CONSTITUTIONAL LAW 1 CASES (C)
A. BASIS: CONSTITUTIONAL AND JURISPRUDENCE
1. Republic v. Villasor, 54 SCRA 83
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-30671 November 28, 1973
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
HON. GUILLERMO P. VILLASOR, as Judge of the Court of First Instance of
Cebu, Branch I, THE PROVINCIAL SHERIFF OF RIZAL, THE SHERIFF OF
QUEZON CITY, and THE SHERIFF OF THE CITY OF MANILA, THE CLERK OF
COURT, Court of First Instance of Cebu, P. J. KIENER CO., LTD., GAVINO
UNCHUAN, AND INTERNATIONAL CONSTRUCTION
CORPORATION, respondents.
Office of the Solicitor General Felix V. Makasiar and Solicitor Bernardo P. Pardo for
petitioner.
Andres T. Velarde and Marcelo B. Fernan for respondents.
FERNANDO, J.:
The Republic of the Philippines in this certiorari and prohibition proceeding challenges
the validity of an order issued by respondent Judge Guillermo P. Villasor, then of the
Court of First Instance of Cebu, Branch I,1 declaring a decision final and executory
and of an alias writ of execution directed against the funds of the Armed Forces of the
Philippines subsequently issued in pursuance thereof, the alleged ground being
excess of jurisdiction, or at the very least, grave abuse of discretion. As thus simply
and tersely put, with the facts being undisputed and the principle of law that calls for
application indisputable, the outcome is predictable. The Republic of the Philippines is
entitled to the writs prayed for. Respondent Judge ought not to have acted thus. The
order thus impugned and the alias writ of execution must be nullified.
In the petition filed by the Republic of the Philippines on July 7, 1969, a summary of
facts was set forth thus: "7. On July 3, 1961, a decision was rendered in Special
Proceedings No. 2156-R in favor of respondents P. J. Kiener Co., Ltd., Gavino
Unchuan, and International Construction Corporation, and against the petitioner
herein, confirming the arbitration award in the amount of P1,712,396.40, subject of
Special Proceedings. 8. On June 24, 1969, respondent Honorable Guillermo P.
Villasor, issued an Order declaring the aforestated decision of July 3, 1961 final and
executory, directing the Sheriffs of Rizal Province, Quezon City [as well as] Manila to
execute the said decision. 9. Pursuant to the said Order dated June 24, 1969, the
corresponding Alias Writ of Execution [was issued] dated June 26, 1969, .... 10. On
the strength of the afore-mentioned Alias Writ of Execution dated June 26, 1969, the
Provincial Sheriff of Rizal (respondent herein) served notices of garnishment dated
June 28, 1969 with several Banks, specially on the "monies due the Armed Forces of
the Philippines in the form of deposits sufficient to cover the amount mentioned in the
said Writ of Execution"; the Philippine Veterans Bank received the same notice of
garnishment on June 30, 1969 .... 11. The funds of the Armed Forces of the
Philippines on deposit with the Banks, particularly, with the Philippine Veterans Bank
and the Philippine National Bank [or] their branches are public funds duly
appropriated and allocated for the payment of pensions of retirees, pay and
allowances of military and civilian personnel and for maintenance and operations of
the Armed Forces of the Philippines, as per Certification dated July 3, 1969 by the
AFP Controller,..."2. The paragraph immediately succeeding in such petition then
alleged: "12. Respondent Judge, Honorable Guillermo P. Villasor, acted in excess of
jurisdiction [or] with grave abuse of discretion amounting to lack of jurisdiction in
granting the issuance of an alias writ of execution against the properties of the Armed
Forces of the Philippines, hence, the Alias Writ of Execution and notices of
garnishment issued pursuant thereto are null and void." 3 In the answer filed by
respondents, through counsel Andres T. Velarde and Marcelo B. Fernan, the facts set
forth were admitted with the only qualification being that the total award was in the
amount of P2,372,331.40.4
The Republic of the Philippines, as mentioned at the outset, did right in filing
this certiorari and prohibition proceeding. What was done by respondent Judge is not
in conformity with the dictates of the Constitution. .
It is a fundamental postulate of constitutionalism flowing from the juristic concept of
sovereignty that the state as well as its government is immune from suit unless it
gives its consent. It is readily understandable why it must be so. In the classic
formulation of Holmes: "A sovereign is exempt from suit, not because of any formal
conception or obsolete theory, but on the logical and practical ground that there can
be no legal right as against the authority that makes the law on which the right
depends."5 Sociological jurisprudence supplies an answer not dissimilar. So it was
indicated in a recent decision, Providence Washington Insurance Co. v. Republic of
the Philippines,6 with its affirmation that "a continued adherence to the doctrine of
non-suability is not to be deplored for as against the inconvenience that may be
caused private parties, the loss of governmental efficiency and the obstacle to the
performance of its multifarious functions are far greater if such a fundamental
principle were abandoned and the availability of judicial remedy were not thus
restricted. With the well known propensity on the part of our people to go to court, at
the least provocation, the loss of time and energy required to defend against law
1
suits, in the absence of such a basic principle that constitutes such an effective 1 The other respondents are the Provincial Sheriff of Rizal, the Sheriff of Quezon City,
obstacle, could very well be imagined."7 the Sheriff of the City of Manila, the Clerk of Court, Court of First Instance of Cebu, P.
J. Kiener Co., Ltd., Gavino Unchuan, and International Construction Corporation.
This fundamental postulate underlying the 1935 Constitution is now made explicit in
the revised charter. It is therein expressly provided: "The State may not be sued 2 Petition, pars. 7-11.
without its consent."8 A corollary, both dictated by logic and sound sense from a basic
concept is that public funds cannot be the object of a garnishment proceeding even if 3 Ibid, par. 12.
the consent to be sued had been previously granted and the state liability adjudged.
Thus in the recent case of Commissioner of Public Highways v. San Diego,9 such a
well-settled doctrine was restated in the opinion of Justice Teehankee: "The universal 4 Answer, par. III.
rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit claimant's action 'only up to the completion of 5 Kawananakoa v. Polyblank 205 U.S. 349 (1907).
proceedings anterior to the stage of execution' and that the power of the Courts ends
when the judgment is rendered, since government funds and properties may not be 6 L-26386, September 30, 1969, 29 SCRA 598.
seized under writs of execution or garnishment to satisfy such judgments, is based on
obvious considerations of public policy. Disbursements of public funds must be
covered by the corresponding appropriation as required by law. The functions and 7 Ibid, 601-602.
public services rendered by the State cannot be allowed to be paralyzed or disrupted
by the diversion of public funds from their legitimate and specific objects, as 8 Article XV, Sec. 16.
appropriated by law." 10 Such a principle applies even to an attempted garnishment of
a salary that had accrued in favor of an employee. Director of Commerce and Industry
9 L-30098, February 8, 1970, SCRA 616.
v. Concepcion, 11 speaks to that effect. Justice Malcolm as ponente left no doubt on
that score. Thus: "A rule which has never been seriously questioned, is that money in
the hands of public officers, although it may be due government employees, is not 10 Ibid, 625. The opinion cited among others the following decisions: Merritt v.
liable to the creditors of these employees in the process of garnishment. One reason Government, 34 Phil. 311 (1916); Visayan Refining Co. v. Camus, 40 Phil. 550
is, that the State, by virtue of its sovereignty, may not be sued in its own courts except (1919); Director of Commerce v. Concepcion, 43 Phil. 384 (1922); Belleng Republic,
by express authorization by the Legislature, and to subject its officers to garnishment L-19856, Sept. 16, 1963, 9 SCRA 6; Republic v. Palacio, L-20322, May 29, 1968, 23
would be to permit indirectly what is prohibited directly. Another reason is that moneys SCRA 899.
sought to be garnished, as long as they remain in the hands of the disbursing officer
of the Government, belong to the latter, although the defendant in garnishment may 11 43 Phil. 384 (1922).
be entitled to a specific portion thereof. And still another reason which covers both of
the foregoing is that every consideration of public policy forbids it." 12
12 Ibid, 386.

In the light of the above, it is made abundantly clear why the Republic of the 2. Lasco v. UNRENRE, 241 SCRA 681
Philippines could rightfully allege a legitimate grievance.

Republic of the Philippines

WHEREFORE, the writs of certiorari and prohibition are granted, nullifying and setting SUPREME COURT
aside both the order of June 24, 1969 declaring executory the decision of July 3, 1961 Manila
as well as the alias writ of execution issued thereunder. The preliminary injunction
issued by this Court on July 12, 1969 is hereby made permanent.
FIRST DIVISION
Zaldivar (Chairman), Antonio, Fernandez and Aquino, JJ., concur.
G.R. Nos. 109095-109107 February 23, 1995
Barredo, J, took no part.
ELDEPIO LASCO, RODOLFO ELISAN, URBANO BERADOR, FLORENTINO
ESTOBIO, MARCELINO MATURAN, FRAEN BALIBAG, CARMELITO GAJOL,
Footnotes DEMOSTHENES MANTO, SATURNINO BACOL, SATURNINO LASCO, RAMON
LOYOLA, JOSENIANO B. ESPINA, all represented by MARIANO R.
2
ESPINA, petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL RESOURCES
EXPLORATION (UNRFNRE) represented by its operations manager, DR.
KYRIACOS LOUCA, OSCAR N. ABELLA, LEON G. GONZAGA, JR., MUSIB M.
BUAT, Commissioners of National Labor Relations Commission (NLRC), Fifth
Division, Cagayan de Oro City and IRVING PETILLA, Labor Arbiter of Butuan
City, respondents.
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set
aside the Resolution dated January 25, 1993 of the National Labor Relations
Commission (NLRC), Fifth Division, Cagayan de Oro City.
We dismiss the petition.
I
Petitioners were dismissed from their employment with private respondent, the United
Nations Revolving Fund for Natural Resources Exploration (UNRFNRE), which is a
special fund and subsidiary organ of the United Nations. The UNRFNRE is involved in
a joint project of the Philippine Government and the United Nations for exploration
work in Dinagat Island.
Petitioners are the complainants in NLRC Cases Nos. SRAB 10-03-00067-91 to 10-
03-00078-91 and SRAB 10-07-00159-91 for illegal dismissal and damages.
In its Motion to Dismiss, private respondent alleged that respondent Labor Arbiter had
no jurisdiction over its personality since it enjoyed diplomatic immunity pursuant to the
1946 Convention on the Privileges and Immunities of the United Nations. In support
thereof, private respondent attached a letter from the Department of Foreign Affairs
dated August 26, 1991, which acknowledged its immunity from suit. The letter
confirmed that private respondent, being a special fund administered by the United
Nations, was covered by the 1946 Convention on the Privileges and Immunities of the
United Nations of which the Philippine Government was an original signatory (Rollo,
p. 21).
On November 25, 1991, respondent Labor Arbiter issued an order dismissing the
complaints on the ground that private respondent was protected by diplomatic
immunity. The dismissal was based on the letter of the Foreign Office dated
September 10, 1991.
Petitioners' motion for reconsideration was denied. Thus, an appeal was filed with the
NLRC, which affirmed the dismissal of the complaints in its Resolution dated January
25, 1993.
Petitioners filed the instant petition for certiorari without first seeking a reconsideration
of the NLRC resolution.
II
Article 223 of the Labor Code of the Philippines, as amended, provides that decisions
of the NLRC are final and executory. Thus, they may only be questioned
through certiorari as a special civil action under Rule 65 of the Revised Rules of
Court.
Ordinarily, certiorari as a special civil action will not lie unless a motion for
reconsideration is first filed before the respondent tribunal, to allow it an opportunity to
correct its assigned errors (Liberty Insurance Corporation v. Court of Appeals, 222
SCRA 37 [1993]).
In the case at bench, petitioners' failure to file a motion for reconsideration is fatal to
the instant petition. Moreover, the petition lacks any explanation for such omission,
which may merit its being considered as falling under the recognized exceptions to
the necessity of filing such motion.
Notwithstanding, we deem it wise to give due course to the petition because of the
implications of the issue in our international relations.
Petitioners argued that the acts of mining exploration and exploitation are outside the
official functions of an international agency protected by diplomatic immunity. Even
assuming that private respondent was entitled to diplomatic immunity, petitioners
insisted that private respondent waived it when it engaged in exploration work and
entered into a contract of employment with petitioners.
Petitioners, likewise, invoked the constitutional mandate that the State shall afford full
protection to labor and promote full employment and equality of employment
opportunities for all (1987 Constitution, Art. XIII, Sec. 3).
The Office of the Solicitor General is of the view that private respondent is covered by
the mantle of diplomatic immunity. Private respondent is a specialized agency of the
United Nations. Under Article 105 of the Charter of the United Nations:
1. The Organization shall enjoy in the territory of its Members such
privileges and immunities as are necessary for the fulfillment of its
purposes.
3
 2. Representatives of the Members of the United Nations and
officials of the Organization shall similarly enjoy such privileges and
immunities as are necessary for the independent exercise of their
functions in connection with the organization.
Corollary to the cited article is the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations, to which the Philippines was a signatory
(Vol. 1, Philippine Treaty Series, p. 621). We quote Sections 4 and 5 of Article III
thereof:
Sec. 4. The specialized agencies, their property and assets,
wherever located and by whomsoever held shall enjoy immunity
from every form of legal process except insofar as in any particular
case they have expressly waived their immunity. It is, however,
understood that no waiver of immunity shall extend to any measure
of execution (Emphasis supplied).
Sec. 5. The premises of the specialized agencies shall be
inviolable. The property and assets of the specialized agencies,
wherever located and by whomsoever held, shall be immune from
search, requisition, confiscation, expropriation and any other form
of interference, whether by executive, administrative, judicial or
legislative action (Emphasis supplied).
As a matter of state policy as expressed in the Constitution, the Philippine
Government adopts the generally accepted principles of international law (1987
Constitution, Art. II, Sec. 2). Being a member of the United Nations and a party to the
Convention on the Privileges and Immunities of the Specialized Agencies of the
United Nations, the Philippine Government adheres to the doctrine of immunity
granted to the United Nations and its specialized agencies. Both treaties have the
force and effect of law.
In World Health Organization v. Aquino, 48 SCRA 242, (1972), we had occasion to
rule that:
It is a recognized principle of international law and under our
system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to look
beyond a determination by the executive branch of the government,
and where the plea of diplomatic immunity is recognized and
affirmed by the executive branch of the government as in the case
at bar, it is then the duty of the courts to accept the claim of
immunity upon appropriate suggestion by the principal law officer of
the government, the Solicitor General or other officer acting under
his direction. Hence, in adherence to the settled principle that
courts may not so exercise their jurisdiction by seizure and
detention of property, as to embarrass the executive arm of the
government in conducting foreign relations, it is accepted doctrine
that "in such cases the judicial department of (this) government
follows the action of the political branch and will not embarrass the
latter by assuming an antagonistic jurisdiction (Emphasis supplied).
We recognize the growth of international organizations dedicated to specific universal
endeavors, such as health, agriculture, science and technology and environment. It is
not surprising that their existence has evolved into the concept of international
immunities. The reason behind the grant of privileges and immunities to international
organizations, its officials and functionaries is to secure them legal and practical
independence in fulfilling their duties (Jenks, International Immunities 17 [1961]).
Immunity is necessary to assure unimpeded performance of their functions. The
purpose is "to shield the affairs of international organizations, in accordance with
international practice, from political pressure or control by the host country to the
prejudice of member States of the organization, and to ensure the unhampered
performance of their functions" (International Catholic Migration Commission v.
Calleja, 190 SCRA 130 [1990]).
In the International Catholic Migration Commission case, we held that there is no
conflict between the constitutional duty of the State to protect the rights of workers
and to promote their welfare, and the grant of immunity to international organizations.
Clauses on jurisdictional immunity are now standard in the charters of the
international organizations to guarantee the smooth discharge of their functions.
The diplomatic immunity of private respondent was sufficiently established by the
letter of the Department of Foreign Affairs, recognizing and confirming the immunity of
UNRFNRE in accordance with the 1946 Convention on Privileges and Immunities of
the United Nations where the Philippine Government was a party. The issue whether
an international organization is entitled to diplomatic immunity is a "political question"
and such determination by the executive branch is conclusive on the courts and
quasi-judicial agencies (The Holy See v. Hon. Eriberto U. Rosario, Jr., G.R. No.
101949, Dec. 1, 1994; International Catholic Migration Commission v. Calleja, supra).
Our courts can only assume jurisdiction over private respondent if it expressly waived
its immunity, which is not so in the case at bench (Convention on the Privileges and
Immunities of the Specialized Agencies of the United Nations, Art. III, Sec. 4).
Private respondent is not engaged in a commercial venture in the Philippines. Its
presence here is by virtue of a joint project entered into by the Philippine Government
and the United Nations for mineral exploration in Dinagat Island. Its mission is not to
exploit our natural resources and gain pecuniarily thereby but to help improve the
quality of life of the people, including that of petitioners.
This is not to say that petitioner have no recourse. Section 31 of the Convention on
the Privileges and Immunities of the Specialized Agencies of the United Nations
states that "each specialized agency shall make a provision for appropriate modes of
4
settlement of: (a) disputes arising out of contracts or other disputes of private cases, the private respondents claim having been wrongfully terminated from their
character to which the specialized agency is a party." employment by the petitioner.

WHEREFORE, the petition is DISMISSED. On 22 August 1990, the petitioner, contending to be an international inter-government
organization, composed of various Southeast Asian countries, filed a Motion to
SO ORDERED. Dismiss, challenging the jurisdiction of the public respondent in taking cognizance of
the above cases.
Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.
On 20 September 1990, the public respondent issued the assailed order denying the
Motion to Dismiss. In due course, a Motion for Reconsideration was interposed but
the same, in an order, dated 07 January 1991, was likewise denied.
3. SEAFDEC v. NLRC, 241 SCRA 580

Hence, the instant petition. This Court, on 20 March 1991, issued the temporary
Republic of the Philippines restraining order prayed for.
SUPREME COURT
Manila
The private respondents, as well as respondent labor arbiter, allege that the petitioner
is not immune from suit and assuming that if, indeed, it is an international
THIRD DIVISION organization, it has, however, impliedly, if not expressly, waived its immunity by
belatedly raising the issue of jurisdiction.
G.R. Nos. 97468-70 September 2, 1993
The Solicitor General, on his part, filed a Manifestation and Motion, which the Court
SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER represented by its granted, praying that he be excused from filing his comment for respondent Labor
Chief, DR. FLOR J. LACANILAO, petitioner, Arbiter, he not being in agreement with the latter's position on this matter.
vs.
DANILO ACOSTA in his capacity as Labor Arbiter of the National Labor On 30 March 1992, this Court dismissed the instant petition in a resolution which
Relations Commission, Regional Arbitration, Branch VI, CORAZON CANTO, reads:
DAN BALIAO, ELIZABETH SUPETRAN, CARMELITA FERRER, CATHRYN
CONTRADOR, and DORIC VELOSO, respondents.
. . . — Considering the allegations, issues and arguments adduced
in the petition for certiorari as well as the separate comments
Hector P. Teodosio for petitioner. thereon of the public and private respondents, and the consolidated
reply thereto of the petitioner, the Court RESOLVED to dismiss the
Cirilo Ganzon, Jr. for private respondents. petition for failure to sufficiently show that the questioned judgment
is tainted with grave abuse of discretion. The temporary restraining
order issued on March 20, 1991 is hereby LIFTED effective
VITUG, J.: immediately.

This is an original petition for certiorari and prohibition, with a prayer for the issuance In time, the petitioner moved for a reconsideration, arguing that the ground for its
of a restraining order, to set aside the order of respondent labor arbiter, dated 20 seeking the allowance of the petition is the labor arbiter's lack of jurisdiction over the
September 1990, denying herein petitioner's motion to dismiss the cases subject dispute.
matter of the petition for lack of jurisdiction.
The court is now asked to rule upon the motion for reconsideration.
Two labor cases, docketed as RAB Case No. VI- 0156-86 and RAB case No. VI -
0214-86, were filed by the herein private respondents against the petitioner, We rule for the petitioner.
Southeast Asian Fisheries Development Center (SEAFDEC), before the National
Labor Relations Commission (NLRC), Regional Arbitration Branch, Iloilo City. In these

5
It is beyond question that petitioner SEAFDEC is an international agency enjoying
diplomatic immunity. This, we have already held in Southeast Asian Fisheries
Development Center-Aquaculture Department vs. National Labor Relations
Commission, G.R. No. 86773, 206 SCRA 283/1992; see also Lacanilao v. de
Leon, G.R. No. 76532, 147 SCRA, 286/1987/, where we
said —
Petitioner Southeast Asian Fisheries Development Center-
Aquaculture Department (SEAFDEC-AQD) is an international
agency beyond the jurisdiction of public respondent NLRC.
It was established by the Governments of Burma, Kingdom of
Cambodia, Republic of Indonesia, Japan, Kingdom of Laos,
Malaysia, Republic of the Philippines, Republic of Singapore,
Kingdom of Thailand and Republic of Vietnam . . . .
The Republic of the Philippines became a signatory to the
Agreement establishing SEAFDEC on January 16, 1968. Its
purpose is as follows:
The purpose of the Center is to contribute to the
promotion of the fisheries development in
Southeast Asia by mutual co-operation among
the member governments of the Center,
hereinafter called the 'Members', and through
collaboration with international organizations and
governments external to the Center.
(Agreement Establishing the SEAFDEC, Art. 1; . . .).
SEAFDEC-AQD was organized during the Sixth Council Meeting of
SEAFDEC on July 3-7, 1973 in Kuala Lumpur, Malaysia as one of
the principal departments of SEAFDEC. . . . to be established in
Iloilo for the promotion of research in aquaculture. Paragraph 1,
Article 6 of the Agreement establishing mandates:
1. The Council shall be the supreme organ of the
Center and all powers of the Center shall be
vested in the Council.
Being an intergovernmental organization, SEAFDEC including its
Departments (AQD), enjoys functional independence and freedom
from control of the state in whose territory its office is located.
As Senator Jovito R. Salonga and Former Chief Justice Pedro L.
Yap stated in their book, Public International Law (p. 83,1956 ed.):
Permanent international commissions and
administrative bodies have been created by the
agreement of a considerable number of States for
a variety of international purposes, economic or
social and mainly non-political. Among the
notable instances are the International Labor
Organization, the International Institute of
Agriculture, the International Danube
Commission. In so far as they are autonomous
and beyond the control of any one State, they
have a distinct juridical personality independent
of the municipal law of the State where they are
situated. As such, according to one leading
authority they must be deemed to possess a
species of international personality of their own.
(Salonga and Yap, Public International Law, 83
[1956 ed.]
Pursuant to its being a signatory to the Agreement, the Republic of
the Philippines agreed to be represented by one Director in
governing SEAFDEC Council (Agreement Establishing SEAFDEC,
Art. 5, Par. 1,. . .), and that its national laws and regulations shall
apply only insofar as its contributions to SEAFDEC of "an agreed
amount of money, movable and immovable property and services
necessary for the establishment and operation of the Center" are
concerned (Art. 11, ibid). It expressly waived the application of the
Philippine laws on the disbursement of funds of petitioner
SEAFDEC-AQD (Section 2, P.D. No. 292).
The then Minister of Justice likewise opined that Philippine Courts
have no jurisdiction over SEAFDEC-AQD in Opinion No. 139,
Series of 1984 —
4. One of the basic immunities of an international organization is
immunity from local jurisdiction, i.e., that it is immune from the legal
writs and processes issued by the tribunals of the country where it
is found. (See Jenks, Id., pp. 37-44). The obvious reason for this is
that the subjection of such an organization to the authority of the
local courts would afford a convenient medium thru which the host
government may interfere in their operations or even influence or
control its policies and decisions of the organization; besides, such
objection to local jurisdiction would impair the capacity of such body
to discharge its responsibilities impartially on behalf of its member-
states. In the case at bar, for instance, the entertainment by the
National Labor Relations Commission of Mr. Madamba's
reinstatement cases would amount to interference by the Philippine
Government in the management decisions of the SEARCA
governing board; even worse, it could compromise the desired
6
 impartiality of the organization since it will have to suit its actuations
to the requirements of Philippine law, which may not necessarily
coincide with the interests of the other member-states. It is
precisely to forestall these possibilities that in cases where the
extent of the immunity is specified in the enabling instruments of
international organizations (jurisdictional immunity, is specified in
the enabling instruments of international organizations),
jurisdictional immunity from the host country is invariably among the
first accorded. (See Jenks, Id.; See Bowett. The Law of
International Institutions. pp. 284-285).
At its Sixth Meeting held at Kuala Lumpur, Malaysia, on 3 to 7 July 1973, the
SEAFDEC Council approved the formal establishment of its Aquaculture Department
in the province of Iloilo, Philippines, to promote research in Aquaculture as so
expressed in the "Whereas" Clauses of Presidential Decree No. 292 issued on 13
September 1973 1. Furthermore, Section 2 of the same decree had provided for the
autonomous character of SEAFDEC, thus:
. . . .All funds received by the Department shall be receipted and
disbursed in accordance with the Agreement establishing the
Southeast Asian Fisheries Development Center and pertinent
resolutions duly approved by the SEAFDEC Council.
As aptly pointed out by Associate Justice Isagani Cruz of this Court—
Certain administrative bodies created by agreement among states
may be vested with international personality when two conditions
concur, to wit:, that their purposes are mainly non-political and that
they are autonomous, i.e., not subject to the control of any state. 2
Anent the issue of waiver of immunity, suffice it to say at the moment that the
petitioner has timely raised the issue of jurisdiction. While the petitioner did not
question the public respondent's lack of jurisdiction at the early stages of the
proceedings, it, nevertheless, did so before it rested its case and certainly well before
the proceedings thereat had terminated.
WHEREFORE, our resolution, dated 30 March 1992, dismissing the petition
for certiorari, is hereby reconsidered, and another is entered (a) granting due course
to the petition; (b) setting aside the order, dated 20 September 1990, of the public
respondent; and (c) enjoining the public respondent from further proceeding with RAB
Case No. VI-0156-86 and RAB Case No. VI-0214-86. No costs.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.
# Footnotes
1 WHEREAS, the Republic of the Philippines, on January 16, 1968, became a
signatory to the Agreement establishing the Southeast Asian Fisheries Development
center (SEAFDEC);
WHEREAS, the SEAFDEC council, at its Sixth Meeting held at Kuala Lumpur
(Malaysia) on July 3-7, 1973, approved the formal establishment of its Aquaculture
Department in the province of Iloilo, Philippines;
WHEREAS, the SEAFDEC Aquaculture Department is designed to promote research
in aquaculture, especially in the production of prawns and shrimps, undertake the
corresponding training programs for fisheries experts and technicians and
disseminate information on fisheries research and development for SEAFDEC
member-countries in Southeast Asia;
WHEREAS, the establishment of the SEAFDEC Aquaculture Department in the
Philippines will directly and immediately stimulate the development of the fisheries
industry in the country, as well as in neighboring nations in Southeast Asia.
2 Isagani Cruz, International Law, 1977 Edition, p. 31.
4. Callado v. IRRI 244 SCRA 210
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 106483 May 22, 1995
ERNESTO L. CALLADO, petitioner,
vs.
INTERNATIONAL RICE RESEARCH INSTITUTE, respondent.
ROMERO, J.:
Did the International Rice Research Institute (IRRI) waive its immunity from suit in this
dispute which arose from an employer-employee relationship?
We rule in the negative and vote to dismiss the petition.
7
Ernesto Callado, petitioner, was employed as a driver at the IRRI from April 11, 1983
to December 14, 1990. On February 11, 1990, while driving an IRRI vehicle on an
official trip to the Ninoy Aquino International Airport and back to the IRRI, petitioner
figured in an accident.
Petitioner was informed of the findings of a preliminary investigation conducted by the
IRRI's Human Resource Development Department Manager in a Memorandum dated
March 5, 1990. 1 In view of the aforesaid findings, he was charged with:
(1) Driving an institute vehicle while on official duty under the
influence of liquor;
(2) Serious misconduct consisting of your failure to report to your
supervisors the failure of your vehicle to start because of a problem
with the car battery which, you alleged, required you to overstay in
Manila for more than six (6) hours, whereas, had you reported the
matter to IRRI, Los Baños by telephone, your problem could have
been solved within one or two hours;
(3) Gross and habitual neglect of your duties. 2 since the investigation of his case was not referred to the Council of IRRI Employees
In a Memorandum dated March 9, 1990, petitioner submitted his answer and
defenses to the charges against him. 3After evaluating petitioner's answer,
explanations and other evidence, IRRI issued a Notice of Termination to petitioner on
December 7, 1990. 4
Thereafter, petitioner filed a complaint on December 19, 1990 before the Labor
Arbiter for illegal dismissal, illegal suspension and indemnity pay with moral and
exemplary damages and attorney's fees.
On January 2, 1991, private respondent IRRI, through counsel, wrote the Labor
Arbiter to inform him that the Institute enjoys immunity from legal process by virtue of
Article 3 of Presidential Decree No. 1620, 5 and that it invokes such diplomatic
immunity and privileges as an international organization in the instant case filed by
petitioner, not having waived the same. 6
IRRI likewise wrote in the same tenor to the Regional Director of the Department of
Labor and Employment. 7
While admitting IRRI's defense of immunity, the Labor Arbiter, nonetheless, cited an
Order issued by the Institute on August 13, 1991 to the effect that "in all cases of
termination, respondent IRRI waives its immunity," 8 and, accordingly, considered the
defense of immunity no longer a legal obstacle in resolving the case. The dispositive
portion of the Labor arbiter's decision dated October 31, 1991, reads:
WHEREFORE, premises considered, judgment is hereby rendered
ordering respondent to reinstate complainant to his former position
without loss or (sic) seniority rights and privileges within five (5)
days from receipt hereof and to pay his full backwages from March
7, 1990 to October 31, 1991, in the total amount of P83,048.75
computed on the basis of his last monthly salary. 9
The NLRC found merit in private respondent' s appeal and, finding that IRRI did not
waive its immunity, ordered the aforesaid decision of the Labor Arbiter set aside and
the complaint dismissed. 10
Hence, this petition where it is contended that the immunity of the IRRI as an
international organization granted by Article 3 of Presidential Decree No. 1620 may
not be invoked in the case at bench inasmuch as it waived the same by virtue of its
Memorandum on "Guidelines on the handling of dismissed employees in relation to
P.D. 1620." 11
It is also petitioner's position that a dismissal of his complaint before the Labor Arbiter
leaves him no other remedy through which he can seek redress. He further states that
and Management (CIEM), he was denied his constitutional right to due process.
We find no merit in petitioner's arguments.
IRRI's immunity from suit is undisputed.
Presidential Decree No. 1620, Article 3 provides:
Art. 3. Immunity from Legal Process. The Institute shall enjoy
immunity from any penal, civil and administrative proceedings,
except insofar as that immunity has been expressly waived by the
Director-General of the Institute or his authorized representatives.
In the case of International Catholic Migration Commission v. Hon. Calleja, et al. and
Kapisanan ng Manggagawa at TAC sa IRRI v. Secretary of Labor and Employment
and IRRI, 12 the Court upheld the constitutionality of the aforequoted law. After the
Court noted the letter of the Acting Secretary of Foreign Affairs to the Secretary of
Labor dated June 17, 1987, where the immunity of IRRI from the jurisdiction of the
Department of Labor and Employment was sustained, the Court stated that this
opinion constituted "a categorical recognition by the Executive Branch of the
Government that . . . IRRI enjoy(s) immunities accorded to international organizations,
which determination has been held to be a political question conclusive upon the
Courts in order not to embarass a political department of Government. 13 We cited the
Court's earlier pronouncement in WHO v. Hon. Benjamin Aquino, et al., 14 to wit:
8
 It is a recognized principle of international law and under our
system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to look
beyond a determination by the executive branch of the government,
and where the plea of diplomatic immunity is recognized and
affirmed by the executive branch of the government as in the case
at bar, it is then the duty of the courts to accept the claim of
immunity upon appropriate suggestion by the principal law officer of
the government . . . or other officer acting under his direction.
Hence, in adherence to the settled principle that courts may not so
exercise their jurisdiction . . . as to embarass the executive arm of
the government in conducting foreign relations, it is accepted
doctrine that in such cases the judicial department of (this)
government follows the action of the political branch and will not
embarrass the latter by assuming an antagonistic jurisdiction. 15
Further, we held that "(t)he raison d'etre for these immunities is the assurance of
unimpeded performance of their functions by the agencies concerned.
The grant of immunity from local jurisdiction to . . . and IRRI is
clearly necessitated by their international character and respective
purposes. The objective is to avoid the danger of partiality and
interference by the host country in their internal workings. The
exercise of jurisdiction by the Department of Labor in these
instances would defeat the very purpose of immunity, which is to
shield the affairs of international organizations, in accordance with
international practice, from political pressure or control by the host
country to the prejudice of member States of the organization, and
to ensure the unhampered the performance of their functions. 16
The grant of immunity to IRRI is clear and unequivocal and an express waiver by its
Director-General is the only way by which it may relinquish or abandon this immunity.
On the matter of waiving its immunity from suit, IRRI had, early on, made its position
clear. Through counsel, the Institute wrote the Labor Arbiter categorically informing
him that the Institute will not waive its diplomatic immunity. In the second place,
petitioner's reliance on the Memorandum with "Guidelines in handling cases of
dismissal of employees in relation to P.D. 1620" dated July 26, 1983, is misplaced.
The Memorandum reads, in part:
Time and again the Institute has reiterated that it will not use its
immunity under P.D. 1620 for the purpose of terminating the
services of any of its employees. Despite continuing efforts on the
part of IRRI to live up to this undertaking, there appears to be
apprehension in the minds of some IRRI employees. To help allay
these fears the following guidelines will be followed hereafter by the
Personnel/Legal Office while handling cases of dismissed
employees.
xxx xxx xxx
2. Notification/manifestation to MOLE or labor arbiter
If and when a dismissed employee files a complaint against the Institute contesting
the legality of dismissal, IRRI's answer to the complaint will:
1. Indicate in the identification of IRRI that it is an international
organization operating under the laws of the Philippines including
P.D. 1620. and
2. Base the defense on the merits and facts of the case as well as the
legality of the cause or causes for termination.
3) Waiving immunity under P.D. 1620
If the plaintiff's attorney or the arbiter, asks if IRRI will waive its
immunity we may reply that the Institute will be happy to do so, as it
has in the past in the formal manner required thereby reaffirming
our commitment to abide by the laws of the Philippines and our full
faith in the integrity and impartially of the legal system. 17 (Emphasis
in this paragraphs ours)
From the last paragraph of the foregoing quotation, it is clear that in cases involving
dismissed employees, the Institute may waive its immunity, signifying that such
waiver is discretionary on its part.
We agree with private respondent IRRI that this memorandum cannot, by any stretch
of the imagination, be considered the express waiver by the Director-General.
Respondent Commission has quoted IRRI's reply thus:
The 1983 . . . is an internal memo addressed to Personnel and
Legal Office and was issued for its guidance in handling those
cases where IRRI opts to waive its immunity. It is not a declaration
of waiver for all cases. This is apparent from the use of the
permissive term "may" rather than the mandatory term "shall" in the
last paragraph of the memo. Certainly the memo cannot be
considered as the express waiver by the Director General as
contemplated by P.D. 1620, especially since the memo was issued
by a former Director-General. At the very least, the express
declaration of the incumbent Director-general supersedes the 1983
memo and should be accorded greater respect. It would be equally
important to point out that the Personnel and Legal Office has been
non-existent since 1988 as a result of major reorganization of the
9
 IRRI. Cases of IRRI before DOLE are handled by an external Legal Feliciano, Melo and Vitug, JJ., concur.
Counsel as in this particular
case. 18 (Emphasis supplied) Francisco, J., is on leave.

