AIR TRANSPORTATION OFFICE, G.R. No.

159402
Petitioner,  
  Present:
   
  BRION, Acting Chairperson,**
- versus - BERSAMIN,
  ABAD,***
  VILLARAMA, JR., and
  SERENO, JJ.
SPOUSES DAVID* and  
ELISEA RAMOS, Promulgated:
Respondents. February 23, 2011
x-----------------------------------------------------------------------------------------x
 
RESOLUTION
 
BERSAMIN, J.:
 
The States immunity from suit does not extend to the petitioner because it is an agency of the State engaged in an
enterprise that is far from being the States exclusive prerogative.
 
Under challenge is the decision promulgated on May 14, 2003,[1] by which the Court of Appeals (CA) affirmed with
modification the decision rendered on February 21, 2001 by the Regional Trial Court, Branch 61 (RTC), in Baguio City in
favor of the respondents.[2]
Antecedents
 
Spouses David and Elisea Ramos (respondents) discovered that a portion of their land registered under Transfer
Certificate of Title No. T-58894 of the Baguio City land records with an area of 985 square meters, more or less, was
being used as part of the runway and running shoulder of the Loakan Airport being operated by petitioner Air
Transportation Office (ATO). On August 11, 1995, the respondents agreed after negotiations to convey the affected
portion by deed of sale to the ATO in consideration of the amount of P778,150.00. However, the ATO failed to pay despite
repeated verbal and written demands.
 
Thus, on April 29, 1998, the respondents filed an action for collection against the ATO and some of its officials in
the RTC (docketed as Civil Case No. 4017-R and entitled Spouses David and Elisea Ramos v. Air Transportation Office,
Capt. Panfilo Villaruel, Gen. Carlos Tanega, and Mr. Cesar de Jesus).
 
In their answer, the ATO and its co-defendants invoked as an affirmative defense the issuance of Proclamation
No. 1358, whereby President Marcos had reserved certain parcels of land that included the respondents affected portion
for use of the Loakan Airport. They asserted that the RTC had no jurisdiction to entertain the action without the States
consent considering that the deed of sale had been entered into in the performance of governmental functions.
On November 10, 1998, the RTC denied the ATOs motion for a preliminary hearing of the affirmative defense.
 
After the RTC likewise denied the ATOs motion for reconsideration on December 10, 1998, the ATO commenced
a special civil action for certiorari in the CA to assail the RTCs orders. The CA dismissed the petition for certiorari,
however, upon its finding that the assailed orders were not tainted with grave abuse of discretion.[3]
 
Subsequently, February 21, 2001, the RTC rendered its decision on the merits,[4] disposing:
 
WHEREFORE, the judgment is rendered ORDERING the defendant Air Transportation Office to pay the
plaintiffs DAVID and ELISEA RAMOS the following: (1) The amount of P778,150.00 being the value of the
parcel of land appropriated by the defendant ATO as embodied in the Deed of Sale, plus an annual
interest of 12% from August 11, 1995, the date of the Deed of Sale until fully paid; (2) The amount
of P150,000.00 by way of moral damages and P150,000.00 as exemplary damages; (3) the amount
 of P50,000.00 by way of attorneys fees plus P15,000.00 representing the 10, more or less, court
appearances of plaintiffs counsel; (4) The costs of this suit.
 
SO ORDERED.
 
In due course, the ATO appealed to the CA, which affirmed the RTCs decision on May 14, 2003,[5] viz:
 
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby AFFIRMED,
with MODIFICATION that the awarded cost therein is deleted, while that of moral and exemplary
damages is reduced to P30,000.00 each, and attorneys fees is lowered to P10,000.00.
No cost.
SO ORDERED.
 
Hence, this appeal by petition for review on certiorari.
 
Issue
 
The only issue presented for resolution is whether the ATO could be sued without the States consent.
 
 
Ruling
 
The petition for review has no merit.
 
The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-suability of the State, is
expressly provided in Article XVI of the 1987 Constitution, viz:
 
Section 3. The State may not be sued without its consent.
 
The immunity from suit is based on the political truism that the State, as a sovereign, can do no wrong. Moreover,
as the eminent Justice Holmes said in Kawananakoa v. Polyblank:[6]
 
The territory [of Hawaii], of course, could waive its exemption (Smith v. Reeves, 178 US 436, 44 L ed
1140, 20 Sup. Ct. Rep. 919), and it took no objection to the proceedings in the cases cited if it could have
done so. xxx But in the case at bar it did object, and the question raised is whether the plaintiffs were
bound to yield. Some doubts have been expressed as to the source of the immunity of a sovereign power
from suit without its own permission, but the answer has been public property since before the days of
Hobbes. Leviathan, chap. 26, 2. A sovereign is exempt from suit, not because of any formal
conception or obsolete theory, but on the logical and practical ground that there can be no legal
right as against the authority that makes the law on which the right depends. Car on peut bien
recevoir loy d'autruy, mais il est impossible par nature de se donner loy. Bodin, Republique, 1, chap. 8,
ed. 1629, p. 132; Sir John Eliot, De Jure Maiestatis, chap. 3. Nemo suo statuto ligatur
necessitative. Baldus, De Leg. et Const. Digna Vox, 2. ed. 1496, fol. 51b, ed. 1539, fol. 61.[7]
 
Practical considerations dictate the establishment of an immunity from suit in favor of the State. Otherwise, and
the State is suable at the instance of every other individual, government service may be severely obstructed and public
safety endangered because of the number of suits that the State has to defend against. [8] Several justifications have been
offered to support the adoption of the doctrine in the Philippines, but that offered in Providence Washington Insurance Co.
v. Republic of the Philippines[9]  is the most acceptable explanation, according to Father Bernas, a recognized
commentator on Constitutional Law,[10] to wit:
 
[A] continued adherence to the doctrine of non-suability is not to be deplored for as against the
inconvenience that may be caused 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
obstacle, could very well be imagined.
 
An unincorporated government agency without any separate juridical personality of its own enjoys immunity from
suit because it is invested with an inherent power of sovereignty. Accordingly, a claim for damages against the agency
cannot prosper; otherwise, the doctrine of sovereign immunity is violated.[11] However, the need to distinguish between an
unincorporated government agency performing governmental function and one performing proprietary functions has
arisen. The immunity has been upheld in favor of the former because its function is governmental or incidental to such
function;[12] it has not been upheld in favor of the latter whose function was not in pursuit of a necessary function of
government but was essentially a business.[13]
 
Should the doctrine of sovereignty immunity or non-suability of the State be extended to the ATO?
 
In its challenged decision,[14] the CA answered in the negative, holding:
 
On the first assignment of error, appellants seek to impress upon Us that the subject contract of
sale partook of a governmental character. Apropos, the lower court erred in applying the High Courts
ruling in National Airports Corporation vs. Teodoro (91 Phil. 203  [1952]), arguing that in Teodoro, the
matter involved the collection of landing and parking fees which is a proprietary function, while the case at
bar involves the maintenance and operation of aircraft and air navigational facilities and services which
are governmental functions.
 
We are not persuaded.
 
Contrary to appellants conclusions, it was not merely the collection of landing and parking fees
which was declared as proprietary in nature by the High Court in Teodoro, but management and
maintenance of airport operations as a whole, as well. Thus, in the much later case of Civil Aeronautics
Administration vs. Court of Appeals (167 SCRA 28 [1988]), the Supreme Court, reiterating the
pronouncements laid down in Teodoro, declared that the CAA (predecessor of ATO) is an agency not
immune from suit, it being engaged in functions pertaining to a private entity. It went on to explain in this
wise:
 
xxx
 
The Civil Aeronautics Administration comes under the category of a private
entity. Although not a body corporate it was created, like the National Airports Corporation,
not to maintain a necessary function of government, but to run what is essentially a
business, even if revenues be not its prime objective but rather the promotion of travel and
the convenience of the travelling public. It is engaged in an enterprise which, far from
being the exclusive prerogative of state, may, more than the construction of public roads,
be undertaken by private concerns. [National Airports Corp. v. Teodoro, supra, p. 207.]
 
xxx
 
True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec.
Order 365 (Reorganizing the Civil Aeronautics Administration and Abolishing the National
Airports Corporation). Republic Act No. 776 (Civil Aeronautics Act of the Philippines),
subsequently enacted on June 20, 1952, did not alter the character of the CAAs objectives
under Exec. Order 365. The pertinent provisions cited in the Teodoro case, particularly
Secs. 3 and 4 of Exec. Order 365, which led the Court to consider the CAA in the category
of a private entity were retained substantially in Republic Act 776, Sec. 32(24) and
(25). Said Act provides:
  
Sec. 32. Powers and Duties of the Administrator. Subject to the general control and
supervision of the Department Head, the Administrator shall have among others, the
following powers and duties:
 
xxx
(24) To administer, operate, manage, control, maintain and develop the Manila
International Airport and all government-owned aerodromes except those controlled or
operated by the Armed Forces of the Philippines including such powers and duties as: (a) to
plan, design, construct, equip, expand, improve, repair or alter aerodromes or such
structures, improvement or air navigation facilities; (b) to enter into, make and execute
contracts of any kind with any person, firm, or public or private corporation or entity;
 
(25) To determine, fix, impose, collect and receive landing fees, parking space fees,
royalties on sales or deliveries, direct or indirect, to any aircraft for its use of aviation
gasoline, oil and lubricants, spare parts, accessories and supplies, tools, other royalties,
fees or rentals for the use of any of the property under its management and control.
 
xxx
 
From the foregoing, it can be seen that the CAA is tasked with private or non-
governmental functions which operate to remove it from the purview of the rule on State
immunity from suit. For the correct rule as set forth in the Teodoro case states:
 
xxx
 
Not all government entities, whether corporate or non-corporate, are immune from
suits. Immunity from suits is determined by the character of the objects for which the entity
was organized. The rule is thus stated in Corpus Juris:
 
Suits against State agencies with relation to matters in which they have
assumed to act in private or non-governmental capacity, and various suits
against certain corporations created by the state for public purposes, but to
engage in matters partaking more of the nature of ordinary business rather
than functions of a governmental or political character, are not regarded as
suits against the state. The latter is true, although the state may own stock or
property of such a corporation for by engaging in business operations
through a corporation, the state divests itself so far of its sovereign character,
and by implication consents to suits against the corporation. (59 C.J., 313)
[National Airports Corporation v. Teodoro, supra, pp. 206-207; Italics
supplied.]
 
This doctrine has been reaffirmed in the recent case of Malong v. Philippine National
Railways [G.R. No. L-49930, August 7, 1985, 138 SCRA 63], where it was held that the
Philippine National Railways, although owned and operated by the government, was not
immune from suit as it does not exercise sovereign but purely proprietary and business
functions. Accordingly, as the CAA was created to undertake the management of airport
operations which primarily involve proprietary functions, it cannot avail of the immunity
from suit accorded to government agencies performing strictly governmental functions.[15]
 
In our view, the CA thereby correctly appreciated the juridical character of the ATO as an agency of the
Government not performing a purely governmental or sovereign function, but was instead involved in the management
and maintenance of the Loakan Airport, an activity that was not the exclusive prerogative of the State in its sovereign
capacity. Hence, the ATO had no claim to the States immunity from suit. We uphold the CAs aforequoted holding.
  
We further observe the doctrine of sovereign immunity cannot be successfully invoked to defeat a valid claim for
compensation arising from the taking without just compensation and without the proper expropriation proceedings being
first resorted to of the plaintiffs property.[16] Thus, in De los Santos v. Intermediate Appellate Court,[17]the trial courts
dismissal based on the doctrine of non-suability of the State of two cases (one of which was for damages) filed by owners
of property where a road 9 meters wide and 128.70 meters long occupying a total area of 1,165 square meters and an
artificial creek 23.20 meters wide and 128.69 meters long occupying an area of 2,906 square meters had been
constructed by the provincial engineer of Rizal and a private contractor without the owners knowledge and consent was
reversed and the cases remanded for trial on the merits. The Supreme Court ruled that the doctrine of sovereign immunity
was not an instrument for perpetrating any injustice on a citizen. In exercising the right of eminent domain, the Court
explained, the State exercised its jus imperii, as distinguished from its proprietary rights, or jus gestionis; yet, even in that
area, where private property had been taken in expropriation without just compensation being paid, the defense of
immunity from suit could not be set up by the State against an action for payment by the owners.
 
Lastly, the issue of whether or not the ATO could be sued without the States consent has been rendered moot by
the passage of Republic Act No. 9497, otherwise known as the Civil Aviation Authority Act of 2008.
 
R.A. No. 9497 abolished the ATO, to wit:
 
Section 4. Creation of the Authority. There is hereby created an independent regulatory body with
quasi-judicial and quasi-legislative powers and possessing corporate attributes to be known as the Civil
Aviation Authority of the Philippines (CAAP), herein after referred to as the Authority attached to the
Department of Transportation and Communications (DOTC) for the purpose of policy coordination. For
this purpose, the existing Air transportation Office created under the provisions of Republic Act
No. 776, as amended is hereby abolished.
xxx
 
Under its Transitory Provisions, R.A. No. 9497 established in place of the ATO the Civil Aviation Authority of the
Philippines (CAAP), which thereby assumed all of the ATOs powers, duties and rights, assets, real and personal
properties, funds, and revenues, viz:
 
CHAPTER XII
TRANSITORTY PROVISIONS
Section 85. Abolition of the Air Transportation Office. The Air Transportation Office (ATO) created
under Republic Act No. 776, a sectoral office of the Department of Transportation and Communications
(DOTC), is hereby abolished.
 
All powers, duties and rights vested by law and exercised by the ATO is hereby transferred to
the Authority.
 
 
All assets, real and personal properties, funds and revenues owned by or vested in the different
offices of the ATO are transferred to the Authority. All contracts, records and documents relating to
the operations of the abolished agency and its offices and branches are likewise transferred to the
Authority. Any real property owned by the national government or government-owned corporation
or authority which is being used and utilized as office or facility by the ATO shall be transferred and
titled in favor of the Authority.
Section 23 of R.A. No. 9497 enumerates the corporate powers vested in the CAAP, including the power to sue
and be sued, to enter into contracts of every class, kind and description, to construct, acquire, own, hold, operate,
maintain, administer and lease personal and real properties, and to settle, under such terms and conditions most
advantageous to it, any claim by or against it.[18]
 
With the CAAP having legally succeeded the ATO pursuant to R.A. No. 9497, the obligations that the ATO had incurred
by virtue of the deed of sale with the Ramos spouses might now be enforced against the CAAP.
 
WHEREFORE, the Court denies the petition for review on certiorari, and affirms the decision promulgated by the Court of
Appeals.
 
No pronouncement on costs of suit.
 
SO ORDERED.
 
 
 
LUCAS P. BERSAMIN
Associate Justice
 
 
 
WE CONCUR:
 
ARTURO D. BRION
Associate Justice
Acting Chairperson
 
 
 
 
ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.
Associate Justice Associate Justice
 
 
 
 
MARIA LOURDES P. A. SERENO
Associate Justice
 
 
ATTESTATION
 
I attest that the conclusions in the above Resolution had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
 
 
ARTURO D. BRION
Associate Justice
Acting Chairperson
 
CERTIFICATION
 
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the
conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.
 
 
RENATO C. CORONA
Chief Justice
 
G.R. No. 203834               July 9, 2014

HEIRS OF DIOSDADO M. MENDOZA, namely: LICINIA V. MENDOZA, PETER VAL V. MENDOZA, CONSTANCIA V.
MENDOZA YOUNG, CRISTINA V. MENDOZA FIGUEROA, DIOSDADO V. MENDOZA, JR., JOSEPHINE V. MENDOZA
JASA, and RIZALINA V. MENDOZA PUSO, Petitioners, 
vs.
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and the DPWH SECRETARY, Respondents.

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review on certiorari1 assailing the 20 June 2012 Decision2 and the 15 October 2012
Resolution3 of the Court of Appeals in CA-G.R. CV No. 86433. The Court of Appeals set aside the 29 October 2001
Decision4 of the Regional.Trial Court of Manila, Branch 36, in Civil Case No. 90-53649.

The Antecedent Facts

The case stemmed from an action for specific performance and damages, with prayer for preliminary injunction, filed by
Diosdado M. Mendoza (Mendoza), doing businessunder the name and style of D’ Superior Builders (Superior Builders)
against the defendants Department of Public Works and Highways (DPWH), then DPWH Secretary Fiorello R. Estuar
(Estuar), Undersecretary Edmundo V. Mir (Mir), Nestor Abarca (Abarca), United Technologies, Inc. (UTI), UTI’s President
Pedro Templo (Templo) and UTI’s Project Manager Rodante Samonte (Samonte). The case was docketed as Civil Case
No. 90-53649.

Mendoza was the winning bidder for the construction of the 15-kilometer Madaymen Masala Amsuling Road in Benguet
and the engineers’ quarters and laboratory, designatedas Package VI, of the Highland Agriculture Development Project
(HADP). His total bid for materials and labor was ₱16,176,878.58. He was also the winning bidder for the construction of
the 15-kilometer barangay roads (Sinipsip-Akiki, SinipsipMaalad, and Madaymen) in Benguet, designated as Package IX
of the HADP, with a bid of ₱10,527,192.14. The DPWH hired UTI as consultant for Packages VI and IX, under the direct
charge of Templo and Samonte.

On 2 March 1989, Mendoza received the Notice to Proceed for Package VI of the HADP. During the pre-construction
survey, Mendoza alleged that he discovered that the whole stretch of the 15-kilometer project had no right-of-way, in
violation of Ministry Order No. 65. He brought the matter to the attention of the DPWH and UTI but according to him, it
was only resolved on 29 November 1989 when the affected landowners and farmers allowed passage at Mendoza’s risk.
Mendoza alleged that the defendants, except for Estuar, conspired to make it appear that Superior Builders incurred
negative slippage of29% and recommended the forfeiture of the contract.

Mendoza further alleged that as regards Package IX, the DPWH did not execute any contract despite the Superior
Builders’ compliance with all the post-evaluation requirements. The DPWH also recommended the rebidding of Package
IX. Package IX was, in effect, canceled together with the forfeiture of the contract for Package VI. The DPWH blacklisted
the Superior Builders from participating inany bidding or entering into any contract with it for a period of one year.

On 2 August 1990, the Regional Trial Court of Manila, Branch 36 (trial court) issued a Temporary Restraining Order
enjoining the defendants from rebidding Package VI and fromawarding Package IX to another contractor, and to cease
and desistfrom withholding the equipment of Superior Builders.

On 20 August 1990, the DPWH, Estuar, Mir and Abarca filed an opposition to the prayer for the issuance of a preliminary
injunction, citing Section 1 of Presidential Decree No. 1818 that the trial court has no jurisdiction to issue a writ of
preliminary injunction. They likewise alleged that Superior Builders failed to exhaust its administrative remedies. They
further alleged that the owner of the road, GregorioAbalos (Abalos) issued a certification that he never disallowed
passage to Superior Builders’ vehicles and equipment and road right-of-way was never a problem. They also alleged that
Superior Builders started mobilization from 12 to 15 July 1989 and resumed its operationsfor one week in December
1989. They also alleged that on 20 November 1989, the Office of the Sangguniang Panlalawiganof Benguet passed
Resolution No. 1176 recommending the termination of the contract between the DPWH and Superior Builders. They
reiterated the allegations in their Opposition in their Answer.
For their part, UTI, Templo and Samonte alleged that Superior Builders had 10 calendar days to commence with the
project from the time it received the Notice to Proceed on 2 March 1989 or until 12 March 1989 but it failed to do so. They
alleged that Superior Builders only mobilized one bulldozer and one loader out of the 47 units required in the contract.
They alleged that at the time of the filing of the case, Superior Builders had only mobilized eight units, a majority of which
were not working. They alleged that Superior Builders failed to mobilize sufficient number of materials, equipment and
personnel and that by 25 October 1989, it already incurred negative slippage of 27.97% that they were compelled to
recommend the termination of the contract for Package VI and rebidding of Package IX.

The Decision of the Trial Court

In its 29 October 2001 Decision, the trial court ruled that the termination of the contract over Package VI and the non-
award of Package IX to Superior Builders were arbitrary and unjustified. The trial court ruled that under the original plan,
Package VI was inaccessible from the starting point which is a privately-owned road. The trial court ruled that there was
no showing of any attempt by the government to secure right-of-way by expropriation or other legal means. The trial court
held that Superior Builders could not be faulted for its failure to perform the obligation within the stipulated period because
the DPWH made it impossible by its failure to acquire the necessary right-of-way and as such, nonegative slippage could
be attributed to Superior Builders. The trial court further ruled that inentering into a contract, the DPWH divested itself of
immunity from suit and assumed the character of an ordinary litigant.

The dispositive portion of the trial court’s decision reads:

WHEREFORE, judgment is hereby rendered ordering defendants Department of Public Works and Highway thru its
Secretary, United Technologies, Inc. and Rodante Samonte to pay plaintiff Diosdado M. Mendoza, jointly and severally,
₱1,565,317.70 as reimbursement for materials and labor on the accomplishment and ₱1,617,187.86 performance bond
forfeited, ₱8,817,926.00 as rental value for eight (8) units of equipment for twenty-six (26) months from December 21,
1989 to January 24, 1992 at ₱339,151.00 per month, with interest at the legal rate until fully paid; ₱300,000.00 for moral
damages, ₱150,000.00 for attorney’s fees, and costs.

The writ of preliminary injunction earlier issued is declared moot and academic but defendant Department of Public Works
and Highways thru its Secretary is ordered to turn over to plaintiff, and the latter is authorized to take delivery of the
construction equipment still under the control of the DPWH.

The counterclaim of the private defendants not being substantiated is dismissed.

SO ORDERED.5

The DPWH and the DPWH Secretary (respondents before us) appealed from the trial court’s decision.

The Decision of the Court of Appeals

In its 20 June 2012 Decision, the Court of Appeals set aside the trial court’s decision and dismissed Mendoza’s complaint
for specific performance and damages for lack of merit.

The Court of Appeals ruled that the DPWH’s forfeiture order of Package VI of the HADP as well asthe non-award of
Package IX to Superior Builders was justified. The Court of Appeals found that Superior Builders incurred a negative
slippage of31.852%, which is double the limit set by the government under DPWH Circular No. 102, series of 1988.
Tracing the slippages incurred by Superior Builders,the Court of Appeals declared:

As early as May 25, 1989, or about two (2) months after the notice to proceed was issued, defendant UTI,the consultant
for the government’s HADP, issued a "first warning"to plaintiff-appellee D’ Superior Builders for having already incurred a
slippage of 7.648% due to late implementation, with time elapseof 13.80%. Defendant UTI instructed plaintiff-appellee D’
Superior Builders to submit a "catch-up" program to address the slippage.

Subsequently, on June 25, 1989, plaintiff-appellee D’ Superior Builders incurred a slippage of 11.743% with
corresponding time elapse of 19.63% (106 days from effectivityof contract) and was given a "second warning."

On July 25, 1989, the negative slippage reached 16.32%, with corresponding time elapse of 25.18% (136 days from
effectivity of the contract). As a consequence, plaintiff-appellee D’ Superior Builders was issued a "final warning."
In its August 11, 1989 letter, defendant UTI reminded plaintiffappellee D’ Superior Builders of itsprevious instructions to
bring the construction materials for the engineers’ quarters, office, and laboratory. Defendant UTI noted:

"We could not find reasons why you cannot immediately bring your construction materials at site, 50 kms. from Baguio
City, whenin fact, there [were] [continuous] deliveries of some construction materials under Contract Package XI, whose
site is located 102 kms. from Baguio City." Thereafter, on September 25, 1989, the negative slippage of plaintiff-appellee
D’ Superior Builders reached 21.109% with elapsed time of 36.66% (equivalent to 198 calendar days), or already at
"terminal stage" pursuant to DPWH Circular No. 102. Defendant UTI, thus, urged plaintiff-appellee D’ Superior Builders to
show positive actions and speed up its operations, otherwise the former would be compelled to recommend the
termination of its contract.

The following month, on October 25, 1989, plaintiff-appellee D’ Superior Builders’ negative slippage reached 27.970%,
still at "terminal stage."The consultant mentioned several reasons for the slippage, such as: (1) late implementation of
construction of the engineers’ building, (2) non-implementation of work itemsdue to lack or non-operational equipment as
site, and (3) continued absence of plaintiff-appellee’s Project Manager.

In November 1989, the negative slippage of plaintiff-appellee D’ Superior Builders was already 31.852%, or more than
double the limit of what is considered as being at "terminal stage", which is 15%.6

Superior Builders’ performance prompted the Sangguniang Panlalawigan of the Province of Benguet to pass a Resolution
on 20 November 1989 recommending the termination of the contract for Package VI that also eventually led to the
forfeiture of the contract for Package VI. The Court of Appeals noted that there were letters and monthly conferences
where UTI, through Samonte and UTI’s Resident Engineer Federico Vinson, Jr. (Vinson), consistently reminded Superior
Builders of its obligations and deficiencies. The Court of Appeals concluded that the delay in the execution of Package VI
was due to Superior Builders’ delay, particularly its failure to mobilize itspersonnel and equipment to the project site.

The Court of Appeals ruled that the area where there was a right-ofway problem was only the first 3.2 kilometers of the
15.5-kilometer project. Hence, Superior Builders could have worked on the other areas and the right-of-way issue could
not justify the 31.852% negative slippage it incurred. The Court of Appeals faulted the trial court for skirting the issue on
state immunity from suit. The Court of Appeals ruled that there should be a distinction whether the DPWH entered the
contracts for Package VI and Package XI in its governmental or proprietary capacity. In this case, the Court of Appeals
ruled that the DPWH’s contractual obligation was made in the exercise of its governmental functions and was imbued with
public interest.

The dispositive portion of the Court of Appeals’ decision reads:

WHEREFORE, premises considered, the appeal is GRANTED. The assailed Decision dated October 29, 2001 of the
Regional Trial Court (RTC), National Capital Judicial Region, Branch 36, Manila in Civil Case No. 90-53649 is hereby
REVERSED and SET ASIDE. Plaintiff-appellee’s complaint for specific performanceand damages with prayer for
preliminary injunction is hereby DISMISSED for lack of merit. No costs.

SO ORDERED.7

The heirs of Mendoza, namely, Licinia V. Mendoza, Peter Val V. Mendoza, Constancia V. Mendoza Young, Cristina V.
Mendoza Figueroa, Diosdado V. Mendoza, Jr., Josephine V. Mendoza Jasa, and Rizalina V. Mendoza Puso (petitioners
in this case)filed a motion for reconsideration, at the same time seeking to substitute Mendoza as the plaintiff-appellee in
view of Mendoza’s death on 25 April 2005 during the pendency of the case before the Court of Appeals.

In its 15 October 2012 Resolution, the Court of Appeals granted the motion for substitution. In the same resolution, the
Court of Appeals denied the motion for reconsideration for lack of merit.

The Court of Appeals ruled that first, petitioners were not denied due process when they were not informed that the case
was re-raffled when the original ponenteinhibited himself from the case. The Court of Appeals ruled that there was no
requirement of notification under Section 2(b), Rule III of the Internal Rules of the Court of Appeals (IRCA). Further, the
action on the inhibition was attached to the rolloand duly paged in compliance with Section 4, Rule V of the IRCA.
Second, the Court of Appeals ruled that contrary to petitioners’ claim, the issue on the absence of road right-of-way was
considered in its 20 June 2012 decision. The Court of Appeals emphasized that under DPWH CircularNo. 102, series of
1988, the allowable rate of slippage is only 15%. In this case, Superior Builders reached 31.852% negative slippage and
thus, the termination of the contract was justified. The Court of Appeals noted that Abalos issued a certification that he
never disallowed the passage of Superior Builders’ vehicles and equipment. The Court of Appeals alsonoted that as early
as May 1989, Superior Builders was instructed to carry out road works where there were no right-of-way problems. Third,
the Court of Appeals ruled that mere entering into a contract by the government does not automatically amount to a
waiver of immunity from suit. The Court of Appeals ruled that in this case, the road construction was in the exercise of the
DPWH’s governmental functions. The Court of Appeals also ruled that it was established that Superior Builders was at
fault and thatit exceeded the allowable limit of slippage set by law. Petitioners came to thisCourt assailing the 20 June
2012 Decision and 15 October 2012 Resolution ofthe Court of Appeals.

The Issues

Petitioners raise two issues before us:

(1) Whether the Court of Appeals committed a reversible error in ruling that the forfeiture of the contract in
Package VI of HADP and the non-payment of the cost of materials, labor on the accomplishment and the rental
value of the heavy equipment were justified; and

(2) Whether the Court of Appeals committed a reversible error in ruling that the DPWH has no juridical personality
of its own and that Mendoza’s action was a suit against the State.

The Ruling of this Court

We deny the petition.

On Negative Slippages

The first issue raised by petitionersrequires a review of the negative slippages incurred by Superior Builders and the
reasons for the slippages.

The records of the case showed thatSuperior Builders incurred the following negative slippages:

1. As of 25 May 1989 – 7.648%

2. As of 25 June 1989 - 11.743%

3. As of 25 July 1989 – 16.32%

4. As of 25 September 1989 - 21.109%

5. As of 25 October 1989 – 27.970%

6. As of November 1989 - 31.852%

Presidential Decree No. 1870,series of 1983 (PD 1870),8 states:

1. Whenever a contractor is behind schedule in its contract work and incur 15% or more negative slippage based on its
approved PERT/CPM, the implementing agency, at the discretion of the Minister concerned, may undertake by
administration the whole ora portion of the unfinished work, or have the whole or a portion of such unfinished work done
by another qualified contractor through negotiated contract at the current valuation price.

Undeniably, the negative slippage incurred by Superior Builders, which reached 31.852%, far exceeded the allowable
slippage under PD 1870.

Under Department Order No. 102,series of 1988 (DO 102),9 the following calibrated actions are required to be done for
infrastructure projects that reached certain levels of negative slippage:

1. Negative slippage of 5% ("Early Warning" Stage): The contractor shall be given a warning and required to
submit a "catch-up" program to eliminate the slippage. The PM/RD/DE10 shall provide thorough supervision and
monitoring of the work.
 2. Negative slippage of 10% ("ICU" Stage): The contractor shall be given a second warning and required to
submit a detailed action program on a fortnightly (two weeks) basis which commits him to accelerate the work and
accomplish specific physical targets which will reduce the slippage over a defined time period. Furthermore, the
contractor shall be instructed to specify the additional input resources – money, manpower, materials, machines,
and management – which he should mobilize for this action program. The PM/RD/DE shall exercise closer
supervision and meet the contractor every other week toevaluate the progress of work and resolve any problems
and bottlenecks.

3. Negative slippage of 15% ("Make-or-Break" Stage): The contractor shall be issued a final warning and required
to come up with a more detailed program of activities with weekly physical targets, together with the required
additional input resources. On-site supervision shall be done at least once a week. At the sametime, the
PM/RD/DE shall prepare contingency plans for the termination/rescission of the contract and/or take-over of the
work by administration or contract.

4. Negative slippage beyond 15% ("Terminal" Stage): The PM/RD/DE shall initiate termination/rescission of the
contract and/or take-over of the remaining work byadministration orassignment to another contractor/appropriate
agency. Proper transitory measures shall be taken to minimize work disruptions, e.g., take-over by administration
while rebidding is going on. The discretion of the DPWH to terminate or rescind the contract comes into play when
the contractor shall have incurreda negative slippage of 15% or more.11

In this case, Superior Builders was warned of its considerable delay in the implementation of the project as early as 29
April 198912 when the progress slippage reached 4.534% due to the late implementation of the project. Thereafter,
Superior Builders received the first,13 second14 and final15 warnings when the negative slippages reached 7.648%,
11.743% and 16.32%, respectively. By the time the contract was terminated, the negative slippage already reached
31.852% or more than twice the terminal stage under DO 102.

Petitioners claimed that the negative slippages were attributable to the government. Petitioners cited the right-of-way
problem because the construction site was privately owned.The construction of the building for the field office laboratory
and engineers’ quarters was also delayed because it took months for the DPWH to approve the revision of the building
layout.

We note that Superior Builders received the Notice to Proceed dated 22 February 1989 on 2 March 1989.16 The Notice to
Proceed stated that "the number of days allowable under [the] contract will be counted from the date [the contractor]
commence[s] work or not later than the 8th of March 1989."17 On 17 April 1989, more thana month after the project was
supposed to start, Mendoza wrote Templo that Superior Builders would start the construction of Package VI and that their
"Survey Team [would] immediately start the preconstruction survey of the project x x x."18In two separate letters dated
27April 1989, both addressed to Samonte, Mendoza informed UTI that: (1) there was an existing building on the site
where the bunkhouse was supposed to be constructed, which had to be cleared and demolished first; and (2) the first
fivekilometers of Package VI allegedly belonged to private residents who were asking for compensation before they could
proceed with the road construction.19

The right-of-way problem was confirmed in a letter dated 2 May 1989 sent by Vinson to DPWH Director Heraldo B. Daway
of the Cordillera Administrative Region.20 In a letter dated 9 May 1989 addressed to "The Project Manager," Mendoza
requested for the temporary suspension of work effective 22 April 1989 due to the right-of-way problem regarding the first
five kilometers of the project.21 Samonte denied the request in a letter dated 24 May 1989 on the ground that Superior
Builders can carry out work in sections without right-of-way conflict. Samonte likewise reminded Superior Builders to
mobilize all the required construction resources in order not to prejudice its performance on the project.22

Apparently, despite the denial of its request for temporary suspension of work, Superior Builders did not mobilize all the
required resources as directed by Samonte. In a letter dated 15 June 1989 to Mir, Mendoza stated that Superior Builders
had started the "mobilization of equipment and personnel since last week,"23 meaning, the mobilization of the construction
resources started on the first week ofJune. However, in a letter dated 24 June 1989, Vinson called the Superior Builders’
attention that as of 21 June 1989, it only mobilized one dozer and one loader at the jobsite.24

The Minutes of the Meeting dated 7 July 198925 showed that Gloria Areniego (Areniego), the Superior Builders’
representative, assured the delivery of additional equipment on site"next week" or the second week of July. The minutes
also showed that Superior Builders was again advised to start working on the sections not affected by the right-of-way
problem.26 In addition, Samonte asked Areniego for the time when Superior Builders would start the demolition of the
building where the engineers’ office and quarters would be built. Areniego promised that it would start on July
14.27 However, Superior Builders still failed to comply, prompting Vinson to send another letter dated 22 July 1989 to
Superior Builders, noting that "since the arrival of your One (1) unit Dozer and One (1) unit Loader last 21 June 1989, no
other construction equipment had been mobilized on site to date."28

The right-of-way problem turned out to affect only the first 3.2 kilometers of the project. However, as the Court of Appeals
pointed out, Superior Builders was not able to go beyond the 3.2 kilometers because of the limited equipment it mobilized
on the project site. Further, the Court of Appeals noted that Superior Builders’ bulldozer broke down after three days of
work, proving that Superior Builders had been remiss in its responsibilities as a contractor. In addition, Abalos denied in a
certification that he disallowed the passage of Superior Builders’ vehicles and equipment on the road within his property
from the time of the commencement of the contract in March 1989.29

In short, Superior Builders could have proceeded with the project, as it was constantly reminded to do so, but it capitalized
on the right-of-way problem to justify its delays.

In a letter30 dated 2 October 1989 by Bial A. Palaez (Palaez), Provincial Planning and Development Coordinator,
addressed to Benguet Provincial Governor Andres R. Bugnosen (Bugnosen), Palaez informed Bugnosen that when he
visited the project with Kibungan Mayor Albert Mayamnes on 14 July 1989, they observed the following: (1) Superior
Builders only constructed 100linear meters of road at Masala; (2) there was no sign of work activity; and (3) there were
only one bulldozer, one payloader and a fiera on the project site, which were all under repair and not functional. When
they visited the project on 31 August 1989, there were no activities and they were not able to meet the project engineer or
the workers on the project site. In addition, the construction of the building for engineering purposes had not started as of
27 September 1989. Thus, the Provincial Government of Benguet passed Resolution No. 117631 on 20 November 1989
recommending to the DPWH the "Termination of Contract or Disqualification of Contractor Pertinent to HADP Project."

Given the foregoing, the DPWH was justified in forfeiting Package VI for Superior Builders’ failure to comply with its
contractual obligations. We also note that Package IX of the HADP was tied to the completion of Package VI because the
Asian Development Bank could not approve the award of Package IX to Superior Builders unless its work on Package VI
was satisfactory to the DPWH.32 This explains why Package IX had to be rebid despite the initial award of the project to
Superior Builders.

The Court of Appeals likewise correctly ruled that the DPWH should not be made to pay for the rental of the unserviceable
equipment of Superior Builders. The Court of Appeals noted that (1) Superior Builders failed to mobilize its equipment
despite having the first 7.5% advance payment under the contract, and (2) even when the trial court issueda temporary
restraining order on 2 August 1990 in favor of Superior Builders, it failed to remove the equipment from the project site. As
regards the delivery and value of the materials, the Court of Appeals found that the supposed delivery was only signed by
Areniego without verification from UTI’s Quantity Engineer and Resident Engineer. Thus, we agree with the Court of
Appeals that Superior Builders should be made tobear its own losses.

On Governmental v. Proprietary Functions

Petitioners assail the Court of Appeals’ ruling that the contract entered into by the DPWH was made in the exercise of its
governmental, not proprietary, function and was imbued with public interest. Petitioners likewise assail the Court of
Appeals’ ruling that the DPWH has no juridical personality of its own and thus, the suit was against the agency’s principal,
the State. Petitioners further argue that the DPWH entered into a contract with Mendoza and by its act of entering into a
contract, it already waived its immunity from suit.

The doctrine of immunity from suit is anchored on Section 3, Article XVI of the 1987 Constitution which provides:

Section 3. The State may not besued without its consent.

The general rule is that a state may not be sued, but it may be the subject of a suit if it consents to be sued, either
expressly or impliedly.33 There is express consent when a law so provides, while there is implied consent when the State
enters into a contract or it itself commences litigation.34 This Court explained that in order to determine implied waiver
when the State or its agency entered into a contract, there is a need to distinguish whether the contract was entered into
in its governmental or proprietary capacity, thus:

x x x. However, it must be clarified that when a state enters into a contract, it does not automatically mean that it has
waived its nonsuability. The State "will be deemedto have impliedly waived its nonsuability [only] if it has entered into a
contract in its proprietary or private capacity. [However,] when the contract involves its sovereign or governmental
capacity[,] x x x no suchwaiver may be implied." Statutory provisions waiving [s]tate immunity are construed in strictissimi
juris. For, waiver of immunity is in derogation of sovereignty.35
In Air Transportation Office v. Ramos,36 the Court expounded:

An unincorporated agency without any separate juridical personality of its own enjoys immunityfrom suit because it is
invested with an inherent power of sovereignty. x x x. However, the need to distinguish between an unincorporated
government agency performing governmental function and one performing proprietary functions has arisen. The immunity
has been upheld in favor of the former because its function is governmental or incidentalto such function; it has not been
upheld in favor of the latter whose function was not in pursuit of a necessary function of government but was essentially a
business.37

Having made this distinction, wereiterate that the DPWH is an unincorporated government agency without any separate
juridical personality of its own and it enjoys immunity from suit.38 The then Ministry of Public Works and Highways, now
DPWH, was created under Executive Order No. 710, series of 1981 (EO 710). EO 710 abolished the old Ministry of
PublicWorks and the Ministry of Public Highways and transferred their functions to the newly-created Ministry of Public
Works of Highways. Section 4 of EO 710 provides:

SECTION 4. The Ministry shall exercise supervision and control over the following staff bureaus which are created in the
Ministry:

(1) Bureau of Construction, which shall provide technical services on the construction, rehabilitation, betterment,
and improvement of infrastructure facilities;

(2) Bureau of Design, which shall undertake project development, engineering surveys, and designs of
infrastructure facilities;

(3) Bureau of Equipment, which shall provide technical services on the management of construction and
maintenance equipment and ancillary facilities;

(4) Bureau of Maintenance, which shall provide technical services on the maintenance and repair of infrastructure
facilities; and

(5) Bureau of Materials and Quality Control, which shall provide research and technical services on quality control
and on the management of materials plants and ancillary facilities for the production and processing of
construction materials.

The Ministry of Public Works and Highways was later reorganized under Executive Order No. 124, series of 1987 (EO
124). Under Section 5 of EO 124, the Ministry shall have the following powersand functions:

Sec. 5. Powers and Functions. — The Ministry, in order to carry out its mandate, shall have the following powers and
functions:

(a) Provide technical services for the planning, design, construction, maintenance, and/or operation of
infrastructure facilities;

(b) Develop and implement effective codes, standards, and reasonable guidelines to ensure the safety of all
public and private structures in the country and assure efficiency and proper quality in the construction of public
works;

(c) Ascertain that all public works plans and project implementation designs are consistent with current standards
and guidelines;

(d) Identify, plan, secure funding for, program, design, construct or undertake prequalification, bidding, and award
of contracts of public works projects with the exception only of specialized projects undertaken by Government
corporate entities withestablished technical capability and as directed by the President of the Philippines or as
provided by law;

(e) Provide the works supervision function for all public works construction and ensure that actual construction is
done in accordance with approved government plans and specifications;
 (f) Assist other agencies, including the local governments, in determining the most suitable entity to undertake the
actual construction of public works and projects;

(g) Maintain or cause to be maintained all highways, flood control, and other public works throughout the country
except those that are the responsibility of other agencies as directed by the President of the Philippines as
provided by law;

(h) Provide an integrated planning for highways, flood control and water resource development systems, and
other public works;

(i) Classify roads and highways intonational, regional, provincial, city, municipal, and barangay roads and
highways, based on objective criteria it shall adopt; provide or authorize the conversion of roads and highways
from one category to another;

(j) Delegate, to any agency it determines to have the adequate technical capability, any of the foregoing powers
and functions.

It is clear from the enumeration of its functions that the DPWH performs governmental functions. Section 5(d) states that it
has the power to "[i]dentify, plan, secure funding for, program, design, construct or undertake prequalification, bidding,
and award of contracts of public works projects x x x" while Section 5(e) states that itshall "[p]rovide the works supervision
function for all public works constructionand ensure that actual construction is done in accordance with approved
government plans and specifications."

The contracts that the DPWH entered into with Mendoza for the construction of Packages VI and IX of the HADP were
done in the exercise of its governmental functions. Hence, petitioners cannot claim that there was an implied waiver by
the DPWH simply by entering into a contract.1âwphi1 Thus, the Court of Appeals correctly ruled that the DPWH enjoys
immunity from suit and may not be sued without its consent.

WHEREFORE, we DENY the petition. We AFFIRM the 20 June 2012 Decision and the 15 October 2012 Resolution of the
Court of Appeals in CA-G.R. CV. No. 86433.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice

MARIANO C. DEL CASTILLO JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION
Pursuant to Section 13, Article· VIII of the Constitution, and the Division Chairperson's Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice
 [G.R. No. 142396. February 11, 2003]

KHOSROW MINUCHER, petitioner, vs. HON. COURT OF APPEALS and ARTHUR SCALZO, respondents.

DECISION
VITUG, J.:

Sometime in May 1986, an Information for violation of Section 4 of Republic Act No. 6425, otherwise also known as
the Dangerous Drugs Act of 1972, was filed against petitioner Khosrow Minucher and one Abbas Torabian with the
Regional Trial Court, Branch 151, of Pasig City. The criminal charge followed a buy-bust operation conducted by the
Philippine police narcotic agents in the house of Minucher, an Iranian national, where a quantity of heroin, a prohibited
drug, was said to have been seized. The narcotic agents were accompanied by private respondent Arthur Scalzo who
would, in due time, become one of the principal witnesses for the prosecution. On 08 January 1988, Presiding Judge
Eutropio Migrino rendered a decision acquitting the two accused.
On 03 August 1988, Minucher filed Civil Case No. 88-45691 before the Regional Trial Court (RTC), Branch 19, of
Manila for damages on account of what he claimed to have been trumped-up charges of drug trafficking made by Arthur
Scalzo. The Manila RTC detailed what it had found to be the facts and circumstances surrounding the case.

"The testimony of the plaintiff disclosed that he is an Iranian national. He came to the Philippines to study in the University
of the Philippines in 1974. In 1976, under the regime of the Shah of Iran, he was appointed Labor Attach for the Iranian
Embassies in Tokyo, Japan and Manila, Philippines. When the Shah of Iran was deposed by Ayatollah Khomeini, plaintiff
became a refugee of the United Nations and continued to stay in the Philippines. He headed the Iranian National
Resistance Movement in the Philippines.

He came to know the defendant on May 13, 1986, when the latter was brought to his house and introduced to him by a
certain Jose Iigo, an informer of the Intelligence Unit of the military. Jose Iigo, on the other hand, was met by plaintiff at
the office of Atty. Crisanto Saruca, a lawyer for several Iranians whom plaintiff assisted as head of the anti-Khomeini
movement in the Philippines.

During his first meeting with the defendant on May 13, 1986, upon the introduction of Jose Iigo, the defendant expressed
his interest in buying caviar. As a matter of fact, he bought two kilos of caviar from plaintiff and paid P10,000.00 for
it. Selling caviar, aside from that of Persian carpets, pistachio nuts and other Iranian products was his business after the
Khomeini government cut his pension of over $3,000.00 per month. During their introduction in that meeting, the
defendant gave the plaintiff his calling card, which showed that he is working at the US Embassy in the Philippines, as a
special agent of the Drug Enforcement Administration, Department of Justice, of the United States, and gave his address
as US Embassy, Manila. At the back of the card appears a telephone number in defendants own handwriting, the number
of which he can also be contacted.

It was also during this first meeting that plaintiff expressed his desire to obtain a US Visa for his wife and the wife of a
countryman named Abbas Torabian. The defendant told him that he [could] help plaintiff for a fee of $2,000.00 per visa.
Their conversation, however, was more concentrated on politics, carpets and caviar. Thereafter, the defendant promised
to see plaintiff again.

On May 19, 1986, the defendant called the plaintiff and invited the latter for dinner at Mario's Restaurant at Makati. He
wanted to buy 200 grams of caviar. Plaintiff brought the merchandize but for the reason that the defendant was not yet
there, he requested the restaurant people to x x x place the same in the refrigerator. Defendant, however, came and
plaintiff gave him the caviar for which he was paid.Then their conversation was again focused on politics and business.

On May 26, 1986, defendant visited plaintiff again at the latter's residence for 18 years at Kapitolyo, Pasig. The defendant
wanted to buy a pair of carpets which plaintiff valued at $27,900.00. After some haggling, they agreed at $24,000.00. For
the reason that defendant did not yet have the money, they agreed that defendant would come back the next day. The
following day, at 1:00 p.m., he came back with his $24,000.00, which he gave to the plaintiff, and the latter, in turn, gave
him the pair of carpets.
At about 3:00 in the afternoon of May 27, 1986, the defendant came back again to plaintiff's house and directly proceeded
to the latter's bedroom, where the latter and his countryman, Abbas Torabian, were playing chess. Plaintiff opened his
safe in the bedroom and obtained $2,000.00 from it, gave it to the defendant for the latter's fee in obtaining a visa for
plaintiff's wife. The defendant told him that he would be leaving the Philippines very soon and requested him to come out
of the house for a while so that he can introduce him to his cousin waiting in a cab. Without much ado, and without putting
on his shirt as he was only in his pajama pants, he followed the defendant where he saw a parked cab opposite the
street. To his complete surprise, an American jumped out of the cab with a drawn high-powered gun. He was in the
company of about 30 to 40 Filipino soldiers with 6 Americans, all armed. He was handcuffed and after about 20 minutes in
the street, he was brought inside the house by the defendant. He was made to sit down while in handcuffs while the
defendant was inside his bedroom. The defendant came out of the bedroom and out from defendant's attach case, he
took something and placed it on the table in front of the plaintiff. They also took plaintiff's wife who was at that time at the
boutique near his house and likewise arrested Torabian, who was playing chess with him in the bedroom and both were
handcuffed together. Plaintiff was not told why he was being handcuffed and why the privacy of his house, especially his
bedroom was invaded by defendant. He was not allowed to use the telephone. In fact, his telephone was unplugged. He
asked for any warrant, but the defendant told him to `shut up. He was nevertheless told that he would be able to call for
his lawyer who can defend him.

The plaintiff took note of the fact that when the defendant invited him to come out to meet his cousin, his safe was opened
where he kept the $24,000.00 the defendant paid for the carpets and another $8,000.00 which he also placed in the safe
together with a bracelet worth $15,000.00 and a pair of earrings worth $10,000.00. He also discovered missing upon his
release his 8 pieces hand-made Persian carpets, valued at $65,000.00, a painting he bought for P30,000.00 together with
his TV and betamax sets. He claimed that when he was handcuffed, the defendant took his keys from his wallet. There
was, therefore, nothing left in his house.

That his arrest as a heroin trafficker x x x had been well publicized throughout the world, in various newspapers,
particularly in Australia, America, Central Asia and in the Philippines. He was identified in the papers as an international
drug trafficker. x x x

In fact, the arrest of defendant and Torabian was likewise on television, not only in the Philippines, but also in America
and in Germany. His friends in said places informed him that they saw him on TV with said news.

After the arrest made on plaintiff and Torabian, they were brought to Camp Crame handcuffed together, where they were
detained for three days without food and water."[1]

During the trial, the law firm of Luna, Sison and Manas, filed a special appearance for Scalzo and moved for
extension of time to file an answer pending a supposed advice from the United States Department of State and
Department of Justice on the defenses to be raised. The trial court granted the motion. On 27 October 1988, Scalzo filed
another special appearance to quash the summons on the ground that he, not being a resident of the Philippines and the
action being one in personam, was beyond the processes of the court. The motion was denied by the court, in its order of
13 December 1988, holding that the filing by Scalzo of a motion for extension of time to file an answer to the complaint
was a voluntary appearance equivalent to service of summons which could likewise be construed a waiver of the
requirement of formal notice. Scalzo filed a motion for reconsideration of the court order, contending that a motion for an
extension of time to file an answer was not a voluntary appearance equivalent to service of summons since it did not seek
an affirmative relief. Scalzo argued that in cases involving the United States government, as well as its agencies and
officials, a motion for extension was peculiarly unavoidable due to the need (1) for both the Department of State and the
Department of Justice to agree on the defenses to be raised and (2) to refer the case to a Philippine lawyer who would be
expected to first review the case.The court a quo denied the motion for reconsideration in its order of 15 October 1989.
Scalzo filed a petition for review with the Court of Appeals, there docketed CA-G.R. No. 17023, assailing the
denial. In a decision, dated 06 October 1989, the appellate court denied the petition and affirmed the ruling of the trial
court. Scalzo then elevated the incident in a petition for review on certiorari, docketed G.R. No. 91173, to this Court. The
petition, however, was denied for its failure to comply with SC Circular No. 1-88; in any event, the Court added, Scalzo
had failed to show that the appellate court was in error in its questioned judgment.
Meanwhile, at the court a quo, an order, dated 09 February 1990, was issued (a) declaring Scalzo in default for his
failure to file a responsive pleading (answer) and (b) setting the case for the reception of evidence. On 12 March 1990,
Scalzo filed a motion to set aside the order of default and to admit his answer to the complaint. Granting the motion, the
trial court set the case for pre-trial. In his answer, Scalzo denied the material allegations of the complaint and raised the
affirmative defenses (a) of Minuchers failure to state a cause of action in his complaint and (b) that Scalzo had acted in
the discharge of his official duties as being merely an agent of the Drug Enforcement Administration of the United States
Department of Justice.Scalzo interposed a counterclaim of P100,000.00 to answer for attorneys' fees and expenses of
litigation.
 Then, on 14 June 1990, after almost two years since the institution of the civil case, Scalzo filed a motion to dismiss
the complaint on the ground that, being a special agent of the United States Drug Enforcement Administration, he was
entitled to diplomatic immunity. He attached to his motion Diplomatic Note No. 414 of the United States Embassy, dated
29 May 1990, addressed to the Department of Foreign Affairs of the Philippines and a Certification, dated 11 June 1990,
of Vice Consul Donna Woodward, certifying that the note is a true and faithful copy of its original. In an order of 25 June
1990, the trial court denied the motion to dismiss.
On 27 July 1990, Scalzo filed a petition for certiorari  with injunction with this Court, docketed G.R. No. 94257 and
entitled "Arthur W. Scalzo, Jr., vs. Hon. Wenceslao Polo, et al.," asking that the complaint in Civil Case No. 88-45691 be
ordered dismissed. The case was referred to the Court of Appeals, there docketed CA-G.R. SP No. 22505, per this Courts
resolution of 07 August 1990. On 31 October 1990, the Court of Appeals promulgated its decision sustaining the
diplomatic immunity of Scalzo and ordering the dismissal of the complaint against him. Minucher filed a petition for review
with this Court, docketed G.R. No. 97765 and entitled "Khosrow Minucher vs. the Honorable Court of Appeals, et. al.
(cited in 214 SCRA 242), appealing the judgment of the Court of Appeals. In a decision, dated 24 September 1992,
penned by Justice (now Chief Justice) Hilario Davide, Jr., this Court reversed the decision of the appellate court and
remanded the case to the lower court for trial. The remand was ordered on the theses (a) that the Court of Appeals erred
in granting the motion to dismiss of Scalzo for lack of jurisdiction over his person without even considering the issue of the
authenticity of Diplomatic Note No. 414 and (b) that the complaint contained sufficient allegations to the effect that Scalzo
committed the imputed acts in his personal capacity and outside the scope of his official duties and, absent any evidence
to the contrary, the issue on Scalzos diplomatic immunity could not be taken up.
The Manila RTC thus continued with its hearings on the case. On 17 November 1995, the trial court reached a
decision; it adjudged:

WHEREFORE, and in view of all the foregoing considerations, judgment is hereby rendered for the plaintiff, who
successfully established his claim by sufficient evidence, against the defendant in the manner following:

"`Adjudging defendant liable to plaintiff in actual and compensatory damages of P520,000.00; moral damages in the sum
of P10 million; exemplary damages in the sum of P100,000.00; attorney's fees in the sum of P200,000.00 plus costs.

