MODULE 2: DOCTRINE OF STATE IMMUNITY

2.1. Concept, Theory and Basis

2.1.1. Article XVI, Section 3
2.1.2. Article II, Section 2
a. Suits against Foreign States, Vienna Convention on Diplomatic Immunity
b. Suits International Agencies, Convention on the Privileges and Immunities of
Specialized Agencies of the United Nations
Cases:
1. Minucher vs. Court of Appeals (G.R. No. 142396, February 11, 2003)

KHOSROW MINUCHER, petitioner,

vs.
HON. COURT OF APPEALS and ARTHUR SCALZO, respondents.

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 Attaché 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 Iñigo, an informer of the Intelligence Unit of the military. Jose Iñigo, 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 Iñigo, 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 defendant’s 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.1awphi1.nét
"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 attaché
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 Minucher’s 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 Court’s
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 Scalzo’s 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 Scalzo’s 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 counsel6 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 Attaché 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' affairs12
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 Attaché of the United States diplomatic
mission and was accredited as such by the Philippine Government. An attaché 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 Attaché 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 standards for 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 suit20 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 Appeals26 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.

Facts:
On 03 August 1988, Minucher filed Civil Case before the Regional Trial Court (RTC) 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.

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. 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 the SC asking that the Civil Case complaint be
ordered dismissed. The case was referred to the Court of Appeals which sustaining the diplomatic immunity of Scalzo
and ordering the dismissal of the complaint against him. Minucher filed a petition for review with the SC appealing the
judgment of the Court of Appeals which the SC reversed the decision of the appellate court and remanded the case to
the lower court for trial. RTC continued with its hearings on the case 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 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 case.

Issue:
Whether Arthur Scalzo is indeed entitled to diplomatic immunity.

Held:
Yes, Arthur Scalzo is indeed entitled to diplomatic immunity. Concededly, vesting a person with diplomatic immunity is a
prerogative of the executive branch of the government. 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. 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 and, with the emergence of
democratic states, made to attach not just to the person of the head of state, or his representative, but also distinctly to
the state itself in its sovereign capacity. If the acts giving rise to a suit are those of a foreign government done by its
foreign agent, although not necessarily a diplomatic personage, but acting in his official capacity, the complaint could be
barred by the immunity of the foreign sovereign from suit without its consent. Suing a representative of a state is
believed to be, in effect, suing the state itself. The proscription is not accorded for the benefit of an individual but for the
State, in whose service he is, under the maxim – par in parem, non habet imperium – that all states are sovereign equals
and cannot assert jurisdiction over one another.

This immunity principle, however, has its limitations. “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. 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.

2. Liang vs. People (G.R. No. 125865, January 28, 2000)

JEFFREY LIANG (HUEFENG), petitioner,

vs.
PEOPLE OF THE PHILIPPINES, respondent.

Petitioner is an economist working with the Asian Development Bank (ADB). Sometime in 1994, for allegedly uttering
defamatory words against fellow ADB worker Joyce Cabal, he was charged before the Metropolitan Trial Court (MeTC) of
Mandaluyong City with two counts of grave oral defamation docketed as Criminal Cases Nos. 53170 and 53171.
Petitioner was arrested by virtue of a warrant issued by the MeTC. After fixing petitioner's bail at P2,400.00 per criminal
charge, the MeTC released him to the custody of the Security Officer of ADB. The next day, the MeTC judge received an
"office of protocol" from the Department of Foreign Affairs (DFA) stating that petitioner is covered by immunity from
legal process under Section 45 of the Agreement between the ADB and the Philippine Government regarding the
Headquarters of the ADB (hereinafter Agreement) in the country. Based on the said protocol communication that
petitioner is immune from suit, the MeTC judge without notice to the prosecution dismissed the two criminal cases. The
latter filed a motion for reconsideration which was opposed by the DFA. When its motion was denied, the prosecution
filed a petition for certiorari and mandamus with the Regional Trial Court (RTC) of Pasig City which set aside the MeTC
rulings and ordered the latter court to enforce the warrant of arrest it earlier issued. After the motion for
reconsideration was denied, petitioner elevated the case to this Court via a petition for review arguing that he is covered
by immunity under the Agreement and that no preliminary investigation was held before the criminal cases were filed in
court.1âwphi1.nêt

The petition is not impressed with merit.

First, courts cannot blindly adhere and take on its face the communication from the DFA that petitioner is covered by
any immunity. The DFA's determination that a certain person is covered by immunity is only preliminary which has no
binding effect in courts. In receiving ex-parte the DFA's advice and in motu propio dismissing the two criminal cases
without notice to the prosecution, the latter's right to due process was violated. It should be noted that due process is a
right of the accused as much as it is of the prosecution. The needed inquiry in what capacity petitioner was acting at the
time of the alleged utterances requires for its resolution evidentiary basis that has yet to be presented at the proper
time.1 At any rate, it has been ruled that the mere invocation of the immunity clause does not ipso facto result in the
dropping of the charges.2

Second, under Section 45 of the Agreement which provides:

Officers and staff of the Bank including for the purpose of this Article experts and consultants performing missions for
the Bank shall enjoy the following privileges and immunities:

a.) immunity from legal process with respect to acts performed by them in their official capacity except when the Bank
waives the immunity.

the immunity mentioned therein is not absolute, but subject to the exception that the acts was done in "official
capacity." It is therefore necessary to determine if petitioner's case falls within the ambit of Section 45(a). Thus, the
prosecution should have been given the chance to rebut the DFA protocol and it must be accorded the opportunity to
present its controverting evidence, should it so desire.

Third, slandering a person could not possibly be covered by the immunity agreement because our laws do not allow the
commission of a crime, such as defamation, in the name of official duty.3 The imputation of theft is ultra vires and
cannot be part of official functions. It is 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 or in bad faith or beyond the
scope of his authority or jurisdiction.4 It appears that even the government's chief legal counsel, the Solicitor General,
does not support the stand taken by petitioner and that of the DFA.

Fourth, under the Vienna Convention on Diplomatic Relations, a diplomatic agent, assuming petitioner is such, enjoys
immunity from criminal jurisdiction of the receiving state except in the case of an action relating to any professional or
commercial activity exercised by the diplomatic agent in the receiving state outside his official functions.5 As already
mentioned above, the commission of a crime is not part of official duty.

Finally, on the contention that there was no preliminary investigation conducted, suffice it to say that preliminary
investigation is not a matter of right in cases cognizable by the MeTC such as the one at bar.6 Being purely a statutory
right, preliminary investigation may be invoked only when specifically granted by law.7 The rule on the criminal
procedure is clear that no preliminary investigation is required in cases falling within the jurisdiction of the MeTC.8
Besides the absence of preliminary investigation does not affect the court's jurisdiction nor does it impair the validity of
the information or otherwise render it defective.9

WHEREFORE, the petition is DENIED.

SO ORDERED.

FACTS
Petitioner is an economist working with the ADB. Sometime in 1994, for allegedly uttering defamatory words against a
fellow ADB worker, he was charged before the MeTC of Mandaluyong City with two counts of grave oral defamation.
Petitioner was arrested by virtue of a warrant issued by the MeTC. He was, thereafter, released on bail. The next day,
the MeTC judge received an "office of protocol" from the DFA stating that petitioner is covered by immunity from legal
process under the Agreement between the ADB and the Philippine Government. The MeTC judge without notice to the
prosecution dismissed the two criminal cases.

ISSUE
whether the petitioner is covered by immunity under the Agreement

RULING
No. The DFA's determination that a certain person is covered by immunity is only preliminary which has no binding
effect in courts. It has been ruled that the mere invocation of the immunity clause does not ipso facto result in the
dropping of the charges. Also, Section 45 of the Agreement provides that the immunity is not absolute, but subject to
the exception that the acts was done in "official capacity". Slandering a person could not possibly be covered by the
immunity agreement because our laws do not allow the commission of a crime, such as defamation, in the name of
official duty.

3. The Holy See vs. Rosario (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.

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).
I
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.

FACTS:
This petition arose from a controversy over a parcel of land, Lot 5-A, 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 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, Starbright Enterprises.
The squatters refused to vacate the lots sold to private respondent so a dispute arose as to who of the parties the
responsibility of evicting and clearing the land of squatters has occurred. Complicating the relations of the parties was
the sale by petitioner of Lot 5-A to Tropicana Properties and Development Corporation (Tropicana).
Private respondent filed a complaint 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.

ISSUE:
Whether or not the petitioner Holy See is immune from suit.

RULING:
YES.
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.
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.
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.

4. Republic vs. Villasor (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.

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.
5. Baer vs. Tizon (57 SCRA 1)

G.R. No. L-24294 May 3, 1974

DONALD BAER, Commander U.S. Naval Base, Subic Bay, Olongapo, Zambales, petitioner,
vs.
HON. TITO V. TIZON, as Presiding Judge of the Court of First Instance of Bataan, and EDGARDO GENER, respondents.

The facts are not in dispute. On November 17, 1964, respondent Edgardo Gener, as plaintiff, filed a complaint for
injunction with the Court of First Instance of Bataan against petitioner, Donald Baer, Commander of the United States
Naval Base in Olongapo. It was docketed as Civil Case No. 2984 of the Court of First Instance of Bataan. He alleged that
he was engaged in the business of logging in an area situated in Barrio Mabayo, Municipality of Morong, Bataan and that
the American Naval Base authorities stopped his logging operations. He prayed for a writ of preliminary injunction
restraining petitioner from interfering with his logging operations. A restraining order was issued by respondent Judge
on November 23, 1964.4 Counsel for petitioner, upon instructions of the American Ambassador to the Philippines,
entered their appearance for the purpose of contesting the jurisdiction of respondent Judge on the ground that the suit
was one against a foreign sovereign without its consent. 5 Then, on December 12, 1964, petitioner filed a motion to
dismiss, wherein such ground was reiterated. It was therein pointed out that he is the chief or head of an agency or
instrumentality of the United States of America, with the subject matter of the action being official acts done by him for
and in behalf of the United States of America. It was added that in directing the cessation of logging operations by
respondent Gener within the Naval Base, petitioner was entirely within the scope of his authority and official duty, the
maintenance of the security of the Naval Base and of the installations therein being the first concern and most
important duty of the Commander of the Base. 6 There was, on December 14, 1964, an opposition and reply to
petitioner's motion to dismiss by respondent Gener, relying on the principle that "a private citizen claiming title and right
of possession of certain property may, to recover possession of said property, sue as individuals, officers and agents of
the Government, who are said to be illegally withholding the same from him, though in doing so, said officers and agents
claim that they are acting for the Government." That was his basis for sustaining the jurisdiction of respondent
Judge.7 Petitioner, thereafter, on January 12, 1965, made a written offer of documentary evidence, including certified
copies of telegrams of the Forestry Director to Forestry personnel in Balanga, Bataan dated January 8, and January 11,
1965, directing immediate investigation of illegal timber cutting in Bataan and calling attention to the fact that the
records of the office show no new renewal of timber license or temporary extension permits. 8 The above
notwithstanding, respondent Judge, on January 12, 1965, issued an order granting respondent Gener's application for
the issuance of a writ of preliminary injunction and denying petitioner's motion to dismiss the opposition to the
application for a writ of preliminary injunction. 9
A motion for reconsideration having proved futile, this petition for certiorari was filed with this Court. The prayer was for
the nullification and setting aside of the writ of preliminary injunction issued by respondent Judge in the aforesaid Civil
Case No. 2984 of the Court of First Instance of Bataan. A resolution of March 17, 1965 was issued by this Court requiring
respondents to file an answer and upon petitioner's posting a bond of P5,000.00 enjoining them from enforcing such
writ of preliminary injunction. The answer was duly forthcoming. It sought to meet the judicial question raised by the
legal proposition that a private citizen claiming title and right of possession of a certain property may, to recover the
same, sue as individuals officers and agents of the government alleged to be illegally withholding such property even if
there is an assertion on their part that they are acting for the government. Support for such a view is found in the
American Supreme Court decisions of United States v. Lee10 and Land v. Dollar.11 Thus the issue is squarely joined
whether or not the doctrine of immunity from suit without consent is applicable. Thereafter, extensive memoranda
were filed both by petitioner and respondents. In addition, there was a manifestation and memorandum of the Republic
of the Philippines as amicus curiae where, after a citation of American Supreme Court decisions going back to  Schooner
Exchange v. M'faddon,12 an 1812 decision, to United States v. Belmont,13 decided in 1937, the plea was made that the
petition for certiorari be granted..
A careful study of the crucial issue posed in this dispute yields the conclusion, as already announced, that petitioner
should prevail.
1. 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.14 In
dismissing a habeas corpus petition for the release of petitioners confined by American army authorities, Justice Hilado,
speaking for the Court, cited from Coleman v. Tennessee,15 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." 16 Two years later, in Tubb and Tedrow v.
Griess,17 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, Oppenhein, Westlake, Hyde, and McNair and
Lauterpacht.18 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. 19 More to the point is Syquia v.
Almeda Lopez,20 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 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 "action must be considered as one against the U.S. Government." 21 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 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."22 Then came Marvel Building Corporation v. Philippine War Damage Commission,23 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."24 The Syquia ruling was again explicitly relied upon in Marquez Lim v. Nelson,25 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." 26 So it was in Philippine Alien Property Administration v.
Castelo,27 where it was held that a suit against the 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,28 as the following excerpt from the opinion of Justice Tuason 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."29 Finally, there is Johnson v. Turner,30 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,31 explaining why it could not be sustained.
The solidity of the stand of petitioner is therefore evident. What was sought by private respondent and what was
granted by respondent Judge amounted to an interference with the performance of the duties of petitioner in the base
area in accordance with the powers possessed by him under the Philippine-American Military Bases Agreement. This
point was made clear in these words: "Assuming, for purposes of argument, that the Philippine Government, through
the Bureau of Forestry, possesses the "authority to issue a Timber License to cut logs" inside a military base, the Bases
Agreement subjects the exercise of rights under a timber license issued by the Philippine Government to the exercise by
the United States of its rights, power and authority of control within the bases; and the findings of the Mutual Defense
Board, an agency of both the Philippine and United States Governments, that "continued logging operation by Mr.
Gener within the boundaries of the U.S. Naval Base would not be consistent with the security and operation of the
Base," is conclusive upon the respondent Judge. .. The doctrine of state immunity is not limited to cases which would
result in a pecuniary charge against the sovereign or would require the doing of an affirmative act by it. Prevention of a
sovereign from doing an affirmative act pertaining directly and immediately to the most important public function of any
government - the defense of the state — is equally as untenable as requiring it to do an affirmative act." 32 That such an
appraisal is not opposed to the interpretation of the relevant treaty provision by our government is made clear in the
aforesaid manifestation and memorandum as amicus curiae, wherein it joined petitioner for the grant of the remedy
prayed for.
2. There should be no misinterpretation of the scope of the decision reached by this Court. Petitioner, as the
Commander of the United States Naval Base in Olongapo, does not possess diplomatic immunity. He may therefore be
proceeded against in his personal capacity, or when the action taken by him cannot be imputed to the government
which he represents. Thus, after the Military Bases Agreement, in Miquiabas v. Commanding General33 and Dizon v. The
Commanding General of the Philippine-Ryukus Command,34 both of them being habeas corpus petitions, there was no
question as to the submission to jurisdiction of the respondents. As a matter of fact, in Miquiabas v. Commanding
General,35 the immediate release of the petitioner was ordered, it being apparent that the general court martial
appointed by respondent Commanding General was without jurisdiction to try petitioner. Thereafter, in the cited cases
of Syquia, Marquez Lim, and Johnson, the parties proceeded against were American army commanding officers stationed
in the Philippines. The insuperable obstacle to the jurisdiction of respondent Judge is that a foreign sovereign without its
consent is haled into court in connection with acts performed by it pursuant to treaty provisions and thus impressed
with a governmental character.
3. The infirmity of the actuation of respondent Judge becomes even more glaring when it is considered that private
respondent had ceased to have any right of entering within the base area. This is made clear in the petition in these
words: "In 1962, respondent Gener was issued by the Bureau of Forestry an ordinary timber license to cut logs in Barrio
Mabayo, Morong, Bataan. The license was renewed on July 10, 1963. In 1963, he commenced logging operation inside
the United States Naval Base, Subic Bay, but in November 1963 he was apprehended and stopped by the Base
authorities from logging inside the Base. The renewal of his license expired on July 30, 1964, and to date his license has
not been renewed by the Bureau of Forestry. .. In July 1964, the Mutual Defense Board, a joint Philippines-United States
agency established pursuant to an exchange of diplomatic notes between the Secretary of Foreign Affairs and the United
States Ambassador to provide "direct liaison and consultation between appropriate Philippine and United States
authorities on military matters of mutual concern,' advised the Secretary of Foreign Affairs in writing that: "The enclosed
map shows that the area in which Mr. Gener was logging definitely falls within the boundaries of the base. This map also
depicts certain contiguous and overlapping areas whose functional usage would be interfered with by the logging
operations.'"36 Nowhere in the answer of respondents, nor in their memorandum, was this point met. It remained
unrefuted.
WHEREFORE, the writ of certiorari prayed for is granted, nullifying and setting aside the writ of preliminary injunction
issued by respondent Judge in Civil Case No. 2984 of the Court of First Instance of Bataan. The injunction issued by this
Court on March 18, 1965 enjoining the enforcement of the aforesaid writ of preliminary injunction of respondent Judge
is hereby made permanent. Costs against private respondent Edgardo Gener.

Facts:
Edgardo Gener was engaged in the business of logging in an area situated in Barrio Mabayo, Bataan. His logging
operations was, however, stopped by American Naval Base authorities - who were headed by Donald Baer, the
Commander of the US Naval Base in Olongapo. 

Gener filed a complaint in the CFI [RTC] of Bataan praying for a writ of preliminary injunction with restraining order
against Baer for interfering with his logging operations. 

Baer, on the otherhand, contested the jurisdiction of the CFI [RTC] of Bataan and invoked the doctrine of state immunity
from suit. He claimed that cessation of the logging operations within the Naval Base is within the scope of his authority
and official duty. Thus, a suit filed against him is one against a foreign sovereign. 

Issue:
Whether Baer may invoke the doctrine of state immunity, thus, he is outside the jurisdiction of the CFI [RTC] of Bataan?

Ruling:
Yes. Baer may validly invoke the doctrine of state immunity, thus, the suit against him will not prosper. 

What was sought by Gener and what was granted by the respondent Judge amounted to an interference with the
performance of the duties of Baer in the base area in accordance with the powers possessed by him under the
Philippine-American Military Bases Agreement. 

His point has been made clear, "Assuming, for purposes of argument, that the Philippine Government, through the
Bureau of Forestry, possesses the "authority to issue a Timber License to cut logs" inside a military base, the Bases
Agreement subjects the exercise of rights under a timber license issued by the Philippine Government to the exercise by
the United States of its rights, power and authority of control within the bases; and the findings of the Mutual Defense
Board, an agency of both the Philippine and United States Governments, that "continued logging operation by Mr.
Gener within the boundaries of the U.S. Naval Base would not be consistent with the security and operation of the
Base," is conclusive upon the respondent Judge.

6. International Catholic Migration Commission vs. Calleja (190 SCRA 130)

G.R. No. 85750 September 28, 1990

INTERNATIONAL CATHOLIC IMMIGRATION COMMISSION, petitioner

vs
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE BUREAU OF LABOR RELATIONS AND TRADE UNIONS OF
THE PHILIPPINES AND ALLIED SERVICES (TUPAS) WFTU respondents.

G.R. No. 89331 September 28, 1990

KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED LABOR ASSOCIATION IN LINE INDUSTRIES AND

AGRICULTURE, petitioner,
vs
SECRETARY OF LABOR AND EMPLOYMENT AND INTERNATIONAL RICE RESEARCH INSTITUTE, INC., respondents.

Facts and Issues

A. G.R. No. 85750 — the International Catholic Migration Commission (ICMC) Case.
As an aftermath of the Vietnam War, the plight of Vietnamese refugees fleeing from South Vietnam's communist rule
confronted the international community.
In response to this crisis, on 23 February 1981, an Agreement was forged between the Philippine Government and the
United Nations High Commissioner for Refugees whereby an operating center for processing Indo-Chinese refugees for
eventual resettlement to other countries was to be established in Bataan (Annex "A", Rollo, pp. 22-32).
ICMC was one of those accredited by the Philippine Government to operate the refugee processing center in Morong,
Bataan. It was incorporated in New York, USA, at the request of the Holy See, as a non-profit agency involved in
international humanitarian and voluntary work. It is duly registered with the United Nations Economic and Social Council
(ECOSOC) and enjoys Consultative Status, Category II. As an international organization rendering voluntary and
humanitarian services in the Philippines, its activities are parallel to those of the International Committee for Migration
(ICM) and the International Committee of the Red Cross (ICRC) [DOLE Records of BLR Case No. A-2-62-87, ICMC v.
Calleja, Vol. 1].
On 14 July 1986, Trade Unions of the Philippines and Allied Services (TUPAS) filed with the then Ministry of Labor and
Employment a Petition for Certification Election among the rank and file members employed by ICMC The latter
opposed the petition on the ground that it is an international organization registered with the United Nations and,
hence, enjoys diplomatic immunity.
On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained ICMC and dismissed the petition for lack of jurisdiction.
On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor Relations (BLR), reversed the Med-Arbiter's Decision
and ordered the immediate conduct of a certification election. At that time, ICMC's request for recognition as a
specialized agency was still pending with the Department of Foreign Affairs (DEFORAF).
Subsequently, however, on 15 July 1988, the Philippine Government, through the DEFORAF, granted ICMC the status of
a specialized agency with corresponding diplomatic privileges and immunities, as evidenced by a Memorandum of
Agreement between the Government and ICMC (Annex "E", Petition, Rollo, pp. 41-43), infra.
ICMC then sought the immediate dismissal of the TUPAS Petition for Certification Election invoking the immunity
expressly granted but the same was denied by respondent BLR Director who, again, ordered the immediate conduct of a
pre-election conference. ICMC's two Motions for Reconsideration were denied despite an opinion rendered by DEFORAF
on 17 October 1988 that said BLR Order violated ICMC's diplomatic immunity.
Thus, on 24 November 1988, ICMC filed the present Petition for Certiorari  with Preliminary Injunction assailing the BLR
Order.
On 28 November 1988, the Court issued a Temporary Restraining Order enjoining the holding of the certification
election.
On 10 January 1989, the DEFORAF, through its Legal Adviser, retired Justice Jorge C. Coquia of the Court of Appeals, filed
a Motion for Intervention alleging that, as the highest executive department with the competence and authority to act
on matters involving diplomatic immunity and privileges, and tasked with the conduct of Philippine diplomatic and
consular relations with foreign governments and UN organizations, it has a legal interest in the outcome of this case.
Over the opposition of the Solicitor General, the Court allowed DEFORAF intervention.
On 12 July 1989, the Second Division gave due course to the ICMC Petition and required the submittal of memoranda by
the parties, which has been complied with.
As initially stated, the issue is whether or not the grant of diplomatic privileges and immunites to ICMC extends to
immunity from the application of Philippine labor laws.
ICMC sustains the affirmative of the proposition citing (1) its Memorandum of Agreement with the Philippine
Government giving it the status of a specialized agency, (infra); (2) the Convention on the Privileges and Immunities of
Specialized Agencies, adopted by the UN General Assembly on 21 November 1947 and concurred in by the Philippine
Senate through Resolution No. 91 on 17 May 1949 (the Philippine Instrument of Ratification was signed by the President
on 30 August 1949 and deposited with the UN on 20 March 1950) infra; and (3) Article II, Section 2 of the 1987
Constitution, which declares that the Philippines adopts the generally accepted principles of international law as part of
the law of the land.
Intervenor DEFORAF upholds ICMC'S claim of diplomatic immunity and seeks an affirmance of the DEFORAF
determination that the BLR Order for a certification election among the ICMC employees is violative of the diplomatic
immunity of said organization.
Respondent BLR Director, on the other hand, with whom the Solicitor General agrees, cites State policy and Philippine
labor laws to justify its assailed Order, particularly, Article II, Section 18 and Article III, Section 8 of the 1987
Constitution, infra; and Articles 243 and 246 of the Labor Code, as amended, ibid. In addition, she contends that a
certification election is not a litigation but a mere investigation of a non-adversary, fact-finding character. It is not a suit
against ICMC its property, funds or assets, but is the sole concern of the workers themselves.
B. G.R. No. 89331 — (The International Rice Research Institute [IRRI] Case).
Before a Decision could be rendered in the ICMC Case, the Third Division, on 11 December 1989, resolved to consolidate
G.R. No. 89331 pending before it with G.R. No. 85750, the lower-numbered case pending with the Second Division, upon
manifestation by the Solicitor General that both cases involve similar issues.
The facts disclose that on 9 December 1959, the Philippine Government and the Ford and Rockefeller Foundations
signed a Memorandum of Understanding establishing the International Rice Research Institute (IRRI) at Los Baños,
Laguna. It was intended to be an autonomous, philanthropic, tax-free, non-profit, non-stock organization designed to
carry out the principal objective of conducting "basic research on the rice plant, on all phases of rice production,
management, distribution and utilization with a view to attaining nutritive and economic advantage or benefit for the
people of Asia and other major rice-growing areas through improvement in quality and quantity of rice."
Initially, IRRI was organized and registered with the Securities and Exchange Commission as a private corporation subject
to all laws and regulations. However, by virtue of Pres. Decree No. 1620, promulgated on 19 April 1979, IRRI was granted
the status, prerogatives, privileges and immunities of an international organization.
The Organized Labor Association in Line Industries and Agriculture (OLALIA), is a legitimate labor organization with an
existing local union, the Kapisanan ng Manggagawa at TAC sa IRRI (Kapisanan, for short) in respondent IRRI.
On 20 April 1987, the Kapisanan filed a Petition for Direct Certification Election with Region IV, Regional Office of the
Department of Labor and Employment (DOLE).
IRRI opposed the petition invoking Pres. Decree No. 1620 conferring upon it the status of an international organization
and granting it immunity from all civil, criminal and administrative proceedings under Philippine laws.
On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the opposition on the basis of Pres. Decree No. 1620 and
dismissed the Petition for Direct Certification.
On appeal, the BLR Director, who is the public respondent in the ICMC Case, set aside the Med-Arbiter's Order and
authorized the calling of a certification election among the rank-and-file employees of IRRI. Said Director relied on
Article 243 of the Labor Code, as amended, infra and Article XIII, Section 3 of the 1987 Constitution, 1 and held that "the
immunities and privileges granted to IRRI do not include exemption from coverage of our Labor Laws." Reconsideration
sought by IRRI was denied.
On appeal, the Secretary of Labor, in a Resolution of 5 July 1989, set aside the BLR Director's Order, dismissed the
Petition for Certification Election, and held that the grant of specialized agency status by the Philippine Government to
the IRRI bars DOLE from assuming and exercising jurisdiction over IRRI Said Resolution reads in part as follows:
Presidential Decree No. 1620 which grants to the IRRI the status, prerogatives, privileges and immunities of an
international organization is clear and explicit. It provides in categorical terms that:
Art. 3 — The Institute shall enjoy immunity from any penal, civil and administrative proceedings, except insofar as
immunity has been expressly waived by the Director-General of the Institution or his authorized representative.
Verily, unless and until the Institute expressly waives its immunity, no summons, subpoena, orders, decisions or
proceedings ordered by any court or administrative or quasi-judicial agency are enforceable as against the Institute. In
the case at bar there was no such waiver made by the Director-General of the Institute. Indeed, the Institute, at the very
first opportunity already vehemently questioned the jurisdiction of this Department by filing an ex-parte motion to
dismiss the case.
Hence, the present Petition for Certiorari  filed by Kapisanan alleging grave abuse of discretion by respondent Secretary
of Labor in upholding IRRI's diplomatic immunity.
The Third Division, to which the case was originally assigned, required the respondents to comment on the petition. In a
Manifestation filed on 4 August 1990, the Secretary of Labor declared that it was "not adopting as his own"  the decision
of the BLR Director in the ICMC Case as well as the Comment of the Solicitor General sustaining said Director. The last
pleading was filed by IRRI on 14 August 1990.
Instead of a Comment, the Solicitor General filed a Manifestation and Motion praying that he be excused from filing a
comment "it appearing that in the earlier case of International Catholic Migration Commission v. Hon. Pura Calleja, G.R.
No. 85750. the Office of the Solicitor General had sustained the stand of Director Calleja on the very same issue now
before it, which position has been superseded by respondent Secretary of Labor in G.R. No. 89331," the present case.
The Court acceded to the Solicitor General's prayer.
The Court is now asked to rule upon whether or not the Secretary of Labor committed grave abuse of discretion in
dismissing the Petition for Certification Election filed by Kapisanan.
Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting IRRI the status, privileges, prerogatives and
immunities of an international organization, invoked by the Secretary of Labor, is unconstitutional in so far as it deprives
the Filipino workers of their fundamental and constitutional right to form trade unions for the purpose of collective
bargaining as enshrined in the 1987 Constitution.
A procedural issue is also raised. Kapisanan faults respondent Secretary of Labor for entertaining IRRI'S appeal from the
Order of the Director of the Bureau of Labor Relations directing the holding of a certification election. Kapisanan
contends that pursuant to Sections 7, 8, 9 and 10 of Rule V 2 of the Omnibus Rules Implementing the Labor Code, the
Order of the BLR Director had become final and unappeable and that, therefore, the Secretary of Labor had no more
jurisdiction over the said appeal.
On the other hand, in entertaining the appeal, the Secretary of Labor relied on Section 25 of Rep. Act. No. 6715, which
took effect on 21 March 1989, providing for the direct filing of appeal from the Med-Arbiter to the Office of the
Secretary of Labor and Employment instead of to the Director of the Bureau of Labor Relations in cases involving
certification election orders.
III
Findings in Both Cases.
There can be no question that diplomatic immunity has, in fact, been granted ICMC and IRRI.
Article II of the Memorandum of Agreement between the Philippine Government and ICMC provides that ICMC shall
have a status "similar to that of a specialized agency." Article III, Sections 4 and 5 of the Convention on the Privileges and
Immunities of Specialized Agencies, adopted by the UN General Assembly on 21 November 1947 and concurred in by
the Philippine Senate through Resolution No. 19 on 17 May 1949, explicitly provides:
Art. III, Section 4. The specialized agencies, their property and assets, wherever located and by whomsoever held,
shall enjoy immunity from every form of legal process except insofar as in any particular case they have expressly waived
their immunity. It is, however, understood that no waiver of immunity shall extend to any measure of execution.
Sec. 5. — The premises of the specialized agencies shall be inviolable. The property and assets of the specialized
agencies, wherever located and by whomsoever held shall be immune from search, requisition, confiscation,
expropriation and any other form of interference, whether by executive, administrative, judicial or legislative action.
(Emphasis supplied).
IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is explicit in its grant of immunity, thus:
Art. 3. Immunity from Legal Process. — The Institute shall enjoy immunity from any penal, civil and administrative
proceedings, except insofar as that immunity has been expressly waived by the Director-General of the Institute or his
authorized representatives.
Thus it is that the DEFORAF, through its Legal Adviser, sustained ICMC'S invocation of immunity when in a
Memorandum, dated 17 October 1988, it expressed the view that "the Order of the Director of the Bureau of Labor
Relations dated 21 September 1988 for the conduct of Certification Election within ICMC violates the diplomatic
immunity of the organization." Similarly, in respect of IRRI, the DEFORAF speaking through The Acting Secretary of
Foreign Affairs, Jose D. Ingles, in a letter, dated 17 June 1987, to the Secretary of Labor, maintained that "IRRI enjoys
immunity from the jurisdiction of DOLE in this particular instance."
The foregoing opinions constitute a categorical recognition by the Executive Branch of the Government that ICMC and
IRRI enjoy immunities accorded to international organizations, which determination has been held to be a political
question conclusive upon the Courts in order not to embarrass a political department of Government.
It is a recognized principle of international law and under our system of separation of powers that diplomatic immunity
is essentially a political question and courts should refuse to look beyond a determination by the executive branch of the
government, and where the plea of diplomatic immunity is recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the courts to accept the claim of immunity upon appropriate
suggestion by the principal law officer of the government . . . or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so exercise their jurisdiction . . . as to embarrass the executive
arm of the government in conducting foreign relations, it is accepted doctrine that in such cases the judicial department
of (this) government follows the action of the political branch and will not embarrass the latter by assuming an
antagonistic jurisdiction. 3
A brief look into the nature of international organizations and specialized agencies is in order. The term "international
organization" is generally used to describe an organization set up by agreement between two or more states. 4 Under
contemporary international law, such organizations are endowed with some degree of international legal
personality 5 such that they are capable of exercising specific rights, duties and powers. 6 They are organized mainly as a
means for conducting general international business in which the member states have an interest. 7 The United Nations,
for instance, is an international organization dedicated to the propagation of world peace.
"Specialized agencies" are international organizations having functions in particular fields. The term appears in Articles
57 8 and 63 9 of the Charter of the United Nations:
The Charter, while it invests the United Nations with the general task of promoting progress and international
cooperation in economic, social, health, cultural, educational and related matters, contemplates that these tasks will be
mainly fulfilled not by organs of the United Nations itself but by autonomous international organizations established by
inter-governmental agreements outside the United Nations. There are now many such international agencies having
functions in many different fields, e.g. in posts, telecommunications, railways, canals, rivers, sea transport, civil aviation,
meteorology, atomic energy, finance, trade, education and culture, health and refugees. Some are virtually world-wide
in their membership, some are regional or otherwise limited in their membership. The Charter provides that those
agencies which have "wide international responsibilities" are to be brought into relationship with the United Nations by
agreements entered into between them and the Economic and Social Council, are then to be known as "specialized
agencies." 10
The rapid growth of international organizations under contemporary international law has paved the way for the
development of the concept of international immunities.
It is now usual for the constitutions of international organizations to contain provisions conferring certain immunities on
the organizations themselves, representatives of their member states and persons acting on behalf of the organizations.
A series of conventions, agreements and protocols defining the immunities of various international organizations in
relation to their members generally are now widely in force; . . . 11
There are basically three propositions underlying the grant of international immunities to international organizations.
These principles, contained in the ILO Memorandum are stated thus: 1) international institutions should have a status
which protects them against control or interference by any one government in the performance of functions for the
effective discharge of which they are responsible to democratically constituted international bodies in which all the
nations concerned are represented; 2) no country should derive any national financial advantage by levying fiscal
charges on common international funds; and 3) the international organization should, as a collectivity of States
members, be accorded the facilities for the conduct of its official business customarily extended to each other by its
individual member States. 12 The theory behind all three propositions is said to be essentially institutional in character.
"It is not concerned with the status, dignity or privileges of individuals, but with the elements of functional
independence necessary to free international institutions from national control and to enable them to discharge their
responsibilities impartially on behalf of all their members. 13 The raison d'etre for these immunities is the assurance of
unimpeded performance of their functions by the agencies concerned.
The grant of immunity from local jurisdiction to ICMC and IRRI is clearly necessitated by their international character and
respective purposes. The objective is to avoid the danger of partiality and interference by the host country in their
internal workings. The exercise of jurisdiction by the Department of Labor in these instances would defeat the very
purpose of immunity, which is to shield the affairs of international organizations, in accordance with international
practice, from political pressure or control by the host country to the prejudice of member States of the organization,
and to ensure the unhampered performance of their functions.
ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its basic rights, which are guaranteed
by Article II, Section 18, 14 Article III, Section 8, 15 and Article XIII, Section 3 (supra), of the 1987 Constitution; and
implemented by Articles 243 and 246 of the Labor Code, 16 relied on by the BLR Director and by Kapisanan.
For, ICMC employees are not without recourse whenever there are disputes to be settled. Section 31 of the Convention
on the Privileges and Immunities of the Specialized Agencies of the United Nations 17 provides that "each specialized
agency shall make provision for appropriate modes of settlement of: (a) disputes arising out of contracts or other
disputes of private character to which the specialized agency is a party." Moreover, pursuant to Article IV of the
Memorandum of Agreement between ICMC the the Philippine Government, whenever there is any abuse of privilege by
ICMC, the Government is free to withdraw the privileges and immunities accorded. Thus:
Art. IV. Cooperation with Government Authorities. — 1. The Commission shall cooperate at all times with the appropriate
authorities of the Government to ensure the observance of Philippine laws, rules and regulations, facilitate the proper
administration of justice and prevent the occurrences of any abuse of the privileges and immunities granted its officials
and alien employees in Article III of this Agreement to the Commission.
2. In the event that the Government determines that there has been an abuse of the privileges and immunities granted
under this Agreement, consultations shall be held between the Government and the Commission to determine whether
any such abuse has occurred and, if so, the Government shall withdraw the privileges and immunities granted the
Commission and its officials.
Neither are the employees of IRRI without remedy in case of dispute with management as, in fact, there had been
organized a forum for better management-employee relationship as evidenced by the formation of the Council of IRRI
Employees and Management (CIEM) wherein "both management and employees were and still are represented for
purposes of maintaining mutual and beneficial cooperation between IRRI and its employees." The existence of this
Union factually and tellingly belies the argument that Pres. Decree No. 1620, which grants to IRRI the status, privileges
and immunities of an international organization, deprives its employees of the right to self-organization.
The immunity granted being "from every form of legal process except in so far as in any particular case they have
expressly waived their immunity," it is inaccurate to state that a certification election is beyond the scope of that
immunity for the reason that it is not a suit against ICMC. A certification election cannot be viewed as an independent or
isolated process. It could tugger off a series of events in the collective bargaining process together with related incidents
and/or concerted activities, which could inevitably involve ICMC in the "legal process," which includes "any penal, civil
and administrative proceedings." The eventuality of Court litigation is neither remote and from which international
organizations are precisely shielded to safeguard them from the disruption of their functions. Clauses on jurisdictional
immunity are said to be standard provisions in the constitutions of international Organizations. "The immunity covers
the organization concerned, its property and its assets. It is equally applicable to proceedings in personam and
proceedings  in rem." 18
We take note of a Manifestation, dated 28 September 1989, in the ICMC Case (p. 161, Rollo), wherein TUPAS calls
attention to the case entitled "International Catholic Migration Commission v. NLRC, et als., (G.R. No. 72222, 30 January
1989, 169 SCRA 606), and claims that, having taken cognizance of that dispute (on the issue of payment of salary for the
unexpired portion of a six-month probationary employment), the Court is now estopped from passing upon the question
of DOLE jurisdiction petition over ICMC.
We find no merit to said submission. Not only did the facts of said controversy occur between 1983-1985, or before the
grant to ICMC on 15 July 1988 of the status of a specialized agency with corresponding immunities, but also because
ICMC in that case did not invoke its immunity and, therefore, may be deemed to have waived it, assuming that during
that period (1983-1985) it was tacitly recognized as enjoying such immunity.
Anent the procedural issue raised in the IRRI Case, suffice it to state that the Decision of the BLR Director, dated 15
February 1989, had not become final because of a Motion for Reconsideration filed by IRRI Said Motion was acted upon
only on 30 March 1989 when Rep. Act No. 6715, which provides for direct appeals from the Orders of the Med-Arbiter
to the Secretary of Labor in certification election cases either from the order or the results of the election itself, was
already in effect, specifically since 21 March 1989. Hence, no grave abuse of discretion may be imputed to respondent
Secretary of Labor in his assumption of appellate jurisdiction, contrary to Kapisanan's allegations. The pertinent portion
of that law provides:
Art. 259. — Any party to an election may appeal the order or results of the election as determined by the Med-
Arbiter directly  to the Secretary of Labor and Employment on the ground that the rules and regulations or parts thereof
established by the Secretary of Labor and Employment for the conduct of the election have been violated. Such appeal
shall be decided within 15 calendar days (Emphasis supplied).
En passant, the Court is gratified to note that the heretofore antagonistic positions assumed by two departments of the
executive branch of government have been rectified and the resultant embarrassment to the Philippine Government in
the eyes of the international community now, hopefully, effaced.
WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is GRANTED, the Order of the Bureau of Labor Relations for
certification election is SET ASIDE, and the Temporary Restraining Order earlier issued is made PERMANENT.
In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no grave abuse of discretion having been committed by the
Secretary of Labor and Employment in dismissing the Petition for Certification Election.
No pronouncement as to costs.
SO ORDERED.

FACTS: 
ICMC was one of those accredited by the Philippine Government to operate the refugee processing center in Morong,
Bataan. It was incorporated in New York, USA, at the request of the Holy See, as a non-profit agency involved in
international humanitarian and voluntary work.
IRRI on the other hand was intended to be an autonomous, philanthropic, tax-free, non-profit, non-stock organization
designed to carry out the principal objective of conducting “basic research on the rice plant, on all phases of rice
production, management, distribution and utilization with a view to attaining nutritive and economic advantage or
benefit for the people of Asia and other major rice-growing areas through improvement in quality and quantity of rice.”
The labor organizations in each of the above mentioned agencies filed a petition for certification election, which was
opposed by both, invoking diplomatic immunity.

ISSUE: 
Are the claim of immunity by the ICMC and the IRRI from the application of Philippine labor laws valid?

HELD:
YES. There are basically three propositions underlying the grant of international immunities to international
organizations. These principles, contained in the ILO Memorandum are stated thus:
1) international institutions should have a status which protects them against control or interference by any one
government in the performance of functions for the effective discharge of which they are responsible to democratically
constituted international bodies in which all the nations concerned are represented;
2) no country should derive any national financial advantage by levying fiscal charges on common international funds;
and
3) the international organization should, as a collectivity of States members, be accorded the facilities for the conduct of
its official business customarily extended to each other by its individual member States.
The theory behind all three propositions is said to be essentially institutional in character. “It is not concerned with the
status, dignity or privileges of individuals, but with the elements of functional independence necessary to free
international institutions from national control and to enable them to discharge their responsibilities impartially on
behalf of all their members. The raison d’etre for these immunities is the assurance of unimpeded performance of their
functions by the agencies concerned.
**
ICMC’s and IRRI’s immunity from local jurisdiction by no means deprives labor of its basic rights, which are guaranteed
by our Constitution.
For, ICMC employees are not without recourse whenever there are disputes to be settled. Section 31 of the Convention
on the Privileges and Immunities of the Specialized Agencies of the United Nations provides that “each specialized
agency shall make provision for appropriate modes of settlement of: (a) disputes arising out of contracts or other
disputes of private character to which the specialized agency is a party.” Moreover, pursuant to Article IV of the
Memorandum of Agreement between ICMC the the Philippine Government, whenever there is any abuse of privilege by
ICMC, the Government is free to withdraw the privileges and immunities accorded.
Neither are the employees of IRRI without remedy in case of dispute with management as, in fact, there had been
organized a forum for better management-employee relationship as evidenced by the formation of the Council of IRRI
Employees and Management (CIEM) wherein “both management and employees were and still are represented for
purposes of maintaining mutual and beneficial cooperation between IRRI and its employees.”

NOTES:
The term “international organization” is generally used to describe an organization set up by agreement between two or
more states.  Under contemporary international law, such organizations are endowed with some degree of international
legal personality such that they are capable of exercising specific rights, duties and powers. They are organized mainly as
a means for conducting general international business in which the member states have an interest. The United Nations,
for instance, is an international organization dedicated to the propagation of world peace.
“Specialized agencies” are international organizations having functions in particular fields.

7. World Health Organization vs. Aquino (48 SCRA 242)

G.R. No. L-35131 November 29, 1972

THE WORLD HEALTH ORGANIZATION and DR. LEONCE VERSTUYFT, petitioners,

vs.
HON. BENJAMIN H. AQUINO, as Presiding Judge of Branch VIII, Court of First Instance of Rizal, MAJOR WILFREDO
CRUZ, MAJOR ANTONIO G. RELLEVE, and CAPTAIN PEDRO S. NAVARRO of the Constabulary Offshore Action Center
(COSAC), respondents.

Upon filing of the petition, the Court issued on June 6, 1972 a restraining order enjoining respondents from executing
the search warrant in question.
Respondents COSAC officers filed their answer joining issue against petitioners and seeking to justify their act of applying
for and securing from respondent judge the warrant for the search and seizure of ten crates consigned to petitioner
Verstuyft and stored at the Eternit Corporation warehouse on the ground that they "contain large quantities of highly
dutiable goods" beyond the official needs of said petitioner "and the only lawful way to reach these articles and effects
for purposes of taxation is through a search warrant." 1
The Court thereafter called for the parties' memoranda in lieu of oral argument, which were filed on August 3, 1972 by
respondents and on August 21, 1972 by petitioners, and the case was thereafter deemed submitted for decision.
It is undisputed in the record that petitioner Dr. Leonce Verstuyft, who was assigned on December 6, 1971 by the WHO
from his last station in Taipei to the Regional Office in Manila as Acting Assistant Director of Health Services, is entitled
to diplomatic immunity, pursuant to the Host Agreement executed on July 22, 1951 between the Philippine Government
and the World Health Organization.
Such diplomatic immunity carries with it, among other diplomatic privileges and immunities, personal inviolability,
inviolability of the official's properties, exemption from local jurisdiction, and exemption from taxation and customs
duties.
When petitioner Verstuyft's personal effects contained in twelve (12) crates entered the Philippines as unaccompanied
baggage on January 10, 1972, they were accordingly allowed free entry from duties and taxes. The crates were directly
stored at the Eternit Corporation's warehouse at Mandaluyong, Rizal, "pending his relocation into permanent quarters
upon the offer of Mr. Berg, Vice President of Eternit who was once a patient of Dr. Verstuyft in the Congo." 2
Nevertheless, as above stated, respondent judge issued on March 3, 1972 upon application on the same date of
respondents COSAC officers search warrant No. 72-138 for alleged violation of Republic Act 4712 amending section 3601
of the Tariff and Customs Code 3 directing the search and seizure of the dutiable items in said crates.
Upon protest of March 6, 1972 of Dr. Francisco Dy, WHO Regional Director for the Western Pacific with station in
Manila, Secretary of Foreign Affairs Carlos P. Romulo, personally wired on the same date respondent Judge advising that
"Dr. Verstuyft is entitled to immunity from search in respect of his personal baggage as accorded to members of
diplomatic missions" pursuant to the Host Agreement and requesting suspension of the search warrant order "pending
clarification of the matter from the ASAC."
Respondent judge set the Foreign Secretary's request for hearing and heard the same on March 16, 1972, but
notwithstanding the official plea of diplomatic immunity interposed by a duly authorized representative of the
Department of Foreign Affairs who furnished the respondent judge with a list of the articles brought in by petitioner
Verstuyft, respondent judge issued his order of the same date maintaining the effectivity of the search warrant issued by
him, unless restrained by a higher court. 4
Petitioner Verstuyft's special appearance on March 24, 1972 for the limited purpose of pleading his diplomatic immunity
and motion to quash search warrant of April 12, 1972 failed to move respondent judge.
At the hearing thereof held on May 8, 1972, the Office of the Solicitor General appeared and filed an extended comment
stating the official position of the executive branch of the Philippine Government that petitioner Verstuyft is entitled to
diplomatic immunity, he did not abuse his diplomatic immunity, 5 and that court proceedings in the receiving or host
State are not the proper remedy in the case of abuse of diplomatic immunity. 6
The Solicitor General accordingly joined petitioner Verstuyft's prayer for the quashal of the search warrant. Respondent
judge nevertheless summarily denied quashal of the search warrant per his order of May 9, 1972 "for the same reasons
already stated in (his) aforesaid order of March 16, 1972" disregarding Foreign Secretary Romulo's plea of diplomatic
immunity on behalf of Dr. Verstuyft.
Hence, the petition at bar. Petitioner Verstuyft has in this Court been joined by the World Health Organization (WHO)
itself in full assertion of petitioner Verstuyft's being entitled "to all privileges and immunities, exemptions and facilities
accorded to diplomatic envoys in accordance with international law" under section 24 of the Host Agreement.
The writs of certiorari and prohibition should issue as prayed for.
1. The executive branch of the Philippine Government has expressly  recognized that petitioner Verstuyft is entitled to
diplomatic immunity, pursuant to the provisions of the Host Agreement. The Department of Foreign Affairs formally
advised respondent judge of the Philippine Government's official position that accordingly "Dr. Verstuyft cannot be the
subject of a Philippine court summons without violating an obligation in international law of the Philippine Government"
and asked for the quashal of the search warrant, since his personal effects and baggages after having been allowed free
entry from all customs duties and taxes, may not be baselessly claimed to have been "unlawfully imported" in violation
of the tariff and customs code as claimed by respondents COSAC officers. The Solicitor-General, as principal law officer of
the Government, 7 likewise expressly affirmed said petitioner's right to diplomatic immunity and asked for the quashal of
the search warrant.
It is a recognized principle of international law and under our system of separation of powers that diplomatic immunity
is essentially a political question and courts should refuse to look beyond a determination by the executive branch of the
government, 8 and where the plea of diplomatic immunity is recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the courts to accept the claim of immunity upon appropriate
suggestion by the principal law officer of the government, the Solicitor General in this case, or other officer acting under
his direction.9 Hence, in adherence to the settled principle that courts may not so exercise their jurisdiction by seizure
and detention of property, as to embarrass the executive arm of the government in conducting foreign relations, it is
accepted doctrine that "in such cases the judicial department of (this) government follows the action of the political
branch and will not embarrass the latter by assuming an antagonistic jurisdiction." 10
2. The unfortunate fact that respondent judge chose to rely on the suspicion of respondents COSAC officers "that the
other remaining crates unopened contain contraband items" 11 rather than on the categorical assurance of the Solicitor-
General that petitioner Verstuyft did not abuse his diplomatic immunity, 12 which was based in turn on the official
positions taken by the highest executive officials with competence and authority to act on the matter, namely, the
Secretaries of Foreign Affairs and of Finance, could not justify respondent judge's denial of the quashal of the search
warrant.
As already stated above, and brought to respondent court's attention, 13 the Philippine Government is bound by the
procedure laid down in Article VII of the Convention on the Privileges and Immunities of the Specialized Agencies of the
United Nations 14 for consultations between the Host State and the United Nations agency concerned to determine, in
the first instance the fact of occurrence of the abuse alleged, and if so, to ensure that no repetition occurs and for other
recourses. This is a treaty commitment voluntarily assumed by the Philippine Government and as such, has the force and
effect of law.
Hence, even assuming arguendo as against the categorical assurance of the executive branch of government that
respondent judge had some ground to prefer respondents COSAC officers' suspicion that there had been an abuse of
diplomatic immunity, the continuation of the search warrant proceedings before him was not the proper remedy. He
should, nevertheless, in deference to the exclusive competence and jurisdiction of the executive branch of government
to act on the matter, have acceded to the quashal of the search warrant, and forwarded his findings or grounds to
believe that there had been such abuse of diplomatic immunity to the Department of Foreign Affairs for it to deal with,
in accordance with the aforementioned Convention, if so warranted.
3. Finally, the Court has noted with concern the apparent lack of coordination between the various departments
involved in the subject-matter of the case at bar, which made it possible for a small unit, the COSAC, to which
respondents officers belong, seemingly to disregard and go against the authoritative determination and
pronouncements of both the Secretaries of Foreign Affairs and of Finance that petitioner Verstuyft is entitled to
diplomatic immunity, as confirmed by the Solicitor-General as the principal law officer of the Government. Such
executive determination properly implemented should have normally constrained respondents officers themselves to
obtain the quashal of the search warrant secured by them rather than oppose such quashal up to this Court, to the
embarrassment of said department heads, if not of the Philippine Government itself vis a vis  the petitioners. 15
The seriousness of the matter is underscored when the provisions of Republic Act 75 enacted since October 21, 1946 to
safeguard the jurisdictional immunity of diplomatic officials in the Philippines are taken into account. Said Act declares
as null and void writs or processes sued out or prosecuted whereby inter alia the person of an ambassador or public
minister is arrested or imprisoned or his goods or chattels are seized or attached and makes it a penal offense for "every
person by whom the same is obtained or prosecuted, whether as party or as attorney, and every officer concerned in
executing it" to obtain or enforce such writ or process. 16
The Court, therefore, holds that respondent judge acted without jurisdiction and with grave abuse of discretion in not
ordering the quashal of the search warrant issued by him in disregard of the diplomatic immunity of petitioner Verstuyft.
ACCORDINGLY, the writs of certiorari and prohibition prayed for are hereby granted, and the temporary restraining
order heretofore issued against execution or enforcement of the questioned search warrant, which is hereby declared
null and void, is hereby made permanent. The respondent court is hereby commanded to desist from further
proceedings in the matter. No costs, none having been prayed for.
The clerk of court is hereby directed to furnish a copy of this decision to the Secretary of Justice for such action as he
may find appropriate with regard to the matters mentioned in paragraph 3 hereof. So ordered.

