction is vested by law and not by the parties to an action.

Consequently, the petition should be dismissed for lack of jurisdiction by the PCGG to
conduct the preliminary investigation. The Ombudsman may still conduct the proper
preliminary investigation for violation of RA No. 1379, and if warranted, the Solicitor
General may file the forfeiture petition with the Sandiganbayan.32 The right of the State
to forfeit unexplained wealth under RA No. 1379 is not subject to prescription, laches or
estoppel.

Second Issue: Propriety of Dismissal of Case

Before Completion of Presentation of Evidence

Petitioner also contends that the Sandiganbayan erred in dismissing the case before
completion of the presentation of petitioner’s evidence.

We disagree.

Based on the findings of the Sandiganbayan and the records of this case, we find that
petitioner has only itself to blame for non-completion of the presentation of its evidence.
First, this case has been pending for four years before the Sandiganbayan dismissed it.
Petitioner filed its Amended Complaint on 11 August 1987, and only began to present
its evidence on 17 April 1989. Petitioner had almost two years to prepare its evidence.
However, despite this sufficient time, petitioner still delayed the presentation of the rest
of its evidence by filing numerous motions for postponements and extensions. Even
before the date set for the presentation of its evidence, petitioner filed, on 13 April 1989,
a Motion for Leave to Amend the Complaint.34 The motion sought "to charge the
delinquent properties (which comprise most of petitioner’s evidence) with being subject
to forfeiture as having been unlawfully acquired by defendant Dimaano alone x x x."

The Sandiganbayan, however, refused to defer the presentation of petitioner’s evidence

since petitioner did not state when it would file the amended complaint. On 18 April
1989, the Sandiganbayan set the continuation of the presentation of evidence on 28-29
September and 9-11 October 1989, giving petitioner ample time to prepare its evidence.
Still, on 28 September 1989, petitioner manifested its inability to proceed with the
presentation of its evidence. The Sandiganbayan issued an Order expressing its view
on the matter, to wit:

The Court has gone through extended inquiry and a narration of the above events
because this case has been ready for trial for over a year and much of the delay hereon
has been due to the inability of the government to produce on scheduled dates for pre-
trial and for trial documents and witnesses, allegedly upon the failure of the military to
supply them for the preparation of the presentation of evidence thereon. Of equal
interest is the fact that this Court has been held to task in public about its alleged failure
to move cases such as this one beyond the preliminary stage, when, in view of the
developments such as those of today, this Court is now faced with a situation where a
case already in progress will revert back to the preliminary stage, despite a five-month
pause where appropriate action could have been undertaken by the plaintiff Republic.

On 9 October 1989, the PCGG manifested in court that it was conducting a preliminary
investigation on the unexplained wealth of private respondents as mandated by RA No.
1379.36 The PCGG prayed for an additional four months to conduct the preliminary
investigation. The Sandiganbayan granted this request and scheduled the presentation
of evidence on 26-29 March 1990. However, on the scheduled date, petitioner failed to
inform the court of the result of the preliminary investigation the PCGG supposedly
conducted. Again, the Sandiganbayan gave petitioner until 18 May 1990 to continue
with the presentation of its evidence and to inform the court of "what lies ahead insofar
as the status of the case is concerned x x x."37 Still on the date set, petitioner failed to
present its evidence. Finally, on 11 July 1990, petitioner filed its Re-Amended
Complaint. The Sandiganbayan correctly observed that a case already pending for
years would revert to its preliminary stage if the court were to accept the Re-Amended
Complaint.

Based on these circumstances, obviously petitioner has only itself to blame for failure to
complete the presentation of its evidence. The Sandiganbayan gave petitioner more
than sufficient time to finish the presentation of its evidence. The Sandiganbayan
overlooked petitioner’s delays and yet petitioner ended the long-string of delays with the
filing of a Re-Amended Complaint, which would only prolong even more the disposition
of the case.

Moreover, the pronouncements of the Court in Migrino and Cruz prompted the
Sandiganbayan to dismiss the case since the PCGG has no jurisdiction to investigate
and prosecute the case against private respondents. This alone would have been
sufficient legal basis for the Sandiganbayan to dismiss the forfeiture case against
private respondents.

Thus, we hold that the Sandiganbayan did not err in dismissing the case before
completion of the presentation of petitioner’s evidence.

Third Issue: Legality of the Search and Seizure

Petitioner claims that the Sandiganbayan erred in declaring the properties confiscated
from Dimaano’s house as illegally seized and therefore inadmissible in evidence. This
issue bears a significant effect on petitioner’s case since these properties comprise
most of petitioner’s evidence against private respondents. Petitioner will not have much
evidence to support its case against private respondents if these properties are
inadmissible in evidence.

On 3 March 1986, the Constabulary raiding team served at Dimaano’s residence a

search warrant captioned "Illegal Possession of Firearms and Ammunition." Dimaano
was not present during the raid but Dimaano’s cousins witnessed the raid. The raiding
team seized the items detailed in the seizure receipt together with other items not
included in the search warrant. The raiding team seized these items: one baby armalite
rifle with two magazines; 40 rounds of 5.56 ammunition; one pistol, caliber .45;
communications equipment, cash consisting of ₱2,870,000 and US$50,000, jewelry,
and land titles.

Petitioner wants the Court to take judicial notice that the raiding team conducted the
search and seizure "on March 3, 1986 or five days after the successful EDSA
revolution."39 Petitioner argues that a revolutionary government was operative at that
time by virtue of Proclamation No. 1 announcing that President Aquino and Vice
President Laurel were "taking power in the name and by the will of the Filipino
people."40 Petitioner asserts that the revolutionary government effectively withheld the
operation of the 1973 Constitution which guaranteed private respondents’ exclusionary
right.

Moreover, petitioner argues that the exclusionary right arising from an illegal search
applies only beginning 2 February 1987, the date of ratification of the 1987 Constitution.
Petitioner contends that all rights under the Bill of Rights had already reverted to its
embryonic stage at the time of the search. Therefore, the government may confiscate
the monies and items taken from Dimaano and use the same in evidence against her
since at the time of their seizure, private respondents did not enjoy any constitutional
right.

Petitioner is partly right in its arguments.

The EDSA Revolution took place on 23-25 February 1986. As succinctly stated in
President Aquino’s Proclamation No. 3 dated 25 March 1986, the EDSA Revolution was
"done in defiance of the provisions of the 1973 Constitution."41 The resulting
government was indisputably a revolutionary government bound by no constitution or
legal limitations except treaty obligations that the revolutionary government, as the de
jure government in the Philippines, assumed under international law.

The correct issues are: (1) whether the revolutionary government was bound by the Bill
of Rights of the 1973 Constitution during the interregnum, that is, after the actual and
effective take-over of power by the revolutionary government following the cessation of
resistance by loyalist forces up to 24 March 1986 (immediately before the adoption of
the Provisional Constitution); and (2) whether the protection accorded to individuals
under the International Covenant on Civil and Political Rights ("Covenant") and the
Universal Declaration of Human Rights ("Declaration") remained in effect during the
interregnum.

We hold that the Bill of Rights under the 1973 Constitution was not operative during the
interregnum. However, we rule that the protection accorded to individuals under the
Covenant and the Declaration remained in effect during the interregnum.

During the interregnum, the directives and orders of the revolutionary government were
the supreme law because no constitution limited the extent and scope of such directives
and orders. With the abrogation of the 1973 Constitution by the successful revolution,
there was no municipal law higher than the directives and orders of the revolutionary
government. Thus, during the interregnum, a person could not invoke any exclusionary
right under a Bill of Rights because there was neither a constitution nor a Bill of Rights
during the interregnum. As the Court explained in Letter of Associate Justice Reynato S.
Puno:

A revolution has been defined as "the complete overthrow of the established

government in any country or state by those who were previously subject to it" or as "a
sudden, radical and fundamental change in the government or political system, usually
effected with violence or at least some acts of violence." In Kelsen's book, General
Theory of Law and State, it is defined as that which "occurs whenever the legal order of
a community is nullified and replaced by a new order . . . a way not prescribed by the
first order itself."

It was through the February 1986 revolution, a relatively peaceful one, and more
popularly known as the "people power revolution" that the Filipino people tore
themselves away from an existing regime. This revolution also saw the unprecedented
rise to power of the Aquino government.
From the natural law point of view, the right of revolution has been defined as "an
inherent right of a people to cast out their rulers, change their policy or effect radical
reforms in their system of government or institutions by force or a general uprising when
the legal and constitutional methods of making such change have proved inadequate or
are so obstructed as to be unavailable." It has been said that "the locus of positive law-
making power lies with the people of the state" and from there is derived "the right of the
people to abolish, to reform and to alter any existing form of government without regard
to the existing constitution."

xxx

It is widely known that Mrs. Aquino’s rise to the presidency was not due to constitutional
processes; in fact, it was achieved in violation of the provisions of the 1973 Constitution
as a Batasang Pambansa resolution had earlier declared Mr. Marcos as the winner in
the 1986 presidential election. Thus it can be said that the organization of Mrs. Aquino’s
Government which was met by little resistance and her control of the state evidenced by
the appointment of the Cabinet and other key officers of the administration, the
departure of the Marcos Cabinet officials, revamp of the Judiciary and the Military
signaled the point where the legal system then in effect, had ceased to be obeyed by
the Filipino. (Emphasis supplied)

To hold that the Bill of Rights under the 1973 Constitution remained operative during the
interregnum would render void all sequestration orders issued by the Philippine
Commission on Good Government ("PCGG") before the adoption of the Freedom
Constitution. The sequestration orders, which direct the freezing and even the take-over
of private property by mere executive issuance without judicial action, would violate the
due process and search and seizure clauses of the Bill of Rights.

During the interregnum, the government in power was concededly a revolutionary

government bound by no constitution. No one could validly question the sequestration
orders as violative of the Bill of Rights because there was no Bill of Rights during the
interregnum. However, upon the adoption of the Freedom Constitution, the sequestered
companies assailed the sequestration orders as contrary to the Bill of Rights of the
Freedom Constitution.

In Bataan Shipyard & Engineering Co. Inc. vs. Presidential Commission on Good
Government, petitioner Baseco, while conceding there was no Bill of Rights during the
interregnum, questioned the continued validity of the sequestration orders upon
adoption of the Freedom Constitution in view of the due process clause in its Bill of
Rights. The Court ruled that the Freedom Constitution, and later the 1987 Constitution,
expressly recognized the validity of sequestration orders, thus:

If any doubt should still persist in the face of the foregoing considerations as to the
validity and propriety of sequestration, freeze and takeover orders, it should be dispelled
by the fact that these particular remedies and the authority of the PCGG to issue them
have received constitutional approbation and sanction. As already mentioned, the
Provisional or "Freedom" Constitution recognizes the power and duty of the President to
enact "measures to achieve the mandate of the people to . . . (r)ecover ill-gotten
properties amassed by the leaders and supporters of the previous regime and protect
the interest of the people through orders of sequestration or freezing of assets or
accounts." And as also already adverted to, Section 26, Article XVIII of the 1987
Constitution treats of, and ratifies the "authority to issue sequestration or freeze orders
under Proclamation No. 3 dated March 25, 1986."

The framers of both the Freedom Constitution and the 1987 Constitution were fully
aware that the sequestration orders would clash with the Bill of Rights. Thus, the
framers of both constitutions had to include specific language recognizing the validity of
the sequestration orders. The following discourse by Commissioner Joaquin G. Bernas
during the deliberations of the Constitutional Commission is instructive:

FR. BERNAS: Madam President, there is something schizophrenic about the arguments
in defense of the present amendment.

For instance, I have carefully studied Minister Salonga’s lecture in the Gregorio Araneta
University Foundation, of which all of us have been given a copy. On the one hand, he
argues that everything the Commission is doing is traditionally legal. This is repeated by
Commissioner Romulo also. Minister Salonga spends a major portion of his lecture
developing that argument. On the other hand, almost as an afterthought, he says that in
the end what matters are the results and not the legal niceties, thus suggesting that the
PCGG should be allowed to make some legal shortcuts, another word for niceties or
exceptions.

Now, if everything the PCGG is doing is legal, why is it asking the CONCOM for special
protection? The answer is clear. What they are doing will not stand the test of ordinary
due process, hence they are asking for protection, for exceptions. Grandes malos,
grandes remedios, fine, as the saying stands, but let us not say grandes malos, grande
y malos remedios. That is not an allowable extrapolation. Hence, we should not give the
exceptions asked for, and let me elaborate and give three reasons:

First, the whole point of the February Revolution and of the work of the CONCOM is to
hasten constitutional normalization. Very much at the heart of the constitutional
normalization is the full effectivity of the Bill of Rights. We cannot, in one breath, ask for
constitutional normalization and at the same time ask for a temporary halt to the full
functioning of what is at the heart of constitutionalism. That would be hypocritical; that
would be a repetition of Marcosian protestation of due process and rule of law. The New
Society word for that is "backsliding." It is tragic when we begin to backslide even before
we get there.

Second, this is really a corollary of the first. Habits tend to become ingrained. The
committee report asks for extraordinary exceptions from the Bill of Rights for six months
after the convening of Congress, and Congress may even extend this longer.
Good deeds repeated ripen into virtue; bad deeds repeated become vice. What the
committee report is asking for is that we should allow the new government to acquire
the vice of disregarding the Bill of Rights.

Vices, once they become ingrained, become difficult to shed. The practitioners of the
vice begin to think that they have a vested right to its practice, and they will fight tooth
and nail to keep the franchise. That would be an unhealthy way of consolidating the
gains of a democratic revolution.

Third, the argument that what matters are the results and not the legal niceties is an
argument that is very disturbing. When it comes from a staunch Christian like
Commissioner Salonga, a Minister, and repeated verbatim by another staunch Christian
like Commissioner Tingson, it becomes doubly disturbing and even discombobulating.
The argument makes the PCGG an auctioneer, placing the Bill of Rights on the auction
block. If the price is right, the search and seizure clause will be sold. "Open your Swiss
bank account to us and we will award you the search and seizure clause. You can keep
it in your private safe."

Alternatively, the argument looks on the present government as hostage to the hoarders
of hidden wealth. The hoarders will release the hidden health if the ransom price is paid
and the ransom price is the Bill of Rights, specifically the due process in the search and
seizure clauses. So, there is something positively revolving about either argument. The
Bill of Rights is not for sale to the highest bidder nor can it be used to ransom captive
dollars. This nation will survive and grow strong, only if it would become convinced of
the values enshrined in the Constitution of a price that is beyond monetary estimation.

For these reasons, the honorable course for the Constitutional Commission is to delete
all of Section 8 of the committee report and allow the new Constitution to take effect in
full vigor. If Section 8 is deleted, the PCGG has two options. First, it can pursue the
Salonga and the Romulo argument — that what the PCGG has been doing has been
completely within the pale of the law. If sustained, the PCGG can go on and should be
able to go on, even without the support of Section 8. If not sustained, however, the
PCGG has only one honorable option, it must bow to the majesty of the Bill of Rights.

The PCGG extrapolation of the law is defended by staunch Christians. Let me conclude
with what another Christian replied when asked to toy around with the law. From his
prison cell, Thomas More said, "I'll give the devil benefit of law for my nation’s safety
sake." I ask the Commission to give the devil benefit of law for our nation’s sake. And
we should delete Section 8.

Thank you, Madam President. (Emphasis supplied)

Despite the impassioned plea by Commissioner Bernas against the amendment

excepting sequestration orders from the Bill of Rights, the Constitutional Commission
still adopted the amendment as Section 26,44 Article XVIII of the 1987 Constitution. The
framers of the Constitution were fully aware that absent Section 26, sequestration
orders would not stand the test of due process under the Bill of Rights.

Thus, to rule that the Bill of Rights of the 1973 Constitution remained in force during the
interregnum, absent a constitutional provision excepting sequestration orders from such
Bill of Rights, would clearly render all sequestration orders void during the interregnum.
Nevertheless, even during the interregnum the Filipino people continued to enjoy, under
the Covenant and the Declaration, almost the same rights found in the Bill of Rights of
the 1973 Constitution.

The revolutionary government, after installing itself as the de jure government, assumed
responsibility for the State’s good faith compliance with the Covenant to which the
Philippines is a signatory. Article 2(1) of the Covenant requires each signatory State "to
respect and to ensure to all individuals within its territory and subject to its jurisdiction
the rights45 recognized in the present Covenant." Under Article 17(1) of the Covenant,
the revolutionary government had the duty to insure that "[n]o one shall be subjected to
arbitrary or unlawful interference with his privacy, family, home or correspondence."

The Declaration, to which the Philippines is also a signatory, provides in its Article 17(2)
that "[n]o one shall be arbitrarily deprived of his property." Although the signatories to
the Declaration did not intend it as a legally binding document, being only a declaration,
the Court has interpreted the Declaration as part of the generally accepted principles of
international law and binding on the State.46 Thus, the revolutionary government was
also obligated under international law to observe the rights47 of individuals under the
Declaration.

The revolutionary government did not repudiate the Covenant or the Declaration during
the interregnum. Whether the revolutionary government could have repudiated all its
obligations under the Covenant or the Declaration is another matter and is not the issue
here. Suffice it to say that the Court considers the Declaration as part of customary
international law, and that Filipinos as human beings are proper subjects of the rules of
international law laid down in the Covenant. The fact is the revolutionary government
did not repudiate the Covenant or the Declaration in the same way it repudiated the
1973 Constitution. As the de jure government, the revolutionary government could not
escape responsibility for the State’s good faith compliance with its treaty obligations
under international law.

It was only upon the adoption of the Provisional Constitution on 25 March 1986 that the
directives and orders of the revolutionary government became subject to a higher
municipal law that, if contravened, rendered such directives and orders void. The
Provisional Constitution adopted verbatim the Bill of Rights of the 1973 Constitution.48
The Provisional Constitution served as a self-limitation by the revolutionary government
to avoid abuses of the absolute powers entrusted to it by the people.

During the interregnum when no constitution or Bill of Rights existed, directives and
orders issued by government officers were valid so long as these officers did not
exceed the authority granted them by the revolutionary government. The directives and
orders should not have also violated the Covenant or the Declaration. In this case, the
revolutionary government presumptively sanctioned the warrant since the revolutionary
government did not repudiate it. The warrant, issued by a judge upon proper
application, specified the items to be searched and seized. The warrant is thus valid
with respect to the items specifically described in the warrant.

However, the Constabulary raiding team seized items not included in the warrant. As
admitted by petitioner’s witnesses, the raiding team confiscated items not included in
the warrant, thus:

Direct Examination of Capt. Rodolfo Sebastian

AJ AMORES

Q. According to the search warrant, you are supposed to seize only for weapons. What
else, aside from the weapons, were seized from the house of Miss Elizabeth Dimaano?

A. The communications equipment, money in Philippine currency and US dollars, some

jewelries, land titles, sir.

Q. Now, the search warrant speaks only of weapons to be seized from the house of
Elizabeth Dimaano. Do you know the reason why your team also seized other
properties not mentioned in said search warrant?

A. During the conversation right after the conduct of said raid, I was informed that the
reason why they also brought the other items not included in the search warrant was
because the money and other jewelries were contained in attaché cases and cartons
with markings "Sony Trinitron", and I think three (3) vaults or steel safes. Believing that
the attaché cases and the steel safes were containing firearms, they forced open these
containers only to find out that they contained money.

xxx

Q. You said you found money instead of weapons, do you know the reason why your
team seized this money instead of weapons?

A. I think the overall team leader and the other two officers assisting him decided to
bring along also the money because at that time it was already dark and they felt most
secured if they will bring that because they might be suspected also of taking money out
of those items, your Honor.49

Cross-examination

Atty. Banaag
Q. Were you present when the search warrant in connection with this case was applied
before the Municipal Trial Court of Batangas, Branch 1?

A. Yes, sir.

Q. And the search warrant applied for by you was for the search and seizure of five (5)
baby armalite rifles M-16 and five (5) boxes of ammunition?

A. Yes, sir.

xxx

AJ AMORES

Q. Before you applied for a search warrant, did you conduct surveillance in the house of
Miss Elizabeth Dimaano?

A. The Intelligence Operatives conducted surveillance together with the MSU elements,
your Honor.

Q. And this party believed there were weapons deposited in the house of Miss Elizabeth
Dimaano?

A. Yes, your Honor.

Q. And they so swore before the Municipal Trial Judge?

A. Yes, your Honor.

Q. But they did not mention to you, the applicant for the search warrant, any other
properties or contraband which could be found in the residence of Miss Elizabeth
Dimaano?

A. They just gave us still unconfirmed report about some hidden items, for instance, the
communications equipment and money. However, I did not include that in the
application for search warrant considering that we have not established concrete
evidence about that. So when…

Q. So that when you applied for search warrant, you had reason to believe that only
weapons were in the house of Miss Elizabeth Dimaano?

A. Yes, your Honor.50

xxx
Q. You stated that a .45 caliber pistol was seized along with one armalite rifle M-16 and
how many ammunition?

A. Forty, sir.

Q. And this became the subject of your complaint with the issuing Court, with the fiscal’s
office who charged Elizabeth Dimaano for Illegal Possession of Firearms and
Ammunition?

A. Yes, sir.

Q. Do you know what happened to that case?

A. I think it was dismissed, sir.

Q. In the fiscal’s office?

A. Yes, sir.

Q. Because the armalite rifle you seized, as well as the .45 caliber pistol had a
Memorandum Receipt in the name of Felino Melegrito, is that not correct?

A. I think that was the reason, sir.

Q. There were other articles seized which were not included in the search warrant, like
for instance, jewelries. Why did you seize the jewelries?

A. I think it was the decision of the overall team leader and his assistant to bring along
also the jewelries and other items, sir. I do not really know where it was taken but they
brought along also these articles. I do not really know their reason for bringing the
same, but I just learned that these were taken because they might get lost if they will
just leave this behind.

xxx

Q. How about the money seized by your raiding team, they were not also included in the
search warrant?

A. Yes sir, but I believe they were also taken considering that the money was
discovered to be contained in attaché cases.1âwphi1 These attaché cases were
suspected to be containing pistols or other high powered firearms, but in the course of
the search the contents turned out to be money. So the team leader also decided to
take this considering that they believed that if they will just leave the money behind, it
might get lost also.
Q. That holds true also with respect to the other articles that were seized by your raiding
team, like Transfer Certificates of Title of lands?

A. Yes, sir. I think they were contained in one of the vaults that were opened.

It is obvious from the testimony of Captain Sebastian that the warrant did not include the
monies, communications equipment, jewelry and land titles that the raiding team
confiscated. The search warrant did not particularly describe these items and the raiding
team confiscated them on its own authority. The raiding team had no legal basis to
seize these items without showing that these items could be the subject of warrantless
search and seizure. Clearly, the raiding team exceeded its authority when it seized
these items.

The seizure of these items was therefore void, and unless these items are contraband
per se, and they are not, they must be returned to the person from whom the raiding
seized them. However, we do not declare that such person is the lawful owner of these
items, merely that the search and seizure warrant could not be used as basis to seize
and withhold these items from the possessor. We thus hold that these items should be
returned immediately to Dimaano.

WHEREFORE, the petition for certiorari is DISMISSED. The questioned Resolutions of

the Sandiganbayan dated 18 November 1991 and 25 March 1992 in Civil Case No.
0037, remanding the records of this case to the Ombudsman for such appropriate
action as the evidence may warrant, and referring this case to the Commissioner of the
Bureau of Internal Revenue for a determination of any tax liability of respondent
Elizabeth Dimaano, are AFFIRMED.

SO ORDERED.
CASE #4

CASE #5
Banco Nacional de Cuba v. Sabbatino

Brief Fact Summary. The bills of lading for a shipment of sugar contracted between
Farr, Whitlock & Co an American commodities broker was assigned by Banco Nacional
de Cuba (P), but another Cuban bank instituted this action alleging conversion of the
bills of lading and sought to recover the proceeds thereof from Farr and to enjoin
Sabbatino (D), a court-appointed receiver from exercising control over such proceeds.

Synopsis of Rule of Law. The judiciary, in line with the Act of State Doctrine will not
examine the validity of a taking of property within its own territory by a foreign sovereign
government recognized by this country in the absence of international agreements to
the contrary, even if the taking violates customary international law.

Facts. A contract to purchase Cuban sugar from a wholly owned subsidaiary of

Compania Azucarera Vertientes-Camaquey de Cuba (CAV) a corporation organized
under Cuban law was made by Farr, Whitlock & Co. (Farr) an American commodities
broker. The CAV stock was principally owned by United States residents. The
agreement was for Farr to pay for the sugar in New York upon the presentation of the
shipping documents. After this deal, a law was enacted in Cuba which empowered the
government to nationalize forcefully, expropriation of property or enterprise in which
American nationals had an interest.
Hence, the sugar which Farr had contracted was expropriated from Compania
Azucarera. Farr however entered into contracts which was similar to the one made with
CAV with the Banco Para el Comercio de Cuba, which was an instrumentality of the
government. This was done by Farr in order to obtain consent from the Cuban
government before a ship carrying sugar could leave Cuba.A bill of lading which was
also an instrumentality of the Cuban government was assigned by the bank to Banco
Para el Comercio de Cuba, who presented the bills and a sight draft as required under
the contract to Farr in New York in return for payment. After CAV notified Farr of its
claim to the proceeds as rightful owner of the sugar, Farr refused the documents.
This action of Farr resulted in a court order which appointed Sabbatino (D) as receiver
of CAV‘s New York assets and enjoined it from removing the payments from the
state. Based on the allegation of the conversion of the bills of lading seeking to recover
the proceeds thereof from Farr and to enjoin Sabbatino (D), the receiver from exercising
dominion over such proceeds, the Banco Nacional (P) instituted this action. A summary
judgment was granted against Banco Nacional (P) by the district court on the grounds
that the Act of State Doctrine does not apply when the foreign act in question is in
violation of international law. The court of appeals also upheld this judgment.

Issue. Does the judiciary have the authority to examine the validity of a taking of
property within its own territory by a foreign sovereign even if the taking violated
international law?
Held. (Harlan, J). No. The judiciary, in line with the Act of State Doctrine will not
examine the validity of a taking of property within its own territory by a foreign sovereign
government recognized by this country in the absence of international agreements to
the contrary, even if the taking violates customary international law. Even in a situation
whereby international law has been violated, the clear implication of past cases is that
the Act of State Doctrine is applicable because the Act of State doctrine does not
deprive the courts of jurisdiction once acquire over a case. The damages of adjudicating
the propriety of such expropriation acts, regardless of whether the State Department
has it did in this case, asserted that the act violated international law are too far-
reaching for the judicial branch to attempt. Hence the judgment of the court of appeals
is reverse and the case remanded back to the district court.

Dissent. (White, J). American courts are not required by the Act of State Doctrine to
decide cases in disregard of international law and of the rights of litigants to a full
determination on the merits.

Discussion. Even in the diversity of citizenship cases, the Court concluded that the Act
of State Doctrine must be determined according to federal rather than state law. The
court also made it clear that it is constrained to make it clear that an issue concerned
with a basic choice regarding the competence and function of the judiciary and national
executive in ordering our relationships with other members of the international
community must be treated exclusively as an aspect of federal law.
CASE #6
OETJEN v. CENTRAL LEATHER CO.(1918)
No. 268
Argued: Decided: March 11, 1918
[246 U.S. 297, 298]   

Mr. Justice CLARKE delivered the opinion of the Court.

These two cases involving the same question, were argued and will be decided
together. They are suits in replevin and involve the title to two large consignments of
hides, which the plaintiff in error claims to own as assignee of Martinez & Co., a
partnership engaged in business in the city of Torreon, Mexico, but which the defendant
in error claims to own by purchase from the Finnegan-Brown Company, a Texas
corporation which it is alleged purchased the hides in Mexico from General Francisco
Villa on January 3, 1914

The cases were commenced in a circuit court of New Jersey in which judgments were
rendered for the defendants, which were affirmed by the Court of Errors and Appeals
(87 N. J. Law, 552, 94 Atl. 789, L. R. A. 1917A, 276; 87 N. J. Law, 704, 96 Atl. 1102),
and they are brought to this court on the theory that the claim of title to the hides by the
defendant in error is invalid because based upon a purchase from General Villa, who, it
is urged, confiscated them contrary to the provisions of the Hague onvention of 1907
respecting the laws and customs of war on land; that the judgment of the state court
denied to the plaintiff in error this right which he 'set up and claimed' under the Hague
Convention or treaty; and that this denial gives him the right of review in this court.

A somewhat detailed description will be necessary of the political conditions in Mexico

prior to and at the time of the seizure of the property in controversy by the military
authorities. It appears in the record, and is a matter of general history, that on February
23, 1913, Madero, President of the Republic of Mexico, was assassinated; that
immediately thereafter General Huerta declared himself Provisional President of the
Republic [246 U.S. 297, 300]   and took the oath of office as such; that on the 26th day of
March following General Carranza, who was then governor of the state of Coahuila,
inaugurated a revolution against the claimed authority of Huerta and in a 'Manifesto
Addressed to the Mexican Nation' proclaimed the organization of a constitutional
government under 'the plan of Guadalupe,' and that civil war was at once entered upon
between the followers and forces of the two leaders. When General Carranza assumed
the leadership of what were called the Constitutionalist forces he commissioned
General Villa his representative, as 'Commander of the North,' and assigned him to an
independent command in that part of the country. Such progress was made by the
Carranza forces that in the autumn of 1913 they were in military possession, as the
record shows, of approximately two-thirds of the area of the entire country, with the
exception of a few scattered towns and cities, and after a battle lasting several days the
city of Torreon in the state of Coahuila was captured by General Villa on October 1 of
that year. Immediately after the capture of Torreon, Villa proposed levying a military
contribution on the inhabitants, for the support of his army, and thereupon influential
citizens, preferring to provide the required money by an assessment upon the
community, to having their property forcibly seized, called together a largely attended
meeting and after negotiations with General Villa as to the amount to be paid, an
assessment was made on the men of property of the city, which was in large part
promptly paid. Martinez, the owner from whom the plaintiff in error claims title to the
property involved in this case, was a wealthy resident of Torreon and was a dealer in
hides in a large way. Being an adherent of Huerta, when Torreon was captured
Martinez fled the city and failed to pay the assessment imposed upon him, and it was to
satisfy this assessment that, by order of General Villa, the hides in controversy [246 U.S.
297, 301]   were seized and on January 3, 1914, were sold in Mexico to the Finnegan-
Brown Company. They were paid for in Mexico, and were thereafter shipped into the
United States and were replevied, as stated.

This court will take judicial notice of the fact that since the transactions thus detailed and
since the trial of this case in the lower courts, the government of the United States
recognized the government of Carranza as the de facto government of the Republic of
Mexico, on October 19, 1915, and as the de jure government on August 31, 1917.
Jones v. United States, 137 U.S. 202 , 11 Sup. Ct. 80; Underhill v. Hernandez, 168, U.
S. 250, 18 Sup. Ct. 83.

