Minucher vs. Court of Appeals (G.R. No.

142396, February 11, 2003)

G.R. No. 142396 February 11, 2003

KHOSROW MINUCHER, petitioner,

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

DECISION

VITUG, J.:

Sometime in May 1986, an Information for violation of Section 4 of Republic Act No. 6425, otherwise also known as
the "Dangerous Drugs Act of 1972," was filed against petitioner Khosrow Minucher and one Abbas Torabian with the
Regional Trial Court, Branch 151, of Pasig City. The criminal charge followed a "buy-bust operation" conducted by
the Philippine police narcotic agents in the house of Minucher, an Iranian national, where a quantity of heroin, a
prohibited drug, was said to have been seized. The narcotic agents were accompanied by private respondent Arthur
Scalzo who would, in due time, become one of the principal witnesses for the prosecution. On 08 January 1988,
Presiding Judge Eutropio Migrino rendered a decision acquitting the two accused.

On 03 August 1988, Minucher filed Civil Case No. 88-45691 before the Regional Trial Court (RTC), Branch 19, of
Manila for damages on account of what he claimed to have been trumped-up charges of drug trafficking made by
Arthur Scalzo. The Manila RTC detailed what it had found to be the facts and circumstances surrounding the case.

"The testimony of the plaintiff disclosed that he is an Iranian national. He came to the Philippines to study in the
University of the Philippines in 1974. In 1976, under the regime of the Shah of Iran, he was appointed Labor 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.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur

Footnotes

1 Rollo, pp. 39-42.

2 Rollo. p. 51.

3 Linzag vs. CA, 291 SCRA 304.

4 Minucher vs. Court of Appeals, 214 SCRA 242.

5 For documentary Exhibits Nos. 1-8, see Rollo, pp. 143-155.

6 For Documentary Exhibits Nos. 9-13, See Rollo, pp. 156-168.

7 Eileen Denza, "Diplomatic Law, A Commentary on the Vienna Convention on Diplomatic Relations," 2nd
Edition, Claredon Press, Oxford, 1998, at 210.

8 Ibid.

9 Article 3 of the Vienna Convention enumerates the functions of the diplomatic mission as

(a) representing the sending State in the receiving State;

(b) protecting in the receiving State the interests of the sending State and of its nationals, within the
limits permitted by international law;

(c) negotiating with the Government of the receiving State;

(d) ascertaining by all lawful means conditions and developments in the receiving State, and
reporting thereon to the Government of the sending State;

(e) promoting friendly relations between the sending State and the receiving State, and developing
their economic, cultural and scientific relations.

10 Ambassadors are diplomatic agents of the first class, who deal, as a rule with the Minister of Foreign
Affairs or the Secretary of State, as the case may be. (Melquiades J. Gamboa, "Elements of Diplomatic and
Consular Practice, A Glossary," Central Lawbook Publishing, Co., 1966, p. 19.)

11 Envoysare diplomatic agents of the second class. This is the title of the head of legation as distinguished
from an embassy, the head of which is called Ambassador Extraordinary and Plenipotentiary. Like the
Ambassador, the envoy is also accredited to the Head of State. (Gamboa, p. 190.)

12 Charges d' Affairs are either en titre or ad interim. Charges d' Affairs en titre are appointed on a permanent
basis and belong to the fourth class of diplomatic envoys, the other three being ambassadors, ministers
plenipotentiary and envoys extraordinary, and ministers resident. He is the head of the legation in his own
right and is not accredited to the head of State but to the foreign office. According to Radloric, charges d'
affairs are sometimes used to described a person who has been placed in custody of the archives and other
property of a mission in a country with which formal diplomatic relations are not maintained. Charges d'
affairs ad interim, in contrast are usually those second in command of the diplomatic mission – minister,
counselor or first secretary, who are only temporarily in charge of the mission during the absence of the
head of the mission. He is not accredited either to the Head of State or the Foreign Office. (Gamboa, Ibid.,
pp. 51-52.)

13 The classification of diplomatic representatives was considered significant before because direct
communication with the head of state depended on the rank of the diplomat and, moreover, only powerful
states were regarded as entitled to send envoys of the highest rank. At present however, diplomatic matters
are usually discussed not with the head of state but with the foreign secretary regardless of the diplomat's
rank. Moreover, it has become the practice now for even the smallest and the weakest states to send
diplomatic representatives of the highest rank, even to the major powers. (Cruz, International Law, 1985
Edition, p. 145.)

14 Gamboa, supra., pp. 32-33.

 15 48 SCRA 242.

16 J.L. Brierly, "The Law of Nations," Oxford University Press, 6th Edition, 1963, p. 244.

17 Denza, supra., at 16.

18 Ibid.

19 Ibid., at 55.

20 Charles G. Fenwick, "International Law," Appleton-Century-Crofts, Inc., New York, 1948, p. 307-308.

21 The international law on sovereign immunity of states from suit in the courts of another state has evolved
from national court decisions with good deal of variance in perspectives. Even though national cases have
been the major source of pronouncements on sovereign immunity, it should be noted that these constitute
evidence of customary international law now widely recognized. In the latter half of the 20th century, a great
deal of consensus on what is covered by sovereign immunity appears to be emerging, i.e., that state
immunity covers only acts which deal with the government functions of a state, and excludes, any of its
commercial activities, or activities not related to "sovereign acts." The consensus involves a more defined
differentiation between public acts (juri imperii) and private acts (jure gestionis). (Gary L. Maris,
"International Law, An Introduction," University Press of America, 1984, p. 119; D.W. Grieg, "International
Law," London Butterworths, 1970, p. 221.)

The United States for example, does not claim immunity for its publicly owned or operated merchant
vessels. The Italian courts have rejected claims of immunity from the US Shipping Board, although a
state body, as it could not be identified with the American government on the ground that
undertaking maritime navigation and business as a commercial enterprise do not constitute a
sovereign act. (D.W. Grieg, "International Law," London Butterworths, 1970, p. 221.)

22 SeeSchooner Exchange vs. McFaddon, 7 Cranch 116 (1812), cited in Charles G. Fenwick, "International
Law," New York, 3rd Edition (1948), p. 307.

23 United States of America, et al. vs. Guinto, etc., et al., G.R. No. 76607, 26 February 1990.

24 182 SCRA 644.

25 At pp. 653-659.

26 191 SCRA 713

27 At pp. 727-728.

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

G.R. No. 125865 January 28, 2000

JEFFREY LIANG (HUEFENG), petitioner,

vs.
PEOPLE OF THE PHILIPPINES, respondent.

YNARES-SANTIAGO, J.:

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.1âwphi1.nêt

Davide, Jr., C.J., Puno, Kapunan and Pardo, JJ., concur.

Footnotes

1 See United States v. Guinto, 182 SCRA 644 [1990].

2 Chavez v. Sandiganbayan, 193 SCRA 282 [1991].

3 K.H. Wylie v. Rarang, 209 SCRA 357, 368 [1992].

4 Shauf v. CA, 191 SCRA 713 [1990]; Animos v. Phil. Veterans Affairs Office, 174 SCRA 214 [1989]; Dumlao
v. CA, 114 SCRA 247 [1982].

5 Sec. 31, 1 (c); See also Minucher v. CA, 214 SCRA 242 [1992].

6 See Del Rosario, Jr. v. Bartolome, 270 SCRA 645 [1997].

7 People v. Abejuela, 38 SCRA 324 [1971].

 8 Sec. 1, Rule 112, Rules of Criminal Procedure.

9 People v. Gomez, 117 SCRA 72 [1982]; People v. Casiano, 1 SCRA 478 [1961].

The Holy See vs. Rosario (G.R. No. 101949, December 1, 1994)

G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner,

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

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

QUIASON, J.:

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

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

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

Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in the real estate
business.

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

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

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

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

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

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

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

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

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

On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991, petitioner filed a "Motion
for a Hearing for the Sole Purpose of Establishing Factual Allegation for claim of Immunity as a Jurisdictional
Defense." So as to facilitate the determination of its defense of sovereign immunity, petitioner prayed that a hearing
be conducted to allow it to establish certain facts upon which the said defense is based. Private respondent
opposed this motion as well as the motion for reconsideration.

On October 1, 1991, the trial court issued an order deferring the resolution on the motion for reconsideration until
after trial on the merits and directing petitioner to file its answer (Rollo, p. 22).

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

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

Private respondent opposed the intervention of the Department of Foreign Affairs. In compliance with the resolution
of this Court, both parties and the Department of Foreign Affairs submitted their respective memoranda.

II

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

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

In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic immunity in
a foreign court, it requests the Foreign Office of the state where it is sued to convey to the court that said defendant
is entitled to immunity.

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

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

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

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

III

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

A. The Holy See

Before we determine the issue of petitioner's non-suability, a brief look into its status as a sovereign state is in order.

Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and he, as the Holy See, was
considered a subject of International Law. With the loss of the Papal States and the limitation of the territory under
the Holy See to an area of 108.7 acres, the position of the Holy See in International Law became controversial
(Salonga and Yap, Public International Law 36-37 [1992]).

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

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

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

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

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

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

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

As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the generally accepted principles
of International Law. Even without this affirmation, such principles of International Law are deemed incorporated as
part of the law of the land as a condition and consequence of our admission in the society of nations (United States
of America v. Guinto, 182 SCRA 644 [1990]).

There are two conflicting concepts of sovereign immunity, each widely held and firmly established. According to the
classical or absolute theory, a sovereign cannot, without its consent, be made a respondent in the courts of another
sovereign. According to the newer or restrictive theory, the immunity of the sovereign is recognized only with regard
to public acts or acts jure imperii of a state, but not with regard to private acts or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago, Public International Law
194 [1984]).

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

The restrictive theory, which is intended to be a solution to the host of problems involving the issue of sovereign
immunity, has created problems of its own. Legal treatises and the decisions in countries which follow the restrictive
theory have difficulty in characterizing whether a contract of a sovereign state with a private party is an act jure
gestionis or an act jure imperii.

The restrictive theory came about because of the entry of sovereign states into purely commercial activities remotely
connected with the discharge of governmental functions. This is particularly true with respect to the Communist
states which took control of nationalized business activities and international trading.

This Court has considered the following transactions by a foreign state with private parties as acts jure imperii: (1)
the lease by a foreign government of apartment buildings for use of its military officers (Syquia v. Lopez, 84 Phil.
312 [1949]; (2) the conduct of public bidding for the repair of a wharf at a United States Naval Station (United States
of America v. Ruiz, supra.); and (3) the change of employment status of base employees (Sanders v. Veridiano, 162
SCRA 88 [1988]).

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

In the absence of legislation defining what activities and transactions shall be considered "commercial" and as
constituting acts jure gestionis, we have to come out with our own guidelines, tentative they may be.

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

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

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

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real estate business, surely
the said transaction can be categorized as an act jure gestionis. However, petitioner has denied that the acquisition
and subsequent disposal of Lot 5-A were made for profit but claimed that it acquired said property for the site of its
mission or the Apostolic Nunciature in the Philippines. Private respondent failed to dispute said claim.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The donation was made not for
commercial purpose, but for the use of petitioner to construct thereon the official place of residence of the Papal
Nuncio. The right of a foreign sovereign to acquire property, real or personal, in a receiving state, necessary for the
creation and maintenance of its diplomatic mission, is recognized in the 1961 Vienna Convention on Diplomatic
Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate and entered into force in the
Philippines on November 15, 1965.

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

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

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

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

IV

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

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

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

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

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

SO ORDERED.

Narvasa, C.J., Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan and Mendoza, JJ.,
concur.

Padilla, J., took no part.

Feliciano, J., is on leave.

Republic vs. Villasor (G.R. No. L-30671, November 28, 1973)

G.R. No. L-30671 November 28, 1973

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HON. GUILLERMO P. VILLASOR, as Judge of the Court of First Instance of Cebu, Branch I, THE
PROVINCIAL SHERIFF OF RIZAL, THE SHERIFF OF QUEZON CITY, and THE SHERIFF OF THE CITY OF
MANILA, THE CLERK OF COURT, Court of First Instance of Cebu, P. J. KIENER CO., LTD., GAVINO
UNCHUAN, AND INTERNATIONAL CONSTRUCTION CORPORATION, respondents.

Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo for petitioner.

Andres T. Velarde and Marcelo B. Fernan for respondents.

FERNANDO, J.:

The Republic of the Philippines in this certiorari and prohibition proceeding challenges the validity of an order issued
by respondent Judge Guillermo P. Villasor, then of the Court of First Instance of Cebu, Branch I,1 declaring a
decision final and executory and of an alias writ of execution directed against the funds of the Armed Forces of the
Philippines subsequently issued in pursuance thereof, the alleged ground being excess of jurisdiction, or at the very
least, grave abuse of discretion. As thus simply and tersely put, with the facts being undisputed and the principle of
law that calls for application indisputable, the outcome is predictable. The Republic of the Philippines is entitled to
the writs prayed for. Respondent Judge ought not to have acted thus. The order thus impugned and the alias writ of
execution must be nullified.

In the petition filed by the Republic of the Philippines on July 7, 1969, a summary of facts was set forth thus: "7. On
July 3, 1961, a decision was rendered in Special Proceedings No. 2156-R in favor of respondents P. J. Kiener Co.,
Ltd., Gavino Unchuan, and International Construction Corporation, and against the petitioner herein, confirming the
arbitration award in the amount of P1,712,396.40, subject of Special Proceedings. 8. On June 24, 1969, respondent
Honorable Guillermo P. Villasor, issued an Order declaring the aforestated decision of July 3, 1961 final and
executory, directing the Sheriffs of Rizal Province, Quezon City [as well as] Manila to execute the said decision. 9.
Pursuant to the said Order dated June 24, 1969, the corresponding Alias Writ of Execution [was issued] dated June
26, 1969, .... 10. On the strength of the afore-mentioned Alias Writ of Execution dated June 26, 1969, the Provincial
Sheriff of Rizal (respondent herein) served notices of garnishment dated June 28, 1969 with several Banks,
specially on the "monies due the Armed Forces of the Philippines in the form of deposits sufficient to cover the
amount mentioned in the said Writ of Execution"; the Philippine Veterans Bank received the same notice of
garnishment on June 30, 1969 .... 11. The funds of the Armed Forces of the Philippines on deposit with the Banks,
particularly, with the Philippine Veterans Bank and the Philippine National Bank [or] their branches are public funds
duly appropriated and allocated for the payment of pensions of retirees, pay and allowances of military and civilian
personnel and for maintenance and operations of the Armed Forces of the Philippines, as per Certification dated
July 3, 1969 by the AFP Controller,..."2. The paragraph immediately succeeding in such petition then alleged: "12.
Respondent Judge, Honorable Guillermo P. Villasor, acted in excess of jurisdiction [or] with grave abuse of
discretion amounting to lack of jurisdiction in granting the issuance of an alias writ of execution against the
properties of the Armed Forces of the Philippines, hence, the Alias Writ of Execution and notices of garnishment
issued pursuant thereto are null and void."3 In the answer filed by respondents, through counsel Andres T. Velarde
and Marcelo B. Fernan, the facts set forth were admitted with the only qualification being that the total award was in
the amount of P2,372,331.40.4

The Republic of the Philippines, as mentioned at the outset, did right in filing this certiorari and prohibition
proceeding. What was done by respondent Judge is not in conformity with the dictates of the Constitution. .

It is a fundamental postulate of constitutionalism flowing from the juristic concept of sovereignty that the state as well
as its government is immune from suit unless it gives its consent. It is readily understandable why it must be so. In
the classic formulation of Holmes: "A sovereign is exempt from suit, not because of any formal conception or
obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that
makes the law on which the right depends."5 Sociological jurisprudence supplies an answer not dissimilar. So it was
indicated in a recent decision, Providence Washington Insurance Co. v. Republic of the Philippines,6 with its
affirmation that "a continued adherence to the doctrine of non-suability is not to be deplored for as against the
inconvenience that may be caused private parties, the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions are far greater if such a fundamental principle were abandoned and the
availability of judicial remedy were not thus restricted. With the well known propensity on the part of our people to go
to court, at the least provocation, the loss of time and energy required to defend against law suits, in the absence of
such a basic principle that constitutes such an effective obstacle, could very well be imagined."7
This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is therein
expressly provided: "The State may not be sued without its consent."8 A corollary, both dictated by logic and sound
sense from a basic concept is that public funds cannot be the object of a garnishment proceeding even if the
consent to be sued had been previously granted and the state liability adjudged. Thus in the recent case
of Commissioner of Public Highways v. San Diego,9 such a well-settled doctrine was restated in the opinion of
Justice Teehankee: "The universal rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit claimant's action 'only up to the completion of proceedings anterior to the stage of
execution' and that the power of the Courts ends when the judgment is rendered, since government funds and
properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on
obvious considerations of public policy. Disbursements of public funds must be covered by the corresponding
appropriation as required by law. The functions and public services rendered by the State cannot be allowed to be
paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by
law." 10 Such a principle applies even to an attempted garnishment of a salary that had accrued in favor of an
employee. Director of Commerce and Industry v. Concepcion, 11 speaks to that effect. Justice Malcolm as ponente
left no doubt on that score. Thus: "A rule which has never been seriously questioned, is that money in the hands of
public officers, although it may be due government employees, is not liable to the creditors of these employees in
the process of garnishment. One reason is, that the State, by virtue of its sovereignty, may not be sued in its own
courts except by express authorization by the Legislature, and to subject its officers to garnishment would be to
permit indirectly what is prohibited directly. Another reason is that moneys sought to be garnished, as long as they
remain in the hands of the disbursing officer of the Government, belong to the latter, although the defendant in
garnishment may be entitled to a specific portion thereof. And still another reason which covers both of the foregoing
is that every consideration of public policy forbids it." 12

In the light of the above, it is made abundantly clear why the Republic of the Philippines could rightfully allege a
legitimate grievance.

WHEREFORE, the writs of certiorari and prohibition are granted, nullifying and setting aside both the order of June
24, 1969 declaring executory the decision of July 3, 1961 as well as the alias writ of execution issued thereunder.
The preliminary injunction issued by this Court on July 12, 1969 is hereby made permanent.

Zaldivar (Chairman), Antonio, Fernandez and Aquino, JJ., concur.

Barredo, J, took no part.

Footnotes

1 The other respondents are the Provincial Sheriff of Rizal, the Sheriff of Quezon City, 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.

2 Petition, pars. 7-11.

3 Ibid, par. 12.

4 Answer, par. III.

5 Kawananakoa v. Polyblank 205 U.S. 349 (1907).

6 L-26386, September 30, 1969, 29 SCRA 598.

7 Ibid, 601-602.

8 Article XV, Sec. 16.

9 L-30098, February 8, 1970, SCRA 616.

10 Ibid, 625. The opinion cited among others the following decisions: Merritt v. Government, 34 Phil.
311 (1916); Visayan Refining Co. v. Camus, 40 Phil. 550 (1919); Director of Commerce v.
Concepcion, 43 Phil. 384 (1922); Belleng Republic, L-19856, Sept. 16, 1963, 9 SCRA 6; Republic v.
Palacio, L-20322, May 29, 1968, 23 SCRA 899.

11 43 Phil. 384 (1922).

12 Ibid, 386.

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.

Sycip, Salazar, Luna Manalo & Feliciano for petitioner.

A. E. Dacanay for private respondent.

Office of the Solicitor General Camilo D. Quiason as amicus curiae.

FERNANDO, J.:p

There is nothing novel about the question raised in this certiorari proceeding against the then Judge Tito V. Tizon,
filed by petitioner Donald Baer, then Commander of the United States Naval Base, Subic Bay, Olongapo, Zambales,
seeking to nullify the orders of respondent Judge denying his motion to dismiss a complaint filed against him by the
private respondent, Edgardo Gener, on the ground of sovereign immunity of a foreign power, his contention being
that it was in effect a suit against the United States, which had not given its consent. The answer given is supplied
by a number of cases coming from this Tribunal starting from a 1945 decision, Raquiza v. Bradford1 to Johnson v.
Turner,2 promulgated in 1954. The doctrine of immunity from suit is of undoubted applicability in this jurisdiction. It
cannot be otherwise, for under the 1935 Constitution, as now, it is expressly made clear that the Philippines "adopts
the generally accepted principles of international law as part of the law of the Nation."3 As will subsequently be
shown, there was a failure on the part of the lower court to accord deference and respect to such a basic doctrine, a
failure compounded by its refusal to take note of the absence of any legal right on the part of petitioner. Hence,
certiorari is the proper remedy.

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.

Zaldivar, Antonio, Fernandez and Aquino, JJ., concur.

Barredo, J., took no part.

Footnotes

1 75 Phil. 50.