`The Clerk of the Regional Trial Court, Manila, is ordered to take note of the lien of the Court on this judgment to answer
for the unpaid docket fees considering that the plaintiff in this case instituted this action as a pauper litigant."[2]

While the trial court gave credence to the claim of Scalzo and the evidence presented by him that he was a
diplomatic agent entitled to immunity as such, it ruled that he, nevertheless, should be held accountable for the acts
complained of committed outside his official duties. On appeal, the Court of Appeals reversed the decision of the trial
court and sustained the defense of Scalzo that he was sufficiently clothed with diplomatic immunity during his term of duty
and thereby immune from the criminal and civil jurisdiction of the Receiving State pursuant to the terms of the Vienna
Convention.
Hence, this recourse by Minucher. The instant petition for review raises a two-fold issue: (1) whether or not the
doctrine of conclusiveness of judgment, following the decision rendered by this Court in G.R. No. 97765, should have
precluded the Court of Appeals from resolving the appeal to it in an entirely different manner, and (2) whether or not
Arthur Scalzo is indeed entitled to diplomatic immunity.
The doctrine of conclusiveness of judgment, or its kindred rule of res judicata, would require 1) the finality of the prior
judgment, 2) a valid jurisdiction over the subject matter and the parties on the part of the court that renders it, 3) a
judgment on the merits, and 4) an identity of the parties, subject matter and causes of action.[3] Even while one of the
issues submitted in G.R. No. 97765  - "whether or not public respondent Court of Appeals erred in ruling that private
respondent Scalzo is a diplomat immune from civil suit conformably with the Vienna Convention on Diplomatic Relations" -
is also a pivotal question raised in the instant petition, the ruling in G.R. No. 97765, however, has not resolved that point
with finality. Indeed, the Court there has made this observation -

"It may be mentioned in this regard that private respondent himself, in his Pre-trial Brief filed on 13 June 1990,
unequivocally states that he would present documentary evidence consisting of DEA records on his investigation and
surveillance of plaintiff and on his position and duties as DEA special agent in Manila. Having thus reserved his right to
present evidence in support of his position, which is the basis for the alleged diplomatic immunity, the barren self-serving
claim in the belated motion to dismiss cannot be relied upon for a reasonable, intelligent and fair resolution of the issue of
diplomatic immunity."[4]

Scalzo contends that the Vienna Convention on Diplomatic Relations, to which the Philippines is a signatory, grants
him absolute immunity from suit, describing his functions as an agent of the United States Drugs Enforcement Agency as
conducting surveillance operations on suspected drug dealers in the Philippines believed to be the source of prohibited
drugs being shipped to the U.S., (and) having ascertained the target, (he then) would inform the Philippine narcotic agents
(to) make the actual arrest." Scalzo has submitted to the trial court a number of documents -

1. Exh. '2' - Diplomatic Note No. 414 dated 29 May 1990;

2. Exh. '1' - Certification of Vice Consul Donna K. Woodward dated 11 June 1990;

3. Exh. '5' - Diplomatic Note No. 757 dated 25 October 1991;

4. Exh. '6' - Diplomatic Note No. 791 dated 17 November 1992; and

5. Exh. '7' - Diplomatic Note No. 833 dated 21 October 1988.

6. Exh. '3' - 1st Indorsement of the Hon. Jorge R. Coquia, Legal Adviser, Department of Foreign Affairs, dated 27 June
1990 forwarding Embassy Note No. 414 to the Clerk of Court of RTC Manila, Branch 19 (the trial court);

7. Exh. '4' - Diplomatic Note No. 414, appended to the 1st Indorsement (Exh. '3'); and

8. Exh. '8' - Letter dated 18 November 1992 from the Office of the Protocol, Department of Foreign Affairs, through
Asst. Sec. Emmanuel Fernandez, addressed to the Chief Justice of this Court.[5]

The documents, according to Scalzo, would show that: (1) the United States Embassy accordingly advised the
Executive Department of the Philippine Government that Scalzo was a member of the diplomatic staff of the United States
diplomatic mission from his arrival in the Philippines on 14 October 1985 until his departure on 10 August 1988; (2) that
the United States Government was firm from the very beginning in asserting the diplomatic immunity of Scalzo with
respect to the case pursuant to the provisions of the Vienna Convention on Diplomatic Relations; and (3) that the United
States Embassy repeatedly urged the Department of Foreign Affairs to take appropriate action to inform the trial court of
Scalzos diplomatic immunity. The other documentary exhibits were presented to indicate that: (1) the Philippine
government itself, through its Executive Department, recognizing and respecting the diplomatic status of Scalzo, formally
advised the Judicial Department of his diplomatic status and his entitlement to all diplomatic privileges and immunities
under the Vienna Convention; and (2) the Department of Foreign Affairs itself authenticated Diplomatic Note No.
414. Scalzo additionally presented Exhibits "9" to "13" consisting of his reports of investigation on the surveillance and
subsequent arrest of Minucher, the certification of the Drug Enforcement Administration of the United States Department
of Justice that Scalzo was a special agent assigned to the Philippines at all times relevant to the complaint, and the
special power of attorney executed by him in favor of his previous counsel [6] to show (a) that the United States Embassy,
affirmed by its Vice Consul, acknowledged Scalzo to be a member of the diplomatic staff of the United States diplomatic
mission from his arrival in the Philippines on 14 October 1985 until his departure on 10 August 1988, (b) that, on May
1986, with the cooperation of the Philippine law enforcement officials and in the exercise of his functions as member of
the mission, he investigated Minucher for alleged trafficking in a prohibited drug, and (c) that the Philippine Department of
Foreign Affairs itself recognized that Scalzo during his tour of duty in the Philippines (14 October 1985 up to 10 August
1988) was listed as being an Assistant Attach of the United States diplomatic mission and accredited with diplomatic
status by the Government of the Philippines. In his Exhibit 12, Scalzo described the functions of the overseas office of the
United States Drugs Enforcement Agency, i.e., (1) to provide criminal investigative expertise and assistance to foreign law
enforcement agencies on narcotic and drug control programs upon the request of the host country, 2) to establish and
maintain liaison with the host country and counterpart foreign law enforcement officials, and 3) to conduct complex
criminal investigations involving international criminal conspiracies which affect the interests of the United States.
The Vienna Convention on Diplomatic Relations was a codification of centuries-old customary law and, by the time of
its ratification on 18 April 1961, its rules of law had long become stable. Among the city states of ancient Greece, among
the peoples of the Mediterranean before the establishment of the Roman Empire, and among the states of India, the
person of the herald in time of war and the person of the diplomatic envoy in time of peace were universally held
sacrosanct.[7] By the end of the 16th century, when the earliest treatises on diplomatic law were published, the inviolability
of ambassadors was firmly established as a rule of customary international law. [8] Traditionally, the exercise of diplomatic
intercourse among states was undertaken by the head of state himself, as being the preeminent embodiment of the state
he represented, and the foreign secretary, the official usually entrusted with the external affairs of the state. Where a state
would wish to have a more prominent diplomatic presence in the receiving state, it would then send to the latter a
diplomatic mission. Conformably with the Vienna Convention, the functions of the diplomatic mission involve, by and
large, the representation of the interests of the sending state and promoting friendly relations with the receiving state.[9]
 The Convention lists the classes of heads of diplomatic missions to include (a) ambassadors or nuncios accredited to
the heads of state,[10] (b) envoys,[11] ministers or internuncios accredited to the heads of states; and (c) charges d'
affairs[12] accredited to the ministers of foreign affairs.[13] Comprising the "staff of the (diplomatic) mission" are the
diplomatic staff, the administrative staff and the technical and service staff. Only the heads of missions, as well as
members of the diplomatic staff, excluding the members of the administrative, technical and service staff of the mission,
are accorded diplomatic rank. Even while the Vienna Convention on Diplomatic Relations provides for immunity to the
members of diplomatic missions, it does so, nevertheless, with an understanding that the same be restrictively
applied. Only "diplomatic agents," under the terms of the Convention, are vested with blanket diplomatic immunity from
civil and criminal suits. The Convention defines "diplomatic agents" as the heads of missions or members of the diplomatic
staff, thus impliedly withholding the same privileges from all others. It might bear stressing that even consuls, who
represent their respective states in concerns of commerce and navigation and perform certain administrative and notarial
duties, such as the issuance of passports and visas, authentication of documents, and administration of oaths, do not
ordinarily enjoy the traditional diplomatic immunities and privileges accorded diplomats, mainly for the reason that they are
not charged with the duty of representing their states in political matters.  Indeed, the main yardstick in ascertaining
whether a person is a diplomat entitled to immunity is the determination of whether or not he performs duties of
diplomatic nature.
Scalzo asserted, particularly in his Exhibits 9 to 13, that he was an Assistant Attach of the United States diplomatic
mission and was accredited as such by the Philippine Government. An attach belongs to a category of officers in the
diplomatic establishment who may be in charge of its cultural, press, administrative or financial affairs. There could also
be a class of attaches belonging to certain ministries or departments of the government, other than the foreign ministry or
department, who are detailed by their respective ministries or departments with the embassies such as the military, naval,
air, commercial, agricultural, labor, science, and customs attaches, or the like. Attaches assist a chief of mission in his
duties and are administratively under him, but their main function is to observe, analyze and interpret trends and
developments in their respective fields in the host country and submit reports to their own ministries or departments in the
home government.[14] These officials are not generally regarded as members of the diplomatic mission, nor are they
normally designated as having diplomatic rank.
In an attempt to prove his diplomatic status, Scalzo presented Diplomatic Notes Nos. 414, 757 and 791, all
issued post litem motam, respectively, on 29 May 1990, 25 October 1991 and 17 November 1992. The presentation did
nothing much to alleviate the Court's initial reservations in G.R. No. 97765, viz:

"While the trial court denied the motion to dismiss, the public respondent gravely abused its discretion in dismissing Civil
Case No. 88-45691 on the basis of an erroneous assumption that simply because of the diplomatic note, the private
respondent is clothed with diplomatic immunity, thereby divesting the trial court of jurisdiction over his person.

x x x x x x x x x

And now, to the core issue - the alleged diplomatic immunity of the private respondent. Setting aside for the moment the
issue of authenticity raised by the petitioner and the doubts that surround such claim, in view of the fact that it took private
respondent one (1) year, eight (8) months and seventeen (17) days from the time his counsel filed on 12 September 1988
a Special Appearance and Motion asking for a first extension of time to file the Answer because the Departments of State
and Justice of the United States of America were studying the case for the purpose of determining his defenses, before he
could secure the Diplomatic Note from the US Embassy in Manila, and even granting for the sake of argument that such
note is authentic, the complaint for damages filed by petitioner cannot be peremptorily dismissed.

x x x x x x x x x

"There is of course the claim of private respondent that the acts imputed to him were done in his official capacity. Nothing
supports this self-serving claim other than the so-called Diplomatic Note. x x x.The public respondent then should have
sustained the trial court's denial of the motion to dismiss. Verily, it should have been the most proper and appropriate
recourse. It should not have been overwhelmed by the self-serving Diplomatic Note whose belated issuance is even
suspect and whose authenticity has not yet been proved. The undue haste with which respondent Court yielded to the
private respondent's claim is arbitrary."

A significant document would appear to be Exhibit No. 08, dated 08 November 1992, issued by the Office of Protocol
of the Department of Foreign Affairs and signed by Emmanuel C. Fernandez, Assistant Secretary, certifying that "the
records of the Department (would) show that Mr. Arthur W. Scalzo, Jr., during his term of office in the Philippines (from 14
October 1985 up to 10 August 1988) was listed as an Assistant Attach of the United States diplomatic mission and was,
therefore, accredited diplomatic status by the Government of the Philippines." No certified true copy of such "records," the
supposed bases for the belated issuance, was presented in evidence.
 Concededly, vesting a person with diplomatic immunity is a prerogative of the executive branch of the
government. In World Health Organization vs. Aquino,[15] the Court has recognized that, in such matters, the hands of the
courts are virtually tied. Amidst apprehensions of indiscriminate and incautious grant of immunity, designed to gain
exemption from the jurisdiction of courts, it should behoove the Philippine government, specifically its Department of
Foreign Affairs, to be most circumspect, that should particularly be no less than compelling, in its post litem
motam issuances. It might be recalled that the privilege is not an immunity from the observance of the law of the territorial
sovereign or from ensuing legal liability; it is, rather, an immunity from the exercise of territorial jurisdiction. [16] The
government of the United States itself, which Scalzo claims to be acting for, has formulated its standardsfor recognition of
a diplomatic agent. The State Department policy is to only concede diplomatic status to a person who possesses an
acknowledged diplomatic title and performs duties of diplomatic nature. [17] Supplementary criteria for accreditation
are the possession of a valid diplomatic passport or, from States which do not issue such passports, a diplomatic note
formally representing the intention to assign the person to diplomatic duties, the holding of a non-immigrant visa, being
over twenty-one years of age, and performing diplomatic functions on an essentially full-time basis.[18] Diplomatic missions
are requested to provide the most accurate and descriptive job title to that which currently applies to the duties
performed. The Office of the Protocol would then assign each individual to the appropriate functional category.[19]
But while the diplomatic immunity of Scalzo might thus remain contentious, it was sufficiently established that,
indeed, he worked for the United States Drug Enforcement Agency and was tasked to conduct surveillance of suspected
drug activities within the country on the dates pertinent to this case. If it should be ascertained that Arthur Scalzo was
acting well within his assigned functions when he committed the acts alleged in the complaint, the present controversy
could then be resolved under the related doctrine of State Immunity from Suit.
The precept that a State cannot be sued in the courts of a foreign state is a long-standing rule of customary
international law then closely identified with the personal immunity of a foreign sovereign from suit [20] and, with the
emergence of democratic states, made to attach not just to the person of the head of state, or his representative, but also
distinctly to the state itself in its sovereign capacity.[21] If the acts giving rise to a suit are those of a foreign government
done by its foreign agent, although not necessarily a diplomatic personage, but acting in his official capacity, the complaint
could be barred by the immunity of the foreign sovereign from suit without its consent. Suing a representative of a state is
believed to be, in effect, suing the state itself. The proscription is not accorded for the benefit of an individual but for the
State, in whose service he is, under the maxim - par in parem, non habet imperium -  that  all states are sovereign equals
and cannot assert jurisdiction over one another.[22] The implication, in broad terms, is that if the judgment against an
official would require the state itself to perform an affirmative act to satisfy the award, such as the appropriation of the
amount needed to pay the damages decreed against him, the suit must be regarded as being against the state itself,
although it has not been formally impleaded.[23]
In United States of America vs. Guinto,[24] involving officers of the United States Air Force and special officers of the
Air Force Office of Special Investigators charged with the duty of preventing the distribution, possession and use of
prohibited drugs, this Court has ruled -

"While the doctrine (of state immunity) 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. x x x. It cannot for a moment be imagined that they were acting in their private or unofficial capacity when they
apprehended and later testified against the complainant.It follows that for discharging their duties as agents of the United
States, they cannot be directly impleaded for acts imputable to their principal, which has not given its consent to be sued.
x x x As they have acted on behalf of the government, and within the scope of their authority, it is that government, and
not the petitioners personally, [who were] responsible for their acts."[25]

This immunity principle, however, has its limitations. Thus, Shauf vs. Court of Appeals[26] elaborates:

It is a different matter where the public official is made to account in his capacity as such for acts contrary to law and
injurious to the rights of the plaintiff. As was clearly set forth by Justice Zaldivar in Director of the Bureau of
Telecommunications, et al., vs. Aligaen, et al. (33 SCRA 368): `Inasmuch as the State authorizes only legal acts by its
officers, unauthorized acts of government officials or officers are not acts of the State, and an action against the officials
or officers by one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a suit
against the State within the rule of immunity of the State from suit. In the same tenor, it has been said that an action at law
or suit in equity against a State officer or the director of a State department on the ground that, while claiming to act for
the State, he violates or invades the personal and property rights of the plaintiff, under an unconstitutional act or under an
assumption of authority which he does not have, is not a suit against the State within the constitutional provision that the
State may not be sued without its consent. The rationale for this ruling is that the doctrine of state immunity cannot be
used as an instrument for perpetrating an injustice.

x x x x x x x x x
(T)he doctrine of immunity from suit will not apply and may not be invoked where the public official is being sued in his
private and personal capacity as an ordinary citizen. The cloak of protection afforded the officers and agents of the
government is removed the moment they are sued in their individual capacity. This situation usually arises where the
public official acts without authority or in excess of the powers vested in him. It is a well-settled principle of law that a
public official may be liable in his personal private capacity for whatever damage he may have caused by his act done
with malice and in bad faith or beyond the scope of his authority and jurisdiction.[27]

A foreign agent, operating within a territory, can be cloaked with immunity from suit but only as long as it can be
established that he is acting within the directives of the sending state.The consent of the host state is an indispensable
requirement of basic courtesy between the two sovereigns. Guinto and Shauf both involve officers and personnel of the
United States, stationed within Philippine territory, under the RP-US Military Bases Agreement. While evidence is wanting
to show any similar agreement between the governments of the Philippines and of the United States (for the latter to send
its agents and to conduct surveillance and related activities of suspected drug dealers in the Philippines), the consent
or imprimatur of the Philippine government to the activities of the United States Drug Enforcement Agency, however, can
be gleaned from the facts heretofore elsewhere mentioned. The official exchanges of communication between agencies of
the government of the two countries, certifications from officials of both the Philippine Department of Foreign Affairs and
the United States Embassy, as well as the participation of members of the Philippine Narcotics Command in the buy-bust
operation conducted at the residence of Minucher at the behest of Scalzo, may be inadequate to support the "diplomatic
status" of the latter but they give enough indication that the Philippine government has given its imprimatur, if not
consent,  to the activities within Philippine territory of agent Scalzo of the United States Drug Enforcement Agency. The job
description of Scalzo has tasked him to conduct surveillance on suspected drug suppliers and, after having ascertained
the target, to inform local law enforcers who would then be expected to make the arrest. In conducting surveillance
activities on Minucher, later acting as the poseur-buyer during the buy-bust operation, and then becoming a principal
witness in the criminal case against Minucher, Scalzo hardly can be said to have acted beyond the scope of his official
function or duties.
All told, this Court is constrained to rule that respondent Arthur Scalzo, an agent of the United States Drug
Enforcement Agency allowed by the Philippine government to conduct activities in the country to help contain the problem
on the drug traffic, is entitled to the defense of state immunity from suit.
WHEREFORE, on the foregoing premises, the petition is DENIED. No costs.
SO ORDERED.
 [G.R. No. 107271. September 10, 2003]

CITY OF CALOOCAN and NORMA M. ABRACIA, petitioners, vs. HON. MAURO T. ALLARDE, Presiding Judge of
Branch 123, RTC of Caloocan City, ALBERTO A. CASTILLO, Deputy Sheriff of Branch 123, RTC of
Caloocan City, and DELFINA HERNANDEZ SANTIAGO and PHILIPPINE NATIONAL BANK
(PNB), respondents.

DECISION
CORONA, J.:

Assailed in this petition for certiorari is the decision[1] dated August 31, 1992, of the Court of Appeals in CA G.R. SP
No. 27423, ordering the Regional Trial Court of Caloocan City, Branch 123, to implement an alias writ of execution dated
January 16, 1992. The dispositive portion read as follows:

WHEREFORE the petition is hereby granted ordering the Regional Trial Court of Kaloocan City, Branch 123, to
immediately effect the alias writ of execution dated January 16, 1992 without further delay.

Counsel for the respondents are warned that a repetition of their contemptuous act to delay the execution of a final and
executory judgment will be dealt with more severely.

SO ORDERED.[2]

It is important to state at the outset that the dispute between petitioner and private respondent has been litigated
thrice before this Court: first, in G.R. No. L-39288-89, entitled Heirs of Abelardo Palomique, et al. vs. Marcial Samson, et
al., decided on January 31, 1985; second, in G.R. No. 98366, entitled City Government of Caloocan vs. Court of Appeals,
et al., resolved on May 16, 1991, and third, in G.R. No. 102625, entitled Santiago vs. Sto. Tomas, et al., decided on
August 1, 1995. This is not to mention the numerous concurrent efforts by the City Government of Caloocan to seek relief
from other judicial and quasi-judicial bodies. The present petition for certiorari is the fourth time we are called upon to
resolve the dispute.
The factual and procedural antecedents follow.
Sometime in 1972, Marcial Samson, City Mayor of Caloocan City, through Ordinance No. 1749, abolished the
position of Assistant City Administrator and 17 other positions from the plantilla of the local government of Caloocan. Then
Assistant City Administrator Delfina Hernandez Santiago and the 17 affected employees of the City Government assailed
the legality of the abolition before the then Court of First Instance (CFI) of Caloocan City, Branch 33.
In 1973, the CFI declared the abolition illegal and ordered the reinstatement of all the dismissed employees and the
payment of their back salaries and other emoluments. The City Government of Caloocan appealed to the Court of
Appeals. Respondent Santiago and her co-parties moved for the dismissal of the appeal for being dilatory and frivolous
but the appellate court denied their motion. Thus, they elevated the case on certiorari before this Court, docketed as G.R.
No. L-39288-89, Heirs of Abelardo Palomique, et al. vs. Marcial Samson, et al. In our Resolution dated January 31, 1985,
we held that the appellate court erred in not dismissing the appeal, and that the appeal of the City Government of
Caloocan was frivolous and dilatory. In due time, the resolution lapsed into finality and entry of judgment was made on
February 27, 1985.
In 1986, the City Government of Caloocan paid respondent Santiago P75,083.37 in partial payment of her
backwages, thereby leaving a balance of P530,761.91. Her co-parties were paid in full.[3] In 1987, the City of Caloocan
appropriated funds for her unpaid back salaries. This was included in Supplemental Budget No. 3 for the fiscal year
1987. Surprisingly, however, the City later refused to release the money to respondent Santiago.
Respondent Santiago exerted effort for the execution of the remainder of the money judgment but she met stiff
opposition from the City Government of Caloocan. On February 12, 1991, Judge Mauro T. Allarde, RTC of Caloocan City,
Branch 123, issued a writ of execution for the payment of the remainder of respondent Santiagos back salaries and other
emoluments.[4]
 For the second time, the City Government of Caloocan went up to the Court of Appeals and filed a petition for
certiorari, prohibition and injunction to stop the trial court from enforcing the writ of execution. The CA dismissed the
petition and affirmed the order of issuance of the writ of execution.[5] One of the issues raised and resolved therein was the
extent to which back salaries and emoluments were due to respondent Santiago. The appellate court held that she was
entitled to her salaries from October, 1983 to December, 1986.
And for the second time, the City Government of Caloocan appealed to this Court in G.R. No. 98366, City
Government of Caloocan vs. Court of Appeals, et al. The petition was dismissed, through our Resolution of May 16, 1991,
for having been filed late and for failure to show any reversible error on the part of the Court of Appeals. The resolution
subsequently attained finality and the corresponding entry of judgment was made on July 29, 1991.
On motion of private respondent Santiago, Judge Mauro T. Allarde ordered the issuance of an alias writ of execution
on March 3, 1992. The City Government of Caloocan moved to reconsider the order, insisting in the main that respondent
Santiago was not entitled to backwages from 1983 to 1986. The court a quo denied the motion and forthwith issued the
alias writ of execution. Unfazed, the City Government of Caloocan filed a motion to quash the writ, maintaining that the
money judgment sought to be enforced should not have included salaries and allowances for the years 1983-1986. The
trial court likewise denied the motion.
On July 27, 1992, Sheriff Alberto A. Castillo levied and sold at public auction one of the motor vehicles of the City
Government of Caloocan, with plate no. SBH-165, for P100,000. The proceeds of the sale were turned over to respondent
Santiago in partial satisfaction of her claim, thereby leaving a balance of P439,377.14, inclusive of interest. Petitioners
filed a motion questioning the validity of the auction sale of the vehicle with plate no. SBH-165, and a supplemental motion
maintaining that the properties of the municipality were exempt from execution. In his Order dated October 1, 1992, Judge
Allarde denied both motions and directed the sheriff to levy and schedule at public auction three more vehicles of the City
of Caloocan - [6]

ONE (1) Unit Motor Vehicle (Hunter Station Wagon); Motor No. C-240-199629; Chassis No. MBB-910369C;

ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel); Engine No. 4FB1-174328, Chassis No. MBB-910345C; Plate No.
SDL-653;

ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel); Engine No. 4FB-165196; Chassis No. MBB 910349C.

All the vehicles, including that previously sold in the auction sale, were owned by the City and assigned for the use of
herein petitioner Norma Abracia, Division Superintendent of Caloocan City, and other officials of the Division of City
Schools.
Meanwhile, the City Government of Caloocan sought clarification from the Civil Service Commission (CSC) on
whether respondent Santiago was considered to have rendered services from 1983-1986 as to be entitled to backwages
for that period. In its Resolution No. 91-1124, the CSC ruled in the negative.
On November 22, 1991, private respondent Santiago challenged the CSC resolution before this Court in G.R. No.
102625, Santiago vs. Sto. Tomas, et al. On July 8, 1993, we initially dismissed the petition for lack of merit; however, we
reconsidered the dismissal of the petition in our Resolution dated August 1, 1995, this time ruling in favor of respondent
Santiago:

The issue of petitioner Santiagos right to back salaries for the period from October 1983 to December 1986 having been
resolved in G.R. No. 98366 on 16 May 1991, CSC Resolution No. 91-1124 promulgated later on 24 September 1991 in
particular, its ruling on the extent of backwages due petitioner Santiago was in fact moot and academic at the time of its
promulgation. CSC Resolution No. 91-1124 could not, of course, set aside what had been judicially decided with finality x
x x x the court considers that resort by the City Government of Caloocan to respondent CSC was but another attempt to
deprive petitioner Santiago of her claim to back salaries x x x and a continuation of the Citys abuse and misuse of the
rules of judicial procedure. The Citys acts have resulted in wasting the precious time and resources of the courts and
respondent CSC. (Underscoring supplied).

On October 5, 1992, the City Council of Caloocan passed Ordinance No. 0134, Series of 1992, which included the
amount of P439,377.14 claimed by respondent Santiago as back salaries, plus interest.[7] Pursuant to the subject
ordinance, Judge Allarde issued an order dated November 10, 1992, decreeing that:

WHEREFORE, the City Treasurer (of Caloocan), Norberto Azarcon is hereby ordered to deliver to this Court within five (5)
days from receipt hereof, (a) managers check covering the amount of P439,378.00 representing the back salaries of
petitioner Delfina H. Santiago in accordance with Ordinance No. 0134 S. 1992 and pursuant to the final and executory
decision in these cases.

Then Caloocan Mayor Macario A. Asistio, Jr., however, refused to sign the check intended as payment for
respondent Santiagos claims. This, despite the fact that he was one of the signatories of the ordinance authorizing such
payment. On April 29, 1993, Judge Allarde issued another order directing the Acting City Mayor of Caloocan, Reynaldo O.
Malonzo, to sign the check which had been pending before the Office of the Mayor since December 11, 1992. Acting City
Mayor Malonzo informed the trial court that he could not comply with the order since the subject check was not formally
turned over to him by the City Mayor who went on official leave of absence on April 15, 1993, and that he doubted
whether he had authority to sign the same.[8]
Thus, in an order dated May 7, 1993, Judge Allarde ordered Sheriff Alberto A. Castillo to immediately garnish the
funds of the City Government of Caloocan corresponding to the claim of respondent Santiago.[9] On the same day, Sheriff
Alberto A. Castillo served a copy of the Notice of Garnishment on the Philippine National Bank (PNB), Sangandaan
Branch, Caloocan City. When PNB immediately notified the City of Caloocan of the Notice of Garnishment, the City
Treasurer sent a letter-advice informing PNB that the order of garnishment was illegal, with a warning that it would hold
PNB liable for any damages which may be caused by the withholding of the funds of the city. PNB opted to comply with
the order of Judge Allarde and released to the Sheriff a managers check amounting to P439,378. After 21 long years, the
claim of private respondent Santiago was finally settled in full.
On June 4, 1993, however, while the instant petition was pending, the City Government of Caloocan filed yet another
motion with this Court, a Motion to Declare in Contempt of Court; to Set Aside the Garnishment and Administrative
Complaint against Judge Allarde, respondent Santiago and PNB. Subsequently, the City Government of Caloocan filed a
Supplemental Petition formally impleading PNB as a party-respondent in this case.
The instant petition for certiorari is  directed this time against the validity of the garnishment of the funds of the City of
Caloocan, as well as the validity of the levy and sale of the motor vehicles belonging to the City of Caloocan. More
specifically, petitioners insist that Judge Allarde gravely abused his discretion in:

(a) ordering the garnishment of the funds of the City of Caloocan deposited with the PNB, since it is settled that public
funds are beyond the reach of garnishment and even with the appropriation passed by the City Council, the authority of
the Mayor is still needed for the release of the appropriation;

(b) ordering the levy and sale at public auction of three (3) motor vehicles owned by the City of Caloocan, which vehicles
are necessary for public use and cannot be attached nor sold in an execution sale to satisfy a money judgment against
the City of Caloocan;

(c) peremptorily denying petitioner City of Caloocans urgent motions to vacate and set aside the auction sale of the motor
vehicle with PLATE NO. SBH-165, notwithstanding that the auction sale by the Sheriff was tainted with serious
irregularities, more particularly:

i. non-compliance with the mandatory posting of the notice of sale;

ii. non-observance of the procedure that a sale through public auction has to be made and consummated at the time of
the auction, at the designated place and upon actual payment of the purchase price by the winning bidder;

iii. violation of Sec. 21, Rule 39 of the Rules of Court to the effect that sale of personal property capable of manual
delivery must be sold within the view of those attending the sale; and,

iv. the Sheriffs Certificate of Sale contained false narration of facts respecting the actual time of the public auction;

(d) the enforcement of the levy made by the Sheriff covering the three (3) motor vehicles based on an alias writ that has
long expired.

The petition has absolutely no merit. The trial court committed no grave abuse of discretion in implementing the alias
writ of execution to settle the claim of respondent Santiago, the satisfaction of which petitioner had been maliciously
evading for 21 years.
Petitioner argues that the garnishment of its funds in PNB was invalid inasmuch as these were public funds and thus
exempt from execution. Garnishment is considered a specie of attachment by means of which the plaintiff seeks to
subject to his claim property of the defendant in the hands of a third person, or money owed by such third person or
garnishee to the defendant.[10]
The rule is and has always been that all government funds deposited in the PNB or any other official depositary of
the Philippine Government by any of its agencies or instrumentalities, whether by general or special deposit, remain
government funds and may not be subject to garnishment or levy, in the absence of a corresponding appropriation as
required by law:[11]

Even though the rule as to immunity of a state from suit is relaxed, the power of the courts ends when the judgment is
rendered. Although the liability of the state has been judicially ascertained, the state is at liberty to determine for itself
whether to pay the judgment or not, and execution cannot issue on a judgment against the state. Such statutes do not
authorize a seizure of state property to satisfy judgments recovered, and only convey an implication that the legislature
will recognize such judgment as final and make provision for the satisfaction thereof.[12]

The rule is based on obvious considerations of public policy. The functions and public services rendered by the State
cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects,
as appropriated by law.[13]
However, the rule is not absolute and admits of a well-defined exception, that is, when there is a corresponding
appropriation as required by law. Otherwise stated, the rule on the immunity of public funds from seizure or garnishment
does not apply where the funds sought to be levied under execution are already allocated by law specifically for the
satisfaction of the money judgment against the government. In such a case, the monetary judgment may be legally
enforced by judicial processes.
Thus, in the similar case of Pasay City Government, et al. vs. CFI of Manila, Br. X, et al.,[14] where petitioners
challenged the trial courts order garnishing its funds in payment of the contract price for the construction of the City Hall,
we ruled that, while government funds deposited in the PNB are exempt from execution or garnishment, this rule does not
apply if an ordinance has already been enacted for the payment of the Citys obligations

Upon the issuance of the writ of execution, the petitioner-appellants moved for its quashal alleging among other things the
exemption of the government from execution. This move on the part of petitioner-appellants is at first glance laudable for
all government funds deposited with the Philippine National Bank by any agency or instrumentality of the government,
whether by way of general or special deposit, remain government funds and may not be subject to garnishment or levy.
But inasmuch as an ordinance has already been enacted expressly appropriating the amount of P613,096.00 as payment
to the respondent-appellee, then the herein case is covered by the exception to the general rule x x x x

In the instant case, the City Council of Caloocan already approved and passed Ordinance No. 0134, Series of 1992,
allocating the amount of P439,377.14 for respondent Santiagos back salaries plus interest. Thus this case fell squarely
within the exception. For all intents and purposes, Ordinance No. 0134, Series of 1992, was the corresponding
appropriation as required by law. The sum indicated in the ordinance for Santiago were deemed automatically segregated
from the other budgetary allocations of the City of Caloocan and earmarked solely for the Citys monetary obligation to her.
The judgment of the trial court could then be validly enforced against such funds.
Indeed, this conclusion is further buttressed by the Certification issued on December 23, 1992 by Norberto C.
Azarcon, City Treasurer of Caloocan:

CERTIFICATION

This is to certify that according to the records available in this Office the claim for backwages of the HON. JUDGE
DELFINA H. SANTIAGO has been properly obligated and can be collected in accordance with existing accounting and
auditing rules and regulations.

This is to certify further that in case the claim is not collected within the present fiscal year, such claim shall be entered in
the books of Accounts Payable and can still be collected in the next fiscal year  x x x x (Underscoring supplied)

Petitioners reliance on Municipality of Makati vs. Court of Appeals, et al.,[15] and Commissioner of Public Highways
vs. San Diego,[16] does not help their cause.[17] Both cases implicitly affirmed that public funds may be garnished if there is
a statute which appropriated the amount so garnished. Thus, in Municipality of Makati, citing San Diego, we unequivocally
held that:

In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless otherwise
provided by statute x x x x
 Similarly, we cannot agree with petitioners argument that the appropriation ordinance of the City Council did not
authorize PNB to release the funds because only the City Mayor could authorize the release thereof. A valid appropriation
of public funds lifts its exemption from execution. Here, the appropriation passed by the City Council of Caloocan
providing for the payment of backwages to respondent was duly approved and signed by both the council and then Mayor
Macario Asistio, Jr. The mayors signature approving the budget ordinance was his assent to the appropriation of funds for
respondent Santiagos backwages. If he did not agree with such allocation, he could have vetoed the item pursuant to
Section 55 of the Local Government Code.[18] There was no such veto.
In view of the foregoing discourse, we dismiss petitioners unfounded assertion, probably made more out of sheer
ignorance of prevailing jurisprudence than a deliberate attempt to mislead us, that the rule that public funds (are) beyond
the reach of levy and garnishment is not qualified by any condition.[19]
We now come to the issue of the legality of the levy on the three motor vehicles belonging to the City of Caloocan
which petitioners claimed to be exempt from execution, and which levy was based on an alias writ that had purportedly
expired. Suffice it to say that Judge Allarde, in his Order dated November 10, 1992, [20] already lifted the levy on the three
vehicles, thereby formally discharging them from the jurisdiction of the court and turning them over to the City Government
of Caloocan:

x x x x the levy of the three (3) vehicles made by Sheriff Alberto Castillo pursuant to the Orders of this Court dated
October 1 and 8, 1992 is hereby lifted and the said Sheriff is hereby ordered to return the same to the City Government in
view of the satisfaction of the decision in these cases x x x x

It is thus unnecessary for us to discuss a moot issue.

We turn to the third issue raised by petitioners that the auction sale by Sheriff Alberto A. Castillo of the motor vehicle
with plate no. SBH-165 was tainted with serious irregularities. We need not emphasize that the sheriff enjoys the
presumption of regularity in the performance of the functions of his office. This presumption prevails in the absence of
substantial evidence to the contrary and cannot be overcome by bare and self-serving allegations. The petitioners failed to
convince us that the auction sale conducted by the sheriff indeed suffered from fatal flaws. No evidence was adduced to
prove that the sheriff had been remiss in the performance of his duties during the public auction sale. Indeed it would be
injudicious for us to assume, as petitioners want us to do, that the sheriff failed to follow the established procedures
governing public auctions.
On the contrary, a review of the records shows that the sheriff complied with the rules on public auction. The sale of
the Citys vehicle was made publicly in front of the Caloocan City Hall on the date fixed in the notice July 27, 1992. In fact,
petitioners in their Motion to Declare in Contempt of Court; to Set Aside the Garnishment and Administrative Complaint
admitted as much:

On July 27, 1992, by virtue of an alias writ of execution issued by the respondent court, a vehicle owned by the petitioner
xxx was levied and sold at public auction for the amount of P100,000.00 and which amount was immediately delivered to
the private respondent x x x x[21]

Hence, petitioners cannot now be heard to impugn the validity of the auction sale.
Petitioners, in desperation, likewise make much of the proceedings before the trial court on October 8, 1992, wherein
petitioner Norma Abracia, Superintendent of the Division of City Schools of Caloocan, was commanded to appear and
show cause why she should not be cited in contempt for delaying the execution of judgment. This was in connection with
her failure (or refusal) to surrender the three motor vehicles assigned to the Division of City Schools to the custody of the
sheriff. Petitioner Abracia, assisted by Mr. Ricardo Nagpacan of the Division of City Schools, appeared during the hearing
but requested a ten-day period within which to refer the matter of contempt to a counsel of her choice. The request was
denied by Judge Allarde in his assailed order dated October 8, 1992. Thus petitioner Abracia claimed, inter alia, that: (a)
she was denied due process; (b) the silence of the order of Judge Allarde on her request for time violated an orderly and
faithful recording of the proceedings, and (c) she was coerced into agreeing to surrender the vehicles.
We do not think so. What violates due process is the absolute lack of opportunity to be heard. That opportunity, the
Court is convinced, was sufficiently accorded to petitioner Abracia. She was notified of the contempt charge against her;
she was effectively assisted by counsel when she appeared during the hearing on October 8, 1992; and she was afforded
ample opportunity to answer and refute the charge against her. The circumstance that she opted not to avail of her
chance to be heard on that occasion by asking for an extension of time within which to hire a counsel of her choice, a
request denied by the trial court, did not transgress nor deprive her of her right to due process.
Significantly, during the hearing on October 8, 1992, Mr. Nagpacan manifested in open court that, after conferring
with petitioner Abracia, the latter was willing to surrender these vehicles into the custody of the sheriff on the condition that
the standing motion (for contempt) be withdrawn.[22] Her decision was made freely and voluntarily, and after conferring
with her counsel. Moreover, it was petitioner Abracia herself who imposed the condition that respondent Santiago should
withdraw her motion for contempt in exchange for her promise to surrender the subject vehicles. Thus, petitioner Abracias
claim that she was coerced into surrendering the vehicles had no basis.
Even assuming ex gratia argumenti that there indeed existed certain legal infirmities in connection with the assailed
orders of Judge Allarde, still, considering the totality of circumstances of this case, the nullification of the contested orders
would be way out of line. For 21 long years, starting 1972 when this controversy started up to 1993 when her claim was
fully paid out of the garnished funds of the City of Caloocan, respondent Santiago was cruelly and unjustly deprived of
what was due her. It would be, at the very least, merciless and unchristian to make private respondent refund the City of
Caloocan the amount already paid to her, only to force her to go through the same nightmare all over again.
At any rate, of paramount importance to us is that justice has been served. No right of the public was violated and
public interest was preserved.
Finally, we cannot simply pass over in silence the deplorable act of the former Mayor of Caloocan City in refusing to
sign the check in payment of the Citys obligation to private respondent. It was an open defiance of judicial processes,
smacking of political arrogance, and a direct violation of the very ordinance he himself approved. Our Resolution in G.R.
No. 98366, City Government of Caloocan vs. Court of Appeals, et al., dated May 16, 1991, dismissing the petition of the
City of Caloocan assailing the issuance of a writ of execution by the trial court, already resolved with finality all
impediments to the execution of judgment in this case. Yet, the City Government of Caloocan, in a blatant display of
malice and bad faith, refused to comply with the decision. Now, it has the temerity to come to this Court once more and
continue inflicting injustice on a hapless citizen, as if all the harm and prejudice it has already heaped upon respondent
Santiago are still not enough.
This Court will not condone the repudiation of just obligations contracted by municipal corporations. On the contrary,
we will extend our aid and every judicial facility to any citizen in the enforcement of just and valid claims against abusive
local government units.
WHEREFORE, the petition is hereby DISMISSED for utter lack of merit. The assailed orders of the trial court dated
October 1, 1992, October 8, 1992 and May 7, 1993, respectively, are AFFIRMED.
Petitioners and their counsels are hereby warned against filing any more pleadings in connection with the issues
already resolved with finality herein and in related cases.
Costs against petitioners.
SO ORDERED.
G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner, 

vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial Court of Makati, Branch 61 and
STARBRIGHT SALES ENTERPRISES, INC., respondents.

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

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.
G.R. No. 104269 November 11, 1993

DEPARTMENT OF AGRICULTURE, petitioner, 
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.

Roy Lago Salcedo for private respondents.

VITUG, J.:

For consideration are the incidents that flow from the familiar doctrine of non-suability of the state.

In this petition for certiorari, the Department of Agriculture seeks to nullify the Resolution, 1 dated 27 November 1991, of
the National Labor Relations Commission (NLRC), Fifth Division, Cagayan de Oro City, denying the petition for injunction,
prohibition and mandamus that prays to enjoin permanently the NLRC's Regional Arbitration Branch X and Cagayan de
Oro City Sheriff from enforcing the decision 2 of 31 May 1991 of the Executive Labor Arbiter and from attaching and
executing on petitioner's property.

The Department of Agriculture (herein petitioner) and Sultan Security Agency entered into a contract3 on 01 April 1989 for
security services to be provided by the latter to the said governmental entity. Save for the increase in the monthly rate of
the guards, the same terms and conditions were also made to apply to another contract, dated 01 May 1990, between the
same parties. Pursuant to their arrangements, guards were deployed by Sultan Agency in the various premises of the
petitioner.

On 13 September 1990, several guards of the Sultan Security Agency filed a complaint for underpayment of wages, non-
payment of 13th month pay, uniform allowances, night shift differential pay, holiday pay and overtime pay, as well as for
damages,4 before the Regional Arbitration Branch X of Cagayan de Oro City, docketed as NLRC Case No. 10-09-00455-
90 (or 10-10-00519-90, its original docket number), against the Department of Agriculture and Sultan Security Agency.

The Executive Labor Arbiter rendered a decision on 31 May finding herein petitioner and  jointly  and severally liable with
Sultan Security Agency for the payment of money claims, aggregating P266,483.91, of the complainant security guards.
The petitioner and Sultan Security Agency did not appeal the decision of the Labor Arbiter. Thus, the decision became
final and executory.

On 18 July 1991, the Labor Arbiter issued a writ of execution. 5 commanding the City Sheriff to enforce and execute the
judgment against the property of the two respondents. Forthwith, or on 19 July 1991, the City Sheriff levied on execution
the motor vehicles of the petitioner, i.e. one (1) unit Toyota Hi-Ace, one (1) unit Toyota Mini Cruiser, and one (1) unit
Toyota Crown.6 These units were put under the custody of Zacharias Roa, the property custodian of the petitioner,
pending their sale at public auction or the final settlement of the case, whichever would come first.

A petition for injunction, prohibition and mandamus, with prayer for preliminary writ of injunction was filed by the petitioner
with the National Labor Relations Commission (NLRC), Cagayan de Oro, alleging, inter alia, that the writ issued was
effected without the Labor Arbiter having duly acquired jurisdiction over the petitioner, and that, therefore, the decision of
the Labor Arbiter was null and void and all actions pursuant thereto should be deemed equally invalid and of no legal,
effect. The petitioner also pointed out that the attachment or seizure of its property would hamper and jeopardize
petitioner's governmental functions to the prejudice of the public good.

On 27 November 1991, the NLRC promulgated its assailed resolution; viz:

WHEREFORE, premises considered, the following orders are issued:

1. The enforcement and execution of the judgments against petitioner in NLRC RABX Cases Nos. 10-10-
00455-90; 10-10-0481-90 and 10-10-00519-90 are temporarily suspended for a period of two (2) months,
more or less, but not extending beyond the last quarter of calendar year 1991 to enable petitioner to
source and raise funds to satisfy the judgment awards against it;
 2. Meantime, petitioner is ordered and directed to source for funds within the period above-stated and to
deposit the sums of money equivalent to the aggregate amount. it has been adjudged to pay jointly and
severally with respondent Sultan Security Agency with the Regional Arbitration Branch X, Cagayan de
Oro City within the same period for proper dispositions;

3. In order to ensure compliance with this order, petitioner is likewise directed to put up and post
sufficient surety and supersedeas bond equivalent to at least to fifty (50%) percent of the total monetary
award issued by a reputable bonding company duly accredited by the Supreme Court or by the Regional
Trial Court of Misamis Oriental to answer for the satisfaction of the money claims in case of failure or
default on the part of petitioner to satisfy the money claims;

4. The City Sheriff is ordered to immediately release the properties of petitioner levied on execution within
ten (10) days from notice of the posting of sufficient surety or supersedeas bond as specified above. In
the meanwhile, petitioner is assessed to pay the costs and/or expenses incurred by the City Sheriff, if
any, in connection with the execution of the judgments in the above-stated cases upon presentation of the
appropriate claims or vouchers and receipts by the city Sheriff, subject to the conditions specified in the
NLRC Sheriff, subject to the conditions specified in the NLRC Manual of Instructions for Sheriffs;

5. The right of any of the judgment debtors to claim reimbursement against each other for any payments
made in connection with the satisfaction of the judgments herein is hereby recognized pursuant to the
ruling in the Eagle Security case, (supra). In case of dispute between the judgment debtors, the Executive
Labor Arbiter of the Branch of origin may upon proper petition by any of the parties conduct arbitration
proceedings for the purpose and thereby render his decision after due notice and hearings;

7. Finally, the petition for injunction is Dismissed for lack of basis. The writ of preliminary injunction
previously issued is Lifted and  Set Aside and in lieu thereof, a Temporary Stay of Execution is issued for
a period of two (2) months but not extending beyond the last quarter of calendar year 1991, conditioned
upon the posting of a surety or supersedeas bond by petitioner within ten (10) days from notice pursuant
to paragraph 3 of this disposition. The motion to admit the complaint in intervention is Denied  for lack of
merit while the motion to dismiss the petition filed by Duty Sheriff is Noted

SO ORDERED.

In this petition for certiorari, the petitioner charges the NLRC with grave abuse of discretion for refusing to quash the writ
of execution. The petitioner faults the NLRC for assuming jurisdiction over a money claim against the Department, which,
it claims, falls under the exclusive jurisdiction of the Commission on Audit. More importantly, the petitioner asserts, the
NLRC has disregarded the cardinal rule on the non-suability of the State.

The private respondents, on the other hand, argue that the petitioner has impliedly waived its immunity from suit by
concluding a service contract with Sultan Security Agency.

The basic postulate enshrined in the constitution that "(t)he State may not be sued without its consent," 7 reflects nothing
less than a recognition of the sovereign character of the State and an express affirmation of the unwritten rule effectively
insulating it from the jurisdiction of courts. 8 It is based on the very essence of sovereignty. As has been aptly observed,
by Justice Holmes, a sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the
logical and practical ground that there can be no legal right as against the authority that makes the law on which the right
depends. 9 True, the doctrine, not too infrequently, is derisively called "the royal prerogative of dishonesty" because it
grants the state the prerogative to defeat any legitimate claim against it by simply invoking its non-suability. 10 We have
had occasion, to explain in its defense, however, that a continued adherence to the doctrine of non-suability cannot be
deplored, for the loss of governmental efficiency and the obstacle to the performance of its multifarious functions would be
far greater in severity than the inconvenience that may be caused private parties, if such fundamental principle is to be
abandoned and the availability of judicial remedy is not to be accordingly restricted. 11

The rule, in any case, is not really absolute for it does not say that the state may not be sued under any circumstances.
On the contrary, as correctly phrased, the doctrine only conveys, "the state may not be sued without its consent;" its clear
import then is that the State may at times be sued. 12 The States' consent may be given expressly or impliedly. Express
consent may be made through a general law13 or a special law. 14 In this jurisdiction, the general law waiving the immunity
of the state from suit is found in Act No. 3083, where the Philippine government "consents and submits to be sued upon
any money claims involving liability arising from contract, express or implied, which could serve as a basis of civil action
between private parties." 15 Implied consent, on the other hand, is conceded when the State itself commences litigation,
thus opening itself to a counterclaim16 or when it enters into a contract. 17 In this situation, the government is deemed to
have descended to the level of the other contracting party and to have divested itself of its sovereign immunity. This rule,
relied upon by the NLRC and the private respondents, is not, however, without qualification. Not all contracts entered into
by the government operate as a waiver of its non-suability; distinction must still be made between one which is executed
in the exercise of its sovereign function and another which is done in its proprietary capacity. 18

In the Unites States of America vs. Ruiz, 19 where the questioned transaction dealt with improvements on the wharves in
the naval installation at Subic Bay, we held:

The traditional rule of immunity exempts a State from being sued in the courts of another State without its
consent or waiver. This rule is a necessary consequence of the principles of independence and equality
of States. However, the rules of International Law are not petrified; they are constantly developing and
evolving. And because the activities of states have multiplied, it has been necessary to distinguish them
— between sovereign and governmental acts (  jure imperii) and private, commercial and proprietary act
( jure gestionisis). The result is that State immunity now extends only to acts jure imperii. The restrictive
application of State immunity is now the rule in the United States, the United Kingdom and other states in
Western Europe.

xxx xxx xxx

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 this be deemed to have actually
given its consent to be sued only when it enters into business contracts. It does not apply where the
contracts relates to the exercise of its sovereign functions. In this case the projects are an integral part of
the naval base which is devoted to the defense of both the United States and the Philippines, indisputably
a function of the government of the highest order; they are not utilized for not dedicated to commercial or
business purposes.