On this state of fact the plaintiff in error argues that the 'Regulations' annexed to the
Hague Convention of 1907 'Respecting Laws and Customs of War on Land' constitute a
treaty between the United States and Mexico; that these 'Regulations' forbid such
seizure and sale of property as we are considering in this case; and that, therefore,
somewhat vaguely, no title passed by the sale made by General Villa and the property
may be recovered by the Mexican owner or his assignees when found in this country.

It would, perhaps, be sufficient answer to this contention to say that the Hague
Conventions are international in character, des gned and adapted to regulate
international warfare, and that they do not, in terms or in purpose, apply to a civil war.
Were it otherwise, however, it might be effectively argued that the declaration relied
upon that 'private property cannot be confiscated' contained in article 46 of the
Regulations does not have the scope claimed for it, since article 49 provides that
'money contributions ... for the needs of the army' may be levied upon on occupied
territory, and article 52 provides that 'requisitions in kind and services may be
demanded for the needs of the army of occupation,' and that contributions in kind shall,
as far as possible, be [246 U.S. 297, 302]   paid for in cash, and when not so paid for a
receipt shall be given and payment of the amount due shall be made as soon as
possible. And also for the reason that the 'Convention' to which the 'Regulations' are
annexed, recognizing the incomplete character of the results arrived at, expressly
provides that until a more complete code is agreed upon, cases not provided for in the
'Regulations' shall be governed by the principles of the law of nations.

But, since claims similar to the one before us are being made in many cases in this and
in other courts, we prefer to place our decision upon the application of three clearly
settled principles of law to the facts of this case as we have stated them.
The 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. United States v. Palmer, 3 Wheat. 610; Foster v. Neilson, 2
Pet. 253, 307, 309; Garcia v. Lee, 12 Pet. 511, 517, 520; Williams v. Suffolk Ins. Co., 13
Pet. 415, 420; In re Cooper, 143 U.S. 472, 499 , 12 S. Sup. Ct. 453. It has been
specifically decided that:

'Who is the sovereign, de jure or de facto, of a territory is not a judicial, but is a political
question, the determination of which by the legislative and executive departments of any
government conclusively binds the judges, as well as all other officers, citizens and
subjects of that government. This principle has always been upheld by this court, and
has been affirmed under a great variety of circumstances.' Jones v. United States, 137
U.S. 202, 212 , 11 S. Sup. Ct. 80, 83 (34 L. Ed. 691).

It is also the result of the interpretation by this court of the principles of international law
that when a government which originates in revolution or revolt is recognized by the
political department of our government as the de [246 U.S. 297, 303]   jure government of
the country in which it is established, such recognition is retroactive in effect and
validates all the actions and conduct of the government so recognized from the
commencement of its existence. Williams v. Bruffy, 96 U.S. 176 , 186; Underhill v.
Hernandez, 168 U.S. 250, 253 , 18 S. Sup. Ct. 83. See s. c., 65 Fed. 577, 13 C. C. A.
51, 38 L. R. A. 405.

To these principles we must add that:

'Every sovereign state is bound to respect the independence of every other sovereign
state, and the courts of one country will not sit in judgment on the acts of the government
of another done within its own territory. Redress of grievances by reason of such acts
must be obtained through the means open to be available of by sovereign powers as
between themselves.' Underhill v. Hernandez, 168 U.S. 250, 252 , 18 S. Sup. Ct. 83, 84
(42 L. Ed. 456); American Banana Co. v. United Fruit Co., 213 U.S. 347 , 29 Sup. Ct.
511, 16 Ann. Cas. 1047.

Applying these principles of law to the case at bar, we have a duly commissioned
military commander of what must be accepted as the legitimate government of Mexico,
in the progress of a revolution, and when conducting active independent operations,
seizing and selling in Mexico, as a military contribu ion, the property in controversy, at
the time owned and in the possession of a citizen of Mexico, the assignor of the plaintiff
in error. Plainly this was the action, in Mexico, of the legitimate Mexican government
when dealing with a Mexican citizen, and, as we have seen, for the soundest reasons,
and upon repeated decisions of this court such action is not subject to re-examination
and modification by the courts of this country.

The principle that the conduct of one independent government cannot be successfully
questioned in the courts of another is as applicable to a case involving the title to
property brought within the custody of a court, such as we have here, as it was held to
be to the cases cited, in which claims for damages were based upon acts done in a
foreign country, for it rests at last upon the highest [246 U.S. 297, 304]   considerations of
international comity and expediency. To permit the validity of the acts of one sovereign
state to be reexamined and perhaps condemned by the courts of another would very
certainly 'imperil the amicable relations between governments and vex the peace of
nations.'

It is not necessary to consider, as the New Jersey court did, the validity of the levy of
the contribution made by the Mexican commanding general, under rules of international
law applicable to the situation, since the subject is not open to re-examination by this or
any other American court.

The remedy of the former owner, or of the purchaser from him, of the property in
controversy, if either has any remedy, must be found in the courts of Mexico or through
the diplomatic agencies of the political department of our government. The judgments of
the Court of Errors and Appeals of New Jersey must be

Affirmed.
CASE #7
THE PEOPLE OF THE PHILIPPINE ISLANDS v. GREGORIO PERFECTO
G.R. No. L-18463, October 4, 1922
MALCOLM, J.

The important question is here squarely presented of whether article 256 of the Spanish
Penal Code, punishing "Any person who, by . . . writing, shall defame, abuse, or insult
any Minister of the Crown or other person in authority . . .," is still in force.

About August 20, 1920, the Secretary of the Philippine Senate, Fernando M. Guerrero,
discovered that certain documents which constituted the records of testimony given by
witnesses in the investigation of oil companies, had disappeared from his office. Shortly
thereafter, the Philippine Senate, having been called into special session by the
Governor-General, the Secretary for the Senate informed that body of the loss of the
documents and of the steps taken by him to discover the guilty party. The day following
the convening of the Senate, September 7, 1920, the newspaper La Nacion, edited by
Mr. Gregorio Perfecto, published an article reading as follows:

Half a month has elapsed since the discovery, for the first time, of the scandalous
robbery of records which were kept and preserved in the iron safe of the Senate, yet up
to this time there is not the slightest indication that the author or authors of the crime will
ever be discovered.

To find them, it would not, perhaps, be necessary to go out of the Sente itself, and the
persons in charge of the investigation of the case would not have to display great skill in
order to succeed in their undertaking, unless they should encounter the insuperable
obstacle of offical concealment.

In that case, every investigation to be made would be but a mere comedy and nothing
more.

After all, the perpetration of the robbery, especially under the circumstances that have
surrounded it, does not surprise us at all.

The execution of the crime was but the natural effect of the environment of the place in
which it was committed.

How many of the present Senators can say without remorse in their conscience and
with serenity of mind, that they do not owe their victory to electoral robbery? How may?

The author or authors of the robbery of the records from the said iron safe of the Senate
have, perhaps, but followed the example of certain Senators who secured their election
through fraud and robbery.

The Philippine Senate, in its session of September 9, 1920, adopted a resolution

authorizing its committee on elections and privileges to report as to the action which
should be taken with reference to the article published in La Nacion. On September 15,
1920, the Senate adopted a resolution authorizing the President of the Senate to
indorse to the Attorney-General, for his study and corresponding action, all the papers
referring to the case of the newspaper La Nacion and its editor, Mr. Gregorio Perfecto.
As a result, an information was filed in the municipal court of the City of Manila by an
assistant city fiscal, in which the editorial in question was set out and in which it was
alleged that the same constituted a violation of article 256 of the Penal Code. The
defendant Gregorio Perfecto was found guilty in the municipal court and again in the
Court of First Instance of Manila.

During the course of the trial in the Court of First Instance, after the prosecution had
rested, the defense moved for the dismissal of the case. On the subject of whether or
not article 256 of the Penal Code, under which the information was presented, is in
force, the trial judge, the Honorable George R. Harvey, said:

This antiquated provision was doubtless incorporated into the Penal Code of Spain for
the protection of the Ministers of the Crown and other representatives of the King
against free speech and action by Spanish subjects. A severe punishment was
prescribed because it was doubtless considered a much more serious offense to insult
the King's representative than to insult an ordinary individual. This provision, with almost
all the other articles of that Code, was extended to the Philippine Islands when under
the dominion of Spain because the King's subject in the Philippines might defame,
abuse or insult the Ministers of the Crown or other representatives of His Majesty. We
now have no Ministers of the Crown or other persons in authority in the Philippines
representing the King of Spain, and said provision, with other articles of the Penal Code,
had apparently passed into "innocuous desuetude," but the Supreme Corut of the
Philippine Islands has, by a majority decision, held that said article 256 is the law of the
land to-day. . . .

The Helbig case is a precedent which, by the rule of stare decisis, is binding upon this
court until otherwise determined by proper authority.

In the decision rendered by the same judge, he concluded with the following language:

In the United States such publications are usually not punishable as criminal offense,
and little importance is attached to them, because they are generally the result of
political controversy and are usually regarded as more or less colored or exaggerated.
Attacks of this character upon a legislative body are not punishable, under the Libel
Law. Although such publications are reprehensible, yet this court feels some aversion to
the application of the provision of law under which this case was filed. Our Penal Code
has come to us from the Spanish regime. Article 256 of that Code prescribes
punishment for persons who use insulting language about Ministers of the Crown or
other "authority." The King of Spain doubtless left the need of such protection to his
ministers and others in authority in the Philippines as well as in Spain. Hence, the article
referred to was made applicable here. Notwithstanding the change of sovereignty, our
Supreme Court, in a majority decision, has held that this provision is still in force, and
that one who made an insulting remark about the President of the United States was
punishable under it. (U.S. vs. Helbig, supra.) If it applicable in that case, it would appear
to be applicable in this case. Hence, said article 256 must be enforced, without fear or
favor, until it shall be repealed or superseded by other legislation, or until the Supreme
Court shall otherwise determine.

In view of the foregoing considerations, the court finds the defendant guilty as charged
in the information and under article 256 of their Penal Code sentences him to suffer two
months and one day of arresto mayor and the accessory penalties prescribed by law,
and to pay the costs of both instances.

The fifteen errors assigned by the defendant and appellant, reenforced by an extensive
brief, and eloquent oral argument made in his own behalf and by his learned counsel, all
reduce themselves to the pertinent and decisive question which was announced in the
beginning of this decision.

It will be noted in the first place that the trial judge considered himself bound to follow
the rule announced in the case of United States vs. Helbig (R. G. No. 14705, 1 not
published). In that case, the accused was charged with having said, "To hell with the
President and his proclamations, or words to that effect," in violation of article 256 of the
Penal Code. He was found guilty in a judgment rendered by the Court of First Instance
of Manila and again on appeal to the Supreme Court, with the writer of the instant
decision dissenting on two principal grounds: (1) That the accused was deprived of the
constitutional right of cross-examination, and (2) that article 256 of the Spanish Penal
Code is no longer in force. Subsequently, on a motion of reconsideration, the court,
being of the opinion that the Court of First Instance had committed a prejudicial error in
depriving the accused of his right to cross-examine a principal witness, set aside the
judgment affirming the judgment appealed from and ordered the return of the record to
the court of origin for the celebration of a new trial. Whether such a trial was actually
had, is not known, but at least, the record in the Helbig case has never again been
elevated to this court.

There may perchance exist some doubt as to the authority of the decision in the Helbig
case, in view of the circumstances above described. This much, however, is certain:
The facts of the Helbig case and the case before us, which we may term the Perfecto
case, are different, for in the first case there was an oral defamation, while in the second
there is a written defamation. Not only this, but a new point which, under the facts, could
not have been considered in the Helbig case, is, in the Perfecto case, urged upon the
court. And, finally, as is apparent to all, the appellate court is not restrained, as was the
trial court, by strict adherence to a former decision. We much prefer to resolve the
question before us unhindered by references to the Helbig decision.

This is one of those cases on which a variety of opinions all leading to the same result
can be had. A majority of the court are of the opinion that the Philippine Libel Law, Act
No. 277, has had the effect of repealing so much of article 256 of the Penal Code as
relates to written defamation, abuse, or insult, and that under the information and the
facts, the defendant is neither guilty of a violation of article 256 of the Penal Code, nor
of the Libel Law. The view of the Chief Justice is that the accused should be acquitted
for the reason that the facts alleged in the information do not constitute a violation of
article 156 of the Penal Code. Three members of the court believe that article 256 was
abrogated completely by the change from Spanish to American sovereignty over the
Philippines and is inconsistent with democratic principles of government.

Without prejudice to the right of any member of the court to explain his position, we will
discuss the two main points just mentioned.

1. Effect of the Philippine Libel Law, Act No. 277, on article 256 of the Spanish Penal
Code. — The Libel Law, Act No. 277, was enacted by the Philippine Commission
shortly after organization of this legislative body. Section 1 defines libel as a "malicious
defamation, expressed either in writing, printing, or by signs or pictures, or the like, or
public theatrical exhibitions, tending to blacken the memory of one who is dead or to
impeach the honesty, virtue, or reputation, or publish the alleged or natural deffects of
one who is alive, and thereby expose him to public hatred, contempt or ridicule." Section
13 provides that "All laws and parts of laws now in force, so far as the same may be in
conflict herewith, are hereby repealed. . . ."

That parts of laws in force in 1901 when the Libel Law took effect, were in conflict
therewith, and that the Libel Law abrogated certain portion of the Spanish Penal Code,
cannot be gainsaid. Title X of Book II of the Penal Code, covering the subjects of
calumny and insults, must have been particularly affected by the Libel Law. Indeed, in
the early case of Pardo de Tavera vs. Garcia Valdez ([1902], 1. Phil., 468), the
Supreme Court spoke of the Libel Law as "reforming the preexisting Spanish law on the
subject of calumnia and injuria." Recently, specific attention was given to the effect of
the Libel Law on the provisions of the Penal Code, dealing with calumny and insults,
and it was found that those provisions of the Penal Code on the subject of calumny and
insults in which the elements of writing an publicity entered, were abrogated by the Libel
Law. (People vs. Castro [1922], p. 842, ante.)

The Libel Law must have had the same result on other provisions of the Penal Code, as
for instance article 256.

The facts here are that the editor of a newspaper published an article, naturally in
writing, which may have had the tendency to impeach the honesty, virtue, or reputation
of members of the Philippine Senate, thereby possibly exposing them to public hatred,
contempt, or ridicule, which is exactly libel, as defined by the Libel Law. Sir J. F.
Stephen is authority for the statement that a libel is indictable when defaming a "body of
persons definite and small enough for individual members to be recognized as such, in
or by means of anything capable of being a libel." (Digest of Criminal Law, art. 267.) But
in the United States, while it may be proper to prosecute criminally the author of a libel
charging a legislator with corruption, criticisms, no matter how severe, on a legislature,
are within the range of the liberty of the press, unless the intention and effect be
seditious. (3 Wharton's Criminal Law, p. 2131.) With these facts and legal principles in
mind, recall that article 256 begins: Any person who, by . . . writing, shall defame,
abuse, or insult any Minister of the Crown or other person in authority," etc.

The Libel Law is a complete and comprehensive law on the subject of libel. The well-
known rule of statutory construction is, that where the later statute clearly covers the old
subject-matter of antecedent acts, and it plainly appears to have been the purpose of
the legislature to give expression in it to the whole law on the subject, previous laws are
held to be repealed by necessary implication. (1 Lewis' Sutherland Statutory
Construction, p. 465.) For identical reasons, it is evident that Act No. 277 had the effect
so much of this article as punishes defamation, abuse, or insults by writing.

Act No. 292 of the Philippine Commission, the Treason and Sedition Law, may also
have affected article 256, but as to this point, it is not necessary to make a
pronouncement.

2. Effect of the change from Spanish to Amercian sevoreignty over the Philippine son
article 256 of the Spanish Penal Code. — Appellant's main proposition in the lower court
and again energetically pressed in the appellate court was that article 256 of the
Spanish Penal Code is not now in force because abrogated by the change from
Spanish to American sovereignty over the Philippines and because inconsistent with
democratic principles of government. This view was indirectly favored by the trial judge,
and, as before stated, is the opinion of three members of this court.

Article 256 is found in Chapter V of title III of Book II of the Spanish Penal Code. Title I
of Book II punishes the crimes of treason, crimes that endanger the peace or
independence of the state, crimes against international law, and the crime of piracy.
Title II of the same book punishes the crimes of lese majeste, crimes against the Cortes
and its members and against the council of ministers, crimes against the form of
government, and crimes committed on the occasion of the exercise of rights guaranteed
by the fundamental laws of the state, including crime against religion and worship. Title
III of the same Book, in which article 256 is found, punishes the crimes of rebellion,
sedition, assaults upon persons in authority, and their agents, and contempts, insults,
injurias, and threats against persons in authority, and insults, injurias, and threats
against their agents and other public officers, the last being the title to Chapter V. The
first two articles in Chapter V define and punish the offense of contempt committed by
any one who shall be word or deed defame, abuse, insult, or threathen a minister of the
crown, or any person in authority. The with an article condemning challenges to fight
duels intervening, comes article 256, now being weighed in the balance. It reads as
follows: "Any person who, by word, deed, or writing, shall defame, abuse, or insult any
Minister of the Crown or other person in authority, while engaged in the performance of
official duties, or by reason of such performance, provided that the offensive minister or
person, or the offensive writing be not addressed to him, shall suffer the penalty of
arresto mayor," — that is, the defamation, abuse, or insult of any Minister of the Crown
of the Monarchy of Spain (for there could not be a Minister of the Crown in the United
States of America), or other person in authority in the Monarchy of Spain.
It cannot admit of doubt that all those provisions of the Spanish Penal Code having to
do with such subjects as treason, lese majeste, religion and worship, rebellion, sedition,
and contempts of ministers of the crown, are not longer in force. Our present task,
therefore, is a determination of whether article 256 has met the same fate, or, more
specifically stated, whether it is in the nature of a municipal law or political law, and is
consistent with the Constitution and laws of the United States and the characteristics
and institutions of the American Government.

It is a general principle of the public law that on acquisition of territory the previous
political relations of the ceded region are totally abrogated. "Political" is here used to
denominate the laws regulating the relations sustained by the inhabitants to the
sovereign. (American Insurance Co. vs. Canter [1828], 1 Pet., 511; Chicago, Rock
Island and Pacific Railway Co. vs. McGlinn [1885], 114 U.S., 542; Roa vs. Collector of
Customs [1912], 23 Phil., 315.) Mr. Justice Field of the United States Supreme Court
stated the obvious when in the course of his opinion in the case of Chicago, Rock Island
and Pacific Railway Co. vs. McGlinn, supra, he said: "As a matter of course, all laws,
ordinances and regulations in conflict with the political character, institutions and
Constitution of the new government are at once displaced. Thus, upon a cession of
political jurisdiction and legislative power — and the latter is involved in the former — to
the United States, the laws of the country in support of an established religion or
abridging the freedom of the press, or authorizing cruel and unusual punishments, and
he like, would at once cease to be of obligatory force without any declaration to that
effect." To quote again from the United States Supreme Court: "It cannot be admitted
that the King of Spain could, by treaty or otherwise, impart to the United States any of
his royal prerogatives; and much less can it be admitted that they have capacity to
receive or power to exercise them. Every nation acquiring territory, by treaty or
otherwise, must hold it subject to the Constitution and laws of its own government, and
not according to those of the government ceding it." (Pollard vs. Hagan [1845], 3 Hos.,
210.)

On American occupation of the Philippines, by instructions of the President to the

Military Commander dated May 28, 1898, and by proclamation of the latter, the
municipal laws of the conquered territory affecting private rights of person and property
and providing for the punishment of crime were nominally continued in force in so far as
they were compatible with the new order of things. But President McKinley, in his
instructions to General Merritt, was careful to say: "The first effect of the military
occupation of the enemy's territory is the severance of the former political relation of the
inhabitants and the establishment of a new political power." From that day to this, the
ordinarily it has been taken for granted that the provisions under consideration were still
effective. To paraphrase the language of the United States Supreme Court in Weems
vs. United States ([1910], 217 U. S., 349), there was not and could not be, except as
precise questions were presented, a careful consideration of the codal provisions and a
determination of the extent to which they accorded with or were repugnant to the "'great
principles of liberty and law' which had been 'made the basis of our governmental
system.' " But when the question has been squarely raised, the appellate court has
been forced on occasion to hold certain portions of the Spanish codes repugnant t
democratic institutions and American constitutional principles. (U.S. vs. Sweet [1901], 1
Phil., 18; U.S. vs. Balcorta [1913], 25 Phil., 273; U.S. vs. Balcorta [1913], 25 Phil., 533;
Weems vs. U.S., supra.)

The nature of the government which has been set up in the Philippines under American
sovereignty was outlined by President McKinley in that Magna Charta of Philippine
liberty, his instructions to the Commission, of April 7, 1900. In part, the President said:

In all the forms of government and administrative provisions which they are authorized
to prescribe, the Commission should bear in mind that he government which they are
establishing is designed not for our satisfaction or for the expression of our theoretical
views, but for the happiness, peace, and prosperity of the people of the Philippine
Islands, and the measures adopted should be made to conform to their customs, their
habits, and even their prejudices, to the fullest extent consistent with the
accomplishment of the indispensable requisites of just and effective government. At the
same time the Commission should bear in mind, and the people of the Islands should
be made plainly to understand, that there are certain great principles of government
which have been made the basis of our governmental system, which we deem essential
to the rule of law and the maintenance of individual freedom, and of which they have,
unfortunately, been denied the experience possessed by us; that there are also certain
practical rules of government which we have found to be essential to the preservation of
these great principles of liberty and law, and that these principles and these rules of
government must be established and maintained in their islands for the sake of their
liberty and happiness, however much they may conflict with the customs or laws of
procedure with which they are familiar. It is evident that the most enligthened thought of
the Philippine Islands fully appreciates the importance of these principles and rules, and
they will inevitably within a short time command universal assent.

The courts have naturally taken the same view. Mr. Justice Elliott, speaking for our
Supreme Court, in the case of United States vs. Bull ([1910], 15 Phil., 7), said: "The
President and Congress framed the government on the model with which American are
familiar, and which has proven best adapted for the advancement of the public interests
and the protection of individual rights and privileges."

Therefore, it has come with somewhat of a shock to hear the statement made that the
happiness, peace, and prosperity of the people of the Philippine Islands and their
customs, habits, and prejudices, to follow the language of President McKinley, demand
obeisance to authority, and royal protection for that authority.

According to our view, article 256 of the Spanish Penal Code was enacted by the
Government of Spain to protect Spanish officials who were the representatives of the
King. With the change of sovereignty, a new government, and a new theory of
government, as set up in the Philippines. It was in no sense a continuation of the old,
although merely for convenience certain of the existing institutions and laws were
continued. The demands which the new government made, and makes, on the
individual citizen are likewise different. No longer is there a Minister of the Crown or a
person in authority of such exalted position that the citizen must speak of him only with
bated breath. "In the eye of our Constitution and laws, every man is a sovereign, a ruler
and a freeman, and has equal rights with every other man. We have no rank or station,
except that of respectability and intelligence as opposed to indecency and ignorance,
and the door to this rank stands open to every man to freely enter and abide therein, if
he is qualified, and whether he is qualified or not depends upon the life and character
and attainments and conduct of each person for himself. Every man may lawfully do
what he will, so long as it is not malum in se or malum prohibitum or does not infringe
upon the qually sacred rights of others." (State vs. Shepherd [1903], 177 Mo., 205; 99
A. S. R., 624.)

It is true that in England, from which so many of the laws and institutions of the United
States are derived, there were once statutes of scandalum magnatum, under which
words which would not be actionable if spoken of an ordinary subject were made
actionable if spoken of a peer of the realm or of any of the great officers of the Crown,
without proof of any special damage. The Crown of England, unfortunately, took a view
less tolerant that that of other sovereigns, as for instance, the Emperors Augustus,
Caesar, and Tiberius. These English statutes have, however, long since, become
obsolete, while in the United States, the offense of scandalum magnatum is not known.
In the early days of the American Republic, a sedition law was enacted, making it an
offense to libel the Government, the Congress, or the President of the United States,
but the law met with so much popular disapproval, that it was soon repealed. "In this
country no distinction as to persons is recognized, and in practice a person holding a
high office is regarded as a target at whom any person may let fly his poisonous words.
High official position, instead of affording immunity from slanderous and libelous
charges, seems rather to be regarded as making his character free plunder for any one
who desires to create a senation by attacking it." (Newell, Slander and Libel, 3d ed., p.
245; Sillars vs. Collier [1890], 151 Mass., 50; 6 L.R.A., 680.)

Article 256 of the Penal Code is contrary to the genius and fundamental principles of the
American character and system of government. The gulf which separates this article
from the spirit which inspires all penal legislation of American origin, is as wide as that
which separates a monarchy from a democratic Republic like that of the United States.
This article was crowded out by implication as soon as the United States established its
authority in the Philippine Islands. Penalties out of all proportion to the gravity of the
offense, grounded in a distorted monarchical conception of the nature of political
authority, as opposed to the American conception of the protection of the interests of
the public, have been obliterated by the present system of government in the Islands.
1awph!l.net

From an entirely different point of view, it must be noted that this article punishes
contempts against executive officials, although its terms are broad enough to cover the
entire official class. Punishment for contempt of non-judicial officers has no place in a
government based upon American principles. Our official class is not, as in monarchies,
an agent of some authority greater than the people but it is an agent and servant of the
people themselves. These officials are only entitled to respect and obedience when they
are acting within the scope of their authority and jurisdiction. The American system of
government is calculated to enforce respect and obedience where such respect and
obedience is due, but never does it place around the individual who happens to occupy
an official position by mandate of the people any official halo, which calls for drastic
punishment for contemptuous remarks.

The crime of lese majeste disappeared in the Philippines with the ratification of the
Treaty of Paris. Ministers of the Crown have no place under the American flag.

To summarize, the result is, that all the members of the court are of the opinion,
although for different reasons, that the judgment should be reversed and the defendant
and appellant acquitted, with costs de officio. So ordered.

Ostrand and Johns, JJ., concur.

CASE #8
VILAS v. CITY OF MANILA (1911)
No. 53
Argued: Decided: April 3, 1911

Mr. Justice Lurton delivered the opinion of the court:

The plaintiffs in error, who were plaintiffs below, are creditors of the city of Manila as it
existed before the cession of the Philippine Islands to the United States by the treaty of
Paris, December 10, 1898 [30 Stat. at L. 1754]. Upon the theory that the city, under its
present charter from the government of the Philippine Islands, is the same juristic
person and liable upon the obligations of the old city, these actions were brought
against it. The supreme court of the Philippine Islands denied relief, holding that the
present municipality is a totally different corporate entity, and in no way liable for the
debts of the Spanish municipality. [220 U.S. 345, 352] The fundamental question is
whether, notwithstanding the cession of the Philippine Islands to the United States,
followed by a reincorporation of the city, the present municipality is liable for the
obligations of the city incurred prior to the cession to the United States.

We shall confine ourselves to the question whether the plaintiffs in error are entitled to
judgments against the city upon their several claims. Whether there is a remedy
adequate to the collection when reduced to judgment is not presented by the record.
But whether there is or is not a remedy affords no reason why the plaintiffs in error may
not reduce their claims to judgment. Mt. Pleasant v. Beckwith, 100 U.S. 514, 530 , 25 S.
L. ed. 699, 703. The city confessedly may be sued under its existing charter, and that
implies at least a right to judgment if they establish their demands.

The city as now incorporated has succeeded to all of the property rights of the old city
and to the right to enforce all of its causes of action. There is identity of purpose
between the Spanish and American charters and substantial identity of municipal
powers. The area and the inhabitants incorporated are substantially the same. But for
the change of sovereignty which has occurred under the treaty of Paris, the question of
the liability of the city under its new charter for the debts of the old city would seem to be
of easy solution. The principal question would therefore seem to be the legal
consequence of the cession referred to upon the property rights and civil obligations of
the city incurred before the cession. And so the question was made to turn in the court
below upon the consequence of a change in sovereignty and a reincorporation of the
city by the substituted sovereignty.

This disposes of the question of the jurisdiction of this court, grounded upon the
absence from the petition of the plaintiffs of any distinct claim under the treaty of Paris,
since, under 10 of the Philippine organic act [220 U.S. 345, 353] of July 1, 1902 [32
Stat. at L. 695, chap. 1369, U. S. Comp. Stat. Supp. 1909, p. 226], this court is given
jurisdiction to review any final decree or judgment of the supreme court of the Philippine
Islands where any treaty of the United States 'is involved.' That treaty was necessarily
'involved,' since neither the court below nor this court can determine the continuity of the
municipality nor the liability of the city as it now exists for the obligation of the old city,
without considering the effect of the change of sovereignty resulting from that treaty.
See Reavis v. Fianza, 215 U.S. 16, 22 , 54 S. L. ed. 72, 75, 30 Sup. Ct. rep. 1.

The historical continuity of a municipality embracing the inhabitants of the territory now
occupied by the city of Manila is impressive. Before the conquest of the Philippine
Islands by Spain, Manila existed. The Spaniards found on the spot now occupied a
populous and fortified community of Moros. In 1571 they occupied what was then and is
now known as Manila, and established it as a municipal corporation. In 1574 there was
conferred upon it the title of 'Illustrious and ever loyal city of Manila.' From time to time
there occurred amendments, and, on January 19, 1894, there was a reorganization of
the city government under a royal decree of that date. Under that charter there was
power to incur debts for municipal purposes and power to sue and be sued. The
obligations here in suit were incurred under the charter referred to, and are obviously
obligations strictly within the provision of the municipal power. To pay judgments upon
such debts it was the duty of the ayuntamiento of Manila, which was the corporate
name of the old city, to make provision in its budget.

The contention that the liability of the city upon such obligations was destroyed by a
mere change of sovereignty is obviously one which is without a shadow of moral force,
and, if true, must result from settled principles of rigid law. While the contracts from
which the claims in suit resulted were in progress, war between the United [220 U.S.
345, 354] States and Spain ensued. On August 13, 1898, the city was occupied by the
forces of this government, and its affairs conducted by military authority. On July 31,
1901, the present incorporating act was passed, and the city since that time has been
an autonomous municipality. The charter in force is act 183 of the Philippine
Commission, and now may be found as chapters 68 to 75 of the compiled acts of the
Philippine Commission. The 1st section of the charter of 1901 reads as follows:

'The inhabitants of the city of Manila, residing within the territory described in 2 of this
act, are hereby constituted a municipality, which shall be known as the city of Manila,
and by that name shall have perpetual succession, and shall possess all the rights of
property herein granted or heretofore enjoyed and possessed by the city of Manila as
organized under Spanish sovereignty.'
The boundaries described in 2 include substantially the area and inhabitants which had
theretofore constituted the old city.

By 4 of the same act, the government of the city was invested in a municipal board.