2 94 Phil. 807. The other cases from Raquiza v. Bradford follow: Tubb and Tedrow v. Griess, 78 Phil.
249 (1947); Miquiabas v. Commanding General, 80 Phil. 262 (1948); Dizon v. Phil. Ryukus
Command, 81 Phil. 286 (1948); Syquia v. Almeda Lopez, 84 Phil. 312 (1949); Marvel Building Corp.
v. Philippine War Damage Commission, 85 Phil. 27 (1949); Marquez Lim v. Nelson, 87 Phil. 328
(1950); Philippine Alien Property Administration v. Castelo, 89 Phil. 568 (1951); Parreno v.
McGranery, 92 Phil. 791 (1953).

3 According to Article II, Sec. 3 of the 1935 Constitution: "The Philippines renounces war as an
instrument of national policy, and adopts the generally accepted principles of international law as
part of the law of the Nation." The same provision is found in the present Constitution, Article II, Sec.
3, reading thus: "The Philippines renounces war as an instrument of national policy, adopts the
generally accepted principles of international law as part of the law of the land, and adheres to the
policy of peace, equality, justice, freedom, cooperation, and amity with all nations."

4 Petition, par. 2(a) and (b).

5 Ibid, par. 2(d).

6 Ibid, par. 2(e).

7 Ibid, par. 2(f).

8 Ibid, par. 2(i).

9 Ibid, par. 2(j).

10 106 US 196 (1882).

11 330 US 731 (1947).

 12 7 Cranch 116..

13 301 US 324.

14 75 Phil. 50.

15 97 US 509 (1879).

16 75 Phil. 50, 60.

17 78 Phil. 249 (1947).

18 Ibid, 252-254.

19 Cf. People v. Acierto, 92 Phil. 534 (1953) and People v. Gozo, L-36409,Oct. 26, 1973, 53 SCRA
476.

20 84 Phil. 312 (1949).

21 Ibid, 323.

22 Ibid.

23 85 Phil. 27 (1949).

24 Ibid, 32.

25 87 Phil. 328 (1950).

26 Ibid, 329.

27 89 Phil. 568 (1951).

28 92 Phil. 791 (1953).

29 Ibid, 792. The excerpt continues with a reference to the Syquia, Marvel Building Corporation, and
Marquez Lim decisions.

30 94 Phil. 807 (1954).

31 84 Phil. 312 (1949).

32 Petition, paragraph 2 (2).

33 80 Phil. 262 (1948).

34 81 Phil. 286 (1948).

35 80 Phil. 262 (1948).

36 Petition, paragraph 3.

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.

Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in 85750.

Dominguez, Armamento, Cabana & Associates for petitioner in G.R. No. 89331.

Jimenez & Associates for IRRI.

Alfredo L. Bentulan for private respondent in 85750.

MELENCIO-HERRERA, J.:

Consolidated on 11 December 1989, these two cases involve the validity of the claim of immunity by the
International Catholic Migration Commission (ICMC) and the International Rice Research Institute, Inc. (IRRI) from
the application of Philippine labor laws.

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.

Padilla, Sarmiento and Regalado, JJ., concur.

Paras, J., is on leave.

Footnotes

1 Article XIII, Section 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full 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.

2 RULE V. Section 7. Appeal — Any aggrieved party may appeal the order of the Med-Arbiter to the
Bureau only on the following grounds: a) grave abuse of discretion and b) gross incompetence. The
appeal shall specifically state the grounds relied upon by the appellant with supporting
memorandum.

Section 8. Where to file appeal — appellant shall file his appeal which shall be under oath, in the
Regional Office where the case originated, copy furnished the appellee.

Section 9. Period to Appeal. — The appeal shall be filed within ten (10) working days from receipt of
the Order by the appellant. Likewise, the appellee shall file his answer thereto within ten (10) working
days from receipt of the appeal. The Regional Director shall immediately forward the entire records
of the case to the Bureau.

Section 10. Decision of the Bureau is final and unappealable. — The Bureau shall have twenty (20)
working days within which to decide the appeal from receipt of the records of the case. The decision
of the Bureau in all cases shall be final and unappealable.

3 World Health Organization and Dr. Leonce Verstuyft v. Hon. Benjamin Aquino, et al., L-35131, 29
November 1972, 48 SCRA 242.

4 MICHAEL AKEHURST A MODERN INTRODUCTION TO INTERNATIONAL LAW (1984) at 69.

5 The leading judicial authority on the personality of international organizations is the advisory
opinion even by the ICJ in the Reparation for Injuries Suffered in the Service of the United Nations
Case ([1949] I.C.J. Rep 174) where the Court recognized the UNs international personality.

6 M. AKEHURST supra, at 70.

 7 J.L. BRIERLY, THE LAW OF NATIONS (1963) at 95.

8 Article 57. — 1. The various specialized-agencies, established by inter-governmental agreement

and having wide international responsibilities, as defined in their basic instruments, in economic,
social, cultural, educational, health, and related fields, shall be brought into relationship with the
United Nations in accordance with the provisions of Article 63.

2. Such agencies thus brought into relationship with the United Nations are hereinafter referred to as
specialized agencies.

9 Article 63. — 1. The Economic and Social Council may enter into agreements with any of the
agencies referred to in Article 57, defining the terms on which the agency concerned shall be
brought into relationship with the United Nations. Such agreements shall be subject to approval by
the General Assembly.

2. It may co-ordinate the activities of the specialized agencies through consultation with and
recommendations to such agencies and through recommendations to the General Assembly and to
the Members of the United Nations.

10 BRIERLY, supra, at 121-122.

11 C. WILFRED JENKS, INTERNATIONAL IMMUNITIES (1961) at 2-3.

12 Ibid., at 17.

13 Ibid.

14 Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare.

15 Article III, Section 8. The right of the people, including those employed in the public and private
sectors, to form unions, associations, or societies for purposes not contrary to law shall not be
abridged.

16 Article 243. Coverage and Employees' Right to Self- Organization. — All persons employed in
commercial, industrial and agricultural enterprises and in religious, charitable, medical or educational
institutions whether operating for profit or not, shall have the right to self-organization and to form,
join or assist labor organizations of their own choosing for purposes of collective bargaining.
Ambulant, intermittent and itinerant workers, self- employed people, rural workers and those without
any definite employees may form labor organizations for their mutual aid and protection.

Article 246. Non-abridgement of Right to Self-organization. — It shall be unlawful for any person to
restrain, coerce, discriminate against or unduly interfere with employees and workers in their
exercise of the right to self-organization. Such right shall include the rignt to form, join, or assist labor
organizations for the purpose of collective bargaining through representatives of their own choosing
and to engage in lawful concerted activities for the same purpose or for their mutual aid and
protection, subject to the provisions of Article 264 of this Code.

17 This Convention, adopted by the U.N. General Assembly on November 21, 1947, was concurred
in by the Philippine Senate under Senate Resolution No. 21, dated 17 May 1949. The Philippine
Instrument of Ratification was signed by the Philippine President on 21 February 1959. (Vol. 1, Phil.
Treaty Series, p. 621).

18 JENKS, supra at 38.

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.

Sycip, Salazar, Luna, Manalo and Feliciano for petitioners.

Emilio L. Baldia for respondents.

TEEHANKEE, J.:p

An original action for certiorari and prohibition to set aside respondent judge's refusal to quash a search warrant
issued by him at the instance of respondents COSAC (Constabulary Offshore Action Center) officers for the search
and seizure of the personal effects of petitioner official of the WHO (World Health Organization) notwithstanding his
being entitled to diplomatic immunity, as duly recognized by the executive branch of the Philippine Government and
to prohibit respondent judge from further proceedings in the matter.

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.

Concepcion, C.J., Makalintal, Zaldivar, Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

Castro, J., reserves his vote.

Footnotes

1 Respondents' Answer, Rollo, p. 138.

2 Citygram of March 6, 1972 of Secretary of Foreign Affairs Carlos P. Romulo to respondent judge,
Annex D, petition.

3 This penal provision of the tariff & customs code imposes a penalty of a fine of not less than
P600.00 nor more than P5000.00 and imprisonment for not less than 6 months nor more than two
years for unlawful importation and illegal possession of goods imported contrary to law, upon "Any
person who shall fraudulently import or bring into the Philippines, or assist in so doing, any article,
contrary to law, or shall receive, conceal, buy, sell, or in any manner facilitate the transportation,
concealment, or sale of such article after importation, knowing the same to have been imported
contrary to law," and states that "(W)hen, upon trial for a violation of this section, the defendant is
shown to have or to have had possession of the article in question, such possession shall be
deemed sufficient evidence to authorize conviction, unless the defendant shall explain the
possession to the satisfaction of the court...."

4 Respondent judge's justification in his said order reads in part as follows:

"... From the reply submitted by Captains Pedro S. Navarro and Antonio G. Relleve of the COSAC, it
appears that the articles contained in the two baggages allegedly belonging to Dr. Verstuyft so far
opened by them, are 120 bottles of assorted foreign wine and 15 tins of PX goods which are said to
be dutiable under the Customs and Tariff Code of the Philippines. The two COSAC officers further
manifested that they positively believe that there are more contraband items in the nine other huge
crates which are still unopened.... The articles so far found in the two crates opened by Capt.
Navarro and Relleve are not mentioned in the list of articles brought in by Dr. Verstuyft and are
highly dutiable under the Customs and Tariff Code and according to said officers they have strong
reasons to believe that the other remaining crates unopened contain contraband items. The Court is
certain that the World Health Organization would not tolerate violations of local laws by its officials
and/or representatives under a claim of immunity granted to them by the host agreement. Since the
right of immunity invoked by the Department of Foreign Affairs is admittedly relative and not
absolute, and there are strong and positive indications of violation of local laws, the Court declines to
suspend the effectivity of the search warrant issued in the case at bar...."

5 Aside from the Foreign Affairs Department's certification that the importation of 120 bottles of wine
is "ordinary in diplomatic practice," the Solicitor General took pains to inform the lower court that the
packing of Dr. Verstuyft's baggages and personal effects was done "by a packing company in Taipei
... (and) Dr. Verstuyft had no hand in the preparation of the packing list of his personal effects which
has been assailed by ASAC agents. Also implicit from the foregoing is the fact that Dr. Verstuyft had
no intention to violate Philippine laws by selling the 120 bottles of foreign wine and 15 tins of PX
goods in the Philippines. Otherwise, he need not have stored the same at the Eternit Corporation
where they may be subject to the probing eyes of government agents."

6 The Solicitor General cites that the Convention on the Privileges and Immunities of the Specialized
Agencies of the U.N. adopted on Nov. 21, 1947, and made applicable by ratification to the WHO
contains Article VII on abuse of privilege, calling for consultations between the Host State and the
U.S. agency concerned and in case no satisfactory result is reached for submittal to the International
Court of Justice for determination whether "such an abuse has occurred," and providing for the
customary procedure of requiring the offending official's departure in certain instances.

7 Section 1661, Rev. Administrative Code.

8 See Trost vs. Tompkins, 44A, 2b 226.

 9 See Ins. Co., 24 N.E. 2d 81, 281 N.Y. 362, reversing 5 N.Y.S. 2d 295, 254 App. Div. 511,
reargument denied 26 N.E. 2d 808, 282 N.Y. 676, motion denied 29 N.E. 2d 939, 284 N.Y. 633 (27-
5th D-1127).

10 See, United States v. Lee, 106 U. S. 196, 209, 1 S. Ct. 240, 27 L. Ed. 171; Ex parte Republic of
Peru, 318 U.S. 578, 63 S. CT. 793, 87 L. Ed. 1014; Republic of Mexico v. Hoffman, 324, U. S. 30,
35, 65 S. Ct. 530, 89 L. Ed. 729; Welleman vs. Chase Manhattan Bank 192 N.Y.S. 2d 469.

11 Supra. fn. 4.

12 Supra, fn. 5.

13 Supra, fn. 6.

14 This Convention was adopted by the U. N. General Assembly on Nov. 21, 1947; it was concurred
in by the Philippine Senate under Sen. Resolution No. 21, May 17, 1949; and the Philippine
Instrument of Ratification was signed by the President of the Republic on Feb. 21, 1959 applying the
Convention to the WHO. See 45 0. G. 3187 (1949) and Vol. I, Phil. Treaty series, p. 621.

15 In their answer to petition, respondents COSAC officers insist on their "belief and contention" that
the 120 bottles of foreign wine found by them "are far in excess, considered by any reasonable
standard of taste and elegance in the diplomatic world of the official mission and needs of a
diplomat, much more of the status of (petitioner), hence, they should be taxed" and on their
"conviction that the articles and effects ... are not in fact and in truth personal effects so as to be
comprehended within the privileges and immunities accorded representatives of (WHO)." Rollo, pp.
138-139.

16 The pertinent section of Rep. Act 75, entitled "An act to penalize acts which would impair the
proper observance by the Republic and inhabitants of the Philippines of the immunities, rights and
privileges of duly accredited foreign diplomatic and consular agents in the Philippines," reads: "Any
writ or process sued out or prosecuted by any person in any court of the Republic of the Philippines,
or by any judge or justice, whereby the person of any ambassador or public minister of any foreign
State, authorized and received as such by the President, or any domestic or domestic servant of any
such ambassador or minister is arrested or imprisoned, or his goods or chattels are distrained,
seized, or attacked, shall be deemed void, and every person by whom the same is obtained or
prosecuted, whether as party or as attorney, and every officer concerned in executing it, shall upon
conviction, be punished by imprisonment for not more than three years and a fine of not exceeding
two hundred pesos in the discretion of the court." (Section 4, emphasis supplied) As to whether this
Act may be invoked on behalf of petitioner (who does not pertain to the foreign diplomatic
corps), quaere.

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

EN BANC

[ 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.

DECISION

CRUZ, J.:

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

In G.R. No. 76607, the private respondents are suing several officers of the U.S. Air Force stationed in Clark Air Base in
connection with the bidding conducted by them for contracts for barbering 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 Roman 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 officials/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 barbershop
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 his 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 ‘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 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.’ 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 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, 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 re-sale
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 persons. 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.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes,
Griño-Aquino, Medialdea, and Regalado, JJ., concur.

[1] Civil Case No. 4772.

[2] Annex "B," Rollo, pp. 36-38.

[3] Rollo, p. 88.

[4] Civil Case No. 829-R(298).

[5] Annex "A," Rollo, p. 38.

[6] Civil Case No. 115-C-87.

[7] Annex "A," Rollo, p. 33.

[8] Rollo, p. 69.

[9] Civil Case No. 4996.

[10] Annex "A," Rollo, p. 58.

[11] Rollo, p. 181.

[12] Kawanakoa v. Polybank, 205 U.S. 349.

[13] De Haber v. Queen of Portugal, 17 Q.B. 171.

[14] Garcia v. Chief of Staff, 16 SCRA 120.

[15] 34 Phil. 311.

[16] Santos v. Santos, 92 Phil. 281; Lyons v. United States of America, 104 Phil. 593.

[17] Froilan v. Pan Oriental Shipping Co., G.R. No. 6060, September 30, 1950.

[18] Republic v. Purisima, 78 SCRA 470.

[19] United States of America v. Ruiz, 136 SCRA 487.

[20] Lim v. Brownell, 107 Phil. 345.

[21] 57 SCRA 1.

[22] 136 SCRA 487.

[23] 50 O.G. 1556.

[24] 162 SCRA 88.

[25] Supra.

USA vs. Ruiz (G.R. No. L-35645, May 22, 1985)

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

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

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

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

ABAD SANTOS, J.:

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

The factual background is as follows:

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

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

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

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

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

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

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

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

The petition is highly impressed with merit.

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

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

It is however contended that when a sovereign state enters into a contract with a private person, the
state can be sued upon the theory that it has descended to the level of an individual from which it
can be implied that it has given its consent to be sued under the contract. ...

xxx xxx xxx

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

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

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

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

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

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

The restrictive application of State immunity is proper only when the proceedings arise out of commercial
transactions of the foreign sovereign, its commercial activities or economic affairs. Stated differently, a State may be
said to have descended to the level of an individual and can thus be deemed to have tacitly given its consent to be
sued only when it enters into business contracts. It does not apply where the contract relates to the exercise of its
sovereign functions. In this case the projects are an integral part of the naval base which is devoted to the defense
of both the United States and the Philippines, indisputably a function of the government of the highest order; they
are not utilized for nor dedicated to commercial or business purposes.

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

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

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

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

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

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

Fernando, C.J., took no part.

Separate Opinions

MAKASIAR, J., dissenting:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Separate Opinions

MAKASIAR, J., dissenting:

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

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

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

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

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

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

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

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

The sanctity of upholding agreements freely entered into by the parties cannot be over emphasized. Whether the
parties are nations or private individuals, it is to be reasonably assumed and expected that the undertakings in the
contract will be complied with in good faith.
One glaring fact of modern day civilization is that a big and powerful nation, like the United States of America, can
always overwhelm small and weak nations. The declaration in the United Nations Charter that its member states are
equal and sovereign, becomes hollow and meaningless because big nations wielding economic and military
superiority impose upon and dictate to small nations, subverting their sovereignty and dignity as nations. Thus, more
often than not, when U.S. interest clashes with the interest of small nations, the American governmental agencies or
its citizens invoke principles of international law for their own benefit.

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

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

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

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

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

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

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

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

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

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

The majority opinion seems to mock the provision of paragraph 1 of the joint statement of President Marcos and
Vice-President Mondale of the United States dated May 4, 1978 that "the United States re-affirms that Philippine
sovereignty extends over the bases and that Its base shall be under the command of a Philippine Base
Commander, " which is supposed to underscore the joint Communique of President Marcos and U.S. President Ford
of December 7, 1975, under which "they affirm that sovereign equality, territorial integrity and political independence
of all States are fundamental principles which both countries scrupulously respect; and that "they confirm that
mutual respect for the dignity of each nation shall characterize their friendship as well as the alliance between their
two countries. "
The majority opinion negates the statement on the delineation of the powers, duties and responsibilities of both the
Philippine and American Base Commanders that "in the performance of their duties, the Philippine Base
Commander and the American Base Commander shall be guided by full respect for Philippine sovereignty on the
one hand and the assurance of unhampered U.S. military operations on the other hand and that "they shall promote
cooperation understanding and harmonious relations within the Base and with the general public in the proximate
vicinity thereof" (par. 2 & par. 3 of the Annex covered by the exchange of notes, January 7, 1979, between
Ambassador Richard W. Murphy and Minister of Foreign Affairs Carlos P. Romulo, Emphasis supplied).

Footnotes

* He signed before he left.

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

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.

DECISION

AZCUNA, J:

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 complaint3 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.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio,
Corona, Carpio-Morales, and Callejo, Sr., JJ., concur.
Austria-Martinez, J., on leave.

Footnotes

1 Rollo, pp. 168-174.

2 Rollo, p. 117.

3 Rollo, pp. 101-108.

4 Rollo, pp. 77-88.

5 Rollo, pp. 127-131.

6 Annex A of Petition; Rollo, pp. 29-39.

 7 Annex B of Petition; Rollo, p. 40.

8 United States of America v. Guinto, 182 SCRA 644, 653 (1990).

9 United States of America, et al v. Ruiz, 136 SCRA 487 (1987).

10 162 SCRA 88, 96 (1988).

11 Supra note 8.

12 Supra note 10 at 97.

13 The Holy See v. Rosario, et. al., 238 SCRA 524 (1994).

14 Supra note 9.

15 United States v. Rodrigo, 182 SCRA 644 (1990).

16 Supra note 8.

17 Supra note 14 at 536.

18 Supra note 16 at 6; Rollo, p. 201.

19 Comment, pp. 11, 17.

20 Comment, p. 20.

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

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.

DECISION

CARPIO MORALES, J.:

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 complaint2 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 Resolution4 of January
26, 2004. Petitioners’ motion for reconsideration having been denied by Resolution5 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 Resolution7 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. Maguad8 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 copy11 (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.

CONCHITA CARPIO MORALES

Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice

LUCAS P. BERSAMIN MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION

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

CONCHITA CARPIO MORALES

Associate Justice
Chairperson

CERTIFICATION

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

RENATO C. CORONA
Chief Justice

Footnotes

1 Annex "C" of the petition, rollo, pp. 59-60.

2 CA rollo, p. 197.

3 Id at. 32-36. Penned by Labor Arbiter Fatima Jambaro Franco.

4Id. at 26-29. Penned by Commissioner (now CA Associate Justice) Angelita A. Gacutan and concurred in
by Presiding Commissioner Raul T. Aquino and Commissioner Victoriano R. Calaycay.

5 Id. at 30-31.

6Id. at 95-104. Penned by Associate Justice Fernanda Lampas Peralta and concurred in by Associate
Justices Edgardo P. Cruz and Normandie B. Pizarro.