The memorandum, issued by the former Director-General to a now-defunct division of Footnotes

the IRRI, was meant for internal circulation and not as a pledge of waiver in all cases
arising from dismissal of employees. Moreover, the IRRI's letter to the Labor Arbiter in
the case at bench made in 1991 declaring that it has no intention of waiving its 1 Rollo, p. 83.
immunity, at the very least, supplants any pronouncement of alleged waiver issued in
previous cases. 2 Rollo, pp. 84-85.

Petitioner's allegation that he was denied due process is unfounded and has no basis. 3 Rollo, p. 86.

It is not denied that he was informed of the findings and charges resulting from an 4 Rollo, p. 90.
investigation conducted of his case in accordance with IRRI policies and procedures.
He had a chance to comment thereon in a Memorandum he submitted to the 5 "Granting to the International Rice Research Institute (IRRI) the Status,
Manager of the Human Resource and Development Department. Therefore, he was Prerogatives, Privileges and Immunities of an International Organization."
given proper notice and adequate opportunity to refute the charges and findings,
hereby fulfilling the basic requirements of due process.
6 Letter to Hon. Numeriano D. Villena, dated January 2, 1991. Rollo, p. 92.
Finally, on the issue of referral to the Council of IRRI Employees and Management
(CIEM), petitioner similarly fails to persuade the Court. 7 Rollo, p. 94.

The Court, in the Kapisanan ng mga Manggagawa at TAC sa IRRI case, 19 held: 8 Rollo, p. 99.

Neither are the employees of IRRI without remedy in case of 9 Rollo, p. 114.
dispute with management as, in fact, there had been organized a
forum for better management-employee relationship as evidenced 10 Decision dated March 20, 1992; Penned by Commissioner Ireneo B. Bernardo,
by the formation of the Council of IRRI Employees and with Presiding Commissioner Lourdes C. Javier and Commissioner Rogelio I. Rayala
Management (CIEM) wherein "both management and employees concurring. Rollo, p. 72.
were and still are represented for purposes of maintaining mutual
and beneficial cooperation between IRRI and its employees." The
11 Memorandum dated July 26, 1983, from the Director General to the Personnel and
existence of this Union factually and tellingly belies the argument
Legal Office Rollo, at Rollo, p. 47; Rollo, p. 31.
that Pres. Decree No. Decree No. 1620, which grants to IRRI the
status, privileges and immunities of an international organization,
deprives its employees of the right to self-organization. 12 G.R. No. 85750 and G.R. No. 89331, September 28, 1990, 190 SCRA 130.

We have earlier concluded that petitioner was not denied due process, and this, 13 Supra at pp. 139-140.
notwithstanding the non-referral to the Council of IRRI Employees and Management.
Private respondent correctly pointed out that petitioner, having opted not to seek the 14 G.R. No. L-35131, November 29, 1972, 48 SCRA 242.
help of the CIEM Grievance Committee, prepared his answer by his own self. 20 He
cannot now fault the Institute for not referring his case to the CIEM.
15 190 SCRA 140.

IN VIEW OF THE FOREGOING, the petition for certiorari is DISMISSED. No costs.

16 Supra, p. 143.

SO ORDERED.
10
17 Rollo, p. 47. effect on June 22, 1957. Del Mar also asked for compensatory, moral and exemplary
damages.
18 Rollo, p. 77.
In his petition below, del Mar averred that he served during World War II as chief
19 G.R. No. 89331, September 28, 1990, 190 SCRA 130. judge advocate of the Cebu Area Command (a duly recognized guerrilla organization)
with the rank of major; that he subsequently obtained an honorable discharge from
the service on October 20, 1946 on a certificate of permanent total physical disability;
20 Rollo, p. 69. that upon proper claim presented and after hearing and adjudication, the Philippine
Veterans Board (the PVA's predecessor granted him a monthly life pension of P50
effective January 28, 1947; that in March 1950, the said Board discontinued payment
of his monthly life pension on the ground that his receipt of a similar pension from the
United States Government, through the United States Veterans Administration, by
B. TESTS TO DETERMINE IF SUIT IS AGAINST THE STATE reason of military service rendered in the United States Army in the Far East during
World War II, precluded him from receiving any further monthly life pension from the
5. Begosa v. PVA 32 SCRA 466 Philippine Government; that he wrote the said Board twice demanding that it continue
paying his monthly life pension, impugning the cancellation thereof as illegal; and that
his demands went unheeded.
6. Del Mar v. PVA 52 SCRA 340
The PVA reiterated its contention that del Mar's receipt of a similar pension from the
Republic of the Philippines United States Government effectively barred him from claiming and receiving from the
SUPREME COURT Philippine Government the monthly life pension granted him as well as the monthly
Manila allowances he claimed for his five living unmarried minor children below eighteen
years of age. The PVA also asserted that it is discretionary on its part to grant or
discontinue the pension sought by del Mar. In addition, it alleged that the action of del
EN BANC
Mar was premature because of his failure to exhaust administrative remedies before
invoking judicial intervention, and that the court a quo was without jurisdiction to try
G.R. No. L-27299 June 27, 1973 the case as del Mar demand partakes of a money claim against the PVA — a mere
agency of the Philippine Government — and, in effect, of a suit against the
QUIRICO DEL MAR, petitioner and appellee, Government which is not suitable without its consent. The PVA thus prayed for the
vs. dismissal of the petition.
THE PHILIPPINE VETERANS ADMINISTRATION, respondent and appellant.
After due trial, the court a quo rendered judgment upholding del Mar claims. In its
Quirico del Mar in his own behalf. decision dated February 27, 1965, the court (1) ordered the PVA to pay to del Mar his
monthly life pension corresponding to the period from April 1950 to May 1957 at the
rate of P50 a month, adding up to P4,334.86, and his monthly life pension
Office of the Solicitor General Felix V. Makasiar, First Assistant Solicitor General corresponding to the period from June 22, 1957 to February 1965 at the amount of
Esmeraldo Umali and Solicitor Eulogio Raquel Santos for respondent appellant. P100 a month totalling P9,200, and thereafter to continue to pay his monthly life
pension at the rate of P100. a month; (2) directed del Mar to file with the PVA the
CASTRO, J.: corresponding written application for the payment to him of the monthly living
allowance of P10 for each of his five living unmarried minor children from June 22,
On June 20, 1964, Quirico del Mar (hereinafter referred to del Mar) filed with the 1957; and ordered the PVA to give due course to the written application as soon as
Court of First Instance of Cebu petition for mandamus (civil case R-8465) against the del Mar shall have filed the same with it, and once approved, to make the necessary
Philippine Veterans Administration (hereinafter referred to the PVA to compel the payment of the accumulated unpaid living allowances due to each of the said children
latter to continue paying him monthly life pension of P50 from the date of its from June 22, 1957 as well as the current ones until each one of them ceases to be
cancellation in March 1950 to June 20, 1957, and thereafter, or from June 22 1957 his entitled to the same; and (3 directed the PVA in the event of unavailability of funds to
monthly life pension, as increased by Republic Act 1920, 1 of P100 and to pay to him pay the claims aforementioned, to set aside funds from such as intended to pay the
as well the monthly living allowance of P10 for each of his unmarried minor children veterans' living pensions, or to cause the same to be appropriated in its budget in
below eighteen years of age,2 pursuant to the said Republic Act 1920 which took
11
order to comply with the judgment. For lack of basis, the court a quo omitted to pass
judgment on del Mar's claim for moral and exemplary damages.
Hence, the present appeal by the PVA.
The PVA alleges that the court a quo erred (1) in not holding itself without jurisdiction
to try civil case R-8465; (2) in no finding as premature the petition for mandamus filed
by del Mar due to the failure of the latter to exhaust available administrative remedies
before seeking judicial intervention; (3) in declaring null and void section 6 of PVA
Regulation No. 2 relied upon by it in discontinuing the monthly life pension of del Mar
since March 1950; (4) in not finding it discretionary on the part of the PVA to grant or
discontinue the said suspension; (5) in ordering it to pay to del Mar the amounts
stated in the judgment; and (6) in ordering it to give due course to and approve the
application which the said court directed del Mar to file for the payment to the latter of
the monthly living allowance for each of his living unmarried minor children below
eighteen years of age.
This appeal raises several questions which will be discussed in seriatim.
1. The PVA argues that the court a quo was without jurisdiction to try civil case R-
8465 because it involves a money claim against the said PVA — a mere agency of
the Government performing governmental functions with no juridical personality of its
own — and, in reality, partakes of an action against the Philippine Government which
is immune from suit without its consent, citing this Court's observation in Republic of
the Philippine vs. Ramolete and Del Mar,3to wit:
....a charge against the Government where the money involved is
part of the public funds, is a suit against the Government, and the
happenstance that the action is directed against the PVA as an
entity and not against the Republic of the Philippines is of no
moment. Perforce, the Republic of the Philippines, on matters of
administration of all benefits due to the veterans of revolutions and
wars, and to their heirs and beneficiaries, acts and has to act
through its agency and instrumentality, the PVA. The suit should
therefore be regarded as one against the Republic of the
Philippines; the PVA is therefore exempt from the filing of an appeal
bond.
The PVA labors under a muddled and mistaken appreciation of the aforecited
observation. This Court stated in precise language the sole issue for resolution in that
case, thus:
Is the PVA exempt from the filing of an appeal bond? To resolve
this issue, we must initially determine whether the PVA is an
agency or instrumentality of the Republic of the Philippines, and, in
the affirmative, whether it exercises governmental functions.
Indeed, the decisive point in the aforementioned case related to the
status of the PVA as an agency or instrumentality of the Republic of
the Philippines exercising governmental functions as to be entitled
to exemption from the filing of the appeal bond per section 16 of
Rule 141 of the Rules of Court, not to the nature of the claim sought
to be enforced by the private respondent therein (del Mar) against
the said PVA. Thus, in the said case, this Court made a lengthy
disquisition on the history, development and organization of the
PVA to show conclusively that the same is an entity or agency of
the Republic of the Philippines performing governmental functions.
True, this Court referred to the claim of the private respondent
therein as "a claim for a sum of money against the Government,
which claim, if adjudged finally to be meritorious, would render the
Republic of the Philippines liable therefor," since the funds from
which the claim was to be satisfied were funds appropriated by
Congress for the PVA; but this Court properly and advisedly omitted
any study and consideration of the question of suitability or non-
suitability of the Government in connection therewith.
As a general proposition, the rule — well-settled in this jurisdiction — on the immunity
of the Government from suit without its consent holds true in all actions resulting in
"adverse consequences on the public treasury, whether in the disbursements of funds
or loss of property."4 Needless to state, in such actions, which, in effect, constitute
suits against the Government, the court has no option but to dismiss them.
Nonetheless, the rule admits of an exception. It finds no application where a claimant
institutes an action against a functionary who fails to comply with his statutory duty to
release the amount claimed from the public funds already appropriated by statute for
the benefit of the said claimant.5 As clearly discernible from the circumstances, the
case at bar falls under the exception.
2. The second question posed by the PVA relates to del Mar alleged failure to
exhaust administrative remedies before resorting to court action. Suffice it to state
that where a case as in the present controversy — involves a question solely of a
legal nature, there arises no need for the litigant to resort to all administrative
remedies available to him before seeking judicial relief. 6
3. The validity of section 6 of Regulation No. 2 of the "Rules and Regulations on
Veterans' Benefits" adopted by the PVA constitutes the core of the present
controversy. The said section 6 reads as follows:
SEC. 6. Effect of receipt of USVA pension benefit — termination,
reduction. — An award of a similar disability compensation from the
US Veterans Administration shall be a ground for the cancellation of
a disability pension granted under the Regulation: Provided,
however, That if and while the disability compensation awarded by
the US Veterans Administration is less than the pension granted
hereunder, the difference in amount shall be assumed and paid by
the PVA: Provided, further, That upon proper application, the
12
 disability award previously cancelled may be restored upon the
termination of the US Veterans Administration award if the cause of
such termination is due to negative military service report of the
pensioner certified by the US Department of the Army and not for
any other valid cause: Provided, finally, That the veteran is
medically determined to be still suffering from the disability for
which he was previously awarded a pension. Payment of pension
thus restored shall take effect or shall commence only from the date
of approval of restoration and when funds become available.
Pursuant to the foregoing, the PVA cancelled and discontinued the monthly life
pension of del Mar reasoning that the latter's receipt of a similar pension from the
United States Government precluded his enjoying any like benefit from the Philippine
Government. The PVA avers that it adopted the aforequoted section 6 in order to
carry out and implement section 9 of Republic Act 65, as amended, 7 particularly its
excepting clause. Said section 9 reads:
SEC. 9. The persons mentioned in sections one and two hereof
who are permanently incapacitated from work owing to sickness,
disease or injuries sustained in line of duty, shall be given a life
pension of one hundred pesos a month, and ten pesos a month for
each of his unmarried minor children below eighteen years of age,
unless they are actually receiving a similar pension from other
Government funds, and shall receive, in addition, the necessary
hospitalization and medical care.8
The PVA reads the phrase "from other Government funds" in the excepting clause of
the aforecited provision as necessarily including funds of the United States
Government. And without question, the pension del Mar receives from the United
States Veterans Administration comes from the funds of the United States
Government.
On the other hand, del Mar avers that section 6 of Regulation No. 2 illegally effects
the suspension of the operation of section 9 of Republic Act 65, as amended, and
argues that under section 209 of Republic Act 65, as amended, the power suspend
the payment of the monthly life pension awarded to disabled veteran belongs
exclusively to the President of the Philippines, not to the PVA which, in the case at
bar, illegally arrogated unto itself the said power. Furthermore, del Mar states, the
PVA "deliberately misinterprets" the phrase from other Government funds" in
extending its scope to include United States Government funds.
The principle recognizing the necessity of vesting administrative authorities with the
power to promulgate rules and regulations to implement a given statute and to
effectual its policies, provided such rules and regulations conform to the terms and
standards prescribed by the statute as well purport to carry into effect its general
policies, constitutes well established doctrine in this jurisdiction. 10 In Teoxon v.
Members of the Board of Administrators, Philippine Veterans Administration, suprea,
this Court fittingly stated: .
... the Constitution limits the authority of the President, in whom all
executive power resides, to take care that the laws be faithfully
executed. No lesser administrative executive office or agency then
can, contrary to the express language of the Constitution, assert for
itself a more extensive prerogative. Necessarily, it is bound to
observe the constitutional mandate. There must be strict
compliance with the legislative enactment. Its terms must be
followed. The statute requires adherence to, not departure from, its
provisions. No deviation is allowable.
Section 11 of Republic Act 2665 11 empowers the PVA to adopt rules and regulations,
thus:
SEC. 11. Policies, rules and regulations. — Subject to existing
laws, the Administration shall have the power to promulgate and
issue rules and regulations as may be found necessary to govern
its operations and to carry out that aims and purposes of this Act
and of all other laws to be administered by the Administration.
Pursuant to this rule making authority, the PVA — allegedly' to
implement section 9 of Republic Act 65, as amended promulgated
its "Rules and Regulations on Veterans' Benefits," section 6 of
Regulation No. 2 of which cancels the disability pension granted if
the beneficiary receives a similar compensation from the United
States Veterans Administration. In effect, the PVA by adopting
section 6 of Regulation No. 2, suspended the operation of section 9'
of Republic Act 65, as amended. This, Republic Act 65, as
amended, forbids the PVA to do for it expressly authorizes only the
President of the Philippines to suspend the operation of any of its
provisions "if and when the Congress of the United States approves
the pending GI Bill of Rights applicable to the Philippines the
provisions of which are identical or similar to the provisions of this
Act." Clearly then, section 6 of Regulation No. 2 not only negates
the very spirit behind section 9 of Republic Act 65, as amended, but
also contravenes the express mandate of section 20 thereof.
The PVA's pretense that del Mar case falls under the clause of section 9 of Republic
Act 65, as amended, which excepts those who "are actually receiving a similar
pension from other Government funds" from the coverage of said section 9 —
predicated upon its interpretation that the phrase other Government funds" includes
funds of the United States Government — fails to persuade this Court as a valid
argument to justify its cancellation of del Mar monthly life pens Section 9 of Republic
Act 65, as amended, in providing for the excepting clause, obviously intends to
prevent the receipt the same beneficiary of concurrent or multiple pensions benefits
13
similar to each other in nature and basis, although coursed through different
departments or agencies, but paid out of the funds of the same Government. Any
contrary interpretation resulting in the derogation of the interests of the beneficiary
who likewise receives a similar pension paid out funds of other Governments,
conflicts with the establish axiom ordaining the construction of pension laws of war
veterans in favor of those seeking their benefits.
The record of the case at bar being completely bereft of any indication to show the
suspension by the President of the Philippines — pursuant to section 20 of Republic
Act 65, amended — of the operation of any of the provisions of the said statute, this
Court perforce must uphold del Mar claims.
4. The rest of the assigned errors relate to the allege undue interference by the
court a quo with the purely discretionary functions of the PVA in the matter of granting
discontinuing the pension benefits.
The law concedes to administrative bodies — like the PVA — the authority to act on
and decide claims and applications in accordance with their judgment, in the exercise
of their adjudicatory capacity. Because of their acquired expertise in specific matters
within the purview of their respective jurisdictions, the findings of these administrative
bodies merit not only great weight but also respect and finality. "There is limit,
however, to such a deference paid to the actuations or such bodies, Clearly, where
there has been a failure to interpret and apply the statutory provisions in question,
judicial power should assert itself. Under the theory of separation of power it is to the
judiciary, and to the judiciary alone, that the final say on questions of law in
appropriate cases coming before it is vested." 12
All told, no roadblock stands in the way of del Mar's demand for the continuance of
his monthly life pension.
In view, however, of the further amendment by Congress of section 9 of Republic Act
65, as amended, through Republic Act 5753 — the provisions of which took effect on
June 21, 1969 — there arises the need to modify the judgment a quo in order to make
it conform to the said statute as it now stands. Republic Act 5753, in further amending
section 9 of Republic Act 65, as amended, grants every totally disabled veteran of
World War II "a life pension of two hundred pesos a month, and thirty pesos a month
for his wife and each of his unmarried minor children below eighteen years of age."
ACCORDINGLY, this Court adjudges the appellee Quirico del Mar entitled to his life
pension (1) at the rate of P50 a month effective as of April 1950 to May 1957, per
Republic Act 65; (2) at the rate of P100 a month effective as of June 22, 1957 to May
1969, per Republic Act 65 as amended by Republic Act 1920; and (3) at the rate of
P200 a month effective as of June 21, 1969, per Republic Act 65 as further amended
by Republic Act 5753. This Court directs the appellant Philippine Veterans
Administration to compute and then to pay to the appellee del Mar his past and
accumulated monthly life pension at the aforementioned statutory rates.
Regarding the monthly living allowance the appellee del Mar asks for each of his five
"living unmarried minor children below eighteen years of age," it appearing that he
has not filed any proper application therefor with the appellant PVA but simply
included them in his claim for the restoration of his discontinued monthly life pension,
the appellee del Mar may, if he so desires, comply with section 15 of Republic Act 65,
as amended, which requires that "[A]ny person who desires to take advantage of the
rights and privileges provided for in this Act should file his application" with the
Philippine Veterans Administration, and the latter is hereby ordered to consider and
pass upon the merits of such application, if filed, particular reference to the
entitlement qualifications of intended beneficiaries. No pronouncement as to costs.
Makalintal, Zaldivar, Fernando, Teehankee Barredo, and Esguerra, JJ., concur.
Antonio and Makasiar, JJ., took no part.
Footnotes
1 AN ACT AMENDING SECTION NINE OF REPUBLIC ACT NUMBERED SIXTY-
FIVE BY INCREASING FROM FIFTY TO ONE HUNDRED PESOS A MONTH THE
LIFE PENSION OF PERMANENTLY INCAPACITATED PHILIPPINE VETERANS.
2 Lydia (born on January 26, 1942), Quirico, Jr. (born on February 10,1945), Rolando
(born on December 5, 1948), Carmencita (born on July 25, 1950), and Lourdes (born
on September 4, 1953).
3 L-94673, August 12, 1966, 16 SCRA 923.
4 Begosa vs. Chairman, Philippine Veterans Administration, 32 SCRA 466.
5 Begosa vs. Chairman, Philippine Veterans Administration, ibid., Teoxon vs.
Members of the Board of Administrators, Philippine Veterans Administration 13 SCRA
585.
6 Begosa vs. Chairman, Philippine Veterans Administration, ibid.; Teoxon vs.
Members of the Board of Administrators, Philippine Veterans Administration, ibid.
7 Amendments were introduced by Republic Act 1362, approved on June 18, 1955;
Republic Act 1920, approved on June 22, 1957; and Republic Act 5753, approved on
June 21, 1969.
8 Prior to its amendment by Republic Act 5753 (AN ACT FURTHER AMENDING
REPUBLIC ACT NUMBERED SIXTY FIVE, AS AMENDED, BY INCREASING THE
PENSION OF TOTALLY DISABLED VETERANS OF WORLD WAR II AND
DEPENDENTS).
14
9 "SEC. 20. This Act shall take effect upon its approval: Provided, That the President
of the Philippines is hereby authorized to suspend the operation of any provision of
this Act if and when the Congress of the United States approves the pending GI Bill of
Rights applicable to the Philippines the provisions of which are identical or similar to
the provisions of this Act."
10 People vs. Exconde 101 Phil. 1125; Geukekoo vs. Araneta, 102 Phil. 706; Teoxon
vs. Members of the Board of Administrators, Philippine Veterans
Administration, supra.
11 AN ACT TO CONSOLIDATE INTO ONE OFFICE TO BE KNOWN AS THE
"PHILIPPINE VETERANS ADMINISTRATION" THE BOARD ON PENSIONS FOR
VETERANS CREATED BY COMMONWEALTH ACT SIX HUNDRED AND FIVE,
THE PHILIPPINE VETERANS BOARD CREATED BY REPUBLIC ACT NUMBERED
SIXTY FIVE, THE CLAIMS OFFICE CREATED BY VIRTUE OF REPUBLIC ACT
NUMBERED ONE HUNDRED THIRTY-SIX, THE VETERANS BACK PAY
COMMISSION CREATED BY REPUBLIC ACT NUMBERED EIGHT HUNDRED
NINETY-SEVEN AND THE VETERANS NINE, AMENDING THEREBY THE LAWS
CITED AND FOR OTHER PURPOSES.
12 Begosa vs. Chairman, Philippine Veterans Administration, supra.
7. Veterans Manpower v. CA 214 SCRA 286 – refer to case #7
VETERANS MANPOWER AND PROTECTIVE SERVICES, INC. VS. COURT OF
APPEALS
FIRST DIVISION
[G.R. No. 91359. September 25, 1992.]
VETERANS MANPOWER AND PROTECTIVE SERVICES, INC., Petitioner, v. THE
COURT OF APPEALS, THE CHIEF OF PHILIPPINE CONSTABULARY and
PHILIPPINE CONSTABULARY SUPERVISORY UNIT FOR SECURITY AND
INVESTIGATION AGENCIES (PC-SUSIA), Respondents.
Franciso A. Lava, Jr. and Andresito X. Fornier for Petitioner.
SYLLABUS
1. POLITICAL LAW; IMMUNITY FROM SUIT; THE PHILIPPINE CONSTABULARY
CHIEF AND THE PC-SUSIA MAY NOT BE SUED WITHOUT THE CONSENT OF
THE STATE. — The State may not be sued without its consent (Article XVI, Section
3, of the 1987 Constitution). Invoking this rule, the PC Chief and PC-SUSIA contend
that, being instrumentalities of the national government exercising a primarily
governmental function of regulating the organization and operation of private
detective, watchmen, or security guard agencies, said official (the PC Chief) and
agency (PC-SUSIA) may not be sued without the Government’s consent, especially in
this case because VMPSI’s complaint seeks not only to compel the public
respondents to act in a certain way, but worse, because VMPSI seeks actual and
compensatory damages in the sum of P1,000,000.00, exemplary damages in the
same amount, and P200,000.00 as attorney’s fees from said public respondents.
Even if its action prospers, the payment of its monetary claims may not be enforced
because the State did not consent to appropriate the necessary funds for that
purpose.
2. ID.; ID.; PUBLIC OFFICIAL MAY BE SUED IN HIS PERSONAL CAPACITY IF HE
ACTS, AMONG OTHERS BEYOND THE SCOPE OF HIS AUTHORITY; CASE AT
BAR. — A public official may sometimes be held liable in his personal or private
capacity if he acts in bad faith, or beyond the scope of his authority or jurisdiction
(Shauf v. Court of Appeals, supra), however, since the acts for which the PC Chief
and PC-SUSIA are being called to account in this case, were performed by them as
part of their official duties, without malice, gross negligence, or bad faith, no recovery
may be had against them in their private capacities.
3. ID.; ID.; CONSENT TO BE SUED MUST EMANATE FROM A LEGISLATIVE ACT.
— Waiver of the State’s immunity from suit, being a derogation of sovereignty, will not
be lightly inferred, but must be construed strictissimi juris (Republic v. Feliciano, 148
SCRA 424). The consent of the State to be sued must emanate from statutory
authority, hence, from a legislative act, not from a mere memorandum. Without such
consent, the trial court did not acquire jurisdiction over the public respondents.
4. ID.; ID.; REASONS BEHIND. — The state immunity doctrine rests upon reasons of
public policy and the inconvenience and danger which would flow from a different
rule. "It is obvious that public service would be hindered, and public safety
endangered, if the supreme authority could be subjected to suits at the instance of
every citizen, and, consequently, controlled in the use and disposition of the means
required for the proper administration of the government" (Siren v. U.S. Wall, 152, 19
L. ed. 129, as cited in 78 SCRA 477).
DECISION
GRIÑO-AQUINO, J.:
This is a petition for review on certiorari of the decision dated August 11, 1989, of the
Court of Appeals in CA-G.R. SP No. 15990, entitled "The Chief of Philippine
Constabulary (PC) and Philippine Constabulary Supervisor Unit for Security and
Investigation Agencies (PC-SUSIA) v. Hon. Omar U. Amin and Veterans Manpower
and Protective Services, Inc. (VMPSI)," lifting the writ of preliminary injunction which
the Regional Trial Court had issued to the PC-SUSIA enjoining them from committing
acts that would result in the cancellation or non-renewal of the license of VMPSI to
operate as a security agency.
On March 28, 1988, VMPSI filed a complaint in the Regional Trial Court at Makati,
Metro Manila, praying the court to:jgc:
"A. Forthwith issue a temporary restraining order to preserve the status quo, enjoining
the defendants, or any one acting in their place or stead, to refrain from committing
acts that would result in the cancellation or non-renewal of VMPSI’s license;
15
"B. In due time, issue a writ of preliminary injunction to the same effect;
"C. Render decision and judgment declaring null and void the amendment of Section
4 of R.A. No. 5487, by PD No. 11 exempting organizations like PADPAO from the
prohibition that no person shall organize or have an interest in more than one agency,
declaring PADPAO as an illegal organization existing in violation of said prohibition,
without the illegal exemption provided in PD No. 11; declaring null and void Section
17 of R.A. No. 5487 which provides for the issuance of rules and regulations in
consultation with PADPAO, declaring null and void the February 1, 1982 directive of
Col. Sabas V. Edadas, in the name of the then PC Chief, requiring all private security
agencies/security forces such as VMPSI to join PADPAO as a prerequisite to
secure/renew their licenses, declaring that VMPSI did not engage in ‘cut-throat
competition’ in its contract with MWSS, ordering defendants PC Chief and PC-SUSIA
to renew the license of VMPSI; ordering the defendants to refrain from further
harassing VMPSI and from threatening VMPSI with cancellations or non-renewal of
license, without legal and justifiable cause; ordering the defendants to pay to VMPSI
the sum of P1,000,000.00 as actual and compensatory damages, P1,000,000.00 as
exemplary damages, and P200,000.00 as attorney’s fees and expenses of litigation;
and granting such further or other reliefs to VMPSI as may be deemed lawful,
equitable and just." (pp. 55-56, Rollo.)
The constitutionality of the following provisions of R.A. 5487 (otherwise known as the
"Private Security Agency Law"), as amended, is questioned by VMPSI in its
complaint:
"SECTION 4. Who may Organize a Security or Watchman Agency. — Any Filipino
citizen or a corporation, partnership, or association, with a minimum capital of five
thousand pesos, one hundred per cent of which is owned and controlled by Filipino
citizens may organize a security or watchman agency: Provided, That no person shall
organize or have an interest in, more than one such agency except those which are
already existing at the promulgation of this Decree: . . ." (As amended by P.D. Nos.
11 and 100.)
"SECTION 17. Rules and Regulations by Chief, Philippine Constabulary. — The Chief
of the Philippine Constabulary, in consultation with the Philippine Association of
Detective and Protective Agency Operators, Inc. and subject to the provision of
existing laws, is hereby authorized to issue the rules and regulations necessary to
carry out the purpose of this Act."
VMPSI alleges that the above provisions of R.A. No. 5487 violate the provisions of the
1987 Constitution against monopolies, unfair competition and combinations in
restraint of trade, and tend to favor and institutionalize the Philippine Association of
Detective and Protective Agency Operators, Inc. (PADPAO) which is monopolistic
because it has an interest in more than one security agency.
Respondent VMPSI likewise questions the validity of paragraph 3, subparagraph (g)
of the Modifying Regulations on the Issuance of License to Operate and Private
Security Licenses and Specifying Regulations for the Operation of PADPAO issued
by then PC Chief Lt. Gen. Fidel V. Ramos, through Col. Sabas V. Edades, requiring
that "all private security agencies/company security forces must register as members
of any PADPAO Chapter organized within the Region where their main offices are
located . . ." (pp. 5-6, Complaint in Civil Case No. 88-471). As such membership
requirement in PADPAO is compulsory in nature, it allegedly violates legal and
constitutional provisions against monopolies, unfair competition and combinations in
restraint of trade.
On May 12, 1986, a Memorandum of Agreement was executed by PADPAO and the
PC Chief, which fixed the minimum monthly contract rate per guard for eight (8) hours
of security service per day at P2,255.00 within Metro Manila and P2,215.00 outside of
Metro Manila (Annex B, Petition).
On June 29, 1987, Odin Security Agency (Odin) filed a complaint with PADPAO
accusing VMPSI of cut-throat competition by undercutting its contract rate for security
services rendered to the Metropolitan Waterworks and Sewerage System (MWSS),
charging said customer lower than the standard minimum rates provided in the
Memorandum of Agreement dated May 12, 1986.
PADPAO found VMPSI guilty of cut-throat competition, hence, the PADPAO
Committee on Discipline recommended the expulsion of VMPSI from PADPAO and
the cancellation of its license to operate a security agency (Annex D, Petition).
The PC-SUSIA made similar findings and likewise recommended the cancellation of
VMPSI’s license (Annex E, Petition).
As a result, PADPAO refused to issue a clearance/certificate of membership to
VMPSI when it requested one.
VMPSI wrote the PC Chief on March 10, 1988, requesting him to set aside or
disregard the findings of PADPAO and consider VMPSI’s application for renewal of its
license, even without a certificate of membership from PADPAO (Annex F, Petition).
As the PC Chief did not reply, and VMPSI’s license was expiring on March 31, 1988,
VMPSI filed Civil Case No. 88-471 in the RTC-Makati, Branch 135, on March 28,
1988 against the PC Chief and PC-SUSIA. On the same date, the court issued a
restraining order enjoining the PC Chief and PC-SUSIA "from committing acts that
would result in the cancellation or non-renewal of VMPSI’s license" (Annex G,
Petition).
The PC chief and PC-SUSIA filed a "Motion to Dismiss, Opposition to the Issuance of
Writ of Preliminary Injunction, and Motion to Quash the Temporary Restraining
Order," on the grounds that the case is against the State which had not given consent
thereto and that VMPSI’s license already expired on March 31, 1988, hence, the
restraining order or preliminary injunction would not serve any purpose because there
was no more license to be cancelled (Annex H, Petition). Respondent VMPSI
opposed the motion.
On April 18, 1988, the lower court denied VMPSI’s application for a writ of preliminary
injunction for being premature because it "has up to May 31, 1988 within which to file
16
its application for renewal pursuant to Section 2 (e) of Presidential Decree No. 199, . .
." (p. 140, Rollo.).
On May 23, 1988, VMPSI reiterated its application for the issuance of a writ of
preliminary injunction because PC-SUSIA had rejected payment of the penalty for its
failure to submit its application for renewal of its license and the requirements therefor
within the prescribed period in Section 2(e) of the Revised Rules and Regulations
Implementing R.A. 5487, as amended by P.D. 1919 (Annex M, Petition).
On June 10, 1998, the RTC-Makati issued a writ of preliminary injunction upon a bond
of P100,000.00, restraining the defendants, or any one acting in their behalf, from
cancelling or denying renewal of VMPSI’s license, until further orders from the court.
The PC Chief and PC-SUSIA filed a Motion for Reconsideration of the above order,
but it was denied by the court in its Order of August 10, 1988 (Annex R, Petition).
On November 3, 1988, the PC Chief and PC-SUSIA sought relief by a petition for
certiorari in the Court of Appeals.
On August 11, 1989, the Court of Appeals granted the petition. The dispositive portion
of its decision reads:
"WHEREFORE, the petition for certiorari filed by petitioners PC Chief and PC-SUSIA
is hereby GRANTED, and the RTC-Makati, Branch 135, is ordered to dismiss the
complaint filed by respondent VMPSI in Civil Case No. 88-471, insofar as petitioners
PC Chief and PC-SUSIA are concerned, for lack of jurisdiction. The writ of preliminary
injunction issued on June 10, 1988, is dissolved." (pp. 295-296, Rollo.)
VMPSI came to us with this petition for review.
The primary issue in this case is whether or not VMPSI’s complaint against the PC
Chief and PC-SUSIA is a suit against the State without its consent.
The answer is yes.
The State may not be sued without its consent (Article XVI, Section 3, of the 1987
Constitution). Invoking this rule, the PC Chief and PC-SUSIA contend that, being
instrumentalities of the national government exercising a primarily governmental
function of regulating the organization and operation of private detective, watchmen,
or security guard agencies, said official (the PC Chief) and agency (PC-SUSIA) may
not be sued without the Government’s consent, especially in this case because
VMPSI’s complaint seeks not only to compel the public respondents to act in a certain
way, but worse, because VMPSI seeks actual and compensatory damages in the sum
of P1,000,000.00, exemplary damages in the same amount, and P200,000.00 as
attorney’s fees from said public respondents. Even if its action prospers, the payment
of its monetary claims may not be enforced because the State did not consent to
appropriate the necessary funds for that purpose.
Thus did we hold in Shauf v. Court of Appeals, 191 SCRA 713
"While the doctrine appears to prohibit only suits against the state without its consent,
it is also applicable to complaints filed against officials of the state for acts allegedly
performed by them in the discharge of their duties. The rule is that if the judgment
against such officials will require the state itself to perform an affirmative act to satisfy
the same, such as the appropriation of the amount needed to pay the damages
awarded against them, the suit must be regarded as against the state itself although it
has not been formally impleaded." (Emphasis supplied.)
A public official may sometimes be held liable in his personal or private capacity if he
acts in bad faith, or beyond the scope of his authority or jurisdiction (Shauf v. Court of
Appeals, supra), however, since the acts for which the PC Chief and PC-SUSIA are
being called to account in this case, were performed by them as part of their official
duties, without malice, gross negligence, or bad faith, no recovery may be had against
them in their private capacities.
We agree with the observation of the Court of Appeals that the Memorandum of
Agreement dated May 12, 1986 does not constitute an implied consent by the State to
be sued
"The Memorandum of Agreement dated May 12, 1986 was entered into by the PC
Chief in relation to the exercise of a function sovereign in nature. The correct test for
the application of state immunity is not the conclusion of a contract by the State but
the legal nature of the act. This was clearly enunciated in the case of United States of
America v. Ruiz where the Hon. Supreme Court held:
"‘The restrictive application of State immunity is proper only when the proceedings
arise out of commercial transactions of the foreign sovereign, its commercial activities
or economic affairs. Stated differently, a State may be said to have descended to the
level of an individual and can thus be deemed to have tacitly given its consent to be
sued only when it enters into a business contract. It does not apply where the contract
relates to the exercise of its functions.’ (136 SCRA 487, 492.)
"In the instant case, the Memorandum of Agreement entered into by the PC Chief and
PADPAO was intended to professionalize the industry and to standardize the salaries
of security guards as well as the current rates of security services, clearly, a
governmental function. The execution of the said agreement is incidental to the
purpose of R.A. 5487, as amended, which is to regulate the organization and
operation of private detective, watchmen or security guard agencies. (Emphasis
ours.)" (pp. 258-259, Rollo.)
Waiver of the State’s immunity from suit, being a derogation of sovereignty, will not be
lightly inferred, but must be construed strictissimi juris (Republic v. Feliciano, 148
SCRA 424). The consent of the State to be sued must emanate from statutory
authority, hence, from a legislative act, not from a mere memorandum. Without such
consent, the trial court did not acquire jurisdiction over the public respondents.
The state immunity doctrine rests upon reasons of public policy and the
inconvenience and danger which would flow from a different rule. "It is obvious that
17
public service would be hindered, and public safety endangered, if the supreme
authority could be subjected to suits at the instance of every citizen, and,
consequently, controlled in the use and disposition of the means required for the
proper administration of the government" (Siren v. U.S. Wall, 152, 19 L. ed. 129, as
cited in 78 SCRA 477). In the same vein, this Court in Republic v. Purisima (78 SCRA
470, 473) rationalized:
"Nonetheless, a continued adherence to the doctrine of nonsuability is not to be
deplored for as against the inconvenience that may be cause [by] private parties, the
loss of governmental efficiency and the obstacle to the performance of its multifarious
functions are far greater if such a fundamental principle were abandoned and the
availability of judicial remedy were not thus restricted. With the well known propensity
on the part of our people to go to court, at the least provocation, the loss of time and
energy required to defend against law suits, in the absence of such a basic principle
that constitutes such an effective obstacles, could very well be imagined." (citing
Providence Washington Insurance Co. v. Republic, 29 SCRA 598.)
WHEREFORE, the petition for review is DENIED and the judgment appealed from is
AFFIRMED in toto. No costs.
SO ORDERED.
C. SUIT AGAINST GOVERNMENT AGENCIES
8. PNB v. CIR 81 SCRA 314
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-32667 January 31, 1978
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS, GABRIEL V. MANANSALA and GILBERT
P. LORENZO, in his official capacity as authorized Deputy sheriff, respondents.
Conrado E. Medina for petitioner.
Gabriel V. Manansala in his own behalf.
Jose K. Manguiat, Jr. for respondent Court.
FERNANDO, J.:
The issue raised in this certiorari proceeding is whether or not an order of the now
defunct respondent Court of Industrial Relations denying for lack of merit petitioner's
motion to quash a notice of garnishment can be stigmatized as a grave abuse of
discretion. What was sought to be garnished was the money of the People's
Homesite and Housing Corporation deposited at petitioner's branch in Quezon City, to
satisfy a decision of respondent Court which had become final and executory. 1 A writ
of execution in favor of private respondent Gabriel V. Manansala had previously been
issued. 2 He was the counsel of the prevailing party, the United Homesite Employees
and Laborers Association, in the aforementioned case. The validity of the order
assailed is challenged on two grounds: (1) that the appointment of respondent Gilbert
P. Lorenzo as authorized deputy sheriff to serve the writ of execution was contrary to
law and (2) that the funds subject of the garnishment "may be public in character." 3 In
thus denying the motion to quash, petitioner contended that there was on the part of
respondent Court a failure to abide by authoritative doctrines amounting to a grave
abuse of discretion. After a careful consideration of the matter, it is the conclusion of
this Tribunal that while the authorization of respondent Lorenzo to act as special
deputy sheriff to serve the notice of garnishment may be open to objection, the more
basic ground that could have been relied upon — not even categorically raised,
petitioner limiting itself to the assertion that the funds "could be public" in character,
thus giving rise to the applicability of the fundamental concept of non-suability — is
hardly persuasive. The People's Homesite and Housing Corporation had a juridical
existence enabling it sue and be sued. 4 Whatever defect could be attributed therefore
to the order denying the motion to quash could not be characterized as a grave abuse
of discretion. Moreover, with the lapse of time during which private respondent had
been unable to execute a judgment in his favor, the equities are on his side.
Accordingly, this petition must be dismissed.
The order of August 26, 1970 of respondent Court denying the motion to quash,
subject of this certiorari proceeding, reads as follows: "The Philippine National Bank
moves to quash the notice of garnishment served upon its branch in Quezon City by
the authorized deputy sheriff of this Court. It contends that the service of the notice by
the authorized deputy sheriff of the court contravenes Section 11 of Commonwealth
Act No. 105, as amended which reads:" 'All writs and processes issued by the Court
shall be served and executed free of charge by provincial or city sheriffs, or by any
person authorized by this Court, in the same manner as writs and processes of
Courts of First Instance.' Following the law, the Bank argues that it is the Sheriff of
Quezon City, and not the Clerk of this Court who is its Ex-Officio Sheriff, that has the
authority to serve the notice of garnishment, and that the actual service by the latter
officer of said notice is therefore not in order. The Court finds no merit in this
argument. Republic Act No. 4201 has, since June 19, 1965, already repealed
Commonwealth Act No. 103, and under this law, it is now the Clerk of this Court that
is at the same time the Ex-Officio Sheriff. As such Ex-Officio Sheriff, the Clerk of this
Court has therefore the authority to issue writs of execution and notices of
garnishment in an area encompassing the whole of the country, including Quezon
18
City, since his area of authority is coterminous with that of the Court itself, which is
national in nature. ... At this stage, the Court notes from the record that the appeal to
the Supreme Court by individual employees of PHHC which questions the award of
attorney's fees to Atty. Gabriel V.
Manansala, has already been dismissed and that the same became final and
executory on August 9, 1970. There is no longer any reason, therefore, for
withholding action in this case. [Wherefore], the motion to quash filed by the
Philippine National Bank is denied for lack of merit. The said Bank is therefore
ordered to comply within five days from receipt with the 'notice of Garnishment' dated
May 6, 1970." 5 There was a motion for reconsideration filed by petitioner, but in a
resolution dated September 22, 1970, it was denied. Hence, this certiorari petition.
As noted at the outset, the petition lacks merit.
1. The plea for setting aside the notice of garnishment was promised on the funds of
the People's homesite and Housing Corporation deposited with petitioner being
"public in character." There was not even a categorical assertion to that effect. It is
only the possibility of its being "public in character." The tone was thus irresolute,the
approach difficult The premise that the funds could be spoken of as public in
character may be accepted in the sense that the People's Homesite and Housing
Corporation was a government-owned entity It does not follow though that they were
exempt from garnishment. National Shipyard and Steel Corporation v. court of
Industrial Relations 6 is squarely in point. As was explicitly stated in the opinion of the
then Justice, later Chief Justice, Concepcion: "The allegation to the effect that the
funds of the NASSCO are public funds of the government, and that, as such, the
same may not be garnished, attached or levied upon, is untenable for, as a
government owned and controlled corporation. the NASSCO has a personality of its
own, distinct and separate from that of the Government. It has pursuant to Section 2
of Executive Order No. 356, dated October 23, 1950 ..., pursuant to which the
NASSCO has been established — 'all the powers of a corporation under the
Corporation Law ...' Accordingly, it may sue and be sued and may be subjected to
court processes just like any other corporation (Section 13, Act No. 1459), as
amended." 7 The similarities between the aforesaid case and the present litigation are
patent. Petitioner was similarly a government-owned corporation. The principal
respondent was the Court of Industrial Relations. The prevailing parties were the
employees of petitioner. There was likewise a writ of execution and thereafter notices
of garnishment served on several banks. There was an objection to such a move and
the ruling was adverse to the National Shipyard and Steel Corporation. Hence the
filing of a petition for certiorari. To repeat, the ruling was quite categorical
Garnishment was the appropriate remedy for the prevailing party which could proceed
against the funds of a corporate entity even if owned or controlled by the government.
In a 1941 decision, Manila Hotel Employees Association v. Manila Hotel
Company, 8 this Court, through Justice Ozaeta, held: "On the other hand, it is well
settled that when the government enters into commercial business, it abandons its
sovereign capacity and is to be treated like any other corporation. (Bank of the United
States v. Planters' Bank, 9 Wheat, 904, 6 L.ed. 244). By engaging in a particular
business thru the instrumentality of a corporation, the governmnent divests itself pro
hac vice of its sovereign character, so as to render the corporation subject to the rules
of law governing private corporations."
2. It is worth noting that the decision referred to, the Bank of the United States v.
Planters' Bank, 10 was promulgated by the American Supreme Court as early as
1824, the opinion being penned by the great Chief Justice Marshall. As was pointed
out by him: "It is, we think, a sound principle, that when a government becomes a
partner in any trading company, it divests itself, so far as concerns the transactions of
that company, of its sovereign character, and takes that of a private citizen. Instead of
communicating to the company its privileges and its prerogatives, it descends to a
level with those with whom it associates itself, and takes the character which belongs
to its associates, and to the business which is to be transacted. Thus, many states of
this Union who have an interest in banks, are not suable even in their own courts; yet
they never exempt the corporation from being sued. The state of Georgia, by giving to
the bank the capacity to sue and be sued, voluntarily strips itself of its sovereign
character, so far as respects the transactions of the bank, and waives an the
privileges of that character. As a member of a corporation, a government never
exercises its sovereignty. It acts merely as a corporator, and exercises no other
power in the management of the affairs of the corporation, that are expressly given by
the incorporating act." 11 The National Shipyard and Steel Corporation case,
therefore, merely reaffirmed one of the oldest and soundest doctrines in this branch of
the law.
3. The invocation of Republic v. Palacio, 12 as well as Commissioner of Public
Highways v. San Diego, 13 did not help the cause of petitioner at all The decisions are
not applicable. If properly understood they can easily be distinguished. As is clear in
the opinion of Justice J.B.L. Reyes in Republic v. Palacio, the Irrigation Service Unit
which was sued was an office and agency under the Department of Public Works and
Communications. The Republic of the Philippines, through the then Solicitor General,
moved for the dismissal of such complaint, alleging that it "has no juridical personality
to sue and be sued." 14 Such a motion to dismiss was denied. The case was tried and
plaintiff Ildefonso Ortiz, included as private respondent in the Supreme Court
proceeding, obtained a favorable money judgment. It became final and executory.
Thereafter, it appeared that the Solicitor General was served with a copy of the writ of
execution issued by the lower court followed by an order of garnishment 15 Again,
there was an urgent motion to lift such order, but it was denied. A certiorari and
prohibition proceeding was then filed with the Court of Appeals. The legality of the
issuance of such execution and punishment was upheld, and the matter was elevated
to this Tribunal The Republic was sustained. The infirmity of the decision reached by
the Court of Appeals, according to the opinion, could be traced to the belief that there
was a waiver of "governmental immunity and, by implication, consent to the
suit." 16 There was no such waiver. Even if there were, it was stressed by justice
J.B.L. Reyes: "It is apparent that this decision of the Court of Appeals suffers from the
erroneous assumption that because the State has waived its immunity, its property
and funds become liable to seizure under the legal process. This emphatically is not
the law. (Merritt v. Insular Government, 34 Phil 311)." 17 To levy the execution of such
funds, according to him, would thus "amount to a disbursement without any proper
appropriation as required by law " 18 In Commissioner of Public Highways v. San
19
Diego, the opening paragraph of Justice Teehankee was quite specific as to why WHEREFORE, the petition for certiorari is dismissed. No costs.
there could be neither execution nor garnishment of the money of petitioner Bureau of
Public Highways: "In this special civil action for certiorari and prohibition, the Court Barredo, Antonio and Concepcion, Jr., JJ., concur.
declares null and void the two questioned orders of respondent Court levying upon
funds of petitioner Bureau of Public Highways on deposit with the Philippine National
Bank, by virtue of the fundamental precept that government funds are not subject to Aquino, J., concurs in the result.
execution or garnishment." 19The funds appertained to a governmental office, not to a
government-owned or controlled corporation with a separate juridical personality. In Santos J., is on leave.
neither case therefore was there an entity with the capacity to sue and be sued, the
funds of which could thereafter be held liable to execution and garnishment in the Footnotes
event of an adverse judgment.