Section 16 grants certain legislative powers to the board, and provides that it shall 'take
possession of all lands, buildings, offices, books, papers, records, moneys, credits,
securities, assets, accounts, or other property or rights belonging to the former city of
Manila, or pertaining to the business or interests thereof, and, subject to the provisions
herein set forth, shall have control of all its property except the building known as the
ayuntamiento, provision for the occupation and control of which is made in 15 of this
act; shall collect taxes and other revenues, and apply the same in accordance with
appropriations, as hereinbefore provided, to the payment of the municipal expenses;
shall supervise and control the discharge of official duties by subordinates; shall institute
judicial proceedings to recover property and [220 U.S. 345, 355] funds of the city
wherever found, or otherwise to protect the interests of the city, and shall defend all
suits against the city,' etc.

Section 69 of the charter expressly preserved 'all city ordinances and orders in force at
the time of the passage of this act, and not inconsistent herewith,' until modified or
repealed by ordinances passed under this act.

Section 72 is the repealing clause, and provides for the repeal of 'all acts, orders, and
regulations' which are inconsistent with the provisions of the act.

The charter contains no reference to the obligations or contracts of the old city.

If we understand the argument against the liability here asserted, it proceeds mainly
upon the theory that inasmuch as the predecessor of the present city, the ayuntamiento
of Manila, was a corporate entity created by the Spanish government, when the
sovereignty of Spain in the islands was terminated by the treaty of cession, if not by the
capitulation of August 13, 1898, the municipality ipso facto disappeared for all purposes.
This conclusion is reached upon the supposed analogy to the doctrine of principal and
agent, the death of the principal ending the agency. So complete is the supposed death
and annihilation of a municipal entity by extinction of sovereignty of the creating state
that it was said in one of the opinions below that all of the public property of Manila
passed to the United States, 'for a consideration, which was paid,' and that the United
States was therefore justified in creating an absolutely new municipality, and endowing
it with all of the assets of the defunct city, free from any obligation to the creditors of that
city. And so the matter was dismissed in the Trigas Case by the court of first instance,
by the suggestion that 'the plaintiff may have a claim against the Crown of Spain, which
has received from the United States payment for that done by the plaintiff.' [220 U.S.
345, 356] We are unable to agree with the argument. It loses sight of the dual
character of municipal corporations. They exercise powers which are governmental and
powers which are of a private or business character. In the one character a municipal
corporation is a governmental subdivision, and for that purpose exercises by delegation
a part of the sovereignty of the state. In the other character it is a mere legal entity or
juristic person. In the latter character it stands for the community in the administration of
local affairs wholly beyond the sphere of the public purposes for which its governmental
powers are conferred.

The distinction is observed in South Carolina v. United States, 199 U.S. 437, 461 , 50 S.
L. ed. 261, 269, 26 Sup. Ct. Rep. 110, 4 A. & E. Ann. Cas. 737, where Lloyd v. New
York, 5 N. Y. 369, 374, 55 Am. Dec. 347, and Western Sav. Fund Soc. v. Philadelphia,
31 Pa. 175, 72 Am. Dec. 730, are cited and approved. In Lloyd v. New York, supra, it is
said:
'The corporation of the city of New York possesses two kinds of powers: one
governmental and public, and to the extent they are held and exercised, is clothed with
sovereignty; the other private, and to the extent they are held and exercised, is a legal
individual. The former are given and used for public purposes, the latter for private
purposes. While in the exercise of the former, the corporation is a municipal
government; and while in the exercise of the latter, is a corporate legal individual.'
See also Dill. Mun. Corp. 4th ed. 66; Petersburg v. Applegarth, 28 Gratt. 321, 343, 26
Am. Rep. 357, and Oliver v. Worcester, 102 Mass. 489, 3 Am. Rep. 485.

In view of the dual character of municipal corporations there is no public reason for
presuming their total dissolution as a mere consequence of military occupation or
territorial cession. The suspension of such governmental functions as are obviously
incompatible with the new political relations thus brought about may be presumed. [220
U.S. 345, 357] But no such implication may be reasonably indulged beyond that result.

Such a conclusion is in harmony with the settled principles of public law as declared by
this and other courts and expounded by the text-books upon the laws of war and
international law. Taylor, International Pub. Law , 578.

That there is a total abrogation of the former political relations of the inhabitants of the
ceded region is obvious. That all laws theretofore in force which are in confiict with the
political character, constitution, or institutions of the substituted sovereign, lose their
force, is also plain. Alvarez y Sanchez v. United States, 216 U.S. 167 , 54 L. ed. 432, 30
Sup. Ct. Rep. 367. But it is equally settled in the same public law that that great body of
municipal law which regulates private and domestic rights continues in force until
abrogated or changed by the new ruler. In Chicago, R. I. & P. R. Co. v. McGlinn, 114
U.S. 542, 546 , 29 S. L. ed. 270, 271, 5 Sup. Ct. Rep. 1005, it was said:

'It is a general rule of public law, recognized and acted upon by the United States, that
whenever political jurisdiction and legislative power over any territory are transferred
from one nation or sovereign to another, the municipal laws of the country, that is, laws
which are intended for the protection of private rights, continue in force until abrogated
or changed by the new government or sovereign. By the cession, public property
passes from one government to the other, but private property remains as before, and
with it those municipal laws which are designed to secure its peaceful use and
enjoyment. As a matter of course, all laws, ordinances, and regulations in conflict with
the political character, institutions, and constitution of the new government are at once
displaced. Thus, upon a cession of political jurisdiction and legislative power-and the
latter is involved in the former-to the United States, the laws of the country in support of
an established religion, or abridging the freedom of the [220 U.S. 345, 358] press, or
authorizing cruel and unusual punishments, and the like, would at once cease to be of
obligatory force without any declaration to that effect; and the laws of the country on
other subjects would necessarily be superseded by existing laws of the new
government upon the same matters. But with respect to other laws affecting the
possession, use, and transfer of property, and designed to secure good order and
peace in the community, and promote its health and prosperity, which are strictly of a
municipal character, the rule is general, that a change of government leaves them in
force until, by direct action of the new government, they are altered or repealed.'
The above language was quoted with approval in Downes v. Bidwell, 182 U.S. 244, 298
, 45 S. L. ed. 1088, 1110, 21 Sup. Ct. Rep. 770.

That the United States might, by virtue of its situation under a treaty ceding full title,
have utterly extinguished every municipality which it found in existence in the Philippine
Islands, may be conceded. That it did so, in view of the practice of nations to the
contrary, is not to be presumed, and can only be established by cogent evidence.

That during military occupation the affairs of the city were in a large part administered
by officials put in place by military order did not operate to dissolve the corporation, or
relieve it from liability upon obligations incurred before the occupation, nor those created
for municipal purposes by the administrators of its affairs while its old officials were
displaced. New Orleans v. New York Mail S. S. Co. 20 Wall. 387, 394, 22 L. ed. 354,
358. During that occupation and military administration the business of the city was
carried on as usual. Taxes were assessed and taxes collected and expended for local
purposes, and many of the officials carrying on the government were those found in
office when the city was occupied. The continuity of the corporate city was not
inconsistent with military occupation or the constitution or institutions of the occupying
power. This [220 U.S. 345, 359] is made evident by the occurrences at the time of
capitulation. Thus, the articles of capitulation concluded in these words: 'This city, its
inhabitants, . . . and its private property of all descriptions, are placed under the special
safeguard of the faith and honor of the American Army.' This was quoted in President
McKinley's instructions of April 7, 1900, to the Philippine Commission, and touching this
he said: 'I believe that this pledge has been faithfully kept.' And the commission was
directed to labor for the full performance of this obligation. This instruction was in line
with and in fulfilment of the 8th article of the treaty of Paris of December 10, 1898.
Under the 3d article of that treaty the archipelago known as the Philippine Islands was
ceded to the United States, the latter agreeing to pay to Spain the sum of $20,000,000.
Under the first paragraph of the 8th article, Spain relinquished to the United States 'all
the buildings, wharves, barracks, forts, structures, public highways, and other
immovable property which, in conformity with law, belong to the public domain, and as
such belong to the Crown of Spain.' It is under this clause, in connection with the clause
agreeing to pay to Spain $20,000,000 for the cession of the Philippine group, that the
contention that all of the public rights of the city of Manila were acquired by the United
States, which country was therefore justified, as absolute owner, in granting the
property rights so acquired to what is called the 'absolutely new corporation' created
thereafter. But the qualifying words touching property rights relinquished by Spain limit
the relinquishment to 'property which, in conformity with law, belonging to the public
domain, and as such belong to the Crown of Spain.' It did not affect property which did
not, in 'conformity with law, belong to the Crown of Spain.' That it was not intended to
apply to property which, 'in conformity with law,' belonged to the city of Manila as a
municipal cor- [220 U.S. 345, 360] poration, is clear. This is demonstrated by the
second paragraph of the same article, which reads: 'And it is hereby declared that the
relinquishment or cession, as the case may be, to which the preceding paragraph
refers, cannot in any respect impair the property or rights which by law belong to the
peaceful possession of property of all kinds, of provinces, municipalities, public or
private establishments . . . having legal capacity to acquire and possess property in the
aforesaid territories renounced or ceded, or of private individuals.' Thus, the property
and property rights of municipal corporations were protected and safeguarded precisely
as were the property and property rights of individuals.

That the cession did not operate as an extinction or dissolution of corporations is herein
recognized, for the stipulation against impairment of their property rights has this plain
significance.

The conclusion we reach, that the legal entity survived both the military occupation and
the cession which followed, finds support in the cases which hold that the Pueblos of
San Francisco and Los Angeles, which existed as municipal organizations prior to the
cession of California by Mexico, continued to exist with their community and property
rights intact. Cohas v. Raisin, 3 Cal. 443; Hart v. Burnett, 15 Cal. 530; Townsend v.
Greeley, 5 Wall. 326, 18 L. ed. 547; Merryman v. Bourne, 9 Wall. 592, 602, 19 L. ed.
683, 686; Moore v. Steinbach, 127 U.S. 70 , 32 L. ed. 51, 8 Sup. Ct. Rep. 1067; Los
Angeles Farming & Mill. Co. v. Los Angeles, 217 U.S. 217 , 54 L. ed. 736, 30 Sup. Ct.
Rep. 452.

Were corporate identity and corporate liability extinguished as a necessary legal result
of the new charter granted in 1901 by the Philippine Commission? The inhabitants of
the old city are the incorporators of the new. There is substantially identity of area.
There are some changes in the form of government and some changes in corporate
powers and methods of administration. the new corporation is endowed with all of the
property and [220 U.S. 345, 361] property rights of the old. It has the same power to
sue and be sued which the former corporation had. There is not the slightest suggestion
that the new corporation shall not succeed to the contracts and obligations of the old
corporation. Laying out of view any question of the constitutional guaranty against
impairment of the obligation of contracts, there is, in the absence of express legislative
declaration of a contrary purpose, no reason for supposing that the reincorporation of an
old municipality is intended to permit an escape from the obligations of the old, to whose
property and rights it has succeeded. The juristic identity of the corporation has been in
no wise affected, and, in law, the present city is, in every legal sense, the successor of
the old. As such it is entitled to the property and property rights of the predecessor
corporation, and is, in law, subject to all of its liabilities. Broughton v. Pensacola 93 U.S.
266 , 23 L. ed. 896; Mt. Pleasant v. Beckwith, 100 U.S. 520 , 25 L. ed. 699; Mobile v.
Watson, 116 U.S. 289 , 29 L. ed. 620, 6 Sup. Ct. Rep. 398; Shapleigh v. San Angelo,
167 U.S. 646, 655 , 42 S. L. ed. 310, 313, 17 Sup. Ct. Rep. 957; O'Connor v. Memphis,
6 Lea, 730; Colchester v. Seaber, 3 Burr. 1866, 1870, in which case, when a
municipality became disabled to act and obtained a new charter, in an action upon an
obligation of the old corporation, there was judgment for the creditor, Lord Mansfield
saying:
'Many corporations, for want of legal magistrates, have lost their activity, and obtained
new charters. Maidstone, Radnor, Carmarthen, and many more are in the same case
with Colchester. And yet it has never been disputed but that the new charters revive and
give activity to the old corporation; except, perhaps, in that case in Levinz, where the
corporation had a new name; and even there the court made no doubt. Where the
question has arisen upon any remarkable metamorphosis, it has always been
determined 'that they remain the same as to debts and rights."
Morris v. State, 62 Tex. 728, 730. [220 U.S. 345, 362] In Shapleigh v. San Angelo,
supra, this court said in a similar case:

'The state's plenary power over its municipal corporations to change their organization,
to modify their method of internal government, or to abolish them altogether, is not
restricted by contracts entered into by the municipality with its creditors or with private
parties. An absolute repeal of a municipal charter is therefor effectual so far as it
abolishes the old corporate organization; but when the same or substantially the same
inhabitants are erected into a new corporation, whether with extended or restricted
territorial limits, such new corporation is treated as in law the successor of the old one,
entitled to its property rights, and subject to its liabilities.'
The cases of Trigas and Vilas went off upon demurrers, and no question of remedy
arises here.

The appeal of Aguado is from a decree upon a final hearing denying him all relief.

That all three of the plaintiffs in error are entitled to proceed to judgment when they shall
establish their several claims is obvious from what we have said. But in the Aguado
Case it is sought to establish his claim as a charge against certain property and funds
held by the city as trustee, known as the Carriedo fund. In 1734 one Don Francisco
Carriedo y Perodo bequeathed to the city a fund for the establishment of waterworks, to
be kept as a separate fund and devoted to the erection and maintenance of the works.
This fund was loyally kept and greatly increased, and was enlarged by a special tax
upon meat, devoted to that purpose. The works were finally completed in 1878, and
have been since operated by the city, the income and special tax going to maintenance.
Certain securities belonging to the fund are now held by the city, the income being
applied to the operation of the works. Aguado took a contract to supply coal for the use
of the [220 U.S. 345, 363] Carriedo works, and made a deposit to guarantee the
contract. When the city was occupied by the American Army it was indebted to him for
coal so supplied, as well as for the deposit so made. That the coal was bought for and
used in the operation of the Carriedo works is not denied. But there is no evidence that
the credit was given to the Carriedo fund so held in trust under the will of Carriedo. The
contract was made with the ayuntamiento of Manila, just as all other contracts for city
supplies or works were made. The contract not having been made with special
reference to the liability of the fund held in trust by the city, but apparently upon the
general credit of the city, we are not disposed to reverse the judgment of the court
below, holding that the claim of Aguado did not constitute a charge upon the Carriedo
fund.
Aguado is, nevertheless, entitled to a judgment. The designation of the city in the
petition as trustee may be regarded as descriptive. The debt having been incurred by
the city, it must be regarded as a city liability. Taylor v. Davis (Taylor v. Mayo), 110 U.S.
330, 336 , 28 S. L. ed. 163, 165, 4 Sup. Ct. Rep. 147.

Our conclusion is that the decree in the Aguado Case must be reversed and the case
remanded, with direction to render judgment and such other relief as may seem in
conformity with law. The judgments in the Trigas and Vilas Cases will be reversed and
the cases remanded, with direction to overrule the respective demurrers, and for such
other action as may be consistent with law, and consistent with this opinion.
CASE #9
Haile Selassie v Cable and Wireless (UK) 1938

Principle
De jure recognition has a retrospective effect. When a county grant recognition of a
foreign government it does it with retrospective effect, therefore, any legal issue of the
past shall be considered as if during that the presently recognized government was in
power.

Fact
Cable & Wireless company limited was a British company who took a loan from the
treasury of Ethiopia at that time Haily Selassie was the emperor of Ethiopia. As a result
of this loan contract between the defendant company and the Director-General of Posts,
Telegraphs and Telephones of Ethiopia, a sum of money become due from the Cable &
Wireless co. ltd. to the public revenues of Ethiopia. In 1936, Italy attacked Ethiopia and
established it’s command over the Ethiopian territory. Meanwhile, Haily Selassie sued
against Cable & Wireless co. ltd. It must be noted that at that time the de jure
recognition of the United Kingdom was on behalf of Haily Selassie. On this issue the
Cable & Wireless co. ltd. claimed that Italy the de facto government of Ethiopia,
therefore, Haily Selassie does not have the right to claim that money, only Italy can
claim that money.

Issue:
Which recognized govt. would get preference?
Who was entitled to sue on behalf of Ethiopia in the British court?

Decision:
On this dispute, the court of first instance decided that although Ethiopia was overrun by
Italy, the emperor of Ethiopia Haile Selassie as the recognized de jure sovereign, still
possessed the right to sue for the money although Italy was recognized as de facto
power. After such judgment, the defendants appealed and while the appeal was
pending, Great Britain granted de jure recognition to the occupying force of Italy as
emperor of Ethiopia. The court of appeal allowed the appeal and dismissed the claim
holding that Heile Selassie is no longer the de jure government or de jure sovereign of
Ethiopia and therefore, his claim had to be dismissed.

Reasoning:
It was found that after the appeal the UK government provided de jure recognition to
Italy as the government of Ethiopia for political reason and thus Italy became the
recognized government of Ethiopia. Generally, this recognition of government comes
with the retrospective effect and therefore the right of succession dated back to the date
of the de facto recognition of the king of Haley as sovereign of Ethiopia to the second
half of the due 1936.

Since de facto recognition took place before the issue of the writ court (on January 4,
1938) the plaintiff’s claim fails and had to be dismissed.
CASE #10
THE HOLY SEE, petitioner v. THE HON. ERIBERTO U. ROSARIO, JR.
G.R. No. 101949 December 1, 1994
QUIASON, J.

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse
and set aside the Orders dated June 20, 1991 and September 19, 1991 of the Regional
Trial Court, Branch 61, Makati, Metro Manila in Civil Case No. 90-183.

The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint
in Civil Case No. 90-183, while the Order dated September 19, 1991 denied the motion
for reconsideration of the June 20,1991 Order.

Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome,
Italy, and is represented in the Philippines by the Papal Nuncio.

Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation

engaged in the real estate business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square
meters (Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of
Parañaque, Metro Manila and registered in the name of petitioner.

Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer
Certificates of Title Nos. 271108 and 265388 respectively and registered in the name of
the Philippine Realty Corporation (PRC).

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting
as agent to the sellers. Later, Licup assigned his rights to the sale to private respondent.

In view of the refusal of the squatters to vacate the lots sold to private respondent, a
dispute arose as to who of the parties has the responsibility of evicting and clearing the
land of squatters. Complicating the relations of the parties was the sale by petitioner of
Lot 5-A to Tropicana Properties and Development Corporation (Tropicana).

On January 23, 1990, private respondent filed a complaint with the Regional Trial Court,
Branch 61, Makati, Metro Manila for annulment of the sale of the three parcels of land,
and specific performance and damages against petitioner, represented by the Papal
Nuncio, and three other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC
and Tropicana (Civil Case No.
90-183).

The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of
petitioner and the PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the
price of P1,240.00 per square meters; (2) the agreement to sell was made on the
condition that earnest money of P100,000.00 be paid by Licup to the sellers, and that
the sellers clear the said lots of squatters who were then occupying the same; (3) Licup
paid the earnest money to Msgr. Cirilos; (4) in the same month, Licup assigned his
rights over the property to private respondent and informed the sellers of the said
assignment; (5) thereafter, private respondent demanded from Msgr. Cirilos that the
sellers fulfill their undertaking and clear the property of squatters; however, Msgr. Cirilos
informed private respondent of the squatters' refusal to vacate the lots, proposing
instead either that private respondent undertake the eviction or that the earnest money
be returned to the latter; (6) private respondent counterproposed that if it would
undertake the eviction of the squatters, the purchase price of the lots should be reduced
from P1,240.00 to P1,150.00 per square meter; (7) Msgr. Cirilos returned the earnest
money of P100,000.00 and wrote private respondent giving it seven days from receipt of
the letter to pay the original purchase price in cash; (8) private respondent sent the
earnest money back to the sellers, but later discovered that on March 30, 1989,
petitioner and the PRC, without notice to private respondent, sold the lots to Tropicana,
as evidenced by two separate Deeds of Sale, one over Lot 5-A, and another over Lots
5-B and 5-D; and that the sellers' transfer certificate of title over the lots were cancelled,
transferred and registered in the name of Tropicana; (9) Tropicana induced petitioner
and the PRC to sell the lots to it and thus enriched itself at the expense of private
respondent; (10) private respondent demanded the rescission of the sale to Tropicana
and the reconveyance of the lots, to no avail; and (11) private respondent is willing and
able to comply with the terms of the contract to sell and has actually made plans to
develop the lots into a townhouse project, but in view of the sellers' breach, it lost profits
of not less than P30,000.000.00.

Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between
petitioner and the PRC on the one hand, and Tropicana on the other; (2) the
reconveyance of the lots in question; (3) specific performance of the agreement to sell
between it and the owners of the lots; and (4) damages.

On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint
— petitioner for lack of jurisdiction based on sovereign immunity from suit, and Msgr.
Cirilos for being an improper party. An opposition to the motion was filed by private
respondent.

On June 20, 1991, the trial court issued an order denying, among others, petitioner's
motion to dismiss after finding that petitioner "shed off [its] sovereign immunity by
entering into the business contract in question" (Rollo, pp. 20-21).

On July 12, 1991, petitioner moved for reconsideration of the order. On August 30,
1991, petitioner filed a "Motion for a Hearing for the Sole Purpose of Establishing
Factual Allegation for claim of Immunity as a Jurisdictional Defense." So as to facilitate
the determination of its defense of sovereign immunity, petitioner prayed that a hearing
be conducted to allow it to establish certain facts upon which the said defense is based.
Private respondent opposed this motion as well as the motion for reconsideration.
On October 1, 1991, the trial court issued an order deferring the resolution on the
motion for reconsideration until after trial on the merits and directing petitioner to file its
answer (Rollo, p. 22).

Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the
privilege of sovereign immunity only on its own behalf and on behalf of its official
representative, the Papal Nuncio.

On December 9, 1991, a Motion for Intervention was filed before us by the Department
of Foreign Affairs, claiming that it has a legal interest in the outcome of the case as
regards the diplomatic immunity of petitioner, and that it "adopts by reference, the
allegations contained in the petition of the Holy See insofar as they refer to arguments
relative to its claim of sovereign immunity from suit" (Rollo, p. 87).

Private respondent opposed the intervention of the Department of Foreign Affairs. In

compliance with the resolution of this Court, both parties and the Department of Foreign
Affairs submitted their respective memoranda.

II

A preliminary matter to be threshed out is the procedural issue of whether the petition
for certiorari under Rule 65 of the Revised Rules of Court can be availed of to question
the order denying petitioner's motion to dismiss. The general rule is that an order
denying a motion to dismiss is not reviewable by the appellate courts, the remedy of the
movant being to file his answer and to proceed with the hearing before the trial court.
But the general rule admits of exceptions, and one of these is when it is very clear in the
records that the trial court has no alternative but to dismiss the complaint (Philippine
National Bank v. Florendo, 206 SCRA 582 [1992]; Zagada v. Civil Service Commission,
216 SCRA 114 [1992]. In such a case, it would be a sheer waste of time and energy to
require the parties to undergo the rigors of a trial.

The other procedural question raised by private respondent is the personality or legal
interest of the Department of Foreign Affairs to intervene in the case in behalf of the
Holy See (Rollo, pp. 186-190).

In Public International Law, when a state or international agency wishes to plead

sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the
state where it is sued to convey to the court that said defendant is entitled to immunity.

In the United States, the procedure followed is the process of "suggestion," where the
foreign state or the international organization sued in an American court requests the
Secretary of State to make a determination as to whether it is entitled to immunity. If the
Secretary of State finds that the defendant is immune from suit, he, in turn, asks the
Attorney General to submit to the court a "suggestion" that the defendant is entitled to
immunity. In England, a similar procedure is followed, only the Foreign Office issues a
certification to that effect instead of submitting a "suggestion" (O'Connell, I International
Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and
Obligations, 50 Yale Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign government or the international
organization to first secure an executive endorsement of its claim of sovereign or
diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement to
the courts varies. In International Catholic Migration Commission v. Calleja, 190 SCRA
130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the Secretary of
Labor and Employment, informing the latter that the respondent-employer could not be
sued because it enjoyed diplomatic immunity. In World Health Organization v. Aquino,
48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to
that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary
of Foreign Affairs to request the Solicitor General to make, in behalf of the Commander
of the United States Naval Base at Olongapo City, Zambales, a "suggestion" to
respondent Judge. The Solicitor General embodied the "suggestion" in a Manifestation
and Memorandum as amicus curiae.

In the case at bench, the Department of Foreign Affairs, through the Office of Legal
Affairs moved with this Court to be allowed to intervene on the side of petitioner. The
Court allowed the said Department to file its memorandum in support of petitioner's
claim of sovereign immunity.

In some cases, the defense of sovereign immunity was submitted directly to the local
courts by the respondents through their private counsels (Raquiza v. Bradford, 75 Phil.
50 [1945]; Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United
States of America v. Guinto, 182 SCRA 644 [1990] and companion cases). In cases
where the foreign states bypass the Foreign Office, the courts can inquire into the facts
and make their own determination as to the nature of the acts and transactions
involved.

III

The burden of the petition is that respondent trial court has no jurisdiction over
petitioner, being a foreign state enjoying sovereign immunity. On the other hand, private
respondent insists that the doctrine of non-suability is not anymore absolute and that
petitioner has divested itself of such a cloak when, of its own free will, it entered into a
commercial transaction for the sale of a parcel of land located in the Philippines.

A. The Holy See

Before we determine the issue of petitioner's non-suability, a brief look into its status as
a sovereign state is in order.
Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch
and he, as the Holy See, was considered a subject of International Law. With the loss of
the Papal States and the limitation of the territory under the Holy See to an area of
108.7 acres, the position of the Holy See in International Law became controversial
(Salonga and Yap, Public International Law 36-37 [1992]).

In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized
the exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City.
It also recognized the right of the Holy See to receive foreign diplomats, to send its own
diplomats to foreign countries, and to enter into treaties according to International Law
(Garcia, Questions and Problems In International Law, Public and Private 81 [1948]).

The Lateran Treaty established the statehood of the Vatican City "for the purpose of
assuring to the Holy See absolute and visible independence and of guaranteeing to it
indisputable sovereignty also in the field of international relations" (O'Connell, I
International Law 311 [1965]).

In view of the wordings of the Lateran Treaty, it is difficult to determine whether the
statehood is vested in the Holy See or in the Vatican City. Some writers even suggested
that the treaty created two international persons — the Holy See and Vatican City
(Salonga and Yap, supra, 37).

The Vatican City fits into none of the established categories of states, and the attribution
to it of "sovereignty" must be made in a sense different from that in which it is applied to
other states (Fenwick, International Law 124-125 [1948]; Cruz, International Law 37
[1991]). In a community of national states, the Vatican City represents an entity
organized not for political but for ecclesiastical purposes and international objects.
Despite its size and object, the Vatican City has an independent government of its own,
with the Pope, who is also head of the Roman Catholic Church, as the Holy See or
Head of State, in conformity with its traditions, and the demands of its mission in the
world. Indeed, the world-wide interests and activities of the Vatican City are such as to
make it in a sense an "international state" (Fenwick, supra., 125; Kelsen, Principles of
International Law 160 [1956]).

One authority wrote that the recognition of the Vatican City as a state has significant
implication — that it is possible for any entity pursuing objects essentially different from
those pursued by states to be invested with international personality (Kunz, The Status
of the Holy See in International Law, 46 The American Journal of International Law 308
[1952]).

Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions
as the Holy See and not in the name of the Vatican City, one can conclude that in the
Pope's own view, it is the Holy See that is the international person.

The Republic of the Philippines has accorded the Holy See the status of a foreign
sovereign. The Holy See, through its Ambassador, the Papal Nuncio, has had
diplomatic representations with the Philippine government since 1957 (Rollo, p. 87).
This appears to be the universal practice in international relations.

B. Sovereign Immunity

As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the

generally accepted principles of International Law. Even without this affirmation, such
principles of International Law are deemed incorporated as part of the law of the land as
a condition and consequence of our admission in the society of nations (United States
of America v. Guinto, 182 SCRA 644 [1990]).

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]).

Some states passed legislation to serve as guidelines for the executive or judicial
determination when an act may be considered as jure gestionis. The United States
passed the Foreign Sovereign Immunities Act of 1976, which defines a commercial
activity as "either a regular course of commercial conduct or a particular commercial
transaction or act." Furthermore, the law declared that the "commercial character of the
activity shall be determined by reference to the nature of the course of conduct or
particular transaction or act, rather than by reference to its purpose." The Canadian
Parliament enacted in 1982 an Act to Provide For State Immunity in Canadian Courts.
The Act defines a "commercial activity" as any particular transaction, act or conduct or
any regular course of conduct that by reason of its nature, is of a "commercial
character."

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]).

On the other hand, this Court has considered the following transactions by a foreign
state with private parties as acts jure gestionis: (1) the hiring of a cook in the recreation
center, consisting of three restaurants, a cafeteria, a bakery, a store, and a coffee and
pastry shop at the John Hay Air Station in Baguio City, to cater to American servicemen
and the general public (United States of America v. Rodrigo, 182 SCRA 644 [1990]);
and (2) the bidding for the operation of barber shops in Clark Air Base in Angeles City
(United States of America v. Guinto, 182 SCRA 644 [1990]). The operation of the
restaurants and other facilities open to the general public is undoubtedly for profit as a
commercial and not a governmental activity. By entering into the employment contract
with the cook in the discharge of its proprietary function, the United States government
impliedly divested itself of its sovereign immunity from suit.

In the absence of legislation defining what activities and transactions shall be

considered "commercial" and as constituting acts jure gestionis, we have to come out
with our own guidelines, tentative they may be.

Certainly, the mere entering into a contract by a foreign state with a private party cannot
be the ultimate test. Such an act can only be the start of the inquiry. The logical
question is whether the foreign state is engaged in the activity in the regular course of
business. If the foreign state is not engaged regularly in a business or trade, the
particular act or transaction must then be tested by its nature. If the act is in pursuit of a
sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it
is not undertaken for gain or profit.

As held in United States of America v. Guinto, (supra):

There is no question that the United States of America, like any other state, will be
deemed to have impliedly waived its non-suability if it has entered into a contract in its
proprietary or private capacity. It is only when the contract involves its sovereign or
governmental capacity that no such waiver may be implied.

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a
real estate business, surely the said transaction can be categorized as an act jure
gestionis. However, petitioner has denied that the acquisition and subsequent disposal
of Lot 5-A were made for profit but claimed that it acquired said property for the site of
its mission or the Apostolic Nunciature in the Philippines. Private respondent failed to
dispute said claim.

Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The
donation was made not for commercial purpose, but for the use of petitioner to construct
thereon the official place of residence of the Papal Nuncio. The right of a foreign
sovereign to acquire property, real or personal, in a receiving state, necessary for the
creation and maintenance of its diplomatic mission, is recognized in the 1961 Vienna
Convention on Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the
Philippine Senate and entered into force in the Philippines on November 15, 1965.