In the instant case, the Department of Agriculture has not pretended to have assumed a capacity apart from its being a
governmental entity when it entered into the questioned contract; nor that it could have, in fact, performed any act
proprietary in character.

But, be that as it may, the claims of private respondents, i.e. for underpayment of wages, holiday pay, overtime pay and
similar other items, arising from the Contract for Service, clearly constitute money claims. Act No. 3083, aforecited, gives
the consent of the State to be "sued upon any moneyed claim involving liability arising from contract, express or
implied, . . . Pursuant, however, to Commonwealth Act ("C.A.") No. 327, as amended by Presidential Decree ("P.D.") No.
1145, the money claim first be brought to the Commission on Audit. Thus, in Carabao, Inc., vs. Agricultural Productivity
Commission, 20 we ruled:

(C)laimants have to prosecute their money claims against the Government under Commonwealth Act
327, stating that Act 3083 stands now merely as the general law waiving the State's immunity from suit,
subject to the general limitation expressed in Section 7 thereof that "no execution shall issue upon any
judgment rendered by any Court against the Government of the (Philippines), and that the conditions
provided in Commonwealth Act 327 for filing money claims against the Government must be strictly
observed."

We fail to see any substantial conflict or inconsistency between the provisions of C.A. No. 327 and the Labor Code with
respect to money claims against the State. The Labor code, in relation to Act No. 3083, provides the legal basis for the
State liability but the prosecution, enforcement or satisfaction thereof must still be pursued in accordance with the rules
and procedures laid down in C.A. No. 327, as amended by P.D. 1445.

When the state gives its consent to be sued, it does thereby necessarily consent to unrestrained execution against it.
tersely put, when the State waives its immunity, all it does, in effect, is to give the other party an opportunity to prove, if it
can, that the State has a liability. 21 In Republic vs. Villasor 22 this Court, in nullifying the issuance of an alias writ of
execution directed against the funds of the Armed Forces of the Philippines to satisfy a final and executory judgment, has
explained, thus —

The universal rule that where the State gives its consent to be sued by private parties either by general or
special law, it may limit the claimant's action "only up to the completion of proceedings anterior to the
 stage of execution" and that the power of the Courts ends when the judgment is rendered, since
government funds and properties may not be seized under writs or execution or garnishment to satisfy
such judgments, is based on obvious considerations of public policy. Disbursements of public funds must
be covered by the correspondent appropriation as required by law. The functions and public services
rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds
from their legitimate and specific objects, as appropriated by law.23

WHEREFORE, the petition is GRANTED. The resolution, dated 27 November 1991, is hereby REVERSED and SET
ASIDE. The writ of execution directed against the property of the Department of Agriculture is nullified, and the public
respondents are hereby enjoined permanently from doing, issuing and implementing any and all writs of execution issued
pursuant to the decision rendered by the Labor Arbiter against said petitioner.

SO ORDERED.
G.R. No. 91359

GRINO-AQUINO, J.:
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 Supervisory Unit for Security and
Investigation Agencies (PC-SUSIA) vs. 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 and 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.
On March 28, 1988, VMPSI filed a complaint in the Regional Trial Court at Makati, Metro Manila, praying the court to:
"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 pre-requisite 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 VMPSIwith 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:
"SEC. 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 thosewhich ar
e already existing at the promulgation of this Decree: x x x." (As amended by P.D. Nos. 11 and 100.)

"SEC.
17. Rules and Regulations by Chief, Philippine Constabulary. - The Chief of the Philippine Constabulary, in consultation w
iththe 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."

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.
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, x x x." (p. 140, Rollo.)
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, 1988, 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:
"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.
Thus did we hold in Shauf vs. Court of Appeals, 191 SCRA 713:
"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 formallyimpleaded." (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 vs. 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:
"The Memorandum of Agreement dated May 12, 1986 was entered into by the PC Chief in relation to the exercise of a fun
ctionsovereign in nature. The correct test for the application of state immunity is not the conclusion of a contract by the St
ate but the legalnature of the act. This was clearly enunciated in the case of United States of America vs. Ruiz where the 
Hon. Supreme Court held:

"'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 notapply where the contract relates to the exercise of its sovereign functions.' (136 SCRA
487, 492.)
"In the instant case, the Memorandum of Agreement entered into by the PC Chief and PADPAO was intended to professi
onalize theindustry and to standardize the salaries of security guards as well as the current rates of security services, clea
rly, a governmentalfunction. The execution of the said agreement is incidental to the purpose of R.A. 5487, as amended, 
which is to regulate theorganization and operation of private detective, watchmen or security guard agencies.
(Underscoring 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 strictissimijuris (Republic vs. 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 vs. U.S. Wall, 152, 19 L. ed. 129, as cited in 78
SCRA 477). In the same vein, this Court in Republic vs. Purisima (78 SCRA 470, 473) rationalized:
"Nonetheless, a continued adherence to the doctrine of non-suability is not to be deplored for as against the
inconvenience that may be caused [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 obstacle, could very well be imagined." (citing Providence Washington
Insurance Co. vs. Republic, 29 SCRA 598.)

WHEREFORE, the petition for review is DENIED and the judgment appealed from is AFFIRMED in toto. No costs.
SO ORDERED.
G.R. No. 90478 November 21, 1991

REPUBLIC OF THE PHILIPPINES (PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT), petitioner, 

vs.
SANDIGANBAYAN, BIENVENIDO R. TANTOCO, JR. and DOMINADOR R. SANTIAGO, respondents.

Dominador R. Santiago for and in his own behalf and as counsel for respondent Tantoco, Jr.

NARVASA, J.:

Private respondents Bienvenido R. Tantoco, Jr. and Dominador R. Santiago — together with Ferdinand E. Marcos, Imelda
R. Marcos, Bienvenido R. Tantoco, Sr., Gliceria R. Tantoco, and Maria Lourdes Tantoco-Pineda-are defendants in Civil
Case No. 0008 of the Sandiganbayan. The case was commenced on July 21, 1987 by the Presidential Commission on
Good Government (PCGG) in behalf of the Republic of the Philippines. The complaint which initiated the action was
denominated one "for reconveyance, reversion, accounting, restitution and damages," and was avowedly filed pursuant to
Executive Order No. 14 of President Corazon C. Aquino.

After having been served with summons, Tantoco, Jr. and Santiago, instead of filing their answer, jointly filed a "MOTION
TO STRIKE OUT SOME PORTIONS OF THE COMPLAINT AND FOR BILL OF PARTICULARS OF OTHER PORTIONS"
dated Nov. 3, 1987. 1 The PCGG filed an opposition thereto, 2 and the movants, a reply to the opposition. 3 By order dated
January 29, 1988, the Sandiganbayan, in order to expedite proceedings and accommodate the defendants, gave the
PCGG forty-five (45) days to expand its complaint to make more specific certain allegations. 4

Tantoco and Santiago then presented a "motion for leave to file interrogatories under Rule 25 of the Rules of Court" dated February 1, 1988, and "Interrogatories under Rule 25." 5
Basically, they
sought an answer to the question: "Who were the Commissioners of the PCGG (aside from its Chairman, Hon. Ramon
Diaz, who verified the complaint) who approved or authorized the inclusion of Messrs. Bienvenido R. Tantoco, Jr. and
Dominador R. Santiago as defendants in the . . case?" 6 The PCGG responded by filing a motion dated February 9, 1988
to strike out said motion and interrogatories as being impertinent, "queer," "weird," or "procedurally bizarre as the purpose
thereof lacks merit as it is improper, impertinent and irrelevant under any 
guise." 7

On March 18, 1988, in compliance with the Order of January 29, 1988, the PCGG filed an Expanded Complaint. 8
 As this expanded complaint, Tantoco and Santiago
reiterated their motion for bill of particulars, through a Manifestation dated April 11, 1988. 9

Afterwards, by Resolution dated July 4, 1988, 10

 the Sandiganbayan denied the motion to strike out, for bill of particulars, and for leave to file
interrogatories, holding them to be without legal and factual basis. Also denied was the PCGG's motion to strike out
impertinent pleading dated February 9, 1988. The Sandiganbayan declared inter alia the complaint to be "sufficiently
definite and clear enough," there are adequate allegations . . which clearly portray the supposed involvement and/or
alleged participation of defendants-movants in the transactions described in detail in said Complaint," and "the other
matters sought for particularization are evidentiary in nature which should be ventilated in the pre-trial or trial proper . ." It
also opined that "(s)ervice of interrogatories before joinder of issue and without leave of court is premature . . (absent) any
special or extraordinary circumstances . . which would justify . . (the same)."

Tantoco and Santiago then filed an Answer with Compulsory Counterclaim under date of July 18, 1988. 11 In response, the
PCGG presented a "Reply to Answer with Motion to Dismiss Compulsory Counterclaim " 12

The case was set for pre-trial on July 31, 1989. 13

 On July 25, 1989, the PCGG submitted its PRE-TRIAL. 14 The pre-trial was however reset to
September 11, 1989, and all other parties were required to submit pre-trial briefs on or before that date. 15

On July 27, 1989 Tantoco and Santiago filed with the Sandiganbayan a pleading denominated "Interrogatories to Plaintiff," 16
 and on August 2, 1989, an "Amended
Interrogatories to Plaintiff"' 17 as well as a Motion for Production and Inspection of Documents. 18

The amended interrogatories chiefly sought factual details relative to specific averments of PCGG's amended complaint, through such questions, for instance, as—
 1. In connection with the allegations . . in paragraph 1 . ., what specific property or properties does the plaintiff claim it has the right to recover from defendants Tantoco, Jr. and Santiago for being
ill-gotten?

3. In connection with the allegations . . in paragraph 10 (a) . . what specific act or acts . . were committed by defendants Tantoco, Jr. and Santiago in "concert with" defendant Ferdinand Marcos
and in furtherance or pursuit, of the alleged systematic plan of said defendant Marcos to accumulate ill-gotten wealth?"

5. In connection with . . paragraph 13 . ., what specific act or acts of the defendants Tantoco, Jr. and Santiago. . were committed by said defendants as part, or in furtherance, of the alleged plan to
conceal assets of defendants Ferdinand and Imelda Marcos?

7. In connection with . . paragraph 15(c) . . is it plaintiff's position or theory of the case that Tourist Duty Free Shops, Inc., including all the assets of said corporation, are beneficially owned by either
or both defendants Ferdinand and Imelda Marcos and that the defendants Tantoco, Jr. and Santiago, as well as, the other stockholders of record of the same corporation are mere "dummies" of
said defendants Ferdinand and /or Imelda R. Marcos?

On the other hand, the motion for production and inspection of documents prayed for examination and copying of—

1) the "official records and other evidence" on the basis of which the verification of the Amended Complaint asserted that the allegations thereof are "true and correct;"

2) the documents listed in PCGG's Pre-Trial Brief as those "intended to be presented and . . marked as exhibits for the plaintiff;" and

3) "the minutes of the meeting of the PCGG which chronicles the discussion (if any) and the decision (of the Chairman and members) to file the complaint" in the case at bar.

By Resolutions dated August 21, 1989 and August 25, 1989, the Sandiganbayan admitted the Amended Interrogatories and granted the motion for production and inspection of documents (production being
scheduled on September 14 and 15, 1989), respectively.

On September 1, 1989, the PCGG filed a Motion for Reconsideration of the Resolution of August 25, 1989 (allowing production and inspection of documents). It argued that

1) since the documents subject thereof would be marked as exhibits during the pre-trial on September 11, 1989 anyway, the order for "their production and inspection on September 14 and 15, are purposeless
and unnecessary;"

2) movants already know of the existence and contents of the document which "are clearly described . . (in) plaintiff's Pre-Trial Brief;"

3) the documents are "privileged in character" since they are intended to be used against the PCGG and/or its Commissioners in violation of Section 4, Executive Order No. 1, viz.:

(a) No civil action shall lie against the Commission or any member thereof for anything done or omitted in the discharge of the task contemplated by this Order.

(b) No member or staff of the Commission shall be required to testify or produce evidence in any judicial, legislative, or administrative proceeding concerning matters within its official cognizance.

It also filed on September 4, 1989 an opposition to the Amended Interrogatories, 19

 which the Sandiganbayan treated as a motion for reconsideration of the
Resolution of August 21, 1989 (admitting the Amended Interrogatories). The opposition alleged that —

1) the interrogatories "are not specific and do not name the person to whom they are propounded . .," or "who in the
PCGG, in particular, . . (should) answer the interrogatories;"

2) the interrogatories delve into "factual matters which had already been decreed . . as part of the proof of the Complaint
upon trial . .;"

3) the interrogatories "are frivolous" since they inquire about "matters of fact . . which defendants . . sought to . . (extract)
through their aborted Motion for Bill of Particulars;"

4) the interrogatories "are really in the nature of a deposition, which is prematurely filed and irregularly utilized . . (since)
the order of trial calls for plaintiff to first present its evidence."

Tantoco and Santiago filed a reply and opposition on September 18, 1989.
After hearing, the Sandiganbayan promulgated two (2) Resolutions on September 29, 1989, the first, denying
reconsideration (of the Resolution allowing production of documents), and the second, reiterating by implication the
permission to serve the amended interrogatories on the plaintiff (PCGG). 20

Hence, this petition for certiorari.

The PCGG contends that said orders, both dated September 29, 1989, should be nullified because rendered with grave abuse of discretion amounting to excess of jurisdiction. More particularly, it claims —

a) as regards the order allowing the amended interrogatories to the plaintiff PCGG:

1) that said interrogatories are not specific and do not name the particular individuals to whom they are propounded, being addressed only to the PCGG;

2) that the interrogatories deal with factual matters which the Sandiganbayan (in denying the movants' motion for bill of particulars) had already declared to be part of the PCGG's proof upon trial;
and

3) that the interrogatories would make PCGG Commissioners and officers witnesses, in contravention of Executive Order No. 14 and related issuances; and

b) as regards the order granting the motion for production of documents:

1) that movants had not shown any good cause therefor;

2) that some documents sought to be produced and inspected had already been presented in Court and marked preliminarily as PCGG's exhibits, and the movants had viewed, scrutinized and
even offered objections thereto and made comments thereon; and

3) that the other documents sought to be produced are either —

(a) privileged in character or confidential in nature and their use is proscribed by the immunity provisions of Executive Order No. 1, or

(b) non-existent, or mere products of the movants' suspicion and fear.

This Court issued a temporary restraining order on October 27, 1989, directing the Sandiganbayan to desist from enforcing its questioned resolutions of September 29, 1989 in Civil Case No.
0008. 21

After the issues were delineated and argued at no little length by the parties, the Solicitor General withdrew "as counsel for plaintiff . . with the reservation, however, conformably with Presidential
Decree No. 478, the provisions of Executive Order No. 292, as well as the decisional law of 'Orbos v. Civil Service Commission, et al.,' (G.R. No. 92561, September 12, 1990) 22
 to submit
his comment/observation on incidents/matters pending with this . . Court if called for by circumstances in the
interest of the Government or if he is so required by the Court." 23 This, the Court allowed by Resolution dated
January 21, 1991. 24

Subsequently, PCGG Commissioner Maximo A. Maceren advised the Court that the cases from which the Solicitor General had withdrawn would henceforth be under his (Maceren's) charge
"and/or any of the following private attorneys: Eliseo B. Alampay, Jr., Mario E. Ongkiko, Mario Jalandoni and such other attorneys as it may later authorize." 25

The facts not being in dispute, and it appearing that the parties have fully ventilated their respective positions, the Court now proceeds to decide the case.
Involved in the present proceedings are two of the modes of discovery provided in the Rules of Court: interrogatories to parties , 26
 and production and inspection of
documents and things. 27 Now, it appears to the Court that among far too many lawyers (and not a few judges),
there is, if not a regrettable unfamiliarity and even outright ignorance about the nature, purposes and operation of
the modes of discovery, at least a strong yet unreasoned and unreasonable disinclination to resort to them —
which is a great pity for the intelligent and adequate use of the deposition-discovery mechanism, coupled with pre-
trial procedure, could, as the experience of other jurisdictions convincingly demonstrates, effectively shorten the
period of litigation and speed up adjudication. 28 Hence, a few words about these remedies is not at all
inappropriate.

The resolution of controversies is, as everyone knows, the raison d'etre of courts. This essential function is
accomplished by first, the ascertainment of all the material and relevant facts from the pleadings and from the
evidence adduced by the parties, and second, after that determination of the facts has been completed, by the
application of the law thereto to the end that the controversy may be settled authoritatively, definitely and finally.

It is for this reason that a substantial part of the adjective law in this jurisdiction is occupied with assuring that all
the facts are indeed presented to the Court; for obviously, to the extent that adjudication is made on the basis of
incomplete facts, to that extent there is faultiness in the approximation of objective justice. It is thus the obligation
of lawyers no less than of judges to see that this objective is attained; that is to say, that there no suppression,
obscuration, misrepresentation or distortion of the facts; and that no party be unaware of any fact material a
relevant to the action, or surprised by any factual detail suddenly brought to his attention during the trial. 29

Seventy-one years ago, in Alonso v. Villamor, 30

 this Court described the nature and object of litigation and in the process laid down
the standards by which judicial contests are to be conducted in this jurisdiction. It said:

A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art
of movement and position, entraps and destroys the other. It is, rather a contest in which each contending
party fully and fairly lays before the court the facts in issue and then brushing aside as wholly trivial and
indecisive all imperfections of form and technicalities of procedure, asks that justice be done on the
merits. Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its
proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant
consideration from courts. There should be no vested right in technicalities. . . .

The message is plain. It is the duty of each contending party to lay before the court the facts in issue-fully and
fairly; i.e., to present to the court all the material and relevant facts known to him, suppressing or concealing
nothing, nor preventing another party, by clever and adroit manipulation of the technical rules of pleading and
evidence, from also presenting all the facts within his knowledge.

Initially, that undertaking of laying the facts before the court is accomplished by the pleadings filed by the parties;
but that, only in a very general way. Only "ultimate facts" are set forth in the pleadings; hence, only the barest
outline of the facfual basis of a party's claims or defenses is limned in his pleadings. The law says that every
pleading "shall contain in a methodical and logical form, a plain, concise and direct statement of the ultimate
facts on which the party pleading relies for his claim or defense, as the case may be, omitting the statement of
mere evidentiary facts." 31

Parenthetically, if this requirement is not observed, i.e., the ultimate facts are alleged too generally or "not averred with sufficient definiteness or particularity to enable . . (an adverse party) properly
to prepare his responsive pleading or to prepare for trial," a bill of particulars seeking a "more definite statement" may be ordered by the court on motion of a party. The office of a bill of particulars
is, however, limited to making more particular or definite the ultimate facts in a pleading It is not its office to supply evidentiary matters. And the common perception is that said evidentiary details
are made known to the parties and the court only during the trial, when proof is adduced on the issues of fact arising from the pleadings.

The truth is that "evidentiary matters" may be inquired into and learned by the parties before the trial. Indeed, it is the purpose and policy of the law that the parties — before the trial if not indeed
even before the pre-trial — should discover or inform themselves of all the facts relevant to the action, not only those known to them individually, but also those known to adversaries; in other
words, the desideratum is that civil trials should not be carried on in the dark; and the Rules of Court make this ideal possible through the deposition-discovery mechanism set forth in Rules 24 to
29. The experience in other jurisdictions has been that ample discovery before trial, under proper regulation, accomplished one of the most necessary of modern procedure: it not only eliminates
unessential issue from trials thereby shortening them considerably, but also requires parties to play the game with the cards on the table so that the possibility of fair settlement before trial is
measurably increased. . ." 32
As just intimated, the deposition-discovery procedure was designed to remedy the conceded inadequacy and cumbersomeness of the pre-trial functions of notice-giving, issue-formulation and fact
revelation theretofore performed primarily by the pleadings.

The various modes or instruments of discovery are meant to serve (1) as a device, along with the pre-trial hearing under Rule 20, to narrow and clarify the basic issues between the parties, and (2)
as a device for ascertaining the facts relative to those issues. The evident purpose is, to repeat, to enable parties, consistent with recognized privileges, to obtain the fullest possible knowledge of
the issues and facts before trials and thus prevent that said trials are carried on in the dark. 33

To this end, the field of inquiry that may be covered by depositions or interrogatories is as broad as when the interrogated party is called as a witness to testify orally at trial. The inquiry extends to
all facts which are relevant, whether they be ultimate or evidentiary, excepting only those matters which are privileged. The objective is as much to give every party the fullest possible information of
all the relevant facts before the trial as to obtain evidence for use upon said trial. The principle is reflected in Section 2, Rule 24 (governing depositions) 34
 which generally allows
the examination of a deponent —

1) "regarding any matter, not privileged, which is relevant to the subject of the pending action, whether
relating to the claim or defense of any other party;"

2) as well as:

(a) "the existence, description, nature, custody, condition and location of any books, documents, or other
tangible things" and

(b) "the identity and location of persons having knowledge of relevant facts."

What is chiefly contemplated is the discovery of every bit of information which may be useful in the preparation for
trial, such as the identity and location of persons having knowledge of relevant facts; those relevant facts
themselves; and the existence, description, nature, custody, condition, and location of any books, documents, or
other tangible things. Hence, "the deposition-discovery rules are to be accorded a broad and liberal treatment. No
longer can the time-honored cry of "fishing expedition" serve to preclude a party from inquiring into the facts
underlying his opponent's case. Mutual knowledge of all the relevant facts gathered by both parties is essential to
proper litigation. To that end, either party may compel the other to disgorge whatever facts he has in his
possession. The deposition-discovery procedure simply advances the stage at which the disclosure can be
compelled from the time of trial to the period preceding it, thus reducing the possibility, of surprise, . . . 35

In line with this principle of according liberal treatment to the deposition-discovery mechanism, such modes of discovery as (a) depositions (whether by oral examination or written interrogatories)
under Rule 24, (b) interrogatories to parties under Rule 25, and (c) requests for admissions under Rule 26, may be availed of without leave of court, and generally, without court intervention. The
Rules of Court explicitly provide that leave of court is not necessary to avail of said modes of discovery after an answer to the complaint has been served. 36
 It is only when an
answer has not yet been filed (but after jurisdiction has been obtained over the defendant or property subject of
the action) that prior leave of court is needed to avail of these modes of discovery, the reason being that at that
time the issues are not yet joined and the disputed facts are not clear. 37

On the other hand, leave of court is required as regards discovery by (a) production or inspection of documents or things in accordance with Rule 27, or (b) physical and mental examination of
persons under Rule 28, which may be granted upon due application and a showing of due cause.

To ensure that availment of the modes of discovery is otherwise untrammeled and efficacious, the law imposes serious sanctions on the party who refuses to make discovery, such as dismissing
the action or proceeding or part thereof, or rendering judgment by default against the disobedient party; contempt of court, or arrest of the party or agent of the party; payment of the amount of
reasonable expenses incurred in obtaining a court order to compel discovery; taking the matters inquired into as established in accordance with the claim of the party seeking discovery; refusal to
allow the disobedient party support or oppose designated claims or defenses; striking out pleadings or parts thereof; staying further proceedings. 38

Of course, there are limitations to discovery, even when permitted to be undertaken without leave and without judicial intervention. "As indicated by (the) Rules . . ., limitations inevitably arise when
it can be shown that the examination is being conducted in bad faith or in such a manner as to annoy, embarass, or oppress the person subject to the inquiry. 39
 And . . . further
limitations come into existence when the inquiry touches upon the irrelevant or encroaches upon the recognized
domains of privilege." 40

In fine, the liberty of a party to make discovery is well nigh unrestricted if the matters inquired into are otherwise relevant and not privileged, and the inquiry is made in good faith and within the
bounds of the law.

It is in light of these broad principles underlying the deposition-discovery mechanism, in relation of course to the particular rules directly involved, that the issues in this case will now be resolved.

The petitioner's objections to the interrogatories served on it in accordance with Rule 25 of the Rules of Court cannot be sustained.

It should initially be pointed out — as regards the private respondents "Motion for Leave to File Interrogatories" dated February 1, 1988 41
 — that it was correct for them to
seek leave to serve interrogatories, because discovery was being availed of before an answer had been served.
In such a situation, i.e., "after jurisdiction has been obtained over any defendant or over property subject of the
action" but before answer, Section 1 of Rule 24 (treating of depositions), in relation to Section 1 of Rule 25
(dealing with interrogatories to parties) explicitly requires "leave of court." 42 But there was no need for the private
respondents to seek such leave to serve their "Amended Interrogatories to Plaintiff" (dated August 2, 1989 43)
after they had filed their answer to the PCGG's complaint, just as there was no need for the Sandiganbayan to act
thereon.

1. The petitioner's first contention — that the interrogatories in question are defective because they (a) do not
name the particular individuals to whom they are propounded, being addressed only to the PCGG, and (b) are
"fundamentally the same matters . . (private respondents) sought to be clarified through their aborted Motion . . for
Bill of Particulars" — are untenable and quickly disposed of.

The first part of petitioner's submission is adequately confuted by Section 1, Rule 25 which states that if the party
served with interrogatories is a juridical entity such as "a public or private corporation or a partnership or
association," the same shall be "answered . . by any officer thereof competent to testify in its behalf." There is
absolutely no reason why this proposition should not be applied by analogy to the interrogatories served on the
PCGG. That the interrogatories are addressed only to the PCGG, without naming any specific commissioner o
officer thereof, is utterly of no consequence, and may not be invoked as a reason to refuse to answer. As the rule
states, the interrogatories shall be answered "by any officer thereof competent to testify in its behalf."

That the matters on which discovery is desired are the same matters subject of a prior motion for bill of particulars
addressed to the PCGG's amended complaint — and denied for lack of merit — is beside the point. Indeed, as
already pointed out above, a bill of particulars may elicit only ultimate facts, not so-called evidentiary facts. The
latter are without doubt proper subject of discovery. 44

Neither may it be validly argued that the amended interrogatories lack specificity. The merest glance at them disproves the argument. The interrogatories are made to relate to individual paragraphs
of the PCGG's expanded complaint and inquire about details of the ultimate facts therein alleged. What the PCGG may properly do is to object to specific items of the interrogatories, on the ground
of lack of relevancy, or privilege, or that the inquiries are being made in bad faith, or simply to embarass or oppress it. 45
 But until such an objection is presented
and sustained, the obligation to answer subsists.

2. That the interrogatories deal with factual matters which will be part of the PCGG's proof upon trial, is not ground
for suppressing them either. As already pointed out, it is the precise purpose of discovery to ensure mutual
knowledge of all the relevant facts on the part of all parties even before trial, this being deemed essential to
proper litigation. This is why either party may compel the other to disgorge whatever facts he has in his
possession; and the stage at which disclosure of evidence is made is advanced from the time of trial to the period
preceding it.

3. Also unmeritorious is the objection that the interrogatories would make PCGG Commissioners and officers
witnesses, in contravention of Executive Order No. 14 and related issuances. In the first place, there is nothing at
all wrong in a party's making his adversary his witness . 46 This is expressly allowed by Section 6, Rule 132 of the
Rules of Court, viz.:
 Sec. 6. Direct examination of unwilling or hostile witnesses. — A party may . . . call an adverse party or an
officer, director, or managing agent of a public or private corporation or of a partnership or association
which is an adverse party, and interrogate him by leading questions and contradict and impeach him in all
respects as if he had been called by the adverse party, and the witness thus called may be contradicted
and impeached by or on behalf of the adverse party also, and may be cross-examined by the adverse
party only upon the subject-matter of his examination in chief.

The PCGG insinuates that the private respondents are engaged on a "fishing expedition," apart from the fact that
the information sought is immaterial since they are evidently meant to establish a claim against PCGG officers
who are not parties to the action. It suffices to point out that "fishing expeditions" are precisely permitted through
the modes of discovery. 47 Moreover, a defendant who files a counterclaim against the plaintiff is allowed by the
Rules to implead persons (therefore strangers to the action) as additional defendants on said counterclaim. This
may be done pursuant to Section 14, Rule 6 of the Rules, to wit:

Sec. 14. Bringing new parties. — When the presence of parties other than those to the original action is
required for the granting of complete relief in the determination of a counterclaim or cross-claim, the court
shall order them to be brought in as defendants, if jurisdiction over them can be obtained."

The PCGG's assertion that it or its members are not amenable to any civil action "for anything done or omitted in
the discharge of the task contemplated by . . (Executive) Order (No. 1)," is not a ground to refuse to answer the
interrogatories. The disclosure of facto relevant to the action and which are not self-incriminatory or otherwise
privileged is one thing; the matter of whether or not liability may arise from the facts disclosed in light of Executive
Order 
No. 1, is another. No doubt, the latter proposition may properly be set up by way of defense in the action.

The apprehension has been expressed that the answers to the interrogatories may be utilized as foundation for a
counterclaim against the PCGG or its members and officers. They will be. The private respondents have made no
secret that this is in fact their intention. Withal, the Court is unable to uphold the proposition that while the PCGG
obviously feels itself at liberty to bring actions on the basis of its study and appreciation of the evidence in its
possession, the parties sued should not be free to file counterclaims in the same actions against the PCGG or its
officers for gross neglect or ignorance, if not downright bad faith or malice in the commencement or initiation of
such judicial proceedings, or that in the actions that it may bring, the PCGG may opt not to be bound by rule
applicable to the parties it has sued, e.g., the rules of discovery.

So, too, the PCGG's postulation that none of its members may be "required to testify or produce evidence in any
judicial . . proceeding concerning matters within its official cognizance," has no application to a judicial proceeding
it has itself initiated. As just suggested, the act of bringing suit must entail a waiver of the exemption from giving
evidence; by bringing suit it brings itself within the operation and scope of all the rules governing civil actions,
including the rights and duties under the rules of discovery. Otherwise, the absurd would have to be conceded,
that while the parties it has impleaded as defendants may be required to "disgorge all the facts" within their
knowledge and in their possession, it may not itself be subject to a like compulsion.

The State is, of course, immune from suit in the sense that it cannot, as a rule, be sued without its consent. But it
is axiomatic that in filing an action, it divests itself of its sovereign character and sheds its immunity from suit,
descending to the level of an ordinary litigant. The PCGG cannot claim a superior or preferred status to the State,
even while assuming to represent or act for the State. 48

The suggestion 49
 that the State makes no implied waiver of immunity by filing suit except when in so doing it acts in, or
in matters concerning, its proprietary or non-governmental capacity, is unacceptable; it attempts a distinction
without support in principle or precedent. On the contrary —

The consent of the State to be sued may be given expressly or impliedly. Express consent may be
manifested either through a general law or a special law. Implied consent is given when the State itself
commences litigation or when it enters into a contract. 50

The immunity of the State from suits does not deprive it of the right to sue private parties in its own courts. The state as plaintiff may avail itself of the different forms of actions open to
private litigants. In short, by taking the initiative in an action against the private parties, the state surrenders its privileged position and comes down to the level of the defendant. The
latter automatically acquires, within certain limits, the right to set up whatever claims and other defenses he might have against the state. . . . (Sinco, Philippine Political Law, Tenth E.,
pp. 36-37, citing U.S. vs. Ringgold, 8 Pet. 150, 8 L. ed. 899)" 51
It can hardly be doubted that in exercising the right of eminent domain, the State exercises its  jus imperii, as distinguished from its proprietary rights or jus gestionis. Yet, even in that area, it has
been held that where private property has been taken in expropriation without just compensation being paid, the defense of immunity from suit cannot be set up by the State against an action for
payment by the owner. 52

The Court also finds itself unable to sustain the PCGG's other principal contention, of the nullity of the Sandiganbayan's Order for the production and inspection of specified documents and things
allegedly in its possession.

The Court gives short shrift to the argument that some documents sought to be produced and inspected had already been presented in Court and marked preliminarily as PCGG's exhibits, the
movants having in fact viewed, scrutinized and even offered objections thereto and made comments thereon. Obviously, there is nothing secret or confidential about these documents. No serious
objection can therefore be presented to the desire of the private respondents to have copies of those documents in order to study them some more or otherwise use them during the trial for any
purpose allowed by law.

The PCGG says that some of the documents are non-existent. This it can allege in response to the corresponding question in the interrogatories, and it will incur no sanction for doing so unless it is
subsequently established that the denial is false.

The claim that use of the documents is proscribed by Executive Order No. 1 has already been dealt with. The PCGG is however at liberty to allege and prove that said documents fall within some
other privilege, constitutional or statutory.

The Court finally finds that, contrary to the petitioner's theory, there is good cause for the production and inspection of the documents subject of the motion dated August 3, 1989. 53
 Some of
the documents are, according to the verification of the amended complaint, the basis of several of the material
allegations of said complaint. Others, admittedly, are to be used in evidence by the plaintiff. It is matters such as
these into which inquiry is precisely allowed by the rules of discovery, to the end that the parties may adequately
prepare for pre-trial and trial. The only other documents sought to be produced are needed in relation to the
allegations of the counterclaim. Their relevance is indisputable; their disclosure may not be opposed.

One last word. Due no doubt to the deplorable unfamiliarity respecting the nature, purposes and operation of the
modes of discovery earlier 
mentioned, 54 there also appears to be a widely entertained idea that application of said modes is a complicated
matter, unduly expensive and dilatory. Nothing could be farther from the truth. For example, as will already have
been noted from the preceding discussion, all that is entailed to activate or put in motion the process of discovery
by interrogatories to parties under Rule 25 of the Rules of Court, is simply the delivery directly to a party of a letter
setting forth a list of least questions with the request that they be answered individually. 55 That is all. The service
of such a communication on the party has the effect of imposing on him the obligation of answering the questions
"separately and fully in writing underoath," and serving "a copy of the answers on the party submitting the
interrogatories within fifteen (15) days after service of the interrogatories . . ." 56 The sanctions for refusing to make
discovery have already been mentioned. 57 So, too, discovery under Rule 26 is begun by nothing more complex
than the service on a party of a letter or other written communication containing a request that specific facts
therein set forth and/or particular documents copies of which are thereto appended, be admitted in writing. 58 That
is all. Again, the receipt of such a communication by the party has the effect of imposing on him the obligation of
serving the party requesting admission with "a sworn statement either denying specifically the matters of which an
admission is requested or setting forth in detail the reasons why he cannot truthfully either admit or deny those
matters," failing in which "(e)ach of the matters of which admission is requested shall be deemed admitted." 59 The
taking of depositions in accordance with Rule 24 (either on oral examination or by written interrogatories) while
somewhat less simple, is nonetheless by no means as complicated as seems to be the lamentably extensive
notion.

WHEREFORE, the petition is DENIED, without pronouncement as to costs. The temporary restraining order
issued on October 27, 1989 is hereby LIFTED AND SET ASIDE.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado and Davide, Jr.,
JJ., concur.
Melencio-Herrera, J., I also join Justice Cruz's concurrence.
Romero, J., took no part.

Separate Opinions

CRUZ, J., concurring:

I am delighted to concurr with Mr. Justice Andres R. Narvasa in his scholarly ponencia which, besides reaching a
conclusion sustained by the applicable law and jurisprudence, makes for reading both pleasurable and instructive.
One function of the court not generally appreciated is to educate the reader on the intricacies and even the
mustique of the law. The opinion performs this function with impressive expertise and makes the modes of
discovery less esoteric or inaccessible to many members of the bar.

# Separate Opinions

CRUZ, J., concurring:

I am delighted to concurr with Mr. Justice Andres R. Narvasa in his scholarly ponencia which, besides reaching a
conclusion sustained by the applicable law and jurisprudence, makes for coding both pleasurable and instructive.
One function of the court not generally appreciated is to educate the reader on the intricacies and even the
mustique of the law. The opinion performs this function with impressive expertise and makes the modes of
discovery less esoteric or inaccessible to many members of the bar.
G.R. No. L-52179             April 8, 1991

MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner 

vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIÑA, IAUREANO BANIÑA, JR., SOR MARIETA BANIÑA,
MONTANO BANIÑA, ORJA BANIÑA, AND LYDIA R. BANIÑA, respondents.

Mauro C. Cabading, Jr. for petitioner.

Simeon G. Hipol for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari with prayer for the issuance of a writ of preliminary mandatory injunction seeking the
nullification or modification of the proceedings and the orders issued by the respondent Judge Romeo N. Firme, in his
capacity as the presiding judge of the Court of First Instance of La Union, Second Judicial District, Branch IV, Bauang, La
Union in Civil Case No. 107-BG, entitled "Juana Rimando Baniña, et al. vs. Macario Nieveras, et al." dated November 4,
1975; July 13, 1976; August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; September 7, 1979; November
7, 1979 and December 3, 1979 and the decision dated October 10, 1979 ordering defendants Municipality of San
Fernando, La Union and Alfredo Bislig to pay, jointly and severally, the plaintiffs for funeral expenses, actual damages
consisting of the loss of earning capacity of the deceased, attorney's fees and costs of suit and dismissing the complaint
against the Estate of Macario Nieveras and Bernardo Balagot.

The antecedent facts are as follows:

Petitioner Municipality of San Fernando, La Union is a municipal corporation existing under and in accordance with the
laws of the Republic of the Philippines. Respondent Honorable Judge Romeo N. Firme is impleaded in his official capacity
as the presiding judge of the Court of First Instance of La Union, Branch IV, Bauang, La Union. While private respondents
Juana Rimando-Baniña, Laureano Baniña, Jr., Sor Marietta Baniña, Montano Baniña, Orja Baniña and Lydia R. Baniña
are heirs of the deceased Laureano Baniña Sr. and plaintiffs in Civil Case No. 107-Bg before the aforesaid court.

At about 7 o'clock in the morning of December 16, 1965, a collision occurred involving a passenger jeepney driven by
Bernardo Balagot and owned by the Estate of Macario Nieveras, a gravel and sand truck driven by Jose Manandeg and
owned by Tanquilino Velasquez and a dump truck of the Municipality of San Fernando, La Union and driven by Alfredo
Bislig. Due to the impact, several passengers of the jeepney including Laureano Baniña Sr. died as a result of the injuries
they sustained and four (4) others suffered varying degrees of physical injuries.

On December 11, 1966, the private respondents instituted a compliant for damages against the Estate of Macario
Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger jeepney, which was docketed Civil Case
No. 2183 in the Court of First Instance of La Union, Branch I, San Fernando, La Union. However, the aforesaid
defendants filed a Third Party Complaint against the petitioner and the driver of a dump truck of petitioner.

Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent judge and was
subsequently docketed as Civil Case No. 107-Bg. By virtue of a court order dated May 7, 1975, the private respondents
amended the complaint wherein the petitioner and its regular employee, Alfredo Bislig were impleaded for the first time as
defendants. Petitioner filed its answer and raised affirmative defenses such as lack of cause of action, non-suability of the
State, prescription of cause of action and the negligence of the owner and driver of the passenger jeepney as the
proximate cause of the collision.

In the course of the proceedings, the respondent judge issued the following questioned orders, to wit:

(1) Order dated November 4, 1975 dismissing the cross-claim against Bernardo Balagot;

(2) Order dated July 13, 1976 admitting the Amended Answer of the Municipality of San Fernando, La Union and
Bislig and setting the hearing on the affirmative defenses only with respect to the supposed lack of jurisdiction;
 (3) Order dated August 23, 1976 deferring there resolution of the grounds for the Motion to Dismiss until the trial;

(4) Order dated February 23, 1977 denying the motion for reconsideration of the order of July 13, 1976 filed by the
Municipality and Bislig for having been filed out of time;

(5) Order dated March 16, 1977 reiterating the denial of the motion for reconsideration of the order of July 13,
1976;

(6) Order dated July 26, 1979 declaring the case deemed submitted for decision it appearing that parties have not
yet submitted their respective memoranda despite the court's direction; and

(7) Order dated September 7, 1979 denying the petitioner's motion for reconsideration and/or order to recall
prosecution witnesses for cross examination.

On October 10, 1979 the trial court rendered a decision, the dispositive portion is hereunder quoted as follows:

IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby rendered for the plaintiffs, and defendants
Municipality of San Fernando, La Union and Alfredo Bislig are ordered to pay jointly and severally, plaintiffs Juana
Rimando-Baniña, Mrs. Priscilla B. Surell, Laureano Baniña Jr., Sor Marietta Baniña, Mrs. Fe B. Soriano, Montano
Baniña, Orja Baniña and Lydia B. Baniña the sums of P1,500.00 as funeral expenses and P24,744.24 as the lost
expected earnings of the late Laureano Baniña Sr., P30,000.00 as moral damages, and P2,500.00 as attorney's
fees. Costs against said defendants.

The Complaint is dismissed as to defendants Estate of Macario Nieveras and Bernardo Balagot.

SO ORDERED. (Rollo, p. 30)

Petitioner filed a motion for reconsideration and for a new trial without prejudice to another motion which was then
pending. However, respondent judge issued another order dated November 7, 1979 denying the motion for
reconsideration of the order of September 7, 1979 for having been filed out of time.

Finally, the respondent judge issued an order dated December 3, 1979 providing that if defendants municipality and Bislig
further wish to pursue the matter disposed of in the order of July 26, 1979, such should be elevated to a higher court in
accordance with the Rules of Court. Hence, this petition.

Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to excess of jurisdiction in
issuing the aforesaid orders and in rendering a decision. Furthermore, petitioner asserts that while appeal of the decision
maybe available, the same is not the speedy and adequate remedy in the ordinary course of law.

On the other hand, private respondents controvert the position of the petitioner and allege that the petition is devoid of
merit, utterly lacking the good faith which is indispensable in a petition for certiorari and prohibition. (Rollo, p. 42.) In
addition, the private respondents stress that petitioner has not considered that every court, including respondent court,
has the inherent power to amend and control its process and orders so as to make them conformable to law and justice.
(Rollo, p. 43.)

The controversy boils down to the main issue of whether or not the respondent court committed grave abuse of discretion
when it deferred and failed to resolve the defense of non-suability of the State amounting to lack of jurisdiction in a motion
to dismiss.

In the case at bar, the respondent judge deferred the resolution of the defense of non-suability of the State amounting to
lack of jurisdiction until trial. However, said respondent judge failed to resolve such defense, proceeded with the trial and
thereafter rendered a decision against the municipality and its driver.

The respondent judge did not commit grave abuse of discretion when in the exercise of its judgment it arbitrarily failed to
resolve the vital issue of non-suability of the State in the guise of the municipality. However, said judge acted in excess of
his jurisdiction when in his decision dated October 10, 1979 he held the municipality liable for the quasi-delict committed
by its regular employee.
The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the Constitution, to wit: "the
State may not be sued without its consent."

Stated in simple parlance, the  general rule is that the State may not be sued except when it gives consent to be sued.
Consent takes the form of express or implied consent.

Express consent may be embodied in a general law or a special law. The standing consent of the State to be sued in case
of money claims involving liability arising from contracts is found in Act No. 3083. A special law may be passed to enable
a person to sue the government for an alleged quasi-delict, as in Merritt v. Government of the Philippine Islands (34 Phil
311). (see United States of America v. Guinto, G.R. No. 76607, February 26, 1990, 182 SCRA 644, 654.)

Consent is implied when the government enters into business contracts, thereby descending to the level of the other
contracting party, and also when the State files a complaint, thus opening itself to a counterclaim. (Ibid)

Municipal corporations, for example, like provinces and cities, are agencies of the State when they are engaged in
governmental functions and therefore should enjoy the sovereign immunity from suit. Nevertheless, they are subject to
suit even in the performance of such functions because their charter provided that they can sue and be sued.
(Cruz, Philippine Political Law, 1987 Edition, p. 39)

A distinction should first be made between suability and liability. "Suability depends on the consent of the state to be sued,
liability on the applicable law and the established facts. The circumstance that a state is suable does not necessarily
mean that it is liable; on the other hand, it can never be held liable if it does not first consent to be sued. Liability is not
conceded by the mere fact that the state has allowed itself to be sued. When the state does waive its sovereign immunity,
it is only giving the plaintiff the chance to prove, if it can, that the defendant is liable." (United States of America vs.
Guinto, supra, p. 659-660)

Anent the issue of whether or not the municipality is liable for the torts committed by its employee, the test of liability of the
municipality depends on whether or not the driver, acting in behalf of the municipality, is performing governmental or
proprietary functions. As emphasized in the case of Torio vs. Fontanilla (G. R. No. L-29993, October 23, 1978. 85 SCRA
599, 606), the distinction of powers becomes important for purposes of determining the liability of the municipality for the
acts of its agents which result in an injury to third persons.

Another statement of the test is given in City of Kokomo vs. Loy, decided by the Supreme Court of Indiana in 1916, thus:

Municipal corporations exist in a dual capacity, and their functions are twofold. In one they exercise the right
springing from sovereignty, and while in the performance of the duties pertaining thereto, their acts are political
and governmental. Their officers and agents in such capacity, though elected or appointed by them, are
nevertheless public functionaries performing a public service, and as such they are officers, agents, and servants
of the state. In the other capacity the municipalities exercise a private, proprietary or corporate right, arising from
their existence as legal persons and not as public agencies. Their officers and agents in the performance of such
functions act in behalf of the municipalities in their corporate or individual capacity, and not for the state or
sovereign power." (112 N.E., 994-995) (Ibid, pp. 605-606.)

It has already been remarked that municipal corporations are suable because their charters grant them the competence to
sue and be sued. Nevertheless, they are generally not liable for torts committed by them in the discharge of governmental
functions and can be held answerable only if it can be shown that they were acting in a proprietary capacity. In permitting
such entities to be sued, the State merely gives the claimant the right to show that the defendant was not acting in its
governmental capacity when the injury was committed or that the case comes under the exceptions recognized by law.
Failing this, the claimant cannot recover. (Cruz, supra, p. 44.)

In the case at bar, the driver of the dump truck of the municipality insists that "he was on his way to the Naguilian river to
get a load of sand and gravel for the repair of San Fernando's municipal streets." (Rollo, p. 29.)

In the absence of any evidence to the contrary, the regularity of the performance of official duty is presumed pursuant to
Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that the driver of the dump truck was performing
duties or tasks pertaining to his office.

We already stressed in the case of Palafox, et. al. vs. Province of Ilocos Norte, the District Engineer, and the Provincial
Treasurer (102 Phil 1186) that "the construction or maintenance of roads in which the truck and the driver worked at the
time of the accident are admittedly governmental activities."
After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the municipality cannot be
held liable for the torts committed by its regular employee, who was then engaged in the discharge of governmental
functions. Hence, the death of the passenger –– tragic and deplorable though it may be –– imposed on the municipality no
duty to pay monetary compensation.

All premises considered, the Court is convinced that the respondent judge's dereliction in failing to resolve the issue of
non-suability did not amount to grave abuse of discretion. But said judge exceeded his jurisdiction when it ruled on the
issue of liability.

ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby modified, absolving the
petitioner municipality of any liability in favor of private respondents.

SO ORDERED.
 THIRD DIVISION

G.R. Nos. 89898-99 October 1, 1990

MUNICIPALITY OF MAKATI, petitioner, 
vs.
THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge RTC of Makati, Branch
CXLII ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and SHERIFF SILVINO R. PASTRANA, respondents.

Defante & Elegado for petitioner.

Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium, Inc.

RESOLUTION

CORTÉS, J.:

The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner Municipality of Makati
against private respondent Admiral Finance Creditors Consortium, Inc., Home Building System & Realty Corporation and
one Arceli P. Jo, involving a parcel of land and improvements thereon located at Mayapis St., San Antonio Village, Makati
and registered in the name of Arceli P. Jo under TCT No. S-5499.

It appears that the action for eminent domain was filed on May 20, 1986, docketed as Civil Case No. 13699. Attached to
petitioner's complaint was a certification that a bank account (Account No. S/A 265-537154-3) had been opened with the
PNB Buendia Branch under petitioner's name containing the sum of P417,510.00, made pursuant to the provisions of
Pres. Decree No. 42. After due hearing where the parties presented their respective appraisal reports regarding the value
of the property, respondent RTC judge rendered a decision on June 4, 1987, fixing the appraised value of the property at
P5,291,666.00, and ordering petitioner to pay this amount minus the advanced payment of P338,160.00 which was earlier
released to private respondent.

After this decision became final and executory, private respondent moved for the issuance of a writ of execution. This
motion was granted by respondent RTC judge. After issuance of the writ of execution, a Notice of Garnishment dated
January 14, 1988 was served by respondent sheriff Silvino R. Pastrana upon the manager of the PNB Buendia Branch.
However, respondent sheriff was informed that a "hold code" was placed on the account of petitioner. As a result of this,
private respondent filed a motion dated January 27, 1988 praying that an order be issued directing the bank to deliver to
respondent sheriff the amount equivalent to the unpaid balance due under the RTC decision dated June 4, 1987.

Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of the expropriation amount
should be done in installments which the respondent RTC judge failed to state in his decision. Private respondent filed its
opposition to the motion.

Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation" informing the court that private
respondent was no longer the true and lawful owner of the subject property because a new title over the property had
been registered in the name of Philippine Savings Bank, Inc. (PSB) Respondent RTC judge issued an order requiring
PSB to make available the documents pertaining to its transactions over the subject property, and the PNB Buendia
Branch to reveal the amount in petitioner's account which was garnished by respondent sheriff. In compliance with this
order, PSB filed a manifestation informing the court that it had consolidated its ownership over the property as
mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987. After several conferences, PSB and
private respondent entered into a compromise agreement whereby they agreed to divide between themselves the
compensation due from the expropriation proceedings.

Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1) approved the compromise
agreement; (2) ordered PNB Buendia Branch to immediately release to PSB the sum of P4,953,506.45 which
corresponds to the balance of the appraised value of the subject property under the RTC decision dated June 4, 1987,
from the garnished account of petitioner; and, (3) ordered PSB and private respondent to execute the necessary deed of
conveyance over the subject property in favor of petitioner. Petitioner's motion to lift the garnishment was denied.

Petitioner filed a motion for reconsideration, which was duly opposed by private respondent. On the other hand, for failure
of the manager of the PNB Buendia Branch to comply with the order dated September 8, 1988, private respondent filed
two succeeding motions to require the bank manager to show cause why he should not be held in contempt of court.
During the hearings conducted for the above motions, the general manager of the PNB Buendia Branch, a Mr. Antonio
Bautista, informed the court that he was still waiting for proper authorization from the PNB head office enabling him to
make a disbursement for the amount so ordered. For its part, petitioner contended that its funds at the PNB Buendia
Branch could neither be garnished nor levied upon execution, for to do so would result in the disbursement of public funds
without the proper appropriation required under the law, citing the case of Republic of the Philippines v. Palacio [G.R. No.
L-20322, May 29, 1968, 23 SCRA 899].

Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion for reconsideration on the
ground that the doctrine enunciated in Republic v. Palacio did not apply to the case because petitioner's PNB Account No.
S/A 265-537154-3 was an account specifically opened for the expropriation proceedings of the subject property pursuant
to Pres. Decree No. 42. Respondent RTC judge likewise declared Mr. Antonio Bautista guilty of contempt of court for his
inexcusable refusal to obey the order dated September 8, 1988, and thus ordered his arrest and detention until his
compliance with the said order.

Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions for certiorari with the Court of
Appeals, which were eventually consolidated. In a decision promulgated on June 28, 1989, the Court of Appeals
dismissed both petitions for lack of merit, sustained the jurisdiction of respondent RTC judge over the funds contained in
petitioner's PNB Account No. 265-537154-3, and affirmed his authority to levy on such funds.

Its motion for reconsideration having been denied by the Court of Appeals, petitioner now files the present petition for
review with prayer for preliminary injunction.

On November 20, 1989, the Court resolved to issue a temporary restraining order enjoining respondent RTC judge,
respondent sheriff, and their representatives, from enforcing and/or carrying out the RTC order dated December 21, 1988
and the writ of garnishment issued pursuant thereto. Private respondent then filed its comment to the petition, while
petitioner filed its reply.