1 Case No. 2810-V of the Court of Industrial Relations.

4. Both the Palacio and the Commissioner of Public Highways decisions, insofar as
they reiterate the doctrine that one of the coronaries of the fundamental concept of
non-suability is that governmental funds are immune from garnishment, refer 2 Petition, Annex A.
to Merritt v. Insular Government, a 1916 decision 20 Since then such a principle has
been followed with undeviating rigidity, the latest case in point being Republic v. 3 Ibid, 13.
Villasor, 21 promulgated in 1973. It is an entirely different matter if, according to
Justice Sanchez in Ramos v. Court of Industrial Relations, 22 the office or entity is
4 Under Presidential Decree No 757 (1975), the People's Homesite and Housing
"possessed of a separate and distinct corporate existence." 23 Then it can sue and be
Corporation was dissolved and the National Housing Authority created.
sued. Thereafter, its funds may be levied upon or garnished. That is what happened
in this case.
5 Petition, Annex F.
5. With the crucial issue thus resolved in favor of the correctness of the order
assailed, the other objection raised, namely that respondent Court acted erroneously 6 118 Phil. 782 (1963).
in having a special sheriff serve to the writ of execution, hardly needs any extensive
decision. It is true that in the aforesaid Commissioner of Public Highways opinion, this 7 Ibid, 788.
Court held that there is no authorization in law for the appointment of special sheriffs
for the service of writs of execution. 24 In the order sought to be nullified, the then
8 73 Phil. 374.
Judge Joaquin M. Salvador of respondent Court pointed out that under a later
Act, 25 the Court of Industrial Relations Act was amended with the proviso that its
Clerk of Court was the ex-oficio sheriff. The point raised in the petition that it should 9 Ibid, 388-389.
be the sheriff of Quezon City that ought to have served the writ of execution would
thus clearly appear to be inconclusive. There is to be sure no thought of deviating 10 9 Wheat, 904, 6 L.ed 244.
from the principle announced in the Commissioner of Public Highways case. That is
as it ought to be. Even if, however, there is sufficient justification for the infirmity
11 Ibid, 907-908.
attributed to respondent Court by virtue of such a ruling, still considering all the
circumstances of this case, it clearly does not call for the nullification of the order in
question. What cannot be denied is that the writ of execution was issued as far back 12 L-20322, May 29, 1968, 23 SCRA 899.
as May 5, 1970 by the then Clerk of Court of respondent Tribunal as the authorized
sheriff. It would be, to say the least, unfair and unequitable if, on the assumption that 13 L-30098, February 18,1970, 31 SCRA 616.
such Clerk of Court lacked such competence, a new writ of execution had to be
issued by the proper official At any rate, what is important is that the judgment be
executed. That is to achieve justice according to law. It would be to carry technicality, 14 23 SCRA 899, 901. The other defendant was the Handog Irrigation, Inc.
therefore, to an absurd length if just because of such a mistake, assuming that it is,
but undoubtedly one committed in good faith, further delay would get be imposed on 15 Ibid, 901.
private respondent by characterizing the order sought to be nullified amounting to a
grave abuse of discretion. 16 Ibid, 905.

20
17 Ibid. This Petition for Review on certiorari of the Decision of the Court of Appeals 1 stems
from the following facts, as narrated by the Trial Court, adopted by the Court of
18 Ibid, 906. Appeals, and quoted by both petitioner 2 and private respondents 3 :

19 31 SCRA 616, 618. Sometime in March, 1963 the spouses David B. Cruz and Socorro
Concio Cruz applied for and were granted a real estate loan by the
SSS with their residential lot located at Lozada Street, Sto. Rosario,
20 34 SCRA 311. Pateros, Rizal covered by Transfer Certificate of Title No. 2000 of
the Register of Deeds of Rizal as collateral. Pursuant to this real
21 L-30671, November 28, 1973, 54 SCRA 83. estate ban said spouses executed on March 26, 1963 the
corresponding real estate mortgage originally in the amount of
22 L-22753, December 18, 1967, 21 SCRA 1283. P39,500.00 which was later increased to P48,000.00 covering the
aforementioned property as shown in their mortgage contract,
Exhibit A and 1. From the proceeds of the real estate loan the
23 Ibid, 1287. mortgagors constructed their residential house on the mortgaged
property and were furnished by the SSS with a passbook to record
24 31 SCRA 616, 631. the monthly payments of their amortizations (Exhibits B and B-1).
The mortgagors, plaintiffs herein, complied with their monthly
payments although there were times when delays were incurred in
25 Republic Act No. 4201(1965).
their monthly payments which were due every first five (5) days of
the month (Exhibits 3-A to 3-N). On July 9, 1968, defendant SSS
filed an application with the Provincial Sheriff of Rizal for the
9. SSS v. CA 120 SCRA 707 foreclosure of the real estate mortgage executed by the plaintiffs on
the ground, among others:
Republic of the Philippines
SUPREME COURT That the conditions of the mortgage have been
Manila broken since October, 1967 with the default on
the part of the mortgagor to pay in full the
EN BANC installments then due and payable on the
principal debt and the interest thereon, and, all of
G.R. No. L-41299 February 21, 1983 the monthly installments due and payable
thereafter up to the present date; ...

SOCIAL SECURITY SYSTEM, petitioner,

vs. That by the terms of the contract herein above
COURT OF APPEALS, DAVID B. CRUZ, SOCORRO CONCIO CRUZ, and LORNA referred to, the indebtedness to the mortgagee as
C. CRUZ, respondents. of June, 1968 amounts to Ten Thousand Seven
Hundred Two Pesos & 58/100 (P10,702.58),
Philippine Currency, excluding interests thereon,
The Solicitor General for petitioner. plus 20% of the total amount of the indebtedness
as attorney's fees, also secured by the said
Eribert D. Ignacio for respondents David Cruz, Socorro Concio Cruz and Lorna Cruz. mortgage. (Exhibit "C ")