In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil
and administrative jurisdiction of the receiving state over any real action relating to
private immovable property situated in the territory of the receiving state which the
envoy holds on behalf of the sending state for the purposes of the mission. If this
immunity is provided for a diplomatic envoy, with all the more reason should immunity
be recognized as regards the sovereign itself, which in this case is the Holy See.

The decision to transfer the property and the subsequent disposal thereof are likewise
clothed with a governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the squatters
living thereon made it almost impossible for petitioner to use it for the purpose of the
donation. The fact that squatters have occupied and are still occupying the lot, and that
they stubbornly refuse to leave the premises, has been admitted by private respondent
in its complaint (Rollo, pp. 26, 27).

The issue of petitioner's non-suability can be determined by the trial court without going
to trial in the light of the pleadings, particularly the admission of private respondent.
Besides, the privilege of sovereign immunity in this case was sufficiently established by
the Memorandum and Certification of the Department of Foreign Affairs. As the
department tasked with the conduct of the Philippines' foreign relations (Administrative
Code of 1987, Book IV, Title I, Sec. 3), the Department of Foreign Affairs has formally
intervened in this case and officially certified that the Embassy of the Holy See is a duly
accredited diplomatic mission to the Republic of the Philippines exempt from local
jurisdiction and entitled to all the rights, privileges and immunities of a diplomatic
mission or embassy in this country (Rollo, pp. 156-157). The determination of the
executive arm of government that a state or instrumentality is entitled to sovereign or
diplomatic immunity is a political question that is conclusive upon the courts
(International Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]). Where
the plea of immunity is recognized and affirmed by the executive branch, it is the duty of
the courts to accept this claim so as not to embarrass the executive arm of the
government in conducting the country's foreign relations (World Health Organization v.
Aquino, 48 SCRA 242 [1972]). As in International Catholic Migration Commission and in
World Health Organization, we abide by the certification of the Department of Foreign
Affairs.

Ordinarily, the procedure would be to remand the case and order the trial court to
conduct a hearing to establish the facts alleged by petitioner in its motion. In view of
said certification, such procedure would however be pointless and unduly circuitous
(Ortigas & Co. Ltd. Partnership v. Judge Tirso Velasco, G.R. No. 109645, July 25,
1994).

IV
Private respondent is not left without any legal remedy for the redress of its grievances.
Under both Public International Law and Transnational Law, a person who feels
aggrieved by the acts of a foreign sovereign can ask his own government to espouse
his cause through diplomatic channels.

Private respondent can ask the Philippine government, through the Foreign Office, to
espouse its claims against the Holy See. Its first task is to persuade the Philippine
government to take up with the Holy See the validity of its claims. Of course, the
Foreign Office shall first make a determination of the impact of its espousal on the
relations between the Philippine government and the Holy See (Young, Remedies of
Private Claimants Against Foreign States, Selected Readings on Protection by Law of
Private Foreign Investments 905, 919 [1964]). Once the Philippine government decides
to espouse the claim, the latter ceases to be a private cause.

According to the Permanent Court of International Justice, the forerunner of the

International Court of Justice:

By taking up the case of one of its subjects and by reporting to diplomatic action or
international judicial proceedings on his behalf, a State is in reality asserting its own
rights — its right to ensure, in the person of its subjects, respect for the rules of
international law (The Mavrommatis Palestine Concessions, 1 Hudson, World Court
Reports 293, 302 [1924]).

WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case
No. 90-183 against petitioner is DISMISSED.

SO ORDERED.
CASE #11
Nicaragua v. United States

Brief Fact Summary. Nicaragua (P) brought a suit against the United States (D) on the
ground that the United States (D) was responsible for illegal military and paramilitary
activities in and against Nicaragua. The jurisdiction of the International Court of Justice
to entertain the case as well as the admissibility of Nicaragua’s (P) application to the
I.C.J. was challenged by the United States (D).

Synopsis of Rule of Law. Nicaragua (P) brought a suit against the United States (D)
on the ground that the United States (D) was responsible for illegal military and
paramilitary activities in and against Nicaragua. The jurisdiction of the International
Court of Justice to entertain the case as well as the admissibility of Nicaragua’s (P)
application to the I.C.J. was challenged by the United States (D).

Facts. The United States (D) challenged the jurisdiction of the I.C.J when it was held
responsible for illegal military and paramilitary activities in and against Nicaragua (P) in
the suit the plaintiff brought against the defendant in 1984. Though a declaration
accepting the mandatory jurisdiction of the Court was deposited by the United States
(D) in a 1946, it tried to justify the declaration in a 1984 notification by referring to the
1946 declaration and stating in part that the declaration “shall not apply to disputes with
any Central American State….”
Apart from maintaining the ground that the I.C.J lacked jurisdiction, the States (D) also
argued that Nicaragua (P) failed to deposit a similar declaration to the Court. On the
other hand, Nicaragua (P) based its argument on its reliance on the 1946 declaration
made by the United states (D) due to the fact that it was a “state accepting the same
obligation” as the United States (D) when it filed charges in the I.C.J. against the United
States (D).  Also, the plaintiff intent to submit to the compulsory jurisdiction of the I.C.J.
was pointed out by the valid declaration it made in 1929 with the I.C.J’s predecessor,
which was the Permanent Court of International Justice, even though Nicaragua had
failed to deposit it with that court. The admissibility of Nicaragua’s (P) application to the
I.C.J. was also challenged by the United States (D).

Issue. (1) Is the jurisdiction to entertain a dispute between two states, if they both
accept the Court’s jurisdiction, within the jurisdiction of the International Court of
Justice?
(2) Where no grounds exist to exclude the application of a state, is the application of
such a state to the International Court of Justice admissible?

Held. (1) Yes. The jurisdiction of the Court to entertain a dispute between two states if
each of the States accepted the Court’s jurisdiction is within the jurisdiction of the
International Court of Justice. Even though Nicaragua (P) declaration of 1929 was not
deposited with the Permanent Court, because of the potential effect it had that it would
last for many years, it was valid.
Thus, it maintained its effect when Nicaragua became a party to the Statute of the I.C.J
because the declaration was made unconditionally and was valid for an unlimited
period. The intention of the current drafters of the current Statute was to maintain the
greatest possible continuity between it and the Permanent Court. Thus, when Nicaragua
(P) accepted the Statute, this would have been deemed that the plaintiff had given its
consent to the transfer of its declaration to the I.C.J.

(2) Yes. When no grounds exist to exclude the application of a state, the application of
such a state to the International Court of Justice is admissible. The five grounds upon
which the United States (D) challenged the admissibility of Nicaragua’s (P) application
were that the plaintiff failed because there is no “indispensable parties” rule when it
could not bring forth necessary parties, Nicaragua’s (P) request of the Court to consider
the possibility of a threat to peace which is the exclusive province of the Security
Council, failed due to the fact that I.C.J. can exercise jurisdiction  which is concurrent
with that of the Security Council, that the I.C.J. is unable to deal with situations involving
ongoing armed conflict and that there is nothing compelling the I.C.J. to decline to
consider one aspect of a dispute just because the dispute has other aspects due to the
fact that the case is incompatible with the Contadora process to which Nicaragua (P) is
a party.

Discussion. Although the questions of jurisdiction and admissibility are primarily based

on the principle that the I.C.J. has only as much power as that agreed to by the parties,
these can be quite complicated. The 1946 declaration of the United States and the 1929
declaration of Nicaragua was the main focus of the case on declaration and each of
these declarations pointed out the respective parties’ intent as it related to the I.C.J’s
jurisdiction.
CASE #12
UNDERHILL v. HERNANDEZ

In the early part of 1892 a revolution was initiated in Venezuela, against the
administration thereof, which the revolutionists claimed had ceased to be the legitimate
government. The principal parties to this conflict were those who recognized Palacio as
their head, and those who followed the leadership of Crespo. Gen. Hernandez belonged
to the antiadministration party, and commanded its forces in the vicinity of Ciudad
Bolivar. On the 8th of August, 1892, an engagement took place between the arimes of
the two parties at Buena Vista, some seven miles from Bolivar, in which the troops
under Hernandez prevailed; and, on the 13th of August, Hernandez entered Bolivar,
and assumed command of the city. All of the local officials had in the meantime left, and
the vacant positions were filled by Gen. Hernandez, who from that date, and during the
period of the transactions complained of, was the civil and military chief of the city and
district. In October the party in revolt had achieved success generally, taking
possession of the capital of Venezuela, October 6th; and on October 23, 1892, the
'Crespo government,' so called, was formally recognized as the legitimate government
of Venezuela by the United States.

George F. Underhill was a citizen of the United States, who had constructed a
waterworks system for the city of Bolivar, under a contract with the government, and
was engaged in supplying the place with water; and he also carried on a machiney
repair business. Some time after the entry of Gen. Hernandez, Underhill applied to him,
as the officer in command, for a passport to leave the city. Hernandez refused this
request, and requests made by others in Underhill's behalf, until October 18th, when a
passport was given, and Underhill left the country.

This action was brought to recover damages for the detention caused by reason of the
refusal to grant the passport, for the alleged confinement of Underhill to his own house,
and for certain alleged assaults and affronts by the soldiers of Hernandez's army.

The cause was tried in the circuit court of the United States for the Eastern district of
New York, and on the conclusion of plaintiff's case the circuit court ruled that upon the
facts plaintiff was not entitled to recover, and directed a verdict for defendant, on the
ground that 'because the acts of defendant were those of a military commander,
representing a de facto government in the prosecution of a war, he was not civilly
responsible therefor.' Judgment having been rendered for defendant, the case was
taken to the circuit court of appeals, and by that court affirmed, upon the ground 'that
the acts of the defendant were the acts of the government of Venezuela, and as such
are not properly the subject of adjudication in the courts of another government.' 26 U.
S. App. 573, 13 C. C. A. 51, and 65 Fed. 577. Thereupon the cause was brought to this
court on certiorari.

Walter S. Logan, C. M. Demond, and Salter S. Clark, for plaintiff in error.

F. R. Coudert, F. R. Coudert, Jr., and Joseph Kling, for defendant in error.

Mr. Chief Justice FULLER, after stating the facts in the foregoing language, delivered
the opinion of the court.

1
Every sovereign state is bound to respect the independence of every other sovereign
state, and the courts of one country will not sit in judgment on the acts of the
government of another, done within its own territory. Redress of grievances by reason
of such acts must be obtained through the means open to be availed of by sovereign
powers as between themselves.

2
Nor can the principle be confined to lawful or recognized governments, or to cases
where redress can manifestly be had through public channels. The immunity of
individuals from suits brought in foreign tribunals for acts done within their own states, in
the exercise of governmental authority, whether as civil officers or as military
commanders, must necessarily extend to the agents of governments ruling by
paramount force as matter of fact. Where a civil war prevails (that is, where the people
of a country are divided into two hostile parties, who take up arms and oppose one
another by military force), generally speaking, foreign nations do not assume to judge of
the merits of the quarrel. If the party seeking to dislodge the existing government
succeeds, and the independence of the government it has set up is recognized, then
the acts of such government, from the commencement of its existence, are regarded as
those of an independent nation. If the political revolt fails of success, still, if actual war
has been waged, acts of legitimate warfare cannot be made the basis of individual
liability. U. S. v. Rice, 4 Wheat. 246; Fleming v. Page, 9 How. 603; Thorington v. Smith,
8 Wall. 1; Williams v. Bruffy, 96 U. S. 176; Ford v. Surget, 97 U. S. 594; Dow v.
Johnson, 100 U. S. 158; and other cases.

3
Revolutions or insurrections may inconvenience other nations, but by accommodation to
the facts the application of settled rules is readily reached. And, where the fact of the
existence of war is in issue in the instance of complaint of acts committed within foreign
territory, it is not an absolute prerequisite that that fact should be made out by an
acknowledgment of belligerency, as other official recognition of its existence may be
sufficient proof thereof. The Three Friends, 166 U. S. 1, 17 Sup. Ct. 495.

4
In this case the archives of the state department show that civil war was flagrant in
Venezuela from the spring of 1892, that the revolution was successful, and that the
revolutionary government was recognized by the United States as the government of
the country; it being, to use the language of the secretary of state in a communication to
our minister to Venezuela, 'accepted by the people, in the possession of the power of
the nation, and fully established.'

5
That these were facts of which the court is bound to take judicial notice, and for
information as to which it may consult the department of state, there can be no doubt.
Jones v. U. S., 137 U. S. 202, 11 Sup. Ct. 80; Mighell v. Sultan of Jahore [1894] 1 Q. B.
149.

6
It is idle to argue that the proceedings of those who thus triumphed should be treated as
the acts of baditti, or mere mobs.

7
We entertain no doubt, upon the evidence, that Hernandez was carrying on military
operations in support of the revolutionary party. It may be that adherents of that side of
the controversy in the particular locality where Hernandez was the leader of the
movement entertained a preference for him as the future executive head of the nation,
but that is beside the question. The acts complained of were the acts of a military
commander representing the authority of the revolutionary party as a government,
which afterwards succeeded, and was recognized by the United States. We think the
circuit court of appeals was justified in concluding 'that the acts of the defendant were
the acts of the government of Venezuela, and as such are not properly the subject of
adjudication in the courts of another government.'

8
The decisions cited on plaintiff's behalf are not in point. Cases respecting arrests by
military authority in the absence of the prevalence of war, or the validity of contracts
between individuals entered into in aid of insurrection, or the right or revolutionary
bodies to vex the commerce of the world on its common highway without incurring the
penalties denounced on piracy, and the like, do not involve the questions presented
here.

9
We agree with the circuit court of appeals that 'the evidence upon the trial indicated that
the purpose of the defendant in his treatment of the plaintiff was to coerce the plaintiff to
operate his waterworks and his repair works for the benefit of the community and the
revolutionary forces,' and that 'it was not sufficient to have warranted a finding by the
jury that the defendant was actuated by malice or any personal or private motive,' and
we concur in its disposition of the rulings below. The decree of the circuit court is
affirmed.
CASE #13
The REPUBLIC OF THE PHILIPPINES v. FERDINAND E. MARCOS

The Republic of the Philippines (the Republic) brought a civil suit against its former
president, Ferdinand Marcos, and his wife Imelda (the Marcoses), asserting claims
under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Secs.
1961 et seq., and other applicable law. The district court on June 25, 1986 entered a
preliminary injunction enjoining the Marcoses from disposing of any of their assets save
for the payment of attorney fees and normal living expenses. The Marcoses appealed.
A panel of this court reversed, 2-1. 818 F.2d 1473 (9th Cir.1987). We took the case en
banc and now affirm the district court.

Federal Jurisdiction

2
The Republic alleges that the Marcoses engaged in mail fraud, wire fraud, and the
transportation of stolen property in the foreign or interstate commerce of the United
States. The acts alleged are crimes under 18 U.S.C. Secs. 1341, 1343, and 2315. The
Republic alleges that the acts were repeated, forming a pattern of predicate acts under
RICO, 18 U.S.C. Sec. 1961, and thereby giving rise to civil liability under RICO, 18
U.S.C. Sec. 1964.

3
Contrary to the contention of the Marcoses, the Republic as a governmental body is a
person within the meaning of 18 U.S.C. Sec. 1961(3). Illinois Department of Revenue v.
Phillips, 771 F.2d 312 (7th Cir.1985). The foreign nature of the Republic does not
deprive it of statutory personhood. Cf. Pfizer, Inc. v. Government of India, 434 U.S. 308,
98 S. Ct. 584, 54 L. Ed. 2d 563 (1978). Accordingly the Republic has standing to assert
the RICO claims.

4
Contrary to the contention of the Marcoses, the complaint, as interpreted by the district
court, sufficiently alleges a RICO offense. The Republic alleges that the Marcoses and
the other defendants arranged for the investment in real estate in Beverly Hills,
California of $4 million fraudulently obtained by the Marcoses; that the Marcoses
arranged for the creation of two bank accounts in the name of Imelda Marcos at Lloyds
Bank of California totaling over $800,000 also fraudulently obtained by the Marcoses;
and that the Marcoses transported into Hawaii money, jewels, and other property worth
over $7 million also fraudulently obtained by them. Criminal conduct under RICO "forms
a pattern if it embraces criminal acts that have the same or similar purposes, results,
participants, victims, or methods of commission, or otherwise are interrelated by
distinguishing characteristics and are not isolated events." Sedima, S.P.R.L. v. Imrex
Co., Inc., 473 U.S. 479, 496 n. 14, 105 S. Ct. 3275, 3285, n. 14, 87 L. Ed. 2d 346
(quoting 18 U.S.C. Sec. 3575(e)). The purposes of the acts here alleged are the same--
to invest and to conceal fraudulently-obtained booty. The results are the same--the
investment of the booty. The principals are the same--the Marcoses. The victim is the
same--the Republic. The episodes are not isolated events. They represent a plan and a
practice of getting the fruits of fraud out of the Philippines and into the assumed safety
of the United States. If proved, the allegations show acts that form a pattern.

5
Contrary to the contention of the Marcoses, the complaint as read by the district court
also alleges a RICO enterprise. A RICO enterprise has been found to consist of "a
group of individuals associated in fact for the purpose of illegally trafficking in
narcotics ..., utilizing the United States mail to defraud ..., and corruptly influencing ...
the outcome of state court proceedings." United States v. Turkette, 452 U.S. 576, 579,
101 S. Ct. 2524, 2526, 69 L. Ed. 2d 246 (1981). Here there is alleged to be a group of
individuals associated in fact for the purpose of illegally investing the fruits of fraud and
illegally using the mails and wire and illegally transporting in interstate commerce the
fruits of the fraud.

6
The effect on the commerce of the United States of engaging in mail or wire fraud or
bringing stolen property into the country is palpable. The Marcoses are mistaken in
arguing that such criminal acts have no consequences for commerce to or in this
country. The criminal enterprise which they are charged with conducting consisted in
operations taking place within the United States. These operations had multiple effects
on the domestic and foreign commerce of this country. If the operations were criminal,
the operators incurred criminal liability under our law. United States v. Stratton, 649
F.2d 1066, 1075 (5th Cir.1981) (appearance of out-of-state litigants before court that
was a criminal RICO enterprise); United States v. Altomare, 625 F.2d 5 (4th Cir.1980)
(interstate telephone calls perpetuating RICO enterprise affected interstate commerce).
The Republic's allegations are sufficient to establish federal jurisdiction. 18 U.S.C. Sec.
1964.

Pendent Jurisdiction

7
The gravamen of the Republic's entire case is the allegation that the Marcoses stole
public money:

8
During his twenty years as President of the Philippines, Mr. Marcos used his position of
power and authority to convert and cause to be converted, to his use and that of his
friends, family, and associates, money, funds, and property belonging to the Philippines
and its people. Complaint, p 12 (emphasis added).

9
This common allegation supports not only plaintiff's RICO claims but also the eight
claims for conversion, fraud and deceit, constructive fraud, constructive trust, breach of
implied contract, quiet title, accounting, and subrogation. The claims for a constructive
trust, to quiet title, an accounting, and subrogation merely set forth different forms of
relief for the same underlying wrongs.

10
The Republic's strategy of bringing suit in a number of other jurisdictions is not decisive
of the question whether the claims are such that they would ordinarily be tried in one
judicial proceeding. The present location of the sought-for funds in banks in various
countries is not determinative as to the underlying wrongs alleged in the complaint. The
claims brought in this suit would ordinarily be tried in a single case. In both the RICO
and non-RICO claims, the Republic alleges that the Marcoses converted public funds
while in office. The district court concluded:

11
This Court has pendent jurisdiction over plaintiff's other claims under state and foreign
law in that such claims arise from a common nucleus of operative fact and are so
intertwined with other matters pending before the court as to make the exercise of such
jurisdiction over these claims appropriate.

12
The district court was correct in asserting pendent jurisdiction over these claims. They
derive from "a common nucleus of operative fact" and are such that a plaintiff "would
ordinarily be expected to try them all in one judicial proceeding." United Mine Workers v.
Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 1138, 16 L. Ed. 2d 218 (1966). The power of
a federal court to decide pendent claims is "wide-ranging." See Carnegie-Mellon Univ.
v. Cohill, --- U.S. ----, 108 S. Ct. 614, 618, 98 L. Ed. 2d 720 (1988). The exercise of the
power is discretionary but ordinarily the power if it exists is exercised; only exceptionally
is the power not employed. See C. Wright, A. Miller & E. Cooper 13B Federal Practice
and Procedure Sec. 3567.1 (1984 and 1988 Supp.).

13
The common nucleus of operative facts that binds the RICO and non-RICO claims
together is pleaded in paragraph 12, which is incorporated by reference into each claim
for relief. To prove the predicates for RICO that allegedly occurred in this country, the
Republic will have to prove theft, the acceptance of bribes, extortion, conspiracy, and
similar acts in the Marcoses' conduct of the government in the Philippines. For example,
to prove that stolen money was unlawfully transported in the United States, the Republic
will have to prove theft in the Philippines. The operative facts necessary as part of the
proof of the RICO claim are also the facts necessary to prove the theft. The RICO
claims cannot be proved without getting deeply into the pendent claims and proving
some or all of them. Because the acts charged, if proved, support both the RICO and
the non-RICO claims, the district court has subject matter jurisdiction over all claims in
the Republic's complaint.

14
True, the pendent claims may involve more property than that which entered into or
affected the foreign or domestic commerce of the United States. The dissent appears to
assume that jurisdiction over the pendent claims cannot extend beyond this property.
But that is not the law. Properly pendent claims need not be for the identical property
involved in the federal cause of action. The pendent claims remain within the court's
jurisdiction if the vital facts that must be proved as predicates of the RICO claims are
the same as those that must be proved to establish the extortion, bribery, theft, fraud,
and conversions alleged by the pendent claims.

15
At "every stage of the proceeding" the district court must exercise discretion as to the
pendent claims. See Carnegie-Mellon Univ. v. Cohill, 108 S. Ct. at 618. In light of a
more fully developed record than that now before this court, the district judge may
conclude that some or all of the pendent claims should be dismissed notwithstanding
our holding that the district court has the power to assert jurisdiction over those claims.
Gibbs, 383 U.S. at 727, 86 S.Ct. at 1139. See also 3A J. Moore, W. Taggert & J.
Wicker, Moore's Federal Practice p 18.07[1.-3] at 18-36-37 (2d ed. 1987). As of the
record now before us, pendent jurisdiction exists and supports an injunction based on
the pendent claims.

Act of State and Political Question

16
Before determining whether issuance of an injunction was appropriate we consider two
defenses which, if accepted, would block trial of the case: the Marcoses maintain, first,
that their acts are insulated because they were acts of state not reviewable by our
courts; and second, that any adjudication of these acts would involve the investigation
of political questions beyond our courts' competence.

17
Acts of State. The classification of certain acts as "acts of state" with the consequence
that their validity will be treated as beyond judicial review is a pragmatic device, not
required by the nature of sovereign authority and inconsistently applied in international
law. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 421-22, 84 S. Ct. 923, 936-
37, 11 L. Ed. 2d 804 (1964). The purpose of the device is to keep the judiciary from
embroiling the courts and the country in the affairs of the foreign nation whose acts are
challenged. Minimally viewed, the classification keeps a court from making
pronouncements on matters over which it has no power; maximally interpreted, the
classification prevents the embarrassment of a court offending a foreign government
that is "extant at the time of suit." Id. at 428, 84 S.Ct. at 940.

18
The "continuing vitality" of the doctrine depends on "its capacity to reflect the proper
distribution of functions between the judicial and political branches of the Government
on matters bearing upon foreign relations." Id. at 427-28, 84 S.Ct. at 939-40.
Consequently, there are "constitutional underpinnings" to the classification. Id. at 423,
84 S.Ct. at 938. A court that passes on the validity of an "act of state" intrudes into the
domain of the political branches. The proper application of the doctrine is illustrated by
Occidental Petroleum Corp. v. Buttes Gas & Oil Co., 331 F. Supp. 92 (C.D.Cal.1971),
aff'd per curiam, 461 F.2d 1261 (9th Cir.), cert. denied, 409 U.S. 950, 93 S. Ct. 272, 34
L. Ed. 2d 221 (1972).

19
As a practical tool for keeping the judicial branch out of the conduct of foreign affairs,
the classification of "act of state" is not a promise to the ruler of any foreign country that
his conduct, if challenged by his own country after his fall, may not become the subject
of scrutiny in our courts. No estoppel exists insulating a deposed dictator from
accounting. No guarantee has been granted that immunity may be acquired by an ex-
chief magistrate invoking the magic words "act of state" to cover his or her past
performance.

20
The classification might, it may be supposed, be used to prevent judicial challenge in
our courts to many deeds of a dictator in power, at least when it is apparent that
sustaining such challenge would bring our country into a hostile confrontation with the
dictator. Once deposed, the dictator will find it difficult to deploy the defense
successfully. The "balance of considerations" is shifted. Sabbatino, 376 U.S. at 428, 84
S. Ct. at 940. A fortiori, when a ruler's former domain has turned against him and seeks
the recovery of what it claims he has stolen, the classification has little or no
applicability. The act of state doctrine is supple, flexible, ad hoc. The doctrine is meant
to facilitate the foreign relations of the United States, not to furnish the equivalent of
sovereign immunity to a deposed leader.

21
In the instant case the Marcoses offered no evidence whatsoever to support the
classification of their acts as acts of state. The burden of proving acts of state rested
upon them. Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 695, 96 S.
Ct. 1854, 1861, 48 L. Ed. 2d 301 (1976). They did not even undertake the proof. The
United States, invited by the court to address this matter as an amicus, assures us that
the Executive does not at present see the applicability of this defense. Brief of the
United States of America as Amicus Curiae, p. 11. The act of state doctrine, the
Executive declares, has "no bearing" on this case as it stands. As the doctrine is a
pragmatic one, we cannot exclude the possibility that, at some later point in the
development of this litigation, the Marcoses might produce evidence that would warrant
its application. On the present record, the defense does not apply.

22
Political Questions. Bribetaking, theft, embezzlement, extortion, fraud, and conspiracy to
do these things are all acts susceptible of concrete proofs that need not involve political
questions. The court, it is true, may have to determine questions of Philippine law in
determining whether a given act was legal or illegal. But questions of foreign law are not
beyond the capacity of our courts. See Zschernig v. Miller, 389 U.S. 429, 461, 88 S. Ct.
664, 681, 19 L. Ed. 2d 683 (1968) (Harlan, J. concurring); Fed.R.Civ.P. 44.1 (allowing
consideration of foreign law materials). The court will be examining the acts of the
president of a country whose immediate political heritage is from our own. Although
sometimes criticized as a ruler and at times invested with extraordinary powers,
Ferdinand Marcos does not appear to have had the authority of an absolute autocrat.
He was not the state, but the head of the state, bound by the laws that applied to him.
Our courts have had no difficulty in distinguishing the legal acts of a deposed ruler from
his acts for personal profit that lack a basis in law. As in the case of the deposed
Venezuelan ruler, Marcos Perez Jimenez, the latter acts are as adjudicable and
redressable as would be a dictator's act of rape. Jimenez v. Aristeguieta, 311 F.2d 547
(5th Cir.1962).

The Convenience of the Forum

23
The Marcoses maintain that the Republic's action should have been dismissed, even if
the district court had jurisdiction, on the ground of forum non conveniens. They point to
the foreign character of the plaintiff, the nature of the Republic's claims about the
Marcoses' conduct in office, and the fact that the court will be called upon to decide
questions of Philippine law. The inconvenience of the forum was argued by the
Marcoses to the district court. But the court did not address the argument. On the
present record the district court did not abuse its discretion in refusing to dismiss the
Republic's action on forum non conveniens grounds before issuing the preliminary
injunction.

Injunction Rather Than Attachment

24
Fed.R.Civ.P. 64 makes available all remedies for the seizure of property "in the manner
provided by the law of the state in which the district court is held." The Marcoses argue
that the freeze of their assets is an attachment and that California law permits
attachment only in connection with a claim based upon a contract. Cal.Civ.Proc.Code
Sec. 483.010(c). The Marcoses are mistaken. While a freeze of assets has the effect of
an attachment, it is not an attachment. F.T.C. v. H.N. Singer, Inc., 668 F.2d 1107, 1112
(9th Cir.1982). The court has power to preserve the status quo by equitable means. A
preliminary injunction is such a means. F.T.C., 668 F.2d at 1112.

25
The Standard for Issuance of the Injunction

26
The issuance of the preliminary injunction was not an abuse of discretion by the district
court if that court properly concluded that the Republic had shown the probability of
success on the merits of its pendent claims and the possibility of irreparable injury, or
that the pendent claims raised serious questions and the balance of hardships tipped
sharply in favor of the Republic. Hoopa Valley Tribe v. Christie, 812 F.2d 1097, 1102
(9th Cir.1987). "These are not two distinct tests, but rather the opposite ends of a single
'continuum in which the required showing of harm varies inversely with the required
showing of meritoriousness.' " Rodeo Collection, Ltd. v. West Seventh, 812 F.2d 1215,
1217 (9th Cir.1987) (quoting San Diego Committee Against Registration and the Draft v.
Governing Board of the Grossmont Union High School Dist., 790 F.2d 1471, 1473 n. 3
(9th Cir.1986)). "The critical element in determining the test to be applied is the relative
hardship to the parties. If the balance of harm tips decidedly toward the plaintiff, then
the plaintiff need not show as robust a likelihood of success on the merits as when the
balance tips less decidedly." Benda v. Grand Lodge of Int'l Assoc. of Machinists &
Aerospace Workers, 584 F.2d 308, 315 (9th Cir.1978), cert. dismissed, 441 U.S. 937,
99 S. Ct. 2065, 60 L. Ed. 2d 667 (1979) (citation omitted).

27
For the purposes of injunctive relief, "serious questions" refers to questions which
cannot be resolved one way or the other at the hearing on the injunction and as to
which the court perceives a need to preserve the status quo lest one side prevent
resolution of the questions or execution of any judgment by altering the status quo.
Serious questions are "substantial, difficult and doubtful, as to make them a fair ground
for litigation and thus for more deliberative investigation." Hamilton Watch Co. v. Benrus
Watch Co., 206 F.2d 738, 740 (2d Cir.1952) (Frank, J.). Serious questions need not
promise a certainty of success, nor even present a probability of success, but must
involve a "fair chance of success on the merits." National Wildlife Fed'n v. Coston, 773
F.2d 1513, 1517 (9th Cir.1985) (Duniway, J.). Applying these principles and definitions
to this case, we conclude that the district court did not abuse its discretion in granting
the preliminary injunction.

28
The district court stated orally that "the hardship is clearly on the side of the plaintiff."
The district court also made the written finding that there was more than a mere
possibility of irreparable harm; in fact, it concluded that the Republic "would be
irreparably injured if [the injunction] were not issued." (emphasis added). The Marcoses
have offered no evidence of any hardship they would suffer if the injunction were
issued. Indeed, the district court stipulated in the injunction that the Marcoses may use
their assets to cover normal living expenses and legal fees. Irreparable injury was
weighed against zero evidence of hardship. On this record, the balance of hardships
tipped decidedly in the Republic's favor.