Petitioner not only reiterates the arguments adduced in its petition before the Court of Appeals, but also alleges for the
first time that it has actually two accounts with the PNB Buendia Branch, to wit:

xxx xxx xxx

(1) Account No. S/A 265-537154-3 — exclusively for the expropriation of the subject property, with an
outstanding balance of P99,743.94.

(2) Account No. S/A 263-530850-7 — for statutory obligations and other purposes of the municipal
government, with a balance of P170,098,421.72, as of July 12, 1989.

xxx xxx xxx

[Petition, pp. 6-7; Rollo, pp. 11-12.]

Because the petitioner has belatedly alleged only in this Court the existence of two bank accounts, it may fairly be asked
whether the second account was opened only for the purpose of undermining the legal basis of the assailed orders of
respondent RTC judge and the decision of the Court of Appeals, and strengthening its reliance on the doctrine that public
funds are exempted from garnishment or execution as enunciated in Republic v. Palacio [supra.] At any rate, the Court
will give petitioner the benefit of the doubt, and proceed to resolve the principal issues presented based on the factual
circumstances thus alleged by petitioner.

Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for expropriation proceedings it had
initiated over the subject property, petitioner poses no objection to the garnishment or the levy under execution of the
funds deposited therein amounting to P99,743.94. However, it is petitioner's main contention that inasmuch as the
assailed orders of respondent RTC judge involved the net amount of P4,965,506.45, the funds garnished by respondent
sheriff in excess of P99,743.94, which are public funds earmarked for the municipal government's other statutory
obligations, are exempted from execution without the proper appropriation required under the law.

There is merit in this contention. The funds deposited in the second PNB Account No. S/A 263-530850-7 are public funds
of the municipal government. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and
execution, unless otherwise provided for by statute [Republic v. Palacio, supra.; The Commissioner of Public Highways v.
San Diego, G.R. No. L-30098, February 18, 1970, 31 SCRA 616]. More particularly, the properties of a municipality,
whether real or personal, which are necessary for public use cannot be attached and sold at execution sale to satisfy a
money judgment against the municipality. Municipal revenues derived from taxes, licenses and market fees, and which
are intended primarily and exclusively for the purpose of financing the governmental activities and functions of the
municipality, are exempt from execution [See Viuda De Tan Toco v. The Municipal Council of Iloilo, 49 Phil. 52 (1926):
The Municipality of Paoay, Ilocos Norte v. Manaois, 86 Phil. 629 (1950); Municipality of San Miguel, Bulacan v.
Fernandez, G.R. No. 61744, June 25, 1984, 130 SCRA 56]. The foregoing rule finds application in the case at bar. Absent
a showing that the municipal council of Makati has passed an ordinance appropriating from its public funds an amount
corresponding to the balance due under the RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited in
Account No. S/A 265-537154-3, no levy under execution may be validly effected on the public funds of petitioner
deposited in Account No. S/A 263-530850-7.

Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a municipality fails
or refuses, without justifiable reason, to effect payment of a final money judgment rendered against it, the claimant may
avail of the remedy of mandamus in order to compel the enactment and approval of the necessary appropriation
ordinance, and the corresponding disbursement of municipal funds therefor [See Viuda De Tan Toco v. The Municipal
Council of Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108 Phil. 247 (1960)].

In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by petitioner. No appeal was taken
therefrom. For three years now, petitioner has enjoyed possession and use of the subject property notwithstanding its
inexcusable failure to comply with its legal obligation to pay just compensation. Petitioner has benefited from its
possession of the property since the same has been the site of Makati West High School since the school year 1986-
1987. This Court will not condone petitioner's blatant refusal to settle its legal obligation arising from expropriation
proceedings it had in fact initiated. It cannot be over-emphasized that, within the context of the State's inherent power of
eminent domain,

. . . [j]ust compensation means not only the correct determination of the amount to be paid to the owner of
the land but also the payment of the land within a reasonable time from its taking. Without prompt
payment, compensation cannot be considered "just" for the property owner is made to suffer the
consequence of being immediately deprived of his land while being made to wait for a decade or more
before actually receiving the amount necessary to cope with his loss [Cosculluela v. The Honorable Court
of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400. See also Provincial Government of
Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August 27, 1987, 153 SCRA 291].

The State's power of eminent domain should be exercised within the bounds of fair play and justice. In the case at bar,
considering that valuable property has been taken, the compensation to be paid fixed and the municipality is in full
possession and utilizing the property for public purpose, for three (3) years, the Court finds that the municipality has had
more than reasonable time to pay full compensation.

WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately pay Philippine Savings
Bank, Inc. and private respondent the amount of P4,953,506.45. Petitioner is hereby required to submit to this Court a
report of its compliance with the foregoing order within a non-extendible period of SIXTY (60) DAYS from the date of
receipt of this resolution.The order of respondent RTC judge dated December 21, 1988, which was rendered in Civil Case
No. 13699, is SET ASIDE and the temporary restraining order issued by the Court on November 20, 1989 is MADE
PERMANENT. SO ORDERED.

G.R. No. 76607 February 26, 1990

UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE REEVES, petitioners, 

vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Regional Trial Court, Angeles City, ROBERTO T.
VALENCIA, EMERENCIANA C. TANGLAO, AND PABLO C. DEL PILAR, respondents.

G.R. No. 79470 February 26, 1990

UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/SGT. USAF, WILFREDO BELSA, PETER ORASCION AND
ROSE CARTALLA, petitioners, 
vs.
HON. RODOLFO D. RODRIGO, as Presiding Judge of Branch 7, Regional Trial Court (BAGUIO CITY), La Trinidad,
Benguet and FABIAN GENOVE, respondents.

G.R. No. 80018 February 26, 1990

UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and STEVEN F. BOSTICK, petitioners, 
vs.
HON. JOSEFINA D. CEBALLOS, As Presiding Judge, Regional Trial Court, Branch 66, Capas, Tarlac, and LUIS
BAUTISTA, respondents.

G.R. No. 80258 February 26, 1990

UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C. CARNS, AIC ERNEST E. RIVENBURGH, AIC
ROBIN BLEVINS, SGT. NOEL A. GONZALES, SGT. THOMAS MITCHELL, SGT. WAYNE L. BENJAMIN, ET
AL., petitioners, 
vs.
HON. CONCEPCION S. ALARCON VERGARA, as Presiding Judge, Branch 62 REGIONAL TRIAL COURT, Angeles
City, and RICKY SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE RIVERA, EDWIN MARIANO, AKA JESSIE
DOLORES SANGALANG, ET AL., respondents.

Luna, Sison & Manas Law Office for petitioners.

CRUZ, J.:

These cases have been consolidated because they all involve the doctrine of state immunity. The United States
of America was not impleaded in the complaints below but has moved to dismiss on the ground that they are in
effect suits against it to which it has not consented. It is now contesting the denial of its motions by the
respondent judges.

In G.R. No. 76607, the private respondents are suing several officers of the U.S. Air Force stationed in Clark Air
Base in connection with the bidding conducted by them for contracts for barber services in the said base.

On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area Exchange, U.S. Air Force, solicited
bids for such contracts through its contracting officer, James F. Shaw. Among those who submitted their bids
were private respondents Roberto T. Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar. Valencia had been
a concessionaire inside Clark for 34 years; del Pilar for 12 years; and Tanglao for 50 years.

The bidding was won by Ramon Dizon, over the objection of the private respondents, who claimed that he had
made a bid for four facilities, including the Civil Engineering Area, which was not included in the invitation to bid.

The private respondents complained to the Philippine Area Exchange (PHAX). The latter, through its
representatives, petitioners Yvonne Reeves and Frederic M. Smouse explained that the Civil Engineering
concession had not been awarded to Dizon as a result of the February 24, 1986 solicitation. Dizon was already
operating this concession, then known as the NCO club concession, and the expiration of the contract had been
extended from June 30, 1986 to August 31, 1986. They further explained that the solicitation of the CE barbershop
would be available only by the end of June and the private respondents would be notified.

On June 30, 1986, the private respondents filed a complaint in the court below to compel PHAX and the individual
petitioners to cancel the award to defendant Dizon, to conduct a rebidding for the barbershop concessions and
to allow the private respondents by a writ of preliminary injunction to continue operating the concessions
pending litigation. 1

Upon the filing of the complaint, the respondent court issued an ex parte order directing the individual petitioners
to maintain the status quo.
On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the petition for preliminary injunction
on the ground that the action was in effect a suit against the United States of America, which had not waived its
non-suability. The individual defendants, as official employees of the U.S. Air Force, were also immune from suit.

On the same date, July 22, 1986, the trial court denied the application for a writ of preliminary injunction.

On October 10, 1988, the trial court denied the petitioners' motion to dismiss, holding in part as follows:

From the pleadings thus far presented to this Court by the parties, the Court's attention is called
by the relationship between the plaintiffs as well as the defendants, including the US Government,
in that prior to the bidding or solicitation in question, there was a binding contract between the
plaintiffs as well as the defendants, including the US Government. By virtue of said contract of
concession it is the Court's understanding that neither the US Government nor the herein
principal defendants would become the employer/s of the plaintiffs but that the latter are the
employers themselves of the barbers, etc. with the employer, the plaintiffs herein, remitting the
stipulated percentage of commissions to the Philippine Area Exchange. The same circumstance
would become in effect when the Philippine Area Exchange opened for bidding or solicitation the
questioned barber shop concessions. To this extent, therefore, indeed a commercial transaction
has been entered, and for purposes of the said solicitation, would necessarily be entered between
the plaintiffs as well as the defendants.

The Court, further, is of the view that Article XVIII of the RP-US Bases Agreement does not cover
such kind of services falling under the concessionaireship, such as a barber shop concession. 2

On December 11, 1986, following the filing of the herein petition for certiorari and prohibition with preliminary injunction,
we issued a temporary restraining order against further proceedings in the court below. 3

In G.R. No. 79470, Fabian Genove filed a complaint for damages against petitioners Anthony Lamachia, Wilfredo Belsa,
Rose Cartalla and Peter Orascion for his dismissal as cook in the U.S. Air Force Recreation Center at the John Hay Air
Station in Baguio City. It had been ascertained after investigation, from the testimony of Belsa Cartalla and Orascion, that
Genove had poured urine into the soup stock used in cooking the vegetables served to the club customers. Lamachia, as
club manager, suspended him and thereafter referred the case to a board of arbitrators conformably to the collective
bargaining agreement between the Center and its employees. The board unanimously found him guilty and recommended
his dismissal. This was effected on March 5, 1986, by Col. David C. Kimball, Commander of the 3rd Combat Support
Group, PACAF Clark Air Force Base. Genove's reaction was to file Ms complaint in the Regional Trial Court of Baguio
City against the individual petitioners. 4

On March 13, 1987, the defendants, joined by the United States of America, moved to dismiss the complaint, alleging that
Lamachia, as an officer of the U.S. Air Force stationed at John Hay Air Station, was immune from suit for the acts done by
him in his official capacity. They argued that the suit was in effect against the United States, which had not given its
consent to be sued.

This motion was denied by the respondent judge on June 4, 1987, in an order which read in part:

It is the understanding of the Court, based on the allegations of the complaint — which have been
hypothetically admitted by defendants upon the filing of their motion to dismiss — that although
defendants acted initially in their official capacities, their going beyond what their functions called for
brought them out of the protective mantle of whatever immunities they may have had in the beginning.
Thus, the allegation that the acts complained of were illegal, done. with extreme bad faith and with pre-
conceived sinister plan to harass and finally dismiss the plaintiff, gains significance. 5

The petitioners then came to this Court seeking certiorari and prohibition with preliminary injunction.

In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in Camp O' Donnell, an extension of Clark Air
Base, was arrested following a buy-bust operation conducted by the individual petitioners herein, namely, Tomi J. King,
Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air Force and special agents of the Air Force Office of Special
Investigators (AFOSI). On the basis of the sworn statements made by them, an information for violation of R.A. 6425,
otherwise known as the Dangerous Drugs Act, was filed against Bautista in the Regional Trial Court of Tarlac. The above-
named officers testified against him at his trial. As a result of the filing of the charge, Bautista was dismissed from his
employment. He then filed a complaint for damages against the individual petitioners herein claiming that it was because
of their acts that he was removed. 6

During the period for filing of the answer, Mariano Y. Navarro a special counsel assigned to the International Law Division,
Office of the Staff Judge Advocate of Clark Air Base, entered a special appearance for the defendants and moved for an
extension within which to file an "answer and/or other pleadings." His reason was that the Attorney General of the United
States had not yet designated counsel to represent the defendants, who were being sued for their official acts. Within the
extended period, the defendants, without the assistance of counsel or authority from the U.S. Department of Justice, filed
their answer. They alleged therein as affirmative defenses that they had only done their duty in the enforcement of the
laws of the Philippines inside the American bases pursuant to the RP-US Military Bases Agreement.

On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained to represent the defendants, filed with
leave of court a motion to withdraw the answer and dismiss the complaint. The ground invoked was that the defendants
were acting in their official capacity when they did the acts complained of and that the complaint against them was in
effect a suit against the United States without its consent.

The motion was denied by the respondent judge in his order dated September 11, 1987, which held that the claimed
immunity under the Military Bases Agreement covered only criminal and not civil cases. Moreover, the defendants had
come under the jurisdiction of the court when they submitted their answer.7

Following the filing of the herein petition for certiorari and prohibition with preliminary injunction, we issued on October 14,
1987, a temporary restraining order. 8

In G.R. No. 80258, a complaint for damages was filed by the private respondents against the herein petitioners (except
the United States of America), for injuries allegedly sustained by the plaintiffs as a result of the acts of the
defendants. 9 There is a conflict of factual allegations here. According to the plaintiffs, the defendants beat them up,
handcuffed them and unleashed dogs on them which bit them in several parts of their bodies and caused extensive
injuries to them. The defendants deny this and claim the plaintiffs were arrested for theft and were bitten by the dogs
because they were struggling and resisting arrest, The defendants stress that the dogs were called off and the plaintiffs
were immediately taken to the medical center for treatment of their wounds.

In a motion to dismiss the complaint, the United States of America and the individually named defendants argued that the
suit was in effect a suit against the United States, which had not given its consent to be sued. The defendants were also
immune from suit under the RP-US Bases Treaty for acts done by them in the performance of their official functions.

The motion to dismiss was denied by the trial court in its order dated August 10, 1987, reading in part as follows:

The defendants certainly cannot correctly argue that they are immune from suit. The allegations, of the
complaint which is sought to be dismissed, had to be hypothetically admitted and whatever ground the
defendants may have, had to be ventilated during the trial of the case on the merits. The complaint
alleged criminal acts against the individually-named defendants and from the nature of said acts it could
not be said that they are Acts of State, for which immunity should be invoked. If the Filipinos themselves
are duty bound to respect, obey and submit themselves to the laws of the country, with more reason, the
members of the United States Armed Forces who are being treated as guests of this country should
respect, obey and submit themselves to its laws. 10

and so was the motion for reconsideration. The defendants submitted their answer as required but subsequently filed their
petition for certiorari and prohibition with preliminary injunction with this Court. We issued a temporary restraining order on
October 27, 1987. 11

II

The rule that a state may not be sued without its consent, now expressed in Article XVI, Section 3, of the 1987
Constitution, is one of the generally accepted principles of international law that we have adopted as part of the law of our
land under Article II, Section 2. This latter provision merely reiterates a policy earlier embodied in the 1935 and 1973
Constitutions and also intended to manifest our resolve to abide by the rules of the international community.

Even without such affirmation, we would still be bound by the generally accepted principles of international law under the
doctrine of incorporation. Under this doctrine, as accepted by the majority of states, such principles are deemed
incorporated in the law of every civilized state as a condition and consequence of its membership in the society of nations.
Upon its admission to such society, the state is automatically obligated to comply with these principles in its relations with
other states.

As applied to the local state, the doctrine of state immunity is based on the justification given by Justice Holmes that
"there can be no legal right against the authority which makes the law on which the right depends." 12 There are other
practical reasons for the enforcement of the doctrine. In the case of the foreign state sought to be impleaded in the local
jurisdiction, the added inhibition is expressed in the maxim par in parem, non habet imperium. All states are sovereign
equals and cannot assert jurisdiction over one another. A contrary disposition would, in the language of a celebrated case,
"unduly vex the peace of nations." 13

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. 14 In such a situation, the state may move to dismiss the complaint
on the ground that it has been filed without its consent.

The doctrine is sometimes derisively called "the royal prerogative of dishonesty" because of the privilege it grants the
state to defeat any legitimate claim against it by simply invoking its non-suability. That is hardly fair, at least in democratic
societies, for the state is not an unfeeling tyrant unmoved by the valid claims of its citizens. In fact, the doctrine is not
absolute and does not say the state may not be sued under any circumstance. On the contrary, the rule says that the
state may not be sued without its consent, which clearly imports that it may be sued if it consents.

The consent of the state to be sued may be manifested expressly or impliedly. Express consent may be embodied in a
general law or a special law. Consent is implied when the state enters into a contract or it itself commences litigation.

The general law waiving the immunity of the state from suit is found in Act No. 3083, under which the Philippine
government "consents and submits to be sued upon any moneyed claim involving liability arising from contract, express or
implied, which could serve as a basis of civil action between private parties." In Merritt v. Government of the Philippine
Islands, 15 a special law was passed to enable a person to sue the government for an alleged tort. When the government
enters into a contract, it is deemed to have descended to the level of the other contracting party and divested of its
sovereign immunity from suit with its implied consent. 16 Waiver is also implied when the government files a complaint,
thus opening itself to a counterclaim. 17

The above rules are subject to qualification. Express consent is effected only by the will of the legislature through the
medium of a duly enacted statute. 18 We have held that not all contracts entered into by the government will operate as a
waiver of its non-suability; distinction must be made between its sovereign and proprietary acts. 19 As for the filing of a
complaint by the government, suability will result only where the government is claiming affirmative relief from the
defendant. 20

In the case of the United States of America, the customary rule of international law on state immunity is expressed with
more specificity in the RP-US Bases Treaty. Article III thereof provides as follows:

It is mutually agreed that the United States shall have the rights, power and authority within the bases
which are necessary for the establishment, use, operation and defense thereof or appropriate for the
control thereof and all the rights, power and authority within the limits of the territorial waters and air
space adjacent to, or in the vicinity of, the bases which are necessary to provide access to them or
appropriate for their control.

The petitioners also rely heavily on Baer v. Tizon, 21 along with several other decisions, to support their position that they
are not suable in the cases below, the United States not having waived its sovereign immunity from suit. It is emphasized
that in Baer, the Court held:

The invocation of the doctrine of immunity from suit of a foreign state without its consent is appropriate.
More specifically, insofar as alien armed forces is concerned, the starting point is Raquiza v. Bradford, a
1945 decision. In dismissing a habeas corpus petition for the release of petitioners confined by American
army authorities, Justice Hilado speaking for the Court, cited Coleman v. Tennessee, where it was
explicitly declared: 'It is well settled that a foreign army, permitted to march through a friendly country or to
be stationed in it, by permission of its government or sovereign, is exempt from the civil and criminal
jurisdiction of the place.' Two years later, in Tubb and Tedrow v. Griess, this Court relied on the ruling in
 Raquiza v. Bradford and cited in support thereof excerpts from the works of the following authoritative
writers: Vattel, Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and McNair and Lauterpacht.
Accuracy demands the clarification that after the conclusion of the Philippine-American Military Bases
Agreement, the treaty provisions should control on such matter, the assumption being that there was a
manifestation of the submission to jurisdiction on the part of the foreign power whenever appropriate.
More to the point is Syquia v. Almeda Lopez, where plaintiffs as lessors sued the Commanding General
of the United States Army in the Philippines, seeking the restoration to them of the apartment buildings
they owned leased to the United States armed forces stationed in the Manila area. A motion to dismiss on
the ground of non-suability was filed and upheld by respondent Judge. The matter was taken to this Court
in a mandamus proceeding. It failed. It was the ruling that respondent Judge acted correctly considering
that the 4 action must be considered as one against the U.S. Government. The opinion of Justice
Montemayor continued: 'It is clear that the courts of the Philippines including the Municipal Court of
Manila have no jurisdiction over the present case for unlawful detainer. The question of lack of jurisdiction
was raised and interposed at the very beginning of the action. The U.S. Government has not given its
consent to the filing of this suit which is essentially against her, though not in name. Moreover, this is not
only a case of a citizen filing a suit against his own Government without the latter's consent but it is of a
citizen firing an action against a foreign government without said government's consent, which renders
more obvious the lack of jurisdiction of the courts of his country. The principles of law behind this rule are
so elementary and of such general acceptance that we deem it unnecessary to cite authorities in support
thereof then came Marvel Building Corporation v. Philippine War Damage Commission, where
respondent, a United States Agency established to compensate damages suffered by the Philippines
during World War II was held as falling within the above doctrine as the suit against it would eventually be
a charge against or financial liability of the United States Government because ... , the Commission has
no funds of its own for the purpose of paying money judgments.' The Syquia ruling was again explicitly
relied upon in Marquez Lim v. Nelson, involving a complaint for the recovery of a motor launch, plus
damages, the special defense interposed being 'that the vessel belonged to the United States
Government, that the defendants merely acted as agents of said Government, and that the United States
Government is therefore the real party in interest.' So it was in Philippine Alien Property Administration v.
Castelo, where it was held that a suit against Alien Property Custodian and the Attorney General of the
United States involving vested property under the Trading with the Enemy Act is in substance a suit
against the United States. To the same effect is Parreno v. McGranery, as the following excerpt from the
opinion of justice Tuazon clearly shows: 'It is a widely accepted principle of international law, which is
made a part of the law of the land (Article II, Section 3 of the Constitution), that a foreign state may not be
brought to suit before the courts of another state or its own courts without its consent.' Finally, there
is Johnson v. Turner, an appeal by the defendant, then Commanding General, Philippine Command (Air
Force, with office at Clark Field) from a decision ordering the return to plaintiff of the confiscated military
payment certificates known as scrip money. In reversing the lower court decision, this Tribunal, through
Justice Montemayor, relied on Syquia v. Almeda Lopez, explaining why it could not be sustained.

It bears stressing at this point that the above observations do not confer on the United States of America a blanket
immunity for all acts done by it or its agents in the Philippines. Neither may the other petitioners claim that they are also
insulated from suit in this country merely because they have acted as agents of the United States in the discharge of their
official functions.

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. This was our ruling in UnitedStates of America v.
Ruiz, 22 where the transaction in question dealt with the improvement of the wharves in the naval installation at Subic Bay.
As this was a clearly governmental function, we held that the contract did not operate to divest the United States of its
sovereign immunity from suit. In the words of Justice Vicente Abad Santos:

The traditional rule of immunity exempts a State from being sued in the courts of another State without its
consent or waiver. This rule is a necessary consequence of the principles of independence and equality
of States. However, the rules of International Law are not petrified; they are constantly developing and
evolving. And because the activities of states have multiplied, it has been necessary to distinguish them
— between sovereign and governmental acts (jure imperii) and private, commercial and proprietary acts
(jure gestionis). The result is that State immunity now extends only to acts jure imperii The restrictive
application of State immunity is now the rule in the United States, the United kingdom and other states in
Western Europe.

xxx xxx xxx

 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 business contracts. It does not apply where the
contract relates to the exercise of its sovereign functions. In this case the projects are an integral part of
the naval base which is devoted to the defense of both the United States and the Philippines, indisputably
a function of the government of the highest order; they are not utilized for nor dedicated to commercial or
business purposes.

The other petitioners in the cases before us all aver they have acted in the discharge of their official functions as officers
or agents of the United States. However, this is a matter of evidence. The charges against them may not be summarily
dismissed on their mere assertion that their acts are imputable to the United States of America, which has not given its
consent to be sued. In fact, the defendants are sought to be held answerable for personal torts in which the United States
itself is not involved. If found liable, they and they alone must satisfy the judgment.

In Festejo v. Fernando, 23 a bureau director, acting without any authority whatsoever, appropriated private land and
converted it into public irrigation ditches. Sued for the value of the lots invalidly taken by him, he moved to dismiss the
complaint on the ground that the suit was in effect against the Philippine government, which had not given its consent to
be sued. This Court sustained the denial of the motion and held that the doctrine of state immunity was not applicable.
The director was being sued in his private capacity for a personal tort.

With these considerations in mind, we now proceed to resolve the cases at hand.

III

It is clear from a study of the records of G.R. No. 80018 that the individually-named petitioners therein were acting in the
exercise of their official functions when they conducted the buy-bust operation against the complainant and thereafter
testified against him at his trial. The said petitioners were in fact connected with the Air Force Office of Special
Investigators and were charged precisely with the function of preventing the distribution, possession and use of prohibited
drugs and prosecuting those guilty of such acts. It cannot for a moment be imagined that they were acting in their private
or unofficial capacity when they apprehended and later testified against the complainant. It follows that for discharging
their duties as agents of the United States, they cannot be directly impleaded for acts imputable to their principal, which
has not given its consent to be sued. As we observed in Sanders v. Veridiano: 24

Given the official character of the above-described letters, we have to conclude that the petitioners were,
legally speaking, being sued as officers of the United States government. As they have acted on behalf of
that government, and within the scope of their authority, it is that government, and not the petitioners
personally, that is responsible for their acts.

The private respondent invokes Article 2180 of the Civil Code which holds the government liable if it acts through a
special agent. The argument, it would seem, is premised on the ground that since the officers are designated "special
agents," the United States government should be liable for their torts.

There seems to be a failure to distinguish between suability and liability and a misconception that the two terms are
synonymous. Suability depends on the consent of the state to be sued, liability on the applicable law and the established
facts. The circumstance that a state is suable does not necessarily mean that it is liable; on the other hand, it can never
be held liable if it does not first consent to be sued. Liability is not conceded by the mere fact that the state has allowed
itself to be sued. When the state does waive its sovereign immunity, it is only giving the plaintiff the chance to prove, if it
can, that the defendant is liable.

The said article establishes a rule of liability, not suability. The government may be held liable under this rule only if it first
allows itself to be sued through any of the accepted forms of consent.

Moreover, the agent performing his regular functions is not a special agent even if he is so denominated, as in the case at
bar. No less important, the said provision appears to regulate only the relations of the local state with its inhabitants and,
hence, applies only to the Philippine government and not to foreign governments impleaded in our courts.

We reject the conclusion of the trial court that the answer filed by the special counsel of the Office of the Sheriff Judge
Advocate of Clark Air Base was a submission by the United States government to its jurisdiction. As we noted in Republic
v. Purisima, 25 express waiver of immunity cannot be made by a mere counsel of the government but must be effected
through a duly-enacted statute. Neither does such answer come under the implied forms of consent as earlier discussed.

But even as we are certain that the individual petitioners in G.R. No. 80018 were acting in the discharge of their official
functions, we hesitate to make the same conclusion in G.R. No. 80258. The contradictory factual allegations in this case
deserve in our view a closer study of what actually happened to the plaintiffs. The record is too meager to indicate if the
defendants were really discharging their official duties or had actually exceeded their authority when the incident in
question occurred. Lacking this information, this Court cannot directly decide this case. The needed inquiry must first be
made by the lower court so it may assess and resolve the conflicting claims of the parties on the basis of the evidence
that has yet to be presented at the trial. Only after it shall have determined in what capacity the petitioners were acting at
the time of the incident in question will this Court determine, if still necessary, if the doctrine of state immunity is
applicable.

In G.R. No. 79470, private respondent Genove was employed as a cook in the Main Club located at the U.S. Air Force
Recreation Center, also known as the Open Mess Complex, at John Hay Air Station. As manager of this complex,
petitioner Lamachia is responsible for eleven diversified activities generating an annual income of $2 million. Under his
executive management are three service restaurants, a cafeteria, a bakery, a Class VI store, a coffee and pantry shop, a
main cashier cage, an administrative office, and a decentralized warehouse which maintains a stock level of $200,000.00
per month in resale items. He supervises 167 employees, one of whom was Genove, with whom the United States
government has concluded a collective bargaining agreement.

From these circumstances, the Court can assume that 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. Such
services are not extended to the American servicemen for free as a perquisite of membership in the Armed Forces of the
United States. Neither does it appear that they are exclusively offered to these servicemen; on the contrary, it is well
known that they are available to the general public as well, including the tourists in Baguio City, many of whom make it a
point to visit John Hay for this reason. All persons availing themselves of this facility pay for the privilege like all other
customers as in ordinary restaurants. Although the prices are concededly reasonable and relatively low, such services are
undoubtedly operated for profit, as a commercial and not a governmental activity.

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 that 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.

But these considerations notwithstanding, we hold that the complaint against the petitioners in the court below must still
be dismissed. While suable, the petitioners are nevertheless not liable. It is obvious that the claim for damages cannot be
allowed on the strength of the evidence before us, which we have carefully examined.

The dismissal of the private respondent was decided upon only after a thorough investigation where it was established
beyond doubt that he had polluted the soup stock with urine. The investigation, in fact, did not stop there. Despite the
definitive finding of Genove's guilt, the case was still referred to the board of arbitrators provided for in the collective
bargaining agreement. This board unanimously affirmed the findings of the investigators and recommended Genove's
dismissal. There was nothing arbitrary about the proceedings. The petitioners acted quite properly in terminating the
private respondent's employment for his unbelievably nauseating act. It is surprising that he should still have the temerity
to file his complaint for damages after committing his utterly disgusting offense.

Concerning G.R. No. 76607, we also find that the barbershops subject of the concessions granted by the United States
government are commercial enterprises operated by private person's. They are not agencies of the United States Armed
Forces nor are their facilities demandable as a matter of right by the American servicemen. These establishments provide
for the grooming needs of their customers and offer not only the basic haircut and shave (as required in most military
organizations) but such other amenities as shampoo, massage, manicure and other similar indulgences. And all for a fee.
Interestingly, one of the concessionaires, private respondent Valencia, was even sent abroad to improve his tonsorial
business, presumably for the benefit of his customers. No less significantly, if not more so, all the barbershop
concessionaires are under the terms of their contracts, required to remit to the United States government fixed
commissions in consideration of the exclusive concessions granted to them in their respective areas.
This being the case, the petitioners cannot plead any immunity from the complaint filed by the private respondents in the
court below. The contracts in question being decidedly commercial, the conclusion reached in the United States of
America v. Ruiz case cannot be applied here.

The Court would have directly resolved the claims against the defendants as we have done in G.R. No. 79470, except for
the paucity of the record in the case at hand. The evidence of the alleged irregularity in the grant of the barbershop
concessions is not before us. This means that, as in G.R. No. 80258, the respondent court will have to receive that
evidence first, so it can later determine on the basis thereof if the plaintiffs are entitled to the relief they seek. Accordingly,
this case must also be remanded to the court below for further proceedings.

IV

There are a number of other cases now pending before us which also involve the question of the immunity of the United
States from the jurisdiction of the Philippines. This is cause for regret, indeed, as they mar the traditional friendship
between two countries long allied in the cause of democracy. It is hoped that the so-called "irritants" in their relations will
be resolved in a spirit of mutual accommodation and respect, without the inconvenience and asperity of litigation and
always with justice to both parties.

WHEREFORE, after considering all the above premises, the Court hereby renders judgment as follows:

1. In G.R. No. 76607, the petition is DISMISSED and the respondent judge is directed to proceed with the
hearing and decision of Civil Case No. 4772. The temporary restraining order dated December 11, 1986,
is LIFTED.

2. In G.R. No. 79470, the petition is GRANTED and Civil Case No. 829-R(298) is DISMISSED.

3. In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115-C-87 is DISMISSED. The
temporary restraining order dated October 14, 1987, is made permanent.

4. In G.R. No. 80258, the petition is DISMISSED and the respondent court is directed to proceed with the
hearing and decision of Civil Case No. 4996. The temporary restraining order dated October 27, 1987, is
LIFTED.

All without any pronouncement as to costs.

SO ORDERED.
G.R. No. L-41299 February 21, 1983

SOCIAL SECURITY SYSTEM, petitioner, 

vs.
COURT OF APPEALS, DAVID B. CRUZ, SOCORRO CONCIO CRUZ, and LORNA C. CRUZ, respondents.

The Solicitor General for petitioner.

Eribert D. Ignacio for respondents David Cruz, Socorro Concio Cruz and Lorna Cruz.

MELENCIO-HERRERA, J.:

This Petition for Review on certiorari of the Decision of the Court of Appeals 1 stems from the following facts, as narrated
by the Trial Court, adopted by the Court of Appeals, and quoted by both petitioner 2 and private respondents 3 :

Sometime in March, 1963 the spouses David B. Cruz and Socorro Concio Cruz applied for and were
granted a real estate loan by the SSS with their residential lot located at Lozada Street, Sto. Rosario,
Pateros, Rizal covered by Transfer Certificate of Title No. 2000 of the Register of Deeds of Rizal as
collateral. Pursuant to this real estate ban said spouses executed on March 26, 1963 the corresponding
real estate mortgage originally in the amount of P39,500.00 which was later increased to P48,000.00
covering the aforementioned property as shown in their mortgage contract, Exhibit A and 1. From the
proceeds of the real estate loan the mortgagors constructed their residential house on the mortgaged
property and were furnished by the SSS with a passbook to record the monthly payments of their
amortizations (Exhibits B and B-1). The mortgagors, plaintiffs herein, complied with their monthly
payments although there were times when delays were incurred in their monthly payments which were
due every first five (5) days of the month (Exhibits 3-A to 3-N). On July 9, 1968, defendant SSS filed an
application with the Provincial Sheriff of Rizal for the foreclosure of the real estate mortgage executed by
the plaintiffs on the ground, among others:

That the conditions of the mortgage have been broken since October, 1967 with the
default on the part of the mortgagor to pay in full the installments then due and payable
on the principal debt and the interest thereon, and, all of the monthly installments due
and payable thereafter up to the present date; ...

That by the terms of the contract herein above referred to, the indebtedness to the
mortgagee as of June, 1968 amounts to Ten Thousand Seven Hundred Two Pesos &
58/100 (P10,702.58), Philippine Currency, excluding interests thereon, plus 20% of the
total amount of the indebtedness as attorney's fees, also secured by the said mortgage.
(Exhibit "C ")

Pursuant to this application for foreclosure, the notice of the Sheriff's Sale of the mortgaged property was
initially published in the Sunday Chronicle in its issue of July 14, 1968 announcing the sale at public
auction of the said mortgaged property. After this first publication of the notice, and before the second
publication of the notice, plaintiff herein thru counsel formally wrote defendant SSS, a letter dated July 19,
1968 and received on the same date by said entity demanding, among others, for said defendant SSS to
withdraw the foreclosure and discontinue the publication of the notice of sale of their property claiming
that plaintiffs were up-to-date in the payment of their monthly amortizations (Exhibits "E" and "E-1"). In
answer to this letter defendant SSS sent a telegram to Atty. Eriberto Ignacio requesting him to come to
their office for a conference. This telegram was received by said counsel on July 23, 1968 (Exhibit "G "
and "G-1 "). To this telegraphic answer, Atty. Ignacio sent a telegraphic reply suggesting instead that a
representative of the SSS be sent to him because his clients were the aggrieved parties (Exhibit-. "G-2").
Nothing came out of the telegraphic communications between the parties and the second and third
publications of the notice of foreclosure were published successively in the Sunday Chronicle in its issues
of July 21 and 28, 1968 (Exhibits "N-1 " and "O-1"). 4

On July 24, 1968, the Cruz spouses, together with their daughter Lorna C. Cruz, instituted before the Court of First
Instance of Rizal an action for damages and attorney's fees against the Social Security System (SSS) and the Provincial
Sheriff of Rizal alleging, among other things, that they had fully and religiously paid their monthly amortizations and had
not defaulted in any payment.

In its Answer, with counterclaim, the SSS stressed its right to foreclose the mortgage executed in its favor by private
respondents by virtue of the automatic acceleration clause provided in the mortgage contract, even after private
respondents had paid their amortization installments. In its counterclaim, the SSS prayed for actual and other damages,
as well as attorney's fees, for malicious and baseless statements made by private respondents and published in the
Manila Chronicle.

On September 23, 1968, the Trial Court enjoined the SSS from holding the sale at public auction of private respondent's
property upon their posting of a P2,000.00 bond executed in favor of the SSS.

The Trial Court rendered judgment on March 5, 1971, the dispositive portion of which reads:

WHEREFORE, judgment is rendered against defendant SSS, directing it to pay plaintiffs the following
amounts:

(a) P2,500.00 as actual damage;

(b) P35,000.00 as moral damage;
(c) P10,000.00 as exemplary or corrective damages; and
(d) P5,000.00 as attorney's fees.

Defendant SSS shall further pay the costs. 5

In respect of the moral and temperate damages awarded, the Trial Court stated:

With respect to moral and temperate damages, the Court holds that the first publication of the notice was
made in good faith but committed by defendant SSS in gross negligence considering the personnel at its
command and the ease with which verifications of the actual defaulting mortgagors may be made. On this
initial publication of the notice of foreclosure (Exhibits "M" and "M-1"), the Court believes plaintiffs are
entitled to the amount of P5,000.00. The second publication of the notice of foreclosure is another matter.
There was already notice by plaintiffs to defendant SSS that there was no reason for the foreclosure of
their mortgaged property as they were never in default. Instead of taking any corrective measure to rectify
its error, defendant SSS adopted a position of righteousness and followed the same course of action
contending that no error has open committed. This act of defendant indeed was deliberate, calculated to
cow plaintiffs into submission, and made obviously with malice. On this score, the Court believes
defendant SSS should pay and indemnify plaintiffs jointly in the sum of P10,000.00. Lastly, on the third
publication of the notice of foreclosure, the Court finds this continued publication an outright disregard for
the reputation and standing of plaintiffs. The publication having reached a bigger segment of society and
also done with malice and callous disregard for the rights of its clients, defendant SSS should
compensate plaintiffs jointly in the sum of P20,000.00. All in all, plaintiffs are entitled to P35,000.00 by
way of moral damages. 6

On appeal, the Court of Appeals affirmed the lower Court judgment in a Decision promulgated on March 14, 1975, but
upon SSS's Motion for Reconsideration, modified the judgment by the elimination of the P5,000.00 moral damages
awarded on account of the initial publication of the foreclosure notice. To quote:

xxx xxx xxx

After a re-examination of the evidence, we find that the negligence of the appellant is not so gross as to
warrant moral and temperate damages. The amount of P5,000.00 should be deducted from the total
damages awarded to the plaintiffs.

WHEREFORE, the decision promulgated on March 14, 1975 is hereby maintained with the sole
modification that the amount of P5,000.00 awarded on account of the initial publication is eliminated so
that the said amount should be deducted from the total damages awarded to the plaintiffs.

SO ORDERED. 7
In so far as exemplary and corrective damages are concerned, the Court of Appeals had this to say.

The Court finds no extenuating circumstances to mitigate the irresponsible action of defendant SSS and
for this reason, said defendant should pay exemplary and corrective damages in the sum of
P10,000.00 ...

Upon denial of its Motion for Reconsideration by respondent Court, the SSS filed this Petition alleging —.

I. Respondent Court of Appeals erred in not finding that under Condition No. 10 of the Mortgage contract,
which is a self-executing, automatic acceleration clause, all amortizations and obligations of the
mortgagors become ipso jure due and demandable if they at any time fail to pay any of the amortizations
or interest when due;

II. Respondent Court of Appeals erred in holding that a previous notice to the mortgagor was necessary
before the mortgage could be foreclosed;

III. Respondent Court of Appeals erred in not holding that, assuming that there was negligence committed
by subordinate employees of the SSS in staking 'Socorro C. Cruz' for 'Socorro J. Cruz' as the defaulting
borrower, the fault cannot be attributed to the SSS, much less should the SSS be made liable for their
acts done without its knowledge and authority;

IV. Respondent Court of Appeals erred in holding that there is no extenuating circumstance to mitigate
the liability of petitioner;

V. Respondent Court of Appeals erred in not holding that petitioner is not liable for damages not being a
profit-oriented governmental institution but one performing governmental functions petitions. 8

For failure of the First Division to obtain concurrence of the five remaining members (Justices Plana and Gutierrez, Jr.
could take no part), the case was referred to the Court en banc.

The pivotal issues raised are: (1) whether the Cruz spouses had, in fact, violated their real estate mortgage contract with
the SSS as would have warranted the publications of the notices of foreclosure; and (2) whether or not the SSS can be
held liable for damages.

The first issue revolves around the question of appreciation of the evidence by the lower Court as concurred in by the
Court of Appeals. The appraisal should be left undisturbed following the general rule that factual findings of the Court of
Appeals are not subject to review by this Court, the present case not being one of the recognized exceptions to that
rule. 9 Accordingly, we are upholding the finding of the Court of Appeals that the SSS application for foreclosure was not
justified, particularly considering that the real estate loan of P48,000.00 obtained by the Cruzes in March, 1963, was
payable in 15 years with a monthly amortization of P425.18, and that as of July 14, 1968, the date of the first notice of
foreclosure and sale, the outstanding obligation was still P38,875.06 and not P10,701.58, as published.

The appellant was not justified in applying for the extrajudicial foreclosure of the mortgage contract
executed in its favor by the spouses, David B. Cruz and Socorro Concio-Cruz, Exh. 'A'. While it is true
that the payments of the monthly installments were previously not regular, it is a fact that as of June 30,
1968 the appellee, David B. Cruz and Socorro Concio-Cruz were up-to-date and current in the payment of
their monthly installments. Having accepted the prior late payments of the monthly installments, the
appellant could no longer suddenly and without prior notice to the mortgagors apply for the extra-judicial
foreclosure of the mortgage in July 1968. 10

A similar conclusion was reached by the trial Court.

Defendant's contention that there was clerical error in the amount of the mortgage loan due as of June,
1968 as per their application for foreclosure of real estate mortgage is a naive attempt to justify an
untenable position. As a matter of fact plaintiffs were able to establish that the mortgagor who actually
committed the violation of her mortgage loan was a certain 'Socorro J. Cruz' who was in arrears in the
amount of P10,702.58 at the time the application for foreclosure of real estate mortgage was filed Exhibits
"BB" and "EE"). Defendant mortgagee must have committed an error in picking the record of plaintiff
'Socorro C. Cruz' instead of the record of 'Socorro J. Cruz'. Defendant SSS, however, denied having
 committed any error and insists that their motion for foreclosure covers the real estate mortgage of
spouses David E. Cruz and Socorro C. Cruz. This Court is nonetheless convinced that the foreclosure
proceedings should have been on the real estate mortgage of 'Socorro J. Cruz' who was in arrears as of
June, 1968 in the amount of P10,701.58, the exact amount mentioned in the application for foreclosure of
real estate mortgage by defendant SSS. 11

We come now to the amendability of the SSS to judicial action and legal responsibility for its acts. To our minds, there
should be no question on this score considering that the SSS is a juridical entity with a personality of its own. 12 It has
corporate powers separate and distinct from the Government. 13 SSS' own organic act specifically provides that it can sue
and be sued in Court. 14 These words "sue and be sued" embrace all civil process incident to a legal action. 15 So that,
even assuming that the SSS, as it claims, enjoys immunity from suit as an entity performing governmental functions, by
virtue of the explicit provision of the aforecited enabling law, the Government must be deemed to have waived immunity in
respect of the SSS, although it does not thereby concede its liability. That statutoy law has given to the private-citizen a
remedy for the enforcement and protection of his rights. The SSS thereby has been required to submit to the jurisdiction
of the Courts, subject to its right to interpose any lawful defense. Whether the SSS performs governmental or proprietary
functions thus becomes unnecessary to belabor. For by that waiver, a private citizen may bring a suit against it for varied
objectives, such as, in this case, to obtain compensation in damages arising from contract 16 and even for tort.

A recent case squarely in point anent the principle, involving the National Power Corporation, is that of Rayo vs. Court of
First Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos,
ruled:

It is not necessary to write an extended dissertation on whether or not the NPC performs a governmental
function with respect to the management and operation of the Angat Dam. It is sufficient to say that the
government has organized a private corporation, put money in it and has snowed it to sue and be sued in
any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a government owned and controlled
corporation, it has a personality of its own, distinct and separate from that of the Government. (See
National Shipyards and Steel Corp. vs. CIR, et al., L-17874, August 31, 1963, 8 SCRA 78 1). Moreover,
the charter provision that the NPC can 'sue and be sued in any court' is without qualification on the cause
of action and accordingly it can include a tort claim such as the one instituted by the petitioners.

The proposition that the SSS is not profit-oriented was rejected in the case of SSS Employees' Association vs. Hon.
Soriano. 17 But even conceding that the SSS is not, in the main, operated for profit, it cannot be denied that, in so far as
contractual loan agreements with private parties are concerned, the SSS enters into them for profit considering that the
borrowers pay interest, which is money paid for the use of money, plus other charges.

In so far as it is argued that to hold the SSS liable for damages would be to deplete the benefit funds available for its
covered members, suffice it to say, that expenditures of the System are not confined to the payment of social security
benefits. For example, the System also has to pay the salaries of its personnel. Moreover, drawing a parallel with the
NASSCO and the Virginia Tobacco Administration, whose funds are in the nature of public funds, it has been held that
those funds may even be made the object of a notice of garnishment. 18

What is of paramount importance in this controversy is that an injustice is not perpetrated and that when damage is
caused a citizen, the latter should have a right of redress particularly when it arises from a purely private and contractual
relationship between said individual and the System.

We find, however, that under the circumstances of the case, the SSS cannot be held liable for the damages as awarded
by the Trial Court and the Appellate Tribunal.

As basis for the award of actual damages, the Trial Court relied on the alleged expenses incurred by private respondents
for the wardrobe they were supposed to use during their trip abroad, which was allegedly aborted because of the filing of
the foreclosure application by the SSS. We find the foregoing too speculative. There could have been other reasons why
the trip did not materialize. Moreover, it appears that private respondents' passports had already expired but that they
made no effort to secure new passports. 19 Nor did they secure the necessary visas from the local consulates of foreign
countries they intended to visit for their trip abroad. 20

Nor can the SSS be held liable for moral and temperate damages. As concluded by the Court of Appeals "the negligence
of the appellant is not so gross as to warrant moral and temperate damages", 21 except that, said Court reduced those
damages by only P5,000.00 instead of eliminating them. Neither can we agree with the findings of both the Trial Court and
respondent Court that the SSS had acted maliciously or in bad faith. The SSS was of the belief that it was acting in the
legitimate exercise of its right under the mortgage contract in the face of irregular payments made by private respondents,
and placed reliance on the automatic acceleration clause in the contract. The filing alone of the foreclosure application
should not be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among
the grounds for moral damages. 22

With the ruling out of compensatory, moral and temperate damages, the grant of exemplary or corrective damages should
also be set aside. 23 Moreover, no proof has been submitted that the SSS had acted in a wanton, reckless and oppressive
manner. 24

However, as found by both the Trial and Appellate Courts, there was clear negligence on the part of SSS when they
mistook the loan account of Socorro J. Cruz for that of private respondent Socorro C. Cruz. Its attention was called to the
error, but it adamantly refused to acknowledge its mistake. The SSS can be held liable for nominal damages. This type of
damages is not for the purpose of indemnifying private respondents for any loss suffered by them but to vindicate or
recognize their rights which have been violated or invaded by petitioner SSS. 25

The circumstances of the case also justify the award of attorney's fees, as granted by the Trial and Appellate Courts,
particularly considering that private respondents were compelled to litigate for the prosecution of their interests. 26

WHEREFORE, the judgment sought to be reviewed is hereby modified in that petitioner SSS shall pay private
respondents: P3,000.00 as nominal damages; and P5,000.00 as attorney's fees.

Costs against petitioner Social Security System.

SO ORDERED.

Teehankee, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Vasquez and Relova, JJ., concur.

Fernando, C.J., concurs in the result.

Plana, Escolin ** and Gutierrez, Jr., *** JJ., took no part.

Separate Opinions

AQUINO, J., concurring:

I concur. The award of moral damages is not justified under arts. 2219 and 2220 of the Civil Code. I vote to award the
private respondents the additional sum of P2,000 as litigation expenses.

MAKASIAR, J.,  dissenting:

I dissent.

To begin with, the negligent acts committed by the officers and employees of the petitioner, Social Security System,
amounted to not simply a contractual breach but tort. For the record is clear that petitioner's officers and employees were
grossly negligent bordering on malice or bad faith in applying for the extrajudicial foreclosure of the mortgage contract
executed in its favor by the spouses David B. Cruz and Socorro Concio-Cruz, and that even after private respondents had
brought to the attention of the petitioner's officers and employees their mistake, they insisted on their course of action,
instead of making the necessary rectifications, which grossly negligent and oppressive acts caused damage to private
respondents. As found by the Court of Appeals:

The appellant was not justified in applying for the extrajudicial foreclosure of the mortgage contract
executed in its favor by the spouses David B. Cruz and Socorro Concio-Cruz, Exh. 'A'. While it is true that
the payments of the monthly installments were previously not regular, it is a fact that as of June 30, 1968
the appellees, David B. Cruz and Socorro Concio-Cruz were up-to-date and current in the payment of
their monthly installments. Having accepted the prior late payments of the monthly installments, the
appellant could no longer suddenly and without prior notice to the mortgagors apply for the extra-judicial
foreclosure of the mortgage in July, 1968.

It is obvious that the appellant applied for the extra-judicial foreclosure of the mortgage in question
because of the gross negligence of its employees. This negligence was aggravated when the
appellant, after being informed of the error, insisted on proceeding with the extra-judicial foreclosure by
invoking alleged violations of the mortgage contract. But these violations are either too minor to warrant
the drastic step of foreclosure or were deemed condoned when the appellant accepted late payments
prior to June 30, 1968. Hence the trial court did not err in concluding that 'the act of defendant indeed was
deliberate, calculated to cow plaintiffs into submission and made obviously with malice (p. 54, rec.;
emphasis supplied).

The circumstance that there was a pre-existing contractual relationship between the herein contending parties, does not
bar the tort liability of the officers and employees of petitioner; because tort liability may still exist despite presence of
contractual relations as the act that breaks the contract may also be a tort, as in this case (Air France vs. Carrascoso, L-
21438, Sept. 28, 1966, 18 SCRA 155, 168-169; Singson & Castillo vs. Bank of the Philippine Islands, L-24837, June 27,
1968, 23 SCRA 1117, 1119-20).

Consequently, a tortious act being involved, the applicable provision of law is Article 2180 in relation to Article 2176 of the
New Civil Code. Under Article 2180, ... The State is responsible in like manner when it acts through a special agent; but
not when the damage has been caused by the official to whom the task done properly pertains, in which case what is
provided in Article 2176 shall be applicable.

In the case at bar, the petitioner Social Security System as the instrumentality of the State to implement the social justice
guarantee enunciated in the Constitution, did not act through a special agent. Hence, the Social Security System cannot
be liable for the damages caused by the tortious acts of its officers and employees while in the performance of their
regular functions. The remedy therefore of private respondents is to proceed against the guilty officers and employees of
petitioner Social Security System as mandated by Article 2176 of the New Civil Code.

For as held in the leading case of Merritt vs. Government of the Philippine Islands (34 Phil. 311).

The responsibility of the State is limited by Article 1903 to the case wherein it acts through a special
agent, ... so that in representation of the state and being bound to act as an agent thereof, he executes
the trust confided to him. This concept does not apply to any executive agent who is an employee of the
active administration and who on his own responsibility performs the functions which are inherent in and
naturally pertain to his office and which are regulated by law and the regulations.

While Article 2180 of the New Civil Code was not invoked by the petitioner as a defense, this does not prevent this
Tribunal from taking cognizance of the same. For as stressed in Ortigas, Jr. vs. Lufthansa German Airlines (June 30,
1975, 64 SCRA 610, 633), failure to assign a defense as an error on appeal is a pure technicality that should not prevail
over the substantial issues in a controversy as the same would not serve the interest of justice, and "this Court is clothed
with ample authority to review matters even if they are not assigned as errors in the appeal, if it finds that our
consideration is necessary in arriving at a just decision of the case" (citing Saura & Export Co., Inc., May 31, 1963, 8
SCRA 143). Further, We have, time and again, re-stated the rule that the Supreme Court can suspend its own rules to
serve the ends of justice (Jose vs. C.A., et al., L-38581, March 31, 1976; Phil. Blooming Mills Employees Organization, et
al. vs. PBM Co., et al., L-31195, 51 SCRA 189, 215; Ronquillo vs. Marasigan, May 31, 1962, 5 SCRA 304, 312-313;
Ordoveza vs. Raymundo, 63 Phil. 275).