Pursuant to this application for foreclosure, the notice of the

MELENCIO-HERRERA, J.: Sheriff's Sale of the mortgaged property was initially published in
the Sunday Chronicle in its issue of July 14, 1968 announcing the
sale at public auction of the said mortgaged property. After this first
publication of the notice, and before the second publication of the
notice, plaintiff herein thru counsel formally wrote defendant SSS, a
21
 letter dated July 19, 1968 and received on the same date by said
entity demanding, among others, for said defendant SSS to
withdraw the foreclosure and discontinue the publication of the
notice of sale of their property claiming that plaintiffs were up-to-
date in the payment of their monthly amortizations (Exhibits "E" and
"E-1"). In answer to this letter defendant SSS sent a telegram to
Atty. Eriberto Ignacio requesting him to come to their office for a
conference. This telegram was received by said counsel on July 23,
1968 (Exhibit "G " and "G-1 "). To this telegraphic answer, Atty.
Ignacio sent a telegraphic reply suggesting instead that a
representative of the SSS be sent to him because his clients were
the aggrieved parties (Exhibit-. "G-2"). Nothing came out of the
telegraphic communications between the parties and the second
and third publications of the notice of foreclosure were published
successively in the Sunday Chronicle in its issues of July 21 and
28, 1968 (Exhibits "N-1 " and "O-1"). 4
On July 24, 1968, the Cruz spouses, together with their daughter Lorna C. Cruz,
instituted before the Court of First Instance of Rizal an action for damages and
attorney's fees against the Social Security System (SSS) and the Provincial Sheriff of
Rizal alleging, among other things, that they had fully and religiously paid their
monthly amortizations and had not defaulted in any payment.
In its Answer, with counterclaim, the SSS stressed its right to foreclose the mortgage
executed in its favor by private respondents by virtue of the automatic acceleration
clause provided in the mortgage contract, even after private respondents had paid
their amortization installments. In its counterclaim, the SSS prayed for actual and
other damages, as well as attorney's fees, for malicious and baseless statements
made by private respondents and published in the Manila Chronicle.
On September 23, 1968, the Trial Court enjoined the SSS from holding the sale at
public auction of private respondent's property upon their posting of a P2,000.00 bond
executed in favor of the SSS.
The Trial Court rendered judgment on March 5, 1971, the dispositive portion of which
reads:
WHEREFORE, judgment is rendered against defendant SSS,
directing it to pay plaintiffs the following amounts:
(a) P2,500.00 as actual damage;
(b) P35,000.00 as moral damage;
(c) P10,000.00 as exemplary or corrective damages; and
(d) P5,000.00 as attorney's fees.
5
Defendant SSS shall further pay the costs.
In respect of the moral and temperate damages awarded, the Trial Court stated:
With respect to moral and temperate damages, the Court holds that
the first publication of the notice was made in good faith but
committed by defendant SSS in gross negligence considering the
personnel at its command and the ease with which verifications of
the actual defaulting mortgagors may be made. On this initial
publication of the notice of foreclosure (Exhibits "M" and "M-1"), the
Court believes plaintiffs are entitled to the amount of P5,000.00.
The second publication of the notice of foreclosure is another
matter. There was already notice by plaintiffs to defendant SSS that
there was no reason for the foreclosure of their mortgaged property
as they were never in default. Instead of taking any corrective
measure to rectify its error, defendant SSS adopted a position of
righteousness and followed the same course of action contending
that no error has open committed. This act of defendant indeed was
deliberate, calculated to cow plaintiffs into submission, and made
obviously with malice. On this score, the Court believes defendant
SSS should pay and indemnify plaintiffs jointly in the sum of
P10,000.00. Lastly, on the third publication of the notice of
foreclosure, the Court finds this continued publication an outright
disregard for the reputation and standing of plaintiffs. The
publication having reached a bigger segment of society and also
done with malice and callous disregard for the rights of its clients,
defendant SSS should compensate plaintiffs jointly in the sum of
P20,000.00. All in all, plaintiffs are entitled to P35,000.00 by way of
moral damages. 6
On appeal, the Court of Appeals affirmed the lower Court judgment in a Decision
promulgated on March 14, 1975, but upon SSS's Motion for Reconsideration,
modified the judgment by the elimination of the P5,000.00 moral damages awarded
on account of the initial publication of the foreclosure notice. To quote:
xxx xxx xxx
After a re-examination of the evidence, we find that the negligence
of the appellant is not so gross as to warrant moral and temperate
damages. The amount of P5,000.00 should be deducted from the
total damages awarded to the plaintiffs.
WHEREFORE, the decision promulgated on March 14, 1975 is
hereby maintained with the sole modification that the amount of
P5,000.00 awarded on account of the initial publication is
eliminated so that the said amount should be deducted from the
total damages awarded to the plaintiffs.
SO ORDERED. 7
22
In so far as exemplary and corrective damages are concerned, the Court of Appeals
had this to say.
The Court finds no extenuating circumstances to mitigate the
irresponsible action of defendant SSS and for this reason, said
defendant should pay exemplary and corrective damages in the
sum of P10,000.00 ...
Upon denial of its Motion for Reconsideration by respondent Court, the SSS filed this
Petition alleging —.
I. Respondent Court of Appeals erred in not finding that under
Condition No. 10 of the Mortgage contract, which is a self-
executing, automatic acceleration clause, all amortizations and
obligations of the mortgagors become ipso jure due and
demandable if they at any time fail to pay any of the amortizations
or interest when due;
II. Respondent Court of Appeals erred in holding that a previous
notice to the mortgagor was necessary before the mortgage could
be foreclosed;
III. Respondent Court of Appeals erred in not holding that,
assuming that there was negligence committed by subordinate
employees of the SSS in staking 'Socorro C. Cruz' for 'Socorro J.
Cruz' as the defaulting borrower, the fault cannot be attributed to
the SSS, much less should the SSS be made liable for their acts
done without its knowledge and authority;
IV. Respondent Court of Appeals erred in holding that there is no
extenuating circumstance to mitigate the liability of petitioner;
V. Respondent Court of Appeals erred in not holding that petitioner
is not liable for damages not being a profit-oriented governmental
institution but one performing governmental functions petitions. 8
For failure of the First Division to obtain concurrence of the five remaining members
(Justices Plana and Gutierrez, Jr. could take no part), the case was referred to the
Court en banc.
The pivotal issues raised are: (1) whether the Cruz spouses had, in fact, violated their
real estate mortgage contract with the SSS as would have warranted the publications
of the notices of foreclosure; and (2) whether or not the SSS can be held liable for
damages.
The first issue revolves around the question of appreciation of the evidence by the
lower Court as concurred in by the Court of Appeals. The appraisal should be left
undisturbed following the general rule that factual findings of the Court of Appeals are
not subject to review by this Court, the present case not being one of the recognized
exceptions to that rule. 9 Accordingly, we are upholding the finding of the Court of
Appeals that the SSS application for foreclosure was not justified, particularly
considering that the real estate loan of P48,000.00 obtained by the Cruzes in March,
1963, was payable in 15 years with a monthly amortization of P425.18, and that as of
July 14, 1968, the date of the first notice of foreclosure and sale, the outstanding
obligation was still P38,875.06 and not P10,701.58, as published.
The appellant was not justified in applying for the extrajudicial
foreclosure of the mortgage contract executed in its favor by the
spouses, David B. Cruz and Socorro Concio-Cruz, Exh. 'A'. While it
is true that the payments of the monthly installments were
previously not regular, it is a fact that as of June 30, 1968 the
appellee, David B. Cruz and Socorro Concio-Cruz were up-to-date
and current in the payment of their monthly installments. Having
accepted the prior late payments of the monthly installments, the
appellant could no longer suddenly and without prior notice to the
mortgagors apply for the extra-judicial foreclosure of the mortgage
in July 1968. 10
A similar conclusion was reached by the trial Court.
Defendant's contention that there was clerical error in the amount of
the mortgage loan due as of June, 1968 as per their application for
foreclosure of real estate mortgage is a naive attempt to justify an
untenable position. As a matter of fact plaintiffs were able to
establish that the mortgagor who actually committed the violation of
her mortgage loan was a certain 'Socorro J. Cruz' who was in
arrears in the amount of P10,702.58 at the time the application for
foreclosure of real estate mortgage was filed Exhibits "BB" and
"EE"). Defendant mortgagee must have committed an error in
picking the record of plaintiff 'Socorro C. Cruz' instead of the record
of 'Socorro J. Cruz'. Defendant SSS, however, denied having
committed any error and insists that their motion for foreclosure
covers the real estate mortgage of spouses David E. Cruz and
Socorro C. Cruz. This Court is nonetheless convinced that the
foreclosure proceedings should have been on the real estate
mortgage of 'Socorro J. Cruz' who was in arrears as of June, 1968
in the amount of P10,701.58, the exact amount mentioned in the
application for foreclosure of real estate mortgage by defendant
SSS. 11
We come now to the amendability of the SSS to judicial action and legal responsibility
for its acts. To our minds, there should be no question on this score considering that
the SSS is a juridical entity with a personality of its own. 12 It has corporate powers
23
separate and distinct from the Government. 13 SSS' own organic act specifically
provides that it can sue and be sued in Court. 14 These words "sue and be sued"
embrace all civil process incident to a legal action. 15 So that, even assuming that the
SSS, as it claims, enjoys immunity from suit as an entity performing governmental
functions, by virtue of the explicit provision of the aforecited enabling law, the
Government must be deemed to have waived immunity in respect of the SSS,
although it does not thereby concede its liability. That statutoy law has given to the
private-citizen a remedy for the enforcement and protection of his rights. The SSS
thereby has been required to submit to the jurisdiction of the Courts, subject to its
right to interpose any lawful defense. Whether the SSS performs governmental or
proprietary functions thus becomes unnecessary to belabor. For by that waiver, a
private citizen may bring a suit against it for varied objectives, such as, in this case, to
obtain compensation in damages arising from contract 16 and even for tort.
A recent case squarely in point anent the principle, involving the National Power
Corporation, is that of Rayo vs. Court of First Instance of Bulacan, 110 SCRA 457
(1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled:
It is not necessary to write an extended dissertation on whether or
not the NPC performs a governmental function with respect to the
management and operation of the Angat Dam. It is sufficient to say
that the government has organized a private corporation, put
money in it and has snowed it to sue and be sued in any court
under its charter. (R.A. No. 6395, Sec. 3[d]). As a government
owned and controlled corporation, it has a personality of its own,
distinct and separate from that of the Government. (See National
Shipyards and Steel Corp. vs. CIR, et al., L-17874, August 31,
1963, 8 SCRA 78 1). Moreover, the charter provision that the NPC
can 'sue and be sued in any court' is without qualification on the
cause of action and accordingly it can include a tort claim such as
the one instituted by the petitioners.
The proposition that the SSS is not profit-oriented was rejected in the case of SSS
Employees' Association vs. Hon. Soriano. 17 But even conceding that the SSS is not,
in the main, operated for profit, it cannot be denied that, in so far as contractual loan
agreements with private parties are concerned, the SSS enters into them for profit
considering that the borrowers pay interest, which is money paid for the use of
money, plus other charges.
In so far as it is argued that to hold the SSS liable for damages would be to deplete
the benefit funds available for its covered members, suffice it to say, that expenditures
of the System are not confined to the payment of social security benefits. For
example, the System also has to pay the salaries of its personnel. Moreover, drawing
a parallel with the NASSCO and the Virginia Tobacco Administration, whose funds
are in the nature of public funds, it has been held that those funds may even be made
the object of a notice of garnishment. 18
What is of paramount importance in this controversy is that an injustice is not
perpetrated and that when damage is caused a citizen, the latter should have a right
of redress particularly when it arises from a purely private and contractual relationship
between said individual and the System.
We find, however, that under the circumstances of the case, the SSS cannot be held
liable for the damages as awarded by the Trial Court and the Appellate Tribunal.
As basis for the award of actual damages, the Trial Court relied on the alleged
expenses incurred by private respondents for the wardrobe they were supposed to
use during their trip abroad, which was allegedly aborted because of the filing of the
foreclosure application by the SSS. We find the foregoing too speculative. There
could have been other reasons why the trip did not materialize. Moreover, it appears
that private respondents' passports had already expired but that they made no effort
to secure new passports. 19 Nor did they secure the necessary visas from the local
consulates of foreign countries they intended to visit for their trip abroad. 20
Nor can the SSS be held liable for moral and temperate damages. As concluded by
the Court of Appeals "the negligence of the appellant is not so gross as to warrant
moral and temperate damages", 21 except that, said Court reduced those damages by
only P5,000.00 instead of eliminating them. Neither can we agree with the findings of
both the Trial Court and respondent Court that the SSS had acted maliciously or in
bad faith. The SSS was of the belief that it was acting in the legitimate exercise of its
right under the mortgage contract in the face of irregular payments made by private
respondents, and placed reliance on the automatic acceleration clause in the
contract. The filing alone of the foreclosure application should not be a ground for an
award of moral damages in the same way that a clearly unfounded civil action is not
among the grounds for moral damages. 22
With the ruling out of compensatory, moral and temperate damages, the grant of
exemplary or corrective damages should also be set aside. 23 Moreover, no proof has
been submitted that the SSS had acted in a wanton, reckless and oppressive
manner. 24
However, as found by both the Trial and Appellate Courts, there was clear negligence
on the part of SSS when they mistook the loan account of Socorro J. Cruz for that of
private respondent Socorro C. Cruz. Its attention was called to the error, but it
adamantly refused to acknowledge its mistake. The SSS can be held liable for
nominal damages. This type of damages is not for the purpose of indemnifying private
respondents for any loss suffered by them but to vindicate or recognize their rights
which have been violated or invaded by petitioner SSS. 25
The circumstances of the case also justify the award of attorney's fees, as granted by
the Trial and Appellate Courts, particularly considering that private respondents were
compelled to litigate for the prosecution of their interests. 26
24
WHEREFORE, the judgment sought to be reviewed is hereby modified in that
petitioner SSS shall pay private respondents: P3,000.00 as nominal damages; and
P5,000.00 as attorney's fees.
Costs against petitioner Social Security System.
SO ORDERED.
Teehankee, Concepcion, Jr., Guerrero, Abad Santos, De Castro, Vasquez and
Relova, JJ., concur.
Fernando, C.J., concurs in the result.
Plana, Escolin ** and Gutierrez, Jr., *** JJ., took no part.
Separate Opinions
AQUINO, J., concurring:
I concur. The award of moral damages is not justified under arts. 2219 and 2220 of
the Civil Code. I vote to award the private respondents the additional sum of P2,000
as litigation expenses.
MAKASIAR, J., dissenting:
I dissent.
I State is responsible in like manner when it acts through a special agent; but not when
To begin with, the negligent acts committed by the officers and employees of the
petitioner, Social Security System, amounted to not simply a contractual breach but
tort. For the record is clear that petitioner's officers and employees were grossly
negligent bordering on malice or bad faith in applying for the extrajudicial foreclosure
of the mortgage contract executed in its favor by the spouses David B. Cruz and
Socorro Concio-Cruz, and that even after private respondents had brought to the
attention of the petitioner's officers and employees their mistake, they insisted on their
course of action, instead of making the necessary rectifications, which grossly
negligent and oppressive acts caused damage to private respondents. As found by
the Court of Appeals:
The appellant was not justified in applying for the extrajudicial
foreclosure of the mortgage contract executed in its favor by the
spouses David B. Cruz and Socorro Concio-Cruz, Exh. 'A'. While it
is true that the payments of the monthly installments were
previously not regular, it is a fact that as of June 30, 1968 the
appellees, David B. Cruz and Socorro Concio-Cruz were up-to-date
and current in the payment of their monthly installments. Having
accepted the prior late payments of the monthly installments, the
appellant could no longer suddenly and without prior notice to the
mortgagors apply for the extra-judicial foreclosure of the mortgage
in July, 1968.
It is obvious that the appellant applied for the extra-judicial
foreclosure of the mortgage in question because of the gross
negligence of its employees. This negligence was aggravated when
the appellant, after being informed of the error, insisted on
proceeding with the extra-judicial foreclosure by invoking alleged
violations of the mortgage contract. But these violations are either
too minor to warrant the drastic step of foreclosure or were deemed
condoned when the appellant accepted late payments prior to June
30, 1968. Hence the trial court did not err in concluding that 'the act
of defendant indeed was deliberate, calculated to cow plaintiffs into
submission and made obviously with malice (p. 54, rec.; emphasis
supplied).
The circumstance that there was a pre-existing contractual relationship between the
herein contending parties, does not bar the tort liability of the officers and employees
of petitioner; because tort liability may still exist despite presence of contractual
relations as the act that breaks the contract may also be a tort, as in this case (Air
France vs. Carrascoso, L-21438, Sept. 28, 1966, 18 SCRA 155, 168-169; Singson &
Castillo vs. Bank of the Philippine Islands, L-24837, June 27, 1968, 23 SCRA 1117,
1119-20).
Consequently, a tortious act being involved, the applicable provision of law is Article
2180 in relation to Article 2176 of the New Civil Code. Under Article 2180, ... The
the damage has been caused by the official to whom the task done properly pertains,
in which case what is provided in Article 2176 shall be applicable.
In the case at bar, the petitioner Social Security System as the instrumentality of the
State to implement the social justice guarantee enunciated in the Constitution, did not
act through a special agent. Hence, the Social Security System cannot be liable for
the damages caused by the tortious acts of its officers and employees while in the
performance of their regular functions. The remedy therefore of private respondents is
to proceed against the guilty officers and employees of petitioner Social Security
System as mandated by Article 2176 of the New Civil Code.
For as held in the leading case of Merritt vs. Government of the Philippine Islands (34
Phil. 311).
The responsibility of the State is limited by Article 1903 to the case
wherein it acts through a special agent, ... so that in representation
25
 of the state and being bound to act as an agent thereof, he
executes the trust confided to him. This concept does not apply to
any executive agent who is an employee of the active
administration and who on his own responsibility performs the
functions which are inherent in and naturally pertain to his office
and which are regulated by law and the regulations.
While Article 2180 of the New Civil Code was not invoked by the petitioner as a
defense, this does not prevent this Tribunal from taking cognizance of the same. For
as stressed in Ortigas, Jr. vs. Lufthansa German Airlines (June 30, 1975, 64 SCRA
610, 633), failure to assign a defense as an error on appeal is a pure technicality that
should not prevail over the substantial issues in a controversy as the same would not
serve the interest of justice, and "this Court is clothed with ample authority to review
matters even if they are not assigned as errors in the appeal, if it finds that our
consideration is necessary in arriving at a just decision of the case" (citing Saura &
Export Co., Inc., May 31, 1963, 8 SCRA 143). Further, We have, time and again, re-
stated the rule that the Supreme Court can suspend its own rules to serve the ends of
justice (Jose vs. C.A., et al., L-38581, March 31, 1976; Phil. Blooming Mills
Employees Organization, et al. vs. PBM Co., et al., L-31195, 51 SCRA 189, 215;
Ronquillo vs. Marasigan, May 31, 1962, 5 SCRA 304, 312-313; Ordoveza vs.
Raymundo, 63 Phil. 275).
The principle that a defense not expressly pleaded is deemed waived unless such
failure is satisfactorily explained, is merely a general rule which is subject to
exceptions, among which is when the Court can take judicial notice of such defense.
In this case, We can take judicial notice of the law, like Article 2180 of the New Civil
Code. It must be emphasized that the courts have as much duty as the Commission
on August to protect the public treasury from being mulcted or raided illegally. And
this becomes more imperative considering that a substantial portion of the funds of
the petitioner comes from the contributions of- employees and workers in private firms
and is therefore in the nature of a trust fund to be expended only for their welfare and
benefit, with the government merely giving some subsidy. Any amount of damages
illegally assessed against the Social Security System will deplete the benefit funds
available to its covered members for the contingencies of sickness, disability,
retirement or death.
It cannot likewise be seriously questioned that the Social Security System is
comprehended in the definition in Section 2 of the Revised Administrative Code of the
term "Government of the Republic of the Philippines ... which refers to the corporate
governmental entity through which the functions of government are exercised
throughout the Philippine Islands, including, save as the contrary appears from the
context, the various arms through which political authority is made effective in the
Philippines, whether pertaining to the central Government or to the provincial or
municipal branches or other forms of local government." And the second paragraph of
said Section 2 provides that the term "national government" refers to the central
government as distinguished from the different forms of local government. There is
nothing therein nor in the Social Security Act, as amended, intimating that the national
government does not include the Social Security System.
It is true that the Social Security System has a corporate or juridical personality of its
own. But this does not remove it as an integral part of the national or central
government. For such corporate or juridical personality invested in it is more for
facility and convenience in the attainment of the objectives for which it was created by
the legislative. Such vesting of corporate or juridical personality in the Social Security
System was never intended to destroy the shield from liability afforded it as an
integral part of the State or Government by Article 2180 of the New Civil Code.
Relatedly, such corporate or juridical personality of the Social Security System and
the express provision of the law creating the same that it can sue and be sued, have
the effect of merely waiving its immunity from suit as an entity performing
governmental functions. Such waiver of its immunity from suit is not an admission of
its liability. Such waiver merely allows a private citizen a remedy for the enforcement
and protection of his rights, but always subject to the lawful defenses of the Social
Security System one of which is Article 2180 of the New Civil Code as aforestated. In
other words, such waiver of immunity from suit is not equivalent to instant liability. The
Social Security System can only be held liable for damages arising from the tortious
acts of its officers and employees only if it acts through a special agent, which is not
true in the case at bar.
II
It must be finally stressed that the Social Security System cannot be liable for
damages because it is an entity of government performing governmental functions;
hence, not profit-oriented. The 1963 doctrine in SSSEA vs. Soriano(7 SCRA 1016
[1963]) that the system is exercising proprietary functions, is no longer controlling.
For in 1969, the distinction between constituent and ministrant functions of the
Government as laid down in the case of Bacani vs. Nacoco (100 Phil. 468 [1956]) has
been obliterated. In the case of Agricultural Credit and Cooperative Financing
Administration (ACCFA) vs. Confederation of Unions in Government Corporations
and Offices (CUGCO) [30 SCRA 649 (1969)], this Court in re-examining the
aforesaid Bacani ruling observed that the trend has been to abandon and reject the
traditional "Constituent- Ministrant" criterion in governmental functions in favor of the
more responsive postulate that the growing complexities of modern society have
rendered the traditional classification of government functions unrealistic and
obsolete.
WE held in the ACCFA case, thus:
The growing complexities of modern society, however, have
rendered this traditional classification of the functions of
government quite unrealistic, not to say obsolete. The areas which
used to be left to private enterprise and initiative and which the
government was called upon to enter optionally, and only 'because
it was better equipped to administer for the public welfare than is
any private individual or groups of individuals,' continue to lose their
well-defined boundaries and to be absorbed within activities that the
26
 government must have undertaken in its sovereign capacity if it is to
meet the increasing social challenges of the times. Here as almost
everywhere, else, the tendency is undoubtedly towards a greater
socialization of economic forces. Here of course, this development
was envisioned indeed adopted as a national policy, by the
Constitution itself in its declaration of principle concerning the
promotion of social justice.
Chief Justice Fernando, then Associate Justice, in his concurring opinion stressed
that:
The decision reached by this Court so ably given expression in the
opinion of Justice Makalintal, characterized with vigor, clarity and
precision, represents what for me is a clear tendency not to be
necessarily bound by our previous pronouncements on what
activities partake of a nature that is governmental. Of even greater
significance, there is a definite rejection of the 'constituent-
ministrant' criterion of governmental functions, followed in Bacani
vs. National Coconut Corporation. That indeed is cause for
gratification. For me at least, there is again full adherence to the
basic philosophy of the Constitution as to the extensive and vast
power lodged in our government to cope with the social and
economic problems that even now sorely beset us. There is
therefore full concurrence on my part to the opinion of the court,
distinguished by its high quality of juristic craftsmanship (pp. 666-
667).
xxx xxx xxx
4. With the decision reached by us today, the government is freed
from the compulsion exerted by the Bacani doctrine of the
'constituent-ministrant' test as a criterion for the type of activity in
which it may engage. It constricting effect is consigned to oblivion.
No doubts or misgivings need assail us that government efforts to
promote the public wealth whether through regulatory legislation of
vast scope and emplitude or through the undertaking of business
activities, would have to face a searching and rigorous scrutiny. It is
clear that their legitimacy cannot be challenged on the ground alone
of their being offensive to the implications of the laissez- faire
concept. Unless there be a repugnancy then to the limitations
expressly set forth in the Constitution to protect individual rights, the
government enjoys a much wider latitude of action as to the means
it chooses to cope with grave social and economic problems that
urgently press for solution. For me, at least, that is to manifest
deference to the philosophy of our fundamental law. Hence my full
concurrence, as announced at the outset. (pp- 682-683, emphasis
supplied).
The 1935 Constitution declared:
Sec. 5. The promotion of social justice to insure the well being and
economic security of all the people should be the concern of the
State. (Art. II, Declaration of Principles).
The present 1973 Constitution provides under its Declaration of Principles and State
Policies (Article 11), that
The State shall promote social justice to ensure the dignity, welfare,
and security of all the people. Towards this end, the State shall
regulate the acquisition, ownership, use, enjoyment, and disposition
of private property, and equitably diffuse property ownership and
profits. (Section 6);
and
The State shall establish, maintain, and ensure adequate social
services in the field of education, health, housing, employment,
welfare, and social security to guarantee the enjoyment by the
people of a decent standard of living. (Section 7).
The strictly governmental function of the SSS is spelled out unmistakably in Section 2
of R.A. No. 1161 entitled "The Social Security Act of 1954," thus:
It is hereby declared to be the policy of the Republic of the
Philippines to develop, establish gradually and perfect a social
security system which shall be suitable to the needs of the people
throughout the Philippines, and shall provide protection against the
hazards of disability, sickness, old age and death.
As stated in the Explanatory Note to the Bill that became R. A. No. 1161, the Social
Security Act of 1954:
It is a recognized principle in free societies that the State must help
its citizens to make provision for emergencies beyond their control,
such as unemployment, sickness requiring expensive medical
treatment, and similar emergencies to a greater or lesser degree by
means of social security legislation in a variety of forms.
And this Court, in Roman Catholic Archbishop of Manila vs. SSS (L-15045, 1 SCRA
10 [1961]), declared that "the Social Security Law was enacted pursuant to the 'policy
of the Republic to develop, establish gradually and perfect a social security system
which shall be suitable to the needs of the people throughout the Philippines and
provide protection to employees against the hazards of disability, sickness, old age
and death' (Sec. 2, Republic Act No. 1161, as amended). Such enactment is a
27
legitimate exercise of the police power. It affords protection to labor, especially to
working women and minors, and is in full accord with the constitutional provisions on
the 'promotion of social justice to insure the well being and economic security of all
the people.
It is interesting to note that aforesaid pronouncement of this Court was incorporated in
the Social Security Act (R.A. 1161) by Presidential Decree No. 24 issued on October
19, 1972. Thus, as amended by said Decree, its section 2 now reads: "It is the policy
of the Republic of the Philippines to establish, develop, promote and perfect a sound
viable 'tax exempt social security service suitable to the needs of the people
throughout the Philippines, which shall provide to covered employees and their
families protection against the hazards of disability, sickness, old age, and death, with
a view to promoting their well-being in the spirit of social justice" (emphasis supplied).
And one of its whereases expressly states that "the measure is necessary to effect
reforms in SSS operations and to revitalize its structure as an important agency in the
promotion of the social and economic development programs of the Government; ...
(emphasis supplied).
Considering therefore that the establishment and maintenance of an adequate social
security and social services, which the Social Security System seeks to perform and
achieve are functions pursuant to the basic constitutional mandate directing the State
to promote "social justice to insure the well-being and economic security of all the
people" (1935 Constitution) or "to insure the dignity, welfare and security of all the
people" as well as the police power of the State, the inescapable conclusion is that
the function of the SSS is and has always been governmental.
It thus becomes clear that petitioner Social Security System, under the obtaining facts
and applicable laws in the case, is not liable for the damages caused to private
respondents by the tortious acts of its officers and employees to whom the task done
properly pertained.
A contrary rule as that enunciated in the majority opinion invites conspiracy between
officials and employees of the Social Security System and private parties to create
financial liabilities against the System. Its funds are public funds and more importantly
trust funds, which must be protected.
Separate Opinions
AQUINO, J., concurring:
I concur. The award of moral damages is not justified under arts. 2219 and 2220 of
the Civil Code. I vote to award the private respondents the additional sum of P2,000
as litigation expenses.
MAKASIAR, J., dissenting:
I dissent.
I
To begin with, the negligent acts committed by the officers and employees of the
petitioner, Social Security System, amounted to not simply a contractual breach but
tort. For the record is clear that petitioner's officers and employees were grossly
negligent bordering on malice or bad faith in applying for the extrajudicial foreclosure
of the mortgage contract executed in its favor by the spouses David B. Cruz and
Socorro Concio-Cruz, and that even after private respondents had brought to the
attention of the petitioner's officers and employees their mistake, they insisted on their
course of action, instead of making the necessary rectifications, which grossly
negligent and oppressive acts caused damage to private respondents. As found by
the Court of Appeals:
The appellant was not justified in applying for the extrajudicial
foreclosure of the mortgage contract executed in its favor by the
spouses David B. Cruz and Socorro Concio-Cruz, Exh. 'A'. While it
is true that the payments of the monthly installments were
previously not regular, it is a fact that as of June 30, 1968 the
appellees, David B. Cruz and Socorro Concio-Cruz were up-to-date
and current in the payment of their monthly installments. Having
accepted the prior late payments of the monthly installments, the
appellant could no longer suddenly and without prior notice to the
mortgagors apply for the extra-judicial foreclosure of the mortgage
in July, 1968.
It is obvious that the appellant applied for the extra-judicial
foreclosure of the mortgage in question because of the gross
negligence of its employees. This negligence was aggravated when
the appellant, after being informed of the error, insisted on
proceeding with the extra-judicial foreclosure by invoking alleged
violations of the mortgage contract. But these violations are either
too minor to warrant the drastic step of foreclosure or were deemed
condoned when the appellant accepted late payments prior to June
30, 1968. Hence the trial court did not err in concluding that 'the act
of defendant indeed was deliberate, calculated to cow plaintiffs into
submission and made obviously with malice (p. 54, rec.; emphasis
supplied).
The circumstance that there was a pre-existing contractual relationship between the
herein contending parties, does not bar the tort liability of the officers and employees
of petitioner; because tort liability may still exist despite presence of contractual
relations as the act that breaks the contract may also be a tort, as in this case (Air
France vs. Carrascoso, L-21438, Sept. 28, 1966, 18 SCRA 155, 168-169; Singson &
Castillo vs. Bank of the Philippine Islands, L-24837, June 27, 1968, 23 SCRA 1117,
1119-20).
28
Consequently, a tortious act being involved, the applicable provision of law is Article
2180 in relation to Article 2176 of the New Civil Code. Under Article 2180, ... The
State is responsible in like manner when it acts through a special agent; but not when
the damage has been caused by the official to whom the task done properly pertains,
in which case what is provided in Article 2176 shall be applicable.
In the case at bar, the petitioner Social Security System as the instrumentality of the
State to implement the social justice guarantee enunciated in the Constitution, did not
act through a special agent. Hence, the Social Security System cannot be liable for
the damages caused by the tortious acts of its officers and employees while in the
performance of their regular functions. The remedy therefore of private respondents is
to proceed against the guilty officers and employees of petitioner Social Security
System as mandated by Article 2176 of the New Civil Code.
For as held in the leading case of Merritt vs. Government of the Philippine Islands (34
Phil. 311).
The responsibility of the State is limited by Article 1903 to the case
wherein it acts through a special agent, ... so that in representation
of the state and being bound to act as an agent thereof, he
executes the trust confided to him. This concept does not apply to
any executive agent who is an employee of the active
administration and who on his own responsibility performs the
functions which are inherent in and naturally pertain to his office
and which are regulated by law and the regulations.
While Article 2180 of the New Civil Code was not invoked by the petitioner as a
defense, this does not prevent this Tribunal from taking cognizance of the same. For
as stressed in Ortigas, Jr. vs. Lufthansa German Airlines (June 30, 1975, 64 SCRA
610, 633), failure to assign a defense as an error on appeal is a pure technicality that
should not prevail over the substantial issues in a controversy as the same would not
serve the interest of justice, and "this Court is clothed with ample authority to review
matters even if they are not assigned as errors in the appeal, if it finds that our
consideration is necessary in arriving at a just decision of the case" (citing Saura &
Export Co., Inc., May 31, 1963, 8 SCRA 143). Further, We have, time and again, re-
stated the rule that the Supreme Court can suspend its own rules to serve the ends of
justice (Jose vs. C.A., et al., L-38581, March 31, 1976; Phil. Blooming Mills
Employees Organization, et al. vs. PBM Co., et al., L-31195, 51 SCRA 189, 215;
Ronquillo vs. Marasigan, May 31, 1962, 5 SCRA 304, 312-313; Ordoveza vs.
Raymundo, 63 Phil. 275).
The principle that a defense not expressly pleaded is deemed waived unless such
failure is satisfactorily explained, is merely a general rule which is subject to
exceptions, among which is when the Court can take judicial notice of such defense.
In this case, We can take judicial notice of the law, like Article 2180 of the New Civil
Code. It must be emphasized that the courts have as much duty as the Commission
on August to protect the public treasury from being mulcted or raided illegally. And
this becomes more imperative considering that a substantial portion of the funds of
the petitioner comes from the contributions of- employees and workers in private firms
and is therefore in the nature of a trust fund to be expended only for their welfare and
benefit, with the government merely giving some subsidy. Any amount of damages
illegally assessed against the Social Security System will deplete the benefit funds
available to its covered members for the contingencies of sickness, disability,
retirement or death.
It cannot likewise be seriously questioned that the Social Security System is
comprehended in the definition in Section 2 of the Revised Administrative Code of the
term "Government of the Republic of the Philippines ... which refers to the corporate
governmental entity through which the functions of government are exercised
throughout the Philippine Islands, including, save as the contrary appears from the
context, the various arms through which political authority is made effective in the
Philippines, whether pertaining to the central Government or to the provincial or
municipal branches or other forms of local government." And the second paragraph of
said Section 2 provides that the term "national government" refers to the central
government as distinguished from the different forms of local government. There is
nothing therein nor in the Social Security Act, as amended, intimating that the national
government does not include the Social Security System.
It is true that the Social Security System has a corporate or juridical personality of its
own. But this does not remove it as an integral part of the national or central
government. For such corporate or juridical personality invested in it is more for
facility and convenience in the attainment of the objectives for which it was created by
the legislative. Such vesting of corporate or juridical personality in the Social Security
System was never intended to destroy the shield from liability afforded it as an
integral part of the State or Government by Article 2180 of the New Civil Code.
Relatedly, such corporate or juridical personality of the Social Security System and
the express provision of the law creating the same that it can sue and be sued, have
the effect of merely waiving its immunity from suit as an entity performing
governmental functions. Such waiver of its immunity from suit is not an admission of
its liability. Such waiver merely allows a private citizen a remedy for the enforcement
and protection of his rights, but always subject to the lawful defenses of the Social
Security System one of which is Article 2180 of the New Civil Code as aforestated. In
other words, such waiver of immunity from suit is not equivalent to instant liability. The
Social Security System can only be held liable for damages arising from the tortious
acts of its officers and employees only if it acts through a special agent, which is not
true in the case at bar.
II
It must be finally stressed that the Social Security System cannot be liable for
damages because it is an entity of government performing governmental functions;
hence, not profit-oriented. The 1963 doctrine in SSSEA vs. Soriano(7 SCRA 1016
[1963]) that the system is exercising proprietary functions, is no longer controlling.
29
For in 1969, the distinction between constituent and ministrant functions of the
Government as laid down in the case of Bacani vs. Nacoco (100 Phil. 468 [1956]) has
been obliterated. In the case of Agricultural Credit and Cooperative Financing
Administration (ACCFA) vs. Confederation of Unions in Government Corporations
and Offices (CUGCO) [30 SCRA 649 (1969)], this Court in re-examining the
aforesaid Bacani ruling observed that the trend has been to abandon and reject the
traditional "Constituent- Ministrant" criterion in governmental functions in favor of the
more responsive postulate that the growing complexities of modern society have
rendered the traditional classification of government functions unrealistic and
obsolete.
WE held in the ACCFA case, thus:
The growing complexities of modern society, however, have
rendered this traditional classification of the functions of
government quite unrealistic, not to say obsolete. The areas which
used to be left to private enterprise and initiative and which the
government was called upon to enter optionally, and only 'because
it was better equipped to administer for the public welfare than is
any private individual or groups of individuals,' continue to lose their
well-defined boundaries and to be absorbed within activities that the
government must have undertaken in its sovereign capacity if it is to
meet the increasing social challenges of the times. Here as almost
everywhere, else, the tendency is undoubtedly towards a greater
socialization of economic forces. Here of course, this development
was envisioned indeed adopted as a national policy, by the
Constitution itself in its declaration of principle concerning the
promotion of social justice.
Chief Justice Fernando, then Associate Justice, in his concurring opinion stressed
that:
The decision reached by this Court so ably given expression in the
opinion of Justice Makalintal, characterized with vigor, clarity and
precision, represents what for me is a clear tendency not to be
necessarily bound by our previous pronouncements on what
activities partake of a nature that is governmental. Of even greater
significance, there is a definite rejection of the 'constituent-
ministrant' criterion of governmental functions, followed in Bacani
vs. National Coconut Corporation. That indeed is cause for
gratification. For me at least, there is again full adherence to the
basic philosophy of the Constitution as to the extensive and vast
power lodged in our government to cope with the social and
economic problems that even now sorely beset us. There is
therefore full concurrence on my part to the opinion of the court,
distinguished by its high quality of juristic craftsmanship (pp. 666-
667).
xxx xxx xxx
4. With the decision reached by us today, the government is freed
from the compulsion exerted by the Bacani doctrine of the
'constituent-ministrant' test as a criterion for the type of activity in
which it may engage. It constricting effect is consigned to oblivion.
No doubts or misgivings need assail us that government efforts to
promote the public wealth whether through regulatory legislation of
vast scope and emplitude or through the undertaking of business
activities, would have to face a searching and rigorous scrutiny. It is
clear that their legitimacy cannot be challenged on the ground alone
of their being offensive to the implications of the laissez- faire
concept. Unless there be a repugnancy then to the limitations
expressly set forth in the Constitution to protect individual rights, the
government enjoys a much wider latitude of action as to the means
it chooses to cope with grave social and economic problems that
urgently press for solution. For me, at least, that is to manifest
deference to the philosophy of our fundamental law. Hence my full
concurrence, as announced at the outset. (pp- 682-683, emphasis
supplied).
The 1935 Constitution declared:
Sec. 5. The promotion of social justice to insure the well being and
economic security of all the people should be the concern of the
State. (Art. II, Declaration of Principles).
The present 1973 Constitution provides under its Declaration of Principles and State
Policies (Article 11), that
The State shall promote social justice to ensure the dignity, welfare,
and security of all the people. Towards this end, the State shall
regulate the acquisition, ownership, use, enjoyment, and disposition
of private property, and equitably diffuse property ownership and
profits. (Section 6);
and
The State shall establish, maintain, and ensure adequate social
services in the field of education, health, housing, employment,
welfare, and social security to guarantee the enjoyment by the
people of a decent standard of living. (Section 7).
The strictly governmental function of the SSS is spelled out unmistakably in Section 2
of R.A. No. 1161 entitled "The Social Security Act of 1954," thus:
30
 It is hereby declared to be the policy of the Republic of the
Philippines to develop, establish gradually and perfect a social
security system which shall be suitable to the needs of the people
throughout the Philippines, and shall provide protection against the
hazards of disability, sickness, old age and death.
As stated in the Explanatory Note to the Bill that became R. A. No. 1161, the Social
Security Act of 1954:
It is a recognized principle in free societies that the State must help
its citizens to make provision for emergencies beyond their control,
such as unemployment, sickness requiring expensive medical
treatment, and similar emergencies to a greater or lesser degree by
means of social security legislation in a variety of forms.
It thus becomes clear that petitioner Social Security System, under the obtaining facts
and applicable laws in the case, is not liable for the damages caused to private
respondents by the tortious acts of its officers and employees to whom the task done
properly pertained.
A contrary rule as that enunciated in the majority opinion invites conspiracy between
officials and employees of the Social Security System and private parties to create
financial liabilities against the System. Its funds are public funds and more importantly
trust funds, which must be protected.
Footnotes
1 Penned by Justice Ramon C. Fernandez and concurred in by Justices Efren I.
Plana and Venicio Escolin.

And this Court, in Roman Catholic Archbishop of Manila vs. SSS (L-15045, 1 SCRA 2 pp. 3-7, Petitioner's Brief.
10 [1961]), declared that "the Social Security Law was enacted pursuant to the 'policy
of the Republic to develop, establish gradually and perfect a social security system
which shall be suitable to the needs of the people throughout the Philippines and 3 pp. 2-5, Respondents' Brief.
provide protection to employees against the hazards of disability, sickness, old age
and death' (Sec. 2, Republic Act No. 1161, as amended). Such enactment is a 4 pp, 70-71, Record on Appeal.
legitimate exercise of the police power. It affords protection to labor, especially to
working women and minors, and is in full accord with the constitutional provisions on 5 p. 74, Record on Appeal, p. 62 Rollo.
the 'promotion of social justice to insure the well being and economic security of all
the people.
6 pp. 73-74, Record on Appeal.
It is interesting to note that aforesaid pronouncement of this Court was incorporated in
the Social Security Act (R.A. 1161) by Presidential Decree No. 24 issued on October 7 p. 59, Rollo.
19, 1972. Thus, as amended by said Decree, its section 2 now reads: "It is the policy
of the Republic of the Philippines to establish, develop, promote and perfect a sound 8 pp. A-B, Brief for the Petitioner, p. 136, Rollo.
viable 'tax exempt social security service suitable to the needs of the people
throughout the Philippines, which shall provide to covered employees and their
9 Talosig vs. Vda. de Nieva, 43 SCRA 473; Evangelists & Co. vs. Abad Santos, 51
families protection against the hazards of disability, sickness, old age, and death, with
SCRA 416; Tiongco vs. De la Merced, 58 SCRA 90; Perido vs. Perido, 63 SCRA 98;
a view to promoting their well-being in the spirit of social justice" (emphasis supplied).
Alaras vs. Court of Appeals, 64 SCRA 671; T.J. Wolff & Co., Inc. vs. Moralde, 81
And one of its whereases expressly states that "the measure is necessary to effect
SCRA 624.
reforms in SSS operations and to revitalize its structure as an important agency in the
promotion of the social and economic development programs of the Government; ...
(emphasis supplied). 10 p. 54, Rollo.

Considering therefore that the establishment and maintenance of an adequate social 11 pp.72-73; Record on Appeal.
security and social services, which the Social Security System seeks to perform and
achieve are functions pursuant to the basic constitutional mandate directing the State 12 SSS Employees' Association (PAFLU) vs. Soriano, 7 SCRA 1016(1963).
to promote "social justice to insure the well-being and economic security of all the
people" (1935 Constitution) or "to insure the dignity, welfare and security of all the
13 SSS Employees' Association vs. Soriano, 9 SCRA 511 (1963).
people" as well as the police power of the State, the inescapable conclusion is that
the function of the SSS is and has always been governmental.
14 Sec. 4 (k) RA 1161; Sec. 4 (k) PD 24.

31
15 Sinco, Philippine Political Law, Revised Ed., p. 34.
16 See Noda vs. Social Security System, 109 SCRA 218 (1981).
17 9 SCRA 511 (1963).
18 NASSCO vs. Court of Industrial Relations, 8 SCRA 781 (1963); PNB vs. Pabalan,
83 SCRA 595 (1978).
19 T.s.n., August 20, 1969, pp. 91-101.
20 T.s.n., Ibid., 101; p. 20, Brief for defendant-appellant, Court of Appeals.
21 p.2 Resolution, p. 59, Rollo.
22 Malonzo vs. Galang, 109 Phil.16 (1960); Enervida vs. de la Torre, 55 SCRA 339
(1974).
GAUDENCIO RAYO, BIENVINIDO PASCUAL, TOMAS MANUEL, MARIANO
CRUZ, PEDRO BARTOLOME, BERNARDINO CRUZ JOSE PALAD , LUCIO
FAJARDO, FRANCISCO RAYOS, ANGEL TORRES, NORBERTO TORRES,
RODELIO JOAQUIN, PEDRO AQUINO, APOLINARIO BARTOLOME, MAMERTO
BERNARDO, CIRIACO CASTILLO, GREGORIO CRUZ, SIMEON ESTRELLA,
EPIFANIO MARCELO, HERMOGENES SAN PEDRO, JUAN SANTOS, ELIZABETH
ABAN, MARCELINA BERNABE, BUENAVENTURA CRUZ, ANTONIO MENESES,
ROMAN SAN PEDRO, LOPEZ ESPINOSA, GODOFREDO PUNZAL, JULIANA
GARCIA, LEBERATO SARMIENTO, INOCENCIO DE LEON, CARLOS CORREA,
REYNALDO CASIMIRO, ANTONIO GENER, GAUDENCIO CASTILLO, MATIAS
PEREZ, CRISPINIANO TORRES, CRESENCIO CRUZ, PROTACIO BERNABE,
MARIANO ANDRES, CRISOSTOMO CRUZ, MARCOS EUSTAQUIO, PABLO
LEGASPI, VICENTE PASCUAL, ALEJANDRA SISON, EUFRACIO TORRES,
ROGELIO BARTOLOME, RODOLFO BERNARDO, APOLONIO CASTILLO,
MARCELINO DALMACIO, EUTIQUIO LEGASPI, LORENZO LUCIANO and
GREGORIO PALAD, petitioners,
vs.
COURT OF FIRST INSTANCE OF BULACAN, BRANCH V, STA. MARIA, and
NATIONAL POWER CORPORATION, respondents.

ABAD SANTOS, J.:

23 Art. 2234, Civil Code.

The relevant antecedents of this case are narrated in the petition and have not been
24 Art. 2232, Ibid.
controverted, namely:

25 Art. 2221, Ibid

3. At about midnight on October 26, 1978, during the height of that
infamous typhoon "KADING" the respondent corporation, acting
26 Art. 2208, Ibid. through its plant superintendent, Benjamin Chavez, opened or
caused to be opened simultaneously all the three floodgates of the
** Justices Efren I. Plana and Venicio Escolin took part in the Decision under review. Angat Dam. And as a direct and immediate result of the sudden,
precipitate and simultaneous opening of said floodgates several
towns in Bulacan were inundated. Hardest-hit was Norzagaray.
*** Justice Hugo E. Gutierrez, -Jr., then Acting Solicitor General, filed the Brief for
About a hundred of its residents died or were reported to have died
petitioner.
and properties worth million of pesos destroyed or washed away.
This flood was unprecedented in Norzagaray.

10. Rayo v. CFI of Bulacan 110 SCRA 460

4. Petitioners, who were among the many unfortunate victims of
that man-caused flood, filed with the respondent Court eleven
Republic of the Philippines complaints for damages against the respondent corporation and the
SUPREME COURT plant superintendent of Angat Dam, Benjamin Chavez, docketed as
Manila Civil Cases Nos. SM-950 951, 953, 958, 959, 964, 965, 966, 981,
982 and 983. These complaints though separately filed have a
SECOND DIVISION common/similar cause of action. ...