7 Id. at 137. Ibid.

8 G.R. No. 166363, August 15, 2006, 498 SCRA 639, 645 citing Catan v. NLRC, 160 SCRA 691.
 9Datuman v. First Cosmopolitan Manpower And Promotion Services, Inc., G.R. No. 156029, November 14,
2008, 571 SCRA 41, 42.

10 G.R. No. 145587, October 26, 2007, 537 SCRA 409, 430.

11 Annex ‘D" of the petition, rollo, pp. 61-63.

12 Annex "D-1" of the petition, id. at 64-66

13 Annex "E" of the petition, id. at 67.

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

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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.

DECISION

VILLARAMA, JR, J.:

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 comment8 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.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:

See Concurring Opinion

MARIA LOURDES P. A. SERENO
Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

(On official leave)

BIENVENIDO L. REYES
JOSE CATRAL MENDOZA*
Associate Justice
Associate Justice
 See Separate Concurring Opinion
ESTELA M. PERLAS-BERNABE
MARVIC M.V.F. LEONEN
Associate Justice
Associate Justice

(No Part)
FRANCIS H. JARDELEZA**
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the 1987 Constitution, it is hereby certified that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

* On official leave.

** No part.

1 T ubbataha Reefs Natural Park - <http://tubbatahareef org>.

2 Id.

3"AN ACT ESTABLISHING THE TUBBATAHA REEFS NATURAL PARK IN THE PROVINCE OF
PALAWAN AS A PROTECTED AREA UNDER THE NIPAS ACT (R.A. 7586) AND THE STRATEGIC
ENVIRONMENTAL PLAN (SEP) FOR PALAWAN ACT (R.A. 7611), PROVIDING FOR ITS MANAGEMENT
AND FOR OTHER PURPOSES."

4 Rollo, pp. 194-199.

5< http://manila.usembassy.gov/pressphotoreleases2013/navy-commander-expresses-regret-concerning-
uss-guardian-grounding.html>.

6"Joint Statement Between The Philippines And The United States On The USS Guardian Grounding On
Tubbatata Reef," February 5, 2013. Accessed. at US Embassy website -
<http://manila.usembassy.gov/jointstatementguardiantubbataha.html>.

7 Rollo, pp. 89-92.

8 Id. at 156-191. In a letter dated 27 May 2013, the DFA's Office of Legal Affairs informed this Court that it
has received from the Embassy of the United States the Notice sent by this Court, with a request to return
the same. It said that the US Embassy "asserts that it is not an agent for the service of process upon the
individuals named in court documents, and that the transmission of the Court documents should have been
done through diplomatic channels." (Id. at 255.)

9 Id. at 215-247.

Bayan Muna v. Romulo, G.R. No. 159618, February 1, 2011, 641 SCRA 244, 254, citing David v.
10

Macapagal-Arroyo, 522 Phil. 705, 755 (2006).

11Id., citing Jumamil v. Cafe, 507 Phil. 455, 465 (2005), citing Integrated Bar of the Philippines v. Zamora,
392 Phil. 6I8, 632-633 (2000).

12Biraogo v. Philippine Truth Commission of2010, G.R. Nos. 192935 & 193036, December 7, 2010, 637
SCRA 78, 151, citing Social Justice Society (SJS) v. Dangerous Drugs Board, et al., 591 Phil. 393, 404
(2008); Tatad v. Secretary of the Department of Energy, 346 Phil. 321 (1997) and De Guia v. COMELEC,
G.R. No. 104712, May 6, 1992, 208 SCRA 420, 422.

13 G.R. No. 101083, July 30, 1993, 224 SCRA 792.

14 Id. at 804-805.

15 Id. at 802-803.

16 See ANNOTATION TO THE RULES OF PROCEDURE FOR ENVIRONMENTAL CASES ..

17 Air Transportation Office v. Ramos, G.R. No. 159402, February 23, 2011, 644 SCRA 36, 41.

18 261 Phil. 777 (1990).

19 Id. at 790-792.

20 445 Phil. 250 (2003).

21 Id. at 269-270. Citations omitted.

22 Id. at 268, citing J.L. Brierly, "The Law of Nations," Oxford University Press, 6th Edition, 1963, p. 244.

23 Supra note 18, at 788-789 & 797.

24 United States of America v. Ruiz, 221 Phil. 179, 182-183 & 184 (1985).

25 G.R. No. 90314, November 27, 1990, 191 SCRA 713.

26 Id. at 727-728.

27 24 F Supp. 2d 155, 159 (D.P.R. 1997).

28 Merlin M. Magallona, A Primer on the Law of the Sea, 1997, p. 1.

29Bertrand Theodor L. Santos, "Untangling a Tangled Net of Confusion: Reconciling the Philippine Fishery
Poaching Law and the UNCLOS' World Bulletin, Vol. 18: 83-116 (July-December 2002), p. 96.

30 Anne Bardin, "Coastal State's Jurisdiction Over Foreign Vessels" 14 Pace Int'!. Rev. 27, 28 (2002).

31 Id. at 29.

32 Art. 2, UNCLOS.

33Art. 29 of UNCLOS defines warship as "a ship belonging to the armed forces of a State bearing the
external marks distinguishing such ships of its nationality, under the command of an officer duly
commissioned by the government of the State and whose name appears in the appropriate service list or its
equivalent, and manned by a crew which is under regular armed forces discipline."

34Commander Robert C. "Rock" De Tolve, JAGC, USN, "At What Cost? Americas UNCLOS Allergy in the
Time of 'Lav.fare'", 61 Naval L. Rev. 1, 3 (2012).

35 <http://www.jag.navy.mil/organizationlcode10lawofthesea.htm>.

36 See BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora, 396 Phil. 623, 652 (2000).

37 Rule 10, RULES OF PROCEDURE FOR ENVIRONMENTAL CASES.

38USS Port Royal (CG73)" - <http://navysite.de/cg/cg73.html>; "USS Port Royal Returns to Homeport",
Navy Military Home Page, Story Number NNS0902 l l-02 Release Date: 2/11/2009 6:00 AM -
<http://www.navymillsubmit/display.asp?story_id=42502>; "Navy, state reach settlement on USS Port Royal
damage'', posted Feb. 05, 2011 8:26 AM - <http:/!www.hawaiinewsnow.com!story/13974224/navystate-
reach-settlement-on-uss-port-royal-reef-damage>.

39 <http://manila.usembassy.gov/usgtargetedassistancetubbataha. html>.

Vinuya v. Romulo, G.R. No. 162230, April 28, 2010, 619 SCRA 533, 559, citing Detjen v. Central Leather
40

Co., 246 U.S. 297, 302 (1918).

41 Supra note 36.

42 Nicolas v. Secretary Romulo, et al., 598 Phil. 262. 280 & 285.
 Southeast Asian Fisheries Development Center vs. NLRC (206 SCRA 283)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

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.

Ramon Encarnacion for petitioners.

Caesar T. Corpus for private respondent.

NOCON, J.:

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

The antecedent facts of the case are as follows:

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

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

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

On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of termination to
private respondent informing him that due to the financial constraints being experienced by the department, his
services shall be terminated at the close of office hours on May 15, 1986 and that he is entitled to separation
benefits equivalent to one (1) month of his basic salary for every year of service plus other benefits (Rollo, p. 153).

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

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

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

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

WHEREFORE, premises considered, judgment is hereby rendered ordering respondents:

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

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

All other claims are hereby dismissed.

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

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

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

The petition is impressed with merit.

Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD) is an

international agency beyond the jurisdiction of public respondent NLRC.

It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia, Japan, Kingdom of
Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of Thailand and Republic of Vietnam
(Annex "H", Petition).

The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on January 16,1968.
Its purpose is as follows:

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

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

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

Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional
independence and freedom from control of the state in whose territory its office is located.

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

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

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

The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over SEAFDEC-AQD in
Opinion No. 139, Series of 1984 —
 4. One of the basic immunities of an international organization is immunity from local
jurisdiction, i.e., that it is immune from the legal writs and processes issued by the tribunals of the
country where it is found. (See Jenks, Id., pp. 37-44) The obvious reason for this is that the
subjection of such an organization to the authority of the local courts would afford a convenient
medium thru which the host government may interfere in there operations or even influence or
control its policies and decisions of the organization; besides, such subjection to local jurisdiction
would impair the capacity of such body to discharge its responsibilities impartially on behalf of its
member-states. In the case at bar, for instance, the entertainment by the National Labor Relations
Commission of Mr. Madamba's reinstatement cases would amount to interference by the Philippine
Government in the management decisions of the SEARCA governing board; even worse, it could
compromise the desired impartiality of the organization since it will have to suit its actuations to the
requirements of Philippine law, which may not necessarily coincide with the interests of the other
member-states. It is precisely to forestall these possibilities that in cases where the extent of the
immunity is specified in the enabling instruments of international organizations, jurisdictional
immunity from the host country is invariably among the first accorded. (See Jenks, Id.; See
also Bowett, The Law of International Institutions, pp. 284-1285).

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

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

Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286 [1987]) to justify its
assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the Court in said case explained why it
took cognizance of the case. Said the Court:

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

WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the courts or local
agency of the Philippine government, the questioned decision and resolution of the NLRC dated July 26, 1988 and
January 9, 1989, respectively, are hereby REVERSED and SET ASIDE for having been rendered without
jurisdiction. No costs.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.

============================================================================

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.

Solicitor General Estelito P. Mendoza, Assistant Solicitor General Santiago M. Kapunan, Solicitor Oscar C.
Fernandez and Special Attorney Renato P. Mabugat for petitioner.
Jose Q. Calingo for private respondent.

FERNANDO, Acting C.J.:

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.

Antonio, Aquino, Concepcion, Jr. and Santos, JJ., concur.

Barredo, J., took no part.

========================================================================

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

G.R. No. L-11154 March 21, 1916

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

Crossfield and O'Brien for plaintiff.

Attorney-General Avanceña for defendant..

TRENT, J.:

This is an appeal by both parties from a judgment of the Court of First Instance of the city of Manila in favor of the
plaintiff for the sum of P14,741, together with the costs of the cause.

Counsel for the plaintiff insist that the trial court erred (1) "in limiting the general damages which the plaintiff suffered
to P5,000, instead of P25,000 as claimed in the complaint," and (2) "in limiting the time when plaintiff was entirely
disabled to two months and twenty-one days and fixing the damage accordingly in the sum of P2,666, instead of
P6,000 as claimed by plaintiff in his complaint."

The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in finding that the collision
between the plaintiff's motorcycle and the ambulance of the General Hospital was due to the negligence of the
chauffeur; (b) in holding that the Government of the Philippine Islands is liable for the damages sustained by the
plaintiff as a result of the collision, even if it be true that the collision was due to the negligence of the chauffeur; and
(c) in rendering judgment against the defendant for the sum of P14,741.

The trial court's findings of fact, which are fully supported by the record, are as follows:

It is a fact not disputed by counsel for the defendant that when the plaintiff, riding on a motorcycle, was
going toward the western part of Calle Padre Faura, passing along the west side thereof at a speed of ten to
twelve miles an hour, upon crossing Taft Avenue and when he was ten feet from the southwestern
intersection of said streets, the General Hospital ambulance, upon reaching said avenue, instead of turning
toward the south, after passing the center thereof, so that it would be on the left side of said avenue, as is
prescribed by the ordinance and the Motor Vehicle Act, turned suddenly and unexpectedly and long before
reaching the center of the street, into the right side of Taft Avenue, without having sounded any whistle or
horn, by which movement it struck the plaintiff, who was already six feet from the southwestern point or from
the post place there.

By reason of the resulting collision, the plaintiff was so severely injured that, according to Dr. Saleeby, who
examined him on the very same day that he was taken to the General Hospital, he was suffering from a
depression in the left parietal region, a would in the same place and in the back part of his head, while blood
issued from his nose and he was entirely unconscious.

The marks revealed that he had one or more fractures of the skull and that the grey matter and brain was
had suffered material injury. At ten o'clock of the night in question, which was the time set for performing the
operation, his pulse was so weak and so irregular that, in his opinion, there was little hope that he would live.
His right leg was broken in such a way that the fracture extended to the outer skin in such manner that it
might be regarded as double and the would be exposed to infection, for which reason it was of the most
serious nature.

At another examination six days before the day of the trial, Dr. Saleeby noticed that the plaintiff's leg showed
a contraction of an inch and a half and a curvature that made his leg very weak and painful at the point of
the fracture. Examination of his head revealed a notable readjustment of the functions of the brain and
nerves. The patient apparently was slightly deaf, had a light weakness in his eyes and in his mental
condition. This latter weakness was always noticed when the plaintiff had to do any difficult mental labor,
especially when he attempted to use his money for mathematical calculations.

According to the various merchants who testified as witnesses, the plaintiff's mental and physical condition
prior to the accident was excellent, and that after having received the injuries that have been discussed, his
physical condition had undergone a noticeable depreciation, for he had lost the agility, energy, and ability
that he had constantly displayed before the accident as one of the best constructors of wooden buildings
and he could not now earn even a half of the income that he had secured for his work because he had lost
 50 per cent of his efficiency. As a contractor, he could no longer, as he had before done, climb up ladders
and scaffoldings to reach the highest parts of the building.

As a consequence of the loss the plaintiff suffered in the efficiency of his work as a contractor, he had to
dissolved the partnership he had formed with the engineer. Wilson, because he was incapacitated from
making mathematical calculations on account of the condition of his leg and of his mental faculties, and he
had to give up a contract he had for the construction of the Uy Chaco building."

We may say at the outset that we are in full accord with the trial court to the effect that the collision between the
plaintiff's motorcycle and the ambulance of the General Hospital was due solely to the negligence of the chauffeur.

The two items which constitute a part of the P14,741 and which are drawn in question by the plaintiff are (a) P5,000,
the award awarded for permanent injuries, and (b) the P2,666, the amount allowed for the loss of wages during the
time the plaintiff was incapacitated from pursuing his occupation. We find nothing in the record which would justify
us in increasing the amount of the first. As to the second, the record shows, and the trial court so found, that the
plaintiff's services as a contractor were worth P1,000 per month. The court, however, limited the time to two months
and twenty-one days, which the plaintiff was actually confined in the hospital. In this we think there was error,
because it was clearly established that the plaintiff was wholly incapacitated for a period of six months. The mere
fact that he remained in the hospital only two months and twenty-one days while the remainder of the six months
was spent in his home, would not prevent recovery for the whole time. We, therefore, find that the amount of
damages sustained by the plaintiff, without any fault on his part, is P18,075.

As the negligence which caused the collision is a tort committed by an agent or employee of the Government, the
inquiry at once arises whether the Government is legally-liable for the damages resulting therefrom.

Act No. 2457, effective February 3, 1915, reads:

An Act authorizing E. Merritt to bring suit against the Government of the Philippine Islands and authorizing
the Attorney-General of said Islands to appear in said suit.

Whereas a claim has been filed against the Government of the Philippine Islands by Mr. E. Merritt, of
Manila, for damages resulting from a collision between his motorcycle and the ambulance of the General
Hospital on March twenty-fifth, nineteen hundred and thirteen;

Whereas it is not known who is responsible for the accident nor is it possible to determine the amount of
damages, if any, to which the claimant is entitled; and

Whereas the Director of Public Works and the Attorney-General recommended that an Act be passed by the
Legislature authorizing Mr. E. Merritt to bring suit in the courts against the Government, in order that said
questions may be decided: Now, therefore,

By authority of the United States, be it enacted by the Philippine Legislature, that:

SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First Instance of the city of Manila
against the Government of the Philippine Islands in order to fix the responsibility for the collision between his
motorcycle and the ambulance of the General Hospital, and to determine the amount of the damages, if any,
to which Mr. E. Merritt is entitled on account of said collision, and the Attorney-General of the Philippine
Islands is hereby authorized and directed to appear at the trial on the behalf of the Government of said
Islands, to defendant said Government at the same.

SEC. 2. This Act shall take effect on its passage.

Enacted, February 3, 1915.

Did the defendant, in enacting the above quoted Act, simply waive its immunity from suit or did it also concede its
liability to the plaintiff? If only the former, then it cannot be held that the Act created any new cause of action in favor
of the plaintiff or extended the defendant's liability to any case not previously recognized.

All admit that the Insular Government (the defendant) cannot be sued by an individual without its consent. It is also
admitted that the instant case is one against the Government. As the consent of the Government to be sued by the
plaintiff was entirely voluntary on its part, it is our duty to look carefully into the terms of the consent, and render
judgment accordingly.

The plaintiff was authorized to bring this action against the Government "in order to fix the responsibility for the
collision between his motorcycle and the ambulance of the General Hospital and to determine the amount of the
damages, if any, to which Mr. E. Merritt is entitled on account of said collision, . . . ." These were the two questions
submitted to the court for determination. The Act was passed "in order that said questions may be decided." We
have "decided" that the accident was due solely to the negligence of the chauffeur, who was at the time an
employee of the defendant, and we have also fixed the amount of damages sustained by the plaintiff as a result of
the collision. Does the Act authorize us to hold that the Government is legally liable for that amount? If not, we must
look elsewhere for such authority, if it exists.

The Government of the Philippine Islands having been "modeled after the Federal and State Governments in the
United States," we may look to the decisions of the high courts of that country for aid in determining the purpose and
scope of Act No. 2457.

In the United States the rule that the state is not liable for the torts committed by its officers or agents whom it
employs, except when expressly made so by legislative enactment, is well settled. "The Government," says Justice
Story, "does not undertake to guarantee to any person the fidelity of the officers or agents whom it employs, since
that would involve it in all its operations in endless embarrassments, difficulties and losses, which would be
subversive of the public interest." (Claussen vs. City of Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, 9
Wheat, 720; 6 L. Ed., 199; and Beers vs. States, 20 How., 527; 15 L. Ed., 991.)

In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover damages from the state for personal
injuries received on account of the negligence of the state officers at the state fair, a state institution created by the
legislature for the purpose of improving agricultural and kindred industries; to disseminate information calculated to
educate and benefit the industrial classes; and to advance by such means the material interests of the state, being
objects similar to those sought by the public school system. In passing upon the question of the state's liability for
the negligent acts of its officers or agents, the court said:

No claim arises against any government is favor of an individual, by reason of the misfeasance, laches, or
unauthorized exercise of powers by its officers or agents. (Citing Gibbons vs. U. S., 8 Wall., 269; Clodfelter
vs. State, 86 N. C., 51, 53; 41 Am. Rep., 440; Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158;
Green vs. State, 73 Cal., 29; Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203; Story on Agency, sec. 319.)

As to the scope of legislative enactments permitting individuals to sue the state where the cause of action arises out
of either fort or contract, the rule is stated in 36 Cyc., 915, thus:

By consenting to be sued a state simply waives its immunity from suit. It does not thereby concede its
liability to plaintiff, or create any cause of action in his favor, or extend its liability to any cause not previously
recognized. It merely gives a remedy to enforce a preexisting liability and submits itself to the jurisdiction of
the court, subject to its right to interpose any lawful defense.

In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915, the Act of 1913, which
authorized the bringing of this suit, read:

SECTION 1. Authority is hereby given to George Apfelbacher, of the town of Summit, Waukesha County,
Wisconsin, to bring suit in such court or courts and in such form or forms as he may be advised for the
purpose of settling and determining all controversies which he may now have with the State of Wisconsin, or
its duly authorized officers and agents, relative to the mill property of said George Apfelbacher, the fish
hatchery of the State of Wisconsin on the Bark River, and the mill property of Evan Humphrey at the lower
end of Nagawicka Lake, and relative to the use of the waters of said Bark River and Nagawicka Lake, all in
the county of Waukesha, Wisconsin.

In determining the scope of this act, the court said:

Plaintiff claims that by the enactment of this law the legislature admitted liability on the part of the state for
the acts of its officers, and that the suit now stands just as it would stand between private parties. It is
difficult to see how the act does, or was intended to do, more than remove the state's immunity from suit. It
simply gives authority to commence suit for the purpose of settling plaintiff's controversies with the estate.
Nowhere in the act is there a whisper or suggestion that the court or courts in the disposition of the suit shall
depart from well established principles of law, or that the amount of damages is the only question to be
settled. The act opened the door of the court to the plaintiff. It did not pass upon the question of liability, but
left the suit just where it would be in the absence of the state's immunity from suit. If the Legislature had
intended to change the rule that obtained in this state so long and to declare liability on the part of the state,
it would not have left so important a matter to mere inference, but would have done so in express terms.
(Murdock Grate Co. vs. Commonwealth, 152 Mass., 28; 24 N.E., 854; 8 L. R. A., 399.)