8. United States vs. Guinto (G.R. No. 76607, February 26, 1990)

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.
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  United States 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.

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

ISSUE:
Are the petitioners immune from suit?

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

9. USA vs. Ruiz (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.

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.

FACTS:  
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 a couple of repair projects. Eligio de Guzman land Co., Inc. responded to the invitation and
submitted bids. Subsequent thereto, the company received from the US two telegrams requesting it to confirm its price
proposals and for the name of its bonding company. The company construed this as an acceptance of its offer so they
complied with the requests. The company received a letter which was signed by William I. Collins of Department of the
Navy of the United States, also one of the petitioners herein informing that the company did not qualify to receive an
award for the projects because of its previous unsatisfactory performance rating in repairs, and that the projects were
awarded to third parties. For this reason, a suit for specific performance was filed by him against the US. 

ISSUE:
Whether the United States Naval Base in bidding for said contracts exercise governmental functions to be able to invoke
state immunity.

DECISION:  
Yes. The Supreme Court held that the contract relates to the exercise of its sovereign functions 

RATIO DECIDENDI:  
The Supreme Court held that 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. 

10. Republic of Indonesia vs. Vinzon (G.R, No. 154705, June 26, 2003)

THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN, and MINISTER COUNSELLOR AZHARI
KASIM, Petitioners,
vs.
JAMES VINZON, doing business under the name and style of VINZON TRADE AND SERVICES, Respondent.

This is a petition for review on certiorari to set aside the Decision of the Court of Appeals dated May 30, 2002 and its
Resolution dated August 16, 2002, in CA-G.R. SP No. 66894 entitled "The Republic of Indonesia, His Excellency
Ambassador Soeratmin and Minister Counselor Azhari Kasim v. Hon. Cesar Santamaria, Presiding Judge, RTC Branch 145,
Makati City, and James Vinzon, doing business under the name and style of Vinzon Trade and Services."
Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah, entered into a Maintenance Agreement in
August 1995 with respondent James Vinzon, sole proprietor of Vinzon Trade and Services. The Maintenance Agreement
stated that respondent shall, for a consideration, maintain specified equipment at the Embassy Main Building, Embassy
Annex Building and the Wisma Duta, the official residence of petitioner Ambassador Soeratmin. The equipment covered
by the Maintenance Agreement are air conditioning units, generator sets, electrical facilities, water heaters, and water
motor pumps. It is likewise stated therein that the agreement shall be effective for a period of four years and will renew
itself automatically unless cancelled by either party by giving thirty days prior written notice from the date of expiry. 1
Petitioners claim that sometime prior to the date of expiration of the said agreement, or before August 1999, they
informed respondent that the renewal of the agreement shall be at the discretion of the incoming Chief of
Administration, Minister Counsellor Azhari Kasim, who was expected to arrive in February 2000. When Minister
Counsellor Kasim assumed the position of Chief of Administration in March 2000, he allegedly found respondent’s work
and services unsatisfactory and not in compliance with the standards set in the Maintenance Agreement. Hence, the
Indonesian Embassy terminated the agreement in a letter dated August 31, 2000. 2 Petitioners claim, moreover, that they
had earlier verbally informed respondent of their decision to terminate the agreement.
On the other hand, respondent claims that the aforesaid termination was arbitrary and unlawful. Respondent cites
various circumstances which purportedly negated petitioners’ alleged dissatisfaction over respondent’s services: (a) in
July 2000, Minister Counsellor Kasim still requested respondent to assign to the embassy an additional full-time worker
to assist one of his other workers; (b) in August 2000, Minister Counsellor Kasim asked respondent to donate a prize,
which the latter did, on the occasion of the Indonesian Independence Day golf tournament; and (c) in a letter dated
August 22, 2000, petitioner Ambassador Soeratmin thanked respondent for sponsoring a prize and expressed his hope
that the cordial relations happily existing between them will continue to prosper and be strengthened in the coming
years.
Hence, on December 15, 2000, respondent filed a complaint 3 against petitioners docketed as Civil Case No. 18203 in the
Regional Trial Court (RTC) of Makati, Branch 145. On February 20, 2001, petitioners filed a Motion to Dismiss, alleging
that the Republic of Indonesia, as a foreign sovereign State, has sovereign immunity from suit and cannot be sued as a
party-defendant in the Philippines. The said motion further alleged that Ambassador Soeratmin and Minister Counsellor
Kasim are diplomatic agents as defined under the Vienna Convention on Diplomatic Relations and therefore enjoy
diplomatic immunity.4 In turn, respondent filed on March 20, 2001, an Opposition to the said motion alleging that the
Republic of Indonesia has expressly waived its immunity from suit. He based this claim upon the following provision in
the Maintenance Agreement:
"Any legal action arising out of this Maintenance Agreement shall be settled according to the laws of the Philippines and
by the proper court of Makati City, Philippines."
Respondent’s Opposition likewise alleged that Ambassador Soeratmin and Minister Counsellor Kasim can be sued and
held liable in their private capacities for tortious acts done with malice and bad faith. 5
On May 17, 2001, the trial court denied herein petitioners’ Motion to Dismiss. It likewise denied the Motion for
Reconsideration subsequently filed.
The trial court’s denial of the Motion to Dismiss was brought up to the Court of Appeals by herein petitioners in a
petition for certiorari and prohibition. Said petition, docketed as CA-G.R. SP No. 66894, alleged that the trial court
gravely abused its discretion in ruling that the Republic of Indonesia gave its consent to be sued and voluntarily
submitted itself to the laws and jurisdiction of Philippine courts and that petitioners Ambassador Soeratmin and Minister
Counsellor Kasim waived their immunity from suit.
On May 30, 2002, the Court of Appeals rendered its assailed decision denying the petition for lack of merit. 6 On August
16, 2002, it denied herein petitioners’ motion for reconsideration. 7
Hence, this petition.
In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals erred in sustaining the trial
court’s decision that petitioners have waived their immunity from suit by using as its basis the abovementioned
provision in the Maintenance Agreement.
The petition is impressed with merit.
International law is founded largely upon the principles of reciprocity, comity, independence, and equality of States
which were adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution. 8 The rule that a
State may not be sued without its consent is a necessary consequence of the principles of independence and equality of
States.9 As enunciated in Sanders v. Veridiano II, 10 the practical justification for the doctrine of sovereign immunity is that
there can be no legal right against the authority that makes the law on which the right depends. In the case of foreign
States, the rule is derived from the principle of the sovereign equality of States, as expressed in the maxim  par in parem
non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one another. 11 A contrary
attitude would "unduly vex the peace of nations." 12
The rules of International Law, however, are neither unyielding nor impervious to change. The increasing need of
sovereign States to enter into purely commercial activities remotely connected with the discharge of their governmental
functions brought about a new concept of sovereign immunity. This concept, the restrictive theory, holds that the
immunity of the sovereign is recognized only with regard to public acts or acts jure imperii, but not with regard to
private acts or acts jure gestionis.13
In United States v. Ruiz,14 for instance, we held that the conduct of public bidding for the repair of a wharf at a United
States Naval Station is an act jure imperii. On the other hand, we considered as an act jure gestionis the hiring of a cook
in the recreation center catering to American servicemen and the general public at the John Hay Air Station in Baguio
City,15 as well as the bidding for the operation of barber shops in Clark Air Base in Angeles City. 16
Apropos the present case, the mere entering into a contract by a foreign State with a private party cannot be construed
as the ultimate test of whether or not it is an act jure imperii or jure gestionis. Such act is only the start of the inquiry. Is
the foreign State engaged in the regular conduct of a business? If the foreign State is not engaged regularly in a business
or commercial activity, and in this case it has not been shown to be so engaged, 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.17
Hence, the existence alone of a paragraph in a contract stating that any legal action arising out of the agreement shall be
settled according to the laws of the Philippines and by a specified court of the Philippines is not necessarily a waiver of
sovereign immunity from suit. The aforesaid provision contains language not necessarily inconsistent with sovereign
immunity. On the other hand, such provision may also be meant to apply where the sovereign party elects to sue in the
local courts, or otherwise waives its immunity by any subsequent act. The applicability of Philippine laws must be
deemed to include Philippine laws in its totality, including the principle recognizing sovereign immunity. Hence, the
proper court may have no proper action, by way of settling the case, except to dismiss it.
Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must be given explicitly or by
necessary implication. We find no such waiver in this case.
Respondent concedes that the establishment of a diplomatic mission is a sovereign function.1âwphi1 On the other hand,
he argues that the actual physical maintenance of the premises of the diplomatic mission, such as the upkeep of its
furnishings and equipment, is no longer a sovereign function of the State. 18
We disagree. There is no dispute that the establishment of a diplomatic mission is an act  jure imperii. A sovereign State
does not merely establish a diplomatic mission and leave it at that; the establishment of a diplomatic mission
encompasses its maintenance and upkeep. Hence, the State may enter into contracts with private entities to maintain
the premises, furnishings and equipment of the embassy and the living quarters of its agents and officials. It is therefore
clear that petitioner Republic of Indonesia was acting in pursuit of a sovereign activity when it entered into a contract
with respondent for the upkeep or maintenance of the air conditioning units, generator sets, electrical facilities, water
heaters, and water motor pumps of the Indonesian Embassy and the official residence of the Indonesian ambassador.
The Solicitor General, in his Comment, submits the view that, "the Maintenance Agreement was entered into by the
Republic of Indonesia in the discharge of its governmental functions. In such a case, it cannot be deemed to have waived
its immunity from suit." As to the paragraph in the agreement relied upon by respondent, the Solicitor General states
that it "was not a waiver of their immunity from suit but a mere stipulation that in the event they do waive their
immunity, Philippine laws shall govern the resolution of any legal action arising out of the agreement and the proper
court in Makati City shall be the agreed venue thereof. 19
On the matter of whether or not petitioners Ambassador Soeratmin and Minister Counsellor Kasim may be sued herein
in their private capacities, Article 31 of the Vienna Convention on Diplomatic Relations provides:
xxx
1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the receiving State. He shall also enjoy
immunity from its civil and administrative jurisdiction, except in the case of:
(a) a real action relating to private immovable property situated in the territory of the receiving State, unless he holds it
on behalf of the sending State for the purposes of the mission;
(b) an action relating to succession in which the diplomatic agent is involved as executor, administrator, heir or legatee
as a private person and not on behalf of the sending State;
(c) an action relating to any professional or commercial activity exercised by the diplomatic agent in the receiving State
outside his official functions.
xxx
The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the Maintenance Agreement
is not covered by the exceptions provided in the abovementioned provision.
The Solicitor General believes that said act may fall under subparagraph (c) thereof, 20 but said provision clearly applies
only to a situation where the diplomatic agent engages in any professional or commercial activity outside official
functions, which is not the case herein.
WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the Court of Appeals in CA G.R. SP No.
66894 are REVERSED and SET ASIDE and the complaint in Civil Case No. 18203 against petitioners is DISMISSED.
No costs.
SO ORDERED.

FACTS: 
Petitioner, Republic of Indonesia, entered into a Maintenance Agreement with respondent James Vinzon, sole proprietor
of Vinzon Trade and Services. The agreement stated that respondent shall, for a consideration, maintain specified
equipment at the Embassy Main Building, Embassy Annex Building and the Wisma Duta, the official residence of
petitioner Ambassador Soeratmin. The equipments covered by the agreement are air conditioning units, generator sets,
electrical facilities, water heaters, and water motor pumps. The agreement shall be effective for a period of four years
and will renew itself automatically unless cancelled by either party by giving thirty days prior written notice from the
date of expiry.
Petitioners claim that prior to the date of expiration of the said agreement, they informed respondent that the renewal
of the agreement shall be at the discretion of the incoming Chief of Administration, who allegedly found respondents
work and services unsatisfactory and not in compliance with the standards set in the Agreement. Hence, the Indonesian
Embassy terminated the agreement. Petitioners claim that they had earlier verbally informed respondent of their
decision to terminate the agreement.
On the other hand, respondent claims that the aforesaid termination was arbitrary and unlawful.
Hence, respondent filed a complaint in the (RTC) of Makati. Petitioners filed a Motion to Dismiss, alleging that the
Republic of Indonesia, as a foreign sovereign State, has sovereign immunity from suit and cannot be sued as a party-
defendant in the Philippines. The said motion further alleged that Ambassador Soeratmin and Minister Counsellor Kasim
are diplomatic agents as defined under the Vienna Convention on Diplomatic Relations and therefore enjoy diplomatic
immunity.
In turn, respondent filed an Opposition to the said motion alleging that the Republic of Indonesia has expressly waived
its immunity from suit. He based this claim upon the following provision in the Maintenance Agreement:
Any legal action arising out of this Maintenance Agreement shall be settled according to the laws of the Philippines and
by the proper court of Makati City, Philippines.
Respondents Opposition likewise alleged that Ambassador Soeratmin and Minister Counsellor Kasim can be sued and
held liable in their private capacities for tortious acts done with malice and bad faith.
The trial court denied herein petitioners Motion to Dismiss. It likewise denied the Motion for Reconsideration
subsequently filed.
The trial courts denial of the Motion to Dismiss was brought up to the CA in a petition for certiorari and prohibition
alleging that the trial court gravely abused its discretion in ruling that the Republic of Indonesia gave its consent to be
sued and voluntarily submitted itself to the laws and jurisdiction of Philippine courts and that petitioners Ambassador
Soeratmin and Minister Counsellor Kasim waived their immunity from suit.
The CA rendered its assailed decision denying the petition for lack of merit. It denied herein petitioners MR.

ISSUE:
Whether the CA erred in sustaining the trial court’s decision that petitioners have waived their immunity from suit by
using as its basis the abovementioned provision in the Maintenance Agreement.

RULING:
The petition is impressed with merit.
International law is founded largely upon the principles of reciprocity, comity, independence, and equality of States
which were adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution.
The rule that a State may not be sued without its consent is a necessary consequence of the principles of independence
and equality of States. As enunciated in Sanders v. Veridiano II, the practical justification for the doctrine of sovereign
immunity is that there can be no legal right against the authority that makes the law on which the right depends.
In the case of foreign States, the rule is derived from the principle of the sovereign equality of States, as expressed in the
maxim par in parem non habet imperium. All states are sovereign equals and cannot assert jurisdiction over one
another. A contrary attitude would unduly vex the peace of nations.
The rules of International Law, however, are neither unyielding nor impervious to change. The increasing need of
sovereign States to enter into purely commercial activities remotely connected with the discharge of their governmental
functions brought about a new concept of sovereign immunity. This concept, the restrictive theory, holds that the
immunity of the sovereign is recognized only with regard to public acts or acts jure imperii, but not with regard to
private acts or acts jure gestionis.
In United States v. Ruiz, for instance, we held that the conduct of public bidding for the repair of a wharf at a United
States Naval Station is an act jure imperii. On the other hand, we considered as an act jure gestionis the hiring of a cook
in the recreation center catering to American servicemen and the general public at the John Hay Air Station in Baguio
City, as well as the bidding for the operation of barber shops in Clark Air Base in Angeles City.
Apropos the present case, the mere entering into a contract by a foreign State with a private party cannot be construed
as the ultimate test of whether or not it is an act jure imperii or jure gestionis. Such act is only the start of the inquiry. Is
the foreign State engaged in the regular conduct of a business? If the foreign State is not engaged regularly in a business
or commercial activity, and in this case it has not been shown to be so engaged, 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.
Hence, the existence alone of a paragraph in a contract stating that any legal action arising out of the agreement shall be
settled according to the laws of the Philippines and by a specified court of the Philippines is not necessarily a waiver of
sovereign immunity from suit. The aforesaid provision contains language not necessarily inconsistent with sovereign
immunity. On the other hand, such provision may also be meant to apply where the sovereign party elects to sue in the
local courts, or otherwise waives its immunity by any subsequent act. The applicability of Philippine laws must be
deemed to include Philippine laws in its totality, including the principle recognizing sovereign immunity. Hence, the
proper court may have no proper action, by way of settling the case, except to dismiss it.
Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must be given explicitly or by
necessary implication. We find no such waiver in this case.
Respondent concedes that the establishment of a diplomatic mission is a sovereign function. On the other hand, he
argues that the actual physical maintenance of the premises of the diplomatic mission, such as the upkeep of its
furnishings and equipment, is no longer a sovereign function of the State.
We disagree. There is no dispute that the establishment of a diplomatic mission is an act jure imperii. A sovereign State
does not merely establish a diplomatic mission and leave it at that; the establishment of a diplomatic mission
encompasses its maintenance and upkeep. Hence, the State may enter into contracts with private entities to maintain
the premises, furnishings and equipment of the embassy and the living quarters of its agents and officials. It is therefore
clear that petitioner Republic of Indonesia was acting in pursuit of a sovereign activity when it entered into a contract
with respondent for the upkeep or maintenance of the air con units, generator sets, electrical facilities, water heaters,
and water motor pumps of the Indonesian Embassy and the official residence of the Indonesian ambassador.
The Solicitor General submits that, the Maintenance Agreement was entered into by the Republic of Indonesia in the
discharge of its governmental functions. In such a case, it cannot be deemed to have waived its immunity from suit. As
to the paragraph in the agreement relied upon by respondent, the Solicitor General states that it was not a waiver of
their immunity from suit but a mere stipulation that in the event they do waive their immunity, Philippine laws shall
govern the resolution of any legal action arising out of the agreement and the proper court in Makati City shall be the
agreed venue thereof.
On the matter of whether or not petitioners Ambassador Soeratmin and Minister Counsellor Kasim may be sued herein
in their private capacities, Article 31 of the Vienna Convention on Diplomatic Relations provides:
1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the receiving State. He shall also enjoy
immunity from its civil and administrative jurisdiction, except in the case of:
(a) a real action relating to private immovable property situated in the territory of the receiving State, unless he holds it
on behalf of the sending State for the purposes of the mission;
(b) an action relating to succession in which the diplomatic agent is involved as executor, administrator, heir or legatee
as a private person and not on behalf of the sending State;
(c) an action relating to any professional or commercial activity exercised by the diplomatic agent in the receiving State
outside his official functions.
The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in terminating the Maintenance Agreement
is not covered by the exceptions provided in the abovementioned provision.
The Solicitor General believes that said act may fall under subparagraph (c) thereof, but said provision clearly applies
only to a situation where the diplomatic agent engages in any professional or commercial activity outside official
functions, which is not the case herein.
The petition was GRANTED.

11. ATCI Overseas Corp., et. al. vs. Echin (G.R. No. 178551, October 11, 2010)

ATCI OVERSEAS CORPORATION, AMALIA G. IKDAL and MINISTRY OF PUBLIC HEALTH-KUWAIT Petitioners,
vs.
MA. JOSEFA ECHIN, Respondent.

Josefina Echin (respondent) was hired by petitioner ATCI Overseas Corporation in behalf of its principal-co-petitioner,
the Ministry of Public Health of Kuwait (the Ministry), for the position of medical technologist under a two-year contract,
denominated as a Memorandum of Agreement (MOA), with a monthly salary of US$1,200.00.
Under the MOA,1 all newly-hired employees undergo a probationary period of one (1) year and are covered by Kuwait’s
Civil Service Board Employment Contract No. 2.
Respondent was deployed on February 17, 2000 but was terminated from employment on February 11, 2001, she not
having allegedly passed the probationary period.
As the Ministry denied respondent’s request for reconsideration, she returned to the Philippines on March 17, 2001,
shouldering her own air fare.
On July 27, 2001, respondent filed with the National Labor Relations Commission (NLRC) a complaint 2 for illegal dismissal
against petitioner ATCI as the local recruitment agency, represented by petitioner, Amalia Ikdal (Ikdal), and the Ministry,
as the foreign principal.
By Decision3 of November 29, 2002, the Labor Arbiter, finding that petitioners neither showed that there was just cause
to warrant respondent’s dismissal nor that she failed to qualify as a regular employee, held that respondent was illegally
dismissed and accordingly ordered petitioners to pay her US$3,600.00, representing her salary for the three months
unexpired portion of her contract.
On appeal of petitioners ATCI and Ikdal, the NLRC affirmed the Labor Arbiter’s decision by Resolution 4 of January 26,
2004. Petitioners’ motion for reconsideration having been denied by Resolution 5 of April 22, 2004, they appealed to the
Court of Appeals, contending that their principal, the Ministry, being a foreign government agency, is immune from suit
and, as such, the immunity extended to them; and that respondent was validly dismissed for her failure to meet the
performance rating within the one-year period as required under Kuwait’s Civil Service Laws. Petitioners further
contended that Ikdal should not be liable as an officer of petitioner ATCI.
By Decision6 of March 30, 2007, the appellate court affirmed the NLRC Resolution.
In brushing aside petitioners’ contention that they only acted as agent of the Ministry and that they cannot be held
jointly and solidarily liable with it, the appellate court noted that under the law, a private employment agency shall
assume all responsibilities for the implementation of the contract of employment of an overseas worker, hence, it can
be sued jointly and severally with the foreign principal for any violation of the recruitment agreement or contract of
employment.
As to Ikdal’s liability, the appellate court held that under Sec. 10 of Republic Act No. 8042, the "Migrant and Overseas
Filipinos’ Act of 1995," corporate officers, directors and partners of a recruitment agency may themselves be jointly and
solidarily liable with the recruitment agency for money claims and damages awarded to overseas workers.
Petitioners’ motion for reconsideration having been denied by the appellate court by Resolution 7 of June 27, 2007, the
present petition for review on certiorari was filed.
Petitioners maintain that they should not be held liable because respondent’s employment contract specifically
stipulates that her employment shall be governed by the Civil Service Law and Regulations of Kuwait. They thus conclude
that it was patent error for the labor tribunals and the appellate court to apply the Labor Code provisions governing
probationary employment in deciding the present case.
Further, petitioners argue that even the Philippine Overseas Employment Act (POEA) Rules relative to master
employment contracts (Part III, Sec. 2 of the POEA Rules and Regulations) accord respect to the "customs, practices,
company policies and labor laws and legislation of the host country."
Finally, petitioners posit that assuming arguendo that Philippine labor laws are applicable, given that the foreign
principal is a government agency which is immune from suit, as in fact it did not sign any document agreeing to be held
jointly and solidarily liable, petitioner ATCI cannot likewise be held liable, more so since the Ministry’s liability had not
been judicially determined as jurisdiction was not acquired over it.
The petition fails.
Petitioner ATCI, as a private recruitment agency, cannot evade responsibility for the money claims of Overseas Filipino
workers (OFWs) which it deploys abroad by the mere expediency of claiming that its foreign principal is a government
agency clothed with immunity from suit, or that such foreign principal’s liability must first be established before it, as
agent, can be held jointly and solidarily liable.
In providing for the joint and solidary liability of private recruitment agencies with their foreign principals, Republic Act
No. 8042 precisely affords the OFWs with a recourse and assures them of immediate and sufficient payment of what is
due them. Skippers United Pacific v. Maguad 8 explains:
. . . [T]he obligations covenanted in the recruitment agreement entered into by and between the local agent and its
foreign principal are not coterminous with the term of such agreement so that if either or both of the parties decide to
end the agreement, the responsibilities of such parties towards the contracted employees under the agreement do not
at all end, but the same extends up to and until the expiration of the employment contracts of the employees recruited
and employed pursuant to the said recruitment agreement. Otherwise, this will render nugatory the very purpose for
which the law governing the employment of workers for foreign jobs abroad was enacted. (emphasis supplied)
The imposition of joint and solidary liability is in line with the policy of the state to protect and alleviate the plight of the
working class.9 Verily, to allow petitioners to simply invoke the immunity from suit of its foreign principal or to wait for
the judicial determination of the foreign principal’s liability before petitioner can be held liable renders the law on joint
and solidary liability inutile.
As to petitioners’ contentions that Philippine labor laws on probationary employment are not applicable since it was
expressly provided in respondent’s employment contract, which she voluntarily entered into, that the terms of her
engagement shall be governed by prevailing Kuwaiti Civil Service Laws and Regulations as in fact POEA Rules accord
respect to such rules, customs and practices of the host country, the same was not substantiated.
Indeed, a contract freely entered into is considered the law between the parties who can establish stipulations, clauses,
terms and conditions as they may deem convenient, including the laws which they wish to govern their respective
obligations, as long as they are not contrary to law, morals, good customs, public order or public policy.
It is hornbook principle, however, that the party invoking the application of a foreign law has the burden of proving the
law, under the doctrine of processual presumption which, in this case, petitioners failed to discharge. The Court’s ruling
in EDI-Staffbuilders Int’l., v. NLRC10 illuminates:
In the present case, the employment contract signed by Gran specifically states that Saudi Labor Laws will govern
matters not provided for in the contract (e.g. specific causes for termination, termination procedures, etc.). Being the
law intended by the parties (lex loci intentiones) to apply to the contract, Saudi Labor Laws should govern all matters
relating to the termination of the employment of Gran.
In international law, the party who wants to have a foreign law applied to a dispute or case has the burden of proving
the foreign law. The foreign law is treated as a question of fact to be properly pleaded and proved as the judge or labor
arbiter cannot take judicial notice of a foreign law. He is presumed to know only domestic or forum law.
Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the International Law
doctrine of presumed-identity approach or processual presumption comes into play. Where a foreign law is not pleaded
or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours. Thus, we apply Philippine
labor laws in determining the issues presented before us. (emphasis and underscoring supplied)
The Philippines does not take judicial notice of foreign laws, hence, they must not only be alleged; they must be proven.
To prove a foreign law, the party invoking it must present a copy thereof and comply with Sections 24 and 25 of Rule 132
of the Revised Rules of Court which reads:
SEC. 24. Proof of official record.  — The record of public documents referred to in paragraph (a) of Section 19, when
admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines,
with a certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent
or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office. (emphasis supplied)
SEC. 25. What attestation of copy must state. — Whenever a copy of a document or record is attested for the purpose of
the evidence, the attestation must state, in substance, that the copy is a correct copy of the original, or a specific part
thereof, as the case may be. The attestation must be under the official seal of the attesting officer, if there be any, or if
he be the clerk of a court having a seal, under the seal of such court.
To prove the Kuwaiti law, petitioners submitted the following: MOA between respondent and the Ministry, as
represented by ATCI, which provides that the employee is subject to a probationary period of one (1) year and that the
host country’s Civil Service Laws and Regulations apply; a translated copy 11 (Arabic to English) of the termination letter
to respondent stating that she did not pass the probation terms, without specifying the grounds therefor, and a
translated copy of the certificate of termination, 12 both of which documents were certified by Mr. Mustapha Alawi, Head
of the Department of Foreign Affairs-Office of Consular Affairs Inslamic Certification and Translation Unit; and
respondent’s letter13 of reconsideration to the Ministry, wherein she noted that in her first eight (8) months of
employment, she was given a rating of "Excellent" albeit it changed due to changes in her shift of work schedule.
These documents, whether taken singly or as a whole, do not sufficiently prove that respondent was validly terminated
as a probationary employee under Kuwaiti civil service laws. Instead of submitting a copy of the pertinent Kuwaiti labor
laws duly authenticated and translated by Embassy officials thereat, as required under the Rules, what petitioners
submitted were mere certifications attesting only to the correctness of the translations of the MOA and the
termination letter which does not prove at all that Kuwaiti civil service laws differ from Philippine laws and that under
such Kuwaiti laws, respondent was validly terminated. Thus the subject certifications read:
xxxx
This is to certify that the herein attached translation/s from Arabic to English/Tagalog and or vice versa was/were
presented to this Office for review and certification and the same was/were found to be in order.  This Office, however,
assumes no responsibility as to the contents of the document/s.
This certification is being issued upon request of the interested party for whatever legal purpose it may serve. (emphasis
supplied)1avvphi1
Respecting Ikdal’s joint and solidary liability as a corporate officer, the same is in order too following the express
provision of R.A. 8042 on money claims, viz:
SEC. 10. Money Claims.—Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue
of any law or contract involving Filipino workers for overseas deployment including claims for actual moral, exemplary
and other forms of damages.
The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section
shall be joint and several. This provision shall be incorporated in the contract for overseas employment and shall be a
condition precedent for its approval. The performance bond to be filed by the recruitment/placement agency, as
provided by law, shall be answerable for all money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may be,
shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and damages.
(emphasis and underscoring supplied)
WHEREFORE, the petition is DENIED.
SO ORDERED.

FACTS:
Josefina Echin was hired by petitioner ATCI Overseas Corporation in behalf of its principal-co-petitioner, the Ministry of
Public Health of Kuwait, for the position of medical technologist under a two-year contract, denominated as a MOA.
Under the MOA, all newly-hired employees undergo a probationary period of one year.
Respondent was deployed on February 17, 2000 but was terminated from employment on February 11, 2001, she not
having allegedly passed the probationary period.
Respondent filed with the NLRC a complaint for illegal dismissal against ATCI as the local recruitment agency,
represented by Amalia Ikdal, and the Ministry, as the foreign principal.
The Labor Arbiter held that respondent was illegally dismissed and accordingly ordered petitioners to pay her
US$3,600.00, representing her salary for the three months unexpired portion of her contract.
The NLRC affirmed the Labor Arbiter’s decision.
Petitioners appealed to the CA, contending that their principal, the Ministry, being a foreign government agency, is
immune from suit and, as such, the immunity extended to them; and that respondent was validly dismissed for her
failure to meet the performance rating within the one-year period as required under Kuwaits Civil Service Laws.
The CA affirmed the NLRC Resolution
 
ISSUE:
Whether or not petitioner is liable for the illegal dismissal of respondent.
 
RULING:
Petitioner ATCI, as a private recruitment agency, cannot evade responsibility for the money claims of OFWs which it
deploys abroad by the mere expediency of claiming that its foreign principal is a government agency clothed with
immunity from suit, or that such foreign principals liability must first be established before it, as agent, can be held
jointly and solidarily liable.
The imposition of joint and solidary liability is in line with the policy of the state to protect and alleviate the plight of the
working class. Verily, to allow petitioners to simply invoke the immunity from suit of its foreign principal or to wait for
the judicial determination of the foreign principals liability before petitioner can be held liable renders the law on joint
and solidary liability inutile.
As to petitioners contentions that Philippine labor laws on probationary employment are not applicable since it was
expressly provided in respondents employment contract, which she voluntarily entered into, that the terms of her
engagement shall be governed by prevailing Kuwaiti Civil Service Laws and Regulations as in fact POEA Rules accord
respect to such rules, customs and practices of the host country, the same was not substantiated.
It is hornbook principle, however, that the party invoking the application of a foreign law has the burden of proving the
law, under the doctrine of processual presumption which, in this case, petitioners failed to discharge.
The Philippines does not take judicial notice of foreign laws, hence, they must not only be alleged; they must be
proven. To prove a foreign law, the party invoking it must present a copy thereof and comply with the Rules of Court.
These documents submitted by petitioners do not sufficiently prove that respondent was validly terminated as a
probationary employee under Kuwaiti civil service laws.
Respecting Ikdal’s joint and solidary liability as a corporate officer, the same is in order too following the express
provision of R.A. 8042:
The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section
shall be joint and several. This provision shall be incorporated in the contract for overseas employment and shall be a
condition precedent for its approval. The performance bond to be filed by the recruitment/placement agency, as
provided by law, shall be answerable for all money claims or damages that may be awarded to the workers.  If the
recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may
be, shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and
damages.
The petition is DENIED

12. Arigo vs. Swift (G.R. No. 206510, September 16, 2014)

MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto Princesa D.D.; MOST REV. DEOGRACIAS S. INIGUEZ, JR.,
Bishop-Emeritus of Caloocan, FRANCES Q. QUIMPO, CLEMENTE G. BAUTISTA, JR., Kalikasan-PNE, MARIA CAROLINA P.
ARAULLO, RENATO M. REYES, JR., Bagong Alyansang Makabayan, HON. NERI JAVIER COLMENARES, Bayan Muna
Partylist, ROLAND G. SIMBULAN, PH.D., Junk VF A Movement, TERESITA R. PEREZ, PH.D., HON. RAYMOND V.
PALATINO, Kabataan Party-list, PETER SJ. GONZALES, Pamalakaya, GIOVANNI A. TAPANG, PH. D., Agham, ELMER C.
LABOG, Kilusang Mayo Uno, JOAN MAY E. SALVADOR, Gabriela, JOSE ENRIQUE A. AFRICA, THERESA A. CONCEPCION,
MARY JOAN A. GUAN, NESTOR T. BAGUINON, PH.D., A. EDSEL F. TUPAZ, Petitioners,
vs.
SCOTT H. SWIFT in his capacity as Commander of the US. 7th Fleet, MARK A. RICE in his capacity as Commanding
Officer of the USS Guardian, PRESIDENT BENIGNO S. AQUINO III in his capacity as Commander-in-Chief of the Armed
Forces of the Philippines, HON. ALBERT F. DEL ROSARIO, Secretary, pepartment of Foreign Affair.s, HON. PAQUITO
OCHOA, JR., Executiv~.:Secretary, Office of the President, . HON. VOLTAIRE T. GAZMIN, Secretary, Department of
National Defense, HON. RAMON JESUS P. P AJE, Secretary, Department of Environment and Natural Resoz!rces, VICE
ADMIRAL JOSE LUIS M. ALANO, Philippine Navy Flag Officer in Command, Armed Forces of the Philippines, ADMIRAL
RODOLFO D. ISO RENA, Commandant, Philippine Coast Guard, COMMODORE ENRICO EFREN EVANGELISTA, Philippine
Coast Guard Palawan, MAJOR GEN. VIRGILIO 0. DOMINGO, Commandant of Armed Forces of the Philippines
Command and LT. GEN. TERRY G. ROBLING, US Marine Corps Forces. Pacific and Balikatan 2013 Exercise Co-Director,
Respondents.

Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the issuance of a Temporary Environmental
Protection Order (TEPO) under Rule 7 of A.M. No. 09-6-8-SC, otherwise known as the Rules of Procedure for
Environmental Cases (Rules), involving violations of environmental laws and regulations in relation to the grounding of
the US military ship USS Guardian over the Tubbataha Reefs.
Factual Background
The name "Tubbataha" came from the Samal (seafaring people of southern Philippines) language which means "long
reef exposed at low tide." Tubbataha is composed of two huge coral atolls - the north atoll and the south atoll - and the
Jessie Beazley Reef, a smaller coral structure about 20 kilometers north of the atolls. The reefs of Tubbataha and Jessie
Beazley are considered part of Cagayancillo, a remote island municipality of Palawan. 1
In 1988, Tubbataha was declared a National Marine Park by virtue of Proclamation No. 306 issued by President Corazon
C. Aquino on August 11, 1988. Located in the middle of Central Sulu Sea, 150 kilometers southeast of Puerto Princesa
City, Tubbataha lies at the heart of the Coral Triangle, the global center of marine biodiversity.
In 1993, Tubbataha was inscribed by the United Nations Educational Scientific and Cultural Organization (UNESCO) as a
World Heritage Site. It was recognized as one of the Philippines' oldest ecosystems, containing excellent examples of
pristine reefs and a high diversity of marine life. The 97,030-hectare protected marine park is also an important habitat
for internationally threatened and endangered marine species. UNESCO cited Tubbataha's outstanding universal value
as an important and significant natural habitat for in situ conservation of biological diversity; an example representing
significant on-going ecological and biological processes; and an area of exceptional natural beauty and aesthetic
importance.2
On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067, 3 otherwise known as the "Tubbataha Reefs Natural
Park (TRNP) Act of 2009" "to ensure the protection and conservation of the globally significant economic, biological,
sociocultural, educational and scientific values of the Tubbataha Reefs into perpetuity for the enjoyment of present and
future generations." Under the "no-take" policy, entry into the waters of TRNP is strictly regulated and many human
activities are prohibited and penalized or fined, including fishing, gathering, destroying and disturbing the resources
within the TRNP. The law likewise created the Tubbataha Protected Area Management Board (TPAMB) which shall be
the sole policy-making and permit-granting body of the TRNP.
The USS Guardian is an Avenger-class mine countermeasures ship of the US Navy. In December 2012, the US Embassy in
the Philippines requested diplomatic clearance for the said vessel "to enter and exit the territorial waters of the
Philippines and to arrive at the port of Subic Bay for the purpose of routine ship replenishment, maintenance, and crew
liberty."4 On January 6, 2013, the ship left Sasebo, Japan for Subic Bay, arriving on January 13, 2013 after a brief stop for
fuel in Okinawa, Japan.1âwphi1
On January 15, 2013, the USS Guardian departed Subic Bay for its next port of call in Makassar, Indonesia. On January
17, 2013 at 2:20 a.m. while transiting the Sulu Sea, the ship ran aground on the northwest side of South Shoal of the
Tubbataha Reefs, about 80 miles east-southeast of Palawan. No cine was injured in the incident, and there have been no
reports of leaking fuel or oil.
On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift, expressed regret for the incident in a press
statement.5 Likewise, US Ambassador to the Philippines Harry K. Thomas, Jr., in a meeting at the Department of Foreign
Affairs (DFA) on February 4, "reiterated his regrets over the grounding incident and assured Foreign Affairs Secretazy
Albert F. del Rosario that the United States will provide appropriate compensation for damage to the reef caused by the
ship."6 By March 30, 2013, the US Navy-led salvage team had finished removing the last piece of the grounded ship from
the coral reef.
On April 1 7, 2013, the above-named petitioners on their behalf and in representation of their respective
sector/organization and others, including minors or generations yet unborn, filed the present petition agairtst Scott H.
Swift in his capacity as Commander of the US 7th Fleet, Mark A. Rice in his capacity as Commanding Officer of the USS
Guardian and Lt. Gen. Terry G. Robling, US Marine Corps Forces, Pacific and Balikatan 2013 Exercises Co-Director ("US
respondents"); President Benigno S. Aquino III in his capacity as Commander-in-Chief of the Armed Forces of the
Philippines (AFP), DF A Secretary Albert F. Del Rosario, Executive Secretary Paquito Ochoa, Jr., Secretary Voltaire T.
Gazmin (Department of National Defense), Secretary Jesus P. Paje (Department of Environment and Natural Resources),
Vice-Admiral Jose Luis M. Alano (Philippine Navy Flag Officer in Command, AFP), Admiral Rodolfo D. Isorena (Philippine
Coast Guard Commandant), Commodore Enrico Efren Evangelista (Philippine Coast Guard-Palawan), and Major General
Virgilio 0. Domingo (AFP Commandant), collectively the "Philippine respondents."
The Petition
Petitioners claim that the grounding, salvaging and post-salvaging operations of the USS Guardian cause and continue to
cause environmental damage of such magnitude as to affect the provinces of Palawan, Antique, Aklan, Guimaras, Iloilo,
Negros Occidental, Negros Oriental, Zamboanga del Norte, Basilan, Sulu, and Tawi-Tawi, which events violate their
constitutional rights to a balanced and healthful ecology. They also seek a directive from this Court for the institution of
civil, administrative and criminal suits for acts committed in violation of environmental laws and regulations in
connection with the grounding incident.
Specifically, petitioners cite the following violations committed by US respondents under R.A. No. 10067: unauthorized
entry (Section 19); non-payment of conservation fees (Section 21 ); obstruction of law enforcement officer (Section 30);
damages to the reef (Section 20); and destroying and disturbing resources (Section 26[g]). Furthermore, petitioners
assail certain provisions of the Visiting Forces Agreement (VFA) which they want this Court to nullify for being
unconstitutional.
The numerous reliefs sought in this case are set forth in the final prayer of the petition, to wit: WHEREFORE, in view of
the foregoing, Petitioners respectfully pray that the Honorable Court: 1. Immediately issue upon the filing of this petition
a Temporary Environmental Protection Order (TEPO) and/or a Writ of Kalikasan, which shall, in particular,
a. Order Respondents and any person acting on their behalf, to cease and desist all operations over the Guardian
grounding incident;
b. Initially demarcating the metes and bounds of the damaged area as well as an additional buffer zone;
c. Order Respondents to stop all port calls and war games under 'Balikatan' because of the absence of clear guidelines,
duties, and liability schemes for breaches of those duties, and require Respondents to assume responsibility for prior
and future environmental damage in general, and environmental damage under the Visiting Forces Agreement in
particular.
d. Temporarily define and describe allowable activities of ecotourism, diving, recreation, and limited commercial
activities by fisherfolk and indigenous communities near or around the TRNP but away from the damaged site and an
additional buffer zone;
2. After summary hearing, issue a Resolution extending the TEPO until further orders of the Court;
3. After due proceedings, render a Decision which shall include, without limitation:
a. Order Respondents Secretary of Foreign Affairs, following the dispositive portion of Nicolas v. Romulo, "to forthwith
negotiate with the United States representatives for the appropriate agreement on [environmental guidelines and
environmental accountability] under Philippine authorities as provided in Art. V[] of the VFA ... "
b. Direct Respondents and appropriate agencies to commence administrative, civil, and criminal proceedings against
erring officers and individuals to the full extent of the law, and to make such proceedings public;
c. Declare that Philippine authorities may exercise primary and exclusive criminal jurisdiction over erring U.S. personnel
under the circumstances of this case;
d. Require Respondents to pay just and reasonable compensation in the settlement of all meritorious claims for
damages caused to the Tubbataha Reef on terms and conditions no less severe than those applicable to other States,
and damages for personal injury or death, if such had been the case;
e. Direct Respondents to cooperate in providing for the attendance of witnesses and in the collection and production of
evidence, including seizure and delivery of objects connected with the offenses related to the grounding of the
Guardian;
f. Require the authorities of the Philippines and the United States to notify each other of the disposition of all cases,
wherever heard, related to the grounding of the Guardian;
g. Restrain Respondents from proceeding with any purported restoration, repair, salvage or post salvage plan or plans,
including cleanup plans covering the damaged area of the Tubbataha Reef absent a just settlement approved by the
Honorable Court;
h. Require Respondents to engage in stakeholder and LOU consultations in accordance with the Local Government Code
and R.A. 10067;
i. Require Respondent US officials and their representatives to place a deposit to the TRNP Trust Fund defined under
Section 17 of RA 10067 as a bona .fide gesture towards full reparations;
j. Direct Respondents to undertake measures to rehabilitate the areas affected by the grounding of the Guardian in light
of Respondents' experience in the Port Royale grounding in 2009, among other similar grounding incidents;
k. Require Respondents to regularly publish on a quarterly basis and in the name of transparency and accountability
such environmental damage assessment, valuation, and valuation methods, in all stages of negotiation;
l. Convene a multisectoral technical working group to provide scientific and technical support to the TPAMB;
m. Order the Department of Foreign Affairs, Department of National Defense, and the Department of Environment and
Natural Resources to review the Visiting Forces Agreement and the Mutual Defense Treaty to consider whether their
provisions allow for the exercise of erga omnes rights to a balanced and healthful ecology and for damages which follow
from any violation of those rights;
n. Narrowly tailor the provisions of the Visiting Forces Agreement for purposes of protecting the damaged areas of
TRNP;
o. Declare the grant of immunity found in Article V ("Criminal Jurisdiction") and Article VI of the Visiting Forces
Agreement unconstitutional for violating equal protection and/or for violating the preemptory norm of
nondiscrimination incorporated as part of the law of the land under Section 2, Article II, of the Philippine Constitution;
p. Allow for continuing discovery measures;
q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all other respects; and
4. Provide just and equitable environmental rehabilitation measures and such other reliefs as are just and equitable
under the premises.7 (Underscoring supplied.)
Since only the Philippine respondents filed their comment 8 to the petition, petitioners also filed a motion for early
resolution and motion to proceed ex parte against the US respondents. 9
Respondents' Consolidated Comment
In their consolidated comment with opposition to the application for a TEPO and ocular inspection and production
orders, respondents assert that: ( 1) the grounds relied upon for the issuance of a TEPO or writ of Kalikasan have
become fait accompli as the salvage operations on the USS Guardian were already completed; (2) the petition is
defective in form and substance; (3) the petition improperly raises issues involving the VFA between the Republic of the
Philippines and the United States of America; and ( 4) the determination of the extent of responsibility of the US
Government as regards the damage to the Tubbataha Reefs rests exdusively with the executive branch.
The Court's Ruling
As a preliminary matter, there is no dispute on the legal standing of petitioners to file the present petition.
Locus standi is "a right of appearance in a court of justice on a given question." 10 Specifically, it is "a party's personal and
substantial interest in a case where he has sustained or will sustain direct injury as a result" of the act being challenged,
and "calls for more than just a generalized grievance." 11 However, the rule on standing is a procedural matter which this
Court has relaxed for non-traditional plaintiffs like ordinary citizens, taxpayers and legislators when the public interest so
requires, such as when the subject matter of the controversy is of transcendental importance, of overreaching
significance to society, or of paramount public interest. 12
In the landmark case of Oposa v. Factoran, Jr., 13 we recognized the "public right" of citizens to "a balanced and healthful
ecology which, for the first time in our constitutional history, is solemnly incorporated in the fundamental law." We
declared that the right to a balanced and healthful ecology need not be written in the Constitution for it is assumed, like
other civil and polittcal rights guaranteed in the Bill of Rights, to exist from the inception of mankind and it is an issue of
transcendental importance with intergenerational implications.1âwphi1 Such right carries with it the correlative duty to
refrain from impairing the environment. 14
On the novel element in the class suit filed by the petitioners minors in Oposa, this Court ruled that not only do ordinary
citizens have legal standing to sue for the enforcement of environmental rights, they can do so in representation of their
own and future generations. Thus:
Petitioners minors assert that they represent their generation as well as generations yet unborn. We find no difficulty in
ruling that they can, for themselves, for others of their generation and for the succeeding generations, file a class suit.
Their personality to sue in behalf of the succeeding generations can only be based on the concept of intergenerational
responsibility insofar as the right to a balanced and healthful ecology is concerned. Such a right, as hereinafter
expounded, considers the "rhythm and harmony of nature." Nature means the created world in its entirety. Such rhythm
and harmony indispensably include, inter alia, the judicious disposition, utilization, management, renewal and
conservation of the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other natural resources
to the end that their exploration, development and utilization be equitably accessible to the present a:: well as future
generations. Needless to say, every generation has a responsibility to the next to preserve that rhythm and harmony for
the full 1:njoyment of a balanced and healthful ecology. Put a little differently, the minors' assertion of their right to a
sound environment constitutes, at the same time, the performance of their obligation to ensure the protection of that
right for the generations to come.15 (Emphasis supplied.)
The liberalization of standing first enunciated in Oposa, insofar as it refers to minors and generations yet unborn, is now
enshrined in the Rules which allows the filing of a citizen suit in environmental cases. The provision on citizen suits in the
Rules "collapses the traditional rule on personal and direct interest, on the principle that humans are stewards of
nature."16
Having settled the issue of locus standi, we shall address the more fundamental question of whether this Court has
jurisdiction over the US respondents who did not submit any pleading or manifestation in this case.
The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-suability of the State, 17 is
expressly provided in Article XVI of the 1987 Constitution which states:
Section 3. The State may not be sued without its consent.
In United States of America v. Judge Guinto,18 we discussed the principle of state immunity from suit, as follows:
The rule that a state may not be sued without its consent, now · expressed in Article XVI, Section 3, of the 1987
Constitution, is one of the generally accepted principles of international law that we have adopted as part of the law of
our land under Article II, Section 2. x x x.
Even without such affirmation, we would still be bound by the generally accepted principles of international law under
the doctrine of incorporation. Under this doctrine, as accepted by the majority of states, such principles are deemed
incorporated in the law of every civilized state as a condition and consequence of its membership in the society of
nations. Upon its admission to such society, the state is automatically obligated to comply with these principles in its
relations with other states.
As applied to the local state, the doctrine of state immunity is based on the justification given by Justice Holmes that
''there can be no legal right against the authority which makes the law on which the right depends." [Kawanakoa v.
Polybank, 205 U.S. 349] There are other practical reasons for the enforcement of the doctrine. In the case of the foreign
state sought to be impleaded in the local jurisdiction, the added inhibition is expressed in the maxim par in parem, non
habet imperium. All states are sovereign equals and cannot assert jurisdiction over one another. A contrary disposition
would, in the language of a celebrated case, "unduly vex the peace of nations." [De Haber v. Queen of Portugal, 17 Q. B.
171]
While the doctrine appears to prohibit only suits against the state without its consent, it is also applicable to complaints
filed against officials of the state for acts allegedly performed by them in the discharge of their duties. The rule is that if
the judgment against such officials will require the state itself to perform an affirmative act to satisfy the same,. such as
the appropriation of the amount needed to pay the damages awarded against them, the suit must be regarded as
against the state itself although it has not been formally impleaded. [Garcia v. Chief of Staff, 16 SCRA 120] In such a
situation, the state may move to dismiss the comp.taint on the ground that it has been filed without its
consent.19 (Emphasis supplied.)
Under the American Constitution, the doctrine is expressed in the Eleventh Amendment which reads:
The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or
prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.
In the case of Minucher v. Court of Appeals, 20 we further expounded on the immunity of foreign states from the
jurisdiction of local courts, as follows:
The precept that a State cannot be sued in the courts of a foreign state is a long-standing rule of customary international
law then closely identified with the personal immunity of a foreign sovereign from suit and, with the emergence of
democratic states, made to attach not just to the person of the head of state, or his representative, but also distinctly to
the state itself in its sovereign capacity. If the acts giving rise to a suit arc 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 soverr~ign equals
and cannot assert jurisdiction over one another. The implication, in broad terms, is that if the judgment against an
official would rec 1uire the state itself to perform an affirmative act to satisfy the award, such as the appropriation of the
amount needed to pay the damages decreed against him, the suit must be regarded as being against the state itself,
although it has not been formally impleaded. 21 (Emphasis supplied.)
In the same case we also mentioned that in the case of diplomatic immunity, the privilege is not an immunity from the
observance of the law of the territorial sovereign or from ensuing legal liability; it is, rather, an immunity from the
exercise of territorial jurisdiction.22
In United States of America v. Judge Guinto, 23 one of the consolidated cases therein involved a Filipino employed at Clark
Air Base who was arrested following a buy-bust operation conducted by two officers of the US Air Force, and was
eventually dismissed from his employment when he was charged in court for violation of R.A. No. 6425. In a complaint
for damages filed by the said employee against the military officers, the latter moved to dismiss the case on the ground
that the suit was against the US Government which had not given its consent. The RTC denied the motion but on a
petition for certiorari and prohibition filed before this Court, we reversed the RTC and dismissed the complaint. We held
that petitioners US military officers were acting in the exercise of their official functions when they conducted the buy-
bust operation against the complainant and thereafter testified against him at his trial. It follows that for discharging
their duties as agents of the United States, they cannot be directly impleaded for acts imputable to their principal, which
has not given its consent to be sued.
This traditional rule of State immunity which exempts a State from being sued in the courts of another State without the
former's consent or waiver has evolved into a restrictive doctrine which distinguishes sovereign and governmental acts
(Jure imperil") from private, commercial and proprietary acts (Jure gestionis). Under the restrictive rule of State
immunity, State immunity extends only to acts Jure imperii. The restrictive application of State immunity is proper only
when the proceedings arise out of commercial transactions of the foreign sovereign, its commercial activities or
economic affairs.24
In Shauf v. Court of Appeals,25 we discussed the limitations of the State immunity principle, thus:
It is a different matter where the public official is made to account in his capacity as such for acts contrary to law and
injurious to the rights of plaintiff. As was clearly set forth by JustiGe Zaldivar in Director of the Bureau of
Telecommunications, et al. vs. Aligaen, etc., et al. : "Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an action against the officials or
officers by one whose rights have been invaded or violated by such acts, for the protection of his rights, is not a suit
against the State within the rule of immunity of the State from suit. In the same tenor, it has been said that an action at
law or suit in equity against a State officer or the director of a State department on the ground that, while claiming to act
for the State, he violates or invades the personal and property rights of the plaintiff, under an unconstitutional act or
under an assumption of authority which he does not have, is not a suit against the State within the constitutional
provision that the State may not be sued without its consent." The rationale for this ruling is that the doctrine of state
immunity cannot be used as an instrument for perpetrating an injustice.
xxxx
The aforecited authorities are clear on the matter. They state that the doctrine of immunity from suit will not apply and
may not be invoked where the public official is being sued in his private and personal capacity as an ordinary citizen. The
cloak of protection afforded the officers and agents of the government is removed the moment they are sued in their
individual capacity. This situation usually arises where the public official acts without authority or in excess of the
powers vested in him. It is a well-settled principle of law that a public official may be liable in his personal private
capacity for whatever damage he may have caused by his act done with malice and in bad faith, or beyond the scope of
his authority or jurisdiction. 26 (Emphasis supplied.) In this case, the US respondents were sued in their official capacity as
commanding officers of the US Navy who had control and supervision over the USS Guardian and its crew. The alleged
act or omission resulting in the unfortunate grounding of the USS Guardian on the TRNP was committed while they
we:re performing official military duties. Considering that the satisfaction of a judgment against said officials will require
remedial actions and appropriation of funds by the US government, the suit is deemed to be one against the US itself.
The principle of State immunity therefore bars the exercise of jurisdiction by this Court over the persons of respondents
Swift, Rice and Robling.
During the deliberations, Senior Associate Justice Antonio T. Carpio took the position that the conduct of the US in this
case, when its warship entered a restricted area in violation of R.A. No. 10067 and caused damage to the TRNP reef
system, brings the matter within the ambit of Article 31 of the United Nations Convention on the Law of the Sea
(UNCLOS). He explained that while historically, warships enjoy sovereign immunity from suit as extensions of their flag
State, Art. 31 of the UNCLOS creates an exception to this rule in cases where they fail to comply with the rules and
regulations of the coastal State regarding passage through the latter's internal waters and the territorial sea.
According to Justice Carpio, although the US to date has not ratified the UNCLOS, as a matter of long-standing policy the
US considers itself bound by customary international rules on the "traditional uses of the oceans" as codified in UNCLOS,
as can be gleaned from previous declarations by former Presidents Reagan and Clinton, and the US judiciary in the case
of United States v. Royal Caribbean Cruise Lines, Ltd. 27
The international law of the sea is generally defined as "a body of treaty rules arid customary norms governing the uses
of the sea, the exploitation of its resources, and the exercise of jurisdiction over maritime regimes. It is a branch of
public international law, regulating the relations of states with respect to the uses of the oceans." 28 The UNCLOS is a
multilateral treaty which was opened for signature on December 10, 1982 at Montego Bay, Jamaica. It was ratified by
the Philippines in 1984 but came into force on November 16, 1994 upon the submission of the 60th ratification.
The UNCLOS is a product of international negotiation that seeks to balance State sovereignty (mare clausum) and the
principle of freedom of the high seas (mare liberum). 29 The freedom to use the world's marine waters is one of the
oldest customary principles of international law. 30 The UNCLOS gives to the coastal State sovereign rights in varying
degrees over the different zones of the sea which are: 1) internal waters, 2) territorial sea, 3) contiguous zone, 4)
exclusive economic zone, and 5) the high seas. It also gives coastal States more or less jurisdiction over foreign vessels
depending on where the vessel is located. 31
Insofar as the internal waters and territorial sea is concerned, the Coastal State exercises sovereignty, subject to the
UNCLOS and other rules of international law. Such sovereignty extends to the air space over the territorial sea as well as
to its bed and subsoil.32
In the case of warships,33 as pointed out by Justice Carpio, they continue to enjoy sovereign immunity subject to the
following exceptions:
Article 30
Non-compliance by warships with the laws and regulations of the coastal State
If any warship does not comply with the laws and regulations of the coastal State concerning passage through the
territorial sea and disregards any request for compliance therewith which is made to it, the coastal State may require it
to leave the territorial sea immediately.
Article 31
Responsibility of the flag State for damage caused by a warship
or other government ship operated for non-commercial purposes
The flag State shall bear international responsibility for any loss or damage to the coastal State resulting from the non-
compliance by a warship or other government ship operated for non-commercial purposes with the laws and regulations
of the coastal State concerning passage through the territorial sea or with the provisions of this Convention or other
rules of international law.
Article 32
Immunities of warships and other government ships operated for non-commercial purposes
With such exceptions as are contained in subsection A and in articles 30 and 31, nothing in this Convention affects the
immunities of warships and other government ships operated for non-commercial purposes. (Emphasis supplied.) A
foreign warship's unauthorized entry into our internal waters with resulting damage to marine resources is one situation
in which the above provisions may apply. But what if the offending warship is a non-party to the UNCLOS, as in this case,
the US?
An overwhelming majority - over 80% -- of nation states are now members of UNCLOS, but despite this the US, the
world's leading maritime power, has not ratified it.
While the Reagan administration was instrumental in UNCLOS' negotiation and drafting, the U.S. delegation ultimately
voted against and refrained from signing it due to concerns over deep seabed mining technology transfer provisions
contained in Part XI. In a remarkable, multilateral effort to induce U.S. membership, the bulk of UNCLOS member states
cooperated over the succeeding decade to revise the objection.able provisions. The revisions satisfied the Clinton
administration, which signed the revised Part XI implementing agreement in 1994. In the fall of 1994, President Clinton
transmitted UNCLOS and the Part XI implementing agreement to the Senate requesting its advice and consent. Despite
consistent support from President Clinton, each of his successors, and an ideologically diverse array of stakeholders, the
Senate has since withheld the consent required for the President to internationally bind the United States to UNCLOS.
While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during the 108th and 110th Congresses, its
progress continues to be hamstrung by significant pockets of political ambivalence over U.S. participation in
international institutions. Most recently, 111 th Congress SFRC Chairman Senator John Kerry included "voting out"
UNCLOS for full Senate consideration among his highest priorities. This did not occur, and no Senate action has been
taken on UNCLOS by the 112th Congress. 34
Justice Carpio invited our attention to the policy statement given by President Reagan on March 10, 1983 that the US
will "recognize the rights of the other , states in the waters off their coasts, as reflected in the convention [UNCLOS], so
long as the rights and freedom of the United States and others under international law are recognized by such coastal
states", and President Clinton's reiteration of the US policy "to act in a manner consistent with its [UNCLOS] provisions
relating to traditional uses of the oceans and to encourage other countries to do likewise." Since Article 31 relates to the
"traditional uses of the oceans," and "if under its policy, the US 'recognize[s] the rights of the other states in the waters
off their coasts,"' Justice Carpio postulates that "there is more reason to expect it to recognize the rights of other states
in their internal waters, such as the Sulu Sea in this case."
As to the non-ratification by the US, Justice Carpio emphasizes that "the US' refusal to join the UN CLOS was centered on
its disagreement with UN CLOS' regime of deep seabed mining (Part XI) which considers the oceans and deep seabed
commonly owned by mankind," pointing out that such "has nothing to do with its [the US'] acceptance of customary
international rules on navigation."
It may be mentioned that even the US Navy Judge Advocate General's Corps publicly endorses the ratification of the
UNCLOS, as shown by the following statement posted on its official website:
The Convention is in the national interest of the United States because it establishes stable maritime zones, including a
maximum outer limit for territorial seas; codifies innocent passage, transit passage, and archipelagic sea lanes passage
rights; works against "jurisdictiomtl creep" by preventing coastal nations from expanding their own maritime zones; and
reaffirms sovereign immunity of warships, auxiliaries anJ government aircraft.
xxxx
Economically, accession to the Convention would support our national interests by enhancing the ability of the US to
assert its sovereign rights over the resources of one of the largest continental shelves in the world. Further, it is the Law
of the Sea Convention that first established the concept of a maritime Exclusive Economic Zone out to 200 nautical
miles, and recognized the rights of coastal states to conserve and manage the natural resources in this Zone. 35
We fully concur with Justice Carpio's view that non-membership in the UNCLOS does not mean that the US will disregard
the rights of the Philippines as a Coastal State over its internal waters and territorial sea. We thus expect the US to bear
"international responsibility" under Art. 31 in connection with the USS Guardian grounding which adversely affected the
Tubbataha reefs. Indeed, it is difficult to imagine that our long-time ally and trading partner, which has been actively
supporting the country's efforts to preserve our vital marine resources, would shirk from its obligation to compensate
the damage caused by its warship while transiting our internal waters. Much less can we comprehend a Government
exercising leadership in international affairs, unwilling to comply with the UNCLOS directive for all nations to cooperate
in the global task to protect and preserve the marine environment as provided in Article 197, viz:
Article 197
Cooperation on a global or regional basis
States shall cooperate on a global basis and, as appropriate, on a regional basis, directly or through competent
international organizations, in formulating and elaborating international rules, standards and recommended practices
and procedures consistent with this Convention, for the protection and preservation of the marine environment, taking
into account characteristic regional features.
In fine, the relevance of UNCLOS provisions to the present controversy is beyond dispute. Although the said treaty
upholds the immunity of warships from the jurisdiction of Coastal States while navigating the.latter's territorial sea, the
flag States shall be required to leave the territorial '::;ea immediately if they flout the laws and regulations of the Coastal
State, and they will be liable for damages caused by their warships or any other government vessel operated for non-
commercial purposes under Article 31.
Petitioners argue that there is a waiver of immunity from suit found in the VFA. Likewise, they invoke federal statutes in
the US under which agencies of the US have statutorily waived their immunity to any action. Even under the common
law tort claims, petitioners asseverate that the US respondents are liable for negligence, trespass and nuisance.
We are not persuaded.
The VFA is an agreement which defines the treatment of United States troops and personnel visiting the Philippines to
promote "common security interests" between the US and the Philippines in the region. It provides for the guidelines to
govern such visits of military personnel, and further defines the rights of the United States and the Philippine
government in the matter of criminal jurisdiction, movement of vessel and aircraft, importation and exportation of
equipment, materials and supplies.36 The invocation of US federal tort laws and even common law is thus improper
considering that it is the VF A which governs disputes involving US military ships and crew navigating Philippine waters in
pursuance of the objectives of the agreement.
As it is, the waiver of State immunity under the VF A pertains only to criminal jurisdiction and not to special civil actions
such as the present petition for issuance of a writ of Kalikasan. In fact, it can be inferred from Section 17, Rule 7 of the
Rules that a criminal case against a person charged with a violation of an environmental law is to be filed separately:
SEC. 17. Institution of separate actions.-The filing of a petition for the issuance of the writ of kalikasan shall not preclude
the filing of separate civil, criminal or administrative actions.
In any case, it is our considered view that a ruling on the application or non-application of criminal jurisdiction provisions
of the VF A to US personnel who may be found responsible for the grounding of the USS Guardian, would be premature
and beyond the province of a petition for a writ of Kalikasan. We also find it unnecessary at this point to determine
whether such waiver of State immunity is indeed absolute. In the same vein, we cannot grant damages which have
resulted from the violation of environmental laws. The Rules allows the recovery of damages, including the collection of
administrative fines under R.A. No. 10067, in a separate civil suit or that deemed instituted with the criminal action
charging the same violation of an environmental law. 37
Section 15, Rule 7 enumerates the reliefs which may be granted in a petition for issuance of a writ of Kalikasan, to wit:
SEC. 15. Judgment.-Within sixty (60) days from the time the petition is submitted for decision, the court shall render
judgment granting or denying the privilege of the writ of kalikasan.
The reliefs that may be granted under the writ are the following:
(a) Directing respondent to permanently cease and desist from committing acts or neglecting the performance of a duty
in violation of environmental laws resulting in environmental destruction or damage;
(b) Directing the respondent public official, govemment agency, private person or entity to protect, preserve,
rehabilitate or restore the environment;
(c) Directing the respondent public official, government agency, private person or entity to monitor strict compliance
with the decision and orders of the court;
(d) Directing the respondent public official, government agency, or private person or entity to make periodic reports on
the execution of the final judgment; and
(e) Such other reliefs which relate to the right of the people to a balanced and healthful ecology or to the protection,
preservation, rehabilitation or restoration of the environment, except the award of damages to individual petitioners.
(Emphasis supplied.)
We agree with respondents (Philippine officials) in asserting that this petition has become moot in the sense that the
salvage operation sought to be enjoined or restrained had already been accomplished when petitioners sought recourse
from this Court. But insofar as the directives to Philippine respondents to protect and rehabilitate the coral reef stn
icture and marine habitat adversely affected by the grounding incident are concerned, petitioners are entitled to these
reliefs notwithstanding the completion of the removal of the USS Guardian from the coral reef. However, we are mindful
of the fact that the US and Philippine governments both expressed readiness to negotiate and discuss the matter of
compensation for the damage caused by the USS Guardian. The US Embassy has also declared it is closely coordinating
with local scientists and experts in assessing the extent of the damage and appropriate methods of rehabilitation.
Exploring avenues for settlement of environmental cases is not proscribed by the Rules. As can be gleaned from the
following provisions, mediation and settlement are available for the consideration of the parties, and which dispute
resolution methods are encouraged by the court, to wit:
RULE3
xxxx
SEC. 3. Referral to mediation.-At the start of the pre-trial conference, the court shall inquire from the parties if they have
settled the dispute; otherwise, the court shall immediately refer the parties or their counsel, if authorized by their
clients, to the Philippine Mediation Center (PMC) unit for purposes of mediation. If not available, the court shall refer
the case to the clerk of court or legal researcher for mediation.
Mediation must be conducted within a non-extendible period of thirty (30) days from receipt of notice of referral to
mediation.
The mediation report must be submitted within ten (10) days from the expiration of the 30-day period.
SEC. 4. Preliminary conference.-If mediation fails, the court will schedule the continuance of the pre-trial. Before the
scheduled date of continuance, the court may refer the case to the branch clerk of court for a preliminary conference for
the following purposes:
(a) To assist the parties in reaching a settlement;
xxxx
SEC. 5. Pre-trial conference; consent decree.-The judge shall put the parties and their counsels under oath, and they
shall remain under oath in all pre-trial conferences.
The judge shall exert best efforts to persuade the parties to arrive at a settlement of the dispute. The judge may issue a
consent decree approving the agreement between the parties in accordance with law, morals, public order and public
policy to protect the right of the people to a balanced and healthful ecology.
xxxx
SEC. 10. Efforts to settle.- The court shall endeavor to make the parties to agree to compromise or settle in accordance
with law at any stage of the proceedings before rendition of judgment. (Underscoring supplied.)
The Court takes judicial notice of a similar incident in 2009 when a guided-missile cruiser, the USS Port Royal, ran
aground about half a mile off the Honolulu Airport Reef Runway and remained stuck for four days. After spending $6.5
million restoring the coral reef, the US government was reported to have paid the State of Hawaii $8.5 million in
settlement over coral reef damage caused by the grounding. 38
To underscore that the US government is prepared to pay appropriate compensation for the damage caused by the USS
Guardian grounding, the US Embassy in the Philippines has announced the formation of a US interdisciplinary scientific
team which will "initiate discussions with the Government of the Philippines to review coral reef rehabilitation options in
Tubbataha, based on assessments by Philippine-based marine scientists." The US team intends to "help assess damage
and remediation options, in coordination with the Tubbataha Management Office, appropriate Philippine government
entities, non-governmental organizations, and scientific experts from Philippine universities." 39
A rehabilitation or restoration program to be implemented at the cost of the violator is also a major relief that may be
obtained under a judgment rendered in a citizens' suit under the Rules, viz:
RULES
SECTION 1. Reliefs in a citizen suit.-If warranted, the court may grant to the plaintiff proper reliefs which shall include the
protection, preservation or rehabilitation of the environment and the payment of attorney's fees, costs of suit and other
litigation expenses. It may also require the violator to submit a program of rehabilitation or restoration of the
environment, the costs of which shall be borne by the violator, or to contribute to a special trust fund for that purpose
subject to the control of the court.1âwphi1
In the light of the foregoing, the Court defers to the Executive Branch on the matter of compensation and rehabilitation
measures through diplomatic channels. Resolution of these issues impinges on our relations with another State in the
context of common security interests under the VFA. It is settled that "[t]he conduct of the foreign relations of our
government is committed by the Constitution to the executive and legislative-"the political" --departments of the
government, and the propriety of what may be done in the exercise of this political power is not subject to judicial
inquiry or decision."40
On the other hand, we cannot grant the additional reliefs prayed for in the petition to order a review of the VFA and to
nullify certain immunity provisions thereof.
As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora, 41 the VFA was duly concurred in by the Philippine
Senate and has been recognized as a treaty by the United States as attested and certified by the duly authorized
representative of the United States government. The VF A being a valid and binding agreement, the parties are required
as a matter of international law to abide by its terms and provisions. 42 The present petition under the Rules is not the
proper remedy to assail the constitutionality of its provisions. WHEREFORE, the petition for the issuance of the privilege
of the Writ of Kalikasan is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.

FACTS:
The USS Guardian is an Avenger-class mine countermeasures ship of the US Navy. In December 2012, the US Embassy in
the Philippines requested diplomatic clearance for the said vessel “to enter and exit the territorial waters of the
Philippines and to arrive at the port of Subic Bay for the purpose of routine ship replenishment, maintenance, and crew
liberty.” On January 6, 2013, the ship left Sasebo, Japan for Subic Bay, arriving on January 13, 2013 after a brief stop for
fuel in Okinawa, Japan. On January 15, 2013, the USS Guardian departed Subic Bay for its next port of call in Makassar,
Indonesia. On January 17, 2013 at 2:20 a.m. while transiting the Sulu Sea, the ship ran aground on the northwest side of
South Shoal of the Tubbataha Reefs, about 80 miles eastsoutheast of Palawan. No cine was injured in the incident, and
there have been no reports of leaking fuel or oil.

ISSUE:
Whether or not immunity from suits can be invoked within territorial waters.

DECISION:
Yes. Immunity from suits can be invoked within territorial waters, except from the exceptions set by UNCLOS.

RATIO DECIDENDI:
Warships enjoy sovereign immunity from suit as extensions of their flag State, Art. 31 of the UNCLOS creates an
exception to this rule in cases where they fail to comply with the rules and regulations of the coastal State regarding
passage through the latter’s internal waters and the territorial sea.

13. Southeast Asian Fisheries Development Center vs. NLRC (206 SCRA 283)

G.R. No. 86773 February 14, 1992

SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT (SEAFDEC-AQD), DR. FLOR

LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE DIV.), BEN DELOS REYES (FINANCE OFFICER), petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA, respondents.

This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National Labor Relations
Commission sustaining the labor arbiter, in holding herein petitioners Southeast Asian Fisheries Development Center-
Aquaculture Department (SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil Cuevas and Ben de los Reyes liable to pay private
respondent Juvenal Lazaga the amount of P126,458.89 plus interest thereon computed from May 16, 1986 until full
payment thereof is made, as separation pay and other post-employment benefits, and the resolution denying the
petitioners' motion for reconsideration of said decision dated January 9, 1989.
The antecedent facts of the case are as follows:
SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries Development Center,
organized through an agreement entered into in Bangkok, Thailand on December 28, 1967 by the governments of
Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines with Japan as the sponsoring country (Article 1,
Agreement Establishing the SEAFDEC).
On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a probationary basis by
the SEAFDEC-AQD and was appointed Senior External Affairs Officer on January 5, 1983 with a monthly basic salary of
P8,000.00 and a monthly allowance of P4,000.00. Thereafter, he was appointed to the position of Professional III and
designated as Head of External Affairs Office with the same pay and benefits.
On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of termination to private
respondent informing him that due to the financial constraints being experienced by the department, his services shall
be terminated at the close of office hours on May 15, 1986 and that he is entitled to separation benefits equivalent to
one (1) month of his basic salary for every year of service plus other benefits (Rollo, p. 153).
Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed on March 18, 1987
a complaint against petitioners for non-payment of separation benefits plus moral damages and attorney's fees with the
Arbitration Branch of the NLRC (Annex "C" of Petition for Certiorari).
Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case inasmuch as the
SEAFDEC-AQD is an international organization and that private respondent must first secure clearances from the proper
departments for property or money accountability before any claim for separation pay will be paid, and which
clearances had not yet been obtained by the private respondent.
A formal hearing was conducted whereby private respondent alleged that the non-issuance of the clearances by the
petitioners was politically motivated and in bad faith. On the other hand, petitioners alleged that private respondent has
property accountability and an outstanding obligation to SEAFDEC-AQD in the amount of P27,532.11. Furthermore,
private respondent is not entitled to accrued sick leave benefits amounting to P44,000.00 due to his failure to avail of
the same during his employment with the SEAFDEC-AQD (Annex "D", Id.).
On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondents:
1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16, 1986 until full payment thereof
is made, as separation pay and other post-employment benefits;
2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's fees.
All other claims are hereby dismissed.
SO ORDERED. (Rollo, p. 51, Annex "E")
On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the award of P50,000.00 as
actual damages and attorney's fees for being baseless. (Annex "A", p. 28, id.)
On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which was denied on January 9,
1989. Thereafter, petitioners instituted this petition for certiorari alleging that the NLRC has no jurisdiction to hear and
decide respondent Lazaga's complaint since SEAFDEC-AQD is immune from suit owing to its international character and
the complaint is in effect a suit against the State which cannot be maintained without its consent.
The petition is impressed with merit.
Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD) is an international
agency beyond the jurisdiction of public respondent NLRC.
It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia, Japan, Kingdom of Laos,
Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of Thailand and Republic of Vietnam (Annex "H",
Petition).
The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on January 16,1968. Its
purpose is as follows:
The purpose of the Center is to contribute to the promotion of the fisheries development in Southeast Asia by mutual
co-operation among the member governments of the Center, hereinafter called the "Members", and through
collaboration with international organizations and governments external to the Center. (Agreement Establishing the
SEAFDEC, Art. 1; Annex "H" Petition) (p.310, Rollo)
SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in Kuala Lumpur, Malaysia
as one of the principal departments of SEAFDEC (Annex "I", id.) to be established in Iloilo for the promotion of research
in aquaculture. Paragraph 1, Article 6 of the Agreement establishing SEAFDEC mandates:
1. The Council shall be the supreme organ of the Center and all powers of the Center shall be vested in the Council.
Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional independence
and freedom from control of the state in whose territory its office is located.
As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public International Law (p. 83,
1956 ed.):
Permanent international commissions and administrative bodies have been created by the agreement of a considerable
number of States for a variety of international purposes, economic or social and mainly non-political. Among the notable
instances are the International Labor Organization, the International Institute of Agriculture, the International Danube
Commission. In so far as they are autonomous and beyond the control of any one State, they have a distinct juridical
personality independent of the municipal law of the State where they are situated. As such, according to one leading
authority "they must be deemed to possess a species of international personality of their own." (Salonga and Yap, Public
International Law, 83 [1956 ed.])
Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be represented by one
Director in the governing SEAFDEC Council (Agreement Establishing SEAFDEC, Art. 5, Par. 1, Annex "H", ibid.) and that its
national laws and regulations shall apply only insofar as its contribution to SEAFDEC of "an agreed amount of money,
movable and immovable property and services necessary for the establishment and operation of the Center" are
concerned (Art. 11, ibid.). It expressly waived the application of the Philippine laws on the disbursement of funds of
petitioner SEAFDEC-AQD (Section 2, P.D. No. 292).
The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over SEAFDEC-AQD in Opinion
No. 139, Series of 1984 —
4. One of the basic immunities of an international organization is immunity from local jurisdiction, i.e., that it is immune
from the legal writs and processes issued by the tribunals of the country where it is found. ( See Jenks, Id., pp. 37-44) The
obvious reason for this is that the subjection of such an organization to the authority of the local courts would afford a
convenient medium thru which the host government may interfere in there operations or even influence or control its
policies and decisions of the organization; besides, such subjection to local jurisdiction would impair the capacity of such
body to discharge its responsibilities impartially on behalf of its member-states. In the case at bar, for instance, the
entertainment by the National Labor Relations Commission of Mr. Madamba's reinstatement cases would amount to
interference by the Philippine Government in the management decisions of the SEARCA governing board; even worse, it
could compromise the desired impartiality of the organization since it will have to suit its actuations to the requirements
of Philippine law, which may not necessarily coincide with the interests of the other member-states. It is precisely to
forestall these possibilities that in cases where the extent of the immunity is specified in the enabling instruments of
international organizations, jurisdictional immunity from the host country is invariably among the first accorded.
(See Jenks, Id.; See also Bowett, The Law of International Institutions, pp. 284-1285).
Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing because estoppel does
not apply to confer jurisdiction to a tribunal that has none over a cause of action. Jurisdiction is conferred by law. Where
there is none, no agreement of the parties can provide one. Settled is the rule that the decision of a tribunal not vested
with appropriate jurisdiction is null and void. Thus, in Calimlim vs.  Ramirez, this Court held:
A rule, that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the
jurisdiction of a court over the subject matter of the action is a matter of law and may not be conferred by consent or
agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on
appeal. This doctrine has been qualified by recent pronouncements which it stemmed principally from the ruling in the
cited case of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations
which were obviously not contemplated therein. The exceptional circumstances involved in Sibonghanoy which justified
the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a
blanket doctrine had been repeatedly upheld that rendered the supposed ruling in  Sibonghanoy not as the exception,
but rather the general rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is
not lost by waiver or by estoppel. (Calimlim vs. Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982])
Respondent NLRC'S citation of the ruling of this Court in Lacanilao v.  De Leon (147 SCRA 286 [1987]) to justify its
assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the Court in said case explained why it took
cognizance of the case. Said the Court:
We would note, finally, that the present petition relates to a controversy between two claimants to the same
position; this is not a controversy between the SEAFDEC on the one hand, and an officer or employee, or a person
claiming to be an officer or employee, of the SEAFDEC, on the other hand. There is before us no question involving
immunity from the jurisdiction of the Court, there being no plea for such immunity whether by or on behalf of SEAFDEC,
or by an official of SEAFDEC with the consent of SEAFDEC (Id., at 300; emphasis supplied).
WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the courts or local agency of
the Philippine government, the questioned decision and resolution of the NLRC dated July 26, 1988 and January 9, 1989,
respectively, are hereby REVERSED and SET ASIDE for having been rendered without jurisdiction. No costs.
SO ORDERED.

2.2. Forms of Consent

2.2.1. Express Consent
a. General and Special Laws
i. Act No. 3083
ii. C.A. No. 327, as amended by P.D. No. 1445, Sections 49-50
iii. Civil Code, Article 2180
iv. R.A. 7160, Sections 22 & 24
b. Money claims arising from contract
c. Torts committed by special agents

Cases:
1. Republic vs. Purisima (78 SCRA 470)

G.R. No. L-36084 August 31, 1977

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HONORABLE AMANTE P. PURISIMA, the Presiding Judge of the court of first Instance of Manila (Branch VII), and
YELLOW BALL FREIGHT LINES, INC., respondents.
The jurisdictional issued raised by Solicitor General Estelito P. Mendoza on behalf of the Republic of the Philippines in
this certiorari and prohibition proceeding arose from the failure of respondent Judge Amante P. Purisima of the Court of
First Instance of Manila to apply the well-known and of-reiterated doctrine of the non-suability of a State, including its
offices and agencies, from suit without its consent. it was so alleged in a motion to dismiss filed by defendant Rice and
Corn Administration in a pending civil suit in the sala of respondent Judge for the collection of a money claim arising
from an alleged breach of contract, the plaintiff being private respondent Yellow Ball Freight Lines, Inc. 1 Such a motion
to dismiss was filed on September 7, 1972. At that time, the leading case of Mobil Philippines Exploration, Inc. v.
Customs Arrastre Service, 2 were Justice Bengzon stressed the lack of jurisdiction of a court to pass on the merits of a
claim against any office or entity acting as part of the machinery of the national government unless consent be shown,
had been applied in 53 other decisions. 3 There is thus more than sufficient basis for an allegation of jurisdiction infirmity
against the order of respondent Judge denying the motion to dismiss dated October 4, 1972.  4 What is more, the
position of the Republic has been fortified with the explicit affirmation found in this provision of the present
Constitution: "The State may not be sued without its consent." 5
The merit of the petition for certiorari and prohibition is thus obvious.
1. There is pertinence to this excerpt from Switzerland General Insurance Co., Ltd. v. Republic of the Philippines: 6 "The
doctrine of non-suability recognized in this jurisdiction even prior to the effectivity of the [1935] Constitution is a logical
corollary of the positivist concept of law which, to para-phrase Holmes, negates the assertion of any legal right as
against the state, in itself the source of the law on which such a right may be predicated. Nor is this all.lwphl@itç  Even if
such a principle does give rise to problems, considering the vastly expanded role of government enabling it to engage in
business pursuits to promote the general welfare, it is not obeisance to the analytical school of thought alone that calls
for its continued applicability. Why it must continue to be so, even if the matter be viewed sociologically, was set forth
in Providence Washington Insurance Co. v. Republic thus: "Nonetheless, 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 the 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 It only remains to be added that under the present Constitution which, as noted,
expressly reaffirmed such a doctrine, the following decisions had been rendered: Del mar v. The Philippine veterans
Administration; 8 Republic v. Villasor; 9 Sayson v. Singson; 10 and Director of the Bureau of Printing v. Francisco. 11
2. Equally so, the next paragraph in the above opinion from the Switzerland General Insurance Company decision is
likewise relevant: "Nor is injustice thereby cause private parties. They could still proceed to seek collection of their
money claims by pursuing the statutory remedy of having the Auditor General pass upon them subject to appeal to
judicial tribunals for final adjudication. We could thus correctly conclude as we did in the cited Provindence Washington
Insurance decision: "Thus the doctrine of non-suability of the government without its consent, as it has operated in
practice, hardly lends itself to the charge that it could be the fruitful parent of injustice, considering the vast and ever-
widening scope of state activities at present being undertaken. Whatever difficulties for private claimants may still exist,
is, from an objective appraisal of all factors, minimal. In the balancing of interests, so unavoidable in the determination
of what principles must prevail if government is to satisfy the public weal, the verdict must be, as it has been these so
many years, for its continuing recognition as a fundamental postulate of constitutional law." 12
3. Apparently respondent Judge was misled by the terms of the contract between the private respondent, plaintiff in his
sala, and defendant Rice and Corn Administration which, according to him, anticipated the case of a breach of contract
within the parties and the suits that may thereafter arise. 13 The consent, to be effective though, must come from the
State acting through a duly enacted statute as pointed out by Justice Bengzon in Mobil. Thus, whatever counsel for
defendant Rice and Corn Administration agreed to had no binding force on the government. That was clearly beyond the
scope of his authority. At any rate, Justice Sanchez, in Ramos v. Court of Industrial Relations, 14 was quite categorical as
to its "not [being] possessed of a separate and distinct corporate existence. On the contrary, by the law of its creation, it
is an office directly 'under the Office of the President of the Philippines." 15
WHEREFORE, the petitioner for certiorari is granted and the resolution of October 4, 1972 denying the motion to dismiss
filed by the Rice and Corn Administration nullified and set aside and the petitioner for prohibition is likewise granted
restraining respondent Judge from acting on civil Case No. 79082 pending in his sala except for the purpose of ordering
its dismissal for lack of jurisdiction. The temporary restraining order issued on February 8, 1973 by this Court is made
permanent terminating this case. Costs against Yellow Ball Freight Lines, Inc.

FACTS: 
The jurisdictional issues raised by Solicitor General Estelito P. Mendoza on behalf of the Republic of the Philippines in
this certiorari and prohibition proceeding arose from the failure of respondent Judge Amante P. Purisima of the Court of
First Instance of Manila to apply the well-known and of-reiterated doctrine of the non-suability of a State, including its
offices and agencies, from suit without its consent. It was so alleged in a motion to dismiss filed by defendant Rice and
Corn Administration in a pending civil suit in the sala of respondent Judge for the collection of a money claim arising
from an alleged breach of contract, the plaintiff being private respondent Yellow Ball Freight Lines, Inc.

ISSUE: 
Can an agreement between the Rice and Corn Administration and Yellow Ball Freight Lines, Inc.  operate as a waiver of
the national government from suit?

HELD: 
NO. The consent to be sued, to be effective must come from the State thru a statute, not through any agreement made
by counsel for the Rice and Corn Administration.Apparently respondent Judge was misled by the terms of the contract
between the private respondent, plaintiff in his sala, and defendant Rice and Corn Administration which, according to
him, anticipated the case of a breach of contract within the parties and the suits that may thereafter arise. The consent,
to be effective though, must come from the State acting through a duly enacted statute as pointed out by Justice
Bengzon in Mobil. Thus, whatever counsel for defendant Rice and Corn Administration agreed to had no binding force
on the government. That was clearly beyond the scope of his authority.

2. Merritt vs. Government of the Philippine Islands (G.R. No. 11154, March 21, 1916)

E. MERRITT, plaintiff-appellant,
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.

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.

FACTS: 
Section 1 Act No. 2457, authorized to E. Meritt to file a “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.”

ISSUE: 
Did the Government of the Philippine Islands, in enacting the above quoted Act, simply waive its immunity from suit or
did it also concede its liability to the plaintiff?

HELD: 
The Act only waived state immunity from suit.
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.
It being quite clear that Act No. 2457 does not operate to extend the Government’s liability to any cause not previously
recognized.

3. Amigable vs. Cuenca (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.

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.

FACTS:
Victoria Amigable is the is the registered owner of a lot which, without prior expropriation proceedings or negotiated
sale, was used by the government. Amigable's counsel wrote the President of the Philippines requesting payment of the
portion of her lot which had been expropriated by the government.
Amigable later filed a case against Cuenca, the Commissioner of Public Highways, for recovery of ownership and
possession of the said lot. She also sought payment for comlensatory damages, moral damages and attorney's fees.
The defendant said that the case was premature, barred by prescription, and the government did not give its consent to
be sued.

ISSUE:
W/N the appellant may properly sue the government.

HELD:
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 violating the doctrine of governmental immunity from suit.
The doctrine of immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen. The only
relief available is for the government to make due compensation which it could and should have done years ago. To
determine just compensation of the land, the basis should be the price or value at the time of the taking.

4. Department of Agriculture vs. NLRC (G.R. No. 104269, November 11, 1993)

DEPARTMENT OF AGRICULTURE, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.

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 contract 3 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 law 13 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 counterclaim 16 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.

FACTS:
On April 1, 1989, the Department of Agriculture (DoA) office in Cagayan de Oro and Sultan Security Agency (SSA) entered
into a contract where the latter was to provide security services to the former. On September 13, 1990, several guards
from SSA filed a complaint for underpayment of wages, non-payment of 13th month pay, uniform allowances, night shift
differential pay, holiday pay, as well as for damages, against DoA and SSA. Both the DoA and SSA were subsequently
found guilty by the Executive Labor Arbiter, which also held both of them liable for the payment of money claims
amounting to P266,483.91.

On July 18, 1991, the Labor Arbiter issued a writ of execution. As a response, the DoA filed a petition for injunction,
prohibition, and mandamus, with prayer for preliminary writ of injunction, before the NLRC. The DoA's petition was
dismissed.

Following the dismissal of its petition before the NLRC, DoA filed a petition before the SC arguing that: (a) it was COA,
not NLRC, that was supposed to have jurisdiction over money claims against the Government pursuant to
Commonwealth Act No. 327 as amended by PD No. 1445; and (b) that NLRC had disregarded the cardinal rule on the
non-suability of the State.

ISSUES:
1. Whether or not it was COA that has exclusive jurisdiction over money claims against the Government.
2. Whether or not DoA, as an agency of the State, is covered by the principle of the non-suability of the State.

HELD:
1. Yes, the Court ruled that money claims against the Government should be filed before the Commission on Audit
pursuant to CA Act No. 327 as amended by PD No. 1445. In the instant case, underpayment of wages, holiday pay,
overtime pay, and other similar items arising from the Contract for Service clearly constitute money claims. As such, the
writ of execution issued by the Labor Arbiter and the resolution issued by NLRC were reversed by the Court in favor of
DoA.

2. No, DoA cannot use the principle of non-suability of the State as an excuse not to be sued.

Section 3, Art. XVI of the 1987 Constitution states that "the State may not be sued without its consent." This principle
reflects a recognition of the sovereign character of the State and an express affirmation of the unwritten rule effectively
insulating it from the jurisdiction of the courts. As per Justice Holmes, a sovereign State is exempt from suits "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."

However, this privilege is not absolute; with its consent, the State can be sued.

The Court clarifies that there are two kinds of consent: (1) express consent, which may be made either through a general
law or a special law; and (2) implied consent, which is conceded when the State either commences litigation or enters
into a contract.

But entering into a contract does not automatically mean the State can be sued. Once again, the Court clarifies that
contracts or agreements that constitute sovereign and governmental acts (jure imperii) cannot be the subject of any
lawsuit, while private, commercial, and proprietary acts (jure gestionisis) can be made the subject of litigation.

In the instant case, express consent was provided for by Act No. 3083, which states that "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." And as cited earlier, money claims against the
Government should be filed before the Commission on Audit.

At the same time, it is inarguable that DoA's contract with SSA was clearly a proprietary act, which essentially means
that DoA cannot invoke the principle of the non-suability of the State.

5. United States vs. Guinto (G.R. No. 76607, February 26, 1990)

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.

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  United States 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.

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

ISSUE:
Are the petitioners immune from suit?

HELD:
It is clear that the petitioners in GR No. 80018 were acting in the exercise of their official functions. They cannot be
directly impleaded for the US government has not given its consent to be sued. In GR No. 79470, petitioners are not
immune because restaurants are commercial enterprises, however, the claim of damages by Genove cannot be allowed
on the strength of the evidence presented. Barber shops are also commercial enterprises operated by private persons,
thus, petitioners in GR No. 76607 cannot plead any immunity from the complaint filed. In GR No. 80258, the respondent
court will have to receive the evidence of the alleged irregularity in the grant of the barbershop concessions before it
can be known in what capacity the petitioners were acting at the time of the incident.
6. Festejo vs. Fernando, G.R. No. L-5156, March 11, 1954

CARMEN FESTEJO, demandante-apelante,

vs.
ISAIAS FERNANDO, Director de Obras Publicas, demandado-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.

FACTS:
The defendant, as Director of the Bureau of Public Works, took possession of the three parcels of land on February 1951
without obtaining first a right of way, without consent and knowledge of plaintiff, and against her express objection. The
petitioner demands that the lands be restored to its former condition and the defendant to pay the plaintiff the sum of
P19, 343.20 for the unlawful taking possession of the defendant.

ISSUE:
Is the defendant liable for the unlawful possession of the lands?

HELD:
The evidence and conceded facts permitted the jury in finding that in the trespass on plaintiff’s land, the defendant
committed acts outside the scope of his authority. There can be no claim that he thus invaded plaintiff’s land
southeasterly of the right of way innocently for the surveys clearly marked the limits of the land appropriated for the
right of way. 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. He cannot shelter himself by the plea that he is a public agent acting under the color of his
office and not personally.

d. Incorporated and Unincorporated Government Agencies

1. Rayo vs. CFI of Bulacan (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.

FACTS: 
On October 26, 1978, typhoon “Kading” struck Bulacan. Due to this, the National Power Corporation (NPC), through its
plant superintendent Benjamin Chavez, simultaneously opened 3 floodgates of Angat Dam.
The opening of the floodgates caused several towns to be inundated (the town of Norzagaray was the most affected
one). It resulted to a hundred deaths and damage to properties that were worth over a million pesos.
Petitioners (victims) filed a complaint for damages against NPC, including plant superintendent Benjamin Chavez.
Respondent filed counterclaims and put up a special and affirmative defense that “in the operation of the Angat Dam,” it
is “performing a purely governmental function”, hence it “cannot be sued without the express consent of the State.”
Petitioners oppose the defense, contending that the NPC is not performing 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.
CFI dropped the NPC from the complaint and left Chavez as the sole party-defendant.
CFI RULING: Upon a motion for reconsideration, the CFI ruled that petitioners’ reliance on Sec. 3 of RA 6395 is not
tenable since the same refer to such matters that are only within the scope of the other corporate powers of said
defendant and not matters of tort as in the instant cases.
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. PETITION DISMISSED.

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.

HELD: SC reversed the CFI decision and GRANTED petitioners to reinstate their complaint against the NPC.
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). As a government owned and controlled corporation, it has a
personality of its own, distinct and separate from that of the Government. Moreover, the charter provision that the NPC
can “sue and be sued in any court” is without qualification on the cause of action and accordingly it can include a tort
claim such as the one instituted by the petitioners.

2. Veterans Manpower & Protective Services, Inc. vs. CA (G.R. No. 91359, September 25,1992)

VETERANS MANPOWER AND PROTECTIVE SERVICES, INC., Petitioner, v. THE COURT OF APPEALS, THE CHIEF OF
PHILIPPINE CONSTABULARY and PHILIPPINE CONSTABULARY SUPERVISORY UNIT FOR SECURITY AND INVESTIGATION
AGENCIES (PC-SUSIA), Respondents.

SYLLABUS

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

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

3. ID.; ID.; CONSENT TO BE SUED MUST EMANATE FROM A LEGISLATIVE ACT. — Waiver of the State’s immunity from
suit, being a derogation of sovereignty, will not be lightly inferred, but must be construed strictissimi juris (Republic v.
Feliciano, 148 SCRA 424). The consent of the State to be sued must emanate from statutory authority, hence, from a
legislative act, not from a mere memorandum. Without such consent, the trial court did not acquire jurisdiction over the
public respondents.

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

DECISION

GRIÑO-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 Supervisor Unit for Security and
Investigation Agencies (PC-SUSIA) v. Hon. Omar U. Amin and Veterans Manpower and Protective Services, Inc. (VMPSI),"
lifting the writ of preliminary injunction which the Regional Trial Court had issued to the PC-SUSIA enjoining them from
committing acts that would result in the cancellation or non-renewal of the license of VMPSI to operate as a security
agency.

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 prerequisite to secure/renew their licenses, declaring that VMPSI did not engage in ‘cut-throat
competition’ in its contract with MWSS, ordering defendants PC Chief and PC-SUSIA to renew the license of VMPSI;
ordering the defendants to refrain from further harassing VMPSI and from threatening VMPSI with cancellations or non-
renewal of license, without legal and justifiable cause; ordering the defendants to pay to VMPSI the sum of
P1,000,000.00 as actual and compensatory damages, P1,000,000.00 as exemplary damages, and P200,000.00 as
attorney’s fees and expenses of litigation; and granting such further or other reliefs to VMPSI as may be deemed lawful,
equitable and just." (pp. 55-56, Rollo.)

The constitutionality of the following provisions of R.A. 5487 (otherwise known as the "Private Security Agency Law"), as
amended, is questioned by VMPSI in its

"SECTION 4. Who may Organize a Security or Watchman Agency. — Any Filipino citizen or a corporation, partnership, or
association, with a minimum capital of five thousand pesos, one hundred per cent of which is owned and controlled by
Filipino citizens may organize a security or watchman agency: Provided, That no person shall organize or have an interest
in, more than one such agency except those which are already existing at the promulgation of this Decree: . . ." (As
amended by P.D. Nos. 11 and 100.)

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

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

Respondent VMPSI likewise questions the validity of paragraph 3, subparagraph (g) of the Modifying Regulations on the
Issuance of License to Operate and Private Security Licenses and Specifying Regulations for the Operation of PADPAO
issued by then PC Chief Lt. Gen. Fidel V. Ramos, through Col. Sabas V. Edades, requiring that "all private security
agencies/company security forces must register as members of any PADPAO Chapter organized within the Region where
their main offices are located . . ." (pp. 5-6, Complaint in Civil Case No. 88-471). As such membership requirement in
PADPAO is compulsory in nature, it allegedly violates legal and constitutional provisions against monopolies, unfair
competition and combinations in restraint of trade.chanrobles.com : virtual law library

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

On June 29, 1987, Odin Security Agency (Odin) filed a complaint with PADPAO accusing VMPSI of cut-throat competition
by undercutting its contract rate for security services rendered to the Metropolitan Waterworks and Sewerage System
(MWSS), charging said customer lower than the standard minimum rates provided in the Memorandum of Agreement
dated May 12, 1986.
PADPAO found VMPSI guilty of cut-throat competition, hence, the PADPAO Committee on Discipline recommended the
expulsion of VMPSI from PADPAO and the cancellation of its license to operate a security agency (Annex D, Petition).

The PC-SUSIA made similar findings and likewise recommended the cancellation of VMPSI’s license (Annex E, Petition).

As a result, PADPAO refused to issue a clearance/certificate of membership to VMPSI when it requested one.

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

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

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

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

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

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

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

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

On August 11, 1989, the Court of Appeals granted the petition. The dispositive portion of its decision

"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 v. 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 formally impleaded." (Emphasis supplied.)