The principle that a defense not expressly pleaded is deemed waived unless such failure is satisfactorily explained, is
merely a general rule which is subject to exceptions, among which is when the Court can take judicial notice of such
defense. In this case, We can take judicial notice of the law, like Article 2180 of the New Civil Code. It must be
emphasized that the courts have as much duty as the Commission on August to protect the public treasury from being
mulcted or raided illegally. And this becomes more imperative considering that a substantial portion of the funds of the
petitioner comes from the contributions of- employees and workers in private firms and is therefore in the nature of a trust
fund to be expended only for their welfare and benefit, with the government merely giving some subsidy. Any amount of
damages illegally assessed against the Social Security System will deplete the benefit funds available to its covered
members for the contingencies of sickness, disability, retirement or death.

It cannot likewise be seriously questioned that the Social Security System is comprehended in the definition in Section 2
of the Revised Administrative Code of the term "Government of the Republic of the Philippines ... which refers to the
corporate governmental entity through which the functions of government are exercised throughout the Philippine Islands,
including, save as the contrary appears from the context, the various arms through which political authority is made
effective in the Philippines, whether pertaining to the central Government or to the provincial or municipal branches or
other forms of local government." And the second paragraph of said Section 2 provides that the term "national
government" refers to the central government as distinguished from the different forms of local government. There is
nothing therein nor in the Social Security Act, as amended, intimating that the national government does not include the
Social Security System.

It is true that the Social Security System has a corporate or juridical personality of its own. But this does not remove it as
an integral part of the national or central government. For such corporate or juridical personality invested in it is more for
facility and convenience in the attainment of the objectives for which it was created by the legislative. Such vesting of
corporate or juridical personality in the Social Security System was never intended to destroy the shield from liability
afforded it as an integral part of the State or Government by Article 2180 of the New Civil Code. Relatedly, such corporate
or juridical personality of the Social Security System and the express provision of the law creating the same that it can sue
and be sued, have the effect of merely waiving its immunity from suit as an entity performing governmental functions.
Such waiver of its immunity from suit is not an admission of its liability. Such waiver merely allows a private citizen a
remedy for the enforcement and protection of his rights, but always subject to the lawful defenses of the Social Security
System one of which is Article 2180 of the New Civil Code as aforestated. In other words, such waiver of immunity from
suit is not equivalent to instant liability. The Social Security System can only be held liable for damages arising from the
tortious acts of its officers and employees only if it acts through a special agent, which is not true in the case at bar.

II

It must be finally stressed that the Social Security System cannot be liable for damages because it is an entity of
government performing governmental functions; hence, not profit-oriented. The 1963 doctrine in SSSEA vs. Soriano(7
SCRA 1016 [1963]) that the system is exercising proprietary functions, is no longer controlling.

For in 1969, the distinction between constituent and ministrant functions of the Government as laid down in the case of
Bacani vs. Nacoco (100 Phil. 468 [1956]) has been obliterated. In the case of Agricultural Credit and Cooperative
Financing Administration (ACCFA) vs. Confederation of Unions in Government Corporations and Offices (CUGCO) [30
SCRA 649 (1969)], this Court in re-examining the aforesaid Bacani ruling observed that the trend has been to abandon
and reject the traditional "Constituent- Ministrant" criterion in governmental functions in favor of the more responsive
postulate that the growing complexities of modern society have rendered the traditional classification of government
functions unrealistic and obsolete.

WE held in the ACCFA case, thus:

The growing complexities of modern society, however, have rendered this traditional classification of the
functions of government quite unrealistic, not to say obsolete. The areas which used to be left to private
enterprise and initiative and which the government was called upon to enter optionally, and only 'because
it was better equipped to administer for the public welfare than is any private individual or groups of
individuals,' continue to lose their well-defined boundaries and to be absorbed within activities that the
government must have undertaken in its sovereign capacity if it is to meet the increasing social
challenges of the times. Here as almost everywhere, else, the tendency is undoubtedly towards a greater
socialization of economic forces. Here of course, this development was envisioned indeed adopted as a
national policy, by the Constitution itself in its declaration of principle concerning the promotion of social
justice.

Chief Justice Fernando, then Associate Justice, in his concurring opinion stressed that:

The decision reached by this Court so ably given expression in the opinion of Justice Makalintal,
characterized with vigor, clarity and precision,  represents what for me is a clear tendency not to be
 necessarily bound by our previous pronouncements on what activities partake of a nature that is
governmental. Of even greater significance, there is a definite rejection of the 'constituent-ministrant'
criterion of governmental functions, followed in Bacani vs. National Coconut Corporation. That indeed is
cause for gratification. For me at least, there is again full adherence to the basic philosophy of the
Constitution as to the extensive and vast power lodged in our government to cope with the social and
economic problems that even now sorely beset us. There is therefore full concurrence on my part to the
opinion of the court, distinguished by its high quality of juristic craftsmanship (pp. 666-667).

xxx xxx xxx

4. With the decision reached by us today, the government is freed from the compulsion exerted by the
Bacani doctrine of the 'constituent-ministrant' test as a criterion for the type of activity in which it may
engage. It constricting effect is consigned to oblivion. No doubts or misgivings need assail us that
government efforts to promote the public wealth whether through regulatory legislation of vast scope and
emplitude or through the undertaking of business activities, would have to face a searching and rigorous
scrutiny. It is clear that their legitimacy cannot be challenged on the ground alone of their being offensive
to the implications of the laissez- faire concept. Unless there be a repugnancy then to the limitations
expressly set forth in the Constitution to protect individual rights, the government enjoys a much wider
latitude of action as to the means it chooses to cope with grave social and economic problems that
urgently press for solution. For me, at least, that is to manifest deference to the philosophy of our
fundamental law. Hence my full concurrence, as announced at the outset. (pp- 682-683, emphasis
supplied).

The 1935 Constitution declared:

Sec. 5. The promotion of social justice to insure the well being and economic security of all the people
should be the concern of the State. (Art. II, Declaration of Principles).

The present 1973 Constitution provides under its Declaration of Principles and State Policies (Article 11), that

The State shall promote social justice to ensure the dignity, welfare, and security of all the people.
Towards this end, the State shall regulate the acquisition, ownership, use, enjoyment, and disposition of
private property, and equitably diffuse property ownership and profits. (Section 6);

and

The State shall establish, maintain, and ensure adequate social services in the field of education, health,
housing, employment, welfare, and social security to guarantee the enjoyment by the people of a decent
standard of living. (Section 7).

The strictly governmental function of the SSS is spelled out unmistakably in Section 2 of R.A. No. 1161 entitled "The
Social Security Act of 1954," thus:

It is hereby declared to be the policy of the Republic of the Philippines to develop, establish gradually and
perfect a social security system which shall be suitable to the needs of the people throughout the
Philippines, and shall provide protection against the hazards of disability, sickness, old age and death.

As stated in the Explanatory Note to the Bill that became R. A. No. 1161, the Social Security Act of 1954:

It is a recognized principle in free societies that the State must help its citizens to make provision for
emergencies beyond their control, such as unemployment, sickness requiring expensive medical
treatment, and similar emergencies to a greater or lesser degree by means of social security legislation in
a variety of forms.

And this Court, in Roman Catholic Archbishop of Manila vs. SSS (L-15045, 1 SCRA 10 [1961]), declared that "the Social
Security Law was enacted pursuant to the 'policy of the Republic to develop, establish gradually and perfect a social
security system which shall be suitable to the needs of the people throughout the Philippines and provide protection to
employees against the hazards of disability, sickness, old age and death' (Sec. 2, Republic Act No. 1161, as amended).
Such enactment is a legitimate exercise of the police power. It affords protection to labor, especially to working women
and minors, and is in full accord with the constitutional provisions on the 'promotion of social justice to insure the well
being and economic security of all the people.

It is interesting to note that aforesaid pronouncement of this Court was incorporated in the Social Security Act (R.A. 1161)
by Presidential Decree No. 24 issued on October 19, 1972. Thus, as amended by said Decree, its section 2 now reads: "It
is the policy of the Republic of the Philippines to establish, develop, promote and perfect a sound viable 'tax exempt social
security service suitable to the needs of the people throughout the Philippines, which shall provide to covered employees
and their families protection against the hazards of disability, sickness, old age, and death, with a view to promoting their
well-being in the spirit of social justice" (emphasis supplied). And one of its whereases expressly states that "the measure
is necessary to effect reforms in SSS operations and to revitalize its structure as an important agency in the promotion of
the social and economic development programs of the Government; ... (emphasis supplied).

Considering therefore that the establishment and maintenance of an adequate social security and social services, which
the Social Security System seeks to perform and achieve are functions pursuant to the basic constitutional mandate
directing the State to promote "social justice to insure the well-being and economic security of all the people" (1935
Constitution) or "to insure the dignity, welfare and security of all the people" as well as the police power of the State, the
inescapable conclusion is that the function of the SSS is and has always been governmental.

It thus becomes clear that petitioner Social Security System, under the obtaining facts and applicable laws in the case, is
not liable for the damages caused to private respondents by the tortious acts of its officers and employees to whom the
task done properly pertained.

A contrary rule as that enunciated in the majority opinion invites conspiracy between officials and employees of the Social
Security System and private parties to create financial liabilities against the System. Its funds are public funds and more
importantly trust funds, which must be protected.

Separate Opinions

AQUINO, J., concurring:

I concur. The award of moral damages is not justified under arts. 2219 and 2220 of the Civil Code. I vote to award the
private respondents the additional sum of P2,000 as litigation expenses.

MAKASIAR, J.,  dissenting:

I dissent.

To begin with, the negligent acts committed by the officers and employees of the petitioner, Social Security System,
amounted to not simply a contractual breach but tort. For the record is clear that petitioner's officers and employees were
grossly negligent bordering on malice or bad faith in applying for the extrajudicial foreclosure of the mortgage contract
executed in its favor by the spouses David B. Cruz and Socorro Concio-Cruz, and that even after private respondents had
brought to the attention of the petitioner's officers and employees their mistake, they insisted on their course of action,
instead of making the necessary rectifications, which grossly negligent and oppressive acts caused damage to private
respondents. As found by the Court of Appeals:

The appellant was not justified in applying for the extrajudicial foreclosure of the mortgage contract
executed in its favor by the spouses David B. Cruz and Socorro Concio-Cruz, Exh. 'A'. While it is true that
the payments of the monthly installments were previously not regular, it is a fact that as of June 30, 1968
the appellees, David B. Cruz and Socorro Concio-Cruz were up-to-date and current in the payment of
 their monthly installments. Having accepted the prior late payments of the monthly installments, the
appellant could no longer suddenly and without prior notice to the mortgagors apply for the extra-judicial
foreclosure of the mortgage in July, 1968.

It is obvious that the appellant applied for the extra-judicial foreclosure of the mortgage in question
because of the gross negligence of its employees. This negligence was aggravated when the
appellant, after being informed of the error, insisted on proceeding with the extra-judicial foreclosure by
invoking alleged violations of the mortgage contract. But these violations are either too minor to warrant
the drastic step of foreclosure or were deemed condoned when the appellant accepted late payments
prior to June 30, 1968. Hence the trial court did not err in concluding that 'the act of defendant indeed was
deliberate, calculated to cow plaintiffs into submission and made obviously with malice (p. 54, rec.;
emphasis supplied).

The circumstance that there was a pre-existing contractual relationship between the herein contending parties, does not
bar the tort liability of the officers and employees of petitioner; because tort liability may still exist despite presence of
contractual relations as the act that breaks the contract may also be a tort, as in this case (Air France vs. Carrascoso, L-
21438, Sept. 28, 1966, 18 SCRA 155, 168-169; Singson & Castillo vs. Bank of the Philippine Islands, L-24837, June 27,
1968, 23 SCRA 1117, 1119-20).

Consequently, a tortious act being involved, the applicable provision of law is Article 2180 in relation to Article 2176 of the
New Civil Code. Under Article 2180, ... The State is responsible in like manner when it acts through a special agent; but
not when the damage has been caused by the official to whom the task done properly pertains, in which case what is
provided in Article 2176 shall be applicable.

In the case at bar, the petitioner Social Security System as the instrumentality of the State to implement the social justice
guarantee enunciated in the Constitution, did not act through a special agent. Hence, the Social Security System cannot
be liable for the damages caused by the tortious acts of its officers and employees while in the performance of their
regular functions. The remedy therefore of private respondents is to proceed against the guilty officers and employees of
petitioner Social Security System as mandated by Article 2176 of the New Civil Code.

For as held in the leading case of Merritt vs. Government of the Philippine Islands (34 Phil. 311).

The responsibility of the State is limited by Article 1903 to the case wherein it acts through a special
agent, ... so that in representation of the state and being bound to act as an agent thereof, he executes
the trust confided to him. This concept does not apply to any executive agent who is an employee of the
active administration and who on his own responsibility performs the functions which are inherent in and
naturally pertain to his office and which are regulated by law and the regulations.

While Article 2180 of the New Civil Code was not invoked by the petitioner as a defense, this does not prevent this
Tribunal from taking cognizance of the same. For as stressed in Ortigas, Jr. vs. Lufthansa German Airlines (June 30,
1975, 64 SCRA 610, 633), failure to assign a defense as an error on appeal is a pure technicality that should not prevail
over the substantial issues in a controversy as the same would not serve the interest of justice, and "this Court is clothed
with ample authority to review matters even if they are not assigned as errors in the appeal, if it finds that our
consideration is necessary in arriving at a just decision of the case" (citing Saura & Export Co., Inc., May 31, 1963, 8
SCRA 143). Further, We have, time and again, re-stated the rule that the Supreme Court can suspend its own rules to
serve the ends of justice (Jose vs. C.A., et al., L-38581, March 31, 1976; Phil. Blooming Mills Employees Organization, et
al. vs. PBM Co., et al., L-31195, 51 SCRA 189, 215; Ronquillo vs. Marasigan, May 31, 1962, 5 SCRA 304, 312-313;
Ordoveza vs. Raymundo, 63 Phil. 275).

The principle that a defense not expressly pleaded is deemed waived unless such failure is satisfactorily explained, is
merely a general rule which is subject to exceptions, among which is when the Court can take judicial notice of such
defense. In this case, We can take judicial notice of the law, like Article 2180 of the New Civil Code. It must be
emphasized that the courts have as much duty as the Commission on August to protect the public treasury from being
mulcted or raided illegally. And this becomes more imperative considering that a substantial portion of the funds of the
petitioner comes from the contributions of- employees and workers in private firms and is therefore in the nature of a trust
fund to be expended only for their welfare and benefit, with the government merely giving some subsidy. Any amount of
damages illegally assessed against the Social Security System will deplete the benefit funds available to its covered
members for the contingencies of sickness, disability, retirement or death.
It cannot likewise be seriously questioned that the Social Security System is comprehended in the definition in Section 2
of the Revised Administrative Code of the term "Government of the Republic of the Philippines ... which refers to the
corporate governmental entity through which the functions of government are exercised throughout the Philippine Islands,
including, save as the contrary appears from the context, the various arms through which political authority is made
effective in the Philippines, whether pertaining to the central Government or to the provincial or municipal branches or
other forms of local government." And the second paragraph of said Section 2 provides that the term "national
government" refers to the central government as distinguished from the different forms of local government. There is
nothing therein nor in the Social Security Act, as amended, intimating that the national government does not include the
Social Security System.

It is true that the Social Security System has a corporate or juridical personality of its own. But this does not remove it as
an integral part of the national or central government. For such corporate or juridical personality invested in it is more for
facility and convenience in the attainment of the objectives for which it was created by the legislative. Such vesting of
corporate or juridical personality in the Social Security System was never intended to destroy the shield from liability
afforded it as an integral part of the State or Government by Article 2180 of the New Civil Code. Relatedly, such corporate
or juridical personality of the Social Security System and the express provision of the law creating the same that it can sue
and be sued, have the effect of merely waiving its immunity from suit as an entity performing governmental functions.
Such waiver of its immunity from suit is not an admission of its liability. Such waiver merely allows a private citizen a
remedy for the enforcement and protection of his rights, but always subject to the lawful defenses of the Social Security
System one of which is Article 2180 of the New Civil Code as aforestated. In other words, such waiver of immunity from
suit is not equivalent to instant liability. The Social Security System can only be held liable for damages arising from the
tortious acts of its officers and employees only if it acts through a special agent, which is not true in the case at bar.

II

It must be finally stressed that the Social Security System cannot be liable for damages because it is an entity of
government performing governmental functions; hence, not profit-oriented. The 1963 doctrine in SSSEA vs. Soriano(7
SCRA 1016 [1963]) that the system is exercising proprietary functions, is no longer controlling.

For in 1969, the distinction between constituent and ministrant functions of the Government as laid down in the case of
Bacani vs. Nacoco (100 Phil. 468 [1956]) has been obliterated. In the case of Agricultural Credit and Cooperative
Financing Administration (ACCFA) vs. Confederation of Unions in Government Corporations and Offices (CUGCO) [30
SCRA 649 (1969)], this Court in re-examining the aforesaid Bacani ruling observed that the trend has been to abandon
and reject the traditional "Constituent- Ministrant" criterion in governmental functions in favor of the more responsive
postulate that the growing complexities of modern society have rendered the traditional classification of government
functions unrealistic and obsolete.

WE held in the ACCFA case, thus:

The growing complexities of modern society, however, have rendered this traditional classification of the
functions of government quite unrealistic, not to say obsolete. The areas which used to be left to private
enterprise and initiative and which the government was called upon to enter optionally, and only 'because
it was better equipped to administer for the public welfare than is any private individual or groups of
individuals,' continue to lose their well-defined boundaries and to be absorbed within activities that the
government must have undertaken in its sovereign capacity if it is to meet the increasing social
challenges of the times. Here as almost everywhere, else, the tendency is undoubtedly towards a greater
socialization of economic forces. Here of course, this development was envisioned indeed adopted as a
national policy, by the Constitution itself in its declaration of principle concerning the promotion of social
justice.

Chief Justice Fernando, then Associate Justice, in his concurring opinion stressed that:

The decision reached by this Court so ably given expression in the opinion of Justice Makalintal,
characterized with vigor, clarity and precision,  represents what for me is a clear tendency not to be
necessarily bound by our previous pronouncements on what activities partake of a nature that is
governmental. Of even greater significance, there is a definite rejection of the 'constituent-ministrant'
criterion of governmental functions, followed in Bacani vs. National Coconut Corporation. That indeed is
cause for gratification. For me at least, there is again full adherence to the basic philosophy of the
Constitution as to the extensive and vast power lodged in our government to cope with the social and
 economic problems that even now sorely beset us. There is therefore full concurrence on my part to the
opinion of the court, distinguished by its high quality of juristic craftsmanship (pp. 666-667).

xxx xxx xxx

4. With the decision reached by us today, the government is freed from the compulsion exerted by the
Bacani doctrine of the 'constituent-ministrant' test as a criterion for the type of activity in which it may
engage. It constricting effect is consigned to oblivion. No doubts or misgivings need assail us that
government efforts to promote the public wealth whether through regulatory legislation of vast scope and
emplitude or through the undertaking of business activities, would have to face a searching and rigorous
scrutiny. It is clear that their legitimacy cannot be challenged on the ground alone of their being offensive
to the implications of the laissez- faire concept. Unless there be a repugnancy then to the limitations
expressly set forth in the Constitution to protect individual rights, the government enjoys a much wider
latitude of action as to the means it chooses to cope with grave social and economic problems that
urgently press for solution. For me, at least, that is to manifest deference to the philosophy of our
fundamental law. Hence my full concurrence, as announced at the outset. (pp- 682-683, emphasis
supplied).

The 1935 Constitution declared:

Sec. 5. The promotion of social justice to insure the well being and economic security of all the people
should be the concern of the State. (Art. II, Declaration of Principles).

The present 1973 Constitution provides under its Declaration of Principles and State Policies (Article 11), that

The State shall promote social justice to ensure the dignity, welfare, and security of all the people.
Towards this end, the State shall regulate the acquisition, ownership, use, enjoyment, and disposition of
private property, and equitably diffuse property ownership and profits. (Section 6);

and

The State shall establish, maintain, and ensure adequate social services in the field of education, health,
housing, employment, welfare, and social security to guarantee the enjoyment by the people of a decent
standard of living. (Section 7).

The strictly governmental function of the SSS is spelled out unmistakably in Section 2 of R.A. No. 1161 entitled "The
Social Security Act of 1954," thus:

It is hereby declared to be the policy of the Republic of the Philippines to develop, establish gradually and
perfect a social security system which shall be suitable to the needs of the people throughout the
Philippines, and shall provide protection against the hazards of disability, sickness, old age and death.

As stated in the Explanatory Note to the Bill that became R. A. No. 1161, the Social Security Act of 1954:

It is a recognized principle in free societies that the State must help its citizens to make provision for
emergencies beyond their control, such as unemployment, sickness requiring expensive medical
treatment, and similar emergencies to a greater or lesser degree by means of social security legislation in
a variety of forms.

And this Court, in Roman Catholic Archbishop of Manila vs. SSS (L-15045, 1 SCRA 10 [1961]), declared that "the Social
Security Law was enacted pursuant to the 'policy of the Republic to develop, establish gradually and perfect a social
security system which shall be suitable to the needs of the people throughout the Philippines and provide protection to
employees against the hazards of disability, sickness, old age and death' (Sec. 2, Republic Act No. 1161, as amended).
Such enactment is a legitimate exercise of the police power. It affords protection to labor, especially to working women
and minors, and is in full accord with the constitutional provisions on the 'promotion of social justice to insure the well
being and economic security of all the people.

It is interesting to note that aforesaid pronouncement of this Court was incorporated in the Social Security Act (R.A. 1161)
by Presidential Decree No. 24 issued on October 19, 1972. Thus, as amended by said Decree, its section 2 now reads: "It
is the policy of the Republic of the Philippines to establish, develop, promote and perfect a sound viable 'tax exempt social
security service suitable to the needs of the people throughout the Philippines, which shall provide to covered employees
and their families protection against the hazards of disability, sickness, old age, and death, with a view to promoting their
well-being in the spirit of social justice" (emphasis supplied). And one of its whereases expressly states that "the measure
is necessary to effect reforms in SSS operations and to revitalize its structure as an important agency in the promotion of
the social and economic development programs of the Government; ... (emphasis supplied).

Considering therefore that the establishment and maintenance of an adequate social security and social services, which
the Social Security System seeks to perform and achieve are functions pursuant to the basic constitutional mandate
directing the State to promote "social justice to insure the well-being and economic security of all the people" (1935
Constitution) or "to insure the dignity, welfare and security of all the people" as well as the police power of the State, the
inescapable conclusion is that the function of the SSS is and has always been governmental.

It thus becomes clear that petitioner Social Security System, under the obtaining facts and applicable laws in the case, is
not liable for the damages caused to private respondents by the tortious acts of its officers and employees to whom the
task done properly pertained.

A contrary rule as that enunciated in the majority opinion invites conspiracy between officials and employees of the Social
Security System and private parties to create financial liabilities against the System. Its funds are public funds and more
importantly trust funds, which must be protected.
 [G.R. No. 129169. November 17, 1999]

NATIONAL IRRIGATION ADMINISTRATION (NIA), petitioner, vs. HONORABLE COURT OF APPEALS (4th

Division), CONSTRUCTION INDUSTRY ARBITRATION COMMISSION, and HYDRO RESOURCES
CONTRACTORS CORPORATION, respondents.

DECISION
DAVIDE, JR., C.J.:

In this special civil action for certiorari under Rule 65 of the Rules of Court, the National Irrigation Administration
(hereafter NIA), seeks to annul and set aside the Resolutions[1]of the Court of Appeals in CA-GR. SP No. 37180 dated 28
June 1996 and 24 February 1997, which dismissed respectively NIAs petition for certiorari and prohibition against the
Construction Industry Arbitration Commission (hereafter CIAC), and the motion for reconsideration thereafter filed.
Records show that in a competitive bidding held by NIA in August 1978, Hydro Resources Contractors Corporation
(hereafter HYDRO) was awarded Contract MPI-C-2 for the construction of the main civil works of the Magat River Multi-
Purpose Project. The contract provided that HYDRO would be paid partly in Philippine pesos and partly in U.S. dollars.
HYDRO substantially completed the works under the contract in 1982 and final acceptance by NIA was made in
1984. HYDRO thereafter determined that it still had an account receivable from NIA representing the dollar rate differential
of the price escalation for the contract.[2]
After unsuccessfully pursuing its case with NIA, HYDRO, on 7 December 1994, filed with the CIAC a Request for
Adjudication of the aforesaid claim. HYDRO nominated six arbitrators for the arbitration panel, from among whom CIAC
appointed Engr. Lauro M. Cruz. On 6 January 1995, NIA filed its Answer wherein it questioned the jurisdiction of the CIAC
alleging lack of cause of action, laches and estoppel in view of HYDROs alleged failure to avail of its right to submit the
dispute to arbitration within the prescribed period as provided in the contract. On the same date, NIA filed a Compliance
wherein it nominated six arbitrators, from among whom CIAC appointed Atty. Custodio O. Parlade, and made a
counterclaim for P1,000,000 as moral damages; at least P100,000 as exemplary damages; P100,000 as attorneys fees;
and the costs of the arbitration.[3]
The two designated arbitrators appointed Certified Public Accountant Joven B. Joaquin as Chairman of the
Arbitration Panel. The parties were required to submit copies of the evidence they intended to present during the
proceedings and were provided the draft Terms of Reference.[4]
At the preliminary conference, NIA through its counsel Atty. Joy C. Legaspi of the Office of the Government
Corporate Counsel, manifested that it could not admit the genuineness of HYDROs evidence since NIAs records had
already been destroyed. NIA requested an opportunity to examine the originals of the documents which HYDRO agreed
to provide.[5]
After reaching an accord on the issues to be considered by the arbitration panel, the parties scheduled the dates of
hearings and of submission of simultaneous memoranda.[6]
On 13 March 1995, NIA filed a Motion to Dismiss [7]alleging lack of jurisdiction over the disputes. NIA contended that
there was no agreement with HYDRO to submit the dispute to CIAC for arbitration considering that the construction
contract was executed in 1978 and the project completed in 1982, whereas the Construction Industry Arbitration Law
creating CIAC was signed only in 1985; and that while they have agreed to arbitration as a mode of settlement of
disputes, they could not have contemplated submission of their disputes to CIAC. NIA further argued that records show
that it had not voluntarily submitted itself to arbitration by CIAC citing TESCO Services, Inc. v. Hon. Abraham Vera, et al.,
[8]
 wherein it was ruled:

CIAC did not acquire jurisdiction over the dispute arising from the sub-contract agreement between petitioner TESCO and
private respondent LAROSA. The records do not show that the parties agreed to submit the disputes to arbitration by the
CIAC xxxx. While both parties in the sub-contract had agreed to submit the matter to arbitration, this was only between
themselves, no request having been made by both with the CIAC. Hence, as already stated, the CIAC, has no jurisdiction
over the dispute. xxxx. Nowhere in the said article (sub-contract) does it mention the CIAC, much less, vest jurisdiction
with the CIAC.
 On 11 April 1995, the arbitral body issued an order [9] which deferred the determination of the motion to dismiss and
resolved to proceed with the hearing of the case on the merits as the grounds cited by NIA did not seem to be indubitable.
NIA filed a motion for reconsideration of the aforesaid Order. CIAC in denying the motion for reconsideration ruled that it
has jurisdiction over the HYDROs claim over NIA pursuant to E.O 1008 and that the hearing should proceed as
scheduled.[10]
On 26 May 1996, NIA filed with the Court of Appeals an original action of certiorari and prohibition with prayer for
restraining order and/or injunction, seeking to annul the Orders of the CIAC for having been issued without or in excess of
jurisdiction. In support of its petition NIA alleged that:
A

RESPONDENT CIAC HAS NO AUTHORITY OR JURIDICTION TO HEAR AND TRY THIS DISPUTE BETWEEN THE
HEREIN PARTIES AS E.O. NO. 1008 HAD NO RETROACTIVE EFFECT.

THE DISPUTE BETWEEN THE PARTIES SHOULD BE SETTLED IN ACCORDANCE WITH GC NO. 25, ART. 2046 OF
THE CIVIL CODE AND R.A. NO. 876 THE GOVERNING LAWS AT THE TIME CONTRACT WAS EXECUTED AND
TERMINATED.

E.O. NO. 1008 IS A SUBSTANTIVE LAW, NOT MERELY PROCEDURAL AS RULED BY THE CIAC.

AN INDORSEMENT OF THE AUDITOR GENERAL DECIDING A CONTROVERSY IS A DECISION BECAUSE ALL THE
ELEMENTS FOR JUDGMENT ARE THERE; THE CONTROVERSY, THE AUTHORITY TO DECIDE AND THE
DECISION. IF IT IS NOT APPEALED SEASONABLY, THE SAME BECOMES FINAL.

NIA HAS TIMELY RAISED THE ISSUE OF JURISDICTION. IT DID NOT WAIVE NOR IS IT ESTOPPED FROM
ASSAILING THE SAME.

THE LEGAL DOCTRINE THAT JURISDICTION IS DETERMINED BY THE STATUTE IN FORCE AT THE TIME OF THE
COMMENCEMENT OF THE ACTION DOES NOT ONLY APPLY TO THE INSTANT CASE.[11]

The Court of Appeals, after finding that there was no grave abuse of discretion on the part of the CIAC in issuing the
aforesaid Orders, dismissed the petition in its Resolution dated 28 June 1996. NIAs motion for reconsideration of the said
decision was likewise denied by the Court of Appeals on 26 February 1997.
On 2 June 1997, NIA filed before us an original action for certiorari and prohibition with urgent prayer for temporary
restraining order and writ of preliminary injunction, praying for the annulment of the Resolutions of the Court of Appeals
dated 28 June 1996 and 24 February 1997. In the said special civil action, NIA merely reiterates the issues it raised
before the Court of Appeals. [12]
We take judicial notice that on 10 June 1997, CIAC rendered a decision in the main case in favor of HYDRO. [13] NIA
assailed the said decision with the Court of Appeals. In view of the pendency of the present petitions before us the
appellate court issued a resolution dated 26 March 1998 holding in abeyance the resolution of the same until after the
instant petitions have been finally decided.[14]
At the outset, we note that the petition suffers from a procedural defect that warrants its outright dismissal. The
questioned resolutions of the Court of Appeals have already become final and executory by reason of the failure of NIA to
appeal therefrom. Instead of filing this petition for certiorari under Rule 65 of the Rules of Court, NIA should have filed a
timely petition for review under Rule 45.
There is no doubt that the Court of Appeals has jurisdiction over the special civil action for certiorari under Rule 65
filed before it by NIA. The original jurisdiction of the Court of Appeals over special civil actions for certiorari is vested upon
it under Section 9(1) of B.P. 129. This jurisdiction is concurrent with the Supreme Court[15] and with the Regional Trial
Court.[16]
Thus, since the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors committed by it
in the exercise of its jurisdiction would be errors of judgment which are reviewable by timely appeal and not by a special
civil action of certiorari.[17] If the aggrieved party fails to do so within the reglementary period, and the decision accordingly
becomes final and executory, he cannot avail himself of the writ of certiorari, his predicament being the effect of his
deliberate inaction.[18]
The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a special
civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil
Procedure.[19] Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e.,
regardless of the nature of the action or proceedings involved, may be appealed to this Court by filing a petition for review,
which would be but a continuation of the appellate process over the original case.[20] Under Rule 45 the reglementary
period to appeal is fifteen (15) days from notice of judgment or denial of motion for reconsideration.[21]
In the instant case the Resolution of the Court of Appeals dated 24 February 1997 denying the motion for
reconsideration of its Resolution dated 28 June 1997 was received by NIA on 4 March1997.Thus, it had until 19 March
1997 within which to perfect its appeal. NIA did not appeal. What it did was to file an original action for certiorari before
this Court, reiterating the issues and arguments it raised before the Court of Appeals.
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has no plain,
speedy and adequate remedy in the ordinary course of law against its perceived grievance.[22] A remedy is considered
plain, speedy and adequate if it will promptly relieve the petitioner from the injurious effects of the judgment and the acts
of the lower court or agency.[23] In this case, appeal was not only available but also a speedy and adequate remedy.
Obviously, NIA interposed the present special civil action of certiorari not because it is the speedy and adequate
remedy but to make up for the loss, through omission or oversight, of the right of ordinary appeal. It is elementary that the
special civil action of certiorari is not and cannot be a substitute for an appeal, where the latter remedy is available, as it
was in this case. A special civil action under Rule 65 of the Rules of Court will not be a cure for failure to timely file a
petition for review on certiorari under Rule 45 of the Rules of Court. [24] Rule 65 is an independent action that cannot be
availed of as a substitute for the lost remedy of an ordinary appeal, including that under Rule 45, [25] especially if such loss
or lapse was occasioned by ones own neglect or error in the choice of remedies.[26]
For obvious reasons the rules forbid recourse to a special civil action for certiorari if appeal is available, as the
remedies of appeal and certiorari are mutually exclusive and not alternative or successive.[27] Although there are
exceptions to the rules, none is present in the case at bar. NIA failed to show circumstances that will justify a deviation
from the general rule as to make available a petition for certiorari in lieu of taking an appropriate appeal.
Based on the foregoing, the instant petition should be dismissed.
In any case, even if the issue of technicality is disregarded and recourse under Rule 65 is allowed, the same result
would be reached since a review of the questioned resolutions of the CIAC shows that it committed no grave abuse of
discretion.
Contrary to the claim of NIA, the CIAC has jurisdiction over the controversy. Executive Order No.1008, otherwise
known as the Construction Industry Arbitration Law which was promulgated on 4 February 1985, vests upon CIAC original
and exclusive jurisdiction over disputes arising from, or connected with contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the
abandonment or breach thereof. The disputes may involve government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.[28]
The complaint of HYDRO against NIA on the basis of the contract executed between them was filed on 7 December
1994, during the effectivity of E.O. No. 1008. Hence, it is well within the jurisdiction of CIAC. The jurisdiction of a court is
determined by the law in force at the time of the commencement of the action.[29]
NIAs argument that CIAC had no jurisdiction to arbitrate on contract which preceded its existence is untenable. E.O.
1008 is clear that the CIAC has jurisdiction over all disputes arising from or connected with construction contract whether
the dispute arises before or after the completion of the contract. Thus, the date the parties entered into a contract and the
date of completion of the same, even if these occurred before the constitution of the CIAC, did not automatically divest the
CIAC of jurisdiction as long as the dispute submitted for arbitration arose after the constitution of the CIAC. Stated
differently, the jurisdiction of CIAC is over the dispute, not the contract; and the instant dispute having arisen when CIAC
was already constituted, the arbitral board was actually exercising current, not retroactive, jurisdiction. As such, there is no
need to pass upon the issue of whether E.O. No. 1008 is a substantive or procedural statute.
 NIA also contended that the CIAC did not acquire jurisdiction over the dispute since it was only HYDRO that
requested for arbitration. It asserts that to acquire jurisdiction over a case, as provided under E.O. 1008, the request for
arbitration filed with CIAC should be made by both parties, and hence the request by one party is not enough.
It is undisputed that the contracts between HYDRO and NIA contained an arbitration clause wherein they agreed to
submit to arbitration any dispute between them that may arise before or after the termination of the
agreement. Consequently, the claim of HYDRO having arisen from the contract is arbitrable. NIAs reliance with the ruling
on the case of Tesco Services Incorporated v. Vera,[30] is misplaced.
The 1988 CIAC Rules of Procedure which were applied by this Court in Tesco case had been duly amended by
CIAC Resolutions No. 2-91 and 3-93, Section 1 of Article III of which read as follows:

Submission to CIAC Jurisdiction - An arbitration clause in a construction contract or a submission to arbitration of a

construction contract or a submission to arbitration of a construction dispute shall be deemed an agreement to submit an
existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitration institution or
arbitral body in such contract or submission.When a contract contains a clause for the submission of a future controversy
to arbitration, it is not necessary for the parties to enter into a submission agreement before the claimant may invoke the
jurisdiction of CIAC.

Under the present Rules of Procedure, for a particular construction contract to fall within the jurisdiction of CIAC, it is
merely required that the parties agree to submit the same to voluntary arbitration.Unlike in the original version of Section
1, as applied in the Tesco case, the law as it now stands does not provide that the parties should agree to submit disputes
arising from their agreement specifically to the CIAC for the latter to acquire jurisdiction over the same. Rather, it is plain
and clear that as long as the parties agree to submit to voluntary arbitration, regardless of what forum they may choose,
their agreement will fall within the jurisdiction of the CIAC, such that, even if they specifically choose another forum, the
parties will not be precluded from electing to submit their dispute before the CIAC because this right has been vested
upon each party by law, i.e., E.O. No. 1008.[31]
Moreover, it is undeniable that NIA agreed to submit the dispute for arbitration to the CIAC. NIA through its counsel
actively participated in the arbitration proceedings by filing an answer with counterclaim, as well as its compliance wherein
it nominated arbitrators to the proposed panel, participating in the deliberations on, and the formulation of, the Terms of
Reference of the arbitration proceeding, and examining the documents submitted by HYDRO after NIA asked for the
originals of the said documents.[32]
As to the defenses of laches and prescription, they are evidentiary in nature which could not be established by mere
allegations in the pleadings and must not be resolved in a motion to dismiss. Those issues must be resolved at the trial of
the case on the merits wherein both parties will be given ample opportunity to prove their respective claims and defenses.
[33]
 Under the rule[34] the deferment of the resolution of the said issues was, thus, in order. An allegation of prescription can
effectively be used in a motion to dismiss only when the complaint on its face shows that indeed the action has already
prescribed.[35] In the instant case, the issue of prescription and laches cannot be resolved on the basis solely of the
complaint. It must, however, be pointed that under the new rules,[36] deferment of the resolution is no longer permitted. The
court may either grant the motion to dismiss, deny it, or order the amendment of the pleading.
WHEREFORE, the instant petition is DISMISSED for lack of merit. The Court of Appeals is hereby DIRECTED to
proceed with reasonable dispatch in the disposition of C.A. G.R. No. 44527 and include in the resolution thereof the issue
of laches and prescription.
SO ORDERED.
G.R. No. 84607 March 19, 1993

REPUBLIC OF THE PHILIPPINES, GEN. RAMON MONTANO, GEN. ALFREDO LIM, GEN. ALEXANDER AGUIRRE,
COL. EDGAR DULA TORRES, COL. CEZAR NAZARENO, MAJ. FILEMON GASMEN, PAT. NICANOR ABANDO, PFC
SERAFIN CEBU, JR., GEN. BRIGIDO PAREDES, COL. ROGELIO MONFORTE, PFC ANTONIO LUCERO, PAT. JOSE
MENDIOLA, PAT. NELSON TUASON, POLICE CORPORAL PANFILO ROGOS, POLICE LT. JUAN B. BELTRAN,
PAT. NOEL MANAGBAO, MARINE THIRD CLASS TRAINEE (3CT) NOLITO NOGATO, 3CT ALEJANDRO B.
NAGUIO, JR., EFREN ARCILLAS, 3CT AGERICO LUNA, 3CT BASILIO BORJA, 3CT MANOLITO LUSPO, 3CT
CRISTITUTO GERVACIO, 3CT MANUEL DELA CRUZ, JR., MARINE (CDC) BN., (CIVIL DISTURBANCE CONTROL),
MOBILE DISPERSAL TEAM (MDT), LT. ROMEO PAQUINTO, LT. LAONGLAANG GOCE, MAJ. DEMETRIO DE LA
CRUZ, POLICE CAPTAIN RODOLFO NAVAL, JOHN DOE, RICHARD DOE, ROBERTO DOE AND OTHER
DOES, petitioners, 
vs.
HON. EDILBERTO G. SANDOVAL, Regional Trial Court of Manila, Branch IX, ERLINDA C. CAYLAO, ANATALIA
ANGELES PEREZ, MYRNA BAUTISTA, CIPRIANA EVANGELIO, ELMA GRAMPA, AMELIA GUTIERREZ, NEMESIO
LAKINDANUM, PURITA YUMUL, MIGUEL ARABE, TERESITA ARJONA, RONALDO CAMPOMANES AND
CARMENCITA ARDONI VDA. DE CAMPOMANES, ROGELIO DOMUNICO, in their capacity as heirs of the deceased
(ROBERTO C. CAYLAO, SONNY "BOY" PEREZ, DIONESIO BAUTISTA, DANTE EVANGELIO, ADELFA ARIBE,
DANILO ARJONA, VICENTE CAMPOMANES, RONILO DOMUNICO) respectively; and (names of sixty-two injured
victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON BAUTISTA, DANILO CRUZ, EDDIE MENSOLA,
ALBERT PITALBO, VICENTE ROSEL, RUBEN CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR., EFREN
MACARAIG, SOLOMON MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN CARSELLAR, JOEY CLEMENTE,
GERARDO COYOCA, LUISITO DACO, BENJAMIN DELA CRUZ, ARTHUR FONTANILLA, WILSON GARCIA,
CARLOS SIRAY, JOSE PERRAS, TOMAS VALLOS, ARNOLD ENAJE, MARIANITA DIMAPILIS, FRANCISCO
ANGELES, MARCELO ESGUERRA, JOSE FERRER, RODEL DE GUIA, ELVIS MENDOZA, VICTORIANO QUIJANO,
JOEY ADIME, RESIENO ADUL, ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO ALIAS, EMELITO
ALMONTE, BENILDA ALONUEVO, EMMA ABADILLO, REYNALDO CABALLES, JR., JAIME CALDETO, FABIAN
CANTELEJO, RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS, MARIO DEMASACA,
FRANCISCO GONZALES, ERNESTO GONZALES, RAMIRO JAMIL, JUAN LUCENA, PERLITO SALAYSAY, JOHNNY
SANTOS, MARCELO SANTOS, EMIL SAYAO, BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO, ARMANDO
MATIENZO, CARLO MEDINA, LITO NOVENARIO, and ROSELLA ROBALE, respondents.

G.R. No. 84645 March 19, 1993

ERLINDA C. CAYLAO, ANATALIA ANGELES PEREZ, MYRNA BAUTISTA, CIPRIANA EVANGELIO, ELMA
GRAMPA, AMELIA GUTIERREZ, NEMESIO LAKINDANUM, PURITA YUMUL, MIGUEL ARABE, TERESITA ARJONA,
RONALDO CAMPOMANES AND CARMENCITA ARDONI VDA. DE CAMPOMANES, ROGELIO DOMUNICO, in their
capacity as heirs of the deceased (ROBERTO C. CAYLAO, SONNY "BOY" PEREZ, DIONESIO GRAMPA,
ANGELITO GUTIERREZ, BERNABE LAKINDANUM, ROBERTO YUMUL, LEOPOLDO ALONZO, ADELFA ARIBE,
DANILO ARJONA, VICENTE CAMPOMANES, RONILO DOMUNICO) respectively; and (names of sixty-two injured
victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON BAUTISTA, DANILO CRUZ, EDDIE MENSOLA,
ALBERT PITALBO, VICENTE ROSEL, RUBEN CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR. EFREN
MACARAIG, SOLOMON MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN CARSELLAR, JOEY CLEMENTE,
GERARDO COYOCA, LUISITO DACO, BENJAMIN DELA CRUZ, ARTHUR FONTANILLA, WILSON GARCIA,
CARLOS SIRAY, JOSE PERRAS TOMAS VALLOS, ARNOLD ENAJE, MARIANITA DIMAPILIS, FRANCISCO
ANGELES, MARCELO ESGUERRA, JOSE FERRER, RODEL DE GUIA, ELVIS MENDOZA, VICTORINO QUIJANO,
JOEY ADIME, RESIENO ADUL, ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO ALIAS, EMELITO
ALMONTE, BENILDA ALONUEVO, EMMA ABADILLO, REYNALDO CABALLES, JR., JAIME CALDETO, FABIAN
CANTELEJO, RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS, MARIO DEMASACA,
FRANCISCO GONZALES, ERNESTO GONZALES, RAMIRO JAMIL, JUAN LUCENA, PERLITO SALAYSAY, JOHNNY
SANTOS, MARCELO SANTOS, EMIL SAYAO, BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO, ARMANDO
MATIENZO, CARLO MEDINA, LITO NOVENARIO, ROSELLA ROBALE, petitioners, 
vs.
REPUBLIC OF THE PHILIPPINES, and HONORABLE EDILBERTO G. SANDOVAL, Regional Trial Court of Manila,
Branch 9, respondents.

The Solicitor General for the Republic of the Philippines.

Structural Alternative Legal Assistance for Grassroots for petitioners in 84645 & private respondents in 84607.
CAMPOS, JR., J.:

People may have already forgotten the tragedy that transpired on January 22, 1987. It is quite ironic that then,
some journalists called it a Black Thursday, as a grim reminder to the nation of the misfortune that befell twelve
(12) rallyists. But for most Filipinos now, the Mendiola massacre may now just as well be a chapter in our history
books. For those however, who have become widows and orphans, certainly they would not settle for just that.
They seek retribution for the lives taken that will never be brought back to life again.

Hence, the heirs of the deceased, together with those injured (Caylao group), instituted this petition, docketed as
G.R. No. 84645, under Section 1 of Rule 65 of the Rules of Court, seeking the reversal and setting aside of the
Orders of respondent Judge Sandoval,1 dated May 31 and August 8, 1988, dismissing the complaint for damages of
herein petitioners against the Republic of the Philippines in Civil Case No. 88-43351.

Petitioner, the Republic of the Philippines, through a similar remedy, docketed as G.R. No. 84607, seeks to set aside the
Order of respondent Judge dated May 31, 1988, in Civil Case No. 88-43351 entitled "Erlinda Caylao, et al. vs. Republic of
the Philippines, et al."

The pertinent portion of the questioned Order2 dated May 31, 1988, reads as follows:

With respect however to the other defendants, the impleaded Military Officers, since they are being
charged in their personal and official capacity, and holding them liable, if at all, would not result in
financial responsibility of the government, the principle of immunity from suit can not conveniently and
correspondingly be applied to them.

WHEREFORE, the case as against the defendant Republic of the Philippines is hereby dismissed. As
against the rest of the defendants the motion to dismiss is denied. They are given a period of ten (10)
days from receipt of this order within which to file their respective pleadings.

On the other hand, the Order3 , dated August 8, 1988, denied the motions filed by both parties, for a reconsideration of the
abovecited Order, respondent Judge finding no cogent reason to disturb the said order.

The massacre was the culmination of eight days and seven nights of encampment by members of the militant Kilusang
Magbubukid sa Pilipinas (KMP) at the then Ministry (now Department) of Agrarian Reform (MAR) at the Philippine
Tobacco Administration Building along Elliptical Road in Diliman, Quezon City.

The farmers and their sympathizers presented their demands for what they called "genuine agrarian reform". The KMP,
led by its national president, Jaime Tadeo, presented their problems and demands, among which were: (a) giving lands
for free to farmers; (b) zero retention of lands by landlords; and (c) stop amortizations of land payments.

The dialogue between the farmers and the MAR officials began on January 15, 1987. The two days that followed saw a
marked increase in people at the encampment. It was only on January 19, 1987 that Jaime Tadeo arrived to meet with
then Minister Heherson Alvarez, only to be informed that the Minister can only meet with him the following day. On
January 20, 1987, the meeting was held at the MAR conference room. Tadeo demanded that the minimum
comprehensive land reform program be granted immediately. Minister Alvarez, for his part, can only promise to do his
best to bring the matter to the attention of then President Aquino, during the cabinet meeting on January 21, 1987.

Tension mounted the following day. The farmers, now on their seventh day of encampment, barricaded the MAR
premises and prevented the employees from going inside their offices. They hoisted the KMP flag together with the
Philippine flag.

At around 6:30 p.m. of the same day, Minister Alvarez, in a meeting with Tadeo and his leaders, advised the latter to
instead wait for the ratification of the 1987 Constitution and just allow the government to implement its comprehensive
land reform program. Tadeo, however, countered by saying that he did not believe in the Constitution and that a genuine
land reform cannot be realized under a landlord-controlled Congress. A heated discussion ensued between Tadeo and
Minister Alvarez. This notwithstanding, Minister Alvarez suggested a negotiating panel from each side to meet again the
following day.
On January 22, 1987, Tadeo's group instead decided to march to Malacañang to air their demands. Before the march
started, Tadeo talked to the press and TV media. He uttered fiery words, the most telling of which were:
". . . inalis namin ang barikada bilang kahilingan ng ating Presidente, pero kinakailangan alisin din niya ang barikada sa
Mendiola sapagkat bubutasin din namin iyon at dadanak ang dugo . . . ."4

The farmers then proceeded to march to Malacañang, from Quezon Memorial Circle, at 10:00 a.m. They were later joined
by members of other sectoral organizations such as the Kilusang Mayo Uno (KMU), Bagong Alyansang Makabayan
(BAYAN), League of Filipino Students (LFS) and Kongreso ng Pagkakaisa ng Maralitang Lungsod (KPML).

At around 1:00 p.m., the marchers reached Liwasang Bonifacio where they held a brief program. It was at this point that
some of the marchers entered the eastern side of the Post Office Building, and removed the steel bars surrounding the
garden. Thereafter, they joined the march to Malacañang. At about 4:30 p.m., they reached C.M. Recto Avenue.

In anticipation of a civil disturbance, and acting upon reports received by the Capital Regional Command (CAPCOM) that
the rallyists would proceed to Mendiola to break through the police lines and rush towards Malacañang, CAPCOM
Commander General Ramon E. Montaño inspected the preparations and adequacy of the government forces to quell
impending attacks.

OPLAN YELLOW (Revised) was put into effect. Task Force Nazareno under the command of Col. Cesar Nazareno was
deployed at the vicinity of Malacañang. The civil disturbance control units of the Western Police District under Police
Brigadier General Alfredo S. Lim were also activated.

Intelligence reports were also received that the KMP was heavily infiltrated by CPP/NPA elements and that an insurrection
was impending. The threat seemed grave as there were also reports that San Beda College and Centro Escolar
University would be forcibly occupied.

In its report, the Citizens' Mendiola Commission (a body specifically tasked to investigate the facts surrounding the
incident, Commission for short) stated that the government anti-riot forces were assembled at Mendiola in a formation of
three phalanges, in the following manner:

(1) The first line was composed of policemen from police stations Nos. 3, 4, 6, 7, 8, 9 and 10 and the
Chinatown detachment of the Western Police District. Police Colonel Edgar Dula Torres, Deputy
Superintendent of the Western Police District, was designated as ground commander of the CDC first line
of defense. The WPD CDC elements were positioned at the intersection of Mendiola and Legarda Streets
after they were ordered to move forward from the top of Mendiola bridge. The WPD forces were in khaki
uniform and carried the standard CDC equipment — aluminum shields, truncheons and gas masks.

(2) At the second line of defense about ten (10) yards behind the WPD policemen were the elements of
the Integrated National Police (INP) Field Force stationed at Fort Bonifacio from the 61st and 62nd INP
Field Force, who carried also the standard CDC equipment — truncheons, shields and gas masks. The
INP Field Force was under the command of Police Major Demetrio dela Cruz.

(3) Forming the third line was the Marine Civil Disturbance Control Battalion composed of the first and
second companies of the Philippine Marines stationed at Fort Bonifacio. The marines were all equipped
with shields, truncheons and M-16 rifles (armalites) slung at their backs, under the command of Major
Felimon B. Gasmin. The Marine CDC Battalion was positioned in line formation ten (10) yards farther
behind the INP Field Force.