In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon and considered, are as follows:

All persons who have, or shall hereafter have, claims on contract or for negligence against the state not
allowed by the state board of examiners, are hereby authorized, on the terms and conditions herein
contained, to bring suit thereon against the state in any of the courts of this state of competent jurisdiction,
and prosecute the same to final judgment. The rules of practice in civil cases shall apply to such suits,
except as herein otherwise provided.

And the court said:

 This statute has been considered by this court in at least two cases, arising under different facts, and in both
it was held that said statute did not create any liability or cause of action against the state where none
existed before, but merely gave an additional remedy to enforce such liability as would have existed if the
statute had not been enacted. (Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Melvin vs. State,
121 Cal., 16.)

A statute of Massachusetts enacted in 1887 gave to the superior court "jurisdiction of all claims against the
commonwealth, whether at law or in equity," with an exception not necessary to be here mentioned. In construing
this statute the court, in Murdock Grate Co. vs. Commonwealth (152 Mass., 28), said:

The statute we are discussing disclose no intention to create against the state a new and heretofore
unrecognized class of liabilities, but only an intention to provide a judicial tribunal where well recognized
existing liabilities can be adjudicated.

In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by the terms of the statute of New York,
jurisdiction of claims for damages for injuries in the management of the canals such as the plaintiff had sustained,
Chief Justice Ruger remarks: "It must be conceded that the state can be made liable for injuries arising from the
negligence of its agents or servants, only by force of some positive statute assuming such liability."

It being quite clear that Act No. 2457 does not operate to extend the Government's liability to any cause not
previously recognized, we will now examine the substantive law touching the defendant's liability for the negligent
acts of its officers, agents, and employees. Paragraph 5 of article 1903 of the Civil Code reads:

The state is liable in this sense when it acts through a special agent, but not when the damage should have
been caused by the official to whom properly it pertained to do the act performed, in which case the
provisions of the preceding article shall be applicable.

The supreme court of Spain in defining the scope of this paragraph said:

That the obligation to indemnify for damages which a third person causes to another by his fault or
negligence is based, as is evidenced by the same Law 3, Title 15, Partida 7, on that the person obligated, by
his own fault or negligence, takes part in the act or omission of the third party who caused the damage. It
follows therefrom that the state, by virtue of such provisions of law, is not responsible for the damages
suffered by private individuals in consequence of acts performed by its employees in the discharge of the
functions pertaining to their office, because neither fault nor even negligence can be presumed on the part of
the state in the organization of branches of public service and in the appointment of its agents; on the
contrary, we must presuppose all foresight humanly possible on its part in order that each branch of service
serves the general weal an that of private persons interested in its operation. Between these latter and the
state, therefore, no relations of a private nature governed by the civil law can arise except in a case where
the state acts as a judicial person capable of acquiring rights and contracting obligations. (Supreme Court of
Spain, January 7, 1898; 83 Jur. Civ., 24.)

That the Civil Code in chapter 2, title 16, book 4, regulates the obligations which arise out of fault or
negligence; and whereas in the first article thereof. No. 1902, where the general principle is laid down that
where a person who by an act or omission causes damage to another through fault or negligence, shall be
obliged to repair the damage so done, reference is made to acts or omissions of the persons who directly or
indirectly cause the damage, the following articles refers to this persons and imposes an identical obligation
upon those who maintain fixed relations of authority and superiority over the authors of the damage,
because the law presumes that in consequence of such relations the evil caused by their own fault or
negligence is imputable to them. This legal presumption gives way to proof, however, because, as held in
the last paragraph of article 1903, responsibility for acts of third persons ceases when the persons
mentioned in said article prove that they employed all the diligence of a good father of a family to avoid the
damage, and among these persons, called upon to answer in a direct and not a subsidiary manner, are
found, in addition to the mother or the father in a proper case, guardians and owners or directors of an
establishment or enterprise, the state, but not always, except when it acts through the agency of a special
agent, doubtless because and only in this case, the fault or negligence, which is the original basis of this
kind of objections, must be presumed to lie with the state.

That although in some cases the state might by virtue of the general principle set forth in article 1902
respond for all the damage that is occasioned to private parties by orders or resolutions which by fault or
negligence are made by branches of the central administration acting in the name and representation of the
state itself and as an external expression of its sovereignty in the exercise of its executive powers, yet said
article is not applicable in the case of damages said to have been occasioned to the petitioners by an
executive official, acting in the exercise of his powers, in proceedings to enforce the collections of certain
property taxes owing by the owner of the property which they hold in sublease.

That the responsibility of the state is limited by article 1903 to the case wherein it acts through a special
agent (and a special agent, in the sense in which these words are employed, is one who receives a definite
and fixed order or commission, foreign to the exercise of the duties of his office if he is a special official) so
 that in representation of the state and being bound to act as an agent thereof, he executes the trust confided
to him. This concept does not apply to any executive agent who is an employee of the acting administration
and who on his own responsibility performs the functions which are inherent in and naturally pertain to his
office and which are regulated by law and the regulations." (Supreme Court of Spain, May 18, 1904; 98 Jur.
Civ., 389, 390.)

That according to paragraph 5 of article 1903 of the Civil Code and the principle laid down in a decision,
among others, of the 18th of May, 1904, in a damage case, the responsibility of the state is limited to that
which it contracts through a special agent, duly empowered by a definite order or commission to perform
some act or charged with some definite purpose which gives rise to the claim, and not where the claim is
based on acts or omissions imputable to a public official charged with some administrative or technical office
who can be held to the proper responsibility in the manner laid down by the law of civil responsibility.
Consequently, the trial court in not so deciding and in sentencing the said entity to the payment of damages,
caused by an official of the second class referred to, has by erroneous interpretation infringed the provisions
of articles 1902 and 1903 of the Civil Code. (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.)

It is, therefore, evidence that the State (the Government of the Philippine Islands) is only liable, according to the
above quoted decisions of the Supreme Court of Spain, for the acts of its agents, officers and employees when they
act as special agents within the meaning of paragraph 5 of article 1903, supra, and that the chauffeur of the
ambulance of the General Hospital was not such an agent.

For the foregoing reasons, the judgment appealed from must be reversed, without costs in this instance. Whether
the Government intends to make itself legally liable for the amount of damages above set forth, which the plaintiff
has sustained by reason of the negligent acts of one of its employees, by legislative enactment and by appropriating
sufficient funds therefor, we are not called upon to determine. This matter rests solely with the Legislature and not
with the courts.

Arellano, C. J., Torres, Johnson, and Moreland, JJ., concur.

=======================================================================

Amigable vs. Cuenca (G.R. No. L-26400, February 29, 1972)

FIRST DIVISION

[G.R. No. L-26400. February 29, 1972.]

VICTORIA AMIGABLE, Plaintiff-Appellant, v. NICOLAS CUENCA, as Commissioner of Public

Highways and REPUBLIC OF THE PHILIPPINES, Defendants-Appellees.

Quirico del Mar, Domingo Antigua, Antonio Paulin and N. Capangpangan for plaintiff
and Appellant.

Assistant Solicitor General Guillermo Torres and Solicitor Dominador L. Quiroz for
defendants and appellees.

SYLLABUS

1. POLITICAL LAW; EMINENT DOMAIN; PROJECT USED BY GOVERNMENT FOR ROAD PURPOSES;
RIGHTS OR REGISTERED OWNER TO DUE COMPENSATION ANYTIME. — 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 has been and is now being 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.

2. ID.; ID.; ID.; ID.; RIGHT TO DAMAGES. — The owner of the land is entitled to damages in the
form of legal interest on the price of the land from the time it was taken up to the time that payment
is made by the government. In addition, the government should pay for attorney’s fees, the amount
of which should be fixed by the trial court after hearing.

3. ID.; ID.; BASIS FOR DUE COMPENSATION. — To determine the due compensation for the land
appropriated by the Government, the basis should be the price or value thereof at the time of the
taking.
 DECISION

MAKALINTAL, J.:

This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case No. R-5977,
dismissing the plaintiff’s complaint.

Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the Banilad Estate
in Cebu City as shown by Transfer Certificate of Title No. T-18060, which superseded Transfer
Certificate of Title No. RT-3272 (T-3435) issued to her by the Register of Deeds of Cebu on February
1, 1924. No annotation in favor of the government of any right or interest in the property appears at
the back of the certificate. Without prior expropriation or negotiated sale, the government used a
portion of said lot, with an area of 6,167 square meters, for the construction of the Mango and
Gorordo Avenues.

It appears that said avenues were already existing in 1921 although "they were in bad condition and
very narrow, unlike the wide and beautiful avenues that they are now," and "that the tracing of said
roads was begun in 1924, and the formal construction in 1925." *

On March 27, 1958 Amigable’s counsel wrote the President of the Philippines, requesting payment of
the portion of her lot which had been appropriated by the government. The claim was indorsed to the
Auditor General, who disallowed it in his 9th Indorsement dated December 9, 1958. A copy of said
indorsement was transmitted to Amigable’s counsel by the Office of the President on January 7,
1959.

On February 6, 1959 Amigable filed in the court a quo a complaint, which was later amended on April
17, 1959 upon motion of the defendants, against the Republic of the Philippines and Nicolas Cuenca,
in his capacity as Commissioner of Public Highways for the recovery of ownership and possession of
the 6,167 square meters of land traversed by the Mango and Gorordo Avenues. She also sought the
payment of compensatory damages in the sum of P50,000.00 for the illegal occupation of her land,
moral damages in the sum of P25,000.00, attorney’s fees in the sum of P5,000.00 and the costs of
the suit.

Within the reglementary period the defendants filed a joint answer denying the material allegations
of the complaint and interposing the following affirmative defenses, to wit: (1) that the action was
premature, the claim not having been filed first with the Office of the Auditor General; (2) that the
right of action for the recovery of any amount which might be due the plaintiff, if any, had already
prescribed; (3) that the action being a suit against the Government, the claim for moral damages,
attorney’s fees and costs had no valid basis since as to these items the Government had not given its
consent to be sued; and (4) that inasmuch as it was the province of Cebu that appropriated and used
the area involved in the construction of Mango Avenue, plaintiff had no cause of action against the
defendants.

During the scheduled hearings nobody appeared for the defendants notwithstanding due notice, so
the trial court proceeded to receive the plaintiff’s evidence ex parte. On July 29, 1959 said court
rendered its decision holding that it had no jurisdiction over the plaintiff’s cause of action for the
recovery of possession and ownership of the portion of her lot in question on the ground that the
government cannot be sued without its consent; that it had neither original nor appellate jurisdiction
to hear, try and decide plaintiff’s claim for compensatory damages in the sum of P50,000.00, the
same being a money claim against the government; and that the claim for moral damages had long
prescribed, nor did it have jurisdiction over said claim because the government had not given its
consent to be sued. Accordingly, the complaint was dismissed. Unable to secure a reconsideration,
the plaintiff appealed to the Court of Appeals, which subsequently certified the case to Us, there
being no question of fact involved.

The issue here is whether or not the appellant may properly sue the government under the facts of
the case.

In the case of Ministerio v. 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:jgc:chanrobles.com.ph

". . . 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."cralaw virtua1aw library

Considering that no annotation in favor of the government appears at the back of her certificate of
title and that she has not executed any deed of conveyance of any portion of her lot to the
government, the appellant remains the owner of the whole lot. As registered owner, she could bring
an action to recover possession of the portion of land in question at anytime because possession is
one of the attributes of ownership. However, since restoration of possession of said portion by the
government is neither convenient nor feasible at this time because it is now and has been used for
road purposes, the only relief available is for the government to make due compensation which it
could and should have done years ago. To determine the due compensation for the land, the basis
should be the price or value thereof at the time of the taking. 2

As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the
price of the land from the time it was taken up to the time that payment is made by the government.
3 In addition, the government should pay for attorney’s fees, the amount of which should be fixed by
the trial court after hearing.

WHEREFORE, the decision appealed from is hereby set aside and the case remanded to the court a
quo for the determination of compensation, including attorney’s fees, to which the appellant is
entitled as above indicated. No pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and
Makasiar, JJ., concur.

====================================================

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

G.R. No. 104269 November 11, 1993

DEPARTMENT OF AGRICULTURE, petitioner,

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

Roy Lago Salcedo for private respondents.

VITUG, J.:

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

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

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

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

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

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

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

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

WHEREFORE, premises considered, the following orders are issued:

1. The enforcement and execution of the judgments against petitioner in NLRC RABX Cases Nos.
10-10-00455-90; 10-10-0481-90 and 10-10-00519-90 are temporarily suspended for a period of two
(2) months, more or less, but not extending beyond the last quarter of calendar year 1991 to enable
petitioner to source and raise funds to satisfy the judgment awards against it;

2. Meantime, petitioner is ordered and directed to source for funds within the period above-stated
and to deposit the sums of money equivalent to the aggregate amount. it has been adjudged to pay
jointly and severally with respondent Sultan Security Agency with the Regional Arbitration Branch X,
Cagayan de Oro City within the same period for proper dispositions;

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

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

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

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

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

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

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

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

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

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

xxx xxx xxx

The restrictive application of State immunity is proper only when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic affairs.
Stated differently, a state may be said to have descended to the level of an individual and can this
be deemed to have actually given its consent to be sued only when it enters into business contracts.
It does not apply where the contracts relates to the exercise of its sovereign functions. In this case
the projects are an integral part of the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the government of the highest order; they are
not utilized for not dedicated to commercial or business purposes.

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

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

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

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

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

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

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

SO ORDERED.

Feliciano, Bidin, Romero and Melo, JJ., concur.

======================================================
United States vs. Guinto (G.R. No. 76607, February 26, 1990)
EN BANC

[G.R. No. 76607. February 26, 1990.]

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

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, v. 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, v. 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, v. HON. CONCEPCION S. ALARCON
VERGARA, as Presiding Judge, Branch 62 REGIONAL TRIAL COURT, Angeles City, and
RICKY SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE RIVERA, EDWIN MARIANO, AKA JESSIE
DOLORES SANGALANG, ET AL., Respondents.

Luna, Sison & Manas Law Office for petitioners.

SYLLABUS

1. CONSTITUTIONAL LAW; DOCTRINE OF STATE IMMUNITY FROM SUIT; GENERALLY ACCEPTED

PRINCIPLE OF INTERNATIONAL LAW; EMBODIED IN PHILIPPINE CONSTITUTION. — 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.

2. ID., ID., ID., PRINCIPLE DEEMED INCORPORATED IN THE LAW OF EVERY CIVILIZED STATE;
STATE IS AUTOMATICALLY OBLIGATED TO COMPLY WITH THE PRINCIPLE. — 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.

3. ID.; ID.; BASIS. — 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." 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."cralaw virtua1aw library

4. ID., ID., APPLIES TO OFFICIALS OF THE STATE FOR ACTS PERFORMED IN THE DISCHARGE OF
THEIR DUTIES. — 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. In such a situation,
the state may move to dismiss the complaint on the ground that it has been filed without its consent.

5. ID., ID., NOT ABSOLUTE AND MAY BE SUED IS STATE GIVES 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.

6. ID., ID., ID., CONSENT MAY BE GIVEN EXPRESSLY OR IMPLIEDLY. — 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.

7. ID., ID., ID., ID., WAIVER OF IMMUNITY; INSTANCES. — 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, 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. Waiver is also implied when the government files a complaint, thus opening
itself to a counterclaim.
8. ID., ID., ID., ID., ID., ID., EXCEPTIONS. — 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.
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. As for the filing
of a complaint by the government, suability will result only where the government is claiming
affirmative relief from the defendant.

9. ID., ID., ID., ID., ID., UNITED STATES OF AMERICA DEEMED TO HAVE IMPLIEDLY WAIVED ITS
NON-SUABILITY IF IT HAS ENTERED INTO A CONTRACT IN ITS PROPRIETARY CAPACITY. — 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, 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.

10. ID., ID., ID., ID., ID., CHARGES MAY NOT BE SUMMARILY DISMISSED ON MERE ASSERTION
THAT ACTS ARE IMPUTABLE TO THE UNITED STATES OF AMERICA. — 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.

11. ID., ID., ID., ID., ID., PETITIONERS CHARGED WITH THE ENFORCEMENT OF LAW REGARDING
PROHIBITED DRUGS ARE AGENTS OF THE UNITED STATES. — 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.

12. ID., ID., ID., ID., ID., SUABILITY AND LIABILITY, DIFFERENTIATED. — 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.

13. ID., ID., ID., ID., ID., ARTICLE 2180 OF THE CIVIL CODE ESTABLISHES A RULE OF LIABILITY. —
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. 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.

14. ID., ID., ID., ID., ID., AN AGENT PERFORMING REGULAR FUNCTIONS IS NOT A SPECIAL AGENT
EVEN IF SO DENOMINATED; ARTICLE APPLIES ONLY TO PHILIPPINE GOVERNMENT. — 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.

15. ID., ID., ID., ID., ID., EXPRESS WAIVER MUST BE EFFECTED THROUGH A DULY-ENACTED
STATUTE. — 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, 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.
16. ID., ID., ID., ID., ID., INQUIRY MUST BE MADE AS TO WHAT CAPACITY PETITIONERS WERE
ACTING. — But even as we are certain that 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.

17. ID., ID., ID., ID., ID., DOCTRINE CANNOT BE INVOKED WHERE THE STATE ENTERED INTO A
CONTRACT IN THE DISCHARGE OF ITS PROPRIETARY FUNCTION; CASE AT BAR. — From the
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.

18. LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; DISMISSAL FOR THE
UNBELIEVABLY NAUSEATING ACT IS PROPER. — 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.

19. ID.; ID.; BARBERSHOPS ARE NOT AGENCIES OF THE UNITED STATES ARMED FORCES;
IMMUNITY FROM SUIT CANNOT BE INVOKED. — 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 persons. They are not agencies of the United States Armed Forces
nor are their facilities demandable as a matter of right by the American servicemen. 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.

DECISION

CRUZ, J.:

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

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 barbering
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.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

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.chanrobles virtual lawlibrary

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 officials/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:chanrob1es virtual 1aw library

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 m 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 his 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.chanrobles
virtual lawlibrary

This motion was denied by the respondent judge on June 4, 1987, in an order which read in
part:chanrob1es virtual 1aw library

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.chanrobles.com : virtual law library

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:chanrob1es virtual 1aw library

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:chanrob1es virtual 1aw library

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:chanrob1es virtual 1aw
library

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 `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 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.’ 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.chanrobles law library

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:chanrob1es virtual 1aw library

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.

x x x

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.chanrobles virtual
lawlibrary

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 persons. 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:chanrob1es virtual 1aw library

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.chanrobles.com:cralaw:red

All without any pronouncement as to costs.

SO ORDERED.

Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin,
Sarmiento, Cortes, Griño-Aquino, Medialdea and Regalado, JJ., concur.

===================================================

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

G.R. No. L-5156 March 11, 1954

CARMEN FESTEJO, demandante-apelante,

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

D. Eloy B. Bello en representacion de la apelante.

El Procurador General Sr. Pompeyo Diaz y el Procurador Sr. Antonio A. Torres en representacion del apelado.

DIOKNO, J.:

Carmen Festejo, dueña de unos terrenos azucareros, de un total de unas 9 hectareas y media de superfice,
demando a "Isaias Fernando Director, Bureau of public Works, que como tal Director de Obras Publicas tiene a su
cargo los sistemas y proyectos de irrigacion y es el funcionario responsable de la construccion de los sistemas de
irrigacion en el pais," alegando que —

The defendant, as Director of the Bureau of Public Works, without authority obtained first from the Court of
First Instance of Ilocos Sur, without obtaining first a right of way, and without the consent and knowledge of
the plaintiff, and against her express objection unlawfully took possession of portions of the three parcels of
land described above, and caused an irrigation canal to be constructed on the portion of the three parcels of
land on or about the month of February 1951 the aggregate area being 24,179 square meters to the damage
and prejudice of the plaintiff. ----- R. on A., p. 3.

causando a ella variados daños y perjuicios. Pidio, en su consecuencia, sentencia condenando el demandado:

. . . to return or cause to be returned the possession of the portions of land unlawfully occupied and
appropriated in the aggregate area of 24,179 square meters and to return the land to its former condition
under the expenses of the defendant. . . .

In the remote event that the portions of land unlawfully occupied and appropriated can not be returned to the
plaintiff, then to order the defendant to pay to the plaintiff the sum of P19,343.20 as value of the portions
totalling an area of 24,179 square meters; ---- R. on A., p. 5.

y ademas a pagar P9,756.19 de daños y P5,000 de honorarios de abogado, con las costas R. on A., pp. 5-6.

El demandado, por medio del Procurador General, presento mocion de sobreseimiento de la demanda por el
fundamento de que el Juzgado no tiene jurisdiccion para dictar sentencia valida contra el, toda vez que
judicialmente la reclamacion es contra la Republica de Filipinas, y esta no ha presentado su consentimiento a la
demanda. El Juzgado inferior estimo la mocion y sobreseyo la demanda sin perjuicio y sin costas.