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

We agree with the observation of the Court of Appeals that the Memorandum of Agreement dated May 12, 1986 does
not constitute an implied consent by the State to be sued:

"The Memorandum of Agreement dated May 12, 1986 was entered into by the PC Chief in relation to the exercise of a
function sovereign in nature. The correct test for the application of state immunity is not the conclusion of a contract by
the State but the legal nature of the act. This was clearly enunciated in the case of United States of America v. Ruiz
where the Hon. Supreme Court held:

"‘The restrictive application of State immunity is proper only when the proceedings arise out of commercial transactions
of the foreign sovereign, its commercial activities or economic affairs. Stated differently, a State may be said to have
descended to the level of an individual and can thus be deemed to have tacitly given its consent to be sued only when it
enters into a business contract. It does not apply where the contract relates to the exercise of its functions.’ (136 SCRA
487, 492.)

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

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

The state immunity doctrine rests upon reasons of public policy and the inconvenience and danger which would flow
from a different rule. "It is obvious that public service would be hindered, and public safety endangered, if the supreme
authority could be subjected to suits at the instance of every citizen, and, consequently, controlled in the use and
disposition of the means required for the proper administration of the government" (Siren v. U.S. Wall, 152, 19 L. ed.
129, as cited in 78 SCRA 477). In the same vein, this Court in Republic v. Purisima (78 SCRA 470, 473) rationalized:
"Nonetheless, a continued adherence to the doctrine of nonsuability is not to be deplored for as against the
inconvenience that may be cause [by] private parties, the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions are far greater if such a fundamental principle were abandoned and the
availability of judicial remedy were not thus restricted. With the well known propensity on the part of our people to go
to court, at the least provocation, the loss of time and energy required to defend against law suits, in the absence of
such a basic principle that constitutes such an effective obstacles, could very well be imagined." (citing Providence
Washington Insurance Co. v. Republic, 29 SCRA 598.)

WHEREFORE, the petition for review is DENIED and the judgment appealed from is AFFIRMED in toto. No costs.

SO ORDERED.

FACTS:
Veterans Manpower and Protective Services, Inc. (VMPSI) alleges that the provisions under Section 4 and 17 of Republic
Act No. 5487 or the Private Security Agency Law violate 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.
Veterans Manpower and Protective Services, Inc. vs. Court of Appeals
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...”.

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.
Veterans Manpower and Protective Services, Inc. vs. Court of Appeals
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.

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.
Veterans Manpower and Protective Services, Inc. vs. Court of Appeals
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.

The PC-SUSIA affirmed the findings and likewise recommended the cancellation of VMPSI’s license.

As a result, PADPAO refused to issue a clearance/certificate of membership to VMPSI.

Veterans Manpower and Protective Services, Inc. vs. Court of Appeals
VMPSI made a request letter to the PC Chief 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.

ISSUE:
Whether or not VMPSI’s complaint against the PC Chief and PC-SUSIA is a suit against the State without its consent.
Veterans Manpower and Protective Services, Inc. vs. Court of Appeals

HELD:
Yes. 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, however, since the acts for which the PC Chief and PC-SUSIA are being called to
account in this case, were performed as part of their official duties, without malice, gross negligence, or bad faith, no
recovery may be had against them in their private capacities.
Veterans Manpower and Protective Services, Inc. vs. Court of Appeals
Furthermore, the Supreme Court agrees with 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 consent of the State to be sued must emanate from statutory authority, hence, a legislative act, not from a mere
memorandum.

Without such consent, the trial court did not acquired jurisdiction over the public respondents.
Veterans Manpower and Protective Services, Inc. vs. Court of Appeals
Petition for review is denied and the judgment appealed from is affirmed in toto.

3. Mobil Phils. Exploration vs. Customs Arrastre Service (G.R. No. L-23139, December 17,1966)

MOBIL PHILIPPINES EXPLORATION, INC., plaintiff-appellant,

vs.
CUSTOMS ARRASTRE SERVICE and BUREAU of CUSTOMS, defendants-appellees.

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.

FACTS:
1. 4 cases of rotary drill parts were shipped from abroad to the Philippines consigned to Mobil Philippines
Exploration, Inc., Manila.
2. The shipment arrived at the Port of Manila and was discharged to the custody of the Customs Arrastre
Service.
a. unit of the Bureau of Customs that handled the arrastre operations.
3. However, the Customs Arrastre Service was only able to deliver three cases of the shipment to the
broker of the plaintiff.
4. The plaintiff filed suit against the Customs Arrastre Service and the Bureau of Customs to recover the
value of the undelivered case.
5. The defendants filed a motion to dismiss the complaint on the ground that they cannot be sued as
government entities.
 
ISSUE:
W/N the Customs Arrastre Service and Bureau of Customs, as an arrastre service provider, are immune from
suit.
 
RULING:
YES
 
RATIO:
 1. Even though that the law impliedly authorized The Customs Arrastre Service and Bureau of Customs to
be sued since the nature of function is proprietary and not governmental, the court ruled that 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.
2. "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"

4. Air Transportation Administration vs. Spouses David (G.R. No. 159402, February 23, 2011)

AIR TRANSPORTATION OFFICE, Petitioner,

vs.
SPOUSES DAVID* ELISEA RAMOS, Respondents.

The State’s 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 State’s 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 ₱778,150.00. 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 State’s 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 ATO’s motion for a preliminary hearing of the affirmative defense.
After the RTC likewise denied the ATO’s motion for reconsideration on December 10, 1998, the ATO commenced a
special civil action for certiorari in the CA to assail the RTC’s 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 ₱778,150.00 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 ₱150,000.00 by way of moral damages and ₱150,000.00 as
exemplary damages; (3) the amount of ₱50,000.00 by way of attorney’s fees plus ₱15,000.00 representing the 10, more
or less, court appearances of plaintiff’s counsel; (4) The costs of this suit.
SO ORDERED.
In due course, the ATO appealed to the CA, which affirmed the RTC’s 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 ₱30,000.00 each, and attorney’s fees is
lowered to ₱10,000.00.
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 State’s 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 Court’s 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 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). 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 State’s immunity from suit. We uphold the CA’s 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
court’s 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 State’s 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 ATO’s 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.1avvphi1
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.

FACTS:
Respondent Spouses discovered that a portion of their registered land in Baguio City was being used as part of the
runway and running shoulder of the Loakan Airport being operated by petitioner Air Transportation Office (ATO). 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, the respondents filed an action for collection against the ATO and some of its officials in the RTC. 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.

The RTC held in favor of the Spouses, ordering the ATO to pay the plaintiffs Spouses 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.

On appeal, the CA affirmed the RTCs decision withmodification deleting the awarded cost, and reducing the moral and
exemplary damage to P30,000.00 each, and attorneys fees is lowered to P10,000.00.

ISSUE:
Could ATO be sued without the State's consent?

HELD:
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. 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; 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. National Airports Corporation v. Teodoro, Sr. and Phil. Airlines Inc., 91 Phil.
203 (1952)

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.

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, 91 Phil. 203 (1952)

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.

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.Republic v. Sandiganbayan, G.R. No. 90478, Nov. 2, 1991. DENIED.

5. Bureau of Printing vs. Bureau of Printing Employees Association (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.

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.

FACTS:
Respondent Bureau of Printing Employees Association (NLU), Pacifico Advincula, Roberto Mendoza, Ponciano Arganda
and Teodulo Toleran fileda complaint for unfair labor practice against herein petitioners 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 Court of Industrial Relations ruled in favor of herein respondents.
PETITIONER’S CLAIM:
That private respondents were suspended pending result of an administrative investigation against them for breach of
Civil Service rules and regulations; 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 governmental functions.
RESPONDENT’S CLAIM:
They alleged that Serafin Salvador and Mariano Ledesma have been engaging in unfair labor practice by interfering with,
or coercing the employees of the Bureau of Printing, particularly the members of the complaining association, in the
exercise of their right to self-organization and discriminating in regard to hire and tenure of their employment in order
to discourage them from pursuing their union activities.

ISSUE:
Whether or not petitioner government office is capable to sue and thus be sued?

HELD:
NO. 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. 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 is obviously, not engaged in business or occupation for pecuniary profit.
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. As an office of
the Government, without any corporate or juridical personality, the Bureau of Printing cannot be sued. 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. 

6. SSS vs. Court of Appeals (120 SCRA 707)

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.
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.

FACTS:
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. Claiming that the conditions of mortgage have been
broken, SSS filed an application for foreclosure of real estate mortgage.

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.

ISSUE:
Can the SSS, exercising governmental functions, be held liable for damages?

HELD:
YES. There should be no question on this score considering that the SSS is a juridical entity with a personality of its own.
It has corporate powers separate and distinct from the Government. SSS’ own organic act specifically provides that it can
sue and be sued in Court. These words “sue and be sued” embrace all civil process incident to a legal action. 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 statutory 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
and even for tort.

7. National Irrigation Administration vs. Court of Appeals (214 SCRA 35)

[G.R. No. 73919. September 18, 1992.]

NATIONAL IRRIGATION ADMINISTRATION AND THE ADMINISTRATOR OF THE NATIONAL IRRIGATION

ADMINISTRATION, Petitioners, v. THE HONORABLE INTERMEDIATE APPELLATE COURT, ANDRES VENTURA, ANTONIO
FAJARDO, MARCELO FAJARDO, ALFONSO VENTURA AND FLORENTINO VENTURA, Respondents.

SYLLABUS

1. PUBLIC CORPORATIONS; NATIONAL IRRIGATION ADMINISTRATION; BEING A CORPORATE BODY PERFORMING

PROPRIETARY FUNCTIONS IS NOT IMMUNE FROM SUIT. — As correctly ruled by the court below, the NIA "is not immune
from suit, by virtue of the express provision of P.D. No. 552." A reading of Section 2, sub-paragraph (f) of P.D. No. 552,
amending Republic Act No. 3601 shows the granting to NIA the power "to exercise all the powers of a corporation under
the Corporation Law, insofar as they are not inconsistent with the provisions of this Act." Paragraph 4 of said law also
provide that petitioner NIA may sue and be sued in court for all kind of actions, whether contractual or quasi-
contractual, in the recovery of compensation and damages as in the instant case considering that private respondents’
action is based on damages caused by the negligence of petitioners. This Court had previously held that "the National
Irrigation Administration is a government agency with a juridical personality separate and distinct from the government.
It is not a mere agency of the government but a corporate body performing proprietary functions" as it has its own
assets and liabilities as well as its own corporate powers to be exercised by a Board of Directors.

2. CIVIL LAW; QUASI-DELICT; LIABILITY OF STATE ACTING THROUGH A SPECIAL AGENT; RULE. — Paragraph 6, Article
2180 of the Civil Code of the Philippines states that: "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." Article 2176 of said Code provides that: "Whoever by act
or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed
by the provisions of this Charter."

DECISION

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision of the then Intermediate Appellate Court
dated February 27, 1986 1 affirming the decision of the then Court of First Instance of Nueva Ecija, Fourth Judicial
District, Branch VII in Civil Case No. 6244 dated November 25, 1981 2 in ordering petitioners to pay private respondents
damages, attorney’s fees and the costs.

It appears on record that private respondents Andres Ventura, Antonio Fajardo, Marcelo Fajardo, Alfonso Ventura and
Florentino Ventura are leasehold tenants of a parcel of land consisting of about five (5) hectares of riceland situated at
Sitio Dagat-dagatan, Sto. Rosario, Sta. Rosa, Nueva Ecija.

Sometime in 1967, petitioner National Irrigation Administration (NIA for brevity) constructed an irrigation canal on the
property of Isabel and Virginia Tecson which passed through the private respondents’ landholdings as said irrigation
canal traverses the Cinco-Cinco Creek which abuts said landholding. The irrigation canal has two (2) outlets which
provide private respondents’ landholdings with water coming from said canal and at the same time serve to drain the
excess water of said landholdings.chanroblesvirtualawlibrary

On February 13, 1975, private respondents filed a complaint for the abatement of nuisance with damages against
petitioners NIA and/or the Administrator of the National Irrigation Administration alleging that the two (2) outlets
constructed on both sides of the irrigation canal were not provided with gates to regulate the flow of water from the
canal to their landholdings which resulted to the inundation of said landholdings causing the former to sustain damages
consisting in the destruction of the planted palay crops and also prevented them from planting on their landholdings.

After trial on the merits, a decision was rendered by the court below on November 25, 1981, the pertinent portion of
which reads as follows:jgc:chanrobles.com.ph
"In view of the foregoing, the Court finds the complaint meritorious. However, since there were typhoons and plant
pests that reduced the harvests of the plaintiffs and that there were benefits that accrued to the plaintiffs by reason of
said irrigation canal, the civil liability of the defendant should naturally be reduced.

"WHEREFORE, judgment is hereby entered: 1) Ordering the defendant to pay to the plaintiffs the sum of P35,000.00
representing damages: 2) Ordering defendant to pay P5,000.00 for attorney’s fees and the cost of the suit." 3

Not satisfied with said decision, petitioners elevated the matter to the appellate court which rendered a decision on
February 27, 1986 affirming in toto the decision of the trial court.

Hence, this petition. It is petitioners’ position that the respondent appellate court erred in affirming the decision of the
trial court because NIA is immune from suit for quasi-delict or tort and assuming NIA could be sued, it is not liable for
tort since it did not act through a special agent as required under paragraph 6, Article 2180 of the Civil Code of the
Philippines.

Petitioners are in error. As correctly ruled by the court below, the NIA "is not immune from suit, by virtue of the express
provision of P.D. No. 552." 4

A reading of Section 2, sub-paragraph (f) of P.D. No. 552, 5 amending Republic Act No. 3601 shows the granting to NIA
the power "to exercise all the powers of a corporation under the Corporation Law, insofar as they are not inconsistent
with the provisions of this Act." Paragraph 4 of said law also provide that petitioner NIA may sue and be sued in court for
all kind of actions, whether contractual or quasi-contractual, in the recovery of compensation and damages as in the
instant case considering that private respondents’ action is based on damages caused by the negligence of petitioners.
This Court had previously held that "the National Irrigation Administration is a government agency with a juridical
personality separate and distinct from the government. It is not a mere agency of the government but a corporate body
performing proprietary functions" 6 as it has its own assets and liabilities as well as its own corporate powers to be
exercised by a Board of Directors.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

Paragraph 6, Article 2180 of the Civil Code of the Philippines states that:jgc:chanrobles.com.ph

"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."cralaw virtua1aw library

Article 2176 of said Code provides that:jgc:chanrobles.com.ph

"Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter."cralaw virtua1aw library

Thus, petitioners are liable for the damages caused by their negligent act. Said the trial court:jgc:chanrobles.com.ph

"On the issue of negligence, plaintiffs through the testimonies of Andres Ventura, Florentino Ventura and Prudencio
Martin showed that the NIA constructed irrigation canals on the landholding[s] of the plaintiffs by scrapping away the
surface of the landholding[s] to raise the embankment of the canal. As a result of the said construction, in 1967 the
landholdings of the plaintiffs were inundated with water. Although it cannot be denied that the irrigation canal of the
NIA is a boon to the plaintiffs, the delay of almost 7 years in installing the safety measures such as check gates,
drainage[s], ditches and paddy drains has caused substantial damage to the annual harvest of the plaintiffs. In fact,
Engineer Garlitos, witness for the defendant declared that these improvements were made only after the settlement of
the claim of Mrs. Virginia Tecson, which was sometime in 1976 or 1977, while the irrigation canal was constructed in
1976 [1967]. The testimonies of the plaintiffs essentially corroborated by a disinterested witness in the person of
Barangay Captain Prudencio Martin, proved that the landholdings of the complainants were inundated when the NIA
irrigation canal was constructed without safety devises thereby reducing their annual harvest of 30 cavans per hectare
(portions flooded). The failure [,] therefore, of the NIA to provide the necessary safeguards to prevent the inundation of
plaintiffs’ landholding[s] is the proximate cause of the damages to the poor farmers. On the other hand, the defendant
maintains that the cause of inundation of plaintiffs’ landholdings was the check gate of the Cinco-cinco creek known as
Tombo check gate. However, evidence showed that this check gate existed long before the NIA irrigation canal was
constructed and there were no complaints from the plaintiffs until the canal of the NIA was built. The uncontested
testimony of barrio captain Prudencio Martin that the former name of the sitio where the plaintiffs’ landholdings were
located was "Hilerang Duhat" but was changed to Sitio Dagat-dagatan because of the inundation was not without
justification." 7
With regard to petitioners’ contention that the respondent appellate court erred in awarding damages to private
respondents, We find said court’s decision in accordance with the evidence and the law. As correctly held by the
appellate court:jgc:chanrobles.com.ph

"It has been established that the plaintiffs’ landholdings were actually inundated. The testimonies by all the plaintiffs
with respect to the amount of the loss they suffered were not impugned by any contradictory evidence of the
defendant. To Our mind, these testimonies are sufficient proof to make the grant of damages valid and proper. Besides,
the amount awarded by the lower court is but just and reasonable considering the circumstances of the case." 8

WHEREFORE, this petition for review on certiorari is hereby DENIED for lack of merit.

SO ORDERED.

8. Civil Aeronautics Administration vs. CA (G.R. No. L-51806, November 8, 1988)

CIVIL AERONAUTICS ADMINISTRATION, petitioner,

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

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.
I
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.

9. Heirs of Mendoza vs. DPWH (729 SCRA 654)

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."18 In
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.

2.2.2. Implied Consent

a. When the State Commences Litigation
1. DOTC vs. Sps. Abecina (G.R. No. 206484, January 29, 2016)

G.R. No. 206484

DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), Petitioner,
vs.
SPOUSES VICENTE ABECINA and MARIA CLEOFE ABECINA, Respondents.
DECISION
BRION, J.:
This petition for review on certiorari  seeks to reverse and set aside the March 20, 2013 decision of the Court of
Appeals (CA)  in CA-G.R. CV No. 93795 1 affirming the decision of the Regional Trial Court (RTC)  of Daet, Camarines
Norte, Branch 39, in Civil Case No. 7355.2The RTC ordered the Department of Transportation and
Communications (DOTC)  to vacate the respondents' properties and to pay them actual and moral damages.
ANTECEDENTS
Respondent spouses Vicente and Maria Cleofe Abecina (respondents/spouses Abecina)  are the registered owners of five
parcels of land in Sitio Paltik, Barrio Sta. Rosa, Jose Panganiban, Camarines Norte.
The properties are covered by Transfer Certificates of Title (TCT)  Nos. T-25094, T-25095, T-25096, T-25097, and T-
25098.3
In February 1993, the DOTC awarded Digitel Telecommunications Philippines, Inc. (Digitel)  a contract for the
management, operation, maintenance, and development of a Regional Telecommunications Development
Project (RTDP)  under the National Telephone Program, Phase I, Tranche 1 (NTPI-1).4
The DOTC and Digitel subsequently entered into several Facilities Management Agreements ( FMA) for Digitel to manage,
operate, maintain, and develop the RTDP and NTPI-1 facilities comprising local telephone exchange lines in various
municipalities in Luzon. The FMAs were later converted into Financial Lease Agreements (FLA)  in 1995.
Later on, the municipality of Jose Panganiban, Camarines Norte, donated a one thousand two hundred (1,200)  square-
meter parcel of land to the DOTC for the implementation of the RDTP in the municipality. However, the municipality
erroneously included portions of the respondents’ property in the donation. Pursuant to the FLAs, Digitel constructed a
telephone exchange on the property which encroached on the properties of the respondent spouses. 5
Sometime in the mid-1990s, the spouses Abecina discovered Digitel’s occupation over portions of their properties. They
required Digitel to vacate their properties and pay damages, but the latter refused, insisting that it was occupying the
property of the DOTC pursuant to their FLA.
On April 29, 2003, the respondent spouses sent a final demand letter to both the DOTC and Digitel to vacate the
premises and to pay unpaid rent/damages in the amount of one million two hundred thousand pesos (₱1,200,000.00).
Neither the DOTC nor Digitel complied with the demand.
On September 3, 2003, the respondent spouses filed an accion publiciana  complaint 6 against the DOTC and Digitel for
recovery of possession and damages. The complaint was docketed as Civil Case No. 7355.
In its answer, the DOTC claimed immunity from suit and ownership over the subject properties. 7 Nevertheless, during
the pre-trial conference, the DOTC admitted that the Abecinas were the rightful owners of the properties and opted to
rely instead on state immunity from suit. 8
On March 12, 2007, the respondent spouses and Digitel executed a Compromise Agreement and entered into a Contract
of Lease. The RTC rendered a partial decision and approved the Compromise Agreement on March 22, 2007. 9
On May 20, 2009, the RTC rendered its decision against the DOTC. 10 It brushed aside the defense of state immunity.
Citing Ministerio v. Court of First Instance11and Amigable v. Cuenca,12it held that government immunity from suit could
not be used as an instrument to perpetuate an injustice on a citizen. 13
The RTC held that as the lawful owners of the properties, the respondent spouses enjoyed the right to use and to
possess them – rights that were violated by the DOTC’s unauthorized entry, construction, and refusal to vacate. The RTC
(1) ordered the Department – as a builder in bad faith – to forfeit the improvements and vacate the properties; and (2)
awarded the spouses with ₱1,200,000.00 as actual damages, ₱200,000.00 as moral damages, and ₱200,000.00 as
exemplary damages plus attorney’s fees and
costs of suit.
The DOTC elevated the case to the CA arguing: (1) that the RTC never acquired jurisdiction over it due to state immunity
from suit; (2) that the suit against it should have been dismissed after the spouses Abecina and Digitel executed a
compromise agreement; and (3) that the RTC erred in awarding actual, moral, and exemplary damages against it. 14 The
appeal was docketed as CA-G.R. CV No. 93795.
On March 20, 2013, the CA affirmed the RTC’s decision but deleted the award of exemplary damages. The CA upheld the
RTC’s jurisdiction over cases for accion publiciana  where the assessed value exceeds ₱20,000.00. 15 It likewise denied the
DOTC’s claim of state immunity from suit, reasoning that the DOTC removed its cloak of immunity after entering into a
proprietary contract – the Financial Lease Agreement with Digitel. 16 It also adopted the RTC’s position that state
immunity cannot be used to defeat a valid claim for compensation arising from an unlawful taking without the proper
expropriation proceedings.17 The CA affirmed the award of actual and moral damages due to the DOTC’s neglect to verify
the perimeter of the telephone exchange construction but found no valid justification for the award of exemplary
damages.18
On April 16, 2013, the DOTC filed the present petition for review on certiorari.
THE PARTIES’ ARGUMENTS
The DOTC asserts that its Financial Lease Agreement with Digitel was entered into in pursuit of its governmental
functions to promote and develop networks of communication systems. 19 Therefore, it cannot be interpreted as a waiver
of state immunity.
The DOTC also maintains that while it was regrettable that the construction of the telephone exchange erroneously
encroached on portions of the respondent’s properties, the RTC erred in ordering the return of the property.  20 It argues
that while the DOTC, in good faith and in the performance of its mandate, took private property without formal
expropriation proceedings, the taking was nevertheless an exercise of eminent domain. 21
Citing the 2007 case of Heirs of Mateo Pidacan v. Air Transportation Office (ATO), 22the Department prays that instead of
allowing recovery of the property, the case should be remanded to the RTC for determination of just compensation.
On the other hand, the respondents counter that the state immunity cannot be invoked to perpetrate an injustice
against its citizens.23 They also maintain that because the subject properties are titled, the DOTC is a builder in bad faith
who is deemed to have lost the improvements it introduced. 24 Finally, they differentiate their case from Heirs of Mateo
Pidacan v. ATO  because Pidacan  originated from a complaint for payment of the value of the property and rentals while
their case originated from a complaint for recovery of possession and damages. 25
OUR RULING
We find no merit in the petition.
The State may not be sued without its consent. 26 This fundamental doctrine stems from the principle that there can be
no legal right against the authority which makes the law on which the right depends. 27 This generally accepted principle
of law has been explicitly expressed in both the 1973 28 and the present Constitutions.
But as the principle itself implies, the doctrine of state immunity is not absolute. The State may waive its cloak of
immunity and the waiver may be made expressly or by implication.
Over the years, the State’s participation in economic and commercial activities gradually expanded beyond its sovereign
function as regulator and governor.1âwphi1 The evolution of the State’s activities and degree of participation in
commerce demanded a parallel evolution in the traditional rule of state immunity. Thus, it became necessary to
distinguish between the State’s sovereign and governmental acts (jure imperii)  and its private, commercial, and
proprietary acts (jure gestionis).  Presently, state immunity restrictively extends only to acts jure imperii  while acts jure
gestionis  are considered as a waiver of immunity.29
The Philippines recognizes the vital role of information and communication in nation building. 30 As a consequence, we
have adopted a policy environment that aspires for the full development of communications infrastructure to facilitate
the flow of information into, out of, and across the country. 31 To this end, the DOTC has been mandated with the
promotion, development, and regulation of dependable and coordinated networks of communication. 32
The DOTC encroached on the respondents’ properties when it constructed the local telephone exchange in Daet,
Camarines Norte. The exchange was part of the RTDP pursuant to the National Telephone Program. We have no doubt
that when the DOTC constructed the encroaching structures and subsequently entered into the FLA with Digitel for their
maintenance, it was carrying out a sovereign function. Therefore, we agree with the DOTC’s contention that these are
acts jure imperii  that fall within the cloak of state immunity.
However, as the respondents repeatedly pointed out, this Court has long established in Ministerio v CFI,33  Amigable v.
Cuenca,  34the 2010 case Heirs of Pidacan v. ATO,  35and more recently in Vigilar v. Aquino36that the doctrine of state
immunity cannot serve as an instrument for perpetrating an injustice to a citizen.
The Constitution identifies the limitations to the awesome and near-limitless powers of the State. Chief among these
limitations are the principles that no person shall be deprived of life, liberty, or property without due process of law and
that private property shall not be taken for public use without just compensation. 37 These limitations are enshrined in no
less than the Bill of Rights that guarantees the citizen protection from abuse by the State.
Consequently, our laws38 require that the State’s power of eminent domain shall be exercised through expropriation
proceedings in court. Whenever private property is taken for public use, it becomes the ministerial duty of the
concerned office or agency to initiate expropriation proceedings. By necessary implication, the filing of a complaint for
expropriation is a waiver of State immunity.
If the DOTC had correctly followed the regular procedure upon discovering that it had encroached on the respondents’
property, it would have initiated expropriation proceedings instead of insisting on its immunity from suit. The petitioners
would not have had to resort to filing its complaint for reconveyance. As this Court said in Ministerio:
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. 39 [emphasis supplied]
We hold, therefore, that the Department’s entry into and taking of possession of the respondents’ property amounted
to an implied waiver of its governmental immunity from suit.
We also find no merit in the DOTC’s contention that the RTC should not have ordered the reconveyance of the
respondent spouses’ property because the property is being used for a vital governmental function, that is, the
operation and maintenance of a safe and efficient communication system. 40
The exercise of eminent domain requires a genuine necessity to take the property for public use and the consequent
payment of just compensation. The property is evidently being used for a public purpose. However, we also note that
the respondent spouses willingly entered into a lease agreement with Digitel for the use of the subject properties.
If in the future the factual circumstances should change and the respondents refuse to continue the lease, then the
DOTC may initiate expropriation proceedings. But as matters now stand, the respondents are clearly willing to lease the
property. Therefore, we find no genuine necessity for the DOTC to actually take the property at this point.
Lastly, we find that the CA erred when it affirmed the RTC's decision without deleting the forfeiture of the improvements
made by the DOTC through Digitel. Contrary to the RTC's findings, the DOTC was not a builder in bad faith when the
improvements were constructed. The CA itself found that the Department's encroachment over the respondents'
properties was a result of a mistaken implementation of the donation from the municipality of Jose Panganiban. 41
Good faith consists in the belief of the builder that the land he is building on is his and [of] his ignorance of any defect or
flaw in his title.42 While the DOTC later realized its error and admitted its encroachment over the respondents' property,
there is no evidence that it acted maliciously or in bad faith when the construction was done.
Article 52743 of the Civil Code presumes good faith. Without proof that. the Department's mistake was made in bad faith,
its construction is presumed to have been made in good faith. Therefore, the forfeiture of the improvements in favor of
the respondent spouses is unwarranted.
WHEREFORE, we hereby DENY the petition for lack of merit. The May 20, 2009 decision of the Regional Trial Court
in Civil Case No. 7355, as modified by the March 20, 2013 decision of the Court of Appeals in CA-G.R. CV No. 93795,
is AFFIRMED with further MODIFICATION that the forfeiture of the improvements made by the DOTC in favor of the
respondents is DELETED. No costs.
SO ORDERED.

2. Republic of the Philippines vs. Sandiganbayan (G.R. No. 85284, February 28, 1990)

REPUBLIC OF THE PHILIPPINES, petitioner

vs.
SANDIGANBAYAN, Third Division, SIMPLICIO A. PALANCA in his own behalf as a stockholder of Bacolod Real Estate
Development Corporation (BREDCO), and other stockholders similarly situated, respondents.
Hilado, Hagad & Hilado for private respondents.
RESOLUTION

PADILLA, J.:
This is a petition for certiorari to annul and set aside the resolution of the Sandiganbayan (Third Division), dated 3 June
1988, granting the private respondents' motion to intervene in Civil Case No. 0025 and admitting their answer in
intervention, as well as its resolution, dated 25 August 1988, denying the petitioner's motion for reconsideration;
PROHIBITION to order the respondent court to cease and desist from proceeding with the intervention filed with it; and
alternatively, mandamus to compel the respondent court to dismiss the intervention case.
The antecedents are as follows:
On 29 July 1987, the Republic of the Philippines, as Plaintiff, through its governmental instrumentality the Presidential
Commission on Good Government (PCGG) filed with the respondent Sandiganbayan a complaint against Ferdinand E.
Marcos, et al. for reconveyance, reversion, accounting, restitution and damages, docketed therein as Civil Case No. 0025
(PCGG No. 26). 1
On or about 3 September 1987, before the said Civil Case No. 0025 could be set for hearing, private respondent
Simplicio A. Palanca in his own behalf as a stockholder of Bacolod Real Estate Development Corporation (BREDCO) and
other stockholders similarly situated, filed with the respondent Sandiganbayan a "Motion For Leave To
Intervene" 2 attaching thereto their "Answer in Intervention ." 3
In their motion, private respondents alleged that they be —
... allowed to intervene in the present action and to file the Answer in intervention hereto attached as Annex 'A', the said
stockholders having a legal interest in the matter in litigation and in the disposition of the properties listed in Annex 'A'
of the Complaint as BREDCO LOTS and shares of stock in Bacolod Real Estate Development Corporation.
In justification, it is further respectfully alleged that.
1. Close examination of the Complaint, in particular par. 12 thereto under 'V. SPECIFIC AVERMENTS OF DEFENDANTS'
ILLEGAL ACTS', makes no mention at all about BREDCO being the subject of any anomalous transaction engaged in by
any of the defendants, in consequence of which the listed BREDCO lots could have been gotten illegally. It is to be
observed, on the other hand, that the titles mentioned in aforesaid Annex of the complaint covering the lots in question
are not registered in the names of any of the defendants but in the name of Bacolod Real Estate Development
Corporation.
2. Similarly, the shares of stock in Bacolod Real Estate Development Corporation appealing under PERSONAL PROPERTY
on page two of Annex A of the complaint t are ' carried not in the names of any of the defendants, but in the name of
Marsteel Consolidated Inc. and were acquired under the circumstances averred more in detail in the accompanying
Answer in Intervention by reason of which detail shares should not be involved in the present action.
3. If intervention is allowed, intervenors are prepared to prove that if ever any of the defendants through Marsteel
Consolidated, Inc. and Marsteel Corporation came to have any interest in Bacolod Real Estate Development Corporation,
it was only by way of accommodation on the part of BREDCO stockholders who transferred their shareholdings
aggregating 70% of the subscribed capital to enable Marsteel Consolidated to secure adequate financing for the
reclamation and port development project . 4
The foregoing allegations were further expanded and elaborated in the private respondents' Answer in Intervention.
On 2 December 1987, petitioner filed its Reply 5 to Answer In Intervention, while private respondents filed a "Rejoinder
to Reply With Motion To Release BREDCO Lots 6 and also a "Motion To Calendar For Hearing" the motion to release
BREDCO lots. 7
On 22 January 1988, respondent court promulgated a resolution 8 holding in abeyance action on the private
respondents' "Rejoinder to Reply with Motion to Release BREDCO lots", and set the Motion for Leave to Intervene for
hearing on 2 February 1988.
On 11 March 1988, respondent court issued an order 9 giving petitioner fifteen (1 5) days from 11 March 1988 within
which to file its opposition and/or comment on the motion to intervene and giving the private respondents in turn ten
(10) days within which to file their reply thereto.
On 23 March 1988, petitioner filed its Motion to Dismiss "Answer In Intervention," on the grounds that; (1) respondent
court lacks jurisdiction and (2) intervenors have no legal interest in the matter in litigation, 10 which the private
respondents opposed. 11
On 6 June 1988, respondent court promulgated a Resolution dated 3 June 1988 12 granting the private respondents'
motion to intervene and admitting their Answer in Intervention.
Petitioner moved for reconsideration but this was denied by respondent court in its resolution of 25 August 1989. 13
Hence, the instant petition.
The petitioner, through the Solicitor General, contends that in issuing the questioned resolutions granting the Motion to
Intervene and admitting the Answer-in-Intervention, respondent Sandiganbayan acted in contravention of a national or
public policy embedded in Executive Order Nos. 1, 2, 4 and related issuances, or otherwise acted in a way not in accord
with law or with the applicable decisions of this Court, because:
(a) Petitioner, being the sovereign state, cannot be sued without its consent, and the Intervention is, in legal effect, a
suit or counter- suit against the sovereign state, the Republic of the Philippines;
(b) The cause of action of intervenors does not fall within the jurisdiction of the Sandiganbayan as expressly spelled out
in P.D. No. 1606 and Executive Order No. 14;
(c) Intervenors have no legal interest in the matter in litigation, and the subject matter is not in custodia legis of
respondent court; and
(d) Intervenors' claims, as contained in their Motion for Intervention and Answer-in-Intervention, are claims between
and/or among Ferdinand and Imelda Marcos and their cronies, i.e., "members of their immediate family close relatives,
subordinates, and/or business associates, dummies, agents and nominees" and are cognizable not by respondent court
but by the regular courts or other for a Even if there would be multiple litigations, as among themselves, the legal effect
remains, i.e., that there is only one case filed by the Republic against the named defendants in Civil Case No. 0025,
grounded on causes of action entirely distinct from any cause of action which intervenors may have against Mr. Marcos
and his cronies.
The petition is not impressed with merit.
The Rules of Court permit an aggrieved party, generally, to take a cause and apply for relief with the appellate courts by
way of either of two distinct and dissimilar modes through the broad process of appeal or the limited special civil action
of certiorari. An appeal brings up for review errors of judgment  committed by a court of competent jurisdiction over the
subject of the suit or the persons of the parties or any such error committed by the court in the exercise of its
jurisdiction amounting to nothing more than an error of judgment. On the other hand, the writ of certiorari issues for
the correction of errors of jurisdiction only or grave abuse of discretion amounting to lack or excess of jurisdiction. The
writ of certiorari cannot legally be used for any other purpose. In terms of its function, the writ of certiorari serves to
keep a lower court within the bounds of its jurisdiction or to prevent it from committing such a grave abuse of discretion
amounting to excess of jurisdiction or to relieve parties from arbitrary acts of courts — acts which courts have no power
or authority in law to perform. 14
Hence, the main issue to be resolved in the present case, which is principally a petition for certiorari to annul and set
aside the questioned resolutions of respondent court is, whether or not the Sandiganbayan has jurisdiction over the
action for intervention, or if it has, whether respondent court acted with grave abuse of discretion amounting to lack or
excess of its jurisdiction in rendering the questioned resolutions.
In the present case, petitioner merely contends that the cause of action of intervenors does not fall within the
jurisdiction of the Sandiganbayan as expressly spelled out in Presidential Decree No. 1606 and Executive Order No. 14; it
does not claim that respondent court committed grave abuse of discretion amounting to lack or excess of its jurisdiction
in rendering the questioned resolutions.
The jurisdiction of the Sandiganbayan has already been settled in Presidential Commission on Good Government vs. Hon.
Emmanuel G. Penal, etc., et al.  15 where the Court held that —
... Under Section 2 of the President's Executive Order No. 14 issued on May 7, 1986, all cases of the Commission
regarding 'the funds, Moneys, Assets, and Properties Illegally Acquired or I Misappropriated by Former President
Ferdinand Marcos, Mrs. Imelda Romualdez Marcos, their Close Relatives, Subordinates, Business Associates, Dummies,
Agents, or Nominees whether civil or criminal, are lodged within the 'exclusive and original jurisdiction of the
Sandiganbayan' and all incidents arising from, incidental to, or related to, such cases necessarily fall likewise under the
Sandiganbayan's exclusive and original jurisdiction, subject to review on certiorari exclusively by the Supreme Court.
(emphasis supplied)
In reiterating the aforequoted ruling in six (6) subsequent cases 16 which were decided jointly, again, the Court held that-
... the exclusive jurisdiction conferred on the Sandiganbayan would evidently extend not only to the principal causes of
action, i.e., the recovery of alleged ill-gotten wealth, but also to 'all incidents arising from, incidental to, or related to,
such cases,' such as the dispute over the sale of the shares, the propriety of the issuance of ancillary writs or provisional
remedies relative thereto, the sequestration thereof, which may not be made the subject of separate actions or
proceedings in another forum.
Intervention is not an independent action, but is ancillary and supplemental to an existing litigation. 17 Hence, the private
respondents' action for intervention in Civil Case No. 0025, not being an independent action, is merely incidental to, or
related to, the said civil case. Since the respondent Sandiganbayan has the exclusive and original jurisdiction over Civil
Case No. 0025, it has likewise original and exclusive jurisdiction over the private respondents' action for intervention
therein.
Now, considering that respondent Sandiganbayan has jurisdiction not only over Civil Case No. 0025 but also over the
private respondents' action for intervention, any error or irregularity that it may have committed in rendering its
questioned resolutions, in the exercise of its jurisdiction, amounts to an error of judgment, which is not correctable in
the present petition for certiorari but by appeal.
Accordingly, this case may be dismissed outright without the Court having to pass upon the other issues raised in the
petition. However, considering that the litigation below is of great public interest and involves a matter of public policy,
the Court has decided to review the other errors allegedly committed by respondent court in rendering its questioned
resolutions.
In this jurisdiction, the law on "intervention" is found in the Rules of Court. 18 Thus, a person may, before or during a
trial, be permitted by the court, in its discretion, to intervene in an action, if he has legal interest in the matter in
litigation, or in the success of either of the parties or an interest against both, or when he is so situated as to be
adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof. 19
The Court is not impressed with the contention of petitioner that the intervenors have no legal interest in the matter in
litigation. In this connection, it would suffice to quote what the respondent court said in holding that the intervenors
have a legal interest in the matter in litigation. Thus —
Has Palanca shown a proper case for intervention by him and his co-stockholders who are similarly situated as he is?
A narration of the pertinent facts alleged by Palanca and the plaintiff indicates the answer.
In 1961, BREDCO was awarded by Bacolod City a contract to undertake the reclamation and port development of the
city. As of 1975, a sizeable portion of land had already been reclaimed from the sea and corresponding torrens titles
issued in BREDCO's name.
In that year, BREDCO engaged MARSTEEL as a contractor to complete the project with power to negotiate in its name or
jointly and/or severally with BREDCO for loans to finance the reclamation and port development, and to mortgage all
reclaimed lots and other assets of the project as security. For its services, MARSTEEL shall receive 65% of the excess of
all revenues over all disbursements. Accordingly, BREDCO conveyed to MARSTEEL 65% of each lot already reclaimed and
that to be reclaimed.
In 1977, MARSTEEL assigned to MCI, which owned 100% of its capital stock, all its rights, interests, obligations, and
undertakings in the project. To enable MCI to expand its base of negotiation for loans needed in the reclamation and
port development the BREDCO stockholders transferred to MCI their respective shares of stock amounting to 70% of the
capital stock of BREDCO. In return, they 'shall be entitled to a share of 35% in excess of all revenues over all
disbursements of the projects,' it being understood that payment of the corresponding share shall be due to BREDCO
stockholders as owners of existing interests in the project, regardless of the fact that by implementation of this
AGREEMENT, they ceased to be stockholders of BREDCO.
In September 1986, the Presidential Commission on Good Government (PCGG) sequestered all assets, properties,
records and documents' of MARSTEEL, MCI, and BREDCO'. In July 1987, the complaint at bar was filed and expanded in
March 1988. The pleadings, original and expanded, allege that the defendants, acting singly or collectively, amassed ill-
gotten wealth listed in Annex 'A' thereof, among which are the BREDCO lots and shares of stock, and pray that the ill-
gotten wealth be reconveyed to the plaintiff, plus damages. Significantly, however, the bodies of the complaints do not
mention anything about BREDCO, its project, lots, and stocks, nor about MCI.
Under these alleged facts, Palanca has established a proper case for intervention. Firstly, he and his co-stockholders
have a legal interest in the matter in litigation, namely, their 70% of the capital stock of BREDCO, which they transferred
to MCI by way of alleged accommodation, or its equivalent of 35% of the excess of all revenues over all disbursements,
to which they are entitled 'as owners of existing interests in the project.' Section 2, Rule 12, Revised Rules of Court,
provides that a person may be permitted 'to intervene in an action, if he has legal interest in the matter in litigation.'
As a general rule the right to intervene exists in favor of one who claims to be the owner or to have some interest in the
property which is the subject of litigation, and this without particular regard to the value of the property or the right
claimed therein. A third party may intervene in a sequestration suit involving title to personal property, and have his
claims to the possession of the property vindicated therein So, in an action for possession of real or personal property,
an intervenor may be admitted on the ground that he is an owner thereof, either to assist in the defense, or to claim the
property for himself, or to obtain some other relief germane to the action.' (59 Am Jur 2d, Parties, Sec. 152, p. 585,
Secondly, the same Section 2, Rule 12, further provides that intervention by a person may be permitted 'when he is so
situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an
officer thereof.' On this point, the Supreme Court observed:
We shall now speak of the case where the stranger desires to intervene for the purpose of asserting a property right in
the res, or thing, which is the subject-matter of the ligitation, without becoming a formal plaintiff or defendant, and
without acquiring the control over the course of a litigation, which is conceded to the main actions (sic) therein. The
mode of intervention to which reference is now made is denominated in equity procedure the intervention pro interesse
suo and is somewhat analogous to the trial of a right of property in an action of law, its purpose being to enable a
person whose property gets into the clutches of a court, in a controversy between others, to go into court and to
procure it or its proceeds to be surrendered to him. It often happens that a person who really owns property, or has a
superior lien or other interest in it, sees a litigation spring up between others who assert rights in or concerning it. If the
court takes possession of the res, or otherwise gets jurisdiction over it in such a controversy, the real owner is not
compelled to stand Idly by and see the property disposed of without asserting his rights. Though it be granted that the
litigation would not be technically binding on him, because of his not being a party, yet it might well happen that
complications would ensue whereby his rights would be materially prejudiced. For instance, the subject-matter of the
litigation might consist of a fund to he distributed, and the conditions might be such that if it were turned over to the
particular litigant who should appear to have the better right in the original action, the person really having a superior
title might be left without redress. Accordingly provision is made whereby persons who have not been joined as parties
in the original proceedings may intervene and assert a right antagonistic or superior to that of one or both of the parties.
(Bosworth vs. Terminal etc. Assoc. of St. Louis, 174 U.S. 182,187, 43 L. ed., 941, 943). As regards the right to intervene in
this manner, it may be stated that if the party desiring to intervene shows a legitimate and proper interest in the fund or
property in question, the motion to intervene should be granted, especially if such interest cannot be otherwise properly
protected. (Joaquin v. Herrera, 37 Phil. 705, 722-724)
Here, the BREDCO lots and stocks were sequestered and are now in custodia legis (Bernas, The Constitution of the
Republic of the Philippines, An Annotated Text, 1987 ed., p. 129, footnote 42). From the facts averred by Palanca and
the plaintiff, it is easy to see that in the event We decide to order the reconveyance of those assets to the plaintiff,
Palanca and his co-stockholders in BREDCO stand to be adversely affected.
And thirdly, the legal interest of Palanca and his co-stockholders in the matter in litigation and the possibility of a
judgment ordering reconveyance in favor of the plaintiff, invest them with legal interest in the success of the
defendants, at least insofar as the BREDCO lots and shares are concerned. Section 2, Rule 12, also permits intervention
by a person who has legal interest in the success of either of the parties. 20
The petitioner's contention that the State cannot be sued without its consent and that private respondents' action for
intervention is, in legal effect, a suit or counter-suit against the sovereign is also untenable.
The Rules of Court 21 provide that the intervention shall be made by complaint filed and served in regular form, and may
be answered as if it where an original complaint; but where the intervenor unites with the defendant in resisting the
claims of the plaintiff, the intervention may be made in the form of an answer to the complaint. In order words, a third
person who makes himself a party to an existing litigation, may either join the plaintiff in claiming what is sought in the
filing a complaint in intervention, or by uniting with the defendant in resisting the claims of the plaintiff, by filing an
answer in intervention.
In Froilan v. Pan Oriental Shipping Co., 22 the plaintiff therein Fernando A. Froilan filed a complaint against the defendant,
Pan Oriental Shipping Co. The Republic of the Philippines intervened by filing a complaint in intervention. Thereafter, the
defendant filed its answer to the complaint in intervention, and set up a counterclaim against the Republic of the
Philippines. The trial court dismissed the defendants counterclaim against the Republic on the ground, among others,
that the state is immune from suit. On appeal, this Court held that the dismissal of the counterclaim was untenable,
because by filing its complaint in intervention the Government in effect waived its right to non-suability.
In another case, Lim vs. Brownell, Jr. and Kagawa, 23 the plaintiff Benito E. Lim, as administrator of the intestate estate of
Arsenia Enriquez, filed a complaint in the Court of First Instance of Manila against the Alien Property Administrator (later
substituted by the Attorney General of the United States) for the recovery of four (4) parcels of land (which were
subsequently transferred to the Republic of the Philippines) with a prayer for the payment of back rentals. The Republic
of the Philippines intervened in the case. The defendant Attorney General of the United States and the defendant-
intervenor Republic of the Philippines each filed an answer, alleging by way of affirmative defense, among others, that
the lower court had no jurisdiction over the claim for rentals since the action in that regard constituted a suit against the
Republic to which it had not given its consent. The trial court dismissed the complaint for lack of jurisdiction. On appeal,
this Court affirmed, with the following reasons:
The claim for damages for the use of the property against the intervenor defendant Republic of the Philippines to which
it was transferred, likewise, cannot be maintained because of the immunity of the state from suit. The claim obviously
constitutes a charge against, or financial liability to, the Government and consequently cannot be entertained by the
courts except with the consent of said government. (Syquia vs. Almeda Lopez, 84 Phil. 312; 47 Off. Gaz., 665; Compania
General de Tabacos vs. Govt. of the PI 45 Phil., 663). Plaintiff argues that by its intervention, the Republic of the
Philippines, in effect, waived its right of non-suability, but it will be remembered that the Republic intervened in the case
merely to unite with the defendant Attorney General of the United States  in resisting plaintiffs claims, and for that
reason asked no affirmative relief against any party in the answer in intervention. x x x. Clearly, this is not a case where
the State takes the initiative in an action against a private party by filing a complaint in intervention, thereby
surrendering its privileged position and coming down to the level of the defendants what happened in the case of Froilan
vs. Pan Oriental Shipping Co., et al.-95 Phil. 905 cited by the plaintiff but one where the State, as one of the defendants
merely resisted a claim against it precisely on the ground, among others, of its privileged position which exempts it from
suit. (emphasis supplied).
In the present case, the private respondents intervened in Civil Case No. 0025 merely to unite with the defendants
therein in resisting the claims of petitioner, as plaintiff, and for that reason asked for no affirmative relief against any
party in their answer in intervention. In other words, this is not a case where the private respondents take the initiative
in an action against petitioner by filing a complaint in intervention or a complaint. As observed by respondent
Sandiganbayan:
In intervening, Palanca and his co-stockholders have for their purpose to exclude the BREDCO lots and stocks or, at least,
their 35% interest in the BREDCO project from any possible judgment directing reconveyance of the alleged ill-gotten
wealth to the plaintiff. They do not pray for damages against the latter. In effect, they occupy a defensive position as
regards those shares of stock or interest. The fact that they interjected themselves into his litigation at their own
initiative does not alter the essential nature of their intervention." 24
Private respondents' action for intervention in Civil Case No. 0025 is not, therefore, a suit or counter-suit against
petitioner Republic of the Philippines.
Having arrived at the above conclusions, the Court finds no need to further discuss the petitioner's pretense that the
private respondents' claims are claims as between and/or among Ferdinand and Imelda Marcos, et al., and that the
same is not cognizable by respondent Sandiganbayan but by the regular courts. It suffices to state that, as already
stated, in intervening in Civil Case No. 0025, private respondents merely joined the defendants therein in resisting the
claims of petitioner, as plaintiff, and that they asked no affirmative relief against any party in their answer in
intervention. They do not appear to have any controversy with the defendants, Ferdinand and Imelda Marcos, et al.
ACCORDINGLY, the petition in the present case is hereby DISMISSED.
SO ORDERED.

3. Santiago vs. GRP (G.R. No. L- 48214, December 19, 1978) (87 SCRA 294)

ILDEFONSO SANTIAGO, represented by his Attorney-in-Fact, ALFREDO T. SANTIAGO, petitioner,

vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, represented by the Director, Bureau of Plant Industry, and
the Regional Director, Region IX, Zamboanga City, respondent,
Ahmad D. Sahak for petitioner.
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Octavio R. Ramirez and Solicitor Mariano M. Martinez
for respondents.