At the back of the marines were four (4) 6 x 6 army trucks, occupying the entire width of Mendiola street,
followed immediately by two water cannons, one on each side of the street and eight fire trucks, four
trucks on each side of the street. The eight fire trucks from Fire District I of Manila under Fire
Superintendent Mario C. Tanchanco, were to supply water to the two water cannons.

Stationed farther behind the CDC forces were the two Mobile Dispersal Teams (MDT) each composed of
two tear gas grenadiers, two spotters, an assistant grenadier, a driver and the team leader.

In front of the College of the Holy Spirit near Gate 4 of Malacañang stood the VOLVO Mobile
Communications Van of the Commanding General of CAPCOM/INP, General Ramon E. Montaño. At this
command post, after General Montaño had conferred with TF Nazareno Commander,  Colonel Cezar
Nazareno, about the adequacy and readiness of his forces, it was agreed that Police General Alfredo S.
 Lim would designate Police Colonel Edgar Dula Torres and Police Major Conrado Franciscoas
negotiators with the marchers. Police General Lim then proceeded to the WPD CDC elements already
positioned at the foot of Mendiola bridge to relay to Police Colonel Torres and Police Major Francisco the
instructions that the latter would negotiate with the marchers.5 (Emphasis supplied)

The marchers, at around 4:30 p.m., numbered about 10,000 to 15,000. From C.M. Recto Avenue, they proceeded toward
the police lines. No dialogue took place between the marchers and the anti-riot squad. It was at this moment that a clash
occurred and, borrowing the words of the Commission "pandemonium broke loose". The Commission stated in its
findings, to wit:

. . . There was an explosion followed by throwing of pillboxes, stones and bottles. Steel bars, wooden
clubs and lead pipes were used against the police. The police fought back with their shields and
truncheons. The police line was breached. Suddenly shots were heard. The demonstrators disengaged
from the government forces and retreated towards C.M. Recto Avenue. But sporadic firing continued from
the government forces.

After the firing ceased, two MDTs headed by Lt. Romeo Paquinto and Lt. Laonglaan Goce sped towards
Legarda Street and lobbed tear gas at the remaining rallyist still grouped in the vicinity of Mendiola. After
dispersing the crowd, the two MDTs, together with the two WPD MDTs, proceeded to Liwasang
Bonifacio upon order of General Montaño to disperse the rallyists assembled thereat. Assisting the MDTs
were a number of policemen from the WPD, attired in civilian clothes with white head bands, who were
armed with long firearms.6 (Emphasis ours)

After the clash, twelve (12) marchers were officially confirmed dead, although according to Tadeo, there were thirteen (13)
dead, but he was not able to give the name and address of said victim. Thirty-nine (39) were wounded by gunshots and
twelve (12) sustained minor injuries, all belonging to the group of the marchers.

Of the police and military personnel, three (3) sustained gunshot wounds and twenty (20) suffered minor physical injuries
such as abrasions, contusions and the like.

In the aftermath of the confrontation, then President Corazon C. Aquino issued Administrative Order No. 11,7 (A.O. 11, for
brevity) dated January 22, 1987, which created the Citizens' Mendiola Commission. The body was composed of retired
Supreme Court Justice Vicente Abad Santos as Chairman, retired Supreme Court Justice Jose Y. Feria and Mr. Antonio
U. Miranda, both as members. A.O. 11 stated that the Commission was created precisely for the "purpose of conducting
an investigation of the disorder, deaths, and casualties that took place in the vicinity of Mendiola Bridge and Mendiola
Street and Claro M. Recto Avenue, Manila, in the afternoon of January 22, 1987". The Commission was expected to have
submitted its findings not later than February 6, 1987. But it failed to do so. Consequently, the deadline was moved to
February 16, 1987 by Administrative Order No. 13. Again, the Commission was unable to meet this deadline. Finally, on
February 27, 1987, it submitted its report, in accordance with Administrative Order No. 17, issued on February 11, 1987.

In its report, the Commission recapitulated its findings, to wit:

(1) The march to Mendiola of the KMP led by Jaime Tadeo, together with the other sectoral groups, was
not covered by any permit as required under Batas Pambansa Blg. 880, the Public Assembly Act of 1985,
in violation of paragraph (a) Section 13, punishable under paragraph (a), Section 14 of said law.

(2) The crowd dispersal control units of the police and the military were armed with .38 and .45 caliber
handguns, and M-16 armalites, which is a prohibited act under paragraph 4(g), Section 13, and
punishable under paragraph (b), Section 14 of Batas Pambansa Blg. 880.

(3) The security men assigned to protect the WPD, INP Field Force, the Marines and supporting military
units, as well as the security officers of the police and military commanders were in civilian attire in
violation of paragraph (a), Section 10, Batas Pambansa 880.

(4) There was unnecessary firing by the police and military crowd dispersal control units in dispersing the
marchers, a prohibited act under paragraph (e), Section 13, and punishable under paragraph (b), Section
14, Batas Pambansa Blg. 880.
 (5) The carrying and use of steel bars, pillboxes, darts, lead pipe, wooden clubs with spikes, and guns by
the marchers as offensive weapons are prohibited acts punishable under paragraph (g), Section 13, and
punishable under paragraph (e), Section 14 of Batas Pambansa Blg. 880.

(6) The KMP farmers broke off further negotiations with the MAR officials and were determined to march
to Malacañang, emboldened as they are, by the inflammatory and incendiary utterances of their leader,
Jaime Tadeo — "bubutasin namin ang barikada . . Dadanak and dugo . . . Ang nagugutom na magsasaka
ay gagawa ng sariling butas. . .

(7) There was no dialogue between the rallyists and the government forces. Upon approaching the
intersections of Legarda and Mendiola, the marchers began pushing the police lines and penetrated and
broke through the first line of the CDC contingent.

(8) The police fought back with their truncheons and shields. They stood their ground but the CDC line
was breached. There ensued gunfire from both sides. It is not clear who started the firing.

(9) At the onset of the disturbance and violence, the water cannons and tear gas were not put into
effective use to disperse the rioting crowd.

(10) The water cannons and fire trucks were not put into operation because (a) there was no order to use
them; (b) they were incorrectly prepositioned; and (c) they were out of range of the marchers.

(11) Tear gas was not used at the start of the disturbance to disperse the rioters. After the crowd had
dispersed and the wounded and dead were being carried away, the MDTs of the police and the military
with their tear gas equipment and components conducted dispersal operations in the Mendiola area and
proceeded to Liwasang Bonifacio to disperse the remnants of the marchers.

(12) No barbed wire barricade was used in Mendiola but no official reason was given for its absence.8

From the results of the probe, the Commission recommended9 the criminal prosecution of four unidentified, uniformed
individuals, shown either on tape or in pictures, firing at the direction of the marchers. In connection with this, it was the
Commission's recommendation that the National Bureau of Investigation (NBI) be tasked to undertake investigations
regarding the identities of those who actually fired their guns that resulted in the death of or injury to the victims of the
incident. The Commission also suggested that all the commissioned officers of both the Western Police District and the
INP Field Force, who were armed during the incident, be prosecuted for violation of paragraph 4(g) of Section 13, Batas
Pambansa Blg. 880, the Public Assembly Act of 1985. The Commission's recommendation also included the prosecution
of the marchers, for carrying deadly or offensive weapons, but whose identities have yet to be established. As for Jaime
Tadeo, the Commission said that he should be prosecuted both for violation of paragraph (a), Section 13, Batas
Pambansa Blg. 880 for holding the rally without a permit and for violation of Article 142, as amended, of the Revised
Penal Code for inciting to sedition. As for the following officers, namely: (1) Gen. Ramon E. Montaño; (2) Police Gen.
Alfredo S. Lim; (3) Police Gen. Edgar Dula Torres; (4) Police Maj. Demetrio dela Cruz; (5) Col. Cezar Nazareno; and (5)
Maj. Felimon Gasmin, for their failure to make effective use of their skill and experience in directing the dispersal
operations in Mendiola, administrative sanctions were recommended to be imposed.

The last and the most significant recommendation of the Commission was for the deceased and wounded victims of the
Mendiola incident to be compensated by the government. It was this portion that petitioners (Caylao group) invoke in their
claim for damages from the government.

Notwithstanding such recommendation, no concrete form of compensation was received by the victims. Thus, on July 27,
1987, herein petitioners, (Caylao group) filed a formal letter of demand for compensation from the Government. 10 This
formal demand was indorsed by the office of the Executive Secretary to the Department of Budget and Management
(DBM) on August 13, 1987. The House Committee on Human Rights, on February 10, 1988, recommended the
expeditious payment of compensation to the Mendiola victims. 11

After almost a year, on January 20, 1988, petitioners (Caylao group) were constrained to institute an action for damages
against the Republic of the Philippines, together with the military officers, and personnel involved in the Mendiola incident,
before the trial court. The complaint was docketed as Civil Case No. 88-43351.

On February 23, 1988, the Solicitor General filed a Motion to Dismiss on the ground that the State cannot be sued without
its consent. Petitioners opposed said motion on March 16, 1988, maintaining that the State has waived its immunity from
suit and that the dismissal of the instant action is contrary to both the Constitution and the International Law on Human
Rights.

Respondent Judge Sandoval, in his first questioned Order, dismissed the complaint as against the Republic of the
Philippines on the ground that there was no waiver by the State. Petitioners (Caylao group) filed a Motion for
Reconsideration therefrom, but the same was denied by respondent judge in his Order dated August 8, 1988.
Consequently, Caylao and her co-petitioners filed the instant petition.

On the other hand, the Republic of the Philippines, together with the military officers and personnel impleaded as
defendants in the court below, filed its petition for certiorari.

Having arisen from the same factual beginnings and raising practically identical issues, the two (2) petitions were
consolidated and will therefore be jointly dealt with and resolved in this Decision.

The resolution of both petitions revolves around the main issue of whether or not the State has waived its immunity from
suit.

Petitioners (Caylao group) advance the argument that the State has impliedly waived its sovereign immunity from suit. It is
their considered view that by the recommendation made by the Commission for the government to indemnify the heirs
and victims of the Mendiola incident and by the public addresses made by then President Aquino in the aftermath of the
killings, the State has consented to be sued.

Under our Constitution the principle of immunity of the government from suit is expressly provided in Article XVI, Section
3. The principle is based on the very essence of sovereignty, and on the practical ground that there can be no legal right
as against the authority that makes the law on which the right depends. 12 It also rests on reasons of public policy — that
public service would be hindered, and the public endangered, if the sovereign authority could be subjected to law suits at
the instance of every citizen and consequently controlled in the uses and dispositions of the means required for the proper
administration of the government. 13

This is not a suit against the State with its consent.

Firstly, the recommendation made by the Commission regarding indemnification of the heirs of the deceased and the
victims of the incident by the government does not in any way mean that liability automatically attaches to the State. It is
important to note that A.O. 11 expressly states that the purpose of creating the Commission was to have a body that will
conduct an "investigation of the disorder, deaths and casualties that took place." 14 In the exercise of its functions, A.O. 11
provides guidelines, and what is relevant to Our discussion reads:

1 Its conclusions regarding the existence of probable cause for the commission of any offense and of the
persons probably guilty of the same shall be sufficient compliance with the rules on preliminary
investigation and the charges arising therefrom may be filed directly with the proper court. 15

In effect, whatever may be the findings of the Commission, the same shall only serve as the cause of action in the event
that any party decides to litigate his/her claim. Therefore, the Commission is merely a preliminary venue. The Commission
is not the end in itself. Whatever recommendation it makes cannot in any way bind the State immediately, such
recommendation not having become final and, executory. This is precisely the essence of it being a fact-finding body.

Secondly, whatever acts or utterances that then President Aquino may have done or said, the same are not tantamount to
the State having waived its immunity from suit. The President's act of joining the marchers, days after the incident, does
not mean that there was an admission by the State of any liability. In fact to borrow the words of petitioners (Caylao
group), "it was an act of solidarity by the government with the people". Moreover, petitioners rely on President Aquino's
speech promising that the government would address the grievances of the rallyists. By this alone, it cannot be inferred
that the State has admitted any liability, much less can it be inferred that it has consented to the suit.

Although consent to be sued may be given impliedly, still it cannot be maintained that such consent was given considering
the circumstances obtaining in the instant case.

Thirdly, the case does not qualify as a suit against the State.

Some instances when a suit against the State is proper are: 16

(1) When the Republic is sued by name;

(2) When the suit is against an unincorporated government agency;

(3) When the, suit is on its face against a government officer but the case is such that ultimate liability will belong not to
the officer but to the government.

While the Republic in this case is sued by name, the ultimate liability does not pertain to the government. Although the
military officers and personnel, then party defendants, were discharging their official functions when the incident occurred,
their functions ceased to be official the moment they exceeded their authority. Based on the Commission findings, there
was lack of justification by the government forces in the use of firearms. 17 Moreover, the members of the police and
military crowd dispersal units committed a prohibited act under B.P. Blg. 880 18 as there was unnecessary firing by them in
dispersing the marchers. 19

As early as 1954, this Court has pronounced that an officer cannot shelter himself by the plea that he is a public agent
acting under the color of his office when his acts are wholly without authority. 20 Until recently in 1991, 21 this doctrine still
found application, this Court saying that immunity from suit cannot institutionalize irresponsibility and non-accountability
nor grant a privileged status not claimed by any other official of the Republic. The military and police forces were deployed
to ensure that the rally would be peaceful and orderly as well as to guarantee the safety of the very people that they are
duty-bound to protect. However, the facts as found by the trial court showed that they fired at the unruly crowd to disperse
the latter.

While it is true that nothing is better settled than the general rule that a sovereign state and its political subdivisions cannot
be sued in the courts except when it has given its consent, it cannot be invoked by both the military officers to release
them from any liability, and by the heirs and victims to demand indemnification from the government. The principle of state
immunity from suit does not apply, as in this case, when the relief demanded by the suit requires no affirmative official
action on the part of the State nor the affirmative discharge of any obligation which belongs to the State in its political
capacity, even though the officers or agents who are made defendants claim to hold or act only by virtue of a title of the
state and as its agents and servants. 22 This Court has made it quite clear that even a "high position in the government
does not confer a license to persecute or recklessly injure another." 23

The inescapable conclusion is that the State cannot be held civilly liable for the deaths that followed the incident. Instead,
the liability should fall on the named defendants in the lower court. In line with the ruling of this court in Shauf vs. Court of
Appeals, 24 herein public officials, having been found to have acted beyond the scope of their authority, may be held liable
for damages.

WHEREFORE, finding no reversible error and no grave abuse of discretion committed by respondent Judge in issuing the
questioned orders, the instant petitions are hereby DISMISSED.

SO ORDERED.
G.R. No. L-46930 June 10, 1988

DALE SANDERS, AND A.S. MOREAU, JR, petitioners, 

vs.
HON. REGINO T. VERIDIANO II, as Presiding Judge, Branch I, Court of First Instance of Zambales, Olongapo City,
ANTHONY M. ROSSI and RALPH L. WYERS, respondents.

CRUZ, J.:

The basic issue to be resolved in this case is whether or not the petitioners were performing their official duties when they
did the acts for which they have been sued for damages by the private respondents. Once this question is decided, the
other answers will fall into place and this petition need not detain us any longer than it already has.

Petitioner Sanders was, at the time the incident in question occurred, the special services director of the U.S. Naval
Station (NAVSTA) in Olongapo City. 1 Petitioner Moreau was the commanding officer of the Subic Naval Base, which
includes the said station. 2 Private respondent Rossi is an American citizen with permanent residence in the
Philippines,3 as so was private respondent Wyer, who died two years ago. 4 They were both employed as gameroom
attendants in the special services department of the NAVSTA, the former having been hired in 1971 and the latter in
1969. 5

On October 3, 1975, the private respondents were advised that their employment had been converted from permanent
full-time to permanent part-time, effective October 18, 1975. 6 Their reaction was to protest this conversion and to institute
grievance proceedings conformably to the pertinent rules and regulations of the U.S. Department of Defense. The result
was a recommendation from the hearing officer who conducted the proceedings for the reinstatement of the private
respondents to permanent full-time status plus backwages. The report on the hearing contained the observation that
"Special Services management practices an autocratic form of supervision." 7

In a letter addressed to petitioner Moreau on May 17, 1976 (Annex "A" of the complaint), Sanders disagreed with the
hearing officer's report and asked for the rejection of the abovestated recommendation. The letter contained the
statements that: a ) "Mr. Rossi tends to alienate most co-workers and supervisors;" b) "Messrs. Rossi and Wyers have
proven, according to their immediate supervisors, to be difficult employees to supervise;" and c) "even though the
grievants were under oath not to discuss the case with anyone, (they) placed the records in public places where others
not involved in the case could hear."

On November 7, 1975, before the start of the grievance hearings, a-letter (Annex "B" of the complaint) purportedly corning
from petitioner Moreau as the commanding general of the U.S. Naval Station in Subic Bay was sent to the Chief of Naval
Personnel explaining the change of the private respondent's employment status and requesting concurrence therewith.
The letter did not carry his signature but was signed by W.B. Moore, Jr. "by direction," presumably of Moreau.

On the basis of these antecedent facts, the private respondent filed in the Court of First Instance of Olongapo City a for
damages against the herein petitioners on November 8, 1976.8 The plaintiffs claimed that the letters contained libelous
imputations that had exposed them to ridicule and caused them mental anguish and that the prejudgment of the grievance
proceedings was an invasion of their personal and proprietary rights.

The private respondents made it clear that the petitioners were being sued in their private or personal capacity. However,
in a motion to dismiss filed under a special appearance, the petitioners argued that the acts complained of were
performed by them in the discharge of their official duties and that, consequently, the court had no jurisdiction over them
under the doctrine of state immunity.

After extensive written arguments between the parties, the motion was denied in an order dated March 8, 1977, 9 on the
main ground that the petitioners had not presented any evidence that their acts were official in nature and not personal
torts, moreover, the allegation in the complaint was that the defendants had acted maliciously and in bad faith. The same
order issued a writ of preliminary attachment, conditioned upon the filing of a P10,000.00 bond by the plaintiffs, against
the properties of petitioner Moreau, who allegedly was then about to leave the Philippines. Subsequently, to make matters
worse for the defendants, petitioner Moreau was declared in a default by the trial court in its order dated August 9, 1977.
The motion to lift the default order on the ground that Moreau's failure to appear at the pre-trial conference was the result
of some misunderstanding, and the motion for reconsideration of the denial of the motion to dismiss, which was filed by
the petitioner's new lawyers, were denied by the respondent court on September 7, 1977.

This petition for certiorari, prohibition and preliminary injunction was thereafter filed before this Court, on the contention
that the above-narrated acts of the respondent court are tainted with grave abuse of discretion amounting to lack of
jurisdiction.

We return now to the basic question of whether the petitioners were acting officially or only in their private capacities when
they did the acts for which the private respondents have sued them for damages.

It is stressed at the outset that the mere allegation that a government functionary is being sued in his personal capacity
will not automatically remove him from the protection of the law of public officers and, if appropriate, the doctrine of state
immunity. By the same token, the mere invocation of official character will not suffice to insulate him from suability and
liability for an act imputed to him as a personal tort committed without or in excess of his authority. These well-settled
principles are applicable not only to the officers of the local state but also where the person sued in its courts pertains to
the government of a foreign state, as in the present case.

The respondent judge, apparently finding that the complained acts were  prima facie personal and tortious, decided to
proceed to trial to determine inter alia their precise character on the strength of the evidence to be submitted by the
parties. The petitioners have objected, arguing that no such evidence was needed to substantiate their claim of
jurisdictional immunity. Pending resolution of this question, we issued a temporary restraining order on September 26,
1977, that has since then suspended the proceedings in this case in the court  a quo.

In past cases, this Court has held that where the character of the act complained of can be determined from the pleadings
exchanged between the parties before the trial, it is not necessary for the court to require them to belabor the point at a
trial still to be conducted. Such a proceeding would be superfluous, not to say unfair to the defendant who is subjected to
unnecessary and avoidable inconvenience.

Thus, in Baer v. Tizon, 10 we held that a motion to dismiss a complaint against the commanding general of the Olongapo
Naval Base should not have been denied because it had been sufficiently shown that the act for which he was being sued
was done in his official capacity on behalf of the American government. The United States had not given its consent to be
sued. It was the reverse situation in Syquia v. Almeda Lopez," where we sustained the order of the lower court granting a
where we motion to dismiss a complaint against certain officers of the U.S. armed forces also shown to be acting officially
in the name of the American government. The United States had also not waived its immunity from suit. Only three years
ago, in United States of America v. Ruiz, 12 we set aside the denial by the lower court of a motion to dismiss a complaint
for damages filed against the United States and several of its officials, it appearing that the act complained of was
governmental rather than proprietary, and certainly not personal. In these and several other cases 13 the Court found it
redundant to prolong the other case proceedings after it had become clear that the suit could not prosper because the
acts complained of were covered by the doctrine of state immunity.

It is abundantly clear in the present case that the acts for which the petitioners are being called to account were performed
by them in the discharge of their official duties. Sanders, as director of the special services department of NAVSTA,
undoubtedly had supervision over its personnel, including the private respondents, and had a hand in their employment,
work assignments, discipline, dismissal and other related matters. It is not disputed that the letter he had written was in
fact a reply to a request from his superior, the other petitioner, for more information regarding the case of the private
respondents.14 Moreover, even in the absence of such request, he still was within his rights in reacting to the hearing
officer's criticism—in effect a direct attack against him—-that Special Services was practicing "an autocratic form of
supervision."

As for Moreau,what he is claimed to have done was write the Chief of Naval Personnel for concurrence with the
conversion of the private respondents' type of employment even before the grievance proceedings had even commenced.
Disregarding for the nonce the question of its timeliness, this act is clearly official in nature, performed by Moreau as the
immediate superior of Sanders and directly answerable to Naval Personnel in matters involving the special services
department of NAVSTA In fact, the letter dealt with the financial and budgetary problems of the department and contained
recommendations for their solution, including the re-designation of the private respondents. There was nothing personal
or private about it.

Given the official character of the above-described letters, we have to conclude that the petitioners were, legally speaking,
being sued as officers of the United States government. As they have acted on behalf of that government, and within the
scope of their authority, it is that government, and not the petitioners personally, that is responsible for their acts.
Assuming that the trial can proceed and it is proved that the claimants have a right to the payment of damages, such
award will have to be satisfied not by the petitioners in their personal capacities but by the United States government as
their principal. This will require that government to perform an affirmative act to satisfy the judgment, viz, the appropriation
of the necessary amount to cover the damages awarded, thus making the action a suit against that government without its
consent.

There should be no question by now that such complaint cannot prosper unless the government sought to be held
ultimately liable has given its consent to' be sued. So we have ruled not only in Baer but in many other decisions where
we upheld the doctrine of state immunity as applicable not only to our own government but also to foreign states sought to
be subjected to the jurisdiction of our courts. 15

The practical justification for the doctrine, as Holmes put it, is that "there can be no legal right against the authority which
makes the law on which the right depends.16 In the case of foreign states, the rule is derived from the principle of the
sovereign equality of states which wisely admonishes that par in parem non habet imperium and that a contrary attitude
would "unduly vex the peace of nations." 17 Our adherence to this precept is formally expressed in Article II, Section 2, of
our Constitution, where we reiterate from our previous charters that the Philippines "adopts the generally accepted
principles of international law as part of the law of the land.

All this is not to say that in no case may a public officer be sued as such without the previous consent of the state. To be
sure, there are a number of well-recognized exceptions. It is clear that a public officer may be sued as such to compel him
to do an act required by law, as where, say, a register of deeds refuses to record a deed of sale; 18 or to restrain a Cabinet
member, for example, from enforcing a law claimed to be unconstitutional; 19 or to compel the national treasurer to pay
damages from an already appropriated assurance fund; 20 or the commissioner of internal revenue to refund tax over-
payments from a fund already available for the purpose; 21 or, in general, to secure a judgment that the officer impleaded
may satisfy by himself without the government itself having to do a positive act to assist him. We have also held that
where the government itself has violated its own laws, the aggrieved party may directly implead the government even
without first filing his claim with the Commission on Audit as normally required, as the doctrine of state immunity "cannot
be used as an instrument for perpetrating an injustice." 22

This case must also be distinguished from such decisions as Festejo v. Fernando, 23 where the Court held that a bureau
director could be sued for damages on a personal tort committed by him when he acted without or in excess of authority in
forcibly taking private property without paying just compensation therefor although he did convert it into a public irrigation
canal. It was not necessary to secure the previous consent of the state, nor could it be validly impleaded as a party
defendant, as it was not responsible for the defendant's unauthorized act.

The case at bar, to repeat, comes under the rule and not under any of the recognized exceptions. The government of the
United States has not given its consent to be sued for the official acts of the petitioners, who cannot satisfy any judgment
that may be rendered against them. As it is the American government itself that will have to perform the affirmative act of
appropriating the amount that may be adjudged for the private respondents, the complaint must be dismissed for lack of
jurisdiction.

The Court finds that, even under the law of public officers, the acts of the petitioners are protected by the presumption of
good faith, which has not been overturned by the private respondents. Even mistakes concededly committed by such
public officers are not actionable as long as it is not shown that they were motivated by malice or gross negligence
amounting to bad faith.24 This, to, is well settled .25 Furthermore, applying now our own penal laws, the letters come under
the concept of privileged communications and are not punishable, 26 let alone the fact that the resented remarks are not
defamatory by our standards. It seems the private respondents have overstated their case.

A final consideration is that since the questioned acts were done in the Olongapo Naval Base by the petitioners in the
performance of their official duties and the private respondents are themselves American citizens, it would seem only
proper for the courts of this country to refrain from taking cognizance of this matter and to treat it as coming under the
internal administration of the said base.

The petitioners' counsel have submitted a memorandum replete with citations of American cases, as if they were arguing
before a court of the United States. The Court is bemused by such attitude. While these decisions do have persuasive
effect upon us, they can at best be invoked only to support our own jurisprudence, which we have developed and
enriched on the basis of our own persuasions as a people, particularly since we became independent in 1946.

We appreciate the assistance foreign decisions offer us, and not only from the United States but also from Spain and
other countries from which we have derived some if not most of our own laws. But we should not place undue and
fawning reliance upon them and regard them as indispensable mental crutches without which we cannot come to our own
decisions through the employment of our own endowments We live in a different ambience and must decide our own
problems in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a people, and always
with our own concept of law and justice.

The private respondents must, if they are still sominded, pursue their claim against the petitioners in accordance with the
laws of the United States, of which they are all citizens and under whose jurisdiction the alleged offenses were committed.
Even assuming that our own laws are applicable, the United States government has not decided to give its consent to be
sued in our courts, which therefore has not acquired the competence to act on the said claim,.

WHEREFORE, the petition is GRANTED. The challenged orders dated March 8,1977, August 9,1977, and September 7,
1977, are SET ASIDE. The respondent court is directed to DISMISS Civil Case No. 2077-O. Our Temporary restraining
order of September 26,1977, is made PERMANENT. No costs.

SO ORDERED.
G.R. No. L-51806 November 8, 1988

CIVIL AERONAUTICS ADMINISTRATION, petitioner, 

vs.
COURT OF APPEALS and ERNEST E. SIMKE, respondents.

The Solicitor General for petitioner.

Ledesma, Guytingco, Veleasco & Associates for respondent Ernest E. Simke.

CORTES, J.:

Assailed in this petition for review on certiorari is the decision of the Court of Appeals affirming the trial court decision
which reads as follows:

WHEREFORE, judgment is hereby rendered ordering defendant to pay plaintiff the amount of P15,589.55
as full reimbursement of his actual medical and hospital expenses, with interest at the legal rate from the
commencement of the suit; the amount of P20,200.00 as consequential damages; the amount of
P30,000.00 as moral damages; the amount of P40,000.00 as exemplary damages; the further amount of
P20,000.00 as attorney's fees and the costs [Rollo, p. 24].

The facts of the case are as follows:

Private respondent is a naturalized Filipino citizen and at the time of the incident was the Honorary Consul Geileral of
Israel in the Philippines.

In the afternoon of December 13, 1968, private respondent with several other persons went to the Manila International
Airport to meet his future son-in-law. In order to get a better view of the incoming passengers, he and his group
proceeded to the viewing deck or terrace of the airport.

While walking on the terrace, then filled with other people, private respondent slipped over an elevation about four (4)
inches high at the far end of the terrace. As a result, private respondent fell on his back and broke his thigh bone.

The next day, December 14, 1968, private respondent was operated on for about three hours.

Private respondent then filed an action for damages based on quasi-delict with the Court of First Instance of Rizal, Branch
VII against petitioner Civil Aeronautics Administration or CAA as the entity empowered "to administer, operate, manage,
control, maintain and develop the Manila International Airport ... ." [Sec. 32 (24), R.A. 776].

Said claim for damages included, aside from the medical and hospital bills, consequential damages for the expenses of
two lawyers who had to go abroad in private respondent's stead to finalize certain business transactions and for the
publication of notices announcing the postponement of private respondent's daughter's wedding which had to be
cancelled because of his accident [Record on Appeal, p. 5].

Judgment was rendered in private respondent's favor prompting petitioner to appeal to the Court of Appeals. The latter
affirmed the trial court's decision. Petitioner then filed with the same court a Motion for, Reconsideration but this was
denied.

Petitioner now comes before this Court raising the following assignment of errors:

1. The Court of Appeals gravely erred in not holding that the present the CAA is really a suit against the
Republic of the Philippines which cannot be sued without its consent, which was not given in this case.

2. The Court of Appeals gravely erred in finding that the injuries of respondent Ernest E. Simke were due
to petitioner's negligence — although there was no substantial evidence to support such finding; and that
 the inference that the hump or elevation the surface of the floor area of the terrace of the fold) MIA
building is dangerous just because said respondent tripped over it is manifestly mistaken —
circumstances that justify a review by this Honorable Court of the said finding of fact of respondent
appellate court (Garcia v. Court of Appeals, 33 SCRA 622; Ramos v. CA, 63 SCRA 331.)

3. The Court of Appeals gravely erred in ordering petitioner to pay actual, consequential, moral and
exemplary damages, as well as attorney's fees to respondent Simke — although there was no substantial
and competent proof to support said awards I Rollo, pp. 93-94 1.

Invoking the rule that the State cannot be sued without its consent, petitioner contends that being an agency of the
government, it cannot be made a party-defendant in this case.

This Court has already held otherwise in the case of National Airports Corporation v. Teodoro, Sr. [91 Phil. 203 (1952)].
Petitioner contends that the said ruling does not apply in this case because: First, in the Teodoro case, the CAA was sued
only in a substituted capacity, the National Airports Corporation being the original party. Second, in the Teodoro case, the
cause of action was contractual in nature while here, the cause of action is based on a quasi-delict. Third, there is no
specific provision in Republic Act No. 776, the law governing the CAA, which would justify the conclusion that petitioner
was organized for business and not for governmental purposes. [Rollo, pp. 94-97].

Such arguments are untenable.

First, the Teodoro case, far from stressing the point that the CAA was only substituted for the National Airports
Corporation, in fact treated the CAA as the real party in interest when it stated that:

xxx xxx xxx

... To all legal intents and practical purposes, the National Airports Corporation is dead and the Civil
Aeronautics Administration is its heir or legal representative, acting by the law of its creation upon its own
rights and in its own name. The better practice there should have been to make the Civil Aeronautics
Administration the third party defendant instead of the National Airports Corporation. [National Airports
Corp. v. Teodoro, supra, p. 208.]

xxx xxx xxx

Second, the Teodoro case did not make any qualification or limitation as to whether or not the CAA's power to sue and be
sued applies only to contractual obligations. The Court in the Teodoro case ruled that Sections 3 and 4 of Executive Order
365 confer upon the CAA, without any qualification, the power to sue and be sued, albeit only by implication. Accordingly,
this Court's pronouncement that where such power to sue and be sued has been granted without any qualification, it can
include a claim based on tort or quasi-delict [Rayo v. Court of First Instance of Bulacan, G.R. Nos. 55273-83, December
19,1981, 1 1 0 SCRA 4561 finds relevance and applicability to the present case.

Third, it has already been settled in the Teodoro case that the CAA as an agency is not immune from suit, it being
engaged in functions pertaining to a private entity.

xxx xxx xxx

The Civil Aeronautics Administration comes under the category of a private entity. Although not a body
corporate it was created, like the National Airports Corporation, not to maintain a necessary function of
government, but to run what is essentially a business, even if revenues be not its prime objective but
rather the promotion of travel and the convenience of the travelling public. It is engaged in an enterprise
which, far from being the exclusive prerogative of state, may, more than the construction of public roads,
be undertaken by private concerns. [National Airports Corp. v. Teodoro, supra, p. 207.]

xxx xxx xxx

True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec. Order 365 (Reorganizing the Civil
Aeronautics Administration and Abolishing the National Airports Corporation). Republic Act No. 776 (Civil Aeronautics Act
of the Philippines), subsequently enacted on June 20, 1952, did not alter the character of the CAA's objectives under
Exec, Order 365. The pertinent provisions cited in the Teodoro case, particularly Secs. 3 and 4 of Exec. Order 365, which
led the Court to consider the CAA in the category of a private entity were retained substantially in Republic Act 776, Sec.
32 (24) and (25).<äre||anº•1àw>  Said Act provides:

Sec. 32. Powers and Duties of the Administrator. Subject to the general — control and supervision of the
Department Head, the Administrator shall have among others, the following powers and duties:

xxx xxx xxx

(24) To administer, operate, manage, control, maintain and develop the Manila International Airport and
all government-owned aerodromes except those controlled or operated by the Armed Forces of the
Philippines including such powers and duties as: (a) to plan, design, construct, equip, expand, improve,
repair or alter aerodromes or such structures, improvement or air navigation facilities; (b) to enter into,
make and execute contracts of any kind with any person, firm, or public or private corporation or
entity; ... .

(25) To determine, fix, impose, collect and receive landing fees, parking space fees, royalties on sales or
deliveries, direct or indirect, to any aircraft for its use of aviation gasoline, oil and lubricants, spare parts,
accessories and supplies, tools, other royalties, fees or rentals for the use of any of the property under its
management and control.

xxx xxx xxx

From the foregoing, it can be seen that the CAA is tasked with private or non-governmental functions which operate to
remove it from the purview of the rule on State immunity from suit. For the correct rule as set forth in the Tedoro case
states:

xxx xxx xxx

Not all government entities, whether corporate or non-corporate, are immune from suits. Immunity
functions suits is determined by the character of the objects for which the entity was organized. The rule
is thus stated in Corpus Juris:

Suits against State agencies with relation to matters in which they have assumed to act in
private or non-governmental capacity, and various suits against certain corporations
created by the state for public purposes, but to engage in matters partaking more of the
nature of ordinary business rather than functions of a governmental or political character,
are not regarded as suits against the state. The latter is true, although the state may own
stock or property of such a corporation for by engaging in business operations through a
corporation, the state divests itself so far of its sovereign character, and by implication
consents to suits against the corporation. (59 C.J., 313) [National Airport Corporation v.
Teodoro, supra, pp. 206-207; Emphasis supplied.]

This doctrine has been reaffirmed in the recent case of Malong v. Philippine National Railways [G.R. No. L-49930, August
7, 1985, 138 SCRA 631, where it was held that the Philippine National Railways, although owned and operated by the
government, was not immune from suit as it does not exercise sovereign but purely proprietary and business functions.
Accordingly, as the CAA was created to undertake the management of airport operations which primarily involve
proprietary functions, it cannot avail of the immunity from suit accorded to government agencies performing strictly
governmental functions.

II

Petitioner tries to escape liability on the ground that there was no basis for a finding of negligence. There can be no
negligence on its part, it alleged, because the elevation in question "had a legitimate purpose for being on the terrace and
was never intended to trip down people and injure them. It was there for no other purpose but to drain water on the floor
area of the terrace" [Rollo, P. 99].
To determine whether or not the construction of the elevation was done in a negligent manner, the trial court conducted
an ocular inspection of the premises.

xxx xxx xxx

... This Court after its ocular inspection found the elevation shown in Exhs. A or 6-A where plaintiff slipped
to be a step, a dangerous sliding step, and the proximate cause of plaintiffs injury...

xxx xxx xxx

This Court during its ocular inspection also observed the dangerous and defective condition of the open
terrace which has remained unrepaired through the years. It has observed the lack of maintenance and
upkeep of the MIA terrace, typical of many government buildings and offices. Aside from the litter allowed
to accumulate in the terrace, pot holes cause by missing tiles remained unrepaired and unattented. The
several elevations shown in the exhibits presented were verified by this Court during the ocular inspection
it undertook. Among these elevations is the one (Exh. A) where plaintiff slipped. This Court also observed
the other hazard, the slanting or sliding step (Exh. B) as one passes the entrance door leading to the
terrace [Record on Appeal, U.S., pp. 56 and 59; Emphasis supplied.]

The Court of Appeals further noted that:

The inclination itself is an architectural anomaly for as stated by the said witness, it is neither a ramp
because a ramp is an inclined surface in such a way that it will prevent people or pedestrians from sliding.
But if, it is a step then it will not serve its purpose, for pedestrian purposes. (tsn, p. 35, Id.) [rollo, p. 29.]

These factual findings are binding and conclusive upon this Court. Hence, the CAA cannot disclaim its liability for the
negligent construction of the elevation since under Republic Act No. 776, it was charged with the duty of planning,
designing, constructing, equipping, expanding, improving, repairing or altering aerodromes or such structures,
improvements or air navigation facilities [Section 32, supra, R.A. 776]. In the discharge of this obligation, the CAA is duty-
bound to exercise due diligence in overseeing the construction and maintenance of the viewing deck or terrace of the
airport.

It must be borne in mind that pursuant to Article 1173 of the Civil Code, "(t)he fault or negligence of the obligor consists in
the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of
the person, of the time and of the place." Here, the obligation of the CAA in maintaining the viewing deck, a facility open to
the public, requires that CAA insure the safety of the viewers using it. As these people come to the viewing deck to watch
the planes and passengers, their tendency would be to look to where the planes and the incoming passengers are and
not to look down on the floor or pavement of the viewing deck. The CAA should have thus made sure that no dangerous
obstructions or elevations exist on the floor of the deck to prevent any undue harm to the public.

The legal foundation of CAA's liability for quasi-delict can be found in Article 2176 of the Civil Code which provides that
"(w)hoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done... As the CAA knew of the existence of the dangerous elevation which it claims though, was made precisely
in accordance with the plans and specifications of the building for proper drainage of the open terrace [See Record on
Appeal, pp. 13 and 57; Rollo, p. 391, its failure to have it repaired or altered in order to eliminate the existing hazard
constitutes such negligence as to warrant a finding of liability based on quasi-delict upon CAA.

The Court finds the contention that private respondent was, at the very least, guilty of contributory negligence, thus
reducing the damages that plaintiff may recover, unmeritorious. Contributory negligence under Article 2179 of the Civil
Code contemplates a negligent act or omission on the part of the plaintiff, which although not the proximate cause of his
injury, contributed to his own damage, the proximate cause of the plaintiffs own injury being the defendant's lack of due
care. In the instant case, no contributory negligence can be imputed to the private respondent, considering the following
test formulated in the early case of Picart v. Smith, 37 Phil. 809 (1918):

The test by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which
an ordinarily prudent man would have used in the same situation? If not, then he is guilty of negligence.
The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of the negligence in a given case is not
determined by reference to the personal judgment of the actor in the situation before him. The law
 considers what would be reckless, blameworthy, or negligent in the man of ordinary intelligence and
prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of course
be always determined in the light of human experience and in view of the facts involved in the particular
case. Abstract speculations cannot be here of much value but this much can be profitably said:
Reasonable men-overn their conduct by the circumstances which are before them or known to them.
They are not, and are not supposed to be omniscient of the future. Hence they can be expected to take
care only when there is something before them to suggest or warn of danger. Could a prudent man, in the
case under consideration, foresee harm as a result of the course actually pursued' If so, it was the duty of
the actor to take precautions to guard against that harm. Reasonable foresight of harm, followed by the
ignoring of the suggestion born of this prevision, is always necessary before negligence can be held to
exist.... [Picart v. Smith, supra, p. 813; Emphasis supplied.]

The private respondent, who was the plaintiff in the case before the lower court, could not have reasonably foreseen the
harm that would befall him, considering the attendant factual circumstances. Even if the private respondent had been
looking where he was going, the step in question could not easily be noticed because of its construction. As the trial court
found:

In connection with the incident testified to, a sketch, Exhibit O, shows a section of the floorings oil which
plaintiff had tripped, This sketch reveals two pavements adjoining each other, one being elevated by four
and one-fourth inches than the other. From the architectural standpoint the higher, pavement is a step.
However, unlike a step commonly seen around, the edge of the elevated pavement slanted outward as
one walks to one interior of the terrace. The length of the inclination between the edges of the two
pavements is three inches. Obviously, plaintiff had stepped on the inclination because had his foot landed
on the lower pavement he would not have lost his balance. The same sketch shows that both pavements
including the inclined portion are tiled in red cement, and as shown by the photograph Exhibit A, the lines
of the tilings are continuous. It would therefore be difficult for a pedestrian to see the inclination especially
where there are plenty of persons in the terrace as was the situation when plaintiff fell down. There was
no warning sign to direct one's attention to the change in the elevation of the floorings. [Rollo, pp. 2829.]

III

Finally, petitioner appeals to this Court the award of damages to private respondent. The liability of CAA to answer for
damages, whether actual, moral or exemplary, cannot be seriously doubted in view of one conferment of the power to sue
and be sued upon it, which, as held in the case of Rayo v. Court of First Instance, supra, includes liability on a claim for
quasi-dilict. In the aforestated case, the liability of the National Power Corporation to answer for damages resulting from
its act of sudden, precipitate and simultaneous opening of the Angat Dam, which caused the death of several residents of
the area and the destruction of properties, was upheld since the o,rant of the power to sue and be sued upon it
necessarily implies that it can be held answerable for its tortious acts or any wrongful act for that matter.

With respect to actual or compensatory damages, the law mandates that the same be proven.

Art. 2199. Except as provided by law or by stipulation, one are entitled to an adequate compensation only
for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as
actual on compensatory damages [New Civil Code].

Private respondent claims P15,589.55 representing medical and hospitalization bills. This Court finds the same to have
been duly proven through the testimony of Dr. Ambrosio Tangco, the physician who attended to private respondent (Rollo,
p. 26) and who Identified Exh. "H" which was his bill for professional services [Rollo, p. 31].

Concerning the P20,200.00 alleged to have been spent for other expenses such as the transportation of the two lawyers
who had to represent private respondent abroad and the publication of the postponement notices of the wedding, the
Court holds that the same had also been duly proven. Private respondent had adequately shown the existence of such
losses and the amount thereof in the testimonies before the trial court [CA decision, p. 81. At any rate, the findings of the
Court of Appeals with respect to this are findings of facts [One Heart Sporting Club, Inc. v. Court of Appeals, G.R. Nos.
5379053972, Oct. 23, 1981, 108 SCRA 4161 which, as had been held time and again, are, as a general rule, conclusive
before this Court [Sese v. Intermediate Appellate Court, G.R. No. 66186, July 31, 1987,152 SCRA 585].
With respect to the P30,000.00 awarded as moral damages, the Court holds private respondent entitled thereto because
of the physical suffering and physical injuries caused by the negligence of the CAA [Arts. 2217 and 2219 (2), New Civil
Code].

With respect to the award of exemplary damages, the Civil Code explicitly, states:

Art. 2229. Exemplary or corrective damages, are imposed, by way of example or correction for the public
good, in addition to the moral, liquidated or compensatory

Art. 2231. In quasi-delicts, exemplary damages may be granted if the defendant acted with gross
negligence.

Gross negligence which, according to the Court, is equivalent to the term "notorious negligence" and consists in the failure
to exercise even slight care [Caunan v. Compania General de Tabacos, 56 Phil. 542 (1932)] can be attributed to the CAA
for its failure to remedy the dangerous condition of the questioned elevation or to even post a warning sign directing the
attention of the viewers to the change in the elevation of the floorings notwithstanding its knowledge of the hazard posed
by such elevation [Rollo, pp. 28-29; Record oil Appeal, p. 57]. The wanton disregard by the CAA of the safety of the
people using the viewing deck, who are charged an admission fee, including the petitioner who paid the entrance fees to
get inside the vantage place [CA decision, p. 2; Rollo, p. 25] and are, therefore, entitled to expect a facility that is properly
and safely maintained — justifies the award of exemplary damages against the CAA, as a deterrent and by way of
example or correction for the public good. The award of P40,000.00 by the trial court as exemplary damages appropriately
underscores the point that as an entity changed with providing service to the public, the CAA. like all other entities serving
the public. has the obligation to provide the public with reasonably safe service.

Finally, the award of attorney's fees is also upheld considering that under Art. 2208 (1) of the Civil Code, the same may be
awarded whenever exemplary damages are awarded, as in this case, and,at any rate, under Art. 2208 (11), the Court has
the discretion to grant the same when it is just and equitable.

However, since the Manila International Airport Authority (MIAA) has taken over the management and operations of the
Manila International Airport [renamed Ninoy Aquino International Airport under Republic Act No. 6639] pursuant to
Executive Order No. 778 as amended by executive Orders Nos. 903 (1983), 909 (1983) and 298 (1987) and under
Section 24 of the said Exec. Order 778, the MIAA has assumed all the debts, liabilities and obligations of the now defunct
Civil Aeronautics Administration (CAA), the liabilities of the CAA have now been transferred to the MIAA.

WHEREFORE, finding no reversible error, the Petition for review on certiorari is DENIED and the decision of the Court of
Appeals in CA-G.R. No. 51172-R is AFFIRMED.

SO ORDERED.
G.R. No. 70853 March 12, 1987

REPUBLIC OF THE PHILIPPINES, petitioner-appellee, 

vs.
PABLO FELICIANO and INTERMEDIATE APPELLATE COURT, respondents-appellants.

YAP, J.:

Petitioner seeks the review of the decision of the Intermediate Appellate Court dated April 30, 1985 reversing the order of
the Court of First Instance of Camarines Sur, Branch VI, dated August 21, 1980, which dismissed the complaint of
respondent Pablo Feliciano for recovery of ownership and possession of a parcel of land on the ground of non-suability of
the State.

The background of the present controversy may be briefly summarized as follows:

On January 22, 1970, respondent Feliciano filed a complaint with the then Court of First Instance of Camarines Sur
against the Republic of the Philippines, represented by the Land Authority, for the recovery of ownership and possession
of a parcel of land, consisting of four (4) lots with an aggregate area of 1,364.4177 hectares, situated in the Barrio of
Salvacion, Municipality of Tinambac, Camarines Sur. Plaintiff alleged that he bought the property in question from Victor
Gardiola by virtue of a Contract of Sale dated May 31, 1952, followed by a Deed of Absolute Sale on October 30, 1954;
that Gardiola had acquired the property by purchase from the heirs of Francisco Abrazado whose title to the said property
was evidenced by an informacion posesoria  that upon plaintiff's purchase of the property, he took actual possession of
the same, introduced various improvements therein and caused it to be surveyed in July 1952, which survey was
approved by the Director of Lands on October 24, 1954; that on November 1, 1954, President Ramon Magsaysay issued
Proclamation No. 90 reserving for settlement purposes, under the administration of the National Resettlement and
Rehabilitation Administration (NARRA), a tract of land situated in the Municipalities of Tinambac and Siruma, Camarines
Sur, after which the NARRA and its successor agency, the Land Authority, started sub-dividing and distributing the land to
the settlers; that the property in question, while located within the reservation established under Proclamation No. 90, was
the private property of plaintiff and should therefore be excluded therefrom. Plaintiff prayed that he be declared the rightful
and true owner of the property in question consisting of 1,364.4177 hectares; that his title of ownership based
on  informacion posesoria of his predecessor-in-interest be declared legal valid and subsisting and that defendant be
ordered to cancel and nullify all awards to the settlers.

The defendant, represented by the Land Authority, filed an answer, raising by way of affirmative defenses lack of sufficient
cause of action and prescription.

On August 29, 1970, the trial court, through Judge Rafael S. Sison, rendered a decision declaring Lot No. 1, with an area
of 701.9064 hectares, to be the private property of the plaintiff, "being covered by a possessory information title in the
name of his predecessor-in-interest" and declaring said lot excluded from the NARRA settlement reservation. The court
declared the rest of the property claimed by plaintiff, i.e. Lots 2, 3 and 4, reverted to the public domain.

A motion to intervene and to set aside the decision of August 29, 1970 was filed by eighty-six (86) settlers, together with
the barrio council of Pag-asay, alleging among other things that intervenors had been in possession of the land in
question for more than twenty (20) years under claim of ownership.

On January 25, 1971, the court a quo reconsidered its decision, reopened the case and directed the intervenors to file
their corresponding pleadings and present their evidence; all evidence already presented were to remain but plaintiff, as
well as the Republic of the Philippines, could present additional evidence if they so desire. The plaintiff presented
additional evidence on July 30, 1971, and the case was set for hearing for the reception of intervenors' evidence on
August 30 and August 31, 1971.

On August 30, 1971, the date set for the presentation of the evidence for intervenors, the latter did not appear but
submitted a motion for postponement and resetting of the hearing on the next day, August 31, 1971. The trial court denied
the motion for postponement and allowed plaintiff to offer his evidence "en ausencia," after which the case would be
deemed submitted for decision. On the following day, August 31, 1971, Judge Sison rendered a decision reiterating his
decision of August 29, 1970.
A motion for reconsideration was immediately filed by the intervenors. But before this motion was acted upon, plaintiff filed
a motion for execution, dated November 18, 1971. On December 10, 1971, the lower court, this time through Judge
Miguel Navarro, issued an order denying the motion for execution and setting aside the order denying intervenors' motion
for postponement. The case was reopened to allow intervenors to present their evidence. Unable to secure a
reconsideration of Judge Navarro's order, the plaintiff went to the Intermediate Appellate Court on a petition for certiorari.
Said petition was, however, denied by the Intermediate Appellate Court, and petitioners brought the matter to this Court in
G.R. No. 36163, which was denied on May 3, 1973 Consequently, the case was remanded to the court a quo for further
proceedings.

On August 31, 1970, intervenors filed a motion to dismiss, principally on the ground that the Republic of the Philippines
cannot be sued without its consent and hence the action cannot prosper. The motion was opposed by the plaintiff.

On August 21, 1980, the trial court, through Judge Esteban Lising, issued the questioned order dismissing the case for
lack of jurisdiction. Respondent moved for reconsideration, while the Solicitor General, on behalf of the Republic of the
Philippines filed its opposition thereto, maintaining that the dismissal was proper on the ground of non-suability of the
State and also on the ground that the existence and/or authenticity of the purported possessory information title of the
respondents' predecessor-in-interest had not been demonstrated and that at any rate, the same is not evidence of title, or
if it is, its efficacy has been lost by prescription and laches.

Upon denial of the motion for reconsideration, plaintiff again went to the Intermediate Appellate Court on petition for
certiorari. On April 30, 1985, the respondent appellate court rendered its decision reversing the order of Judge Lising and
remanding the case to the court a quo for further proceedings. Hence this petition.

We find the petition meritorious. The doctrine of non-suability of the State has proper application in this case. The plaintiff
has impleaded the Republic of the Philippines as defendant in an action for recovery of ownership and possession of a
parcel of land, bringing the State to court just like any private person who is claimed to be usurping a piece of property. A
suit for the recovery of property is not an action in rem, but an action in personam. 1 It is an action directed against a
specific party or parties, and any judgment therein binds only such party or parties. The complaint filed by plaintiff, the
private respondent herein, is directed against the Republic of the Philippines, represented by the Land Authority, a
governmental agency created by Republic Act No. 3844.