En apelacion, la demandante sostiene que fue un error considerar la demanda como una contra la Republica y
sobreseer en su virtud la demanda.

La mocion contra "Isaias Fernando, Director de Obras Publicas, encargado y responsable de la construccion de los
sistemas de irrigacion en Filipinas" es una dirigida personalmente contra el, por actos que asumio ejecutar en su
concepto oficial. La ley no le exime de responsabilidad por las extralimitaciones que cometa o haga cometer en el
desempeño de sus funciones oficiales. Un caso semejante es el de Nelson vs. Bobcock (1933) 18 minn. 584, NW
49, 90 ALR 1472. Alli el Comisionado de Carreteras, al mejorar un trozo de la carretera ocupo o se apropio de
terrenos contiguos al derecho de paso. El Tribunal Supremo del Estado declaro que es personalmente responsable
al dueño de los daños causados. Declaro ademas que la ratificacion de lo que hicieron sus subordinados era
equivalente a una orden a los mismos. He aqui lo dijo el Tribunal.
 We think the evidence and conceded facts permitted the jury in finding that in the trespass on plaintiff's land
defendant committed acts outside the scope of his authority. When he went outside the boundaries of the
right of way upon plaintiff's land and damaged it or destroyed its former condition an dusefulness, he must
be held to have designedly departed from the duties imposed on him by law. There can be no claim that he
thus invaded plaintiff's land southeasterly of the right of way innocently. Surveys clearly marked the limits of
the land appropriated for the right of way of this trunk highway before construction began. . . .

"Ratification may be equivalent to command, and cooperation may be inferred from acquiescence where
there is power to restrain." It is unnecessary to consider other cases cited, . . ., for as before suggested, the
jury could find or infer that, in so far as there was actual trespass by appropriation of plaintiff's land as a
dumping place for the rock to be removed from the additional appropriated right of way, defendant planned,
approved, and ratified what was done by his subordinates. — Nelson vs. Bobcock, 90 A.L.R., 1472, 1476,
1477.

La doctrina sobre la responsabilidad civil de los funcionarios en casos parecidos se resume como sigue:

Ordinarily the officer or employee committing the tort is personally liable therefor, and may be sued as any
other citizen and held answerable for whatever injury or damage results from his tortious act. — 49 Am. Jur.
289.

. . . If an officer, even while acting under color of his office, exceeds the power conferred on him by law, he
cannot shelter himself under the plea that he is a public agent. — 43 Am. Jur. 86.

It is a general rule that an officer-executive, administrative quasi-judicial, ministerial, or otherwise who acts
outside the scope of his jurisdiction and without authorization of law may thereby render himself amenable to
personal liability in a civil suit. If he exceed the power conferred on him by law, he cannot shelter himself by
the plea that he is a public agent acting under the color of his office, and not personally. In the eye of the
law, his acts then are wholly without authority. — 43 Am. Jur. 89-90.

El articulo 32 del Codigo Civil dice a su vez:

ART. 32. Any public officer or emplyee, or any private individual, who directly or indirectly obstructs, defeats,
violates or in any manner impedes or impairs any of the following rights and liberties of another person shall
be liable to the latter for damages:

xxx xxx xxx

(6) The right against deprivation of property without due process of law;

xxx xxx xxx

In any of the cases referred to this article, whether or not the defendant's acts or omission constitutes a
criminal offense, the aggrieved party has a right ot commence an entirely separate and distinct civil action
for damages, and for other relief. Such civil action shall proceed independently of any criminal prosecution (if
the latter be instituted), and may be proved by a preponderance of evidence.

The inmdemnity shall include moral damages Exemplary damages may also be adjudicated.

Veanse tambien Lung vs. Aldanese, 45 Phil., 784; Syquia vs. Almeda, No. L-1648, Agosto 17, 1947;
Marquez vs. Nelson, No. L-2412, Septiembre 1950.

Se revoca la orden apelada y se ordena la continuacion de la tramitacion de la demanda conforme proveen los
reglamentos. Sin especial pronunciamiento en cuanto a las costas. Asi se ordena.

Padilla, Reyes, Jugo, Bautista Angelo and Labrador, MM., estan conformes.

Separate Opinions

CONCEPCION, J., dissenting:

To my mind, the allegations of the complaint lead to no other conclusion than that appellee Isaias Fernando is a
party in this case, not in his personal capacity, but as an officer of the Government. According to said pleading the
defendant is "Isaias Fernando, Director, Bureau of Public Works." Moreover, in paragraphs 4 and 5 of the complaint,
it is alleged:
 4. That the defendant as Director of the Bureau of Public Works, is in charge of irrigation projects and
systems, and the official responsible for the construction of irrigation system in the Philippines;

5. That the defendant, as Director of the Bureau of Public Works, without authority obtained first from the
Court of First Instance of Ilocos Sur, without obtaining first a right of way, and without the consent and
knowledge of the plaintiff, and against her express objection, unlawfully took possession of portions of the
three parcels of land described above, and caused an irrigation canal to be constructed on the portion of the
three parcels of land on or about the month of February 1951 the aggregate area being 24,179 square
meters to the damage and prejudice of the plaintiff. (Emphasis supplied.)

The emphasis thus placed upon the allegation that the acts complained of were performed by said defendant "as
Director of the Bureau of Public Works," clearly shows that the designation of his office was included in the title of
the case to indicate that he was being sued in his official capacity. This conclusion is bolstered up by the fact that,
among other things, plaintiff prays, in the complaint, for a judgment

Ordering the defendant to return or caused to be returned the possession of the portions of land unlawfully
occupied and appropriated in the aggregate area of 24,179 square meters and to return the land to its
former condition under the expense of the defendant. (Paragraph a, of the complaint).

We take judicial notice of the fact that the irrigation projects and system reffered to in the complaint — of which the
defendant, Isaias Fernando, according to the same pleading, is "in charge" and for which he is "responsible" as
Director of the Bureau of Public Works — are established and operated with public funds, which pursuant to the
Constitution, must be appropriated by law. Irrespective of the manner in which the construction may have been
undertaken by the Bureau of Public Works, the system or canal is, therefore, a property of the Government.
Consequently, in praying that possession of the portions of land occupied by the irrigation canal involved in the
present case be returned to plaintiff therein, and that said land be restored to its former condition, plaintiff seeks to
divest the Government of its possession of said irrigation canal, and, what is worse, to cause said property of the
Government to be removed or destroyed. As held in Syquia vs. Lopez (47 Off. Gaz., 665), the Government is,
accordingly, "the real party in interest as defendant" in the case at bar. In other words, the same partakes of the
nature of a suit against the state and may not be maintained without its consent.

Hence I am constrained to dissent.

Bengzon, J., concurs.

=================================================================

Rayo vs. CFI of Bulacan (G.R. No. L-55273-83, December 19, 1981)

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: chanrobles
virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual
law library
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. ...chanroblesvirtualawlibrarychanrobles
virtual law library

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."
...chanroblesvirtualawlibrarychanrobles virtual law library

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. ...chanroblesvirtualawlibrarychanrobles virtual law library

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. ...chanroblesvirtualawlibrarychanrobles virtual law library

8. On August 7, 1980 petitioners filed with the respondent Court a motion for reconsideration of the questioned order
of dismissal. ...chanroblesvirtualawlibrarychanrobles virtual law library

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: chanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

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.) chanrobles virtual law library

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.)chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

The parties are agreed that the Order dated December 21, 1979, raises the following issues:chanrobles virtual law
library

1. Whether respondent National Power Corporation performs a governmental function with respect to the
management and operation of the Angat Dam; and chanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

The petition is highly impressed with merit.chanroblesvirtualawlibrarychanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library

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.chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.

Barredo (Chairman), Aquino, De Castro, Ericta and Escolin JJ., concur.chanroblesvirtualawlibrary chanrobles virtual
law library

Concepcion Jr., J., is on leave.

====================================================================

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

FIRST DIVISION

[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.

Franciso A. Lava, Jr. and Andresito X. Fornier for Petitioner.

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).

D E C I S I O N

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.chanrobles virtual lawlibrary

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

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

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

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

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

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

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

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

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

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

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

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

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

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

one.

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

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

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

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

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

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

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

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

On August 11, 1989, the Court of Appeals granted the petition. The dispositive portion of its decision
reads:jgc:chanrobles.com.ph

"WHEREFORE, the petition for certiorari filed by petitioners PC Chief and PC-SUSIA is hereby GRANTED,
and the RTC-Makati, Branch 135, is ordered to dismiss the complaint filed by respondent VMPSI in Civil
Case No. 88-471, insofar as petitioners PC Chief and PC-SUSIA are concerned, for lack of jurisdiction.
The writ of preliminary injunction issued on June 10, 1988, is dissolved." (pp. 295-296, Rollo.)

VMPSI came to us with this petition for review.

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

The answer is yes.

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

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

"While the doctrine appears to prohibit only suits against the state without its consent, it is also
applicable to complaints filed against officials of the state for acts allegedly performed by them in the
discharge of their duties. The rule is that if the judgment against such officials will require the state
itself to perform an affirmative act to satisfy the same, such as the appropriation of the amount needed
to pay the damages awarded against them, the suit must be regarded as against the state itself
although it has not been formally impleaded." (Emphasis supplied.)

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

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

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

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

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

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

"Nonetheless, a continued adherence to the doctrine of nonsuability is not to be deplored for as against
the inconvenience that may be cause [by] private parties, the loss of governmental efficiency and the
obstacle to the performance of its multifarious functions are far greater if such a fundamental principle
were abandoned and the availability of judicial remedy were not thus restricted. With the well known
propensity on the part of our people to go to court, at the least provocation, the loss of time and energy
required to defend against law suits, in the absence of such a basic principle that constitutes such an
effective obstacles, could very well be imagined." (citing Providence Washington Insurance Co. v.
Republic, 29 SCRA 598.)cralawnad

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

SO ORDERED.

Medialdea and Bellosillo, JJ., concur.

Cruz, J., is on leave.

====================================================

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

G.R. No. L-23139 December 17, 1966

MOBIL PHILIPPINES EXPLORATION, INC., plaintiff-appellant,

vs.
CUSTOMS ARRASTRE SERVICE and BUREAU of CUSTOMS, defendants-appellees.
Alejandro Basin, Jr. and Associates for plaintiff-appellant.
Felipe T. Cuison for defendants-appellees.

BENGZON, J.P., J.:

Four cases of rotary drill parts were shipped from abroad on S.S. "Leoville" sometime in November of 1962, consigned
to Mobil Philippines Exploration, Inc., Manila. The shipment arrived at the Port of Manila on April 10, 1963, and was
discharged to the custody of the Customs Arrastre Service, the unit of the Bureau of Customs then handling arrastre
operations therein. The Customs Arrastre Service later delivered to the broker of the consignee three cases only of
the shipment.

On April 4, 1964 Mobil Philippines Exploration, Inc., filed suit in the Court of First Instance of Manila against the
Customs Arrastre Service and the Bureau of Customs to recover the value of the undelivered case in the amount of
P18,493.37 plus other damages.

On April 20, 1964 the defendants filed a motion to dismiss the complaint on the ground that not being persons under
the law, defendants cannot be sued.

After plaintiff opposed the motion, the court, on April 25, 1964, dismissed the complaint on the ground that neither the
Customs Arrastre Service nor the Bureau of Customs is suable. Plaintiff appealed to Us from the order of dismissal.

Raised, therefore, in this appeal is the purely legal question of the defendants' suability under the facts stated.

Appellant contends that not all government entities are immune from suit; that defendant Bureau of Customs as
operator of the arrastre service at the Port of Manila, is discharging proprietary functions and as such, can be sued
by private individuals.

The Rules of Court, in Section 1, Rule 3, provide:

SECTION 1. Who may be parties.—Only natural or juridical persons or entities authorized by law may be parties in a
civil action.

Accordingly, a defendant in a civil suit must be (1) a natural person; (2) a juridical person or (3) an entity authorized
by law to be sued. Neither the Bureau of Customs nor (a fortiori) its function unit, the Customs Arrastre Service, is a
person. They are merely parts of the machinery of Government. The Bureau of Customs is a bureau under the
Department of Finance (Sec. 81, Revised Administrative Code); and as stated, the Customs Arrastre Service is a unit
of the Bureau of Custom, set up under Customs Administrative Order No. 8-62 of November 9, 1962 (Annex "A" to
Motion to Dismiss, pp. 13-15, Record an Appeal). It follows that the defendants herein cannot he sued under the first
two abovementioned categories of natural or juridical persons.

Nonetheless it is urged that by authorizing the Bureau of Customs to engage in arrastre service, the law
thereby impliedly authorizes it to be sued as arrastre operator, for the reason that the nature of this function (arrastre
service) is proprietary, not governmental. Thus, insofar as arrastre operation is concerned, appellant would put
defendants under the third category of "entities authorized by law" to be sued. Stated differently, it is argued that while
there is no law expressly authorizing the Bureau of Customs to sue or be sued, still its capacity to be sued is implied
from its very power to render arrastre service at the Port of Manila, which it is alleged, amounts to the transaction of
a private business.

The statutory provision on arrastre service is found in Section 1213 of Republic Act 1937 (Tariff and Customs Code,
effective June 1, 1957), and it states:

SEC. 1213. Receiving, Handling, Custody and Delivery of Articles.—The Bureau of Customs shall have exclusive
supervision and control over the receiving, handling, custody and delivery of articles on the wharves and piers at all
ports of entry and in the exercise of its functions it is hereby authorized to acquire, take over, operate and superintend
such plants and facilities as may be necessary for the receiving, handling, custody and delivery of articles, and the
convenience and comfort of passengers and the handling of baggage; as well as to acquire fire protection equipment
for use in the piers: Provided, That whenever in his judgment the receiving, handling, custody and delivery of articles
can be carried on by private parties with greater efficiency, the Commissioner may, after public bidding and subject to
the approval of the department head, contract with any private party for the service of receiving, handling, custody
and delivery of articles, and in such event, the contract may include the sale or lease of government-owned equipment
and facilities used in such service.

In Associated Workers Union, et al. vs. Bureau of Customs, et al., L-21397, resolution of August 6, 1963, this Court
indeed held "that the foregoing statutory provisions authorizing the grant by contract to any private party of the right
to render said arrastre services necessarily imply that the same is deemed by Congress to be proprietary or non-
governmental function." The issue in said case, however, was whether laborers engaged in arrastre service fall under
the concept of employees in the Government employed in governmental functions for purposes of the prohibition in
Section 11, Republic Act 875 to the effect that "employees in the Government . . . shall not strike," but "may belong to
any labor organization which does not impose the obligation to strike or to join in strike," which prohibition "shall apply
only to employees employed in governmental functions of the Government . . . .

Thus, the ruling therein was that the Court of Industrial Relations had jurisdiction over the subject matter of the case,
but not that the Bureau of Customs can be sued. Said issue of suability was not resolved, the resolution stating only
that "the issue on the personality or lack of personality of the Bureau of Customs to be sued does not affect the
jurisdiction of the lower court over the subject matter of the case, aside from the fact that amendment may be made
in the pleadings by the inclusion as respondents of the public officers deemed responsible, for the unfair labor practice
acts charged by petitioning Unions".

Now, the fact that a non-corporate government entity performs a function proprietary in nature does not necessarily
result in its being suable. If said non-governmental function is undertaken as an incident to its governmental function,
there is no waiver thereby of the sovereign immunity from suit extended to such government entity. This is the doctrine
recognized in Bureau of Printing, et al. vs. Bureau of Printing Employees Association, et al., L-15751, January 28,
1961:

The Bureau of Printing is an office of the Government created by the Administrative Code of 1916 (Act No. 2657). As
such instrumentality of the Government, it operates under the direct supervision of the Executive Secretary, Office of
the President, and is "charged with the execution of all printing and binding, including work incidental to those
processes, required by the National Government and such other work of the same character as said Bureau may, by
law or by order of the (Secretary of Finance) Executive Secretary, be authorized to undertake . . . ." (Sec. 1644, Rev.
Adm. Code.) It has no corporate existence, and its appropriations are provided for in the General Appropriations Act.
Designed to meet the printing needs of the Government, it is primarily a service bureau and, obviously, not engaged
in business or occupation for pecuniary profit.

xxx xxx xxx

. . . Clearly, while the Bureau of Printing is allowed to undertake private printing jobs, it cannot be pretended that it is
thereby an industrial or business concern. The additional work it executes for private parties is merely incidental to its
function, and although such work may be deemed proprietary in character, there is no showing that the employees
performing said proprietary function are separate and distinct from those emoloyed in its general governmental
functions.

xxx xxx xxx

Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of Printing cannot
be sued (Sec. 1, Rule 3, Rules of Court.) Any suit, action or proceeding against it, if it were to produce any effect,
would actually be a suit, action or proceeding against the Government itself, and the rule is settled that the Government
cannot be sued without its consent, much less over its objection. (See Metran vs. Paredes, 45 Off. Gaz. 2835; Angat
River Irrigation System, et al. vs. Angat River Workers Union, et al., G.R. Nos. L-10943-44, December 28, 1957.)

The situation here is not materially different. The Bureau of Customs, to repeat, is part of the Department of Finance
(Sec. 81, Rev. Adm. Code), with no personality of its own apart from that of the national government. Its primary
function is governmental, that of assessing and collecting lawful revenues from imported articles and all other tariff
and customs duties, fees, charges, fines and penalties (Sec. 602, R.A. 1937). To this function, arrastre service is a
necessary incident. For practical reasons said revenues and customs duties can not be assessed and collected by
simply receiving the importer's or ship agent's or consignee's declaration of merchandise being imported and imposing
the duty provided in the Tariff law. Customs authorities and officers must see to it that the declaration tallies with the
merchandise actually landed. And this checking up requires that the landed merchandise be hauled from the ship's
side to a suitable place in the customs premises to enable said customs officers to make it, that is, it requires arrastre
operations.1

Clearly, therefore, although said arrastre function may be deemed proprietary, it is a necessary incident of the primary
and governmental function of the Bureau of Customs, so that engaging in the same does not necessarily render said
Bureau liable to suit. For otherwise, it could not perform its governmental function without necessarily exposing itself
to suit. Sovereign immunity, granted as to the end, should not be denied as to the necessary means to that end.

And herein lies the distinction between the present case and that of National Airports Corporation vs. Teodoro, 91
Phil. 203, on which appellant would rely. For there, the Civil Aeronautics Administration was found have for its prime
reason for existence not a governmental but a proprietary function, so that to it the latter was not a mere incidental
function:

Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of any
kind, to purchase property, and to grant concessions rights, and under Section 4, to charge landing fees, royalties on
sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property under its
management.

These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued. The
power to sue and be sued is implied from the power to transact private business. . . .
 xxx xxx xxx

The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate it
was created, like the National Airports Corporation, not to maintain a necessary function of government, but to run
what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel and the
convenience of the travelling public. . . .

Regardless of the merits of the claim against it, the State, for obvious reasons of public policy, cannot be sued without
its consent. Plaintiff should have filed its present claim to the General Auditing Office, it being for money under the
provisions of Commonwealth Act 327, which state the conditions under which money claims against the Government
may be filed.

It must be remembered that statutory provisions waiving State immunity from suit are strictly construed and that waiver
of immunity, being in derogation of sovereignty, will not be lightly inferred. (49 Am. Jur., States, Territories and
Dependencies, Sec. 96, p. 314; Petty vs. Tennessee-Missouri Bridge Com., 359 U.S. 275, 3 L. Ed. 804, 79 S. Ct.
785). From the provision authorizing the Bureau of Customs to lease arrastre operations to private parties, We see
no authority to sue the said Bureau in the instances where it undertakes to conduct said operation itself. The Bureau
of Customs, acting as part of the machinery of the national government in the operation of the arrastre service,
pursuant to express legislative mandate and as a necessary incident of its prime governmental function, is immune
from suit, there being no statute to the contrary.

WHEREFORE, the order of dismissal appealed from is hereby affirmed, with costs against appellant. So ordered.

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Zaldivar and Sanchez, JJ., concur.

Makalintal, J., concurs in the result.

Castro, J., reserves his vote.

====================================================================

Air Transportation Administration vs. Spouses David (G.R. No. 159402,

February 23, 2011)

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 159402 February 23, 2011

AIR TRANSPORTATION OFFICE, Petitioner,

vs.
SPOUSES DAVID* ELISEA RAMOS, Respondents.