G.R. No. L-55273-83 December 19, 1981 5. Respondent corporation filed separate answers to each of these
eleven complaints. Apart from traversing the material averments in
the complaints and setting forth counterclaims for damages

32
 respondent corporation invoked in each answer a special and
affirmative defense that "in the operation of the Angat Dam," it is
"performing a purely governmental function", hence it "can not be
sued without the express consent of the State." ...
6. On motion of the respondent corporation a preliminary hearing
was held on its affirmative defense as though a motion to dismiss
were filed. Petitioners opposed the prayer for dismissal and
contended that respondent corporation is performing not
governmental but merely proprietary functions and that under its
own organic act, Section 3 (d) of Republic Act No. 6395, it can sue
and be sued in any court. ...
7. On July 29, 1980 petitioners received a copy of the questioned
order of the respondent Court dated December 21, 1979 dismissing
all their complaints as against the respondent corporation thereby
leaving the superintendent of the Angat Dam, Benjamin Chavez, as
the sole party-defendant. ...
8. On August 7, 1980 petitioners filed with the respondent Court a
motion for reconsideration of the questioned order of dismissal. ...
9. The respondent Court denied petitioners' motion for
reconsideration in its order dated October 3, 1980. ... Hence, the
present petition for review on certiorari under Republic Act No.
5440. (Rollo, pp. 3-6.)
The Order of dismissal dated December 12, 1979, reads as follows:
Under consideration is a motion to dismiss embodied as a special
affirmative defense in the answer filed by defendant NPC on the
grounds that said defendant performs a purely governmental
function in the operation of the Angat Dam and cannot therefore be
sued for damages in the instant cases in connection therewith.
Plaintiffs' opposition to said motion to discuss, relying on Sec. 3 (d)
of Republic Act 6396 which imposes on the NPC the power and
liability to sue and be sued in any court, is not tenable since the
same refer to such matters only as are within the scope of the other
corporate powers of said defendant and not matters of tort as in the
instant cases. It being an agency performing a purely governmental
function in the operation of the Angat Dam, said defendant was not
given any right to commit wrongs upon individuals. To sue said
defendant for tort may require the express consent of the State.
WHEREFORE, the cases against defendant NPC are hereby
dismissed. (Rollo, p. 60.)
The Order dated October 3, 1980, denying the motion for reconsideration filed by the
plaintiffs is pro forma; the motion was simply denied for lack of merit. (Rollo, p. 74.)
The petition to review the two orders of the public respondent was filed on October
16, 1980, and on October 27, 1980, We required the respondents to comment. It was
only on April 13, 1981, after a number of extensions, that the Solicitor General filed
the required comment. (Rollo, pp. 107-114.)
On May 27, 1980, We required the parties to file simultaneous memoranda within
twenty (20) days from notice. (Rollo, p. 115.) Petitioners filed their memorandum on
July 22, 1981. (Rollo, pp. 118-125.) The Solicitor General filed a number of motions
for extension of time to file his memorandum. We granted the seventh extension with
a warning that there would be no further extension. Despite the warning the Solicitor
General moved for an eighth extension which We denied on November 9, 1981. A
motion for a ninth extension was similarly denied on November 18, 1981. The
decision in this case is therefore, without the memorandum of the Solicitor General.
The parties are agreed that the Order dated December 21, 1979, raises the following
issues:
1. Whether respondent National Power Corporation performs a governmental function
with respect to the management and operation of the Angat Dam; and
2. Whether the power of respondent National Power Corporation to sue and be sued
under its organic charter includes the power to be sued for tort.
The petition is highly impressed with merit.
It is not necessary to write an extended dissertation on whether or not the NPC
performs a governmental function with respect to the management and operation of
the Angat Dam. It is sufficient to say that the government has organized a private
corporation, put money in it and has allowed it to sue and be sued in any court under
its charter. (R.A. No. 6395, Sec. 3 (d).) As a government owned and controlled
corporation, it has a personality of its own, distinct and separate from that of the
Government. (See National Shipyards and Steel Corp. vs. CIR, et al., L-17874,
August 31, 1963, 8 SCRA 781.) Moreover, the charter provision that the NPC can
"sue and be sued in any court" is without qualification on the cause of action and
accordingly it can include a tort claim such as the one instituted by the petitioners.
WHEREFORE, the petition is hereby granted; the Orders of the respondent court
dated December 12, 1979 and October 3, 1980, are set aside; and said court is
ordered to reinstate the complaints of the petitioners. Costs against the NPC.
33
SO ORDERED.
Barredo (Chairman), Aquino, De Castro, Ericta and Escolin JJ., concur.
Concepcion Jr., J., is on leave.
11. Malong v. PNR 185 SCRA 63
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-49930 August 7, 1985
FRANCISCO MALONG and ROSALINA AQUINOMALONG petitioners,
vs.
PHILIPPINE NATIONAL RAILWAYS and COURT OF FIRST INSTANCE OF
PANGASINAN, Lingayen Branch 11, respondents.
AQUINO, J.:
This case is about the immunity from suit of the Philippine National Railways. The
Malong spouses alleged in their complaint that on October 30, 1977 their son, Jaime
Aquino, a paying passenger, was killed when he fell from a PNR train while it was
between Tarlac and Capas.
The tragedy occurred because Jaime had to sit near the door of a coach. The train
was overloaded with passengers and baggage in view of the proximity of All Saints
Day. The Malong spouses prayed that the PNR be ordered to pay them damages
totalling P136,370.
Upon the Solicitor General's motion, the trial court dismissed the complaint. It ruled
that it had no jurisdiction because the PNR, being a government instrumentality, the
action was a suit against the State (Sec. 16, Art. XV of the Constitution). The Malong
spouses appealed to this Court pursuant to Republic Act No. 5440.
The Manila Railroad Company, the PNR's predecessor, as a common carrier, was not
immune from suit under Act No. 1510, its charter.
The PNR charter, Republic Act No. 4156, as amended by Republic Act No. 6366 and
Presidential Decree No. 741, provides that the PNR is a government instrumentality
under government ownership during its 50-year term, 1964 to 2014. It is under the
Office of the President of the Philippines. Republic Act No. 6366 provides:
SECTION 1-a. Statement of policy. The Philippine National
Railways, being a factor for socio-economic development and
growth, shall be a part of the infrastructure program of the
government and as such shall remain in and under government
ownership during its corporate existence. The Philippine National
Railways must be administered with the view of serving the
interests of the public by providing them the maximum of service
and, while aiming at its greatest utility by the public, the economy of
operation must be ensured so that service can be rendered at the
minimum passenger and freight prices possible.
The charter also provides:
SEC. 4. General powers. The Philippine National Railways shall
have the following general powers:
(a) To do all such other things and to transact all such business
directly or indirectly necessary, incidental or conducive to the
attainment of the purpose of the corporation; and
(b) Generally, to exercise all powers of a railroad corporation under
the Corporation Law. (This refers to sections 81 to 102 of the
Corporation Law on railroad corporations, not reproduced in the
Corporation Code.)
Section 36 of the Corporation Code provides that every corporation has the power to
sue and be sued in its corporate name. Section 13(2) of the Corporation Law provides
that every corporation has the power to sue and be sued in any court.
A sovereign is exempt from suit, not because of any formal
conception or obsolete theory, but on the logical and practical
ground that there can be no legal right as against the authority that
makes the law on which the right depends (Justice Holmes in
Kawananakoa vs. Polyblank 205 U.S. 353, 51 L. ed. 834).
The public service would be hindered, and public safety
endangered, if the supreme authority could be subjected to suit at
the instance of every citizen and, consequently, controlled in the
use and disposition of the means required for the proper
administration of the Government (The Siren vs. U.S., 7 Wall. 152,
19 L. ed. 129).
34
Did the State act in a sovereign capacity or in a corporate capacity when it organized
the PNR for the purpose of engaging in transportation? Did it act differently when it
organized the PNR as successor of the Manila Railroad Company?
We hold that in the instant case the State divested itself of its sovereign capacity
when it organized the PNR which is no different from its predecessor, the Manila
Railroad Company. The PNR did not become immune from suit. It did not remove
itself from the operation of articles 1732 to 1766 of the Civil Code on common
carriers.
The correct rule is that "not all government entities, whether corporate or non-
corporate, are immune from suits. Immunity from suit is determined by the character
of the objects for which the entity was organized." (Nat. Airports Corp. vs. Teodoro
and Phil. Airlines, Inc., 91 Phil. 203, 206; Santos vs, Santos, 92 Phil. 281, 285; Harry
Lyons, Inc. vs. USA, 104 Phil. 593.)
Suits against State agencies with respect to matters in which they have assumed to
act in a private or non-governmental capacity are not suits against the State (81
C.J.S. 1319).
Suits against State agencies with relation to matters in which they
have assumed to act in a private or non-governmental capacity,
and various suits against certain corporations created by the State
for public purposes, but to engage in matters partaking more of the
nature of ordinary business rather than functions of a governmental
or political character, are not regarded as suits against the State.
The latter is true, although the State may own the stock or property
of such a corporation, for by engaging in business operations
through a corporation the State divests itself so far of its sovereign
character, and by implicating consents to suits against the
corporation. (81 C.J. S. 1319.)
The foregoing rule was applied to State Dock Commissions carrying on business
relating to pilots, terminals and transportation (Standard Oil Co. of New Jersey vs.
U.S., 27 Fed. 2nd 370) and to State Highway Commissions created to build public
roads and given appropriations in advance to discharge obligations incurred in their
behalf (Arkansas State Highway Commission vs. Dodge, 26 SW 2nd 879 and State
Highway Commission of Missouri vs. Bates, 296 SW 418, cited in National Airports
case).
The point is that when the government enters into a commercial business it abandons
its sovereign capacity and is to be treated like any other private corporation (Bank of
the U.S. vs. Planters' Bank, 9 Wheat. 904, 6 L. ed. 244, cited in Manila Hotel
Employees Association vs. Manila Hotel Company, et al., 73 Phil. 374, 388). The
Manila Hotel case also relied on the following rulings:
By engaging in a particular business through the instrumentality of
a corporation, the government divests itself pro hac vice of its
sovereign character, so as to render the corporation subject to the
rules of law governing private corporations.
When the State acts in its proprietary capacity, it is amenable to all
the rules of law which bind private individuals.
There is not one law for the sovereign and another for the subject,
but when the sovereign engages in business and 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 principles as if both contracting parties were private persons.
Both stand upon equality before the law, and the sovereign is
merged in the dealer, contractor and suitor (People vs. Stephens,
71 N.Y. 549).
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.
It would be unjust if the heirs of the victim of an alleged negligence of the PNR
employees could not sue the PNR for damages. Like any private common carrier, the
PNR is subject to the obligations of persons engaged in that private enterprise. It is
not performing any governmental function.
Thus, the National Development Company is not immune from suit. It does not
exercise sovereign functions. It is an agency for the performance of purely corporate,
proprietary or business functions (National Development Company vs. Tobias, 117
Phil. 703, 705 and cases cited therein; National Development Company vs. NDC
Employees and Workers' Union, L-32387, August 19,1975,66 SCRA 181,184).
Other government agencies not enjoying immunity from suit are the Social Security
System (Social Security System vs. Court of Appeals, L-41299, February 21, 1983,
120 SCRA 707) and the Philippine National Bank (Republic vs. Philippine National
Bank, 121 Phil. 26).
WHEREFORE, the order of dismissal is reversed and set aside. The case is
remanded to the trial court for further proceedings. Costs against the Philippine
National Railways.
SO ORDERED.
Concepcion, Jr., Melencio-Herrera, Plana, Escolin, Relova, Gutierrez, Jr., De la
Fuente, Cuevas and Alampay, JJ., concur.
35
Teehankee, J., concurs in the result.
Makasiar, C.J., I concur both on express waiver by its charter and implied waiver by
the contract of carriage.
Separate Opinions
ABAD SANTOS, J., concurring:
The claim that Philippine National Railways is immune from suit because it is an
instrumentality of the government is so outlandish that it deserves scant
consideration. All corporations organized by the government are its instrumentality by
the very reason of their creation. But that fact alone does not invest them with
immunity from suit. The Central Bank of the Philippines which theoretically formulates
monetary policies is perhaps the best example of a corporation which is an
instrumentality of the government. But the Central Bank is not immune from suit for it
also performs proprietary functions. The docket of this Court provides proof for this
assertion. The test whether or not an instrumentality of the government is immune
from suit is well-known.
I deplore the tendency to invoke immunity from suit on the part of the government
corporations. They would deny justice to the people they are to serve. In Rayo et at
vs. National Power Corporation et al., G.R. No. 55273-83, Dec. 19, 1981, I 10 SCRA
456, the petitioners filed suit against the National Power Corporation for damages as
a result of the opening of the floodgates of Angat Dam. The defendant invoked
immunity from suit. The trial court sustained the claim and dismissed the suit. This
Court in reinstating the case said.
It is not necessary to write an extended dissertation on whether or
not the NPC performs a governmental function with respect to the
management and operation of the Angat Dam. It is sufficient to say
that the government has organized a private corporation, put
money in it and has allowed it to sue and be sued in any court
under its charter, (R.A. No. 6395, Sec. 3 (D).) As a government
owned and controlled corporation, it has a personality of its own,
distinct and separate from that of the Government. (See National
Shipyards and Steel Corp. vs. CIR, et al., L-17874, August 31,
1963, 8 SCRA 781.) Moreover, the charter provision that the NPC
can sue and be sued in any court' is without qualification on the
cause of action and accordingly it can include a tort claim such as
the one instituted by the petitioners. (At p. 460.)
Separate Opinions
ABAD SANTOS, J., concurring:
The claim that Philippine National Railways is immune from suit because it is an
instrumentality of the government is so outlandish that it deserves scant
consideration. All corporations organized by the government are its instrumentality by
the very reason of their creation. But that fact alone does not invest them with
immunity from suit. The Central Bank of the Philippines which theoretically formulates
monetary policies is perhaps the best example of a corporation which is an
instrumentality of the government. But the Central Bank is not immune from suit for it
also performs proprietary functions. The docket of this Court provides proof for this
assertion. The test whether or not an instrumentality of the government is immune
from suit is well-known.
I deplore the tendency to invoke immunity from suit on the part of the government
corporations. They would deny justice to the people they are to serve. In Rayo et at
vs. National Power Corporation et al., G.R. No. 55273-83, Dec. 19, 1981, I 10 SCRA
456, the petitioners filed suit against the National Power Corporation for damages as
a result of the opening of the floodgates of Angat Dam. The defendant invoked
immunity from suit. The trial court sustained the claim and dismissed the suit. This
Court in reinstating the case said.
It is not necessary to write an extended dissertation on whether or
not the NPC performs a governmental function with respect to the
management and operation of the Angat Dam. It is sufficient to say
that the government has organized a private corporation, put
money in it and has allowed it to sue and be sued in any court
under its charter, (R.A. No. 6395, Sec. 3 (D).) As a government
owned and controlled corporation, it has a personality of its own,
distinct and separate from that of the Government. (See National
Shipyards and Steel Corp. vs. CIR, et al., L-17874, August 31,
1963, 8 SCRA 781.) Moreover, the charter provision that the NPC
can sue and be sued in any court' is without qualification on the
cause of action and accordingly it can include a tort claim such as
the one instituted by the petitioners. (At p. 460.)
12. Jesus P. Disini v. The Hon. Sandiganbayan, et. Al., June 22, 2010
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. Nos. 169823-24 September 11, 2013
HERMINIO T. DISINI, Petitioner,
vs.
36
THE HON. SANDIGANBAYAN, FIRST DIVISION, AND THE PEOPLE OF THE
PHILIPPINES, Respondents.
x-----------------------x
G.R. Nos. 174764-65
HERMINIO T. DISINI, Petitioner,
vs.
SANDIGANBAYAN, FIRST DIVISION, AND THE PEOPLE OF THE
PHILIPPINES, Respondents.
DECISION
BERSAMIN, J.:
The Sandiganbayan has exclusive original jurisdiction over the criminal action
involving petitioner notwithstanding that he is a private individual considering that his
criminal prosecution is intimately related to the recovery of ill-gotten wealth of the
Marcoses, their immediate family, subordinates and close associates.
The Case
Petitioner Herminio T. Disini assails via petition for certiorari there solutions
promulgated by the Sandiganbayan in Criminal Case No. 28001and Criminal Case
No. 28002, both entitled People v. Herminio T. Disini, on January 17, 2005 (denying
his motion to quash the informations)1 and August 10, 2005 (denying his motion for
reconsideration of the denial of his motion to quash),2 alleging that the
Sandiganbayan (First Division) thereby committed grave abuse of discretion
amounting to lack or excess of jurisdiction.
Antecedents
The Office of the Ombudsman filed two informations dated June 30,2004 charging
Disini in the Sandiganbayan with corruption of public officials, penalized under Article
212 in relation to Article 210 of the Revised Penal Code (Criminal Case No. 28001),
and with a violation of Section 4(a) of Republic Act 3019 (R.A. No. 3019), also known
as the Anti-Graft and Corrupt Practices Act (Criminal Case No. 28002).
The accusatory portions of the informations read as follows:
Criminal Case No. 28001
That during the period from 1974 to February 1986, in Manila, Philippines, and within
the jurisdiction of this Honorable Court, accused HERMINIO T. DISINI, conspiring
together and confederating with the then President of the Philippines Ferdinand E.
Marcos, did then and there, willfully, unlawfully and feloniously offer, promise and give
gifts and presents to said Ferdinand E. Marcos, consisting of accused DISINI’s
ownership of two billion and five hundred (2.5 billion) shares of stock in Vulcan
Industrial and Mining Corporation and four billion (4 billion)shares of stock in The
Energy Corporation, with both shares of stock having then a book value of ₱100.00
per share of stock, and subcontracts, to Engineering and Construction Company of
Asia, owned and controlled by said Ferdinand E. Marcos, on the mechanical and
electrical construction work on the Philippine Nuclear Power Plant Project("Project")
of the National Power Corporation at Morong, Bataan, all for and in consideration of
accused Disini seeking and obtaining for Burns and Roe and Westinghouse Electrical
Corporation (Westinghouse), the contracts to do the engineering and architectural
design and to construct, respectively, the Project, as in fact said Ferdinand E. Marcos,
taking undue advantage of his position and committing the offense in relation to his
office and in consideration of the aforesaid gifts and presents, did award or cause to
be awarded to said Burns and Roe and Westinghouse, the contracts to do the
engineering and architectural design and to construct the Project, respectively, which
acts constitute the crime of corruption of public officials.
CONTRARY TO LAW.3
Criminal Case No. 28002
That during the period 1974 to February 1986, in Manila, Philippines, and within the
jurisdiction of the Honorable Court, accused HERMINIO T. DISINI, conspiring
together and confederating with the then President of the Philippines, Ferdinand E.
Marcos, being then the close personal friend and golfing partner of said Ferdinand E.
Marcos, and being further the husband of Paciencia Escolin-Disini who was the first
cousin of then First Lady Imelda Romualdez-Marcos and family physicianof the
Marcos family, taking advantage of such close personal relation, intimacy and free
access, did then and there, willfully, unlawfully and criminally, in connection with the
Philippine Nuclear Power Plant (PNPP)Project ("PROJECT") of the National Power
Corporation (NPC) at Morong, Bataan, request and receive from Burns and Roe, a
foreign consultant, the total amount of One Million U.S. Dollars ($1,000,000.00),more
or less, and also from Westinghouse Electric Corporation(WESTINGHOUSE), the
total amount of Seventeen Million U.S. Dollars($17,000,000.00), more or less, both of
which entities were then having business, transaction, and application with the
Government of the Republic of the Philippines, all for and in consideration of accused
DISINI securing and obtaining, as accused Disini did secure and obtain, the contract
for the said Burns and Roe and Westinghouse to do the engineering and architectural
design, and construct, respectively, the said PROJECT, and subsequently, request
and receive subcontracts for Power Contractors, Inc. owned by accused DISINI, and
Engineering and Construction Company of Asia (ECCO-Asia), owned and controlled
by said Ferdinand E. Marcos, which stated amounts and subcontracts constituted
kickbacks, commissions and gifts as material or pecuniary advantages, for securing
and obtaining, as accused DISINI did secure and obtain, through the direct
intervention of said Ferdinand E. Marcos, for Burns and Roe the engineering and
37
architectural contract, and for Westinghouse the construction contract, for the
PROJECT.
CONTRARY TO LAW.4
On August 2, 2004, Disini filed a motion to quash,5 alleging that the criminal actions
had been extinguished by prescription, and that the informations did not conform to
the prescribed form. The Prosecution opposed the motion to quash. 6
On September 16, 2004, Disini voluntarily submitted himself for arraignment to obtain
the Sandiganbayan’s favorable action on his motion for permission to travel
abroad.7 He then entered a plea of not guilty to both informations.
As stated, on January 17, 2005, the Sandiganbayan (First Division) promulgated its
first assailed resolution denying the motion to quash. 8
Disini moved for the reconsideration of the resolution dated January 17, 2005, 9 but
the Sandiganbayan (First Division) denied his motion on August 10, 2005 through the
second assailed resolution.10
Issues
Undaunted, Disini commenced this special civil action for certiorari, alleging that:
A. THE RESPONDENT COURT HAS NO JURISDICTION OVER
THEOFFENSES CHARGED.
1. THE RESPONDENT COURT GRAVELY ERRED WHEN
ITRULED THAT SECTION 4, PARAGRAPHS (A) AND (B)
OFREPUBLIC ACT NO. 8249 DO NOT APPLY SINCE
THEINFORMATIONS WERE "FILED PURSUANT TO E.O. NOS.
1,2, 14 AND 14-A".
2. THE RESPONDENT COURT GRAVELY ERRED WHEN
ITASSUMED JURISDICTION WITHOUT HAVING MET
THEREQUISITE UNDER SECTION 4 OF R.A. 8249 THAT
THEACCUSED MUST BE A PUBLIC OFFICER.
B. THE RESPONDENT COURT ACTED WITH SUCH GRAVEABUSE OF
DISCRETION WHEN IT EFFECTIVELY IGNORED, DISREGARDED, AND
DENIED PETITIONER’SCONSTITUTIONAL AND STATUTORY RIGHT
TOPRESCRIPTION.
1. THE RESPONDENT COURT GRAVELY ERRED
INDETERMINING THE APPLICABLE PRESCRIPTIVE PERIOD.
2. THE RESPONDENT COURT GRAVELY ERRED
INDETERMINING THE COMMENCEMENT OF
THEPRESCRIPTIVE PERIOD.
3. THE RESPONDENT COURT GRAVELY ERRED
INDETERMINING THE POINT OF INTERRUPTION OF
THEPRESCRIPTIVE PERIOD.
C. BY MERELY ASSUMING THE PRESENCE OF GLARINGLYABSENT
ELEMENTS IN THE OFFENSES CHARGED TOUPHOLD THE
‘SUFFICIENCY’ OF THE INFORMATIONS INCRIMINAL CASE NOS. 28001
AND 28002, THE RESPONDENTCOURT DEMONSTRATED ITS
PREJUDGMENT OVER THE SUBJECT CASES AND ACTED WITH
GRAVE ABUSE OF ITSDISCRETION.
D. THE RESPONDENT COURT ACTED WITH GRAVE ABUSE
OFDISCRETION IN REFUSING TO QUASH THE
INFORMATIONSDESPITE THEIR UTTER FAILURE TO COMPLY WITH
THEPRESCRIBED FORM, THUS EFFECTIVELY DENYING THEACCUSED
HIS CONSTITUTIONAL AND STATUTORY RIGHTTO BE INFORMED OF
THE NATURE AND CAUSE OF THEACCUSATION AGAINST HIM.11
Ruling
The petition for certiorari has no merit.
1.Preliminary Considerations
To properly resolve this case, reference is made to the ruling of the Court in G.R. No.
175730 entitled Herminio Disini v. Sandiganbayan,12 which involved the civil action for
reconveyance, reversion, accounting, restitution, and damages (Civil Case No. 0013
entitled Republic v. HerminioT. Disini, et al.) filed by the Presidential Commission on
Good Government(PCGG) against Disini and others.13 The amended complaint in
Civil Case No. 0013 alleged that Disini had acted in unlawful concert with his co-
defendants in acquiring and accumulating ill-gotten wealth through them is
appropriation of public funds, plunder of the nation’s wealth, extortion, embezzlement,
and other acts of corruption,14 as follows:
4. Defendant HERMINIO T. DISINI is a close associate of defendant Ferdinand E.
Marcos and the husband of the first cousin of Defendant Imelda R. Marcos. By reason
of this relationship xxx defendant Herminio Disini obtained staggering commissions
from the Westinghouse in exchange for securing the nuclear power plant contract
from the Philippine government.
xxxx
38
13. Defendants Herminio T. Disini and Rodolfo Jacob, by themselves and/or in
unlawful concert, active collaboration and willing participation of defendants
Ferdinand E. Marcos and Imelda R. Marcos, and taking undue advantage of their
association and influence with the latter defendant spouses in order to prevent
disclosure and recovery of ill-gotten assets, engaged in devices, schemes, and
stratagems such as:
xxxx
(c) unlawfully utilizing the Herdis Group of Companies and Asia Industries, Inc. as
conduits through which defendants received, kept, and/or invested improper
payments such as unconscionably large commissions from foreign corporations like
the Westinghouse Corporation; (d) secured special concessions, privileges and/or
benefits from defendants Ferdinand E. Marcos and Imelda R. Marcos, such as a
contract awarded to Westinghouse Corporation which built an inoperable nuclear
facility in the country for a scandalously exorbitant amount that included defendant’s
staggering commissions – defendant Rodolfo Jacob executed for HGI the contract for
the aforesaid nuclear plant;15
Through its letter dated April 8, 1991,16 the PCGG transmitted the records of Criminal
Case No. 28001 and Criminal Case No. 28002 to then Ombudsman Conrado M.
Vasquez for appropriate action, to wit:
In line with the decision of the Supreme Court in the case of EduardoM. Cojuangco,
Jr. versus the PCGG (G.R. Nos. 92319–92320) dated October 2, 1990, we are
hereby transmitting to your Office for appropriate action the records of the attached
criminal case which we believe is similar to the said Cojuangco case in certain
aspects, such as: (i) some parts or elements are also parts of the causes of action in
the civil complaints[-]filed with the Sandiganbayan; (ii) some properties or assets of
the respondents have been sequestered; (iii) some of the respondents are also party
defendants in the civil cases.
Although the authority of the PCGG has been upheld by the Supreme Court, we are
constrained to refer to you for proper action the herein-attached case in view of the
suspicion that the PCGG cannot conduct an impartial investigation in cases similar to
that of the Cojuangco case. x x x
Ostensibly, the PCGG’s letter of transmittal was adverting to the ruling in Cojuangco,
Jr. v. Presidential Commission on Good Government (Cojuangco, Jr.), 17 viz:
x x x The PCGG and the Solicitor General finding a prima facie basis filed a civil
complaint against petitioner and intervenors alleging substantially the same illegal or
criminal acts subject of the subsequent criminal complaints the Solicitor General filed
with the PCGG for preliminary investigation. x x x.
Moreover, when the PCGG issued the sequestration and freeze orders against
petitioner’s properties, it was on the basis of a prima facie finding that the same were
ill-gotten and/or were acquired in relation to the illegal disposition of coconut levy
funds. Thus, the Court finds that the PCGG cannot possibly conduct the preliminary
investigation of said criminal complaints with the "cold neutrality of an impartial judge,"
as it has prejudged the matter. x x x18
xxxx
The Court finds that under the circumstances of the case, the PCGG cannot inspire
belief that it could be impartial in the conduct of the preliminary investigation of the
aforesaid complaints against petitioner and intervenors. It cannot possibly preside in
the said preliminary investigation with an even hand.
The Court holds that a just and fair administration of justice can be promoted if the
PCGG would be prohibited from conducting the preliminary investigation of the
complaints subject of this petition and the petition for intervention and that the records
of the same should be forwarded to the Ombudsman, who as an independent
constitutional officer has primary jurisdiction over cases of this nature, to conduct
such preliminary investigation and take appropriate action. 19 (Bold emphasis
supplied)
It appears that the resolutions of the Office of the Ombudsman, following its conduct
of the preliminary investigation on the criminal complaints thus transmitted by the
PCGG, were reversed and set aside by the Court in Presidential Commission on
Good Government v. Desierto,20
with the Court requiring the Office of the Ombudsman to file the informations that
became the subject of Disini’s motion to quash in Criminal Case No.28001 and
Criminal Case No. 28002.
2.
Sandiganbayan has exclusive and
original jurisdiction over the offenses charged
Disini challenges the jurisdiction of the Sandiganbayan over the offenses charged in
Criminal Case No. 28001 and Criminal Case No. 28002.He contends that: (1) the
informations did not allege that the charges were being filed pursuant to and in
connection with Executive Order (E.O.) Nos.1, 2, 14 and 14-A; (2) the offenses
charged were not of the nature contemplated by E.O. Nos. 1, 2, 14 and 14-A because
the allegations in the informations neither pertained to the recovery of ill-gotten
wealth, nor involved sequestration cases; (3) the cases were filed by the Office of the
Ombudsman instead of by the PCGG; and (4) being a private individual not charged
39
as a co-principal, accomplice or accessory of a public officer, he should be
prosecuted in the regular courts instead of in the Sandiganbayan.
The Office of the Solicitor General (OSG) counters that the Sandiganbayan has
jurisdiction over the offenses charged because Criminal Case No. 28001 and Criminal
Case No. 28002 were filed within the purview of Section 4 (c) of R.A. No. 8249; and
that both cases stemmed from the criminal complaints initially filed by the PCGG
pursuant to its mandate under E.O. Nos. 1, 2, 14 and 14-A to investigate and file the
appropriate civil or criminal cases to recover ill-gotten wealth not only of the Marcoses
and their immediately family but also of their relatives, subordinates and close
associates.
We hold that the Sandiganbayan has jurisdiction over Criminal Case No. 28001 and
Criminal Case No. 28002.
Presidential Decree (P.D.) No. 1606 was the law that established the Sandiganbayan
and defined its jurisdiction. The law was amended by R.A. No. 7975 and R.A. No.
8249. Under Section 4 of R.A. No. 8249, the Sandiganbayan was vested with original
and exclusive jurisdiction over all cases involving:
a. Violations of Republic Act No. 3019, as amended, otherwise known as the
Anti-Graft and Corrupt Practices Act, Republic Act No.1379, and Chapter II,
Section 2, Title VII, Book II of the Revised Penal Code, where one or more of
the accused are officials occupying the following positions in the government
whether in a permanent, acting or interim capacity, at the time of the
commission of the offense:
xxxx
b. Other offenses or felonies whether simple or complexed with other crimes
committed by the public officials and employees mentioned in subsection (a)
of this section in relation to their office.
c. Civil and criminal cases filed pursuant to and in connection with Executive
Order Nos. 1, 2, 14 and 14-A, issued in 1986. (Bold emphasis supplied)
In cases where none of the accused are occupying positions corresponding to salary
grade ‘27’ or higher, as prescribed in the said Republic Act No. 6758, or military or
PNP officers mentioned above, exclusive original jurisdiction thereof shall be vested
in the proper regional trial court, metropolitan trial court, municipal trial court and
municipal circuit trial court, as the case may be, pursuant to their respective
jurisdiction as provided in Batas Pambansa Blg. 129, as amended.
xxxx
In case private individuals are charged as co-principals, accomplices or accessories
with the public officers or employees, including those employed in government-owned
or controlled corporations, they shall be tried jointly with said public officers and
employees in the proper courts which shall exercise exclusive jurisdiction over them.
xxxx
It is underscored that it was the PCGG that had initially filed the criminal complaints in
the Sandiganbayan, with the Office of the Ombudsman taking over the investigation
of Disini only after the Court issued in Cojuangco, Jr. the directive to the PCGG to
refer the criminal cases to the Office of the Ombudsman on the ground that the
PCGG would not be an impartial office following its finding of a prima facie case being
established against Disini to sustain the institution of Civil Case No. 0013.
Also underscored is that the complaint in Civil Case No. 0013 and the informations in
Criminal Case No. 28001 and Criminal Case No. 28002involved the same
transaction, specifically the contracts awarded through the intervention of Disini and
President Marcos in favor of Burns & Roe to do the engineering and architectural
design, and Westinghouse to do the construction of the Philippine Nuclear Power
Plant Project (PNPPP). Given their sameness in subject matter, to still expressly aver
in Criminal Case No.28001 and Criminal Case No. 28002 that the charges involved
the recovery of ill-gotten wealth was no longer necessary.21 With Criminal Case
No.28001 and Criminal Case No. 28002 being intertwined with Civil Case No.0013,
the PCGG had the authority to institute the criminal prosecutions against Disini
pursuant to E.O. Nos. 1, 2, 14 and 14-A.
That Disini was a private individual did not remove the offenses charged from the
jurisdiction of the Sandiganbayan. Section 2 of E.O. No.1, which tasked the PCGG
with assisting the President in "the recovery of all ill-gotten wealth accumulated by
former President Ferdinand E. Marcos, his immediate family, relatives, subordinates
and close associates, whether located in the Philippines or abroad, including the
takeover or sequestration of all business enterprises and entities owned or controlled
by them, during his administration, directly or through nominees, by taking undue
advantage of their public office and/or using their powers, authority, influence,
connections or relationship," expressly granted the authority of the PCGG to recover
ill-gotten wealth covered President Marcos’ immediate family, relatives, subordinates
and close associates, without distinction as to their private or public status.
Contrary to Disini’s argument, too, the qualifying clause found in Section 4 of R.A. No.
824922
applied only to the cases listed in Subsection 4aand Subsection 4b of R.A. No. 8249,
the full text of which follows:
xxxx
a. Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-
Graft and Corrupt Practices Act, Republic Act No.1379, and Chapter II, Section 2,
40
Title VII, Book II of the Revised Penal Code, where one or more of the accused are
officials occupying the following positions in the government whether in a permanent,
acting or interim capacity, at the time of the commission of the offense:
(1) Officials of the executive branch occupying the positions of regional
director and higher, otherwise classified as Grade ‘27’ and higher, of the
Compensation and Position Classification Act of 1989(Republic Act No.
6758), specifically including:
(a) Provincial governors, vice-governors, members of the
sangguniang panlalawigan and provincial treasurers, assessors,
engineers and other provincial department heads;
(b) City mayors, vice-mayors, members of the sangguniang
panlungsod, city treasurers, assessors engineers and other city
department heads;
(c) Officials of the diplomatic service occupying the position of
consul and higher;
(d) Philippine army and air force colonels, naval captains, and all
officers of higher rank;
(e) Officers of the Philippine National Police while occupying the
position of provincial director and those holding the rank of senior
superintendent or higher;
(f) City and provincial prosecutors and their assistants, and officials
and prosecutors in the Office of the Ombudsman and special
prosecutor;
(g) Presidents, directors or trustees, or managers of government-
owned or -controlled corporations, state universities or educational
institutions or foundations;
(2) Members of Congress and officials thereof classified as Grade‘27’ and up
under the Compensation and Position Classification Act of 1989;
(3) Members of the judiciary without prejudice to the provisions of the
Constitution;
(4) Chairmen and members of Constitutional Commissions, without prejudice
to the provisions of the Constitution; and
(5) All other national and local officials classified as Grade ‘27’and higher
under the Compensation and Position Classification Act of 1989. b. Other
offenses or felonies whether simple or complexed with other crimes
committed by the public officials and employees mentioned in subsection a
of this section in relation to their office. (bold emphasis supplied)
xxxx
Unquestionably, public officials occupying positions classified as Grade 27 or higher
are mentioned only in Subsection 4a and Subsection 4b,signifying the plain legislative
intent of limiting the qualifying clause to such public officials. To include within the
ambit of the qualifying clause the persons covered by Subsection 4c would
contravene the exclusive mandate of the PCGG to bring the civil and criminal cases
pursuant to and in connection with E.O. Nos. 1, 2, 14 and 14-A. In view of this, the
Sandiganbayan properly took cognizance of Criminal Case No. 28001 and Criminal
Case No. 28002 despite Disini’s being a private individual, and despite the lack of any
allegation of his being the co-principal, accomplice or accessory of a public official in
the commission of the offenses charged.
3.
The offenses charged in the
informations have not yet prescribed
In resolving the issue of prescription, the following must be considered, namely: (1)
the period of prescription for the offense charged;(2) the time when the period of
prescription starts to run; and (3) the time when the prescriptive period is
interrupted.23
The information in Criminal Case No. 28001 alleged that Disini had offered, promised
and given gifts and presents to Ferdinand E. Marcos; that said gifts were in
consideration of Disini obtaining for Burns & Roe and Westinghouse Electrical
Corporation (Westinghouse) the contracts, respectively, to do the engineering and
architectural design of and to construct the PNPPP; and that President Marcos did
award or cause to be awarded the respective contracts to Burns & Roe and
Westinghouse, which acts constituted the crime of corruption of public officials.24
The crime of corruption of public officials charged in Criminal Case No. 28001 is
punished by Article 212 of the Revised Penal Code with the" same penalties imposed
upon the officer corrupted."25 Under the second paragraph of Article 210 of the
Revised Penal Code (direct bribery),26 if the gift was accepted by the officer in
consideration of the execution of an act that does not constitute a crime, and the
officer executes the act, he shall suffer the penalty of prision mayor in its medium and
minimum periods and a fine of not less than three times the value of the gift.
Conformably with Article 90 of the Revised Penal Code,27 the period of prescription
for this specie of corruption of public officials charged against Disini is 15 years.
41
As for Criminal Case No. 28002, Disini was charged with a violation of Section 4(a) of
R.A. No. 3019. By express provision of Section 11 of R.A. No. 3019, as amended by
Batas Pambansa Blg. 195, the offenses committed under R.A. No. 3019 shall
prescribe in 15 years. Prior to the amendment, the prescriptive period was only 10
years. It became settled in People v. Pacificador,28 however, that the longer
prescriptive period of 15years would not apply to crimes committed prior to the
effectivity of Batas Pambansa Blg. 195, which was approved on March 16, 1982,
because the longer period could not be given retroactive effect for not being favorable
to the accused. With the information alleging the period from 1974 to February1986
as the time of the commission of the crime charged, the applicable prescriptive period
is 10 years in order to accord with People v. Pacificador .
For crimes punishable by the Revised Penal Code, Article 91 thereof provides that
prescription starts to run from the day on which the crime is discovered by the
offended party, the authorities, or their agents. As to offenses punishable by R.A. No.
3019, Section 2 of R.A. No. 332629 states:
Section 2. Prescription shall begin to run from the day of the commission of the
violation of the law, and if the same be not known at the time, from the discovery
thereof and the institution of judicial proceedings for its investigation and punishment.
The prescription shall be interrupted when proceedings are instituted against the
guilty person, and shall begin to run again if the proceedings are dismissed for
reasons not constituting double jeopardy.
The ruling on the issue of prescription in Presidential Ad Hoc Fact-Finding Committee
on Behest Loans v. Desierto30 is also enlightening, viz:
Generally, the prescriptive period shall commence to run on the day the crime is
committed. That an aggrieved person "entitled to an action has no knowledge of his
right to sue or of the facts out of which his right arises," does not prevent the running
of the prescriptive period. An exception to this rule is the "blameless ignorance"
doctrine, incorporated in Section 2 of Act No. 3326. Under this doctrine, "the statute of
limitations runs only upon discovery of the fact of the invasion of a right which will
support a cause of action. In other words, the courts would decline to apply the
statute of limitations where the plaintiff does not know or has no reasonable means of
knowing the existence of a cause of action." It was in this accord that the Court
confronted the question on the running of the prescriptive period in People v. Duque
which became the cornerstone of our 1999 Decision in Presidential Ad Hoc Fact-
Finding Committee on Behest Loans v. Desierto (G.R. No. 130149), and the
subsequent cases which Ombudsman Desierto dismissed, emphatically, on the
ground of prescription too. Thus, we held in a catena of cases, that if the violation of
the special law was not known at the time of its commission, the prescription begins
to run only from the discovery thereof, i.e., discovery of the unlawful nature of the
constitutive act or acts.
Corollary, it is safe to conclude that the prescriptive period for the crime which is the
subject herein, commenced from the date of its discovery in 1992 after the Committee
made an exhaustive investigation. When the complaint was filed in 1997, only five
years have elapsed, and, hence, prescription has not yet set in. The rationale for this
was succinctly discussed in the 1999 Presidential Ad Hoc Fact-Finding Committee on
Behest Loans, that "it was well-high impossible for the State, the aggrieved party, to
have known these crimes committed prior to the 1986EDSA Revolution, because of
the alleged connivance and conspiracy among involved public officials and the
beneficiaries of the loans." In yet another pronouncement, in the 2001 Presidential Ad
Hoc Fact-Finding Committee on Behest Loans v. Desierto (G.R. No. 130817), the
Court held that during the Marcos regime, no person would have dared to question
the legality of these transactions. (Citations omitted)31
Accordingly, we are not persuaded to hold here that the prescriptive period began to
run from 1974, the time when the contracts for the PNPP Project were awarded to
Burns & Roe and Westinghouse. Although the criminal cases were the offshoot of the
sequestration case to recover ill-gotten wealth instead of behest loans like in
Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto, the
connivance and conspiracy among the public officials involved and the beneficiaries
of the favors illegally extended rendered it similarly well-nigh impossible for the State,
as the aggrieved party, to have known of the commission of the crimes charged prior
to the EDSA Revolution in 1986. Notwithstanding the highly publicized and widely-
known nature of the PNPPP, the unlawful acts or transactions in relation to it were
discovered only through the PCGG’s exhaustive investigation, resulting in the
establishment of a prima facie case sufficient for the PCGG to institute Civil Case No.
0013 against Disini. Before the discovery, the PNPPP contracts, which partook of a
public character, enjoyed the presumption of their execution having been regularly
done in the course of official functions.32
Considering further that during the Marcos regime, no person would have dared to
assail the legality of the transactions, it would be unreasonable to expect that the
discovery of the unlawful transactions was possible prior to 1986.
We note, too, that the criminal complaints were filed and their records transmitted by
the PCGG to the Office of the Ombudsman on April 8, 1991for the conduct the
preliminary investigation.33 In accordance with Article 91 of the
Revised Penal Code34 and the ruling in Panaguiton, Jr. v. Department of Justice,35 the
filing of the criminal complaints in the Office of the Ombudsman effectively interrupted
the running of the period of prescription. According to Panaguiton:36
In Ingco v. Sandiganbayan and Sanrio Company Limited v. Lim, which involved
violations of the Anti-Graft and Corrupt Practices Act(R.A. No. 3019) and the
Intellectual Property Code (R.A. No. 8293),which are both special laws, the Court
ruled that the prescriptive period is interrupted by the institution of proceedings for
preliminary investigation against the accused. In the more recent case of Securities
and Exchange Commission v. Interport Resources Corporation, the Court ruled that
42
the nature and purpose of the investigation conducted by the Securities and
Exchange Commission on violations of the Revised Securities Act, another special
law, is equivalent to the preliminary investigation conducted by the DOJ in criminal
cases, and thus effectively interrupts the prescriptive period.
The following disquisition in the Interport Resources case is instructive, thus:
While it may be observed that the term "judicial proceedings" in Sec. 2 of Act No.
3326 appears before" investigation and punishment" in the old law, with the
subsequent change in set-up whereby the investigation of the charge for purposes of
prosecution has become the exclusive function of the executive branch, the term
"proceedings" should now be understood either executive or judicial in character:
executive when it involves the investigation phase and judicial when it refers to the
trial and judgment stage. With this clarification, any kind of investigative proceeding
instituted against the guilty person which may ultimately lead to his prosecution
should be sufficient to toll prescription.
Indeed, to rule otherwise would deprive the injured party the right to obtain vindication
on account of delays that are not under his control.
The prevailing rule is, therefore, that irrespective of whether the offense charged is
punishable by the Revised Penal Code or by a special law, it is the filing of the
complaint or information in the office of the public prosecutor for purposes of the
preliminary investigation that interrupts the period of prescription. Consequently,
prescription did not yet set in because only five years elapsed from 1986, the time of
the discovery of the offenses charged, up to April 1991, the time of the filing of the
criminal complaints in the Office of the Ombudsman.
The informations were sufficient in form and substance
It is axiomatic that a complaint or information must state every single fact necessary
to constitute the offense charged; otherwise, a motion to dismiss or to quash on the
ground that the complaint or information charges no offense may be properly
sustained. The fundamental test in determining whether a motion to quash may be
sustained based on this ground is whether the facts alleged, if hypothetically
admitted, will establish the essential elements of the offense as defined in the
law.37 Extrinsic matters or evidence aliunde are not considered. 38
The test does not require absolute certainty as to the presence of the elements of the
offense; otherwise, there would no longer be any need for the Prosecution to proceed
to trial.
The informations in Criminal Case No. 28001 (corruption of public officials) and
Criminal Case No. 28002 (violation of Section 4(a) of RA No.3019) have sufficiently
complied with the requirements of Section 6, Rule110 of the Rules of Court, viz:
Section 6. Sufficiency of complaint or information. — A complaint or information is
sufficient if it states the name of the accused; the designation of the offense given by
the statute; the acts or omissions complained of as constituting the offense; the name
of the offended party; the approximate date of the commission of the offense; and the
place where the offense was committed.
When the offense is committed by more than one person, all of them shall be included
in the complaint or information.
The information in Criminal Case No. 28001 alleging corruption of public officers
specifically put forth that Disini, in the period from 1974 to February 1986 in Manila,
Philippines, conspiring and confederating with then President Marcos, willfully,
unlawfully and feloniously offered, promised and gave gifts and presents to President
Marcos, who, by taking undue advantage of his position as President, committed the
offense in relation to his office, and in consideration of the gifts and presents offered,
promised and given by Disini, President Marcos caused to be awarded to Burns &
Roe and Westinghouse the respective contracts to do the engineering and
architectural design of and to construct the PNPPP. The felonious act consisted of
causing the contracts for the PNPPP to be awarded to Burns & Roe and
Westinghouse by reason of the gifts and promises offered by Disini to President
Marcos.
The elements of corruption of public officials under Article 212 of the Revised Penal
Code are:
1. That the offender makes offers or promises, or gives gifts or presents to a
public officer; and
2. That the offers or promises are made or the gifts or presents are given to
a public officer under circumstances that will make the public officer liable for
direct bribery or indirect bribery.
The allegations in the information for corruption of public officials, if hypothetically
admitted, would establish the essential elements of the crime. The information stated
that: (1) Disini made an offer and promise, and gave gifts to President Marcos, a
public officer; and (2) in consideration of the offers, promises and gifts, President
Marcos, in causing the award of the contracts to Burns & Roe and Westinghouse by
taking advantage of his position and in committing said act in relation to his office,
was placed under circumstances that would make him liable for direct bribery.39
The second element of corruption of public officers simply required the public officer
to be placed under circumstances, not absolute certainty, that would make him liable
for direct or indirect bribery. Thus, even without alleging that President Marcos
received or accepted Disini’s offers, promises and gifts – an essential element in
direct bribery – the allegation that President Marcos caused the award of the
contracts to Burns & Roe and Westinghouse sufficed to place him under
circumstances of being liable for direct bribery.
43
The sufficiency of the allegations in the information charging the violation of Section BIENVENIDO L. REYES
4(a) of R.A. No. 3019 is similarly upheld. The elements of the offense under Section Associate Justice
4(a) of R.A. No. 3019 are:
CERTIFICATION
1. That the offender has family or close personal relation with a public
official; Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in
the above Decision had been reached in consultation before the case was assigned
2. That he capitalizes or exploits or takes advantage of such family or close to the writer of the opinion of the Court's Division.
personal relation by directly or indirectly requesting or receiving any present,
gift, material or pecuniary advantage from any person having some MARIA LOURDES P. A. SERENO
business, transaction, application, request or contract with the government; Chief Justice