By its caption and its allegation and prayer, the complaint is clearly a suit against the State, which under settled
jurisprudence is not permitted, except upon a showing that the State has consented to be sued, either expressly or by
implication through the use of statutory language too plain to be misinterpreted.2 There is no such showing in the instant
case. Worse, the complaint itself fails to allege the existence of such consent. This is a fatal defect, 3 and on this basis
alone, the complaint should have been dismissed.

The failure of the petitioner to assert the defense of immunity from suit when the case was tried before the court a quo, as
alleged by private respondent, is not fatal. It is now settled that such defense "may be invoked by the courts sua sponte at
any stage of the proceedings." 4

Private respondent contends that the consent of petitioner may be read from the Proclamation itself, when it established
the reservation " subject to private rights, if any there be. " We do not agree. No such consent can be drawn from the
language of the Proclamation. The exclusion of existing private rights from the reservation established by Proclamation
No. 90 can not be construed as a waiver of the immunity of the State from suit. Waiver of immunity, being a derogation of
sovereignty, will not be inferred lightly. but must be construed in strictissimi juris. 5Moreover, the Proclamation is not a
legislative act. The consent of the State to be sued must emanate from statutory authority. Waiver of State immunity can
only be made by an act of the legislative body.

Neither is there merit in respondent's submission, which the respondent appellate court sustained, on the basis of our
decision in the Begosa case, 6 that the present action is not a suit against the State within the rule of State immunity from
suit, because plaintiff does not seek to divest the Government of any of its lands or its funds. It is contended that the
complaint involves land not owned by the State, but private land belonging to the plaintiff, hence the Government is not
being divested of any of its properties. There is some sophistry involved in this argument, since the character of the land
sought to be recovered still remains to be established, and the plaintiff's action is directed against the State precisely to
compel the latter to litigate the ownership and possession of the property. In other words, the plaintiff is out to establish
that he is the owner of the land in question based, incidentally, on an informacion posesoria of dubious value, and he
seeks to establish his claim of ownership by suing the Republic of the Philippines in an action in personam.
The inscription in the property registry of an informacion posesoria under the Spanish Mortgage Law was a means
provided by the law then in force in the Philippines prior to the transfer of sovereignty from Spain to the United States of
America, to record a claimant's actual possession of a piece of land, established through an ex parte proceeding
conducted in accordance with prescribed rules. 7 Such inscription merely furnishes, at best, prima facieevidence of the
fact that at the time the proceeding was held, the claimant was in possession of the land under a claim of right as set forth
in his application. 8 The possessory information could ripen into a record of ownership after the lapse of 20 years (later
reduced to 10 years), upon the fulfillment of the requisites prescribed in Article 393 of the Spanish Mortgage Law.

There is no showing in the case at bar that the informacion posesoria held by the respondent had been converted into a
record of ownership. Such possessory information, therefore, remained at best mere prima facie evidence of possession.
Using this possessory information, the respondent could have applied for judicial confirmation of imperfect title under the
Public Land Act, which is an action in rem. However, having failed to do so, it is rather late for him to pursue this avenue
at this time. Respondent must also contend, as the records disclose, with the fact admitted by him and stated in the
decision of the Court a quo  that settlers have been occupying and cultivating the land in question since even before the
outbreak of the war, which puts in grave doubt his own claim of possession.

Worthy of note is the fact, as pointed out by the Solicitor General, that the informacion posesoria registered in the Office of
the Register of Deed of Camarines Sur on September 23, 1952 was a "reconstituted" possessory information; it was
"reconstituted from the duplicate presented to this office (Register of Deeds) by Dr. Pablo Feliciano," without the
submission of proof that the alleged duplicate was authentic or that the original thereof was lost. Reconstitution can be
validly made only in case of loss of the original. 10 These circumstances raise grave doubts as to the authenticity and
validity of the "informacion posesoria" relied upon by respondent Feliciano. Adding to the dubiousness of said document is
the fact that "possessory information calls for an area of only 100 hectares," 11 whereas the land claimed by respondent
Feliciano comprises 1,364.4177 hectares, later reduced to 701-9064 hectares. Courts should be wary in accepting
"possessory information documents, as well as other purportedly old Spanish titles, as proof of alleged ownership of
lands.

WHEREFORE, judgment is hereby rendered reversing and setting aside the appealed decision of the Intermediate
Appellate Court, dated April 30, 1985, and affirming the order of the court a quo, dated August 21, 1980, dismissing the
complaint filed by respondent Pablo Feliciano against the Republic of the Philippines. No costs.

SO ORDERED.
G.R. No. L-35645 May 22, 1985

UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I. COLLINS and ROBERT
GOHIER, petitioners, 
vs.
HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First Instance of Rizal and ELIGIO DE GUZMAN & CO.,
INC., respondents.

Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners.

Albert, Vergara, Benares, Perias & Dominguez Law Office for respondents.

ABAD SANTOS, J.:

This is a petition to review, set aside certain orders and restrain the respondent judge from trying Civil Case No. 779M of
the defunct Court of First Instance of Rizal.

The factual background is as follows:

At times material to this case, the United States of America had a naval base in Subic, Zambales. The base was one of
those provided in the Military Bases Agreement between the Philippines and the United States.

Sometime in May, 1972, the United States invited the submission of bids for the following projects

1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay, Philippines.

2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to shoreline revetment, NAVBASE Subic; and
repair to Leyte Wharf approach, NAVBASE Subic Bay, Philippines.

Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids. Subsequent thereto, the company received
from the United States two telegrams requesting it to confirm its price proposals and for the name of its bonding company.
The company complied with the requests. [In its complaint, the company alleges that the United States had accepted its
bids because "A request to confirm a price proposal confirms the acceptance of a bid pursuant to defendant United States'
bidding practices." (Rollo, p. 30.) The truth of this allegation has not been tested because the case has not reached the
trial stage.]

In June, 1972, the company received a letter which was signed by Wilham I. Collins, Director, Contracts Division, Naval
Facilities Engineering Command, Southwest Pacific, Department of the Navy of the United States, who is one of the
petitioners herein. The letter said that the company did not qualify to receive an award for the projects because of its
previous unsatisfactory performance rating on a repair contract for the sea wall at the boat landings of the U.S. Naval
Station in Subic Bay. The letter further said that the projects had been awarded to third parties. In the abovementioned
Civil Case No. 779-M, the company sued the United States of America and Messrs. James E. Galloway, William I. Collins
and Robert Gohier all members of the Engineering Command of the U.S. Navy. The complaint is to order the defendants
to allow the plaintiff to perform the work on the projects and, in the event that specific performance was no longer
possible, to order the defendants to pay damages. The company also asked for the issuance of a writ of preliminary
injunction to restrain the defendants from entering into contracts with third parties for work on the projects.

The defendants entered their special appearance for the purpose only of questioning the jurisdiction of this court over the
subject matter of the complaint and the persons of defendants, the subject matter of the complaint being acts and
omissions of the individual defendants as agents of defendant United States of America, a foreign sovereign which has
not given her consent to this suit or any other suit for the causes of action asserted in the complaint." (Rollo, p. 50.)

Subsequently the defendants filed a motion to dismiss the complaint which included an opposition to the issuance of the
writ of preliminary injunction. The company opposed the motion. The trial court denied the motion and issued the writ. The
defendants moved twice to reconsider but to no avail. Hence the instant petition which seeks to restrain perpetually the
proceedings in Civil Case No. 779-M for lack of jurisdiction on the part of the trial court.
The petition is highly impressed with merit.

The traditional rule of State immunity exempts a State from being sued in the courts of another State without its consent
or waiver. This rule is a necessary consequence of the principles of independence and equality of States. However, the
rules of International Law are not petrified; they are constantly developing and evolving. And because the activities of
states have multiplied, it has been necessary to distinguish them-between sovereign and governmental acts (jure imperii)
and private, commercial and proprietary acts (jure gestionis). The result is that State immunity now extends only to acts
jure imperil The restrictive application of State immunity is now the rule in the United States, the United Kingdom and
other states in western Europe. (See Coquia and Defensor Santiago, Public International Law, pp. 207-209 [1984].)

The respondent judge recognized the restrictive doctrine of State immunity when he said in his Order denying the
defendants' (now petitioners) motion: " A distinction should be made between a strictly governmental function of the
sovereign state from its private, proprietary or non- governmental acts (Rollo, p. 20.) However, the respondent judge also
said: "It is the Court's considered opinion that entering into a contract for the repair of wharves or shoreline is certainly not
a governmental function altho it may partake of a public nature or character. As aptly pointed out by plaintiff's counsel in
his reply citing the ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)], and which this Court quotes with approval, viz.:

It is however contended 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. ...

xxx xxx xxx

We agree to the above contention, and considering that the United States government, through its agency
at Subic Bay, entered into a contract with appellant for stevedoring and miscellaneous labor services
within the Subic Bay Area, a U.S. Naval Reservation, it is evident that it can bring an action before our
courts for any contractual liability that that political entity may assume under the contract. The trial court,
therefore, has jurisdiction to entertain this case ... (Rollo, pp. 20-21.)

The reliance placed on Lyons by the respondent judge is misplaced for the following reasons:

In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in the Court of First Instance of Manila
to collect several sums of money on account of a contract between plaintiff and defendant. The defendant filed a motion to
dismiss on the ground that the court had no jurisdiction over defendant and over the subject matter of the action. The
court granted the motion on the grounds that: (a) it had no jurisdiction over the defendant who did not give its consent to
the suit; and (b) plaintiff failed to exhaust the administrative remedies provided in the contract. The order of dismissal was
elevated to this Court for review.

In sustaining the action of the lower court, this Court said:

It appearing in the complaint that appellant has not complied with the procedure laid down in Article XXI of
the contract regarding the prosecution of its claim against the United States Government, or, stated
differently, it has failed to first exhaust its administrative remedies against said Government, the lower
court acted properly in dismissing this case.(At p. 598.)

It can thus be seen that the statement in respect of the waiver of State immunity from suit was purely gratuitous and,
therefore, obiter so that it has no value as an imperative authority.

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 business contracts. It does not apply where the contract relates to the exercise of its sovereign functions. In
this case the projects are an integral part of the naval base which is devoted to the defense of both the United States and
the Philippines, indisputably a function of the government of the highest order; they are not utilized for nor dedicated to
commercial or business purposes.

That the correct test for the application of State immunity is not the conclusion of a contract by a State but the legal nature
of the act is shown in Syquia vs. Lopez, 84 Phil. 312 (1949). In that case the plaintiffs leased three apartment buildings to
the United States of America for the use of its military officials. The plaintiffs sued to recover possession of the premises
on the ground that the term of the leases had expired. They also asked for increased rentals until the apartments shall
have been vacated.

The defendants who were armed forces officers of the United States moved to dismiss the suit for lack of jurisdiction in
the part of the court. The Municipal Court of Manila granted the motion to dismiss; sustained by the Court of First
Instance, the plaintiffs went to this Court for review on certiorari. In denying the petition, this Court said:

On the basis of the foregoing considerations we are of the belief and we hold that the real party defendant
in interest is the Government of the United States of America; that any judgment for back or Increased
rentals or damages will have to be paid not by defendants Moore and Tillman and their 64 co-defendants
but by the said U.S. Government. On the basis of the ruling in the case of Land vs. Dollar already cited,
and on what we have already stated, the present action must be considered as one against the U.S.
Government. It is clear hat the courts of the Philippines including the Municipal Court of Manila have no
jurisdiction over the present case for unlawful detainer. The question of lack of jurisdiction was raised and
interposed at the very beginning of the action. The U.S. Government has not , given its consent to the
filing of this suit which is essentially against her, though not in name. Moreover, this is not only a case of a
citizen filing a suit against his own Government without the latter's consent but it is of a citizen filing an
action against a foreign government without said government's consent, which renders more obvious the
lack of jurisdiction of the courts of his country. The principles of law behind this rule are so elementary
and of such general acceptance that we deem it unnecessary to cite authorities in support thereof. (At p.
323.)

In Syquia,the United States concluded contracts with private individuals but the contracts notwithstanding the States was
not deemed to have given or waived its consent to be sued for the reason that the contracts were for  jure imperii and not
for jure gestionis.

WHEREFORE, the petition is granted; the questioned orders of the respondent judge are set aside and Civil Case No. is
dismissed. Costs against the private respondent.

Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera, Plana,  * Escolin, Relova, Gutierrez, Jr., De la Fuente, Cuevas
and Alampay, JJ., concur.

Fernando, C.J., took no part.

Separate Opinions

MAKASIAR, J.,  dissenting:

The petition should be dismissed and the proceedings in Civil Case No. 779-M in the defunct CFI (now RTC) of Rizal be
allowed to continue therein.

In the case of Lyons vs. the United States of America (104 Phil. 593), where the contract entered into between the plaintiff
(Harry Lyons, Inc.) and the defendant (U.S. Government) involved stevedoring and labor services within the Subic Bay
area, this Court further stated that inasmuch as ". . . the United States Government. through its agency at Subic Bay,
entered into a contract with appellant for stevedoring and miscellaneous labor services within the Subic Bay area, a U.S.
Navy Reservation, it is evident that it can bring an action before our courts for any contractual liability that that political
entity may assume under the contract."

When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance of a bid of a private company for
the repair of wharves or shoreline in the Subic Bay area, it is deemed to have entered into a contract and thus waived the
mantle of sovereign immunity from suit and descended to the level of the ordinary citizen. Its consent to be sued,
therefore, is implied from its act of entering into a contract (Santos vs. Santos, 92 Phil. 281, 284).
Justice and fairness dictate that a foreign government that commits a breach of its contractual obligation in the case at bar
by the unilateral cancellation of the award for the project by the United States government, through its agency at Subic
Bay should not be allowed to take undue advantage of a party who may have legitimate claims against it by seeking
refuge behind the shield of non-suability. A contrary view would render a Filipino citizen, as in the instant case, helpless
and without redress in his own country for violation of his rights committed by the agents of the foreign government
professing to act in its name.

Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs. Almeda Lopez, 84 Phil. 312, 325:

Although, generally, foreign governments are beyond the jurisdiction of domestic courts of justice, such
rule is inapplicable to cases in which the foreign government enters into private contracts with the citizens
of the court's jurisdiction. A contrary view would simply run against all principles of decency and violative
of all tenets of morals.

Moral principles and principles of justice are as valid and applicable as well with regard to private
individuals as with regard to governments either domestic or foreign. Once a foreign government enters
into a private contract with the private citizens of another country, such foreign government cannot shield
its non-performance or contravention of the terms of the contract under the cloak of non-jurisdiction. To
place such foreign government beyond the jurisdiction of the domestic courts is to give approval to the
execution of unilateral contracts, graphically described in Spanish as 'contratos leoninos', because one
party gets the lion's share to the detriment of the other. To give validity to such contract is to sanctify bad
faith, deceit, fraud. We prefer to adhere to the thesis that all parties in a private contract, including
governments and the most powerful of them, are amenable to law, and that such contracts are
enforceable through the help of the courts of justice with jurisdiction to take cognizance of any violation of
such contracts if the same had been entered into only by private individuals.

Constant resort by a foreign state or its agents to the doctrine of State immunity in this jurisdiction impinges unduly upon
our sovereignty and dignity as a nation. Its application will particularly discourage Filipino or domestic contractors from
transacting business and entering into contracts with United States authorities or facilities in the Philippines whether
naval, air or ground forces-because the difficulty, if not impossibility, of enforcing a validly executed contract and of
seeking judicial remedy in our own courts for breaches of contractual obligation committed by agents of the United States
government, always, looms large, thereby hampering the growth of Filipino enterprises and creating a virtual monopoly in
our own country by United States contractors of contracts for services or supplies with the various U.S. offices and
agencies operating in the Philippines.

The sanctity of upholding agreements freely entered into by the parties cannot be over emphasized. Whether the parties
are nations or private individuals, it is to be reasonably assumed and expected that the undertakings in the
contract will be complied with in good faith.

One glaring fact of modern day civilization is that a big and powerful nation, like the United States of America, can always
overwhelm small and weak nations. The declaration in the United Nations Charter that its member states are equal and
sovereign, becomes hollow and meaningless because big nations wielding economic and military superiority impose upon
and dictate to small nations, subverting their sovereignty and dignity as nations. Thus, more often than not, when U.S.
interest clashes with the interest of small nations, the American governmental agencies or its citizens invoke principles of
international law for their own benefit.

In the case at bar, the efficacy of the contract between the U.S. Naval authorities at Subic Bay on one hand, and herein
private respondent on the other, was honored more in the breach than in the compliance The opinion of the majority will
certainly open the floodgates of more violations of contractual obligations. American authorities or any foreign government
in the Philippines for that matter, dealing with the citizens of this country, can conveniently seek protective cover under the
majority opinion. The result is disastrous to the Philippines.

This opinion of the majority manifests a neo-colonial mentality. It fosters economic imperialism and foreign political
ascendancy in our Republic.

The doctrine of government immunity from suit cannot and should not serve as an instrument for perpetrating an injustice
on a citizen (Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA 360; Ministerio vs. Court of First Instance, L-
31635, August 31, 1971, 40 SCRA 464).
Under the doctrine of implied waiver of its non-suability, the United States government, through its naval authorities at
Subic Bay, should be held amenable to lawsuits in our country like any other juristic person.

The invocation by the petitioner United States of America is not in accord with paragraph 3 of Article III of the original RP-
US Military Bases Agreement of March 14, 1947, which states that "in the exercise of the above-mentioned rights, powers
and authority, the United States agrees that the powers granted to it will not be used unreasonably. . ." (Emphasis
supplied).

Nor is such posture of the petitioners herein in harmony with the amendment dated May 27, 1968 to the aforesaid RP-US
Military Bases Agreement, which recognizes "the need to promote and maintain sound employment practices which will
assure equality of treatment of all employees ... and continuing favorable employer-employee relations ..." and "(B)elieving
that an agreement will be mutually beneficial and will strengthen the democratic institutions cherished by both
Governments, ... the United States Government agrees to accord preferential employment of Filipino citizens in the
Bases, thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian employment by employing Filipino citizens,
etc." (Par. 1, Art. I of the Amendment of May 27, 1968).

Neither does the invocation by petitioners of state immunity from suit express fidelity to paragraph 1 of Article IV of the
aforesaid amendment of May 2 7, 1968 which directs that " contractors and concessionaires performing work for the U.S.
Armed Forces shall be required  by their contract or concession agreements to comply with all applicable Philippine labor
laws and regulations, " even though paragraph 2 thereof affirms that "nothing in this Agreement shall imply any waiver by
either of the two Governments of such immunity under international law."

Reliance by petitioners on the non-suability of the United States Government before the local courts, actually clashes with
No. III on respect for Philippine law of the Memorandum of Agreement signed on January 7, 1979, also amending RP-US
Military Bases Agreement, which stresses that "it is the duty of members of the United States Forces, the civilian
component and their dependents, to respect the laws of the Republic of the Philippines and to abstain from any activity
inconsistent with the spirit of the Military Bases Agreement and, in particular, from any political activity in the Philippines.
The United States shag take all measures within its authority to insure that they adhere to them (Emphasis supplied).

The foregoing duty imposed by the amendment to the Agreement is further emphasized by No. IV on the economic and
social improvement of areas surrounding the bases, which directs that "moreover, the United States Forces shall procure
goods and services in the Philippines to the maximum extent feasible" (Emphasis supplied).

Under No. VI on labor and taxation of the said amendment of January 6, 1979 in connection with the discussions on
possible revisions or alterations of the Agreement of May 27, 1968, "the discussions shall be conducted on the basis of
the principles of equality of treatment, the right to organize, and bargain collectively, and respect for the sovereignty of the
Republic of the Philippines" (Emphasis supplied)

The majority opinion seems to mock the provision of paragraph 1 of the joint statement of President Marcos and Vice-
President Mondale of the United States dated May 4, 1978 that "the United States re-affirms that Philippine sovereignty
extends over the bases and that Its base shall be under the command of a Philippine Base Commander," which is
supposed to underscore the joint Communique of President Marcos and U.S. President Ford of December 7, 1975, under
which "they affirm that sovereign equality, territorial integrity and political independence of all States are fundamental
principles which both countries scrupulously respect; and that "they confirm that mutual respect for the dignity of each
nation shall characterize their friendship as well as the alliance between their two countries. "

The majority opinion negates the statement on the delineation of the powers, duties and responsibilities of both the
Philippine and American Base Commanders that "in the performance of their duties, the Philippine Base Commander and
the American Base Commander shall be guided by full respect for Philippine sovereignty on the one hand and the
assurance of unhampered U.S. military operations on the other hand and that "they shall promote cooperation
understanding and harmonious relations within the Base and with the general public in the proximate vicinity thereof" (par.
2 & par. 3 of the Annex covered by the exchange of notes, January 7, 1979, between Ambassador Richard W. Murphy
and Minister of Foreign Affairs Carlos P. Romulo, Emphasis supplied).

Separate Opinions
MAKASIAR, J.,  dissenting:

The petition should be dismissed and the proceedings in Civil Case No. 779-M in the defunct CFI (now RTC) of Rizal be
allowed to continue therein.

In the case of Lyons vs. the United States of America (104 Phil. 593), where the contract entered into between the plaintiff
(Harry Lyons, Inc.) and the defendant (U.S. Government) involved stevedoring and labor services within the Subic Bay
area, this Court further stated that inasmuch as ". . . the United States Government. through its agency at Subic Bay,
entered into a contract with appellant for stevedoring and miscellaneous labor services within the Subic Bay area, a U.S.
Navy Reservation, it is evident that it can bring an action before our courts for any contractual liability that that political
entity may assume under the contract."

When the U.S. Government, through its agency at Subic Bay, confirmed the acceptance of a bid of a private company for
the repair of wharves or shoreline in the Subic Bay area, it is deemed to have entered into a contract and thus waived the
mantle of sovereign immunity from suit and descended to the level of the ordinary citizen. Its consent to be sued,
therefore, is implied from its act of entering into a contract (Santos vs. Santos, 92 Phil. 281, 284).

Justice and fairness dictate that a foreign government that commits a breach of its contractual obligation in the case at bar
by the unilateral cancellation of the award for the project by the United States government, through its agency at Subic
Bay should not be allowed to take undue advantage of a party who may have legitimate claims against it by seeking
refuge behind the shield of non-suability. A contrary view would render a Filipino citizen, as in the instant case, helpless
and without redress in his own country for violation of his rights committed by the agents of the foreign government
professing to act in its name.

Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs. Almeda Lopez, 84 Phil. 312, 325:

Although, generally, foreign governments are beyond the jurisdiction of domestic courts of justice, such
rule is inapplicable to cases in which the foreign government enters into private contracts with the citizens
of the court's jurisdiction. A contrary view would simply run against all principles of decency and violative
of all tenets of morals.

Moral principles and principles of justice are as valid and applicable as well with regard to private
individuals as with regard to governments either domestic or foreign. Once a foreign government enters
into a private contract with the private citizens of another country, such foreign government cannot shield
its non-performance or contravention of the terms of the contract under the cloak of non-jurisdiction. To
place such foreign government beyond the jurisdiction of the domestic courts is to give approval to the
execution of unilateral contracts, graphically described in Spanish as 'contratos leoninos', because one
party gets the lion's share to the detriment of the other. To give validity to such contract is to sanctify bad
faith, deceit, fraud. We prefer to adhere to the thesis that all parties in a private contract, including
governments and the most powerful of them, are amenable to law, and that such contracts are
enforceable through the help of the courts of justice with jurisdiction to take cognizance of any violation of
such contracts if the same had been entered into only by private individuals.

Constant resort by a foreign state or its agents to the doctrine of State immunity in this jurisdiction impinges unduly upon
our sovereignty and dignity as a nation. Its application will particularly discourage Filipino or domestic contractors from
transacting business and entering into contracts with United States authorities or facilities in the Philippines whether
naval, air or ground forces-because the difficulty, if not impossibility, of enforcing a validly executed contract and of
seeking judicial remedy in our own courts for breaches of contractual obligation committed by agents of the United States
government, always, looms large, thereby hampering the growth of Filipino enterprises and creating a virtual monopoly in
our own country by United States contractors of contracts for services or supplies with the various U.S. offices and
agencies operating in the Philippines.

The sanctity of upholding agreements freely entered into by the parties cannot be over emphasized. Whether the parties
are nations or private individuals, it is to be reasonably assumed and expected that the undertakings in the
contract will be complied with in good faith.

One glaring fact of modern day civilization is that a big and powerful nation, like the United States of America, can always
overwhelm small and weak nations. The declaration in the United Nations Charter that its member states are equal and
sovereign, becomes hollow and meaningless because big nations wielding economic and military superiority impose upon
and dictate to small nations, subverting their sovereignty and dignity as nations. Thus, more often than not, when U.S.
interest clashes with the interest of small nations, the American governmental agencies or its citizens invoke principles of
international law for their own benefit.

In the case at bar, the efficacy of the contract between the U.S. Naval authorities at Subic Bay on one hand, and herein
private respondent on the other, was honored more in the breach than in the compliance The opinion of the majority will
certainly open the floodgates of more violations of contractual obligations. American authorities or any foreign government
in the Philippines for that matter, dealing with the citizens of this country, can conveniently seek protective cover under the
majority opinion. The result is disastrous to the Philippines.

This opinion of the majority manifests a neo-colonial mentality. It fosters economic imperialism and foreign political
ascendancy in our Republic.

The doctrine of government immunity from suit cannot and should not serve as an instrument for perpetrating an injustice
on a citizen (Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA 360; Ministerio vs. Court of First Instance, L-
31635, August 31, 1971, 40 SCRA 464).

Under the doctrine of implied waiver of its non-suability, the United States government, through its naval authorities at
Subic Bay, should be held amenable to lawsuits in our country like any other juristic person.

The invocation by the petitioner United States of America is not in accord with paragraph 3 of Article III of the original RP-
US Military Bases Agreement of March 14, 1947, which states that "in the exercise of the above-mentioned rights, powers
and authority, the United States agrees that the powers granted to it will not be used unreasonably. . ." (Emphasis
supplied).

Nor is such posture of the petitioners herein in harmony with the amendment dated May 27, 1968 to the aforesaid RP-US
Military Bases Agreement, which recognizes "the need to promote and maintain sound employment practices which will
assure equality of treatment of all employees ... and continuing favorable employer-employee relations ..." and "(B)elieving
that an agreement will be mutually beneficial and will strengthen the democratic institutions cherished by both
Governments, ... the United States Government agrees to accord preferential employment of Filipino citizens in the
Bases, thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian employment by employing Filipino citizens,
etc." (Par. 1, Art. I of the Amendment of May 27, 1968).

Neither does the invocation by petitioners of state immunity from suit express fidelity to paragraph 1 of Article IV of the
aforesaid amendment of May 2 7, 1968 which directs that " contractors and concessionaires performing work for the U.S.
Armed Forces shall be required  by their contract or concession agreements to comply with all applicable Philippine labor
laws and regulations, " even though paragraph 2 thereof affirms that "nothing in this Agreement shall imply any waiver by
either of the two Governments of such immunity under international law."

Reliance by petitioners on the non-suability of the United States Government before the local courts, actually clashes with
No. III on respect for Philippine law of the Memorandum of Agreement signed on January 7, 1979, also amending RP-US
Military Bases Agreement, which stresses that "it is the duty of members of the United States Forces, the civilian
component and their dependents, to respect the laws of the Republic of the Philippines and to abstain from any activity
inconsistent with the spirit of the Military Bases Agreement and, in particular, from any political activity in the Philippines.
The United States shag take all measures within its authority to insure that they adhere to them (Emphasis supplied).

The foregoing duty imposed by the amendment to the Agreement is further emphasized by No. IV on the economic and
social improvement of areas surrounding the bases, which directs that "moreover, the United States Forces shall procure
goods and services in the Philippines to the maximum extent feasible" (Emphasis supplied).

Under No. VI on labor and taxation of the said amendment of January 6, 1979 in connection with the discussions on
possible revisions or alterations of the Agreement of May 27, 1968, "the discussions shall be conducted on the basis of
the principles of equality of treatment, the right to organize, and bargain collectively, and respect for the sovereignty of the
Republic of the Philippines" (Emphasis supplied)

The majority opinion seems to mock the provision of paragraph 1 of the joint statement of President Marcos and Vice-
President Mondale of the United States dated May 4, 1978 that "the United States re-affirms that Philippine sovereignty
extends over the bases and that Its base shall be under the command of a Philippine Base Commander," which is
supposed to underscore the joint Communique of President Marcos and U.S. President Ford of December 7, 1975, under
which "they affirm that sovereign equality, territorial integrity and political independence of all States are fundamental
principles which both countries scrupulously respect; and that "they confirm that mutual respect for the dignity of each
nation shall characterize their friendship as well as the alliance between their two countries. "

The majority opinion negates the statement on the delineation of the powers, duties and responsibilities of both the
Philippine and American Base Commanders that "in the performance of their duties, the Philippine Base Commander and
the American Base Commander shall be guided by full respect for Philippine sovereignty on the one hand and the
assurance of unhampered U.S. military operations on the other hand and that "they shall promote cooperation
understanding and harmonious relations within the Base and with the general public in the proximate vicinity thereof" (par.
2 & par. 3 of the Annex covered by the exchange of notes, January 7, 1979, between Ambassador Richard W. Murphy
and Minister of Foreign Affairs Carlos P. Romulo, Emphasis supplied).
G.R. No. L-61744 June 25, 1984

MUNICIPALITY OF SAN MIGUEL, BULACAN, petitioner, 

vs.
HONORABLE OSCAR C. FERNANDEZ, in his capacity as the Presiding Judge, Branch IV, Baliuag, Bulacan, The
PROVINCIAL SHERIFF of Bulacan, MARGARITA D. VDA. DE IMPERIO, ADORACION IMPERIO, RODOLFO
IMPERIO, CONRADO IMPERIO, ERNESTO IMPERIO, ALFREDO IMPERIO, CARLOS IMPERIO, JR., JUAN IMPERIO
and SPOUSES MARCELO PINEDA and LUCILA PONGCO, respondents.

Pascual C. Liatchko for petitioner.

The Solicitor General and Marcelo Pineda for respondents.

RELOVA, J.:

In Civil Case No. 604-B, entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal Government of San Miguel, Bulacan,
et al.", the then Court of First Instance of Bulacan, on April 28, 1978, rendered judgment holding herein petitioner
municipality liable to private respondents, as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against
the defendant Municipal Government of San Miguel Bulacan, represented by Mayor Mar Marcelo G. Aure
and its Municipal Treasurer:

1. ordering the partial revocation of the Deed of Donation signed by the deceased Carlos Imperio in favor
of the Municipality of San Miguel Bulacan, dated October 27, 1947 insofar as Lots Nos. 1, 2, 3, 4 and 5,
Block 11 of Subdivision Plan Psd-20831 are concerned, with an aggregate total area of 4,646 square
meters, which lots are among those covered and described under TCT No. T-1831 of the Register of
Deeds of Bulacan in the name of the Municipal Government of San Miguel Bulacan,

2. ordering the defendant to execute the corresponding Deed of Reconveyance over the aforementioned
five lots in favor of the plaintiffs in the proportion of the undivided one-half (½) share in the name of
plaintiffs Margarita D. Vda. de Imperio, Adoracion, Rodolfo, Conrado, Ernesto, Alfredo, Carlos, Jr. and
Juan, all surnamed Imperio, and the remaining undivided one-half (½) share in favor of plaintiffs uses
Marcelo E. Pineda and Lucila Pongco;

3. ordering the defendant municipality to pay to the plaintiffs in the proportion mentioned in the
immediately preceding paragraph the sum of P64,440.00 corresponding to the rentals it has collected
from the occupants for their use and occupation of the premises from 1970 up to and including 1975, plus
interest thereon at the legal rate from January 1970 until fully paid;

4. ordering the restoration of ownership and possession over the five lots in question in favor of the
plaintiffs in the same proportion aforementioned;

5. ordering the defendant to pay the plaintiffs the sum of P3,000.00 for attomey's fees; and to pay the cost
of suit.

The counterclaim of the defendant is hereby ordered dismissed for lack of evidence presented to
substantiate the same.

SO ORDERED. (pp. 11-12, Rollo)

The foregoing judgment became final when herein petitioner's appeal was dismissed due to its failure to file the record on
appeal on time. The dismissal was affirmed by the then Court of Appeals in CA-G.R. No. SP-12118 and by this Court in
G.R. No. 59938. Thereafter, herein private respondents moved for issuance of a writ of execution for the satisfaction of
the judgment. Respondent judge, on July 27, 1982, issued an order, to wit:
 Considering that an entry of judgment had already been made on June 14, 1982 in G. R. No. L-59938
and;

Considering further that there is no opposition to plaintiffs' motion for execution dated July 23, 1983;

Let a writ of execution be so issued, as prayed for in the aforestated motion. (p. 10, Rollo)

Petitioner, on July 30, 1982, filed a Motion to Quash the writ of execution on the ground that the municipality's property or
funds are all public funds exempt from execution. The said motion to quash was, however, denied by the respondent
judge in an order dated August 23, 1982 and the alias writ of execution stands in full force and effect.

On September 13, 1982, respondent judge issued an order which in part, states:

It is clear and evident from the foregoing that defendant has more than enough funds to meet its judgment
obligation. Municipal Treasurer Miguel C, Roura of San Miguel, Bulacan and Provincial Treasurer of
Bulacan Agustin O. Talavera are therefor hereby ordered to comply with the money judgment rendered by
Judge Agustin C. Bagasao against said municipality. In like manner, the municipal authorities of San
Miguel, Bulacan are likewise ordered to desist from plaintiffs' legal possession of the property already
returned to plaintiffs by virtue of the alias writ of execution.

Finally, defendants are hereby given an inextendible period of ten (10) days from receipt of a copy of this
order by the Office of the Provincial Fiscal of Bulacan within which to submit their written compliance, (p.
24, Rollo)

When the treasurers (provincial and municipal) failed to comply with the order of September 13, 1982, respondent judge
issued an order for their arrest and that they will be release only upon compliance thereof.

Hence, the present petition on the issue whether the funds of the Municipality of San Miguel, Bulacan, in the hands of the
provincial and municipal treasurers of Bulacan and San Miguel, respectively, are public funds which are exempt from
execution for the satisfaction of the money judgment in Civil Case No. 604-B.

Well settled is the rule that public funds are not subject to levy and execution. The reason for this was explained in the
case of Municipality of Paoay vs. Manaois, 86 Phil. 629 "that they are held in trust for the people, intended and used for
the accomplishment of the purposes for which municipal corporations are created, and that to subject said properties and
public funds to execution would materially impede, even defeat and in some instances destroy said purpose." And,
in Tantoco vs. Municipal Council of Iloilo, 49 Phil. 52, it was held that "it is the settled doctrine of the law that not only the
public property but also the taxes and public revenues of such corporations Cannot be seized under execution against
them, either in the treasury or when in transit to it. Judgments rendered for taxes, and the proceeds of such judgments in
the hands of officers of the law, are not subject to execution unless so declared by statute." Thus, it is clear that all the
funds of petitioner municipality in the possession of the Municipal Treasurer of San Miguel, as well as those in the
possession of the Provincial Treasurer of Bulacan, are also public funds and as such they are exempt from execution.

Besides, Presidential Decree No. 477, known as "The Decree on Local Fiscal Administration", Section 2 (a), provides:

SEC. 2. Fundamental Principles. — Local government financial affairs, transactions, and operations shall
be governed by the fundamental principles set forth hereunder:

(a) No money shall be paid out of the treasury except in pursuance of a lawful appropriation or other
specific statutory authority.

xxx xxx xxx

Otherwise stated, there must be a corresponding appropriation in the form of an ordinance duly passed by the
Sangguniang Bayan before any money of the municipality may be paid out. In the case at bar, it has not been shown that
the Sangguniang Bayan has passed an ordinance to this effect.

Furthermore, Section 15, Rule 39 of the New Rules of Court, outlines the procedure for the enforcement of money
judgment:
 (a) By levying on all the property of the debtor, whether real or personal, not otherwise exempt from
execution, or only on such part of the property as is sufficient to satisfy the judgment and accruing cost, if
he has more than sufficient property for the purpose;

(b) By selling the property levied upon;

(c) By paying the judgment-creditor so much of the proceeds as will satisfy the judgment and accruing
costs; and

(d) By delivering to the judgment-debtor the excess, if any, unless otherwise, directed by judgment or
order of the court.

The foregoing has not been followed in the case at bar.

ACCORDINGLY, the petition is granted and the order of respondent judge, dated July 27, 1982, granting issuance of a
writ of execution; the alias writ of execution, dated July 27, 1982; and the order of respondent judge, dated September 13,
1982, directing the Provincial Treasurer of Bulacan and the Municipal Treasurer of San Miguel, Bulacan to comply with
the money judgments, are SET ASIDE; and respondents are hereby enjoined from implementing the writ of execution.

SO ORDERED.
G.R. No. L-55273-83 December 19, 1981

GAUDENCIO RAYO, BIENVINIDO PASCUAL, TOMAS MANUEL, MARIANO CRUZ, PEDRO BARTOLOME,
BERNARDINO CRUZ JOSE PALAD , LUCIO FAJARDO, FRANCISCO RAYOS, ANGEL TORRES, NORBERTO
TORRES, RODELIO JOAQUIN, PEDRO AQUINO, APOLINARIO BARTOLOME, MAMERTO BERNARDO, CIRIACO
CASTILLO, GREGORIO CRUZ, SIMEON ESTRELLA, EPIFANIO MARCELO, HERMOGENES SAN PEDRO, JUAN
SANTOS, ELIZABETH ABAN, MARCELINA BERNABE, BUENAVENTURA CRUZ, ANTONIO MENESES, ROMAN
SAN PEDRO, LOPEZ ESPINOSA, GODOFREDO PUNZAL, JULIANA GARCIA, LEBERATO SARMIENTO,
INOCENCIO DE LEON, CARLOS CORREA, REYNALDO CASIMIRO, ANTONIO GENER, GAUDENCIO CASTILLO,
MATIAS PEREZ, CRISPINIANO TORRES, CRESENCIO CRUZ, PROTACIO BERNABE, MARIANO ANDRES,
CRISOSTOMO CRUZ, MARCOS EUSTAQUIO, PABLO LEGASPI, VICENTE PASCUAL, ALEJANDRA SISON,
EUFRACIO TORRES, ROGELIO BARTOLOME, RODOLFO BERNARDO, APOLONIO CASTILLO, MARCELINO
DALMACIO, EUTIQUIO LEGASPI, LORENZO LUCIANO and GREGORIO PALAD, petitioners, 
vs.
COURT OF FIRST INSTANCE OF BULACAN, BRANCH V, STA. MARIA, and NATIONAL POWER
CORPORATION, respondents.

ABAD SANTOS, J.:

The relevant antecedents of this case are narrated in the petition and have not been controverted, namely:

3. At about midnight on October 26, 1978, during the height of that infamous typhoon "KADING" the
respondent corporation, acting through its plant superintendent, Benjamin Chavez, opened or caused to
be opened simultaneously all the three floodgates of the Angat Dam. And as a direct and immediate
result of the sudden, precipitate and simultaneous opening of said floodgates several towns in Bulacan
were inundated. Hardest-hit was Norzagaray. About a hundred of its residents died or were reported to
have died and properties worth million of pesos destroyed or washed away. This flood was
unprecedented in Norzagaray.

4. Petitioners, who were among the many unfortunate victims of that man-caused flood, filed with the
respondent Court eleven complaints for damages against the respondent corporation and the plant
superintendent of Angat Dam, Benjamin Chavez, docketed as Civil Cases Nos. SM-950 951, 953, 958,
959, 964, 965, 966, 981, 982 and 983. These complaints though separately filed have a common/similar
cause of action. ...

5. Respondent corporation filed separate answers to each of these eleven complaints. Apart from
traversing the material averments in the complaints and setting forth counterclaims for damages
respondent corporation invoked in each answer a special and affirmative defense that "in the operation of
the Angat Dam," it is "performing a purely governmental function", hence it "can not be sued without the
express consent of the State." ...

6. On motion of the respondent corporation a preliminary hearing was held on its affirmative defense as
though a motion to dismiss were filed. Petitioners opposed the prayer for dismissal and contended that
respondent corporation is performing not governmental but merely proprietary functions and that under its
own organic act, Section 3 (d) of Republic Act No. 6395, it can sue and be sued in any court. ...

7. On July 29, 1980 petitioners received a copy of the questioned order of the respondent Court dated
December 21, 1979 dismissing all their complaints as against the respondent corporation thereby leaving
the superintendent of the Angat Dam, Benjamin Chavez, as the sole party-defendant. ...

8. On August 7, 1980 petitioners filed with the respondent Court a motion for reconsideration of the
questioned order of dismissal. ...

9. The respondent Court denied petitioners' motion for reconsideration in its order dated October 3,
1980. ... Hence, the present petition for review on certiorari under Republic Act No. 5440. (Rollo, pp. 3-6.)
The Order of dismissal dated December 12, 1979, reads as follows:

Under consideration is a motion to dismiss embodied as a special affirmative defense in the answer filed
by defendant NPC on the grounds that said defendant performs a purely governmental function in the
operation of the Angat Dam and cannot therefore be sued for damages in the instant cases in connection
therewith.

Plaintiffs' opposition to said motion to discuss, relying on Sec. 3 (d) of Republic Act 6396 which imposes
on the NPC the power and liability to sue and be sued in any court, is not tenable since the same refer to
such matters only as are within the scope of the other corporate powers of said defendant and not
matters of tort as in the instant cases. It being an agency performing a purely governmental function in the
operation of the Angat Dam, said defendant was not given any right to commit wrongs upon individuals.
To sue said defendant for tort may require the express consent of the State.

WHEREFORE, the cases against defendant NPC are hereby dismissed. (Rollo, p. 60.)

The Order dated October 3, 1980, denying the motion for reconsideration filed by the plaintiffs is pro forma;  the motion
was simply denied for lack of merit. (Rollo, p. 74.)

The petition to review the two orders of the public respondent was filed on October 16, 1980, and on October 27, 1980,
We required the respondents to comment. It was only on April 13, 1981, after a number of extensions, that the Solicitor
General filed the required comment. (Rollo, pp. 107-114.)

On May 27, 1980, We required the parties to file simultaneous memoranda within twenty (20) days from notice. (Rollo, p.
115.) Petitioners filed their memorandum on July 22, 1981. (Rollo, pp. 118-125.) The Solicitor General filed a number of
motions for extension of time to file his memorandum. We granted the seventh extension with a warning that there would
be no further extension. Despite the warning the Solicitor General moved for an eighth extension which We denied on
November 9, 1981. A motion for a ninth extension was similarly denied on November 18, 1981. The decision in this case
is therefore, without the memorandum of the Solicitor General.

The parties are agreed that the Order dated December 21, 1979, raises the following issues:

1. Whether respondent National Power Corporation performs a governmental function with respect to the management
and operation of the Angat Dam; and

2. Whether the power of respondent National Power Corporation to sue and be sued under its organic charter includes the
power to be sued for tort.

The petition is highly impressed with merit.

It is not necessary to write an extended dissertation on whether or not the NPC performs a governmental function with
respect to the management and operation of the Angat Dam. It is sufficient to say that the government has organized a
private corporation, put money in it and has allowed it to sue and be sued in any court under its charter. (R.A. No. 6395,
Sec. 3 (d).) As a government owned and controlled corporation, it has a personality of its own, distinct and separate from
that of the Government. (See National Shipyards and Steel Corp. vs. CIR, et al., L-17874, August 31, 1963, 8 SCRA 781.)
Moreover, the charter provision that the NPC can "sue and be sued in any court" is without qualification on the cause of
action and accordingly it can include a tort claim such as the one instituted by the petitioners.

WHEREFORE, the petition is hereby granted; the Orders of the respondent court dated December 12, 1979 and October
3, 1980, are set aside; and said court is ordered to reinstate the complaints of the petitioners. Costs against the NPC. SO
ORDERED.
G.R. No. L-33112 June 15, 1978

PHILIPPINE NATIONAL BANK, petitioner, 

vs.
HON. JUDGE JAVIER PABALAN, Judge of the Court of First Instance, Branch III, La Union, AGOO TOBACCO
PLANTERS ASSOCIATION, INC., PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, and PANFILO P. JIMENEZ,
Deputy Sheriff, La Union, respondents.

Conrado E. Medina, Edgardo M. Magtalas & Walfrido Climaco for petitioner.

Felimon A. Aspirin fit respondent Agoo 'Tobacco Planters Association, Inc.

Virgilio C. Abejo for respondent Phil. Virginia Tobacco Administration.

FERNANDO, Acting C.J.:

The reliance of petitioner Philippine National Bank in this certiorari and prohibition proceeding against respondent Judge
Javier Pabalan who issued a writ of execution, 1 followed thereafter by a notice of garnishment of the funds of respondent
Philippine Virginia Tobacco Administration, 2 deposited with it, is on the fundamental constitutional law doctrine of non-
suability of a state, it being alleged that such funds are public in character. This is not the first time petitioner raised that
issue. It did so before in Philippine National Bank v. Court of industrial Relations, 3 decided only last January. It did not
meet with success, this Court ruling in accordance with the two previous cases of National Shipyard and Steel
Corporation 4 and Manila Hotel Employees Association v. Manila Hotel Company,5 that funds of public corporations which
can sue and be sued were not exempt from garnishment. As respondent Philippine Virginia Tobacco Administration is
likewise a public corporation possessed of the same attributes,6 a similar outcome is indicated. This petition must be
dismissed.

It is undisputed that the judgment against respondent Philippine Virginia Tobacco Administration had reached the stage of
finality. A writ of execution was, therefore, in order. It was accordingly issued on December 17, 1970. 7There was a notice
of garnishment for the full amount mentioned in such writ of execution in the sum of P12,724,66. 8 In view of the objection,
however, by petitioner Philippine National Bank on the above ground, coupled with an inquiry as to whether or not
respondent Philippine Virginia Tobacco Administration had funds deposited with petitioner's La Union branch, it was not
until January 25, 1971 that the order sought to be set aside in this certiorari proceeding was issued by respondent
Judge.9 Its dispositive portion reads as follows: Conformably with the foregoing, it is now ordered, in accordance with law,
that sufficient funds of the Philippine Virginia Tobacco Administration now deposited with the Philippine National Bank, La
Union Branch, shall be garnished and delivered to the plaintiff immediately to satisfy the Writ of Execution for one-half of
the amount awarded in the decision of November 16, 1970." 10 Hence this certiorari and prohibition proceeding.

As noted at the outset, petitioner Philippine National Bank would invoke the doctrine of non-suability. It is to be admitted
that under the present Constitution, what was formerly implicit as a fundamental doctrine in constitutional law has been
set forth in express terms: "The State may not be sued without its consent." 11 If the funds appertained to one of the
regular departments or offices in the government, then, certainly, such a provision would be a bar to garnishment. Such is
not the case here. Garnishment would lie. Only last January, as noted in the opening paragraph of this decision, this
Court, in a case brought by the same petitioner precisely invoking such a doctrine, left no doubt that the funds of public
corporations could properly be made the object of a notice of garnishment. Accordingly, this petition must fail.

1. The alleged grave abuse of discretion, the basis of this certiorari proceeding, was sought to be justified on the failure of
respondent Judge to set aside the notice of garnishment of funds belonging to respondent Philippine Virginia Tobacco
Administration. This excerpt from the aforecited decision of Philippine National Bank v. Court of Industrial
Relations  makes manifest why such an argument is far from persuasive. "The premise that the funds could be spoken as
public character may be accepted in the sense that the People Homesite and Housing Corporation was a government-
owned entity. It does not follow though that they were exempt. from garnishment. National Shipyard and Steel Corporation
v. Court of Industrial Relations is squarely in point. As was explicitly stated in the opinion of the then Justice, later Chief
Justice, Concepcion: "The allegation to the effect that the funds of the NASSCO are public funds of the government, and
that, as such, the same may not be garnished, attached or levied upon, is untenable for, as a government owned and
controlled corporation, the NASSCO has a personality of its own. distinct and separate from that of the Government. It has
— pursuant to Section 2 of Executive Order No. 356, dated October 23, 1950 ... , pursuant to which The NASSCO has
been established — all the powers of a corporation under the Corporation Law ... ." Accordingly, it may be sue and be
sued and may be subjected to court processes just like any other corporation (Section 13, Act No. 1459, as amended.)" ...
To repeat, the ruling was the appropriate remedy for the prevailing party which could proceed against the funds of a
corporate entity even if owned or controlled by the government." 12

2. The National Shipyard and Steel Corporation decision was not the first of its kind. The ruling therein could be inferred
from the judgment announced in Manila Hotel Employees Association v. Manila Hotel Company, decided as far back as
1941. 13 In the language of its ponente Justice Ozaeta "On the other hand, it is well-settled that when the government
enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation. (Bank
of the United States v. Planters' Bank, 9 Wheat. 904, 6 L.ed. 244). By engaging in a particular business thru the
instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the
corporation subject to the rules of law governing private corporations." 14 It is worth mentioning that Justice Ozaeta could
find support for such a pronouncement from the leading American Supreme Court case of united States v. Planters'
Bank, 15 with the opinion coming from the illustrious Chief Justice Marshall. It was handed down more than one hundred
fifty years ago, 1824 to be exact. It is apparent, therefore, that petitioner Bank could it legally set forth as a bar or
impediment to a notice of garnishment the doctrine of non-suability.

WHEREFORE, this petition for certiorari and prohibition is dismissed. No costs.

G.R. No. L-30671 November 28, 1973

REPUBLIC OF THE PHILIPPINES, petitioner, 

vs.
HON. GUILLERMO P. VILLASOR, as Judge of the Court of First Instance of Cebu, Branch I, THE PROVINCIAL
SHERIFF OF RIZAL, THE SHERIFF OF QUEZON CITY, and THE SHERIFF OF THE CITY OF MANILA, THE CLERK
OF COURT, Court of First Instance of Cebu, P. J. KIENER CO., LTD., GAVINO UNCHUAN, AND INTERNATIONAL
CONSTRUCTION CORPORATION, respondents.

Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo for petitioner.

Andres T. Velarde and Marcelo B. Fernan for respondents.

FERNANDO, J.:

The Republic of the Philippines in this certiorari and prohibition proceeding challenges the validity of an order issued by
respondent Judge Guillermo P. Villasor, then of the Court of First Instance of Cebu, Branch I,1 declaring a decision final
and executory and of an alias writ of execution directed against the funds of the Armed Forces of the Philippines
subsequently issued in pursuance thereof, the alleged ground being excess of jurisdiction, or at the very least, grave
abuse of discretion. As thus simply and tersely put, with the facts being undisputed and the principle of law that calls for
application indisputable, the outcome is predictable. The Republic of the Philippines is entitled to the writs prayed for.
Respondent Judge ought not to have acted thus. The order thus impugned and the alias writ of execution must be
nullified.

In the petition filed by the Republic of the Philippines on July 7, 1969, a summary of facts was set forth thus: "7. On July 3,
1961, a decision was rendered in Special Proceedings No. 2156-R in favor of respondents P. J. Kiener Co., Ltd., Gavino
Unchuan, and International Construction Corporation, and against the petitioner herein, confirming the arbitration award in
the amount of P1,712,396.40, subject of Special Proceedings. 8. On June 24, 1969, respondent Honorable Guillermo P.
Villasor, issued an Order declaring the aforestated decision of July 3, 1961 final and executory, directing the Sheriffs of
Rizal Province, Quezon City [as well as] Manila to execute the said decision. 9. Pursuant to the said Order dated June 24,
1969, the corresponding Alias Writ of Execution [was issued] dated June 26, 1969, .... 10. On the strength of the afore-
mentioned Alias Writ of Execution dated June 26, 1969, the Provincial Sheriff of Rizal (respondent herein) served notices
of garnishment dated June 28, 1969 with several Banks, specially on the "monies due the Armed Forces of the Philippines
in the form of deposits sufficient to cover the amount mentioned in the said Writ of Execution"; the Philippine Veterans
Bank received the same notice of garnishment on June 30, 1969 .... 11. The funds of the Armed Forces of the Philippines
on deposit with the Banks, particularly, with the Philippine Veterans Bank and the Philippine National Bank [or] their
branches are public funds duly appropriated and allocated for the payment of pensions of retirees, pay and allowances of
military and civilian personnel and for maintenance and operations of the Armed Forces of the Philippines, as per
Certification dated July 3, 1969 by the AFP Controller,..."2. The paragraph immediately succeeding in such petition then
alleged: "12. Respondent Judge, Honorable Guillermo P. Villasor, acted in excess of jurisdiction [or] with grave abuse of
discretion amounting to lack of jurisdiction in granting the issuance of an alias writ of execution against the properties of
the Armed Forces of the Philippines, hence, the Alias Writ of Execution and notices of garnishment issued pursuant
thereto are null and void."3 In the answer filed by respondents, through counsel Andres T. Velarde and Marcelo B. Fernan,
the facts set forth were admitted with the only qualification being that the total award was in the amount of P2,372,331.40.4

The Republic of the Philippines, as mentioned at the outset, did right in filing this certiorari and prohibition proceeding.
What was done by respondent Judge is not in conformity with the dictates of the Constitution. .