RESOLUTION

BERSAMIN, J.:

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 Philippines9 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.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

ARTURO D. BRION**
Associate Justice
Acting Chairperson

ROBERTO A. ABAD*** MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

ATTESTATION

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

ARTURO D. BRION
Associate Justice
Acting Chairperson

CERTIFICATION

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

RENATO C. CORONA
Chief Justice

Footnotes
*David Ramos died on October 14, 2001, before the assailed decision was promulgated. He was substituted by his
children Cherry Ramos, Joseph David Ramos and Elsie Grace R. Dizon pursuant to a resolution of the CA
promulgated on April 23, 2003 (see rollo, p. 136).

**Acting Chairperson in lieu of Justice Conchita Carpio Morales who is on leave per Special Order No. 925 dated
January 24, 2011.

*** Additional member per Special Order No. 926 dated January 24, 2011.

1Rollo, pp. 25-35; penned by Associate Justice Conrado M. Vasquez (later Presiding Justice, now retired), and
concurred in by Associate Justice Mercedes Gozo-Dadole (retired) and Associate Justice Rosmari D. Carandang,

2 Id., pp. 80-87; penned by Judge Antonio C. Reyes.

3 Id.

4 Id.

5 Id., pp. 25-35.

6 205 US 349, 353 (1907).

7 Bold emphasis supplied.

8Veterans Manpower and Protective Services, Inc. v. Court of Appeals, G.R. No. 91359, Sept. 25, 1992, 214 SCRA
286, 294; Republic v. Purisima, No. L-36084, Aug. 31, 1977, 78 SCRA 470, 473.

9 L-26386, Sept. 30, 1969, 29 SCRA 598, 601-602.

10 Bernas, The 1987 Constitution of the Republic of the Philippines: A Commentary, 2003 Edition, p. 1269.

11 Metropolitan Transportation Service v. Paredes, 79 Phil. 819 (1948).

12 E.g., Angat River Irrigation System, et. al. v. Angat River Worker’s Union, et. al., 102 Phil. 789 (1957).

13 E.g., National Airports Corporation v. Teodoro, Sr. and Phil. Airlines Inc., 91 Phil. 203 (1952).

14 Rollo, pp. 25-35.

15 Id., pp. 29-32.

16Republic v. Sandiganbayan, G.R. No. 90478, Nov. 2, 1991, 204 SCRA 212, 231; Ministerio v. Court of First Instance
of Cebu, No. L-31635, Aug. 31, 1971, 40 SCRA 464; Santiago v. Republic, No. L-48214, Dec. 19, 1978, 87 SCRA
294.

17 G.R. Nos. 71998-99, June 2, 1993, 223 SCRA 11.

18Section 23. Corporate Powers. – The Authority, acting through the Board, shall have the following corporate
powers:

(a) To succeed in its corporate name, to sue and be sued in such corporate name xxx.

xxx

(c) To enter into, make, perform and carry out contracts of every class, kind and description, which are
necessary or incidental to the realization of its purposes, with any person, domestic or foreign private firm, or
corporation, local or national government office, agency and with international institutions or foreign government;

xxx

(e) To construct, acquire, own, hold, operate, maintain, administer and lease personal and real properties, including
buildings, machinery, equipment, other infrastructure, agricultural land, and its improvements, property rights, and
interest therein x x x

xxx

(i) To settle, under such terms and conditions most advantageous to it, any claim by or against it;
Bureau of Printing vs. Bureau of Printing Employees Association (G.R. No.
L-15751, January 28, 1961)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-15751 January 28, 1961

BUREAU OF PRINTING, SERAFIN SALVADOR and MARIANO LEDESMA, petitioners,

vs.
THE BUREAU OF PRINTING EMPLOYEES ASSOCIATION (NLU), PACIFICO ADVINCULA, ROBERTO
MENDOZA, PONCIANO ARGANDA and TEODULO TOLERAN, respondents.

Office of the Solicitor General for petitioners.

Eulogio R. Lerum for respondents.

GUTIERREZ DAVID, J.:

This is a petition for certiorari and prohibition with preliminary injunction to annul Certain orders of the respondent
Court of Industrial Relations and to restrain it from further proceeding in the action for unfair labor practice pending
before it on the ground of lack of jurisdiction. Giving due course to the petition, this Court ordered the issuance of
the writ of preliminary injunction prayed for without bond.

The action in question was — upon complaint of the respondents Bureau of Printing Employees Association (NLU)
Pacifico Advincula, Roberto Mendoza, Ponciano Arganda and Teodulo Toleran — filed by an acting prosecutor of
the Industrial Court against herein petitioner Bureau of Printing, Serafin Salvador, the Acting Secretary of the
Department of General Services, and Mariano Ledesma the Director of the Bureau of Printing. The complaint
alleged that Serafin Salvador and Mariano Ledesma have been engaging in unfair labor practices by interfering with,
or coercing the employees of the Bureau of Printing particularly the members of the complaining association
petition, in the exercise of their right to self-organization an discriminating in regard to hire and tenure of their
employment in order to discourage them from pursuing the union activities.

Answering the complaint, the petitioners Bureau of Printing, Serafin Salvador and Mariano Ledesma denied the
charges of unfair labor practices attributed to the and, by way of affirmative defenses, alleged, among other things,
that respondents Pacifico Advincula, Roberto Mendoza Ponciano Arganda and Teodulo Toleran were suspended
pending result of an administrative investigation against them for breach of Civil Service rules and regulations
petitions; that the Bureau of Printing has no juridical personality to sue and be sued; that said Bureau of Printing is
not an industrial concern engaged for the purpose of gain but is an agency of the Republic performing government
functions. For relief, they prayed that the case be dismissed for lack of jurisdiction. Thereafter, before the case could
be heard, petitioners filed an "Omnibus Motion" asking for a preliminary hearing on the question of jurisdiction raised
by them in their answer and for suspension of the trial of the case on the merits pending the determination of such
jurisdictional question. The motion was granted, but after hearing, the trial judge of the Industrial Court in an order
dated January 27, 1959 sustained the jurisdiction of the court on the theory that the functions of the Bureau of
Printing are "exclusively proprietary in nature," and, consequently, denied the prayer for dismissal. Reconsideration
of this order having been also denied by the court in banc, the petitioners brought the case to this Court through the
present petition for certiorari and prohibition.

We find the petition to be meritorious.

The Bureau of Printing is an office of the Government created by the Administrative Code of 1916 (Act No. 2657).
As such instrumentality of the Government, it operates under the direct supervision of the Executive Secretary,
Office of the President, and is "charged with the execution of all printing and binding, including work incidental to
those processes, required by the National Government and such other work of the same character as said Bureau
may, by law or by order of the (Secretary of Finance) Executive Secretary, be authorized to undertake . . .." (See.
1644, Rev. Adm. Code). It has no corporate existence, and its appropriations are provided for in the General
Appropriations Act. Designed to meet the printing needs of the Government, it is primarily a service bureau and
obviously, not engaged in business or occupation for pecuniary profit.

It is true, as stated in the order complained of, that the Bureau of Printing receives outside jobs and that many of its
employees are paid for overtime work on regular working days and on holidays, but these facts do not justify the
conclusion that its functions are "exclusively proprietary in nature." Overtime work in the Bureau of Printing is done
only when the interest of the service so requires (sec. 566, Rev. Adm. Code). As a matter of administrative policy,
the overtime compensation may be paid, but such payment is discretionary with the head of the Bureau depending
upon its current appropriations, so that it cannot be the basis for holding that the functions of said Bureau are wholly
proprietary in character. Anent the additional work it executes for private persons, we find that such work is done
upon request, as distinguished from those solicited, and only "as the requirements of Government work will permit"
(sec. 1654, Rev. Adm. Code), and "upon terms fixed by the Director of Printing, with the approval of the Department
Head" (sec. 1655, id.). As shown by the uncontradicted evidence of the petitioners, most of these works consist of
orders for greeting cards during Christmas from government officials, and for printing of checks of private banking
institutions. On those greeting cards, the Government seal, of which only the Bureau of Printing is authorized to use,
is embossed, and on the bank cheeks, only the Bureau of Printing can print the reproduction of the official
documentary stamps appearing thereon. The volume of private jobs done, in comparison with government jobs, is
only one-half of 1 per cent, and in computing the costs for work done for private parties, the Bureau does not include
profit because it is not allowed to make any. Clearly, while the Bureau of Printing is allowed to undertake private
printing jobs, it cannot be pretended that it is thereby an industrial or business concern. The additional work it
executes for private parties is merely incidental to its function, and although such work may be deemed proprietary
in character, there is no showing that the employees performing said proprietary function are separate and distinct
from those employed in its general governmental functions.

From what has been stated, it is obvious that the Court of Industrial Relations did not acquire jurisdiction over the
respondent Bureau of Printing, and is thus devoid of any authority to take cognizance of the case. This Court has
already held in a long line of decisions that the Industrial Court has no jurisdiction to hear and determine the
complaint for unfair labor practice filed against institutions or corporations not organized for profit and, consequently,
not an industrial or business organization. This is so because the Industrial Peace Act was intended to apply only to
industrial employment, and to govern the relations between employers engaged in industry and occupations for
purposes of gain, and their industrial employees. (University of the Philippines, et al. vs. CIR, et al., G.R. No. L-
15416, April 28, 1960; University of Sto. Tomas vs. Villanueva, et al., G.R. No. L-13748, October 30, 1959; La
Consolacion College vs. CIR, G.R. No. L-13282, April 22, 1960; See also the cases cited therein.) .

Indeed, as an office of the Government, without any corporate or juridical personality, the Bureau of Printing cannot
be sued. (Sec. 1, Rule 3, Rules of Court). Any suit, action or proceeding against it, if it were to produce any effect,
would actually be a suit, action or proceeding against the Government itself, and the rule is settled that the
Government cannot be sued without its consent, much less over its objection. (See Metran vs. Paredes, 45 Off.
Gaz. 2835; Angat River Irrigation System, et al. vs. Angat River Workers' Union, et. al., G.R. Nos. L-10943-44,
December 28, 1957).

The record also discloses that the instant case arose from the filing of administrative charges against some officers
of the respondent Bureau of Printing Employees' Association by the Acting Secretary of General Services. Said
administrative charges are for insubordination, grave misconduct and acts prejudicial to public service committed by
inciting the employees, of the Bureau of Printing to walk out of their jobs against the order of the duly constituted
officials. Under the law, the Heads of Departments and Bureaus are authorized to institute and investigate
administrative charges against erring subordinates. For the Industrial Court now to take cognizance of the case filed
before it, which is in effect a review of the acts of executive officials having to do with the discipline of government
employees under them, would be to interfere with the discharge of such functions by said officials. WHEREFORE,
the petition for a writ of prohibition is granted. The orders complained of are set aside and the complaint for unfair
labor practice against the petitioners is dismissed, with costs against respondents other than the respondent court.

Bengzon, Bautista Angelo, Labrador, Paredes and Dizon, JJ., concur.

Reyes, J.B.L., J., concurs in the result.

SSS vs. Court of Appeals (120 SCRA 707)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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

SOCIAL SECURITY SYSTEM, petitioner,

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

The Solicitor General for petitioner.

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

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

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

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

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

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

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

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

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

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

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

(a) P2,500.00 as actual damage;

(b) P35,000.00 as moral damage;
(c) P10,000.00 as exemplary or corrective damages; and
(d) P5,000.00 as attorney's fees.
 Defendant SSS shall further pay the costs. 5

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

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

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

xxx xxx xxx

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

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

SO ORDERED. 7

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

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

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

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

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

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

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

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

For failure of the First Division to obtain concurrence of the five remaining members (Justices Plana and Gutierrez,
Jr. could take no part), the case was referred to the Court en banc.
The pivotal issues raised are: (1) whether the Cruz spouses had, in fact, violated their real estate mortgage contract
with the SSS as would have warranted the publications of the notices of foreclosure; and (2) whether or not the SSS
can be held liable for damages.

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

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

A similar conclusion was reached by the trial Court.

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

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

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

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

The proposition that the SSS is not profit-oriented was rejected in the case of SSS Employees' Association vs. Hon.
Soriano. 17 But even conceding that the SSS is not, in the main, operated for profit, it cannot be denied that, in so far
as contractual loan agreements with private parties are concerned, the SSS enters into them for profit considering
that the borrowers pay interest, which is money paid for the use of money, plus other charges.
In so far as it is argued that to hold the SSS liable for damages would be to deplete the benefit funds available for its
covered members, suffice it to say, that expenditures of the System are not confined to the payment of social
security benefits. For example, the System also has to pay the salaries of its personnel. Moreover, drawing a
parallel with the NASSCO and the Virginia Tobacco Administration, whose funds are in the nature of public funds, it
has been held that those funds may even be made the object of a notice of garnishment. 18

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

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

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

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

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

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

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

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

Costs against petitioner Social Security System.

SO ORDERED.

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

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

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

Separate Opinions

AQUINO, J., concurring:

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

MAKASIAR, J., dissenting:

I dissent.

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

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

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

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

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

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

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

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

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

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

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

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

II

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

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

WE held in the ACCFA case, thus:

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

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

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

xxx xxx xxx

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

The 1935 Constitution declared:

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

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

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

and

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

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

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

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

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

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

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

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

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

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

Separate Opinions

AQUINO, J., concurring:

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

MAKASIAR, J., dissenting:

I dissent.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

WE held in the ACCFA case, thus:

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

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

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

xxx xxx xxx

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

The 1935 Constitution declared:

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

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

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

and

The State shall establish, maintain, and ensure adequate social services in the field of education,
health, housing, employment, welfare, and social security to guarantee the enjoyment by the people
of a decent standard of living. (Section 7).
The strictly governmental function of the SSS is spelled out unmistakably in Section 2 of R.A. No. 1161 entitled "The
Social Security Act of 1954," thus:

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

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

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

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

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

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

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

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

Footnotes

1 Penned by Justice Ramon C. Fernandez and concurred in by Justices Efren I. Plana and Venicio
Escolin.

2 pp. 3-7, Petitioner's Brief.

3 pp. 2-5, Respondents' Brief.

4 pp, 70-71, Record on Appeal.

5 p. 74, Record on Appeal, p. 62 Rollo.

6 pp. 73-74, Record on Appeal.

7 p. 59, Rollo.

8 pp. A-B, Brief for the Petitioner, p. 136, Rollo.

 9 Talosig vs. Vda. de Nieva, 43 SCRA 473; Evangelists & Co. vs. Abad Santos, 51 SCRA 416;
Tiongco vs. De la Merced, 58 SCRA 90; Perido vs. Perido, 63 SCRA 98; Alaras vs. Court of
Appeals, 64 SCRA 671; T.J. Wolff & Co., Inc. vs. Moralde, 81 SCRA 624.

10 p. 54, Rollo.

11 pp.72-73; Record on Appeal.

12 SSS Employees' Association (PAFLU) vs. Soriano, 7 SCRA 1016(1963).

13 SSS Employees' Association vs. Soriano, 9 SCRA 511 (1963).

14 Sec. 4 (k) RA 1161; Sec. 4 (k) PD 24.

15 Sinco, Philippine Political Law, Revised Ed., p. 34.

16 See Noda vs. Social Security System, 109 SCRA 218 (1981).

17 9 SCRA 511 (1963).

18 NASSCO vs. Court of Industrial Relations, 8 SCRA 781 (1963); PNB vs. Pabalan, 83 SCRA 595
(1978).

19 T.s.n., August 20, 1969, pp. 91-101.

20 T.s.n., Ibid., 101; p. 20, Brief for defendant-appellant, Court of Appeals.

21 p.2 Resolution, p. 59, Rollo.

22 Malonzo vs. Galang, 109 Phil.16 (1960); Enervida vs. de la Torre, 55 SCRA 339 (1974).

23 Art. 2234, Civil Code.

24 Art. 2232, Ibid.

25 Art. 2221, Ibid

26 Art. 2208, Ibid.

** Justices Efren I. Plana and Venicio Escolin took part in the Decision under review.

*** Justice Hugo E. Gutierrez, -Jr., then Acting Solicitor General, filed the Brief for petitioner.

==================================================================================================

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

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 129169 November 17, 1999

NATIONAL IRRIGATION ADMINISTRATION (NIA), petitioner,

vs.
HONORABLE COURT OF APPEALS (4th Division), CONSTRUCTION INDUSTRY ARBITRATION
COMMISSION, and HYDRO RESOURCES CONTRACTORS CORPORATION, respondents.

DAVIDE, JR., C.J.:

In this special civil action for certiorari under Rule 65 of the Rules of Court, the National Irrigation Administration
(hereafter NIA), seeks to annul and set aside the Resolutions 1 of the Court of Appeals in CA-GR. SP No. 37180
dated 28 June 1996 and 24 February 1997, which dismissed respectively NIA's petition for certiorari and prohibition
against the Construction Industry Arbitration Commission (hereafter CIAC), and the motion for reconsideration
thereafter filed.

Records show that in a competitive bidding held by NIA in August 1978, Hydro Resources Contractors Corporation
(hereafter HYDRO) was awarded Contract MPI-C-2 for the construction of the main civil works of the Magat River
Multi-Purpose Project. The contract provided that HYDRO would be paid partly in Philippine pesos and partly in U.S.
dollars. HYDRO substantially completed the works under the contract in 1982 and final acceptance by NIA was
made in 1984. HYDRO thereafter determined that it still had an account receivable from NIA representing the dollar
rate differential of the price escalation for the contract. 2

After unsuccessfully pursuing its case with NIA, HYDRO, on 7 December 1994, filed with the CIAC a Request for
Adjudication of the aforesaid claim. HYDRO nominated six arbitrators for the arbitration panel, from among whom
CIAC appointed Engr. Lauro M. Cruz. On 6 January 1995, NIA filed its Answer wherein it questioned the jurisdiction
of the CIAC alleging lack of cause of action, laches and estoppel in view of HYDRO's alleged failure to avail of its
right to submit the dispute to arbitration within the prescribed period as provided in the contract. On the same date,
NIA filed a Compliance wherein it nominated six arbitrators, from among whom CIAC appointed Atty. Custodio O.
Parlade, and made a counterclaim for P1,000,000 as moral damages; at least P100,000 as exemplary damages;
P100,000 as attorney's fees; and the costs of the arbitration. 3

The two designated arbitrators appointed Certified Public Accountant Joven B. Joaquin as Chairman of the
Arbitration Panel. The parties were required to submit copies of the evidence they intended to present during the
proceedings and were provided the draft Terms of Reference. 4

At the preliminary conference, NIA through its counsel Atty. Joy C. Legaspi of the Office of the Government
Corporate Counsel, manifested that it could not admit the genuineness of HYDRO's evidence since NIA's records
had already been destroyed. NIA requested an opportunity to examine the originals of the documents which
HYDRO agreed to provide. 5

After reaching an accord on the issues to be considered by the arbitration panel, the parties scheduled the dates of
hearings and of submission of simultaneous memoranda. 6

On 13 March 1995, NIA filed a Motion to Dismiss 7 alleging lack of jurisdiction over the disputes. NIA contended that
there was no agreement with HYDRO to submit the dispute to CIAC for arbitration considering that the construction
contract was executed in 1978 and the project completed in 1982, whereas the Construction Industry Arbitration
Law creating CIAC was signed only in 1985; and that while they have agreed to arbitration as a mode of settlement
of disputes, they could not have contemplated submission of their disputes to CIAC. NIA further argued that records
show that it had not voluntarily submitted itself to arbitration by CIAC citing TESCO Services, Inc. v. Hon. Abraham
Vera, et al., 8 wherein it was ruled:

CIAC did not acquire jurisdiction over the dispute arising from the sub-contract agreement between
petitioner TESCO and private respondent LAROSA. The records do not show that the parties agreed
to submit the disputes to arbitration by the CIAC . . . . While both parties in the sub-contract had
agreed to submit the matter to arbitration, this was only between themselves, no request having
been made by both with the CIAC. Hence, as already stated, the CIAC, has no jurisdiction over the
dispute. . . . . Nowhere in the said article (sub-contract) does it mention the CIAC, much less, vest
jurisdiction with the CIAC.

On 11 April 1995, the arbitral body issued an order 9 which deferred the determination of the motion to dismiss and
resolved to proceed with the hearing of the case on the merits as the grounds cited by NIA did not seem to be
"indubitable." NIA filed a motion for reconsideration of the aforesaid Order. CIAC in denying the motion for
reconsideration ruled that it has jurisdiction over the HYDRO's claim over NIA pursuant to E.O 1008 and that the
hearing should proceed as scheduled. 10

On 26 May 1996, NIA filed with the Court of Appeals an original action of certiorari and prohibition with prayer for
restraining order and/or injunction, seeking to annul the Orders of the CIAC for having been issued without or in
excess of jurisdiction. In support of its petition NIA alleged that:

RESPONDENT CIAC HAS NO AUTHORITY OR JURIDICTION TO HEAR AND TRY THIS

DISPUTE BETWEEN THE HEREIN PARTIES AS E.O. NO. 1008 HAD NO RETROACTIVE
EFFECT.