3. That the public official with whom the offender has family or close Footnotes
personal relation has to intervene in the business transaction, application,
request, or contract with the government.
* In lieu of Associate Justice Teresita J. Leonardo-De Castro, who took part in the
Sandiganbayan, per the raffle of October 3, 2011.
The allegations in the information charging the violation of Section 4(a) of R.A. No.
3019, if hypothetically admitted, would establish the elements of the offense, 1
considering that: (1) Disini, being the husband of Paciencia Escolin-Disini, the first Rollo, pp. 51-55; penned by Associate Justice Diosdado M. Peralta (now a Member
cousin of First Lady Imelda Romualdez-Marcos, and at the same time the family of the Court), and concurred in by Associate Justice Teresita J. Leonardo-De Castro
physician of the Marcoses, had close personal relations and intimacy with and free (now a Member of the Court) and Associate Justice Efren N. De la Cruz.
access to President Marcos, a public official; (2) Disini, taking advantage of such
family and close personal relations, requested and received $1,000,000.00 from 2Id. at 57-73; penned by Associate Justice Peralta, and still joined by Associate
Burns & Roe and $17,000,000.00 from Westinghouse, the entities then having Justice Leonardo-De Castro and Associate Justice De la Cruz.
business, transaction, and application with the Government in connection with the
PNPPP; (3) President Marcos, the public officer with whom Disini had family or close 3
Id. at 104-105.
personal relations, intervened to secure and obtain for Burns & Roe the engineering
and architectural contract, and for Westinghouse the construction of the PNPPP.
4 Id. at 108-109.
WHEREFORE, the Court DISMISSES the petition for certiorari; AFFIRMS the
5
resolutions promulgated on January 17, 2005 and August 10, 2005 by the Id. at 111-116.
Sandiganbayan (First Division) in Criminal Case No. 28001 and Criminal Case No.
28002; and DIRECTS petitioner to pay the costs of suit. 6 Id. at 117-128.

SO ORDERED. 7 Id. at 129-130.

LUCAS P. BERSAMIN 8 Supra note 1.

Associate Justice
9 Rollo, pp. 74-103.
WE CONCUR:
10 Supra note 2.
MARIA LOURDES P. A. SERENO
Chief Justice 11 Rollo, pp. 10-11.
MARTIN S. VILLARAMA, JR. JOSE PORTUGAL PEREZ*
Associate Justice Associate Justice 12 G.R. No. 175730, July 5, 2010, 623 SCRA 354.

44
13 Id. at 358.
14 Id. at 359.
15 Id. at 359-360.
16
Sandiganbayan, rollo, Vol. 1, pp. 164-165.
17
G.R. Nos. 92319-20, October 2, 1991, 190 SCRA 226.
18
Id. at 254-255.
19
Id. at 256-257.
20 G.R. No. 132120, February 10, 2003, 397 SCRA 171.
21 See the Section 1(A), Rules and Regulations of the PCGG, to wit:
Section 1.Definition. – (A) "Ill-gotten wealth" is hereby defined as any asset,
property, business enterprise or material possession of persons within the
purview of Executive Orders 1 and 2, acquired by him directly or indirectly
through dummies, nominees, agents, subordinates and/or business
associates by any combination or series of the following means or similar
schemes:
(1) Through misappropriation, conversion, or misuse or
malversation of public funds or raids on the public treasury;
(2) Through the receipt, directly or indirectly, of any commission,
gift, share, percentage, kickbacks or any other form of pecuniary
benefit from any person and/or entity in connection with any
government contract or project or by the reason of the office or
position of the official concerned;
(3) By the illegal or fraudulent conveyance or disposition of assets
belonging to the government or any of its subdivisions, agencies or
instrumentalities or government-owned or controlled corporations;
(4) By obtaining, receiving or accepting directly or indirectly any
shares of stock, equity or any other form of interest or participation
in any business enterprise or undertaking;
(5) Through the establishment of agricultural, industrial or
commercial monopolies or other combination and/or by the
issuance, promulgation and/or implementation of decrees and
orders intended to benefit particular persons or special interests;
and
(6) By taking undue advantage of official position, authority,
relationship or influence for personal gain or benefit. (Bold
emphasis supplied)
22
In cases where none of the accused are occupying positions corresponding to
salary grade ‘27’ or higher, as prescribed in the said Republic Act No. 6758, or
military or PNP officers mentioned above, exclusive original jurisdiction thereof shall
be vested in the proper regional trial court, metropolitan trial court, municipal trial
court and municipal circuit trial court as the case may be, pursuant to their respective
jurisdiction as provided in Batas Pambansa Blg. 129, as amended."
23
Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto, G.R.
No. 130817, August22, 2001, 363 SCRA 489, 493.
24 Supra, Note 3.
25 Article 212. Corruption of public officials. — The same penalties imposed upon the
officer corrupted, except those of disqualification and suspension, shall be imposed
upon any person who shall have made the offers or promises or given gifts or
presents described in the preceding articles."
26Article 210. Direct bribery. — Any public officer who shall agree to perform an act
constituting a crime, in connection with the performance of this official duties, in
consideration of any offer, promise, gift or present received by such officer, personally
or through the mediation of another, shall suffer the penalty of prision mayor in its
medium and maximum periods and a fine of not less than the value of the gift and not
less than three times the value of the gift in addition to the penalty corresponding to
the crime agreed upon, if the same shall have been committed.
If the gift was accepted by the officer in consideration of the execution of an
act which does not constitute a crime, and the officer executed said act, he
shall suffer the same penalty provided in the preceding paragraph; and if
said act shall not have been accomplished, the officer shall suffer the
penalties of prision correccional, in its medium period and a fine of not less
than twice the value of such gift.
If the object for which the gift was received or promised was to make the
public officer refrain from doing something which it was his official duty to do,
he shall suffer the penalties of prision correccional in its maximum period
and a fine of not less than the value of the gift and not less than three times
the value of such gift.
45
 36
In addition to the penalties provided in the preceding paragraphs, the culprit Id. at 560-561.
shall suffer the penalty of special temporary disqualification. The provisions
contained in the preceding paragraphs shall be made applicable to 37Cruz, Jr. v. Court of Appeals, G.R. No. 83754, February 18, 1991, 194 SCRA 145,
assessors, arbitrators, appraisal and claim commissioners, experts or any 150.
other persons performing public duties.
38 People v. Balao, G.R. No. 176819, January 26, 2011, 640 SCRA 565, 573.
27 Article 90. Prescription of crime. — Crimes punishable by death, reclusion perpetua
or reclusionte mporal shall prescribe in twenty years. Crimes punishable by other 39
afflictive penalties shall prescribe in fifteen years. The elements of direct bribery are:

Those punishable by a correctional penalty shall prescribe in ten years; with
the exception of those punishable by arresto mayor, which shall prescribe in
five years.
The crime of libel or other similar offenses shall prescribe in one year.
The crime of oral defamation and slander by deed shall prescribe in six
months. Light offenses prescribe in two months.
When the penalty fixed by law is a compound one, the highest penalty shall
be made the basis of the application of the rules contained in the first,
second and third paragraphs of this article.
1. The offender is a public officer;
2. The offender accepts an offer or promise or receives a gift or present by
himself or through another;
3. That such offer or promise be accepted or gift or present be received by
the public officer with a view to committing some crime, or in consideration of
the execution of an act which does not constitute a crime but the act must be
unjust, or to refrain from doing something which it is his official duty to do;
and 4. The act which the offender agrees to perform or which he executes is
connected with the performance of his official duties (Magno v. Commission
on Elections, G.R. No. 147904, October 4, 2002,390 SCRA 495, 499).

28 G.R. No. 139405, March 13, 2001, 354 SCRA 310, 318. 13. Dept. of Agriculture v. NLRC 227 SCRA 693

29An Act to Establish Periods of Prescription for Violations Penalized by Special Acts
and Municipal Ordinances And to Provide When Prescription Shall Begin to Run. Republic of the Philippines
SUPREME COURT
30 G.R. No. 135715, April 13, 2011, 648 SCRA 586. Manila

31 Id. at 596-597. THIRD DIVISION

32 Section 3(m), Rule 131, Rules of Court . G.R. No. 104269 November 11, 1993

33 Records, Vol. 1, p. 164. DEPARTMENT OF AGRICULTURE, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION, et al., respondents.
34 Article 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 Roy Lago Salcedo for private respondents.
complaint or information, and shall commence to run again when such proceedings
terminate without the accused being convicted or acquitted, or are unjustifiably VITUG, J.:
stopped for any reason not imputable to him. The term of prescription shall not run
when the offender is absent from the Philippine Archipelago.
For consideration are the incidents that flow from the familiar doctrine of non-suability
of the state.
35 G.R. No. 167571, November 25, 2008, 571 SCRA 549.
46
In this petition for certiorari, the Department of Agriculture seeks to nullify the
Resolution, 1 dated 27 November 1991, of the National Labor Relations Commission
(NLRC), Fifth Division, Cagayan de Oro City, denying the petition for injunction,
prohibition and mandamus that prays to enjoin permanently the NLRC's Regional
Arbitration Branch X and Cagayan de Oro City Sheriff from enforcing the decision 2 of
31 May 1991 of the Executive Labor Arbiter and from attaching and executing on
petitioner's property.
The Department of Agriculture (herein petitioner) and Sultan Security Agency entered
into a contract3 on 01 April 1989 for security services to be provided by the latter to
the said governmental entity. Save for the increase in the monthly rate of the guards,
the same terms and conditions were also made to apply to another contract, dated 01
May 1990, between the same parties. Pursuant to their arrangements, guards were
deployed by Sultan Agency in the various premises of the petitioner.
On 13 September 1990, several guards of the Sultan Security Agency filed a
complaint for underpayment of wages, non-payment of 13th month pay, uniform
allowances, night shift differential pay, holiday pay and overtime pay, as well as for
damages,4 before the Regional Arbitration Branch X of Cagayan de Oro City,
docketed as NLRC Case No. 10-09-00455-90 (or 10-10-00519-90, its original docket
number), against the Department of Agriculture and Sultan Security Agency.
The Executive Labor Arbiter rendered a decision on 31 May finding herein petitioner
and jointly and severally liable with Sultan Security Agency for the payment of money
claims, aggregating P266,483.91, of the complainant security guards. The petitioner
and Sultan Security Agency did not appeal the decision of the Labor Arbiter. Thus, the
decision became final and executory.
On 18 July 1991, the Labor Arbiter issued a writ of execution. 5 commanding the City
Sheriff to enforce and execute the judgment against the property of the two
respondents. Forthwith, or on 19 July 1991, the City Sheriff levied on execution the
motor vehicles of the petitioner, i.e. one (1) unit Toyota Hi-Ace, one (1) unit Toyota
Mini Cruiser, and one (1) unit Toyota Crown.6 These units were put under the custody
of Zacharias Roa, the property custodian of the petitioner, pending their sale at public
auction or the final settlement of the case, whichever would come first.
A petition for injunction, prohibition and mandamus, with prayer for preliminary writ of
injunction was filed by the petitioner with the National Labor Relations Commission
(NLRC), Cagayan de Oro, alleging, inter alia, that the writ issued was effected without
the Labor Arbiter having duly acquired jurisdiction over the petitioner, and that,
therefore, the decision of the Labor Arbiter was null and void and all actions pursuant
thereto should be deemed equally invalid and of no legal, effect. The petitioner also
pointed out that the attachment or seizure of its property would hamper and
jeopardize petitioner's governmental functions to the prejudice of the public good.
On 27 November 1991, the NLRC promulgated its assailed resolution; viz:
WHEREFORE, premises considered, the following orders are
issued:
1. The enforcement and execution of the judgments against
petitioner in NLRC RABX Cases Nos. 10-10-00455-90; 10-10-0481-
90 and 10-10-00519-90 are temporarily suspended for a period of
two (2) months, more or less, but not extending beyond the last
quarter of calendar year 1991 to enable petitioner to source and
raise funds to satisfy the judgment awards against it;
2. Meantime, petitioner is ordered and directed to source for funds
within the period above-stated and to deposit the sums of money
equivalent to the aggregate amount. it has been adjudged to pay
jointly and severally with respondent Sultan Security Agency with
the Regional Arbitration Branch X, Cagayan de Oro City within the
same period for proper dispositions;
3. In order to ensure compliance with this order, petitioner is
likewise directed to put up and post
sufficient surety and supersedeas bond equivalent to at least to fifty
(50%) percent of the total monetary award issued by a reputable
bonding company duly accredited by the Supreme Court or by the
Regional Trial Court of Misamis Oriental to answer for the
satisfaction of the money claims in case of failure or default on the
part of petitioner to satisfy the money claims;
4. The City Sheriff is ordered to immediately release the properties
of petitioner levied on execution within ten (10) days from notice of
the posting of sufficient surety or supersedeas bond as specified
above. In the meanwhile, petitioner is assessed to pay the costs
and/or expenses incurred by the City Sheriff, if any, in connection
with the execution of the judgments in the above-stated cases upon
presentation of the appropriate claims or vouchers and receipts by
the city Sheriff, subject to the conditions specified in the NLRC
Sheriff, subject to the conditions specified in the NLRC Manual of
Instructions for Sheriffs;
5. The right of any of the judgment debtors to claim reimbursement
against each other for any payments made in connection with the
satisfaction of the judgments herein is hereby recognized pursuant
to the ruling in the Eagle Security case, (supra). In case of dispute
between the judgment debtors, the Executive Labor Arbiter of the
Branch of origin may upon proper petition by any of the parties
conduct arbitration proceedings for the purpose and thereby render
his decision after due notice and hearings;
47
 7. Finally, the petition for injunction is Dismissed for lack of basis.
The writ of preliminary injunction previously issued is Lifted and Set
Aside and in lieu thereof, a Temporary Stay of Execution is issued
for a period of two (2) months but not extending beyond the last
quarter of calendar year 1991, conditioned upon the posting of a
surety or supersedeas bond by petitioner within ten (10) days from
notice pursuant to paragraph 3 of this disposition. The motion to
admit the complaint in intervention is Denied for lack of merit while
the motion to dismiss the petition filed by Duty Sheriff is Noted
SO ORDERED.
In this petition for certiorari, the petitioner charges the NLRC with grave abuse of
discretion for refusing to quash the writ of execution. The petitioner faults the NLRC
for assuming jurisdiction over a money claim against the Department, which, it claims,
falls under the exclusive jurisdiction of the Commission on Audit. More importantly,
the petitioner asserts, the NLRC has disregarded the cardinal rule on the non-suability
of the State.
The private respondents, on the other hand, argue that the petitioner has impliedly
waived its immunity from suit by concluding a service contract with Sultan Security
Agency.
The basic postulate enshrined in the constitution that "(t)he State may not be sued
without its consent," 7 reflects nothing less than a recognition of the sovereign
character of the State and an express affirmation of the unwritten rule effectively
insulating it from the jurisdiction of courts. 8 It is based on the very essence of
sovereignty. As has been aptly observed, by Justice Holmes, a sovereign is exempt
from suit, not because of any formal conception or obsolete theory, but on the logical
and practical ground that there can be no legal right as against the authority that
makes the law on which the right depends. 9 True, the doctrine, not too infrequently, is
derisively called "the royal prerogative of dishonesty" because it grants the state the
prerogative to defeat any legitimate claim against it by simply invoking its non-
suability. 10 We have had occasion, to explain in its defense, however, that a
continued adherence to the doctrine of non-suability cannot be deplored, for the loss
of governmental efficiency and the obstacle to the performance of its multifarious
functions would be far greater in severity than the inconvenience that may be caused
private parties, if such fundamental principle is to be abandoned and the availability of
judicial remedy is not to be accordingly restricted. 11
The rule, in any case, is not really absolute for it does not say that the state may not
be sued under any circumstances. On the contrary, as correctly phrased, the doctrine
only conveys, "the state may not be sued without its consent;" its clear import then is
that the State may at times be sued. 12 The States' consent may be given expressly or
impliedly. Express consent may be made through a general law13 or a special
law. 14 In this jurisdiction, the general law waiving the immunity of the state from suit is
found in Act No. 3083, where the Philippine government "consents and submits to be
sued upon any money claims involving liability arising from contract, express or
implied, which could serve as a basis of civil action between private
parties." 15 Implied consent, on the other hand, is conceded when the State itself
commences litigation, thus opening itself to a counterclaim16 or when it enters into a
contract. 17 In this situation, the government is deemed to have descended to the
level of the other contracting party and to have divested itself of its sovereign
immunity. This rule, relied upon by the NLRC and the private respondents, is not,
however, without qualification. Not all contracts entered into by the government
operate as a waiver of its non-suability; distinction must still be made between one
which is executed in the exercise of its sovereign function and another which is done
in its proprietary capacity. 18
In the Unites States of America vs. Ruiz, 19 where the questioned transaction dealt
with improvements on the wharves in the naval installation at Subic Bay, we held:
The traditional rule of immunity exempts a State from being sued in
the courts of another State without its consent or waiver. This rule is
a necessary consequence of the principles of independence and
equality of States. However, the rules of International Law are not
petrified; they are constantly developing and evolving. And because
the activities of states have multiplied, it has been necessary to
distinguish them — between sovereign and governmental acts
( jure imperii) and private, commercial and proprietary act ( jure
gestionisis). The result is that State immunity now extends only to
acts jure imperii. The restrictive application of State immunity is now
the rule in the United States, the United Kingdom and other states
in Western Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign
sovereign, its commercial activities or economic affairs. Stated
differently, a state may be said to have descended to the level of an
individual and can this be deemed to have actually given its
consent to be sued only when it enters into business contracts. It
does not apply where the contracts relates to the exercise of its
sovereign functions. In this case the projects are an integral part of
the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the
government of the highest order; they are not utilized for not
dedicated to commercial or business purposes.
In the instant case, the Department of Agriculture has not pretended to have assumed
a capacity apart from its being a governmental entity when it entered into the
questioned contract; nor that it could have, in fact, performed any act proprietary in
character.
48
But, be that as it may, the claims of private respondents, i.e. for underpayment of
wages, holiday pay, overtime pay and similar other items, arising from the Contract
for Service, clearly constitute money claims. Act No. 3083, aforecited, gives the
consent of the State to be "sued upon any moneyed claim involving liability arising
from contract, express or implied, . . . Pursuant, however, to Commonwealth Act
("C.A.") No. 327, as amended by Presidential Decree ("P.D.") No. 1145, the money
claim first be brought to the Commission on Audit. Thus, in Carabao, Inc., vs.
Agricultural Productivity Commission, 20 we ruled:
(C)laimants have to prosecute their money claims against the
Government under Commonwealth Act 327, stating that Act 3083
stands now merely as the general law waiving the State's immunity
from suit, subject to the general limitation expressed in Section 7
thereof that "no execution shall issue upon any judgment rendered
by any Court against the Government of the (Philippines), and that
the conditions provided in Commonwealth Act 327 for filing money
claims against the Government must be strictly observed."
We fail to see any substantial conflict or inconsistency between the provisions of C.A.
No. 327 and the Labor Code with respect to money claims against the State. The
Labor code, in relation to Act No. 3083, provides the legal basis for the State liability
but the prosecution, enforcement or satisfaction thereof must still be pursued in
accordance with the rules and procedures laid down in C.A. No. 327, as amended by
P.D. 1445.
When the state gives its consent to be sued, it does thereby necessarily consent to
unrestrained execution against it. tersely put, when the State waives its immunity, all it
does, in effect, is to give the other party an opportunity to prove, if it can, that the
State has a liability. 21 In Republic vs. Villasor 22 this Court, in nullifying the issuance
of an alias writ of execution directed against the funds of the Armed Forces of the
Philippines to satisfy a final and executory judgment, has explained, thus —
The universal rule that where the State gives its consent to be sued
by private parties either by general or special law, it may limit the
claimant's action "only up to the completion of proceedings anterior
to the stage of execution" and that the power of the Courts ends
when the judgment is rendered, since government funds and
properties may not be seized under writs or execution or
garnishment to satisfy such judgments, is based on obvious
considerations of public policy. Disbursements of public funds must
be covered by the correspondent appropriation as required by law.
The functions and public services rendered by the State cannot be
allowed to be paralyzed or disrupted by the diversion of public
funds from their legitimate and specific objects, as appropriated by
law.23
WHEREFORE, the petition is GRANTED. The resolution, dated 27 November 1991,
is hereby REVERSED and SET ASIDE. The writ of execution directed against the
property of the Department of Agriculture is nullified, and the public respondents are
hereby enjoined permanently from doing, issuing and implementing any and all writs
of execution issued pursuant to the decision rendered by the Labor Arbiter against
said petitioner.
SO ORDERED.
Feliciano, Bidin, Romero and Melo, JJ., concur.
# Footnotes
1 Annex "A", Rollo, 23-52.
2 Annex "C", Ibid., 57-68.
3 Rollo, 59.
4 Ibid., 57.
5 Annex "D", Petition, Rollo, 69.
6 Annex "E", Ibid., ibid., p. 70.
7 Article XVI, Section 3 of the Constitution.
8 Isagani Cruz, Philippine Political Law, 1991, p. 29.
9 Kawananakoa vs. Polyblank, 205 U.S. 353, 51 L. ed. 834.
10 U.S.A. vs. Guinto, 182 SCRA 644,654 (1990).
11 Providence Washington Ins. Co. vs. Republic, 29 SCRA 598
12 Ibid.
13 i.e. Commonwealth Act No. 327, as amended by Presidential Decree No. 1445
(Sections 49-50), which requires that all money claims against the government must
first be filed with the Commission on Audit which must act upon it within sixty-days.
Rejection of the claim will authorize the claimant to elevate the matter to the Supreme
Court on certiorari and, in effect, sue the State thereby.
49
14 Merritt vs. Government of the Philippines, 34 Phil. 311. T/SGT ALDORA LARKINS, petitioner,
vs.
15 See United States vs. Guinto, 182 SCRA 644, 654, supra. NATIONAL LABOR RELATIONS COMMISSION, HON. IRINEO BERNARDO,
DANIEL HERRERA, MARIETTA DE GUZMAN, JOSELITO CATACUTAN, JOSEPH
GALANG, ROBERTO HERRERA, DELPIN PECSON, CARLOS CORTEZ, JAIME
16 Froilan vs. Pan Oriental Shipping, G.R. No. 6060, 30 September 1950. CORTEZ, ARSENIO DIAZ, ROBERTO SAGAD and MARCELO
LOZANO, respondents.
17 Santos vs. Santos, 92 Phil. 281; Lyons vs. United States of America, 104 SCRA
593. QUIASON, J.:

18 United States of America vs. Guinto, 182 SCRA 644; United States of America vs. This is a petition for certiorari under Rule 65 of the Revised Rules of Court to set
Ruiz, 136 SCRA 487 (195). aside the Resolutions dated August 31, 1989 and February 5, 1990 of the National
Labor Relations Commission (NLRC) in NLRC Case No. RAB- III-08-0572-88.
19 136 SCRA 487.
We grant the petition.
20 35 SCRA 224, 229 (1970).
I
21 Cruz, supra., 44-45.
Petitioner was a member of the United States Air Force (USAF) assigned to oversee
22 54 SCRA 84 (1973). the dormitories of the Third Aircraft Generation Squadron (3 AGS) at Clark Air Base,
Pampanga.
23 See also Commissioner of Public Highways vs. San Diego, 31 SCRA 616
(1970) citing others the following decisions: Merritt vs. Government, 34 Phil. 311 On August 10, 1988, 3 AGS terminated the contract for the maintenance and upkeep
(1916); Visayan Refining Co. vs. Camus, 40 Phil. 550 (1919); Director of Commerce of the dormitories with the De Guzman Custodial Services. The employees thereof,
vs. Concepcion, 43 Phil. 384 (1922); Belleng vs. Republic, 9 SCRA 6 (1963); including private respondents, were allowed to continue working for 3 AGS. It was left
Republic vs. Palacio, 23 SCRA 899 (1968). to the new contractor, the JAC Maintenance Services owned by Joselito Cunanan, to
decide whether it would retain their services.

Joselito Cunanan, however, chose to bring in his own workers. As a result, the
workers of the De Guzman Custodial Services were requested to surrender their base
passes to Lt. Col. Frankhauser or to petitioner.
D. SUIT AGAINST PUBLIC OFFICERS

14. VMPSI v. CA 214 SCRA 286 – refer to Case #9 On August 12, 1988, private respondents filed a complaint with the Regional
Arbitration Branch No. III of the NLRC, San Fernando, Pampanga, against petitioner,
Lt. Col. Frankhauser, and Cunanan for illegal dismissal and underpayment of wages
(NLRC Case No. RAB-III-08-0572-88). On September 9, 1988, private respondents
15. Larkins v. NLRC 241 SCRA 598 amended their complaint and added therein claims for emergency cost of living
allowance, thirteenth-month pay, service incentive leave pay and holiday premiums.
Republic of the Philippines
SUPREME COURT The Labor Arbiter, with the conformity of private respondents, ordered Cunanan
Manila dropped as party respondent.

