Republic of the Philippines Rehabilitation Administration (NARRA), a tract of land situated in the

SUPREME COURT Municipalities of Tinambac and Siruma, Camarines Sur, after which the
Manila NARRA and its successor agency, the Land Authority, started sub-
dividing and distributing the land to the settlers; that the property in
FIRST DIVISION question, while located within the reservation established under
Proclamation No. 90, was the private property of plaintiff and should
G.R. No. 70853 March 12, 1987 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
REPUBLIC OF THE PHILIPPINES, petitioner-appellee, posesoria of his predecessor-in-interest be declared legal valid and
vs. subsisting and that defendant be ordered to cancel and nullify all awards
PABLO FELICIANO and INTERMEDIATE APPELLATE to the settlers.
COURT, respondents-appellants.
The defendant, represented by the Land Authority, filed an answer,
raising by way of affirmative defenses lack of sufficient cause of action
YAP, J.: and prescription.

Petitioner seeks the review of the decision of the Intermediate Appellate On August 29, 1970, the trial court, through Judge Rafael S. Sison,
Court dated April 30, 1985 reversing the order of the Court of First rendered a decision declaring Lot No. 1, with an area of 701.9064
Instance of Camarines Sur, Branch VI, dated August 21, 1980, which hectares, to be the private property of the plaintiff, "being covered by a
dismissed the complaint of respondent Pablo Feliciano for recovery of possessory information title in the name of his predecessor-in-interest"
ownership and possession of a parcel of land on the ground of non- and declaring said lot excluded from the NARRA settlement reservation.
suability of the State. The court declared the rest of the property claimed by plaintiff, i.e. Lots
2, 3 and 4, reverted to the public domain.
The background of the present controversy may be briefly summarized
as follows: 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
On January 22, 1970, respondent Feliciano filed a complaint with the Pag-asay, alleging among other things that intervenors had been in
then Court of First Instance of Camarines Sur against the Republic of the possession of the land in question for more than twenty (20) years under
Philippines, represented by the Land Authority, for the recovery of claim of ownership.
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 On January 25, 1971, the court a quo reconsidered its decision,
Salvacion, Municipality of Tinambac, Camarines Sur. Plaintiff alleged that reopened the case and directed the intervenors to file their
he bought the property in question from Victor Gardiola by virtue of a corresponding pleadings and present their evidence; all evidence
Contract of Sale dated May 31, 1952, followed by a Deed of Absolute already presented were to remain but plaintiff, as well as the Republic of
Sale on October 30, 1954; that Gardiola had acquired the property by the Philippines, could present additional evidence if they so desire. The
purchase from the heirs of Francisco Abrazado whose title to the said plaintiff presented additional evidence on July 30, 1971, and the case
property was evidenced by an informacion posesoria that upon plaintiff's was set for hearing for the reception of intervenors' evidence on August
purchase of the property, he took actual possession of the same, 30 and August 31, 1971.
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 On August 30, 1971, the date set for the presentation of the evidence
Magsaysay issued Proclamation No. 90 reserving for settlement for intervenors, the latter did not appear but submitted a motion for
purposes, under the administration of the National Resettlement and postponement and resetting of the hearing on the next day, August 31,
1971. The trial court denied the motion for postponement and allowed We find the petition meritorious. The doctrine of non-suability of the
plaintiff to offer his evidence "en ausencia," after which the case would State has proper application in this case. The plaintiff has impleaded the
be deemed submitted for decision. On the following day, August 31, Republic of the Philippines as defendant in an action for recovery of
1971, Judge Sison rendered a decision reiterating his decision of August ownership and possession of a parcel of land, bringing the State to court
29, 1970. 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
A motion for reconsideration was immediately filed by the intervenors. an action in personam. 1 It is an action directed against a specific party
But before this motion was acted upon, plaintiff filed a motion for or parties, and any judgment therein binds only such party or parties.
execution, dated November 18, 1971. On December 10, 1971, the lower The complaint filed by plaintiff, the private respondent herein, is
court, this time through Judge Miguel Navarro, issued an order denying directed against the Republic of the Philippines, represented by the Land
the motion for execution and setting aside the order denying Authority, a governmental agency created by Republic Act No. 3844.
intervenors' motion for postponement. The case was reopened to allow
intervenors to present their evidence. Unable to secure a By its caption and its allegation and prayer, the complaint is clearly a
reconsideration of Judge Navarro's order, the plaintiff went to the suit against the State, which under settled jurisprudence is not
Intermediate Appellate Court on a petition for certiorari. Said petition permitted, except upon a showing that the State has consented to be
was, however, denied by the Intermediate Appellate Court, and sued, either expressly or by implication through the use of statutory
petitioners brought the matter to this Court in G.R. No. 36163, which language too plain to be misinterpreted.2 There is no such showing in
was denied on May 3, 1973 Consequently, the case was remanded to the instant case. Worse, the complaint itself fails to allege the existence
the court a quo for further proceedings. of such consent. This is a fatal defect, 3 and on this basis alone, the
complaint should have been dismissed.
On August 31, 1970, intervenors filed a motion to dismiss, principally on
the ground that the Republic of the Philippines cannot be sued without The failure of the petitioner to assert the defense of immunity from suit
its consent and hence the action cannot prosper. The motion was when the case was tried before the court a quo, as alleged by private
opposed by the plaintiff. 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
On August 21, 1980, the trial court, through Judge Esteban Lising, issued
the questioned order dismissing the case for lack of jurisdiction. Private respondent contends that the consent of petitioner may be read
Respondent moved for reconsideration, while the Solicitor General, on from the Proclamation itself, when it established the reservation "
behalf of the Republic of the Philippines filed its opposition thereto, subject to private rights, if any there be. " We do not agree. No such
maintaining that the dismissal was proper on the ground of non-suability consent can be drawn from the language of the Proclamation. The
of the State and also on the ground that the existence and/or exclusion of existing private rights from the reservation established by
authenticity of the purported possessory information title of the Proclamation No. 90 can not be construed as a waiver of the immunity of
respondents' predecessor-in-interest had not been demonstrated and the State from suit. Waiver of immunity, being a derogation of
that at any rate, the same is not evidence of title, or if it is, its efficacy sovereignty, will not be inferred lightly. but must be construed
has been lost by prescription and laches. in strictissimi juris. 5 Moreover, the Proclamation is not a legislative act.
The consent of the State to be sued must emanate from statutory
Upon denial of the motion for reconsideration, plaintiff again went to the authority. Waiver of State immunity can only be made by an act of the
Intermediate Appellate Court on petition for certiorari. On April 30, 1985, legislative body.
the respondent appellate court rendered its decision reversing the order
of Judge Lising and remanding the case to the court a quo for further Neither is there merit in respondent's submission, which the respondent
proceedings. Hence this petition. 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 without the submission of proof that the alleged duplicate was authentic
private land belonging to the plaintiff, hence the Government is not or that the original thereof was lost. Reconstitution can be validly made
being divested of any of its properties. There is some sophistry involved only in case of loss of the original. 10 These circumstances raise grave
in this argument, since the character of the land sought to be recovered doubts as to the authenticity and validity of the "informacion posesoria"
still remains to be established, and the plaintiff's action is directed relied upon by respondent Feliciano. Adding to the dubiousness of said
against the State precisely to compel the latter to litigate the ownership document is the fact that "possessory information calls for an area of
and possession of the property. In other words, the plaintiff is out to only 100 hectares," 11 whereas the land claimed by respondent
establish that he is the owner of the land in question based, incidentally, Feliciano comprises 1,364.4177 hectares, later reduced to 701-9064
on an informacion posesoria of dubious value, and he seeks to establish hectares. Courts should be wary in accepting "possessory information
his claim of ownership by suing the Republic of the Philippines in an documents, as well as other purportedly old Spanish titles, as proof of
action in personam. alleged ownership of lands.

The inscription in the property registry of an informacion WHEREFORE, judgment is hereby rendered reversing and setting aside
posesoria under the Spanish Mortgage Law was a means provided by the appealed decision of the Intermediate Appellate Court, dated April
the law then in force in the Philippines prior to the transfer of 30, 1985, and affirming the order of the court a quo, dated August 21,
sovereignty from Spain to the United States of America, to record a 1980, dismissing the complaint filed by respondent Pablo Feliciano
claimant's actual possession of a piece of land, established through against the Republic of the Philippines. No costs.
an ex parte proceeding conducted in accordance with prescribed
rules. 7 Such inscription merely furnishes, at best, prima facie evidence SO ORDERED.
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 Narvasa, Cruz, Feliciano, Gancayco and Sarmiento, JJ., concur.
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 Melencio-Herrera, J., is on leave.
Mortgage Law.

There is no showing in the case at bar that the informacion Republic of the Philippines
posesoria held by the respondent had been converted into a record of SUPREME COURT
ownership. Such possessory information, therefore, remained at best Manila
mere prima facie evidence of possession. Using this possessory
information, the respondent could have applied for judicial confirmation
FIRST DIVISION
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 G.R. No. L-46930 June 10, 1988
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 DALE SANDERS, AND A.S. MOREAU, JR, petitioners,
in question since even before the outbreak of the war, which puts in vs.
grave doubt his own claim of possession. HON. REGINO T. VERIDIANO II, as Presiding Judge, Branch I,
Court of First Instance of Zambales, Olongapo City, ANTHONY M.
Worthy of note is the fact, as pointed out by the Solicitor General, that ROSSI and RALPH L. WYERS, respondents.
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 CRUZ, J.:
presented to this office (Register of Deeds) by Dr. Pablo Feliciano,"
The basic issue to be resolved in this case is whether or not the On the basis of these antecedent facts, the private respondent filed in
petitioners were performing their official duties when they did the acts the Court of First Instance of Olongapo City a for damages against the
for which they have been sued for damages by the private respondents. herein petitioners on November 8, 1976.8 The plaintiffs claimed that the
Once this question is decided, the other answers will fall into place and letters contained libelous imputations that had exposed them to ridicule
this petition need not detain us any longer than it already has. and caused them mental anguish and that the prejudgment of the
grievance proceedings was an invasion of their personal and proprietary
Petitioner Sanders was, at the time the incident in question occurred, rights.
the special services director of the U.S. Naval Station (NAVSTA) in
Olongapo City. 1 Petitioner Moreau was the commanding officer of the The private respondents made it clear that the petitioners were being
Subic Naval Base, which includes the said station. 2 Private respondent sued in their private or personal capacity. However, in a motion to
Rossi is an American citizen with permanent residence in the dismiss filed under a special appearance, the petitioners argued that the
Philippines,3 as so was private respondent Wyer, who died two years acts complained of were performed by them in the discharge of their
ago. 4 They were both employed as gameroom attendants in the special official duties and that, consequently, the court had no jurisdiction over
services department of the NAVSTA, the former having been hired in them under the doctrine of state immunity.
1971 and the latter in 1969. 5
After extensive written arguments between the parties, the motion was
On October 3, 1975, the private respondents were advised that their denied in an order dated March 8, 1977, 9 on the main ground that the
employment had been converted from permanent full-time to petitioners had not presented any evidence that their acts were official
permanent part-time, effective October 18, 1975. 6 Their reaction was to in nature and not personal torts, moreover, the allegation in the
protest this conversion and to institute grievance proceedings complaint was that the defendants had acted maliciously and in bad
conformably to the pertinent rules and regulations of the U.S. faith. The same order issued a writ of preliminary attachment,
Department of Defense. The result was a recommendation from the conditioned upon the filing of a P10,000.00 bond by the plaintiffs,
hearing officer who conducted the proceedings for the reinstatement of against the properties of petitioner Moreau, who allegedly was then
the private respondents to permanent full-time status plus backwages. about to leave the Philippines. Subsequently, to make matters worse for
The report on the hearing contained the observation that "Special the defendants, petitioner Moreau was declared in a default by the trial
Services management practices an autocratic form of supervision." 7 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
In a letter addressed to petitioner Moreau on May 17, 1976 (Annex "A" of conference was the result of some misunderstanding, and the motion for
the complaint), Sanders disagreed with the hearing officer's report and reconsideration of the denial of the motion to dismiss, which was filed by
asked for the rejection of the abovestated recommendation. The letter the petitioner's new lawyers, were denied by the respondent court on
contained the statements that: a ) "Mr. Rossi tends to alienate most co- September 7, 1977.
workers and supervisors;" b) "Messrs. Rossi and Wyers have proven,
according to their immediate supervisors, to be difficult employees to This petition for certiorari, prohibition and preliminary injunction was
supervise;" and c) "even though the grievants were under oath not to thereafter filed before this Court, on the contention that the above-
discuss the case with anyone, (they) placed the records in public places narrated acts of the respondent court are tainted with grave abuse of
where others not involved in the case could hear." discretion amounting to lack of jurisdiction.

On November 7, 1975, before the start of the grievance hearings, a- We return now to the basic question of whether the petitioners were
letter (Annex "B" of the complaint) purportedly corning from petitioner acting officially or only in their private capacities when they did the acts
Moreau as the commanding general of the U.S. Naval Station in Subic for which the private respondents have sued them for damages.
Bay was sent to the Chief of Naval Personnel explaining the change of
the private respondent's employment status and requesting concurrence It is stressed at the outset that the mere allegation that a government
therewith. The letter did not carry his signature but was signed by W.B. functionary is being sued in his personal capacity will not automatically
Moore, Jr. "by direction," presumably of Moreau.
remove him from the protection of the law of public officers and, if It is abundantly clear in the present case that the acts for which the
appropriate, the doctrine of state immunity. By the same token, the petitioners are being called to account were performed by them in the
mere invocation of official character will not suffice to insulate him from discharge of their official duties. Sanders, as director of the special
suability and liability for an act imputed to him as a personal tort services department of NAVSTA, undoubtedly had supervision over its
committed without or in excess of his authority. These well-settled personnel, including the private respondents, and had a hand in their
principles are applicable not only to the officers of the local state but employment, work assignments, discipline, dismissal and other related
also where the person sued in its courts pertains to the government of a matters. It is not disputed that the letter he had written was in fact a
foreign state, as in the present case. reply to a request from his superior, the other petitioner, for more
information regarding the case of the private respondents. 14 Moreover,
The respondent judge, apparently finding that the complained acts even in the absence of such request, he still was within his rights in
were prima facie personal and tortious, decided to proceed to trial to reacting to the hearing officer's criticism—in effect a direct attack
determine inter alia their precise character on the strength of the against him—-that Special Services was practicing "an autocratic form of
evidence to be submitted by the parties. The petitioners have objected, supervision."
arguing that no such evidence was needed to substantiate their claim of
jurisdictional immunity. Pending resolution of this question, we issued a As for Moreau,what he is claimed to have done was write the Chief of
temporary restraining order on September 26, 1977, that has since then Naval Personnel for concurrence with the conversion of the private
suspended the proceedings in this case in the court a quo. respondents' type of employment even before the grievance
proceedings had even commenced. Disregarding for the nonce the
In past cases, this Court has held that where the character of the act question of its timeliness, this act is clearly official in nature, performed
complained of can be determined from the pleadings exchanged by Moreau as the immediate superior of Sanders and directly
between the parties before the trial, it is not necessary for the court to answerable to Naval Personnel in matters involving the special services
require them to belabor the point at a trial still to be conducted. Such a department of NAVSTA In fact, the letter dealt with the financial and
proceeding would be superfluous, not to say unfair to the defendant who budgetary problems of the department and contained recommendations
is subjected to unnecessary and avoidable inconvenience. for their solution, including the re-designation of the private
respondents. There was nothing personal or private about it.
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 Given the official character of the above-described letters, we have to
have been denied because it had been sufficiently shown that the act for conclude that the petitioners were, legally speaking, being sued as
which he was being sued was done in his official capacity on behalf of officers of the United States government. As they have acted on behalf
the American government. The United States had not given its consent of that government, and within the scope of their authority, it is that
to be sued. It was the reverse situation in Syquia v. Almeda Lopez," government, and not the petitioners personally, that is responsible for
where we sustained the order of the lower court granting a where we their acts. Assuming that the trial can proceed and it is proved that the
motion to dismiss a complaint against certain officers of the U.S. armed claimants have a right to the payment of damages, such award will have
forces also shown to be acting officially in the name of the American to be satisfied not by the petitioners in their personal capacities but by
government. The United States had also not waived its immunity from the United States government as their principal. This will require that
suit. Only three years ago, in United States of America v. Ruiz, 12 we set government to perform an affirmative act to satisfy the
aside the denial by the lower court of a motion to dismiss a complaint judgment, viz, the appropriation of the necessary amount to cover the
for damages filed against the United States and several of its officials, it damages awarded, thus making the action a suit against that
appearing that the act complained of was governmental rather than government without its consent.
proprietary, and certainly not personal. In these and several other
cases 13 the Court found it redundant to prolong the other case There should be no question by now that such complaint cannot prosper
proceedings after it had become clear that the suit could not prosper unless the government sought to be held ultimately liable has given its
because the acts complained of were covered by the doctrine of state consent to' be sued. So we have ruled not only in Baer but in many other
immunity. 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 given its consent to be sued for the official acts of the petitioners, who
subjected to the jurisdiction of our courts. 15 cannot satisfy any judgment that may be rendered against them. As it is
the American government itself that will have to perform the affirmative
The practical justification for the doctrine, as Holmes put it, is that act of appropriating the amount that may be adjudged for the private
"there can be no legal right against the authority which makes the law respondents, the complaint must be dismissed for lack of jurisdiction.
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 The Court finds that, even under the law of public officers, the acts of
wisely admonishes that par in parem non habet imperium and that a the petitioners are protected by the presumption of good faith, which
contrary attitude would "unduly vex the peace of nations." 17 Our has not been overturned by the private respondents. Even mistakes
adherence to this precept is formally expressed in Article II, Section 2, of concededly committed by such public officers are not actionable as long
our Constitution, where we reiterate from our previous charters that the as it is not shown that they were motivated by malice or gross
Philippines "adopts the generally accepted principles of international law negligence amounting to bad faith.24 This, to, is well settled .
as part of the law of the land. 25
Furthermore, applying now our own penal laws, the letters come under
the concept of privileged communications and are not punishable, 26 let
All this is not to say that in no case may a public officer be sued as such alone the fact that the resented remarks are not defamatory by our
without the previous consent of the state. To be sure, there are a standards. It seems the private respondents have overstated their case.
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 A final consideration is that since the questioned acts were done in the
where, say, a register of deeds refuses to record a deed of sale; 18 or to Olongapo Naval Base by the petitioners in the performance of their
restrain a Cabinet member, for example, from enforcing a law claimed to official duties and the private respondents are themselves American
be unconstitutional; 19 or to compel the national treasurer to pay citizens, it would seem only proper for the courts of this country to
damages from an already appropriated assurance fund; 20 or the refrain from taking cognizance of this matter and to treat it as coming
commissioner of internal revenue to refund tax over-payments from a under the internal administration of the said base.
fund already available for the purpose; 21 or, in general, to secure a
judgment that the officer impleaded may satisfy by himself without the The petitioners' counsel have submitted a memorandum replete with
government itself having to do a positive act to assist him. We have also citations of American cases, as if they were arguing before a court of the
held that where the government itself has violated its own laws, the United States. The Court is bemused by such attitude. While these
aggrieved party may directly implead the government even without first decisions do have persuasive effect upon us, they can at best be
filing his claim with the Commission on Audit as normally required, as invoked only to support our own jurisprudence, which we have
the doctrine of state immunity "cannot be used as an instrument for developed and enriched on the basis of our own persuasions as a
perpetrating an injustice." 22 people, particularly since we became independent in 1946.

This case must also be distinguished from such decisions as Festejo v. We appreciate the assistance foreign decisions offer us, and not only
Fernando, 23 where the Court held that a bureau director could be sued from the United States but also from Spain and other countries from
for damages on a personal tort committed by him when he acted which we have derived some if not most of our own laws. But we should
without or in excess of authority in forcibly taking private property not place undue and fawning reliance upon them and regard them as
without paying just compensation therefor although he did convert it indispensable mental crutches without which we cannot come to our
into a public irrigation canal. It was not necessary to secure the previous own decisions through the employment of our own endowments We live
consent of the state, nor could it be validly impleaded as a party in a different ambience and must decide our own problems in the light of
defendant, as it was not responsible for the defendant's unauthorized our own interests and needs, and of our qualities and even
act. idiosyncrasies as a people, and always with our own concept of law and
justice.
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
The private respondents must, if they are still sominded, pursue their Department of Transportation and Communications (DOTC) represented
claim against the petitioners in accordance with the laws of the United by then Secretary Jesus B. Garcia, Jr. relative to the launching,
States, of which they are all citizens and under whose jurisdiction the ownership, operation and management of a Philippine satellite by a
alleged offenses were committed. Even assuming that our own laws are Filipino-owned or controlled private consortium or corporation.
applicable, the United States government has not decided to give its
consent to be sued in our courts, which therefore has not acquired the Pursuant to Article IV of the MOU, the consortium of private
competence to act on the said claim,. telecommunications carriers formed a corporation and adopted the
corporate name Philippine Agila Satellite, Inc. (PASI), herein petitioner.
WHEREFORE, the petition is GRANTED. The challenged orders dated By letter2 dated June 28, 1996, PASI president Rodrigo A. Silverio
March 8,1977, August 9,1977, and September 7, 1977, are SET ASIDE. (Silverio) requested the then DOTC Secretary Amado S. Lagdameo, Jr. for
The respondent court is directed to DISMISS Civil Case No. 2077-O. Our official government confirmation of the assignment of Philippine orbital
Temporary restraining order of September 26,1977, is made slots 161ºE and 153ºE to PASI for its AGILA satellites.
PERMANENT. No costs.
In response to Silverio’s letter, Secretary Lagdameo, by letter3 dated July
SO ORDERED. 3, 1996, confirmed the government’s assignment of Philippine orbital
slots 161ºE and 153ºE to PASI for its AGILA satellites.
Narvasa, Gancayco, Grino-Aquiño and Medialdea, JJ., Concur. PASI thereupon undertook preparations for the launching, operation and
management of its satellites by, among other things, obtaining loans,
increasing its capital, conducting negotiations with its business partners,
and making an initial payment of US$ 3.5 million to Aerospatiale, a
French satellite manufacturer.
Michael de Guzman (de Guzman), PASI President and Chief Executive
Officer (CEO), later informed Jesli Lapuz (Lapuz), President and CEO of
the Landbank of the Philippines, by letter4 of December 3, 1996, of the
government’s assignment to PASI of orbital slots 161ºE and 153ºE and
requested the bank’s confirmation of its participation in a club loan in
the amount of US$ 11 million, the proceeds of which would be applied to
PASI’s interim satellite.
THIRD DIVISION
It appears that Lapuz sent a copy of De Guzman’s letter to then DOTC
G.R. No. 134887 July 27, 2006 Undersecretary Josefina T. Lichauco, (Lichauco) who, by letter 5 of
December 5, 1996, wrote Lapuz as follows:
PHILIPPINE AGILA SATELLITE, INC. represented by MICHAEL C. U.
DE GUZMAN, petitioner, 1. Kindly be informed that there is simply no basis for Michael de
vs. Guzman to allege that the DOTC has assigned two (2) slots to
SEC. JOSEFINA TRINIDAD LICHAUCO and the HON. PASI. He conveniently neglected to attach as another annex, in
OMBUDSMAN, respondents. addition to Sec. Lagdameo’s letter of 3 July 1996 (Annex "A") the
letter of 28 June (Annex "B") in response to which the July 3rd
DECISION letter had been sent to PASI. Annex "B" precisely provides that
one slot (153º E, to which the interim satellite was supposed to
CARPIO MORALES, J.: migrate) was to be used for the migration of the Russian satellite
On June 6, 1994, a Memorandum of Understanding1 (MOU) was entered in time for the APEC Leaders’ Summit. This particular endeavor
into by a consortium of private telecommunications carriers and the was not successful. The interim satellite "Gorizont" never moved
from its orbital location of 130ºE Longitude. Annex "C" is a letter
 from an official of the Subic Bay Satellite Systems Inc., with its Trial Court (RTC) of Mandaluyong City against Lichauco and the
attachments, addressed to me stating that as of the 13th of "Unknown Awardee," for injunction to enjoin the award of orbital slot
November, no such voyage to 153ºE orbital slot had been 153ºE, declare its nullity, and for damages.
commenced. In fact DHI hid this fact from me, and in fact stated
that Gorizont had already moved and was on its way to 153ºE. PASI also filed on February 23, 1998 a complaint before the Office of the
Ombudsman against Secretary Josefina Trinidad Lichauco. In his
Since this timely migration did not happen in time for the APEC affidavit-complaint, de Guzman charged Lichauco with gross violation of
Leaders Meeting on 24 November, this 153ºE Longitude slot can Section 3(e) of Republic Act No. 3019, otherwise known as the Anti-Graft
no longer be assigned to PASI. and Corrupt Practices Act, as amended, reading:
The other slot 161ºE Longitude is the one that can be made (e) Causing any undue injury to any party, including the
available for PASI’s eventual launch, in 1998 most likely, in Government, or giving any private party any unwarranted
exchange for one free satellite transponder unit utilization, for all benefits, advantage or preference in the discharge of his official,
requirements of Government. These have yet to be embodied in administrative or judicial functions through manifest partiality,
a contract between PASI and the DOTC. evident bad faith or gross inexcusable negligence. This provision
shall apply to officers and employees of officers or government
2. I understand from my meeting with DHI/PASI this morning, and corporations charged with the grant of licenses or permits or
from the de Guzman letter you sent to me, that the latter are still other concessions.
interested in pursuing their "interim satellite project" and are
applying for a loan with your bank. Of course they can always The complaint was docketed as OMB Case No. 0-98-0416. The
pursue this as a business venture of DHI/PASI which is their own Evaluation and Preliminary Investigation Bureau (EPIB) of the Office of
corporate business decision. The DOTC supports this venture the Ombudsman, by Evaluation Report8 dated April 15, 1998, found the
but they will be getting only one orbital slot for both the Interim existence of a prejudicial question after considering that "the case filed
Satellite Project and for the Launch Project. I understand from with the RTC involves facts intimately related to those upon which the
today’s meeting with them that this is technically feasible. criminal prosecution would be based and that the guilt or the innocence
of the accused would necessarily be determined in the resolution of the
3. As regards the use of the name "Agila", Mr. de Guzman’s issues raised in the civil case." It thus concluded that the filing of the
allegation that DHI/PASI has registered "Agila" as a "corporate complaint before the Ombudsman "is premature since the issues
alias/trademark" is FALSE. There is no such thing as registration involved herein are now subject of litigation in the case filed with the
of a "corporate alias". Nor for that matter can the trade name of RTC," and accordingly recommended its dismissal. Then Ombudsman
a satellite be registered for just any satellite, where it was the Aniano A. Desierto approved on April 24, 1998 the recommendation of
President who chose the name for the first Philippine satellite in the EPIB.
orbit. No one else coined that name but he. He has therefore
given the name "Agila I" to the Mabuhay satellite now in orbit at PASI moved to reconsider9 the dismissal of the complaint, but was
144ºE, being the first Philippine satellite in orbit. He made this denied by Order10 dated July 17, 1998.
announcement in the presence of all the APEC Heads of State just
before the presentation to him of the Manila Action Plan for APEC. In the meantime, a motion to dismiss the civil case against respondent
(Underscoring supplied) was denied by the trial court. On elevation of the order of denial to the
Court of Appeals, said court, by Decision dated February 21, 2000,
Lichauco subsequently issued, in December 1997, a Notice of Offer 6 for ordered the dismissal of the case. This Court, by Decision dated May 3,
several orbital slots including 153ºE. 2006, ordered the reinstatement of the case, however.11
PASI, claiming that the offer was without its knowledge and that it PASI is now before this Court via petition for review on certiorari, arguing
subsequently came to learn that another company whose identity had that the Ombudsman erred in dismissing the complaint.
not been disclosed had submitted a bid and won the award for orbital
slot 153ºE, filed on January 23, 1998 a complaint 7 before the Regional
In issue are 1) whether there exists a prejudicial question and, if in the 4. His action caused undue injury to the Government or any
affirmative, 2) whether the dismissal of the complaint on that account is private party, or gave any party any unwarranted benefit,
in order. advantage or preference to such parties.13
Section 7, Rule 111 of the Rules on Criminal Procedure provides: The civil case against Lichauco on the other hand involves three causes
of action. The first, for injunction, seeks to enjoin the award of orbital
Section 7. Elements of prejudicial question. – The elements of a slot 153ºE, the DOTC having previously assigned the same to PASI; the
prejudicial question are: (a) the previously instituted civil action second, for declaration of nullity of award, seeks to nullify the award
involves an issue similar or intimately related to the issue raised given to the undisclosed bidder for being beyond Lichauco’s authority;
in the subsequent criminal action, and (b) the resolution of such and the third, for damages arising from Lichauco’s questioned acts.
issue determines whether or not the criminal action may
proceed. If the award to the undisclosed bidder of orbital slot 153ºE is, in the civil
case, declared valid for being within Lichauco’s scope of authority to
The rationale for the principle of prejudicial question is that although it thus free her from liability for damages, there would be no prohibited
does not conclusively resolve the guilt or innocence of the accused, it act to speak of nor would there be basis for undue injury claimed to
tests the sufficiency of the allegations in the complaint or information in have been suffered by petitioner. The finding by the Ombudsman of the
order to sustain the further prosecution of the criminal case.12 Hence, existence of a prejudicial question is thus well-taken.
the need for its prior resolution before further proceedings in the
criminal action may be had. Respecting the propriety of the dismissal by the Ombudsman of the
complaint due to the pendency of a prejudicial question, PASI argues
PASI concedes that the issues in the civil case are similar or intimately that since the Rules of Procedure of the Office of the Ombudsman is
related to the issue raised in the criminal case. It contends, however, silent on the matter, the Rules of Court, specifically Section 6, Rule 111
that the resolution of the issues in the civil case is not determinative of of the Rules of Court, which now reads:
the guilt or innocence of Lichauco, it arguing that even if she is adjudged
liable for damages, it does not necessarily follow that she would be SECTION 6. Suspension by reason of prejudicial question. –
convicted of the crime charged. A petition for suspension of the criminal action based upon the
pendency of a prejudicial question in a civil action may be filed in
To determine the existence of a prejudicial question in the case before the office of the prosecutor or the court conducting the
the Ombudsman, it is necessary to examine the elements of Section 3(e) preliminary investigation. When the criminal action has been filed
of R.A. 3019 for which Lichauco was charged and the causes of action in in court for trial, the petition to suspend shall be filed in the same
the civil case. criminal action at any time before the prosecution rests.
Section 3(e) of R.A. 3019 which was earlier quoted has the following (Underscoring supplied),
elements: applies in a suppletory character.
1. The accused is a public officer discharging administrative or The Ombudsman, on the other hand, argues that the above-quoted
official functions or private persons charged in conspiracy with provision of the Rules of Court applies to cases which are at the
them; preliminary or trial stage and not to those, like the case subject of the
2. The public officer committed the prohibited act during the present petition, at the evaluation stage.
performance of his official duty or in relation to his public The Ombudsman goes on to proffer that at the evaluation stage, the
position; investigating officer may recommend any of several causes of action
3. The public officer acted with manifest partiality, evident bad including dismissal of the complaint for want of palpable merit or
faith or gross, inexcusable negligence; and subjecting the complaint to preliminary investigation, and the evaluation
of the complaint involves the discretion of the investigating officer which
this Court cannot interfere with.
While the evaluation of a complaint involves the discretion of the ART. 89. How criminal liability is totally extinguished. — Criminal
investigating officer, its exercise should not be abused14 or wanting in liability is totally extinguished:
legal basis.
1. By the death of the convict, as to the personal
Rule II, Section 2 of the Rules of Procedure of the Office of the penalties; and as to pecuniary penalties, liability therefore
Ombudsman reads: is extinguished only when the death of the offender
occurs before final judgment;
SECTION 2. Evaluation. – Upon evaluating the complaint, the
investigating officer shall recommend whether it may be: 2. By service of the sentence;
a) dismissed outright for want of palpable merit; 3. By amnesty, which completely extinguishes the penalty
and all its effects;
b) referred to respondent for comment;
4. By absolute pardon;
c) indorsed to the proper government office or agency which has
jurisdiction over the case; 5. By prescription of the crime;
d) forwarded to the appropriate office or official for fact-finding 6. By prescription of the penalty;
investigation;
7. By the marriage of the offended woman, as provided in
e) referred for administrative adjudication; or Article 344 of this Code. (Underscoring supplied)
f) subjected to a preliminary investigation. (Underscoring ART. 90. Prescription of crimes. — Crimes punishable by
supplied) death, reclusion perpetua or reclusion temporal shall prescribe in
twenty years.
From the above-quoted provision, a complaint at the evaluation stage
may be dismissed outright only for want of palpable merit. Want of Crimes punishable by other afflictive penalties shall prescribe in
palpable merit obviously means that there is no basis for the charge or fifteen years.
charges. If the complaint has prima facie merit, however, the
investigating officer shall recommend the adoption of any of the actions Those punishable by a correctional penalty shall prescribe in ten
enumerated above from (b) to (f).15 years; with the exception of those punishable by arresto mayor,
which shall prescribe in five years.
When, in the course of the actions taken by those to whom the
complaint is endorsed or forwarded, a prejudicial question is found to be The crime of libel or other similar offenses shall prescribe in one
pending, Section 6, Rule 111 of the Rules of Court should be applied in a year.
suppletory character.16 As laid down in Yap v. Paras,17 said rule directs The offenses of oral defamation and slander by deed shall
that the proceedings may only be suspended, not dismissed, and that prescribe in six months.
it may be made only upon petition,and not at the instance of the
judge alone or as in this case, the investigating officer. Light offenses prescribe in two months.
To give imprimatur to the Ombudsman’s dismissal of petitioner’s When the penalty fixed by law is a compound one, the highest
criminal complaint due to prejudicial question would not only run penalty shall be made the basis of the application of the rules
counter to the provision of Section 6 of Rule 111 of the Rules of Court. It contained in the first, second, and third paragraphs of this article.
would sanction the extinguishment of criminal liability, if there be any, xxx
through prescription under Article 89 vis a vis Articles 90 and 91 of the
Revised Penal Code which respectively read: ART. 91. Computation of prescription of offenses. — The period of
prescription shall commence to run from the day on which the
crime is discovered by the offended party, the authorities, or
 their agents, and shall be interrupted by the filing of the
complaint or information, and shall commence to run again when FERNANDO, J.:
such proceedings terminate without the accused being
convicted or acquitted, or are unjustifiably stopped for any The real party in interest before this Court in this certiorari proceeding to
reason not imputable to him. review a decision of the Court of First Instance of Cebu is the Republic of
the Philippines, although the petitioners are the public officials who were
x x x x (Emphasis and underscoring supplied)
named as respondents1 in a mandamus suit below. Such is the
WHEREFORE, the Order dated July 17, 1998 of respondent Ombudsman contention of the then Solicitor General, now Associate Justice, Felix V.
dismissing OMB Case No. 0-98-0416 against respondent then Secretary Makasiar,2 for as he did point out, what is involved is a money claim
Josefina Trinidad Lichauco is SET ASIDE. against the government, predicated on a contract. The basic doctrine of
non-suability of the government without its consent is thus decisive of
The Ombudsman is ORDERED to REINSTATE to its docket for further the controversy. There is a governing statute that is
proceedings, in line with the foregoing ratiocination, OMB Case No. 0-98- controlling.3 Respondent Felipe Singson, the claimant, for reasons known
0416. to him, did not choose to abide by its terms. That was a fatal misstep.
The lower court, however, did not see it that way. We cannot affirm its
SO ORDERED
decision.
Quisumbing, Chairman, Carpio, Tinga, Velasco, Jr., J.J., concur.
As found by the lower court, the facts are the following: "In January,
1967, the Office of the District Engineer requisitioned various items of
Republic of the Philippines spare parts for the repair of a D-8 bulldozer, ... . The requisition (RIV No.
SUPREME COURT 67/0331) was signed by the District Engineer, Adventor Fernandez, and
Manila the Requisitioning Officer (civil engineer), Manuel S. Lepatan. ... It was
approved by the Secretary of Public Works and Communications, Antonio
V. Raquiza. It is noted in the approval of the said requisition that "This is
SECOND DIVISION an exception to the telegram dated Feb. 21, 1967 of the Secretary of
Public Works and Communications." ... So, a canvass or public bidding
was conducted on May 5, 1967 ... . The committee on award accepted
the bid of the Singkier Motor Service [owned by respondent Felipe
G.R. No. L-30044 December 19, 1973 Singson] for the sum of P43,530.00. ... Subsequently, it was approved by
the Secretary of Public Works and Communications; and on May 16,
LORENZO SAYSON, as Highway Auditor, Bureau of Public 1967 the Secretary sent a letter-order to the Singkier Motor Service,
Highways, Cebu First Engineering District; CORNELIO FORNIER, Mandaue, Cebu requesting it to immediately deliver the items listed
as Regional Supervising Auditor, Eastern Visayas Region; therein for the lot price of P43,530.00. ... It would appear that a
ASTERIO, BUQUERON, ADVENTOR FERNANDEZ, MANUEL S. purchase order signed by the District Engineer, the Requisitioning Officer
LEPATAN, RAMON QUIRANTE, and TEODULFO REGIS, petitioners, and the Procurement Officer, was addressed to the Singkier Motor
vs. Service. ... In due course the Voucher No. 07806 reached the hands of
FELIPE SINGSON, as sole owner and proprietor of Singkier Motor Highway Auditor Sayson for pre-audit. He then made inquiries about the
Service, respondent. reasonableness of the price. ... Thus, after finding from the indorsements
of the Division Engineer and the Commissioner of Public Highways that
Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. the prices of the various spare parts are just and reasonable and that
Pardo for petitioners. the requisition was also approved by no less than the Secretary of Public
Works and Communications with the verification of V.M. Secarro a
representative of the Bureau of Supply Coordination, Manila, he
Teodoro Almase and Casiano U. Laput for respondent. approved it for payment in the sum of P34,824.00, with the retention of
20% equivalent to P8,706.00. ... His reason for withholding the 20% 327 ... which prescribe the conditions under which money claim against
equivalent to P8,706.00 was to submit the voucher with the supporting the government may be
papers to the Supervising Auditor, which he did. ... The voucher ... was filed ...."5 Commonwealth Act No. 327 is quite explicit. It is therein
paid on June 9, 1967 in the amount of P34,824.00 to the petitioner provided: "In all cases involving the settlement of accounts or claims,
[respondent Singson]. On June 10,1967, Highway Auditor Sayson other than those of accountable officers, the Auditor General shall act
received a telegram from Supervising Auditor Fornier quoting a and decide the same within sixty days, exclusive of Sundays and
telegraphic message of the General Auditing Office which states: "In holidays, after their presentation. If said accounts or claims need
view of excessive prices charge for purchase of spare parts and reference to other persons, office or offices, or to a party interested, the
equipment shown by vouchers already submitted this Office direct all period aforesaid shall be counted from the time the last comment
highway auditors refer General Office payment similar nature for necessary to a proper decision is received by
appropriate action." ... In the interim it would appear that when the him."6 Thereafter, the procedure for appeal is indicated: "The party
voucher and the supporting papers reached the GAO, a canvass was aggrieved by the final decision of the Auditor General in the settlement
made of the spare parts among the suppliers in Manila, particularly, the of an account or claim may, within thirty days from receipt of the
USI (Phil.), which is the exclusive dealer of the spare parts of the decision, take an appeal in writing: (a) To the President of the United
caterpillar tractors in the Philippines. Said firm thus submitted its States, pending the final and complete withdrawal of her sovereignty
quotations at P2,529.64 only which is P40,000.00 less than the price of over the Philippines, or (b) To the President of the Philippines, or (c) To
the Singkier. ... In view of the overpricing the GAO took up the matter the Supreme Court of the Philippines if the appellant is a private person
with the Secretary of Public Works in a third indorsement of July 18, or entity."7
1967. ... The Secretary then circularized a telegram holding the district
engineer responsible for overpricing."4 What is more, charges for 2. With the facts undisputed and the statute far from indefinite or
malversation were filed against the district engineer and the civil ambiguous, the appealed decision defies explanation. It would be to
engineer involved. It was the failure of the Highways Auditor, one of the disregard a basic corollary of the cardinal postulate of non-suability. It is
petitioners before us, that led to the filing of the mandamus suit below, true that once consent is secured, an action may be filed. There is
with now respondent Singson as sole proprietor of Singkier Motor nothing to prevent the State, however, in such statutory grant, to
Service, being adjudged as entitled to collect the balance of P8,706.00, require that certain administrative proceedings be had and be
the contract in question having been upheld. Hence this appeal exhausted. Also, the proper forum in the judicial hierarchy can be
by certiorari. specified if thereafter an appeal would be taken by the party aggrieved.
Here, there was no ruling of the Auditor General. Even had there been
1. To state the facts is to make clear the solidity of the stand taken by such, the court to which the matter should have been elevated is this
the Republic. The lower court was unmindful of the fundamental doctrine Tribunal; the lower court could not legally act on the matter. What
of non-suability. So it was stressed in the petition of the then Solicitor transpired was anything but that. It is quite obvious then that it does not
General Makasiar. Thus: "It is apparent that respondent Singson's cause have the imprint of validity.
of action is a money claim against the government, for the payment of
the alleged balance of the cost of spare parts supplied by him to the WHEREFORE, the decision of the Court of First Instance of Cebu of
Bureau of Public Highways. Assuming momentarily the validity of such September 4, 1968 is reversed and set aside, and the suit for
claim, although as will be shown hereunder, the claim is void for the mandamus filed against petitioners, respondents below, is dismissed.
cause or consideration is contrary to law, morals or public policy, With costs against respondent Felipe Singson.
mandamus is not the remedy to enforce the collection of such claim
against the State but a ordinary action for specific performance ... . Zaldivar (Chairman), Barredo, Antonio, Fernandez and Aquino, JJ.,
Actually, the suit disguised as one for mandamus to compel the Auditors concur.
to approve the vouchers for payment, is a suit against the State, which
cannot prosper or be entertained by the Court except with the consent
of the State ... . In other words, the respondent should have filed his
claim with the General Auditing Office, under the provisions of Com. Act
 Republic of the Philippines side of said avenue, as is prescribed by the ordinance and the
SUPREME COURT Motor Vehicle Act, turned suddenly and unexpectedly and long
Manila before reaching the center of the street, into the right side of Taft
Avenue, without having sounded any whistle or horn, by which
EN BANC movement it struck the plaintiff, who was already six feet from
G.R. No. L-11154 March 21, 1916 the southwestern point or from the post place there.