29
The district court also concluded that the Republic had a "substantial likelihood" of
prevailing on the merits. Although we do not read this as a finding of probability of
success, we do believe that it represents a finding that the Republic has at least a fair
chance of success, which is all that is required. See Benda, 584 F.2d at 315. We agree
with the district court that the Republic has at least a fair chance of prevailing on the
merits, including on the merits of its constructive trust claim.

30
The Republic presented evidence that in February 1986 the Marcoses had transported
from the Philippines to Hawaii $8.2 million worth of cash, negotiable instruments,
jewelry, and other property, allegedly derived from the Marcoses' wrongdoing in the
Philippines. Ferdinand Marcos swore by affidavit that it had not been his intention to go
to Hawaii and that he had been taken there involuntarily by the government of the
United States. But as he sought to recover from United States Customs all of these
items he clearly intended to introduce them into the United States. He used the United
States mail and telephone services for this purpose.

31
The Republic also presented evidence that since at least 1968 the Marcoses had a
checking account at a bank in Beverly Hills, California and that this account was used to
make payments of $200,000 to "William Saunders" and $100,000 to "Jane Ryan." The
Republic introduced evidence that these names were aliases under which Ferdinand
Marcos and Imelda Marcos acted. The Republic presented evidence of the creation by
the Marcoses in 1970 of a Lichtenstein entity entitled the "Sandy Foundation," which in
effect was a trust to make investments for the benefit of the Marcoses and their
children, Imelda, Ferdinand, and Irene, and which was funded by the Marcoses with an
initial capital of 100,000 Swiss francs. The Republic presented evidence that "Jane
Ryan" and "William Saunders" transferred their accounts to this trust and that Credit
Suisse, a Zurich bank, was "the administering bank" of the trust. The Republic
presented evidence of correspondence by the Marcoses as customers of that bank and
the use by Imelda Marcos of the alias of Jane Ryan in dealing with that bank.

32
According to the Republic's evidence, a code was worked out for contacts between the
Marcoses and the trust. According to a copy of a memorandum signed by Ferdinand
Marcos, if he cabled "Happy Birthday" to the bank, its Hong Kong representative, Ralph
Klein, would proceed to Manila and "contact him through Col. Fabian C. Ver." (Colonel
Ver is now General Ver, associated with the Marcoses in power and in their flight from
the Philippines.)

33
In addition to this evidence of secretive dealings in substantial sums of money in the
course of which the Marcoses used a bank in California, the Republic submitted a
statement by the Minister of the Budget of the Philippines as to the total salaries
authorized to be paid Ferdinand Marcos as president from 1966 to 1985 and Imelda
Marcos as a minister of government from 1976 to 1985. The total authorized amount is
P 2,288,750, in dollars less than $800,000. The Republic submitted what purports to be
a balance sheet signed by Ferdinand Marcos as part of a tax return stating his assets
as of December 31, 1966 as P 150,000, in dollars less than $60,000. The Republic
submitted the sworn deposition, executed June 16, 1986, of Rafael Fernando,
Representative and Coordinator on the West Coast of the United States of the
Presidential Commission on Good Government of the Republic of the Philippines.
Fernando declares that Swiss bank authorities have documented to the government of
the Republic the existence of bank accounts owned by Ferdinand Marcos in the amount
of $200 million and have reported to the Republic the existence of other accounts held
for or on behalf of him in the amount of approximately $1.3 billion.
34
The Marcoses' clandestine dealings with Credit Suisse and the Lichtenstein trust and
the discrepancy between the purported balance sheet of 1966 and the reported assets
of 1986, coupled with the reported authorized salaries of the Marcoses as members of
the government of the Republic, give rise to the inference that very large sums of
money were amassed by the Marcoses by the unlawful means alleged by the Republic.
The inference depends in part on the hearsay statements of Fernando. It was within the
discretion of the district court to accept this hearsay for purposes of deciding whether to
issue the preliminary injunction. Flynt Distrib. Co., Inc. v. Harvey, 734 F.2d 1389, 1394
(9th Cir.1984) ("The urgency of obtaining a preliminary injunction necessitates a prompt
determination and makes it difficult to obtain affidavits from persons who would be
competent to testify at trial. The trial court may give even inadmissible evidence some
weight, when to do so serves the purpose of preventing irreparable harm before trial.");
see also K-2 Ski Co. v. Head Ski Co., 467 F.2d 1087, 1088 (9th Cir.1972) (trial court
may consider allegations in verified complaint in issuing preliminary injunction). No
affidavits countering the inference were presented by the Marcoses. See K-2 Ski Co.,
467 F.2d at 1089. The Republic's case remains to be proved. The Republic has put
forward enough to show a fair chance of succeeding with its proof.

The Scope of the Injunction

35
The injunction is directed against individuals, not against property; it enjoins the
Marcoses and their associates from transferring certain assets wherever they are
located. Because the injunction operates in personam, not in rem, there is no reason to
be concerned about its territorial reach. See, e.g., Steele v. Bulova Watch Co., 344 U.S.
280, 289, 73 S. Ct. 252, 257, 97 L. Ed. 319 (1952) (district court "in exercising its equity
powers may command persons properly before it to cease to perform acts outside its
territorial jurisdiction") (citations omitted).

36
A court has the power to issue a preliminary injunction to prevent a defendant from
dissipating assets in order to preserve the possibility of equitable remedies. See, e.g.,
F.T.C. v. H.N. Singer, Inc., 668 F.2d 1107, 1112 (9th Cir.1982) (preliminary injunction
appropriate to preserve the possibility of equitable remedies). The injunction here
enjoins the defendants from secreting those assets necessary to preserve the possibility
of equitable relief.

37
Although the gravamen of the complaint is that the Marcoses converted public property
to their own use, the seventh claim for relief, which alleges a constructive trust, states
an equitable cause of action and seeks equitable relief: "[The Marcoses], by virtue of
their position as President of the Philippines and Governor of Manila, respectively,
occupied positions of trust as to the Philippines and its people. [The Marcoses] violated
said trust by their numerous acts of conversion, fraud, deceit, constructive fraud, civil
conspiracy, acts of racketeering, and other unlawful acts." As the result of these
asserted violations of trust, the Marcoses acquired specific funds and real property,
including the accounts with Lloyds Bank, the real property in Beverly Hills, the deposits
with the Swiss banks and the property brought into Hawaii. Complaint, paragraphs 62-
67. In granting the preliminary injunction, the district court specifically found "that the
Philippines will be entitled to an accounting for, and to impose a constructive trust upon,
the property subject to this Order." The district court found the preliminary injunction
necessary to preserve the possibility of equitable relief. On this record, the district court
did not abuse its discretion in entering an injunction of this scope.

38
The district court remains free to modify or dissolve the preliminary injunction if
warranted by developments in this case subsequent to the noticing of this appeal. Lyng
v. Northwest Indian Cemetery Protective Assoc., --- U.S. ----, 108 S. Ct. 1319, 1330, 99
L. Ed. 2d 534 (1988). See also 7 J. Moore, W. Taggert & J. Wicker, Moore's Federal
Practice p 65.07 at 65-114 (2d ed. 1987).

39
In Summation. Jurisdiction to hear the Republic's claims and to enter the preliminary
injunction exists. A serious question of liability has been presented and the Republic
has a fair chance of success on the merits of its case. The Marcoses have not
presented any preclusive defense. The scope of the injunction is justified. It was
imperative for the district court to preserve the status quo lest the defendants prevent
resolution of the case by putting their property beyond the reach of the court. Hardship
to the Republic would have been great and irreparable if the district court had not taken
its prudent, amply justified action to keep the Marcoses' assets from disappearing.

40
AFFIRMED.

41
SCHROEDER, Circuit Judge, with whom CANBY, Circuit Judge, joins concurring in part
and dissenting in part.

42
I join in the majority's conclusion that there is a well-pleaded RICO claim providing
federal subject matter jurisdiction. I agree further that the act of state doctrine is not a
threshold bar to considering the activities of the defendants during the time that Mr.
Marcos was the Philippine head of state. Those were the principal issues that a majority
of the three-judge panel considered and that we undertook to decide in this en banc
proceeding.

43
The injunction we review, however, was entered only a week after this suit was filed,
and the record before us is minimal. It does not provide support for the majority's
resolution of the further issues it must reach, without reasoned analysis, in order to
uphold this injunction. I therefore dissent from the affirmance.

44
The injunction is based upon the district court's exercise of pendent jurisdiction, not
federal question jurisdiction. It is based on a complaint alleging, in the most sweeping of
generalities, pendent claims of fraud and conversion by the Marcoses over the course
of twenty years. The pendent claims are alleged to be violations of as yet unspecified
laws of as yet unspecified states and countries. The district court's injunction purports to
reach over a billion dollars worth of assets, the bulk of which are located in Switzerland.
See Republic of the Philippines v. Marcos, 818 F.2d 1473, 1476 (9th Cir.1987).

45
To affirm this injunction, the majority must hold that the district court properly exercised
pendent jurisdictional authority to reach all of the Marcoses' property, wherever located.
I cannot agree. The basis for federal jurisdiction is contained in RICO allegations of
illegal activities concerning assets now located in the United States. There has been no
showing that these claims arise in any way from the same allegedly wrongful
transactions through which the Marcoses acquired other property located elsewhere.
Nor does the record disclose any reason why a court in California, as opposed to courts
in the Philippines or Switzerland, should decide claims to property stolen from the
Philippines and transported to Switzerland. I therefore part company with the majority
when it affirms on this record the district court's issuance of a preliminary injunction
preventing the Marcoses from disposing of any assets anywhere in the world.

46
In my view the existence of pendent jurisdiction over claims reaching all the Marcoses'
assets has not yet been established. As explained more fully below this injunction
should be vacated and the matter remanded to the district court for consideration of
pendent jurisdiction and other issues on the basis of a fuller record.

BACKGROUND

47
The plaintiff sought an injunction to be entered solely in the exercise of pendent
jurisdiction because RICO does not authorize injunctive relief. See Religious
Technology Center v. Wollersheim, 796 F.2d 1076, 1088-89 (9th Cir.1986), cert. denied,
479 U.S. 1103, 107 S. Ct. 1336, 94 L. Ed. 2d 187 (1987). RICO, however, does provide
the requisite federal question jurisdiction.

48
For the RICO predicate acts in violation of the laws of the United States, the complaint
alleged violations of 18 U.S.C. Secs. 1341, 1343, 2314, and 2315. The alleged
racketeering activities essentially involve mail and wire fraud and the importation of
stolen goods into the United States. The showing before the district court of the
Marcoses' actual holdings in the United States included the Marcoses' interests in
California real estate, the existence of a bank account with a California bank, and the
transporting to Hawaii of $8.2 million in funds and property.

49
The district court granted the injunction in conclusory fashion, finding:

50
(1) That there is a substantial danger that, if this Order were not issued, the parties
against whom this Order is directed would transfer or conceal funds, property, books
and records, placing said items beyond the Court's process and recovery by the
Philippines in this action.

51
(2) That the Philippines therefore would be irreparably injured if this Order were not
issued.

52
(3) That there is a substantial likelihood that the Philippines will prevail in this action,
and that the Philippines will be entitled to an accounting for, and to impose a
constructive trust upon, the property subject to this Order.

53
When this court first considered this appeal, a fractured three-judge panel held that the
complaint should have been dismissed in its entirety. A majority of the panel held that
the act of state doctrine prevented the court from inquiring into the Marcoses' activities
during the period in question. Marcos, 818 F.2d at 1489-90. Because a majority of the
panel concluded that the act of state doctrine prevented the court from adjudicating any
of the claims, the majority did not need to consider, and did not address, the issues of
pendent jurisdiction.

54
Judge Hall, in a separate concurring opinion, concluded that there was additionally a
lack of subject matter jurisdiction because no RICO claim had been well pleaded. Id. at
1490-91.

55
Judge Nelson dissented, disagreeing with the other judges as to the applicability of the
act of state doctrine. The dissent argued persuasively that the majority's holding with
respect to the act of state doctrine was inconsistent with existing Supreme Court and
Ninth Circuit authority. Id. at 1492-95. We granted en banc review because of that
inconsistency, which was the principal focus of the petition for rehearing and rehearing
en banc filed by the Government of the Philippines.

RICO CLAIMS AND FEDERAL QUESTION JURISDICTION

56
In defense of the panel's decision that the complaint be dismissed in its entirety, the
Marcoses have focused upon Judge Hall's separate opinion that there was no well-
pleaded RICO claim and hence no federal jurisdiction. See id. at 1490-91. The
Marcoses have urged that in order to make out a claim under RICO, the complaint
would have to allege that there was an adverse economic impact upon the United
States by virtue of the defendants' conduct.

57
RICO, however, was aimed at the destructive effect of organized criminal activity on our
society. Its provisions do not focus on any adverse effect of specific activity on the
nation's GNP. Its history emphasizes the adverse consequences of organized crime on
our democratic processes, our domestic security and our general welfare, including but
not limited to the economic system. See RICO Statement of Findings and Purpose,
Pub.L. No. 91-452, 84 Stat. 922 (1970), 91st Cong., 2d Sess., reprinted in 1970
U.S.Code Cong. & Admin.News 1073. The Supreme Court has stated:

58
RICO is to be read broadly. This is the lesson not only of Congress' self-consciously
expansive language and overall approach, ... but also of its express admonition that
RICO is to "be liberally construed to effectuate its remedial purposes." ... RICO was an
aggressive initiative to supplement old remedies and develop new methods for fighting
crime.

59
Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 497-98, 105 S. Ct. 3275, 3286, 87 L.
Ed. 2d 346 (1985); see also Russello v. United States, 464 U.S. 16, 26, 104 S. Ct. 296,
302, 78 L. Ed. 2d 17 (1983) ("[t]he legislative history clearly demonstrates that the RICO
statute was intended to provide new weapons of unprecedented scope for an assault
upon organized crime and its economic roots").

60
What RICO does require is "a pattern of racketeering activity." 18 U.S.C. Sec. 1962. By
definition, "racketeering activity" necessitates a violation of one of our state or federal
laws. 18 U.S.C. Sec. 1961. Federal RICO jurisdiction thus attaches only to those
activities that allegedly violate our domestic laws.

61
In this case, in Count One of the Complaint, the plaintiff alleges that the Marcoses
engaged in mail and wire fraud, and importation of stolen property into the United States
in violation of 18 U.S.C. Secs. 1341, 1343, 2314, 2315. In engaging in these activities,
the plaintiff alleges that the Marcoses were conducting a RICO enterprise as part of an
association in fact with the other defendants. These allegations, on their face at least,
would survive a motion to dismiss for lack of subject matter jurisdiction. I therefore
agree that there is a RICO basis for federal subject matter jurisdiction.

62
Finding a basis for federal question jurisdiction is but a first step, however, in reviewing
the propriety of this injunction. The claims on which this injunction rests are pleaded as
claims pendent to the RICO claims. The next step is thus to consider whether the
relationship between the pendent claims and the federal claims are sufficiently close to
permit the district court to assume jurisdiction over pendent claims reaching the
Marcoses' worldwide holdings. See United Mine Workers v. Gibbs, 383 U.S. 715, 725,
86 S. Ct. 1130, 1138, 16 L. Ed. 2d 218 (1966).THE INJUNCTION AND PENDENT
JURISDICTION

63
In holding that the district court had pendent jurisdiction over claims to the Marcoses'
assets wherever located in the world, the majority fails to appreciate that pendent
jurisdiction can derive only when there is a sufficient factual connection between the
activities giving rise to the pendent claims and the activities giving rise to the federal
claims. In this case, such pendent jurisdiction should properly derive only from activities
directly related to the alleged RICO violations of United States law. These comprise the
alleged fraudulent dealings in this country and illegal importation of assets into the
United States. It is not enough for the majority to characterize all the claims as involving
criminal misconduct. See majority op. at 1359-1360.

64
Plaintiff claims the assets now in the United States are traceable to thefts of assets
rightfully belonging to the people of the Philippines. There may well be a sufficient
factual nexus to sustain pendent jurisdiction for claims arising from the original wrongful
appropriations of the property now found in this country. This is because the property is
the same. No such factual link as yet exists for the pendent claims to property
transferred from the Philippines to other countries.

65
It is an elementary legal principle that federal courts are courts of limited jurisdiction.
There are constitutional restraints on their exercise of jurisdiction. The Constitution
restricts federal courts' jurisdiction to claims "arising under [the] Constitution, the Laws
of the United States, and Treaties made, or which shall be made, under their Authority."
U.S. Const., art. III, Sec. 2. When a plaintiff pleads a federal claim within a district
court's federal subject matter jurisdiction, a plaintiff may not automatically bring any
other claim against the same defendant. Subject matter jurisdiction of non-federal
claims, under the judicially-created doctrine of pendent jurisdiction, depends upon the
relationship between those claims and the federal claims.

66
The Supreme Court initially set out the concept underlying pendent jurisdiction in 1824
in Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 6 L. Ed. 204 (1824).
There, the Court stated that

67
when a question to which the judicial power of the Union is extended by the constitution,
forms an ingredient of the original cause, it is in the power of congress to give the
Circuit Courts jurisdiction of that cause, although other questions of fact or of law may
be involved in it.

68
Id. at 823. The Court subsequently expanded the Osborn doctrine in Siler v. Louisville &
Nashville R.R. Co., 213 U.S. 175, 29 S. Ct. 451, 53 L. Ed. 753 (1909), then narrowed
pendent jurisdiction's scope in Hurn v. Oursler, 289 U.S. 238, 53 S. Ct. 586, 77 L. Ed.
1148 (1933). Finally, more than two decades ago, the Court clarified the scope of
pendent jurisdiction in United Mine Workers v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16
L. Ed. 2d 218 (1966).

69
In Gibbs, a unanimous Court rejected Hurn as "unnecessarily grudging," id. at 725, 86
S.Ct. at 1138, and adopted a two-part test resting on considerations of power and
discretion. In evaluating a federal court's power to hear a pendent claim, the Court
stated that:

70
[p]endent jurisdiction, in the sense of judicial power, exists whenever there is a claim
"arising under [the] Constitution, the Laws of the United States, and Treaties made, or
which shall be made, under their Authority ...," U.S. Const., Art. III, Sec. 2, and the
relationship between that claim and the state claim permits the conclusion that the
entire action before the court comprises but one constitutional "case." The federal claim
must have substance sufficient to confer subject matter jurisdiction on the court.... The
state and federal claims must derive from a common nucleus of operative fact. But if,
considered without regard to their federal or state character, a plaintiff's claims are such
that he would ordinarily be expected to try them all in one judicial proceeding, then,
assuming substantiality of the federal issues, there is power in federal courts to hear the
whole.

71
Id.

72
Thus, federal claims and pendent claims must all derive from a "common nucleus of
operative fact." They must also be the sort that would ordinarily be tried in "one judicial
proceeding." Id. The majority opinion does not analyze the pendent claims. Instead, it
merely announces that the pendent claims arose from a nucleus of operative fact
common to the RICO claims. Majority op. at 1359.

73
In reviewing the entry of the preliminary injunction, we should consider the nature of the
asserted pendent jurisdiction and address the two jurisdictional issues that Gibbs
requires courts to address when dealing with pendent claims.
74
The first question, therefore, is whether the RICO claims and all of the pendent claims
arise from a "common nucleus of operative fact." They do not. The RICO claims of
necessity have to do with the defendants' activities that violated the criminal laws of the
United States. The pendent claims are not limited to those activities and reach property
that has not been shown to have any connection with the United States itself or
violations of our law.

75
Upholding pendent jurisdiction in such circumstances is thus contrary to the teaching of
decisions following Gibbs that have focused on the nexus between events underlying
the federal cause of action and those underlying pendent state causes of action. See,
e.g., Finn v. Gunter, 722 F.2d 711, 713 (11th Cir.1984) (finding pendent jurisdiction);
PAAC v. Rizzo, 502 F.2d 306, 312-13 (3d Cir.1974), cert. denied, 419 U.S. 1108, 95 S.
Ct. 780, 42 L. Ed. 2d 804 (1975) (no pendent jurisdiction); see also C. Wright, A. Miller
& E. Cooper, 13B Federal Practice and Procedure Sec. 3567.1 (1984). Our circuit also
evaluates pendent claims under the nexus test. See, e.g., Klaus v. Hi-Shear Corp., 528
F.2d 225, 231 (9th Cir.1975). The plaintiffs have provided us with no explanation of how
the pendent claims are related to the RICO claims. The only factual connection between
all the claims of wrongdoing in this case appears to be a common plaintiff and common
defendants. Under Gibbs and the constitutional restraints on the exercise of power by
the federal judiciary in Article III, that is not sufficient.

76
Moreover, even assuming there is a common nexus of fact reaching all the Marcoses'
assets, pendent jurisdiction would exist only as to the claims that would ordinarily be
tried in one judicial proceeding. Gibbs, 383 U.S. at 725, 86 S. Ct. at 1138. These are not
such claims. The RICO claims allege violations of the United States' criminal laws
through activities in this country. The pendent claims, on the other hand, encompass
allegations of fraud and conversion stemming from the Marcoses' actions in the
Philippines spanning a twenty-year period. Further, the bulk of the property claimed,
according to the complaint, is located in Switzerland. The claims against the Marcoses
are in fact already the subject of multiple judicial proceedings. See, e.g., Republic of the
Philippines v. Marcos, litigation in the Southern District of New York, 86 Civ. 2294
(PNL), and Republic of the Philippines v. Marcos, litigation in the District of Hawaii, No.
CV-86-0155 HMF. The plaintiff cites no case remotely similar in scope to this case. The
claims here are not those ordinarily tried in one judicial proceeding.

ACT OF STATE DOCTRINE

77
The majority of our three-judge panel concluded that the act of state doctrine bars
consideration of the plaintiffs' claims. I agree with the majority of this en banc court that
such a holding is not appropriate on this record. I do not agree with the majority,
however, that this injunction can be affirmed without any regard to the act of state
doctrine.

78
The panel majority's use of the act of state doctrine as a threshold bar in the
circumstances of this case is not consistent with the development of that doctrine under
Supreme Court authority. See, e.g., Alfred Dunhill of London, Inc. v. Cuba, 425 U.S.
682, 96 S. Ct. 1854, 48 L. Ed. 2d 301 (1976); Banco Nacional de Cuba v. Sabbatino,
376 U.S. 398, 84 S. Ct. 923, 11 L. Ed. 2d 804 (1964). We have expressly stated that the
act of state doctrine is not jurisdictional. See International Association of Machinists and
Aerospace Workers v. OPEC, 649 F.2d 1354, 1359 (9th Cir.1981), cert. denied, 454
U.S. 1163, 102 S. Ct. 1036, 71 L. Ed. 2d 319 (1982); Timberlane Lumber Co. v. Bank of
America, 549 F.2d 597, 602 (9th Cir.1976), cert. denied, 472 U.S. 1032, 105 S. Ct.
3514, 87 L. Ed. 2d 643 (1985). Rather, the doctrine involves the judiciary's prudential
decision to refrain from adjudicating the legality of a foreign sovereign's public acts that
were committed within its own territory. See OPEC, 649 F.2d at 1359; see also
Sabbatino, 376 U.S. at 401, 84 S.Ct. at 926. The Supreme Court, in addressing the act
of state doctrine, has stated:

79
Every sovereign state is bound to respect the independence of every other sovereign
state, and the courts of one country will not sit in judgment on the acts of the
government of another, done within its own territory. Redress of grievances by reason
of such acts must be obtained through the means open to be availed of by sovereign
powers as between themselves.

80
Sabbatino, 376 U.S. at 416, 84 S.Ct. at 934 (quoting Underhill v. Hernandez, 168 U.S.
250, 252, 18 S. Ct. 83, 84, 42 L. Ed. 456 (1897)).

81
The act of state doctrine "expresses the strong sense of the Judicial Branch that its
engagement in the task of passing on the validity of foreign acts of state may hinder
rather than further this country's pursuit of goals both for itself and for the community of
nations as a whole in the international sphere." Sabbatino, 376 U.S. at 423, 84 S. Ct. at
938. The Court further elaborated that the doctrine involves separation of powers:

82
[The doctrine's] continuing vitality depends on its capacity to reflect the proper
distribution of functions between the judicial and political branches of the Government
on matters bearing upon foreign affairs.... [S]ome aspects of international law touch
much more sharply on national nerves than do others; the less important the
implications of an issue are for our foreign relations, the weaker the justification for
exclusivity in the political branches.... [W]e decide only that the Judicial Branch will not
examine the validity of a taking of property within its own territory by a foreign sovereign
government, extant and recognized by this country at the time of suit.
83
Id. at 427-28, 84 S.Ct. at 940.

84
However, these considerations are less compelling in the situation before us, where the
foreign government has itself invoked our jurisdiction, and the challenged actions
involve a government no longer in power. In Sabbatino, the Supreme Court observed
that, "[t]he balance of relevant considerations may also be shifted if the government
which perpetrated the challenged act of state is no longer in existence ... for the political
interest of this country may, as a result, be measurably altered." 376 U.S. at 428, 84 S.
Ct. at 940. "Moreover, the act of state doctrine reflects respect for foreign states, so that
when a state comes into our courts and asks that our courts scrutinize its actions, the
justification for application of the doctrine may well be significantly weaker." Republic of
the Philippines v. Marcos, 806 F.2d 344, 359 (2d Cir.1986).

85
Further, the Supreme Court has noted that for doctrine to apply the acts in question
must have involved public acts of the sovereign. The Court stated that in each of its act
of state decisions, the facts were sufficient to demonstrate that

86
the conduct in question was the public act of those with authority to exercise sovereign
powers and was entitled to respect in our courts. [H]ere, no statute, decree, order, or
resolution of the Cuban Government itself was offered in evidence indicating that Cuba
had repudiated its obligations in general or any class thereof or that it had as a
sovereign matter determined to confiscate the amounts due three foreign importers.

87
Alfred Dunhill, 425 U.S. at 694-95, 96 S.Ct. at 1861.

88
Accordingly, the courts have insisted that the act of state doctrine precludes review of
public acts of the sovereign. See, e.g., Marcos, 806 F.2d at 358 ("[t]hat the acts must be
public acts of the sovereign as been repeatedly affirmed") (emphasis in original);
Filartiga v. Pena-Irala, 630 F.2d 876, 889 (2d Cir.1980) ("we doubt whether action by a
state official in violation of the Constitution and laws of the Republic of Paraguay, and
wholly unratified by that nation's government, could properly be characterized as an act
of state"); Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1380 (5th Cir.1980)
("[t]he act of state doctrine only precludes judicial inquiry into the legality, validity, and
propriety of the acts and motivations of foreign sovereigns acting in their governmental
roles within their own boundaries"); Jimenez v. Aristeguieta, 311 F.2d 547, 557 (5th
Cir.1962) ("judicial authorities cannot review the acts done by a sovereign in his own
territory to determine illegality"); Sharon v. Time, Inc., 599 F. Supp. 538, 544
(S.D.N.Y.1984) ("[t]he doctrine is limited to laws, decrees, decisions, seizures, and other
officially authorized 'public acts' "); see also Restatement (Second) of Foreign Relations
Law Sec. 41 (1965) (doctrine involves refraining "from examining the validity of an act of
a foreign state by which that state has exercised its jurisdiction to give effect to its public
interest").

89
As the dissenting opinion of Judge Nelson quite rightly pointed out, the act of state
doctrine cannot bar the plaintiffs' action at this stage in the proceedings due to the
distinction between the official acts and the private conduct of a former head of state. As
Judge Nelson stated:

90
Marcos and his agents no doubt exercised broad power, especially after the imposition
of martial law in 1972. But the appropriate inquiry is not to invoke the talismanic label
"dictator." The district court should determine which of the challenged acts were official
and which were not. Only by doing so can the court determine the extent to which the
act of state doctrine may apply.

91
818 F.2d at 1494-95.

92
At this point, no determinations have been made regarding the capacity in which the
Marcoses were acting when the alleged unlawful conduct occurred. Accordingly, the
original panel majority erred in finding that, at this stage of the litigation, the act of state
doctrine bars adjudication of the bulk of the Philippine government's pendent claims.

93
The majority decision here, however, goes much further. It declares that the injunction
can be affirmed without regard to the act of state doctrine. In my view, we should
instead instruct the district court to consider to what extent, if any, the doctrine applies in
the circumstances of this case, and on the basis of the record which has developed
more fully during the pendency of this interlocutory appeal. Until such consideration can
be given, an injunction of this breadth is not appropriate.

94
This en banc court requested the amicus views of the Department of State on the act of
state issues. Its brief concludes that the application of the act of state doctrine at this
stage is speculative and the injunction premature. The majority's reliance upon the
position of the United States as support for its holding is wholly misplaced. The
government urges that an injunction should not have been entered on the basis of this
record. The government amicus curiae brief states in appropriate context as follows:

95
[T]he record before the district court, which did not include any detailed specification of
the factual basis for the bulk of the nonfederal claims, did not make it possible even to
analyze the extent to which those claims are properly before the court....
96
Even assuming jurisdiction, it is not clear at this stage that the district court should, as a
prudential matter, undertake to adjudicate the bulk of the nonfederal claims. The court's
capacity to do so fairly and expeditiously and without offending the sensibility of other
nations cannot be resolved on this record. Adjudication in this district court may turn out
to be barred by considerations of international comity and forum non conveniens.

97
The act of state doctrine seems to us to have little or no bearing on this case at this
stage of its development. The doctrine provides, in general, that the validity of specific
acts of a foreign sovereign is not subject to challenge in our courts; the circumstances
of a particular case may, however, make that general principle inapplicable. On the
present record, it is not clear that any act of state--an act of a sovereign within its
territorial jurisdiction on matters pertaining to its governmental sovereignty--is involved
in this case. Nor is it clear that the case would require an adjudication of the validity of
such an act, without which the case could not fairly proceed. Under these
circumstances, the bearing, if any, of the act of state doctrine on this case should be
determined only after further development of the case on the merits.

98
Amicus brief at 11-12.

99
The United States' views are wholly in accord with those expressed in this dissent and
are in conflict with the majority.

CONCLUSION

100
This injunction is unprecedented in its breadth. To decide the merits of the pendent
claims, the district court would have to unravel all of the Marcoses' financial transactions
over a long period of time and over much of the globe. It would take a corps of
historians years to accomplish the task. We are not yet told why a single district judge in
California should undertake it.

101
I would vacate the injunction and remand the matter to the district court for further
consideration of the appropriate scope of a preliminary injunction.

102
FLETCHER, Circuit Judge, concurring specially in Judge SCHROEDER's concurring
and dissenting opinion:

103
I concur fully in the following portions of Judge Schroeder's opinion: its discussion of the
basis for finding jurisdiction based on a well-pleaded RICO claim; its discussion of the
basis for concluding that the act of state doctrine is not a prudential bar at this stage of
the proceedings in this case.