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

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

AN INDORSEMENT OF THE AUDITOR GENERAL DECIDING A CONTROVERSY IS A DECISION

BECAUSE ALL THE ELEMENTS FOR JUDGMENT ARE THERE; THE CONTROVERSY, THE
AUTHORITY TO DECIDE AND THE DECISION. IF IT IS NOT APPEALED SEASONABLY, THE
SAME BECOMES FINAL.

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

THE LEGAL DOCTRINE THAT JURISDICTION IS DETERMINED BY THE STATUTE IN FORCE

AT THE TIME OF THE COMMENCEMENT OF THE ACTION DOES NOT ONLY APPLY TO THE
INSTANT CASE. 11

The Court of Appeals, after finding that there was no grave abuse of discretion on the part of the CIAC in issuing the
aforesaid Orders, dismissed the petition in its Resolution dated 28 June 1996. NIA's motion for reconsideration of
the said decision was likewise denied by the Court of Appeals on 26 February 1997.

On 2 June 1997, NIA filed before us an original action for certiorari and prohibition with urgent prayer for temporary
restraining order and writ of preliminary injunction, praying for the annulment of the Resolutions of the Court of
Appeals dated 28 June 1996 and 24 February 1997. In the said special civil action, NIA merely reiterates the issues
it raised before the Court of Appeals. 12

We take judicial notice that on 10 June 1997, CIAC rendered a decision in the main case in favor of HYDRO. 13 NIA
assailed the said decision with the Court of Appeals. In view of the pendency of the present petitions before us the
appellate court issued a resolution dated 26 March 1998 holding in abeyance the resolution of the same until after
the instant petitions have been finally decided. 14

At the outset, we note that the petition suffers from a procedural defect that warrants its outright dismissal. The
questioned resolutions of the Court of Appeals have already become final and executory by reason of the failure of
NIA to appeal therefrom. Instead of filing this petition for certiorari under Rule 65 of the Rules of Court, NIA should
have filed a timely petition for review under Rule 45.

There is no doubt that the Court of Appeals has jurisdiction over the special civil action for certiorari under Rule 65
filed before it by NIA. The original jurisdiction of the Court of Appeals over special civil actions for certiorari is vested
upon it under Section 9(1) of B.P. 129. This jurisdiction is concurrent with the Supreme Court 15 and with the
Regional Trial Court. 16

Thus, since the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged errors committed by it
in the exercise of its jurisdiction would be errors of judgment which are reviewable by timely appeal and not by a
special civil action of certiorari. 17 If the aggrieved party fails to do so within the reglementary period, and the decision
accordingly becomes final and executory, he cannot avail himself of the writ of certiorari, his predicament being the
effect of his deliberate inaction. 18

The appeal from a final disposition of the Court of Appeals is a petition for review under Rule 45 and not a special
civil action under Rule 65 of the Rules of Court, now Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil
Procedure. 19 Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e.,
regardless of the nature of the action or proceedings involved, may be appealed to this Court by filing a petition for
review, which would be but a continuation of the appellate process over the original case. 20 Under Rule 45 the
reglementary period to appeal is fifteen (15) days from notice of judgment or denial of motion for reconsideration. 21

In the instant case the Resolution of the Court of Appeals dated 24 February 1997 denying the motion for
reconsideration of its Resolution dated 28 June 1997 was received by NIA on 4 March 1997. Thus, it had until 19
March 1997 within which to perfect its appeal. NIA did not appeal. What it did was to file an original action
for certiorari before this Court, reiterating the issues and arguments it raised before the Court of Appeals.
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must show that he has no plain,
speedy and adequate remedy in the ordinary course of law against its perceived grievance. 22 A remedy is
considered "plain, speedy and adequate" if it will promptly relieve the petitioner from the injurious effects of the
judgment and the acts of the lower court or agency. 23 In this case, appeal was not only available but also a speedy
and adequate remedy.

Obviously, NIA interposed the present special civil action of certiorari not because it is the speedy and adequate
remedy but to make up for the loss, through omission or oversight, of the right of ordinary appeal. It is elementary
that the special civil action of certiorari is not and cannot be a substitute for an appeal, where the latter remedy is
available, as it was in this case. A special civil action under Rule 65 of the Rules of Court will not be a cure for failure
to timely file a petition for review on certiorari under Rule 45 of the Rules of Court. 24 Rule 65 is an independent
action that cannot be availed of as a substitute for the lost remedy of an ordinary appeal, including that under Rule
45, 25 especially if such loss or lapse was occasioned by one's own neglect or error in the choice of remedies. 26

For obvious reasons the rules forbid recourse to a special civil action for certiorari if appeal is available, as the
remedies of appeal and certiorari are mutually exclusive and not alternative or successive. 27 Although there are
exceptions to the rules, none is present in the case at bar. NIA failed to show circumstances that will justify a
deviation from the general rule as to make available a petition for certiorari in lieu of taking an appropriate appeal.

Based on the foregoing, the instant petition should be dismissed.

In any case, even if the issue of technicality is disregarded and recourse under Rule 65 is allowed, the same result
would be reached since a review of the questioned resolutions of the CIAC shows that it committed no grave abuse
of discretion.

Contrary to the claim of NIA, the CIAC has jurisdiction over the controversy. Executive Order No. 1008, otherwise
known as the "Construction Industry Arbitration Law" which was promulgated on 4 February 1985, vests upon CIAC
original and exclusive jurisdiction over disputes arising from, or connected with contracts entered into by parties
involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract,
or after the abandonment or breach thereof. The disputes may involve government or private contracts. For the
Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration. 28

The complaint of HYDRO against NIA on the basis of the contract executed between them was filed on 7 December
1994, during the effectivity of E.O. No. 1008. Hence, it is well within the jurisdiction of CIAC. The jurisdiction of a
court is determined by the law in force at the time of the commencement of the action. 29

NIA's argument that CIAC had no jurisdiction to arbitrate on contract which preceded its existence is untenable. E.O.
1008 is clear that the CIAC has jurisdiction over all disputes arising from or connected with construction contract
whether the dispute arises before or after the completion of the contract. Thus, the date the parties entered into a
contract and the date of completion of the same, even if these occurred before the constitution of the CIAC, did not
automatically divest the CIAC of jurisdiction as long as the dispute submitted for arbitration arose after the
constitution of the CIAC. Stated differently, the jurisdiction of CIAC is over the dispute, not the contract; and the
instant dispute having arisen when CIAC was already constituted, the arbitral board was actually exercising current,
not retroactive, jurisdiction. As such, there is no need to pass upon the issue of whether E.O. No. 1008 is a
substantive or procedural statute.

NIA also contended that the CIAC did not acquire jurisdiction over the dispute since it was only HYDRO that
requested for arbitration. It asserts that to acquire jurisdiction over a case, as provided under E.O. 1008, the request
for arbitration filed with CIAC should be made by both parties, and hence the request by one party is not enough.

It is undisputed that the contracts between HYDRO and NIA contained an arbitration clause wherein they agreed to
submit to arbitration any dispute between them that may arise before or after the termination of the agreement.
Consequently, the claim of HYDRO having arisen from the contract is arbitrable. NIA's reliance with the ruling on the
case of Tesco Services Incorporated v. Vera, 30 is misplaced.

The 1988 CIAC Rules of Procedure which were applied by this Court in Tesco case had been duly amended by
CIAC Resolutions No. 2-91 and 3-93, Section 1 of Article III of which read as follows:

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

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

Under the present Rules of Procedure, for a particular construction contract to fall within the jurisdiction of CIAC, it is
merely required that the parties agree to submit the same to voluntary arbitration. Unlike in the original version of
Section 1, as applied in the Tesco case, the law as it now stands does not provide that the parties should agree to
submit disputes arising from their agreement specifically to the CIAC for the latter to acquire jurisdiction over the
same. Rather, it is plain and clear that as long as the parties agree to submit to voluntary arbitration, regardless of
what forum they may choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they
specifically choose another forum, the parties will not be precluded from electing to submit their dispute before the
CIAC because this right has been vested upon each party by law, i.e., E.O. No. 1008. 31

Moreover, it is undeniable that NIA agreed to submit the dispute for arbitration to the CIAC. NIA through its counsel
actively participated in the arbitration proceedings by filing an answer with counterclaim, as well as its compliance
wherein it nominated arbitrators to the proposed panel, participating in the deliberations on, and the formulation of,
the Terms of Reference of the arbitration proceeding, and examining the documents submitted by HYDRO after NIA
asked for the originals of the said documents. 32

As to the defenses of laches and prescription, they are evidentiary in nature which could not be established by mere
allegations in the pleadings and must not be resolved in a motion to dismiss. Those issues must be resolved at the
trial of the case on the merits wherein both parties will be given ample opportunity to prove their respective claims
and defenses. 33 Under the rule 34 the deferment of the resolution of the said issues was, thus, in order. An allegation
of prescription can effectively be used in a motion to dismiss only when the complaint on its face shows that indeed
the action has already prescribed. 35 In the instant case, the issue of prescription and laches cannot be resolved on
the basis solely of the complaint. It must, however, be pointed that under the new rules, 36 deferment of the
resolution is no longer permitted. The court may either grant the motion to dismiss, deny it, or order the amendment
of the pleading.

WHEREFORE, the instant petition is DISMISSED for lack of merit. The Court of Appeals is hereby DIRECTED to
proceed with reasonable dispatch in the disposition of C.A. G.R. No. 44527 and include in the resolution thereof the
issue of laches and prescription.

SO ORDERED.

Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.

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

1988)
THIRD DIVISION

[G.R. No. L-51806. November 8, 1988.]

CIVIL AERONAUTICS ADMINISTRATION, Petitioner, v. COURT OF APPEALS and ERNEST E.

SIMKE, Respondents.

The Solicitor General for Petitioner.

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

SYLLABUS

1. ADMINISTRATIVE LAW; ADMINISTRATIVE AGENCY; CIVIL AERONAUTICS

ADMINISTRATION. — If the power to sue and be sued has been granted without qualification, it can include
a claim based on tort or quasi-delict.

2. ID.; ID.; IMMUNITY FROM SUIT DETERMINED BY THE OBJECTION FOR ITS CREATION. — 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.

3. REMEDIAL LAE; EVIDENCE; FINDINGS OF FACT BY THE TRIAL COURT, BINDING UPON THE
SUPREME COURT. — The trial court’s findings during its ocular inspection of the MIA terrace that the
elevation where plaintiff slipped was a dangerous sliding step and the proximate cause of plaintiff’s injury are
factual findings binding upon the Supreme Court.

4. CIVIL LAW; TORTS AND DAMAGES; QUASI-DELICT; BASIS OF LIABILITY. — Article 2176 of the
Civil Code which provides the basis for liability for quasi-delict. CAA knew of the existence of the dangerous
elevation. 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.
5. ID.; ID.; ID.; NEGLIGENCE; TEST TO DETERMINE EXISTENCE THEREOF. — As formulated in the
case of Picart v. Smith, 37 Phil. 809 (1918) the test by which to determine the existence of negligence 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.

6. ID.; ID.; ID.; LACK OF CONTRIBUTORY NEGLIGENCE. — 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 private respondent 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.

7. ID.; ID.; ID.; LIABILITY FOR DAMAGES IMPLIED FROM THE GRANT OF POWER TO SUE AND
BE SUED. — The liability of CAA to answer for damages, whether actual, moral or exemplary, cannot be
seriously doubted in view of the conferment of the power to sue and be sued upon it.

8. ID.; ID.; ID.; ACTUAL OR COMPENSATORY DAMAGE. — Article 2199 of the Civil Code, with respect
to actual or compensatory damages, mandates that the same be proven. Private respondent claims P15,589.55
representing medical and hospitalization bills P20,000.00 spent as transportation expenses of two layers who
represented private respondent abroad and the publication of the postponement notices of the wedding, were
found by the court to have been duly proven.

9. ID.; ID.; ID.; MORAL DAMAGES. — The court holds private respondent entitled to the award of
P30,000.00 as moral damages because of the physical suffering and physical injuries caused by the negligence
of the CAA (Arts. 2217 and 2R 19 (2), New Civil Code.)

10. ID.; ID.; ID.; EXEMPLARY DAMAGES; AWARD DUE TO DEFENDANT’S GROSS NEGLIGENCE.
— Gross negligence 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. The award of P40,000.00 by the trial
court as exemplary damages appropriately underscores the point that as an entity charged 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.

11. ID.; ID.; ID.; ATTORNEY’S FEES. — 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.

DECISION

CORTES, J.:

Assailed in this petition for review on certiorari is the decision of the Court of Appeals affirming the
trial court decision which reads as follows: chanrob1e s vi rtual 1aw lib rary

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: chanrob1es v irt ual 1aw l ibra ry

Private respondent is a naturalized Filipino citizen and at the time of the incident was the Honorary
Consul General 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, 1963, 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: chanrob1es v irt ual 1aw l ibra ry

1. The Court of Appeals gravely erred in not holding that the present suit against 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 in the surface of the floor area of the terrace of the
(old) 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 [Rollo, pp. 93-94].

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:chanrob1es virtual 1aw lib rary

x x x

. . . 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 lights and in its own name. The better practice then 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.]

x x x

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, 110 SCRA 456] 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.

x x x

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.]

x x x

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: chanrob1es virtua l 1aw lib ra ry

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:
libra ry
chanrob1es v irt ual 1aw

x x x

(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.

x x x

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: chanrob1e s virtual 1aw l ibra ry

x x x

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:chanrob1e s virt ual 1aw l ibra ry

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 fan 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; 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 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.

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.

x x x

. . . 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 . . .

x x x

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; Italics supplied.]

The Court of Appeals further noted that: chanrob1es virtua l 1aw lib ra ry

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. 39], 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): chanrob1e s virtual 1aw lib rary

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 govern 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; Italics
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:chanrob1e s virtual 1aw l ibra ry

In connection with the incident testified to, a sketch, Exhibit O, shows a section of the floorings on
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 the 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. 28-29.]

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 the 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-delict. 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 grant 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 is 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 or 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. 8]. 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.
53790-53972, Oct. 23, 1981 , 108 SCRA 416] 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: chanrob1es virtua l 1aw lib rary

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

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 on 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 charged 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.

Fernan, C.J., Gutierrez Jr., Feliciano and Bidin, JJ., concur.

Heirs of Mendoza vs. DPWH (729 SCRA 654)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

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. Thus, the Court of Appeals correctly ruled that the DPWH
enjoys immunity from suit and may not be sued without its consent.
1âw phi1

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

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:

ARTURO D. BRION
Associate Justice
 MARIANO C. DEL CASTILLO JOSE PORTUGAL PEREZ
Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION

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

ANTONIO T. CARPIO
Associate Justice
Chairperson

CERTIFICATION

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

MARIA LOURDES P. A. SERENO

Chief Justice

DOTC vs. Sps. Abecina (G.R. No. 206484, January 29, 2016)

SECOND DIVISION

G.R. No. 206484, June 29, 2016

DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS

(DOTC), Petitioner, v. 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. 937951 affirming the decision of the Regional Trial
Court (RTC) of Daet, Camarines Norte, Branch 39, in Civil Case No. 7355.2 The 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 chanrobleslaw

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 chanrobles law

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 chanroble slaw

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 (P1,200,000.00). Neither the DOTC nor Digitel complied with the demand.

On September 3, 2003, the respondent spouses filed an accion publiciana complaint6 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
chan robleslaw

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 chanrobleslaw

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 Instance11 and Amigable v. Cuenca,12 it held that
government immunity from suit could not be used as an instrument to perpetuate an injustice on a
citizen.13
chanrob leslaw

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
P1,200,000.00 as actual damages, P200,000.00 as moral damages, and P200,000.00 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 P20,000.00.15 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 chanrobleslaw

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 chanroble slaw

Citing the 2007 case of Heirs of Mateo Pidacan v. Air Transportation Office (ATO),22 the 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 cralawred chan roble slaw

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
197328 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. 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 chanrobles law

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 chanroble slaw

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,33Amigable v. Cuenca,34 the 2010 case Heirs of Pidacan v. ATO,35 and more recently in Vigilar v.
Aquino36 that 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,
ChanRoblesVirtualawlibra ry

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 chanrobleslaw

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 chanrobleslaw

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. chanRoblesvi rtualLawli bra ry

Carpio, (Chairperson), Mendoza, and Leonen, JJ., concur.

Del Castillo, J., on leave.

Republic of the Philippines vs. Sandiganbayan (G.R. No. 85284, February

28, 1990)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

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.

Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Bidin, Sarmiento,
Cortes, Griño-Aquino, Medialdea and Regalado, JJ., concur.
Santiago vs. GRP (G.R. No. L- 48214, December 19, 1978) (87 SCRA 294)

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-48214 December 19, 1978

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.

Barredo, Antonio, Aquino, Concepcion, Jr. and Santos, JJ., concur.

Froilan vs. Pan Oriental Shipping Corp. (G.R. No. L-6060, September 30,
1950)
EN BANC

[G.R. No. L-6060. September 30, 1954.]

FERNANDO A. FROILAN, Plaintiff-Appellee, v. PAN ORIENTAL SHIPPING CO., Defendant-

Appellant, REPUBLIC OF THE PHILIPPINES, Intervenor-Appellee.

Quisumbing, Sycip, Quisumbing & Salazar, for Appellant.

Ernesto Zaragoza, for Appellee.

Hilarion U. Jarencio, for the intervenor.

SYLLABUS

1. PLEADING AND PRACTICE; COMPLAINT IN INTERVENTION; COUNTERCLAIM NOT BARRED

BY PRIOR JUDGMENT FOR FAILURE TO APPEAL FROM DISMISSAL OF COMPLAINT IN
INTERVENTION WITH RESERVATION. — An order dismissing the complaint in intervention after a
counterclaim has been filed but reserving the right of the defendant as against the intervenor, does not bar at the
defendant from proceeding with its counterclaim against the intervenor, notwithstanding the failure of the
defendant to appeal from said order.

2. ID.; ID.; ID.; COUNTERCLAIM FOR SPECIFIC PERFORMANCE STATES A CAUSE OF ACTION. —
The complaint in the intervention sought to recover possession of the vessel in question from the plaintiff,
which claim is adverse to the position assumed by the defendant that it has a better right to said possession than
the plaintiff, on the theory that the latter had already lost his rights over the same, and that, on the other hand,
the defendant is relying on the charter contract executed in its favor by the intervenor. Held: The counterclaim
calls for specific performance on the part of the intervenor and therefore states a cause of action.

3. ID.; ID.; ID.; ID.; FILING OF COMPLAINT N INTERVENTION BY THE GOVERNMENT IS WAIVER
OF NONSUABILITY. — The filing by the Government of a complaint in intervention is in effect a wavier of
its right of nonsuability.

DECISION

PARAS, C.J. :

The factual antecedents of this case are sufficiently recited in the brief filed by the intervenor-
appellee as follows: jgc:chanrobles.c om.ph

"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 reasons, among
them the non-payment of the installments, the Shipping Commission tool 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 condition 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 is alleged that
it has 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
excluding the dry-docking expenses incurred on said vessel by the session 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 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 its (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 bareboat 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 of the vessel and claimed the right of retention of the vessel. It,
therefore, prayed that, if the Republic 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 circumstances 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 question that are now
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. had 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 order of the lower
court dated February 3, 1952, holding that the payment made by Froilan’s obligation to the Shipping
Administration, which order had already become final, the counterclaim 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. App. pp. 104-106).

"11. It is 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. App.
pp. 107)."cralaw virt ua1aw lib rary

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: jgc:chanroble s.com.p h

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

"The counterclaim stated as follows: chanrob1e s virtual 1aw l ibra ry

‘COUNTERCLAIM

‘As counterclaim against the intervenor Republic of the Philippines, the defendant alleges: chanro b1es vi rtual 1aw lib rary

‘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 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.

‘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 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." cralaw virt ua1aw li bra ry

"The ground of the motion to dismiss are (a) That the cause of action is barred by prior judgment;
(b) That the counterclaim stated no cause of action; (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." cralaw virtua 1aw lib rary

The defendant’s appeal is predicated upon the following assignments of error: jgc:chanrobles .com.p h

"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 over the intervenor Republic of the
Philippines.

III. The lower court erred in dismissing the counterclaim on the ground of alleged lack of jurisdiction
over the intervenor Republic of the Philippines." cralaw virtua1aw li bra ry

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 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." cralaw virtua 1aw lib rary

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 judge 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 counter-claim calls for specific
performance on the part of the intervenor. As to whether this counterclaim is meritorious is another
question 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 the 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 defense he might have against the
state. The United States Supreme Court thus explains: chanrob1es virtua l 1aw lib rary

‘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. v. 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 complainant 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.