E. MERRITT, plaintiff-appellant, By reason of the resulting collision, the plaintiff was so severely
vs. injured that, according to Dr. Saleeby, who examined him on the
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant. 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
Crossfield and O'Brien for plaintiff. the same place and in the back part of his head, while blood
Attorney-General Avanceña for defendant.. issued from his nose and he was entirely unconscious.

TRENT, J.: The marks revealed that he had one or more fractures of the skull
and that the grey matter and brain was had suffered material
This is an appeal by both parties from a judgment of the Court of First injury. At ten o'clock of the night in question, which was the time
Instance of the city of Manila in favor of the plaintiff for the sum of set for performing the operation, his pulse was so weak and so
P14,741, together with the costs of the cause. 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
Counsel for the plaintiff insist that the trial court erred (1) "in limiting the
extended to the outer skin in such manner that it might be
general damages which the plaintiff suffered to P5,000, instead of
regarded as double and the would be exposed to infection, for
P25,000 as claimed in the complaint," and (2) "in limiting the time when
which reason it was of the most serious nature.
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 At another examination six days before the day of the trial, Dr.
as claimed by plaintiff in his complaint." 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
The Attorney-General on behalf of the defendant urges that the trial
painful at the point of the fracture. Examination of his head
court erred: (a) in finding that the collision between the plaintiff's
revealed a notable readjustment of the functions of the brain and
motorcycle and the ambulance of the General Hospital was due to the
nerves. The patient apparently was slightly deaf, had a light
negligence of the chauffeur; (b) in holding that the Government of the
weakness in his eyes and in his mental condition. This latter
Philippine Islands is liable for the damages sustained by the plaintiff as a
weakness was always noticed when the plaintiff had to do any
result of the collision, even if it be true that the collision was due to the
difficult mental labor, especially when he attempted to use his
negligence of the chauffeur; and (c) in rendering judgment against the
money for mathematical calculations.
defendant for the sum of P14,741.
According to the various merchants who testified as witnesses,
The trial court's findings of fact, which are fully supported by the record,
the plaintiff's mental and physical condition prior to the accident
are as follows:
was excellent, and that after having received the injuries that
It is a fact not disputed by counsel for the defendant that when have been discussed, his physical condition had undergone a
the plaintiff, riding on a motorcycle, was going toward the noticeable depreciation, for he had lost the agility, energy, and
western part of Calle Padre Faura, passing along the west side ability that he had constantly displayed before the accident as
thereof at a speed of ten to twelve miles an hour, upon crossing one of the best constructors of wooden buildings and he could
Taft Avenue and when he was ten feet from the southwestern not now earn even a half of the income that he had secured for
intersection of said streets, the General Hospital ambulance, his work because he had lost 50 per cent of his efficiency. As a
upon reaching said avenue, instead of turning toward the south, contractor, he could no longer, as he had before done, climb up
after passing the center thereof, so that it would be on the left
 ladders and scaffoldings to reach the highest parts of the ambulance of the General Hospital on March twenty-fifth,
building. nineteen hundred and thirteen;
As a consequence of the loss the plaintiff suffered in the Whereas it is not known who is responsible for the accident nor is
efficiency of his work as a contractor, he had to dissolved the it possible to determine the amount of damages, if any, to which
partnership he had formed with the engineer. Wilson, because he the claimant is entitled; and
was incapacitated from making mathematical calculations on
account of the condition of his leg and of his mental faculties, Whereas the Director of Public Works and the Attorney-General
and he had to give up a contract he had for the construction of recommended that an Act be passed by the Legislature
the Uy Chaco building." authorizing Mr. E. Merritt to bring suit in the courts against the
Government, in order that said questions may be decided: Now,
We may say at the outset that we are in full accord with the trial court to therefore,
the effect that the collision between the plaintiff's motorcycle and the
ambulance of the General Hospital was due solely to the negligence of By authority of the United States, be it enacted by the Philippine
the chauffeur. Legislature, that:

The two items which constitute a part of the P14,741 and which are SECTION 1. E. Merritt is hereby authorized to bring suit in the
drawn in question by the plaintiff are (a) P5,000, the award awarded for Court of First Instance of the city of Manila against the
permanent injuries, and (b) the P2,666, the amount allowed for the loss Government of the Philippine Islands in order to fix the
of wages during the time the plaintiff was incapacitated from pursuing responsibility for the collision between his motorcycle and the
his occupation. We find nothing in the record which would justify us in ambulance of the General Hospital, and to determine the amount
increasing the amount of the first. As to the second, the record shows, of the damages, if any, to which Mr. E. Merritt is entitled on
and the trial court so found, that the plaintiff's services as a contractor account of said collision, and the Attorney-General of the
were worth P1,000 per month. The court, however, limited the time to Philippine Islands is hereby authorized and directed to appear at
two months and twenty-one days, which the plaintiff was actually the trial on the behalf of the Government of said Islands, to
confined in the hospital. In this we think there was error, because it was defendant said Government at the same.
clearly established that the plaintiff was wholly incapacitated for a SEC. 2. This Act shall take effect on its passage.
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 Enacted, February 3, 1915.
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 Did the defendant, in enacting the above quoted Act, simply waive its
plaintiff, without any fault on his part, is P18,075. 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
As the negligence which caused the collision is a tort committed by an cause of action in favor of the plaintiff or extended the defendant's
agent or employee of the Government, the inquiry at once arises liability to any case not previously recognized.
whether the Government is legally-liable for the damages resulting
therefrom. All admit that the Insular Government (the defendant) cannot be sued
by an individual without its consent. It is also admitted that the instant
Act No. 2457, effective February 3, 1915, reads: 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
An Act authorizing E. Merritt to bring suit against the Government duty to look carefully into the terms of the consent, and render
of the Philippine Islands and authorizing the Attorney-General of judgment accordingly.
said Islands to appear in said suit.
The plaintiff was authorized to bring this action against the Government
Whereas a claim has been filed against the Government of the "in order to fix the responsibility for the collision between his motorcycle
Philippine Islands by Mr. E. Merritt, of Manila, for damages and the ambulance of the General Hospital and to determine the amount
resulting from a collision between his motorcycle and the
of the damages, if any, to which Mr. E. Merritt is entitled on account of As to the scope of legislative enactments permitting individuals to sue
said collision, . . . ." These were the two questions submitted to the court the state where the cause of action arises out of either fort or contract,
for determination. The Act was passed "in order that said questions may the rule is stated in 36 Cyc., 915, thus:
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 By consenting to be sued a state simply waives its immunity from
defendant, and we have also fixed the amount of damages sustained by suit. It does not thereby concede its liability to plaintiff, or create
the plaintiff as a result of the collision. Does the Act authorize us to hold any cause of action in his favor, or extend its liability to any
that the Government is legally liable for that amount? If not, we must cause not previously recognized. It merely gives a remedy to
look elsewhere for such authority, if it exists. enforce a preexisting liability and submits itself to the jurisdiction
of the court, subject to its right to interpose any lawful defense.
The Government of the Philippine Islands having been "modeled after
the Federal and State Governments in the United States," we may look In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided
to the decisions of the high courts of that country for aid in determining April 16, 1915, the Act of 1913, which authorized the bringing of this
the purpose and scope of Act No. 2457. suit, read:

In the United States the rule that the state is not liable for the torts SECTION 1. Authority is hereby given to George Apfelbacher, of
committed by its officers or agents whom it employs, except when the town of Summit, Waukesha County, Wisconsin, to bring suit in
expressly made so by legislative enactment, is well settled. "The such court or courts and in such form or forms as he may be
Government," says Justice Story, "does not undertake to guarantee to advised for the purpose of settling and determining all
any person the fidelity of the officers or agents whom it employs, since controversies which he may now have with the State of
that would involve it in all its operations in endless embarrassments, Wisconsin, or its duly authorized officers and agents, relative to
difficulties and losses, which would be subversive of the public interest." the mill property of said George Apfelbacher, the fish hatchery of
(Claussen vs. City of Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, the State of Wisconsin on the Bark River, and the mill property of
9 Wheat, 720; 6 L. Ed., 199; and Beers vs. States, 20 How., 527; 15 L. Evan Humphrey at the lower end of Nagawicka Lake, and relative
Ed., 991.) to the use of the waters of said Bark River and Nagawicka Lake,
all in the county of Waukesha, Wisconsin.
In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to
recover damages from the state for personal injuries received on In determining the scope of this act, the court said:
account of the negligence of the state officers at the state fair, a state Plaintiff claims that by the enactment of this law the legislature
institution created by the legislature for the purpose of improving admitted liability on the part of the state for the acts of its
agricultural and kindred industries; to disseminate information officers, and that the suit now stands just as it would stand
calculated to educate and benefit the industrial classes; and to advance between private parties. It is difficult to see how the act does, or
by such means the material interests of the state, being objects similar was intended to do, more than remove the state's immunity from
to those sought by the public school system. In passing upon the suit. It simply gives authority to commence suit for the purpose
question of the state's liability for the negligent acts of its officers or of settling plaintiff's controversies with the estate. Nowhere in the
agents, the court said: act is there a whisper or suggestion that the court or courts in the
No claim arises against any government is favor of an individual, disposition of the suit shall depart from well established
by reason of the misfeasance, laches, or unauthorized exercise of principles of law, or that the amount of damages is the only
powers by its officers or agents. (Citing Gibbons vs. U. S., 8 Wall., question to be settled. The act opened the door of the court to
269; Clodfelter vs. State, 86 N. C., 51, 53; 41 Am. Rep., 440; the plaintiff. It did not pass upon the question of liability, but left
Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158; Green the suit just where it would be in the absence of the state's
vs. State, 73 Cal., 29; Bourn vs. Hart, 93 Cal., 321; 27 Am. St. immunity from suit. If the Legislature had intended to change the
Rep., 203; Story on Agency, sec. 319.) 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., the negligent acts of its officers, agents, and employees. Paragraph 5 of
854; 8 L. R. A., 399.) article 1903 of the Civil Code reads:
In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, The state is liable in this sense when it acts through a special
relied upon and considered, are as follows: agent, but not when the damage should have been caused by
the official to whom properly it pertained to do the act
All persons who have, or shall hereafter have, claims on contract performed, in which case the provisions of the preceding article
or for negligence against the state not allowed by the state board shall be applicable.
of examiners, are hereby authorized, on the terms and conditions
herein contained, to bring suit thereon against the state in any of The supreme court of Spain in defining the scope of this paragraph said:
the courts of this state of competent jurisdiction, and prosecute
the same to final judgment. The rules of practice in civil cases That the obligation to indemnify for damages which a third
shall apply to such suits, except as herein otherwise provided. 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
And the court said: person obligated, by his own fault or negligence, takes part in the
act or omission of the third party who caused the damage. It
This statute has been considered by this court in at least two follows therefrom that the state, by virtue of such provisions of
cases, arising under different facts, and in both it was held that law, is not responsible for the damages suffered by private
said statute did not create any liability or cause of action against individuals in consequence of acts performed by its employees in
the state where none existed before, but merely gave an the discharge of the functions pertaining to their office, because
additional remedy to enforce such liability as would have existed neither fault nor even negligence can be presumed on the part of
if the statute had not been enacted. (Chapman vs. State, 104 the state in the organization of branches of public service and in
Cal., 690; 43 Am. St. Rep., 158; Melvin vs. State, 121 Cal., 16.) the appointment of its agents; on the contrary, we must
A statute of Massachusetts enacted in 1887 gave to the superior court presuppose all foresight humanly possible on its part in order
"jurisdiction of all claims against the commonwealth, whether at law or that each branch of service serves the general weal an that of
in equity," with an exception not necessary to be here mentioned. In private persons interested in its operation. Between these latter
construing this statute the court, in Murdock Grate Co. vs. and the state, therefore, no relations of a private nature
Commonwealth (152 Mass., 28), said: governed by the civil law can arise except in a case where the
state acts as a judicial person capable of acquiring rights and
The statute we are discussing disclose no intention to create contracting obligations. (Supreme Court of Spain, January 7,
against the state a new and heretofore unrecognized class of 1898; 83 Jur. Civ., 24.)
liabilities, but only an intention to provide a judicial tribunal
where well recognized existing liabilities can be adjudicated. That the Civil Code in chapter 2, title 16, book 4, regulates the
obligations which arise out of fault or negligence; and whereas in
In Sipple vs. State (99 N. Y., 284), where the board of the canal claims the first article thereof. No. 1902, where the general principle is
had, by the terms of the statute of New York, jurisdiction of claims for laid down that where a person who by an act or omission causes
damages for injuries in the management of the canals such as the damage to another through fault or negligence, shall be obliged
plaintiff had sustained, Chief Justice Ruger remarks: "It must be to repair the damage so done, reference is made to acts or
conceded that the state can be made liable for injuries arising from the omissions of the persons who directly or indirectly cause the
negligence of its agents or servants, only by force of some positive damage, the following articles refers to this persons and imposes
statute assuming such liability." an identical obligation upon those who maintain fixed relations of
authority and superiority over the authors of the damage,
It being quite clear that Act No. 2457 does not operate to extend the because the law presumes that in consequence of such relations
Government's liability to any cause not previously recognized, we will the evil caused by their own fault or negligence is imputable to
now examine the substantive law touching the defendant's liability for 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 to the claim, and not where the claim is based on acts or
mentioned in said article prove that they employed all the omissions imputable to a public official charged with some
diligence of a good father of a family to avoid the damage, and administrative or technical office who can be held to the proper
among these persons, called upon to answer in a direct and not a responsibility in the manner laid down by the law of civil
subsidiary manner, are found, in addition to the mother or the responsibility. Consequently, the trial court in not so deciding and
father in a proper case, guardians and owners or directors of an in sentencing the said entity to the payment of damages, caused
establishment or enterprise, the state, but not always, except by an official of the second class referred to, has by erroneous
when it acts through the agency of a special agent, doubtless interpretation infringed the provisions of articles 1902 and 1903
because and only in this case, the fault or negligence, which is of the Civil Code. (Supreme Court of Spain, July 30, 1911; 122 Jur.
the original basis of this kind of objections, must be presumed to Civ., 146.)
lie with the state.
It is, therefore, evidence that the State (the Government of the
That although in some cases the state might by virtue of the Philippine Islands) is only liable, according to the above quoted decisions
general principle set forth in article 1902 respond for all the of the Supreme Court of Spain, for the acts of its agents, officers and
damage that is occasioned to private parties by orders or employees when they act as special agents within the meaning of
resolutions which by fault or negligence are made by branches of paragraph 5 of article 1903, supra, and that the chauffeur of the
the central administration acting in the name and representation ambulance of the General Hospital was not such an agent.
of the state itself and as an external expression of its sovereignty
in the exercise of its executive powers, yet said article is not For the foregoing reasons, the judgment appealed from must be
applicable in the case of damages said to have been occasioned reversed, without costs in this instance. Whether the Government
to the petitioners by an executive official, acting in the exercise intends to make itself legally liable for the amount of damages above set
of his powers, in proceedings to enforce the collections of certain forth, which the plaintiff has sustained by reason of the negligent acts of
property taxes owing by the owner of the property which they one of its employees, by legislative enactment and by appropriating
hold in sublease. sufficient funds therefor, we are not called upon to determine. This
matter rests solely with the Legislature and not with the courts.
That the responsibility of the state is limited by article 1903 to
the case wherein it acts through a special agent (and a special Arellano, C. J., Torres, Johnson, and Moreland, JJ., concur.
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 Republic of the Philippines
that in representation of the state and being bound to act as an SUPREME COURT
agent thereof, he executes the trust confided to him. This Manila
concept does not apply to any executive agent who is an
employee of the acting administration and who on his own HIRD DIVISION
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.)
G.R. No. 42204 January 21, 1993
That according to paragraph 5 of article 1903 of the Civil Code
and the principle laid down in a decision, among others, of the HON. RAMON J. FAROLAN, JR., in his capacity as Commissioner of
18th of May, 1904, in a damage case, the responsibility of the Customs, petitioner,
state is limited to that which it contracts through a special agent, vs.
duly empowered by a definite order or commission to perform COURT OF TAX APPEALS and BAGONG BUHAY
some act or charged with some definite purpose which gives rise TRADING, respondents.
The Solicitor General for petitioner. was also misdeclared as to quantity and value, the Collector of Customs
forfeited the subject shipment in favor of the government. 5
Jorge G. Macapagal counsel for respondent.
Private respondent then appealed the decision of the Collector of
Aurea Aragon-Casiano for Bagong Buhay Trading. Customs by filing a petition for review with the Commissioner of
Customs. On November 25, 1972 the Commissioner affirmed the
Collector of Customs.6 Private respondent moved for reconsideration but
ROMERO, J.: the same was denied on January 22, 1973.7

This is a petition for review on certiorari which seeks to annul and set From the Commissioner of Customs, private respondent elevated his
aside the decision of the Court of Tax Appeals dated December 27, 1974 case before the Court of Tax Appeals. Upon review, the Court of Tax
(CTA Case No. 2490) reversing the decision of the Commissioner of Appeals reversed the decision of the Commissioner of Customs. It ruled
Customs which affirmed the decision of the Collector of Customs. 1 that the Commissioner erred in imputing fraud upon private respondent
because fraud is never presumed and thus concluded that the forfeiture
of the articles in question was not in accordance with law. Moreover, the
The undisputed facts are as follows: appellate court stated that the imported articles in question should be
classified as "polyethylene plastic" at the rate of 35% ad
On January 30, 1972, the vessel S/S "Pacific Hawk" with Registry No. 170 valorem instead of "synthetic (polyethylene) woven fabric" at the rate of
arrived at the Port of Manila carrying, among others, 80 bales of screen 100% ad valorem based upon the results conducted by the Bureau of
net consigned to Bagong Buhay Trading (Bagong Buhay). Said Customs Laboratory. Consequently, the Court of Tax Appeals ordered the
importation was declared through a customs broker under Entry No. release of the said article upon payment of the corresponding duties and
8651-72 as 80 bales of screen net of 500 rolls with a gross weight of taxes. (C.T.A. Case No. 2490).8
12,777 kilograms valued at $3,750.00 and classified under Tariff
Heading No. 39.06-B of the Tariff and Customs Code2 at 35% ad valorem. Thereafter, the Commissioner of Customs moved for reconsideration. On
Since the customs examiner found the subject shipment reflective of the November 19, 1975, the Court of Tax Appeals denied said motion for
declaration, Bagong Buhay paid the duties and taxes due in the amount reconsideration.9
of P11,350.00 which was paid through the Bank of Asia under Official
Receipt No. 042787 dated February 1, 1972. Thereafter, the customs
appraiser made a return of duty. On August 20, 1976, private respondent filed a petition asking for the
release of the questioned goods which this Court denied. After several
motions for the early resolution of this case and for the release of goods
Acting on the strength of an information that the shipment consisted of and in view of the fact that the goods were being exposed to the natural
"mosquito net" made of nylon dutiable under Tariff Heading No. 62.02 of elements, we ordered the release of the goods on June 2, 1986.
the Tariff and Customs Code, the Office of the Collector of Customs Consequently, on July 26, 1986, private respondent posted a cash bond
ordered a of P149,443.36 to secure the release of 64 bales 10 out of the 80
re-examination of the shipment. A report on the re-examination revealed bales11 originally delivered on January 30, 1972. Sixteen bales12 remain
that the shipment consisted of 80 bales of screen net, each bale missing.
containing 20 rolls or a total of 1,600 rolls.3 Re-appraised, the shipment
was valued at $37,560.00 or $10.15 per yard instead of $.075 per yard
as previously declared. Furthermore, the Collector of Customs Private respondent alleges that of the 143,454 yards (64 bales) released
determined the subject shipment as made of synthetic (polyethylene) to Bagong Buhay, only 116,950 yards were in good condition and the
woven fabric classifiable under Tariff Heading No. 51.04-B at 100% ad 26,504 yards were in bad condition. Consequently, private respondent
valorem. Thus, Bagong Buhay Trading was assessed P272,600.00 as demands that the Bureau of Customs be ordered to pay for damages for
duties and taxes due on the shipment in question. 4 Since the shipment the 43,050 yards 13 it actually lost.14
Hence, this petition, the issues being; a) whether or not the shipment in declared in the import entry. We agree with the contention of the
question is subject to forfeiture under Section 2530-M subparagraphs petitioner. In declaring the weight of its shipment in an import entry,
(3), (4) and (5) of the Tariff and Customs Code; b) whether or not the through its customs broker as 12,777 kilograms when in truth and in fact
shipment in question falls under Tariff Heading No. 39.06-B (should be the actual weight is 13,600 kilograms, an apparent misdeclaration as to
39.02-B) of the Tariff and Customs Code subject to ad valorem duty of the weight of the questioned goods was committed by private
35% instead of Tariff Heading No. 51.04-B with ad valorem of 100% and respondent. Had it not been for a re-examination and re-appraisal of the
c) whether or not the Collector of Customs may be held liable for the shipment by the Collector of Customs which yielded a difference of 823
43,050 yards actually lost by private respondent. kilograms, the government would have lost revenue derived from
customs duties.
Section 2530, paragraph m, subparagraphs (3), (4) and (5) states:
Although it is admitted that indeed there was a misdeclaration, such
Sec. 2530. Property Subject to Forfeiture Under Tariff and violation, however, does not warrant forfeiture for such act was not
Customs Law. — Any vehicle, vessel or aircraft, cargo, committed directly by the owner, importer, exporter or consignee as set
article and other objects shall, under the following forth in Section 2530, paragraph m, subparagraph (3), and/or (4).
conditions be subjected to forfeiture:
In defense of its position denying the commission of misdeclaration,
xxx xxx xxx private respondent contends that its import entry was based solely on
the shipping documents and that it had no knowledge of any flaw in the
m. Any article sought to be imported or exported. said documents at the time the entry was filed. For this reason, private
respondent believes that if there was any discrepancy in the quantity of
the goods as declared and as examined, such discrepancy should not be
xxx xxx xxx attributed to Bagong Buhay.15

(3) On the strength of a false declaration or Private respondent's argument is persuasive. Under Section 2530,
affidavit or affidavit executed by the owner, paragraph m, subparagraphs (3) and (4), the requisites for forfeiture are:
importer, exporter or consignee concerning (1) the wrongful making by the owner, importer, exporter or consignees
the importation of such article; of any declaration or affidavit, or the wrongful making or delivery by the
same persons of any invoice, letter or paper — all touching on the
(4) On the strength of a false invoice or importation or exportation of merchandise; and (2) that such
other document executed by the owner, declaration, affidavit, invoice, letter or paper is false.16
importer, exporter or consignee concerning
the importation or exportation of such In the case at bar, although it cannot be denied that private respondent
article; and. caused to be prepared through its customs broker a false import entry or
declaration, it cannot be charged with the wrongful making thereof
(5) Through any other practice or device because such entry or declaration merely restated faithfully the data
contrary found in the corresponding certificate of origin, 17 certificate of manager
to law by means of which such articles was of the shipper,18 the packing lists 19 and the bill of lading20 which were all
entered through a custom-house to the prepared by its
prejudice of government. (Emphasis suppliers abroad. If, at all, the wrongful making or falsity of the
supplied). documents above-mentioned can only be attributed to Bagong Buhay's
foreign suppliers or shippers.
Petitioner contends that there has been a misdeclaration as to the
quantity in rolls of the shipment in question, the undisputed fact being
that the said shipment consisted of 1,600 rolls and not 500 rolls as
With regard to the second requirement on falsity, it bears mentioning Examples of these are polyethylene, polytetrafluro-
that the evidence on record, specifically, the decisions of the Collector of ethylene and polychlorotrifluro-ethylene. Their
Customs and the Commissioner of Customs, do not reveal that the characteristic is that they are translucent, flexible and
importer or consignee, Bagong Buhay Trading had any knowledge of any light in weight. They are used largely for insulating
falsity on the subject importation. electric wire. 23

Since private respondent's misdeclaration can be traced directly to its On the other hand, Tariff Heading No. 51.04 provides:
foreign suppliers, Section 2530, paragraph m, subparagraphs (3) and (4)
cannot find application. 51.04. — Woven fabrics of man-made fibers (continuous)
including woven fabrics of monofil or strip of heading No.
Applying subparagraph (5), fraud must be committed by an 51.01 or 51.02.
importer/consignee to evade payment of the duties due.21 We support
the stance of the Court of Tax Appeals that the Commissioner of This heading covers woven fabrics (as described in Part [I]
Customs failed to show that fraud had been committed by the private [C] of the General Explanatory Note on Section XI) made
respondent. The fraud contemplated by law must be actual and not of yarns of continuous man-made fibers, or of monofil or
constructive. It must be intentional fraud, consisting of deception strip of heading 51.01 and 51.02; it includes a very large
willfully and deliberately done or resorted to in order to induce another variety of dress fabrics, linings, curtain materials,
to give up some right.22 As explained earlier, the import entry was furnishing fabrics, tyre fabrics, tent fabrics, parachute
prepared on the basis of the shipping documents provided by the foreign fabrics, etc.24 (Emphasis supplied)
supplier or shipper. Hence, Bagong Buhay Trading can be considered to
have acted in good faith when it relied on these documents. To correctly classify the subject importation, we need to refer to
chemical analysis submitted before the Court of Tax Appeals. Mr.
Proceeding now to the question of the correct classification of the Norberto Z. Manuel, an Analytical Chemist of the Bureau of Customs and
questioned shipments, petitioner contends that the same falls under an Assistant to the Chief of the Customs Laboratory, testified that a
Tariff Heading No. 51.04 being a "synthetic (polyethylene) woven fabric." chemical test was conducted on the sample25 and "the result is that the
On the other hand, private respondent contends that these fall under attached sample submitted under Entry No. 8651 was found to be
Tariff Heading No. 39.06 (should be 39.02), having been found to be made wholly of Polyethylene plastic."26
made of polyethylene plastic.
A similar result conducted by the Adamson University Testing
Heading No. 39.02 of the Tariff and Customs Code provides: Laboratories provides as follows:

39.02 — Polymerisation and copolymerisation products The submitted sample, being insoluble in 10% sodium
(for example, polyethylene, polytetrahaloethylene, carbonate; hydrochloric acid, glacial acetic acid, toluene,
polyisobutylene, polystyrene, polyvinyl chloride, polyvinyl acetone, formic acid, and nitric acid, does not belong to
acetate, polyvinyl chloroacetate and other polyvinyl the man-made fibers, i.e., cellulosic and alginate rayons,
derivatives, polyacrylic and polymethacrylic derivatives, poly (vinyl chloride), polyacrylonitrile, copolymer or
coumaroneindene resins). polyester silicones including Dolan, Dralon, Orlin, PAN,
Redon, Courtelle, etc., Tarylene, Dacron; but it is a type of
The principal products included in this heading are: plastic not possessing, the properties of the man-made
fibers. 27 (Emphasis supplied)
(1) Polymerization products of ethylene or its substitution
derivatives, particularly the halogen derivatives. Consequently, the Court of Tax Appeals, relying on the laboratory
findings of the Bureau of Customs and Adamson University correctly
classified the questioned shipment as polyethylene plastic taxable under 35% ad valorem on the 13,600 kilograms of polyethylene plastic
Tariff Heading No. 39.02 instead of synthetic (polyethylene) woven fabric imported by private respondent.
under Tariff Heading 51.04, to wit:
SO ORDERED.
While it is true that the finding and conclusion of the
Collector of Customs with respect to classification of Gutierrez, Jr., Bidin, Davide, Jr. and Melo, JJ., concur.
imported articles are presumptively correct, yet as
matters that require laboratory tests or analysis to arrive
at the proper classification, the opinion of the Collector
must yield to the finding of an expert whose opinion is Republic of the Philippines
based on such laboratory test or analysis unless such SUPREME COURT
laboratory analysis is shown to be erroneous. And this is Manila
especially so in this case where the test and analysis were
made in the laboratory of the Bureau of Customs itself. It EN BANC
has not been shown why such laboratory finding was
G.R. No. L-6060 September 30, 1954
disregarded. There is no claim or pretense that an error
was committed by the laboratory technician. Significantly, FERNANDO A. FROILAN, plaintiff-appellee,
the said finding of the Chief, Customs Laboratory finds vs.
support in the "REPORT OF ANALYSIS" submitted by the PAN ORIENTAL SHIPPING CO., defendant-appellant,
Adamson University Testing Laboratories, dated REPUBLIC OF THE PHILIPPINES, intervenor-appellee.
September 21, 1966. 28
Quisumbing, Sycip, Quisumbing and Salazar, for appellant.
On the third issue, we opine that the Bureau of Customs cannot be held Ernesto Zaragoza for appellee.
liable for actual damages that the private respondent sustained with Hilarion U. Jarencio for the intervenor.
regard to its goods. Otherwise, to permit private respondent's claim to PARAS, C.J.:
prosper would violate the doctrine of sovereign immunity. Since it
demands that the Commissioner of Customs be ordered to pay for actual The factual antecedents of this case are sufficiently recited in the brief
damages it sustained, for which ultimately liability will fall on the filed by the intervenor-appellee as follows:
government, it is obvious that this case has been converted technically
into a suit against the state.29 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
On this point, the political doctrine that "the state may not be sued
Commission the vessel FS-197 for P200,000, paying P50,000
without its consent," categorically applies.30 As an unincorporated
down and agreeing to pay the balance in installments; that to
government agency without any separate juridical personality of its own,
secure the payment of the balance of the purchase price, he
the Bureau of Customs enjoys immunity from suit. Along with the Bureau
executed a chattel mortgage of said vessel in favor of the
of Internal Revenue, it is invested with an inherent power of sovereignty,
Shipping Commission; that for various reason, among them the
namely, taxation. As an agency, the Bureau of Customs performs the
non-payment of the installments, the Shipping Commission took
governmental function of collecting revenues which is definitely not a
possession of said vessel and considered the contract of sale
proprietary function. Thus, private respondent's claim for damages
cancelled; that the Shipping Commission chartered and delivered
against the Commissioner of Customs must fail.
said vessel to the defendant-appellant Pan Oriental Shipping Co.
subject to the approval of the President of the Philippines; that he
WHEREFORE, the decision of the respondent Court of Tax Appeals is appealed the action of the Shipping Commission to the President
AFFIRMED. The Collector of Customs is directed to expeditiously re- of the Philippines and, in its meeting on August 25, 1950, the
compute the customs duties applying Tariff Heading 39.02 at the rate of
Cabinet restored him to all his rights under his original contract vessel in question to its authorized representative, the Board of
with the Shipping Commission; that he had repeatedly demanded Liquidators; that Froilan be declared to be without any rights on
from the Pan Oriental Shipping Co. the possession of the vessel in said vessel and the amounts he paid thereon forfeited or
question but the latter refused to do so. He, therefore, prayed alternately, that the said vessel be delivered to the Board of
that, upon the approval of the bond accompanying his complaint, Liquidators in order that the intervenor may have its chattel
a writ of replevin be issued for the seizure of said vessel with all mortgage extrajudicially foreclosed in accordance with the
its equipment and appurtenances, and that after hearing, he be provisions of the Chattel Mortgage Law; and that pending the
adjudged to have the rightful possession thereof (Rec. on App. hearing on the merits, the said vessel be delivered to it (Rec. on
pp. 2-8). App. pp. 54-66).
2. On February 3, 1951, the lower court issued the writ of 5. On November 29, 1951, the Pan Oriental Shipping Co. filed an
replevin prayed for by Froilan and by virtue thereof the Pan answer to the complaint in intervention alleging that the
Oriental Shipping Co. was divested of its possession of said Government of the Republic of the Philippines was obligated to
vessel (Rec. on App. p. 47). deliver the vessel in question to it by virtue of a contract of bare-
boat charter with option to purchase executed on June 16, 1949,
3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer by the latter in favor of the former; it also alleged that it had
denying the right of Froilan to the possession of the said vessel; it made necessary and useful expenses on the vessel and claimed
alleged that the action of the Cabinet on August 25, 1950, the right of retention of the vessel. It, therefore, prayed that, if
restoring Froilan to his rights under his original contract with the the Republic of the Philippines succeeded in obtaining possession
Shipping Commission was null and void; that, in any event, of the said vessel, to comply with its obligations of delivering to it
Froilan had not complied with the conditions precedent imposed (Pan Oriental Shipping co.) or causing its delivery by recovering it
by the Cabinet for the restoration of his rights to the vessel under from Froilan (Rec. on App. pp. 69-81).
the original contract; that it suffered damages in the amount of
P22,764.59 for wrongful replevin in the month of February, 1951, 6. On November 29, 1951, Froilan tendered to the Board of
and the sum of P17,651.84 a month as damages suffered for Liquidators, which was liquidating the affairs of the Shipping
wrongful replevin from March 1, 1951; it alleged that it had Administration, a check in the amount of P162,576.96 in payment
incurred necessary and useful expenses on the vessel amounting of his obligation to the Shipping Administration for the said vessel
to P127,057.31 and claimed the right to retain said vessel until as claimed in the complaint in intervention of the Government of
its useful and necessary expenses had been reimbursed (Rec. on the Republic of the Philippines. The Board of Liquidators issued
App. pp. 8-53). an official report therefor stating that it was a 'deposit pending
the issuance of an order of the Court of First Instance of Manila'
4. On November 10, 1951, after the leave of the lower court had (Rec. on App. pp. 92-93).
been obtained, the intervenor-appellee, Government of the
Republic of the Philippines, filed a complaint in intervention 7. On December 7, 1951, the Government of the Republic of the
alleging that Froilan had failed to pay to the Shipping Commission Philippines brought the matter of said payment and the
(which name was later changed to Shipping Administration) the circumstance surrounding it to the attention of the lower court "in
balance due on the purchase price of the vessel in question, the order that they may be taken into account by this Honorable
interest thereon, and its advances on insurance premium Court in connection with the questions that are not pending
totalling P162,142.95, excluding the dry-docking expenses before it for determination" (Rec. on App. pp. 82-86).
incurred on said vessel by the Pan Oriental Shipping Co.; that
intervenor was entitled to the possession of the said vessel either 8. On February 3, 1952, the lower court held that the payment by
under the terms of the original contract as supplemented by Froilan of the amount of P162,576.96 on November 29, 1951, to
Froilan's letter dated January 28, 1949, or in order that it may the Board of Liquidators constituted a payment and a discharge
cause the extrajudicial sale thereof under the Chattel Mortgage of Froilan's obligation to the Government of the Republic of the
Law. It, therefore, prayed that Froilan be ordered to deliver 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 "COUNTERCLAIM
between Froilan and the Oriental Shipping Co. which was also
pending determination in said court (Rec. on App. pp. 92-93). "As counterclaim against the intervenor Republic of the
This order dismissing the complaint in intervention, but reserving Philippines, the defendant alleges:
for future adjudication the controversy between Froilan and the "1. That the defendant reproduces herein all the pertinent
Pan Oriental Shipping Co. has already become final since neither allegations of the foregoing answer to the complaint in
the Government of the Republic of the Philippines nor the Pan intervention
Oriental Shipping Co. had appealed therefrom.
"2. That, as shown by the allegations of the foregoing answer to
9. On May 10, 1952, the Government of the Republic of the the complaint in intervention, the defendant Pan Oriental
Philippines filed a motion to dismiss the counterclaim of the Pan Shipping Company is entitled to the possession of the vessel and
Oriental Shipping Co. against it on the ground that the purpose of the intervenor Republic of the Philippines is bound under the
said counterclaim was to compel the Government of the Republic contract of charter with option to purchase it entered into with
of the Philippines to deliver the vessel to it (Pan Oriental Shipping the defendant to deliver that possession to the defendant —
Co.) in the event that the Government of the Republic of the whether it actually has the said possession or it does not have
Philippines recovers the vessel in question from Froilan. In view, that possession from the plaintiff Fernando A. Froilan and deliver
however, of the order of the lower court dated February 3, the same to the defendant;
holding that the payment made by Froilan to the Board of
Liquidators constituted full payment of Froilan's obligation to the "3. That, notwithstanding demand, the intervenor Republic of the
Shipping Administration, which order had already become final, Philippines has not to date complied with its obligation of
the claim of the Pan Oriental Shipping Co. against the Republic of delivering or causing the delivery of the vessel to the defendant
the Philippines was no longer feasible, said counterclaim was Pan Oriental Shipping Company.1âwphïl.nêt
barred by prior judgment and stated no cause of action. It was
also alleged that movant was not subject to the jurisdiction of the "RELIEF
court in connection with the counterclaim. (Rec. on App. pp. 94- "WHEREFORE, the defendant respectfully prays that judgment be
97). This motion was opposed by the Pan Oriental Shipping Co. in
rendered ordering the intervenor Republic of the Philippines
its written opposition dated June 4, 1952 (Rec. on app. pp. 19- alternatively to deliver to the defendants the possession of the
104).
said vessel, or to comply with its obligation to the defendant or
10. In an order dated July 1, 1952, the lower court dismissed the causing the delivery to the latter of the said vessel by recovering
counterclaim of the Pan Oriental Shipping Co. as prayed for by the same from plaintiff, with costs.
the Republic of the Philippines (Rec. on App. pp. 104-106). "The defendant prays for such other remedy as the
11. It if from this order of the lower court dismissing its Court may deem just and equitable in the
counterclaim against the Government of the Republic of the premises."
Philippines that Pan Oriental Shipping Co. has perfected the
The ground of the motion to dismiss are (a) That the cause of
present appeal (Rec. on App. p. 107). action is barred by prior judgment; (b) That the counterclaim
The order of the Court of First Instance of Manila, dismissing the states no cause of action; and (c) That this Honorable Court has
counterclaim of the defendant Pan Oriental Shipping Co., from which the no jurisdiction over the intervenor government of the Republic of
latter has appealed, reads as follows: the Philippines in connection with the counterclaim of the
defendant Pan Oriental Shipping Co.
This is a motion to dismiss the counterclaim interposed by the
defendant in its answer to the complaint in intervention. The intervenor contends that the complaint in intervention
having been dismissed and no appeal having been taken, the
"The counterclaim states as follows: dismissal of said complaint is tantamount to a judgment.
 The complaint in intervention did not contain any claim The defendant's failure to appeal from the order of February 8 cannot,
whatsoever against the defendant Pan Oriental Shipping Co.; therefore, be held as barring the defendant from proceeding with its
hence, the counterclaim has no foundation. counterclaim, since, as already stated, said order preserved its right as
against the intervenor. Indeed, the maintenance of said right is in
The question as to whether the Court has jurisdiction over the consonance with Rule 30, section 2, of the Rules of Court providing that
intervenor with regard to the counterclaim, the Court is of the "if a counterclaim has been pleaded by a defendant prior to the service
opinion that it has no jurisdiction over said intervenor. upon him of the plaintiff's motion to dismiss, the action shall not be
It appearing, therefore, that the grounds of the motion to dismiss dismissed against the defendant's objection unless the counterclaim can
are well taken, the counterclaim of the defendant is dismissed, remain pending for independent adjudication by the court."
without pronouncement as to costs. The lower court also erred in holding that, as the intervenor had not
The defendant's appeal is predicated upon the following assignments of made any claim against the defendant, the latter's counterclaim had no
error: foundation. The complaint in intervention sought to recover possession
of the vessel in question from the plaintiff, and this claim is logically
I. The lower court erred in dismissing the counterclaim on the adverse to the position assumed by the defendant that it has a better
ground of prior judgment. 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
II. The lower court erred in dismissing the counterclaim on the a counterclaim should be judged by its own allegations, and not by the
ground that the counterclaim had no foundation because made averments of the adverse party. It should be recalled that the
to a complaint in intervention that contained no claim against the defendant's theory is that the plaintiff had already lost his rights under
defendant. the contract with the Shipping Administration and that, on the other
hand, the defendant is relying on the charter contract executed in its
III. The lower court erred in dismissing the counterclaim on the
favor by the intervenor which is bound to protect the defendant in its
ground of alleged lack of jurisdiction over the intervenor Republic
possession of the vessel. In other words, the counterclaim calls for
of the Philippines.
specific performance on the part of the intervenor. As to whether this
We agree with appellant's contention that its counterclaim is not barred counterclaim is meritorious is another question which is not now before
by prior judgment (order of February 8, 1952, dismissing the complaint us.
in intervention), first, because said counterclaim was filed on November
The other ground for dismissing the defendant's counterclaim is that the
29, 1951, before the issuance of the order invoked; and, secondly,
State is immune from suit. This is untenable, because by filing its
because in said order of February 8, the court dismissed the complaint in
complaint in intervention the Government in effect waived its right of
intervention, "without, of course, precluding the determination of the
nonsuability.
right of the defendant in the instant case," and subject to the condition
that the "release and cancellation of the chattel mortgage does not, The immunity of the state from suits does not deprive it of the
however, prejudge the question involved between the plaintiff and the right to sue private parties in its own courts. The state as plaintiff
defendant which is still the subject of determination in this case." It is to may avail itself of the different forms of actions open to private
be noted that the first condition referred to the right of the defendant, as litigants. In short, by taking the initiative in an action against a
distinguished from the second condition that expressly specified the private party, the state surrenders its privileged position and
controversy between the plaintiff and the defendant. That the first comes down to the level of the defendant. The latter
condition reserved the right of the defendant as against the intervenor, automatically acquires, within certain limits, the right to set up
is clearly to be deduced from the fact that the order of February 8 whatever claims and other defenses he might have against the
mentioned the circumstance that "the question of the expenses of state. The United States Supreme Court thus explains:
drydocking incurred by the defendant has been included in its
counterclaim against the plaintiff," apparently as one of the grounds for "No direct suit can be maintained against the United
granting the motion to dismiss the complaint in intervention. 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 proximity of All Saints Day. The Malong spouses prayed that the PNR be
deny to him the right of setting up such claim in a court of ordered to pay them damages totalling P136,370.
justice, and turn him around to an application to
Congress." (Sinco, Philippine Political Law, Tenth Ed., pp. Upon the Solicitor General's motion, the trial court dismissed the
36-37, citing U. S. vs. Ringgold, 8 Pet. 150, 8 L. ed. 899.) complaint. It ruled that it had no jurisdiction because the PNR, being
a government instrumentality, the action was a suit against the State
It is however, contended for the intervenor that, if there was at all any
(Sec. 16, Art. XV of the Constitution). The Malong spouses appealed to
waiver, it was in favor of the plaintiff against whom the complaint in
this Court pursuant to Republic Act No. 5440.
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. The Manila Railroad Company, the PNR's predecessor, as a common
carrier, was not immune from suit under Act No. 1510, its charter.
Wherefore, the appealed order is hereby reversed and set aside and the
case remanded to the lower court for further proceedings. So ordered, The PNR charter, Republic Act No. 4156, as amended by Republic Act No.
without costs. 6366 and Presidential Decree No. 741, provides that the PNR is a
government instrumentality under government ownership during its 50-
Pablo, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo,
year term, 1964 to 2014. It is under the Office of the President of the
Concepcion, and Reyes, J.B.L., JJ., concur.
Philippines. Republic Act No. 6366 provides:

SECTION 1-a. Statement of policy. The Philippine National

Republic of the Philippines Railways, being a factor for socio-economic development
SUPREME COURT and growth, shall be a part of the infrastructure program
Manila of the government and as such shall remain in and under
government ownership during its corporate existence. The
EN BANC Philippine National Railways must be administered with
the view of serving the interests of the public by providing
G.R. No. L-49930 August 7, 1985 them the maximum of service and, while aiming at its
greatest utility by the public, the economy of operation
FRANCISCO MALONG and ROSALINA AQUINOMALONG petitioners, must be ensured so that service can be rendered at the
vs. minimum passenger and freight prices possible.
PHILIPPINE NATIONAL RAILWAYS and COURT OF FIRST INSTANCE
OF PANGASINAN, Lingayen Branch 11, respondents. The charter also provides:

SEC. 4. General powers. The Philippine National Railways

AQUINO, J.: shall have the following general powers:

This case is about the immunity from suit of the Philippine National (a) To do all such other things and to transact all such
Railways. The Malong spouses alleged in their complaint that on October business directly or indirectly necessary, incidental or
30, 1977 their son, Jaime Aquino, a paying passenger, was killed when conducive to the attainment of the purpose of the
he fell from a PNR train while it was between Tarlac and Capas. corporation; and

The tragedy occurred because Jaime had to sit near the door of a coach. (b) Generally, to exercise all powers of a railroad
The train was overloaded with passengers and baggage in view of the corporation under the Corporation Law. (This refers to
 sections 81 to 102 of the Corporation Law on railroad Suits against State agencies with relation to matters in
corporations, not reproduced in the Corporation Code.) which they have assumed to act in a private or non-
governmental capacity, and various suits against certain
Section 36 of the Corporation Code provides that every corporation has corporations created by the State for public purposes, but
the power to sue and be sued in its corporate name. Section 13(2) of the to engage in matters partaking more of the nature of
Corporation Law provides that every corporation has the power to sue ordinary business rather than functions of a governmental
and be sued in any court. or political character, are not regarded as suits against the
State.
A sovereign is exempt from suit, not because of any
formal conception or obsolete theory, but on the logical The latter is true, although the State may own the stock or
and practical ground that there can be no legal right as property of such a corporation, for by engaging in
against the authority that makes the law on which the business operations through a corporation the State
right depends (Justice Holmes in Kawananakoa vs. divests itself so far of its sovereign character, and by
Polyblank 205 U.S. 353, 51 L. ed. 834). implicating consents to suits against the corporation. (81
C.J. S. 1319.)
The public service would be hindered, and public safety
endangered, if the supreme authority could be subjected The foregoing rule was applied to State Dock Commissions carrying on
to suit at the instance of every citizen and, consequently, business relating to pilots, terminals and transportation (Standard Oil Co.
controlled in the use and disposition of the means of New Jersey vs. U.S., 27 Fed. 2nd 370) and to State Highway
required for the proper administration of the Government Commissions created to build public roads and given appropriations in
(The Siren vs. U.S., 7 Wall. 152, 19 L. ed. 129). advance to discharge obligations incurred in their behalf (Arkansas State
Highway Commission vs. Dodge, 26 SW 2nd 879 and State Highway
Did the State act in a sovereign capacity or in a corporate capacity when Commission of Missouri vs. Bates, 296 SW 418, cited in National Airports
it organized the PNR for the purpose of engaging in transportation? Did case).
it act differently when it organized the PNR as successor of the Manila
Railroad Company? The point is that when the government enters into a commercial
business it abandons its sovereign capacity and is to be treated like any
We hold that in the instant case the State divested itself of its sovereign other private corporation (Bank of the U.S. vs. Planters' Bank, 9 Wheat.
capacity when it organized the PNR which is no different from its 904, 6 L. ed. 244, cited in Manila Hotel Employees Association vs. Manila
predecessor, the Manila Railroad Company. The PNR did not become Hotel Company, et al., 73 Phil. 374, 388). The Manila Hotel case also
immune from suit. It did not remove itself from the operation of articles relied on the following rulings:
1732 to 1766 of the Civil Code on common carriers.
By engaging in a particular business through the
The correct rule is that "not all government entities, whether corporate instrumentality of a corporation, the government divests
or non-corporate, are immune from suits. Immunity from suit is itself pro hac vice of its sovereign character, so as to
determined by the character of the objects for which the entity was render the corporation subject to the rules of law
organized." (Nat. Airports Corp. vs. Teodoro and Phil. Airlines, Inc., 91 governing private corporations.
Phil. 203, 206; Santos vs, Santos, 92 Phil. 281, 285; Harry Lyons, Inc. vs.
USA, 104 Phil. 593.) When the State acts in its proprietary capacity, it is
amenable to all the rules of law which bind private
Suits against State agencies with respect to matters in which they have individuals.
assumed to act in a private or non-governmental capacity are not suits
against the State (81 C.J.S. 1319).
 There is not one law for the sovereign and another for the Makasiar, C.J., I concur both on express waiver by its charter and implied
subject, but when the sovereign engages in business and waiver by the contract of carriage.
the conduct of business enterprises, and contracts with
individuals, whenever the contract in any form comes
before the courts, the rights and obligation of the
contracting parties must be adjusted upon the same Republic of the Philippines
principles as if both contracting parties were private SUPREME COURT
persons. Both stand upon equality before the law, and the Manila
sovereign is merged in the dealer, contractor and suitor
(People vs. Stephens, 71 N.Y. 549). EN BANC

It should be noted that in Philippine National Railways vs. Union de

Maquinistas, etc., L-31948, July 25, 1978, 84 SCRA 223, it was held that
the PNR funds could be garnished at the instance of a labor union. G.R. No. L-26400 February 29, 1972

It would be unjust if the heirs of the victim of an alleged negligence of VICTORIA AMIGABLE, plaintiff-appellant,
the PNR employees could not sue the PNR for damages. Like any private vs.
common carrier, the PNR is subject to the obligations of persons NICOLAS CUENCA, as Commissioner of Public Highways and
engaged in that private enterprise. It is not performing any REPUBLIC OF THE PHILIPPINES, defendants-appellees.
governmental function.

Thus, the National Development Company is not immune from suit. It MAKALINTAL, J.:p
does not exercise sovereign functions. It is an agency for the
performance of purely corporate, proprietary or business functions
This is an appeal from the decision of the Court of First Instance of Cebu
(National Development Company vs. Tobias, 117 Phil. 703, 705 and
in its Civil Case No. R-5977, dismissing the plaintiff's complaint.
cases cited therein; National Development Company vs. NDC Employees
and Workers' Union, L-32387, August 19,1975,66 SCRA 181,184).
Victoria Amigable, the appellant herein, is the registered owner of Lot
No. 639 of the Banilad Estate in Cebu City as shown by Transfer
Other government agencies not enjoying immunity from suit are the
Certificate of Title No. T-18060, which superseded Transfer Certificate of
Social Security System (Social Security System vs. Court of Appeals, L-
Title No. RT-3272 (T-3435) issued to her by the Register of Deeds of Cebu
41299, February 21, 1983, 120 SCRA 707) and the Philippine National
on February 1, 1924. No annotation in favor of the government of any
Bank (Republic vs. Philippine National Bank, 121 Phil. 26).
right or interest in the property appears at the back of the certificate.
Without prior expropriation or negotiated sale, the government used a
WHEREFORE, the order of dismissal is reversed and set aside. The case portion of said lot, with an area of 6,167 square meters, for the
is remanded to the trial court for further proceedings. Costs against the construction of the Mango and Gorordo Avenues.
Philippine National Railways.
It appears that said avenues were already existing in 1921 although
SO ORDERED. "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
Concepcion, Jr., Melencio-Herrera, Plana, Escolin, Relova, Gutierrez, Jr., was begun in 1924, and the formal construction in
De la Fuente, Cuevas and Alampay, JJ., concur. 1925." *

Teehankee, J., concurs in the result.

On March 27, 1958 Amigable's counsel wrote the President of the the Court of Appeals, which subsequently certified the case to Us, there
Philippines, requesting payment of the portion of her lot which had been being no question of fact involved.
appropriated by the government. The claim was indorsed to the Auditor
General, who disallowed it in his 9th Indorsement dated December 9, The issue here is whether or not the appellant may properly sue the
1958. A copy of said indorsement was transmitted to Amigable's counsel government under the facts of the case.
by the Office of the President on January 7, 1959.
In the case of Ministerio vs. Court of First Instance of Cebu,1 involving a
On February 6, 1959 Amigable filed in the court a quo a complaint, claim for payment of the value of a portion of land used for the widening
which was later amended on April 17, 1959 upon motion of the of the Gorordo Avenue in Cebu City, this Court, through Mr. Justice
defendants, against the Republic of the Philippines and Nicolas Cuenca, Enrique M. Fernando, held that where the government takes away
in his capacity as Commissioner of Public Highways for the recovery of property from a private landowner for public use without going through
ownership and possession of the 6,167 square meters of land traversed the legal process of expropriation or negotiated sale, the aggrieved
by the Mango and Gorordo Avenues. She also sought the payment of party may properly maintain a suit against the government without
compensatory damages in the sum of P50,000.00 for the illegal thereby violating the doctrine of governmental immunity from suit
occupation of her land, moral damages in the sum of P25,000.00, without its consent. We there said: .
attorney's fees in the sum of P5,000.00 and the costs of the suit.
... . If the constitutional mandate that the owner be
Within the reglementary period the defendants filed a joint answer compensated for property taken for public use were to be
denying the material allegations of the complaint and interposing the respected, as it should, then a suit of this character should
following affirmative defenses, to wit: (1) that the action was premature, not be summarily dismissed. The doctrine of
the claim not having been filed first with the Office of the Auditor governmental immunity from suit cannot serve as an
General; (2) that the right of action for the recovery of any amount instrument for perpetrating an injustice on a citizen. Had
which might be due the plaintiff, if any, had already prescribed; (3) that the government followed the procedure indicated by the
the action being a suit against the Government, the claim for moral governing law at the time, a complaint would have been
damages, attorney's fees and costs had no valid basis since as to these filed by it, and only upon payment of the compensation
items the Government had not given its consent to be sued; and (4) that fixed by the judgment, or after tender to the party entitled
inasmuch as it was the province of Cebu that appropriated and used the to such payment of the amount fixed, may it "have the
area involved in the construction of Mango Avenue, plaintiff had no right to enter in and upon the land so condemned, to
cause of action against the defendants. appropriate the same to the public use defined in the
judgment." If there were an observance of procedural
During the scheduled hearings nobody appeared for the defendants regularity, petitioners would not be in the sad plaint they
notwithstanding due notice, so the trial court proceeded to receive the are now. It is unthinkable then that precisely because
plaintiff's evidence ex parte. On July 29, 1959 said court rendered its there was a failure to abide by what the law requires, the
decision holding that it had no jurisdiction over the plaintiff's cause of government would stand to benefit. It is just as important,
action for the recovery of possession and ownership of the portion of her if not more so, that there be fidelity to legal norms on the
lot in question on the ground that the government cannot be sued part of officialdom if the rule of law were to be
without its consent; that it had neither original nor appellate jurisdiction maintained. It is not too much to say that when the
to hear, try and decide plaintiff's claim for compensatory damages in the government takes any property for public use, which is
sum of P50,000.00, the same being a money claim against the conditioned upon the payment of just compensation, to be
government; and that the claim for moral damages had long prescribed, judicially ascertained, it makes manifest that it submits to
nor did it have jurisdiction over said claim because the government had the jurisdiction of a court. There is no thought then that
not given its consent to be sued. Accordingly, the complaint was the doctrine of immunity from suit could still be
dismissed. Unable to secure a reconsideration, the plaintiff appealed to appropriately invoked.
Considering that no annotation in favor of the government appears at BOLASTIG, LEAGUE OF URBAN POOR FOR ACTION (LUPA),
the back of her certificate of title and that she has not executed any KILUSAN NG MARALITA SA MEYCAUAYAN (KMM-LUPA CHAPTER),
deed of conveyance of any portion of her lot to the government, the DANILO M. CALDERON, VICENTE C. ALBAN, MERLYN M. VAAL,
appellant remains the owner of the whole lot. As registered owner, she LOLITA S. QUINONES, RICARDO D. LANOZO, JR., CONCHITA G.
could bring an action to recover possession of the portion of land in GOZO, MA. TERESA D. ZEPEDA, JOSEFINA A. LANOZO, and
question at anytime because possession is one of the attributes of SERGIO C. LEGASPI, JR., KALIPUNAN NG DAMAYANG MAHIHIRAP
ownership. However, since restoration of possession of said portion by (KADAMAY), EDY CLERIGO, RAMMIL DINGAL, NELSON B.
the government is neither convenient nor feasible at this time because it TERRADO, CARMEN DEUNIDA, and EDUARDO
is now and has been used for road purposes, the only relief available is LEGSON, Respondents.
for the government to make due compensation which it could and
should have done years ago. To determine the due compensation for the DECISION
land, the basis should be the price or value thereof at the time of the SERENO, J.:
taking.2
This is a Petition for Review on Certiorari with Prayer for the Issuance of
As regards the claim for damages, the plaintiff is entitled thereto in the a Temporary Restraining Order (TRO) and/or Preliminary Injunction
form of legal interest on the price of the land from the time it was taken assailing the 30 September 2008 Decision and 5 December 2008
up to the time that payment is made by the government. 3 In addition, Resolution of the Court of Appeals (CA) in CA–G.R. SP No. 103351. 1
the government should pay for attorney's fees, the amount of which
On 14 September 2002, petitioner China National Machinery &
should be fixed by the trial court after hearing.
Equipment Corp. (Group) (CNMEG), represented by its chairperson, Ren
Hongbin, entered into a Memorandum of Understanding with the North
WHEREFORE, the decision appealed from is hereby set aside and the Luzon Railways Corporation (Northrail), represented by its president,
case remanded to the court a quo for the determination of Jose L. Cortes, Jr. for the conduct of a feasibility study on a possible
compensation, including attorney's fees, to which the appellant is railway line from Manila to San Fernando, La Union (the Northrail
entitled as above indicated. No pronouncement as to costs. Project).2

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, On 30 August 2003, the Export Import Bank of China (EXIM Bank) and
Barredo, Villamor and Makasiar JJ., concur. the Department of Finance of the Philippines (DOF) entered into a
Memorandum of Understanding (Aug 30 MOU), wherein China agreed to
extend Preferential Buyer’s Credit to the Philippine government to
finance the Northrail Project.3 The Chinese government designated EXIM
Republic of the Philippines Bank as the lender, while the Philippine government named the DOF as
SUPREME COURT the borrower.4 Under the Aug 30 MOU, EXIM Bank agreed to extend an
Manila amount not exceeding USD 400,000,000 in favor of the DOF, payable in
20 years, with a 5-year grace period, and at the rate of 3% per annum. 5
EN BANC
On 1 October 2003, the Chinese Ambassador to the Philippines, Wang
G.R. No. 185572 February 7, 2012 Chungui (Amb. Wang), wrote a letter to DOF Secretary Jose Isidro
Camacho (Sec. Camacho) informing him of CNMEG’s designation as the
CHINA NATIONAL MACHINERY & EQUIPMENT CORP.
Prime Contractor for the Northrail Project.6
(GROUP), Petitioner,
vs. On 30 December 2003, Northrail and CNMEG executed a Contract
HON. CESAR D. SANTAMARIA, in his official capacity as Presiding Agreement for the construction of Section I, Phase I of the North Luzon
Judge of Branch 145, Regional Trial Court of Makati City, Railway System from Caloocan to Malolos on a turnkey basis (the
HERMINIO HARRY L. ROQUE, JR., JOEL R. BUTUYAN, ROGER R. Contract Agreement).7 The contract price for the Northrail Project was
RAYEL, ROMEL R. BAGARES, CHRISTOPHER FRANCISCO C. pegged at USD 421,050,000.8
On 26 February 2004, the Philippine government and EXIM Bank entered Review on Certiorari dated 21 January 2009, raising the following
into a counterpart financial agreement – Buyer Credit Loan Agreement issues: 23
No. BLA 04055 (the Loan Agreement).9 In the Loan Agreement, EXIM
Bank agreed to extend Preferential Buyer’s Credit in the amount of USD Whether or not petitioner CNMEG is an agent of the sovereign People’s
400,000,000 in favor of the Philippine government in order to finance Republic of China.
the construction of Phase I of the Northrail Project.10 Whether or not the Northrail contracts are products of an executive
On 13 February 2006, respondents filed a Complaint for Annulment of agreement between two sovereign states.
Contract and Injunction with Urgent Motion for Summary Hearing to Whether or not the certification from the Department of Foreign Affairs is
Determine the Existence of Facts and Circumstances Justifying the necessary under the foregoing circumstances.
Issuance of Writs of Preliminary Prohibitory and Mandatory Injunction
and/or TRO against CNMEG, the Office of the Executive Secretary, the Whether or not the act being undertaken by petitioner CNMEG is an act
DOF, the Department of Budget and Management, the National jure imperii.
Economic Development Authority and Northrail.11 The case was docketed
as Civil Case No. 06-203 before the Regional Trial Court, National Capital Whether or not the Court of Appeals failed to avoid a procedural limbo in
Judicial Region, Makati City, Branch 145 (RTC Br. 145). In the Complaint, the lower court.
respondents alleged that the Contract Agreement and the Loan Whether or not the Northrail Project is subject to competitive public
Agreement were void for being contrary to (a) the Constitution; (b)
bidding.
Republic Act No. 9184 (R.A. No. 9184), otherwise known as the
Government Procurement Reform Act; (c) Presidential Decree No. 1445, Whether or not the Court of Appeals ignored the ruling of this Honorable
otherwise known as the Government Auditing Code; and (d) Executive Court in the Neri case.
Order No. 292, otherwise known as the Administrative Code. 12
CNMEG prays for the dismissal of Civil Case No. 06-203 before RTC Br.
RTC Br. 145 issued an Order dated 17 March 2006 setting the case for 145 for lack of jurisdiction. It likewise requests this Court for the
hearing on the issuance of injunctive reliefs.13 On 29 March 2006, CNMEG issuance of a TRO and, later on, a writ of preliminary injunction to
filed an Urgent Motion for Reconsideration of this Order.14 Before RTC Br. restrain public respondent from proceeding with the disposition of Civil
145 could rule thereon, CNMEG filed a Motion to Dismiss dated 12 April Case No. 06-203.
2006, arguing that the trial court did not have jurisdiction over (a) its
person, as it was an agent of the Chinese government, making it The crux of this case boils down to two main issues, namely:
immune from suit, and (b) the subject matter, as the Northrail Project
1. Whether CNMEG is entitled to immunity, precluding it from
was a product of an executive agreement.15
being sued before a local court.
On 15 May 2007, RTC Br. 145 issued an Omnibus Order denying
2. Whether the Contract Agreement is an executive agreement,
CNMEG’s Motion to Dismiss and setting the case for summary hearing to
such that it cannot be questioned by or before a local court.
determine whether the injunctive reliefs prayed for should be
issued.16 CNMEG then filed a Motion for Reconsideration,17 which was First issue: Whether CNMEG is entitled to immunity
denied by the trial court in an Order dated 10 March 2008. 18 Thus,
CNMEG filed before the CA a Petition for Certiorari with Prayer for the This Court explained the doctrine of sovereign immunity in Holy See v.
Issuance of TRO and/or Writ of Preliminary Injunction dated 4 April Rosario,24 to wit:
2008.19
There are two conflicting concepts of sovereign immunity, each widely
In the assailed Decision dated 30 September 2008, the appellate court held and firmly established. According to the classical or absolute
dismissed the Petition for Certiorari.20 Subsequently, CNMEG filed a theory, a sovereign cannot, without its consent, be made a
Motion for Reconsideration,21 which was denied by the CA in a Resolution respondent in the courts of another sovereign. According to the
dated 5 December 2008.22 Thus, CNMEG filed the instant Petition for 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 The parties executed the Contract Agreement for the purpose of
gestionis. (Emphasis supplied; citations omitted.) constructing the Luzon Railways, viz:29
xxx xxx xxx WHEREAS the Employer (Northrail) desired to construct the railways
form Caloocan to Malolos, section I, Phase I of Philippine North Luzon
The restrictive theory came about because of the entry of sovereign Railways Project (hereinafter referred to as THE PROJECT);
states into purely commercial activities remotely connected with the
discharge of governmental functions. This is particularly true with AND WHEREAS the Contractor has offered to provide the Project on
respect to the Communist states which took control of nationalized Turnkey basis, including design, manufacturing, supply, construction,
business activities and international trading. commissioning, and training of the Employer’s personnel;
In JUSMAG v. National Labor Relations Commission, 25 this Court affirmed AND WHEREAS the Loan Agreement of the Preferential Buyer’s Credit
the Philippines’ adherence to the restrictive theory as follows: between Export-Import Bank of China and Department of Finance of
Republic of the Philippines;
The doctrine of state immunity from suit has undergone further
metamorphosis. The view evolved that the existence of a contract does NOW, THEREFORE, the parties agree to sign this Contract for the
not, per se, mean that sovereign states may, at all times, be sued in Implementation of the Project.
local courts. The complexity of relationships between sovereign states,
brought about by their increasing commercial activities, mothered a The above-cited portion of the Contract Agreement, however, does not
more restrictive application of the doctrine. on its own reveal whether the construction of the Luzon railways was
meant to be a proprietary endeavor. In order to fully understand the
xxx xxx xxx intention behind and the purpose of the entire undertaking, the Contract
Agreement must not be read in isolation. Instead, it must be construed
As it stands now, the application of the doctrine of immunity from suit in conjunction with three other documents executed in relation to the
has been restricted to sovereign or governmental activities (jure Northrail Project, namely: (a) the Memorandum of Understanding dated
imperii). The mantle of state immunity cannot be extended to 14 September 2002 between Northrail and CNMEG;30 (b) the letter of
commercial, private and proprietary acts (jure gestionis).26 (Emphasis Amb. Wang dated 1 October 2003 addressed to Sec. Camacho; 31 and (c)
supplied.) the Loan Agreement.32
Since the Philippines adheres to the restrictive theory, it is crucial to 1. Memorandum of Understanding dated 14 September 2002
ascertain the legal nature of the act involved – whether the entity
claiming immunity performs governmental, as opposed to proprietary, The Memorandum of Understanding dated 14 September 2002 shows
functions. As held in United States of America v. Ruiz –27 that CNMEG sought the construction of the Luzon Railways as a
proprietary venture. The relevant parts thereof read:
The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign WHEREAS, CNMEG has the financial capability, professional competence
sovereign, its commercial activities or economic affairs. Stated and technical expertise to assess the state of the [Main Line North
differently, a State may be said to have descended to the level of an (MLN)] and recommend implementation plans as well as undertake its
individual and can thus be deemed to have tacitly given its consent to rehabilitation and/or modernization;
be sued only when it enters into business contracts. It does not apply
where the contract relates to the exercise of its sovereign functions. 28 WHEREAS, CNMEG has expressed interest in the rehabilitation and/or
modernization of the MLN from Metro Manila to San Fernando, La Union
A. CNMEG is engaged in a proprietary activity. passing through the provinces of Bulacan, Pampanga, Tarlac, Pangasinan
and La Union (the ‘Project’);
A threshold question that must be answered is whether CNMEG performs
governmental or proprietary functions. A thorough examination of the WHEREAS, the NORTHRAIL CORP. welcomes CNMEG’s proposal to
basic facts of the case would show that CNMEG is engaged in a undertake a Feasibility Study (the "Study") at no cost to NORTHRAIL
proprietary activity. CORP.;
WHEREAS, the NORTHRAIL CORP. also welcomes CNMEG’s interest in corporation within the People’s Republic of China which initiated
undertaking the Project with Supplier’s Credit and intends to employ our Government’s involvement in the Project.
CNMEG as the Contractor for the Project subject to compliance with
Philippine and Chinese laws, rules and regulations for the selection of a 3. Among the various state corporations of the People’s Republic
contractor; of China, only CNMEG has the advantage of being fully familiar
with the current requirements of the Northrail Project having
WHEREAS, the NORTHRAIL CORP. considers CNMEG’s proposal already accomplished a Feasibility Study which was used as
advantageous to the Government of the Republic of the Philippines and inputs by the North Luzon Railways Corporation in the approvals
has therefore agreed to assist CNMEG in the conduct of the aforesaid (sic) process required by the Republic of the
Study; Philippines.34 (Emphasis supplied.)
xxx xxx xxx Thus, the desire of CNMEG to secure the Northrail Project was in the
ordinary or regular course of its business as a global construction
II. APPROVAL PROCESS company. The implementation of the Northrail Project was intended to
2.1 As soon as possible after completion and presentation of the Study generate profit for CNMEG, with the Contract Agreement placing a
in accordance with Paragraphs 1.3 and 1.4 above and in compliance with contract price of USD 421,050,000 for the venture.35 The use of the term
necessary governmental laws, rules, regulations and procedures "state corporation" to refer to CNMEG was only descriptive of its nature
required from both parties, the parties shall commence the preparation as a government-owned and/or -controlled corporation, and its
and negotiation of the terms and conditions of the Contract (the assignment as the Primary Contractor did not imply that it was acting on
"Contract") to be entered into between them on the implementation of behalf of China in the performance of the latter’s sovereign functions. To
the Project. The parties shall use their best endeavors to formulate and imply otherwise would result in an absurd situation, in which all Chinese
finalize a Contract with a view to signing the Contract within one corporations owned by the state would be automatically considered as
hundred twenty (120) days from CNMEG’s presentation of the performing governmental activities, even if they are clearly engaged in
Study.33 (Emphasis supplied) commercial or proprietary pursuits.

Clearly, it was CNMEG that initiated the undertaking, and not the 3. The Loan Agreement
Chinese government. The Feasibility Study was conducted not because CNMEG claims immunity on the ground that the Aug 30 MOU on the
of any diplomatic gratuity from or exercise of sovereign functions by the financing of the Northrail Project was signed by the Philippine and
Chinese government, but was plainly a business strategy employed by Chinese governments, and its assignment as the Primary Contractor
CNMEG with a view to securing this commercial enterprise. meant that it was bound to perform a governmental function on behalf
2. Letter dated 1 October 2003 of China. However, the Loan Agreement, which originated from the same
Aug 30 MOU, belies this reasoning, viz:
That CNMEG, and not the Chinese government, initiated the Northrail
Project was confirmed by Amb. Wang in his letter dated 1 October 2003, Article 11. xxx (j) Commercial Activity The execution and delivery of this
thus: Agreement by the Borrower constitute, and the Borrower’s performance
of and compliance with its obligations under this Agreement will
1. CNMEG has the proven competence and capability to constitute, private and commercial acts done and performed for
undertake the Project as evidenced by the ranking of 42 given by commercial purposes under the laws of the Republic of the
the ENR among 225 global construction companies. Philippines and neither the Borrower nor any of its assets is
entitled to any immunity or privilege (sovereign or otherwise)
2. CNMEG already signed an MOU with the North Luzon Railways from suit, execution or any other legal process with respect to
Corporation last September 14, 2000 during the visit of Chairman its obligations under this Agreement, as the case may be, in any
Li Peng. Such being the case, they have already established an jurisdiction. Notwithstanding the foregoing, the Borrower does not
initial working relationship with your North Luzon Railways waive any immunity with respect of its assets which are (i) used by a
Corporation. This would categorize CNMEG as the state diplomatic or consular mission of the Borrower and (ii) assets of a
military character and under control of a military authority or defense Admittedly, the Loan Agreement was entered into between EXIM Bank
agency and (iii) located in the Philippines and dedicated to public or and the Philippine government, while the Contract Agreement was
governmental use (as distinguished from patrimonial assets or assets between Northrail and CNMEG. Although the Contract Agreement is
dedicated to commercial use). (Emphasis supplied.) silent on the classification of the legal nature of the transaction, the
foregoing provisions of the Loan Agreement, which is an inextricable
(k) Proceedings to Enforce Agreement In any proceeding in the Republic part of the entire undertaking, nonetheless reveal the intention of the
of the Philippines to enforce this Agreement, the choice of the laws of parties to the Northrail Project to classify the whole venture as
the People’s Republic of China as the governing law hereof will be commercial or proprietary in character.
recognized and such law will be applied. The waiver of immunity by the
Borrower, the irrevocable submissions of the Borrower to the non- Thus, piecing together the content and tenor of the Contract Agreement,
exclusive jurisdiction of the courts of the People’s Republic of China and the Memorandum of Understanding dated 14 September 2002, Amb.
the appointment of the Borrower’s Chinese Process Agent is legal, valid, Wang’s letter dated 1 October 2003, and the Loan Agreement would
binding and enforceable and any judgment obtained in the People’s reveal the desire of CNMEG to construct the Luzon Railways in pursuit of
Republic of China will be if introduced, evidence for enforcement in any a purely commercial activity performed in the ordinary course of its
proceedings against the Borrower and its assets in the Republic of the business.
Philippines provided that (a) the court rendering judgment had
jurisdiction over the subject matter of the action in accordance with its B. CNMEG failed to adduce evidence that it is immune from suit under
jurisdictional rules, (b) the Republic had notice of the proceedings, (c) Chinese law.
the judgment of the court was not obtained through collusion or fraud, Even assuming arguendo that CNMEG performs governmental functions,
and (d) such judgment was not based on a clear mistake of fact or law. 36 such claim does not automatically vest it with immunity. This view finds
Further, the Loan Agreement likewise contains this express waiver of support in Malong v. Philippine National Railways, in which this Court
immunity: held that "(i)mmunity from suit is determined by the character of the
objects for which the entity was organized."39
15.5 Waiver of Immunity The Borrower irrevocably and unconditionally
waives, any immunity to which it or its property may at any time be or In this regard, this Court’s ruling in Deutsche Gesellschaft Für Technische
become entitled, whether characterized as sovereign immunity or Zusammenarbeit (GTZ) v. CA40 must be examined. In Deutsche
otherwise, from any suit, judgment, service of process upon it or any Gesellschaft, Germany and the Philippines entered into a Technical
agent, execution on judgment, set-off, attachment prior to judgment, Cooperation Agreement, pursuant to which both signed an arrangement
attachment in aid of execution to which it or its assets may be entitled in promoting the Social Health Insurance–Networking and Empowerment
any legal action or proceedings with respect to this Agreement or any of (SHINE) project. The two governments named their respective
the transactions contemplated hereby or hereunder. Notwithstanding implementing organizations: the Department of Health (DOH) and the
the foregoing, the Borrower does not waive any immunity in respect of Philippine Health Insurance Corporation (PHIC) for the Philippines, and
its assets which are (i) used by a diplomatic or consular mission of the GTZ for the implementation of Germany’s contributions. In ruling that
Borrower, (ii) assets of a military character and under control of a GTZ was not immune from suit, this Court held:
military authority or defense agency and (iii) located in the Philippines The arguments raised by GTZ and the [Office of the Solicitor General
and dedicated to a public or governmental use (as distinguished from (OSG)] are rooted in several indisputable facts. The SHINE project was
patrimonial assets or assets dedicated to commercial use).37 implemented pursuant to the bilateral agreements between the
Thus, despite petitioner’s claim that the EXIM Bank extended financial Philippine and German governments. GTZ was tasked, under the 1991
assistance to Northrail because the bank was mandated by the Chinese agreement, with the implementation of the contributions of the German
government, and not because of any motivation to do business in the government. The activities performed by GTZ pertaining to the SHINE
Philippines,38 it is clear from the foregoing provisions that the Northrail project are governmental in nature, related as they are to the promotion
Project was a purely commercial transaction. of health insurance in the Philippines. The fact that GTZ entered into
employment contracts with the private respondents did not disqualify it
from invoking immunity from suit, as held in cases such as Holy See v. invoke immunity from suit, owing to provisions in their charters
Rosario, Jr., which set forth what remains valid doctrine: manifesting their consent to be sued.
Certainly, the mere entering into a contract by a foreign state with a xxx xxx xxx
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 It is useful to note that on the part of the Philippine government, it had
engaged in the activity in the regular course of business. If the foreign designated two entities, the Department of Health and the Philippine
state is not engaged regularly in a business or trade, the particular act Health Insurance Corporation (PHIC), as the implementing agencies in
or transaction must then be tested by its nature. If the act is in pursuit of behalf of the Philippines. The PHIC was established under Republic Act
a sovereign activity, or an incident thereof, then it is an act jure imperii, No. 7875, Section 16 (g) of which grants the corporation the power "to
especially when it is not undertaken for gain or profit. sue and be sued in court." Applying the previously cited jurisprudence,
PHIC would not enjoy immunity from suit even in the performance of its
Beyond dispute is the tenability of the comment points (sic) raised by functions connected with SHINE, however, (sic) governmental in nature
GTZ and the OSG that GTZ was not performing proprietary functions as (sic) they may be.
notwithstanding its entry into the particular employment contracts. Yet
there is an equally fundamental premise which GTZ and the OSG fail to Is GTZ an incorporated agency of the German government?
address, namely: Is GTZ, by conception, able to enjoy the Federal There is some mystery surrounding that question. Neither GTZ
Republic’s immunity from suit? nor the OSG go beyond the claim that petitioner is "the
implementing agency of the Government of the Federal Republic
The principle of state immunity from suit, whether a local state or a of Germany." On the other hand, private respondents asserted before
foreign state, is reflected in Section 9, Article XVI of the Constitution, the Labor Arbiter that GTZ was "a private corporation engaged in the
which states that "the State may not be sued without its consent." Who implementation of development projects." The Labor Arbiter accepted
or what consists of "the State"? For one, the doctrine is available to that claim in his Order denying the Motion to Dismiss, though he was
foreign States insofar as they are sought to be sued in the courts of the silent on that point in his Decision. Nevertheless, private respondents
local State, necessary as it is to avoid "unduly vexing the peace of argue in their Comment that the finding that GTZ was a private
nations." corporation "was never controverted, and is therefore deemed
admitted." In its Reply, GTZ controverts that finding, saying that it is a
If the instant suit had been brought directly against the Federal Republic matter of public knowledge that the status of petitioner GTZ is that of
of Germany, there would be no doubt that it is a suit brought against a the "implementing agency," and not that of a private corporation.
State, and the only necessary inquiry is whether said State had
consented to be sued. However, the present suit was brought against In truth, private respondents were unable to adduce any evidence to
GTZ. It is necessary for us to understand what precisely are the substantiate their claim that GTZ was a "private corporation," and the
parameters of the legal personality of GTZ. Labor Arbiter acted rashly in accepting such claim without explanation.
But neither has GTZ supplied any evidence defining its legal
Counsel for GTZ characterizes GTZ as "the implementing agency nature beyond that of the bare descriptive "implementing
of the Government of the Federal Republic of Germany," a agency." There is no doubt that the 1991 Agreement designated
depiction similarly adopted by the OSG. Assuming that the GTZ as the "implementing agency" in behalf of the German
characterization is correct, it does not automatically invest GTZ government. Yet the catch is that such term has no precise
with the ability to invoke State immunity from suit. The definition that is responsive to our concerns. Inherently, an
distinction lies in whether the agency is incorporated or unincorporated. agent acts in behalf of a principal, and the GTZ can be said to
xxx xxx xxx act in behalf of the German state. But that is as far as
"implementing agency" could take us. The term by itself does
State immunity from suit may be waived by general or special law. The not supply whether GTZ is incorporated or unincorporated,
special law can take the form of the original charter of the incorporated whether it is owned by the German state or by private interests,
government agency. Jurisprudence is replete with examples of whether it has juridical personality independent of the German
incorporated government agencies which were ruled not entitled to government or none at all.
 xxx xxx xxx In Holy See,42 this Court reiterated the oft-cited doctrine that the
determination by the Executive that an entity is entitled to sovereign or
Again, we are uncertain of the corresponding legal implications diplomatic immunity is a political question conclusive upon the courts, to
under German law surrounding "a private company owned by wit:
the Federal Republic of Germany." Yet taking the description on
face value, the apparent equivalent under Philippine law is that In Public International Law, when a state or international agency wishes
of a corporation organized under the Corporation Code but to plead sovereign or diplomatic immunity in a foreign court, it requests
owned by the Philippine government, or a government-owned or the Foreign Office of the state where it is sued to convey to the court
controlled corporation without original charter. And it bears that said defendant is entitled to immunity.
notice that Section 36 of the Corporate Code states that
"[e]very corporation incorporated under this Code has the xxx xxx xxx
power and capacity x x x to sue and be sued in its corporate In the Philippines, the practice is for the foreign government or the
name." international organization to first secure an executive endorsement of its
It is entirely possible that under German law, an entity such as GTZ or claim of sovereign or diplomatic immunity. But how the Philippine
particularly GTZ itself has not been vested or has been specifically Foreign Office conveys its endorsement to the courts varies.
deprived the power and capacity to sue and/or be sued. Yet in the In International Catholic Migration Commission v. Calleja, 190 SCRA 130
proceedings below and before this Court, GTZ has failed to establish (1990), the Secretary of Foreign Affairs just sent a letter directly to the
that under German law, it has not consented to be sued despite Secretary of Labor and Employment, informing the latter that the
it being owned by the Federal Republic of Germany. We adhere respondent-employer could not be sued because it enjoyed diplomatic
to the rule that in the absence of evidence to the contrary, immunity. In World Health Organization v. Aquino, 48 SCRA 242 (1972),
foreign laws on a particular subject are presumed to be the the Secretary of Foreign Affairs sent the trial court a telegram to that
same as those of the Philippines, and following the most effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the
intelligent assumption we can gather, GTZ is akin to a Secretary of Foreign Affairs to request the Solicitor General to make, in
governmental owned or controlled corporation without original behalf of the Commander of the United States Naval Base at Olongapo
charter which, by virtue of the Corporation Code, has expressly City, Zambales, a "suggestion" to respondent Judge. The Solicitor
consented to be sued. At the very least, like the Labor Arbiter and the General embodied the "suggestion" in a Manifestation and Memorandum
Court of Appeals, this Court has no basis in fact to conclude or presume as amicus curiae.
that GTZ enjoys immunity from suit.41 (Emphasis supplied.) In the case at bench, the Department of Foreign Affairs, through the
Applying the foregoing ruling to the case at bar, it is readily apparent Office of Legal Affairs moved with this Court to be allowed to intervene
that CNMEG cannot claim immunity from suit, even if it contends that it on the side of petitioner. The Court allowed the said Department to file
performs governmental functions. Its designation as the Primary its memorandum in support of petitioner’s claim of sovereign immunity.
Contractor does not automatically grant it immunity, just as the term In some cases, the defense of sovereign immunity was submitted
"implementing agency" has no precise definition for purposes of directly to the local courts by the respondents through their private
ascertaining whether GTZ was immune from suit. Although CNMEG counsels (Raquiza v. Bradford, 75 Phil. 50 [1945]; Miquiabas v.
claims to be a government-owned corporation, it failed to adduce Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of
evidence that it has not consented to be sued under Chinese law. Thus, America v. Guinto, 182 SCRA 644 [1990] and companion cases). In cases
following this Court’s ruling in Deutsche Gesellschaft, in the absence of where the foreign states bypass the Foreign Office, the courts can
evidence to the contrary, CNMEG is to be presumed to be a government- inquire into the facts and make their own determination as to the nature
owned and -controlled corporation without an original charter. As a of the acts and transactions involved.43 (Emphasis supplied.)
result, it has the capacity to sue and be sued under Section 36 of the
Corporation Code. The question now is whether any agency of the Executive Branch can
make a determination of immunity from suit, which may be considered
C. CNMEG failed to present a certification from the Department of as conclusive upon the courts. This Court, in Department of Foreign
Foreign Affairs.
Affairs (DFA) v. National Labor Relations Commission is it manifested that the DFA has endorsed GTZ’s claim, or that the OSG
(NLRC),44 emphasized the DFA’s competence and authority to provide had solicited the DFA’s views on the issue. The arguments raised by the
such necessary determination, to wit: OSG are virtually the same as the arguments raised by GTZ without any
indication of any special and distinct perspective maintained by the
The DFA’s function includes, among its other mandates, the Philippine government on the issue. The Comment filed by the OSG does
determination of persons and institutions covered by diplomatic not inspire the same degree of confidence as a certification from the DFA
immunities, a determination which, when challenge, (sic) entitles it to would have elicited.46 (Emphasis supplied.)
seek relief from the court so as not to seriously impair the conduct of the
country's foreign relations. The DFA must be allowed to plead its case In the case at bar, CNMEG offers the Certification executed by the
whenever necessary or advisable to enable it to help keep the credibility Economic and Commercial Office of the Embassy of the People’s
of the Philippine government before the international community. When Republic of China, stating that the Northrail Project is in pursuit of a
international agreements are concluded, the parties thereto are deemed sovereign activity.47 Surely, this is not the kind of certification that can
to have likewise accepted the responsibility of seeing to it that their establish CNMEG’s entitlement to immunity from suit, as Holy See
agreements are duly regarded. In our country, this task falls principally unequivocally refers to the determination of the "Foreign Office of the
of (sic) the DFA as being the highest executive department with the state where it is sued."
competence and authority to so act in this aspect of the international
arena.45 (Emphasis supplied.) Further, CNMEG also claims that its immunity from suit has the
executive endorsement of both the OSG and the Office of the
Further, the fact that this authority is exclusive to the DFA was also Government Corporate Counsel (OGCC), which must be respected by the
emphasized in this Court’s ruling in Deutsche Gesellschaft: courts. However, as expressly enunciated in Deutsche Gesellschaft, this
determination by the OSG, or by the OGCC for that matter, does not
It is to be recalled that the Labor Arbiter, in both of his rulings, noted inspire the same degree of confidence as a DFA certification. Even with a
that it was imperative for petitioners to secure from the Department of DFA certification, however, it must be remembered that this Court is not
Foreign Affairs "a certification of respondents’ diplomatic status and precluded from making an inquiry into the intrinsic correctness of such
entitlement to diplomatic privileges including immunity from suits." The certification.
requirement might not necessarily be imperative. However, had GTZ
obtained such certification from the DFA, it would have provided factual D. An agreement to submit any dispute to arbitration may be construed
basis for its claim of immunity that would, at the very least, establish a as an implicit waiver of immunity from suit.
disputable evidentiary presumption that the foreign party is indeed
immune which the opposing party will have to overcome with its own In the United States, the Foreign Sovereign Immunities Act of 1976
factual evidence. We do not see why GTZ could not have secured such provides for a waiver by implication of state immunity. In the said law,
certification or endorsement from the DFA for purposes of this case. the agreement to submit disputes to arbitration in a foreign country is
Certainly, it would have been highly prudential for GTZ to obtain the construed as an implicit waiver of immunity from suit. Although there is
same after the Labor Arbiter had denied the motion to dismiss. Still, no similar law in the Philippines, there is reason to apply the legal
even at this juncture, we do not see any evidence that the DFA, the reasoning behind the waiver in this case.
office of the executive branch in charge of our diplomatic relations, has The Conditions of Contract,48 which is an integral part of the Contract
indeed endorsed GTZ’s claim of immunity. It may be possible that GTZ Agreement,49 states:
tried, but failed to secure such certification, due to the same concerns
that we have discussed herein. 33. SETTLEMENT OF DISPUTES AND ARBITRATION
Would the fact that the Solicitor General has endorsed GTZ’s claim of 33.1. Amicable Settlement
State’s immunity from suit before this Court sufficiently substitute for
the DFA certification? Note that the rule in public international law Both parties shall attempt to amicably settle all disputes or
quoted in Holy See referred to endorsement by the Foreign Office of the controversies arising from this Contract before the commencement of
State where the suit is filed, such foreign office in the Philippines being arbitration.
the Department of Foreign Affairs. Nowhere in the Comment of the OSG
33.2. Arbitration nevertheless concur: (a) the agreement must be between states; (b) it
must be written; and (c) it must governed by international law. The first
All disputes or controversies arising from this Contract which cannot be and the third requisites do not obtain in the case at bar.
settled between the Employer and the Contractor shall be submitted to
arbitration in accordance with the UNCITRAL Arbitration Rules at present A. CNMEG is neither a government nor a government agency.
in force and as may be amended by the rest of this Clause. The
appointing authority shall be Hong Kong International Arbitration Center. The Contract Agreement was not concluded between the Philippines and
The place of arbitration shall be in Hong Kong at Hong Kong International China, but between Northrail and CNMEG. 51 By the terms of the Contract
Arbitration Center (HKIAC). Agreement, Northrail is a government-owned or -controlled corporation,
while CNMEG is a corporation duly organized and created under the laws
Under the above provisions, if any dispute arises between Northrail and of the People’s Republic of China.52 Thus, both Northrail and CNMEG
CNMEG, both parties are bound to submit the matter to the HKIAC for entered into the Contract Agreement as entities with personalities
arbitration. In case the HKIAC makes an arbitral award in favor of distinct and separate from the Philippine and Chinese governments,
Northrail, its enforcement in the Philippines would be subject to the respectively.
Special Rules on Alternative Dispute Resolution (Special Rules). Rule 13
thereof provides for the Recognition and Enforcement of a Foreign Neither can it be said that CNMEG acted as agent of the Chinese
Arbitral Award. Under Rules 13.2 and 13.3 of the Special Rules, the party government. As previously discussed, the fact that Amb. Wang, in his
to arbitration wishing to have an arbitral award recognized and enforced letter dated 1 October 2003,53 described CNMEG as a "state corporation"
in the Philippines must petition the proper regional trial court (a) where and declared its designation as the Primary Contractor in the Northrail
the assets to be attached or levied upon is located; (b) where the acts to Project did not mean it was to perform sovereign functions on behalf of
be enjoined are being performed; (c) in the principal place of business in China. That label was only descriptive of its nature as a state-owned
the Philippines of any of the parties; (d) if any of the parties is an corporation, and did not preclude it from engaging in purely commercial
individual, where any of those individuals resides; or (e) in the National or proprietary ventures.
Capital Judicial Region. B. The Contract Agreement is to be governed by Philippine law.
From all the foregoing, it is clear that CNMEG has agreed that it will not Article 2 of the Conditions of Contract,54 which under Article 1.1 of the
be afforded immunity from suit. Thus, the courts have the competence Contract Agreement is an integral part of the latter, states:
and jurisdiction to ascertain the validity of the Contract Agreement.
APPLICABLE LAW AND GOVERNING LANGUAGE
Second issue: Whether the Contract Agreement is an executive
agreement The contract shall in all respects be read and construed in accordance
with the laws of the Philippines.
Article 2(1) of the Vienna Convention on the Law of Treaties (Vienna
Convention) defines a treaty as follows: The contract shall be written in English language. All correspondence
and other documents pertaining to the Contract which are exchanged by
[A]n international agreement concluded between States in written form the parties shall be written in English language.
and governed by international law, whether embodied in a single
instrument or in two or more related instruments and whatever its Since the Contract Agreement explicitly provides that Philippine law
particular designation. shall be applicable, the parties have effectively conceded that their
rights and obligations thereunder are not governed by international law.
In Bayan Muna v. Romulo, this Court held that an executive agreement is
similar to a treaty, except that the former (a) does not require legislative It is therefore clear from the foregoing reasons that the Contract
concurrence; (b) is usually less formal; and (c) deals with a narrower Agreement does not partake of the nature of an executive agreement. It
range of subject matters.50 is merely an ordinary commercial contract that can be questioned before
the local courts.
Despite these differences, to be considered an executive agreement, the
following three requisites provided under the Vienna Convention must
WHEREFORE, the instant Petition is DENIED. Petitioner China National ROBERTO, all surnamed FONTANILLA, and the Honorable COURT
Machinery & Equipment Corp. (Group) is not entitled to immunity from OF APPEALS, respondents.
suit, and the Contract Agreement is not an executive agreement.
CNMEG’s prayer for the issuance of a TRO and/or Writ of Preliminary Julian M. Armas, Assistant Provincial Fiscal for petitioners.
Injunction is DENIED for being moot and academic. This case is
REMANDED to the Regional Trial Court of Makati, Branch 145, for further Isidro L. Padilla for respondents.
proceedings as regards the validity of the contracts subject of Civil Case
No. 06-203.
No pronouncement on costs of suit. MUÑOZ PALMA, J.:

SO ORDERED. These Petitions for review present the issue of whether or not the
MARIA LOURDES P. A. SERENO celebration of a town fiesta authorized by a municipal council under Sec.
Associate Justice 2282 of the Municipal Law as embodied in the Revised Administrative
Code is a governmental or a corporate or proprietary function of the
WE CONCUR: municipality.

A resolution of that issue will lead to another, viz the civil liability for
Republic of the Philippines damages of the Municipality of Malasiqui, and the members of the
SUPREME COURT Municipal Council of Malasiqui, province of Pangasinan, for a death which
Manila occurred during the celebration of the town fiesta on January 22, 1959,
and which was attributed to the negligence of the municipality and its
FIRST DIVISION council members.

G.R. No. L-29993 October 23, 1978 The following facts are not in dispute:

LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL DE On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan,
GUZMAN, ALFONSO R. MAGSANOC, JESUS MACARANAS, MAXIMO passed Resolution No. 159 whereby "it resolved to manage the 1959
MANANGAN, FIDEL MONTEMAYOR, MELCHOR VIRAY, RAMON Malasiqui town fiesta celebration on January 21, 22, and 23, 1959."
TULAGAN, all Members of the Municipal Council of Malasiqui in Resolution No. 182 was also passed creating the "1959 Malasiqui 'Town
1959, Malasiqui, Pangasinan, petitioners, Fiesta Executive Committee" which in turn organized a sub-committee
vs. on entertainment and stage, with Jose Macaraeg as Chairman. the
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, council appropriated the amount of P100.00 for the construction of 2
ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA, REMEDIOS and stages, one for the "zarzuela" and another for the cancionan Jose
ROBERTO, all surnamed FONTANILLA, and THE HONORABLE Macaraeg supervised the construction of the stage and as constructed
COURT OF APPEALS, respondents. the stage for the "zarzuela" was "5-½ meters by 8 meters in size, had a
wooden floor high at the rear and was supported by 24 bamboo posts —
4 in a row in front, 4 in the rear and 5 on each side — with bamboo
G.R. No. L-30183 October 23, 1978
braces." 1
MUNICIPALITY OF MALASIQUI, petitioner,
The "zarzuela" entitled "Midas Extravaganza" was donated by an
vs.
association of Malasiqui employees of the Manila Railroad Company in
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO,
Caloocan, Rizal. The troupe arrived in the evening of January 22 for the
ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA, REMEDIOS and
performance and one of the members of the group was Vicente
Fontanilla. The program started at about 10:15 o'clock that evening with heirs of Vicente Fontanilla the sums of P12,000.00 by way of moral and
some speeches, and many persons went up the stage. The "zarzuela" actual damages: P1200.00 its attorney's fees; and the costs. 4
then began but before the dramatic part of the play was reached, the
stage collapsed and Vicente Fontanilla who was at the rear of the stage The case is now before Us on various assignments of errors all of which
was pinned underneath. Fontanilia was taken to tile San Carlos General center on the proposition stated at the sentence of this Opinion and
Hospital where he died in the afternoon of the following day. which We repeat:

The heirs of Vicente Fontanilia filed a complaint with the Court of First Is the celebration of a town fiesta an undertaking in the excercise of a
Instance of Manila on September 11, 1959 to recover damages. Named municipality's governmental or public function or is it or a private or
party-defendants were the Municipality of Malasiqui, the Municipal proprietary character?
Council of Malasiqui and all the individual members of the Municipal
Council in 1959. 1. Under Philippine laws municipalities are political bodies corporate and
as such ag endowed with the faculties of municipal corporations to be
Answering the complaint defendant municipality invoked inter alia the exercised by and through their respective municipal governments in
principal defense that as a legally and duly organized public corporation conformity with law, and in their proper corporate name, they may inter
it performs sovereign functions and the holding of a town fiesta was an alia sue and be sued, and contract and be contracted with. 5
exercise of its governmental functions from which no liability can arise to
answer for the negligence of any of its agents. The powers of a municipality are twofold in character public,
governmental or political on the one hand, and corporate, private, or
The defendant councilors inturn maintained that they merely acted as proprietary on the other. Governmental powers are those exercised by
agents of the municipality in carrying out the municipal ordinance the corporation in administering the powers of the state and promoting
providing for the management of the town fiesta celebration and as such the public welfare and they include the legislative, judicial public, and
they are likewise not liable for damages as the undertaking was not one political Municipal powers on the other hand are exercised for the special
for profit; furthermore, they had exercised due care and diligence in benefit and advantage of the community and include those which are
implementing the municipal ordinance. 2 ministerial private and corporate. 6

After trial, the Presiding Judge, Hon. Gregorio T. Lantin narrowed the As to when a certain activity is governmental and when proprietary or
issue to whether or not the defendants exercised due diligence 'm the private, that is generally a difficult matter to determine. The evolution of
construction of the stage. From his findings he arrived at the conclusion the municipal law in American Jurisprudence, for instance, has shown
that the Executive Committee appointed by the municipal council had that; none of the tests which have evolved and are stated in textbooks
exercised due diligence and care like a good father of the family in have set down a conclusive principle or rule, so that each case will have
selecting a competent man to construct a stage strong enough for the to be determined on the basis of attending circumstances.
occasion and that if it collapsed that was due to forces beyond the
control of the committee on entertainment, consequently, the In McQuillin on Municipal Corporations, the rule is stated thus: "A
defendants were not liable for damages for the death of Vicente municipal corporation proper has ... a public character as regards the
Fontanilla. The complaint was accordingly dismissed in a decision dated state at large insofar as it is its agent in government, and private (so-
July 10, 1962. 3 called) insofar as it is to promote local necessities and conveniences for
its own community. 7
The Fontanillas appealed to the Court of Appeals. In a decision
Promulgated on October 31, 1968, the Court of Appeals through its Another statement of the test is given in City of Kokomo v. Loy, decided
Fourth Division composed at the time of Justices Salvador V. Esguerra, by the Supreme Court of Indiana in 1916, thus:
Nicasio A. Yatco and Eulogio S. Serrano reversed the trial court's decision
and ordered all the defendants-appellees to pay jointly and severally the
 Municipal corporations exist in a dual capacity, and their tragic and deplorable it may be, the death of Palafox imposed on the
functions are two fold. In one they exercise the right province no duty to pay monetary consideration. 12
springing from sovereignty, and while in the performance
of the duties pertaining thereto, their acts are political and With respect to proprietary functions, the settled rule is that a municipal
governmental Their officers and agents in such capacity, corporation can be held liable to third persons ex contract 13 or ex
though elected or appointed by the are nevertheless delicto. 14
public functionaries performing a public service, and as
such they are officers, agents, and servants of the state. Municipal corporations are subject to be sued upon
In the other capacity the municipalities exercise a private. contracts and in tort. ...
proprietary or corporate right, arising from their existence
as legal persons and not as public agencies. Their officers
and agents in the performance of such functions act in xxx xxx xxx
behalf of the municipalities in their corporate or in.
individual capacity, and not for the state or sovereign The rule of law is a general one, that the superior or
power. (112 N. E 994-995) employer must answer civilly for the negligence or want of
skill of its agent or servant in the course or fine of his
In the early Philippine case of Mendoza v. de Leon 1916, the Supreme employment, by which another, who is free from
Court, through Justice Grant T. Trent, relying mainly on American contributory fault, is injured. Municipal corporations under
Jurisprudence classified certain activities of the municipality as the conditions herein stated, fall within the operation of
governmental, e.g.: regulations against fire, disease, preservation of this rule of law, and are liable, accordingly, to civil actions
public peace, maintenance of municipal prisons, establishment of for damages when the requisite elements of liability co-
schools, post-offices, etc. while the following are corporate or proprietary exist. ... (Dillon on Municipal Corporations, 5th ed. Sec.
in character, viz: municipal waterwork, slaughter houses, markets, 1610,1647, cited in Mendoza v. de Leon, supra. 514)
stables, bathing establishments, wharves, ferries, and
fisheries. 8 Maintenance of parks, golf courses, cemeteries and airports 3. Coming to the cam before Us, and applying the general tests given
among others, are also recognized as municipal or city activities of a above, We hold that the ho of the town fiesta in 1959 by the
proprietary character. 9 municipality of Malsiqui Pangasinan was an exercise of a private or
proprietary function of the municipality.
2. This distinction of powers becomes important for purposes of
determining the liability of the municipality for the acts of its agents Section 2282 of the Chatter on Municipal Law of the Revised
which result in an injury to third persons. Administrative Code provides:

If the injury is caused in the course of the performance of a Section 2282. Celebration of fiesta. — fiesta may be held
governmental function or duty no recovery, as a rule, can be. had from in each municipality not oftener than once a year upon a
the municipality unless there is an existing statute on the matter, 10 nor date fixed by the municipal council A fiesta s not be held
from its officers, so long as they performed their duties honestly and in upon any other date than that lawfully fixed therefor,
good faith or that they did not act wantonly and except when, for weighty reasons, such as typhoons,
maliciously. 11 In Palafox, et al., v. Province of Ilocos Norte, et al., 1958, a foundations, earthquakes, epidemics, or other public ties,
truck driver employed by the provincial government of Ilocos Norte ran the fiesta cannot be hold in the date fixed in which case it
over Proceto Palafox in the course of his work at the construction of a may be held at a later date in the same year, by
road. The Supreme Court in affirming the trial court's dismissal of the resolution of the council.
complaint for damages held that the province could not be made liable
because its employee was in the performance of a governmental This provision simply gives authority to the municipality to accelebrate a
function — the construction and maintenance of roads — and however yearly fiesta but it does not impose upon it a duty to observe one.
Holding a fiesta even if the purpose is to commemorate a religious or rightly so. According to said defendants, those two braces were "mother"
historical event of the town is in essence an act for the special benefit of or "principal" braces located semi-diagonally from the front ends of the
the community and not for the general welfare of the public performed stage to the front posts of the ticket booth located at the rear of the
in pursuance of a policy of the state. The mere fact that the celebration, stage and were fastened with a bamboo twine. 16 That being the case, it
as claimed was not to secure profit or gain but merely to provide becomes incredible that any person in his right mind would remove
entertainment to the town inhabitants is not a conclusive test. For those principal braces and leave the front portion of the stage practically
instance, the maintenance of parks is not a source of income for the unsuported Moreover, if that did happen, there was indeed negligence
nonetheless it is private undertaking as distinguished from the as there was lack of suspension over the use of the stage to prevent
maintenance of public schools, jails, and the like which are for public such an occurrence.
service.
At any rate, the guitarist who was pointed to by Novado as the person
As stated earlier, there can be no hard and fast rule for purposes of who removed the two bamboo braces denied having done go. The Court
determining the true nature of an undertaking or function of a of Appeals said "Amor by himself alone could not have removed the two
municipality; the surrounding circumstances of a particular case are to braces which must be about ten meters long and fastened them on top
be considered and will be decisive. The basic element, however of the stags for the curtain. The stage was only five and a half meters
beneficial to the public the undertaking may be, is that it is wide. Surely, it, would be impractical and unwieldy to use a ten meter
governmental in essence, otherwise. the function becomes private or bamboo pole, much more two poles for the stage curtain. 17
proprietary in character. Easily, no overnmental or public policy of the
state is involved in the celebration of a town fiesta. 15 The appellate court also found that the stage was not strong enough
considering that only P100.00 was appropriate for the construction of
4. It follows that under the doctrine of respondent superior, petitioner- two stages and while the floor of the "zarzuela" stage was of wooden
municipality is to be held liable for damages for the death of Vicente planks, the Post and braces used were of bamboo material We likewise
Fontanilia if that was at- tributable to the negligence of the observe that although the stage was described by the Petitioners as
municipality's officers, employees, or agents. being supported by "24" posts, nevertheless there were only 4 in front, 4
at the rear, and 5 on each side. Where were the rest?
Art. 2176, Civil Code: Whoever by act or omission causes
damage to another, there being fault or negligence, is The Court of Appeals thus concluded
obliged to pay for the damage done. . .
The court a quo itself attributed the collapse of the stage
Art. 2180, Civil Code: The obligation imposed by article to the great number of onlookers who mounted the stage.
2176 is demandable not only for one's own acts or The municipality and/or its agents had the necessary
omission, but also for those of persons for whom one is means within its command to prevent such an occurrence.
responsible. . . Having filed to take the necessary steps to maintain the
safety of the stage for the use of the participants in the
On this point, the Court of Appeals found and held that there was stage presentation prepared in connection with the
negligence. celebration of the town fiesta, particularly, in preventing
non participants or spectators from mounting and
The trial court gave credence to the testimony of Angel Novado, a accumulating on the stage which was not constructed to
witness of the defendants (now petitioners), that a member of the meet the additional weight- the defendant-appellees were
"extravaganza troupe removed two principal braces located on the front negligent and are liable for the death of Vicente Fontanilla
portion of the stage and u them to hang the screen or "telon", and that . (pp. 30-31, rollo, L-29993)
when many people went up the stage the latter collapsed. This
testimony was not believed however by respondent appellate court, and
The findings of the respondent appellate court that the facts as Sanders had the right to expect that he would be exposed to danger on
presented to it establish negligence as a matter of law and that the that occasion.
Municipality failed to exercise the due diligence of a good father of the
family, will not disturbed by Us in the absence of a clear showing of an Lastly, petitioner or appellant Municipality cannot evade ability and/or
abuse of discretion or a gross misapprehension of facts." 18 liability under the c that it was Jose Macaraeg who constructed the
stage. The municipality acting through its municipal council appointed
Liability rests on negligence which is "the want of such care as a person Macaraeg as chairman of the sub-committee on entertainment and in
of ordinary prudence would exercise under the circumstances of the charge of the construction of the "zarzuela" stage. Macaraeg acted
case." 19 merely as an agent of the Municipality. Under the doctrine of respondent
superior mentioned earlier, petitioner is responsible or liable for the
Thus, private respondents argue that the "Midas Extravaganza" which negligence of its agent acting within his assigned tasks. 22
was to be performed during the town fiesta was a "donation" offered by
an association of Malasiqui employees of the Manila Railroad Co. in ... when it is sought to render a municipal corporation liable for the act
Caloocan, and that when the Municipality of Malasiqui accepted the of servants or agents, a cardinal inquiry is, whether they are the
donation of services and constructed precisely a "zarzuela stage" for the servants or agents of the corporation. If the corporation appoints or
purpose, the participants in the stage show had the right to expect that elects them, can control them in the discharge of their duties, can
the Municipality through its "Committee on entertainment and stage" continue or remove the can hold them responsible for the manner in
would build or put up a stage or platform strong enough to sustain the which they discharge their trust, and if those duties relate to the
weight or burden of the performance and take the necessary measures exercise of corporate powers, and are for the benefit of the corporation
to insure the personal safety of the participants. 20 We agree. in its local or special interest, they may justly be regarded as its agents
or servants, and the maxim of respondent superior applies." ... (Dillon on
Quite relevant to that argument is the American case of Sanders v. City Municipal Corporations, 5th Ed., Vol IV, p. 2879)
of Long Beach, 1942, which was an action against the city for injuries
sustained from a fall when plaintiff was descending the steps of the city 5. The remaining question to be resolved centers on the liability of the
auditorium. The city was conducting a "Know your City Week" and one of municipal councilors who enacted the ordinance and created the fiesta
the features was the showing of a motion picture in the city auditorium committee.
to which the general public was invited and plaintiff Sanders was one of
those who attended. In sustaining the award for Damages in favor of The Court of Appeals held the councilors jointly and solidarity liable with
plaintiff, the District Court of Appeal, Second district, California, the municipality for damages under Article 27 of the Civil Code which
held inter alia that the "Know your City Week" was a "proprietary provides that d any person suffering ing material or moral loss because
activity" and not a "governmental one" of the city, that defendant owed a public servant or employee refuses or neglects, without just cause to
to plaintiff, an invitee the duty of exercising ordinary care for her safety, perform his official duty may file an action for damages and other relief
and plaintiff was entitled to assume that she would not be exposed to a at the latter. 23
danger (which in this case consisted of lack of sufficient illumination of
the premises) that would come to her through a violation of defendant In their Petition for review the municipal councilors allege that the Court
duty. 21 of Appeals erred in ruling that the holding of a town fiesta is not a
governmental function and that there was negligence on their part for
We can say that the deceased Vicente Fontanilla was similarly situated not maintaining and supervising the safe use of the stage, in applying
as Sander The Municipality of Malasiqui resolved to celebrate the town Article 27 of the Civil Code against them and in not holding Jose
fiesta in January of 1959; it created a committee in charge of the Macaraeg liable for the collapse of the stage and the consequent death
entertainment and stage; an association of Malasiqui residents of Vicente Fontanilla. 24
responded to the call for the festivities and volunteered to present a
stage show; Vicente Fontanilla was one of the participants who like
We agree with petitioners that the Court of Appeals erred in applying corporation liable for the negligence of the corporation
Article 27 of the Civil Code against the for this particular article covers a there must have been upon his part such a breach of duty
case of nonfeasance or non-performance by a public officer of his official as contributed to, or helped to bring about, the injury; that
duty; it does not apply to a case of negligence or misfeasance in is to say, he must be a participant in the wrongful act. ...
carrying out an official duty. (pp. 207-208, Ibid.)

If We are led to set aside the decision of the Court of Appeals insofar as xxx xxx xxx
these petitioners are concerned, it is because of a plain error committed
by respondent court which however is not invoked in petitioners' brief. Directors who merely employ one to give a fireworks
Ambition on the corporate are not personally liable for the
In Miguel v. The Court of appeal. et al., the Court, through Justice, now negligent acts of the exhibitor. (p. 211, Ibid.)
Chief Justice, Fred Ruiz Castro, held that the Supreme Court is vested
with ample authority to review matters not assigned as errors in an On these people We absolve Use municipal councilors from any liability
appeal if it finds that their consideration and resolution are for the death of Vicente Fontanilla. The records do not show that said
indispensable or necessary in arriving at a just decision in a given case, petitioners directly participated in the defective construction of the
and that tills is author under Sec. 7, Rule 51 of the Rules of Court. 25 We "zarzuela" stage or that they personally permitted spectators to go up
believe that this pronouncement can well be applied in the instant case. the platform.

The Court of Appeals in its decision now under review held that the 6. One last point We have to resolve is on the award of attorney's fees
celebration of a town fiesta by the Municipality of Malasiqui was not a by respondent court. Petitioner-municipality assails the award.
governmental function. We upheld that ruling. The legal consequence
thereof is that the Municipality stands on the same footing as an Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and
ordinary private corporation with the municipal council acting as its expenses of litigation may be granted when the court deems it just and
board of directors. It is an elementary principle that a corporation has a equitable. In this case of Vicente Fontanilla, although respondent
personality, separate and distinct from its officers, directors, or persons appellate court failed to state the grounds for awarding attorney's fees,
composing it 26 and the latter are not as a rule co-responsible in an the records show however that attempts were made by plaintiffs, now
action for damages for tort or negligence culpa aquilla committed by the private respondents, to secure an extrajudicial compensation from the
corporation's employees or agents unless there is a showing of bad faith municipality: that the latter gave prorases and assurances of assistance
or gross or wanton negligence on their part. 27 but failed to comply; and it was only eight month after the incident that
the bereaved family of Vicente Fontanilla was compelled to seek relief
xxx xxx xxx from the courts to ventilate what was believed to be a just cause. 28

The ordinary doctrine is that a director, merely by reason We hold, therefore, that there is no error committed in the grant of
of his office, is not personally Stable for the torts of his attorney's fees which after all is a matter of judicial discretion. The
corporation; he Must be shown to have personally voted amount of P1,200.00 is fair and reasonable.
for or otherwise participated in them ... Fletcher
Encyclopedia Corporations, Vol 3A Chapt 11, p. 207) PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of
Appeals insofar as the Municipality of Malasiqui is concerned (L-30183),
Officers of a corporation 'are not held liable for the and We absolve the municipal councilors from liability and SET ASIDE
negligence of the corporation merely because of their the judgment against them (L-9993).
official relation to it, but because of some wrongful or
negligent act by such officer amounting to a breach of Without pronouncement as to costs.
duty which resulted in an injury ... To make an officer of a
SO ORDERED, On August 30, 1990, the UP, through its then President Jose V. Abueva,
entered into a General Construction Agreement with respondent Stern
Teehankee (Chairman), Makasiar, Fernandez, and Guerrero, JJ., concur. Builders Corporation (Stern Builders), represented by its President and
General Manager Servillano dela Cruz, for the construction of the
extension building and the renovation of the College of Arts and
Sciences Building in the campus of the University of the Philippines in
Republic of the Philippines Los Baños (UPLB).3
SUPREME COURT
Manila In the course of the implementation of the contract, Stern Builders
submitted three progress billings corresponding to the work
FIRST DIVISION accomplished, but the UP paid only two of the billings. The third billing
worth ₱ 273,729.47 was not paid due to its disallowance by the
G.R. No. 171182 August 23, 2012 Commission on Audit (COA). Despite the lifting of the disallowance, the
UP failed to pay the billing, prompting Stern Builders and dela Cruz to
UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. DE
sue the UP and its co-respondent officials to collect the unpaid billing
GUZMAN, RUBEN P. ASPIRAS, EMMANUEL P. BELLO, WILFREDO P.
and to recover various damages. The suit, entitled Stern Builders
DAVID, CASIANO S. ABRIGO, and JOSEFINA R.
Corporation and Servillano R. Dela Cruz v. University of the Philippines
LICUANAN, Petitioners,
Systems, Jose V. Abueva, Raul P. de Guzman, Ruben P. Aspiras,
vs.
Emmanuel P. Bello, Wilfredo P. David, Casiano S. Abrigo, and Josefina R.
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the
Licuanan, was docketed as Civil Case No. Q-93-14971 of the Regional
Regional Trial Court of Quezon City, Branch 80, STERN
Trial Court in Quezon City (RTC).4
BUILDERS, INC., and SERVILLANO DELA CRUZ, Respondents.
After trial, on November 28, 2001, the RTC rendered its decision in favor
DECISION
of the plaintiffs,5 viz:
BERSAMIN, J.:
Wherefore, in the light of the foregoing, judgment is hereby rendered in
Trial judges should not immediately issue writs of execution or favor of the plaintiff and against the defendants ordering the latter to
garnishment against the Government or any of its subdivisions, agencies pay plaintiff, jointly and severally, the following, to wit:
and instrumentalities to enforce money judgments.1 They should bear in
1. ₱ 503,462.74 amount of the third billing, additional
mind that the primary jurisdiction to examine, audit and settle all claims
accomplished work and retention money
of any sort due from the Government or any of its subdivisions, agencies
and instrumentalities pertains to the Commission on Audit (COA) 2. ₱ 5,716,729.00 in actual damages
pursuant to Presidential Decree No. 1445 (Government Auditing Code of
the Philippines). 3. ₱ 10,000,000.00 in moral damages

The Case 4. ₱ 150,000.00 and ₱ 1,500.00 per appearance as attorney’s

fees; and
On appeal by the University of the Philippines and its then incumbent
officials (collectively, the UP) is the decision promulgated on September 5. Costs of suit.
16, 2005,2 whereby the Court of Appeals (CA) upheld the order of the
Regional Trial Court (RTC), Branch 80, in Quezon City that directed the SO ORDERED.
garnishment of public funds amounting to ₱ 16,370,191.74 belonging to Following the RTC’s denial of its motion for reconsideration on May 7,
the UP to satisfy the writ of execution issued to enforce the already final 2002,6 the UP filed a notice of appeal on June 3, 2002.7 Stern Builders
and executory judgment against the UP. and dela Cruz opposed the notice of appeal on the ground of its filing
Antecedents being belated, and moved for the execution of the decision. The UP
countered that the notice of appeal was filed within the reglementary
period because the UP’s Office of Legal Affairs (OLS) in Diliman, Quezon Motion for Reconsideration on May 17, 2002 but filed a Notice of Appeal
City received the order of denial only on May 31, 2002. On September only on June 3, 3003. As such, the decision of the lower court ipso
26, 2002, the RTC denied due course to the notice of appeal for having facto became final when no appeal was perfected after the lapse of the
been filed out of time and granted the private respondents’ motion for reglementary period. This procedural caveat cannot be trifled with, not
execution.8 even by the High Court.15
The RTC issued the writ of execution on October 4, 2002,9 and the sheriff The UP sought a reconsideration, but the CA denied the UP’s motion for
of the RTC served the writ of execution and notice of demand upon the reconsideration on April 19, 2004.16
UP, through its counsel, on October 9, 2002.10 The UP filed an urgent
motion to reconsider the order dated September 26, 2002, to quash the On May 11, 2004, the UP appealed to the Court by petition for review
writ of execution dated October 4, 2002, and to restrain the on certiorari (G.R. No. 163501).
proceedings.11 However, the RTC denied the urgent motion on April 1, On June 23, 2004, the Court denied the petition for review. 17 The UP
2003.12 moved for the reconsideration of the denial of its petition for review on
On June 24, 2003, the UP assailed the denial of due course to its appeal August 29, 2004,18 but the Court denied the motion on October 6,
through a petition for certiorari in the Court of Appeals (CA), docketed as 2004.19 The denial became final and executory on November 12, 2004. 20
CA-G.R. No. 77395.13 In the meanwhile that the UP was exhausting the available remedies to
On February 24, 2004, the CA dismissed the petition for certiorari upon overturn the denial of due course to the appeal and the issuance of the
finding that the UP’s notice of appeal had been filed late, 14 stating: writ of execution, Stern Builders and dela Cruz filed in the RTC their
motions for execution despite their previous motion having already been
Records clearly show that petitioners received a copy of the Decision granted and despite the writ of execution having already issued. On June
dated November 28, 2001 and January 7, 2002, thus, they had until 11, 2003, the RTC granted another motion for execution filed on May 9,
January 22, 2002 within which to file their appeal. On January 16, 2002 2003 (although the RTC had already issued the writ of execution on
or after the lapse of nine (9) days, petitioners through their counsel Atty. October 4, 2002).21
Nolasco filed a Motion for Reconsideration of the aforesaid decision,
hence, pursuant to the rules, petitioners still had six (6) remaining days On June 23, 2003 and July 25, 2003, respectively, the sheriff served
to file their appeal. As admitted by the petitioners in their petition (Rollo, notices of garnishment on the UP’s depository banks, namely: Land Bank
p. 25), Atty. Nolasco received a copy of the Order denying their motion of the Philippines (Buendia Branch) and the Development Bank of the
for reconsideration on May 17, 2002, thus, petitioners still has until May Philippines (DBP), Commonwealth Branch.22 The UP assailed the
23, 2002 (the remaining six (6) days) within which to file their appeal. garnishment through an urgent motion to quash the notices of
Obviously, petitioners were not able to file their Notice of Appeal on May garnishment;23 and a motion to quash the writ of execution dated May 9,
23, 2002 as it was only filed on June 3, 2002. 2003.24

In view of the said circumstances, We are of the belief and so holds that On their part, Stern Builders and dela Cruz filed their ex parte motion for
the Notice of Appeal filed by the petitioners was really filed out of time, issuance of a release order.25
the same having been filed seventeen (17) days late of the On October 14, 2003, the RTC denied the UP’s urgent motion to quash,
reglementary period. By reason of which, the decision dated November and granted Stern Builders and dela Cruz’s ex parte motion for issuance
28, 2001 had already become final and executory. "Settled is the rule of a release order.26
that the perfection of an appeal in the manner and within the period
permitted by law is not only mandatory but jurisdictional, and failure to The UP moved for the reconsideration of the order of October 14, 2003,
perfect that appeal renders the challenged judgment final and but the RTC denied the motion on November 7, 2003.27
executory. This is not an empty procedural rule but is grounded on
fundamental considerations of public policy and sound practice." (Ram’s On January 12, 2004, Stern Builders and dela Cruz again sought the
Studio and Photographic Equipment, Inc. vs. Court of Appeals, 346 SCRA release of the garnished funds.28 Despite the UP’s opposition,29 the RTC
691, 696). Indeed, Atty. Nolasco received the order of denial of the granted the motion to release the garnished funds on March 16,
2004.30 On April 20, 2004, however, the RTC held in abeyance the the CA had already lapsed.39 The UP opposed the amended motion and
enforcement of the writs of execution issued on October 4, 2002 and countered that the implementation of the release order be suspended. 40
June 3, 2003 and all the ensuing notices of garnishment, citing Section
4, Rule 52, Rules of Court, which provided that the pendency of a timely On May 3, 2005, the RTC granted the amended motion for sheriff’s
motion for reconsideration stayed the execution of the judgment. 31 assistance and directed the sheriff to proceed to the DBP to receive the
check in satisfaction of the judgment.41
On December 21, 2004, the RTC, through respondent Judge Agustin S.
Dizon, authorized the release of the garnished funds of the UP,32 to wit: The UP sought the reconsideration of the order of May 3, 2005. 42