FERNANDO, J.:
The first impression yielded by a perusal of this petition for certiorari is its inherent weakness considering the explicit
provision in the present Constitution prohibiting a suit against the Republic without its consent. 1 Here petitioner
Ildefonso Santiago 2 filed on August 9, 1976 an action in the Court of First Instance of Zamboanga City naming as
defendant the government of the Republic of the Philippines represented by the Director of the Bureau of Plant
Industry. 3 His plea was for the revocation of a deed of donation executed by him and his spouse in January of
1971, 4 with the Bureau of Plant Industry as the donee. As alleged in such complaint, such Bureau, contrary to the terms
of the donation, failed to "install lighting facilities and water system on the property donated and to build an office
building and parking [lot] thereon which should have been constructed and ready for occupancy on or before December
7, 1974. 5 That led him to conclude that under the circumstances, he was exempt from compliance with such an explicit
constitutional command. The lower court, in the order challenged in this petition, was of a different view. It sustained a
motion to dismiss on the part of the defendant Republic of the Philippines, now named as one of the respondents, the
other respondent being the Court of First Instance of Zamboanga City, Branch II. It premised such an order on the settled
"rule that the state cannot be sued without its consent. This is so, because the New Constitution of the Philippines
expressly provides that the state may not be sued without its consent. 6 Solicitor General Estelito P. Mendoza, 7 in the
com ment on the petition filed with this Court, is for the affirmance of the order of dismissal of respondent Court
precisely to accord deference to the above categorical constitutional mandate.
On its face, such a submission carries persuasion. Upon further reflection, this Tribunal is impressed with the unique
aspect of this petition for certiorari, dealing as it does with a suit for the revocation of a donation to the Republic, which
allegedly fatted to conform with what was agreed to by the donee. If an order of dismissal would suffice, then the
element of unfairness enters, the facts alleged being hypothetically admitted. It is the considered opinion of this Court
then that to conform to the high dictates of equity and justice, the presumption of consent could be indulged in safely.
That would serve to accord to petitioner as plaintiff, at the very least, the right to be heard. certiorari lies.
1. This is not to deny the obstacle posed by the constitutional provision. It is expressed in language plain and
unmistakable: "The State may not be sued without its consent. 8 The Republic cannot be proceeded against unless it
allows itself to be sued. Neither can a department, bureau, agency, office, or instrumentality of the government where
the suit, according to the then Justice, now Chief Justice, Castro in Del Mar v. Philippine Veterans Administration, 9 may
result "in adverse consequences to the public treasury, whether in the disbursements of funds or loss of
property. 10 Such a doctrine was reiterated in the following cases: Republic v. Villasor, 11 Sayson v. Singson, 12 Director of
the Bureau of Printing v. Francisco,  13 and Republic v. Purisima. 14
2. It is contended by counsel for petitioner that the above constitutional provision would be given a retroactive
application in this case if the suit for the revocation of donation were dismissed. That is not the case at all. In  Republic v.
Purisima, this Court made clear that such a basic postulate is part and parcel of the system of government implanted in
the Philippines from the time of the acquisition of sovereignty by the United States, and therefore, was implicit in the
1935 Constitution even in the absence of any explicit language to that effect. This it did in a citation from  Switzerland
General Insurance Co., Ltd. v. Republic of the Philippines:  15 "The doctrine of non-suability recognized in this jurisdiction
even prior to the effectivity of the [1935] Constitution is a logical corollary of the positivist concept of law which, to
paraphrase Holmes, negates the assertion of any legal right as against the state, in itself the source of the law on which
such a right may be predicated. Nor is this all. Even if such a principle does give rise to problems, considering the vastly
expanded role of government enabling it to engage in business pursuits to promote the general welfare, it is not
obeisance to the analytical school of thought alone that calls for its continued applicability.  16 That is the teaching of the
leading case of Mobil Philippines Exploration, Inc. v. Customs Arrastre Service, 17 promulgated in December of 1966. As a
matter of fact, the Switzerland General Insurance Co. decision was the thirty-seventh of its kind after Mobil. Clearly,
then, the contention that to dismiss the suit would be to give the applicable constitutional provision a retroactive effect
is, to put it at its mildest, untenable.
3. Petitioner's counsel invoked Santos v. Santos, 18 a 1952 decision. A more thorough analysis ought to have cautioned
him against reliance on such a case. It was therein clearly pointed out that the government entity involved was originally
the National Airports Corporation. Thereafter, it "was abolished by Executive Order No. 365, series of 1950, and in its
place and stead the Civil Aeronautics Administration was created and took over all the assets and assumed all the
liabilities of the abolished corporation. The Civil Aeronautics Administration, even if it is not a juridical entity, cannot
legally prevent a party or parties from enforcing their proprietary rights under the cloak or shield of lack of juridical
personality, because to took over all the powers and assumed all the obligations of the defunct corporation which had
entered into the contract in question." 19 Then came National Shipyard and Steel Corporation v. Court of Industrial
Relations, 20 a 1963 decision, where the then Justice, later Chief Justice, Concepcion, as ponente, stated that a
government-owned and controlled corporation "has a personality of its own distinct and separate from that of the
government. ... Accordingly, it may sue and be sued and may be subjected to court processes just like any other
corporation. (Section 13, Act 1459, as amended). 21 In three recent decisions, Philippine National Bank v. Court of
Industrial Relations, 22 Philippine National Bank v. Honorable Judge Pabalan, 23 and Philippine National Railways v. Union
de Maquinistas, 24 this constitutional provision on non-suability was unavailing in view of the suit being against a
government-owned or controlled corporation. That point apparently escaped the attention of counsel for petitioner.
Hence Santos v. Santos is hardly controlling.
4. It is to be noted further that the trend against the interpretation sought to be fastened in the broad language of
Santos v. Santos is quite discernible. Not long after, in Araneta v. Hon. M. Gatmaitan, 25 decided in 1957, it was held that
an action [against] Government officials, is essentially one against the Government, ... . 26 In the same year, this Court,
in Angat River Irrigation System v. Angat River Workers  27 Union, after referring to the "basic and fundamental principle
of the law that the Government cannot be sued before courts of justice without its consent," pointed out that "this
privilege of non-suability of the Government" covers with the mantle of its protection "an entity," in this case, the Angat
River Irrigation System. 28 Then, in 1960, came Lim v. Brownell, Jr., 29 where there was a reaffirmation of the doctrine that
a "claim [constituting] a charge against, or financial liability to, the Government cannot be entertained by the courts
except with the consent of said government. 30 Bureau of Printing v. Bureau of Printing Employees Association 31 came a
year later; it reiterated such a doctrine. It was not surprising therefore that in 1966, Mobil Philippines Exploration, Inc.
was decided the way it was. The remedy, where the liability is based on contract, according to this Court, speaking
through Justice J. P. Bengzon, is for plaintiff to file a claim with the general office in accordance with the controlling
statute, Commonwealth Act No. 327. 32 To repeat, that doctrine has been adhered to ever since. The latest case in point
is Travelers Indemnity Company v. Barber Steamship Lines, Inc. 33 Justice Aquino's opinion concluded with this paragraph:
"It is settled that the Bureau of Customs, acting as part of the machinery of the national government in the operation of
the arrastre service, is immune from suit under the doctrine of non-suability of the State. The claimant's remedy to
recover the loss or damage to the goods under the custody of the customs arrastre service is to file a claim with the
Commission in Audit as contemplated in Act No. 3083 and Commonwealth Act No. 327.  34 With the explicit provision
found in the present Constitution, the fundamental principle of non-suability becomes even more exigent in its
command.
5. The reliance on Santos v. Santos as a prop for this petition having failed, it would ordinarily follow that this suit cannot
prosper. Nonetheless, as set forth at the outset, there is a novel aspect that suffices to call for a contrary conclusion. It
would be manifestly unfair for the Republic, as donee, alleged to have violated the conditions under which it received
gratuitously certain property, thereafter to put as a barrier the concept of non-suitability. That would be a purely one-
sided arrangement offensive to one's sense of justice. Such conduct, whether proceeding from an individual or
governmental agency, is to be condemned. As a matter of fact, in case it is the latter that is culpable, the affront to
decency is even more manifest. The government, to paraphrase Justice Brandeis, should set the example. If it is
susceptible to the charge of having acted dishonorably, then it forfeits public trust-and rightly so.
6. Fortunately, the constitutional provision itself snows a waiver. Where there is consent, a suit may be filed. Consent
need not be express. It can be implied. So it was more than implied in Ministerio v. Court of First Instance of
Cebu: 35 "The doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice
on a citizen. 36 The fact that this decision arose from a suit against the Public Highways Commissioner and the Auditor
General for failure of the government to pay for land necessary to widen a national highway, the defense of immunity
without the consent proving unavailing, is not material. The analogy is quite obvious. Where the government ordinarily
benefited by the taking of the land, the failure to institute the necessary condemnation proceedings should not be a bar
to an ordinary action for the collection of the just compensation due. Here, the alleged failure to abide by the conditions
under which a donation was given should not prove an insuperable obstacle to a civil action, the consent likewise being
presumed. This conclusion is strengthened by the fact that while a donation partakes of a contract, there is no money
claim, and therefore reliance on Commonwealth Act No. 327 would be futile.
7. Our decision, it must be emphasized, goes no further than to rule that a donor, with the Republic or any of its agency
being the donee, is entitled to go to court in case of an alleged breach of the conditions of such donation. He has the
right to be heard. Under the circumstances, the fundamental postulate of non-suability cannot stand in the way. It is
made to accommodate itself to the demands of procedural due process, which is the negation of arbitrariness and
inequity. The government, in the final analysis, is the beneficiary. It thereby manifests its adherence to the highest
ethical standards, which can only be ignored at the risk of losing the confidence of the people, the repository of the
sovereign power. The judiciary under this circumstance has the grave responsibility of living up to the ideal of objectivity
and impartiality, the very essence of the rule of law. Only by displaying the neutrality expected of an arbiter, even if it
happens to be one of the departments of a litigant, can the decision arrived at, whatever it may be, command respect
and be entitled to acceptance.
WHEREFORE, the writ of certiorari prayed for is granted and the order of dismissal of October 20, 1977 is nullified, set
aside and declared to be without force and effect. The Court of First Instance of Zamboanga City, Branch II, is hereby
directed to proceed with this case, observing the procedure set forth in the Rules of Court. No costs.

Facts: On August 9, 1976, Ildefonso Santiago through his counsel filed an action for revocation of a Deed of Donation
executed by him and his spouse in January of 1971, with the Bureau of Plant Industry as the Donee, in the Court of First
Instance of Zamboanga City. Mr. Santiago alleged that the Bureau, contrary to the terms of donation, failed to install
lighting facilities and water system on the property and to build an office building and parking lot thereon which should
have been constructed and ready for occupancy on before December7, 1974. That because of the circumstances, Mr.
Santiago concluded that he was exempt from compliance with an explicit constitutional command, as invoked in
the Santos v Santos case, a 1952 decision which is similar. The Court of First Instance dismissed the action in favor of the
respondent on the ground that the state cannot be sued without its consent, and Santos v Santos case is discernible.
The Solicitor General, Estelito P. Mendoza affirmed the dismissal on ground of constitutional mandate. Ildefonso
Santiago filed a petition for certiorari to the Supreme Court.

Issue: Whether or not the state can be sued without its consent.

Held: The Supreme Court rules, that the constitutional provision shows a waiver. Where there is consent, a suit may be
filed. Consent need not to be express. It can be implied. In this case it must be emphasized, goes no further than a rule
that a donor, with the Republic or any of its agency being a Donee, is entitle to go to court in case of an alleged breach of
the conditions of such donation.

The writ of  Certiorari prayed is granted and the order of dismissal of October 20, 1977 is nullified, set aside and declare
to be without force and effect. The Court of First Instance of Zamboanga City, Branch II, is hereby directed to proceed
with this case, observing the procedure set forth in the rules of court. No cost.

4. Froilan vs. Pan Oriental Shipping Corp. (G.R. No. L-6060, September 30, 1954)

FERNANDO A. FROILAN, plaintiff-appellee,

vs.
PAN ORIENTAL SHIPPING CO., defendant-appellant,
REPUBLIC OF THE PHILIPPINES, intervenor-appellee.

The factual antecedents of this case are sufficiently recited in the brief filed by the intervenor-appellee as follows:

1. On February 3, 1951, plaintiff-appellee, Fernando A. Froilan, filed a complaint against the defendant-appellant, Pan
Oriental Shipping Co., alleging that he purchased from the Shipping Commission the vessel FS-197 for P200,000, paying
P50,000 down and agreeing to pay the balance in installments; that to secure the payment of the balance of the
purchase price, he executed a chattel mortgage of said vessel in favor of the Shipping Commission; that for various
reason, among them the non-payment of the installments, the Shipping Commission took possession of said vessel and
considered the contract of sale cancelled; that the Shipping Commission chartered and delivered said vessel to the
defendant-appellant Pan Oriental Shipping Co. subject to the approval of the President of the Philippines; that he
appealed the action of the Shipping Commission to the President of the Philippines and, in its meeting on August 25,
1950, the Cabinet restored him to all his rights under his original contract with the Shipping Commission; that he had
repeatedly demanded from the Pan Oriental Shipping Co. the possession of the vessel in question but the latter refused
to do so. He, therefore, prayed that, upon the approval of the bond accompanying his complaint, a writ of replevin be
issued for the seizure of said vessel with all its equipment and appurtenances, and that after hearing, he be adjudged to
have the rightful possession thereof (Rec. on App. pp. 2-8).

2. On February 3, 1951, the lower court issued the writ of replevin prayed for by Froilan and by virtue thereof the Pan
Oriental Shipping Co. was divested of its possession of said vessel (Rec. on App. p. 47).

3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer denying the right of Froilan to the possession of the said
vessel; it alleged that the action of the Cabinet on August 25, 1950, restoring Froilan to his rights under his original
contract with the Shipping Commission was null and void; that, in any event, Froilan had not complied with the
conditions precedent imposed by the Cabinet for the restoration of his rights to the vessel under the original contract;
that it suffered damages in the amount of P22,764.59 for wrongful replevin in the month of February, 1951, and the sum
of P17,651.84 a month as damages suffered for wrongful replevin from March 1, 1951; it alleged that it had incurred
necessary and useful expenses on the vessel amounting to P127,057.31 and claimed the right to retain said vessel until
its useful and necessary expenses had been reimbursed (Rec. on App. pp. 8-53).
4. On November 10, 1951, after the leave of the lower court had been obtained, the intervenor-appellee, Government
of the Republic of the Philippines, filed a complaint in intervention alleging that Froilan had failed to pay to the Shipping
Commission (which name was later changed to Shipping Administration) the balance due on the purchase price of the
vessel in question, the interest thereon, and its advances on insurance premium totalling P162,142.95, excluding the
dry-docking expenses incurred on said vessel by the Pan Oriental Shipping Co.; that intervenor was entitled to the
possession of the said vessel either under the terms of the original contract as supplemented by Froilan's letter dated
January 28, 1949, or in order that it may cause the extrajudicial sale thereof under the Chattel Mortgage Law. It,
therefore, prayed that Froilan be ordered to deliver the vessel in question to its authorized representative, the Board of
Liquidators; that Froilan be declared to be without any rights on said vessel and the amounts he paid thereon forfeited
or alternately, that the said vessel be delivered to the Board of Liquidators in order that the intervenor may have its
chattel mortgage extrajudicially foreclosed in accordance with the provisions of the Chattel Mortgage Law; and that
pending the hearing on the merits, the said vessel be delivered to it (Rec. on App. pp. 54-66).

5. On November 29, 1951, the Pan Oriental Shipping Co. filed an answer to the complaint in intervention alleging that
the Government of the Republic of the Philippines was obligated to deliver the vessel in question to it by virtue of a
contract of bare-boat charter with option to purchase executed on June 16, 1949, by the latter in favor of the former; it
also alleged that it had made necessary and useful expenses on the vessel and claimed the right of retention of the
vessel. It, therefore, prayed that, if the Republic of the Philippines succeeded in obtaining possession of the said vessel,
to comply with its obligations of delivering to it (Pan Oriental Shipping co.) or causing its delivery by recovering it from
Froilan (Rec. on App. pp. 69-81).

6. On November 29, 1951, Froilan tendered to the Board of Liquidators, which was liquidating the affairs of the Shipping
Administration, a check in the amount of P162,576.96 in payment of his obligation to the Shipping Administration for
the said vessel as claimed in the complaint in intervention of the Government of the Republic of the Philippines. The
Board of Liquidators issued an official report therefor stating that it was a 'deposit pending the issuance of an order of
the Court of First Instance of Manila' (Rec. on App. pp. 92-93).

7. On December 7, 1951, the Government of the Republic of the Philippines brought the matter of said payment and the
circumstance surrounding it to the attention of the lower court "in order that they may be taken into account by this
Honorable Court in connection with the questions that are not pending before it for determination" (Rec. on App. pp.
82-86).

8. On February 3, 1952, the lower court held that the payment by Froilan of the amount of P162,576.96 on November
29, 1951, to the Board of Liquidators constituted a payment and a discharge of Froilan's obligation to the Government of
the Republic of the Philippines and ordered the dismissal of the latter's complaint in intervention. In the same order, the
lower court made it very clear that said order did not pre-judge the question involved between Froilan and the Oriental
Shipping Co. which was also pending determination in said court (Rec. on App. pp. 92-93). This order dismissing the
complaint in intervention, but reserving for future adjudication the controversy between Froilan and the Pan Oriental
Shipping Co. has already become final since neither the Government of the Republic of the Philippines nor the Pan
Oriental Shipping Co. had appealed therefrom.

9. On May 10, 1952, the Government of the Republic of the Philippines filed a motion to dismiss the counterclaim of the
Pan Oriental Shipping Co. against it on the ground that the purpose of said counterclaim was to compel the Government
of the Republic of the Philippines to deliver the vessel to it (Pan Oriental Shipping Co.) in the event that the Government
of the Republic of the Philippines recovers the vessel in question from Froilan. In view, however, of the order of the
lower court dated February 3, holding that the payment made by Froilan to the Board of Liquidators constituted full
payment of Froilan's obligation to the Shipping Administration, which order had already become final, the claim of the
Pan Oriental Shipping Co. against the Republic of the Philippines was no longer feasible, said counterclaim was barred by
prior judgment and stated no cause of action. It was also alleged that movant was not subject to the jurisdiction of the
court in connection with the counterclaim. (Rec. on App. pp. 94-97). This motion was opposed by the Pan Oriental
Shipping Co. in its written opposition dated June 4, 1952 (Rec. on app. pp. 19-104).

10. In an order dated July 1, 1952, the lower court dismissed the counterclaim of the Pan Oriental Shipping Co. as prayed
for by the Republic of the Philippines (Rec. on App. pp. 104-106).

11. It if from this order of the lower court dismissing its counterclaim against the Government of the Republic of the
Philippines that Pan Oriental Shipping Co. has perfected the present appeal (Rec. on App. p. 107).

The order of the Court of First Instance of Manila, dismissing the counterclaim of the defendant Pan Oriental Shipping
Co., from which the latter has appealed, reads as follows:

This is a motion to dismiss the counterclaim interposed by the defendant in its answer to the complaint in intervention.

"The counterclaim states as follows:

"COUNTERCLAIM

"As counterclaim against the intervenor Republic of the Philippines, the defendant alleges:

"1. That the defendant reproduces herein all the pertinent allegations of the foregoing answer to the complaint in
intervention

"2. That, as shown by the allegations of the foregoing answer to the complaint in intervention, the defendant Pan
Oriental Shipping Company is entitled to the possession of the vessel and the intervenor Republic of the Philippines is
bound under the contract of charter with option to purchase it entered into with the defendant to deliver that
possession to the defendant — whether it actually has the said possession or it does not have that possession from the
plaintiff Fernando A. Froilan and deliver the same to the defendant;

"3. That, notwithstanding demand, the intervenor Republic of the Philippines has not to date complied with its
obligation of delivering or causing the delivery of the vessel to the defendant Pan Oriental Shipping
Company.1âwphïl.nêt

"RELIEF

"WHEREFORE, the defendant respectfully prays that judgment be rendered ordering the intervenor Republic of the
Philippines alternatively to deliver to the defendants the possession of the said vessel, or to comply with its obligation to
the defendant or causing the delivery to the latter of the said vessel by recovering the same from plaintiff, with costs.

"The defendant prays for such other remedy as the Court may deem just and equitable in the premises."

The ground of the motion to dismiss are (a) That the cause of action is barred by prior judgment; (b) That the
counterclaim states no cause of action; and (c) That this Honorable Court has no jurisdiction over the intervenor
government of the Republic of the Philippines in connection with the counterclaim of the defendant Pan Oriental
Shipping Co.

The intervenor contends that the complaint in intervention having been dismissed and no appeal having been taken, the
dismissal of said complaint is tantamount to a judgment.

The complaint in intervention did not contain any claim whatsoever against the defendant Pan Oriental Shipping Co.;
hence, the counterclaim has no foundation.

The question as to whether the Court has jurisdiction over the intervenor with regard to the counterclaim, the Court is
of the opinion that it has no jurisdiction over said intervenor.

It appearing, therefore, that the grounds of the motion to dismiss are well taken, the counterclaim of the defendant is
dismissed, without pronouncement as to costs.

The defendant's appeal is predicated upon the following assignments of error:

I. The lower court erred in dismissing the counterclaim on the ground of prior judgment.

II. The lower court erred in dismissing the counterclaim on the ground that the counterclaim had no foundation because
made to a complaint in intervention that contained no claim against the defendant.

III. The lower court erred in dismissing the counterclaim on the ground of alleged lack of jurisdiction over the intervenor
Republic of the Philippines.

We agree with appellant's contention that its counterclaim is not barred by prior judgment (order of February 8, 1952,
dismissing the complaint in intervention), first, because said counterclaim was filed on November 29, 1951, before the
issuance of the order invoked; and, secondly, because in said order of February 8, the court dismissed the complaint in
intervention, "without, of course, precluding the determination of the right of the defendant in the instant case," and
subject to the condition that the "release and cancellation of the chattel mortgage does not, however, prejudge the
question involved between the plaintiff and the defendant which is still the subject of determination in this case." It is to
be noted that the first condition referred to the right of the defendant, as distinguished from the second condition that
expressly specified the controversy between the plaintiff and the defendant. That the first condition reserved the right
of the defendant as against the intervenor, is clearly to be deduced from the fact that the order of February 8
mentioned the circumstance that "the question of the expenses of drydocking incurred by the defendant has been
included in its counterclaim against the plaintiff," apparently as one of the grounds for granting the motion to dismiss
the complaint in intervention.

The defendant's failure to appeal from the order of February 8 cannot, therefore, be held as barring the defendant from
proceeding with its counterclaim, since, as already stated, said order preserved its right as against the intervenor.
Indeed, the maintenance of said right is in consonance with Rule 30, section 2, of the Rules of Court providing that "if a
counterclaim has been pleaded by a defendant prior to the service upon him of the plaintiff's motion to dismiss, the
action shall not be dismissed against the defendant's objection unless the counterclaim can remain pending for
independent adjudication by the court."

The lower court also erred in holding that, as the intervenor had not made any claim against the defendant, the latter's
counterclaim had no foundation. The complaint in intervention sought to recover possession of the vessel in question
from the plaintiff, and this claim is logically adverse to the position assumed by the defendant that it has a better right to
said possession than the plaintiff who alleges in his complaint that he is entitled to recover the vessel from the
defendant. At any rate a counterclaim should be judged by its own allegations, and not by the averments of the adverse
party. It should be recalled that the defendant's theory is that the plaintiff had already lost his rights under the contract
with the Shipping Administration and that, on the other hand, the defendant is relying on the charter contract executed
in its favor by the intervenor which is bound to protect the defendant in its possession of the vessel. In other words, the
counterclaim calls for specific performance on the part of the intervenor. As to whether this counterclaim is meritorious
is another question which is not now before us.

The other ground for dismissing the defendant's counterclaim is that the State is immune from suit. This is untenable,
because by filing its complaint in intervention the Government in effect waived its right of nonsuability.

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 a private party, the state surrenders its privileged position and comes down to the level of the defendant.
The latter automatically acquires, within certain limits, the right to set up whatever claims and other defenses he might
have against the state. The United States Supreme Court thus explains:

"No direct suit can be maintained against the United States. But when an action is brought by the United States to
recover money in the hands of a party who has a legal claim against them, it would be a very rigid principle to deny to
him the right of setting up such claim in a court of justice, and turn him around to an application to Congress." (Sinco,
Philippine Political Law, Tenth Ed., pp. 36-37, citing U. S. vs. Ringgold, 8 Pet. 150, 8 L. ed. 899.)

It is however, contended for the intervenor that, if there was at all any waiver, it was in favor of the plaintiff against
whom the complaint in intervention was directed. This contention is untenable. As already stated, the complaint in
intervention was in a sense in derogation of the defendant's claim over the possession of the vessel in question.

Wherefore, the appealed order is hereby reversed and set aside and the case remanded to the lower court for further
proceedings. So ordered, without costs.
5. Republic vs. Feliciano (G.R. No. 70853, March 12, 1987)

REPUBLIC OF THE PHILIPPINES, petitioner-appellee,

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

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. 5 Moreover, 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 facie evidence 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.
b. When the State Enters into a Contract
i. Jure Imperii
ii. Jure Gestionis
1. DOTC vs. Sps. Abecina (G.R. No. 206484, January 29, 2016)

G.R. No. 206484

DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), Petitioner,
vs.
SPOUSES VICENTE ABECINA and MARIA CLEOFE ABECINA, Respondents.
DECISION
BRION, J.:
This petition for review on certiorari  seeks to reverse and set aside the March 20, 2013 decision of the Court of
Appeals (CA)  in CA-G.R. CV No. 93795 1 affirming the decision of the Regional Trial Court (RTC)  of Daet, Camarines
Norte, Branch 39, in Civil Case No. 7355.2The RTC ordered the Department of Transportation and
Communications (DOTC)  to vacate the respondents' properties and to pay them actual and moral damages.
ANTECEDENTS
Respondent spouses Vicente and Maria Cleofe Abecina (respondents/spouses Abecina)  are the registered owners of five
parcels of land in Sitio Paltik, Barrio Sta. Rosa, Jose Panganiban, Camarines Norte.
The properties are covered by Transfer Certificates of Title (TCT)  Nos. T-25094, T-25095, T-25096, T-25097, and T-
25098.3
In February 1993, the DOTC awarded Digitel Telecommunications Philippines, Inc. (Digitel)  a contract for the
management, operation, maintenance, and development of a Regional Telecommunications Development
Project (RTDP)  under the National Telephone Program, Phase I, Tranche 1 (NTPI-1).4
The DOTC and Digitel subsequently entered into several Facilities Management Agreements ( FMA) for Digitel to manage,
operate, maintain, and develop the RTDP and NTPI-1 facilities comprising local telephone exchange lines in various
municipalities in Luzon. The FMAs were later converted into Financial Lease Agreements (FLA)  in 1995.
Later on, the municipality of Jose Panganiban, Camarines Norte, donated a one thousand two hundred (1,200)  square-
meter parcel of land to the DOTC for the implementation of the RDTP in the municipality. However, the municipality
erroneously included portions of the respondents’ property in the donation. Pursuant to the FLAs, Digitel constructed a
telephone exchange on the property which encroached on the properties of the respondent spouses. 5
Sometime in the mid-1990s, the spouses Abecina discovered Digitel’s occupation over portions of their properties. They
required Digitel to vacate their properties and pay damages, but the latter refused, insisting that it was occupying the
property of the DOTC pursuant to their FLA.
On April 29, 2003, the respondent spouses sent a final demand letter to both the DOTC and Digitel to vacate the
premises and to pay unpaid rent/damages in the amount of one million two hundred thousand pesos (₱1,200,000.00).
Neither the DOTC nor Digitel complied with the demand.
On September 3, 2003, the respondent spouses filed an accion publiciana  complaint 6 against the DOTC and Digitel for
recovery of possession and damages. The complaint was docketed as Civil Case No. 7355.
In its answer, the DOTC claimed immunity from suit and ownership over the subject properties. 7 Nevertheless, during
the pre-trial conference, the DOTC admitted that the Abecinas were the rightful owners of the properties and opted to
rely instead on state immunity from suit. 8
On March 12, 2007, the respondent spouses and Digitel executed a Compromise Agreement and entered into a Contract
of Lease. The RTC rendered a partial decision and approved the Compromise Agreement on March 22, 2007. 9
On May 20, 2009, the RTC rendered its decision against the DOTC. 10 It brushed aside the defense of state immunity.
Citing Ministerio v. Court of First Instance11and Amigable v. Cuenca,12it held that government immunity from suit could
not be used as an instrument to perpetuate an injustice on a citizen. 13
The RTC held that as the lawful owners of the properties, the respondent spouses enjoyed the right to use and to
possess them – rights that were violated by the DOTC’s unauthorized entry, construction, and refusal to vacate. The RTC
(1) ordered the Department – as a builder in bad faith – to forfeit the improvements and vacate the properties; and (2)
awarded the spouses with ₱1,200,000.00 as actual damages, ₱200,000.00 as moral damages, and ₱200,000.00 as
exemplary damages plus attorney’s fees and
costs of suit.
The DOTC elevated the case to the CA arguing: (1) that the RTC never acquired jurisdiction over it due to state immunity
from suit; (2) that the suit against it should have been dismissed after the spouses Abecina and Digitel executed a
compromise agreement; and (3) that the RTC erred in awarding actual, moral, and exemplary damages against it. 14 The
appeal was docketed as CA-G.R. CV No. 93795.
On March 20, 2013, the CA affirmed the RTC’s decision but deleted the award of exemplary damages. The CA upheld the
RTC’s jurisdiction over cases for accion publiciana  where the assessed value exceeds ₱20,000.00. 15 It likewise denied the
DOTC’s claim of state immunity from suit, reasoning that the DOTC removed its cloak of immunity after entering into a
proprietary contract – the Financial Lease Agreement with Digitel. 16 It also adopted the RTC’s position that state
immunity cannot be used to defeat a valid claim for compensation arising from an unlawful taking without the proper
expropriation proceedings.17 The CA affirmed the award of actual and moral damages due to the DOTC’s neglect to verify
the perimeter of the telephone exchange construction but found no valid justification for the award of exemplary
damages.18
On April 16, 2013, the DOTC filed the present petition for review on certiorari.
THE PARTIES’ ARGUMENTS
The DOTC asserts that its Financial Lease Agreement with Digitel was entered into in pursuit of its governmental
functions to promote and develop networks of communication systems. 19 Therefore, it cannot be interpreted as a waiver
of state immunity.
The DOTC also maintains that while it was regrettable that the construction of the telephone exchange erroneously
encroached on portions of the respondent’s properties, the RTC erred in ordering the return of the property.  20 It argues
that while the DOTC, in good faith and in the performance of its mandate, took private property without formal
expropriation proceedings, the taking was nevertheless an exercise of eminent domain. 21
Citing the 2007 case of Heirs of Mateo Pidacan v. Air Transportation Office (ATO), 22the Department prays that instead of
allowing recovery of the property, the case should be remanded to the RTC for determination of just compensation.
On the other hand, the respondents counter that the state immunity cannot be invoked to perpetrate an injustice
against its citizens.23 They also maintain that because the subject properties are titled, the DOTC is a builder in bad faith
who is deemed to have lost the improvements it introduced. 24 Finally, they differentiate their case from Heirs of Mateo
Pidacan v. ATO  because Pidacan  originated from a complaint for payment of the value of the property and rentals while
their case originated from a complaint for recovery of possession and damages. 25
OUR RULING
We find no merit in the petition.
The State may not be sued without its consent. 26 This fundamental doctrine stems from the principle that there can be
no legal right against the authority which makes the law on which the right depends. 27 This generally accepted principle
of law has been explicitly expressed in both the 1973 28 and the present Constitutions.
But as the principle itself implies, the doctrine of state immunity is not absolute. The State may waive its cloak of
immunity and the waiver may be made expressly or by implication.
Over the years, the State’s participation in economic and commercial activities gradually expanded beyond its sovereign
function as regulator and governor.1âwphi1 The evolution of the State’s activities and degree of participation in
commerce demanded a parallel evolution in the traditional rule of state immunity. Thus, it became necessary to
distinguish between the State’s sovereign and governmental acts (jure imperii)  and its private, commercial, and
proprietary acts (jure gestionis).  Presently, state immunity restrictively extends only to acts jure imperii  while acts jure
gestionis  are considered as a waiver of immunity.29
The Philippines recognizes the vital role of information and communication in nation building. 30 As a consequence, we
have adopted a policy environment that aspires for the full development of communications infrastructure to facilitate
the flow of information into, out of, and across the country. 31 To this end, the DOTC has been mandated with the
promotion, development, and regulation of dependable and coordinated networks of communication. 32
The DOTC encroached on the respondents’ properties when it constructed the local telephone exchange in Daet,
Camarines Norte. The exchange was part of the RTDP pursuant to the National Telephone Program. We have no doubt
that when the DOTC constructed the encroaching structures and subsequently entered into the FLA with Digitel for their
maintenance, it was carrying out a sovereign function. Therefore, we agree with the DOTC’s contention that these are
acts jure imperii  that fall within the cloak of state immunity.
However, as the respondents repeatedly pointed out, this Court has long established in Ministerio v CFI,33  Amigable v.
Cuenca,  34the 2010 case Heirs of Pidacan v. ATO,  35and more recently in Vigilar v. Aquino36that the doctrine of state
immunity cannot serve as an instrument for perpetrating an injustice to a citizen.
The Constitution identifies the limitations to the awesome and near-limitless powers of the State. Chief among these
limitations are the principles that no person shall be deprived of life, liberty, or property without due process of law and
that private property shall not be taken for public use without just compensation. 37 These limitations are enshrined in no
less than the Bill of Rights that guarantees the citizen protection from abuse by the State.
Consequently, our laws38 require that the State’s power of eminent domain shall be exercised through expropriation
proceedings in court. Whenever private property is taken for public use, it becomes the ministerial duty of the
concerned office or agency to initiate expropriation proceedings. By necessary implication, the filing of a complaint for
expropriation is a waiver of State immunity.
If the DOTC had correctly followed the regular procedure upon discovering that it had encroached on the respondents’
property, it would have initiated expropriation proceedings instead of insisting on its immunity from suit. The petitioners
would not have had to resort to filing its complaint for reconveyance. As this Court said in Ministerio:
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. 39 [emphasis supplied]
We hold, therefore, that the Department’s entry into and taking of possession of the respondents’ property amounted
to an implied waiver of its governmental immunity from suit.
We also find no merit in the DOTC’s contention that the RTC should not have ordered the reconveyance of the
respondent spouses’ property because the property is being used for a vital governmental function, that is, the
operation and maintenance of a safe and efficient communication system. 40
The exercise of eminent domain requires a genuine necessity to take the property for public use and the consequent
payment of just compensation. The property is evidently being used for a public purpose. However, we also note that
the respondent spouses willingly entered into a lease agreement with Digitel for the use of the subject properties.
If in the future the factual circumstances should change and the respondents refuse to continue the lease, then the
DOTC may initiate expropriation proceedings. But as matters now stand, the respondents are clearly willing to lease the
property. Therefore, we find no genuine necessity for the DOTC to actually take the property at this point.
Lastly, we find that the CA erred when it affirmed the RTC's decision without deleting the forfeiture of the improvements
made by the DOTC through Digitel. Contrary to the RTC's findings, the DOTC was not a builder in bad faith when the
improvements were constructed. The CA itself found that the Department's encroachment over the respondents'
properties was a result of a mistaken implementation of the donation from the municipality of Jose Panganiban. 41
Good faith consists in the belief of the builder that the land he is building on is his and [of] his ignorance of any defect or
flaw in his title.42 While the DOTC later realized its error and admitted its encroachment over the respondents' property,
there is no evidence that it acted maliciously or in bad faith when the construction was done.
Article 52743 of the Civil Code presumes good faith. Without proof that. the Department's mistake was made in bad faith,
its construction is presumed to have been made in good faith. Therefore, the forfeiture of the improvements in favor of
the respondent spouses is unwarranted.
WHEREFORE, we hereby DENY the petition for lack of merit. The May 20, 2009 decision of the Regional Trial Court
in Civil Case No. 7355, as modified by the March 20, 2013 decision of the Court of Appeals in CA-G.R. CV No. 93795,
is AFFIRMED with further MODIFICATION that the forfeiture of the improvements made by the DOTC in favor of the
respondents is DELETED. No costs.
SO ORDERED.

2. USA vs. Ruiz (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.

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.

FACTS:  
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 a couple of repair projects. Eligio de Guzman land Co., Inc. responded to the invitation and
submitted bids. Subsequent thereto, the company received from the US two telegrams requesting it to confirm its price
proposals and for the name of its bonding company. The company construed this as an acceptance of its offer so they
complied with the requests. The company received a letter which was signed by William I. Collins of Department of the
Navy of the United States, also one of the petitioners herein informing that the company did not qualify to receive an
award for the projects because of its previous unsatisfactory performance rating in repairs, and that the projects were
awarded to third parties. For this reason, a suit for specific performance was filed by him against the US. 

ISSUE:
Whether the United States Naval Base in bidding for said contracts exercise governmental functions to be able to invoke
state immunity.

DECISION:  
Yes. The Supreme Court held that the contract relates to the exercise of its sovereign functions 

RATIO DECIDENDI:  
The Supreme Court held that 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. 

3. Republic vs. Sandiganbayan (204 SCRA 212)

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.
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.

c. When it is Inequitable for the State to Claim Immunity

Amigable vs. Cuenca (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.

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.
d. Suits against Public Officers
1. Sanders vs. Veridiano (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.

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.
2. Republic vs. Sandoval (G.R. No. 84607, March 19, 1993)

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.

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 Francisco as 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 recommended 9 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.

Facts:
This case is connected to the Mendiola Massacre, which was the culmination of eight days and seven nights of
encampment by members of the Kilusang Magbubukid sa Pilipinas (KMP) at the Ministry of Agrarian Reform (MAR) at
the Philippine Tobacco Administration Building along Elliptical Road in Diliman, Quezon City. The farmers demanded
genuine agrarian reform. The group was led by its national president, Jaime Tadeo.
On January 20, 1987, the minister of agriculture, Heherson Alvarez, told Tadeo that he should wait for the ratification of
the 1987 Constitution and just allow the government to implement its comprehensive land reform program. Tadeo,
however, said that he did not believe in the Constitution.
On January 22, Tadeo’s group marched to Malacanang to air their demands. He threatened the government, saying, “. . .
inalis namin ang barikada bilang kahilingan ng ating Presidente, pero kailangan alisin din niya ang barikada sa Mendiola
sapahkat bubutasin naming iyon at dadanak ang dugo . . .”
The group proceeded to march from Quezon Menorial Circle at 10:00 am and were joined by organizations such as
Kilusang Mayo Uno (KMU), Baging Alyansang Makabayan (BAYAN), League of Filipino Students (LFS), and Kongreso ng
Pagkakaisa ng Maralitang Lungsod (KPML).
In anticipation of a civil disturbance, Capital Regional Command (CAPCOM) Commander General Ramon Montano
inspected the preparations and adequacy of the government forces to quell impending attacks. OPLAN YELLOW was put
into effect. Task Force Nazareno, under the command of Col. Cesar Nazareno, was deployed at the vicinity of
Malacanang. Intelligence reports were received that the KMP was heavily infiltrated by CPP/ NPA elements and that
insurrection was pending. To prepare for the disturbance, the  atni-riot forces were assembled at Mendiola under the
command of the following:
·       Police Colonel Edgar Dula Torres
·       Police Major Demetrio dela Cruz
·       Major Felimon Gasmin
·       Fire Superintendent Mario Tanchanco
·       General Ramon Montano
·       Colonel Cezar Nazareno
·       Police General Alfredo Lim
The marchers were around 10,000 to 15,000 in number. At 4:30 p.m., they proceeded to the police lines. No dialog took
place between the marchers and the anti-riot squad. Then, there was suddenly an explosion followed by the throwing of
pillboxes, stones, and bottles. After the riot, 12 marchers were confirmed dead, 39 were wounded by gunshots, and 12
sustained minor injuries, all belonging to the group of marchers. From the police and military personnel, 3 sustained
gunshot wounds, and 20 suffered minor physical injuries.
President Corazon Aquino then issued AI 11 on January 22, 1987, which created the Citizens’ Mendiola Commission. It
was specifically created for investigating the Mendiola Massacre. The Commission found the following:
·       The KMP rally was not covered by any permit as required by BP 880.
·       The crowd dispersal control units were armed with .38 and .45 caliber handguns, and M-16 armalites, which were
prohibited under BP 880.
·       Some officers were in civilian attire.
·       There was unnecessary firing by the police and military.
·       The marchers carried steel bars, pillboxes, darts, lead pipes, wooden clubs with spikes, and guns. These are
offensive weapons and are prohibited under BP 880.
·       The KMP farmers broke further negotiations by the MAR officials, and Jaime Tadeo issued threats.
·       There was no dialog between the government forces and rallyists.
·       The police fought back with truncheons and shield. There ensued gunfire from both sides.
·       The water cannons and tear gas were not put into effective use.
·       The water cannons and fire trucks were not put into operation for the following reasons:
o   There was no order to use them
o   They were incorrectly prepositioned
o   They were out of range of the marchers
·       No barbed wire barricade was used in Mendiola, but no official reason was given for its absence.
The Commission recommended that Jaime Tadeo be prosecuted for holding the rally without a permit. They also
recommended that the following officers be prosecuted for their failure to make effective use of their skill and
experience in directing the dispersal operations in Mendiola:
1.     Gen. Ramon Montano
2.     Police Gen. Alfredo Lim
3.     Police Gen. Edgar Dula Torres
4.     Police Maj. Demetrio dela Cruz
5.     Col. Cezar Nazareno
6.     Maj. Felimon Gasmin
Respondent Judge Sandoval dismissed the complaint because it was against the Republic of the Philippines, and the
latter has not given its consent to be sued. He also denied the motion for reconsideration of the Caylao group, which
was composed of the heirs of the victims.
The Caylao group contended that the State has given its consent to be sued when President Aquino created the fact-
finding commission and when she gave a speech, saying that the government will address the grievances of the rallyists.
Issue:
1.     Has the State given its consent to be sued?
2.     Did Judge Sandoval commit grave abuse of discretion?
Ruling:
1.     No. This is not a suit against the State with its consent. The recommendation made by the Commission regarding
the indemnification of the heirs of the deceased and victims did not automatically mean that the liability attaches to the
State. The Commission was merely a fact-finding commission. Furthermore, the speech made by President Aquino did
not amount to consent by the State. In this case, even if the Republic is sued by name, the ultimate liability does not
pertain to the government. Instead, it pertains to the military and police officials. The Court said that their official
functions ceased when they exceeded their authority. Based on the Commission’s findings, there was not enough
justification of the use of firearms by the military and police personnel. 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.
2.     No. There was no irreversible error committed by Judge Sandoval, and no grave abuse of discretion was found to be
committed by him.

3. Festejo vs. Fernando (G.R. No. L-5156, March 11, 1954)

CARMEN FESTEJO, demandante-apelante,

vs.
ISAIAS FERNANDO, Director de Obras Publicas, demandado-apelado.

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.

FACTS:
The defendant, as Director of the Bureau of Public Works, took possession of the three parcels of land on February 1951
without obtaining first a right of way, without consent and knowledge of plaintiff, and against her express objection. The
petitioner demands that the lands be restored to its former condition and the defendant to pay the plaintiff the sum of
P19, 343.20 for the unlawful taking possession of the defendant.

ISSUE:
Is the defendant liable for the unlawful possession of the lands?

HELD:
The evidence and conceded facts permitted the jury in finding that in the trespass on plaintiff’s land, the defendant
committed acts outside the scope of his authority. There can be no claim that he thus invaded plaintiff’s land
southeasterly of the right of way innocently for the surveys clearly marked the limits of the land appropriated for the
right of way. 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. He cannot shelter himself by the plea that he is a public agent acting under the color of his
office and not personally.

e. Suits against Municipal Corporations

1. Mun. of San Miguel vs. Fernandez (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.

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.