104
I concur only in its conclusion that the injunction should be vacated and remanded for
further consideration in that I do not agree with its restrictive view of pendent jurisdiction
(by the same token, I cannot agree with the majority's expansive approach). Also, I
would stay the vacation of the injunction for a reasonable period of time to allow the
district court to reconsider the injunction and its scope in light of the current state of the
record.
CASE #14
Trendtex Trading v Bank of Nigeria [1977]

Facts

The Central Bank of issued an irrevocable letter of credit to pay for quantities of cement
ordered by the Nigerian Ministry of Defence. The credit was, properly, transferred to the
plaintiffs who shipped the cement to Nigeria. Because of complications at port caused
by substantial over-ordering of cement, the plaintiffs' vessels were delayed prior to
discharge; the Bank refused to make payments under the letter of credit upon the
plaintiffs applying for the same in respect of demurrage. Upon the plaintiffs issuing
proceedings for breach and repudiation of the letter of credit, the Bank contended
successfully before Donaldson J. that it was entitled to sovereign immunity.

Issue

The Court of Appeal were required to consider whether the Bank enjoyed governmental
status, as an arm of the government of Nigeria, and if so whether the fact that the
transactions in question were of an ordinary commercial nature precluded the Bank
from pleading sovereign immunity from the suit of the plaintiffs.

Held

The Court of Appeal, in allowing the plaintiffs' appeal, held that the Bank was not
entitled to governmental status, as it could not be described as an “alter ego” of the
state; Moreover, and in line with contemporary trends in international law, sovereign
immunity should not extend to commercial transactions, and in that context no
distinction could be drawn between commercial and “governmental” transactions until
the law was altered by act of Parliament or by decision of the House of Lords.
CASE #15

CASE #16
MIGHELL V. SULTAN OF JOHORE
1 QB 149

Principle: Foreign sovereign shall be treated as independent sovereign and therefore

have immunity form local jurisdiction.

Fact: The Sultan’ s sovereign status was an issue in a court case in England. When
Miss Mighell sued a certain Albert Baker (Sultan of Johor), travelling incognito in the
United Kingdom) for breach of promise of marriage, the Court granted the Sultan as an
“independent sovereign” immunity from jurisdiction. The decision was based on a letter
from the Secretary of State for the Colonies stating that “generally speaking, [the Sultan]
exercises without question the usual attributes of a sovereign ruler.” This further
demonstrates the British recognition of the Sultanate of Johor as an independent State.

Issue: whether sultan Johor will get diplomatic immunity or not?

Decision: Sultan Johor will get the diplomatic immunity as an “independent sovereign

Reasoning: The Court granted the Sultan as an “independent sovereign” immunity from
jurisdiction
CASE #17
United States v. Noriega - 117 F.3d 1206 (11th Cir. 1997)

RULE:
A criminal defendant, abducted to the United States from a nation with which it has an
extradition treaty, does not thereby acquire a defense to the jurisdiction of the United
State's courts. He may be tried in federal district court for violations of the criminal law of
the United States.

FACTS:
Manuel Antonio Noriega appealed his multiple convictions stemming from his
involvement in cocaine trafficking; and the district court's denial of his motion for a new
trial based on newly discovered evidence. In attacking his convictions, Noriega asserted
that the district court should have dismissed the indictment against him due to his status
as a head of state and the manner in which the United States brought him to justice.
Noriega also contended that the district court committed two reversible evidentiary
errors. Alternatively, he sought new trial based on his discovery of: (1) the government's
suppression of its pact with a non-witness; and/or (2) certain allegations, lodged after
his conviction, that a group associated with the undisclosed, cooperating non-witness
bribed a prosecution witness.

ISSUE:
Should the indictment be dismissed due to the defendant’s status as a head of state?

ANSWER:
No.

CONCLUSION:
The court affirmed. The court rejected defendant's contention that the indictment should
have been dismissed due to his status as a head of state and the manner in which the
United States brought him to justice, because he was denied head-of-state immunity.
The court also rejected defendant's alternative contentions that he was entitled to a new
trial based on his discovery of the government's suppression of its pact with a non-
witness, and certain allegations, lodged after his conviction, that a group associated
with the undisclosed, cooperating non-witness bribed a prosecution witness.
CASE #18
USA v. GUINTO
182 SCRA 644

FACTS:
The cases have been consolidated because they all involve the doctrine of state
immunity. In GR No. 76607, private respondents regarding suing several officers of the
US Air Force in connection with the bidding for barbering services in Clark Air Base. In
GR No. 80018, Luis Bautista was arrested following a buy-bust operation for a violation
of the Dangerous Drugs Act. Bautista then filed a complaint for damages claiming that
because of the acts of the respondents, he lost his job. In GR No. 79470, Fabian
Genove filed a complaint for damages against petitioner for his dismissal as cook in the
US Air Force. In GR No. 80258, complaint for damage was filed by the respondents
against petitioners for injuries allegedly sustained by plaintiffs. All cases invoke the
doctrine of state immunity as a ground to dismiss the same.

ISSUE:
Are the petitioners immune from suit?

HELD:
It is clear that the petitioners in GR No. 80018 were acting in the exercise of their official
functions. They cannot be directly impleaded for the US government has not given its
consent to be sued. In GR No. 79470, petitioners are not immune because restaurants
are commercial enterprises, however, the claim of damages by Genove cannot be
allowed on the strength of the evidence presented. Barber shops are also commercial
enterprises operated by private persons, thus, petitioners in GR No. 76607 cannot plead
any immunity from the complaint filed. In GR No. 80258, the respondent court will have
to receive the evidence of the alleged irregularity in the grant of the barbershop
concessions before it can be known in what capacity the petitioners were acting at the
time of the incident.
CASE #19
JUSMAG PHILIPPINES v. THE NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 108813 December 15, 1994

PUNO, J.:

The immunity from suit of the Joint United States Military Assistance Group to the
Republic of the Philippines (JUSMAG-Philippines) is the pivotal issue in the case at
bench.

JUSMAG assails the January 29, 1993 Resolution of the NATIONAL LABOR
RELATIONS COMMISSION (public respondent), in NLRC NCR CASE NO. 00-03-
02092-92, reversing the July 30, 1991 Order of the Labor Arbiter, and ordering the latter
to assume jurisdiction over the complaint for illegal dismissal filed by FLORENCIO
SACRAMENTO (private respondent) against petitioner.

First, the undisputed facts.

Private respondent was one of the seventy-four (74) security assistance support
personnel (SASP) working at JUSMAG-Philippines. 1 He had been with JUSMAG from
December 18, 1969, until his dismissal on April 27, 1992. When dismissed, he held the
position of Illustrator 2 and was the incumbent President of JUSMAG PHILIPPINES-
FILIPINO CIVILIAN EMPLOYEES ASSOCIATION (JPFCEA), a labor organization duly
registered with the Department of Labor and Employment. His services were terminated
allegedly due to the abolition of his position.2 He was also advised that he was under
administrative leave until April 27, 1992, although the same was not charged against his
leave.

On March 31, 1992, private respondent filed a complaint with the Department of Labor
and Employment on the ground that he was illegally suspended and dismissed from
service by JUSMAG. 3 He asked for his reinstatement.

JUSMAG then filed a Motion to Dismiss invoking its immunity from suit as an agency of
the United States. It further alleged lack of employer-employee relationship and that it
has no juridical personality to sue and be sued.4

In an Order dated July 30, 1991, Labor Arbiter Daniel C. Cueto dismissed the subject
complaint " for want of jurisdiction."5 Private respondent appealed6 to the National
Labor Relations Commission (public respondent), assailing the ruling that petitioner is
immune from suit for alleged violation of our labor laws. JUSMAG filed its Opposition, 7
reiterating its immunity from suit for its non-contractual, governmental and/or public
acts.

In a Resolution, dated January 29, 1993, the NLRC8 reversed the ruling of the Labor
Arbiter as it held that petitioner had lost its right not to be sued. The resolution was
predicated on two grounds: (1) the principle of estoppel — that JUSMAG failed to refute
the existence of employer-employee relationship under the "control test"; and (2)
JUSMAG has waived its right to immunity from suit when it hired the services of private
respondent on December 18, 1969.

The NLRC relied on the case of Harry Lyons vs. United States of America,9 where the
"United States Government (was considered to have) waived its immunity from suit by
entering into (a) contract of stevedoring services, and thus, it submitted itself to the
jurisdiction of the local courts."

Accordingly, the case was remanded to the labor arbiter for reception of evidence as to
the issue on illegal dismissal.

Hence, this petition, JUSMAG contends:

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION —

A. IN REVERSING THE DECISION OF THE LABOR ARBITER AND IN NOT

AFFIRMING THE DISMISSAL OF THE COMPLAINT IT BEING A SUIT AGAINST THE
UNITED STATES OF AMERICA WHICH HAD NOT GIVEN ITS CONSENT TO BE
SUED; AND

B. IN FINDING WAIVER BY JUSMAG OF IMMUNITY FROM SUIT;

II

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION —

A. WHEN IT FOUND AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN

JUSMAG AND PRIVATE RESPONDENT; AND

B. WHEN IT CONSIDERED JUSMAG ESTOPPED FROM DENYING THAT PRIVATE

RESPONDENT IS ITS EMPLOYEE FOR FAILURE TO PRESENT PROOF TO THE
CONTRARY.

We find the petition impressed with merit.

It is meet to discuss the historical background of the JUSMAG to determine its immunity
from suit.

JUSMAG was created pursuant to the Military Assistance Agreement 10 dated March
21, 1947, between the Government of the Republic of the Philippines and the
Government of the United States of America. As agreed upon, JUSMAG shall consist of
Air, Naval and Army group, and its primary task was to advise and assist the
Philippines, on air force, army and naval matters. 11

Article 14 of the 1947 Agreement provides, inter alia, that "the cost of all services
required by the Group, including compensation of locally employed interpreters, clerks,
laborers, and other personnel, except personal servants, shall be borne by the Republic
of the Philippines."

This set-up was to change in 1991. In Note No 22, addressed to the Department of
Foreign Affairs (DFA) of the Philippines, dated January 23, 1991, the United States
Government, thru its Embassy, manifested its preparedness "to provide funds to cover
the salaries of security assistance support personnel" and security guards, the rent of
JUSMAG occupied buildings and housing, and the cost of utilities. 12 This offer was
accepted by our Government, thru the DFA, in Note No. 911725, dated April 18,
1991.13

Consequently, a Memorandum of Agreement 14 was forged between the Armed Forces

of the Philippines and JUSMAG-Philippines, thru General Lisandro C. Abadia and U.S.
Brigadier General Robert G. Sausser. The Agreement delineated the terms of the
assistance-in-kind of JUSMAG for 1991, the relevant parts of which read:

a. The term salaries as used in this agreement include those for the security guards
currently contracted between JUSMAG and A' Prime Security Services Inc., and the
Security Assistance Support Personnel (SASP). . . . .

b. The term Security Assistance Support Personnel (SASP) does not include active duty
uniformed members of the Armed Forces of the Philippines performing duty at
JUSMAG.

c. It is understood that SASP are employees of the Armed Forces of the Philippines
(AFP). Therefore, the AFP agrees to appoint, for service with JUSMAG, no more than
74 personnel to designated positions with JUSMAG.

d. SASP are under the total operational control of the Chief, JUSMAG-Philippines. The
term "Operational Control" includes, but is not limited to, all personnel administrative
actions, such as: hiring recommendations; firing recommendations; position
classification; discipline; nomination and approval of incentive awards; and payroll
computation. Personnel administration will be guided by Annex E of JUSMAG-
Philippines Memo 10-2. For the period of time that there is an exceptional funding
agreement between the government of the Philippines and the United States
Government (USG), JUSMAG will pay the total payroll costs for the SASP employees.
Payroll costs include only regular salary; approved overtime, costs of living allowance;
medical insurance; regular contributions to the Philippine Social Security System, PAG-
IBIG Fund and Personnel Economic Relief Allowance (PERA); and the thirteenth-month
bonus. Payroll costs do not include gifts or other bonus payments in addition to those
previously defined above. Entitlements not considered payroll costs under this
agreement will be funded and paid by the AFP.

e. All SASP employed as of July 1, 1990 will continue their service with JUSMAG at
their current rate of pay and benefits up to 30 June 1991, with an annual renewal of
employment thereafter subject to renewal of their appointment with the AFP (employees
and rates of pay are indicated at Enclosure 3). No promotion or transfer internal to
JUSMAG of the listed personnel will result in the reduction of their pay and benefits.

f. All SASP will, after proper classification, be paid salaries and benefits at established
AFP civilian rates. Rules for computation of pay and allowances will be made available
to the Comptroller, JUSMAG, by the Comptroller, GHQ, AFP. Additionally, any legally
mandated changes in salary levels or methods of computation shall be transmitted
within 48 hours of receipt by Comptroller, GHQ to Comptroller, JUSMAG.

g. The AFP agrees not to terminate SASP without 60 days prior written notice to Chief,
JUSMAG-Philippines. Any termination of these personnel thought to be necessary
because of budgetary restrictions or manpower ceiling will be subject to consultations
between AFP and JUSMAG to ensure that JUSMAG's mission of dedicated support to
the AFP will not be degraded or harmed in any way.

h. The AFP agrees to assume the severance pay/retirement pay liability for all
appointed SASP. (Enclosure 3 lists the severance pay liability date for current SASP).
Any termination of services, other than voluntary resignations or termination for cause,
will result in immediate payments of AFP of all termination pay to the entitled employee.
Vouchers for severance/retirement pay and accrued bonuses and annual leave will be
presented to the Comptroller, GHQ, AFP, not later than 14 calendar days prior to
required date of payment.

i. All SASP listed in Enclosure 3 will continue to participate in the Philippine Social
Security System.

A year later, or in 1992, the United States Embassy sent another note of similar import
to the Department of Foreign Affairs (No. 227, dated April 8, 1992), extending the
funding agreement for the salaries of SASP and security guards until December 31,
1992.

From the foregoing, it is apparent that when JUSMAG took the services of private
respondent, it was performing a governmental function on behalf of the United States
pursuant to the Military Assistance Agreement dated March 21, 1947. Hence, we agree
with petitioner that the suit is, in effect, one against the United States Government,
albeit it was not impleaded in the complaint. Considering that the United States has not
waived or consented to the suit, the complaint against JUSMAG cannot not prosper.

In this jurisdiction, we recognize and adopt the generally accepted principles of

international law as part of the law of the land. 15 Immunity of State from suit is one of
these universally recognized principles. In international law, "immunity" is commonly
understood as an exemption of the state and its organs from the judicial jurisdiction of
another state. 16 This is anchored on the principle of the sovereign equality of states
under which one state cannot assert jurisdiction over another in violation of the maxim
par in parem non habet imperium (an equal has no power over an equal).17

Under the traditional rule of State immunity, a state cannot be sued in the courts of
another State, without its consent or waiver. However, in Santos, et al., vs. Santos, et
al., 18 we recognized an exception to the doctrine of immunity from suit by a state, thus:

. . . . Nevertheless, if, where and when the state or its government enters into a
contract, through its officers or agents, in furtherance of a legitimate aim and purpose
and pursuant to constitutional legislative authority, whereby mutual or reciprocal
benefits accrue and rights and obligations arise therefrom, and if the law granting the
authority to enter into such contract does not provide for or name the officer against
whom action may be brought in the event of a breach thereof, the state itself may be
sued, even without its consent, because by entering into a contract, the sovereign state
has descended to the level of the citizen and its consent to be sued is implied from the
very act of entering into such contract. . . . . (emphasis ours)

It was in this light that the state immunity issue in Harry Lyons, Inc., vs. United States of
America 19 was decided.

In the case of Harry Lyons, Inc., the petitioner entered into a contract with the United
States Government for stevedoring services at the U.S. Naval Base, Subic Bay,
Philippines. It then sought to collect from the US government sums of money arising
from the contract. One of the issues posed in the case was whether or not the defunct
Court of First Instance had jurisdiction over the defendant United States, a sovereign
state which cannot be sued without its consent. This Court upheld the contention of
Harry Lyons, Inc., that "when a sovereign state enters into a contract with a private
person, the state can be sued upon the theory that it has descended to the level of an
individual from which it can be implied that it has given its consent to be sued under the
contract."

The doctrine of state immunity from suit has undergone further metamorphosis. The
view evolved that the existence of a contract does not, per se, mean that sovereign
states may, at all times, be sued in local courts. The complexity of relationships
between sovereign states, brought about by their increasing commercial activities,
mothered a more restrictive application of the doctrine. 20 Thus, in United States of
America vs. Ruiz, 21 we clarified that our pronouncement in Harry Lyons, supra, with
respect to the waiver of State immunity, was obiter and "has no value as an imperative
authority."

As it stands now, the application of the doctrine of immunity from suit has been
restricted to sovereign or governmental activities ( jure imperii). 22 The mantle of state
immunity cannot be extended to commercial, private and proprietary acts ( jure
gestionis). As aptly stated by this Court (En banc) in US vs. Ruiz, supra:

The restrictive application of State immunity is proper 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 thus can be deemed to have tacitly given its consent to be used only
when it enters into business contracts. It does not apply where the contract relates to
the exercise of its sovereign functions. (emphasis ours)

We held further, that the application of the doctrine of state immunity depends on the
legal nature of the act. Ergo, since a governmental function was involved — the
transaction dealt with the improvement of the wharves in the naval installation at Subic
Bay — it was held that the United States was not deemed to have waived its immunity
from suit.

Then came the case of United States vs. Hon. Rodrigo, et al. 23 In said case, Genove
was employed as a cook in the Main Club located at U.S. Air Force Recreation Center,
John Hay Air Station. He was dismissed from service after he was found to have
polluted the stock of soup with urine. Genove countered with a complaint for damages.
Apparently, the restaurant services offered at the John Hay Air Station partake of the
nature of a business enterprise undertaken by the United States government in its
proprietary capacity. The Court then noted that the restaurant is well known and
available to the general public, thus, the services are operated for profit, as a
commercial and not a governmental activity. Speaking through Associate Justice
Isagani Cruz, the Court (En Banc) said:

The consequence of this finding is that the petitioners cannot invoke the doctrine of
state immunity to justify the dismissal of the damage suit against them by Genove. Such
defense will not prosper even if it be established that they were acting as agents of the
United States when they investigated and later dismissed Genove. For the matter, not
even the United States government itself can claim such immunity. The reason is that
by entering into the employment contract with Genove in the discharge of its proprietary
functions, it impliedly divested itself of its sovereign immunity from suit. (emphasis ours)

Conversely, if the contract was entered into in the discharge of its governmental
functions, the sovereign state cannot be deemed to have waived its immunity from suit.
24 Such is the case at bench. Prescinding from this premise, we need not determine
whether JUSMAG controls the employment conditions of the private respondent.

We also hold that there appears to be no basis for public respondent to rule that
JUSMAG is stopped from denying the existence of employer-employee relationship with
private respondent. On the contrary, in its Opposition before the public respondent,
JUSMAG consistently contended that the (74) SASP, including private respondent,
working in JUSMAG, are employees of the Armed Forces of the Philippines. This can
be gleaned from: (1) the Military Assistance Agreement, supra, (2) the exchange of
notes between our Government, thru Department of Foreign Affairs, and the United
States, thru the US Embassy to the Philippines, and (3) the Agreement on May 21,
1991, supra between the Armed Forces of the Philippines and JUSMAG.

We symphatize with the plight of private respondent who had served JUSMAG for more
than twenty (20) years. Considering his length of service with JUSMAG, he deserves a
more compassionate treatment. Unfortunately, JUSMAG is beyond the jurisdiction of
this Court. Nonetheless, the Executive branch, through the Department of Foreign
Affairs and the Armed Forces of the Philippines, can take the cudgel for private
respondent and the other SASP working for JUSMAG, pursuant to the aforestated
Military Assistance Agreement.

IN VIEW OF THE FOREGOING, the petition for certiorari is GRANTED. Accordingly,

the impugned Resolution dated January 29, 1993 of the National Labor Relations
Commission is REVERSED and SET ASIDE. No costs.

SO ORDERED.
CASE #20
SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE
DEPARTMENT (SEAFDEC-AQD) v. NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 86773 February 14, 1992

NOCON, J.:

This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the
National Labor Relations Commission sustaining the labor arbiter, in holding herein
petitioners Southeast Asian Fisheries Development Center-Aquaculture Department
(SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil Cuevas and Ben de los Reyes liable to pay
private respondent Juvenal Lazaga the amount of P126,458.89 plus interest thereon
computed from May 16, 1986 until full payment thereof is made, as separation pay and
other post-employment benefits, and the resolution denying the petitioners' motion for
reconsideration of said decision dated January 9, 1989.

The antecedent facts of the case are as follows:

SEAFDEC-AQD is a department of an international organization, the Southeast Asian

Fisheries Development Center, organized through an agreement entered into in
Bangkok, Thailand on December 28, 1967 by the governments of Malaysia, Singapore,
Thailand, Vietnam, Indonesia and the Philippines with Japan as the sponsoring country
(Article 1, Agreement Establishing the SEAFDEC).

On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research
Associate an a probationary basis by the SEAFDEC-AQD and was appointed Senior
External Affairs Officer on January 5, 1983 with a monthly basic salary of P8,000.00 and
a monthly allowance of P4,000.00. Thereafter, he was appointed to the position of
Professional III and designated as Head of External Affairs Office with the same pay
and benefits.

On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a

notice of termination to private respondent informing him that due to the financial
constraints being experienced by the department, his services shall be terminated at the
close of office hours on May 15, 1986 and that he is entitled to separation benefits
equivalent to one (1) month of his basic salary for every year of service plus other
benefits (Rollo, p. 153).

Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay,
the latter filed on March 18, 1987 a complaint against petitioners for non-payment of
separation benefits plus moral damages and attorney's fees with the Arbitration Branch
of the NLRC (Annex "C" of Petition for Certiorari).

Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction
over the case inasmuch as the SEAFDEC-AQD is an international organization and that
private respondent must first secure clearances from the proper departments for
property or money accountability before any claim for separation pay will be paid, and
which clearances had not yet been obtained by the private respondent.

A formal hearing was conducted whereby private respondent alleged that the non-
issuance of the clearances by the petitioners was politically motivated and in bad faith.
On the other hand, petitioners alleged that private respondent has property
accountability and an outstanding obligation to SEAFDEC-AQD in the amount of
P27,532.11. Furthermore, private respondent is not entitled to accrued sick leave
benefits amounting to P44,000.00 due to his failure to avail of the same during his
employment with the SEAFDEC-AQD (Annex "D", Id.).

On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of
which reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering

respondents:

1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16,
1986 until full payment thereof is made, as separation pay and other post-employment
benefits;

2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's
fees.

All other claims are hereby dismissed.

SO ORDERED. (Rollo, p. 51, Annex "E")

On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except
as to the award of P50,000.00 as actual damages and attorney's fees for being
baseless. (Annex "A", p. 28, id.)

On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.)
which was denied on January 9, 1989. Thereafter, petitioners instituted this petition for
certiorari alleging that the NLRC has no jurisdiction to hear and decide respondent
Lazaga's complaint since SEAFDEC-AQD is immune from suit owing to its international
character and the complaint is in effect a suit against the State which cannot be
maintained without its consent.

The petition is impressed with merit.

Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department

(SEAFDEC-AQD) is an international agency beyond the jurisdiction of public
respondent NLRC.
It was established by the Governments of Burma, Kingdom of Cambodia, Republic of
Indonesia, Japan, Kingdom of Laos, Malaysia. Republic of the Philippines, Republic of
Singapore, Kingdom of Thailand and Republic of Vietnam (Annex "H", Petition).

The Republic of the Philippines became a signatory to the Agreement establishing

SEAFDEC on January 16,1968. Its purpose is as follows:

The purpose of the Center is to contribute to the promotion of the fisheries development
in Southeast Asia by mutual co-operation among the member governments of the
Center, hereinafter called the "Members", and through collaboration with international
organizations and governments external to the Center. (Agreement Establishing the
SEAFDEC, Art. 1; Annex "H" Petition) (p.310, Rollo)

SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July
3-7, 1973 in Kuala Lumpur, Malaysia as one of the principal departments of SEAFDEC
(Annex "I", id.) to be established in Iloilo for the promotion of research in aquaculture.
Paragraph 1, Article 6 of the Agreement establishing SEAFDEC mandates:

1. The Council shall be the supreme organ of the Center and all powers of the Center
shall be vested in the Council.

Being an intergovernmental organization, SEAFDEC including its Departments (AQD),

enjoys functional independence and freedom from control of the state in whose territory
its office is located.

As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their
book, Public International Law (p. 83, 1956 ed.):

Permanent international commissions and administrative bodies have been created by

the agreement of a considerable number of States for a variety of international
purposes, economic or social and mainly non-political. Among the notable instances are
the International Labor Organization, the International Institute of Agriculture, the
International Danube Commission. In so far as they are autonomous and beyond the
control of any one State, they have a distinct juridical personality independent of the
municipal law of the State where they are situated. As such, according to one leading
authority "they must be deemed to possess a species of international personality of their
own." (Salonga and Yap, Public International Law, 83 [1956 ed.])

Pursuant to its being a signatory to the Agreement, the Republic of the Philippines
agreed to be represented by one Director in the governing SEAFDEC Council
(Agreement Establishing SEAFDEC, Art. 5, Par. 1, Annex "H", ibid.) and that its national
laws and regulations shall apply only insofar as its contribution to SEAFDEC of "an
agreed amount of money, movable and immovable property and services necessary for
the establishment and operation of the Center" are concerned (Art. 11, ibid.). It
expressly waived the application of the Philippine laws on the disbursement of funds of
petitioner SEAFDEC-AQD (Section 2, P.D. No. 292).
The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction
over SEAFDEC-AQD in Opinion No. 139, Series of 1984 —

4. One of the basic immunities of an international organization is immunity from local

jurisdiction, i.e., that it is immune from the legal writs and processes issued by the
tribunals of the country where it is found. (See Jenks, Id., pp. 37-44) The obvious
reason for this is that the subjection of such an organization to the authority of the local
courts would afford a convenient medium thru which the host government may interfere
in there operations or even influence or control its policies and decisions of the
organization; besides, such subjection to local jurisdiction would impair the capacity of
such body to discharge its responsibilities impartially on behalf of its member-states. In
the case at bar, for instance, the entertainment by the National Labor Relations
Commission of Mr. Madamba's reinstatement cases would amount to interference by
the Philippine Government in the management decisions of the SEARCA governing
board; even worse, it could compromise the desired impartiality of the organization
since it will have to suit its actuations to the requirements of Philippine law, which may
not necessarily coincide with the interests of the other member-states. It is precisely to
forestall these possibilities that in cases where the extent of the immunity is specified in
the enabling instruments of international organizations, jurisdictional immunity from the
host country is invariably among the first accorded. (See Jenks, Id.; See also Bowett,
The Law of International Institutions, pp. 284-1285).

Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is

unavailing because estoppel does not apply to confer jurisdiction to a tribunal that has
none over a cause of action. Jurisdiction is conferred by law. Where there is none, no
agreement of the parties can provide one. Settled is the rule that the decision of a
tribunal not vested with appropriate jurisdiction is null and void. Thus, in Calimlim vs.
Ramirez, this Court held:

A rule, that had been settled by unquestioned acceptance and upheld in decisions so
numerous to cite is that the jurisdiction of a court over the subject matter of the action is
a matter of law and may not be conferred by consent or agreement of the parties. The
lack of jurisdiction of a court may be raised at any stage of the proceedings, even on
appeal. This doctrine has been qualified by recent pronouncements which it stemmed
principally from the ruling in the cited case of Sibonghanoy. It is to be regretted,
however, that the holding in said case had been applied to situations which were
obviously not contemplated therein. The exceptional circumstances involved in
Sibonghanoy which justified the departure from the accepted concept of non-waivability
of objection to jurisdiction has been ignored and, instead a blanket doctrine had been
repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the
exception, but rather the general rule, virtually overthrowing altogether the time-honored
principle that the issue of jurisdiction is not lost by waiver or by estoppel. (Calimlim vs.
Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982])
Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147
SCRA 286 [1987]) to justify its assumption of jurisdiction over SEAFDEC is misplaced.
On the contrary, the Court in said case explained why it took cognizance of the case.
Said the Court:

We would note, finally, that the present petition relates to a controversy between two
claimants to the same position; this is not a controversy between the SEAFDEC on the
one hand, and an officer or employee, or a person claiming to be an officer or
employee, of the SEAFDEC, on the other hand. There is before us no question
involving immunity from the jurisdiction of the Court, there being no plea for such
immunity whether by or on behalf of SEAFDEC, or by an official of SEAFDEC with the
consent of SEAFDEC (Id., at 300; emphasis supplied).

WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the

jurisdiction of the courts or local agency of the Philippine government, the questioned
decision and resolution of the NLRC dated July 26, 1988 and January 9, 1989,
respectively, are hereby REVERSED and SET ASIDE for having been rendered without
jurisdiction. No costs.

SO ORDERED.
CASE #21
ERNESTO L. CALLADO v. INTERNATIONAL RICE RESEARCH INSTITUTE
G.R. No. 106483 May 22, 1995
ROMERO, J.:

Did the International Rice Research Institute (IRRI) waive its immunity from suit in this
dispute which arose from an employer-employee relationship?

We rule in the negative and vote to dismiss the petition.

Ernesto Callado, petitioner, was employed as a driver at the IRRI from April 11, 1983 to
December 14, 1990. On February 11, 1990, while driving an IRRI vehicle on an official
trip to the Ninoy Aquino International Airport and back to the IRRI, petitioner figured in
an accident.

Petitioner was informed of the findings of a preliminary investigation conducted by the

IRRI's Human Resource Development Department Manager in a Memorandum dated
March 5, 1990. 1 In view of the aforesaid findings, he was charged with:

(1) Driving an institute vehicle while on official duty under the influence of liquor;

(2) Serious misconduct consisting of your failure to report to your supervisors the failure
of your vehicle to start because of a problem with the car battery which, you alleged,
required you to overstay in Manila for more than six (6) hours, whereas, had you
reported the matter to IRRI, Los Baños by telephone, your problem could have been
solved within one or two hours;

(3) Gross and habitual neglect of your duties. 2

In a Memorandum dated March 9, 1990, petitioner submitted his answer and defenses
to the charges against him. 3 After evaluating petitioner's answer, explanations and
other evidence, IRRI issued a Notice of Termination to petitioner on December 7, 1990.
4

Thereafter, petitioner filed a complaint on December 19, 1990 before the Labor Arbiter
for illegal dismissal, illegal suspension and indemnity pay with moral and exemplary
damages and attorney's fees.