WHEREFORE, premises considered, there being no more legal On May 16, 2005, DBP filed a motion to consign the check representing
impediment for the release of the garnished amount in satisfaction of the judgment award and to dismiss the motion to cite its officials in
the judgment award in the instant case, let the amount garnished be contempt of court.43
immediately released by the Development Bank of the Philippines, On May 23, 2005, the UP presented a motion to withhold the release of
Commonwealth Branch, Quezon City in favor of the plaintiff. the payment of the judgment award.44
SO ORDERED. On July 8, 2005, the RTC resolved all the pending matters, 45 noting that
The UP was served on January 3, 2005 with the order of December 21, the DBP had already delivered to the sheriff Manager’s Check No.
2004 directing DBP to release the garnished funds.33 811941 for ₱ 16,370,191.74 representing the garnished funds payable
to the order of Stern Builders and dela Cruz as its compliance with the
On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in RTC’s order dated December 21, 2004.46 However, the RTC directed in
direct contempt of court for its non-compliance with the order of the same order that Stern Builders and dela Cruz should not encash the
release.34 check or withdraw its amount pending the final resolution of the UP’s
petition for certiorari, to wit:47
Thereupon, on January 10, 2005, the UP brought a petition
for certiorari in the CA to challenge the jurisdiction of the RTC in issuing To enable the money represented in the check in question (No.
the order of December 21, 2004 (CA-G.R. CV No. 88125). 35 Aside from 00008119411) to earn interest during the pendency of the defendant
raising the denial of due process, the UP averred that the RTC committed University of the Philippines application for a writ of injunction with the
grave abuse of discretion amounting to lack or excess of jurisdiction in Court of Appeals the same may now be deposited by the plaintiff at the
ruling that there was no longer any legal impediment to the release of garnishee Bank (Development Bank of the Philippines), the disposition of
the garnished funds. The UP argued that government funds and the amount represented therein being subject to the final outcome of
properties could not be seized by virtue of writs of execution or the case of the University of the Philippines et al., vs. Hon. Agustin S.
garnishment, as held in Department of Agriculture v. National Labor Dizon et al., (CA G.R. 88125) before the Court of Appeals.
Relations Commission,36 and citing Section 84 of Presidential Decree No.
1445 to the effect that "revenue funds shall not be paid out of any public Let it be stated herein that the plaintiff is not authorized to encash and
treasury or depository except in pursuance of an appropriation law or withdraw the amount represented in the check in question and enjoy the
other specific statutory authority;" and that the order of garnishment same in the fashion of an owner during the pendency of the case
clashed with the ruling in University of the Philippines Board of Regents between the parties before the Court of Appeals which may or may not
v. Ligot-Telan37 to the effect that the funds belonging to the UP were be resolved in plaintiff’s favor.
public funds. With the end in view of seeing to it that the check in question is
On January 19, 2005, the CA issued a temporary restraining order (TRO) deposited by the plaintiff at the Development Bank of the Philippines
upon application by the UP.38 (garnishee bank), Branch Sheriff Herlan Velasco is directed to
accompany and/or escort the plaintiff in making the deposit of the check
On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their in question.
amended motion for sheriff’s assistance to implement the release order
dated December 21, 2004, stating that the 60-day period of the TRO of SO ORDERED.
On September 16, 2005, the CA promulgated its assailed decision Construction of Agreement there is an amount already allocated
dismissing the UP’s petition for certiorari, ruling that the UP had been by the latter for the said project which is no longer subject of
given ample opportunity to contest the motion to direct the DBP to future appropriation."49
deposit the check in the name of Stern Builders and dela Cruz; and that
the garnished funds could be the proper subject of garnishment because After the CA denied their motion for reconsideration on December 23,
they had been already earmarked for the project, with the UP holding 2005, the petitioners appealed by petition for review.
the funds only in a fiduciary capacity, 48 viz: Matters Arising During the Pendency of the Petition
Petitioners next argue that the UP funds may not be seized for execution On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern
or garnishment to satisfy the judgment award. Citing Department of Builders and dela Cruz’s motion to withdraw the deposit, in
Agriculture vs. NLRC, University of the Philippines Board of Regents vs. consideration of the UP’s intention to appeal to the CA,50 stating:
Hon. Ligot-Telan, petitioners contend that UP deposits at Land Bank and
the Development Bank of the Philippines, being government funds, may Since it appears that the defendants are intending to file a petition for
not be released absent an appropriations bill from Congress. review of the Court of Appeals resolution in CA-G.R. No. 88125 within the
reglementary period of fifteen (15) days from receipt of resolution, the
The argument is specious. UP entered into a contract with private Court agrees with the defendants stand that the granting of plaintiffs’
respondents for the expansion and renovation of the Arts and Sciences subject motion is premature.
Building of its campus in Los Baños, Laguna. Decidedly, there was
already an appropriations earmarked for the said project. The said funds Let it be stated that what the Court meant by its Order dated July 8,
are retained by UP, in a fiduciary capacity, pending completion of the 2005 which states in part that the "disposition of the amount
construction project. represented therein being subject to the final outcome of the case of the
University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA
We agree with the trial Court [sic] observation on this score: G.R. No. 88125 before the Court of Appeals) is that the judgment or
"4. Executive Order No. 109 (Directing all National Government resolution of said court has to be final and executory, for if the same will
Agencies to Revert Certain Accounts Payable to the Cumulative still be elevated to the Supreme Court, it will not attain finality yet until
Result of Operations of the National Government and for Other the highest court has rendered its own final judgment or resolution. 51
Purposes) Section 9. Reversion of Accounts Payable, provides However, on January 22, 2007, the UP filed an Urgent Application for A
that, all 1995 and prior years documented accounts payable and Temporary Restraining Order and/or A Writ of Preliminary
all undocumented accounts regardless of the year they were Injunction,52 averring that on January 3, 2007, Judge Maria Theresa dela
incurred shall be reverted to the Cumulative Result of Operations Torre-Yadao (who had meanwhile replaced Judge Dizon upon the latter’s
of the National Government (CROU). This shall apply to accounts appointment to the CA) had issued another order allowing Stern Builders
payable of all funds, except fiduciary funds, as long as the and dela Cruz to withdraw the deposit,53 to wit:
purpose for which the funds were created have not been
accomplished and accounts payable under foreign assisted It bears stressing that defendants’ liability for the payment of the
projects for the duration of the said project. In this regard, the judgment obligation has become indubitable due to the final and
Department of Budget and Management issued Joint-Circular No. executory nature of the Decision dated November 28, 2001. Insofar as
99-6 4.0 (4.3) Procedural Guidelines which provides that all the payment of the [sic] judgment obligation is concerned, the Court
accounts payable that reverted to the CROU may be considered believes that there is nothing more the defendant can do to escape
for payment upon determination thru administrative process, of liability. It is observed that there is nothing more the defendant can do
the existence, validity and legality of the claim. Thus, the to escape liability. It is observed that defendant U.P. System had already
allegation of the defendants that considering no appropriation for exhausted all its legal remedies to overturn, set aside or modify the
the payment of any amount awarded to plaintiffs appellee the decision (dated November 28, 2001( rendered against it. The way the
funds of defendant-appellants may not be seized pursuant to a Court sees it, defendant U.P. System’s petition before the Supreme Court
writ of execution issued by the regular court is misplaced. Surely concerns only with the manner by which said judgment award should be
when the defendants and the plaintiff entered into the General satisfied. It has nothing to do with the legality or propriety thereof,
although it prays for the deletion of [sic] reduction of the award of moral forthwith release the garnished amount to Stern Builders and dela
damages. Cruz; 56 and that DBP had forthwith complied with the order on January
17, 2007 upon the sheriff’s service of the order of Judge Yadao. 57
It must be emphasized that this Court’s finding, i.e., that there was
sufficient appropriation earmarked for the project, was upheld by the These intervening developments impelled the UP to file in this Court a
Court of Appeals in its decision dated September 16, 2005. Being a supplemental petition on January 26, 2007,58 alleging that the RTC (Judge
finding of fact, the Supreme Court will, ordinarily, not disturb the same Yadao) gravely erred in ordering the immediate release of the garnished
was said Court is not a trier of fact. Such being the case, defendants’ amount despite the pendency of the petition for review in this Court.
arguments that there was no sufficient appropriation for the payment of
the judgment obligation must fail. The UP filed a second supplemental petition59 after the RTC (Judge Yadao)
denied the UP’s motion for the redeposit of the withdrawn amount on
While it is true that the former Presiding Judge of this Court in its Order April 10, 2007,60 to wit:
dated January 30, 2006 had stated that:
This resolves defendant U.P. System’s Urgent Motion to Redeposit
Let it be stated that what the Court meant by its Order dated July 8, Judgment Award praying that plaintiffs be directed to redeposit the
2005 which states in part that the "disposition of the amount judgment award to DBP pursuant to the Temporary Restraining Order
represented therein being subject to the final outcome of the case of the issued by the Supreme Court. Plaintiffs opposed the motion and
University of the Philippines, et. al., vs. Hon. Agustin S. Dizon et al., (CA countered that the Temporary Restraining Order issued by the Supreme
G.R. No. 88125 before the Court of Appeals) is that the judgment or Court has become moot and academic considering that the act sought
resolution of said court has to be final and executory, for if the same will to be restrained by it has already been performed. They also alleged
still be elevated to the Supreme Court, it will not attain finality yet until that the redeposit of the judgment award was no longer feasible as they
the highest court has rendered its own final judgment or resolution. have already spent the same.
it should be noted that neither the Court of Appeals nor the Supreme It bears stressing, if only to set the record straight, that this Court did
Court issued a preliminary injunction enjoining the release or withdrawal not – in its Order dated January 3, 2007 (the implementation of which
of the garnished amount. In fact, in its present petition for review before was restrained by the Supreme Court in its Resolution dated January 24,
the Supreme Court, U.P. System has not prayed for the issuance of a writ 2002) – direct that that garnished amount "be deposited with the
of preliminary injunction. Thus, the Court doubts whether such writ is garnishee bank (Development Bank of the Philippines)". In the first
forthcoming. place, there was no need to order DBP to make such deposit, as the
garnished amount was already deposited in the account of plaintiffs with
The Court honestly believes that if defendants’ petition assailing the the DBP as early as May 13, 2005. What the Court granted in its Order
Order of this Court dated December 31, 2004 granting the motion for dated January 3, 2007 was plaintiff’s motion to allow the release of said
the release of the garnished amount was meritorious, the Court of deposit. It must be recalled that the Court found plaintiff’s motion
Appeals would have issued a writ of injunction enjoining the same. meritorious and, at that time, there was no restraining order or
Instead, said appellate court not only refused to issue a wit of preliminary injunction from either the Court of Appeals or the Supreme
preliminary injunction prayed for by U.P. System but denied the petition, Court which could have enjoined the release of plaintiffs’ deposit. The
as well.54 Court also took into account the following factors:
The UP contended that Judge Yadao thereby effectively reversed the a) the Decision in this case had long been final and executory
January 30, 2006 order of Judge Dizon disallowing the withdrawal of the after it was rendered on November 28, 2001;
garnished amount until after the decision in the case would have
become final and executory. b) the propriety of the dismissal of U.P. System’s appeal was
upheld by the Supreme Court;
Although the Court issued a TRO on January 24, 2007 to enjoin Judge
Yadao and all persons acting pursuant to her authority from enforcing c) a writ of execution had been issued;
her order of January 3, 2007,55 it appears that on January 16, 2007, or
prior to the issuance of the TRO, she had already directed the DBP to
 d) defendant U.P. System’s deposit with DBP was garnished The UP now submits that:
pursuant to a lawful writ of execution issued by the Court; and
I
e) the garnished amount had already been turned over to the
plaintiffs and deposited in their account with DBP. THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING THE
PETITION, ALLOWING IN EFFECT THE GARNISHMENT OF UP FUNDS,
The garnished amount, as discussed in the Order dated January 16, WHEN IT RULED THAT FUNDS HAVE ALREADY BEEN EARMARKED FOR
2007, was already owned by the plaintiffs, having been delivered to THE CONSTRUCTION PROJECT; AND THUS, THERE IS NO NEED FOR
them by the Deputy Sheriff of this Court pursuant to par. (c), Section 9, FURTHER APPROPRIATIONS.
Rule 39 of the 1997 Rules of Civil Procedure. Moreover, the judgment
obligation has already been fully satisfied as per Report of the Deputy II
Sheriff. THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING
Anent the Temporary Restraining Order issued by the Supreme Court, GARNISHMENT OF A STATE UNIVERSITY’S FUNDS IN VIOLATION OF
the same has become functus oficio, having been issued after the ARTICLE XIV, SECTION 5(5) OF THE CONSTITUTION.
garnished amount had been released to the plaintiffs. The judgment III
debt was released to the plaintiffs on January 17, 2007, while the
Temporary Restraining Order issued by the Supreme Court was received IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE
by this Court on February 2, 2007. At the time of the issuance of the REVIEW POWERS OF THIS HONORABLE COURT TO MODIFY, IF NOT
Restraining Order, the act sought to be restrained had already been TOTALLY DELETE THE AWARD OF ₱ 10 MILLION AS MORAL DAMAGES TO
done, thereby rendering the said Order ineffectual. RESPONDENTS.
After a careful and thorough study of the arguments advanced by the IV
parties, the Court is of the considered opinion that there is no legal basis
to grant defendant U.P. System’s motion to redeposit the judgment THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE
amount. Granting said motion is not only contrary to law, but it will also IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 3
render this Court’s final executory judgment nugatory. Litigation must JANUARY 2007 ON THE GROUND OF EQUITY AND JUDICIAL COURTESY.
end and terminate sometime and somewhere, and it is essential to an
V
effective administration of justice that once a judgment has become
final the issue or cause involved therein should be laid to rest. This THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE
doctrine of finality of judgment is grounded on fundamental IMMEDIATE RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 16
considerations of public policy and sound practice. In fact, nothing is JANUARY 2007 ON THE GROUND THAT PETITIONER UNIVERSITY STILL
more settled in law than that once a judgment attains finality it thereby HAS A PENDING MOTION FOR RECONSIDERATION OF THE ORDER DATED
becomes immutable and unalterable. It may no longer be modified in 3 JANUARY 2007.
any respect, even if the modification is meant to correct what is
perceived to be an erroneous conclusion of fact or law, and regardless of VI
whether the modification is attempted to be made by the court
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE
rendering it or by the highest court of the land.
REDEPOSIT OF THE GARNISHED AMOUNT TO THE DBP IN VIOLATION OF
WHEREFORE, premises considered, finding defendant U.P. System’s THE CLEAR LANGUAGE OF THE SUPREME COURT RESOLUTION DATED 24
Urgent Motion to Redeposit Judgment Award devoid of merit, the same is JANUARY 2007.
hereby DENIED.
The UP argues that the amount earmarked for the construction project
SO ORDERED. had been purposely set aside only for the aborted project and did not
include incidental matters like the awards of actual damages, moral
Issues damages and attorney’s fees. In support of its argument, the UP cited
Article 12.2 of the General Construction Agreement, which stipulated (a) whether the funds of the UP were the proper subject of garnishment
that no deductions would be allowed for the payment of claims, in order to satisfy the judgment award; and (b) whether the UP’s prayer
damages, losses and expenses, including attorney’s fees, in case of any for the deletion of the awards of actual damages of ₱ 5,716,729.00,
litigation arising out of the performance of the work. The UP insists that moral damages of ₱ 10,000,000.00 and attorney’s fees of ₱ 150,000.00
the CA decision was inconsistent with the rulings in Commissioner of plus ₱ 1,500.00 per appearance could be granted despite the finality of
Public Highways v. San Diego61 and Department of Agriculture v. the judgment of the RTC.
NLRC62 to the effect that government funds and properties could not be
seized under writs of execution or garnishment to satisfy judgment Ruling
awards. The petition for review is meritorious.
Furthermore, the UP contends that the CA contravened Section 5, Article I.
XIV of the Constitution by allowing the garnishment of UP funds, UP’s funds, being government funds,
because the garnishment resulted in a substantial reduction of the UP’s are not subject to garnishment
limited budget allocated for the remuneration, job satisfaction and
fulfillment of the best available teachers; that Judge Yadao should have The UP was founded on June 18, 1908 through Act 1870 to provide
exhibited judicial courtesy towards the Court due to the pendency of the advanced instruction in literature, philosophy, the sciences, and arts,
UP’s petition for review; and that she should have also desisted from and to give professional and technical training to deserving
declaring that the TRO issued by this Court had become functus officio. students.63 Despite its establishment as a body corporate,64 the UP
remains to be a "chartered institution"65 performing a legitimate
Lastly, the UP states that the awards of actual damages of ₱ government function. It is an institution of higher learning, not a
5,716,729.00 and moral damages of ₱ 10 million should be reduced, if corporation established for profit and declaring any dividends.66 In
not entirely deleted, due to its being unconscionable, inequitable and enacting Republic Act No. 9500 (The University of the Philippines Charter
detrimental to public service. of 2008), Congress has declared the UP as the national
In contrast, Stern Builders and dela Cruz aver that the petition for review university67 "dedicated to the search for truth and knowledge as well as
was fatally defective for its failure to mention the other cases upon the the development of future leaders."68
same issues pending between the parties (i.e., CA-G.R. No. 77395 and Irrefragably, the UP is a government instrumentality, 69 performing the
G.R No. 163501); that the UP was evidently resorting to forum shopping, State’s constitutional mandate of promoting quality and accessible
and to delaying the satisfaction of the final judgment by the filing of its education.70 As a government instrumentality, the UP administers special
petition for review; that the ruling in Commissioner of Public Works v. funds sourced from the fees and income enumerated under Act No. 1870
San Diego had no application because there was an appropriation for the and Section 1 of Executive Order No. 714,71 and from the yearly
project; that the UP retained the funds allotted for the project only in a appropriations, to achieve the purposes laid down by Section 2 of Act
fiduciary capacity; that the contract price had been meanwhile adjusted 1870, as expanded in Republic Act No. 9500.72 All the funds going into
to ₱ 22,338,553.25, an amount already more than sufficient to cover the the possession of the UP, including any interest accruing from the
judgment award; that the UP’s prayer to reduce or delete the award of deposit of such funds in any banking institution, constitute a "special
damages had no factual basis, because they had been gravely wronged, trust fund," the disbursement of which should always be aligned with the
had been deprived of their source of income, and had suffered untold UP’s mission and purpose,73 and should always be subject to auditing by
miseries, discomfort, humiliation and sleepless years; that dela Cruz had the COA.74
even been constrained to sell his house, his equipment and the
implements of his trade, and together with his family had been forced to Presidential Decree No. 1445 defines a "trust fund" as a fund that
live miserably because of the wrongful actuations of the UP; and that the officially comes in the possession of an agency of the government or of
RTC correctly declared the Court’s TRO to be already functus officio by a public officer as trustee, agent or administrator, or that is received for
reason of the withdrawal of the garnished amount from the DBP. the fulfillment of some obligation.75 A trust fund may be utilized only for
the "specific purpose for which the trust was created or the funds
The decisive issues to be considered and passed upon are, therefore: received."76
The funds of the UP are government funds that are public in character. issued on April 1, 2003 that no appropriation by Congress to allocate
They include the income accruing from the use of real property ceded to and set aside the payment of the judgment awards was necessary
the UP that may be spent only for the attainment of its institutional because "there (were) already an appropriations (sic) earmarked for the
objectives.77 Hence, the funds subject of this action could not be validly said project."82 The CA and the RTC thereby unjustifiably ignored the
made the subject of the RTC’s writ of execution or garnishment. The legal restriction imposed on the trust funds of the Government and its
adverse judgment rendered against the UP in a suit to which it had agencies and instrumentalities to be used exclusively to fulfill the
impliedly consented was not immediately enforceable by execution purposes for which the trusts were created or for which the funds were
against the UP,78 because suability of the State did not necessarily mean received except upon express authorization by Congress or by the head
its liability.79 of a government agency in control of the funds, and subject to pertinent
budgetary laws, rules and regulations.83
A marked distinction exists between suability of the State and its
liability. As the Court succinctly stated in Municipality of San Fernando, Indeed, an appropriation by Congress was required before the judgment
La Union v. Firme:80 that rendered the UP liable for moral and actual damages (including
attorney’s fees) would be satisfied considering that such monetary
A distinction should first be made between suability and liability. liabilities were not covered by the "appropriations earmarked for the
"Suability depends on the consent of the state to be sued, liability on the said project." The Constitution strictly mandated that "(n)o money shall
applicable law and the established facts. The circumstance that a state be paid out of the Treasury except in pursuance of an appropriation
is suable does not necessarily mean that it is liable; on the other hand, it made by law."84
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 II
sued. When the state does waive its sovereign immunity, it is only giving COA must adjudicate private respondents’ claim
the plaintiff the chance to prove, if it can, that the defendant is liable. before execution should proceed
Also, in Republic v. Villasor,81 where the issuance of an alias writ of The execution of the monetary judgment against the UP was within the
execution directed against the funds of the Armed Forces of the primary jurisdiction of the COA. This was expressly provided in Section
Philippines to satisfy a final and executory judgment was nullified, the 26 of Presidential Decree No. 1445, to wit:
Court said:
Section 26. General jurisdiction. - The authority and powers of the
xxx The universal rule that where the State gives its consent to be sued Commission shall extend to and comprehend all matters relating to
by private parties either by general or special law, it may limit auditing procedures, systems and controls, the keeping of the general
claimant’s action "only up to the completion of proceedings anterior to accounts of the Government, the preservation of vouchers pertaining
the stage of execution" and that the power of the Courts ends when the thereto for a period of ten years, the examination and inspection of the
judgment is rendered, since government funds and properties may not books, records, and papers relating to those accounts; and the audit and
be seized under writs of execution or garnishment to satisfy such settlement of the accounts of all persons respecting funds or property
judgments, is based on obvious considerations of public policy. received or held by them in an accountable capacity, as well as the
Disbursements of public funds must be covered by the corresponding examination, audit, and settlement of all debts and claims of any sort
appropriation as required by law. The functions and public services due from or owing to the Government or any of its subdivisions,
rendered by the State cannot be allowed to be paralyzed or disrupted by agencies and instrumentalities. The said jurisdiction extends to all
the diversion of public funds from their legitimate and specific objects, government-owned or controlled corporations, including their
as appropriated by law. subsidiaries, and other self-governing boards, commissions, or agencies
of the Government, and as herein prescribed, including non
The UP correctly submits here that the garnishment of its funds to governmental entities subsidized by the government, those funded by
satisfy the judgment awards of actual and moral damages (including donations through the government, those required to pay levies or
attorney’s fees) was not validly made if there was no special government share, and those for which the government has put up a
appropriation by Congress to cover the liability. It was, therefore, legally counterpart fund or those partly funded by the government.
unwarranted for the CA to agree with the RTC’s holding in the order
It was of no moment that a final and executory decision already action ‘only up to the completion of proceedings anterior to the stage of
validated the claim against the UP. The settlement of the monetary execution’ and that the power of the Court ends when the judgment is
claim was still subject to the primary jurisdiction of the COA despite the rendered, since government funds and properties may not be seized
final decision of the RTC having already validated the claim. 85 As such, under writs of execution or garnishment to satisfy such judgments, is
Stern Builders and dela Cruz as the claimants had no alternative except based on obvious considerations of public policy. Disbursements of
to first seek the approval of the COA of their monetary claim. public funds must be covered by the corresponding appropriation as
required by law. The functions and public services rendered by the State
On its part, the RTC should have exercised utmost caution, prudence and cannot be allowed to be paralyzed or disrupted by the diversion of public
judiciousness in dealing with the motions for execution against the UP funds from their legitimate and specific objects, as appropriated by law.
and the garnishment of the UP’s funds. The RTC had no authority to
direct the immediate withdrawal of any portion of the garnished funds Moreover, it is settled jurisprudence that upon determination of
from the depository banks of the UP. By eschewing utmost caution, State liability, the prosecution, enforcement or satisfaction
prudence and judiciousness in dealing with the execution and thereof must still be pursued in accordance with the rules and
garnishment, and by authorizing the withdrawal of the garnished funds procedures laid down in P.D. No. 1445, otherwise known as the
of the UP, the RTC acted beyond its jurisdiction, and all its orders and Government Auditing Code of the Philippines (Department of
issuances thereon were void and of no legal effect, specifically: (a) the Agriculture v. NLRC, 227 SCRA 693, 701-02 1993 citing Republic
order Judge Yadao issued on January 3, 2007 allowing Stern Builders and vs. Villasor, 54 SCRA 84 1973). All money claims against the
dela Cruz to withdraw the deposited garnished amount; (b) the order Government must first be filed with the Commission on Audit
Judge Yadao issued on January 16, 2007 directing DBP to forthwith which must act upon it within sixty days. Rejection of the claim
release the garnish amount to Stern Builders and dela Cruz; (c) the will authorize the claimant to elevate the matter to the Supreme
sheriff’s report of January 17, 2007 manifesting the full satisfaction of Court on certiorari and in effect, sue the State thereby (P.D.
the writ of execution; and (d) the order of April 10, 2007 deying the UP’s 1445, Sections 49-50).
motion for the redeposit of the withdrawn amount. Hence, such orders
and issuances should be struck down without exception. However, notwithstanding the rule that government properties are not
subject to levy and execution unless otherwise provided for by statute
Nothing extenuated Judge Yadao’s successive violations of Presidential (Republic v. Palacio, 23 SCRA 899 1968; Commissioner of Public
Decree No. 1445. She was aware of Presidential Decree No. 1445, Highways v. San Diego, supra) or municipal ordinance (Municipality of
considering that the Court circulated to all judges its Administrative Makati v. Court of Appeals, 190 SCRA 206 1990), the Court has, in
Circular No. 10-2000,86 issued on October 25, 2000, enjoining them "to various instances, distinguished between government funds and
observe utmost caution, prudence and judiciousness in the issuance of properties for public use and those not held for public use. Thus, in
writs of execution to satisfy money judgments against government Viuda de Tan Toco v. Municipal Council of Iloilo (49 Phil 52 1926, the
agencies and local government units" precisely in order to prevent the Court ruled that "where property of a municipal or other public
circumvention of Presidential Decree No. 1445, as well as of the rules corporation is sought to be subjected to execution to satisfy judgments
and procedures of the COA, to wit: recovered against such corporation, the question as to whether such
property is leviable or not is to be determined by the usage and
In order to prevent possible circumvention of the rules and purposes for which it is held." The following can be culled from Viuda de
procedures of the Commission on Audit, judges are hereby Tan Toco v. Municipal Council of Iloilo:
enjoined to observe utmost caution, prudence and judiciousness
in the issuance of writs of execution to satisfy money judgments 1. Properties held for public uses – and generally everything
against government agencies and local government units. held for governmental purposes – are not subject to levy and
sale under execution against such corporation. The same rule
Judges should bear in mind that in Commissioner of Public Highways v. applies to funds in the hands of a public officer and taxes due to
San Diego (31 SCRA 617, 625 1970), this Court explicitly stated: a municipal corporation.
"The universal rule that where the State gives its consent to be sued by 2. Where a municipal corporation owns in its proprietary capacity, as
private parties either by general or special law, it may limit claimant’s distinguished from its public or government capacity, property not used
or used for a public purpose but for quasi-private purposes, it is the subterfuge devised by the losing party. Unjustified delay in the
general rule that such property may be seized and sold under execution enforcement of such judgment sets at naught the role and purpose of
against the corporation. the courts to resolve justiciable controversies with finality. 89 Indeed, all
litigations must at some time end, even at the risk of occasional errors.
3. Property held for public purposes is not subject to execution merely
because it is temporarily used for private purposes. If the public use is But the doctrine of immutability of a final judgment has not been
wholly abandoned, such property becomes subject to execution. absolute, and has admitted several exceptions, among them: (a) the
correction of clerical errors; (b) the so-called nunc pro tunc entries that
This Administrative Circular shall take effect immediately and the Court cause no prejudice to any party; (c) void judgments; and (d) whenever
Administrator shall see to it that it is faithfully implemented. circumstances transpire after the finality of the decision that render its
Although Judge Yadao pointed out that neither the CA nor the Court had execution unjust and inequitable.90 Moreover, in Heirs of Maura So v.
issued as of then any writ of preliminary injunction to enjoin the release Obliosca,91 we stated that despite the absence of the preceding
or withdrawal of the garnished amount, she did not need any writ of circumstances, the Court is not precluded from brushing aside
injunction from a superior court to compel her obedience to the law. The procedural norms if only to serve the higher interests of justice and
Court is disturbed that an experienced judge like her should look at equity. Also, in Gumaru v. Quirino State College,92 the Court nullified the
public laws like Presidential Decree No. 1445 dismissively instead of proceedings and the writ of execution issued by the RTC for the reason
loyally following and unquestioningly implementing them. That she did that respondent state college had not been represented in the litigation
so turned her court into an oppressive bastion of mindless tyranny by the Office of the Solicitor General.
instead of having it as a true haven for the seekers of justice like the UP. We rule that the UP’s plea for equity warrants the Court’s exercise of the
III exceptional power to disregard the declaration of finality of the
Period of appeal did not start without effective judgment of the RTC for being in clear violation of the UP’s right to due
service of decision upon counsel of record; process.
Fresh-period rule announced in Both the CA and the RTC found the filing on June 3, 2002 by the UP of
Neypes v. Court of Appeals the notice of appeal to be tardy. They based their finding on the fact that
can be given retroactive application only six days remained of the UP’s reglementary 15-day period within
The UP next pleads that the Court gives due course to its petition for which to file the notice of appeal because the UP had filed a motion for
review in the name of equity in order to reverse or modify the adverse reconsideration on January 16, 2002 vis-à-vis the RTC’s decision the UP
judgment against it despite its finality. At stake in the UP’s plea for received on January 7, 2002; and that because the denial of the motion
equity was the return of the amount of ₱ 16,370,191.74 illegally for reconsideration had been served upon Atty. Felimon D. Nolasco of the
garnished from its trust funds. Obstructing the plea is the finality of the UPLB Legal Office on May 17, 2002, the UP had only until May 23, 2002
judgment based on the supposed tardiness of UP’s appeal, which the within which to file the notice of appeal.
RTC declared on September 26, 2002. The CA upheld the declaration of The UP counters that the service of the denial of the motion for
finality on February 24, 2004, and the Court itself denied the UP’s reconsideration upon Atty. Nolasco was defective considering that its
petition for review on that issue on May 11, 2004 (G.R. No. 163501). The counsel of record was not Atty. Nolasco of the UPLB Legal Office but the
denial became final on November 12, 2004. OLS in Diliman, Quezon City; and that the period of appeal should be
It is true that a decision that has attained finality becomes immutable reckoned from May 31, 2002, the date when the OLS received the order.
and unalterable, and cannot be modified in any respect,87 even if the The UP submits that the filing of the notice of appeal on June 3, 2002
modification is meant to correct erroneous conclusions of fact and law, was well within the reglementary period to appeal.
and whether the modification is made by the court that rendered it or by We agree with the submission of the UP.
this Court as the highest court of the land.88 Public policy dictates that
once a judgment becomes final, executory and unappealable, the Firstly, the service of the denial of the motion for reconsideration upon
prevailing party should not be deprived of the fruits of victory by some Atty. Nolasco of the UPLB Legal Office was invalid and ineffectual
because he was admittedly not the counsel of record of the UP. The rule However, equity calls for the retroactive application in the UP’s favor of
is that it is on the counsel and not the client that the service should be the fresh-period rule that the Court first announced in mid-September of
made.93 2005 through its ruling in Neypes v. Court of Appeals,98 viz:
That counsel was the OLS in Diliman, Quezon City, which was served To standardize the appeal periods provided in the Rules and to afford
with the denial only on May 31, 2002. As such, the running of the litigants fair opportunity to appeal their cases, the Court deems it
remaining period of six days resumed only on June 1, 2002,94 rendering practical to allow a fresh period of 15 days within which to file the notice
the filing of the UP’s notice of appeal on June 3, 2002 timely and well of appeal in the Regional Trial Court, counted from receipt of the order
within the remaining days of the UP’s period to appeal. dismissing a motion for a new trial or motion for reconsideration.
Verily, the service of the denial of the motion for reconsideration could The retroactive application of the fresh-period rule, a procedural law that
only be validly made upon the OLS in Diliman, and no other. The fact aims "to regiment or make the appeal period uniform, to be counted
that Atty. Nolasco was in the employ of the UP at the UPLB Legal Office from receipt of the order denying the motion for new trial, motion for
did not render the service upon him effective. It is settled that where a reconsideration (whether full or partial) or any final order or
party has appeared by counsel, service must be made upon such resolution,"99 is impervious to any serious challenge. This is because
counsel.95 Service on the party or the party’s employee is not effective there are no vested rights in rules of procedure.100 A law or regulation is
because such notice is not notice in law.96 This is clear enough from procedural when it prescribes rules and forms of procedure in order that
Section 2, second paragraph, of Rule 13, Rules of Court, which explicitly courts may be able to administer justice.101 It does not come within the
states that: "If any party has appeared by counsel, service upon him legal conception of a retroactive law, or is not subject of the general rule
shall be made upon his counsel or one of them, unless service upon the prohibiting the retroactive operation of statues, but is given retroactive
party himself is ordered by the court. Where one counsel appears for effect in actions pending and undetermined at the time of its passage
several parties, he shall only be entitled to one copy of any paper served without violating any right of a person who may feel that he is adversely
upon him by the opposite side." As such, the period to appeal resumed affected.
only on June 1, 2002, the date following the service on May 31, 2002
upon the OLS in Diliman of the copy of the decision of the RTC, not from We have further said that a procedural rule that is amended for the
the date when the UP was notified.97 benefit of litigants in furtherance of the administration of justice shall be
retroactively applied to likewise favor actions then pending, as equity
Accordingly, the declaration of finality of the judgment of the RTC, being delights in equality.102 We may even relax stringent procedural rules in
devoid of factual and legal bases, is set aside. order to serve substantial justice and in the exercise of this Court’s
equity jurisdiction.103 Equity jurisdiction aims to do complete justice in
Secondly, even assuming that the service upon Atty. Nolasco was valid cases where a court of law is unable to adapt its judgments to the
and effective, such that the remaining period for the UP to take a timely special circumstances of a case because of the inflexibility of its
appeal would end by May 23, 2002, it would still not be correct to find statutory or legal jurisdiction.104
that the judgment of the RTC became final and immutable thereafter
due to the notice of appeal being filed too late on June 3, 2002. It is cogent to add in this regard that to deny the benefit of the fresh-
period rule to the UP would amount to injustice and absurdity – injustice,
In so declaring the judgment of the RTC as final against the UP, the CA because the judgment in question was issued on November 28, 2001 as
and the RTC applied the rule contained in the second paragraph of compared to the judgment in Neypes that was rendered in 1998;
Section 3, Rule 41 of the Rules of Court to the effect that the filing of a absurdity, because parties receiving notices of judgment and final orders
motion for reconsideration interrupted the running of the period for filing issued in the year 1998 would enjoy the benefit of the fresh-period rule
the appeal; and that the period resumed upon notice of the denial of the but the later rulings of the lower courts like that herein would not. 105
motion for reconsideration. For that reason, the CA and the RTC might
not be taken to task for strictly adhering to the rule then prevailing. Consequently, even if the reckoning started from May 17, 2002, when
Atty. Nolasco received the denial, the UP’s filing on June 3, 2002 of the
notice of appeal was not tardy within the context of the fresh-period
rule. For the UP, the fresh period of 15-days counted from service of the
denial of the motion for reconsideration would end on June 1, 2002, and the Rules of Court require not only that a decision should state the
which was a Saturday. Hence, the UP had until the next working day, or ultimate facts but also that it should specify the supporting evidentiary
June 3, 2002, a Monday, within which to appeal, conformably with facts, for they are what are called the findings of fact.
Section 1 of Rule 22, Rules of Court, which holds that: "If the last day of
the period, as thus computed, falls on a Saturday, a Sunday, or a legal The importance of the findings of fact and of law cannot be overstated.
holiday in the place where the court sits, the time shall not run until the The reason and purpose of the Constitution and the Rules of Court in
next working day." that regard are obviously to inform the parties why they win or lose, and
what their rights and obligations are. Only thereby is the demand of due
IV process met as to the parties. As Justice Isagani A. Cruz explained
Awards of monetary damages, in Nicos Industrial Corporation v. Court of Appeals:108
being devoid of factual and legal bases,
did not attain finality and should be deleted It is a requirement of due process that the parties to a litigation be
informed of how it was decided, with an explanation of the factual and
Section 14 of Article VIII of the Constitution prescribes that express legal reasons that led to the conclusions of the court. The court cannot
findings of fact and of law should be made in the decision rendered by simply say that judgment is rendered in favor of X and against Y and just
any court, to wit: leave it at that without any justification whatsoever for its action. The
losing party is entitled to know why he lost, so he may appeal to a
Section 14. No decision shall be rendered by any court without higher court, if permitted, should he believe that the decision should be
expressing therein clearly and distinctly the facts and the law on which it reversed. A decision that does not clearly and distinctly state the facts
is based. and the law on which it is based leaves the parties in the dark as to how
No petition for review or motion for reconsideration of a decision of the it was reached and is especially prejudicial to the losing party, who is
court shall be refused due course or denied without stating the legal unable to pinpoint the possible errors of the court for review by a higher
basis therefor. tribunal.

Implementing the constitutional provision in civil actions is Section 1 of Here, the decision of the RTC justified the grant of actual and moral
Rule 36, Rules of Court, viz: damages, and attorney’s fees in the following terse manner, viz:

Section 1. Rendition of judgments and final orders. — A judgment or xxx The Court is not unmindful that due to defendants’ unjustified
final order determining the merits of the case shall be in writing refusal to pay their outstanding obligation to plaintiff, the same suffered
personally and directly prepared by the judge, stating clearly and losses and incurred expenses as he was forced to re-mortgage his house
distinctly the facts and the law on which it is based, signed by him, and and lot located in Quezon City to Metrobank (Exh. "CC") and BPI Bank
filed with the clerk of the court. (1a) just to pay its monetary obligations in the form of interest and penalties
incurred in the course of the construction of the subject project. 109
The Constitution and the Rules of Court apparently delineate two main
essential parts of a judgment, namely: the body and the decretal The statement that "due to defendants’ unjustified refusal to pay their
portion. Although the latter is the controlling part,106 the importance of outstanding obligation to plaintiff, the same suffered losses and incurred
the former is not to be lightly regarded because it is there where the expenses as he was forced to re-mortgage his house and lot located in
court clearly and distinctly states its findings of fact and of law on which Quezon City to Metrobank (Exh. "CC") and BPI Bank just to pay its
the decision is based. To state it differently, one without the other is monetary obligations in the form of interest and penalties incurred in the
ineffectual and useless. The omission of either inevitably results in a course of the construction of the subject project" was only a conclusion
judgment that violates the letter and the spirit of the Constitution and of fact and law that did not comply with the constitutional and statutory
the Rules of Court. prescription. The statement specified no detailed expenses or losses
constituting the ₱ 5,716,729.00 actual damages sustained by Stern
The term findings of fact that must be found in the body of the decision Builders in relation to the construction project or to other pecuniary
refers to statements of fact, not to conclusions of law.107 Unlike in hardships. The omission of such expenses or losses directly indicated
pleadings where ultimate facts alone need to be stated, the Constitution that Stern Builders did not prove them at all, which then contravened
Article 2199, Civil Code, the statutory basis for the award of actual attorney’s fees being allowed in the concept of actual damages, 117 their
damages, which entitled a person to an adequate compensation only for amounts must be factually and legally justified in the body of the
such pecuniary loss suffered by him as he has duly proved. As such, the decision and not stated for the first time in the decretal
actual damages allowed by the RTC, being bereft of factual support, portion.118 Stating the amounts only in the dispositive portion of the
were speculative and whimsical. Without the clear and distinct findings judgment is not enough;119 a rendition of the factual and legal
of fact and law, the award amounted only to an ipse dixit on the part of justifications for them must also be laid out in the body of the
the RTC,110 and did not attain finality. decision.120
There was also no clear and distinct statement of the factual and legal That the attorney’s fees granted to the private respondents did not
support for the award of moral damages in the substantial amount of ₱ satisfy the foregoing requirement suffices for the Court to undo
10,000,000.00. The award was thus also speculative and whimsical. Like them.121 The grant was ineffectual for being contrary to law and public
the actual damages, the moral damages constituted another judicial policy, it being clear that the express findings of fact and law were
ipse dixit, the inevitable consequence of which was to render the award intended to bring the case within the exception and thereby justify the
of moral damages incapable of attaining finality. In addition, the grant of award of the attorney’s fees. Devoid of such express findings, the award
moral damages in that manner contravened the law that permitted the was a conclusion without a premise, its basis being improperly left to
recovery of moral damages as the means to assuage "physical suffering, speculation and conjecture.122
mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury." 111 The Nonetheless, the absence of findings of fact and of any statement of the
contravention of the law was manifest considering that Stern Builders, law and jurisprudence on which the awards of actual and moral
as an artificial person, was incapable of experiencing pain and moral damages, as well as of attorney’s fees, were based was a fatal flaw that
sufferings.112 Assuming that in granting the substantial amount of ₱ invalidated the decision of the RTC only as to such awards. As the Court
10,000,000.00 as moral damages, the RTC might have had in mind that declared in Velarde v. Social Justice Society,123 the failure to comply with
dela Cruz had himself suffered mental anguish and anxiety. If that was the constitutional requirement for a clear and distinct statement of the
the case, then the RTC obviously disregarded his separate and distinct supporting facts and law "is a grave abuse of discretion amounting to
personality from that of Stern Builders.113 Moreover, his moral and lack or excess of jurisdiction" and that "(d)ecisions or orders issued in
emotional sufferings as the President of Stern Builders were not the careless disregard of the constitutional mandate are a patent nullity and
sufferings of Stern Builders. Lastly, the RTC violated the basic principle must be struck down as void."124 The other item granted by the RTC (i.e.,
that moral damages were not intended to enrich the plaintiff at the ₱ 503,462.74) shall stand, subject to the action of the COA as stated
expense of the defendant, but to restore the plaintiff to his status quo herein.
ante as much as possible. Taken together, therefore, all these WHEREFORE, the Court GRANTS the petition for review on
considerations exposed the substantial amount of ₱ 10,000,000.00 certiorari; REVERSES and SETS ASIDE the decision of the Court of
allowed as moral damages not only to be factually baseless and legally Appeals under review; ANNULS the orders for the garnishment of the
indefensible, but also to be unconscionable, inequitable and funds of the University of the Philippines and for the release of the
unreasonable. garnished amount to Stern Builders Corporation and Servillano dela
Like the actual and moral damages, the ₱ 150,000.00, plus ₱ 1,500.00 Cruz; and DELETES from the decision of the Regional Trial Court dated
per appearance, granted as attorney’s fees were factually unwarranted November 28, 2001 for being void only the awards of actual damages of
and devoid of legal basis. The general rule is that a successful litigant ₱ 5,716,729.00, moral damages of ₱ 10,000,000.00, and attorney's fees
cannot recover attorney’s fees as part of the damages to be assessed of ₱ 150,000.00, plus ₱ 1,500.00 per appearance, in favor of Stern
against the losing party because of the policy that no premium should Builders Corporation and Servillano dela Cruz.
be placed on the right to litigate.114 Prior to the effectivity of the present The Court ORDERS Stem Builders Corporation and Servillano dela Cruz
Civil Code, indeed, such fees could be recovered only when there was a to redeposit the amount of ₱ 16,370,191.74 within 10 days from receipt
stipulation to that effect. It was only under the present Civil Code that of this decision.
the right to collect attorney’s fees in the cases mentioned in Article
2208115 of the Civil Code came to be recognized.116 Nonetheless, with Costs of suit to be paid by the private respondents.
SO ORDERED. Petitioner is the Holy See who exercises sovereignty over the Vatican
City in Rome, Italy, and is represented in the Philippines by the Papal
LUCAS P. BERSAMIN Nuncio.
Associate Justice
WE CONCUR: Private respondent, Starbright Sales Enterprises, Inc., is a domestic
corporation engaged in the real estate business.