2. City of Bacolod vs. Mayor Leonardia (G.R. No. 190289, January 17, 2018)

THE CITY OF BACOLOD, HON. MAYOR EVELIO R. LEONARDIA, ATTY. ALLAN L. ZAMORA and ARCH. LEMUEL D.
REYNALDO, in their personal capacities and in their capacities as Officials of the City of Bacolod, Petitioners
vs.
PHUTURE VISIONS CO., INC., Respondent

Nature of the Case

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court of the Decision 1 dated
February 27, 2009 and the Resolution 2 dated October 27, 2009 of the Court of Appeals (CA) in CAG. R. SP No. 03322. The
assailed rulings reversed the dismissal of respondent's Petition for Mandamus and Damages with Prayer for Issuance of
a Temporary Mandatory Order and/or Writ of Preliminary Mandatory Injunction (Petition for Mandamus and Damages)
by the Regional Trial Court of Bacolod City, Branch 49. 3
The Facts
The instant case stems from the Petition for Mandamus and Damages filed by respondent Phuture Visions Co., Inc.
(Phuture) on March 5, 2007 against petitioners City of Bacolod, Hon. Mayor Evelio R. Leonardia, Atty. Allan L. Zamora
(now deceased) and Arch. Lemuel D. Reynaldo. In the Petition for Mandamus and Damages, Phuture alleged the
following:
Phuture was incorporated in 2004. In May 2005, its Articles of Incorporation (AOI) was amended to, among others,
include the operation of lotto betting stations and/or other gaming outlets as one of its secondary purposes. Eventually,
it applied with the Philippine Amusement and Gaming Corporation (P AGCOR) for an authority to operate bingo games
at the SM City Bacolod Mall (SM Bacolod), as well as with SM Prime Holdings (SM Prime) for the lease of a space in the
said building. Phuture was issued a provisional Grant of Authority (GOA) on December 5, 2006 by P AGCOR, subject to
compliance with certain requirements, and received an Award Notice from SM Prime on January 10, 2007. 4
Thereafter, Phuture processed, completed and submitted to the Permits and Licensing Division of the City Mayor of
Bacolod City its Application for Permit to Engage in Business, Trade or Occupation to operate bingo games at SM Bacolod
and paid the fees therefor. It was then issued a claim slip for its permit on February 19, 2007, which was to be claimed
on March 16, 2007.5 In the meantime, Phuture further amended its AOI on February 27, 2007 to reflect its engagement
in bingo operations as its primary purpose.
Phuture commenced bingo operations at SM Bacolod on March 2, 2007, prior to the issuance of the actual hard copy of
the mayor's permit. However, at around 6:10 a.m. of March 3, 2007, respondent learned that its bingo outlet was
padlocked by agents of the Office of the City Legal Officer and that a copy of a Closure Order dated March 2, 2007 was
posted at the entrance of the bingo outlet. 6
Phuture claimed that the closure of its bingo outlet at SM Bacolod is tainted with malice and bad faith and that
petitioners did not have the legal authority to shut down said bingo operations, especially since PAGCOR itself had
already issued a provisional GOA in its favor.
On March 7, 2007, the RTC conducted a summary hearing to determine the sufficiency of the form and substance of the
application for the issuance of a temporary mandatory order and/or preliminary mandatory injunction to remove the
padlock installed at respondent's place of business at SM Bacolod and allow it to conduct unhampered bingo
operations.7 In the course of the summary hearing, specifically on March 9, 2007, petitioners released in open court to
respondent's counsel the hard copy of the Mayor's Permit dated February 19, 2007 which indicated the kind of business
allowed is "Professional Services, Band/Entertainment Services." Phuture's counsel, however, refused to receive the
same, protesting that it was not the Mayor's Permit which respondent had applied for. 8
On March 19, 2007, petitioners filed their Comment and Answer with Counterclaim, denying the allegations set forth in
the Petition for Mandamus and Damages and presenting a slightly different set of facts, 9 as follows:
On January 10, 2007, Phuture applied for the renewal of its mayor's permit with "professional services,
band/entertainment services" as its declared line of business, providing the address of the business as "RH Building, 26
Lacson Street, Barangay 5" instead of SM Bacolod where respondent's bingo operations was located. 10
Upon submission of the requirements on February 19, 2007 and while the application was being processed, Phuture was
issued a "claim slip" for it to claim the actual mayor's permit on March 16, 2007 if the requirements were found to be in
order.11 However, petitioners found discrepancies in Phuture's submitted requirements, wherein the application form
was notarized earlier than the amendment of its AOI to reflect the company's primary purpose for bingo operations.
Aside from this, respondent failed to pay the necessary permit fee/assessment fee under the applicable tax ordinances
of the City of Bacolod.12
Also, without waiting for the release of the mayor's permit, respondent started the operation of its bingo outlet at SM
Bacolod. This prompted the former City Legal Officer, Atty. Allan Zamora, to issue a Closure Order dated March 2, 2007,
pursuant to City Tax Ordinance No. 93- 001, Series of 1993, 13 which declares unlawful for any person to operate any
business in the City of Bacolod without first obtaining a permit therefor from the City Mayor and paying the necessary
permit fee and other charges to the City Treasurer.
The Closure Order was presented by petitioners' representative to respondent's lawyers to negotiate a possible peaceful
solution before its implementation. However, respondent simply ignored the information relayed to them and thus, at
around 6:00 a.m. on March 3, 2007, the Composite Enforcement Unit under the Office of the City Legal Officer
implemented the Closure Order.14
Petitioners contended that the claim slip so heavily relied upon by respondent was a mere oversight or human error of
the City Government's employee who processed the same, who was likewise duped by the tampered entries that
respondent's application was for a permit for bingo operations when, in tn1th, it was only for the renewal of a
previously-issued permit albeit for a different line of business, i.e., "professional services, band/entertainment
services."15
Ruling of the Regional Trial Court
In a Decision16 dated March 20, 2007, the R TC denied the prayer for the issuance of a temporary mandatory order and
dismissed the case for lack of merit, to wit:
In view of the foregoing disquisitions, it follows that the prayer for issuance of a temporary mandatory order prayed for
must be denied.
WHEREFORE, in the light of all the foregoing discussions, the instant petition is ordered DISMISSED for lack of merit,
without prejudice to filing an application of a Mayor's Permit specifically for bingo operation. Respondents' counterclaim
is ordered DISMISSED, without prejudice to filing appropriate action with a court of competent jurisdiction.
Without pronouncement as to costs.
SO ORDERED.17
Phuture filed an Urgent Motion for Partial Reconsideration on April 2, 2007, but the same was denied by the RTC in its
Order dated September 6, 2007.18 Thus, respondent elevated the matter to the CA on appeal. 19
Ruling of the Court of Appeals
In the assailed Decision dated February 27, 2009, the CA partially granted the appeal by affirming the trial court's denial
of the application for a temporary mandatory order but reversing the dismissal of the suit for damages and ordering the
case to be reinstated and remanded to the court of origin for further proceedings. The dispositive portion of the assailed
Decision reads:
WHEREFORE, based on the foregoing premises, the appeal is PARTLY GRANTED. The Decision of Branch 49 of the
Regional Trial Court of Bacolod City dated 20 March 2007 and Order dated 06 September 2007, denying the application
for a Temporary Mandatory Order is AFFIRMED. The dismissal of the main action is REVERSED and is hereby REINSTATED
and REMANDED to the court of origin for further proceedings.
SO ORDERED.20
The CA pronounced that the issue of whether the RTC erred in dismissing the prayer for temporary mandatory order for
the removal of the padlock allegedly installed illegally at respondent's place of business at SM Bacolod, as well as the
prayer ordering petitioners to allow respondent to conduct unhampered bingo operations during the pendency of the
case, had already been rendered moot since, with the onset of another year, it was necessary to apply for another
business permit with the Mayor's Office. 21
Nevertheless, the CA proceeded to rule on the issue on whether the closure of respondent's bingo operations at SM
Bacolod was effected in a manner consistent with law. While it ruled that the Mayor's power to issue licenses and
permits is discretionary, and thus, cannot be compelled by mandamus, it found that respondent was not given due
notice and hearing as to the closure of its business establishment at SM Bacolod. Based on the CA's finding on the
manner by which the closure of the bingo operations was effected, it concluded that respondent was denied its
proprietary right without due process of law. Accordingly, the CA ordered the case to be reinstated and remanded to the
RTC to determine if damages should be awarded. 22
Petitioners timely interposed a Motion for Reconsideration, 23 protesting the CA's order to remand the case to the R TC
for trial on the aspect of damages. The CA, however, maintained its position, issuing the now assailed Resolution.
Agggrieved, petitioners brought the matter before this Court through the present recourse.
The Petition
Petitioners again limit their argument to the CA's order to remand the case to the R TC for trial on the aspect of
damages. According to petitioners, hearing the action for damages effectively violates the City's immunity from suit
since respondent had not yet obtained the consent of the City Government of Bacolod to be included in the claim for
damages. They also argue that the other petitioners, the City Mayor and other officials impleaded, are similarly immune
from suit since the acts they performed were within their lawful duty and functions. 24 Moreover, petitioners maintain
that they were merely performing governmental or sovereign acts and exercised their legal rights and duties to
implement the provisions of the City Ordinance. 25 Finally, petitioners contend that the assailed Decision contained
inconsistencies such that the CA declared mandamus to be an inappropriate remedy, yet allowed the case for damages
to prosper.26
In its Comment,27 respondent Phuture argues that the grounds raised by petitioners should not be considered since
these were only invoked for the first time on appeal. Aside from this, respondent asserts that the case for damages
should proceed since petitioners allegedly caused the illegal closure of its bingo outlet without proper notice and
hearing and with obvious discrimination.
In their Reply to the Comment dated August 26, 2010, petitioners oppose respondent's arguments, saying that the
issues they raised in the instant petition cannot be considered as having been raised for the first time since they are
intertwined and bear relevance and close relation to the issues resolved by the trial court. They further reiterate that
they cannot be held liable for damages since they were merely performing governmental or sovereign acts in the
issuance of a mayor's permit. Thus, they argue that whatever damages that respondent may have incurred belong to the
concept of damnum absque injuria for which the law provides no remedy.28
The Issues
Stripped of the verbiage, the sole issue in this case is whether petitioners can be made liable to pay respondent
damages.
The Court's Ruling
The petition is meritorious.
Petitioners have not given their
consent to be sued
The principle of immunity from suit is embodied in Section 3, Article XVI of the 1987 Philippine Constitution which states
that "[t]he State cannot be sued without its consent." The purpose behind this principle is to prevent the loss of
governmental efficiency as a result of the time and energy it would require to defend itself against lawsuits. 29 The State
and its political subdivisions are open to suit only when they consent to it.
Consent may be express or implied, such as when the government exercises its proprietary functions, or where such is
embodied in a general or special law. 30 In the present case, respondent sued petitioners for the latter's refusal to issue a
mayor's permit for bingo operations and for closing its business on account of the lack of such permit. However, while
the authority of city mayors to issue or grant licenses and business permits is granted by the Local Government Code
(LGC),31 which also vests local government units with corporate powers, one of which is the power to sue and be sued,
this Court has held that the power to issue or grant licenses and business permits is not an exercise of the government's
proprietary function. Instead, it is in an exercise of the police power of the State, ergo a governmental act. This is clearly
elucidated by the Court in Acebedo Optical Company, Inc. v. The Honorable Court of Appeals: 32
The Court of Appeals erred in adjudging subject business permit as having been issued by respondent City Mayor in the
performance of proprietary functions of Iligan City. As hereinabove elaborated upon, the issuance of business licenses
and permits by a municipality or city is essentially regulatory in nature. The authority, which devolved upon local
government units to issue or grant such licenses or permits, is essentially in the exercise of the police power of the State
within the contemplation of the general welfare clause of the Local Government Code. (emphasis supplied)
No consent to be sued and be liable for damages can thus be implied from the mere conferment and exercise of the
power to issue business permits and licences. Accordingly, there is merit in petitioners' argument that they cannot be
sued by respondent since the City's consent had not been secured for this purpose. This is notwithstanding petitioners'
failure to raise this exculpatory defense at the first instance before the trial court or even before the appellate court.
As this Court has repeatedly held, waiver of immunity from suit, being in derogation of sovereignty, will not be lightly
inferred.33 Moreover, it deserves mentioning that the City of Bacolod as a government agency or instrumentality cannot
be estopped by the omission, mistake or error of its officials or agents. 34 Estoppel does not also lie against the
government or any of its agencies arising from unauthorized or illegal acts of public officers. 35 Hence, we cannot hold
petitioners estopped from invoking their immunity from suit on account of having raised it only for the first time on
appeal. On this score, Justice Barredo's Opinion in Insurance Co. of North America v. Osaka Shosen Kaisha 36 is particularly
illuminating:
x x x [T]he real reason why, from the procedural point of view, a suit against the state filed without its consent must be
dismissed is because, necessarily, any such complaint cannot state a cause of action, since, as the above decision
confirms, "there can be no legal right as against the authority that makes the law on which the right depends." x x x
The question that arises now is, may failure to state a cause of action be alleged as a ground of dismissal for the first-
time on appeal?
xxx
x x x The requirement that this defense should be raised at the trial is only to give the plaintiff a chance to cure the
defect of his complaint, but if, as in this case, the lack of consent of the state cannot be cured because it is a matter of
judicial notice that there is no law allowing the present suit, (only Congress that can give such consent) the reason for
the rule cannot obtain, hence it is clear that such non-suability may be raised even on appeal. After all, the record on
appeal can be examined to find out if the consent of the state is alleged in the complaint.
xxxx
x x x It is plain, however, that as far as the date is concerned, this rule of waiver cannot apply, for the simple reason that
in the case of the state as already stated, the waiver may not be made by anyone other than Congress, so any
appearance in any form made on its behalf would be ineffective and invalid if not authorized by a law duly passed by
Congress. Besides, the state has to act thru subalterns who are not always prepared to act in the premises with the
necessary capability, and instances there can be when thru ignorance, negligence or malice, the interest of the state
may not be properly protected because of the erroneous appearance made on its behalf by a government lawyer or
some other officer, hence, as a matter of public policy, the law must be understood as insulating the state from such
undesirable contingencies and leaving it free to invoke its sovereign attributes at any time and at any stage of a judicial
proceeding, under the principle that the mistakes and ommissions of its officers do not bind it.
Petitioners are not liable for damages
As to the primary issue of whether petitioners are liable to respondent for damages, respondent Phuture alleged that
petitioners are guilty of surreptitiously padlocking its SM bingo outlet in a "patently arbitrary, whimsical, capricious,
oppressive, irregular, immoral and shamelessly politically motivated" manner and with clear discrimination since the
majority owners of the company are the sons of petitioner Mayor Leonardia's political rival, then Congressman Monico
Puentevella.37 Such contention is clearly but non sequitur, grounded as it is in pure conjecture.
Sticking closely to the facts, it is best to recapitulate that while the CA ruled that respondent was not given due notice
and hearing as to the closure of its business establishment at SM Bacolod, it nevertheless remanded the issue of the
award of damages to the trial court for further proceedings. Such action would only be an exercise in futility, as the trial
court had already ruled in its September 6, 2007 Decision that respondent Phuture had no right and/or authority to
operate bingo games at SM Bacolod because it did not have a Business Permit and has not paid assessment for bingo
operation. Thus, it held that petitioners acted lawfully in stopping respondent's bingo operation on March 2, 2007 and
closing its establishment for lack of any business permit.
The trial court further found that the Mayor's Office had already decided and released a Business Permit for
"Professional Services, Band/Entertainment Services" dated January 19, 2007 to respondent, which cannot reasonably
expect to receive a Mayor's Permit for "Bingo Operations" unless and until it files a new application for bingo operations,
submit the necessary requirements therefor, and pay the corresponding assessment. 38
Aside from this, the R TC had also found that respondent's reliance on the GOA issued by PAGCOR, the SM Award
Notice, and the "questionable" Claim Slip and Application paper tainted with alteration/falsification did not appear to be
a right that is clear and unmistakable. From this, the trial court concluded that the right being claimed by respondent to
operate bingo games at SM Bacolod was, at the very least, doubtful. 39
Based on the above observations made by the trial court, it appears that respondent had no clear and unmistakable
legal right to operate its bingo operations at the onset. Respondent failed to establish that it had duly applied for the
proper permit for bingo operations with the Office of the Mayor and, instead, merely relied on the questionable claim
stub to support its claim. The trial court also found that the application form submitted by respondent pertained to a
renewal of respondent's business for "Professional Services, Band/Entertainment Services" located at "RH Bldg., 26th
Lacson St." and not at SM Bacolod. These factual findings by the trial court belie respondent's claim that it had the right
to operate its bingo operations at SM Bacolod.
Certainly, respondent's claim that it had applied for a license for bingo operations is questionable since, as it had
admitted in its Petition for Mandamus and Damages, the primary purpose in its AOI was only amended to reflect bingo
operations on February 14, 2007 or more than a month after it had supposedly applied for a license for bingo operations
with the Office of the Mayor. It is settled that a judicial admission is binding on the person who makes it, and absent any
showing that it was made through palpable mistake, no amount of rationalization can offset such admission. 40 This
admission clearly casts doubt on respondent's so-called right to operate its business of bingo operations.
Petitioners, in ordering the closure of respondent's bingo operations, were exercising their duty to implement laws and
ordinances which include the local government's authority to issue licenses and permits for business operations in the
city. This authority is granted to them as a delegated exercise of the police power of the State. It must be emphasized
that the nature of bingo operations is a form of gambling; thus, its operation is a mere privilege which could not only be
regulated, but may also very well be revoked or closed down when public interests so require. 41
In this jurisdiction, we adhere to the principle that injury alone does not give respondent the right to recover damages,
but it must also have a right of action for the legal wrong inflicted by petitioners. In order that the law will give redress
for an act causing damage, there must be damnum et injuria that act must be not only hurtful, but wrongful. The case
of The Orchard Golf & Country Club, Inc., et al. v. Ernesto V Yu and Manuel C. Yuhico,42 citing Spouses Custodio v. Court of
Appeals,43 is instructive, to wit:
x x [T]he mere fact that the plaintiff suffered losses does not give rise to a right to recover damages. To warrant the
recovery of damages, there must be both a right of action for a legal wrong inflicted by the defendant, and damage
resulting to the plaintiff therefrom. Wrong without damage, or damage without wrong, does not constitute a cause of
action, since damages are merely part of the remedy allowed for the injury caused by a breach or wrong.
xxxx
In order that a plaintiff may maintain an action for the injuries of which he complains, he must establish that such
injuries resulted from a breach of duty which the defendant owed to the plaintiff - a concurrence of injury to the plaintiff
and legal responsibility by the person causing it. The underlying basis for the award of tort damages is the premise that
an individual was injured in contemplation of law. Thus, there must first be the breach of some duty and the imposition
of liability for that breach before damages may be awarded; it is not sufficient to state that there should be tort liability
merely because the plaintiff suffered some pain and suffering.
xxxx
In other words, in order that the law will give redress for an act causing damage, that act must be not only hurtful, but
wrongful.1âwphi1 There must be damnum et injuria. If, as may happen in many cases, a person sustains actual damage,
that is, harm or loss to his person or property, without sustaining any legal injury, that is, an act or omission which the
law does not deem an injury, the damage is regarded as damnum absque injuria.
Considering that respondent had no legal right to operate the bingo operations at the outset, then it is not entitled to
the damages which it is demanding from petitioners.
WHEREFORE, the petition is hereby GRANTED. The Decision dated February 27, 2009 and the Resolution dated October
27, 2009 of the Court of Appeals in CA-G.R. SP No. 03322 are hereby ANNULLED and SET ASIDE. The Decision dated
March 20, 2007 of the Regional Trial Court of Bacolod City, Branch 49 is hereby REINSTATED.
SO ORDERED.

Subject:
1. Political and International Law ; State Immunity from Suit
2. Civil Law ; Damages
Principle:
No consent to be sued and be liable for damages can thus be implied from the mere conferment and exercise of the
power to issue business permits and licences. Accordingly, there is merit in petitioners’ argument that they cannot be
sued by respondent since the City’s consent had not been secured for this purpose.
Injury alone does not give respondent the right to recover damages, but it must also have a right of action for the legal
wrong inflicted by petitioners. In order that the law will give redress for an act causing damage, there must be damnum
et injuria that act must be not only hurtful, but wrongful. Considering that respondent had no legal right to operate the
bingo operations at the outset, then it is not entitled to the damages which it is demanding from petitioners.
FACTS:
The instant case stems from the Petition for Mandamus and Damages filed by respondent Phuture Visions Co., Inc.
(Phuture) on March 5, 2007 against petitioners City of Bacolod, Hon. Mayor Evelio R. Leonardia, Atty. Allan L. Zamora
(now deceased) and Arch. Lemuel D. Reynaldo.
On January 10, 2007, Phuture applied for the renewal of its mayor’s permit with “professional services,
band/entertainment services” as its declared line of business, providing the address of the business as “RH Building, 26
Lacson Street, Barangay 5” instead of SM Bacolod where respondent’s bingo operations was located.
Upon submission of the requirements on February 19,2007 and while the application was being processed, Phuture was
issued a “claim slip” for it to claim the actual mayor’s permit on March 16, 2007 if the requirements were found to be in
order. However, petitioners found discrepancies in Phuture’s submitted requirements, wherein the application form was
notarized earlier than the amendment of its Articles of Incorporation (AOI) to reflect the company’s primary purpose for
bingo operations. Aside from this, respondent failed to pay the necessary permit fee/assessment fee under the
applicable tax ordinances of the City of Bacolod.
Without waiting for the release of the mayor’s permit, respondent started the operation of its bingo outlet at SM
Bacolod. This prompted the former City Legal Officer, Atty. Allan Zamora, to issue a Closure Order dated March 2, 2007,
pursuant to City Tax Ordinance No. 93-001, Series of 1993, which declares unlawful for any person to operate any
business in the City of Bacolod without first obtaining a permit therefor from the City Mayor and paying the necessary
permit fee and other charges to the City Treasurer.
The Closure Order was presented by petitioners’ representative to respondent’s lawyers to negotiate a possible peaceful
solution before its implementation. However, respondent simply ignored the information relayed to them and thus, at
around 6:00 a.m. on March 3, 2007, the Composite Enforcement Unit under the Office of the City Legal Officer
implemented the Closure Order.
In a Decision dated March 20, 2007, the RTC denied the prayer for the issuance of a temporary mandatory order and
dismissed the case for lack of merit. On appeal, the CA partially granted the appeal by affirming the trial court’s denial of
the application for a temporary mandatory order but reversing the dismissal of the suit for damages and ordering the
case to be reinstated and remanded to the court of origin for further proceedings. Hence, the instant petition.
Petitioners’ argued that hearing the action for damages effectively violates the City’s immunity from suit since
respondent had not yet obtained the consent of the City Government of Bacolod to be included in the claim for
damages. They also argue that the other petitioners, the City Mayor and other officials impleaded, are similarly immune
from suit since the acts they performed were within their lawful duty and functions. Moreover, petitioners maintain that
they were merely performing governmental or sovereign acts and exercised their legal rights and duties to implement
the provisions of the City Ordinance. Finally, petitioners contend that the assailed Decision contained inconsistencies
such that the CA declared mandamus to be an inappropriate remedy, yet allowed the case for damages to prosper.
In its Comment, respondent Phuture argues that the grounds raised by petitioners should not be considered since these
were only invoked for the first time on appeal. Aside from this, respondent asserts that the case for damages should
proceed since petitioners allegedly caused the illegal closure of its bingo outlet without proper notice and hearing and
with obvious discrimination.
ISSUES:
1. Whether petitioners have given their consent to be sued. (NO)
2. Whether petitioners can be made liable to pay respondent damages. (NO)
RULING:
1. Petitioners have not given their consent to be sued
The principle of immunity from suit is embodied in Section 3, Article XVI of the 1987 Philippine Constitution which
states that “the State cannot be sued without its consent.” The purpose behind this principle is to prevent the loss of
governmental efficiency as a result of the time and energy it would require to defend itself against lawsuits. The State
and its political subdivisions are open to suit only when they consent to it.
Consent may be express or implied, such as when the government exercises its proprietary functions, or where such is
embodied in a general or special law.
In the present case, respondent sued petitioners for the latter’s refusal to issue a mayor’s permit for bingo operations
and for closing its business on account of the lack of such permit. However, while the authority of city mayors to issue or
grant licenses and business permits is granted by the Local Government Code (LGC), which also vests local government
units with corporate powers, one of which is the power to sue and be sued, this Court has held that the power to issue
or grant licenses and business permits is not an exercise of the government’s proprietary function. Instead, it is in an
exercise of the police power of the State, ergo a governmental act.
No consent to be sued and be liable for damages can thus be implied from the mere conferment and exercise of the
power to issue business permits and licences.
Accordingly, there is merit in petitioners’ argument that they cannot be sued by respondent since the City’s consent had
not been secured for this purpose. This is notwithstanding petitioners’ failure to raise this exculpatory defense at the
first instance before the trial court or even before the appellate court.
As this Court has repeatedly held, waiver of immunity from suit, being in derogation of sovereignty, will not be lightly
inferred. Moreover, it deserves mentioning that the City of Bacolod as a government agency or instrumentality cannot
be estopped by the omission, mistake or error of its officials or agents.
Estoppel does not also lie against the government or any of its agencies arising from unauthorized or illegal acts of public
officers.
Hence, the SC cannot hold petitioners estopped from invoking their immunity from suit on account of having raised it
only for the first time on appeal.
2. Petitioners are not liable for damages
Based on the observations made by the trial court, it appears that respondent had no clear and unmistakable legal right
to operate its bingo operations at the onset. Respondent failed to establish that it had duly applied for the proper
permit for bingo operations with the Office of the Mayor and, instead, merely relied on the questionable claim stub to
support its claim. The trial court also found that the application form submitted by respondent pertained to a renewal of
respondent’s business for “Professional Services, Band/Entertainment Services” located at “RH Bldg., 26th Lacson St.”
and not at SM Bacolod. These factual findings by the trial court belie respondent’s claim that it had the right to operate
its bingo operations at SM Bacolod.
Certainly, respondent’s claim that it had applied for a license for bingo operations is questionable since, as it had
admitted in its Petition for Mandamus and Damages, the primary purpose in its AOI was only amended to reflect bingo
operations on February 14, 2007 or more than a month after it had supposedly applied for a license for bingo operations
with the Office of the Mayor. It is settled that a judicial admission is binding on the person who makes it, and absent
any showing that it was made through palpable mistake, no amount of rationalization can offset such admission.  This
admission clearly casts doubt on respondent’s so-called right to operate its business of bingo operations.
Petitioners, in ordering the closure of respondent’s bingo operations, were exercising their duty to implement laws and
ordinances which include the local government’s authority to issue licenses and permits for business operations in the
city. This authority is granted to them as a delegated exercise of the police power of the State. It must be emphasized
that the nature of bingo operations is a form of gambling; thus, its operation is a mere privilege which could not only be
regulated, but may also very well be revoked or closed down when public interests so require.
In this jurisdiction, the SC adheres to the principle that injury alone does not give respondent the right to recover
damages, but it must also have a right of action for the legal wrong inflicted by petitioners. In order that the law will
give redress for an act causing damage, there must be damnum et injuria that act must be not only hurtful, but
wrongful.
Considering that respondent had no legal right to operate the bingo operations at the outset, then it is not entitled to
the damages which it is demanding from petitioners.

3. Palafox vs. Province of Ilocos Norte (G.R. No. L-10659, January 31, 1958)

REPUBLIC OF THE PHILIPPINESSUPREME COURTMANILAG.R. No. L-10659Jan. 31, 1958LEONARDO PALAFOX, et. al.,
Plaintiffs and Appellants,versus PROVINCE OF ILOCOS NORTE, THE DISTRICT ENGINEER AND THE PROVINCIAL
TREASURER, Defendants and Appellees.

The Court of First Instance of Ilocos Norte dismissed plaintiffs' claim against the above appellees for damages arising
from the death of their father Proceto Palafox, who had been run over by a freight truck driven by Sabas Torralba on
September 30, 1948. The latter was a chauffeur of the Provincial Government of Ilocos Norte detailed to the office of the
District Engineer; and on the said date he drove the motor vehicle along the National Highway in compliance with his
duties as such. Prosecuted for homicide through reckless imprudence, Sabas Torralba pleaded guilty and was accordingly
sentenced.Having reserved their right to file civil action, the heirs subsequently began these proceedings against the
employer the province, the District Engineer, the Provincial Treasurer and Sabas Torralba.Upon a motion to dismiss, the
Hon. Fidel Villaneuva, Judge, quashed the case against the defendants, except Sabas Torralba. Hence, this appeal.There
being no allegation, His Honor explained, that said province and officers had been engaged in some kind of industry as
provided in Art. 103 of the Revised Penal Code, no cause of action exists against them. For purposes of clarification said
article is quoted herewith.ART. 103. Subsidiary civil liability of other persons. - The subsidiary liability established in the
next preceding article shall also apply to employers, teachers, persons, and corporations engaged in any kind of industry
for felonies committed by their servants, pupils, workmen, apprentices, or employees in the discharge of their
duties.Appellants insist that the basis of their demand for indemnity is not the above Art. 103, but Art. 1903 of the Civil
Code providing as follows: ART. 1903. The obligation imposed by the next preceding articles is enforceable not only for
personal acts and omissions, but also for those of persons for whom another is responsible. x x x.The State is liable in
this sense when it acts through a special agent, but not when the damage has been caused by the official upon whom
properly devolved the duty of doing the act performed, in which case the provisions of the preceding article shall be
applicable. x x x.It will be observed that to attach liability to the State for the negligence of Sabas Torralba a declaration
must be made that he was a special agent, - and not one upon whom properly devolved the duty of driving the truck on
that occasion. Such ruling may not be made, because in Merrit v. Government of the Philippines, 34 Phil. 311, this Court
absolved the Government from liability for damages caused through the negligence of the driver of a Philippine General
Hospital's ambulance that collided with and injured a motorcycle rider (Merrit) holding (contrary to claimants claimant's
contention) that the driver was not a special agent of the Government within the scope of Art. 1903 of the Civil
Code.And let it not be argued that the principle applies only to the Insular, as distinguished from the provincial or
municipal governments; because this Court has interpreted the State to mean Government of the Philippines, and these
words include both central and the local governments. (Sec. 2 Revised Administrative Code.)As an alternative, the
appellants invoke the doctrine of respondeat superior as illustrated in the case of Mendoza v. De Leon, 33 Phil. 508,
concerning liability of municipal corporations for negligent acts of their employees. Two quotations from said decision
will offer sufficient guidance for adjudication.The municipality is not liable for the acts of its officers or agents in the
performance of its governmental functions. Governmental affairs do not lose their governmental character by being
delegated to the municipal governments. Nor does the fact that such duties are performed by officers of the
municipality which, for convenience, the state allows the municipality to select, change their character. To preserve the
peace, protect the morals and health of the community and so on to administer government, whether it be done by the
central government itself or is shifted to a local organization. And the state being immune for injuries suffered by private
individuals in the administration of strictly governmental functions, like immunity is enjoyed by the municipality in the
performance of the same duties, unless it is expressly made liable by statute. (Mendoza vs. De Leon, 33 Phil. 508; 511)A
municipality is not exempt from liability for the negligent performance of its corporate or proprietary or business
functions. In the administration of its patrimonial property, it is to be regarded as a private corporation or individual so
far as its liability to third persons on contract or in tort is concerned. Its contracts, validly entered into, may be enforced
and damages may be collected from it for the torts of its officers or agents within the scope of their employment in
precisely the same manner and to the same extent as those of private corporations or individuals. As to such matters the
principles of respondeat superior applies. It is for these purposes that the municipality is made liable to suits in the
courts. (Mendoza v. De Leon, 33 Phil. 508; 513-514)Here we see that if the negligent employee was engaged in the
performance of governmental duties, as distinguished from corporate or proprietary or business functions the
government is not liable. The construction or maintenance of roads in which the truck and the driver worked at the time
of the accident are admittedly governmental activities. Wherefore, the death of Palafox - tragic and deplorable though
as it may be imposed on the province no duty to pay monetary compensation. The reason for the exemption according
to Mr. Justice Story is that the Government does not undertake to guarantee to any person the fidelity of the officers or
agents whom it employs, since that would involve in all its operations in endless embarrassments, difficulties and loses
which would be subversive of the public interest. (U.S. v. Kirkpatrick, 9 Wheat., 720; 6 L. ed., 199; Beers v. Arkansas, 20
How., 527; 15 L. ed., 991.)The judgment will be affirmed with costs against appellants.

(SGD.) CESAR BENGZONWE CONCUR:(SGD.) RICARDO PARAS(SGD.) MARCELIANO R. MONTEMAYOR(SGD.) FELIX

BAUTISTA ANGELO(SGD.) JOSE B.L. REYES(SGD.) SABINO PADILLA(SGD.) ALEX. REYES(SGD.) ALEJO LABRADOR(SGD.)
PASTOR M. ENDENCIA(SGD.) ALFONSO FELIXI reserve my vote (SGD.) ROBERTO CONCEPCION

Facts:                        
Sabas Torralba was employed as a truck driver of the provincial government of Ilocos Norte. While driving his truck, he
ran over Proceto Palafox, resulting to the latter’s death. Sabas was prosecuted for homicide through reckless
imprudence to which he pleaded guilty. The heirs of Palafox instituted a civil case against him and the Province.

Issue: 
Can the Province of Ilocos Norte be held liable for the death of Palafox?

Held:
NO. The general rule is that local government units are not liable for negligent acts of its employees while they are
performing governmental functions or duties. In this case, the driver was involved in the construction or maintenance of
roads which was a governmental duty. Therefore, the province cannot be held liable for his negligent act. However
tragic and deplorable it may be, the death of Palafox imposed on the province no duty to pay monetary
consideration.  (Palafox vs. Province of Ilocos Norte,  102 Phil 1186)

2.3. Suability, Liability and Execution

1. Republic v. National Labor Relations Commission (Third Division) [787 SCRA 90 (2016)]

G.R. No. 174747, March 09, 2016

REPUBLIC OF THE PHILIPPINES REPRESENTED BY PRIVATIZATION AND MANAGEMENT OFFICE, Petitioners, v.

NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) AND NACUSIP/BISUDECO CHAPTER/GEORGE EMATA,
DOMINGO REBANCOS, NELSON BERINA, ROBERTO TIRAO, AMADO VILLOTE, AND BIENVENIDO FELINA, Respondents.

Under Proclamation No. 50, Series of 1986,1 no employer-employee relationship is created by the acquisition of Asset
Privatization Trust (now Privatization and Management Office) of government assets for privatization. It is not obliged to
pay for any money claims arising from employer-employee relations except when it voluntarily holds itself liable to pay.
These money claims, however, must be filed within the three-year period under Article 2912 of the Labor Code. Once
liability is determined, a separate money claim must be brought before the Commission on Audit, unless the funds to be
used have already been previously appropriated and disbursed.

This resolves a Petition for Review on Certiorari3 assailing the Decision4 dated February 27, 2004 and Resolution5 dated
September 19, 2006 of the Court of Appeals. The Decision and Resolution affirmed the National Labor Relations
Commission Resolutions dated May 10, 20026 and June 21, 20027 dismissing petitioner's appeal for failure to file the
appeal within the reglementary period.

Asset Privatization Trust was a government entity created under Proclamation No. 50 dated December 8, 1986 for the
purpose of conserving, provisionally managing, and disposing of assets that have been identified for privatization or
disposition. NACUSIP/BISUDECO Chapter is the exclusive bargaining agent for the rank-and-file employees of Bicolandia
Sugar Development Corporation, a corporation engaged in milling and producing sugar.8 Since the 1980s, Bicolandia
Sugar Development Corporation had been incurring heavy losses.9 It obtained loans from Philippine Sugar Corporation
and Philippine National Bank, secured by its assets and properties.10

Under Proclamation No. 50, as amended, Administrative Order No. 14 dated February 3, 1987, the Deed of Transfer
dated February 27, 1987, and the Trust Agreement dated February 27, 1987,11 Philippine National Bank ceded its rights
and interests over Bicolandia Sugar Development Corporation's loans to the government through Asset Privatization
Trust.12
On November 18, 1988, Bicolandia Sugar Development Corporation, with the conformity of Asset Privatization Trust,
entered into a Supervision and Financing Agreement13 with Philippine Sugar Corporation for the latter to operate and
manage the mill until August 31, 1992.14

Due to Bicolandia Sugar Development Corporation's continued failure to pay its loan obligations, Asset Privatization
Trust filed a Petition for Extrajudicial Foreclosure of Bicolandia Sugar Development Corporation's mortgaged properties
on March 26, 1990. There being no other qualified bidder, Asset Privatization Trust was issued a certificate of sale upon
payment of P1,725,063,044.00.15

On December 15, 1990, NACUSIP/BISUDECO Chapter and Bicolandia Sugar Development Corporation entered into a
Collective Bargaining Agreement to be in effect until December 15, 1996.16 Asset Privatization Trust and Philippine
Sugar Corporation were also joined as parties.17

Sometime in 1992, the Asset Privatization Trust, pursuant to its mandate to dispose of government properties for
privatization, decided to sell the assets and properties of Bicolandia Sugar Development Corporation. On September 1,
1992, it issued a Notice of Termination to Bicolandia Sugar Development Corporation's employees, advising them that
their services would be terminated within 30 days. NASUCIP/BISUDECO Chapter received the Notice under protest.18

After the employees' dismissal from service, Bicolandia Sugar Development Corporation's assets and properties were
sold to Bicol Agro-Industrial Producers Cooperative, Incorporated-Peñafrancia Sugar Mill.19

As a result, several members of the NACUSIP/BISUDECO Chapter20 filed a Complaint dated April 24, 1996 charging Asset
Privatization Trust, Bicolandia Sugar Development Corporation, Philippine Sugar Corporation, and Bicol Agro-Industrial
Producers Cooperative, Incorporated-Peñafrancia Sugar Mill with unfair labor practice, union busting, and claims for
labor standard benefits.21

On January 14, 2000, the Labor Arbiter rendered the Decision22 dismissing the Complaint for lack of merit. The Labor
Arbiter found that there was no union busting when Asset Privatization Trust and Philippine Sugar Corporation disposed
of Bicolandia Sugar Development Corporation's assets and properties since Asset Privatization Trust was merely
disposing of a non-performing asset of government, pursuant to its mandate under Proclamation No. 50.23

However, the Labor Arbiter found that although Asset Privatization Trust previously released funds for separation pay,
13th month pay, and accrued vacation and sick leave credits for 1992, George Emata, Bienvenido Felina, Domingo
Rebancos, Jr., Nelson Berina, Armando Villote, and Roberto Tirao (Emata, et al.) refused to receive their checks24 "on
account of their protested dismissal."25 Their refusal to receive their checks was premised on their Complaint that Asset
Privatization Trust's sale of Bicolandia Sugar Development Corporation violated their Collective Bargaining Agreement
and was a method of union busting.26

While the Labor Arbiter acknowledged that Emata, et al.'s entitlement to these benefits had already prescribed under
Article 29127 of the Labor Code,28 he nevertheless ordered Asset Privatization Trust to pay Emata, et al. their benefits
since their co-complainants were able to claim their checks.29

Pursuant to the Decision, Asset Privatization Trust deposited with the National Labor Relations Commission a Cashier's
Check in the amount of P116,182.20, the equivalent of the monetary award in favor of Emata, et al. On February 8,
2000, it filed a Notice of Partial Appeal, together with a Memorandum of Partial Appeal, before the National Labor
Relations Commission.30

Under Executive Order No. 323 dated December 6, 2000, Asset Privatization Trust was succeeded by Privatization and
Management Office.31

On May 10, 2002, the National Labor Relations Commission issued the Resolution32 dismissing the Partial Appeal for
failure to perfect the appeal within the statutory period of appeal. Privatization and Management Office moved for
reconsideration, but its Motion was denied in the National Labor Relations Commission's June 21, 2002 Resolution.33

Aggrieved, Privatization and Management Office filed before the Court of Appeals a Petition for Certiorari34 arguing that
its appeal should have been decided on the merits in the interest of substantial justice.

On February 27, 2004, the Court of Appeals rendered its Decision35 denying the Petition. According to the Court of
Appeals, Privatization and Management Office failed to show that it falls under the exemption for strict compliance with
procedural rules. It ruled that the grant of separation pay to Emata, et al. was anchored on the finding that Privatization
and Management Office had already granted the same benefits to the other complainants in the labor case.36
Privatization and Management Office moved for reconsideration, but the Motion was denied in the Resolution37 dated
September 19, 2006.

Hence, this Petition38 was filed.

Privatization and Management Office argues that there should have been a liberal application of the procedural rules
since the dismissal of its appeal would cause grave and irreparable damage to government.39 It alleges that the money
claims of the employees had already prescribed since their Complaint for illegal dismissal was filed beyond the three-
year prescriptive period under Article 29140 of the Labor Code.41

Privatization and Management Office argues further that even assuming that the action had not yet prescribed, it would
still not be liable to pay separation pay and other benefits since the closure of the business was due to serious losses and
financial reverses.42 It also argues that the transfer of Bicolandia Sugar Development Corporation's assets and
properties to it, by virtue of a foreclosure sale, did not create an employer-employee relationship with Bicolandia Sugar
Development Corporation's employees.43 Moreover, since Privatization and Management Office is an instrumentality of
government, any money claim against it should first be brought before the Commission on Audit in view of
Commonwealth Act No. 327,44 as amended by Presidential Decree No. 1445.45

On the other hand, Emata, et al. allege that the Petition did not raise any new issue that had not already been addressed
by the Labor Arbiter, the National Labor Relations Commission, and the Court of Appeals.46 They argue that the issues
raised involve the exercise of discretion by the Court of Appeals and the quasi-judicial agencies. They further argue that
the Petition does not specifically mention any law relied upon by Privatization and Management Office to support its
arguments.47

In rebuttal, Privatization and Management Office insists that it was able to point out laws and jurisprudence that the
Court of Appeals and the National Labor Relations Commission failed to take into consideration when it dismissed the
appeal on a technicality.48

For this Court's resolution are the following issues:

First, whether there was an employer-employee relationship between petitioner Privatization and Management Office
(then Asset Privatization Trust) and private respondents NACUSIP/BISUDECO Chapter employees, and thus, whether
petitioner is liable to pay the separation benefits of private respondents George Emata, Bienvenido Felina, Domingo
Rebancos, Jr., Nelson Berina, Armando Villote, and Roberto Tirao;

Second, whether Bicolandia Sugar Development Corporation's closure could be considered serious business losses that
would exempt petitioner from payment of separation benefits; and

Lastly, whether private respondents' claim for labor standard benefits had already prescribed under Article 291 of the
Labor Code.

Before proceeding to the substantive issues of the case, petitioner's procedural misstep before the National Labor
Relations Commission must first be addressed.

It is settled that appeal is not a right but a mere statutory privilege. It may only be exercised within the manner provided
by law.49 In labor cases, the perfection of an appeal is governed by the Labor Code. Article 223 provides:
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Art. 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the
Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such
appeal may be entertained only on any of the following grounds:

....
Petitioner received a copy of the Labor Arbiter's Decision on January 26, 2000.50 It had 10 days, or until February 7,
2000,51 to file its appeal. However, it filed its Memorandum of Appeal only on February 8, 2000.52 Petitioner did not
explain the reason for its delay.

Petitioner's disregard of procedural rules resulted in the denial of its appeal before the National Labor Relations
Commission and its subsequent Petition for Certiorari before the Court of Appeals. In its Petition for Review before this
Court, petitioner still did not explain its delay in filing the Memorandum of Appeal. It merely insisted that its case should
have been resolved on the merits.
Procedural rules are designed to facilitate the orderly administration of justice.53 In labor cases, however, procedural
rules are not to be applied "in a very rigid and technical sense"54 if its strict application will frustrate, rather than
promote, substantial justice.55

Liberality favors the laborer.56 However, this case is also brought against a government entity. If the government entity
is found liable, its liability will necessarily entail the dispensation of public funds. Thus, its basis for liability must be
subjected to strict scrutiny.

Even assuming that we grant the plea of liberality, the Petition will still be denied.

II

Initially, petitioner was not liable for the Union's claims for labor standard benefits. Its acquisition of Bicolandia Sugar
Development Corporation's assets was not for the purpose of continuing its business. It was to conserve the assets in
order to prepare it for privatization.

When Philippine National Bank ceded its rights and interests over Bicolandia Sugar Development Corporation's loan to
petitioner in 1987, it merely transferred its rights and interests over Bicolandia's outstanding loan obligations. The
transfer was not for the purpose of continuing Bicolandia Sugar Development Corporation's business. Thus, petitioner
never became the substitute employer of Bicolandia Sugar Development Corporation's employees. It would not have
been liable for any money claim arising from an employer-employee relationship.

Section 24 of Proclamation No. 50 states:

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The transfer of any asset of government directly to the national government as mandated herein shall be for the
purpose of disposition, liquidation and/or privatization only, any import in the covering deed of assignment to the
contrary notwithstanding. Such transfer, therefore, shall not operate to revert such assets automatically to the general
fund or the national patrimony, and shall not require specific enabling legislation to authorize their subsequent
disposition, but shall remain as duly appropriated public properties earmarked for assignment, transfer or conveyance
under the signature of the Minister of Finance or his duly authorized representative, who is hereby authorized for this
purpose, to any disposition entity approved by the Committee pursuant to the provisions of this Proclamation.
(Emphasis supplied)
This Court explained in Republic v. National Labor Relations Commission, et al.57 that the Asset Privatization Trust is
usually joined as a party respondent due to its role as the conservator of assets of the corporation undergoing
privatization:
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A matter that must not be overlooked is the fact that the inclusion of APT as a respondent in the monetary claims
against [Pantranco North Express, Inc.] is merely the consequence of its being a conservator of assets, a role that APT
normally plays in, or the relationship that ordinarily it maintains with, corporations identified for and while under
privatization. The liability of APT under this particular arrangement, nothing else having been shown, should be co-
extensive with the amount of assets taken over from the privatized firm.58ChanRoblesVirtualawlibrary
Pursuant to its mandate under Proclamation No. 50, petitioner provisionally took possession of assets and properties
only for the purpose of privatization or disposition. Its interest over Bicolandia Sugar Development Corporation was not
the latter's continued business operations.

The issue of petitioner's role in the money claims of Bicolandia Sugar Development Corporation's employees was already
settled in Barayoga v. Asset Privatization Trust.59

In Barayoga, BISUDECO-PHILSUCOR Corfarm Workers Union alleged that when Philippine Sugar Corporation took over
Bicolandia Sugar Development Corporation's operations in 1988, it retained the Corporation's existing employees until
the start of the season sometime in May 1991. At the start of the 1991 season, Philippine Sugar Corporation failed to
recall some of the union's members back to work. For this reason, it filed a Complaint on July 23, 1991 for unfair labor
practice, illegal dismissal, illegal deduction, and underpayment of wages and other labor standard benefits against
Bicolandia Sugar Development Corporation, Asset Privatization Trust, and Philippine Sugar Corporation. Of the three
respondents, only Asset Privatization Trust was held liable by the Labor Arbiter and the National Labor Relations
Commission for the union members' money claims.

The Court of Appeals reversed the Labor Arbiter's and the National Labor Relations Commission's rulings and held that
Asset Privatization Trust did not become the employer of Bicolandia Sugar Development Corporation's employees. The
terminated employees appealed to this Court, arguing that their claims against Asset Privatization Trust were recognized
under the law.

This Court, however, denied their Petition and held that the Asset Privatization Trust could not be held liable for any
money claims arising from an employer-employee relationship. Asset Privatization Trust, being a mere transferee of
Bicolandia Sugar Development Corporation's assets for the purpose of conservation, never became the union's
employer. Hence, it could not be liable for their money claims:
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The duties and liabilities of BISUDECO, including its monetary liabilities to its employees, were not all automatically
assumed by APT as purchaser of the foreclosed properties at the auction sale. Any assumption of liability must be
specifically and categorically agreed upon. In Sundowner Development Corp. v. Drilon, the Court ruled that, unless
expressly assumed, labor contracts like collective bargaining agreements are not enforceable against the transferee of
an enterprise. Labor contracts are in personam and thus binding only between the parties.

No succession of employment rights and obligations can be said to have taken place between the two. Between the
employees of BISUDECO and APT, there is no privity of contract that would make the latter a substitute employer that
should be burdened with the obligations of the corporation. To rule otherwise would result in unduly imposing upon
APT an unwarranted assumption of accounts not contemplated in Proclamation No. 50 or in the Deed of Transfer
between the national government and PNB.60 (Emphasis supplied)
For petitioner to be liable for private respondents' money claims arising from an employer-employee relationship, it
must specifically and categorically agree to be liable for these claims.

III

While petitioner per se is not liable for private respondents' money claims arising from an employer-employee
relationship, it voluntarily obliged itself to pay Bicolandia Sugar Development Corporation's terminated employees
separation benefits in the event of the Corporation's privatization.

In Barayoga, the aggrieved union members were those who were not recalled back to work by Philippine Sugar
Corporation during the start of the season in May 1991. The union members in this case were those who were recalled
back to work in May 1991 but were eventually served with a Notice of Termination on September 1, 1992.

The timeline of events in this case mirror that of Barayoga. In Barayoga, Asset Privatization Trust's Board of Trustees
issued the Resolution dated September 23, 1992 authorizing the payment of separation pay and other benefits to
Bicolandia Sugar Development Corporation's employees in the event of its privatization:
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In the present case, petitioner-unions members who were not recalled to work by Philsucor in May 1991 seek to hold
APT liable for their monetary claims and allegedly illegal dismissal. Significantly, prior to the actual sale of BISUDECO
assets to BAPCI on October 30, 1992, the APT board of trustees had approved a Resolution on September 23, 1992. The
Resolution authorized the payment of separation benefits to the employees of the corporation in the event of its
privatization. Not included in the Resolution, though, were petitioner-unions members who had not been recalled to
work in May 1991.61 (Emphasis supplied)
This Resolution was not made part of the records of this case. However, it is not disputed that the union members here
were Bicolandia Sugar Development Corporation's employees at the time the Corporation was sold to Bicol Agro-
Industrial Producers Cooperative, Incorporated-Peñafrancia Sugar Mill. The Labor Arbiter also found that:
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With respect to complainants['] claim for labor standard benefits, records show that they were paid separation pay
including 13th month pay for the year 1992 as well as conversion of their accrued vacation and sick leave (pp. 698 to
763, rollo) except that some complainants refused to collect their checks representing said benefits whereas the
payments due complainants Domulot, de Luna, Falcon, Aguilar, Gomez, Ramos, Arao, de Jesus, Abonite, Bomanlag, and
Parro were released by APT to this Arbitration Branch (p. 764), rollo) in compliance with the Alias Writ of Execution
issued by then Executive Labor Arbiter Vito C. Bose.62ChanRoblesVirtualawlibrary
Under Section 27 of Proclamation No. 50, the employer-employee relationship is severed upon the sale or disposition of
assets of a company undergoing privatization. This, however, is without prejudice to "benefits incident to their
employment or attaching to termination under applicable employment contracts, collective bargaining agreements, and
applicable legislation":
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SECTION 27. AUTOMATIC TERMINATION OF EMPLOYER-EMPLOYEE RELATIONS. Upon the sale or other disposition of the
ownership and/or controlling interest of the government in a corporation held by the Trust, or all or substantially all of
the assets of such corporation, the employer-employee relations between the government and the officers and other
personnel of such corporations shall terminate by operation of law. None of such officers or employees shall retain any
vested right to future employment in the privatized or disposed corporation, and the new owners or controlling interest
holders thereof shall have full and absolute discretion to retain or dismiss said officers and employees and to hire the
replacement or replacements of any one or all of them as the pleasure and confidence of such owners or controlling
interest holders may dictate.

Nothing in this section, however, be construed to deprive said officers and employees of their vested entitlements in
accrued or due compensation and other benefits incident to their employment or attaching to termination under
applicable employment contracts, collective bargaining agreements, and applicable legislation. (Emphasis supplied)
When petitioner's Board of Trustees issued the Resolution dated September 23, 1992, it acknowledged its contractual
obligation to be liable for benefits arising from an employer-employee relationship even though, as a mere conservator
of assets, it was not supposed to be liable. Under Article III, Section 12(6) of Proclamation No. 50,63 Asset Privatization
Trust had the power to release claims or settle liabilities, as in this case. When it issued its Resolution dated September
23, 1992, petitioner voluntarily bound itself to be liable for separation benefits to Bicolandia Sugar Development
Corporation's terminated employees.

IV

Petitioner proposes that even if it is found liable for separation benefits, it cannot be made to pay since Bicolandia Sugar
Development Corporation's closure was due to serious business losses.

An employer may terminate employment to prevent business losses. Article 29864 of the Labor Code allows the
termination of employees provided that the employer pays the affected employees separation pay of one month or at
least one-half month for every month of pay, whichever is higher. The provision states:
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Art. 298. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any
employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole
year.
The employer is exempted from having to pay separation pay if the closure was due to serious business losses.65 A
business suffers from serious business losses when it has operated at a loss for such a period of time that its financial
standing is unlikely to improve in the future.66

Bicolandia Sugar Development Corporation incurred heavy loans from Philippine National Bank in the 1980s to cover its
losses. The Corporation's losses were substantial. When Philippine National Bank transferred its interests over the
Corporation's loans to petitioner, it effectively transferred all of the Corporation's assets. Petitioner eventually sold
these assets and properties to a private company, pursuant to its mandate to dispose of government's non-performing
assets.

Bicolandia Sugar Development Corporation's financial standing when petitioner took over as its conservator clearly
showed that it was suffering from serious business losses and would have been exempted from paying its terminated
employees their separation pay. This exemption, however, only applies to employers. It does not apply to petitioner.

Even assuming that petitioner became NACUSIP/BISUDECO's substitute employer, the exemption would still not apply if
the employer voluntarily assumes the obligation to pay terminated employees, regardless of the employer's financial
situation. In Benson Industries Employees Union-ALU-TUCP v. Benson Industries, Inc.:67
To reiterate, an employer which closes shop due to serious business losses is exempt from paying separation benefits
under Article 297 of the Labor Code for the reason that the said provision explicitly requires the same only when the
closure is not due to serious business losses; conversely, the obligation is maintained when the employer's closure is not
due to serious business losses. For a similar exemption to obtain against a contract, such as a CBA, the tenor of the
parties' agreement ought to be similar to the law's tenor. When the parties, however, agree to deviate therefrom, and
unqualifiedly covenant the payment of separation benefits irrespective of the employer's financial position, then the
obligatory force of that contract prevails and its terms should be carried out to its full effect.68(Emphasis supplied)
Petitioner's Board of Trustees issued the Resolution dated September 23, 1992 authorizing the payment of separation
benefits to Bicolandia Sugar Development Corporation's terminated employees in the event of the Corporation's
privatization. It voluntarily bound itself to pay separation benefits regardless of the Corporation's financial standing. It
cannot now claim that it was exempted from paying such benefits due to serious business losses.