Pablo, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Concepcion and Reyes, J.B.L., JJ.,
concur.
=====================================================
Republic vs. Feliciano (G.R. No. 70853, March 12, 1987)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 70853 March 12, 1987

REPUBLIC OF THE PHILIPPINES, petitioner-appellee,

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

YAP, J.:

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

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

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

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

On August 29, 1970, the trial court, through Judge Rafael S. Sison, rendered a decision declaring Lot No. 1, with an
area of 701.9064 hectares, to be the private property of the plaintiff, "being covered by a possessory information title
in the name of his predecessor-in-interest" and declaring said lot excluded from the NARRA settlement reservation.
The court declared the rest of the property claimed by plaintiff, i.e. Lots 2, 3 and 4, reverted to the public domain.
A motion to intervene and to set aside the decision of August 29, 1970 was filed by eighty-six (86) settlers, together
with the barrio council of Pag-asay, alleging among other things that intervenors had been in possession of the land
in question for more than twenty (20) years under claim of ownership.

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

On August 30, 1971, the date set for the presentation of the evidence for intervenors, the latter did not appear but
submitted a motion for postponement and resetting of the hearing on the next day, August 31, 1971. The trial court
denied the motion for postponement and allowed plaintiff to offer his evidence "en ausencia," after which the case
would be deemed submitted for decision. On the following day, August 31, 1971, Judge Sison rendered a decision
reiterating his decision of August 29, 1970.

A motion for reconsideration was immediately filed by the intervenors. But before this motion was acted upon,
plaintiff filed a motion for execution, dated November 18, 1971. On December 10, 1971, the lower court, this time
through Judge Miguel Navarro, issued an order denying the motion for execution and setting aside the order
denying intervenors' motion for postponement. The case was reopened to allow intervenors to present their
evidence. Unable to secure a reconsideration of Judge Navarro's order, the plaintiff went to the Intermediate
Appellate Court on a petition for certiorari. Said petition was, however, denied by the Intermediate Appellate Court,
and petitioners brought the matter to this Court in G.R. No. 36163, which was denied on May 3, 1973 Consequently,
the case was remanded to the court a quo for further proceedings.

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

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

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

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

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

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

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

Narvasa, Cruz, Feliciano, Gancayco and Sarmiento, JJ., concur.

Melencio-Herrera, J., is on leave.

Sanders vs. Veridiano (G.R. No. L-46930, June 10, 1988)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

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

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

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

CRUZ, J.:

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

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

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

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

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

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

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

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

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

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

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

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

In past cases, this Court has held that where the character of the act complained of can be determined from the
pleadings exchanged between the parties before the trial, it is not necessary for the court to require them to belabor
the point at a trial still to be conducted. Such a proceeding would be superfluous, not to say unfair to the defendant
who is subjected to unnecessary and avoidable inconvenience.
Thus, in Baer v. Tizon, 10 we held that a motion to dismiss a complaint against the commanding general of the
Olongapo Naval Base should not have been denied because it had been sufficiently shown that the act for which he
was being sued was done in his official capacity on behalf of the American government. The United States had not
given its consent to be sued. It was the reverse situation in Syquia v. Almeda Lopez," where we sustained the order
of the lower court granting a where we motion to dismiss a complaint against certain officers of the U.S. armed
forces also shown to be acting officially in the name of the American government. The United States had also not
waived its immunity from suit. Only three years ago, in United States of America v. Ruiz, 12 we set aside the denial
by the lower court of a motion to dismiss a complaint for damages filed against the United States and several of its
officials, it appearing that the act complained of was governmental rather than proprietary, and certainly not
personal. In these and several other cases 13 the Court found it redundant to prolong the other case proceedings
after it had become clear that the suit could not prosper because the acts complained of were covered by the
doctrine of state immunity.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SO ORDERED.

Narvasa, Gancayco, Grino-Aquiño and Medialdea, JJ., Concur.

===============================================================================

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

EN BANC

[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 SERAPIN CEBU, JR., GEN. BRIGIDO PAREDES, COL.
ROGELIO MONFORTE, PFC ANTONIO LUCERO, PAT. JOSE MENDIOLA, PAT. NELSON
TUAZON, 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, v. 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,
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, 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 BAUTISTA, DANTE EVANGELIO,
RODRIGO 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, v. REPUBLIC OF THE PHILIPPINES, and
HONORABLE EDILBERTO G. SANDOVAL, Regional Trial Court of Manila, Branch
9, Respondents.

SYLLABUS

1. POLITICAL LAW; PRINCIPLE OF STATE’S IMMUNITY FROM SUIT; CONSTRUED. — 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. 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.

2. ID.; ID.; NOT DEEMED WAIVED WHEN THE GOVERNMENT AUTHORIZES THE INDEMNIFICATION
FOR THE VICTIM OR THROUGH PUBLIC ADDRESSES MADE BY THE PRESIDENT. — 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 indemnity 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. 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." 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." 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.

3. ID.; ID.; WHEN AVAILABLE; RULE; CASE AT BAR. — Some instances when a suit against the State
is proper are" (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. Moreover, the members of the police and military crowd dispersal units
committed a prohibited act under B.P. Blg. 880 as there was unnecessary firing by them in dispersing
the marchers.

4. ID.; ID.; CANNOT INSTITUTIONALIZE IRRESPONSIBILITY AND NON-ACCOUNTABILITY NOR

GRANT A PRIVILEGE STATUS NOT CLAIMED BY ANY OTHER OFFICIAL OF THE REPUBLIC. — 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. Until
recently in 1991, 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.

5. ID.; ID.; DOES NOT APPLY 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. — 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. 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."

DECISION

CAMPOS, JR., J.:

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

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. v. Republic of the Philippines, Et. Al." cralaw virtua 1aw lib rary

The pertinent portion of the questioned Order 2 dated May 31, 1988, reads as follows: jgc:chanrob les.com. ph

"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." cralaw virtua1 aw lib rary

On the other hand, the Order 3 , 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: jgc:chanroble s.com.p h

"(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: jgc:chanrobles. com.ph

". . . 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 Paguinto 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: jgc:chanrobles. com.ph

"(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 . . ." cralaw virtua1aw l ibra ry

(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. chanrobles law l ibra ry : red

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: jgc:chanrobles. com.ph

"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 v. 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.

Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr., Romero, Nocon,
Bellosillo, Melo and Quiason, JJ., concur.

Gutierrez, Jr., J., on terminal leave.

Mun. of San Miguel vs. Fernandez (G.R. No. L-61744, June 25, 1984)

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-61744 June 25, 1984

MUNICIPALITY OF SAN MIGUEL, BULACAN, petitioner,

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

Pascual C. Liatchko for petitioner.

The Solicitor General and Marcelo Pineda for respondents.

RELOVA, J.:

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

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against the defendant Municipal Government of San Miguel Bulacan, represented by Mayor Mar
Marcelo G. Aure and its Municipal Treasurer:
 1. ordering the partial revocation of the Deed of Donation signed by the deceased Carlos Imperio in
favor of the Municipality of San Miguel Bulacan, dated October 27, 1947 insofar as Lots Nos. 1, 2, 3,
4 and 5, Block 11 of Subdivision Plan Psd-20831 are concerned, with an aggregate total area of
4,646 square meters, which lots are among those covered and described under TCT No. T-1831 of
the Register of Deeds of Bulacan in the name of the Municipal Government of San Miguel Bulacan,

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

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

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

5. ordering the defendant to pay the plaintiffs the sum of P3,000.00 for attomey's fees; and to pay
the cost of suit.

The counterclaim of the defendant is hereby ordered dismissed for lack of evidence presented to
substantiate the same.

SO ORDERED. (pp. 11-12, Rollo)

The foregoing judgment became final when herein petitioner's appeal was dismissed due to its failure to file the
record on appeal on time. The dismissal was affirmed by the then Court of Appeals in CA-G.R. No. SP-12118 and
by this Court in G.R. No. 59938. Thereafter, herein private respondents moved for issuance of a writ of execution for
the satisfaction of the judgment. Respondent judge, on July 27, 1982, issued an order, to wit:

Considering that an entry of judgment had already been made on June 14, 1982 in G. R. No. L-
59938 and;

Considering further that there is no opposition to plaintiffs' motion for execution dated July 23, 1983;

Let a writ of execution be so issued, as prayed for in the aforestated motion. (p. 10, Rollo)

Petitioner, on July 30, 1982, filed a Motion to Quash the writ of execution on the ground that the municipality's
property or funds are all public funds exempt from execution. The said motion to quash was, however, denied by the
respondent judge in an order dated August 23, 1982 and the alias writ of execution stands in full force and effect.

On September 13, 1982, respondent judge issued an order which in part, states:

It is clear and evident from the foregoing that defendant has more than enough funds to meet its
judgment obligation. Municipal Treasurer Miguel C, Roura of San Miguel, Bulacan and Provincial
Treasurer of Bulacan Agustin O. Talavera are therefor hereby ordered to comply with the money
judgment rendered by Judge Agustin C. Bagasao against said municipality. In like manner, the
municipal authorities of San Miguel, Bulacan are likewise ordered to desist from plaintiffs' legal
possession of the property already returned to plaintiffs by virtue of the alias writ of execution.

Finally, defendants are hereby given an inextendible period of ten (10) days from receipt of a copy of
this order by the Office of the Provincial Fiscal of Bulacan within which to submit their written
compliance, (p. 24, Rollo)

When the treasurers (provincial and municipal) failed to comply with the order of September 13, 1982, respondent
judge issued an order for their arrest and that they will be release only upon compliance thereof.

Hence, the present petition on the issue whether the funds of the Municipality of San Miguel, Bulacan, in the hands
of the provincial and municipal treasurers of Bulacan and San Miguel, respectively, are public funds which are
exempt from execution for the satisfaction of the money judgment in Civil Case No. 604-B.

Well settled is the rule that public funds are not subject to levy and execution. The reason for this was explained in
the case of Municipality of Paoay vs. Manaois, 86 Phil. 629 "that they are held in trust for the people, intended and
used for the accomplishment of the purposes for which municipal corporations are created, and that to subject said
properties and public funds to execution would materially impede, even defeat and in some instances destroy said
purpose." And, in Tantoco vs. Municipal Council of Iloilo, 49 Phil. 52, it was held that "it is the settled doctrine of the
law that not only the public property but also the taxes and public revenues of such corporations Cannot be seized
under execution against them, either in the treasury or when in transit to it. Judgments rendered for taxes, and the
proceeds of such judgments in the hands of officers of the law, are not subject to execution unless so declared by
statute." Thus, it is clear that all the funds of petitioner municipality in the possession of the Municipal Treasurer of
San Miguel, as well as those in the possession of the Provincial Treasurer of Bulacan, are also public funds and as
such they are exempt from execution.

Besides, Presidential Decree No. 477, known as "The Decree on Local Fiscal Administration", Section 2 (a),
provides:

SEC. 2. Fundamental Principles. — Local government financial affairs, transactions, and operations
shall be governed by the fundamental principles set forth hereunder:

(a) No money shall be paid out of the treasury except in pursuance of a lawful appropriation or other
specific statutory authority.

xxx xxx xxx

Otherwise stated, there must be a corresponding appropriation in the form of an ordinance duly passed by the
Sangguniang Bayan before any money of the municipality may be paid out. In the case at bar, it has not been
shown that the Sangguniang Bayan has passed an ordinance to this effect.

Furthermore, Section 15, Rule 39 of the New Rules of Court, outlines the procedure for the enforcement of money
judgment:

(a) By levying on all the property of the debtor, whether real or personal, not otherwise exempt from
execution, or only on such part of the property as is sufficient to satisfy the judgment and accruing
cost, if he has more than sufficient property for the purpose;

(b) By selling the property levied upon;

(c) By paying the judgment-creditor so much of the proceeds as will satisfy the judgment and
accruing costs; and

(d) By delivering to the judgment-debtor the excess, if any, unless otherwise, directed by judgment or
order of the court.

The foregoing has not been followed in the case at bar.

ACCORDINGLY, the petition is granted and the order of respondent judge, dated July 27, 1982, granting issuance
of a writ of execution; the alias writ of execution, dated July 27, 1982; and the order of respondent judge, dated
September 13, 1982, directing the Provincial Treasurer of Bulacan and the Municipal Treasurer of San Miguel,
Bulacan to comply with the money judgments, are SET ASIDE; and respondents are hereby enjoined from
implementing the writ of execution.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr., and De la Fuente, JJ,. concur.

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

THIRD DIVISION

January 17, 2018

G.R. No. 190289

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

DECISION

VELASCO, JR., J.:

Nature of the Case

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court of the Decision1 dated
February 27, 2009 and the Resolution2 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 Kaisha36 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. 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
1âwphi1

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.

PRESBITERO J. VELASCO, JR.

Associate Justice

WE CONCUR:

LUCAS P. BERSAMIN
Associate Justice

MARVIC M.V.F. LEONEN SAMUEL R. MARTIRES

Associate Justice Associate Justice

ALEXANDER G. GESMUNDO
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decisionhad been reached in consultation before the case was assigned to
the writer of the opinion of the Court’s Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson

CERTIFICATION

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

MARIA LOURDES P.A. SERENO

Chief Justice

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

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-10659 November 11, 1915

MACARIO LAVITORIA, ET AL., petitioners,

vs.
THE JUDGE OF THE COURT OF FIRST INSTANCE OF TAYABAS and THE DIRECTOR OF LANDS on behalf
of the Government of the Philippine Islands, respondents.

Reyes and Millar for petitioners.

Attorney-General Avanceña for respondents.

JOHNSON, J.:

This is an action of prohibition. It is an original action in the Supreme Court. It was commenced on or about the 1st
of March, 1915. Its purpose was to secure an order prohibiting the respondents from proceedings with the hearing of
a certain cause pending in the Court of Land Registration. The facts, as they appear from the record, are as follows:

First. That on or about the 11th of August, 1913, Charles H. Sleeper, as Director of Lands, presented a petition in
the Court of Land Registration, in representation of the Government of the Philippine Islands, for the purpose of
registering a certain parcel or parcels of land, composed of about 300 hectares, located in the municipality of
Candelaria, Province of Tayabas, in accordance with the provisions of section 61 of Act No. 926. (See Exhibit A.)

Second. That on the 2nd of March, 1914, the Attorney-General presented exactly the same petition which had
therefore been presented by the Director of Lands. (Exhibit B.) No reason appears of record why the second petition
was presented.

Third. That on the 21st of September, 1914, after said cause had been transferred from the Court of Land
Registration to the Court of First Instance of the Province of Tayabas, by virtue of Act No. 2347, of July 1st, 1914,
the clerk of said court issued a notice to the Director of Lands, in accordance with section 20 of said Act, notifying
said Director that said cause had been set down for hearing in the municipality of Lucena, on the 23rd of November,
1914, at eight o'clock a.m. (Exhibit C.)

Fourth. That on the 26th of September, 1914, the general notice required by the Land Registration Law was issued
by the chief clerk of the General Land Registration Office, notifying all persons that said cause had been set down
for hearing at 8 o'clock a. m. on the 23d of November, 1914. (Exhibit D.)

Fifth. That on the 17th of October, 1914, the sheriff of the Province of Tayabas certified that he had, on the 14th of
October, 1914, caused a certified copy of the notice to all the parties to be posted in a conspicuous place on each
parcel of the land in question, as well as in a conspicuous place on the chief municipal building of the said
municipality of Candelaria. (Exhibit E.)

Sixth. That on 27th of October, 1914, the chief of the General Land Registration Office under the torrens system,
presented a certificate that he had duly complied with the provisions of section 32 of Act No. 496. (Exhibit F.) law ph!1. net
Seventh. That on the 2nd of October, 1914, a number of persons, through their attorneys, Reyes & Millar, presented
an answer to the petition originally presented and described in paragraph 1 above, alleging that they were the only
and absolute owners, in common, of the property described in said petition, and that no other person had any right
or legitimate interest in the same. (Exhibit G.)

Eight. That on the 23d of November, 1914, at 8 o'clock a. m., the Honorable Isidro Paredes, judge, entered an order
of general default against all persons who had not appeared on said date. According to said order the only persons
who had appeared were Gregorio Suaverdes, Florentino Vensuela, Abdon Romulo, Cornelio de Guzman, Espiridion
Dune, Macario Lavitoria, Regino Lavitoria, Bernarda Lavitoria, Vidal Lavitoria, Ariston Lavarro, Sofia Lavarro, Isidro
Labares. (See Exhibit H.)

Ninth. That on the 1st of December, 1914, the Honorable Isidro Paredes, judge, after hearing the respective parties,
rendered a decision in which he ordered said parcel of land to be registered in favor of Macario Lavitoria, Regina
Lavitoria, Bernarda Lavitoria, Vidal Lavitoria, Ariston Lavarro, Sofia Lavarro, and Isidro Labares. (Exhibit I.)

Tenth. That on the 8th of December, 1914, the Honorable Ramon Avanceña, Attorney-General, presented a motion
for a new trial, and asked that the decision of December 1st, 1914, be declared to be without effect. Said motion
was based upon the fact that neither the Attorney-General nor the Director of Lands had received notice of the date
fixed for the trial of said cause. (Exhibit J.)

Eleventh. Said motion of the Attorney-General was brought on for hearing and granted by the Honorable Isidro
Paredes, upon the 7th of January, 1915. (Exhibit L.)

Twelfth. On the same day and within one half hour after the decision granting the new trial mentioned in paragraph
11, the attorneys for the respondents presented a verbal request for a reconsideration of said order granting the new
trial, which verbal request for a reconsideration was denied upon the 7th of January, 1915. (Exhibit LL.)

By reference to the above facts, it will be noted:

First. That the decision of the lower court was rendered on the 1st of December, 1914.

Second. That a motion for a new trial by the Attorney-General was made on the 8th of December, 1914.

Third. That said motion was based upon the fact that neither the Attorney-General nor the Director of Lands had
received notice of the trial of the cause.

Fourth. That said motion of the Attorney-General was considered and granted upon the 7th of January, 1915.

The petitioners herein now asked that the lower court be prohibited from proceeding with the new trial in said cause,
for the reason that the court was without jurisdiction to consider and decide the motion for a new trial, or to grant a
new trial, after the expiration of thirty days from the notification of the decision.

Evidently the petitioners have not read the record of the court below nor the exhibits which they themselves present.
Exhibit I (the decision of the lower court) shows that the decision of the lower court was rendered on the 1st of
December, 1914, while the motion for a new trial was made by the Attorney-General seven days thereafter, or upon
the 8th of December, 1914. The thirty days therefore concerning which the petitioners complain, had not passed. It
is true that the judge did not pass upon said motion for a new trial until the 7th of January, 1915. While it is true that
more than thirty days elapsed from the date of the decision of the court until the decision on the motion for a new
trial, yet, nevertheless, we have decided in numerous cases that the time during which the court considers a motion
for a new trial is not counted nor included in the time within which a decision of the Court of First Instance becomes
final. Therefore the time during which the court was considering the motion for a new trial, from December 8, 1914,
to January 7, 1915, must be eliminated from the time within which the decision of the lower court would otherwise
become final. (Garcia vs. Ambler and Sweeney, 4 Phil. Rep., 81; De la Cruz vs. Garcia, 4 Phil. Rep., 680;
Santos vs. Vallafuerte, 5 Phil. Rep., 739; Paez vs. Berenguer, 6 Phil. Rep., 521.) The rule that the time during which
the judge is considering a motion for a new trial shall not count against the time within which the judgment shall
become final has been specifically applied to decisions in the Court of Land Registration, notwithstanding the
provisions of Act No. 1484. (Paez vs. Berenguer, supra.) In view of the fact that the motion was presented within the
time and before the decision became final, the court had jurisdiction and, having jurisdiction to consider said motion,
the present application must be denied.

Parties have a right to be present at the trial of their causes, either by themselves or by their attorneys. They are
also entitled to reasonable notice of the time fixed for the trial. If the court discovers that either of the parties to the
action has not been notified of the trial, he may, on his own motion, grant a new trial. (Muerteguy &
Aboitiz vs. Delgado, 22 Phil. Rep., 109.)

The record fully discloses facts sufficient to justify the lower court in the exercise of its lawful powers in granting a
new trial in the present case. The demurrer is therefore hereby sustained and the petitioners are hereby given ten
days within which to amend their petition, if they so desire. If an amended petition is not so presented, then let an
order be entered denying the remedy prayed for, with costs. So ordered.
Arellano, C.J., Torres, Carson, Moreland, and Araullo, JJ., concur.