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

G.R. No. 101949 December 1, 1994

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
THE HOLY SEE, petitioner, to the sale to private respondent.
vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the
In view of the refusal of the squatters to vacate the lots sold to private
Regional Trial Court of Makati, Branch 61 and STARBRIGHT
respondent, a dispute arose as to who of the parties has the
SALES ENTERPRISES, INC., respondents.
responsibility of evicting and clearing the land of squatters.
Complicating the relations of the parties was the sale by petitioner of Lot
Padilla Law Office for petitioner. 5-A to Tropicana Properties and Development Corporation (Tropicana).

Siguion Reyna, Montecillo & Ongsiako for private respondent. I

On January 23, 1990, private respondent filed a complaint with the

QUIASON, J.: Regional Trial Court, Branch 61, Makati, Metro Manila for annulment of
the sale of the three parcels of land, and specific performance and
This is a petition for certiorari under Rule 65 of the Revised Rules of damages against petitioner, represented by the Papal Nuncio, and three
Court to reverse and set aside the Orders dated June 20, 1991 and other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and
September 19, 1991 of the Regional Trial Court, Branch 61, Makati, Tropicana (Civil Case No.
Metro Manila in Civil Case No. 90-183. 90-183).

The Order dated June 20, 1991 denied the motion of petitioner to The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on
dismiss the complaint in Civil Case No. 90-183, while the Order dated behalf of petitioner and the PRC, agreed to sell to Ramon Licup Lots 5-A,
September 19, 1991 denied the motion for reconsideration of the June 5-B and 5-D at the price of P1,240.00 per square meters; (2) the
20,1991 Order. 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 Purpose of Establishing Factual Allegation for claim of Immunity as a
the sellers of the said assignment; (5) thereafter, private respondent Jurisdictional Defense." So as to facilitate the determination of its
demanded from Msgr. Cirilos that the sellers fulfill their undertaking and defense of sovereign immunity, petitioner prayed that a hearing be
clear the property of squatters; however, Msgr. Cirilos informed private conducted to allow it to establish certain facts upon which the said
respondent of the squatters' refusal to vacate the lots, proposing instead defense is based. Private respondent opposed this motion as well as the
either that private respondent undertake the eviction or that the earnest motion for reconsideration.
money be returned to the latter; (6) private respondent counterproposed
that if it would undertake the eviction of the squatters, the purchase On October 1, 1991, the trial court issued an order deferring the
price of the lots should be reduced from P1,240.00 to P1,150.00 per resolution on the motion for reconsideration until after trial on the merits
square meter; (7) Msgr. Cirilos returned the earnest money of and directing petitioner to file its answer (Rollo, p. 22).
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) Petitioner forthwith elevated the matter to us. In its petition, petitioner
private respondent sent the earnest money back to the sellers, but later invokes the privilege of sovereign immunity only on its own behalf and
discovered that on March 30, 1989, petitioner and the PRC, without on behalf of its official representative, the Papal Nuncio.
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 On December 9, 1991, a Motion for Intervention was filed before us by
were cancelled, transferred and registered in the name of Tropicana; (9) the Department of Foreign Affairs, claiming that it has a legal interest in
Tropicana induced petitioner and the PRC to sell the lots to it and thus the outcome of the case as regards the diplomatic immunity of
enriched itself at the expense of private respondent; (10) private petitioner, and that it "adopts by reference, the allegations contained in
respondent demanded the rescission of the sale to Tropicana and the the petition of the Holy See insofar as they refer to arguments relative to
reconveyance of the lots, to no avail; and (11) private respondent is its claim of sovereign immunity from suit" (Rollo, p. 87).
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 Private respondent opposed the intervention of the Department of
view of the sellers' breach, it lost profits of not less than P30,000.000.00. Foreign Affairs. In compliance with the resolution of this Court, both
parties and the Department of Foreign Affairs submitted their respective
Private respondent thus prayed for: (1) the annulment of the Deeds of memoranda.
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 II
performance of the agreement to sell between it and the owners of the
lots; and (4) damages. 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
On June 8, 1990, petitioner and Msgr. Cirilos separately moved to Court can be availed of to question the order denying petitioner's motion
dismiss the complaint — petitioner for lack of jurisdiction based on to dismiss. The general rule is that an order denying a motion to dismiss
sovereign immunity from suit, and Msgr. Cirilos for being an improper is not reviewable by the appellate courts, the remedy of the movant
party. An opposition to the motion was filed by private respondent. 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
On June 20, 1991, the trial court issued an order denying, among others, when it is very clear in the records that the trial court has no alternative
petitioner's motion to dismiss after finding that petitioner "shed off [its] but to dismiss the complaint (Philippine National Bank v. Florendo, 206
sovereign immunity by entering into the business contract in question" SCRA 582 [1992]; Zagada v. Civil Service Commission, 216 SCRA 114
(Rollo, pp. 20-21). [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.
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
The other procedural question raised by private respondent is the In some cases, the defense of sovereign immunity was submitted
personality or legal interest of the Department of Foreign Affairs to directly to the local courts by the respondents through their private
intervene in the case in behalf of the Holy See (Rollo, pp. 186-190). counsels (Raquiza v. Bradford, 75 Phil. 50 [1945]; Miquiabas v.
Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of
In Public International Law, when a state or international agency wishes America v. Guinto, 182 SCRA 644 [1990] and companion cases). In cases
to plead sovereign or diplomatic immunity in a foreign court, it requests where the foreign states bypass the Foreign Office, the courts can
the Foreign Office of the state where it is sued to convey to the court inquire into the facts and make their own determination as to the nature
that said defendant is entitled to immunity. of the acts and transactions involved.

In the United States, the procedure followed is the process of III

"suggestion," where the foreign state or the international organization
sued in an American court requests the Secretary of State to make a The burden of the petition is that respondent trial court has no
determination as to whether it is entitled to immunity. If the Secretary of jurisdiction over petitioner, being a foreign state enjoying sovereign
State finds that the defendant is immune from suit, he, in turn, asks the immunity. On the other hand, private respondent insists that the
Attorney General to submit to the court a "suggestion" that the doctrine of non-suability is not anymore absolute and that petitioner has
defendant is entitled to immunity. In England, a similar procedure is divested itself of such a cloak when, of its own free will, it entered into a
followed, only the Foreign Office issues a certification to that effect commercial transaction for the sale of a parcel of land located in the
instead of submitting a "suggestion" (O'Connell, I International Law 130 Philippines.
[1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities
and Obligations, 50 Yale Law Journal 1088 [1941]). A. The Holy See

In the Philippines, the practice is for the foreign government or the Before we determine the issue of petitioner's non-suability, a brief look
international organization to first secure an executive endorsement of its into its status as a sovereign state is in order.
claim of sovereign or diplomatic immunity. But how the Philippine
Foreign Office conveys its endorsement to the courts varies. Before the annexation of the Papal States by Italy in 1870, the Pope was
In International Catholic Migration Commission v. Calleja, 190 SCRA 130 the monarch and he, as the Holy See, was considered a subject of
(1990), the Secretary of Foreign Affairs just sent a letter directly to the International Law. With the loss of the Papal States and the limitation of
Secretary of Labor and Employment, informing the latter that the the territory under the Holy See to an area of 108.7 acres, the position of
respondent-employer could not be sued because it enjoyed diplomatic the Holy See in International Law became controversial (Salonga and
immunity. In World Health Organization v. Aquino, 48 SCRA 242 (1972), Yap, Public International Law 36-37 [1992]).
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 In 1929, Italy and the Holy See entered into the Lateran Treaty, where
behalf of the Commander of the United States Naval Base at Olongapo Italy recognized the exclusive dominion and sovereign jurisdiction of the
City, Zambales, a "suggestion" to respondent Judge. The Solicitor Holy See over the Vatican City. It also recognized the right of the Holy
General embodied the "suggestion" in a Manifestation and Memorandum See to receive foreign diplomats, to send its own diplomats to foreign
as amicus curiae. countries, and to enter into treaties according to International Law
(Garcia, Questions and Problems In International Law, Public and Private
81 [1948]).
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 The Lateran Treaty established the statehood of the Vatican City "for the
its memorandum in support of petitioner's claim of sovereign immunity. 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 incorporated as part of the law of the land as a condition and
whether the statehood is vested in the Holy See or in the Vatican City. consequence of our admission in the society of nations (United States of
Some writers even suggested that the treaty created two international America v. Guinto, 182 SCRA 644 [1990]).
persons — the Holy See and Vatican City (Salonga and Yap, supra, 37).
There are two conflicting concepts of sovereign immunity, each widely
The Vatican City fits into none of the established categories of states, held and firmly established. According to the classical or absolute
and the attribution to it of "sovereignty" must be made in a sense theory, a sovereign cannot, without its consent, be made a respondent
different from that in which it is applied to other states (Fenwick, in the courts of another sovereign. According to the newer or restrictive
International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In theory, the immunity of the sovereign is recognized only with regard to
a community of national states, the Vatican City represents an entity public acts or acts jure imperii of a state, but not with regard to private
organized not for political but for ecclesiastical purposes and acts or acts jure gestionis
international objects. Despite its size and object, the Vatican City has an (United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and
independent government of its own, with the Pope, who is also head of Defensor-Santiago, Public International Law 194 [1984]).
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 Some states passed legislation to serve as guidelines for the executive
world. Indeed, the world-wide interests and activities of the Vatican City or judicial determination when an act may be considered as jure
are such as to make it in a sense an "international state" gestionis. The United States passed the Foreign Sovereign Immunities
(Fenwick, supra., 125; Kelsen, Principles of International Law 160 Act of 1976, which defines a commercial activity as "either a regular
[1956]). course of commercial conduct or a particular commercial transaction or
act." Furthermore, the law declared that the "commercial character of
One authority wrote that the recognition of the Vatican City as a state the activity shall be determined by reference to the nature of the course
has significant implication — that it is possible for any entity pursuing of conduct or particular transaction or act, rather than by reference to its
objects essentially different from those pursued by states to be invested purpose." The Canadian Parliament enacted in 1982 an Act to Provide
with international personality (Kunz, The Status of the Holy See in For State Immunity in Canadian Courts. The Act defines a "commercial
International Law, 46 The American Journal of International Law 308 activity" as any particular transaction, act or conduct or any regular
[1952]). course of conduct that by reason of its nature, is of a "commercial
character."
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, The restrictive theory, which is intended to be a solution to the host of
one can conclude that in the Pope's own view, it is the Holy See that is problems involving the issue of sovereign immunity, has created
the international person. problems of its own. Legal treatises and the decisions in countries which
follow the restrictive theory have difficulty in characterizing whether a
The Republic of the Philippines has accorded the Holy See the status of a contract of a sovereign state with a private party is an act jure
foreign sovereign. The Holy See, through its Ambassador, the Papal gestionis or an act jure imperii.
Nuncio, has had diplomatic representations with the Philippine
government since 1957 (Rollo, p. 87). This appears to be the universal The restrictive theory came about because of the entry of sovereign
practice in international relations. states into purely commercial activities remotely connected with the
discharge of governmental functions. This is particularly true with
B. Sovereign Immunity respect to the Communist states which took control of nationalized
business activities and international trading.
As expressed in Section 2 of Article II of the 1987 Constitution, we have
adopted the generally accepted principles of International Law. Even This Court has considered the following transactions by a foreign state
without this affirmation, such principles of International Law are deemed with private parties as acts jure imperii: (1) the lease by a foreign
government of apartment buildings for use of its military officers (Syquia In the case at bench, if petitioner has bought and sold lands in the
v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for the ordinary course of a real estate business, surely the said transaction can
repair of a wharf at a United States Naval Station (United States of be categorized as an act jure gestionis. However, petitioner has denied
America v. Ruiz, supra.); and (3) the change of employment status of that the acquisition and subsequent disposal of Lot 5-A were made for
base employees (Sanders v. Veridiano, 162 SCRA 88 [1988]). profit but claimed that it acquired said property for the site of its mission
or the Apostolic Nunciature in the Philippines. Private respondent failed
On the other hand, this Court has considered the following transactions to dispute said claim.
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, Lot 5-A was acquired by petitioner as a donation from the Archdiocese of
a cafeteria, a bakery, a store, and a coffee and pastry shop at the John Manila. The donation was made not for commercial purpose, but for the
Hay Air Station in Baguio City, to cater to American servicemen and the use of petitioner to construct thereon the official place of residence of
general public (United States of America v. Rodrigo, 182 SCRA 644 the Papal Nuncio. The right of a foreign sovereign to acquire property,
[1990]); and (2) the bidding for the operation of barber shops in Clark real or personal, in a receiving state, necessary for the creation and
Air Base in Angeles City (United States of America v. Guinto, 182 SCRA maintenance of its diplomatic mission, is recognized in the 1961 Vienna
644 [1990]). The operation of the restaurants and other facilities open to Convention on Diplomatic Relations (Arts. 20-22). This treaty was
the general public is undoubtedly for profit as a commercial and not a concurred in by the Philippine Senate and entered into force in the
governmental activity. By entering into the employment contract with Philippines on November 15, 1965.
the cook in the discharge of its proprietary function, the United States
government impliedly divested itself of its sovereign immunity from suit. In Article 31(a) of the Convention, a diplomatic envoy is granted
immunity from the civil and administrative jurisdiction of the receiving
In the absence of legislation defining what activities and transactions state over any real action relating to private immovable property
shall be considered "commercial" and as constituting acts jure gestionis, situated in the territory of the receiving state which the envoy holds on
we have to come out with our own guidelines, tentative they may be. 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
Certainly, the mere entering into a contract by a foreign state with a should immunity be recognized as regards the sovereign itself, which in
private party cannot be the ultimate test. Such an act can only be the this case is the Holy See.
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 The decision to transfer the property and the subsequent disposal
state is not engaged regularly in a business or trade, the particular act thereof are likewise clothed with a governmental character. Petitioner
or transaction must then be tested by its nature. If the act is in pursuit of did not sell Lot
a sovereign activity, or an incident thereof, then it is an act jure imperii, 5-A for profit or gain. It merely wanted to dispose off the same because
especially when it is not undertaken for gain or profit. the squatters living thereon made it almost impossible for petitioner to
use it for the purpose of the donation. The fact that squatters have
As held in United States of America v. Guinto, (supra): occupied and are still occupying the lot, and that they stubbornly refuse
to leave the premises, has been admitted by private respondent in its
There is no question that the United States of America, complaint (Rollo, pp. 26, 27).
like any other state, will be deemed to have impliedly
waived its non-suability if it has entered into a contract in The issue of petitioner's non-suability can be determined by the trial
its proprietary or private capacity. It is only when the court without going to trial in the light of the pleadings, particularly the
contract involves its sovereign or governmental capacity admission of private respondent. Besides, the privilege of sovereign
that no such waiver may be implied. 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 According to the Permanent Court of International Justice, the forerunner
that the Embassy of the Holy See is a duly accredited diplomatic mission of the International Court of Justice:
to the Republic of the Philippines exempt from local jurisdiction and
entitled to all the rights, privileges and immunities of a diplomatic By taking up the case of one of its subjects and by
mission or embassy in this country (Rollo, pp. 156-157). The reporting to diplomatic action or international judicial
determination of the executive arm of government that a state or proceedings on his behalf, a State is in reality asserting its
instrumentality is entitled to sovereign or diplomatic immunity is a own rights — its right to ensure, in the person of its
political question that is conclusive upon the courts (International subjects, respect for the rules of international law (The
Catholic Migration Commission v. Calleja, 190 SCRA 130 [1990]). Where Mavrommatis Palestine Concessions, 1 Hudson, World
the plea of immunity is recognized and affirmed by the executive Court Reports 293, 302 [1924]).
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 WHEREFORE, the petition for certiorari is GRANTED and the complaint in
country's foreign relations (World Health Organization v. Aquino, 48 Civil Case No. 90-183 against petitioner is DISMISSED.
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. SO ORDERED.

Ordinarily, the procedure would be to remand the case and order the Narvasa, C.J., Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno,
trial court to conduct a hearing to establish the facts alleged by Vitug, Kapunan and Mendoza, JJ., concur.
petitioner in its motion. In view of said certification, such procedure
would however be pointless and unduly circuitous (Ortigas & Co. Ltd. Padilla, J., took no part.
Partnership v. Judge Tirso Velasco, G.R. No. 109645, July 25, 1994).
Feliciano, J., is on leave.
IV
Republic of the Philippines
Private respondent is not left without any legal remedy for the redress of SUPREME COURT
its grievances. Under both Public International Law and Transnational Manila
Law, a person who feels aggrieved by the acts of a foreign sovereign can
ask his own government to espouse his cause through diplomatic EN BANC
channels.
G.R. No. L-35645 May 22, 1985
Private respondent can ask the Philippine government, through the
Foreign Office, to espouse its claims against the Holy See. Its first task is UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY,
to persuade the Philippine government to take up with the Holy See the WILLIAM I. COLLINS and ROBERT GOHIER, petitioners,
validity of its claims. Of course, the Foreign Office shall first make a vs.
determination of the impact of its espousal on the relations between the HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First
Philippine government and the Holy See (Young, Remedies of Private Instance of Rizal and ELIGIO DE GUZMAN & CO.,
Claimants Against Foreign States, Selected Readings on Protection by INC., respondents.
Law of Private Foreign Investments 905, 919 [1964]). Once the
Philippine government decides to espouse the claim, the latter ceases to Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners.
be a private cause.
Albert, Vergara, Benares, Perias & Dominguez Law Office for
respondents.
 William I. Collins and Robert Gohier all members of the Engineering
ABAD SANTOS, J.: 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
This is a petition to review, set aside certain orders and restrain the that specific performance was no longer possible, to order the
respondent judge from trying Civil Case No. 779M of the defunct Court of defendants to pay damages. The company also asked for the issuance of
First Instance of Rizal. a writ of preliminary injunction to restrain the defendants from entering
into contracts with third parties for work on the projects.
The factual background is as follows:
The defendants entered their special appearance for the purpose only of
At times material to this case, the United States of America had a naval questioning the jurisdiction of this court over the subject matter of the
base in Subic, Zambales. The base was one of those provided in the complaint and the persons of defendants, the subject matter of the
Military Bases Agreement between the Philippines and the United States. 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
Sometime in May, 1972, the United States invited the submission of bids action asserted in the complaint." (Rollo, p. 50.)
for the following projects
Subsequently the defendants filed a motion to dismiss the complaint
1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic which included an opposition to the issuance of the writ of preliminary
Bay, Philippines. injunction. The company opposed the motion. The trial court denied the
motion and issued the writ. The defendants moved twice to reconsider
2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon but to no avail. Hence the instant petition which seeks to restrain
damage to shoreline revetment, NAVBASE Subic; and repair to Leyte perpetually the proceedings in Civil Case No. 779-M for lack of
Wharf approach, NAVBASE Subic Bay, Philippines. jurisdiction on the part of the trial court.

Eligio de Guzman & Co., Inc. responded to the invitation and submitted The petition is highly impressed with merit.
bids. Subsequent thereto, the company received from the United States
two telegrams requesting it to confirm its price proposals and for the The traditional rule of State immunity exempts a State from being sued
name of its bonding company. The company complied with the requests. in the courts of another State without its consent or waiver. This rule is a
[In its complaint, the company alleges that the United States had necessary consequence of the principles of independence and equality
accepted its bids because "A request to confirm a price proposal of States. However, the rules of International Law are not petrified; they
confirms the acceptance of a bid pursuant to defendant United States' are constantly developing and evolving. And because the activities of
bidding practices." (Rollo, p. 30.) The truth of this allegation has not states have multiplied, it has been necessary to distinguish them-
been tested because the case has not reached the trial stage.] between sovereign and governmental acts (jure imperii) and private,
commercial and proprietary acts (jure gestionis). The result is that State
In June, 1972, the company received a letter which was signed by immunity now extends only to acts jure imperil The restrictive
Wilham I. Collins, Director, Contracts Division, Naval Facilities application of State immunity is now the rule in the United States, the
Engineering Command, Southwest Pacific, Department of the Navy of United Kingdom and other states in western Europe. (See Coquia and
the United States, who is one of the petitioners herein. The letter said Defensor Santiago, Public International Law, pp. 207-209 [1984].)
that the company did not qualify to receive an award for the projects
because of its previous unsatisfactory performance rating on a repair The respondent judge recognized the restrictive doctrine of State
contract for the sea wall at the boat landings of the U.S. Naval Station in immunity when he said in his Order denying the defendants' (now
Subic Bay. The letter further said that the projects had been awarded to petitioners) motion: " A distinction should be made between a strictly
third parties. In the abovementioned Civil Case No. 779-M, the company governmental function of the sovereign state from its private,
sued the United States of America and Messrs. James E. Galloway,
proprietary or non- governmental acts (Rollo, p. 20.) However, the It appearing in the complaint that appellant has not
respondent judge also said: "It is the Court's considered opinion that complied with the procedure laid down in Article XXI of the
entering into a contract for the repair of wharves or shoreline is certainly contract regarding the prosecution of its claim against the
not a governmental function altho it may partake of a public nature or United States Government, or, stated differently, it has
character. As aptly pointed out by plaintiff's counsel in his reply citing failed to first exhaust its administrative remedies against
the ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)], and which said Government, the lower court acted properly in
this Court quotes with approval, viz.: dismissing this case.(At p. 598.)

It is however contended that when a sovereign state It can thus be seen that the statement in respect of the waiver of State
enters into a contract with a private person, the state can immunity from suit was purely gratuitous and, therefore, obiter so that it
be sued upon the theory that it has descended to the level has no value as an imperative authority.
of an individual from which it can be implied that it has
given its consent to be sued under the contract. ... The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign
xxx xxx xxx sovereign, its commercial activities or economic affairs. Stated
differently, a State may be said to have descended to the level of an
We agree to the above contention, and considering that individual and can thus be deemed to have tacitly given its consent to
the United States government, through its agency at be sued only when it enters into business contracts. It does not apply
Subic Bay, entered into a contract with appellant for where the contract relates to the exercise of its sovereign functions. In
stevedoring and miscellaneous labor services within the this case the projects are an integral part of the naval base which is
Subic Bay Area, a U.S. Naval Reservation, it is evident that devoted to the defense of both the United States and the Philippines,
it can bring an action before our courts for any contractual indisputably a function of the government of the highest order; they are
liability that that political entity may assume under the not utilized for nor dedicated to commercial or business purposes.
contract. The trial court, therefore, has jurisdiction to
entertain this case ... (Rollo, pp. 20-21.) 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
The reliance placed on Lyons by the respondent judge is misplaced for shown in Syquia vs. Lopez, 84 Phil. 312 (1949). In that case the plaintiffs
the following reasons: leased three apartment buildings to the United States of America for the
use of its military officials. The plaintiffs sued to recover possession of
In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff the premises on the ground that the term of the leases had expired.
brought suit in the Court of First Instance of Manila to collect several They also asked for increased rentals until the apartments shall have
sums of money on account of a contract between plaintiff and been vacated.
defendant. The defendant filed a motion to dismiss on the ground that
the court had no jurisdiction over defendant and over the subject matter The defendants who were armed forces officers of the United States
of the action. The court granted the motion on the grounds that: (a) it moved to dismiss the suit for lack of jurisdiction in the part of the court.
had no jurisdiction over the defendant who did not give its consent to The Municipal Court of Manila granted the motion to dismiss; sustained
the suit; and (b) plaintiff failed to exhaust the administrative remedies by the Court of First Instance, the plaintiffs went to this Court for review
provided in the contract. The order of dismissal was elevated to this on certiorari. In denying the petition, this Court said:
Court for review.
On the basis of the foregoing considerations we are of the
In sustaining the action of the lower court, this Court said: 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 MAKASIAR, J., dissenting:
and their 64 co-defendants but by the said U.S.
Government. On the basis of the ruling in the case of Land The petition should be dismissed and the proceedings in Civil Case No.
vs. Dollar already cited, and on what we have already 779-M in the defunct CFI (now RTC) of Rizal be allowed to continue
stated, the present action must be considered as one therein.
against the U.S. Government. It is clear hat the courts of
the Philippines including the Municipal Court of Manila In the case of Lyons vs. the United States of America (104 Phil. 593),
have no jurisdiction over the present case for unlawful where the contract entered into between the plaintiff (Harry Lyons, Inc.)
detainer. The question of lack of jurisdiction was raised and the defendant (U.S. Government) involved stevedoring and labor
and interposed at the very beginning of the action. The services within the Subic Bay area, this Court further stated that
U.S. Government has not , given its consent to the filing of inasmuch as ". . . the United States Government. through its agency at
this suit which is essentially against her, though not in Subic Bay, entered into a contract with appellant for stevedoring and
name. Moreover, this is not only a case of a citizen filing a miscellaneous labor services within the Subic Bay area, a U.S. Navy
suit against his own Government without the latter's Reservation, it is evident that it can bring an action before our courts for
consent but it is of a citizen filing an action against a any contractual liability that that political entity may assume under the
foreign government without said government's consent, contract."
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 When the U.S. Government, through its agency at Subic Bay, confirmed
we deem it unnecessary to cite authorities in support the acceptance of a bid of a private company for the repair of wharves
thereof. (At p. 323.) 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
In Syquia,the United States concluded contracts with private individuals sued, therefore, is implied from its act of entering into a contract (Santos
but the contracts notwithstanding the States was not deemed to have vs. Santos, 92 Phil. 281, 284).
given or waived its consent to be sued for the reason that the contracts
were for jure imperii and not for jure gestionis.
Justice and fairness dictate that a foreign government that commits a
breach of its contractual obligation in the case at bar by the unilateral
WHEREFORE, the petition is granted; the questioned orders of the cancellation of the award for the project by the United States
respondent judge are set aside and Civil Case No. is dismissed. Costs government, through its agency at Subic Bay should not be allowed to
against the private respondent. take undue advantage of a party who may have legitimate claims
against it by seeking refuge behind the shield of non-suability. A contrary
Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera, Plana, * Escolin, view would render a Filipino citizen, as in the instant case, helpless and
Relova, Gutierrez, Jr., De la Fuente, Cuevas and Alampay, JJ., concur. 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.
Fernando, C.J., took no part.
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
Separate Opinions 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 One glaring fact of modern day civilization is that a big and powerful
of morals. nation, like the United States of America, can always overwhelm small
and weak nations. The declaration in the United Nations Charter that its
Moral principles and principles of justice are as valid and member states are equal and sovereign, becomes hollow and
applicable as well with regard to private individuals as meaningless because big nations wielding economic and military
with regard to governments either domestic or foreign. superiority impose upon and dictate to small nations, subverting their
Once a foreign government enters into a private contract sovereignty and dignity as nations. Thus, more often than not, when U.S.
with the private citizens of another country, such foreign interest clashes with the interest of small nations, the American
government cannot shield its non-performance or governmental agencies or its citizens invoke principles of international
contravention of the terms of the contract under the cloak law for their own benefit.
of non-jurisdiction. To place such foreign government
beyond the jurisdiction of the domestic courts is to give In the case at bar, the efficacy of the contract between the U.S. Naval
approval to the execution of unilateral contracts, authorities at Subic Bay on one hand, and herein private respondent on
graphically described in Spanish as 'contratos leoninos', the other, was honored more in the breach than in the compliance The
because one party gets the lion's share to the detriment opinion of the majority will certainly open the floodgates of more
of the other. To give validity to such contract is to sanctify violations of contractual obligations. American authorities or any foreign
bad faith, deceit, fraud. We prefer to adhere to the thesis government in the Philippines for that matter, dealing with the citizens
that all parties in a private contract, including of this country, can conveniently seek protective cover under the
governments and the most powerful of them, are majority opinion. The result is disastrous to the Philippines.
amenable to law, and that such contracts are enforceable
through the help of the courts of justice with jurisdiction to This opinion of the majority manifests a neo-colonial mentality. It fosters
take cognizance of any violation of such contracts if the economic imperialism and foreign political ascendancy in our Republic.
same had been entered into only by private individuals.
The doctrine of government immunity from suit cannot and should not
Constant resort by a foreign state or its agents to the doctrine of State serve as an instrument for perpetrating an injustice on a citizen
immunity in this jurisdiction impinges unduly upon our sovereignty and (Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA 360;
dignity as a nation. Its application will particularly discourage Filipino or Ministerio vs. Court of First Instance, L-31635, August 31, 1971, 40 SCRA
domestic contractors from transacting business and entering into 464).
contracts with United States authorities or facilities in the Philippines
whether naval, air or ground forces-because the difficulty, if not Under the doctrine of implied waiver of its non-suability, the United
impossibility, of enforcing a validly executed contract and of seeking States government, through its naval authorities at Subic Bay, should be
judicial remedy in our own courts for breaches of contractual obligation held amenable to lawsuits in our country like any other juristic person.
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 The invocation by the petitioner United States of America is not in
contracts for services or supplies with the various U.S. offices and accord with paragraph 3 of Article III of the original RP-US Military Bases
agencies operating in the Philippines. 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. . ."
The sanctity of upholding agreements freely entered into by the parties (Emphasis supplied).
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. 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 The majority opinion seems to mock the provision of paragraph 1 of the
employees ... and continuing favorable employer-employee relations ..." joint statement of President Marcos and Vice-President Mondale of the
and "(B)elieving that an agreement will be mutually beneficial and will United States dated May 4, 1978 that "the United States re-affirms that
strengthen the democratic institutions cherished by both Philippine sovereignty extends over the bases and that Its base shall be
Governments, ... the United States Government agrees to accord under the command of a Philippine Base Commander, " which is
preferential employment of Filipino citizens in the Bases, thus (1) the supposed to underscore the joint Communique of President Marcos and
U.S. Forces in the Philippines shall fill the needs for civilian employment U.S. President Ford of December 7, 1975, under which "they affirm that
by employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of sovereign equality, territorial integrity and political independence of all
May 27, 1968). States are fundamental principles which both countries scrupulously
respect; and that "they confirm that mutual respect for the dignity of
Neither does the invocation by petitioners of state immunity from suit each nation shall characterize their friendship as well as the alliance
express fidelity to paragraph 1 of Article IV of the aforesaid amendment between their two countries. "
of May 2 7, 1968 which directs that " contractors and concessionaires
performing work for the U.S. Armed Forces shall be required by their The majority opinion negates the statement on the delineation of the
contract or concession agreements to comply with all applicable powers, duties and responsibilities of both the Philippine and American
Philippine labor laws and regulations, " even though paragraph 2 thereof Base Commanders that "in the performance of their duties, the
affirms that "nothing in this Agreement shall imply any waiver by either Philippine Base Commander and the American Base Commander shall
of the two Governments of such immunity under international law." 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
Reliance by petitioners on the non-suability of the United States and that "they shall promote cooperation understanding and
Government before the local courts, actually clashes with No. III on harmonious relations within the Base and with the general public in the
respect for Philippine law of the Memorandum of Agreement signed on proximate vicinity thereof" (par. 2 & par. 3 of the Annex covered by the
January 7, 1979, also amending RP-US Military Bases Agreement, which exchange of notes, January 7, 1979, between Ambassador Richard W.
stresses that "it is the duty of members of the United States Forces, the Murphy and Minister of Foreign Affairs Carlos P. Romulo, Emphasis
civilian component and their dependents, to respect the laws of the supplied).
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).
Separate Opinions
The foregoing duty imposed by the amendment to the Agreement is
further emphasized by No. IV on the economic and social improvement MAKASIAR, J., dissenting:
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). 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.
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 In the case of Lyons vs. the United States of America (104 Phil. 593),
conducted on the basis of the principles of equality of treatment, the where the contract entered into between the plaintiff (Harry Lyons, Inc.)
right to organize, and bargain collectively, and respect for the and the defendant (U.S. Government) involved stevedoring and labor
sovereignty of the Republic of the Philippines" (Emphasis supplied) 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 beyond the jurisdiction of the domestic courts is to give
miscellaneous labor services within the Subic Bay area, a U.S. Navy approval to the execution of unilateral contracts,
Reservation, it is evident that it can bring an action before our courts for graphically described in Spanish as 'contratos leoninos',
any contractual liability that that political entity may assume under the because one party gets the lion's share to the detriment
contract." of the other. To give validity to such contract is to sanctify
bad faith, deceit, fraud. We prefer to adhere to the thesis
When the U.S. Government, through its agency at Subic Bay, confirmed that all parties in a private contract, including
the acceptance of a bid of a private company for the repair of wharves governments and the most powerful of them, are
or shoreline in the Subic Bay area, it is deemed to have entered into a amenable to law, and that such contracts are enforceable
contract and thus waived the mantle of sovereign immunity from suit through the help of the courts of justice with jurisdiction to
and descended to the level of the ordinary citizen. Its consent to be take cognizance of any violation of such contracts if the
sued, therefore, is implied from its act of entering into a contract (Santos same had been entered into only by private individuals.
vs. Santos, 92 Phil. 281, 284).
Constant resort by a foreign state or its agents to the doctrine of State
Justice and fairness dictate that a foreign government that commits a immunity in this jurisdiction impinges unduly upon our sovereignty and
breach of its contractual obligation in the case at bar by the unilateral dignity as a nation. Its application will particularly discourage Filipino or
cancellation of the award for the project by the United States domestic contractors from transacting business and entering into
government, through its agency at Subic Bay should not be allowed to contracts with United States authorities or facilities in the Philippines
take undue advantage of a party who may have legitimate claims whether naval, air or ground forces-because the difficulty, if not
against it by seeking refuge behind the shield of non-suability. A contrary impossibility, of enforcing a validly executed contract and of seeking
view would render a Filipino citizen, as in the instant case, helpless and judicial remedy in our own courts for breaches of contractual obligation
without redress in his own country for violation of his rights committed committed by agents of the United States government, always, looms
by the agents of the foreign government professing to act in its name. large, thereby hampering the growth of Filipino enterprises and creating
a virtual monopoly in our own country by United States contractors of
Appropriate are the words of Justice Perfecto in his dissenting opinion contracts for services or supplies with the various U.S. offices and
in Syquia vs. Almeda Lopez, 84 Phil. 312, 325: agencies operating in the Philippines.

Although, generally, foreign governments are beyond the The sanctity of upholding agreements freely entered into by the parties
jurisdiction of domestic courts of justice, such rule is cannot be over emphasized. Whether the parties are nations or private
inapplicable to cases in which the foreign government individuals, it is to be reasonably assumed and expected that the
enters into private contracts with the citizens of the undertakings in the contract will be complied with in good faith.
court's jurisdiction. A contrary view would simply run
against all principles of decency and violative of all tenets One glaring fact of modern day civilization is that a big and powerful
of morals. nation, like the United States of America, can always overwhelm small
and weak nations. The declaration in the United Nations Charter that its
Moral principles and principles of justice are as valid and member states are equal and sovereign, becomes hollow and
applicable as well with regard to private individuals as meaningless because big nations wielding economic and military
with regard to governments either domestic or foreign. superiority impose upon and dictate to small nations, subverting their
Once a foreign government enters into a private contract sovereignty and dignity as nations. Thus, more often than not, when U.S.
with the private citizens of another country, such foreign interest clashes with the interest of small nations, the American
government cannot shield its non-performance or governmental agencies or its citizens invoke principles of international
contravention of the terms of the contract under the cloak law for their own benefit.
of non-jurisdiction. To place such foreign government
In the case at bar, the efficacy of the contract between the U.S. Naval Neither does the invocation by petitioners of state immunity from suit
authorities at Subic Bay on one hand, and herein private respondent on express fidelity to paragraph 1 of Article IV of the aforesaid amendment
the other, was honored more in the breach than in the compliance The of May 2 7, 1968 which directs that " contractors and concessionaires
opinion of the majority will certainly open the floodgates of more performing work for the U.S. Armed Forces shall be required by their
violations of contractual obligations. American authorities or any foreign contract or concession agreements to comply with all applicable
government in the Philippines for that matter, dealing with the citizens Philippine labor laws and regulations, " even though paragraph 2 thereof
of this country, can conveniently seek protective cover under the affirms that "nothing in this Agreement shall imply any waiver by either
majority opinion. The result is disastrous to the Philippines. of the two Governments of such immunity under international law."

This opinion of the majority manifests a neo-colonial mentality. It fosters Reliance by petitioners on the non-suability of the United States
economic imperialism and foreign political ascendancy in our Republic. Government before the local courts, actually clashes with No. III on
respect for Philippine law of the Memorandum of Agreement signed on
The doctrine of government immunity from suit cannot and should not January 7, 1979, also amending RP-US Military Bases Agreement, which
serve as an instrument for perpetrating an injustice on a citizen stresses that "it is the duty of members of the United States Forces, the
(Amigable vs. Cuenca, L-26400, February 29, 1972, 43 SCRA 360; civilian component and their dependents, to respect the laws of the
Ministerio vs. Court of First Instance, L-31635, August 31, 1971, 40 SCRA Republic of the Philippines and to abstain from any activity inconsistent
464). with the spirit of the Military Bases Agreement and, in particular, from
any political activity in the Philippines. The United States shag take all
Under the doctrine of implied waiver of its non-suability, the United measures within its authority to insure that they adhere to them
States government, through its naval authorities at Subic Bay, should be (Emphasis supplied).
held amenable to lawsuits in our country like any other juristic person.
The foregoing duty imposed by the amendment to the Agreement is
The invocation by the petitioner United States of America is not in further emphasized by No. IV on the economic and social improvement
accord with paragraph 3 of Article III of the original RP-US Military Bases of areas surrounding the bases, which directs that "moreover, the United
Agreement of March 14, 1947, which states that "in the exercise of the States Forces shall procure goods and services in the Philippines to the
above-mentioned rights, powers and authority, the United States agrees maximum extent feasible" (Emphasis supplied).
that the powers granted to it will not be used unreasonably. . ."
(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
Nor is such posture of the petitioners herein in harmony with the alterations of the Agreement of May 27, 1968, "the discussions shall be
amendment dated May 27, 1968 to the aforesaid RP-US Military Bases conducted on the basis of the principles of equality of treatment, the
Agreement, which recognizes "the need to promote and maintain sound right to organize, and bargain collectively, and respect for the
employment practices which will assure equality of treatment of all sovereignty of the Republic of the Philippines" (Emphasis supplied)
employees ... and continuing favorable employer-employee relations ..."
and "(B)elieving that an agreement will be mutually beneficial and will The majority opinion seems to mock the provision of paragraph 1 of the
strengthen the democratic institutions cherished by both joint statement of President Marcos and Vice-President Mondale of the
Governments, ... the United States Government agrees to accord United States dated May 4, 1978 that "the United States re-affirms that
preferential employment of Filipino citizens in the Bases, thus (1) the Philippine sovereignty extends over the bases and that Its base shall be
U.S. Forces in the Philippines shall fill the needs for civilian employment under the command of a Philippine Base Commander, " which is
by employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of supposed to underscore the joint Communique of President Marcos and
May 27, 1968). 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 vs.
between their two countries. " HON. RODOLFO D. RODRIGO, as Presiding Judge of Branch 7,
Regional Trial Court (BAGUIO CITY), La Trinidad, Benguet and
The majority opinion negates the statement on the delineation of the FABIAN GENOVE, respondents.
powers, duties and responsibilities of both the Philippine and American
Base Commanders that "in the performance of their duties, the G.R. No. 80018 February 26, 1990
Philippine Base Commander and the American Base Commander shall
be guided by full respect for Philippine sovereignty on the one hand and UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and
the assurance of unhampered U.S. military operations on the other hand STEVEN F. BOSTICK, petitioners,
and that "they shall promote cooperation understanding and vs.
harmonious relations within the Base and with the general public in the HON. JOSEFINA D. CEBALLOS, As Presiding Judge, Regional Trial
proximate vicinity thereof" (par. 2 & par. 3 of the Annex covered by the Court, Branch 66, Capas, Tarlac, and LUIS
exchange of notes, January 7, 1979, between Ambassador Richard W. BAUTISTA, respondents.
Murphy and Minister of Foreign Affairs Carlos P. Romulo, Emphasis
supplied). G.R. No. 80258 February 26, 1990

Footnotes UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C.