FIRST DIVISION Petitioner and Lt. Col. Frankhauser failed to answer the complaint and to appear at
the hearings. They, likewise, failed to submit their position paper, which the Labor
G.R. No. 92432 February 23, 1995 Arbiter deemed a waiver on their part to do so. The case was therefore submitted for

50
decision on the basis of private respondents' position paper and supporting
documents.
On November 21, 1988, the Labor Arbiter rendered a decision granting all the claims
of private respondents. He found both Lt. Col. Frankhauser and petitioner "guilty of
illegal dismissal" and ordered them to reinstate private respondents with full back
wages, or if that is no longer possible, to pay private respondents' separation pay
(Rollo, p. 78).
Petitioner appealed to the NLRC claiming that the Labor Arbiter never acquired
jurisdiction over her person because no summons or copies of the complaints, both
original and amended, were ever served on her. In her "Supplemental Memorandum
to Memorandum of Appeal," petitioner argued that the attempts to serve her with
notices of hearing were not in accordance with the provisions of the R.P. — U.S.
Military Bases Agreement of 1947 (Rollo, pp. 35-37).
On August 31, 1989, NLRC issued a Resolution affirming the decision of the Labor
Arbiter, but declared that:
In the event this decision is executed and/or enforced, and
considering our finding that the real party respondent is the United
States Government through its Armed Forces stationed at Clark Air
Base, let such execution be made subject to existing international
agreements diplomatic protocol (Rollo, p. 95).
Petitioner moved for reconsideration, which NLRC denied on February 5, 1990 (Rollo,
p. 101).
Petitioner then elevated the matter to us.
On July 11, 1990, the Office of the solicitor General filed a Manifestation stating that it
"cannot legally support the decision of the Labor Arbiter" and therefore prayed that it
be relieved from the responsibility of filing the required Comment for the public
respondents (Rollo, pp. 117-118). In view of this Manifestation, on July 18, 1990, we
resolved to require NLRC to file its own comment to the petition, which NLRC did on
November 29, 1990 (Rollo, pp. 120, 133-139).
II
It is petitioner's contention that the questioned resolutions are null and void because
respondent Labor Arbiter did not acquire jurisdiction to entertain and decide the case.
Petitioner alleges that she never received nor was served, any summons or copies of
the original and amended complaints, and therefore the Labor Arbiter had no
jurisdiction over her person under Article XIV of the R.P. — U.S. Military Bases
Agreement.
We agree.
The "Agreement Between the Republic of the Philippines and the United States of
America Concerning Military Bases," otherwise known as the R.P. — U.S. Military
Bases Agreement, governed the rights, duties, authority, and the exercise thereof by
Philippine and American nationals inside the U.S. military bases in the country.
Article XIV thereof, governing the procedure for service of summons on persons
inside U.S. military bases, provides that:
. . . [N]o process, civil or criminal, shall be served within any base
except with the permission of the commanding officer of such base;
but should the commanding officer refuse to grant such permission
he shall forthwith take the necessary steps . . . . to serve such
process, as the case may be, and to provide the attendance of the
server of such process before the appropriate court in the
Philippines or procure such server to make the necessary affidavit
or declaration to prove such service as the case may require.
Summonses and other processes issued by Philippine courts and administrative
agencies for United States Armed Forces personnel within any U.S. base in the
Philippines could be served therein only with the permission of the Base Commander.
If he withholds giving his permission, he should instead designate another person to
serve the process, and obtain the server's affidavit for filing with the appropriate court.
Respondent Labor Arbiter did not follow said procedure. He instead, addressed the
summons to Lt. Col. Frankhauser and not the Base Commander (Rollo, p. 11).
Respondents do not dispute petitioner's claim that no summons was ever issued and
served on her. They contend, however, that they sent notices of the hearings to her
(Rollo, pp. 12-13).
Notices of hearing are not summonses. The provisions and prevailing jurisprudence in
Civil Procedure may be applied by analogy to NLRC proceedings (Revised Rules of
the NLRC, Rule I, Sec. 3). It is basic that the Labor Arbiter cannot acquire jurisdiction
over the person of the respondent without the latter being served with summons
(cf. Vda. de Macoy v. Court of Appeals, 206 SCRA 244 [1992]; Filmerco Commercial
Co., Inc. v. Intermediate Appellate Court, 149 SCRA 193 [1987]). In the absence of
service of summons or a valid waiver thereof, the hearings and judgment rendered by
the Labor Arbiter are null and void (cf. Vda. de Macoy v. Court of Appeals, supra.)
Petitioner, in the case at bench, appealed to the NLRC and participated in the oral
argument before the said body. This, however, does not constitute a waiver of the
lack of summons and a voluntary submission of her person to the jurisdiction of the
Labor Arbiter. She may have raised in her pleadings grounds other than lack of
jurisdiction, but these grounds were discussed in relation to and as a result of the
51
issue of the lack of jurisdiction. In effect, petitioner set forth only one issue and that is
the absence of jurisdiction over her person. If an appearance before the NLRC is
precisely to question the jurisdiction of the said agency over the person of the
defendant, then this appearance is not equivalent to service of summons (De los
Santos v. Montera, 221 SCRA 15 [1993]).
Be that as it may, on the assumption that petitioner validly waived service of
summons on her, still the case could not prosper. There is no allegation from the
pleadings filed that Lt. Col. Frankhauser and petitioner were being sued in their
personal capacities for tortious acts (United States of America v. Guinto, 182 SCRA
644 [1990]). However, private respondents named 3 AGS as one of the respondents
in their complaint (Rollo, p. 10).
It is worth noting that NLRC admitted that:
At the outset, let it be made clear that We are aware as to who is
the real party respondent in this case; it is the Government of the
United States of America which is maintaining military facilities in
the Philippines, one of which is located inside Clark Air Base. The 3
AGS where the appellees previously worked as dormitory
attendants is just one of the various units of the United States
Armed Forces (USAF) inside the said military base. While individual
respondents, particularly Lt. Col. William Frankhauser and T/Sgt.
Aldora Larkins, are mere elements of the USAF assigned to the 3
AGS. Thus, whatever awards, monetary or otherwise, the appellees
are entitled to by virtue of this case are the primary liabilities of their
real employer, the United States Government (Rollo, pp. 91-92).
Private respondents were dismissed from their employment by Lt. Col. Frankhauser
acting for and in behalf of the U.S. Government. The employer of private respondents
was not Lt. Col. Frankhauser nor petitioner. The employer of private respondents, as
found by NLRC, was the U.S. Government which, by right of sovereign power,
operated and maintained the dormitories at Clark Air Base for members of the USAF
(United States of America v. Guinto, 182 SCRA 644 [1990]; United States of America
v. Ruiz, 136 SCRA 487 [1985]).
Indeed, assuming that jurisdiction was acquired over the United States Government
and the monetary claims of private respondents proved, such awards will have to be
satisfied not by Lt. Col. Frankhauser and petitioner in their personal capacities, but by
the United States government (Sanders v. Veridiano II, 162 SCRA 88 [1988]).
Under the "Agreement Between the Government of the Republic of the Philippines
and the Government of the United States of America Relating to the Employment of
Philippine Nationals in the United States Military Bases in the Philippines" otherwise
known as the Base Labor Agreement of May 27, 1968, any dispute or disagreement
between the United States Armed Forces and Filipino employees should be settled
under grievance or labor relations procedures established therein (Art. II) or by the
arbitration process provided in the Romualdez-Bosworth Memorandum of Agreement
dated September 5, 1985. If no agreement was reached or if the grievance procedure
failed, the dispute was appealable by either party to a Joint Labor Committee
established in Article III of the Base Labor Agreement.
Unquestionably therefore, no jurisdiction was ever acquired by the Labor Arbiter over
the case and the person of petitioner and the judgment rendered is null and void
(Filmerco Commercial Co. v. Intermediate Appellate Court, supra.; Sy v. Navarro, 81
SCRA 458 [1978]).
WHEREFORE, the petition for certiorari is GRANTED.
SO ORDERED.
Padilla, Davide, Jr. Bellosillo and Kapunan, JJ., concur.
16. Shauf v. CA 191 SCRA 713
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 90314 November 27, 1990
LOIDA Q. SHAUF and JACOB SHAUF, Petitioners,
vs.
HON. COURT OF APPEALS, DON E. DETWILER and ANTHONY
PERSI, Respondents.
REGALADO, J.:
In this petition for review on certiorari, petitioners would have us reverse and set aside
the decision rendered by respondent Court of Appeals on August 22, 1989, in CA-
G.R. CV No. 17932, entitled "Loida Shauf and Jacob Shauf, Plaintiffs-Appellants,
versus Don Detwiler and Anthony Persi, Defendants-Appellants,"1 dismissing
petitioners’ complaint for damages filed before the Regional Trial Court, Branch LVI,
Angeles City, in Civil Case No. 2783 thereof, and its subsequent resolution denying
petitioners’ motion for the reconsideration of its aforesaid decision.
52
As found by respondent court,2 Clark Air Base is one of the bases established and
maintained by the United States by authority of the agreement between the
Philippines and the United States concerning military bases which entered into force
on March 26, 1947.
The Third Combat Support Group, a unit of Clark Air Base, maintains a Central
Civilian Personnel Office (CCPO) charged with the responsibility for civilian personnel
management and administration. It is through its civilian personnel officer that the
base commander is responsible for direction and administration of civilian personnel
program, including advising management and operating officials on civilian personnel
matters. Acting for the commander, the civilian personnel officer is the administrative
official in charge of the activities of the CCPO, and the commander relies on him to
carry out all aspects of the civilian personnel program. The CCPO personnel program
encompasses placement and staffing, position management and classification.
The Third Combat Support Group also maintains an Education Branch, Personnel
Division, which provides an education program for military personnel, U.S. civilian
employees, and adult dependents, assigned or attached to Clark Air Base. Its head,
the education director, is responsible directly to the base director of personnel for
administering the education services program for Clark Air Base. In this capacity, and
within broad agency policies, is delegated to him the full responsibility and authority
for the technical, administrative and management functions of the program. As part of
his duties, the education director provides complete academic and vocational
guidance for military dependents, including counseling, testing and test interpretation.
During the time material to the complaint, private respondent Don Detwiler was
civilian personnel officer, while private respondent Anthony Persi was education
director.3
Petitioner Loida Q. Shauf, a Filipino by origin and married to an American who is a
member of the United States Air Force, applied for the vacant position of Guidance
Counselor, GS17109, in the Base Education Office at Clark Air Base, for which she is
eminently qualified. As found by the trial court, she received a Master of Arts degree
from the University of Sto. Tomas, Manila, in 1971 and has completed 34 semester
hours in psychology-guidance and 25 quarter hours in human behavioral science; she
has also completed all course work in human behavior and counseling psychology for
a doctoral degree; she is a civil service eligible; and, more importantly, she had
functioned as a Guidance Counselor at the Clark Air Base at the GS 1710-9 level for
approximately four years at the time she applied for the same position in 1976. 4
By reason of her non-selection to the position, petitioner Loida Q. Shauf filed an equal
employment opportunity complaint against private respondents, for alleged
discrimination against the former by reason of her nationality and sex. The
controversy was investigated by one Rudolph Duncan, an appeals and grievance
examiner assigned to the Office of Civilian Personnel Operations, Appellate Division,
San Antonio, Texas, U.S.A. and what follows are taken from his findings embodied in
a report duly submitted by him to the Equal Opportunity Officer on February 22,
1977.5
On or about October 1976, the position of Guidance Counselor, GS 1710-9, became
vacant in the Base Education Office, Clark Air Base. A standard Form 52 was
submitted to the Civilian Personnel Office to fill said position. The Civilian Personnel
Division took immediate steps to fill the position by advertisement in the Clark Air
Base Daily Bulletin #205 dated October 21, 1976. As a result of the advertisement,
one application was received by the Civilian Personnel Office and two applications
were retrieved from the applicants supply file in the Civilian Personnel Office. These
applications were that of Mrs. Jean Hollenshead, an employee of the DOD Schools at
Clark Air Base, Mrs. Lydia B. Gaillard, an unemployed dependent, and Mrs. Loida Q.
Shauf. All three applications were reviewed and their experiences were considered
qualifying for the advertised position.
On November 11, 1976, the application of Loida Q. Shauf was referred to Mr.
Anthony Persi, with the applications of Mrs. Jean Hollenshead and Mrs. Lydia
Gaillard, to be considered for the position of Guidance Counselor, GS 1710-9, Mr.
Persi, after review of the applications, stated that upon screening the applications he
concluded that two applicants had what he considered minimum qualifications for the
position. The two applicants were Mrs. Hollenshead and Mrs. Gaillard. In the case of
Loida Q. Shauf, Mr. Persi felt that her application was quite complete except for a
reply to an inquiry form attached to the application. This inquiry form stated that the
National Personnel Records Center, St. Louis, Missouri, was unable to find an official
personnel folder for Loida Q. Shauf. Mr. Persi said that as a result of the National
Personnel Records Center, GSA, not being able to find any records on Loida Q.
Shauf, this raised some questions in his mind as to the validity of her work
experience. As a result of his reservations on Loida Q. Shauf’s work experience and
his conclusions that the two other applications listed minimum qualifications, Mr. Persi
decided to solicit additional names for consideration.
Subsequently in his correspondence dated November 12, 1976, Mr. Persi returned
the three applications to the Civilian Personnel Office without a selection decision. Mr.
Persi also requested in his correspondence that the Civilian Personnel Office initiate
immediate inquiry to the Central Oversea Rotation and Recruiting Office (CORRO) for
the submission of a list of highly qualified candidates. He further stated in his
correspondence that the three applicants who had indicated an interest would be
considered with the CORRO input for selection.
As a result of Mr. Persi’s request, an AF Form 1188 "Oversea Civilian Personnel
Request" was submitted to CORRO on November 12, 1976. This request in fact
asked for one Guidance Counselor, GS 1710-9. The form listed the fact that local
candidates are available. However, instead of getting a list of candidates for
consideration, Mr. Persi was informed by CORRO, through the Civilian Personnel
Office in their December 15, 1976 message that a Mr. Edward B. Isakson from Loring
AFB, Maine, was selected for the position. Mr. Persi stated, when informed of
CORRO’s selection, that he had heard of Mr. Isakson and, from what he had heard,
Mr. Isakson was highly qualified for the position; therefore, he wished to have the
selection stand. This statement was denied by Mr. Persi. Mr. Isakson was placed on
the rolls at Clark Air Base on January 24, 1977.6
53
Said examiner, however, also stated in his findings that, by reason of petitioner Loida
Q. Shauf’s credentials which he recited therein, she is and was at the time of the
vacancy,7 highly qualified for the position of Guidance Counselor, GS 1710-9. In
connection with said complaint, a Notice of Proposed Disposition of Discrimination
Complaint, dated May 16, 1977,8 was served upon petitioner Loida Q. Shauf stating
that because the individual selected did not meet the criteria of the qualification
requirements, it was recommended "that an overhire GS 1710-9 Assistant Education
Advisor position be established for a 180 day period. x x x. The position should be
advertised for local procurement on a best qualified basis with the stipulation that if a
vacancy occurs in a permanent GS 1710-9 position the selectee would automatically
be selected to fill the vacancy. If a position is not vacated in the 180 day period the
temporary overhire would be released but would be selected to fill a future vacancy if
the selectee is available."
During that time, private respondents already knew that a permanent GS 1710-9
position would shortly be vacant, that is, the position of Mrs. Mary Abalateo whose
appointment was to expire on August 6, 1977 and this was exactly what private
respondent Detwiler had in mind when he denied on June 27, 1977 Mrs. Abalateo’s
request for extension of March 31, 1977. However, private respondents deny that Col.
Charles J. Corey represented to petitioner Loida Q. Shauf that she would be
appointed to the overhire position and to a permanent GS 1710-9 position as soon as
it became vacant, which allegedly prompted the latter to accept the proposed
disposition.
Contrary to her expectations, petitioner Loida Q. Shauf was never appointed to the
position occupied by Mrs. Abalateo whose appointment was extended indefinitely by
private respondent Detwiler.9
Feeling aggrieved by what she considered a shabby treatment accorded her,
petitioner Loida Q. Shauf wrote the U.S. Civil Service Commission questioning the
qualifications of Edward Isakson. Thereafter, said commission sent a communication
addressed to private respondent Detwiler,10 finding Edward Isakson not qualified to
the position of Guidance Counselor, GS 1710-9, and requesting that action be taken
to remove him from the position and that efforts be made to place him in a position for
which he qualifies. Petitioner Loida Q. Shauf avers that said recommendation was
ignored by private respondent Detwiler and that Isakson continued to occupy said
position of guidance counselor.
Petitioner Loida Q. Shauf likewise wrote the Base Commander of Clark Air Base
requesting a hearing on her complaint for discrimination. Consequently, a hearing
was held on March 29, 1978 before the U.S. Department of Air Force in Clark Air
Base.11
Before the Department of Air Force could render a decision, petitioner Loida Q. Shauf
filed a complaint for damages, dated April 27, 1978, against private respondents Don
Detwiler and Anthony Persi before the Regional Trial Court, Branch LVI at Angeles
City, docketed as Civil Case No. 2783, for the alleged discriminatory acts of herein
private respondents in maliciously denying her application for the GS 1710-9 position.
Private respondents, as defendants in Civil Case No. 2783, filed a motion to dismiss
on the ground that as officers of the United States Armed Forces performing official
functions in accordance with the powers vested in them under the Philippine-
American Military Bases Agreement, they are immune from suit. The motion to
dismiss was denied by the trial court. A motion for reconsideration was likewise
denied.
Consequently, private respondents filed an Answer reiterating the issue of jurisdiction
and alleging, inter alia, that defendant Persi’s request to Central Oversea Rotation
and Recruiting Office (CORRO) was not for appointment of a person to the position of
Guidance Counselor, GS 1710-9, but for referrals whom defendant Persi would
consider together with local candidates for the position; that the extension of the
employment of Mrs. Abalato was in accordance with applicable regulation and was
not related to plaintiff Loida Q. Shauf’s discrimination complaint; that the decision was
a joint decision of management and CCPO reached at a meeting on June 29, 1977
and based on a letter of the deputy director of civilian personnel, Headquarters Pacific
Air Forces, dated June 15, 1977; and that the ruling was made known to and
amplified by the director and the deputy director of civilian personnel in letters to
petitioner Loida Q. Shauf dated August 30, 1977 and September 19, 1977.
The parties submitted a Partial Stipulation of Facts in the court a quo providing, in
part, as follows:
a) In October 1976, the position of guidance counselor, GS-1710-9, at Clark
Air Base was vacant;
b) Plaintiff Loida Q, Shauf, a qualified dependent locally available, was
among those who applied for said vacant position of guidance counselor,
GS-1710-9;
c) Plaintiff Loida Q. Shauf at the time she filed her aforesaid application was
qualified for the position of guidance counselor, GS-1710-9;
d) Civilian Personnel Office accomplished and forwarded to CORRO an AF
Form 1188 covering the position of guidance counselor, GS-1710-9, applied
for by plaintiff Loida Q. Shauf;
e) U.S. Department of Defense Instructions (DODI) No. 1400.23 under
Policy and Procedures provides that-
"Where qualified dependents of military or civilian personnel of the Department of
Defense are locally available for appointment to positions in foreign areas which are
designated for U.S. citizen occupancy and for which recruitment outside the current
54
work force is appropriate, appointment to the position will be limited to such
dependents unless precluded by treaties or other agreements which provide for
preferential treatment for local nationals."
And Air Force Regulation 40-301 dated 12 May 1976 in par. 2 c (1) thereof provides
that-
"c. Selection or Referral of Eligible Applicants From the 50 States:
(1)CORRO makes selection, except as provided in (3) below, for oversea
positions of Grades GS-11 and below (and wage grade equivalents) for
which it has received an AF Form 1188, and for higher grade positions if
requested by the oversea activity."12
Likewise, a Supplement to Partial Stipulation of Facts was filed by the parties on
October 6, 1978, which reads:
1. Under date of 30 September 1978, plaintiff Loida Q. Shauf through her counsel,
Quasha Asperilla Ancheta Valmonte Peña & Marcos, lodged an appeal before the
Civil Service Commission, Appeals Review Board, from the decision of the Secretary
of the Air Force dated 1 September 1978 affirming the EEO Complaints Examiner’s
Findings and Recommended Decision in the Discrimination Complaint of Mrs. Loida
Q. Shauf, No. SF 071380181 dated 3 July 1978, x x x;
2. The aforesaid appeal has not been decided up to now by the Civil Service
Commission, Appeals Review Board; and
3. Plaintiff Loida Q. Shauf has not instituted any action before any federal district court
of the United States impugning the validity of the decision of the Secretary of the Air
Force dated 1 September 1978 affirming the EEO Complaints Examiner’s Findings
and Recommended Decision in the Discrimination Complaint of Mrs. Loida Q. Shauf,
No. SF 071380181 dated 3 July 1978.13
Thereafter, on March 8, 1988, the trial court rendered judgment in favor of herein
petitioner Loida Q. Shauf, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering the defendants jointly and
severally to pay the plaintiffs:
1) The amount $39,662.49 as actual damages or its equivalent in Philippine
pesos in October 1976 as reported by the Central Bank of the Philippines or
any authorized agency of the Government;
2) The amount of P100,000.00 as moral and exemplary damages;
3) Twenty (20%) percent of $39,662.49 or its equivalent in Philippine Pesos
in October 1976 as reported by the Central Bank of the Philippines or any
authorized agency of the Government, as attorney’s gees, and;
4) Cost(s) of suit.
SO ORDERED.14
Both parties appealed from the aforecited decision to respondent Court of Appeals.
In their appeal, plaintiffs-appellants (herein petitioners) raised the following
assignment of errors:
1. Lower court gravely erred in holding that the actual and exemplary
damages and attorney’s fees may be paid in Philippine Pesos based on the
exchange rate prevailing during October 1976 as determined by the Central
Bank;
2. Lower court gravely erred in limiting the amount of moral and exemplary
damages recoverable by plaintiff to P100,000.0015
On the other hand, defendants-appellants (private respondents herein) argued that:
1. The trial court erred in not dismissing the complaint on the ground that
defendants-appellants, as officers/officials of the United States Armed
Forces, are immune from suit for acts done or statements made by them in
the performance of their official governmental functions in accordance with
the powers possessed by them under the Philippine-American Military Bases
Agreement of 1947, as amended;
2. The trial court erred in not dismissing the complaint for a) non-exhaustion
of administrative remedies; and b) lack of jurisdiction of the trial court over
the subject matter of the case in view of the exclusive jurisdiction of an
appropriate U.S. District Court over an appeal from an agency decision on a
complaint of discrimination under the U.S. Federal Law on Equality of
opportunity for civilian employees;
3. The trial court erred in holding that plaintiff-appellant Loida Q. Shauf was
refused appointment as guidance counselor by the defendants-appellants on
account of her six (female), color (brown), and national origin (Filipino by
birth) and that the trial court erred in awarding damages to plaintiffs-
appellants.16
55
As stated at the outset, respondent Court of Appeals reversed the decision of the trial
court, dismissed herein petitioners’complaint and denied their motion for
reconsideration. Hence this petition, on the basis of he following grounds:
The respondent Honorable Court of Appeals has decided a question of substance not
in accord with law and/or with applicable decisions of this Honorable Court.
Respondent court committed grave error in dismissing plaintiffs-appellants’ complaint
and-
(a) in holding that private respondents are immune from suit for
discriminatory acts performed without or in excess of, their authority as
officers of the U.S. Armed Forces;
(b) for applying the doctrine of state immunity from suit when it is clear that
the suit is not against the U.S. Government or its Armed Forces; and
(c) for failing to recognize the fact that the instant action is a pure and simple
case for damages based on the discriminatory and malicious acts committed
by private respondents in their individual capacity who by force of
circumstance and accident are officers of the U.S. Armed Forces, against
petitioner Loida Shauf solely on account of the latter’s sex (female), color
(brown), and national origin (Filipino).17
Petitioners aver that private respondents are being sued in their private capacity for
discriminatory acts performed beyond their authority, hence the instant action is not a
suit against the United States Government which would require its consent.
Private respondents, on the other hand, claim that in filing the case, petitioners sought
a judicial review by a Philippine court of the official actuations of respondents as
officials of a military unit of the U.S. Air Force stationed at Clark Air Base. The acts
complained of were done by respondents while administering the civil service laws of
the United States. The acts sued upon being a governmental activity of respondents,
the complaint is barred by the immunity of the United States, as a foreign sovereign,
from suit without its consent and by the immunity of the officials of the United States
armed forces for acts committed in the performance of their official functions pursuant
to the grant to the United States armed forces of rights, power and authority within the
bases under the Military Bases Agreement. It is further contended that the rule
allowing suits against public officers and employees for unauthorized acts, torts and
criminal acts is a rule of domestic law, not of international law. It applies to cases
involving the relations between private suitors and their government or state, not the
relations between one government and another from which springs the doctrine of
immunity of a foreign sovereign.
I. The rule that a state may not be sued without its consent, now expressed in Article
XVI, Section 3, of the 1987 Constitution, is one of the generally accepted principles of
international law that we have adopted as part of the law of our land under Article II,
Section 2. This latter provision merely reiterates a policy earlier embodied in the 1935
and 1973 Constitutions and also intended to manifest our resolve to abide by the
rules of the international community.18
While the doctrine appears to prohibit only suits against the state without its consent,
it is also applicable to complaints filed against officials of the state for acts allegedly
performed by them in the discharge of their duties. The rule is that if the judgment
against such officials will require the state itself to perform an affirmative act to satisfy
the same, such as the appropriation of the amount needed to pay the damages
awarded against them, the suit must be regarded as against the state itself although it
has been formally impleaded.19 It must be noted, however, that the rule is not also all-
encompassing as to be applicable under all circumstances.
It is a different matter where the public official is made to account in his capacity as
such for acts contrary to law and injurious to the rights of plaintiff. As we clearly set
forth by Justice Zaldivar in Director of the Bureau of Telecommunications, et al. Vs.
Aligaen, etc., et al.:20 "Inasmuch as the State authorizes only legal acts by its officers,
unauthorized acts of government officials or officers are not acts of the State, and an
action against the officials or officers by one whose rights have been invaded or
violated by such acts, for the protection of his rights, is not a suit against the State
within the rule of immunity of the State from suit. In the same tenor, it has been said
that an action at law or suit in equity against a State officer or the director of a State
department on the ground that, while claiming to act for the State, he violates or
invades the personal and property rights of the plaintiff, under an unconstitutional act
or under an assumption of authority which he does not have, is not a suit against the
State within the constitutional provision that the State may not be sued without its
consent."21 The rationale for this ruling is that the doctrine of state immunity cannot be
used as an instrument for perpetrating an injustice.22
In the case of Baer, etc. vs. Tizon, etc., et al.,23 it was ruled that:
There should be no misinterpretation of the scope of the decision reached by this
Court. Petitioner, as the Commander of the United States Naval Base in Olongapo,
does not possess diplomatic immunity. He may therefore be proceeded against in his
personal capacity, or when the action taken by him cannot be imputed to the
government which he represents.
Also, in animos, et al. Vs. Philippine Veterans Affairs Office, et al.,24 we held that:
"x x x it is equally well-settled that where a litigation may have adverse consequences
on the public treasury, whether in the disbursements of funds or loss of property, the
public official proceeded against not being liable in his personal capacity, then the
doctrine of non-suability may appropriately be invoked. It has no application, however,
where the suit against such a functionary had to be instituted because of his failure to
comply with the duty imposed by statute appropriating public funds for the benefit of
plaintiff or petitioner. x x x.
56
The aforecited authorities are clear on the matter. They state that the doctrine of
immunity from suit will not apply and may not be invoked where the public official is
being sued in his private and personal capacity as an ordinary citizen. The cloak of
protection afforded the officers and agents of the government is removed the moment
they are sued in their individual capacity. This situation usually arises where the
public official acts without authority or in excess of the powers vested in him. It is a
well-settled principle of law that a public official may be liable in his personal private
capacity for whatever damage he may have caused by his act done with malice and
in bad faith, or beyond the scope of his authority or jurisdiction. 25
The agents and officials of the United States armed forces stationed in Clark Air Base
are no exception to this rule. In the case of United States of America, et al. Vs.
Guinto, etc., et al., ante,26 we declared:
It bears stressing at this point that the above observation do not confer on the United
States of America blanket immunity for all acts done by it or its agents in the
Philippines. Neither may the other petitioners claim that they are also insulated from
suit in this country merely because they have acted as agents of the United States in
the discharge of their official functions.
II. The court below, in finding that private respondents are guilty of discriminating
against petitioner Loida Q. Shauf on account of her sex, color and origin, categorically
emphasized that:
There is ample evidence to sustain plaintiffs’ complaint that plaintiff Loida Q. Shauf
was refused appointment as Guidance Counselor by the defendants on account of
her sex, color and origin.
She is a female, brown in color and a Filipino by origin, although married to an
American who is a member of the United States Air Force. She is qualified for the
vacant position of Guidance Counselor in the office of the education director at Clark
Air Base. She received a Master of Arts Degree from the University of Santo Tomas,
Manila, in 1971 and has completed 34 semester hours in psychology-guidance and
25 quarter hours in human behavioral science. She has also completed all course
work in human behavior and counseling psychology for a doctoral degree. She is a
civil service eligible. More important, she had functioned as a Guidance Counselor at
the Clark Air Base at the GS-1710-9 level for approximately four years at the time she
applied for the same position in 1976.
In filling the vacant position of Guidance Counselor, defendant Persi did not even
consider the application of plaintiff Loida Q. Shauf, but referred the vacancy to
CORRO which appointed Edward B. Isakson who was not eligible to the position.
In defending his act, defendant Persi gave as his excuse that there was a question in
his mind regarding validity of plaintiff Loida Q. Shauf’s work experience because of
lack of record. But his assertion is belied by the fact that plaintiff Loida Q. Shauf had
previously been employed as Guidance Counselor at the Clark Air Base in 1971 and
this would have come out if defendant Persi had taken the trouble of interviewing her.
Nor can defendant free himself from any blame for the non-appointment of plaintiff
Loida Q. Shauf by claiming that it was CORRO that appointed Edward B. Isakson.
This would not have happened if defendant Persi adhered to the regulation that limits
the appointment to the position of Guidance Counselor, GS-1710-9 to qualified
dependents of military personnel of the Department of Defense who are locally
available like the plaintiff Loida Q. Shauf. He should not have referred the matter to
CORRO. Furthermore, defendant Persi should have protested the appointment of
Edward B. Isakson who was ineligible for the position. He, however, remained silent
because he was satisfied with the appointment.
Likewise, the acts of the defendant Detwiler in rejecting the appointment of plaintiff
Loida Q. Shauf were undoubtedly discriminatory.
Plaintiff Loida Q. Shauf twice applied for the position of Guidance Counselor
sometime in 1975 and in October 1978. Although she was qualified for the postision,
her appointment was rejected ny the defendant Detwiler. The two who were
appointed, a certain Petrucci and Edward B. Isakson, were ordered removed by the
U.S. Civil Service Commission. Instead of replacing Petrucci with the plaintiff Loida Q.
Shauf, the defendant Detwiler had the position vacated by Petrucci abolished. And in
the case of Edward Isakson, the defendant Detwiler ignored the order of the U.S. Civil
Service Commission to have him removed according to the testimony of plaintiff Loida
Q. Shauf.
In connection with her complaint against the defendants, plaintiff Loida Q. Shauf was
presented a Notice of Proposed Disposition of her Discrimination Complaint by Col.
Charles J. Corey, Vice Commander, Third Combat Support Group, Clark Air Base,
which would entitle her to a temporary appointment as Guidance Counselor with the
implied assurance that she would be appointed in a permanent capacity in the event
of a vacancy.
At the time of the issuance of said Notice, defendants knew that there would be a
vacancy in a permanent position as Guidance Counselor occupied by Mrs. Mary
Abalateo and it was understood between Col. Corey and plaintiff Loida Q. Shauf that
this position would be reserved for her. Knowing this arrangement, defendant Detwiler
rejected the request for extension of services of Mrs. Mary Abalateo. However, after
plaintiff Loida Q. Shauf consented to the terms of the Notice of Proposed Disposition
of her Discrimination Complaint, defendant Detwiler extended the services of Mrs.
Mary Abalateo indefinitely. This act barred plaintiff Loida Q. Shauf from applying for
the position of Mrs. Mary Abalateo.
To rebut the evidence of the plaintiffs, defendant cited the findings and conclusions of
Mr. Rudolph Duncan, who was appointed to investigate plaintiff Loida Q. Shauf’s
complaint for discrimination and Col. Charles J. Corey, Vice Commander, Third
Combat Support Group that defendants were not guilty of Discrimination.
57
It is pointed out, however, that Mr. Rudolph Duncan found plaintiff loida Q. Shauf to
be highly qualified for the position of Guidance Counselor at the GS-1710-9 level and
that management should have hired a local applicant. While Col. Corey characterized
the act of defendant Persi as sloppy and recommend that he be reprimanded. In any
event their findings and conclusions are not binding with this Court.
To blunt the accusation of discrimination against them, defendants maintained that
the extension of the appointment of Mrs. Mary Abalateo was a joint decision of
management and Central Civilian Personnel Office, Clark Air Base. Nonetheless,
having earlier rejected by himself the request for extension of the services of Mrs.
Mary Abalateo, defendant Detwiler should not have concurred to such an extension
as the reversal of his stand gave added substance to the charge of discrimination
against him.
To further disprove the charge that the defendants discriminated against plaintiff
Loida Q. Shauf for her non-appointment as Guidance Counselor on account of her
being a Filipino and a female, counsel for the defendants cited the following: (1) that
Mrs. Mary Abalateo whose appointment was extended by the defendant Detwiler is
likewise a female and a Filipino by origin; (2) that there are Filipinos employed in the
office of the defendant Persi; and (3) that there were two other women who applied in
1976 with the plaintiff Loida Q. Shauf for the position of Guidance Counselor.
The contention of the defendants based on the allegations enumerated in Nos. 1 and
2 of the preceding paragraph is without merit as there is no evidence to show that
Mrs. Mary Abalateo and the Filipinos in the office of the defendant Persi were
appointed by the defendants. Moreover, faced with a choice between plaintiff Loida Q.
Shauf or Mrs. Mary Abalateo, it was to be expected that defendant Detwiler chose to
retain Mrs. Mary Abalateo as Guidance Counselor in retaliation for the complaint of
discrimination filed against him by plaintiff Loida Q. Shauf. Finally, as to the
contention based on the allegation in No. 3 of the preceding paragraph that there
were two other women applicants in 1976 with plaintiff Loida Q. Shauf, the record
reveals that they had minimum qualifications unlike plaintiff Loida Q. Shauf who was
highly qualified.27
Elementary is the rule that the conclusions and findings of fact of the trial court are
entitled to great weight on appeal and should not be disturbed unless for strong and
cogent reasons.28 Absent any substancial proof, therefore, that the trial court’s
decision was grounded entirely on speculations, surmises or conjectures, the same
must be accorded full consideration and respect. This should be so because the trial
court is, after all, in a much better position to observe and correctly appreciate the
respective parties’ evidence as they were presented.29
In the case at bar, there is nothing in the record which suggests any arbitrary,
irregular or abusive conduct or motive on the part of the trial judge in ruling that
private respondents committed acts of discrimination for which they should be held
personally liable. His conclusion on the matter is sufficiently borne out by the
evidence on record. We are thus constrained to uphold his findings of fact.
Respondent Court of Appeals, in its questioned decision, states that private
respondents did, in fact, discriminate against petitioner Loida Q. Shauf. However, it
deemed such acts insufficient to prevent an application of the doctrine of state
immunity, contrary to the findings made by the trial court. It reasons out that "the
parties invoked are all American citizens (although plaintiff is a Filipina by origin) and
the appointment of personnel inside the base is clearly a sovereign act of the United
States. This is an internal affair in which we cannot interfere without having to touch
some delicate constitutional issues."30 In other words, it believes that the alleged
discriminatory acts are not so grave in character as would justify the award of
damages.
In view of the apparent discrepancy between the findings of fact of respondent Court
of Appeals and the trial court, we are tasked to review the evidence in order to arrive
at the correct findings based on the record. A consideration of the evidence presented
supports our view that the court a quo was correct in holding herein private
respondents personally liable and in ordering the indemnification of petitioner Loida
Q. Shauf. The records are clear that even prior to the filing of the complaint in this
case, there were various reports and communications issued on the matter which,
while they make no categorical statement of the private respondents’ liability,
nevertheless admit of facts from which the intent of private respondents to
discriminate against Loida Q. Shauf is easily discernible. Witness the following
pertinent excerpts from the documents extant in the folder of Plaintiff’s Exhibits:
1. Notice of Proposed Disposition of Discrimination Complaint, dated May 16, 1977
(Exhibit "G").
B. Mr. Anthony Persi was totally inept in the recruitment practices employed in
attempting on fill the GS 1710-9 Assistant Education applicable DOD regulations. In
addition, he failed to conduct an interview of qualified personnel in the local
environment and when the qualifications of the complainant (sic) were questioned by
Mr. Persi he did not request a review by the CCPO nor request an interview with the
complainant (sic). Mr. Persi failed to follow Department of Defense Instructions
Number 1400.23, under Policy and Procedures which states-"Where qualified
dependents of military or civilian personnel of the Department of Defense are locally
available for appointment to positions in foreign areas which are designated for US
citizen occupancy and for which recruitment outside the current work force is
appropriate, appointment to the positions will be limited to such dependents unless
precluded by treaties or other agreements which provide for preferential treatment for
local nationals." Attachment to Air Force Supplement to FFM 213.2106 (b) (6) lists the
positions of Guidance Counsellor, GS 1710-9, as positions to be filled by locally
available dependents. An added point is the lack of qualifications of the individual
selected for the GS 1710-9 positions as outlined under X-118 Civil Service Handbook.
x x x31
2. Letter of the Director of the U.S. Civil Service Commission, San Francisco Region,
dated October 27, 1977, addressed to Mr. Don Detwiler, concerning Mr. Edward B.
Isakson whose file was reviewed by the Commission (Exhibit "K").
58
The position of Guidance Counsellor is one for which the Commission has
established a mandatory education requirement that may not be waived. An individual
may not be assigned to such a position without meeting the minimum qualification
requirements. The requirements, as given in Handbook X-118, are completion of all
academic requirements for a bachelor’s degree from an accredited college or
university and successful completion of a teacher education program under an
"approved program" or successful completion of required kinds of courses.
On review of his record, we find that Mr. Isakson has a bachelor’s degree but he does
not show completion of a teacher education program. To qualify for Guidance
Counselor on the basis of coursework and semester hour credit, he would need to
have 24 semester hours in Education and 12 semester hours in a combination of
Psychology and Guidance subjects directly related to education. We do not find that
he meets these requirements.
xxx
We can appreciate the fact that Mr. Isakson may be working toward meeting the
Guidance Counselor requirements. Nonetheless, he does not appear to meet them at
this time. We must, therefore, request that action be taken to remove him from the
position and that efforts be made to place him in a position for which he qualifies. 32
3. Letter of the Staff Judge Advocate of the Department of the Airforce addressed to
Mr. Detwiler, dated January 25, 1977 (Exhibit "L").
1. The attached memo from Captain John Vento of this office is forwarded
for your review and any action you deem appropriate. I concur with his
conclusion that there is no evidence of sex or ethnic bias in this matter. I also
concur, however, that there were certain irregularities in the handling of this
selection.
xxx
3. Considering the above, it is most unfortunate that the filing of this latest
Guidance Counselor vacancy was not handled wholly in accordance with
prescribed policies and regulations. This is not to suggest that Mrs. Shauf
should necessarily have been hired. But, she and other qualified candidates
should have been given the consideration to which they were entitled. (At no
time now or in the past have Mrs. Shauf’s qualifications ever been
questioned.) Had that happened and management chose to select some
qualified candidate other than Mrs. Shauf, there would be no basis for her
complaint.
4. It is my understanding that Mrs. Shauf has filed a formal EEO complaint.
While I am convinced that there was no discrimination in this case, my
experience with EEO complaints teaches me that, if Civil Service
Commission finds that nonselection resulted from any kind of management
malpractice, it is prone to brand it as a "discriminatory practice." This usually
results in a remedial order which can often be distasteful to management. x x
x.33
The initial burden is on the plaintiff to establish a prima facie case or discrimination.
Once the discriminatory act is proven, the burden shifts to the defendant to articulate
some legitimate, undiscriminatory reason for the plaintiff’s rejection. 34 Any such
justification is wanting in the case at bar, despite the prima facie case for petitioner
Loida Q. Shauf. Private respondents’ defense is based purely on outright denials
which are insufficient to discharge the onus probandi imposed upon them. They
equally rely on the assertion that they are immune from suit by reason of their official
functions. As correctly pointed out by petitioners in their Memorandum, the mere
invocation by private respondents of the official character of their duties cannot shield
them from liability especially when the same were clearly done beyond the scope of
their authority, again citing the Guinto, case, supra:
The other petitioners in the case before us all aver they have acted in the discharge of
their official functions as officers or agents of the United States. However, this is a
matter of evidence. The charges against them may not be summarily dismissed on
their mere assertion that their acts are imputable to the United States of America,
which has not given its consent to be sued. In fact, the defendants are sought to be
held answerable for personal torts in which the United States itself is not involved. If
found liable, they and they alone must satisfy the judgment.
III. Article XIII, Section 3, of the 1987 Constitution provides that the State shall afford
full protection to labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for all. This is a carry-over
from Article II, Section 9, of the 1973 Constitution ensuring equal work opportunities
regardless of sex, race, or creed.
Under the Constitution of the United States, the assurance of equality in employment
and work opportunities regardless of sex, race, or creed is also given by the equal
protection clause of the Bill of Rights. The 14th Amendment, in declaring that no state
shall deprive a person of his life, liberty, or property without due process of law or
deny to any person within its jurisdiction the equal protection of the laws, undoubtedly
intended not only that there should be no arbitrary spoliation of property, but that
equal protection and security should be given to all under like circumstances in the
enjoyment of their personal and civil rights, and that all persons should be equally
entitled to pursue their happiness ands acquire and enjoy property. It extends its
protection to all persons without regard to race, color, or class. It means equality of
opportunity to all in like circumstances.35
The words "life, liberty, and property" as used in constitutions are representative
terms and are intended to cover every right to which a member of the body politic in
entitled under the law. These terms include the right of self-defense, freedom of
speech, religious and political freedom, exemption from arbitrary arrests, the right to
59
freely buy and sell as others may, the right to labor, to contract, to terminate
contracts, to acquire property, and the right to all our liberties, personal, civil and
political-in short, all that makes life worth living.36
There is no doubt that private respondents Persi and Detwiler, in committing the acts
complained of have, in effect, violated the basic constitutional right of petitioner Loida
Q. Shauf to earn a living which is very much an integral aspect of the right to life. For
this, they should be held accountable.
While we recognize petitioner Loida Q. Shauf’s entitlement to an award of moral
damages, we however find no justification for the award of actual or compensatory
damages, based on her supposedly unearned income from March, 1975 up to April,
1978 in the total amount of $39,662.49, as erroneously granted by the trial court.
Evidence that the plaintiff could have bettered her position had it not been for the
defendants’ wrongful act cannot serve as basis for an award of damages, because it
is highly speculative.37 Petitioner Loida Q. Shauf’s claim is merely premised on the
possibility that had she been employed, she would have earned said amount. But, the
undeniable fact remains that she was never so employed. Petitioner never acquired
any vested right to the salaries pertaining to the position of GS 1710-9 to which she
was never appointed. Damages which are merely possible are speculative.38 In
determining actual damages, the court cannot rely on speculation, conjecture or
guesswork. Without the actual proof of loss, the award of actual damages is
erroneous.39 Consequently, the award of actual damages made by the trial court
should be deleted. Attorney’s fees, however, may be granted and we believe that an
award thereof in the sum of P20,000.00 is reasonable under the
circumstances.1âwphi1
IV. Finally, private respondents postulate that petitioner Loida Q. Shauf failed to avail
herself of her remedy under the United States federal legislation on equality of
opportunity for civilian employees, which is allegedly exclusive of any other remedy
under American law, let alone remedies before a foreign court and under a foreign
law such as the Civil Code of the Philippines.
In a letter of the Department of the Air Force in Washington, D.C., dated September
1, 1978 and addressed to petitioner Loida Q. Shauf,40 the appeal rights of the latter
from the Air Force decision were enumerated as follows:
-You may appeal to the Civil Service Commission within 15 calendar days of
receipt of the decision. Your appeal should be addressed to the Civil Service
Commission, Appeals Review Board, 1990 E Street, N.Q., Washington, D.C.
20415. The appeal and any representation in support thereof must be
submitted in duplicate.
-In lieu of an appeal to the Commission you may file a civil action in an
appropriate U.S. District Court within 30 days of receipt of the decision.
-If you elect to appeal to the Commission’s Appeals Review Board, you may
file a civil action in a U.S. District Court within 30 days of receipt of the
Commission’s final decision.
-A civil action may also be filed anytime after 180 days of the date of initial
appeal to the Commission, if a final decision has not been rendered.
As earlier noted, in a Supplement to Partial Stipulation of Facts filed by the parties on
October 6, 1978, it was manifested to the trial court that an appeal was lodged by
counsel for petitioners on September 30, 1978 before the Civil Service Commission.
Appeals Review Board from the decision of the Secretary of the Air Force in the
discrimination case filed by petitioner Loida Q. Shauf, No. SF 071380181. Said
appeal has not been decided up to now.
Furthermore, it is basic that remedial statutes are to be construed liberally. The term
"may," as used in adjective rules, is only permissive and not mandatory, and we see
no reason why the so-called rules on the above procedural options communicated to
said petitioner should depart from this fundamental . petitioner Loida Q. Shauf is not
limited to these remedies, but is entitled as a matter of plain and simple justice to
choose that remedy, not otherwise proscribed, which will best advance and protect
her interests. There is, thus, nothing to enjoin her from seeking redress in Philippine
courts which should not be ousted of jurisdiction on the dubious and inconclusive
representations of private respondents on that score.
WHEREFORE, the challenged decision and resolution of respondent Court of
Appeals in CA-G.R. CV No. 17932 are hereby ANNULLED and SET ASIDE. Private
respondents are hereby ORDERED, jointly and severally, to pay petitioners the sum
of P100,000.00 as moral damages, P20,000.00 as and for attorney’s fees, and the
costs of suit.
SO ORDERED.
Melencio-Herrera (Chairman), Paras, Padilla and Sarmiento, jj., concur.
Decision and resolution annulled and set aside.
Footnotes
1 Associate
Justice Jose A.R. Melo, ponente, with Justices Alfredo L. Benipayo and
Abelardo M. Dayrit, concurring; Annex A, Petition; Rollo, 26.
2 Rollo, 32-33.
3 Partial Stipulation of Facts, 2-4; Original Record, 134-136.
4 Rollo, 107.
60
5 Report 25 Dumlao
of Investigation, Equal Opportunity Complaint of Mrs. Loida Q. Shauf, E-77- vs. Court of Appeals, et al., 114 SCRA 247 (1982).
154; Exhibit M, Plaintiff’s Exhibits, 22-29.
26 Footnote 18.
6 Exhibit M; Plaintiffs’ Exhibits, 26-27.
27 Rollo, 107-111.
7 Ibid., 28.
28 Vda. De Alberto, etc., et al. vs. Court of Appeals, et al., 173 SCRA 436 (1989).
8 Exhibit G; ibid., 12.
29 Matabuena vs. Court of Appeals, et al., 173 SCRA 170 (1989).
9 Exhibit J; ibid., 17.
30 Rollo, 37.
10 Exhibit K; ibid., 18.
31
Plaintiff’s Exhibits, 12.
11 Exhibit N; ibid., 30.
32 Ibid., 18-19.
12 Original Record, 133-134.
33 Ibid., 20-21.
13 Ibid., 186-187.
34 McDonnell Douglas Corp. vs. Precy Green, 36 L Ed 2d 668.
14 Rollo, 112.
35 16 Am. Jur. 2d 577, 846, 849.
15 Brief for the Plaintiffs, 6; Rollo, 58.
36 Op. Cit., 683.
16
Rollo, 12-13, 35.
37 Osmeña & Associates vs. Court of Appeals, et al., 120 SCRA 395 (1983).
17 Ibid., 13-14.
38 25 C.J.S. 667.
18 UnitedStates of America, et al. Vs. Guinto, etc., et al., G.R. No. 76607, February
26, 1990. 39 Guilatco vs. City of Dagupan, et al., 171 SCRA 382 (1989).
19 Id.
40 Exhibit 2; Defendants’ Exhibits, 314-315.
20 33 SCRA 368 (1970). 17. Republic v. Hon. Edilberto Sandoval 220 SCRA 124