On January 2, 1991, private respondent IRRI, through counsel, wrote the Labor Arbiter
to inform him that the Institute enjoys immunity from legal process by virtue of Article 3
of Presidential Decree No. 1620, 5 and that it invokes such diplomatic immunity and
privileges as an international organization in the instant case filed by petitioner, not
having waived the same. 6
IRRI likewise wrote in the same tenor to the Regional Director of the Department of
Labor and Employment. 7

While admitting IRRI's defense of immunity, the Labor Arbiter, nonetheless, cited an
Order issued by the Institute on August 13, 1991 to the effect that "in all cases of
termination, respondent IRRI waives its immunity," 8 and, accordingly, considered the
defense of immunity no longer a legal obstacle in resolving the case. The dispositive
portion of the Labor arbiter's decision dated October 31, 1991, reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondent

to reinstate complainant to his former position without loss or (sic) seniority rights and
privileges within five (5) days from receipt hereof and to pay his full backwages from
March 7, 1990 to October 31, 1991, in the total amount of P83,048.75 computed on the
basis of his last monthly salary. 9

The NLRC found merit in private respondent' s appeal and, finding that IRRI did not
waive its immunity, ordered the aforesaid decision of the Labor Arbiter set aside and the
complaint dismissed. 10

Hence, this petition where it is contended that the immunity of the IRRI as an
international organization granted by Article 3 of Presidential Decree No. 1620 may not
be invoked in the case at bench inasmuch as it waived the same by virtue of its
Memorandum on "Guidelines on the handling of dismissed employees in relation to P.D.
1620." 11

It is also petitioner's position that a dismissal of his complaint before the Labor Arbiter
leaves him no other remedy through which he can seek redress. He further states that
since the investigation of his case was not referred to the Council of IRRI Employees
and Management (CIEM), he was denied his constitutional right to due process.

We find no merit in petitioner's arguments.

IRRI's immunity from suit is undisputed.

Presidential Decree No. 1620, Article 3 provides:

Art. 3. Immunity from Legal Process. The Institute shall enjoy immunity from any penal,
civil and administrative proceedings, except insofar as that immunity has been
expressly waived by the Director-General of the Institute or his authorized
representatives.

In the case of International Catholic Migration Commission v. Hon. Calleja, et al. and
Kapisanan ng Manggagawa at TAC sa IRRI v. Secretary of Labor and Employment and
IRRI, 12 the Court upheld the constitutionality of the aforequoted law. After the Court
noted the letter of the Acting Secretary of Foreign Affairs to the Secretary of Labor
dated June 17, 1987, where the immunity of IRRI from the jurisdiction of the Department
of Labor and Employment was sustained, the Court stated that this opinion constituted
"a categorical recognition by the Executive Branch of the Government that . . . IRRI
enjoy(s) immunities accorded to international organizations, which determination has
been held to be a political question conclusive upon the Courts in order not to embarass
a political department of Government. 13 We cited the Court's earlier pronouncement in
WHO v. Hon. Benjamin Aquino, et al., 14 to wit:

It is a recognized principle of international law and under our system of separation of

powers that diplomatic immunity is essentially a political question and courts should
refuse to look beyond a determination by the executive branch of the government, and
where the plea of diplomatic immunity is recognized and affirmed by the executive
branch of the government as in the case at bar, it is then the duty of the courts to accept
the claim of immunity upon appropriate suggestion by the principal law officer of the
government . . . or other officer acting under his direction. Hence, in adherence to the
settled principle that courts may not so exercise their jurisdiction . . . as to embarass the
executive arm of the government in conducting foreign relations, it is accepted doctrine
that in such cases the judicial department of (this) government follows the action of the
political branch and will not embarrass the latter by assuming an antagonistic
jurisdiction. 15

Further, we held that "(t)he raison d'etre for these immunities is the assurance of
unimpeded performance of their functions by the agencies concerned.

The grant of immunity from local jurisdiction to . . . and IRRI is clearly necessitated by
their international character and respective purposes. The objective is to avoid the
danger of partiality and interference by the host country in their internal workings. The
exercise of jurisdiction by the Department of Labor in these instances would defeat the
very purpose of immunity, which is to shield the affairs of international organizations, in
accordance with international practice, from political pressure or control by the host
country to the prejudice of member States of the organization, and to ensure the
unhampered the performance of their functions. 16

The grant of immunity to IRRI is clear and unequivocal and an express waiver by its
Director-General is the only way by which it may relinquish or abandon this immunity.

On the matter of waiving its immunity from suit, IRRI had, early on, made its position
clear. Through counsel, the Institute wrote the Labor Arbiter categorically informing him
that the Institute will not waive its diplomatic immunity. In the second place, petitioner's
reliance on the Memorandum with "Guidelines in handling cases of dismissal of
employees in relation to P.D. 1620" dated July 26, 1983, is misplaced. The
Memorandum reads, in part:

Time and again the Institute has reiterated that it will not use its immunity under P.D.
1620 for the purpose of terminating the services of any of its employees. Despite
continuing efforts on the part of IRRI to live up to this undertaking, there appears to be
apprehension in the minds of some IRRI employees. To help allay these fears the
following guidelines will be followed hereafter by the Personnel/Legal Office while
handling cases of dismissed employees.

xxx xxx xxx

2. Notification/manifestation to MOLE or labor arbiter

If and when a dismissed employee files a complaint against the Institute contesting the
legality of dismissal, IRRI's answer to the complaint will:

Indicate in the identification of IRRI that it is an international organization operating

under the laws of the Philippines including P.D. 1620. and
Base the defense on the merits and facts of the case as well as the legality of the cause
or causes for termination.
3) Waiving immunity under P.D. 1620

If the plaintiff's attorney or the arbiter, asks if IRRI will waive its immunity we may reply
that the Institute will be happy to do so, as it has in the past in the formal manner
required thereby reaffirming our commitment to abide by the laws of the Philippines and
our full faith in the integrity and impartially of the legal system. 17 (Emphasis in this
paragraphs ours)

From the last paragraph of the foregoing quotation, it is clear that in cases involving
dismissed employees, the Institute may waive its immunity, signifying that such waiver
is discretionary on its part.

We agree with private respondent IRRI that this memorandum cannot, by any stretch of
the imagination, be considered the express waiver by the Director-General. Respondent
Commission has quoted IRRI's reply thus:

The 1983 . . . is an internal memo addressed to Personnel and Legal Office and was
issued for its guidance in handling those cases where IRRI opts to waive its immunity. It
is not a declaration of waiver for all cases. This is apparent from the use of the
permissive term "may" rather than the mandatory term "shall" in the last paragraph of
the memo. Certainly the memo cannot be considered as the express waiver by the
Director General as contemplated by P.D. 1620, especially since the memo was issued
by a former Director-General. At the very least, the express declaration of the
incumbent Director-general supersedes the 1983 memo and should be accorded
greater respect. It would be equally important to point out that the Personnel and Legal
Office has been non-existent since 1988 as a result of major reorganization of the IRRI.
Cases of IRRI before DOLE are handled by an external Legal Counsel as in this
particular
case. 18 (Emphasis supplied)

The memorandum, issued by the former Director-General to a now-defunct division of

the IRRI, was meant for internal circulation and not as a pledge of waiver in all cases
arising from dismissal of employees. Moreover, the IRRI's letter to the Labor Arbiter in
the case at bench made in 1991 declaring that it has no intention of waiving its
immunity, at the very least, supplants any pronouncement of alleged waiver issued in
previous cases.

Petitioner's allegation that he was denied due process is unfounded and has no basis.

It is not denied that he was informed of the findings and charges resulting from an
investigation conducted of his case in accordance with IRRI policies and procedures.
He had a chance to comment thereon in a Memorandum he submitted to the Manager
of the Human Resource and Development Department. Therefore, he was given proper
notice and adequate opportunity to refute the charges and findings, hereby fulfilling the
basic requirements of due process.

Finally, on the issue of referral to the Council of IRRI Employees and Management
(CIEM), petitioner similarly fails to persuade the Court.

The Court, in the Kapisanan ng mga Manggagawa at TAC sa IRRI case, 19 held:

Neither are the employees of IRRI without remedy in case of dispute with management
as, in fact, there had been organized a forum for better management-employee
relationship as evidenced by the formation of the Council of IRRI Employees and
Management (CIEM) wherein "both management and employees were and still are
represented for purposes of maintaining mutual and beneficial cooperation between
IRRI and its employees." The existence of this Union factually and tellingly belies the
argument that Pres. Decree No. Decree No. 1620, which grants to IRRI the status,
privileges and immunities of an international organization, deprives its employees of the
right to self-organization.

We have earlier concluded that petitioner was not denied due process, and this,
notwithstanding the non-referral to the Council of IRRI Employees and Management.
Private respondent correctly pointed out that petitioner, having opted not to seek the
help of the CIEM Grievance Committee, prepared his answer by his own self. 20 He
cannot now fault the Institute for not referring his case to the CIEM.

IN VIEW OF THE FOREGOING, the petition for certiorari is DISMISSED. No costs.

SO ORDERED.
CASE #22
VETERANS MANPOWER AND PROTECTIVE SERVICES, INC v. THE COURT OF
APPEALS
G.R. No. 91359. September 25, 1992
GRIÑO-AQUINO, J.:

SYLLABUS

1. POLITICAL LAW; IMMUNITY FROM SUIT; THE PHILIPPINE CONSTABULARY

CHIEF AND THE PC-SUSIA MAY NOT BE SUED WITHOUT THE CONSENT OF THE
STATE. — The State may not be sued without its consent (Article XVI, Section 3, of the
1987 Constitution). Invoking this rule, the PC Chief and PC-SUSIA contend that, being
instrumentalities of the national government exercising a primarily governmental
function of regulating the organization and operation of private detective, watchmen, or
security guard agencies, said official (the PC Chief) and agency (PC-SUSIA) may not
be sued without the Government’s consent, especially in this case because VMPSI’s
complaint seeks not only to compel the public respondents to act in a certain way, but
worse, because VMPSI seeks actual and compensatory damages in the sum of
P1,000,000.00, exemplary damages in the same amount, and P200,000.00 as
attorney’s fees from said public respondents. Even if its action prospers, the payment of
its monetary claims may not be enforced because the State did not consent to
appropriate the necessary funds for that purpose.

2. ID.; ID.; PUBLIC OFFICIAL MAY BE SUED IN HIS PERSONAL CAPACITY IF HE

ACTS, AMONG OTHERS BEYOND THE SCOPE OF HIS AUTHORITY; CASE AT
BAR. — A public official may sometimes be held liable in his personal or private
capacity if he acts in bad faith, or beyond the scope of his authority or jurisdiction (Shauf
v. Court of Appeals, supra), however, since the acts for which the PC Chief and PC-
SUSIA are being called to account in this case, were performed by them as part of their
official duties, without malice, gross negligence, or bad faith, no recovery may be had
against them in their private capacities.

3. ID.; ID.; CONSENT TO BE SUED MUST EMANATE FROM A LEGISLATIVE ACT. —

Waiver of the State’s immunity from suit, being a derogation of sovereignty, will not be
lightly inferred, but must be construed strictissimi juris (Republic v. Feliciano, 148 SCRA
424). The consent of the State to be sued must emanate from statutory authority,
hence, from a legislative act, not from a mere memorandum. Without such consent, the
trial court did not acquire jurisdiction over the public respondents.

4. ID.; ID.; REASONS BEHIND. — The state immunity doctrine rests upon reasons of
public policy and the inconvenience and danger which would flow from a different rule.
"It is obvious that public service would be hindered, and public safety endangered, if the
supreme authority could be subjected to suits at the instance of every citizen, and,
consequently, controlled in the use and disposition of the means required for the proper
administration of the government" (Siren v. U.S. Wall, 152, 19 L. ed. 129, as cited in 78
SCRA 477).
DECISION

This is a petition for review on certiorari of the decision dated August 11, 1989, of the
Court of Appeals in CA-G.R. SP No. 15990, entitled "The Chief of Philippine
Constabulary (PC) and Philippine Constabulary Supervisor Unit for Security and
Investigation Agencies (PC-SUSIA) v. Hon. Omar U. Amin and Veterans Manpower and
Protective Services, Inc. (VMPSI)," lifting the writ of preliminary injunction which the
Regional Trial Court had issued to the PC-SUSIA enjoining them from committing acts
that would result in the cancellation or non-renewal of the license of VMPSI to operate
as a security agency.chanrobles virtual lawlibrary

On March 28, 1988, VMPSI filed a complaint in the Regional Trial Court at Makati,
Metro Manila, praying the court to:jgc:chanrobles.com.ph

"A. Forthwith issue a temporary restraining order to preserve the status quo, enjoining
the defendants, or any one acting in their place or stead, to refrain from committing acts
that would result in the cancellation or non-renewal of VMPSI’s license;

"B. In due time, issue a writ of preliminary injunction to the same effect;

"C. Render decision and judgment declaring null and void the amendment of Section 4
of R.A. No. 5487, by PD No. 11 exempting organizations like PADPAO from the
prohibition that no person shall organize or have an interest in more than one agency,
declaring PADPAO as an illegal organization existing in violation of said prohibition,
without the illegal exemption provided in PD No. 11; declaring null and void Section 17
of R.A. No. 5487 which provides for the issuance of rules and regulations in consultation
with PADPAO, declaring null and void the February 1, 1982 directive of Col. Sabas V.
Edadas, in the name of the then PC Chief, requiring all private security
agencies/security forces such as VMPSI to join PADPAO as a prerequisite to
secure/renew their licenses, declaring that VMPSI did not engage in ‘cut-throat
competition’ in its contract with MWSS, ordering defendants PC Chief and PC-SUSIA to
renew the license of VMPSI; ordering the defendants to refrain from further harassing
VMPSI and from threatening VMPSI with cancellations or non-renewal of license,
without legal and justifiable cause; ordering the defendants to pay to VMPSI the sum of
P1,000,000.00 as actual and compensatory damages, P1,000,000.00 as exemplary
damages, and P200,000.00 as attorney’s fees and expenses of litigation; and granting
such further or other reliefs to VMPSI as may be deemed lawful, equitable and just."
(pp. 55-56, Rollo.)

The constitutionality of the following provisions of R.A. 5487 (otherwise known as the
"Private Security Agency Law"), as amended, is questioned by VMPSI in its
complaint:chanrobles.com.ph : virtual law library

"SECTION 4. Who may Organize a Security or Watchman Agency. — Any Filipino

citizen or a corporation, partnership, or association, with a minimum capital of five
thousand pesos, one hundred per cent of which is owned and controlled by Filipino
citizens may organize a security or watchman agency: Provided, That no person shall
organize or have an interest in, more than one such agency except those which are
already existing at the promulgation of this Decree: . . ." (As amended by P.D. Nos. 11
and 100.)

"SECTION 17. Rules and Regulations by Chief, Philippine Constabulary. — The Chief
of the Philippine Constabulary, in consultation with the Philippine Association of
Detective and Protective Agency Operators, Inc. and subject to the provision of existing
laws, is hereby authorized to issue the rules and regulations necessary to carry out the
purpose of this Act."cralaw virtua1aw library

VMPSI alleges that the above provisions of R.A. No. 5487 violate the provisions of the
1987 Constitution against monopolies, unfair competition and combinations in restraint
of trade, and tend to favor and institutionalize the Philippine Association of Detective
and Protective Agency Operators, Inc. (PADPAO) which is monopolistic because it has
an interest in more than one security agency.

Respondent VMPSI likewise questions the validity of paragraph 3, subparagraph (g) of

the Modifying Regulations on the Issuance of License to Operate and Private Security
Licenses and Specifying Regulations for the Operation of PADPAO issued by then PC
Chief Lt. Gen. Fidel V. Ramos, through Col. Sabas V. Edades, requiring that "all private
security agencies/company security forces must register as members of any PADPAO
Chapter organized within the Region where their main offices are located . . ." (pp. 5-6,
Complaint in Civil Case No. 88-471). As such membership requirement in PADPAO is
compulsory in nature, it allegedly violates legal and constitutional provisions against
monopolies, unfair competition and combinations in restraint of trade.chanrobles.com :
virtual law library

On May 12, 1986, a Memorandum of Agreement was executed by PADPAO and the PC
Chief, which fixed the minimum monthly contract rate per guard for eight (8) hours of
security service per day at P2,255.00 within Metro Manila and P2,215.00 outside of
Metro Manila (Annex B, Petition).

On June 29, 1987, Odin Security Agency (Odin) filed a complaint with PADPAO
accusing VMPSI of cut-throat competition by undercutting its contract rate for security
services rendered to the Metropolitan Waterworks and Sewerage System (MWSS),
charging said customer lower than the standard minimum rates provided in the
Memorandum of Agreement dated May 12, 1986.

PADPAO found VMPSI guilty of cut-throat competition, hence, the PADPAO Committee
on Discipline recommended the expulsion of VMPSI from PADPAO and the cancellation
of its license to operate a security agency (Annex D, Petition).

The PC-SUSIA made similar findings and likewise recommended the cancellation of
VMPSI’s license (Annex E, Petition).
As a result, PADPAO refused to issue a clearance/certificate of membership to VMPSI
when it requested one.

VMPSI wrote the PC Chief on March 10, 1988, requesting him to set aside or disregard
the findings of PADPAO and consider VMPSI’s application for renewal of its license,
even without a certificate of membership from PADPAO (Annex F, Petition).

As the PC Chief did not reply, and VMPSI’s license was expiring on March 31, 1988,
VMPSI filed Civil Case No. 88-471 in the RTC-Makati, Branch 135, on March 28, 1988
against the PC Chief and PC-SUSIA. On the same date, the court issued a restraining
order enjoining the PC Chief and PC-SUSIA "from committing acts that would result in
the cancellation or non-renewal of VMPSI’s license" (Annex G, Petition).

The PC chief and PC-SUSIA filed a "Motion to Dismiss, Opposition to the Issuance of
Writ of Preliminary Injunction, and Motion to Quash the Temporary Restraining Order,"
on the grounds that the case is against the State which had not given consent thereto
and that VMPSI’s license already expired on March 31, 1988, hence, the restraining
order or preliminary injunction would not serve any purpose because there was no more
license to be cancelled (Annex H, Petition). Respondent VMPSI opposed the motion.

On April 18, 1988, the lower court denied VMPSI’s application for a writ of preliminary
injunction for being premature because it "has up to May 31, 1988 within which to file its
application for renewal pursuant to Section 2 (e) of Presidential Decree No. 199, . . ." (p.
140, Rollo.).chanrobles.com : virtual law library

On May 23, 1988, VMPSI reiterated its application for the issuance of a writ of
preliminary injunction because PC-SUSIA had rejected payment of the penalty for its
failure to submit its application for renewal of its license and the requirements therefor
within the prescribed period in Section 2(e) of the Revised Rules and Regulations
Implementing R.A. 5487, as amended by P.D. 1919 (Annex M, Petition).

On June 10, 1998, the RTC-Makati issued a writ of preliminary injunction upon a bond
of P100,000.00, restraining the defendants, or any one acting in their behalf, from
cancelling or denying renewal of VMPSI’s license, until further orders from the court.

The PC Chief and PC-SUSIA filed a Motion for Reconsideration of the above order, but
it was denied by the court in its Order of August 10, 1988 (Annex R, Petition).

On November 3, 1988, the PC Chief and PC-SUSIA sought relief by a petition for
certiorari in the Court of Appeals.

On August 11, 1989, the Court of Appeals granted the petition. The dispositive portion
of its decision reads:jgc:chanrobles.com.ph
"WHEREFORE, the petition for certiorari filed by petitioners PC Chief and PC-SUSIA is
hereby GRANTED, and the RTC-Makati, Branch 135, is ordered to dismiss the
complaint filed by respondent VMPSI in Civil Case No. 88-471, insofar as petitioners PC
Chief and PC-SUSIA are concerned, for lack of jurisdiction. The writ of preliminary
injunction issued on June 10, 1988, is dissolved." (pp. 295-296, Rollo.)

VMPSI came to us with this petition for review.

The primary issue in this case is whether or not VMPSI’s complaint against the PC
Chief and PC-SUSIA is a suit against the State without its consent.

The answer is yes.

The State may not be sued without its consent (Article XVI, Section 3, of the 1987
Constitution). Invoking this rule, the PC Chief and PC-SUSIA contend that, being
instrumentalities of the national government exercising a primarily governmental
function of regulating the organization and operation of private detective, watchmen, or
security guard agencies, said official (the PC Chief) and agency (PC-SUSIA) may not
be sued without the Government’s consent, especially in this case because VMPSI’s
complaint seeks not only to compel the public respondents to act in a certain way, but
worse, because VMPSI seeks actual and compensatory damages in the sum of
P1,000,000.00, exemplary damages in the same amount, and P200,000.00 as
attorney’s fees from said public respondents. Even if its action prospers, the payment of
its monetary claims may not be enforced because the State did not consent to
appropriate the necessary funds for that purpose.chanroblesvirtualawlibrary

Thus did we hold in Shauf v. Court of Appeals, 191 SCRA 713:jgc:chanrobles.com.ph

"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." (Emphasis supplied.)

A public official may sometimes be held liable in his personal or private capacity if he
acts in bad faith, or beyond the scope of his authority or jurisdiction (Shauf v. Court of
Appeals, supra), however, since the acts for which the PC Chief and PC-SUSIA are
being called to account in this case, were performed by them as part of their official
duties, without malice, gross negligence, or bad faith, no recovery may be had against
them in their private capacities.

We agree with the observation of the Court of Appeals that the Memorandum of
Agreement dated May 12, 1986 does not constitute an implied consent by the State to
be sued:jgc:chanrobles.com.ph
"The Memorandum of Agreement dated May 12, 1986 was entered into by the PC Chief
in relation to the exercise of a function sovereign in nature. The correct test for the
application of state immunity is not the conclusion of a contract by the State but the
legal nature of the act. This was clearly enunciated in the case of United States of
America v. Ruiz where the Hon. Supreme Court held:jgc:chanrobles.com.ph

"‘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 thus be deemed to have tacitly given its consent to be sued
only when it enters into a business contract. It does not apply where the contract relates
to the exercise of its functions.’ (136 SCRA 487, 492.)

"In the instant case, the Memorandum of Agreement entered into by the PC Chief and
PADPAO was intended to professionalize the industry and to standardize the salaries of
security guards as well as the current rates of security services, clearly, a governmental
function. The execution of the said agreement is incidental to the purpose of R.A. 5487,
as amended, which is to regulate the organization and operation of private detective,
watchmen or security guard agencies. (Emphasis ours.)" (pp. 258-259, Rollo.)

Waiver of the State’s immunity from suit, being a derogation of sovereignty, will not be
lightly inferred, but must be construed strictissimi juris (Republic v. Feliciano, 148 SCRA
424). The consent of the State to be sued must emanate from statutory authority,
hence, from a legislative act, not from a mere memorandum. Without such consent, the
trial court did not acquire jurisdiction over the public respondents.

The state immunity doctrine rests upon reasons of public policy and the inconvenience
and danger which would flow from a different rule. "It is obvious that public service
would be hindered, and public safety endangered, if the supreme authority could be
subjected to suits at the instance of every citizen, and, consequently, controlled in the
use and disposition of the means required for the proper administration of the
government" (Siren v. U.S. Wall, 152, 19 L. ed. 129, as cited in 78 SCRA 477). In the
same vein, this Court in Republic v. Purisima (78 SCRA 470, 473)
rationalized:jgc:chanrobles.com.ph

"Nonetheless, a continued adherence to the doctrine of nonsuability is not to be

deplored for as against the inconvenience that may be cause [by] private parties, the
loss of governmental efficiency and the obstacle to the performance of its multifarious
functions are far greater if such a fundamental principle were abandoned and the
availability of judicial remedy were not thus restricted. With the well known propensity
on the part of our people to go to court, at the least provocation, the loss of time and
energy required to defend against law suits, in the absence of such a basic principle
that constitutes such an effective obstacles, could very well be imagined." (citing
Providence Washington Insurance Co. v. Republic, 29 SCRA 598.)cralawnad
WHEREFORE, the petition for review is DENIED and the judgment appealed from is
AFFIRMED in toto. No costs.

SO ORDERED.
CASE #24
WENCESLAO VlNZONS TAN v. THE DIRECTOR OF FORESTRY
G.R. No. L- 24548 October 27, 1983
MAKASIAR, J.

This is an appeal from the order dated January 20, 1965 of the then Court of First
Instance of Manila, Branch VII, in Civil Case No. 56813, a petition for certiorari,
prohibition and mandamus with preliminary prohibitory injunction (p. 2. rec.), which
dismissed the petition of petitioner-appellant Wenceslao Vinzons Tan on the ground that
it does not state a sufficient cause of action, and upon the respondents-appellees'
(Secretary of Agriculture and Natural resources and the Director of Forestry) motion to
dismiss (p. 28, rec.).

Sometime in April 1961, the Bureau of Forestry issued Notice No. 2087, advertising for
public bidding a certain tract of public forest land situated in Olongapo, Zambales,
provided tenders were received on or before May 22, 1961 (p. 15, CFI rec.). This public
forest land, consisting of 6,420 hectares, is located within the former U.S. Naval
Reservation comprising 7,252 hectares of timberland, which was turned over by the
United States Government to the Philippine Government (P. 99, CFI rec.).

On May 5, 1961, petitioner-appellant Wenceslao Vinzons Tan submitted his application

in due form after paying the necessary fees and posting tile required bond therefor. Nine
other applicants submitted their offers before the deadline (p. 29, rec.).

Thereafter, questions arose as to the wisdom of having the area declared as a forest
reserve or allow the same to be awarded to the most qualified bidder. On June 7, 1961,
then President Carlos P. Garcia issued a directive to the Director of the Bureau of
Forestry, which read as follows:

It is desired that the area formerly covered by the Naval Reservation be made a forest
reserve for watershed purposes. Prepare and submit immediately a draft of a
proclamation establishing the said area as a watershed forest reserve for Olongapo,
Zambales. It is also desired that the bids received by the Bureau of Forestry for the
issuance of the timber license in the area during the public bidding conducted last May
22, 1961 be rejected in order that the area may be reserved as above stated. ...

(SGD.) CARLOS P. GARCIA

(pp. 98, CFI rec.).

On August 3, 1961, Secretary Cesar M. Fortich of Agriculture and Natural Resources

sustained the findings and re comendations of the Director of Forestry who concluded
that "it would be beneficial to the public interest if the area is made available for
exploitation under certain conditions," and

We quote:
Respectfully forwarded to the honorable, the Executive Secretary Malacanang. Manila
inviting particular attention to the comment and recommendation of the Director of
Forestry in the proceeding in indorsement in which this Of fice fully concurs.

The observations of responsible forest officials are most revealing of their zeal to
promote forest conservation and watershed protection especially in Olongapo,
Zambales area. In convincing fashion, they have demonstrated that to declare the forest
area involved as a forest reserve ratify than open it for timber exploitation under license
and regulation would do more harm than of to the public interest. To convert the area
into a forest reserve without an adequate forest protection force, would make of it a
'Free Zone and Logging Paradise,' to the ever 'Problem Loggers' of Dinalupihan, Bataan
. . . an open target of timber smugglers, kaingineros and other forms of forest vandals
and despoilers. On the other hand, to award the area, as planned, to a reputable and
responsible licensee who shall conduct logging operations therein under the selective
logging method and who shall be obliged to employ a sufficient number of forest guards
to patrol and protect the forest consecration and watershed protection.

Worthy of mention is the fact that the Bureau of Forestry had already conducted a public
bidding to determine the most qualified bidder to whom the area advertised should be
awarded. Needless to stress, the decision of the Director of Forestry to dispose of the
area thusly was arrived at after much thought and deliberation and after having been
convinced that to do so would not adversely affect the watershed in that sector. The
result of the bidding only have to be announced. To be sure, some of the participating
bidders like Mr. Edgardo Pascual, went to much expense in the hope of winning a virgin
forest concession. To suddenly make a turn about of this decision without strong
justifiable grounds, would cause the Bureau of Forestry and this Office no end of
embarrassment.

In view of the foregoing, it is earnestly urged that the Director of Forestry be allowed to
proceed with the announcement of the results of the bidding for the subject forest area
(p. 13, CFI rec.).

The Office of the President in its 4th Indorsement dated February 2, 1962, signed by
Atty. Juan Cancio, Acting Legal Officer, "respectfully returned to the Honorable
Secretary of the Department of Agriculture and Natural Resources for appropriate
action," the papers subject of Forestry Notice No. 2087 which was referred to the
Bureau of Forestry for decision (p. 14, CFI rec.).

Finally, of the ten persons who submitted proposed the area was awarded to herein
petitioner-appellant Wenceslao Vinzons Tan, on April 15, 1963 by the Bureau of
Forestry (p. 17, CFI rec.). Against this award, bidders Ravago Commercial Company
and Jorge Lao Happick filed motions for reconsideration which were denied by the
Director of Forestry on December 6, 1963.
On May 30, 1963, the Secretary of Agriculture and Natural Resources Benjamin M.
Gozon — who succeeded Secretary Cesar M. Fortich in office — issued General
Memorandum Order No. 46, series of 1963, pertinent portions of which state:

xxx xxx xxx

SUBJECT: ... ... ...

(D)elegation of authority to the Director of Forestry to grant ordinary timber licenses.

1. ... ... ...

2. The Director of Forestry is hereby authorized to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and (be
the extension of ordinary timber licenses for areas not exceeding 5,000 hectares each;

3. This Order shall take effect immediately (p. 267, CFI rec.).

Thereafter, Jose Y. Feliciano was appointed as Acting secretary of Agriculture and

Natural Resources, replacing secretary Benjamin M. Gozon. Upon assumption of office
he Immediately promulgate on December 19, 19b3 General memorandum Order No.
60, revoking the authority delegated to the Director of Forestry, under General
Memorandum order No. 46, to grant ordinary timber licenses, which order took effect on
the same day, December 19, 1963. Pertinent portions of the said Order read as follows:

xxx xxx xxx

SUBJECT: Revocation of General Memorandum Order No 46 dated May 30, 1963 —

1. In order to acquaint the undersigned with the volume and Nature of the work of the
Department, the authority delegated to the Director of forestry under General
Memorandum Order No. 46, dated May 30, 1963, to grant (a) new ordinary timber
licenses where the area covered thereby is not more than 3,000 hectares each; and (b)
the extension of ordinary timber licenses for areas not exceeding 3,000 hectares each is
hereby revoked. Until further notice, the issuance of' new licenses , including
amendments thereto, shall be signed by the secretary of Agriculture and Natural
Resources.

2. This Order shall take effect immediately and all other previous orders, directives,
circulars, memoranda, rules and regulations inconsistent with this Order are hereby
revoked (p. 268, CFl rec.; Emphasis supplied).

On the same date that the above-quoted memorandum took effect, December 19, 1963,
Ordinary Timber License No. 20-'64 (NEW) dated April 22, 1963, in the name of
Wenceslao Vinzons Tan, was signed by then Acting Director of Forestry Estanislao R.
Bernal without the approval of the Secretary of Agriculture and Natural Resources. On
January 6, 1964, the license was released by the Office of the Director of Forestry (p.
30, CFI rec.; p. 77, rec.). It was not signed by the Secretary of Agriculture and Natural
Resources as required by Order No. 60 aforequoted.