CARNS, AIC ERNEST E. RIVENBURGH, AIC ROBIN BLEVINS, SGT.
* He signed before he left. NOEL A. GONZALES, SGT. THOMAS MITCHELL, SGT. WAYNE L.
BENJAMIN, ET AL., petitioners,
vs.
HON. CONCEPCION S. ALARCON VERGARA, as Presiding Judge,
Republic of the Philippines Branch 62 REGIONAL TRIAL COURT, Angeles City, and RICKY
SUPREME COURT SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE RIVERA, EDWIN
Manila MARIANO, AKA JESSIE DOLORES SANGALANG, ET
AL., respondents.
EN BANC
Luna, Sison & Manas Law Office for petitioners.
G.R. No. 76607 February 26, 1990

UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND CRUZ, J.:

YVONNE REEVES, petitioners,
vs. These cases have been consolidated because they all involve
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, the doctrine of state immunity. The United States of America
Regional Trial Court, Angeles City, ROBERTO T. VALENCIA, was not impleaded in the complaints below but has moved to
EMERENCIANA C. TANGLAO, AND PABLO C. DEL dismiss on the ground that they are in effect suits against it to
PILAR, respondents. which it has not consented. It is now contesting the denial of its
motions by the respondent judges.
G.R. No. 79470 February 26, 1990
In G.R. No. 76607, the private respondents are suing several
UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/SGT. USAF, officers of the U.S. Air Force stationed in Clark Air Base in
WILFREDO BELSA, PETER ORASCION AND ROSE connection with the bidding conducted by them for contracts for
CARTALLA, petitioners, barber services in the said base.
On February 24, 1986, the Western Pacific Contracting Office, On the same date, July 22, 1986, the trial court denied the
Okinawa Area Exchange, U.S. Air Force, solicited bids for such application for a writ of preliminary injunction.
contracts through its contracting officer, James F. Shaw. Among
those who submitted their bids were private respondents On October 10, 1988, the trial court denied the petitioners'
Roberto T. Valencia, Emerenciana C. Tanglao, and Pablo C. del motion to dismiss, holding in part as follows:
Pilar. Valencia had been a concessionaire inside Clark for 34
years; del Pilar for 12 years; and Tanglao for 50 years. From the pleadings thus far presented to this Court
by the parties, the Court's attention is called by the
The bidding was won by Ramon Dizon, over the objection of the relationship between the plaintiffs as well as the
private respondents, who claimed that he had made a bid for defendants, including the US Government, in that
four facilities, including the Civil Engineering Area, which was prior to the bidding or solicitation in question,
not included in the invitation to bid. there was a binding contract between the plaintiffs
as well as the defendants, including the US
The private respondents complained to the Philippine Area Government. By virtue of said contract of
Exchange (PHAX). The latter, through its representatives, concession it is the Court's understanding that
petitioners Yvonne Reeves and Frederic M. Smouse explained neither the US Government nor the herein principal
that the Civil Engineering concession had not been awarded to defendants would become the employer/s of the
Dizon as a result of the February 24, 1986 solicitation. Dizon plaintiffs but that the latter are the employers
was already operating this concession, then known as the NCO themselves of the barbers, etc. with the employer,
club concession, and the expiration of the contract had been the plaintiffs herein, remitting the stipulated
extended from June 30, 1986 to August 31, 1986. They further percentage of commissions to the Philippine Area
explained that the solicitation of the CE barbershop would be Exchange. The same circumstance would become in
available only by the end of June and the private respondents effect when the Philippine Area Exchange opened
would be notified. for bidding or solicitation the questioned barber
shop concessions. To this extent, therefore, indeed
On June 30, 1986, the private respondents filed a complaint in a commercial transaction has been entered, and for
the court below to compel PHAX and the individual petitioners purposes of the said solicitation, would necessarily
to cancel the award to defendant Dizon, to conduct a rebidding be entered between the plaintiffs as well as the
for the barbershop concessions and to allow the private defendants.
respondents by a writ of preliminary injunction to continue
operating the concessions pending litigation. 1 The Court, further, is of the view that Article XVIII
of the RP-US Bases Agreement does not cover such
Upon the filing of the complaint, the respondent court issued kind of services falling under the
an ex parte order directing the individual petitioners to concessionaireship, such as a barber shop
maintain the status quo. concession. 2

On July 22, 1986, the petitioners filed a motion to dismiss and On December 11, 1986, following the filing of the herein petition
opposition to the petition for preliminary injunction on the for certiorari and prohibition with preliminary injunction, we issued a
ground that the action was in effect a suit against the United temporary restraining order against further proceedings in the court
States of America, which had not waived its non-suability. The below. 3
individual defendants, as official employees of the U.S. Air
Force, were also immune from suit. 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 Investigators (AFOSI). On the basis of the sworn statements made by
at the John Hay Air Station in Baguio City. It had been ascertained after them, an information for violation of R.A. 6425, otherwise known as the
investigation, from the testimony of Belsa Cartalla and Orascion, that Dangerous Drugs Act, was filed against Bautista in the Regional Trial
Genove had poured urine into the soup stock used in cooking the Court of Tarlac. The above-named officers testified against him at his
vegetables served to the club customers. Lamachia, as club manager, trial. As a result of the filing of the charge, Bautista was dismissed from
suspended him and thereafter referred the case to a board of arbitrators his employment. He then filed a complaint for damages against the
conformably to the collective bargaining agreement between the Center individual petitioners herein claiming that it was because of their acts
and its employees. The board unanimously found him guilty and that he was removed. 6
recommended his dismissal. This was effected on March 5, 1986, by Col.
David C. Kimball, Commander of the 3rd Combat Support Group, PACAF During the period for filing of the answer, Mariano Y. Navarro a special
Clark Air Force Base. Genove's reaction was to file Ms complaint in the counsel assigned to the International Law Division, Office of the Staff
Regional Trial Court of Baguio City against the individual petitioners. 4 Judge Advocate of Clark Air Base, entered a special appearance for the
defendants and moved for an extension within which to file an "answer
On March 13, 1987, the defendants, joined by the United States of and/or other pleadings." His reason was that the Attorney General of the
America, moved to dismiss the complaint, alleging that Lamachia, as an United States had not yet designated counsel to represent the
officer of the U.S. Air Force stationed at John Hay Air Station, was defendants, who were being sued for their official acts. Within the
immune from suit for the acts done by him in his official capacity. They extended period, the defendants, without the assistance of counsel or
argued that the suit was in effect against the United States, which had authority from the U.S. Department of Justice, filed their answer. They
not given its consent to be sued. alleged therein as affirmative defenses that they had only done their
duty in the enforcement of the laws of the Philippines inside the
This motion was denied by the respondent judge on June 4, 1987, in an American bases pursuant to the RP-US Military Bases Agreement.
order which read in part:
On May 7, 1987, the law firm of Luna, Sison and Manas, having been
It is the understanding of the Court, based on the retained to represent the defendants, filed with leave of court a motion
allegations of the complaint — which have been to withdraw the answer and dismiss the complaint. The ground invoked
hypothetically admitted by defendants upon the filing of was that the defendants were acting in their official capacity when they
their motion to dismiss — that although defendants acted did the acts complained of and that the complaint against them was in
initially in their official capacities, their going beyond what effect a suit against the United States without its consent.
their functions called for brought them out of the
protective mantle of whatever immunities they may have The motion was denied by the respondent judge in his order dated
had in the beginning. Thus, the allegation that the acts September 11, 1987, which held that the claimed immunity under the
complained of were illegal, done. with extreme bad faith Military Bases Agreement covered only criminal and not civil cases.
and with pre-conceived sinister plan to harass and finally Moreover, the defendants had come under the jurisdiction of the court
dismiss the plaintiff, gains significance. 5 when they submitted their answer.7

The petitioners then came to this Court seeking certiorari and Following the filing of the herein petition for certiorari and prohibition
prohibition with preliminary injunction. with preliminary injunction, we issued on October 14, 1987, a temporary
restraining order. 8
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 In G.R. No. 80258, a complaint for damages was filed by the private
a buy-bust operation conducted by the individual petitioners herein, respondents against the herein petitioners (except the United States of
namely, Tomi J. King, Darrel D. Dye and Stephen F. Bostick, officers of the America), for injuries allegedly sustained by the plaintiffs as a result of
U.S. Air Force and special agents of the Air Force Office of Special the acts of the defendants. 9 There is a conflict of factual allegations
here. According to the plaintiffs, the defendants beat them up, the generally accepted principles of international law that we have
handcuffed them and unleashed dogs on them which bit them in several adopted as part of the law of our land under Article II, Section 2. This
parts of their bodies and caused extensive injuries to them. The latter provision merely reiterates a policy earlier embodied in the 1935
defendants deny this and claim the plaintiffs were arrested for theft and and 1973 Constitutions and also intended to manifest our resolve to
were bitten by the dogs because they were struggling and resisting abide by the rules of the international community.
arrest, The defendants stress that the dogs were called off and the
plaintiffs were immediately taken to the medical center for treatment of Even without such affirmation, we would still be bound by the generally
their wounds. accepted principles of international law under the doctrine of
incorporation. Under this doctrine, as accepted by the majority of states,
In a motion to dismiss the complaint, the United States of America and such principles are deemed incorporated in the law of every civilized
the individually named defendants argued that the suit was in effect a state as a condition and consequence of its membership in the society
suit against the United States, which had not given its consent to be of nations. Upon its admission to such society, the state is automatically
sued. The defendants were also immune from suit under the RP-US obligated to comply with these principles in its relations with other
Bases Treaty for acts done by them in the performance of their official states.
functions.
As applied to the local state, the doctrine of state immunity is based on
The motion to dismiss was denied by the trial court in its order dated the justification given by Justice Holmes that "there can be no legal right
August 10, 1987, reading in part as follows: against the authority which makes the law on which the right
depends." 12 There are other practical reasons for the enforcement of the
The defendants certainly cannot correctly argue that they doctrine. In the case of the foreign state sought to be impleaded in the
are immune from suit. The allegations, of the complaint local jurisdiction, the added inhibition is expressed in the maxim par in
which is sought to be dismissed, had to be hypothetically parem, non habet imperium. All states are sovereign equals and cannot
admitted and whatever ground the defendants may have, assert jurisdiction over one another. A contrary disposition would, in the
had to be ventilated during the trial of the case on the language of a celebrated case, "unduly vex the peace of nations." 13
merits. The complaint alleged criminal acts against the
individually-named defendants and from the nature of While the doctrine appears to prohibit only suits against the state
said acts it could not be said that they are Acts of State, without its consent, it is also applicable to complaints filed against
for which immunity should be invoked. If the Filipinos officials of the state for acts allegedly performed by them in the
themselves are duty bound to respect, obey and submit discharge of their duties. The rule is that if the judgment against such
themselves to the laws of the country, with more reason, officials will require the state itself to perform an affirmative act to
the members of the United States Armed Forces who are satisfy the same, such as the appropriation of the amount needed to pay
being treated as guests of this country should respect, the damages awarded against them, the suit must be regarded as
obey and submit themselves to its laws. 10 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
and so was the motion for reconsideration. The defendants submitted ground that it has been filed without its consent.
their answer as required but subsequently filed their petition
for certiorari and prohibition with preliminary injunction with this Court. The doctrine is sometimes derisively called "the royal prerogative of
We issued a temporary restraining order on October 27, 1987. 11 dishonesty" because of the privilege it grants the state to defeat any
legitimate claim against it by simply invoking its non-suability. That is
II 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
The rule that a state may not be sued without its consent, now doctrine is not absolute and does not say the state may not be sued
expressed in Article XVI, Section 3, of the 1987 Constitution, is one of 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 cases below, the United States not having waived its sovereign
be sued if it consents. immunity from suit. It is emphasized that in Baer, the Court held:

The consent of the state to be sued may be manifested expressly or The invocation of the doctrine of immunity from suit of a
impliedly. Express consent may be embodied in a general law or a foreign state without its consent is appropriate. More
special law. Consent is implied when the state enters into a contract or it specifically, insofar as alien armed forces is concerned,
itself commences litigation. the starting point is Raquiza v. Bradford, a 1945 decision.
In dismissing a habeas corpus petition for the release of
The general law waiving the immunity of the state from suit is found in petitioners confined by American army authorities, Justice
Act No. 3083, under which the Philippine government "consents and Hilado speaking for the Court, cited Coleman v.
submits to be sued upon any moneyed claim involving liability arising Tennessee, where it was explicitly declared: 'It is well
from contract, express or implied, which could serve as a basis of civil settled that a foreign army, permitted to march through a
action between private parties." In Merritt v. Government of friendly country or to be stationed in it, by permission of
the Philippine Islands, 15 a special law was passed to enable a person to its government or sovereign, is exempt from the civil and
sue the government for an alleged tort. When the government enters criminal jurisdiction of the place.' Two years later, in Tubb
into a contract, it is deemed to have descended to the level of the other and Tedrow v. Griess, this Court relied on the ruling in
contracting party and divested of its sovereign immunity from suit with Raquiza v. Bradford and cited in support thereof excerpts
its implied consent. 16 Waiver is also implied when the government files from the works of the following authoritative writers:
a complaint, thus opening itself to a counterclaim. 17 Vattel, Wheaton, Hall, Lawrence, Oppenheim, Westlake,
Hyde, and McNair and Lauterpacht. Accuracy demands
The above rules are subject to qualification. Express consent is effected the clarification that after the conclusion of the Philippine-
only by the will of the legislature through the medium of a duly enacted American Military Bases Agreement, the treaty provisions
statute. 18 We have held that not all contracts entered into by the should control on such matter, the assumption being that
government will operate as a waiver of its non-suability; distinction must there was a manifestation of the submission to jurisdiction
be made between its sovereign and proprietary acts. 19 As for the filing on the part of the foreign power whenever appropriate.
of a complaint by the government, suability will result only where the More to the point is Syquia v. Almeda Lopez, where
government is claiming affirmative relief from the defendant. 20 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
In the case of the United States of America, the customary rule of owned leased to the United States armed forces stationed
international law on state immunity is expressed with more specificity in in the Manila area. A motion to dismiss on the ground of
the RP-US Bases Treaty. Article III thereof provides as follows: non-suability was filed and upheld by respondent Judge.
The matter was taken to this Court in a mandamus
It is mutually agreed that the United States shall have the proceeding. It failed. It was the ruling that respondent
rights, power and authority within the bases which are Judge acted correctly considering that the 4 action must
necessary for the establishment, use, operation and be considered as one against the U.S. Government. The
defense thereof or appropriate for the control thereof and opinion of Justice Montemayor continued: 'It is clear that
all the rights, power and authority within the limits of the the courts of the Philippines including the Municipal Court
territorial waters and air space adjacent to, or in the of Manila have no jurisdiction over the present case for
vicinity of, the bases which are necessary to provide unlawful detainer. The question of lack of jurisdiction was
access to them or appropriate for their control. raised and interposed at the very beginning of the action.
The U.S. Government has not given its consent to the
The petitioners also rely heavily on Baer v. Tizon, 21 along with several filing of this suit which is essentially against her, though
other decisions, to support their position that they are not suable in the not in name. Moreover, this is not only a case of a citizen
filing a suit against his own Government without the It bears stressing at this point that the above observations do not confer
latter's consent but it is of a citizen firing an action against on the United States of America a blanket immunity for all acts done by
a foreign government without said government's consent, it or its agents in the Philippines. Neither may the other petitioners claim
which renders more obvious the lack of jurisdiction of the that they are also insulated from suit in this country merely because
courts of his country. The principles of law behind this rule they have acted as agents of the United States in the discharge of their
are so elementary and of such general acceptance that official functions.
we deem it unnecessary to cite authorities in support
thereof then came Marvel Building Corporation v. There is no question that the United States of America, like any other
Philippine War Damage Commission, where respondent, a state, will be deemed to have impliedly waived its non-suability if it has
United States Agency established to compensate entered into a contract in its proprietary or private capacity. It is only
damages suffered by the Philippines during World War II when the contract involves its sovereign or governmental capacity that
was held as falling within the above doctrine as the suit no such waiver may be implied. This was our ruling in United States of
against it would eventually be a charge against or America v. Ruiz, 22 where the transaction in question dealt with the
financial liability of the United States Government improvement of the wharves in the naval installation at Subic Bay. As
because ... , the Commission has no funds of its own for this was a clearly governmental function, we held that the contract did
the purpose of paying money judgments.' The Syquia not operate to divest the United States of its sovereign immunity from
ruling was again explicitly relied upon in Marquez Lim v. suit. In the words of Justice Vicente Abad Santos:
Nelson, involving a complaint for the recovery of a motor
launch, plus damages, the special defense interposed The traditional rule of immunity exempts a State from
being 'that the vessel belonged to the United States being sued in the courts of another State without its
Government, that the defendants merely acted as agents consent or waiver. This rule is a necessary consequence of
of said Government, and that the United States the principles of independence and equality of States.
Government is therefore the real party in interest.' So it However, the rules of International Law are not petrified;
was in Philippine Alien Property Administration v. Castelo, they are constantly developing and evolving. And because
where it was held that a suit against Alien Property the activities of states have multiplied, it has been
Custodian and the Attorney General of the United States necessary to distinguish them — between sovereign and
involving vested property under the Trading with the governmental acts (jure imperii) and private, commercial
Enemy Act is in substance a suit against the United and proprietary acts (jure gestionis). The result is that
States. To the same effect is Parreno v. McGranery, as the State immunity now extends only to acts jure imperii The
following excerpt from the opinion of justice Tuazon clearly restrictive application of State immunity is now the rule in
shows: 'It is a widely accepted principle of international the United States, the United kingdom and other states in
law, which is made a part of the law of the land (Article II, Western Europe.
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. xxx xxx xxx
Turner, an appeal by the defendant, then Commanding
General, Philippine Command (Air Force, with office at The restrictive application of State immunity is proper only
Clark Field) from a decision ordering the return to plaintiff when the proceedings arise out of commercial
of the confiscated military payment certificates known as transactions of the foreign sovereign, its commercial
scrip money. In reversing the lower court decision, this activities or economic affairs. Stated differently, a State
Tribunal, through Justice Montemayor, relied on Syquia v. may be said to have descended to the level of an
Almeda Lopez, explaining why it could not be sustained. 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 Given the official character of the above-described letters,
devoted to the defense of both the United States and the we have to conclude that the petitioners were, legally
Philippines, indisputably a function of the government of speaking, being sued as officers of the United States
the highest order; they are not utilized for nor dedicated government. As they have acted on behalf of that
to commercial or business purposes. government, and within the scope of their authority, it is
that government, and not the petitioners personally, that
The other petitioners in the cases before us all aver they have acted in is responsible for their acts.
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 The private respondent invokes Article 2180 of the Civil Code which
may not be summarily dismissed on their mere assertion that their acts holds the government liable if it acts through a special agent. The
are imputable to the United States of America, which has not given its argument, it would seem, is premised on the ground that since the
consent to be sued. In fact, the defendants are sought to be held officers are designated "special agents," the United States government
answerable for personal torts in which the United States itself is not should be liable for their torts.
involved. If found liable, they and they alone must satisfy the judgment.
There seems to be a failure to distinguish between suability and liability
In Festejo v. Fernando, 23 a bureau director, acting without any authority and a misconception that the two terms are synonymous. Suability
whatsoever, appropriated private land and converted it into public depends on the consent of the state to be sued, liability on the
irrigation ditches. Sued for the value of the lots invalidly taken by him, applicable law and the established facts. The circumstance that a state
he moved to dismiss the complaint on the ground that the suit was in is suable does not necessarily mean that it is liable; on the other hand, it
effect against the Philippine government, which had not given its can never be held liable if it does not first consent to be sued. Liability is
consent to be sued. This Court sustained the denial of the motion and not conceded by the mere fact that the state has allowed itself to be
held that the doctrine of state immunity was not applicable. The director sued. When the state does waive its sovereign immunity, it is only giving
was being sued in his private capacity for a personal tort. the plaintiff the chance to prove, if it can, that the defendant is liable.

With these considerations in mind, we now proceed to resolve the cases The said article establishes a rule of liability, not suability. The
at hand. 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.
III
Moreover, the agent performing his regular functions is not a special
It is clear from a study of the records of G.R. No. 80018 that the agent even if he is so denominated, as in the case at bar. No less
individually-named petitioners therein were acting in the exercise of important, the said provision appears to regulate only the relations of
their official functions when they conducted the buy-bust operation the local state with its inhabitants and, hence, applies only to the
against the complainant and thereafter testified against him at his trial. Philippine government and not to foreign governments impleaded in our
The said petitioners were in fact connected with the Air Force Office of courts.
Special Investigators and were charged precisely with the function of
preventing the distribution, possession and use of prohibited drugs and We reject the conclusion of the trial court that the answer filed by the
prosecuting those guilty of such acts. It cannot for a moment be special counsel of the Office of the Sheriff Judge Advocate of Clark Air
imagined that they were acting in their private or unofficial capacity Base was a submission by the United States government to its
when they apprehended and later testified against the complainant. It jurisdiction. As we noted in Republic v. Purisima, 25 express waiver of
follows that for discharging their duties as agents of the United States, immunity cannot be made by a mere counsel of the government but
they cannot be directly impleaded for acts imputable to their principal, must be effected through a duly-enacted statute. Neither does such
which has not given its consent to be sued. As we observed in Sanders answer come under the implied forms of consent as earlier discussed.
v. Veridiano: 24
But even as we are certain that the individual petitioners in G.R. No. against them by Genove. Such defense will not prosper even if it be
80018 were acting in the discharge of their official functions, we hesitate established that they were acting as agents of the United States when
to make the same conclusion in G.R. No. 80258. The contradictory they investigated and later dismissed Genove. For that matter, not even
factual allegations in this case deserve in our view a closer study of the United States government itself can claim such immunity. The
what actually happened to the plaintiffs. The record is too meager to reason is that by entering into the employment contract with Genove in
indicate if the defendants were really discharging their official duties or the discharge of its proprietary functions, it impliedly divested itself of
had actually exceeded their authority when the incident in question its sovereign immunity from suit.
occurred. Lacking this information, this Court cannot directly decide this
case. The needed inquiry must first be made by the lower court so it But these considerations notwithstanding, we hold that the complaint
may assess and resolve the conflicting claims of the parties on the basis against the petitioners in the court below must still be dismissed. While
of the evidence that has yet to be presented at the trial. Only after it suable, the petitioners are nevertheless not liable. It is obvious that the
shall have determined in what capacity the petitioners were acting at claim for damages cannot be allowed on the strength of the evidence
the time of the incident in question will this Court determine, if still before us, which we have carefully examined.
necessary, if the doctrine of state immunity is applicable.
The dismissal of the private respondent was decided upon only after a
In G.R. No. 79470, private respondent Genove was employed as a cook thorough investigation where it was established beyond doubt that he
in the Main Club located at the U.S. Air Force Recreation Center, also had polluted the soup stock with urine. The investigation, in fact, did not
known as the Open Mess Complex, at John Hay Air Station. As manager stop there. Despite the definitive finding of Genove's guilt, the case was
of this complex, petitioner Lamachia is responsible for eleven diversified still referred to the board of arbitrators provided for in the collective
activities generating an annual income of $2 million. Under his executive bargaining agreement. This board unanimously affirmed the findings of
management are three service restaurants, a cafeteria, a bakery, a Class the investigators and recommended Genove's dismissal. There was
VI store, a coffee and pantry shop, a main cashier cage, an nothing arbitrary about the proceedings. The petitioners acted quite
administrative office, and a decentralized warehouse which maintains a properly in terminating the private respondent's employment for his
stock level of $200,000.00 per month in resale items. He supervises 167 unbelievably nauseating act. It is surprising that he should still have the
employees, one of whom was Genove, with whom the United States temerity to file his complaint for damages after committing his utterly
government has concluded a collective bargaining agreement. disgusting offense.

From these circumstances, the Court can assume that the restaurant Concerning G.R. No. 76607, we also find that the barbershops subject of
services offered at the John Hay Air Station partake of the nature of a the concessions granted by the United States government are
business enterprise undertaken by the United States government in its commercial enterprises operated by private person's. They are not
proprietary capacity. Such services are not extended to the American agencies of the United States Armed Forces nor are their facilities
servicemen for free as a perquisite of membership in the Armed Forces demandable as a matter of right by the American servicemen. These
of the United States. Neither does it appear that they are exclusively establishments provide for the grooming needs of their customers and
offered to these servicemen; on the contrary, it is well known that they offer not only the basic haircut and shave (as required in most military
are available to the general public as well, including the tourists in organizations) but such other amenities as shampoo, massage,
Baguio City, many of whom make it a point to visit John Hay for this manicure and other similar indulgences. And all for a fee. Interestingly,
reason. All persons availing themselves of this facility pay for the one of the concessionaires, private respondent Valencia, was even sent
privilege like all other customers as in ordinary restaurants. Although the abroad to improve his tonsorial business, presumably for the benefit of
prices are concededly reasonable and relatively low, such services are his customers. No less significantly, if not more so, all the barbershop
undoubtedly operated for profit, as a commercial and not a concessionaires are under the terms of their contracts, required to remit
governmental activity. to the United States government fixed commissions in consideration of
the exclusive concessions granted to them in their respective areas.
The consequence of this finding is that the petitioners cannot invoke the
doctrine of state immunity to justify the dismissal of the damage suit
This being the case, the petitioners cannot plead any immunity from the 4. In G.R. No. 80258, the petition is DISMISSED and the
complaint filed by the private respondents in the court below. The respondent court is directed to proceed with the hearing
contracts in question being decidedly commercial, the conclusion and decision of Civil Case No. 4996. The temporary
reached in the United States of America v. Ruiz case cannot be applied restraining order dated October 27, 1987, is LIFTED.
here.
All without any pronouncement as to costs.
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 SO ORDERED.
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 Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano,
that, as in G.R. No. 80258, the respondent court will have to receive that Gancayco, Padilla, Bidin, Sarmiento, Cortes, Griño-Aquino, Medialdea
evidence first, so it can later determine on the basis thereof if the and Regalado, JJ., concur.
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. EN BANC
G.R. No. 154705 June 26, 2003
WHEREFORE, after considering all the above premises, the Court hereby
renders judgment as follows: THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR
SOERATMIN, and MINISTER COUNSELLOR AZHARI
1. In G.R. No. 76607, the petition is DISMISSED and the KASIM, Petitioners,
respondent judge is directed to proceed with the hearing vs.
and decision of Civil Case No. 4772. The temporary JAMES VINZON, doing business under the name and style of
restraining order dated December 11, 1986, is LIFTED. VINZON TRADE AND SERVICES, Respondent.
DECISION
2. In G.R. No. 79470, the petition is GRANTED and Civil
Case No. 829-R(298) is DISMISSED. AZCUNA, J:

3. In G.R. No. 80018, the petition is GRANTED and Civil This is a petition for review on certiorari to set aside the Decision of the
Case No. 115-C-87 is DISMISSED. The temporary Court of Appeals dated May 30, 2002 and its Resolution dated August
restraining order dated October 14, 1987, is made 16, 2002, in CA-G.R. SP No. 66894 entitled "The Republic of Indonesia,
permanent. 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 Motion to Dismiss, alleging that the Republic of Indonesia, as a foreign
of Vinzon Trade and Services." sovereign State, has sovereign immunity from suit and cannot be sued
as a party-defendant in the Philippines. The said motion further alleged
Petitioner, Republic of Indonesia, represented by its Counsellor, Siti that Ambassador Soeratmin and Minister Counsellor Kasim are
Partinah, entered into a Maintenance Agreement in August 1995 with diplomatic agents as defined under the Vienna Convention on
respondent James Vinzon, sole proprietor of Vinzon Trade and Services. Diplomatic Relations and therefore enjoy diplomatic immunity. 4 In turn,
The Maintenance Agreement stated that respondent shall, for a respondent filed on March 20, 2001, an Opposition to the said motion
consideration, maintain specified equipment at the Embassy Main alleging that the Republic of Indonesia has expressly waived its
Building, Embassy Annex Building and the Wisma Duta, the official immunity from suit. He based this claim upon the following provision in
residence of petitioner Ambassador Soeratmin. The equipment covered the Maintenance Agreement:
by the Maintenance Agreement are air conditioning units, generator
sets, electrical facilities, water heaters, and water motor pumps. It is "Any legal action arising out of this Maintenance Agreement shall be
likewise stated therein that the agreement shall be effective for a period settled according to the laws of the Philippines and by the proper court
of four years and will renew itself automatically unless cancelled by of Makati City, Philippines."
either party by giving thirty days prior written notice from the date of
expiry.1 Respondent’s Opposition likewise alleged that Ambassador Soeratmin
and Minister Counsellor Kasim can be sued and held liable in their
Petitioners claim that sometime prior to the date of expiration of the private capacities for tortious acts done with malice and bad faith. 5
said agreement, or before August 1999, they informed respondent that
the renewal of the agreement shall be at the discretion of the incoming On May 17, 2001, the trial court denied herein petitioners’ Motion to
Chief of Administration, Minister Counsellor Azhari Kasim, who was Dismiss. It likewise denied the Motion for Reconsideration subsequently
expected to arrive in February 2000. When Minister Counsellor Kasim filed.
assumed the position of Chief of Administration in March 2000, he The trial court’s denial of the Motion to Dismiss was brought up to the
allegedly found respondent’s work and services unsatisfactory and not Court of Appeals by herein petitioners in a petition for certiorari and
in compliance with the standards set in the Maintenance Agreement. prohibition. Said petition, docketed as CA-G.R. SP No. 66894, alleged
Hence, the Indonesian Embassy terminated the agreement in a letter that the trial court gravely abused its discretion in ruling that the
dated August 31, 2000.2 Petitioners claim, moreover, that they had Republic of Indonesia gave its consent to be sued and voluntarily
earlier verbally informed respondent of their decision to terminate the submitted itself to the laws and jurisdiction of Philippine courts and that
agreement. petitioners Ambassador Soeratmin and Minister Counsellor Kasim waived
On the other hand, respondent claims that the aforesaid termination was their immunity from suit.
arbitrary and unlawful. Respondent cites various circumstances which On May 30, 2002, the Court of Appeals rendered its assailed decision
purportedly negated petitioners’ alleged dissatisfaction over denying the petition for lack of merit.6 On August 16, 2002, it denied
respondent’s services: (a) in July 2000, Minister Counsellor Kasim still herein petitioners’ motion for reconsideration.7
requested respondent to assign to the embassy an additional full-time
worker to assist one of his other workers; (b) in August 2000, Minister Hence, this petition.
Counsellor Kasim asked respondent to donate a prize, which the latter
did, on the occasion of the Indonesian Independence Day golf In the case at bar, petitioners raise the sole issue of whether or not the
tournament; and (c) in a letter dated August 22, 2000, petitioner Court of Appeals erred in sustaining the trial court’s decision that
Ambassador Soeratmin thanked respondent for sponsoring a prize and petitioners have waived their immunity from suit by using as its basis
expressed his hope that the cordial relations happily existing between the abovementioned provision in the Maintenance Agreement.
them will continue to prosper and be strengthened in the coming years.
The petition is impressed with merit.
Hence, on December 15, 2000, respondent filed a complaint3 against International law is founded largely upon the principles of reciprocity,
petitioners docketed as Civil Case No. 18203 in the Regional Trial Court
comity, independence, and equality of States which were adopted as
(RTC) of Makati, Branch 145. On February 20, 2001, petitioners filed a
part of the law of our land under Article II, Section 2 of the 1987 waives its immunity by any subsequent act. The applicability of
Constitution.8 The rule that a State may not be sued without its consent Philippine laws must be deemed to include Philippine laws in its totality,
is a necessary consequence of the principles of independence and including the principle recognizing sovereign immunity. Hence, the
equality of States.9 As enunciated in Sanders v. Veridiano II,10 the proper court may have no proper action, by way of settling the case,
practical justification for the doctrine of sovereign immunity is that there except to dismiss it.
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 Submission by a foreign state to local jurisdiction must be clear and
the principle of the sovereign equality of States, as expressed in the unequivocal. It must be given explicitly or by necessary implication. We
maxim par in parem non habet imperium. All states are sovereign equals find no such waiver in this case.
and cannot assert jurisdiction over one another.11 A contrary attitude Respondent concedes that the establishment of a diplomatic mission is a
would "unduly vex the peace of nations."12 sovereign function.1âwphi1 On the other hand, he argues that the actual
The rules of International Law, however, are neither unyielding nor physical maintenance of the premises of the diplomatic mission, such as
impervious to change. The increasing need of sovereign States to enter the upkeep of its furnishings and equipment, is no longer a sovereign
into purely commercial activities remotely connected with the discharge function of the State.18
of their governmental functions brought about a new concept of We disagree. There is no dispute that the establishment of a diplomatic
sovereign immunity. This concept, the restrictive theory, holds that the mission is an act jure imperii. A sovereign State does not merely
immunity of the sovereign is recognized only with regard to public acts establish a diplomatic mission and leave it at that; the establishment of
or acts jure imperii, but not with regard to private acts or acts jure a diplomatic mission encompasses its maintenance and upkeep. Hence,
gestionis.13 the State may enter into contracts with private entities to maintain the
In United States v. Ruiz,14 for instance, we held that the conduct of public premises, furnishings and equipment of the embassy and the living
bidding for the repair of a wharf at a United States Naval Station is an quarters of its agents and officials. It is therefore clear that petitioner
act jure imperii. On the other hand, we considered as an act jure Republic of Indonesia was acting in pursuit of a sovereign activity when
gestionis the hiring of a cook in the recreation center catering to it entered into a contract with respondent for the upkeep or
American servicemen and the general public at the John Hay Air Station maintenance of the air conditioning units, generator sets, electrical
in Baguio City,15 as well as the bidding for the operation of barber shops facilities, water heaters, and water motor pumps of the Indonesian
in Clark Air Base in Angeles City.16 Embassy and the official residence of the Indonesian ambassador.

Apropos the present case, the mere entering into a contract by a foreign The Solicitor General, in his Comment, submits the view that, "the
State with a private party cannot be construed as the ultimate test of Maintenance Agreement was entered into by the Republic of Indonesia
whether or not it is an act jure imperii or jure gestionis. Such act is only in the discharge of its governmental functions. In such a case, it cannot
the start of the inquiry. Is the foreign State engaged in the regular be deemed to have waived its immunity from suit." As to the paragraph
conduct of a business? If the foreign State is not engaged regularly in a in the agreement relied upon by respondent, the Solicitor General states
business or commercial activity, and in this case it has not been shown that it "was not a waiver of their immunity from suit but a mere
to be so engaged, the particular act or transaction must then be tested stipulation that in the event they do waive their immunity, Philippine
by its nature. If the act is in pursuit of a sovereign activity, or an incident laws shall govern the resolution of any legal action arising out of the
thereof, then it is an act jure imperii.17 agreement and the proper court in Makati City shall be the agreed venue
thereof.19
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 On the matter of whether or not petitioners Ambassador Soeratmin and
the laws of the Philippines and by a specified court of the Philippines is Minister Counsellor Kasim may be sued herein in their private capacities,
not necessarily a waiver of sovereign immunity from suit. The aforesaid Article 31 of the Vienna Convention on Diplomatic Relations provides:
provision contains language not necessarily inconsistent with sovereign xxx
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
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: G.R. No. L-35131 November 29, 1972
(a) a real action relating to private immovable property situated
in the territory of the receiving State, unless he holds it on behalf THE WORLD HEALTH ORGANIZATION and DR. LEONCE
of the sending State for the purposes of the mission; VERSTUYFT, petitioners,
vs.
(b) an action relating to succession in which the diplomatic agent HON. BENJAMIN H. AQUINO, as Presiding Judge of Branch VIII,
is involved as executor, administrator, heir or legatee as a private Court of First Instance of Rizal, MAJOR WILFREDO CRUZ, MAJOR
person and not on behalf of the sending State; ANTONIO G. RELLEVE, and CAPTAIN PEDRO S. NAVARRO of the
Constabulary Offshore Action Center (COSAC), respondents.
(c) an action relating to any professional or commercial activity
exercised by the diplomatic agent in the receiving State outside
Sycip, Salazar, Luna, Manalo and Feliciano for petitioners.
his official functions.
xxx Emilio L. Baldia for respondents.
The act of petitioners Ambassador Soeratmin and Minister Counsellor
Kasim in terminating the Maintenance Agreement is not covered by the
TEEHANKEE, J.:p
exceptions provided in the abovementioned provision.
The Solicitor General believes that said act may fall under subparagraph An original action for certiorari and prohibition to set aside respondent
(c) thereof,20 but said provision clearly applies only to a situation where judge's refusal to quash a search warrant issued by him at the instance
the diplomatic agent engages in any professional or commercial of respondents COSAC (Constabulary Offshore Action Center) officers for
activity outside official functions, which is not the case herein. the search and seizure of the personal effects of petitioner official of the
WHO (World Health Organization) notwithstanding his being entitled to
WHEREFORE, the petition is hereby GRANTED. The decision and diplomatic immunity, as duly recognized by the executive branch of the
resolution of the Court of Appeals in CA G.R. SP No. 66894 are Philippine Government and to prohibit respondent judge from further
REVERSED and SET ASIDE and the complaint in Civil Case No. 18203 proceedings in the matter.
against petitioners is DISMISSED.
No costs. Upon filing of the petition, the Court issued on June 6, 1972 a restraining
order enjoining respondents from executing the search warrant in
SO ORDERED. question.
Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales, and Respondents COSAC officers filed their answer joining issue against
Callejo, Sr., JJ., concur. petitioners and seeking to justify their act of applying for and securing
Austria-Martinez, J., on leave. 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
Republic of the Philippines "and the only lawful way to reach these articles and effects for purposes
SUPREME COURT of taxation is through a search warrant." 1
Manila
The Court thereafter called for the parties' memoranda in lieu of oral
EN BANC argument, which were filed on August 3, 1972 by respondents and on
August 21, 1972 by petitioners, and the case was thereafter deemed judge issued his order of the same date maintaining the effectivity of the
submitted for decision. search warrant issued by him, unless restrained by a higher court. 4

It is undisputed in the record that petitioner Dr. Leonce Verstuyft, who Petitioner Verstuyft's special appearance on March 24, 1972 for the
was assigned on December 6, 1971 by the WHO from his last station in limited purpose of pleading his diplomatic immunity and motion to
Taipei to the Regional Office in Manila as Acting Assistant Director of quash search warrant of April 12, 1972 failed to move respondent judge.
Health Services, is entitled to diplomatic immunity, pursuant to the Host
Agreement executed on July 22, 1951 between the Philippine At the hearing thereof held on May 8, 1972, the Office of the Solicitor
Government and the World Health Organization. General appeared and filed an extended comment stating the official
position of the executive branch of the Philippine Government that
Such diplomatic immunity carries with it, among other diplomatic petitioner Verstuyft is entitled to diplomatic immunity, he did not abuse
privileges and immunities, personal inviolability, inviolability of the his diplomatic immunity, 5 and that court proceedings in the receiving or
official's properties, exemption from local jurisdiction, and exemption host State are not the proper remedy in the case of abuse of diplomatic
from taxation and customs duties. immunity. 6

When petitioner Verstuyft's personal effects contained in twelve (12) The Solicitor General accordingly joined petitioner Verstuyft's prayer for
crates entered the Philippines as unaccompanied baggage on January the quashal of the search warrant. Respondent judge nevertheless
10, 1972, they were accordingly allowed free entry from duties and summarily denied quashal of the search warrant per his order of May 9,
taxes. The crates were directly stored at the Eternit Corporation's 1972 "for the same reasons already stated in (his) aforesaid order of
warehouse at Mandaluyong, Rizal, "pending his relocation into March 16, 1972" disregarding Foreign Secretary Romulo's plea of
permanent quarters upon the offer of Mr. Berg, Vice President of Eternit diplomatic immunity on behalf of Dr. Verstuyft.
who was once a patient of Dr. Verstuyft in the Congo." 2
Hence, the petition at bar. Petitioner Verstuyft has in this Court been
Nevertheless, as above stated, respondent judge issued on March 3, joined by the World Health Organization (WHO) itself in full assertion of
1972 upon application on the same date of respondents COSAC officers petitioner Verstuyft's being entitled "to all privileges and immunities,
search warrant No. 72-138 for alleged violation of Republic Act 4712 exemptions and facilities accorded to diplomatic envoys in accordance
amending section 3601 of the Tariff and Customs Code 3 directing the with international law" under section 24 of the Host Agreement.
search and seizure of the dutiable items in said crates.
The writs of certiorari and prohibition should issue as prayed for.
Upon protest of March 6, 1972 of Dr. Francisco Dy, WHO Regional
Director for the Western Pacific with station in Manila, Secretary of 1. The executive branch of the Philippine Government
Foreign Affairs Carlos P. Romulo, personally wired on the same date has expressly recognized that petitioner Verstuyft is entitled to
respondent Judge advising that "Dr. Verstuyft is entitled to immunity diplomatic immunity, pursuant to the provisions of the Host Agreement.
from search in respect of his personal baggage as accorded to members The Department of Foreign Affairs formally advised respondent judge of
of diplomatic missions" pursuant to the Host Agreement and requesting the Philippine Government's official position that accordingly "Dr.
suspension of the search warrant order "pending clarification of the Verstuyft cannot be the subject of a Philippine court summons without
matter from the ASAC." violating an obligation in international law of the Philippine Government"
and asked for the quashal of the search warrant, since his personal
Respondent judge set the Foreign Secretary's request for hearing and effects and baggages after having been allowed free entry from all
heard the same on March 16, 1972, but notwithstanding the official plea customs duties and taxes, may not be baselessly claimed to have been
of diplomatic immunity interposed by a duly authorized representative "unlawfully imported" in violation of the tariff and customs code as
of the Department of Foreign Affairs who furnished the respondent judge claimed by respondents COSAC officers. The Solicitor-General, as
with a list of the articles brought in by petitioner Verstuyft, respondent principal law officer of the Government, 7 likewise expressly affirmed
said petitioner's right to diplomatic immunity and asked for the quashal nevertheless, in deference to the exclusive competence and jurisdiction
of the search warrant. of the executive branch of government to act on the matter, have
acceded to the quashal of the search warrant, and forwarded his
It is a recognized principle of international law and under our system of findings or grounds to believe that there had been such abuse of
separation of powers that diplomatic immunity is essentially a political diplomatic immunity to the Department of Foreign Affairs for it to deal
question and courts should refuse to look beyond a determination by the with, in accordance with the aforementioned Convention, if so
executive branch of the government, 8 and where the plea of diplomatic warranted.
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 3. Finally, the Court has noted with concern the apparent lack of
accept the claim of immunity upon appropriate suggestion by the coordination between the various departments involved in the subject-
principal law officer of the government, the Solicitor General in this case, matter of the case at bar, which made it possible for a small unit, the
or other officer acting under his direction.9 Hence, in adherence to the COSAC, to which respondents officers belong, seemingly to disregard
settled principle that courts may not so exercise their jurisdiction by and go against the authoritative determination and pronouncements of
seizure and detention of property, as to embarrass the executive arm of both the Secretaries of Foreign Affairs and of Finance that petitioner
the government in conducting foreign relations, it is accepted doctrine Verstuyft is entitled to diplomatic immunity, as confirmed by the
that "in such cases the judicial department of (this) government follows Solicitor-General as the principal law officer of the Government. Such
the action of the political branch and will not embarrass the latter by executive determination properly implemented should have normally
assuming an antagonistic jurisdiction." 10 constrained respondents officers themselves to obtain the quashal of
the search warrant secured by them rather than oppose such quashal up
2. The unfortunate fact that respondent judge chose to rely on the to this Court, to the embarrassment of said department heads, if not of
suspicion of respondents COSAC officers "that the other remaining the Philippine Government itself vis a vis the petitioners. 15
crates unopened contain contraband items" 11 rather than on the
categorical assurance of the Solicitor-General that petitioner Verstuyft The seriousness of the matter is underscored when the provisions of
did not abuse his diplomatic immunity, 12 which was based in turn on the Republic Act 75 enacted since October 21, 1946 to safeguard the
official positions taken by the highest executive officials with jurisdictional immunity of diplomatic officials in the Philippines are taken
competence and authority to act on the matter, namely, the Secretaries into account. Said Act declares as null and void writs or processes sued
of Foreign Affairs and of Finance, could not justify respondent judge's out or prosecuted whereby inter alia the person of an ambassador or
denial of the quashal of the search warrant. 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
As already stated above, and brought to respondent court's whom the same is obtained or prosecuted, whether as party or as
attention, 13 the Philippine Government is bound by the procedure laid attorney, and every officer concerned in executing it" to obtain or
down in Article VII of the Convention on the Privileges and Immunities of enforce such writ or process. 16
the Specialized Agencies of the United Nations 14 for consultations
between the Host State and the United Nations agency concerned to The Court, therefore, holds that respondent judge acted without
determine, in the first instance the fact of occurrence of the abuse jurisdiction and with grave abuse of discretion in not ordering the
alleged, and if so, to ensure that no repetition occurs and for other quashal of the search warrant issued by him in disregard of the
recourses. This is a treaty commitment voluntarily assumed by the diplomatic immunity of petitioner Verstuyft.
Philippine Government and as such, has the force and effect of law.
ACCORDINGLY, the writs of certiorari and prohibition prayed for are
Hence, even assuming arguendo as against the categorical assurance of hereby granted, and the temporary restraining order heretofore issued
the executive branch of government that respondent judge had some against execution or enforcement of the questioned search warrant,
ground to prefer respondents COSAC officers' suspicion that there had which is hereby declared null and void, is hereby made permanent. The
been an abuse of diplomatic immunity, the continuation of the search respondent court is hereby commanded to desist from further
warrant proceedings before him was not the proper remedy. He should, 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 plaintiffs for funeral expenses, actual damages consisting of the loss
the Secretary of Justice for such action as he may find appropriate with of earning capacity of the deceased, attorney's fees and costs of suit
regard to the matters mentioned in paragraph 3 hereof. So ordered. and dismissing the complaint against the Estate of Macario Nieveras and
Bernardo Balagot.
Concepcion, C.J., Makalintal, Zaldivar, Fernando, Barredo, Makasiar,
Antonio and Esguerra, JJ., concur. The antecedent facts are as follows:

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

G.R. No. L-52179 April 8, 1991 At about 7 o'clock in the morning of December 16, 1965, a collision
occurred involving a passenger jeepney driven by Bernardo Balagot and
MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner owned by the Estate of Macario Nieveras, a gravel and sand truck driven
vs. by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-BANIÑA, of the Municipality of San Fernando, La Union and driven by Alfredo
IAUREANO BANIÑA, JR., SOR MARIETA BANIÑA, MONTANO Bislig. Due to the impact, several passengers of the jeepney including
BANIÑA, ORJA BANIÑA, AND LYDIA R. BANIÑA, respondents. Laureano Baniña Sr. died as a result of the injuries they sustained and
four (4) others suffered varying degrees of physical injuries.
Mauro C. Cabading, Jr. for petitioner.
Simeon G. Hipol for private respondent. On December 11, 1966, the private respondents instituted a compliant
for damages against the Estate of Macario Nieveras and Bernardo
Balagot, owner and driver, respectively, of the passenger jeepney, which
was docketed Civil Case No. 2183 in the Court of First Instance of La
Union, Branch I, San Fernando, La Union. However, the aforesaid
MEDIALDEA, J.: defendants filed a Third Party Complaint against the petitioner and the
driver of a dump truck of petitioner.
This is a petition for certiorari with prayer for the issuance of a writ of
preliminary mandatory injunction seeking the nullification or Thereafter, the case was subsequently transferred to Branch IV, presided
modification of the proceedings and the orders issued by the respondent over by respondent judge and was subsequently docketed as Civil Case
Judge Romeo N. Firme, in his capacity as the presiding judge of the Court No. 107-Bg. By virtue of a court order dated May 7, 1975, the private
of First Instance of La Union, Second Judicial District, Branch IV, Bauang, respondents amended the complaint wherein the petitioner and its
La Union in Civil Case No. 107-BG, entitled "Juana Rimando Baniña, et al. regular employee, Alfredo Bislig were impleaded for the first time as
vs. Macario Nieveras, et al." dated November 4, 1975; July 13, 1976; defendants. Petitioner filed its answer and raised affirmative defenses
August 23,1976; February 23, 1977; March 16, 1977; July 26, 1979; such as lack of cause of action, non-suability of the State, prescription of
September 7, 1979; November 7, 1979 and December 3, 1979 and the cause of action and the negligence of the owner and driver of the
decision dated October 10, 1979 ordering defendants Municipality of passenger jeepney as the proximate cause of the collision.
San Fernando, La Union and Alfredo Bislig to pay, jointly and severally,
In the course of the proceedings, the respondent judge issued the The Complaint is dismissed as to defendants Estate of Macario
following questioned orders, to wit: Nieveras and Bernardo Balagot.