Private respondents' claim to their separation benefits has not yet prescribed under Article 291 of the Labor Code.69
Article 291 provides:
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Art. 291. Money claims. All money claims arising from employer- employee relations accruing during the effectivity of
this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise they shall be forever
barred[.]
In Arriola v. National Labor Relations Commission,70 we have distinguished a money claim arising from an employer-
employee relationship and a money claim as reparation for illegal acts done by an employer in violation of the Labor
Code. The prescriptive period for the former is three (3) years under Article 291 of the Labor Code while the prescriptive
period of the latter is four (4) years under Article 114671 of the Civil Code. We also reiterated that the three-year
prescriptive period under Article 290 of the Labor Code refers to "illegal acts penalized under the Labor Code, including
committing any of the prohibited activities during strikes and lockouts, unfair labor practices, and illegal recruitment
activities."72 Article 290 provides:
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Art. 290. Offenses. Offenses penalized under this Code and the rules and regulations pursuant thereto shall prescribe in
three (3) years.

All unfair labor practice arising from Book V shall be filed within one (1) year from accrual of such unfair labor practice;
otherwise, they shall be forever barred.
Private respondents filed their Complaint for unfair labor practices, union busting, and labor standard benefits on April
24, 1996,73 or three (3) years, seven (7) months and 24 days after their termination on September 30, 1992. Their
Complaint essentially alleged that their termination was illegal because it was made prior to Bicolandia Sugar
Development Corporation's sale to Bicol Agro-Industrial Producers Cooperative, Incorporated-Peñafrancia Sugar Mill.74
They also alleged that the sale was illegal since it was made for the purpose of removing NACUSIP/BISUDECO Chapter as
the sugar mill's Union.75

Under the prescriptive periods stated in the Labor Code and Arriola, private respondents' cause of action and any
subsequent money claim for illegal termination has not yet prescribed. Their Complaint dated April 24, 1996 before the
Labor Arbiter was filed within the prescriptive period.

The claim for separation pay, 13th month pay, and accrued vacation and sick leaves are incidental to employer-
employee relations. Under Article 291 of the Labor Code, these claims prescribe within three (3) years from the accrual
of the cause of action:
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Art. 291. Money Claims. All money claims arising from employer-employee relations accruing during the effectivity of
this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise they shall be barred
forever.
This Court has stated that "in the computation of the three-year prescriptive period, a determination must be made as
to the period when the act constituting a violation of the workers' right to the benefits being claimed was
committed."76 In Barayoga, the September 23, 1992 Resolution "authorized the payment of separation benefits to the
employees of the corporation in the event of its privatization."77 The payment of these benefits, however, to private
respondents was mandated by the Labor Arbiter in his Decision dated January 14, 2000.78 It was only then that private
respondents' right to these benefits was determined. Since the case was appealed to the National Labor Relations
Commission, the prescriptive period to claim these benefits began to run only after the Commission's Decision had
become final and executory. The refusal to pay these benefits after the Commission's Decision had become final and
executory would be "the act constituting a violation of the worker's right to the benefits being claimed."79

Under Rule VII, Section 1480 of the New Rules of Procedure of the National Labor Relations Commission,81 decisions of
the Commission become final and executory 10 days after the receipt of the notice of decision, order, or resolution. The
three-year prescriptive period, therefore, begins from private respondents' receipt of the National Labor Relations
Commission Resolution dated June 21, 2002 denying petitioner's Motion for Reconsideration.

Since the Complaint, which included the claim for labor benefits, was filed on April 24, 1996, private respondents' claims
did not prescribe.

Further, the Labor Arbiter did not err in ordering the release of separation benefits to private respondents despite their
initial refusal to receive them. The Constitution guarantees workers full protection of their rights, including that of
"economic security and parity."82 Article II, Section 18 and Article XIII, Section 3 state:
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Article II
State Policies

SECTION 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and
promote their welfare.

Article XIII
Labor

SECTION 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the preferential use
of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in
the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth.
Under these provisions, workers should be granted all rights, including monetary benefits, enjoyed by other workers
who are similarly situated. Thus, the separation benefits granted to Bicolandia Sugar Development Corporation's
terminated employees as of September 30, 1992 must be enjoyed by all, including private respondents.

This case is unique, however, in that though private respondents' separation benefits were already released by
petitioner, they refused to collect their checks "on account of their protested dismissal."83 Their refusal to receive their
checks was premised on their Complaint that petitioner's sale of Bicolandia Sugar Development Corporation violated
their Collective Bargaining Agreement and was a method of union busting. It was not because of negligence or malice. It
was because of their honest belief that their rights as laborers were violated and the grant of separation benefits would
not be enough compensation for it. While private respondents' allegations have not been properly substantiated, it
would be unjust to deprive them of their rightful claim to their separation benefits.

Moreover, private respondents' co-complainants84 were able to collect their checks for their separation benefits during
the pendency of the Complaint85 without having to go through the Commission on Audit.

Under Section 26 of the State Auditing Code, the Commission on Audit has jurisdiction over the settlement of debts and
claims "of any sort" against government:
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Section 26. General jurisdiction. The authority and powers of the Commission shall extend to and comprehend all
matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the Government,
the preservation of vouchers pertaining thereto for a period of ten years, the examination and inspection of the books,
records, and papers relating to those accounts; and the audit and settlement of the accounts of all persons respecting
funds or property received or held by them in an accountable capacity, as well as the examination, audit, and settlement
of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and
instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations, including their
subsidiaries, and other selfgoverning [sic] boards, commissions, or agencies of the Government, and as herein
prescribed, including non-governmental entities subsidized by the government, those funded by donation through the
government, those required to pay levies or government share, and those for which the government has put up a
counterpart fund or those partly funded by the government. (Emphasis supplied)
The purpose of requiring a separate process with the Commission on Audit for money claims against government is
under the principle that public funds may only be released upon proper appropriation and disbursement:
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Section 4. Fundamental principles. Financial transactions and operations of any government agency shall be governed by
the fundamental principles set forth hereunder, to wit:

(1) No money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other
specific statutory authority.

(2) Government funds or property shall be spent or used solely for public purposes.

(3) Trust funds shall be available and may be spent only for the specific purpose for which the trust was created or the
funds received.

(4) Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the financial affairs,
transactions, and operations of the government agency.

(5) Disbursements or disposition of government funds or property shall invariably bear the approval of the proper
officials.

(6) Claims against government funds shall be supported with complete documentation.

(7) All laws and regulations applicable to financial transactions shall be faithfully adhered to.
(8) Generally accepted principles and practices of accounting as well as of sound management and fiscal administration
shall be observed, provided that they do not contravene existing laws and regulations.
Money claims against government include money judgments by courts, which must be brought before the Commission
on Audit before it can be satisfied. Supreme Court Administrative Circular No. 10-200086 states the rationale for
requiring claimants to file their money judgments before the Commission on Audit:
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Republic of the Philippines
Supreme Court
Manila

ADMINISTRATIVE CIRCULAR NO. 10-2000

TO : All Judges of Lower Courts
SUBJECT : Exercise of Utmost Caution, Prudence and Judiciousness in the Issuance of Writs of Execution to Satisfy Money
Judgments Against Government Agencies and Local Government Units

In order to prevent possible circumvention of the rules and procedures of the Commission on Audit, judges are hereby
enjoined to observe utmost caution, prudence and judiciousness in the issuance of writs of execution to satisfy money
judgments against government agencies and local government units.

Judges should bear in mind that in Commissioner of Public Highways v. San Diego (31 SCRA 617, 625 [1970]), this Court
explicitly stated:

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.

Moreover, it is settled jurisprudence that upon determination of State liability, the prosecution, enforcement or
satisfaction thereof must still be pursued in accordance with the rules and procedures laid down in P.D. No. 1445,
otherwise known as the Government Auditing Code of the Philippines (Department of Agriculture v. NLRC, 227 SCRA
693, 701-02 [1993] citing Republic vs. Villasor, 54 SCRA 84 [1973]). All money claims against the Government must first
be filed with the Commission on Audit which must act upon it within sixty days. Rejection of the claim will authorize the
claimant to elevate the matter to the Supreme Court on certiorari and in effect sue the State thereby (P.D. 1445,
Sections 49-50). . . . (Emphasis supplied)
Thus, in National Electrification Administration v. Morales,87 while entitlement to claims for rice allowance, meal
allowance, medical/dental/optical allowance, children's allowance, and longevity pay under Republic Act No. 6758 may
be adjudicated by the trial court, a separate action must be filed before the Commission on Audit for the satisfaction of
the judgment award.

Similarly, in Lockheed Detective and Watchman Agency v. University of the Philippines,88 this Court reimbursed to the
University of the Philippines its funds that were garnished upon orders of the National Labor Relations Commission for
the satisfaction of a judgment award. The reimbursement was on the ground that the money claim must first be filed
before the Commission on Audit.

The situation in this case, however, is different from these previous cases. Petitioner's Board of Trustees already issued
the Resolution on September 23, 1992 for the release of funds to pay separation benefits to terminated employees of
Bicolandia Sugar Development Corporation.89 Private respondents' checks were released by petitioner to the
Arbitration Branch of the Labor Arbiter in 1992.90 Under these circumstances, it is presumed that the funds to be used
for private respondents' separation benefits have already been appropriated and disbursed. This would account for why
private respondents' co-complainants were able to claim their checks without need of filing a separate claim before the
Commission on Audit.

In this instance, private respondents' separation benefits may be released to them without filing a separate money claim
before the Commission on Audit. It would be unjust and a violation of private respondents' right to equal protection if
they were not allowed to claim, under the same conditions as their fellow workers, what is rightfully due to
them.chanrobleslaw

WHEREFORE, the Petition is DENIED.

SO ORDERED.cralawlawlibrary
2. National Housing Authority vs. Roxas [773 SCRA 358 (2015)]

G.R. No. 171953, October 21, 2015

NATIONAL HOUSING AUTHORITY, Petitioner, v. ERNESTO ROXAS, Respondent.

DECISION

BERSAMIN, J.:

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

The Case

Being challenged on appeal by the NHA is the adverse decision promulgated on February 20, 2006,2 whereby the Court
of Appeals (CA) dismissed the NHA's petition for certiorari brought to nullify the orders issued in Special Civil Action No.
93-060-MN entitled Ernesto Roxas v. National Housing Authority, et al. by the Regional Trial Court (RTC), Branch 72, in
Malabon City. The first order, dated May 3, 2002, had granted the motion for the issuance of the writ of execution filed
by respondent Ernesto Roxas.3 The other order, dated January 6, 2003, had denied the NHA's motion for
reconsideration.4 The NHA had also thereby assailed the writ of execution consequently issued on February 24, 2003.5
In its petition for certiorari, the NHA insisted that the RTC had thereby committed grave abuse of discretion amounting
to lack or excess of jurisdiction.

Antecedents

The NHA is charged, among others, with the development of the Dagat-dagatan Development Project (project) situated
in Navotas, Metro Manila.6 On December 4, 1985, Roxas applied for commercial lots in the project, particularly Lot 9
and Lot 10 in Block 11, Area 3, Phase III A/B, with an area of 176 square meters, for the use of his business of buying and
selling gravel, sand and cement products.7 The NHA approved his application, and issued on December 6, 1985 the
order of payment respecting the lots. On December 27, 1985, the NHA issued the notice of award for the lots in favor of
Roxas,8 at P1,500.00/square meter.9 On the basis of the order of payment and the notice of award, Roxas made his
downpayment of P79,200.00.10 A relocation/reblocking survey resulted in the renumbering of Lot 9 to Lot 5 and Lot 10
to Lot 6 (subject lots).11 He completed his payment for the subject lots on December 20, 1991.

In the meanwhile, the NHA conducted a final subdivision project survey, causing the increase in the area of the subject
lots from 176 to 320 square meters. The NHA informed Roxas about the increase in the area of the subject lots, and
approved the award of the additional area of 144 square meters to him at P3,500.00/square meter.12 Although
manifesting his interest in acquiring the additional area, he appealed for the reduction of the price to Pl,500.00/square
meter,13 pointing out that Lot 5 and Lot 6 were a substitution unilaterally imposed by the NHA that resulted in the
increase of 144 square meters based on the technical description, and that although he desired to purchase the
increased area, the purchase must be in accordance with the terms and conditions contained in the order of payment
and notice of award issued to him. After the NHA rejected his appeal,14 he commenced in the RTC this action for specific
performance and damages, with prayer for the issuance of a writ of preliminary injunction. He amended the
complaint15 to compel the NHA to comply with the terms and conditions of the order of payment and the notice of
award.

The NHA countered in its answer16 that Roxas' prayer to include in the original contract the increase in lot
measurement of 144 square meters was contrary to its existing rules and regulation; that he could not claim more than
what had been originally awarded to him; and that at the very least, his right in the additional area was limited only to
first refusal.

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

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff Ernesto Roxas and against
defendant NHA, represented by its General Manager and its Dagat-dagatan Development Project Manager, as follows:
1. Declaring plaintiff Ernesto Roxas the legal awardee of subject lots 5 and 6 in the full total area thereof of 320 sq.
meters;
2. Ordering defendant NHA, thru its General Manager Robert P. Balao and the project Manager for its Dagat-dagatan
Development Project Evelyn V. Ramos, or whoever shall be the incumbents of the positions at the time of the
enforcement hereof to execute the corresponding Contract to Sell for the entire area of subject lots 5 and 6 totaling to
320 sq. meters at the cost of PI,500.00 per sq. meter under the same terms and conditions as that provided for in the
Order of Payment and Notice of Award (Exhs. B and D), respectively, deducting whatever has already been paid by
plaintiff;

3. Ordering defendant NHA to pay plaintiff P30,000.00 by way of reasonable Attorney's Fees.
The Writ of Preliminary Injunction issued in this case on January 31, 1994 is hereby made permanent.

Costs against defendant NHA.

SO ORDERED.cralawlawlibrary

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

On July 27, 2001, Roxas filed his motion for the issuance of the writ of execution,19 which the RTC granted on May 3,
2002.20 The NHA sought reconsideration, but its motion was denied on January 6, 2003. Accordingly, on February 24,
2003, the RTC issued the writ of execution to enforce the final and executory decision of July 15, 1994.21

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

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

Issues

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

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

Ruling of the Court

The appeal is partly meritorious.

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

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

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

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

Section 26. General jurisdiction. The authority and powers of the Commission shall extend to and comprehend all
matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the Government,
the preservation of vouchers pertaining thereto for a period of ten years, the examination and inspection of the books,
records, and papers relating to those accounts; and the audit and settlement of the accounts of all persons respecting
funds or property received or held by them in an accountable capacity, as well as the examination, audit, and settlement
of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and
instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations, including their
subsidiaries, and other self-governing boards, commissions, or agencies of the Government, and as herein prescribed,
including nongovernmental entities subsidized by the government, those funded by donations through the government,
those required to pay levies or government share, and those for which the government has put up a counterpart fund or
those partly funded by the government, (bold underscoring supplied for emphasis)
cralawlawlibrary

As the text of the legal provision plainly shows, the audit jurisdiction of the COA extends to all government-owned or -
controlled corporations, their subsidiaries, and other self-governing boards, commissions, or agencies of the
Government, as well as to all non-governmental entities subsidized by the Government, or funded by donations through
the Government, or required to pay levies or government share, or for which the Government has put up a counterpart
fund, or those partly funded by the Government. There is no distinction as to the class of claims. Ubi lex non distinguish
nee nos distinguere debemos.26 Indeed, a general term or phrase should not be reduced into parts and one part
distinguished from the other so as to justify its exclusion from the operation of the law. In other words, there should be
no distinction in the application of a statute where none is indicated. Corollary to this rule is the principle that where the
law does not make any exception, the courts may not exempt something therefrom, unless there is compelling reason to
the contrary.27

There is no question that the NHA could sue or be sued, and thus could be held liable under the judgment rendered
against it. But the universal rule remains to be that the State, although it gives its consent to be sued either by general or
special law, may limit the claimant's action only up to the completion of proceedings anterior to the stage of execution.
In other words, the power of the court ends when the judgment is rendered because government funds and property
may not be seized pursuant to writs of execution or writs of garnishment to satisfy such judgments. The functions and
public services of the State cannot be allowed to be paralyzed or disrupted by the diversion of public fund from their
legitimate and specific objects, and as appropriated by law. The rule is based on obvious considerations of public policy.
Indeed, the disbursements of public funds must be covered by the corresponding appropriation as required by law.28

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

SO ORDERED.chanroblesvirtuallawlibrary

Facts:
National Housing Authority (NHA), a government-owned and -controlled corporation (GOCC) created under
Presidential Decree 757, is tasked with the development of the Dagat-dagatan Development Project (Project), among
others. Incidental to such development, NHA sold part of the commercial lots in the project to Ernesto Roxas, herein
respondent, for the use of his business of buying and selling gravel.
The initial notice of award of sale of the lots in favor of Roxas on December 27, 1985, included a total of 176
sq.m priced at P1500/sq.m. On December 20, 1991, Roxas completed the payment. Meanwhile, after conducting a final
subdivision project survey, the area of the subject lot sold to Roxas increased by 144 sq.m. NHA informed Roxas of such
addition in the lot area and again awarded the sale of the additional 144 sq.m to him, this time at P3500/sq.m.
While Roxas showed interest in acquiring the additional 144 sq.m, he wanted to purchase it at P1500/sq.m
which is in accordance with the terms and conditions of the original award of sale. When NHA rejected the request,
Roxas filed an action to the RTC to compel NHA to comply with the terms and conditions of the original award of sale.
 RTC granted the prayer of Roxas and also ordered NHA to pay Roxas an amount of P30,000.00 for attorney’s fee.
Roxas also filed his motion for the issuance of the writ of execution to compel the NHA to sell the lot at P1500/sq.m and
pay for the P30,000.00 attorney’s fee. To prevent the execution, NHA brought up the case to the CA but the latter
affirmed the decision of RTC. CA likewise observed that NHA’s funds, as a GOCC, were not exempt from garnishment or
execution; and ruled that Roxas did not need to first file his claim in the Commission on Audit (COA).

Issue:
Whether or not the money judgment awarded to Roxas, particularly the secondary relief which was the
P30,000.00 attorney’s fee, could be recovered by motion for execution without having been first filed in the COA.

Ruling:
NO. The Supreme Court ruled that the NHA possessed the legal competence and authority to directly afford the
main relief adjudicated which was the decree of specific performance as to the right of Roxas to acquire the subject lots
at P1,500.00/sq.m as stated in the original agreement between the parties without Roxas needing to first submit to the
COA the contract of sale for review and approval. However, the settling or paying off of the secondary relief for the
attorney’s fees of P30,000.00, being a monetary obligation of the NHA, would not be in the usual course of the activities
of the NHA under its charter. That such relief was the consequence of the suit that granted the main relief did not
matter hence Roxas should first bring it to the COA prior to its enforcement against the NHA.
It must be remembered that GOCCs may sue and be sued for performing merely ministrant function but upon
rendering judgement, execution does not automatically follow. If the judgment may result to any monetary claim, such
monetary judgment must first be passed upon by COA.
The power of the court ends when the judgment is rendered because government funds and property may not
be seized pursuant to writs of execution or writs of garnishment to satisfy such judgments. The functions and public
services of the State cannot be allowed to be paralyzed or disrupted by the diversion of public fund from their legitimate
and specific objects, and as appropriated by law. The rule is based on obvious considerations of public policy. Indeed,
the disbursements of public funds must be covered by the corresponding appropriation as required by law.

3. UP vs. Dizon [679 SCRA 54 (2012]

G.R. No. 171182 August 23, 2012

UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. DE GUZMAN, RUBEN P. ASPIRAS, EMMANUEL P. BELLO,
WILFREDO P. DAVID, CASIANO S. ABRIGO, and JOSEFINA R. LICUANAN, Petitioners,
vs.
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the Regional Trial Court of Quezon City, Branch 80, STERN
BUILDERS, INC., and SERVILLANO DELA CRUZ, Respondents.

DECISION

BERSAMIN, J.:

Trial judges should not immediately issue writs of execution or garnishment against the Government or any of its
subdivisions, agencies and instrumentalities to enforce money judgments.1 They should bear in mind that the primary
jurisdiction to examine, audit and settle all claims of any sort due from the Government or any of its subdivisions,
agencies and instrumentalities pertains to the Commission on Audit (COA) pursuant to Presidential Decree No. 1445
(Government Auditing Code of the Philippines).

The Case

On appeal by the University of the Philippines and its then incumbent officials (collectively, the UP) is the decision
promulgated on September 16, 2005,2 whereby the Court of Appeals (CA) upheld the order of the Regional Trial Court
(RTC), Branch 80, in Quezon City that directed the garnishment of public funds amounting to ₱ 16,370,191.74 belonging
to the UP to satisfy the writ of execution issued to enforce the already final and executory judgment against the UP.

Antecedents

On August 30, 1990, the UP, through its then President Jose V. Abueva, entered into a General Construction Agreement
with respondent Stern Builders Corporation (Stern Builders), represented by its President and General Manager
Servillano dela Cruz, for the construction of the extension building and the renovation of the College of Arts and Sciences
Building in the campus of the University of the Philippines in Los Baños (UPLB).3

In the course of the implementation of the contract, Stern Builders submitted three progress billings corresponding to
the work accomplished, but the UP paid only two of the billings. The third billing worth ₱ 273,729.47 was not paid due to
its disallowance by the Commission on Audit (COA). Despite the lifting of the disallowance, the UP failed to pay the
billing, prompting Stern Builders and dela Cruz to sue the UP and its co-respondent officials to collect the unpaid billing
and to recover various damages. The suit, entitled Stern Builders Corporation and Servillano R. Dela Cruz v. University of
the Philippines Systems, Jose V. Abueva, Raul P. de Guzman, Ruben P. Aspiras, Emmanuel P. Bello, Wilfredo P. David,
Casiano S. Abrigo, and Josefina R. Licuanan, was docketed as Civil Case No. Q-93-14971 of the Regional Trial Court in
Quezon City (RTC).4

After trial, on November 28, 2001, the RTC rendered its decision in favor of the plaintiffs,5 viz:

Wherefore, in the light of the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendants
ordering the latter to pay plaintiff, jointly and severally, the following, to wit:

1. ₱ 503,462.74 amount of the third billing, additional accomplished work and retention money

2. ₱ 5,716,729.00 in actual damages

3. ₱ 10,000,000.00 in moral damages

4. ₱ 150,000.00 and ₱ 1,500.00 per appearance as attorney’s fees; and

5. Costs of suit.

SO ORDERED.

Following the RTC’s denial of its motion for reconsideration on May 7, 2002,6 the UP filed a notice of appeal on June 3,
2002.7 Stern Builders and dela Cruz opposed the notice of appeal on the ground of its filing being belated, and moved
for the execution of the decision. The UP countered that the notice of appeal was filed within the reglementary period
because the UP’s Office of Legal Affairs (OLS) in Diliman, Quezon City received the order of denial only on May 31, 2002.
On September 26, 2002, the RTC denied due course to the notice of appeal for having been filed out of time and granted
the private respondents’ motion for execution.8

The RTC issued the writ of execution on October 4, 2002,9 and the sheriff of the RTC served the writ of execution and
notice of demand upon the UP, through its counsel, on October 9, 2002.10 The UP filed an urgent motion to reconsider
the order dated September 26, 2002, to quash the writ of execution dated October 4, 2002, and to restrain the
proceedings.11 However, the RTC denied the urgent motion on April 1, 2003.12

On June 24, 2003, the UP assailed the denial of due course to its appeal through a petition for certiorari in the Court of
Appeals (CA), docketed as CA-G.R. No. 77395.13

On February 24, 2004, the CA dismissed the petition for certiorari upon finding that the UP’s notice of appeal had been
filed late,14 stating:

Records clearly show that petitioners received a copy of the Decision dated November 28, 2001 and January 7, 2002,
thus, they had until January 22, 2002 within which to file their appeal. On January 16, 2002 or after the lapse of nine (9)
days, petitioners through their counsel Atty. Nolasco filed a Motion for Reconsideration of the aforesaid decision, hence,
pursuant to the rules, petitioners still had six (6) remaining days to file their appeal. As admitted by the petitioners in
their petition (Rollo, p. 25), Atty. Nolasco received a copy of the Order denying their motion for reconsideration on May
17, 2002, thus, petitioners still has until May 23, 2002 (the remaining six (6) days) within which to file their appeal.
Obviously, petitioners were not able to file their Notice of Appeal on May 23, 2002 as it was only filed on June 3, 2002.

In view of the said circumstances, We are of the belief and so holds that the Notice of Appeal filed by the petitioners was
really filed out of time, the same having been filed seventeen (17) days late of the reglementary period. By reason of
which, the decision dated November 28, 2001 had already become final and executory. "Settled is the rule that the
perfection of an appeal in the manner and within the period permitted by law is not only mandatory but jurisdictional,
and failure to perfect that appeal renders the challenged judgment final and executory. This is not an empty procedural
rule but is grounded on fundamental considerations of public policy and sound practice." (Ram’s Studio and
Photographic Equipment, Inc. vs. Court of Appeals, 346 SCRA 691, 696). Indeed, Atty. Nolasco received the order of
denial of the Motion for Reconsideration on May 17, 2002 but filed a Notice of Appeal only on June 3, 3003. As such, the
decision of the lower court ipso facto became final when no appeal was perfected after the lapse of the reglementary
period. This procedural caveat cannot be trifled with, not even by the High Court.15

The UP sought a reconsideration, but the CA denied the UP’s motion for reconsideration on April 19, 2004.16

On May 11, 2004, the UP appealed to the Court by petition for review on certiorari (G.R. No. 163501).
On June 23, 2004, the Court denied the petition for review.17 The UP moved for the reconsideration of the denial of its
petition for review on August 29, 2004,18 but the Court denied the motion on October 6, 2004.19 The denial became
final and executory on November 12, 2004.20

In the meanwhile that the UP was exhausting the available remedies to overturn the denial of due course to the appeal
and the issuance of the writ of execution, Stern Builders and dela Cruz filed in the RTC their motions for execution
despite their previous motion having already been granted and despite the writ of execution having already issued. On
June 11, 2003, the RTC granted another motion for execution filed on May 9, 2003 (although the RTC had already issued
the writ of execution on October 4, 2002).21

On June 23, 2003 and July 25, 2003, respectively, the sheriff served notices of garnishment on the UP’s depository banks,
namely: Land Bank of the Philippines (Buendia Branch) and the Development Bank of the Philippines (DBP),
Commonwealth Branch.22 The UP assailed the garnishment through an urgent motion to quash the notices of
garnishment;23 and a motion to quash the writ of execution dated May 9, 2003.24

On their part, Stern Builders and dela Cruz filed their ex parte motion for issuance of a release order.25

On October 14, 2003, the RTC denied the UP’s urgent motion to quash, and granted Stern Builders and dela Cruz’s ex
parte motion for issuance of a release order.26

The UP moved for the reconsideration of the order of October 14, 2003, but the RTC denied the motion on November 7,
2003.27

On January 12, 2004, Stern Builders and dela Cruz again sought the release of the garnished funds.28 Despite the UP’s
opposition,29 the RTC granted the motion to release the garnished funds on March 16, 2004.30 On April 20, 2004,
however, the RTC held in abeyance the enforcement of the writs of execution issued on October 4, 2002 and June 3,
2003 and all the ensuing notices of garnishment, citing Section 4, Rule 52, Rules of Court, which provided that the
pendency of a timely motion for reconsideration stayed the execution of the judgment.31

On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon, authorized the release of the garnished
funds of the UP,32 to wit:

WHEREFORE, premises considered, there being no more legal impediment for the release of the garnished amount in
satisfaction of the judgment award in the instant case, let the amount garnished be immediately released by the
Development Bank of the Philippines, Commonwealth Branch, Quezon City in favor of the plaintiff.

SO ORDERED.

The UP was served on January 3, 2005 with the order of December 21, 2004 directing DBP to release the garnished
funds.33

On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in direct contempt of court for its non-compliance
with the order of release.34

Thereupon, on January 10, 2005, the UP brought a petition for certiorari in the CA to challenge the jurisdiction of the
RTC in issuing the order of December 21, 2004 (CA-G.R. CV No. 88125).35 Aside from raising the denial of due process,
the UP averred that the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction in ruling
that there was no longer any legal impediment to the release of the garnished funds. The UP argued that government
funds and properties could not be seized by virtue of writs of execution or garnishment, as held in Department of
Agriculture v. National Labor Relations Commission,36 and citing Section 84 of Presidential Decree No. 1445 to the effect
that "revenue funds shall not be paid out of any public treasury or depository except in pursuance of an appropriation
law or other specific statutory authority;" and that the order of garnishment clashed with the ruling in University of the
Philippines Board of Regents v. Ligot-Telan37 to the effect that the funds belonging to the UP were public funds.

On January 19, 2005, the CA issued a temporary restraining order (TRO) upon application by the UP.38

On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their amended motion for sheriff’s assistance to
implement the release order dated December 21, 2004, stating that the 60-day period of the TRO of the CA had already
lapsed.39 The UP opposed the amended motion and countered that the implementation of the release order be
suspended.40

On May 3, 2005, the RTC granted the amended motion for sheriff’s assistance and directed the sheriff to proceed to the
DBP to receive the check in satisfaction of the judgment.41
The UP sought the reconsideration of the order of May 3, 2005.42

On May 16, 2005, DBP filed a motion to consign the check representing the judgment award and to dismiss the motion
to cite its officials in contempt of court.43

On May 23, 2005, the UP presented a motion to withhold the release of the payment of the judgment award.44

On July 8, 2005, the RTC resolved all the pending matters,45 noting that the DBP had already delivered to the sheriff
Manager’s Check No. 811941 for ₱ 16,370,191.74 representing the garnished funds payable to the order of Stern
Builders and dela Cruz as its compliance with the RTC’s order dated December 21, 2004.46 However, the RTC directed in
the same order that Stern Builders and dela Cruz should not encash the check or withdraw its amount pending the final
resolution of the UP’s petition for certiorari, to wit:47

To enable the money represented in the check in question (No. 00008119411) to earn interest during the pendency of
the defendant University of the Philippines application for a writ of injunction with the Court of Appeals the same may
now be deposited by the plaintiff at the garnishee Bank (Development Bank of the Philippines), the disposition of the
amount represented therein being subject to the final outcome of the case of the University of the Philippines et al., vs.
Hon. Agustin S. Dizon et al., (CA G.R. 88125) before the Court of Appeals.

Let it be stated herein that the plaintiff is not authorized to encash and withdraw the amount represented in the check
in question and enjoy the same in the fashion of an owner during the pendency of the case between the parties before
the Court of Appeals which may or may not be resolved in plaintiff’s favor.

With the end in view of seeing to it that the check in question is deposited by the plaintiff at the Development Bank of
the Philippines (garnishee bank), Branch Sheriff Herlan Velasco is directed to accompany and/or escort the plaintiff in
making the deposit of the check in question.

SO ORDERED.

On September 16, 2005, the CA promulgated its assailed decision dismissing the UP’s petition for certiorari, ruling that
the UP had been given ample opportunity to contest the motion to direct the DBP to deposit the check in the name of
Stern Builders and dela Cruz; and that the garnished funds could be the proper subject of garnishment because they had
been already earmarked for the project, with the UP holding the funds only in a fiduciary capacity,48 viz:

Petitioners next argue that the UP funds may not be seized for execution or garnishment to satisfy the judgment award.
Citing Department of Agriculture vs. NLRC, University of the Philippines Board of Regents vs. Hon. Ligot-Telan,
petitioners contend that UP deposits at Land Bank and the Development Bank of the Philippines, being government
funds, may not be released absent an appropriations bill from Congress.

The argument is specious. UP entered into a contract with private respondents for the expansion and renovation of the
Arts and Sciences Building of its campus in Los Baños, Laguna. Decidedly, there was already an appropriations
earmarked for the said project. The said funds are retained by UP, in a fiduciary capacity, pending completion of the
construction project.

We agree with the trial Court [sic] observation on this score:

"4. Executive Order No. 109 (Directing all National Government Agencies to Revert Certain Accounts Payable to the
Cumulative Result of Operations of the National Government and for Other Purposes) Section 9. Reversion of Accounts
Payable, provides that, all 1995 and prior years documented accounts payable and all undocumented accounts
regardless of the year they were incurred shall be reverted to the Cumulative Result of Operations of the National
Government (CROU). This shall apply to accounts payable of all funds, except fiduciary funds, as long as the purpose for
which the funds were created have not been accomplished and accounts payable under foreign assisted projects for the
duration of the said project. In this regard, the Department of Budget and Management issued Joint-Circular No. 99-6
4.0 (4.3) Procedural Guidelines which provides that all accounts payable that reverted to the CROU may be considered
for payment upon determination thru administrative process, of the existence, validity and legality of the claim. Thus,
the allegation of the defendants that considering no appropriation for the payment of any amount awarded to plaintiffs
appellee the funds of defendant-appellants may not be seized pursuant to a writ of execution issued by the regular court
is misplaced. Surely when the defendants and the plaintiff entered into the General Construction of Agreement there is
an amount already allocated by the latter for the said project which is no longer subject of future appropriation."49

After the CA denied their motion for reconsideration on December 23, 2005, the petitioners appealed by petition for
review.

Matters Arising During the Pendency of the Petition

On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern Builders and dela Cruz’s motion to withdraw the
deposit, in consideration of the UP’s intention to appeal to the CA,50 stating:

Since it appears that the defendants are intending to file a petition for review of the Court of Appeals resolution in CA-
G.R. No. 88125 within the reglementary period of fifteen (15) days from receipt of resolution, the Court agrees with the
defendants stand that the granting of plaintiffs’ subject motion is premature.

Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that the "disposition of
the amount represented therein being subject to the final outcome of the case of the University of the Philippines, et.
al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before the Court of Appeals) is that the judgment or resolution of
said court has to be final and executory, for if the same will still be elevated to the Supreme Court, it will not attain
finality yet until the highest court has rendered its own final judgment or resolution.51

However, on January 22, 2007, the UP filed an Urgent Application for A Temporary Restraining Order and/or A Writ of
Preliminary Injunction,52 averring that on January 3, 2007, Judge Maria Theresa dela Torre-Yadao (who had meanwhile
replaced Judge Dizon upon the latter’s appointment to the CA) had issued another order allowing Stern Builders and
dela Cruz to withdraw the deposit,53 to wit:

It bears stressing that defendants’ liability for the payment of the judgment obligation has become indubitable due to
the final and executory nature of the Decision dated November 28, 2001. Insofar as the payment of the [sic] judgment
obligation is concerned, the Court believes that there is nothing more the defendant can do to escape liability. It is
observed that there is nothing more the defendant can do to escape liability. It is observed that defendant U.P. System
had already exhausted all its legal remedies to overturn, set aside or modify the decision (dated November 28,
2001( rendered against it. The way the Court sees it, defendant U.P. System’s petition before the Supreme Court
concerns only with the manner by which said judgment award should be satisfied. It has nothing to do with the legality
or propriety thereof, although it prays for the deletion of [sic] reduction of the award of moral damages.

It must be emphasized that this Court’s finding, i.e., that there was sufficient appropriation earmarked for the project,
was upheld by the Court of Appeals in its decision dated September 16, 2005. Being a finding of fact, the Supreme Court
will, ordinarily, not disturb the same was said Court is not a trier of fact. Such being the case, defendants’ arguments
that there was no sufficient appropriation for the payment of the judgment obligation must fail.

While it is true that the former Presiding Judge of this Court in its Order dated January 30, 2006 had stated that:

Let it be stated that what the Court meant by its Order dated July 8, 2005 which states in part that the "disposition of
the amount represented therein being subject to the final outcome of the case of the University of the Philippines, et.
al., vs. Hon. Agustin S. Dizon et al., (CA G.R. No. 88125 before the Court of Appeals) is that the judgment or resolution of
said court has to be final and executory, for if the same will still be elevated to the Supreme Court, it will not attain
finality yet until the highest court has rendered its own final judgment or resolution.

it should be noted that neither the Court of Appeals nor the Supreme Court issued a preliminary injunction enjoining the
release or withdrawal of the garnished amount. In fact, in its present petition for review before the Supreme Court, U.P.
System has not prayed for the issuance of a writ of preliminary injunction. Thus, the Court doubts whether such writ is
forthcoming.

The Court honestly believes that if defendants’ petition assailing the Order of this Court dated December 31, 2004
granting the motion for the release of the garnished amount was meritorious, the Court of Appeals would have issued a
writ of injunction enjoining the same. Instead, said appellate court not only refused to issue a wit of preliminary
injunction prayed for by U.P. System but denied the petition, as well.54

The UP contended that Judge Yadao thereby effectively reversed the January 30, 2006 order of Judge Dizon disallowing
the withdrawal of the garnished amount until after the decision in the case would have become final and executory.

Although the Court issued a TRO on January 24, 2007 to enjoin Judge Yadao and all persons acting pursuant to her
authority from enforcing her order of January 3, 2007,55 it appears that on January 16, 2007, or prior to the issuance of
the TRO, she had already directed the DBP to forthwith release the garnished amount to Stern Builders and dela Cruz; 56
and that DBP had forthwith complied with the order on January 17, 2007 upon the sheriff’s service of the order of Judge
Yadao.57

These intervening developments impelled the UP to file in this Court a supplemental petition on January 26, 2007,58
alleging that the RTC (Judge Yadao) gravely erred in ordering the immediate release of the garnished amount despite the
pendency of the petition for review in this Court.
The UP filed a second supplemental petition59 after the RTC (Judge Yadao) denied the UP’s motion for the redeposit of
the withdrawn amount on April 10, 2007,60 to wit:

This resolves defendant U.P. System’s Urgent Motion to Redeposit Judgment Award praying that plaintiffs be directed to
redeposit the judgment award to DBP pursuant to the Temporary Restraining Order issued by the Supreme Court.
Plaintiffs opposed the motion and countered that the Temporary Restraining Order issued by the Supreme Court has
become moot and academic considering that the act sought to be restrained by it has already been performed. They
also alleged that the redeposit of the judgment award was no longer feasible as they have already spent the same.

It bears stressing, if only to set the record straight, that this Court did not – in its Order dated January 3, 2007 (the
implementation of which was restrained by the Supreme Court in its Resolution dated January 24, 2002) – direct that
that garnished amount "be deposited with the garnishee bank (Development Bank of the Philippines)". In the first place,
there was no need to order DBP to make such deposit, as the garnished amount was already deposited in the account of
plaintiffs with the DBP as early as May 13, 2005. What the Court granted in its Order dated January 3, 2007 was
plaintiff’s motion to allow the release of said deposit. It must be recalled that the Court found plaintiff’s motion
meritorious and, at that time, there was no restraining order or preliminary injunction from either the Court of Appeals
or the Supreme Court which could have enjoined the release of plaintiffs’ deposit. The Court also took into account the
following factors:

a) the Decision in this case had long been final and executory after it was rendered on November 28, 2001;

b) the propriety of the dismissal of U.P. System’s appeal was upheld by the Supreme Court;

c) a writ of execution had been issued;

d) defendant U.P. System’s deposit with DBP was garnished pursuant to a lawful writ of execution issued by the Court;
and

e) the garnished amount had already been turned over to the plaintiffs and deposited in their account with DBP.

The garnished amount, as discussed in the Order dated January 16, 2007, was already owned by the plaintiffs, having
been delivered to them by the Deputy Sheriff of this Court pursuant to par. (c), Section 9, Rule 39 of the 1997 Rules of
Civil Procedure. Moreover, the judgment obligation has already been fully satisfied as per Report of the Deputy Sheriff.

Anent the Temporary Restraining Order issued by the Supreme Court, the same has become functus oficio, having been
issued after the garnished amount had been released to the plaintiffs. The judgment debt was released to the plaintiffs
on January 17, 2007, while the Temporary Restraining Order issued by the Supreme Court was received by this Court on
February 2, 2007. At the time of the issuance of the Restraining Order, the act sought to be restrained had already been
done, thereby rendering the said Order ineffectual.

After a careful and thorough study of the arguments advanced by the parties, the Court is of the considered opinion that
there is no legal basis to grant defendant U.P. System’s motion to redeposit the judgment amount. Granting said motion
is not only contrary to law, but it will also render this Court’s final executory judgment nugatory. Litigation must end and
terminate sometime and somewhere, and it is essential to an effective administration of justice that once a judgment
has become final the issue or cause involved therein should be laid to rest. This doctrine of finality of judgment is
grounded on fundamental considerations of public policy and sound practice. In fact, nothing is more settled in law than
that once a judgment attains finality it thereby becomes immutable and unalterable. It may no longer be modified in any
respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the court rendering it or by the highest court of the
land.

WHEREFORE, premises considered, finding defendant U.P. System’s Urgent Motion to Redeposit Judgment Award
devoid of merit, the same is hereby DENIED.

SO ORDERED.

Issues

The UP now submits that:

I
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING THE PETITION, ALLOWING IN EFFECT THE
GARNISHMENT OF UP FUNDS, WHEN IT RULED THAT FUNDS HAVE ALREADY BEEN EARMARKED FOR THE
CONSTRUCTION PROJECT; AND THUS, THERE IS NO NEED FOR FURTHER APPROPRIATIONS.

II

THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING GARNISHMENT OF A STATE UNIVERSITY’S FUNDS IN
VIOLATION OF ARTICLE XIV, SECTION 5(5) OF THE CONSTITUTION.

III

IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE REVIEW POWERS OF THIS HONORABLE COURT TO
MODIFY, IF NOT TOTALLY DELETE THE AWARD OF ₱ 10 MILLION AS MORAL DAMAGES TO RESPONDENTS.

IV

THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN
ITS ORDER DATED 3 JANUARY 2007 ON THE GROUND OF EQUITY AND JUDICIAL COURTESY.

THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN
ITS ORDER DATED 16 JANUARY 2007 ON THE GROUND THAT PETITIONER UNIVERSITY STILL HAS A PENDING MOTION
FOR RECONSIDERATION OF THE ORDER DATED 3 JANUARY 2007.

VI

THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE REDEPOSIT OF THE GARNISHED AMOUNT TO
THE DBP IN VIOLATION OF THE CLEAR LANGUAGE OF THE SUPREME COURT RESOLUTION DATED 24 JANUARY 2007.

The UP argues that the amount earmarked for the construction project had been purposely set aside only for the
aborted project and did not include incidental matters like the awards of actual damages, moral damages and attorney’s
fees. In support of its argument, the UP cited Article 12.2 of the General Construction Agreement, which stipulated that
no deductions would be allowed for the payment of claims, damages, losses and expenses, including attorney’s fees, in
case of any litigation arising out of the performance of the work. The UP insists that the CA decision was inconsistent
with the rulings in Commissioner of Public Highways v. San Diego61 and Department of Agriculture v. NLRC62 to the
effect that government funds and properties could not be seized under writs of execution or garnishment to satisfy
judgment awards.

Furthermore, the UP contends that the CA contravened Section 5, Article XIV of the Constitution by allowing the
garnishment of UP funds, because the garnishment resulted in a substantial reduction of the UP’s limited budget
allocated for the remuneration, job satisfaction and fulfillment of the best available teachers; that Judge Yadao should
have exhibited judicial courtesy towards the Court due to the pendency of the UP’s petition for review; and that she
should have also desisted from declaring that the TRO issued by this Court had become functus officio.

Lastly, the UP states that the awards of actual damages of ₱ 5,716,729.00 and moral damages of ₱ 10 million should be
reduced, if not entirely deleted, due to its being unconscionable, inequitable and detrimental to public service.

In contrast, Stern Builders and dela Cruz aver that the petition for review was fatally defective for its failure to mention
the other cases upon the same issues pending between the parties (i.e., CA-G.R. No. 77395 and G.R No. 163501); that
the UP was evidently resorting to forum shopping, and to delaying the satisfaction of the final judgment by the filing of
its petition for review; that the ruling in Commissioner of Public Works v. San Diego had no application because there
was an appropriation for the project; that the UP retained the funds allotted for the project only in a fiduciary capacity;
that the contract price had been meanwhile adjusted to ₱ 22,338,553.25, an amount already more than sufficient to
cover the judgment award; that the UP’s prayer to reduce or delete the award of damages had no factual basis, because
they had been gravely wronged, had been deprived of their source of income, and had suffered untold miseries,
discomfort, humiliation and sleepless years; that dela Cruz had even been constrained to sell his house, his equipment
and the implements of his trade, and together with his family had been forced to live miserably because of the wrongful
actuations of the UP; and that the RTC correctly declared the Court’s TRO to be already functus officio by reason of the
withdrawal of the garnished amount from the DBP.

The decisive issues to be considered and passed upon are, therefore:

(a) whether the funds of the UP were the proper subject of garnishment in order to satisfy the judgment award; and (b)
whether the UP’s prayer for the deletion of the awards of actual damages of ₱ 5,716,729.00, moral damages of ₱
10,000,000.00 and attorney’s fees of ₱ 150,000.00 plus ₱ 1,500.00 per appearance could be granted despite the finality
of the judgment of the RTC.

Ruling

The petition for review is meritorious.

I.
UP’s funds, being government funds,
are not subject to garnishment

The UP was founded on June 18, 1908 through Act 1870 to provide advanced instruction in literature, philosophy, the
sciences, and arts, and to give professional and technical training to deserving students.63 Despite its establishment as a
body corporate,64 the UP remains to be a "chartered institution"65 performing a legitimate government function. It is
an institution of higher learning, not a corporation established for profit and declaring any dividends.66 In enacting
Republic Act No. 9500 (The University of the Philippines Charter of 2008), Congress has declared the UP as the national
university67 "dedicated to the search for truth and knowledge as well as the development of future leaders."68

Irrefragably, the UP is a government instrumentality,69 performing the State’s constitutional mandate of promoting
quality and accessible education.70 As a government instrumentality, the UP administers special funds sourced from the
fees and income enumerated under Act No. 1870 and Section 1 of Executive Order No. 714,71 and from the yearly
appropriations, to achieve the purposes laid down by Section 2 of Act 1870, as expanded in Republic Act No. 9500.72 All
the funds going into the possession of the UP, including any interest accruing from the deposit of such funds in any
banking institution, constitute a "special trust fund," the disbursement of which should always be aligned with the UP’s
mission and purpose,73 and should always be subject to auditing by the COA.74

Presidential Decree No. 1445 defines a "trust fund" as a fund that officially comes in the possession of an agency of the
government or of a public officer as trustee, agent or administrator, or that is received for the fulfillment of some
obligation.75 A trust fund may be utilized only for the "specific purpose for which the trust was created or the funds
received."76

The funds of the UP are government funds that are public in character. They include the income accruing from the use of
real property ceded to the UP that may be spent only for the attainment of its institutional objectives.77 Hence, the
funds subject of this action could not be validly made the subject of the RTC’s writ of execution or garnishment. The
adverse judgment rendered against the UP in a suit to which it had impliedly consented was not immediately
enforceable by execution against the UP,78 because suability of the State did not necessarily mean its liability.79

A marked distinction exists between suability of the State and its liability. As the Court succinctly stated in Municipality
of San Fernando, La Union v. Firme:80

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.

Also, in Republic v. Villasor,81 where 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 was nullified, the Court said:

xxx 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.

The UP correctly submits here that the garnishment of its funds to satisfy the judgment awards of actual and moral
damages (including attorney’s fees) was not validly made if there was no special appropriation by Congress to cover the
liability. It was, therefore, legally unwarranted for the CA to agree with the RTC’s holding in the order issued on April 1,
2003 that no appropriation by Congress to allocate and set aside the payment of the judgment awards was necessary
because "there (were) already an appropriations (sic) earmarked for the said project."82 The CA and the RTC thereby
unjustifiably ignored the legal restriction imposed on the trust funds of the Government and its agencies and
instrumentalities to be used exclusively to fulfill the purposes for which the trusts were created or for which the funds
were received except upon express authorization by Congress or by the head of a government agency in control of the
funds, and subject to pertinent budgetary laws, rules and regulations.83

Indeed, an appropriation by Congress was required before the judgment that rendered the UP liable for moral and
actual damages (including attorney’s fees) would be satisfied considering that such monetary liabilities were not covered
by the "appropriations earmarked for the said project." The Constitution strictly mandated that "(n)o money shall be
paid out of the Treasury except in pursuance of an appropriation made by law."84

II
COA must adjudicate private respondents’ claim
before execution should proceed

The execution of the monetary judgment against the UP was within the primary jurisdiction of the COA. This was
expressly provided in Section 26 of Presidential Decree No. 1445, to wit:

Section 26. General jurisdiction. - The authority and powers of the Commission shall extend to and comprehend all
matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the Government,
the preservation of vouchers pertaining thereto for a period of ten years, the examination and inspection of the books,
records, and papers relating to those accounts; and the audit and settlement of the accounts of all persons respecting
funds or property received or held by them in an accountable capacity, as well as the examination, audit, and settlement
of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and
instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations, including their
subsidiaries, and other self-governing boards, commissions, or agencies of the Government, and as herein prescribed,
including non governmental entities subsidized by the government, those funded by donations through the government,
those required to pay levies or government share, and those for which the government has put up a counterpart fund or
those partly funded by the government.

It was of no moment that a final and executory decision already validated the claim against the UP. The settlement of
the monetary claim was still subject to the primary jurisdiction of the COA despite the final decision of the RTC having
already validated the claim.85 As such, Stern Builders and dela Cruz as the claimants had no alternative except to first
seek the approval of the COA of their monetary claim.

On its part, the RTC should have exercised utmost caution, prudence and judiciousness in dealing with the motions for
execution against the UP and the garnishment of the UP’s funds. The RTC had no authority to direct the immediate
withdrawal of any portion of the garnished funds from the depository banks of the UP. By eschewing utmost caution,
prudence and judiciousness in dealing with the execution and garnishment, and by authorizing the withdrawal of the
garnished funds of the UP, the RTC acted beyond its jurisdiction, and all its orders and issuances thereon were void and
of no legal effect, specifically: (a) the order Judge Yadao issued on January 3, 2007 allowing Stern Builders and dela Cruz
to withdraw the deposited garnished amount; (b) the order Judge Yadao issued on January 16, 2007 directing DBP to
forthwith release the garnish amount to Stern Builders and dela Cruz; (c) the sheriff’s report of January 17, 2007
manifesting the full satisfaction of the writ of execution; and (d) the order of April 10, 2007 deying the UP’s motion for
the redeposit of the withdrawn amount. Hence, such orders and issuances should be struck down without exception.

