PHILROCK vs Board of Liquidators

G.R. No. 84992, December 15,1989

GRIÑO-AQUINO, J.:

DOCTRINE:
In its decision dated March 21, 1987 in CA-G.R. SP No. 12017, the Court of
appeals set aside the decision and order of execution pending appeal which
the Regional Trial Court of Manila issued in favor of the Philippine Rock
Industries (Philrock for brevity) in Civil Case No. 82-11394, authorizing the
immediate execution of its decision against the funds deposited in the
Philippine National Bank (PNB) of the respondent Board of Liquidators as
liquidator of the defunct Reparations Commission (REPACOM for brevity).

FACTS:
PHILROCK filed in the RTC of Manila a complaint against the Board of
Liquidators, as liquidator of the defunct REPACOM, for: (1) the replacement
of the defective rock pulverizing machinery purchased from REPACOM, or, as
alternative, to refund the purchase at 31% of its contract price; (2)
reparation for losses incurred due to the increased expenses of maintaining
the plant at Php5,000 a month and Php4,000 per day as unrealized profits
and exemplary damages; and (3) Php50,000 attorney fees plus expenses
and costs of the suit.

The RTC decided in favor of PHILROCK. The Solicitor General, in behalf of

the State, filed a notice of appeal on the ground that the payment for
damages are public funds, hence, exempt from attachment and execution.
Nevertheless, the RTC judge issued a Writ of Execution. Subsequently the
Board of Liquidators filed a petition for certiorari and prohibition in the Court
of Appeals where the Court of Appeals set aside the Writ of Execution by the
RTC. Hence, this petition for review.

ISSUE:
Whether or not the Board of Liquidators, as a government agency without
juridical capacity, may be sued and held liable as litigators of REPACOM.

RULING:
No. The Board of Liquidators is a government agency, created under E.O.
372 to administer the assets and pay the liabilities of the defunct REPACOM,
thus it has no juridical personality, separate and distinct from the
government, and therefore, as a general rule, suing it is akin to suing the
State. The State enjoys immunity from suit except when it conducts
business through a government-owned and controlled corporation or a non-
corporate agency set up primarily for a business purpose, and even then,
the State may not be liable for damages since the purse of the State, or the
disbursement of public funds is in the discretion of the Legislature. 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
specific objectives, as appropriated by law. Although the liability of
REPACOM has been ascertained, the State is at liberty to determine for itself
how to satisfy such liability. Funds should be appropriated by the Legislature
for the specific purpose of satisfying the judgement in favor of PHILROCK
before said judgement may be paid.