(1) Order dated November 4, 1975 dismissing the cross-claim SO ORDERED. (Rollo, p. 30)
against Bernardo Balagot;
Petitioner filed a motion for reconsideration and for a new trial without
(2) Order dated July 13, 1976 admitting the Amended Answer of prejudice to another motion which was then pending. However,
the Municipality of San Fernando, La Union and Bislig and setting respondent judge issued another order dated November 7, 1979
the hearing on the affirmative defenses only with respect to the denying the motion for reconsideration of the order of September 7,
supposed lack of jurisdiction; 1979 for having been filed out of time.

(3) Order dated August 23, 1976 deferring there resolution of the Finally, the respondent judge issued an order dated December 3, 1979
grounds for the Motion to Dismiss until the trial; providing that if defendants municipality and Bislig further wish to
pursue the matter disposed of in the order of July 26, 1979, such should
(4) Order dated February 23, 1977 denying the motion for be elevated to a higher court in accordance with the Rules of Court.
reconsideration of the order of July 13, 1976 filed by the Hence, this petition.
Municipality and Bislig for having been filed out of time;
Petitioner maintains that the respondent judge committed grave abuse
(5) Order dated March 16, 1977 reiterating the denial of the of discretion amounting to excess of jurisdiction in issuing the aforesaid
motion for reconsideration of the order of July 13, 1976; orders and in rendering a decision. Furthermore, petitioner asserts that
while appeal of the decision maybe available, the same is not the
(6) Order dated July 26, 1979 declaring the case deemed speedy and adequate remedy in the ordinary course of law.
submitted for decision it appearing that parties have not yet
submitted their respective memoranda despite the court's On the other hand, private respondents controvert the position of the
direction; and petitioner and allege that the petition is devoid of merit, utterly lacking
the good faith which is indispensable in a petition for certiorari and
(7) Order dated September 7, 1979 denying the petitioner's prohibition. (Rollo, p. 42.) In addition, the private respondents stress that
motion for reconsideration and/or order to recall prosecution petitioner has not considered that every court, including respondent
witnesses for cross examination. court, has the inherent power to amend and control its process and
orders so as to make them conformable to law and justice. (Rollo, p. 43.)
On October 10, 1979 the trial court rendered a decision, the dispositive
portion is hereunder quoted as follows: The controversy boils down to the main issue of whether or not the
respondent court committed grave abuse of discretion when it deferred
and failed to resolve the defense of non-suability of the State amounting
IN VIEW OF ALL OF (sic) THE FOREGOING, judgment is hereby to lack of jurisdiction in a motion to dismiss.
rendered for the plaintiffs, and defendants Municipality of San
Fernando, La Union and Alfredo Bislig are ordered to pay jointly
and severally, plaintiffs Juana Rimando-Baniña, Mrs. Priscilla B. In the case at bar, the respondent judge deferred the resolution of the
Surell, Laureano Baniña Jr., Sor Marietta Baniña, Mrs. Fe B. defense of non-suability of the State amounting to lack of jurisdiction
Soriano, Montano Baniña, Orja Baniña and Lydia B. Baniña the until trial. However, said respondent judge failed to resolve such
sums of P1,500.00 as funeral expenses and P24,744.24 as the defense, proceeded with the trial and thereafter rendered a decision
lost expected earnings of the late Laureano Baniña Sr., against the municipality and its driver.
P30,000.00 as moral damages, and P2,500.00 as attorney's fees.
Costs against said defendants.
The respondent judge did not commit grave abuse of discretion when in the plaintiff the chance to prove, if it can, that the defendant is liable."
the exercise of its judgment it arbitrarily failed to resolve the vital issue (United States of America vs. Guinto, supra, p. 659-660)
of non-suability of the State in the guise of the municipality. However,
said judge acted in excess of his jurisdiction when in his decision dated Anent the issue of whether or not the municipality is liable for the torts
October 10, 1979 he held the municipality liable for the quasi-delict committed by its employee, the test of liability of the municipality
committed by its regular employee. depends on whether or not the driver, acting in behalf of the
municipality, is performing governmental or proprietary functions. As
The doctrine of non-suability of the State is expressly provided for in emphasized in the case of Torio vs. Fontanilla (G. R. No. L-29993,
Article XVI, Section 3 of the Constitution, to wit: "the State may not be October 23, 1978. 85 SCRA 599, 606), the distinction of powers becomes
sued without its consent." important for purposes of determining the liability of the municipality for
the acts of its agents which result in an injury to third persons.
Stated in simple parlance, the general rule is that the State may not be
sued except when it gives consent to be sued. Consent takes the form of Another statement of the test is given in City of Kokomo vs. Loy, decided
express or implied consent. by the Supreme Court of Indiana in 1916, thus:

Express consent may be embodied in a general law or a special law. The Municipal corporations exist in a dual capacity, and their
standing consent of the State to be sued in case of money claims functions are twofold. In one they exercise the right springing
involving liability arising from contracts is found in Act No. 3083. A from sovereignty, and while in the performance of the duties
special law may be passed to enable a person to sue the government for pertaining thereto, their acts are political and governmental.
an alleged quasi-delict, as in Merritt v. Government of the Philippine Their officers and agents in such capacity, though elected or
Islands (34 Phil 311). (see United States of America v. Guinto, G.R. No. appointed by them, are nevertheless public functionaries
76607, February 26, 1990, 182 SCRA 644, 654.) performing a public service, and as such they are officers,
agents, and servants of the state. In the other capacity the
Consent is implied when the government enters into business contracts, municipalities exercise a private, proprietary or corporate right,
thereby descending to the level of the other contracting party, and also arising from their existence as legal persons and not as public
when the State files a complaint, thus opening itself to a counterclaim. agencies. Their officers and agents in the performance of such
(Ibid) functions act in behalf of the municipalities in their corporate or
individual capacity, and not for the state or sovereign power."
Municipal corporations, for example, like provinces and cities, are (112 N.E., 994-995) (Ibid, pp. 605-606.)
agencies of the State when they are engaged in governmental functions
and therefore should enjoy the sovereign immunity from suit. It has already been remarked that municipal corporations are suable
Nevertheless, they are subject to suit even in the performance of such because their charters grant them the competence to sue and be sued.
functions because their charter provided that they can sue and be sued. Nevertheless, they are generally not liable for torts committed by them
(Cruz, Philippine Political Law, 1987 Edition, p. 39) in the discharge of governmental functions and can be held answerable
only if it can be shown that they were acting in a proprietary capacity. In
A distinction should first be made between suability and liability. permitting such entities to be sued, the State merely gives the claimant
"Suability depends on the consent of the state to be sued, liability on the the right to show that the defendant was not acting in its governmental
applicable law and the established facts. The circumstance that a state capacity when the injury was committed or that the case comes under
is suable does not necessarily mean that it is liable; on the other hand, it the exceptions recognized by law. Failing this, the claimant cannot
can never be held liable if it does not first consent to be sued. Liability is recover. (Cruz, supra, p. 44.)
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 In the case at bar, the driver of the dump truck of the municipality
insists that "he was on his way to the Naguilian river to get a load of
sand and gravel for the repair of San Fernando's municipal streets."
(Rollo, p. 29.)

In the absence of any evidence to the contrary, the regularity of the

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

We already stressed in the case of Palafox, et. al. vs. Province of Ilocos
Norte, the District Engineer, and the Provincial Treasurer (102 Phil 1186) SECOND DIVISION
that "the construction or maintenance of roads in which the truck and G.R. No. 102667 February 23, 2000
the driver worked at the time of the accident are admittedly
governmental activities." AMADO J. LANSANG, petitioner,
vs.
After a careful examination of existing laws and jurisprudence, We arrive COURT OF APPEALS, GENERAL ASSEMBLY OF THE BLIND, INC.,
at the conclusion that the municipality cannot be held liable for the torts and JOSE IGLESIAS, respondents.
committed by its regular employee, who was then engaged in the
discharge of governmental functions. Hence, the death of the passenger QUISUMBING, J.:
–– tragic and deplorable though it may be –– imposed on the Before us is a petition to review the decision of the Court of Appeals in
municipality no duty to pay monetary compensation. C.A. G.R. CV No. 27244, which set aside the ruling of the Regional Trial
Court, Manila, Branch 8, in Civil Case No. 88-43887, and ordered
All premises considered, the Court is convinced that the respondent petitioner Amado J. Lansang to pay private respondent Jose Iglesias
judge's dereliction in failing to resolve the issue of non-suability did not P50,000.00 in moral damages, P10,000.00 in exemplary damages and
amount to grave abuse of discretion. But said judge exceeded his P5,000.00 in attorney's fees.
jurisdiction when it ruled on the issue of liability.
Like public streets, public parks are beyond the commerce of man.
However, private respondents were allegedly awarded a "verbal contract
ACCORDINGLY, the petition is GRANTED and the decision of the
of lease" in 1970 by the National Parks Development Committee (NPDC),
respondent court is hereby modified, absolving the petitioner
a government initiated civic body engaged in the development of
municipality of any liability in favor of private respondents.
national parks, including Rizal Park,1 but actually administered by high
profile civic leaders and journalists. Whoever in NPDC gave such "verbal"
SO ORDERED. accommodation to private respondents was unclear, for indeed no
document or instrument appears on record to show the grantor of the
Narvasa, Cruz, Gancayco and Griño-Aquino, JJ., concur. verbal license to private respondents to occupy a portion of the
government park dedicated to the national hero's memory.
Private respondents were allegedly given office and library space as well
as kiosks area selling food and drinks. One such kiosk was located along
T.M. Kalaw St., in front of the Army and Navy Club. Private respondent
General Assembly of the Blind, Inc. (GABI) was to remit to NPDC, 40
percent of the profits derived from operating the kiosks,2 without again
anything shown in the record who received the share of the profits or
how they were used or spent.
With the change of government after the EDSA Revolution, the new the NPDC, and second, after Iglesias sent the Tanodbayan, a letter on
Chairman of the NPDC, herein petitioner, sought to clean up Rizal Park. November 26, 1987, denouncing alleged graft and corruption in the
In a written notice dated February 23, 1988 and received by private NPDC.9 These, according to the Court of Appeals, should not have been
respondents on February 29, 1988, petitioner terminated the so-called taken against GABI, which had been occupying Rizal Park for nearly 20
verbal agreement with GABI and demanded that the latter vacate the years. GABI was evicted purportedly for violating its verbal agreement
premises and the kiosks it ran privately within the public park. 3 In with NPDC.10 However, the Court of Appeals pointed out that NPDC failed
another notice dated March 5, 1988, respondents were given until March to present proof of such violation.11
8, 1988 to vacate.4
The Court of Appeals found petitioner liable for damages under Articles
The latter notice was signed by private respondent Iglesias, GABI 19, 21, and 24 of the Civil Code.12
president, allegedly to indicate his conformity to its contents. However,
Iglesias, who is totally blind, claims that he was deceived into signing The Court of Appeals absolved from liability all other persons impleaded
the notice. He was allegedly told by Ricardo Villanueva, then chief in GABI's complaint since it appeared that they were merely acting
warden of Rizal Park, that he was merely acknowledging receipt of the under the orders of petitioner. The new officers of NPDC, additionally
notice. Although blind, Iglesias as president was knowledgeable enough impleaded by GABI, were likewise absolved from liability, absent any
to run GABI as well as its business. showing that they participated in the acts complained of. Petitioner was
ordered to pay private respondent Iglesias moral and exemplary
On the day of the supposed eviction, GABI filed an action for damages damages and attorney's fees.
and injunction in the Regional Trial Court against petitioner, Villanueva,
and "all persons acting on their behalf". 5 The trial court issued a Hence, this petition, in which petitioner raises the following issues:
temporary restraining order on the same day.6 I. WHETHER OR NOT RESPONDENT COURT ERRED IN NOT
The TRO expired on March 28, 1988. The following day, GABI was finally HOLDING THAT PRIVATE RESPONDENTS' COMPLAINT AGAINST
evicted by NPDC. PETITIONER, AS CHAIRMAN OF NPDC, AND HIS CO-DEFENDANTS
IN CIVIL CASE NO. 88-43887, IS IN EFFECT A SUIT AGAINST THE
GABI's action for damages and injunction was subsequently dismissed STATE WHICH CANNOT BE SUED WITHOUT ITS CONSENT.
by the RTC, ruling that the complaint was actually directed against the
State which could not be sued without its consent. Moreover, the trial II. WHETHER OR NOT RESPONDENT COURT ERRED IN NOT
court ruled that GABI could not claim damages under the alleged oral HOLDING THAT PETITIONER'S ACT OF TERMINATING RESPONDENT
lease agreement since GABI was a mere accommodation concessionaire. GABI'S CONCESSION IS VALID AND DONE IN THE LAWFUL
As such, it could only recover damages upon proof of the profits it could PERFORMANCE OF OFFICIAL DUTY.13
realize from the conclusion. The trial court noted that no such proof was Petitioner insists that the complaint filed against him is in reality a
presented.1âwphi1.nêt complaint against the State, which could not prosper without the latter's
On appeal, the Court of Appeals reversed the decision of the trial court. consent. He anchors his argument on the fact that NPDC is a
government agency, and that when he ordered the eviction of GABI, he
The Court of Appeals ruled that the mere allegation that a government was acting in his capacity as chairman of NPDC. Petitioner avers that the
official is being sued in his official capacity is not enough to protect such mere allegation that he was being sued in his personal capacity did not
official from liability for acts done without or in excess of his remove the case from the coverage of the law of public officers and the
authority.7 Granting that petitioner had the authority to evict GABI from doctrine of state immunity.
Rizal Park, "the abusive and capricious manner in which that authority
was exercised amounted to a legal wrong for which he must now be held Petitioner points out that Iglesias signed the notice of eviction to
liable for damages"8 according to the Court of Appeals. indicate his conformity thereto. He contends that as evidence of private
respondents' bad faith, they sued petitioner instead of complying with
The Court of Appeals noted that, as the trial court observed, the eviction their undertaking to vacate their library and kiosk at Rizal Park.
of GABI came at the heels of two significant incidents. First, after private
respondent Iglesias extended monetary support to striking workers of
Petitioner adds that during the actual eviction, no untoward incident capacity.19 Also, it is evident from paragraph 4 of said complaint that
occurred. GABI's properties were properly inventoried and stored. petitioner was sued allegedly for having personal motives in ordering
the ejectment of GABI from Rizal Park.
According to petitioner, the Court of Appeals' observation that the
eviction was prompted by Iglesias' support for striking NPDC workers 4. Defendant AMADO J. LANSANG, JR., the Chairman of the
and the letter-complaint sent to the Tanodbayan is merely conjectural. National Parks Development Committee, acting under the spirit
of revenge, ill-will, evil motive and personal resentment against
Finally, petitioner avers that the move to evict GABI and award the plaintiff JOSE IGLESIAS, served on the plaintiff corporation a
spaces it occupied to another group was an executive policy decision letter, dated February 23, 1988 terminating plaintiffs lease
within the discretion of NPDC. GABI's possession of the kiosks as agreement with a demand for the plaintiff corporation to vacate
concessionaire was by mere tolerance of NPDC and, thus, such its office premises. . .20 (Emphasis supplied.)
possession may be withdrawn at any time, with or without cause.
The parties do not dispute that it was petitioner who ordered the
On the other hand, private respondents aver that petitioner acted ejectment of GABI from their office and kiosk at Rizal Park. There is also
beyond the scope of his authority when he showed malice and bad faith no dispute that petitioner, as chairman of the NPDC which was the
in ordering GABI's ejectment from Rizal Park. Quoting from the decision agency tasked to administer Rizal Park, had the authority to terminate
of the Court of Appeals, private respondents argue that petitioner is the agreement with GABI21 and order the organization's ejectment. The
liable for damages for performing acts "to injure an individual rather question now is whether or not petitioner abused his authority in
than to discharge a public duty."14 ordering the ejectment of private respondents.
While private respondents recognize the authority of petitioner to We find, however, no evidence of such abuse of authority on record. As
terminate the agreement with GABI "if [the contract] is prejudicial to the earlier stated, Rizal Park is beyond the commerce of man and, thus,
interest of the NPDC,"15 they maintain that petitioner's personal interest, could not be the subject of a lease contract. Admittedly, there was no
and not that of the NPDC, was the root cause of GABI's ejecment. written contract. That private respondents were allowed to occupy office
The doctrine of state immunity from suit applies to complaints filed and kiosk spaces in the park was only a matter of accommodation by
against public officials for acts done in the performance of their duties. the previous administrator. This being so, also admittedly, petitioner
The rule is that the suit must be regarded as one against the state may validly discontinue the accommodation extended to private
where satisfaction of the judgment against the public official concerned respondents, who may be ejected from the park when necessary. Private
will require the state itself to perform a positive act, such as respondents cannot and does not claim a vested right to continue to
appropriation of the amount necessary to pay the damages awarded to occupy Rizal Park.
the plaintiff.16 The Court of Appeals awarded private respondent Iglesias moral and
The rule does not apply where the public official is charged in his official exemplary damages and attorney's fees. However, we find no evidence
capacity for acts that are unlawful and injurious to the rights of on record to support Iglesias' claim that he suffered moral injury as a
others.17 Public officials are not exempt, in their personal capacity, from result of GABI's ejectment from Rizal Park. Absent any satisfactory proof
liability arising from acts committed in bad faith. 18 upon which the Court may base the amount of damages suffered, the
award of moral damages cannot be sustained.22
Neither does it apply where the public official is clearly being sued not in
his official capacity but in his personal capacity, although the acts Neither can we sustain the award of exemplary damages, which may
complained of may have been committed while he occupied a public only be awarded in addition to moral, temperate, liquidated, or
position. compensatory damages.23 We also disallow the award for attorney's
fees, which can only be recovered per stipulation of the parties, which is
We are convinced that petitioner is being sued not in his capacity as absent in this case. There is no showing that any of the exceptions
NPDC chairman but in his personal capacity. The complaint filed by justifying the award of attorney's fees absent a stipulation is present in
private respondents in the RTC merely identified petitioner as chairman this case.24
of the NPDC, but did not categorically state that he is being sued in that
WHEREFORE, the instant petition is GRANTED. The decision of the Court law doctrine of non-suability of a state, it being alleged that such funds
of Appeals in CA-G.R. CV No. 27244 is hereby SET ASIDE, and the are public in character. This is not the first time petitioner raised that
DISMISSAL of the complaint for damages by the trial court for want of issue. It did so before in Philippine National Bank v. Court of industrial
merit is AFFIRMED. No costs. Relations, 3 decided only last January. It did not meet with success, this
Court ruling in accordance with the two previous cases of National
SO ORDERED.1âwphi1.nêt Shipyard and Steel Corporation 4 and Manila Hotel Employees
Bellosillo, Mendoza and De Leon, Jr., JJ., concur. Association v. Manila Hotel Company,5 that funds of public corporations
Buena, J., on official leave. which can sue and be sued were not exempt from garnishment. As
respondent Philippine Virginia Tobacco Administration is likewise a public
corporation possessed of the same attributes,6 a similar outcome is
indicated. This petition must be dismissed.
Republic of the Philippines
SUPREME COURT
It is undisputed that the judgment against respondent Philippine Virginia
Manila
Tobacco Administration had reached the stage of finality. A writ of
execution was, therefore, in order. It was accordingly issued on
SECOND DIVISION December 17, 1970. 7 There was a notice of garnishment for the full
amount mentioned in such writ of execution in the sum of
G.R. No. L-33112 June 15, 1978 P12,724,66. 8 In view of the objection, however, by petitioner Philippine
National Bank on the above ground, coupled with an inquiry as to
PHILIPPINE NATIONAL BANK, petitioner, whether or not respondent Philippine Virginia Tobacco Administration
vs. had funds deposited with petitioner's La Union branch, it was not until
HON. JUDGE JAVIER PABALAN, Judge of the Court of First January 25, 1971 that the order sought to be set aside in this certiorari
Instance, Branch III, La Union, AGOO TOBACCO PLANTERS proceeding was issued by respondent Judge.9 Its dispositive portion
ASSOCIATION, INC., PHILIPPINE VIRGINIA TOBACCO reads as follows: Conformably with the foregoing, it is now ordered, in
ADMINISTRATION, and PANFILO P. JIMENEZ, Deputy Sheriff, La accordance with law, that sufficient funds of the Philippine Virginia
Union, respondents. Tobacco Administration now deposited with the Philippine National Bank,
La Union Branch, shall be garnished and delivered to the plaintiff
Conrado E. Medina, Edgardo M. Magtalas & Walfrido Climaco for immediately to satisfy the Writ of Execution for one-half of the amount
petitioner. awarded in the decision of November 16, 1970." 10 Hence this certiorari
and prohibition proceeding.
Felimon A. Aspirin fit respondent Agoo 'Tobacco Planters Association,
Inc. As noted at the outset, petitioner Philippine National Bank would invoke
the doctrine of non-suability. It is to be admitted that under the present
Constitution, what was formerly implicit as a fundamental doctrine in
Virgilio C. Abejo for respondent Phil. Virginia Tobacco Administration.
constitutional law has been set forth in express terms: "The State may
not be sued without its consent." 11 If the funds appertained to one of
the regular departments or offices in the government, then, certainly,
FERNANDO, Acting C.J.: such a provision would be a bar to garnishment. Such is not the case
here. Garnishment would lie. Only last January, as noted in the opening
The reliance of petitioner Philippine National Bank in this certiorari and paragraph of this decision, this Court, in a case brought by the same
prohibition proceeding against respondent Judge Javier Pabalan who petitioner precisely invoking such a doctrine, left no doubt that the funds
issued a writ of execution, 1 followed thereafter by a notice of of public corporations could properly be made the object of a notice of
garnishment of the funds of respondent Philippine Virginia Tobacco garnishment. Accordingly, this petition must fail.
Administration, 2 deposited with it, is on the fundamental constitutional
1. The alleged grave abuse of discretion, the basis of this certiorari a bar or impediment to a notice of garnishment the doctrine of non-
proceeding, was sought to be justified on the failure of respondent Judge suability.
to set aside the notice of garnishment of funds belonging to respondent
Philippine Virginia Tobacco Administration. This excerpt from the WHEREFORE, this petition for certiorari and prohibition is dismissed. No
aforecited decision of Philippine National Bank v. Court of Industrial costs.
Relations makes manifest why such an argument is far from persuasive.
"The premise that the funds could be spoken as public character may be Barredo, Antonio, Aquino, and Santos, JJ., concur.
accepted in the sense that the People Homesite and Housing
Corporation was a government-owned entity. It does not follow though
that they were exempt. from garnishment. National Shipyard and Steel Concepcion, Jr., J., is on leave.
Corporation v. Court of Industrial Relations is squarely in point. As was
explicitly stated in the opinion of the then Justice, later Chief Justice,
Concepcion: "The allegation to the effect that the funds of the NASSCO
Republic of the Philippines
are public funds of the government, and that, as such, the same may
SUPREME COURT
not be garnished, attached or levied upon, is untenable for, as a
Manila
government owned and controlled corporation, the NASSCO has a
personality of its own. distinct and separate from that of the THIRD DIVISION
Government. It has — pursuant to Section 2 of Executive Order No. 356,
dated October 23, 1950 ... , pursuant to which The NASSCO has been
established — all the powers of a corporation under the Corporation Law
G.R. Nos. 89898-99 October 1, 1990
... ." Accordingly, it may be sue and be sued and may be subjected to
court processes just like any other corporation (Section 13, Act No. 1459, MUNICIPALITY OF MAKATI, petitioner,
as amended.)" ... To repeat, the ruling was the appropriate remedy for vs.
the prevailing party which could proceed against the funds of a THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE
corporate entity even if owned or controlled by the government." 12 GUZMAN, JR., as Judge RTC of Makati, Branch CXLII ADMIRAL
FINANCE CREDITORS CONSORTIUM, INC., and SHERIFF SILVINO
2. The National Shipyard and Steel Corporation decision was not the first R. PASTRANA, respondents.
of its kind. The ruling therein could be inferred from the judgment
announced in Manila Hotel Employees Association v. Manila Hotel Defante & Elegado for petitioner.
Company, decided as far back as 1941. 13 In the language of Roberto B. Lugue for private respondent Admiral Finance Creditors'
its ponente Justice Ozaeta "On the other hand, it is well-settled that Consortium, Inc.
when the government enters into commercial business, it abandons its
sovereign capacity and is to be treated like any other corporation. (Bank RESOLUTION
of the United States v. Planters' Bank, 9 Wheat. 904, 6 L.ed. 244). By
engaging in a particular business thru the instrumentality of a
corporation, the government divests itself pro hac vice of its sovereign
CORTÉS, J.:
character, so as to render the corporation subject to the rules of law
governing private corporations." 14 It is worth mentioning that Justice The present petition for review is an off-shoot of expropriation
Ozaeta could find support for such a pronouncement from the leading proceedings initiated by petitioner Municipality of Makati against private
American Supreme Court case of united States v. Planters' Bank, 15 with respondent Admiral Finance Creditors Consortium, Inc., Home Building
the opinion coming from the illustrious Chief Justice Marshall. It was System & Realty Corporation and one Arceli P. Jo, involving a parcel of
handed down more than one hundred fifty years ago, 1824 to be exact. land and improvements thereon located at Mayapis St., San Antonio
It is apparent, therefore, that petitioner Bank could it legally set forth as Village, Makati and registered in the name of Arceli P. Jo under TCT No. S-
5499.
It appears that the action for eminent domain was filed on May 20, PNB Buendia Branch to immediately release to PSB the sum of
1986, docketed as Civil Case No. 13699. Attached to petitioner's P4,953,506.45 which corresponds to the balance of the appraised value
complaint was a certification that a bank account (Account No. S/A 265- of the subject property under the RTC decision dated June 4, 1987, from
537154-3) had been opened with the PNB Buendia Branch under the garnished account of petitioner; and, (3) ordered PSB and private
petitioner's name containing the sum of P417,510.00, made pursuant to respondent to execute the necessary deed of conveyance over the
the provisions of Pres. Decree No. 42. After due hearing where the subject property in favor of petitioner. Petitioner's motion to lift the
parties presented their respective appraisal reports regarding the value garnishment was denied.
of the property, respondent RTC judge rendered a decision on June 4,
1987, fixing the appraised value of the property at P5,291,666.00, and Petitioner filed a motion for reconsideration, which was duly opposed by
ordering petitioner to pay this amount minus the advanced payment of private respondent. On the other hand, for failure of the manager of the
P338,160.00 which was earlier released to private respondent. PNB Buendia Branch to comply with the order dated September 8, 1988,
private respondent filed two succeeding motions to require the bank
After this decision became final and executory, private respondent manager to show cause why he should not be held in contempt of court.
moved for the issuance of a writ of execution. This motion was granted During the hearings conducted for the above motions, the general
by respondent RTC judge. After issuance of the writ of execution, a manager of the PNB Buendia Branch, a Mr. Antonio Bautista, informed
Notice of Garnishment dated January 14, 1988 was served by the court that he was still waiting for proper authorization from the PNB
respondent sheriff Silvino R. Pastrana upon the manager of the PNB head office enabling him to make a disbursement for the amount so
Buendia Branch. However, respondent sheriff was informed that a "hold ordered. For its part, petitioner contended that its funds at the PNB
code" was placed on the account of petitioner. As a result of this, private Buendia Branch could neither be garnished nor levied upon execution,
respondent filed a motion dated January 27, 1988 praying that an order for to do so would result in the disbursement of public funds without the
be issued directing the bank to deliver to respondent sheriff the amount proper appropriation required under the law, citing the case of Republic
equivalent to the unpaid balance due under the RTC decision dated June of the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA
4, 1987. 899].
Petitioner filed a motion to lift the garnishment, on the ground that the Respondent trial judge issued an order dated December 21, 1988
manner of payment of the expropriation amount should be done in denying petitioner's motion for reconsideration on the ground that the
installments which the respondent RTC judge failed to state in his doctrine enunciated in Republic v. Palacio did not apply to the case
decision. Private respondent filed its opposition to the motion. because petitioner's PNB Account No. S/A 265-537154-3 was an account
specifically opened for the expropriation proceedings of the subject
Pending resolution of the above motions, petitioner filed on July 20, 1988 property pursuant to Pres. Decree No. 42. Respondent RTC judge likewise
a "Manifestation" informing the court that private respondent was no declared Mr. Antonio Bautista guilty of contempt of court for his
longer the true and lawful owner of the subject property because a new inexcusable refusal to obey the order dated September 8, 1988, and
title over the property had been registered in the name of Philippine thus ordered his arrest and detention until his compliance with the said
Savings Bank, Inc. (PSB) Respondent RTC judge issued an order requiring order.
PSB to make available the documents pertaining to its transactions over
the subject property, and the PNB Buendia Branch to reveal the amount Petitioner and the bank manager of PNB Buendia Branch then filed
in petitioner's account which was garnished by respondent sheriff. In separate petitions for certiorari with the Court of Appeals, which were
compliance with this order, PSB filed a manifestation informing the court eventually consolidated. In a decision promulgated on June 28, 1989, the
that it had consolidated its ownership over the property as Court of Appeals dismissed both petitions for lack of merit, sustained the
mortgagee/purchaser at an extrajudicial foreclosure sale held on April jurisdiction of respondent RTC judge over the funds contained in
20, 1987. After several conferences, PSB and private respondent entered petitioner's PNB Account No. 265-537154-3, and affirmed his authority to
into a compromise agreement whereby they agreed to divide between levy on such funds.
themselves the compensation due from the expropriation proceedings.
Its motion for reconsideration having been denied by the Court of
Respondent trial judge subsequently issued an order dated September Appeals, petitioner now files the present petition for review with prayer
8, 1988 which: (1) approved the compromise agreement; (2) ordered for preliminary injunction.
On November 20, 1989, the Court resolved to issue a temporary There is merit in this contention. The funds deposited in the second PNB
restraining order enjoining respondent RTC judge, respondent sheriff, Account No. S/A 263-530850-7 are public funds of the municipal
and their representatives, from enforcing and/or carrying out the RTC government. In this jurisdiction, well-settled is the rule that public funds
order dated December 21, 1988 and the writ of garnishment issued are not subject to levy and execution, unless otherwise provided for by
pursuant thereto. Private respondent then filed its comment to the statute [Republic v. Palacio, supra.; The Commissioner of Public
petition, while petitioner filed its reply. Highways v. San Diego, G.R. No. L-30098, February 18, 1970, 31 SCRA
616]. More particularly, the properties of a municipality, whether real or
Petitioner not only reiterates the arguments adduced in its petition personal, which are necessary for public use cannot be attached and
before the Court of Appeals, but also alleges for the first time that it has sold at execution sale to satisfy a money judgment against the
actually two accounts with the PNB Buendia Branch, to wit: municipality. Municipal revenues derived from taxes, licenses and
xxx xxx xxx market fees, and which are intended primarily and exclusively for the
purpose of financing the governmental activities and functions of the
(1) Account No. S/A 265-537154-3 — exclusively for the municipality, are exempt from execution [See Viuda De Tan Toco v. The
expropriation of the subject property, with an outstanding Municipal Council of Iloilo, 49 Phil. 52 (1926): The Municipality of Paoay,
balance of P99,743.94. Ilocos Norte v. Manaois, 86 Phil. 629 (1950); Municipality of San Miguel,
Bulacan v. Fernandez, G.R. No. 61744, June 25, 1984, 130 SCRA 56]. The
(2) Account No. S/A 263-530850-7 — for statutory foregoing rule finds application in the case at bar. Absent a showing that
obligations and other purposes of the municipal the municipal council of Makati has passed an ordinance appropriating
government, with a balance of P170,098,421.72, as of July from its public funds an amount corresponding to the balance due under
12, 1989. the RTC decision dated June 4, 1987, less the sum of P99,743.94
deposited in Account No. S/A 265-537154-3, no levy under execution
xxx xxx xxx
may be validly effected on the public funds of petitioner deposited in
[Petition, pp. 6-7; Rollo, pp. 11-12.] Account No. S/A 263-530850-7.

Because the petitioner has belatedly alleged only in this Court the Nevertheless, this is not to say that private respondent and PSB are left
existence of two bank accounts, it may fairly be asked whether the with no legal recourse. Where a municipality fails or refuses, without
second account was opened only for the purpose of undermining the justifiable reason, to effect payment of a final money judgment rendered
legal basis of the assailed orders of respondent RTC judge and the against it, the claimant may avail of the remedy of mandamus in order
decision of the Court of Appeals, and strengthening its reliance on the to compel the enactment and approval of the necessary appropriation
doctrine that public funds are exempted from garnishment or execution ordinance, and the corresponding disbursement of municipal funds
as enunciated in Republic v. Palacio [supra.] At any rate, the Court will therefor [See Viuda De Tan Toco v. The Municipal Council of Iloilo, supra;
give petitioner the benefit of the doubt, and proceed to resolve the Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108 Phil.
principal issues presented based on the factual circumstances thus 247 (1960)].
alleged by petitioner.
In the case at bar, the validity of the RTC decision dated June 4, 1987 is
Admitting that its PNB Account No. S/A 265-537154-3 was specifically not disputed by petitioner. No appeal was taken therefrom. For three
opened for expropriation proceedings it had initiated over the subject years now, petitioner has enjoyed possession and use of the subject
property, petitioner poses no objection to the garnishment or the levy property notwithstanding its inexcusable failure to comply with its legal
under execution of the funds deposited therein amounting to obligation to pay just compensation. Petitioner has benefited from its
P99,743.94. However, it is petitioner's main contention that inasmuch as possession of the property since the same has been the site of Makati
the assailed orders of respondent RTC judge involved the net amount of West High School since the school year 1986-1987. This Court will not
P4,965,506.45, the funds garnished by respondent sheriff in excess of condone petitioner's blatant refusal to settle its legal obligation arising
P99,743.94, which are public funds earmarked for the municipal from expropriation proceedings it had in fact initiated. It cannot be over-
government's other statutory obligations, are exempted from execution emphasized that, within the context of the State's inherent power of
without the proper appropriation required under the law. eminent domain,
 . . . [j]ust compensation means not only the correct
determination of the amount to be paid to the owner of
the land but also the payment of the land within a
reasonable time from its taking. Without prompt payment,
compensation cannot be considered "just" for the property
owner is made to suffer the consequence of being
immediately deprived of his land while being made to wait
for a decade or more before actually receiving the amount
necessary to cope with his loss [Cosculluela v. The
Honorable Court of Appeals, G.R. No. 77765, August 15,
1988, 164 SCRA 393, 400. See also Provincial Government
of Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August
27, 1987, 153 SCRA 291].
The State's power of eminent domain should be exercised within the
bounds of fair play and justice. In the case at bar, considering that
valuable property has been taken, the compensation to be paid fixed
and the municipality is in full possession and utilizing the property for
public purpose, for three (3) years, the Court finds that the municipality
has had more than reasonable time to pay full compensation.
WHEREFORE, the Court Resolved to ORDER petitioner Municipality of
Makati to immediately pay Philippine Savings Bank, Inc. and private
respondent the amount of P4,953,506.45. Petitioner is hereby required
to submit to this Court a report of its compliance with the foregoing
order within a non-extendible period of SIXTY (60) DAYS from the date of
receipt of this resolution.
The order of respondent RTC judge dated December 21, 1988, which was
rendered in Civil Case No. 13699, is SET ASIDE and the temporary
restraining order issued by the Court on November 20, 1989 is MADE
PERMANENT.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.