Nothing extenuated Judge Yadao’s successive violations of Presidential Decree No. 1445. She was aware of Presidential
Decree No. 1445, considering that the Court circulated to all judges its Administrative Circular No. 10-2000,86 issued on
October 25, 2000, enjoining them "to observe utmost caution, prudence and judiciousness in the issuance of writs of
execution to satisfy money judgments against government agencies and local government units" precisely in order to
prevent the circumvention of Presidential Decree No. 1445, as well as of the rules and procedures of the COA, to wit:

In order to prevent possible circumvention of the rules and procedures of the Commission on Audit, judges are hereby
enjoined to observe utmost caution, prudence and judiciousness in the issuance of writs of execution to satisfy money
judgments against government agencies and local government units.

Judges should bear in mind that in Commissioner of Public Highways v. San Diego (31 SCRA 617, 625 1970), this Court
explicitly stated:

"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 Court 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.

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

However, notwithstanding the rule that government properties are not subject to levy and execution unless otherwise
provided for by statute (Republic v. Palacio, 23 SCRA 899 1968; Commissioner of Public Highways v. San Diego, supra) or
municipal ordinance (Municipality of Makati v. Court of Appeals, 190 SCRA 206 1990), the Court has, in various
instances, distinguished between government funds and properties for public use and those not held for public use.
Thus, in Viuda de Tan Toco v. Municipal Council of Iloilo (49 Phil 52 1926, the Court ruled that "where property of a
municipal or other public corporation is sought to be subjected to execution to satisfy judgments recovered against such
corporation, the question as to whether such property is leviable or not is to be determined by the usage and purposes
for which it is held." The following can be culled from Viuda de Tan Toco v. Municipal Council of Iloilo:

1. Properties held for public uses – and generally everything held for governmental purposes – are not subject to levy
and sale under execution against such corporation. The same rule applies to funds in the hands of a public officer and
taxes due to a municipal corporation.

2. Where a municipal corporation owns in its proprietary capacity, as distinguished from its public or government
capacity, property not used or used for a public purpose but for quasi-private purposes, it is the general rule that such
property may be seized and sold under execution against the corporation.

3. Property held for public purposes is not subject to execution merely because it is temporarily used for private
purposes. If the public use is wholly abandoned, such property becomes subject to execution.

This Administrative Circular shall take effect immediately and the Court Administrator shall see to it that it is faithfully
implemented.

Although Judge Yadao pointed out that neither the CA nor the Court had issued as of then any writ of preliminary
injunction to enjoin the release or withdrawal of the garnished amount, she did not need any writ of injunction from a
superior court to compel her obedience to the law. The Court is disturbed that an experienced judge like her should look
at public laws like Presidential Decree No. 1445 dismissively instead of loyally following and unquestioningly
implementing them. That she did so turned her court into an oppressive bastion of mindless tyranny instead of having it
as a true haven for the seekers of justice like the UP.

III
Period of appeal did not start without effective
service of decision upon counsel of record;
Fresh-period rule announced in
Neypes v. Court of Appeals
can be given retroactive application

The UP next pleads that the Court gives due course to its petition for review in the name of equity in order to reverse or
modify the adverse judgment against it despite its finality. At stake in the UP’s plea for equity was the return of the
amount of ₱ 16,370,191.74 illegally garnished from its trust funds. Obstructing the plea is the finality of the judgment
based on the supposed tardiness of UP’s appeal, which the RTC declared on September 26, 2002. The CA upheld the
declaration of finality on February 24, 2004, and the Court itself denied the UP’s petition for review on that issue on May
11, 2004 (G.R. No. 163501). The denial became final on November 12, 2004.

It is true that a decision that has attained finality becomes immutable and unalterable, and cannot be modified in any
respect,87 even if the modification is meant to correct erroneous conclusions of fact and law, and whether the
modification is made by the court that rendered it or by this Court as the highest court of the land.88 Public policy
dictates that once a judgment becomes final, executory and unappealable, the prevailing party should not be deprived
of the fruits of victory by some subterfuge devised by the losing party. Unjustified delay in the enforcement of such
judgment sets at naught the role and purpose of the courts to resolve justiciable controversies with finality.89 Indeed,
all litigations must at some time end, even at the risk of occasional errors.
But the doctrine of immutability of a final judgment has not been absolute, and has admitted several exceptions, among
them: (a) the correction of clerical errors; (b) the so-called nunc pro tunc entries that cause no prejudice to any party; (c)
void judgments; and (d) whenever circumstances transpire after the finality of the decision that render its execution
unjust and inequitable.90 Moreover, in Heirs of Maura So v. Obliosca,91 we stated that despite the absence of the
preceding circumstances, the Court is not precluded from brushing aside procedural norms if only to serve the higher
interests of justice and equity. Also, in Gumaru v. Quirino State College,92 the Court nullified the proceedings and the
writ of execution issued by the RTC for the reason that respondent state college had not been represented in the
litigation by the Office of the Solicitor General.

We rule that the UP’s plea for equity warrants the Court’s exercise of the exceptional power to disregard the declaration
of finality of the judgment of the RTC for being in clear violation of the UP’s right to due process.

Both the CA and the RTC found the filing on June 3, 2002 by the UP of the notice of appeal to be tardy. They based their
finding on the fact that only six days remained of the UP’s reglementary 15-day period within which to file the notice of
appeal because the UP had filed a motion for reconsideration on January 16, 2002 vis-à-vis the RTC’s decision the UP
received on January 7, 2002; and that because the denial of the motion for reconsideration had been served upon Atty.
Felimon D. Nolasco of the UPLB Legal Office on May 17, 2002, the UP had only until May 23, 2002 within which to file
the notice of appeal.

The UP counters that the service of the denial of the motion for reconsideration upon Atty. Nolasco was defective
considering that its counsel of record was not Atty. Nolasco of the UPLB Legal Office but the OLS in Diliman, Quezon City;
and that the period of appeal should be reckoned from May 31, 2002, the date when the OLS received the order. The UP
submits that the filing of the notice of appeal on June 3, 2002 was well within the reglementary period to appeal.

We agree with the submission of the UP.

Firstly, the service of the denial of the motion for reconsideration upon Atty. Nolasco of the UPLB Legal Office was
invalid and ineffectual because he was admittedly not the counsel of record of the UP. The rule is that it is on the
counsel and not the client that the service should be made.93

That counsel was the OLS in Diliman, Quezon City, which was served with the denial only on May 31, 2002. As such, the
running of the remaining period of six days resumed only on June 1, 2002,94 rendering the filing of the UP’s notice of
appeal on June 3, 2002 timely and well within the remaining days of the UP’s period to appeal.

Verily, the service of the denial of the motion for reconsideration could only be validly made upon the OLS in Diliman,
and no other. The fact that Atty. Nolasco was in the employ of the UP at the UPLB Legal Office did not render the service
upon him effective. It is settled that where a party has appeared by counsel, service must be made upon such counsel.95
Service on the party or the party’s employee is not effective because such notice is not notice in law.96 This is clear
enough from Section 2, second paragraph, of Rule 13, Rules of Court, which explicitly states that: "If any party has
appeared by counsel, service upon him shall be made upon his counsel or one of them, unless service upon the party
himself is ordered by the court. Where one counsel appears for several parties, he shall only be entitled to one copy of
any paper served upon him by the opposite side." As such, the period to appeal resumed only on June 1, 2002, the date
following the service on May 31, 2002 upon the OLS in Diliman of the copy of the decision of the RTC, not from the date
when the UP was notified.97

Accordingly, the declaration of finality of the judgment of the RTC, being devoid of factual and legal bases, is set aside.

Secondly, even assuming that the service upon Atty. Nolasco was valid and effective, such that the remaining period for
the UP to take a timely appeal would end by May 23, 2002, it would still not be correct to find that the judgment of the
RTC became final and immutable thereafter due to the notice of appeal being filed too late on June 3, 2002.

In so declaring the judgment of the RTC as final against the UP, the CA and the RTC applied the rule contained in the
second paragraph of Section 3, Rule 41 of the Rules of Court to the effect that the filing of a motion for reconsideration
interrupted the running of the period for filing the appeal; and that the period resumed upon notice of the denial of the
motion for reconsideration. For that reason, the CA and the RTC might not be taken to task for strictly adhering to the
rule then prevailing.

However, equity calls for the retroactive application in the UP’s favor of the fresh-period rule that the Court first
announced in mid-September of 2005 through its ruling in Neypes v. Court of Appeals,98 viz:

To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal their cases, the
Court deems it practical to allow a fresh period of 15 days within which to file the notice of appeal in the Regional Trial
Court, counted from receipt of the order dismissing a motion for a new trial or motion for reconsideration.
The retroactive application of the fresh-period rule, a procedural law that aims "to regiment or make the appeal period
uniform, to be counted from receipt of the order denying the motion for new trial, motion for reconsideration (whether
full or partial) or any final order or resolution,"99 is impervious to any serious challenge. This is because there are no
vested rights in rules of procedure.100 A law or regulation is procedural when it prescribes rules and forms of procedure
in order that courts may be able to administer justice.101 It does not come within the legal conception of a retroactive
law, or is not subject of the general rule prohibiting the retroactive operation of statues, but is given retroactive effect in
actions pending and undetermined at the time of its passage without violating any right of a person who may feel that
he is adversely affected.

We have further said that a procedural rule that is amended for the benefit of litigants in furtherance of the
administration of justice shall be retroactively applied to likewise favor actions then pending, as equity delights in
equality.102 We may even relax stringent procedural rules in order to serve substantial justice and in the exercise of this
Court’s equity jurisdiction.103 Equity jurisdiction aims to do complete justice in cases where a court of law is unable to
adapt its judgments to the special circumstances of a case because of the inflexibility of its statutory or legal
jurisdiction.104

It is cogent to add in this regard that to deny the benefit of the fresh-period rule to the UP would amount to injustice
and absurdity – injustice, because the judgment in question was issued on November 28, 2001 as compared to the
judgment in Neypes that was rendered in 1998; absurdity, because parties receiving notices of judgment and final orders
issued in the year 1998 would enjoy the benefit of the fresh-period rule but the later rulings of the lower courts like that
herein would not.105

Consequently, even if the reckoning started from May 17, 2002, when Atty. Nolasco received the denial, the UP’s filing
on June 3, 2002 of the notice of appeal was not tardy within the context of the fresh-period rule. For the UP, the fresh
period of 15-days counted from service of the denial of the motion for reconsideration would end on June 1, 2002,
which was a Saturday. Hence, the UP had until the next working day, or June 3, 2002, a Monday, within which to appeal,
conformably with Section 1 of Rule 22, Rules of Court, which holds that: "If the last day of the period, as thus computed,
falls on a Saturday, a Sunday, or a legal holiday in the place where the court sits, the time shall not run until the next
working day."

IV
Awards of monetary damages,
being devoid of factual and legal bases,
did not attain finality and should be deleted

Section 14 of Article VIII of the Constitution prescribes that express findings of fact and of law should be made in the
decision rendered by any court, to wit:

Section 14. No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the
law on which it is based.

No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied
without stating the legal basis therefor.

Implementing the constitutional provision in civil actions is Section 1 of Rule 36, Rules of Court, viz:

Section 1. Rendition of judgments and final orders. — A judgment or final order determining the merits of the case shall
be in writing personally and directly prepared by the judge, stating clearly and distinctly the facts and the law on which it
is based, signed by him, and filed with the clerk of the court. (1a)

The Constitution and the Rules of Court apparently delineate two main essential parts of a judgment, namely: the body
and the decretal portion. Although the latter is the controlling part,106 the importance of the former is not to be lightly
regarded because it is there where the court clearly and distinctly states its findings of fact and of law on which the
decision is based. To state it differently, one without the other is ineffectual and useless. The omission of either
inevitably results in a judgment that violates the letter and the spirit of the Constitution and the Rules of Court.

The term findings of fact that must be found in the body of the decision refers to statements of fact, not to conclusions
of law.107 Unlike in pleadings where ultimate facts alone need to be stated, the Constitution and the Rules of Court
require not only that a decision should state the ultimate facts but also that it should specify the supporting evidentiary
facts, for they are what are called the findings of fact.

The importance of the findings of fact and of law cannot be overstated. The reason and purpose of the Constitution and
the Rules of Court in that regard are obviously to inform the parties why they win or lose, and what their rights and
obligations are. Only thereby is the demand of due process met as to the parties. As Justice Isagani A. Cruz explained in
Nicos Industrial Corporation v. Court of Appeals:108

It is a requirement of due process that the parties to a litigation be informed of how it was decided, with an explanation
of the factual and legal reasons that led to the conclusions of the court. The court cannot simply say that judgment is
rendered in favor of X and against Y and just leave it at that without any justification whatsoever for its action. The losing
party is entitled to know why he lost, so he may appeal to a higher court, if permitted, should he believe that the
decision should be reversed. A decision that does not clearly and distinctly state the facts and the law on which it is
based leaves the parties in the dark as to how it was reached and is especially prejudicial to the losing party, who is
unable to pinpoint the possible errors of the court for review by a higher tribunal.

Here, the decision of the RTC justified the grant of actual and moral damages, and attorney’s fees in the following terse
manner, viz:

xxx The Court is not unmindful that due to defendants’ unjustified refusal to pay their outstanding obligation to plaintiff,
the same suffered losses and incurred expenses as he was forced to re-mortgage his house and lot located in Quezon
City to Metrobank (Exh. "CC") and BPI Bank just to pay its monetary obligations in the form of interest and penalties
incurred in the course of the construction of the subject project.109

The statement that "due to defendants’ unjustified refusal to pay their outstanding obligation to plaintiff, the same
suffered losses and incurred expenses as he was forced to re-mortgage his house and lot located in Quezon City to
Metrobank (Exh. "CC") and BPI Bank just to pay its monetary obligations in the form of interest and penalties incurred in
the course of the construction of the subject project" was only a conclusion of fact and law that did not comply with the
constitutional and statutory prescription. The statement specified no detailed expenses or losses constituting the ₱
5,716,729.00 actual damages sustained by Stern Builders in relation to the construction project or to other pecuniary
hardships. The omission of such expenses or losses directly indicated that Stern Builders did not prove them at all, which
then contravened Article 2199, Civil Code, the statutory basis for the award of actual damages, which entitled a person
to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. As such, the actual
damages allowed by the RTC, being bereft of factual support, were speculative and whimsical. Without the clear and
distinct findings of fact and law, the award amounted only to an ipse dixit on the part of the RTC,110 and did not attain
finality.

There was also no clear and distinct statement of the factual and legal support for the award of moral damages in the
substantial amount of ₱ 10,000,000.00. The award was thus also speculative and whimsical. Like the actual damages, the
moral damages constituted another judicial ipse dixit, the inevitable consequence of which was to render the award of
moral damages incapable of attaining finality. In addition, the grant of moral damages in that manner contravened the
law that permitted the recovery of moral damages as the means to assuage "physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury."111 The
contravention of the law was manifest considering that Stern Builders, as an artificial person, was incapable of
experiencing pain and moral sufferings.112 Assuming that in granting the substantial amount of ₱ 10,000,000.00 as
moral damages, the RTC might have had in mind that dela Cruz had himself suffered mental anguish and anxiety. If that
was the case, then the RTC obviously disregarded his separate and distinct personality from that of Stern Builders.113
Moreover, his moral and emotional sufferings as the President of Stern Builders were not the sufferings of Stern
Builders. Lastly, the RTC violated the basic principle that moral damages were not intended to enrich the plaintiff at the
expense of the defendant, but to restore the plaintiff to his status quo ante as much as possible. Taken together,
therefore, all these considerations exposed the substantial amount of ₱ 10,000,000.00 allowed as moral damages not
only to be factually baseless and legally indefensible, but also to be unconscionable, inequitable and unreasonable.

Like the actual and moral damages, the ₱ 150,000.00, plus ₱ 1,500.00 per appearance, granted as attorney’s fees were
factually unwarranted and devoid of legal basis. The general rule is that a successful litigant cannot recover attorney’s
fees as part of the damages to be assessed against the losing party because of the policy that no premium should be
placed on the right to litigate.114 Prior to the effectivity of the present Civil Code, indeed, such fees could be recovered
only when there was a stipulation to that effect. It was only under the present Civil Code that the right to collect
attorney’s fees in the cases mentioned in Article 2208115 of the Civil Code came to be recognized.116 Nonetheless, with
attorney’s fees being allowed in the concept of actual damages,117 their amounts must be factually and legally justified
in the body of the decision and not stated for the first time in the decretal portion.118 Stating the amounts only in the
dispositive portion of the judgment is not enough;119 a rendition of the factual and legal justifications for them must
also be laid out in the body of the decision.120

That the attorney’s fees granted to the private respondents did not satisfy the foregoing requirement suffices for the
Court to undo them.121 The grant was ineffectual for being contrary to law and public policy, it being clear that the
express findings of fact and law were intended to bring the case within the exception and thereby justify the award of
the attorney’s fees. Devoid of such express findings, the award was a conclusion without a premise, its basis being
improperly left to speculation and conjecture.122
Nonetheless, the absence of findings of fact and of any statement of the law and jurisprudence on which the awards of
actual and moral damages, as well as of attorney’s fees, were based was a fatal flaw that invalidated the decision of the
RTC only as to such awards. As the Court declared in Velarde v. Social Justice Society,123 the failure to comply with the
constitutional requirement for a clear and distinct statement of the supporting facts and law "is a grave abuse of
discretion amounting to lack or excess of jurisdiction" and that "(d)ecisions or orders issued in careless disregard of the
constitutional mandate are a patent nullity and must be struck down as void."124 The other item granted by the RTC
(i.e., ₱ 503,462.74) shall stand, subject to the action of the COA as stated herein.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS ASIDE the decision of the Court
of Appeals under review; ANNULS the orders for the garnishment of the funds of the University of the Philippines and
for the release of the garnished amount to Stern Builders Corporation and Servillano dela Cruz; and DELETES from the
decision of the Regional Trial Court dated November 28, 2001 for being void only the awards of actual damages of ₱
5,716,729.00, moral damages of ₱ 10,000,000.00, and attorney's fees of ₱ 150,000.00, plus ₱ 1,500.00 per appearance,
in favor of Stern Builders Corporation and Servillano dela Cruz.

The Court ORDERS Stem Builders Corporation and Servillano dela Cruz to redeposit the amount of ₱ 16,370,191.74
within 10 days from receipt of this decision.

Costs of suit to be paid by the private respondents.

SO ORDERED.

The funds of the UP are government funds that are public of character which coulld not be validly made subject of a writ
of execution or garnishment.

FACTS:
The University of the Philippines (UP) entered in a General Construction Agreement with respondent Stern Builders
Corporation for the construction of the extension building and the renovation of the College of Arts and Science Building
in the campus of the University of the Philippines Los Baños (UPLB). In the course of the implementation of the contract,
Stern submitted three progress billings corresponding to the work accomplished, but UP paid only the two of the
billings. The third billing, prompting stern builders to sue UP, an officials to collect the unpaid billing and to recover
various damages.

Meanwhile, the sheriff served notices of garnishment on the UP’s depository banks, namely; Land Bank of the
Philippines and Development Bank of the Philippines (DBP). The UP assailed said garnishment of funds. Stern builders,
meanwhile, again sought the release of the garnished funds.

ISSUE:
Whether the Funds of UP are subject to garnishment

HELD:
The Funds of the UP are government funds that are public in character. They include the income accruing from the use
of real property ceded to the UP that may be spent only for the attainment of its institutional objectives. Hence, the
funds subject of this action could not be validly made the subject of writ of execution or garnishment. The adverse
judgement rendered against the UP in a suit to which it had impliedly consented was not immediately enforcable by
execution against UP, because suability of the state did not necessarily mean its liability.

4. Republic vs. Hidalgo [534 SCRA 619 (2007)]

G.R. No. 161657 October 4, 2007

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
HON. VICENTE A. HIDALGO, in his capacity as Presiding Judge of the Regional Trial Court of Manila, Branch 37,
CARMELO V. CACHERO, in his capacity as Sheriff IV, Regional Trial Court of Manila, and TARCILA LAPERAL MENDOZA,
Respondents.

DECISION
GARCIA, J.:
Via this verified petition for certiorari and prohibition under Rule 65 of the Rules of Court, the Republic of the Philippines
("Republic," for short), thru the Office of the Solicitor General (OSG), comes to this Court to nullify and set aside the
decision dated August 27, 2003 and other related issuances of the Regional Trial Court (RTC) of Manila, Branch 37, in
its Civil Case No. 99-94075. In directly invoking the Court’s original jurisdiction to issue the extraordinary writs of
certiorari and prohibition, without challenge from any of the respondents, the Republic gave as justification therefor the
fact that the case involves an over TWO BILLION PESO judgment against the State, allegedly rendered in blatant
violation of the Constitution, law and jurisprudence.
By any standard, the case indeed involves a colossal sum of money which, on the face of the assailed decision, shall be
the liability of the national government or, in fine, the taxpayers. This consideration, juxtaposed with the constitutional
and legal questions surrounding the controversy, presents special and compelling reasons of public interests why direct
recourse to the Court should be allowed, as an exception to the policy on hierarchy of courts.
At the core of the litigation is a 4,924.60-square meter lot once covered by Transfer Certificate of Title (TCT) No. 118527
of the Registry of Deeds of Manila in the name of the herein private respondent Tarcila Laperal Mendoza (Mendoza),
married to Perfecto Mendoza. The lot is situated at No. 1440 Arlegui St., San Miguel, Manila, near the Malacañang
Palace complex. On this lot, hereinafter referred to as the Arlegui property, now stands the Presidential Guest House
which was home to two (2) former Presidents of the Republic and now appears to be used as office building of the Office
of the President.1
The facts:
Sometime in June 1999, Mendoza filed a suit with the RTC of Manila for reconveyance and the corresponding
declaration of nullity of a deed of sale and title against the Republic, the Register of Deeds of Manila and one Atty. Fidel
Vivar. In her complaint, as later amended, docketed as Civil Case No. 99-94075 and eventually raffled to Branch 35 of the
court, Mendoza essentially alleged being the owner of the disputed Arlegui property which the Republic forcibly
dispossessed her of and over which the Register of Deeds of Manila issued TCT No. 118911 in the name of the Republic.
Answering, the Republic set up, among other affirmative defenses, the State’s immunity from suit.
The intervening legal tussles are not essential to this narration. What is material is that in an Order of March 17, 2000,
the RTC of Manila, Branch 35, dismissed Mendoza’s complaint. The court would also deny, in another order dated May
12, 2000, Mendoza’s omnibus motion for reconsideration. On a petition for certiorari, however, the Court of Appeals
(CA), in CA-G.R. SP No. 60749, reversed the trial court’s assailed orders and remanded the case to the court a quo for
further proceedings.2 On appeal, this Court, in G.R. No. 155231, sustained the CA’s reversal action.3
From Branch 35 of the trial court whose then presiding judge inhibited himself from hearing the remanded Civil Case No.
99-94075, the case was re-raffled to Branch 37 thereof, presided by the respondent judge.
On May 5, 2003, Mendoza filed a Motion for Leave of Court to file a Third Amended Complaint with a copy of the
intended third amended complaint thereto attached. In the May 16, 2003 setting to hear the motion, the RTC, in open
court and in the presence of the Republic’s counsel, admitted the third amended complaint, ordered the Republic to file
its answer thereto within five (5) days from May 16, 2003 and set a date for pre-trial.
In her adverted third amended complaint for recovery and reconveyance of the Arlegui property, Mendoza sought the
declaration of nullity of a supposed deed of sale dated July 15, 1975 which provided the instrumentation toward the
issuance of TCT No. 118911 in the name of the Republic. And aside from the cancellation of TCT No. 118911, Mendoza
also asked for the reinstatement of her TCT No. 118527. 4 In the same third amended complaint, Mendoza averred that,
since time immemorial, she and her predecessors-in-interest had been in peaceful and adverse possession of the
property as well as of the owner’s duplicate copy of TCT No. 118527. Such possession, she added, continued " until the
first week of July 1975 when a group of armed men representing themselves to be members of the Presidential Security
Group [PSG] of the then President Ferdinand E. Marcos, had forcibly entered [her] residence and ordered [her] to turn
over to them her … Copy of TCT No. 118525 … and compelled her and the members of her household to vacate the same
…; thus, out of fear for their lives, [she] handed her Owner’s Duplicate Certificate Copy of TCT No. 118527 and had left
and/or vacated the subject property."  Mendoza further alleged the following:
1. Per verification, TCT No. 118527 had already been cancelled by virtue of a deed of sale in favor of the Republic
allegedly executed by her and her deceased husband on July 15, 1975 and acknowledged before Fidel Vivar which deed
was annotated at the back of TCT No. 118527 under PE: 2035/T-118911 dated July 28, 1975; and
2. That the aforementioned deed of sale is fictitious as she (Mendoza) and her husband have not executed any deed of
conveyance covering the disputed property in favor of the Republic, let alone appearing before Fidel Vivar.
Inter alia, she prayed for the following:
4. Ordering the … Republic to pay plaintiff [Mendoza] a reasonable compensation or rental for the use or occupancy of
the subject property in the sum of FIVE HUNDRED THOUSAND (P500,000.00) PESOS a month with a five (5%) per cent
yearly increase, plus interest thereon at the legal rate, beginning July 1975 until it finally vacates the same;
5. Ordering the … Republic to pay plaintiff’s counsel a sum equivalent to TWENTY FIVE (25%) PER CENT of the current
value of the subject property and/or whatever amount is recovered under the premises; Further, plaintiff prays for such
other relief, just and equitable under the premises.
On May 21, 2003, the Republic, represented by the OSG, filed a Motion for Extension (With Motion for Cancellation of
scheduled pre-trial).  In it, the Republic manifested its inability to simply adopt its previous answer and, accordingly,
asked that it be given a period of thirty (30) days from May 21, 2003 or until June 20, 2003 within which to submit an
Answer.5 June 20, 2003 came and went, but no answer was filed. On July 18, 2003 and again on August 19, 2003, the
OSG moved for a 30-day extension at each instance. The filing of the last two motions for extension proved to be an idle
gesture, however, since the trial court had meanwhile issued an order 6 dated July 7, 2003 declaring the petitioner
Republic as in default and allowing the private respondent to present her evidence ex-parte.
The evidence for the private respondent, as plaintiff a quo, consisted of her testimony denying having executed the
alleged deed of sale dated July 15, 1975 which paved the way for the issuance of TCT No. 118911. According to her, said
deed is fictitious or inexistent, as evidenced by separate certifications, the first (Exh. "E"), issued by the Register of
Deeds for Manila and the second (Exh. "F"), by the Office of Clerk of Court, RTC Manila. Exhibit "E"7 states that a copy of
the supposed conveying deed cannot, despite diligent efforts of records personnel, be located, while Exhibit  "F"8 states
that Fidel Vivar was not a commissioned notary public for and in the City of Manila for the year 1975. Three other
witnesses9 testified, albeit their testimonies revolved around the appraisal and rental values of the Arlegui property.
Eventually, the trial court rendered a judgment by default 10 for Mendoza and against the Republic. To the trial court, the
Republic had veritably confiscated Mendoza’s property, and deprived her not only of the use thereof but also denied her
of the income she could have had otherwise realized during all the years she was illegally dispossessed of the same.
Dated August 27, 2003, the trial court’s decision dispositively reads as follows:
WHEREFORE, judgment is hereby rendered:
1. Declaring the deed of sale dated July 15, 1975, annotated at the back of [TCT] No. 118527 as PE:2035/T-118911, as
non-existent and/or fictitious, and, therefore, null and void from the beginning;
2. Declaring that [TCT] No. 118911 of the defendant Republic of the Philippines has no basis, thereby making it null and
void from the beginning;
3. Ordering the defendant Register of Deeds for the City of Manila to reinstate plaintiff [Mendoza’s TCT] No. 118527;
4. Ordering the defendant Republic … to pay just compensation in the sum of ONE HUNDRED FORTY THREE MILLION SIX
HUNDRED THOUSAND (P143,600,000.00) PESOS, plus interest at the legal rate, until the whole amount is paid in full for
the acquisition of the subject property;
5. Ordering the plaintiff, upon payment of the just compensation for the acquisition of her property, to execute the
necessary deed of conveyance in favor of the defendant Republic …; and, on the other hand, directing the defendant
Register of Deeds, upon presentation of the said deed of conveyance, to cancel plaintiff’s TCT No. 118527 and to issue,
in lieu thereof, a new Transfer Certificate of Title in favor of the defendant Republic;
6. Ordering the defendant Republic … to pay the plaintiff the sum of ONE BILLION FOUR HUNDRED EIGHTY MILLION SIX
HUNDRED TWENTY SEVEN THOUSAND SIX HUNDRED EIGHTY EIGHT (P1,480,627,688.00) PESOS, representing the
reasonable rental for the use of the subject property, the interest thereon at the legal rate, and the opportunity cost at
the rate of three (3%) per cent per annum, commencing July 1975 continuously up to July 30, 2003, plus an additional
interest at the legal rate, commencing from this date until the whole amount is paid in full;
7. Ordering the defendant Republic … to pay the plaintiff attorney’s fee, in an amount equivalent to FIFTEEN (15%) PER
CENT of the amount due to the plaintiff.
With pronouncement as to the costs of suit.
SO ORDERED. (Words in bracket and emphasis added.)
Subsequently, the Republic moved for, but was denied, a new trial per order of the trial court of October 7,
2003.11 Denied also was its subsequent plea for reconsideration. 12 These twin denial orders were followed by several
orders and processes issued by the trial court on separate dates as hereunder indicated:
1. November 27, 2003 - - Certificate of Finality declaring the August 27, 2003 decision final and executory. 13
2. December 17, 2003 - - Order denying the Notice of Appeal filed on November 27, 2003, the same having been filed
beyond the reglementary period.14
3. December 19, 2003 - - Order 15 granting the private respondent’s motion for execution.
4. December 22, 2003 - - Writ of Execution. 16
Hence, this petition for certiorari.
By Resolution17 of November 20, 2006, the case was set for oral arguments. On January 22, 2007, when this case was
called for the purpose, both parties manifested their willingness to settle the case amicably, for which reason the Court
gave them up to February 28, 2007 to submit the compromise agreement for approval. Following several approved
extensions of the February 28, 2007 deadline, the OSG, on August 6, 2007, manifested that it is submitting the case for
resolution on the merits owing to the inability of the parties to agree on an acceptable compromise.
In this recourse, the petitioner urges the Court to strike down as a nullity the trial court’s order declaring it in default and
the judgment by default that followed. Sought to be nullified, too, also on the ground that they were issued in grave
abuse of discretion amounting to lack or in excess of jurisdiction, are the orders and processes enumerated immediately
above issued after the rendition of the default judgment.
Petitioner lists five (5) overlapping grounds for allowing its petition. It starts off by impugning the order of default and
the judgment by default. To the petitioner, the respondent judge committed serious jurisdictional error when he
proceeded to hear the case and eventually awarded the private respondent a staggering amount without so much as
giving the petitioner the opportunity to present its defense.
Petitioner’s posture is simply without merit.
Deprivation of procedural due process is obviously the petitioner’s threshold theme. Due process, in its procedural
aspect, guarantees in the minimum the opportunity to be heard. 18 Grave abuse of discretion, however, cannot plausibly
be laid at the doorstep of the respondent judge on account of his having issued the default order against the petitioner,
then proceeding with the hearing and eventually rendering a default judgment. For, what the respondent judge did hew
with what Section 3, Rule 9 of the Rules of Court prescribes and allows in the event the defending party fails to
seasonably file a responsive pleading. The provision reads:
SEC. 3. Default; declaration of.- If the defending party fails to answer within the time allowed therefor, the court shall,
upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending
party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading
may warrant, unless the court in its discretion requires the claimant to submit evidence …. 19
While the ideal lies in avoiding orders of default, 20 the policy of the law being to have every litigated case tried on its full
merits,21 the act of the respondent judge in rendering the default judgment after an order of default was properly issued
cannot be struck down as a case of grave abuse of discretion.
The term "grave abuse of discretion," in its juridical sense, connotes capricious, despotic, oppressive or whimsical
exercise of judgment as is equivalent to lack of jurisdiction. 22 The abuse must be of such degree as to amount to an
evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, as where the power is exercised in a
capricious manner. The word "capricious," usually used in tandem with "arbitrary," conveys the notion of willful and
unreasoning action.23
Under the premises, the mere issuance by the trial court of the order of default followed by a judgment by default can
easily be sustained as correct and doubtless within its jurisdiction. Surely, a disposition directing the Republic to pay an
enormous sum without the trial court hearing its side does not, without more, vitiate, on due procedural ground, the
validity of the default judgment. The petitioner may have indeed been deprived of such hearing, but this does not mean
that its right to due process had been violated. For, consequent to being declared in default, the defaulting defendant is
deemed to have waived his right to be heard or to take part in the trial. The handling solicitors simply squandered the
Republic’s opportunity to be heard. But more importantly, the law itself imposes such deprivation of the right to
participate as a form of penalty against one unwilling without justification to join issue upon the allegations tendered by
the plaintiff.
And going to another point, the petitioner would ascribe jurisdictional error on the respondent judge for denying its
motion for new trial based on any or a mix of the following factors, viz., (1) the failure to file an answer is attributable to
the negligence of the former handling solicitor; (2) the meritorious nature of the petitioner’s defense; and (3) the value
of the property involved.
The Court is not convinced. Even as the Court particularly notes what the trial court had said on the matter of
negligence: that all of the petitioner’s pleadings below bear at least three signatures, that of the handling solicitor, the
assistant solicitor and the Solicitor General himself, and hence accountability should go up all the way to the top of the
totem pole of authority, the cited reasons advanced by the petitioner for a new trial are not recognized under Section 1,
Rule 37 of the Rules of Court for such recourse. 24 Withal, there is no cogent reason to disturb the denial by the trial court
of the motion for new trial and the denial of the reiterative motion for reconsideration.
Then, too, the issuance by the trial court of the Order dated December 17, 2003 25 denying the petitioner’s notice of
appeal after the court caused the issuance on November 27, 2003 of a certificate of finality of its August 27, 2003
decision can hardly be described as arbitrary, as the petitioner would have this Court believe. In this regard, the Court
takes stock of the following key events and material dates set forth in the assailed December 17, 2003 order,  supra: (a)
The petitioner, thru the OSG, received on August 29, 2003 a copy of the RTC decision in this case, hence had up
to September 13, 2003, a Saturday, within which to perfect an appeal; (b) On September 15, 2003, a Monday, the OSG
filed its motion for new trial, which the RTC denied, the OSG receiving a copy of the order of denial on October 9, 2003;
and (c) On October 24, 2003, the OSG sought reconsideration of the order denying the motion for new trial. The motion
for reconsideration was denied per Order dated November 25, 2003, a copy of which the OSG received on the same
date.
Given the foregoing time perspective, what the trial court wrote in its aforementioned impugned order of December 17,
2003 merits approval:
In the case at bar, it is clear that the motion for new trial filed on the fifteenth (15th) day after the decision was received
on August 29, 2003 was denied and the moving party has only the remaining period from notice of notice of denial
within which to file a notice of appeal. xxx
Accordingly, when defendants [Republic et al.] filed their motion for new trial on the last day of the fifteen day (15)
prescribed for taking an appeal, which motion was subsequently denied, they had one (1) day from receipt of a copy of
the order denying … new trial within which to perfect [an] appeal …. Since defendants had received a copy of the order
denying their motion for new trial on 09 October 2003, reckoned from that date, they only have one (1) day left within
which to file the notice of appeal. But instead of doing so, the defendants filed a motion for reconsideration which was
later declared by the Court as pro forma motion in the Order dated 25 November 2003. The running of the prescriptive
period, therefore, can not be interrupted by a pro forma motion. Hence the filing of the notice of appeal on 27
November 2007 came much too late for by then the judgment had already become final and executory. 26 (Words in
bracket added; Emphasis in the original.)
It cannot be over-emphasized at this stage that the special civil action of certiorari is limited to resolving only errors of
jurisdiction; it is not a remedy to correct errors of judgment. Hence, the petitioner’s lament, partly covered by and
discussed under the first ground for allowing its petition, about the trial court taking cognizance of the case
notwithstanding private respondent’s claim or action being barred by prescription and/or laches cannot be considered
favorably. For, let alone the fact that an action for the declaration of the inexistence of a contract, as here, does not
prescribe;27 that a void transfer of property can be recovered by accion reivindicatoria;28 and that the legal fiction of
indefeasibility of a Torrens title cannot be used as a shield to perpetuate fraud, 29 the trial court’s disinclination not to
appreciate in favor of the Republic the general principles of prescription or laches constitutes, at best, errors of
judgment not correctable by certiorari.
The evidence adduced below indeed adequately supports a conclusion that the Office of the President, during the
administration of then President Marcos, wrested possession of the property in question and somehow secured a
certificate of title over it without a conveying deed having been executed to legally justify the cancellation of the old title
(TCT No. 118527) in the name of the private respondent and the issuance of a new one (TCT No. 118911) in the name of
petitioner Republic. Accordingly, granting private respondent’s basic plea for recovery of the Arlegui property, which
was legally hers all along, and the reinstatement of her cancelled certificate of title are legally correct as they are morally
right. While not exactly convenient because the Office of the President presently uses it for mix residence and office
purposes, restoring private respondent to her possession of the Arlegui property is still legally and physically feasible.
For what is before us, after all, is a registered owner of a piece of land who, during the early days of the martial law
regime, lost possession thereof to the Government which appropriated the same for some public use, but without going
through the legal process of expropriation, let alone paying such owner just compensation.
The Court cannot, however, stop with just restoring the private respondent to her possession and ownership of her
property. The restoration ought to be complemented by some form of monetary compensation for having been unjustly
deprived of the beneficial use thereof, but not, however, in the varying amounts and level fixed in the assailed decision
of the trial court and set to be executed by the equally assailed writ of execution. The Court finds the monetary award
set forth therein to be erroneous. And the error relates to basic fundamentals of law as to constitute grave abuse of
discretion.
As may be noted, private respondent fixed the assessed value of her Arlegui property at ₱2,388,990.00. And in the
prayer portion of her third amended complaint for recovery, she asked to be restored to the possession of her property
and that the petitioner be ordered to pay her, as reasonable compensation or rental use or occupancy thereof, the sum
of ₱500,000.00 a month, or ₱6 Million a year, with a five percent (5%) yearly increase plus interest at the legal rate
beginning July 1975. From July 1975 when the PSG allegedly took over the subject property to July 2003, a month before
the trial court rendered judgment, or a period of 28 years, private respondent’s total rental claim would, per the OSG’s
computation, only amount to ₱371,440,426.00. In its assailed decision, however, the trial court ordered the petitioner
to pay private respondent the total amount of over ₱1.48 Billion or the mind-boggling amount of ₱1,480,627,688.00, to
be exact, representing the reasonable rental for the property, the interest rate thereon at the legal rate and the
opportunity cost. This figure is on top of the ₱143,600,000.00 which represents the acquisition cost of the disputed
property. All told, the trial court would have the Republic pay the total amount of about ₱1.624 Billion, exclusive of
interest, for the taking of a property with a declared assessed value of ₱2,388,900.00. This is not to mention the award
of attorney’s fees in an amount equivalent to 15% of the amount due the private respondent.
In doing so, the respondent judge brazenly went around the explicit command of Rule 9, Section 3(d) of the Rules of
Court30 which defines the extent of the relief that may be awarded in a judgment by default, i.e., only so much as has
been alleged and proved. The court acts in excess of jurisdiction if it awards an amount beyond the claim made in the
complaint or beyond that proved by the evidence. 31 While a defaulted defendant may be said to be at the mercy of the
trial court, the Rules of Court and certainly the imperatives of fair play see to it that any decision against him must be in
accordance with law.32 In the abstract, this means that the judgment must not be characterized by outrageous one-
sidedness, but by what is fair, just and equitable that always underlie the enactment of a law.
Given the above perspective, the obvious question that comes to mind is the level of compensation which – for the use
and occupancy of the Arlegui property - would be fair to both the petitioner and the private respondent and, at the
same time, be within acceptable legal bounds. The process of balancing the interests of both parties is not an easy one.
But surely, the Arlegui property cannot possibly be assigned, even perhaps at the present real estate business standards,
a monthly rental value of at least ₱500,000.00 or ₱6,000,000.00 a year, the amount private respondent particularly
sought and attempted to prove. This asking figure is clearly unconscionable, if not downright ridiculous, attendant
circumstances considered. To the Court, an award of ₱20,000.00 a month for the use and occupancy of the Arlegui
property, while perhaps a little bit arbitrary, is reasonable and may be granted pro hac vice considering the following
hard realities which the Court takes stock of:
1. The property is relatively small in terms of actual area and had an assessed value of only P2,388,900.00;
2. What the martial law regime took over was not exactly an area with a new and imposing structure, if there was any;
and
3. The Arlegui property had minimal rental value during the relatively long martial law years, given the very restrictive
entry and egress conditions prevailing at the vicinity at that time and even after.
To be sure, the grant of monetary award is not without parallel. In Alfonso v. Pasay City,33 a case where a registered
owner also lost possession of a piece of lot to a municipality which took it for a public purposes without instituting
expropriation proceedings or paying any compensation for the lot, the Court, citing Herrera v. Auditor General,34 ordered
payment of just compensation but in the form of interest when a return of the property was no longer feasible.
The award of attorney’s fees equivalent to 15% of the amount due the private respondent, as reduced herein, is
affirmed.
The assessment of costs of suit against the petitioner is, however, nullified, costs not being allowed against the Republic,
unless otherwise provided by law.35
The assailed trial court’s issuance of the writ of execution 36 against government funds to satisfy its money judgment is
also nullified. It is basic that government funds and properties may not be seized under writs of execution or
garnishment to satisfy such judgments.37 Republic v. Palacio38 teaches that a judgment against the State generally
operates merely to liquidate and establish the plaintiff’s claim in the absence of express provision; otherwise, they can
not be enforced by processes of law.
Albeit title to the Arlegui property remains in the name of the petitioner Republic, it is actually the Office of the
President which has beneficial possession of and use over it since the 1975 takeover. Accordingly, and in accord with the
elementary sense of justice, it behooves that office to make the appropriate budgetary arrangements towards paying
private respondent what is due her under the premises. This, to us, is the right thing to do. The imperatives of fair
dealing demand no less. And the Court would be remiss in the discharge of its duties as dispenser of justice if it does not
exhort the Office of the President to comply with what, in law and equity, is its obligation. If the same office will
undertake to pay its obligation with reasonable dispatch or in a manner acceptable to the private respondent, then
simple justice, while perhaps delayed, will have its day. Private respondent is in the twilight of her life, being now over
90 years of age.39 Any delay in the implementation of this disposition would be a bitter cut.1âwphi1
WHEREFORE, the decision of the Regional Trial Court of Manila dated August 27, 2003 insofar as it nullified TCT No.
118911 of petitioner Republic of the Philippines and ordered the Register of Deeds of Manila to reinstate private
respondent Tarcila L. Mendoza’s TCT No. 118527, or to issue her a new certificate of title is AFFIRMED. Should it be
necessary, the Register of Deeds of Manila shall execute the necessary conveying deed to effect the reinstatement of
title or the issuance of a new title to her.
It is MODIFIED in the sense that for the use and occupancy of the Arlegui property, petitioner Republic is ordered to pay
private respondent the reasonable amount of ₱20,000.00 a month beginning July 1975 until it vacates the same and the
possession thereof restored to the private respondent, plus an additional interest of 6% per annum on the total amount
due upon the finality of this Decision until the same is fully paid. Petitioner is further ordered to pay private respondent
attorney's fees equivalent to 15% of the amount due her under the premises.
Accordingly, a writ of certiorari is hereby ISSUED in the sense that:
1. The respondent court’s assailed decision of August 27, 2003 insofar as it ordered the petitioner Republic of the
Philippines to pay private respondent Tarcila L. Mendoza the sum of One Billion Four Hundred Eighty Million Six
Hundred Twenty Seven Thousand Six Hundred Eighty Eight Pesos (₱1,480,627,688.00) representing the purported rental
use of the property in question, the interest thereon and the opportunity cost at the rate of 3% per annum plus the
interest at the legal rate added thereon is nullified. The portion assessing the petitioner Republic for costs of suit is also
declared null and void.
2. The Order of the respondent court dated December 19, 2003 for the issuance of a writ of execution and the Writ of
Execution dated December 22, 2003 against government funds are hereby declared null and void. Accordingly, the
presiding judge of the respondent court, the private respondent, their agents and persons acting for and in their
behalves are permanently enjoined from enforcing said writ of execution.
However, consistent with the basic tenets of justice, fairness and equity, petitioner Republic, thru the  Office of the
President, is hereby strongly enjoined to take the necessary steps, and, with reasonable dispatch, make the appropriate
budgetary arrangements to pay private respondent Tarcila L. Mendoza or her assigns the amount adjudged due her
under this disposition.
SO ORDERED.

Facts:
On 02 June 1999, Tarcila Laperal Mendoza filed an action for the annulment or declaration of nullity of the title and deed
of sale of a property against the Republic of the Philippines (in whose name the title to the property was transferred and
registered) in the RTC of Manila.
The case was initially dismissed by the presiding Judge of the Manila RTC on the ground of state immunity. A petition for
certiorari was filed with the Court of Appeals which reversed the trial court’s ruling and remanded the case to the trial
court for further proceedings. The Supreme Court affirmed.

Upon the inhibition of the presiding Judge of the Manila RTC (Branch 35), the case was re-raffled Branch 37, with
respondent Vicente A. Hidalgo as presiding Judge.

In an Order, Judge Hidalgo declared the Republic in default for failure of Solicitor Ramirez, the handling solicitor, to file
the required Answer within the period prayed for in his motion for extension dated 21 May 2003. On 27 August 2003,
Judge Hidalgo rendered a decision in favor of plaintiff Mendoza. On 10 December 2003, respondent issued an order
directing the issuance of a writ of execution. On 22 December 2003, a writ of execution was issued.

Issue:
Whether the respondent Judge violated the Constitution and the fundamental rule that government funds are exempt
from execution or garnishment when he caused the issuance of the writ of execution against the Republic

Ruling:
Yes, the respondent judge violated the constitution since no costs shall be allowed against the government of the
Philippines where the government is the unsuccessful party.

In declaring the government answerable to the attorney’s fees of the plaintiff and other costs of the suit, the respondent
utterly disregarded the well-established rule that costs of suit are not recoverable against the government. Also, the
Court ruled that court costs are not recoverable from a government agency.

5. Republic vs. Villasor (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.

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.

6. Merritt vs. Government of the Philippine Islands (G.R. No. 11154, March 21, 1916)

E. MERRITT, plaintiff-appellant,
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.

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.

7. Mun. of San Fernando vs. Firme (G.R. No. 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.

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.
8. Mun. of Makati vs. CA (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.

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.

FACTS:
An action for eminent domain was filed by petitioner Municipality of Makati, attached was a certification that a bank
account (Account No. S/A 265-537154-3) opened with the PNB Buendia Branch. After due hearing, respondent Judge
fixed the appraised value of the property to 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. Private respondent moved for the
issuance of a writ of execution, followed by the garnishment of petitioners fund with PNB Buendia Branch. Petitioner
alleges that it has two accounts with PNB Buendia:
(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.
Petitioner claims that only the first PNB account may be garnished, but not the second.

ISSUE: 
Is the second PNB account (S/A 263-530850-7) exempt from garnishment?

HELD: 
YES. 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 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  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.

9. City of Caloocan vs. Judge Allarde (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.

Assailed in this petition for certiorari is the decision1 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 Santiago’s 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</p>
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 Santiago’s 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 City’s abuse and
misuse of the rules of judicial procedure. The City’s 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) manager’s 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
Santiago’s 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 manager’s 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 Caloocan’s 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 Sheriff’s 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 court’s 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 City’s 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 Santiago’s 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 City’s 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 petitioner’s 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 mayor’s signature approving the budget ordinance was his assent to the
appropriation of funds for respondent Santiago’s 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
City’s 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 Abracia’s 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 City’s 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.

FACTS: 
The City Mayor, through an ordinance, 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, which was ruled in their favor and has attained finality. Later, all
dismissed employees were paid their back wages except respondent Santiago who was only partially paid. City of
Caloocan resorted to several attempts to delay the payment of remaining unpaid back wages with interest of Santiago
by filing another action with the Court of Appeals and later, inquiry from the Civil Service Commission. Both were not
favorable to the City.
When the City Council of Caloocan enacted appropriation Ordinance No. 0134, Series of 1992 which included the
amount of P439,377.14 claimed by Santiago, Judge Allarde issued an order for the City of Caloocan to deliver to the RTC
a manager’s check for the satisfaction of the judgment.  When the City Mayor refused to sign the check intended for
Santiago’s payment, Judge Allarde ordered the Sheriff to garnish the funds of the City of Caloocan. The order was
questioned by the City contending their public funds are beyond the reach of garnishment.

ISSUE: 
Is Judge Allarde correct in ordering the garnishment of City funds to satisfy the judgment in favor of Santiago?

HELD: 
YES. 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. 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. 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.
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 Santiago’s 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 City’s monetary
obligation to her. The judgment of the trial court could then be validly enforced against such funds.

10. PNB vs. Pabalan (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.

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.  7 There 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.