On February 12, 1964, Ravago Commercial Company wrote a letter to the Secretary of
Agriculture and Natural Resources shall be considered by tile Natural Resources
praying that, pending resolution of the appeal filed by Ravago Commercial Company
and Jorge Lao Happick from the order of the Director of Forestry denying their motion
for reconsideration, OTI No. 20-'64 in the name of Wenceslao V. Tan be cancelled or
revoked on the ground that the grant thereof was irregular, anomalous and contrary to
existing forestry laws, rules and regulations.

On March 9, 1964, acting on the said representation made by Ravago Commercial

Company, the Secretary of Agriculture and Natural Resources promulgated an order
declaring Ordinary Timber License No. 20-'64 issued in the name of Wenceslao Vinzons
Tan, as having been issued by the Director of Forestry without authority, and is
therefore void ab initio. The dispositive portion of said order reads as follows:

WHEREFORE, premises considered, this Office is of the opinion and so holds that O.T.
License No. 20-'64 in the name of Wenceslao Vinzons Tan should be, as hereby it is,
REVOKED AND DECLARED without force and effect whatsoever from the issuance
thereof.

The Director of Forestry is hereby directed to stop the logging operations of Wenceslao
Vinzons Tan, if there be any, in the area in question and shall see to it that the appellee
shall not introduce any further improvements thereon pending the disposition of the
appeals filed by Ravago Commercial Company and Jorge lao Happick in this case" (pp.
30-31, CFI rec.).

Petitioner-appellant moved for a reconsideration of the order, but the Secretary of

Agriculture and Natural Resources denied the motion in an Order dated March 25,
1964, wherein this paragraph appears:

In this connection, it has been observed by the Acting Director of Forestry in his 2nd
indorsement of February 12, 1964, that the area in question composes of water basin
overlooking Olongapo, including the proposed Olongapo watershed Reservation; and
that the United States as well as the Bureau of Forestry has earmarked this entire
watershed for a watershed pilot forest for experiment treatment Concerning erosion and
water conservation and flood control in relation to wise utilization of the forest,
denudation, shifting cultivation, increase or decrease of crop harvest of agricultural
areas influenced by the watershed, etc. .... (pp. 3839, CFI rec.; p. 78, rec.).

On April 11, 1964, the Secretary of Agriculture and Natural Resources, acting on the
separate appeals filed by Jorge Lao Happick and Ravago Commercial Company, from
the order of the Director of Forestry dated April 15, 1963, awarding to Wenceslao
Vinzons Tan the area under Notive No. 2087, and rejecting the proposals of the other
applicants covering the same area, promulgated an order commenting that in view of
the observations of the Director of Forestry just quoted, "to grant the area in question to
any of the parties herein, would undoubtedly adversely affect public interest which is
paramount to private interests," and concluding that, "for this reason, this Office is of the
opinion and so holds, that without the necessity of discussing the appeals of the herein
appellants, the said appeals should be, as hereby they are, dismissed and this case is
considered a closed matter insofar as this Office is concerned" (p. 78, rec.).

On April 18, 1964, on the basis of the denial of his motion for reconsideration by the
Secretary of Agriculture and Natural Resources, petitioner-appellant filed the instant
case before tile court a quo (Court of First Instance, Manila), Special Civil Action No.
56813, a petition for certiorari, prohibition and mandamus with preliminary prohibitory
injunction (pp. 1-12, CFI rec.). Petitioner-appellant claims that the respondents-
appellees "unlawfully, illegally whimsically, capriciously and arbitrarily acted without or in
excess of their jurisdiction, and/or with grave abuse of discretion by revoking a valid and
existing timber license without just cause, by denying petitioner-appellant of the equal
protection of the laws, by depriving him of his constitutional right to property without due
process of law, and in effect, by impairing the obligation of contracts" (P. 6, CFI rec.).
Petitioner-appellant prayed for judgment making permanent the writ of preliminary
injunction against the respondents- appellees; declaring the orders of the Secretary of
Agriculture and Natural Resources dated March 9, March 25, and April 11, 1964, as well
as all his acts and those of the Director of Forestry implementing said orders, and all the
proceedings in connection therewith, null and void, unlawful and of no force and effect;
ordering the Director of Forestry to renew OTI No. 20-'64 upon expiration, and
sentencing the respondents, jointly and severally, to pay the petitioner-appellant the
sum of Two Hundred Thousand Pesos (P200,000.000) by way of pecuniary damage,
One Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary
damages, and Thirty Thousand Pesos (P30,000-00) as attorney's fees and costs. The
respondents-appellees separately filed oppositions to the issuance of the writ of
preliminary injunction, Ravago Commercial Company, Jorge Lao, Happick and Atanacio
Mallari, presented petitions for intervention which were granted, and they too opposed
the writ.

The Director of Forestry in his motion to dismiss dated April 24, 1964, alleges the
following grounds: (1) that the court has no jurisdiction; (2) that the respondents may not
be sued without their consent; (3) that the petitioner has not exhausted all available
administrative remedies; (4) that the petition does not state a cause of action; and (5)
that purely administrative and discretionary functions of administrative officials may not
be interfered with by the courts. The Secretary of Agriculture and Natural Resources
joined the motion to dismiss when in his answer of May 18, 1964, he avers the following
special and affirmative defenses: (1) that the court has no jurisdiction to entertain the
action for certiorari, prohibition and mandamus; (2) that the petitioner has no cause of
action; (3) that venue is improperly laid; (4) that the State is immune from suit without its
consent; (5) that the court has no power to interfere in purely administrative functions;
and (6) that the cancellation of petitioner's license was dictated by public policy (pp.
172-177, rec.). Intervenors also filed their respective answers in intervention with
special and affirmative defenses (pp. 78-79, rec.). A hearing was held on the petition for
the issuance of writ of preliminary injunction, wherein evidence was submitted by all the
parties including the intervenors, and extensive discussion was held both orally and in
writing.

After the said hearing, on January 20, 1965, the court a quo, from the evidence
received, resolved not only the question on the issuance of a writ of preliminary
injunction but also the motion to dismiss, declared that the petition did not state a
sufficient cause of action, and dismissed the same accordingly. To justify such action,
the trial court, in its order dismissing the petition, stated that "the court feels that the
evidence presented and the extensive discussion on the issuance of the writ of
preliminary mandatory and prohibitory injunction should also be taken into consideration
in resolving not only this question but also the motion to dismiss, because there is no
reason to believe that the parties will change their stand, arguments and evidence" (p.
478, CFI rec.). His motion for reconsideration having been denied (p. 488, CFI rec.),
petitioner-appellant Wenceslao Vinzons Tan appealed directly to this Court.

Petitioner-appellant now comes before this Court, claiming that the trial court erred in:

(1) holding that the petition does not state a sufficient cause of action: and

(2) dismissing the petition [p.27,rec. ].

He argues that the sole issue in the present case is, whether or not the facts in the
petition constitute a sufficient cause of action (p. 31, rec.). Petitioner-appellant, in his
brief, presented a lengthy discussion on the definition of the term cause of action
wherein he contended that the three essential elements thereon, — namely, the legal
right of the plaintiff, the correlative obligation of the defendants and the act or omission
of the defendant in violation of that right — are satisfied in the averments of this petition
(pp. 31-32, rec.). He invoked the rule that when the ground for dismissal is that the
complaint states no cause of action, such fact can be determined only from the facts
alleged in the complaint and from no other, and the court cannot consider other matters
aliunde He further invoked the rule that in a motion to dismiss based on insufficiency of
cause of action, the facts alleged in the complaint are deemed hypothetically admitted
for the purpose of the motion (pp. 32-33, rec.).

A perusal of the records of the case shows that petitioner-appellant's contentions are
untenable. As already observed, this case was presented to the trial court upon a
motion to dismiss for failure of the petition to state a claim upon which relief could be
granted (Rule 16 [g], Revised Rules of Court), on the ground that the timber license
relied upon by the petitioner- appellant in his petition was issued by the Director of
Forestry without authority and is therefore void ab initio. This motion supplanted the
general demurrer in an action at law and, as a rule admits, for the purpose of the
motion, ail facts which are well pleaded however while the court must accept as true all
well pleaded facts, the motion does not admit allegations of which the court will take
judicial notice are not true, nor does the rule apply to legally impossible facts, nor to
facts inadmissible in evidence, nor to facts which appear by record or document
included in the pleadings to be unfounded (Vol. 1, Moran's Comments on the Rules of
Court, 1970 ed., p. 505, citing cases).

It must be noted that there was a hearing held in the instant case wherein answers were
interposed and evidence introduced. In the course of the hearing, petitioner-appellant
had the opportunity to introduce evidence in support of tile allegations iii his petition,
which he readily availed of. Consequently, he is estopped from invoking the rule that to
determine the sufficiency of a cause of action on a motion to dismiss, only the facts
alleged in the complaint must be considered. If there were no hearing held, as in the
case of Cohen vs. U.S. CCA Minn 1942,129 F. 2d 733), "where the case was presented
to District Court upon a motion to dismiss because of alleged failure of complaint to
state a claim upon which relief could be granted, and no answer was interposed and no
evidence introduced, the only facts which the court could properly consider in passing
upon the motion were those facts appearing in the complaint, supplemented be such
facts as the court judicially knew.

In Llanto vs. Ali Dimaporo, et al. (16 SCRA 601, March 31, 1966), this Court, thru
Justice Conrado V. Sanchez, held that the trial court can properly dismiss a complaint
on a motion to dismiss due to lack of cause of action even without a hearing, by taking
into consideration the discussion in said motion and the opposition thereto. Pertinent
portion of said decision is hereby quoted:

Respondents moved to dismiss. Ground therefor is lack of cause of action. The Court
below granted the motion, dismissed the petition. The motion to reconsider failed.
Offshoot is this appeal.

1. The threshold questions are these: Was the dismissal order issued without any
hearing on the motion to dismiss? Is it void?

WE go to the record. The motion to dismiss was filed on February 1, 1961 and set for
hearing on February 10 following. On February 8, 1961 petitioner's counsel telegraphed
the court, (r)equest postponement motion dismissal till written opposition filed.' He did
not appear at the scheduled hearing. But on March 4, 1961, he followed up his wire,
with his written opposition to the motion to dismiss. Adverting to the 5-page motion to
dismiss and the 6-page opposition thereto, We find that the arguments pro and con on
the question of the board's power to abolish petitioner's position to discussed the
problem said profusely cited authorities. The May 15, 1961 8-page court order recited at
length the said arguments and concluded that petitioner made no case.

One good reason for the statutory requirement of hearing on a motion as to enable the
suitors to adduce evidence in support of their opposing claims. But here the motion to
dismiss is grounded on lack of cause of action. Existence of a cause of action or lack of
it is determined be a reference to the facts averred in the challenged pleading. The
question raised in the motion is purely one of law. This legal issue was fully discussed in
said motion and the opposition thereto. In this posture, oral arguments on the motion
are reduced to an unnecessary ceremony and should be overlooked. And, correctly so,
because the other intendment of the law in requiring hearing on a motion, i.e., 'to avoid
surprises upon the opposite party and to give to the latter time to study and meet the
arguments of the motion,' has been sufficiently met. And then, courts do not exalt form
over substance (Emphasis supplied).

Furthermore even if the complaint stated a valid cause of action, a motion to dismiss
for- insufficiency of cause of action will be granted if documentary evidence admitted by
stipulation disclosing facts sufficient to defeat the claim enabled the court to go beyond
disclosure in the complaint (LOCALS No. 1470, No. 1469, and No. 1512 of the
International Longshoremen's Association vs. Southern Pacific Co., 6 Fed. Rules
Service, p. 107; U.S. Circuit Court of Appeals, Fifth Circuit, Dec. 7, 1952; 131 F. 2d
605). Thus, although the evidence of the parties were presented on the question of
granting or denying petitioner-appellant's application for a writ of preliminary injunction,
the trial court correctly applied said evidence in the resolution of the motion to dismiss.
Moreover, in applying said evidence in the resolution of the motion to dismiss, the trial
court, in its order dismissing the petition, pointed out that, "there is no reason to believe
that the parties will change their stand, arguments and evidence" (p. 478, CFI rec.).
Petitioner-appellant did not interpose any objection thereto, nor presented new
arguments in his motion for reconsideration (pp. 482-484, CFI rec.). This omission
means conformity to said observation, and a waiver of his right to object, estopping him
from raising this question for the first time on appeal. " I question not raised in the trial
court cannot be raised for the first time on appeal" (Matienzo vs. Servidad, Sept. 10,
1981, 107 SCRA 276).

Moreover, petitioner-appellant cannot invoke the rule that, when the ground for asking
dismissal is that the complaint states no cause of action, its sufficiency must be
determined only from the allegations in the complaint. "The rules of procedure are not to
be applied in a very rigid, technical sense; rules of procedure are used only to help
secure substantial justice. If a technical and rigid enforcement of the rules is made, their
aim would be defeated. Where the rules are merely secondary in importance are made
to override the ends of justice; the technical rules had been misapplied to the prejudice
of the substantial right of a party, said rigid application cannot be countenanced" (Vol. 1,
Francisco, Civil Procedure, 2 ed., 1973, p. 157, citing cases).

What more can be of greater importance than the interest of the public at large, more
particularly the welfare of the inhabitants of Olongapo City and Zambales province,
whose lives and properties are directly and immediately imperilled by forest denudation.

The area covered by petitioner-appellant's timber license practically comprises the

entire Olongapo watershed (p. 265, CFI rec.). It is of public knowledge that watersheds
serves as a defense against soil erosion and guarantees the steady supply of water. As
a matter of general policy, the Philippine Constitution expressly mandated the
conservation and proper utilization of natural resources, which includes the country's
watershed. Watersheds in the Philippines had been subjected to rampant abusive
treatment due to various unscientific and destructive land use practices. Once lush
watersheds were wantonly deforested due to uncontrolled timber cutting by licensed
concessionaries and illegal loggers. This is one reason why, in paragraph 27.of the
rules and regulations included in the ordinary timber license it is stated:

The terms and conditions of this license are subject to change at the discretion of the
Director of Forestry, and that this license may be made to expire at an earlier date,
when public interests so require (Exh. D, p. 22, CFI rec.).

Considering the overriding public interest involved in the instant case, We therefore take
judicial notice of the fact that, on April 30, 1964, the area covered by petitioner-
appellant's timber license has been established as the Olongapo Watershed Forest
Reserve by virtue of Executive Proclamation No. 238 by then President Diosdado
Macapagal which in parts read as follows:

Pursuant to the provisions of Section 1824 of the Revised Administrative Code, as

amended, 1, Diosdado Macapagal, President of the Philippines do hereby withdraw
from entry, sale, or settlement and establish as Olongapo Watershed Forest Reserve
for watershed, soil protection, and timber production purposes, subject to private rights,
if any there be, under the administration and control of the Director of Forestry, xx the
following parcels of land of the public domain situated in the municipality of Olongapo,
province of Zambales, described in the Bureau of Forestry map No. FR-132, to wit: ... ...
(60 O.G. No. 23, 3198).

Petitioner-appellant relies on Ordinary Timber License No. 20-'64 (NEW) for his alleged
right over the timber concession in question. He argues thus: "The facts alleged in the
petition show: (1) the legal right of the petitioner to log in the area covered by his timber
license; (2) the legal or corresponding obligation on the part of the respondents to give
effect, recognize and respect the very timber license they issued to the petitioner; and
(3) the act of the respondents in arbitrarily revoking the timber license of the petitioner
without giving him his day in court and in preventing him from using and enjoying the
timber license issued to him in the regular course of official business" (p. 32, rec.).

In the light of petitioner-appellant's arguments, it is readily seen that the whole

controversy hinges on the validity or invalidity of his timber license.

WE fully concur with the findings of the trial court that petitioner- appellant's timber
license was signed and released without authority by then Acting Director Estanislao R.
Bernal of Forestry, and is therefore void ab initio. WE hereby quote such findings:

In the first place, in general memorandum order No. 46 dated May 30, 1963, the
Director of Forestry was authorized to grant a new ordinary timber license only where
the area covered thereby was not more than 3,000 hectares; the tract of public forest
awarded to the petitioner contained 6,420 hectares (Exhs. 2-A and 2-B Ravago,
embodied in Annex B; Exh. B). The petitioner contends that only 1,756 hectares of the
said area contain commercial and operable forest; the authority given to the Director of
Forestry to grant a new ordinary timber license of not more than 3,000 hectares does
not state that the whole area should be commercial and operable forest. It should be
taken into consideration that the 1,756 hectares containing commercial and operable
forest must have been distributed in the whole area of 6,420 hectares. Besides the
license states, 'Please see attached sketch and technical description,' gives an area of
6,420 hectares and does not state what is the area covered of commmercial and
operable forest (Exh. Ravago Also Annex B of the petition, which was marked as Exhibit
B, states:

Under Notice No. 2087, a tract of public forest containing 6,420 hectares located in
Olongapo, Zambales was declared available for timber utilization and development.
Pursuant to this Notice, there were received bid proposals from the following persons: ...

Wherefore, confirming the findings of said Committee, the area described in Notice No.
2087 shall be awarded, as it is hereby awarded to Wenceslao Vinzons Tan, subject to
the following conditions: ... ...

In the second place, at the time it was released to the petitioner, the Acting Director of
Forestry had no more authority to grant any license. The license was signed by the
Acting Director of Forestry on December 19, 1963, and released to the petitioner on
January 6, 1964 (Exh. RavaGo The authority delegated to the Director of Forestry to
grant a new ordinary timber license was contained in general memorandum order No.
46 dated May 30, 1963. This was revoked by general memorandum order No. 60, which
was promulgated on December 19, 1963. In view thereof, the Director of Forestry had
no longer any authority to release the license on January 6, 1964, and said license is
therefore void ab initio (pp. 479480, CFI rec.).

The release of the license on January 6, 1964, gives rise to the impression that it was
ante-dated to December 19, 1963 on which date the authority of the Director of Forestry
was revoked. But, what is of greatest importance is the date of the release or issuance,
and not the date of the signing of the license. While petitioner-appellant's timber license
might have been signed on December 19, 1963 it was released only on January 6,
1964. Before its release, no right is acquired by the licensee. As pointed out by the trial
court, the Director of Forestry had no longer any authority to release the license on
January 6, 1964. Therefore, petitioner-appellant had not acquired any legal right under
such void license. This is evident on the face of his petition as supplemented by its
annexes which includes Ordinary Timber License No. 20-'64 (NEW). Thus, in the case
of World Wide Insurance & Surety Co., Inc. vs. Macrohon, et al. (105 Phil. 250, Feb. 28,
1959), this Court held that if from the face of the complaint, as supplemented by its
annexes, plaintiff is not the owner, or entitled to the properties it claims to have been
levied upon and sold at public auction by the defendants and for which it now seeks
indemnity, the said complaint does not give plaintiff any right of action against the
defendants. In the same case, this Court further held that, in acting on a motion to
dismiss, the court cannot separate the complaint from its annexes where it clearly
appears that the claim of the plaintiff to be the A owner of the properties in question is
predicated on said annexes. Accordingly, petitioner-appellant's petition must be
dismissed due to lack of cause of action.

II

Petitioner-appellant, in his petition, alleged that he has exhausted all his administrative
remedies to no avail as respondents-appellees have failed, neglected, refused and
continue to refuse to allow petitioner-appellant to continue operation in the area covered
by his timber license. He further alleged that he has neither recourse by way of appeal,
nor any plain, speedy and adequate remedy in the ordinary course of law except thru
this special civil action, as the last official act of the respondent-appellee Secretary of
Agriculture and Natural Resources in declaring void the timber license referred to above
after denying petitioner-appellant's motion for reconsideration, is the last administrative
act. Petitioner-appellant relies on the case of Demaisip vs. The Court of Appeals, et al.
(106 Phil. 237, Sept. 24, 1959), wherein it was held that the failure of the plaintiff to
appeal from the adverse decision of the Secretary to the President cannot preclude the
plaintiff from taking court action in view of the theory that the Secretary of a department
is merely an alter-ego of the President. The presumption is that the action of the
Secretary bears the implied sanction of the President unless the same is disapproved
by the latter (Villena vs. the Secretary of Interior, 67 Phil. 451; p. 7, CFI rec.).

To this We cannot agree. Petitioner-appellant did not appeal the order of the respondent
Secretary of Agriculture and Natural Resources to the President of the Philippines, who
issued Executive Proclamation No. 238 withdrawing the area from private exploitation,
and establishing it as the Olongapo Watershed Forest Reserve. Considering that the
President has the power to review on appeal the orders or acts of the respondents-
appellees, the failure of the petitioner-appellant to take that appeal is failure on his part
to exhaust his administrative remedies. Thus, this Court, in the case of Calo vs. Fuertes
(5 SCRA 399, 400, June 29, 1962), held that:

At any rate, the appellant's contention that, as the Secretary of Agriculture and Natural
Resources is the alter ego of the President and his acts or decisions are also those of
the latter, he need not appeal from the decision or opinion of the former to the latter,
and that, such being the case, after he had appealed to the Secretary of Agriculture and
Natural Resources from the decision or opinion of the Director of Lands he had
exhausted the administrative remedies, is untenable.

The withdrawal of the appeal taken to the President of the Philippines is tantamount to
not appealing all thereto. Such withdrawal is fatal, because the appeal to the President
is the last step he should take in an administrative case.

In 1912, in the case of Lamb vs. Phipps (22 Phil. 491-92, July 22, 1912), this Court
stressed the doctrine of exhaustion of administrative remedies, thus:

When a plain, adequate and speedy remedy is afforded by and within the executive
department of the government the courts will not interfere until at least that remedy has
been exhausted. Jao Igco vs. Shuster, 10 Phil. Rep. 448; Ekiu vs. U.S., 142 U.S. 651;
U.S. vs. Sing Tuck, 194 U.S. 161; U.S. vs. Ju Toy 198 U.S. 253; Chill Yow vs. U.S., 28
Sup. Ct. Rep. 201). The administrative remedies afforded by law must first be
exhausted before resort can be had to the courts, especially when the administrative
remedies are by law exclusive and final. Some matters and some questions are by law
delegated entirely and absolutely to the discretion of particular branches of the
executive department of the government. When the law confers exclusive and final
jurisdiction upon the executive department of the government to dispose of particular
questions, their judgments or the judgments of that particular department are no more
reviewable by the courts than the final judgment or decisions of the courts are subject to
be reviewed and modified by them" (emphasis supplied).

Moreover, this being a special civil action, petitioner-appellant must allege and prove
that he has no other speedy and adequate remedy (Diego vs. The Court of Appeals, et
al., 54 Off. Gaz., No. 4, 956). In the case at bar, petitioner- appellant's speedy and
adequate remedy is an appeal to the President of the Philippines.

Accordingly, "it is settled to the point of being elementary that the only question involved
n certiorari is jurisdiction, either want of jurisdiction or excess thereof, and abuse of
discretion shall warrant the issuance of the extraordinary remedy of certiorari when the
same is so grave as when the power is exercised in an arbitrary or despotic manner by
reason of passion, prejudice or personal hostility, and it must be so patent and gross as
to amount to an evasion of positive duty, or to a virtual refusal to perform a duty
enjoined, or to act at all in contemplation of law" FS Divinagracia Agro-Commercial Inc.
vs. Court of Appeals, 104 SCRA 191 [April .1, 1981]). The foregoing is on the
assumption that there is any irregularity, albeit there is none in the acts or omissions of
the respondents-appellees. certiorari is not a substitute for appeal as held time and
again by this Court (People vs. Villanueva, 110 SCRA 465), "it being a time honored
and well known principle that before seeking judicial redress, a party must first exhaust
the administrative remedies available" (Garcia vs. Teehankee, 27 SCRA 944, April 18,
1969).

Moreover, from the decision of the Secretary of Agriculture and Natural Resources
complained of, petitioners had a plain, speedy and adequate remedy by appealing
therefrom to the Chief Executive. In other words, before filing the present action for
certiorari in the court below, they should have availed of this administrative remedy and
their failure to do so must be deemed fatal to their case [Calo vs. Fuertes, et al., G.R.
No. L-16537, June 29,1962]. To place petitioners' case beyond the pale of this rule, they
must show that their case falls — which it does not — within the cases where, in
accordance with our decisions, the aggrieved party need not exhaust administrative
remedies within his reach in the ordinary course of the law [Tapales vs. The President
and the Board of Regents of the U.P., G.R. No. L-17532, March 30, 1963; Mangubat vs.
Osmena, G.R. No. L- 12837, April 30, 1959; Baguio vs. Hon. Jose Rodriguez, G. R. No.
L-11078, May 27, 1959; Pascual vs. Provincial Board, G.R. No. L-11959, Oct. 31, 1959;
Marinduque Iron Mines, etc. vs. Secretary of Public Works, G.R. No. L-15982, May 31,
1963; Alzate vs. Aldaba, G.R. No. L-14407, Feb. 29, 1960 and Demaisip vs. Court of
Appeals, G.R. No. L- 13000, Sept. 25, 1959] (Ganob vs. Ramas, 27 SCRA 1178, April
28, 1969).

III

Petitioner-appellant not only failed to exhaust his administrative remedies, but also
failed to note that his action is a suit against the State which, under the doctrine of State
immunity from suit, cannot prosper unless the State gives its consent to be sued
Kawananakoa vs. Polybank, 205 U.S. 349; Siren vs. U.S., 7 Wall. 152; Sec. 16, Art. XV,
1973 Constitution).

The respondents-appellees, in revoking the petitioner-appellant's timber license, were

acting within the scope of their authority. Petitioner-appellant contends that "this case is
not a suit against the State but an application of a sound principle of law whereby
administrative decisions or actuations may be reviewed by the courts as a protection
afforded the citizens against oppression" (p. 122, CFI rec.). But, piercing the shard of
his contention, We find that petitioner-appellant's action is just an attempt to circumvent
the rule establishing State exemption from suits. He cannot use that principle of law to
profit at the expense and prejudice of the State and its citizens. The promotion of public
welfare and the protection of the inhabitants near the public forest are property, rights
and interest of the State. Accordingly, "the rule establishing State exeraiption from suits
may not be circumvented by directing the action against the officers of the State instead
of against the State itself. In such cases the State's immunity may be validly invoked
against the action as long as it can be shown that the suit really affects the property,
rights, or interests of the State and not merely those of the officer nominally made party
defendant" (SINCO, Phil. Political Law, 10th ed., p. 35; Salgado vs. Ramos, 64 Phil.
724; see also Angat River Irrigation System vs. Angat River Workers' Union, G.R. No. L-
10943-44, Dec. 28, 1957, 102 Phil. 789, 800-802; Mobil PhiL vs. Customs Arrastre
Service, 18 SCRA 1120, 1121-1125; Bureau of Printing vs. Bureau of Printing
Employees' Association, 1 SCRA 340, 341, 343).

Both the Secretary of Agriculture and Natural Resources and the Director of Forestry
acted in their capacity as officers of the State, representatives of the sovereign authority
discharging governmental powers. A private individual cannot issue a timber license.

Consequently, a favorable judgment for the petitioner-appellant would result in the

government losing a substantial part of its timber resources. This being the case,
petitioner-appellant's action cannot prosper unless the State gives its consent to be
sued.

IV

Granting arguendo, that petitioner-appellant's timber license is valid, still respondents-

appellees can validly revoke his timber license. As pointed out earlier, paragraph 27 of
the rules and regulations included in the ordinary timber license states: "The terms and
conditions of this license are subject to change at the discretion of the Director of
Forestry, and that this license may be made to expire at an earlier date, when public
interests so require" (Exh. D, p. 22, CFI rec.). A timber license is an instrument by which
the State regulates the utilization and disposition of forest resources to the end that
public welfare is promoted. A timber license is not a contract within the purview of the
due process clause; it is only a license or privilege, which can be validly withdrawn
whenever dictated by public interest or public welfare as in this ceise

"A license is merely a permit or privilege to do what otherwise would be unlawful, and is
not a contract between the authority, federal, state, or municipal, granting it and the
person to whom it is granted; neither is it property or a property right, nor does it create
a vested right; nor is it taxation" (37 C.J. 168). Thus, this Court held that the granting of
license does not create irrevocable rights, neither is it property or property rights
(People vs. Ong Tin 54 O.G. 7576). In the case of Pedro vs. Provincial Board of Rizal
(56 Phil. 123), it was held that:

A license authorizing the operation and exploitation of a cockpit is not property of which
the holder may not be deprived without due process of law, but a mere privilege which
may be revoked when public interests so require.

The welfare of the people is the supreme law. Thus, no franchise or right can be availed
of to defeat the proper exercise of police power (Surigao Electric Co., Inc. vs.
Municipality of Surigao, 24 SCRA 898, Aug. 30, 1968). The State has inherent power
enabling it to prohibit all things hurtful to comfort, safety, and welfare of society (Edu vs.
Ericta, 35 SCRA 481, Oct. 24,1970).

As provided in the aforecited provision, timber licenses are subject to the authority of
the Director of Forestry. The utilization and disposition of forest resources is directly
under the control and supervision of the Director of Forestry. However, "while Section
1831 of the Revised Administrative Code provides that forest products shall be cut,
gathered and removed from any forest only upon license from the Director of Forestry, it
is no less true that as a subordinate officer, the Director of Forestry is subject to the
control of the Department Head or the Secretary of Agriculture and Natural Resources
(See. 79[c], Rev. Adm. Code), who, therefore, may impose reasonable regulations in
the exercise of the powers of the subordinate officer" (Director of Forestry vs.
Benedicto, 104 SCRA 309, May 5, 1981). The power of control of the Department Head
over bureaus and offices includes the power to modify, reverse or set aside acts of
subordinate officials (Province of Pangasinan vs. Secretary of Public Works and
Communications, 30 SCRA 134, Oct. 31, 1969; Montano vs. Silvosa, 97 Phil. 143, 144,
147-148). Accordingly, respondent-appellee Secretary of Agriculture and Natural
Resources has the authority to revoke, on valid grounds, timber licenses issued by the
Director of Forestry. There being supporting evidence, the revocation of petitioner-
appellant's timber license was a wise exercise of the power of the respondent- appellee
(Secretary of Agriculture and Natural Resources) and therefore, valid.
Thus, "this Court had rigorously adhered to the principle of conserving forest resources,
as corollary to which the alleged right to them of private individuals or entities was
meticulously inquired into and more often than not rejected. We do so again" (Director
of Forestry vs. Benedicto, supra). WE reiterate Our fidelity to the basic policy of
conserving the national patrimony as ordained by the Constitution.

WHEREFORE, IN VIEW OF ALL THE FOREGOING, THE ORDER APPEALED FROM

IS HEREBY .AFFIRMED IN TOTO. COSTS AGAINST PETITIONER-APPELLANT.

SO ORDERED,