It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the state as well as
its government is immune from suit unless it gives its consent. It is readily understandable why it must be so. In the classic
formulation of Holmes: "A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on
the logical and practical ground that there can be no legal right as against the authority that makes the law on which the
right depends."5 Sociological jurisprudence supplies an answer not dissimilar. So it was indicated in a recent
decision, Providence Washington Insurance Co. v. Republic of the Philippines,6 with its affirmation that "a continued
adherence to the doctrine of non-suability is not to be deplored for as against the inconvenience that may be caused
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
obstacle, could very well be imagined."7

This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is therein
expressly provided: "The State may not be sued without its consent."8 A corollary, both dictated by logic and sound sense
from a basic concept is that public funds cannot be the object of a garnishment proceeding even if the consent to be sued
had been previously granted and the state liability adjudged. Thus in the recent case of Commissioner of Public Highways
v. San Diego,9 such a well-settled doctrine was restated in the opinion of Justice Teehankee: "The universal rule that
where the State gives its consent to be sued by private parties either by general or special law, it may limit claimant's
action 'only up to the completion of proceedings anterior to the stage of execution' and that the power of the Courts ends
when the judgment is rendered, since government funds and properties may not be seized under writs of execution or
garnishment to satisfy such judgments, is based on obvious considerations of public policy. Disbursements of public funds
must be covered by the corresponding appropriation as required by law. The functions and public services rendered by
the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific
objects, as appropriated by law." 10 Such a principle applies even to an attempted garnishment of a salary that had
accrued in favor of an employee. Director of Commerce and Industry v. Concepcion, 11 speaks to that effect. Justice
Malcolm as ponente left no doubt on that score. Thus: "A rule which has never been seriously questioned, is that money
in the hands of public officers, although it may be due government employees, is not liable to the creditors of these
employees in the process of garnishment. One reason is, that the State, by virtue of its sovereignty, may not be sued in its
own courts except by express authorization by the Legislature, and to subject its officers to garnishment would be to
permit indirectly what is prohibited directly. Another reason is that moneys sought to be garnished, as long as they remain
in the hands of the disbursing officer of the Government, belong to the latter, although the defendant in garnishment may
be entitled to a specific portion thereof. And still another reason which covers both of the foregoing is that every
consideration of public policy forbids it." 12

In the light of the above, it is made abundantly clear why the Republic of the Philippines could rightfully allege a legitimate
grievance.

WHEREFORE, the writs of certiorari and prohibition are granted, nullifying and setting aside both the order of June 24,
1969 declaring executory the decision of July 3, 1961 as well as the alias writ of execution issued thereunder. The
preliminary injunction issued by this Court on July 12, 1969 is hereby made permanent.
G.R. No. L-26400 February 29, 1972

VICTORIA AMIGABLE, plaintiff-appellant, 
vs.
NICOLAS CUENCA, as Commissioner of Public Highways and REPUBLIC OF THE PHILIPPINES, defendants-
appellees.

MAKALINTAL, J.:p

This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case No. R-5977, dismissing the
plaintiff's complaint.

Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the Banilad Estate in Cebu City as
shown by Transfer Certificate of Title No. T-18060, which superseded Transfer Certificate of Title No. RT-3272 (T-3435)
issued to her by the Register of Deeds of Cebu on February 1, 1924. No annotation in favor of the government of any right
or interest in the property appears at the back of the certificate. Without prior expropriation or negotiated sale, the
government used a portion of said lot, with an area of 6,167 square meters, for the construction of the Mango and
Gorordo Avenues.

It appears that said avenues were already existing in 1921 although "they were in bad condition and very narrow, unlike
the wide and beautiful avenues that they are now," and "that the tracing of said roads was begun in 1924, and the formal
construction in 
1925." *

On March 27, 1958 Amigable's counsel wrote the President of the Philippines, requesting payment of the portion of her lot
which had been appropriated by the government. The claim was indorsed to the Auditor General, who disallowed it in his
9th Indorsement dated December 9, 1958. A copy of said indorsement was transmitted to Amigable's counsel by the
Office of the President on January 7, 1959.

On February 6, 1959 Amigable filed in the court a quo a complaint, which was later amended on April 17, 1959 upon
motion of the defendants, against the Republic of the Philippines and Nicolas Cuenca, in his capacity as Commissioner of
Public Highways for the recovery of ownership and possession of the 6,167 square meters of land traversed by the
Mango and Gorordo Avenues. She also sought the payment of compensatory damages in the sum of P50,000.00 for the
illegal occupation of her land, moral damages in the sum of P25,000.00, attorney's fees in the sum of P5,000.00 and the
costs of the suit.

Within the reglementary period the defendants filed a joint answer denying the material allegations of the complaint and
interposing the following affirmative defenses, to wit: (1) that the action was premature, the claim not having been filed
first with the Office of the Auditor General; (2) that the right of action for the recovery of any amount which might be due
the plaintiff, if any, had already prescribed; (3) that the action being a suit against the Government, the claim for moral
damages, attorney's fees and costs had no valid basis since as to these items the Government had not given its consent
to be sued; and (4) that inasmuch as it was the province of Cebu that appropriated and used the area involved in the
construction of Mango Avenue, plaintiff had no cause of action against the defendants.

During the scheduled hearings nobody appeared for the defendants notwithstanding due notice, so the trial court
proceeded to receive the plaintiff's evidence ex parte. On July 29, 1959 said court rendered its decision holding that it had
no jurisdiction over the plaintiff's cause of action for the recovery of possession and ownership of the portion of her lot in
question on the ground that the government cannot be sued without its consent; that it had neither original nor appellate
jurisdiction to hear, try and decide plaintiff's claim for compensatory damages in the sum of P50,000.00, the same being a
money claim against the government; and that the claim for moral damages had long prescribed, nor did it have
jurisdiction over said claim because the government had not given its consent to be sued. Accordingly, the complaint was
dismissed. Unable to secure a reconsideration, the plaintiff appealed to the Court of Appeals, which subsequently certified
the case to Us, there being no question of fact involved.

The issue here is whether or not the appellant may properly sue the government under the facts of the case.
In the case of Ministerio vs. Court of First Instance of Cebu,1 involving a claim for payment of the value of a portion of land
used for the widening of the Gorordo Avenue in Cebu City, this Court, through Mr. Justice Enrique M. Fernando, held that
where the government takes away property from a private landowner for public use without going through the legal
process of expropriation or negotiated sale, the aggrieved party may properly maintain a suit against the government
without thereby violating the doctrine of governmental immunity from suit without its consent. We there said: .

... . If the constitutional mandate that the owner be compensated for property taken for public use were to
be respected, as it should, then a suit of this character should not be summarily dismissed. The doctrine
of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a
citizen. Had the government followed the procedure indicated by the governing law at the time, a
complaint would have been filed by it, and only upon payment of the compensation fixed by the judgment,
or after tender to the party entitled to such payment of the amount fixed, may it "have the right to enter in
and upon the land so condemned, to appropriate the same to the public use defined in the judgment." If
there were an observance of procedural regularity, petitioners would not be in the sad plaint they are now.
It is unthinkable then that precisely because there was a failure to abide by what the law requires, the
government would stand to benefit. It is just as important, if not more so, that there be fidelity to legal
norms on the part of officialdom if the rule of law were to be maintained. It is not too much to say that
when the government takes any property for public use, which is conditioned upon the payment of just
compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a court.
There is no thought then that the doctrine of immunity from suit could still be appropriately invoked.

Considering that no annotation in favor of the government appears at the back of her certificate of title and that she has
not executed any deed of conveyance of any portion of her lot to the government, the appellant remains the owner of the
whole lot. As registered owner, she could bring an action to recover possession of the portion of land in question at
anytime because possession is one of the attributes of ownership. However, since restoration of possession of said
portion by the government is neither convenient nor feasible at this time because it is now and has been used for road
purposes, the only relief available is for the government to make due compensation which it could and should have done
years ago. To determine the due compensation for the land, the basis should be the price or value thereof at the time of
the taking.2

As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the price of the land from
the time it was taken up to the time that payment is made by the government.3 In addition, the government should pay for
attorney's fees, the amount of which should be fixed by the trial court after hearing.

WHEREFORE, the decision appealed from is hereby set aside and the case remanded to the court a quo for the
determination of compensation, including attorney's fees, to which the appellant is entitled as above indicated. No
pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar JJ., concur.
G.R. No. L-5156             March 11, 1954

CARMEN FESTEJO, demandante-apelante, 
vs.
ISAIAS FERNANDO, Director de Obras Publicas, demandado-apelado.

D. Eloy B. Bello en representacion de la apelante.

El Procurador General Sr. Pompeyo Diaz y el Procurador Sr. Antonio A. Torres en representacion del apelado.

DIOKNO, J.:

Carmen Festejo, dueña de unos terrenos azucareros, de un total de unas 9 hectareas y media de superfice, demando a
"Isaias Fernando Director, Bureau of public Works, que como tal Director de Obras Publicas tiene a su cargo los sistemas
y proyectos de irrigacion y es el funcionario responsable de la construccion de los sistemas de irrigacion en el pais,"
alegando que —

The defendant, as Director of the Bureau of Public Works, without authority obtained first from the Court of First
Instance of Ilocos Sur, without obtaining first a right of way, and without the consent and knowledge of the plaintiff,
and against her express objection unlawfully took possession of portions of the three parcels of land described
above, and caused an irrigation canal to be constructed on the portion of the three parcels of land on or about the
month of February 1951 the aggregate area being 24,179 square meters to the damage and prejudice of the
plaintiff. ----- R. on A., p. 3.

causando a ella variados daños y perjuicios. Pidio, en su consecuencia, sentencia condenando el demandado:

. . . to return or cause to be returned the possession of the portions of land unlawfully occupied and appropriated
in the aggregate area of 24,179 square meters and to return the land to its former condition under the expenses of
the defendant. . . .

In the remote event that the portions of land unlawfully occupied and appropriated can not be returned to the
plaintiff, then to order the defendant to pay to the plaintiff the sum of P19,343.20 as value of the portions totalling
an area of 24,179 square meters; ---- R. on A., p. 5.

y ademas a pagar P9,756.19 de daños y P5,000 de honorarios de abogado, con las costas R. on A., pp. 5-6.

El demandado, por medio del Procurador General, presento mocion de sobreseimiento de la demanda por el fundamento
de que el Juzgado no tiene jurisdiccion para dictar sentencia valida contra el, toda vez que judicialmente la reclamacion
es contra la Republica de Filipinas, y esta no ha presentado su consentimiento a la demanda. El Juzgado inferior estimo
la mocion y sobreseyo la demanda sin perjuicio y sin costas.

En apelacion, la demandante sostiene que fue un error considerar la demanda como una contra la Republica y sobreseer
en su virtud la demanda.

La mocion contra "Isaias Fernando, Director de Obras Publicas, encargado y responsable de la construccion de los
sistemas de irrigacion en Filipinas" es una dirigida personalmente contra el, por actos que asumio ejecutar en su
concepto oficial. La ley no le exime de responsabilidad por las extralimitaciones que cometa o haga cometer en el
desempeño de sus funciones oficiales. Un caso semejante es el de Nelson vs. Bobcock (1933) 18 minn. 584, NW 49, 90
ALR 1472. Alli el Comisionado de Carreteras, al mejorar un trozo de la carretera ocupo o se apropio de terrenos
contiguos al derecho de paso. El Tribunal Supremo del Estado declaro que es personalmente responsable al dueño de
los daños causados. Declaro ademas que la ratificacion de lo que hicieron sus subordinados era equivalente a una orden
a los mismos. He aqui lo dijo el Tribunal.

We think the evidence and conceded facts permitted the jury in finding that in the trespass on plaintiff's land
defendant committed acts outside the scope of his authority. When he went outside the boundaries of the right of
way upon plaintiff's land and damaged it or destroyed its former condition an dusefulness, he must be held to
have designedly departed from the duties imposed on him by law. There can be no claim that he thus invaded
plaintiff's land southeasterly of the right of way innocently. Surveys clearly marked the limits of the land
appropriated for the right of way of this trunk highway before construction began. . . .
 "Ratification may be equivalent to command, and cooperation may be inferred from acquiescence where there is
power to restrain." It is unnecessary to consider other cases cited, . . ., for as before suggested, the jury could find
or infer that, in so far as there was actual trespass by appropriation of plaintiff's land as a dumping place for the
rock to be removed from the additional appropriated right of way, defendant planned, approved, and ratified what
was done by his subordinates. — Nelson vs. Bobcock, 90 A.L.R., 1472, 1476, 1477.

La doctrina sobre la responsabilidad civil de los funcionarios en casos parecidos se resume como sigue:

Ordinarily the officer or employee committing the tort is personally liable therefor, and may be sued as any other
citizen and held answerable for whatever injury or damage results from his tortious act. — 49 Am. Jur. 289.

. . . If an officer, even while acting under color of his office, exceeds the power conferred on him by law, he cannot
shelter himself under the plea that he is a public agent. — 43 Am. Jur. 86.

It is a general rule that an officer-executive, administrative quasi-judicial, ministerial, or otherwise who acts outside
the scope of his jurisdiction and without authorization of law may thereby render himself amenable to personal
liability in a civil suit. If he exceed the power conferred on him by law, he cannot shelter himself by the plea that he
is a public agent acting under the color of his office, and not personally. In the eye of the law, his acts then are
wholly without authority. — 43 Am. Jur. 89-90.

El articulo 32 del Codigo Civil dice a su vez:

ART. 32. Any public officer or emplyee, or any private individual, who directly or indirectly obstructs, defeats,
violates or in any manner impedes or impairs any of the following rights and liberties of another person shall be
liable to the latter for damages:

xxx     xxx     xxx

(6) The right against deprivation of property without due process of law;

xxx     xxx     xxx

In any of the cases referred to this article, whether or not the defendant's acts or omission constitutes a criminal
offense, the aggrieved party has a right ot commence an entirely separate and distinct civil action for damages,
and for other relief. Such civil action shall proceed independently of any criminal prosecution (if the latter be
instituted), and may be proved by a preponderance of evidence.

The inmdemnity shall include moral damages Exemplary damages may also be adjudicated.

Veanse tambien Lung vs. Aldanese, 45 Phil., 784; Syquia vs. Almeda, No. L-1648, Agosto 17, 1947;
Marquez vs. Nelson, No. L-2412, Septiembre 1950.

Se revoca la orden apelada y se ordena la continuacion de la tramitacion de la demanda conforme proveen los
reglamentos. Sin especial pronunciamiento en cuanto a las costas. Asi se ordena.

Padilla, Reyes, Jugo, Bautista Angelo and Labrador, MM., estan conformes.

Separate Opinions

CONCEPCION, J., dissenting:

To my mind, the allegations of the complaint lead to no other conclusion than that appellee Isaias Fernando is a party in
this case, not in his personal capacity, but as an officer of the Government. According to said pleading the defendant is
"Isaias Fernando, Director, Bureau of Public Works." Moreover, in paragraphs 4 and 5 of the complaint, it is alleged:
 4. That the defendant as Director of the Bureau of Public Works, is in charge of irrigation projects and systems,
and the official responsible for the construction of irrigation system in the Philippines;

5. That the defendant, as Director of the Bureau of Public Works, without authority obtained first from the Court of
First Instance of Ilocos Sur, without obtaining first a right of way, and without the consent and knowledge of the
plaintiff, and against her express objection, unlawfully took possession of portions of the three parcels of land
described above, and caused an irrigation canal to be constructed on the portion of the three parcels of land on or
about the month of February 1951 the aggregate area being 24,179 square meters to the damage and prejudice
of the plaintiff. (Emphasis supplied.)

The emphasis thus placed upon the allegation that the acts complained of were performed by said defendant "as Director
of the Bureau of Public Works," clearly shows that the designation of his office was included in the title of the case to
indicate that he was being sued in his official capacity. This conclusion is bolstered up by the fact that, among other
things, plaintiff prays, in the complaint, for a judgment

Ordering the defendant to return or caused to be returned the possession of the portions of land unlawfully
occupied and appropriated in the aggregate area of 24,179 square meters and to return the land to its former
condition under the expense of the defendant. (Paragraph a, of the complaint).

We take judicial notice of the fact that the irrigation projects and system reffered to in the complaint — of which the
defendant, Isaias Fernando, according to the same pleading, is "in charge" and for which he is "responsible" as Director of
the Bureau of Public Works — are established and operated with public funds, which pursuant to the Constitution, must
be appropriated by law. Irrespective of the manner in which the construction may have been undertaken by the Bureau of
Public Works, the system or canal is, therefore, a property of the Government. Consequently, in praying that possession
of the portions of land occupied by the irrigation canal involved in the present case be returned to plaintiff therein, and that
said land be restored to its former condition, plaintiff seeks to divest the Government of its possession of said irrigation
canal, and, what is worse, to cause said property of the Government to be removed or destroyed. As held in Syquia vs.
Lopez (47 Off. Gaz., 665), the Government is, accordingly, "the real party in interest as defendant" in the case at bar. In
other words, the same partakes of the nature of a suit against the state and may not be maintained without its consent.

Hence I am constrained to dissent.

Bengzon, J., concurs.

G.R. No. L-23139      December 17, 1966

MOBIL PHILIPPINES EXPLORATION, INC., plaintiff-appellant, 

vs.
CUSTOMS ARRASTRE SERVICE and BUREAU of CUSTOMS, defendants-appellees.

Alejandro Basin, Jr. and Associates for plaintiff-appellant.

Felipe T. Cuison for defendants-appellees.

BENGZON, J.P., J.:

Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville" sometime in November of 1962, consigned to
Mobil Philippines Exploration, Inc., Manila. The shipment arrived at the Port of Manila on April 10, 1963, and was
discharged to the custody of the Customs Arrastre Service, the unit of the Bureau of Customs then handling arrastre
operations therein. The Customs Arrastre Service later delivered to the broker of the consignee three cases only of the
shipment.

On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court of First Instance of Manila against the Customs
Arrastre Service and the Bureau of Customs to recover the value of the undelivered case in the amount of P18,493.37
plus other damages.

On April 20, 1964 the defendants filed a motion to dismiss the complaint on the ground that not being persons under the
law, defendants cannot be sued.

After plaintiff opposed the motion, the court, on April 25, 1964, dismissed the complaint on the ground that neither the
Customs Arrastre Service nor the Bureau of Customs is suable. Plaintiff appealed to Us from the order of dismissal.

Raised, therefore, in this appeal is the purely legal question of the defendants' suability under the facts stated.

Appellant contends that not all government entities are immune from suit; that defendant Bureau of Customs as operator
of the arrastre service at the Port of Manila, is discharging proprietary functions and as such, can be sued by private
individuals.

The Rules of Court, in Section 1, Rule 3, provide:

SECTION 1. Who may be parties.—Only natural or juridical persons or entities authorized by law may be parties
in a civil action.

Accordingly, a defendant in a civil suit must be (1) a natural person; (2) a juridical person or (3) an entity authorized by law
to be sued. Neither the Bureau of Customs nor (a fortiori) its function unit, the Customs Arrastre Service, is a person.
They are merely parts of the machinery of Government. The Bureau of Customs is a bureau under the Department of
Finance (Sec. 81, Revised Administrative Code); and as stated, the Customs Arrastre Service is a unit of the Bureau of
Custom, set up under Customs Administrative Order No. 8-62 of November 9, 1962 (Annex "A" to Motion to Dismiss, pp.
13-15, Record an Appeal). It follows that the defendants herein cannot he sued under the first two abovementioned
categories of natural or juridical persons.

Nonetheless it is urged that by authorizing the Bureau of Customs to engage in arrastre service, the law thereby impliedly
authorizes it to be sued as arrastre operator, for the reason that the nature of this function (arrastre service) is proprietary,
not governmental. Thus, insofar as arrastre operation is concerned, appellant would put defendants under the third
category of "entities authorized by law" to be sued. Stated differently, it is argued that while there is no law expressly
authorizing the Bureau of Customs to sue or be sued, still its capacity to be sued is implied from its very power to render
arrastre service at the Port of Manila, which it is alleged, amounts to the transaction of a private business.

The statutory provision on arrastre service is found in Section 1213 of Republic Act 1937 (Tariff and Customs Code,
effective June 1, 1957), and it states:

SEC. 1213. Receiving, Handling, Custody and Delivery of Articles.—The Bureau of Customs shall have exclusive
supervision and control over the receiving, handling, custody and delivery of articles on the wharves and piers at
 all ports of entry and in the exercise of its functions it is hereby authorized to acquire, take over, operate and
superintend such plants and facilities as may be necessary for the receiving, handling, custody and delivery of
articles, and the convenience and comfort of passengers and the handling of baggage; as well as to acquire fire
protection equipment for use in the piers: Provided, That whenever in his judgment the receiving, handling,
custody and delivery of articles can be carried on by private parties with greater efficiency, the Commissioner
may, after public bidding and subject to the approval of the department head, contract with any private party for
the service of receiving, handling, custody and delivery of articles, and in such event, the contract may include the
sale or lease of government-owned equipment and facilities used in such service.

In Associated Workers Union, et al. vs. Bureau of Customs, et al., L-21397, resolution of August 6, 1963, this Court
indeed held "that the foregoing statutory provisions authorizing the grant by contract to any private party of the right to
render said arrastre services necessarily imply that the same is deemed by Congress to be proprietary or non-
governmental function." The issue in said case, however, was whether laborers engaged in arrastre service fall under
the concept of employees in the Government employed in governmental functions  for purposes of the prohibition in
Section 11, Republic Act 875 to the effect that "employees in the Government . . . shall not strike," but "may belong to any
labor organization which does not impose the obligation to strike or to join in strike," which prohibition "shall apply only to
employees employed in governmental functions of the Government . . . .

Thus, the ruling therein was that the Court of Industrial Relations had jurisdiction over the subject matter of the case, but
not that the Bureau of Customs can be sued. Said issue of suability was not resolved, the resolution stating only that "the
issue on the personality or lack of personality of the Bureau of Customs to be sued does not affect the jurisdiction of the
lower court over the subject matter of the case, aside from the fact that amendment may be made in the pleadings by the
inclusion as respondents of the public officers deemed responsible, for the unfair labor practice acts charged by
petitioning Unions".

Now, the fact that a non-corporate government entity performs a function proprietary in nature does not necessarily result
in its being suable. If said non-governmental function is undertaken as an incident to its governmental function, there is no
waiver thereby of the sovereign immunity from suit extended to such government entity. This is the doctrine recognized
in Bureau of Printing, et al. vs. Bureau of Printing Employees Association, et al.,  L-15751, January 28, 1961:

The Bureau of Printing is an office of the Government created by the Administrative Code of 1916 (Act No. 2657).
As such instrumentality of the Government, it operates under the direct supervision of the Executive Secretary,
Office of the President, and is "charged with the execution of all printing and binding, including work incidental to
those processes, required by the National Government and such other work of the same character as said Bureau
may, by law or by order of the (Secretary of Finance) Executive Secretary, be authorized to undertake . . . ." (Sec.
1644, Rev. Adm. Code.) It has no corporate existence, and its appropriations are provided for in the General
Appropriations Act. Designed to meet the printing needs of the Government, it is primarily a service bureau and,
obviously, not engaged in business or occupation for pecuniary profit.

xxx      xxx      xxx

. . . Clearly, while the Bureau of Printing is allowed to undertake private printing jobs, it cannot be pretended that it
is thereby an industrial or business concern. The additional work it executes for private parties is merely incidental
to its function, and although such work may be deemed proprietary in character, there is no showing that the
employees performing said proprietary function are separate and distinct from those emoloyed in its general
governmental functions.

xxx      xxx      xxx

Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of Printing
cannot be sued (Sec. 1, Rule 3, Rules of Court.) Any suit, action or proceeding against it, if it were to produce any
effect, would actually be a suit, action or proceeding against the Government itself, and the rule is settled that the
Government cannot be sued without its consent, much less over its objection. (See Metran vs. Paredes, 45 Off.
Gaz. 2835; Angat River Irrigation System, et al. vs. Angat River Workers Union, et al., G.R. Nos. L-10943-44,
December 28, 1957.)

The situation here is not materially different. The Bureau of Customs, to repeat, is part of the Department of Finance (Sec.
81, Rev. Adm. Code), with no personality of its own apart from that of the national government. Its primary function is
governmental, that of assessing and collecting lawful revenues from imported articles and all other tariff and customs
duties, fees, charges, fines and penalties (Sec. 602, R.A. 1937). To this function, arrastre service is a necessary incident.
For practical reasons said revenues and customs duties can not be assessed and collected by simply receiving the
importer's or ship agent's or consignee's declaration of merchandise being imported and imposing the duty provided in the
Tariff law. Customs authorities and officers must see to it that the declaration tallies with the merchandise actually landed.
And this checking up requires that the landed merchandise be hauled from the ship's side to a suitable place in the
customs premises to enable said customs officers to make it, that is, it requires arrastre operations.1

Clearly, therefore, although said arrastre function may be deemed proprietary, it is a necessary incident of the primary and
governmental function of the Bureau of Customs, so that engaging in the same does not necessarily render said Bureau
liable to suit. For otherwise, it could not perform its governmental function without necessarily exposing itself to suit.
Sovereign immunity, granted as to the end, should not be denied as to the necessary means to that end.

And herein lies the distinction between the present case and that of National Airports Corporation vs. Teodoro, 91 Phil.
203, on which appellant would rely. For there, the Civil Aeronautics Administration was found have for its prime reason for
existence not a governmental but a proprietary function, so that to it the latter was not a mere incidental function:

Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of
any kind, to purchase property, and to grant concessions rights, and under Section 4, to charge landing fees,
royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property
under its management.

These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued.
The power to sue and be sued is implied from the power to transact private business. . . .

xxx      xxx      xxx

The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate
it was created, like the National Airports Corporation, not to maintain a necessary function of government, but to
run what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel
and the convenience of the travelling public. . . .

Regardless of the merits of the claim against it, the State, for obvious reasons of public policy, cannot be sued without its
consent. Plaintiff should have filed its present claim to the General Auditing Office, it being for money under the provisions
of Commonwealth Act 327, which state the conditions under which money claims against the Government may be filed.

It must be remembered that statutory provisions waiving State immunity from suit are strictly construed and that waiver of
immunity, being in derogation of sovereignty, will not be lightly inferred. (49 Am. Jur., States, Territories and
Dependencies, Sec. 96, p. 314; Petty vs. Tennessee-Missouri Bridge Com., 359 U.S. 275, 3 L. Ed. 804, 79 S. Ct. 785).
From the provision authorizing the Bureau of Customs to lease arrastre operations to private parties, We see no authority
to sue the said Bureau in the instances where it undertakes to conduct said operation itself. The Bureau of Customs,
acting as part of the machinery of the national government in the operation of the arrastre service, pursuant to express
legislative mandate and as a necessary incident of its prime governmental function, is immune from suit, there being no
statute to the contrary.

WHEREFORE, the order of dismissal appealed from is hereby affirmed, with costs against appellant. So ordered.
G.R. No. L-15751             January 28, 1961

BUREAU OF PRINTING, SERAFIN SALVADOR and MARIANO LEDESMA, petitioners, 

vs.
THE BUREAU OF PRINTING EMPLOYEES ASSOCIATION (NLU), PACIFICO ADVINCULA, ROBERTO MENDOZA,
PONCIANO ARGANDA and TEODULO TOLERAN, respondents.

Office of the Solicitor General for petitioners.

Eulogio R. Lerum for respondents.

GUTIERREZ DAVID, J.:

This is a petition for certiorari and prohibition with preliminary injunction to annul Certain orders of the respondent Court of
Industrial Relations and to restrain it from further proceeding in the action for unfair labor practice pending before it on the
ground of lack of jurisdiction. Giving due course to the petition, this Court ordered the issuance of the writ of preliminary
injunction prayed for without bond.

The action in question was — upon complaint of the respondents Bureau of Printing Employees Association (NLU)
Pacifico Advincula, Roberto Mendoza, Ponciano Arganda and Teodulo Toleran — filed by an acting prosecutor of the
Industrial Court against herein petitioner Bureau of Printing, Serafin Salvador, the Acting Secretary of the Department of
General Services, and Mariano Ledesma the Director of the Bureau of Printing. The complaint alleged that Serafin
Salvador and Mariano Ledesma have been engaging in unfair labor practices by interfering with, or coercing the
employees of the Bureau of Printing particularly the members of the complaining association petition, in the exercise of
their right to self-organization an discriminating in regard to hire and tenure of their employment in order to discourage
them from pursuing the union activities.

Answering the complaint, the petitioners Bureau of Printing, Serafin Salvador and Mariano Ledesma denied the charges
of unfair labor practices attributed to the and, by way of affirmative defenses, alleged, among other things, that
respondents Pacifico Advincula, Roberto Mendoza Ponciano Arganda and Teodulo Toleran were suspended pending
result of an administrative investigation against them for breach of Civil Service rules and regulations petitions; that the
Bureau of Printing has no juridical personality to sue and be sued; that said Bureau of Printing is not an industrial concern
engaged for the purpose of gain but is an agency of the Republic performing government functions. For relief, they prayed
that the case be dismissed for lack of jurisdiction. Thereafter, before the case could be heard, petitioners filed an
"Omnibus Motion" asking for a preliminary hearing on the question of jurisdiction raised by them in their answer and for
suspension of the trial of the case on the merits pending the determination of such jurisdictional question. The motion was
granted, but after hearing, the trial judge of the Industrial Court in an order dated January 27, 1959 sustained the
jurisdiction of the court on the theory that the functions of the Bureau of Printing are "exclusively proprietary in nature,"
and, consequently, denied the prayer for dismissal. Reconsideration of this order having been also denied by the court in
banc, the petitioners brought the case to this Court through the present petition for certiorari and prohibition.

We find the petition to be meritorious.

The Bureau of Printing is an office of the Government created by the Administrative Code of 1916 (Act No. 2657). As such
instrumentality of the Government, it operates under the direct supervision of the Executive Secretary, Office of the
President, and is "charged with the execution of all printing and binding, including work incidental to those processes,
required by the National Government and such other work of the same character as said Bureau may, by law or by order
of the (Secretary of Finance) Executive Secretary, be authorized to undertake . . .." (See. 1644, Rev. Adm. Code). It has
no corporate existence, and its appropriations are provided for in the General Appropriations Act. Designed to meet the
printing needs of the Government, it is primarily a service bureau and obviously, not engaged in business or occupation
for pecuniary profit.

It is true, as stated in the order complained of, that the Bureau of Printing receives outside jobs and that many of its
employees are paid for overtime work on regular working days and on holidays, but these facts do not justify the
conclusion that its functions are "exclusively proprietary in nature." Overtime work in the Bureau of Printing is done only
when the interest of the service so requires (sec. 566, Rev. Adm. Code). As a matter of administrative policy, the overtime
compensation may be paid, but such payment is discretionary with the head of the Bureau depending upon its current
appropriations, so that it cannot be the basis for holding that the functions of said Bureau are wholly proprietary in
character. Anent the additional work it executes for private persons, we find that such work is done upon request, as
distinguished from those solicited, and only "as the requirements of Government work will permit" (sec. 1654, Rev. Adm.
Code), and "upon terms fixed by the Director of Printing, with the approval of the Department Head" (sec. 1655, id.). As
shown by the uncontradicted evidence of the petitioners, most of these works consist of orders for greeting cards during
Christmas from government officials, and for printing of checks of private banking institutions. On those greeting cards,
the Government seal, of which only the Bureau of Printing is authorized to use, is embossed, and on the bank cheeks,
only the Bureau of Printing can print the reproduction of the official documentary stamps appearing thereon. The volume
of private jobs done, in comparison with government jobs, is only one-half of 1 per cent, and in computing the costs for
work done for private parties, the Bureau does not include profit because it is not allowed to make any. Clearly, while the
Bureau of Printing is allowed to undertake private printing jobs, it cannot be pretended that it is thereby an industrial or
business concern. The additional work it executes for private parties is merely incidental to its function, and although such
work may be deemed proprietary in character, there is no showing that the employees performing said proprietary
function are separate and distinct from those employed in its general governmental functions.

From what has been stated, it is obvious that the Court of Industrial Relations did not acquire jurisdiction over the
respondent Bureau of Printing, and is thus devoid of any authority to take cognizance of the case. This Court has already
held in a long line of decisions that the Industrial Court has no jurisdiction to hear and determine the complaint for unfair
labor practice filed against institutions or corporations not organized for profit and, consequently, not an industrial or
business organization. This is so because the Industrial Peace Act was intended to apply only to industrial employment,
and to govern the relations between employers engaged in industry and occupations for purposes of gain, and their
industrial employees. (University of the Philippines, et al. vs. CIR, et al., G.R. No. L-15416, April 28, 1960; University of
Sto. Tomas vs. Villanueva, et al., G.R. No. L-13748, October 30, 1959; La Consolacion College vs. CIR, G.R. No. L-
13282, April 22, 1960; See also the cases cited therein.) .

Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of Printing cannot be
sued. (Sec. 1, Rule 3, Rules of Court). Any suit, action or proceeding against it, if it were to produce any effect, would
actually be a suit, action or proceeding against the Government itself, and the rule is settled that the Government cannot
be sued without its consent, much less over its objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat River
Irrigation System, et al. vs. Angat River Workers' Union, et. al., G.R. Nos. L-10943-44, December 28, 1957).

The record also discloses that the instant case arose from the filing of administrative charges against some officers of the
respondent Bureau of Printing Employees' Association by the Acting Secretary of General Services. Said administrative
charges are for insubordination, grave misconduct and acts prejudicial to public service committed by inciting the
employees, of the Bureau of Printing to walk out of their jobs against the order of the duly constituted officials. Under the
law, the Heads of Departments and Bureaus are authorized to institute and investigate administrative charges against
erring subordinates. For the Industrial Court now to take cognizance of the case filed before it, which is in effect a review
of the acts of executive officials having to do with the discipline of government employees under them, would be to
interfere with the discharge of such functions by said officials. WHEREFORE, the petition for a writ of prohibition is
granted. The orders complained of are set aside and the complaint for unfair labor practice against the petitioners is
dismissed, with costs against respondents other than the respondent court.
G.R. No. L-11154            March 21, 1916

E. MERRITT, plaintiff-appellant, 
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.

Crossfield and O'Brien for plaintiff.

Attorney-General Avanceña for defendant..

TRENT, J.:

This is an appeal by both parties from a judgment of the Court of First Instance of the city of Manila in favor of the plaintiff
for the sum of P14,741, together with the costs of the cause.

Counsel for the plaintiff insist that the trial court erred (1) "in limiting the general damages which the plaintiff suffered to
P5,000, instead of P25,000 as claimed in the complaint," and (2) "in limiting the time when plaintiff was entirely disabled to
two months and twenty-one days and fixing the damage accordingly in the sum of P2,666, instead of P6,000 as claimed
by plaintiff in his complaint."

The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in finding that the collision between
the plaintiff's motorcycle and the ambulance of the General Hospital was due to the negligence of the chauffeur; (b) in
holding that the Government of the Philippine Islands is liable for the damages sustained by the plaintiff as a result of the
collision, even if it be true that the collision was due to the negligence of the chauffeur; and (c) in rendering judgment
against the defendant for the sum of P14,741.

The trial court's findings of fact, which are fully supported by the record, are as follows:

It is a fact not disputed by counsel for the defendant that when the plaintiff, riding on a motorcycle, was going
toward the western part of Calle Padre Faura, passing along the west side thereof at a speed of ten to twelve
miles an hour, upon crossing Taft Avenue and when he was ten feet from the southwestern intersection of said
streets, the General Hospital ambulance, upon reaching said avenue, instead of turning toward the south, after
passing the center thereof, so that it would be on the left side of said avenue, as is prescribed by the ordinance
and the Motor Vehicle Act, turned suddenly and unexpectedly and long before reaching the center of the street,
into the right side of Taft Avenue, without having sounded any whistle or horn, by which movement it struck the
plaintiff, who was already six feet from the southwestern point or from the post place there.

By reason of the resulting collision, the plaintiff was so severely injured that, according to Dr. Saleeby, who
examined him on the very same day that he was taken to the General Hospital, he was suffering from a
depression in the left parietal region, a would in the same place and in the back part of his head, while blood
issued from his nose and he was entirely unconscious.

The marks revealed that he had one or more fractures of the skull and that the grey matter and brain was had
suffered material injury. At ten o'clock of the night in question, which was the time set for performing the
operation, his pulse was so weak and so irregular that, in his opinion, there was little hope that he would live. His
right leg was broken in such a way that the fracture extended to the outer skin in such manner that it might be
regarded as double and the would be exposed to infection, for which reason it was of the most serious nature.

At another examination six days before the day of the trial, Dr. Saleeby noticed that the plaintiff's leg showed a
contraction of an inch and a half and a curvature that made his leg very weak and painful at the point of the
fracture. Examination of his head revealed a notable readjustment of the functions of the brain and nerves. The
patient apparently was slightly deaf, had a light weakness in his eyes and in his mental condition. This latter
weakness was always noticed when the plaintiff had to do any difficult mental labor, especially when he attempted
to use his money for mathematical calculations.

According to the various merchants who testified as witnesses, the plaintiff's mental and physical condition prior to
the accident was excellent, and that after having received the injuries that have been discussed, his physical
condition had undergone a noticeable depreciation, for he had lost the agility, energy, and ability that he had
constantly displayed before the accident as one of the best constructors of wooden buildings and he could not
 now earn even a half of the income that he had secured for his work because he had lost 50 per cent of his
efficiency. As a contractor, he could no longer, as he had before done, climb up ladders and scaffoldings to reach
the highest parts of the building.

As a consequence of the loss the plaintiff suffered in the efficiency of his work as a contractor, he had to dissolved
the partnership he had formed with the engineer. Wilson, because he was incapacitated from making
mathematical calculations on account of the condition of his leg and of his mental faculties, and he had to give up
a contract he had for the construction of the Uy Chaco building."

We may say at the outset that we are in full accord with the trial court to the effect that the collision between the plaintiff's
motorcycle and the ambulance of the General Hospital was due solely to the negligence of the chauffeur.

The two items which constitute a part of the P14,741 and which are drawn in question by the plaintiff are (a) P5,000, the
award awarded for permanent injuries, and (b) the P2,666, the amount allowed for the loss of wages during the time the
plaintiff was incapacitated from pursuing his occupation. We find nothing in the record which would justify us in increasing
the amount of the first. As to the second, the record shows, and the trial court so found, that the plaintiff's services as a
contractor were worth P1,000 per month. The court, however, limited the time to two months and twenty-one days, which
the plaintiff was actually confined in the hospital. In this we think there was error, because it was clearly established that
the plaintiff was wholly incapacitated for a period of six months. The mere fact that he remained in the hospital only two
months and twenty-one days while the remainder of the six months was spent in his home, would not prevent recovery for
the whole time. We, therefore, find that the amount of damages sustained by the plaintiff, without any fault on his part, is
P18,075.

As the negligence which caused the collision is a tort committed by an agent or employee of the Government, the inquiry
at once arises whether the Government is legally-liable for the damages resulting therefrom.

Act No. 2457, effective February 3, 1915, reads:

An Act authorizing E. Merritt to bring suit against the Government of the Philippine Islands and authorizing the
Attorney-General of said Islands to appear in said suit.

Whereas a claim has been filed against the Government of the Philippine Islands by Mr. E. Merritt, of Manila, for
damages resulting from a collision between his motorcycle and the ambulance of the General Hospital on March
twenty-fifth, nineteen hundred and thirteen;

Whereas it is not known who is responsible for the accident nor is it possible to determine the amount of
damages, if any, to which the claimant is entitled; and

Whereas the Director of Public Works and the Attorney-General recommended that an Act be passed by the
Legislature authorizing Mr. E. Merritt to bring suit in the courts against the Government, in order that said
questions may be decided: Now, therefore,

By authority of the United States, be it enacted by the Philippine Legislature, that:

SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First Instance of the city of Manila against
the Government of the Philippine Islands in order to fix the responsibility for the collision between his motorcycle
and the ambulance of the General Hospital, and to determine the amount of the damages, if any, to which Mr. E.
Merritt is entitled on account of said collision, and the Attorney-General of the Philippine Islands is hereby
authorized and directed to appear at the trial on the behalf of the Government of said Islands, to defendant said
Government at the same.

SEC. 2. This Act shall take effect on its passage.

Enacted, February 3, 1915.

Did the defendant, in enacting the above quoted Act, simply waive its immunity from suit or did it also concede its liability
to the plaintiff? If only the former, then it cannot be held that the Act created any new cause of action in favor of the
plaintiff or extended the defendant's liability to any case not previously recognized.
All admit that the Insular Government (the defendant) cannot be sued by an individual without its consent. It is also
admitted that the instant case is one against the Government. As the consent of the Government to be sued by the
plaintiff was entirely voluntary on its part, it is our duty to look carefully into the terms of the consent, and render judgment
accordingly.

The plaintiff was authorized to bring this action against the Government "in order to fix the responsibility for the collision
between his motorcycle and the ambulance of the General Hospital and to determine the amount of the damages, if any,
to which Mr. E. Merritt is entitled on account of said collision, . . . ." These were the two questions submitted to the court
for determination. The Act was passed "in order that said questions may be decided." We have "decided" that the accident
was due solely to the negligence of the chauffeur, who was at the time an employee of the defendant, and we have also
fixed the amount of damages sustained by the plaintiff as a result of the collision. Does the Act authorize us to hold that
the Government is legally liable for that amount? If not, we must look elsewhere for such authority, if it exists.

The Government of the Philippine Islands having been "modeled after the Federal and State Governments in the United
States," we may look to the decisions of the high courts of that country for aid in determining the purpose and scope of Act
No. 2457.

In the United States the rule that the state is not liable for the torts committed by its officers or agents whom it employs,
except when expressly made so by legislative enactment, is well settled. "The Government," says Justice Story, "does not
undertake to guarantee to any person the fidelity of the officers or agents whom it employs, since that would involve it in
all its operations in endless embarrassments, difficulties and losses, which would be subversive of the public interest."
(Claussen vs. City of Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and Beers vs.
States, 20 How., 527; 15 L. Ed., 991.)

In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover damages from the state for personal injuries
received on account of the negligence of the state officers at the state fair, a state institution created by the legislature for
the purpose of improving agricultural and kindred industries; to disseminate information calculated to educate and benefit
the industrial classes; and to advance by such means the material interests of the state, being objects similar to those
sought by the public school system. In passing upon the question of the state's liability for the negligent acts of its officers
or agents, the court said:

No claim arises against any government is favor of an individual, by reason of the misfeasance, laches, or
unauthorized exercise of powers by its officers or agents. (Citing Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs.
State, 86 N. C., 51, 53; 41 Am. Rep., 440; Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Green vs.
State, 73 Cal., 29; Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203; Story on Agency, sec. 319.)

As to the scope of legislative enactments permitting individuals to sue the state where the cause of action arises out of
either fort or contract, the rule is stated in 36 Cyc., 915, thus:

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

In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915, the Act of 1913, which authorized the
bringing of this suit, read:

SECTION 1. Authority is hereby given to George Apfelbacher, of the town of Summit, Waukesha County,
Wisconsin, to bring suit in such court or courts and in such form or forms as he may be advised for the purpose of
settling and determining all controversies which he may now have with the State of Wisconsin, or its duly
authorized officers and agents, relative to the mill property of said George Apfelbacher, the fish hatchery of the
State of Wisconsin on the Bark River, and the mill property of Evan Humphrey at the lower end of Nagawicka
Lake, and relative to the use of the waters of said Bark River and Nagawicka Lake, all in the county of Waukesha,
Wisconsin.

In determining the scope of this act, the court said:

Plaintiff claims that by the enactment of this law the legislature admitted liability on the part of the state for the acts
of its officers, and that the suit now stands just as it would stand between private parties. It is difficult to see how
the act does, or was intended to do, more than remove the state's immunity from suit. It simply gives authority to
 commence suit for the purpose of settling plaintiff's controversies with the estate. Nowhere in the act is there a
whisper or suggestion that the court or courts in the disposition of the suit shall depart from well established
principles of law, or that the amount of damages is the only question to be settled. The act opened the door of the
court to the plaintiff. It did not pass upon the question of liability, but left the suit just where it would be in the
absence of the state's immunity from suit. If the Legislature had intended to change the rule that obtained in this
state so long and to declare liability on the part of the state, it would not have left so important a matter to mere
inference, but would have done so in express terms. (Murdock Grate Co. vs. Commonwealth, 152 Mass., 28; 24
N.E., 854; 8 L. R. A., 399.)

In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon and considered, are as follows:

All persons who have, or shall hereafter have, claims on contract or for negligence against the state not allowed
by the state board of examiners, are hereby authorized, on the terms and conditions herein contained, to bring
suit thereon against the state in any of the courts of this state of competent jurisdiction, and prosecute the same to
final judgment. The rules of practice in civil cases shall apply to such suits, except as herein otherwise provided.

And the court said:

This statute has been considered by this court in at least two cases, arising under different facts, and in both it
was held that said statute did not create any liability or cause of action against the state where none existed
before, but merely gave an additional remedy to enforce such liability as would have existed if the statute had not
been enacted. (Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Melvin vs. State, 121 Cal., 16.)

A statute of Massachusetts enacted in 1887 gave to the superior court "jurisdiction of all claims against the
commonwealth, whether at law or in equity," with an exception not necessary to be here mentioned. In construing this
statute the court, in Murdock Grate Co. vs. Commonwealth (152 Mass., 28), said:

The statute we are discussing disclose no intention to create against the state a new and heretofore unrecognized
class of liabilities, but only an intention to provide a judicial tribunal where well recognized existing liabilities can
be adjudicated.

In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by the terms of the statute of New York,
jurisdiction of claims for damages for injuries in the management of the canals such as the plaintiff had sustained, Chief
Justice Ruger remarks: "It must be conceded that the state can be made liable for injuries arising from the negligence of
its agents or servants, only by force of some positive statute assuming such liability."

It being quite clear that Act No. 2457 does not operate to extend the Government's liability to any cause not previously
recognized, we will now examine the substantive law touching the defendant's liability for the negligent acts of its officers,
agents, and employees. Paragraph 5 of article 1903 of the Civil Code reads:

The state is liable in this sense when it acts through a special agent, but not when the damage should have been
caused by the official to whom properly it pertained to do the act performed, in which case the provisions of the
preceding article shall be applicable.

The supreme court of Spain in defining the scope of this paragraph said:

That the obligation to indemnify for damages which a third person causes to another by his fault or negligence is
based, as is evidenced by the same Law 3, Title 15, Partida 7, on that the person obligated, by his own fault or
negligence, takes part in the act or omission of the third party who caused the damage. It follows therefrom that
the state, by virtue of such provisions of law, is not responsible for the damages suffered by private individuals in
consequence of acts performed by its employees in the discharge of the functions pertaining to their office,
because neither fault nor even negligence can be presumed on the part of the state in the organization of
branches of public service and in the appointment of its agents; on the contrary, we must presuppose all foresight
humanly possible on its part in order that each branch of service serves the general weal an that of private
persons interested in its operation. Between these latter and the state, therefore, no relations of a private nature
governed by the civil law can arise except in a case where the state acts as a judicial person capable of acquiring
rights and contracting obligations. (Supreme Court of Spain, January 7, 1898; 83 Jur. Civ., 24.)

That the Civil Code in chapter 2, title 16, book 4, regulates the obligations which arise out of fault or negligence;
and whereas in the first article thereof. No. 1902, where the general principle is laid down that where a person
 who by an act or omission causes damage to another through fault or negligence, shall be obliged to repair the
damage so done, reference is made to acts or omissions of the persons who directly or indirectly cause the
damage, the following articles refers to this persons and imposes an identical obligation upon those who maintain
fixed relations of authority and superiority over the authors of the damage, because the law presumes that in
consequence of such relations the evil caused by their own fault or negligence is imputable to them. This legal
presumption gives way to proof, however, because, as held in the last paragraph of article 1903, responsibility for
acts of third persons ceases when the persons mentioned in said article prove that they employed all the diligence
of a good father of a family to avoid the damage, and among these persons, called upon to answer in a direct and
not a subsidiary manner, are found, in addition to the mother or the father in a proper case, guardians and owners
or directors of an establishment or enterprise, the state, but not always, except when it acts through the agency of
a special agent, doubtless because and only in this case, the fault or negligence, which is the original basis of this
kind of objections, must be presumed to lie with the state.

That although in some cases the state might by virtue of the general principle set forth in article 1902 respond for
all the damage that is occasioned to private parties by orders or resolutions which by fault or negligence are made
by branches of the central administration acting in the name and representation of the state itself and as an
external expression of its sovereignty in the exercise of its executive powers, yet said article is not applicable in
the case of damages said to have been occasioned to the petitioners by an executive official, acting in the
exercise of his powers, in proceedings to enforce the collections of certain property taxes owing by the owner of
the property which they hold in sublease.

That the responsibility of the state is limited by article 1903 to the case wherein it acts through a special agent(and
a special agent, in the sense in which these words are employed, is one who receives a definite and fixed order or
commission, foreign to the exercise of the duties of his office if he is a special official) so that in representation of
the state and being bound to act as an agent thereof, he executes the trust confided to him. This concept does not
apply to any executive agent who is an employee of the acting administration and who on his own responsibility
performs the functions which are inherent in and naturally pertain to his office and which are regulated by law and
the regulations." (Supreme Court of Spain, May 18, 1904; 98 Jur. Civ., 389, 390.)

That according to paragraph 5 of article 1903 of the Civil Code and the principle laid down in a decision, among
others, of the 18th of May, 1904, in a damage case, the responsibility of the state is limited to that which it
contracts through a special agent, duly empowered by a definite order or commission to perform some act or
charged with some definite purpose which gives rise to the claim, and not where the claim is based on acts or
omissions imputable to a public official charged with some administrative or technical office who can be held to
the proper responsibility in the manner laid down by the law of civil responsibility. Consequently, the trial court in
not so deciding and in sentencing the said entity to the payment of damages, caused by an official of the second
class referred to, has by erroneous interpretation infringed the provisions of articles 1902 and 1903 of the Civil
Code. (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.)

It is, therefore, evidence that the State (the Government of the Philippine Islands) is only liable, according to the above
quoted decisions of the Supreme Court of Spain, for the acts of its agents, officers and employees when they act as
special agents within the meaning of paragraph 5 of article 1903, supra, and that the chauffeur of the ambulance of the
General Hospital was not such an agent.

For the foregoing reasons, the judgment appealed from must be reversed, without costs in this instance. Whether the
Government intends to make itself legally liable for the amount of damages above set forth, which the plaintiff has
sustained by reason of the negligent acts of one of its employees, by legislative enactment and by appropriating sufficient
funds therefor, we are not called upon to determine. This matter rests solely with the Legislature and not with the courts.

Arellano, C. J., Torres, Johnson, and Moreland, JJ., concur.