21 Ministerio, et al. v. Court of First Instance of Cebu, etc., et al., 40 SCRA 464 (1971). Republic of the Philippines
SUPREME COURT
22 Sanders, et al. vs. Veridiano, etc., et al., 162 SCRA 88 (1988). Manila

23 57 SCRA 1 (1974). EN BANC

24 174 SCRA 214 (1989). G.R. No. 84607 March 19, 1993

61
REPUBLIC OF THE PHILIPPINES, GEN. RAMON MONTANO, GEN. ALFREDO
LIM, GEN. ALEXANDER AGUIRRE, COL. EDGAR DULA TORRES, COL. CEZAR
NAZARENO, MAJ. FILEMON GASMEN, PAT. NICANOR ABANDO, PFC SERAFIN
CEBU, JR., GEN. BRIGIDO PAREDES, COL. ROGELIO MONFORTE, PFC
ANTONIO LUCERO, PAT. JOSE MENDIOLA, PAT. NELSON TUASON, POLICE
CORPORAL PANFILO ROGOS, POLICE LT. JUAN B. BELTRAN, PAT. NOEL
MANAGBAO, MARINE THIRD CLASS TRAINEE (3CT) NOLITO NOGATO, 3CT
ALEJANDRO B. NAGUIO, JR., EFREN ARCILLAS, 3CT AGERICO LUNA, 3CT
BASILIO BORJA, 3CT MANOLITO LUSPO, 3CT CRISTITUTO GERVACIO, 3CT
MANUEL DELA CRUZ, JR., MARINE (CDC) BN., (CIVIL DISTURBANCE
CONTROL), MOBILE DISPERSAL TEAM (MDT), LT. ROMEO PAQUINTO, LT.
LAONGLAANG GOCE, MAJ. DEMETRIO DE LA CRUZ, POLICE CAPTAIN
RODOLFO NAVAL, JOHN DOE, RICHARD DOE, ROBERTO DOE AND OTHER
DOES, petitioners,
vs.
HON. EDILBERTO G. SANDOVAL, Regional Trial Court of Manila, Branch IX,
ERLINDA C. CAYLAO, ANATALIA ANGELES PEREZ, MYRNA BAUTISTA,
CIPRIANA EVANGELIO, ELMA GRAMPA, AMELIA GUTIERREZ, NEMESIO
LAKINDANUM, PURITA YUMUL, MIGUEL ARABE, TERESITA ARJONA,
RONALDO CAMPOMANES AND CARMENCITA ARDONI VDA. DE
CAMPOMANES, ROGELIO DOMUNICO, in their capacity as heirs of the
deceased (ROBERTO C. CAYLAO, SONNY "BOY" PEREZ, DIONESIO
BAUTISTA, DANTE EVANGELIO, ADELFA ARIBE, DANILO ARJONA, VICENTE
CAMPOMANES, RONILO DOMUNICO) respectively; and (names of sixty-two
injured victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON
BAUTISTA, DANILO CRUZ, EDDIE MENSOLA, ALBERT PITALBO, VICENTE
ROSEL, RUBEN CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR., EFREN
MACARAIG, SOLOMON MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN
CARSELLAR, JOEY CLEMENTE, GERARDO COYOCA, LUISITO DACO,
BENJAMIN DELA CRUZ, ARTHUR FONTANILLA, WILSON GARCIA, CARLOS
SIRAY, JOSE PERRAS, TOMAS VALLOS, ARNOLD ENAJE, MARIANITA
DIMAPILIS, FRANCISCO ANGELES, MARCELO ESGUERRA, JOSE FERRER,
RODEL DE GUIA, ELVIS MENDOZA, VICTORIANO QUIJANO, JOEY ADIME,
RESIENO ADUL, ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO
ALIAS, EMELITO ALMONTE, BENILDA ALONUEVO, EMMA ABADILLO,
REYNALDO CABALLES, JR., JAIME CALDETO, FABIAN CANTELEJO,
RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS, MARIO
DEMASACA, FRANCISCO GONZALES, ERNESTO GONZALES, RAMIRO JAMIL,
JUAN LUCENA, PERLITO SALAYSAY, JOHNNY SANTOS, MARCELO SANTOS,
EMIL SAYAO, BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO,
ARMANDO MATIENZO, CARLO MEDINA, LITO NOVENARIO, and ROSELLA
ROBALE, respondents.
G.R. No. 84645 March 19, 1993
ERLINDA C. CAYLAO, ANATALIA ANGELES PEREZ, MYRNA BAUTISTA,
CIPRIANA EVANGELIO, ELMA GRAMPA, AMELIA GUTIERREZ, NEMESIO
LAKINDANUM, PURITA YUMUL, MIGUEL ARABE, TERESITA ARJONA,
RONALDO CAMPOMANES AND CARMENCITA ARDONI VDA. DE
CAMPOMANES, ROGELIO DOMUNICO, in their capacity as heirs of the
deceased (ROBERTO C. CAYLAO, SONNY "BOY" PEREZ, DIONESIO GRAMPA,
ANGELITO GUTIERREZ, BERNABE LAKINDANUM, ROBERTO YUMUL,
LEOPOLDO ALONZO, ADELFA ARIBE, DANILO ARJONA, VICENTE
CAMPOMANES, RONILO DOMUNICO) respectively; and (names of sixty-two
injured victims) EDDIE AGUINALDO, FELICISIMO ALBASIA, NAPOLEON
BAUTISTA, DANILO CRUZ, EDDIE MENSOLA, ALBERT PITALBO, VICENTE
ROSEL, RUBEN CARRIEDO, JOY CRUZ, HONORIO LABAMBA, JR. EFREN
MACARAIG, SOLOMON MANALOTO, ROMEO DURAN, NILO TAGUBAT, JUN
CARSELLAR, JOEY CLEMENTE, GERARDO COYOCA, LUISITO DACO,
BENJAMIN DELA CRUZ, ARTHUR FONTANILLA, WILSON GARCIA, CARLOS
SIRAY, JOSE PERRAS TOMAS VALLOS, ARNOLD ENAJE, MARIANITA
DIMAPILIS, FRANCISCO ANGELES, MARCELO ESGUERRA, JOSE FERRER,
RODEL DE GUIA, ELVIS MENDOZA, VICTORINO QUIJANO, JOEY ADIME,
RESIENO ADUL, ALBERTO TARSONA, CARLOS ALCANTARA, MAMERTO
ALIAS, EMELITO ALMONTE, BENILDA ALONUEVO, EMMA ABADILLO,
REYNALDO CABALLES, JR., JAIME CALDETO, FABIAN CANTELEJO,
RODRIGO CARABARA, ENRIQUE DELGADO, JUN DELOS SANTOS, MARIO
DEMASACA, FRANCISCO GONZALES, ERNESTO GONZALES, RAMIRO JAMIL,
JUAN LUCENA, PERLITO SALAYSAY, JOHNNY SANTOS, MARCELO SANTOS,
EMIL SAYAO, BAYANI UMALI, REMIGIO MAHALIN, BONG MANLULO,
ARMANDO MATIENZO, CARLO MEDINA, LITO NOVENARIO, ROSELLA
ROBALE, petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, and HONORABLE EDILBERTO G.
SANDOVAL, Regional Trial Court of Manila, Branch 9, respondents.
The Solicitor General for the Republic of the Philippines.
Structural Alternative Legal Assistance for Grassroots for petitioners in 84645
& private respondents in 84607.
CAMPOS, JR., J.:
People may have already forgotten the tragedy that transpired on January 22,
1987. It is quite ironic that then, some journalists called it a Black Thursday, as
a grim reminder to the nation of the misfortune that befell twelve (12) rallyists.
But for most Filipinos now, the Mendiola massacre may now just as well be a
chapter in our history books. For those however, who have become widows
and orphans, certainly they would not settle for just that. They seek retribution
for the lives taken that will never be brought back to life again.
Hence, the heirs of the deceased, together with those injured (Caylao group),
instituted this petition, docketed as G.R. No. 84645, under Section 1 of Rule 65
of the Rules of Court, seeking the reversal and setting aside of the Orders of
62
respondent Judge Sandoval,1 dated May 31 and August 8, 1988, dismissing the
complaint for damages of herein petitioners against the Republic of the Philippines in
Civil Case No. 88-43351.
Petitioner, the Republic of the Philippines, through a similar remedy, docketed as
G.R. No. 84607, seeks to set aside the Order of respondent Judge dated May 31,
1988, in Civil Case No. 88-43351 entitled "Erlinda Caylao, et al. vs. Republic of the
Philippines, et al."
The pertinent portion of the questioned Order2 dated May 31, 1988, reads as follows:
With respect however to the other defendants, the impleaded
Military Officers, since they are being charged in their personal and
official capacity, and holding them liable, if at all, would not result in
financial responsibility of the government, the principle of immunity
from suit can not conveniently and correspondingly be applied to
them.
WHEREFORE, the case as against the defendant Republic of the
Philippines is hereby dismissed. As against the rest of the
defendants the motion to dismiss is denied. They are given a period
of ten (10) days from receipt of this order within which to file their
respective pleadings.
On the other hand, the Order3 , dated August 8, 1988, denied the motions filed by
both parties, for a reconsideration of the abovecited Order, respondent Judge finding
no cogent reason to disturb the said order.
The massacre was the culmination of eight days and seven nights of encampment by
members of the militant Kilusang Magbubukid sa Pilipinas (KMP) at the then Ministry
(now Department) of Agrarian Reform (MAR) at the Philippine Tobacco Administration
Building along Elliptical Road in Diliman, Quezon City.
The farmers and their sympathizers presented their demands for what they called
"genuine agrarian reform". The KMP, led by its national president, Jaime Tadeo,
presented their problems and demands, among which were: (a) giving lands for free
to farmers; (b) zero retention of lands by landlords; and (c) stop amortizations of land
payments.
The dialogue between the farmers and the MAR officials began on January 15, 1987.
The two days that followed saw a marked increase in people at the encampment. It
was only on January 19, 1987 that Jaime Tadeo arrived to meet with then Minister
Heherson Alvarez, only to be informed that the Minister can only meet with him the
following day. On January 20, 1987, the meeting was held at the MAR conference
room. Tadeo demanded that the minimum comprehensive land reform program be
granted immediately. Minister Alvarez, for his part, can only promise to do his best to
bring the matter to the attention of then President Aquino, during the cabinet meeting
on January 21, 1987.
Tension mounted the following day. The farmers, now on their seventh day of
encampment, barricaded the MAR premises and prevented the employees from going
inside their offices. They hoisted the KMP flag together with the Philippine flag.
At around 6:30 p.m. of the same day, Minister Alvarez, in a meeting with Tadeo and
his leaders, advised the latter to instead wait for the ratification of the 1987
Constitution and just allow the government to implement its comprehensive land
reform program. Tadeo, however, countered by saying that he did not believe in the
Constitution and that a genuine land reform cannot be realized under a landlord-
controlled Congress. A heated discussion ensued between Tadeo and Minister
Alvarez. This notwithstanding, Minister Alvarez suggested a negotiating panel from
each side to meet again the following day.
On January 22, 1987, Tadeo's group instead decided to march to Malacañang to air
their demands. Before the march started, Tadeo talked to the press and TV media.
He uttered fiery words, the most telling of which were:
". . . inalis namin ang barikada bilang kahilingan ng ating Presidente, pero
kinakailangan alisin din niya ang barikada sa Mendiola sapagkat bubutasin din namin
iyon at dadanak ang dugo . . . ."4
The farmers then proceeded to march to Malacañang, from Quezon Memorial Circle,
at 10:00 a.m. They were later joined by members of other sectoral organizations such
as the Kilusang Mayo Uno (KMU), Bagong Alyansang Makabayan (BAYAN), League
of Filipino Students (LFS) and Kongreso ng Pagkakaisa ng Maralitang Lungsod
(KPML).
At around 1:00 p.m., the marchers reached Liwasang Bonifacio where they held a
brief program. It was at this point that some of the marchers entered the eastern side
of the Post Office Building, and removed the steel bars surrounding the garden.
Thereafter, they joined the march to Malacañang. At about 4:30 p.m., they reached
C.M. Recto Avenue.
In anticipation of a civil disturbance, and acting upon reports received by the Capital
Regional Command (CAPCOM) that the rallyists would proceed to Mendiola to break
through the police lines and rush towards Malacañang, CAPCOM Commander
General Ramon E. Montaño inspected the preparations and adequacy of the
government forces to quell impending attacks.
OPLAN YELLOW (Revised) was put into effect. Task Force Nazareno under the
command of Col. Cesar Nazareno was deployed at the vicinity of Malacañang. The
civil disturbance control units of the Western Police District under Police Brigadier
General Alfredo S. Lim were also activated.
63
Intelligence reports were also received that the KMP was heavily infiltrated by
CPP/NPA elements and that an insurrection was impending. The threat seemed
grave as there were also reports that San Beda College and Centro Escolar
University would be forcibly occupied.
In its report, the Citizens' Mendiola Commission (a body specifically tasked to
investigate the facts surrounding the incident, Commission for short) stated that the
government anti-riot forces were assembled at Mendiola in a formation of three
phalanges, in the following manner:
(1) The first line was composed of policemen from police stations
Nos. 3, 4, 6, 7, 8, 9 and 10 and the Chinatown detachment of the
Western Police District. Police Colonel Edgar Dula Torres, Deputy
Superintendent of the Western Police District, was designated as
ground commander of the CDC first line of defense. The WPD CDC
elements were positioned at the intersection of Mendiola and
Legarda Streets after they were ordered to move forward from the
top of Mendiola bridge. The WPD forces were in khaki uniform and
carried the standard CDC equipment — aluminum shields,
truncheons and gas masks.
(2) At the second line of defense about ten (10) yards behind the
WPD policemen were the elements of the Integrated National
Police (INP) Field Force stationed at Fort Bonifacio from the 61st
and 62nd INP Field Force, who carried also the standard CDC
equipment — truncheons, shields and gas masks. The INP Field
Force was under the command of Police Major Demetrio dela Cruz.
(3) Forming the third line was the Marine Civil Disturbance Control
Battalion composed of the first and second companies of the
Philippine Marines stationed at Fort Bonifacio. The marines were all
equipped with shields, truncheons and M-16 rifles (armalites) slung
at their backs, under the command of Major Felimon B. Gasmin.
The Marine CDC Battalion was positioned in line formation ten (10)
yards farther behind the INP Field Force.
At the back of the marines were four (4) 6 x 6 army trucks,
occupying the entire width of Mendiola street, followed immediately
by two water cannons, one on each side of the street and eight fire
trucks, four trucks on each side of the street. The eight fire trucks
from Fire District I of Manila under Fire Superintendent Mario C.
Tanchanco, were to supply water to the two water cannons.
Stationed farther behind the CDC forces were the two Mobile
Dispersal Teams (MDT) each composed of two tear gas
grenadiers, two spotters, an assistant grenadier, a driver and the
team leader.
In front of the College of the Holy Spirit near Gate 4 of Malacañang
stood the VOLVO Mobile Communications Van of the Commanding
General of CAPCOM/INP, General Ramon E. Montaño. At this
command post, after General Montaño had conferred with TF
Nazareno Commander, Colonel Cezar Nazareno, about the
adequacy and readiness of his forces, it was agreed that Police
General Alfredo S. Lim would designate Police Colonel Edgar Dula
Torres and Police Major Conrado Franciscoas negotiators with the
marchers. Police General Lim then proceeded to the WPD CDC
elements already positioned at the foot of Mendiola bridge to relay
to Police Colonel Torres and Police Major Francisco the instructions
that the latter would negotiate with the marchers.5 (Emphasis
supplied)
The marchers, at around 4:30 p.m., numbered about 10,000 to 15,000. From C.M.
Recto Avenue, they proceeded toward the police lines. No dialogue took place
between the marchers and the anti-riot squad. It was at this moment that a clash
occurred and, borrowing the words of the Commission "pandemonium broke loose".
The Commission stated in its findings, to wit:
. . . There was an explosion followed by throwing of pillboxes,
stones and bottles. Steel bars, wooden clubs and lead pipes were
used against the police. The police fought back with their shields
and truncheons. The police line was breached. Suddenly shots
were heard. The demonstrators disengaged from the government
forces and retreated towards C.M. Recto Avenue. But sporadic
firing continued from the government forces.
After the firing ceased, two MDTs headed by Lt. Romeo
Paquinto and Lt. Laonglaan Goce sped towards Legarda Street and
lobbed tear gas at the remaining rallyist still grouped in the vicinity
of Mendiola. After dispersing the crowd, the two MDTs, together
with the two WPD MDTs, proceeded to Liwasang Bonifacio upon
order of General Montaño to disperse the rallyists assembled
thereat. Assisting the MDTs were a number of policemen from the
WPD, attired in civilian clothes with white head bands, who were
armed with long firearms.6 (Emphasis ours)
After the clash, twelve (12) marchers were officially confirmed dead, although
according to Tadeo, there were thirteen (13) dead, but he was not able to give the
name and address of said victim. Thirty-nine (39) were wounded by gunshots and
twelve (12) sustained minor injuries, all belonging to the group of the marchers.
Of the police and military personnel, three (3) sustained gunshot wounds and twenty
(20) suffered minor physical injuries such as abrasions, contusions and the like.
64
In the aftermath of the confrontation, then President Corazon C. Aquino issued
Administrative Order No. 11,7 (A.O. 11, for brevity) dated January 22, 1987, which
created the Citizens' Mendiola Commission. The body was composed of retired
Supreme Court Justice Vicente Abad Santos as Chairman, retired Supreme Court
Justice Jose Y. Feria and Mr. Antonio U. Miranda, both as members. A.O. 11 stated
that the Commission was created precisely for the "purpose of conducting an
investigation of the disorder, deaths, and casualties that took place in the vicinity of
Mendiola Bridge and Mendiola Street and Claro M. Recto Avenue, Manila, in the
afternoon of January 22, 1987". The Commission was expected to have submitted its
findings not later than February 6, 1987. But it failed to do so. Consequently, the
deadline was moved to February 16, 1987 by Administrative Order No. 13. Again, the
Commission was unable to meet this deadline. Finally, on February 27, 1987, it
submitted its report, in accordance with Administrative Order No. 17, issued on
February 11, 1987.
In its report, the Commission recapitulated its findings, to wit:
(1) The march to Mendiola of the KMP led by Jaime Tadeo,
together with the other sectoral groups, was not covered by any
permit as required under Batas Pambansa Blg. 880, the Public
Assembly Act of 1985, in violation of paragraph (a) Section 13,
punishable under paragraph (a), Section 14 of said law.
(2) The crowd dispersal control units of the police and the military
were armed with .38 and .45 caliber handguns, and M-16 armalites,
which is a prohibited act under paragraph 4(g), Section 13, and
punishable under paragraph (b), Section 14 of Batas Pambansa
Blg. 880.
(3) The security men assigned to protect the WPD, INP Field Force,
the Marines and supporting military units, as well as the security
officers of the police and military commanders were in civilian attire
in violation of paragraph (a), Section 10, Batas Pambansa 880.
(4) There was unnecessary firing by the police and military crowd
dispersal control units in dispersing the marchers, a prohibited act
under paragraph (e), Section 13, and punishable under paragraph
(b), Section 14, Batas Pambansa Blg. 880.
(5) The carrying and use of steel bars, pillboxes, darts, lead pipe,
wooden clubs with spikes, and guns by the marchers as offensive
weapons are prohibited acts punishable under paragraph (g),
Section 13, and punishable under paragraph (e), Section 14 of
Batas Pambansa Blg. 880.
(6) The KMP farmers broke off further negotiations with the MAR
officials and were determined to march to Malacañang,
emboldened as they are, by the inflammatory and incendiary
utterances of their leader, Jaime Tadeo — "bubutasin namin ang
barikada . . Dadanak and dugo . . . Ang nagugutom na magsasaka
ay gagawa ng sariling butas. . .
(7) There was no dialogue between the rallyists and the
government forces. Upon approaching the intersections of Legarda
and Mendiola, the marchers began pushing the police lines and
penetrated and broke through the first line of the CDC contingent.
(8) The police fought back with their truncheons and shields. They
stood their ground but the CDC line was breached. There ensued
gunfire from both sides. It is not clear who started the firing.
(9) At the onset of the disturbance and violence, the water cannons
and tear gas were not put into effective use to disperse the rioting
crowd.
(10) The water cannons and fire trucks were not put into operation
because (a) there was no order to use them; (b) they were
incorrectly prepositioned; and (c) they were out of range of the
marchers.
(11) Tear gas was not used at the start of the disturbance to
disperse the rioters. After the crowd had dispersed and the
wounded and dead were being carried away, the MDTs of the
police and the military with their tear gas equipment and
components conducted dispersal operations in the Mendiola area
and proceeded to Liwasang Bonifacio to disperse the remnants of
the marchers.
(12) No barbed wire barricade was used in Mendiola but no official
reason was given for its absence.8
From the results of the probe, the Commission recommended 9 the criminal
prosecution of four unidentified, uniformed individuals, shown either on tape or in
pictures, firing at the direction of the marchers. In connection with this, it was the
Commission's recommendation that the National Bureau of Investigation (NBI) be
tasked to undertake investigations regarding the identities of those who actually fired
their guns that resulted in the death of or injury to the victims of the incident. The
Commission also suggested that all the commissioned officers of both the Western
Police District and the INP Field Force, who were armed during the incident, be
prosecuted for violation of paragraph 4(g) of Section 13, Batas Pambansa Blg. 880,
the Public Assembly Act of 1985. The Commission's recommendation also included
the prosecution of the marchers, for carrying deadly or offensive weapons, but whose
identities have yet to be established. As for Jaime Tadeo, the Commission said that
he should be prosecuted both for violation of paragraph (a), Section 13, Batas
65
Pambansa Blg. 880 for holding the rally without a permit and for violation of Article
142, as amended, of the Revised Penal Code for inciting to sedition. As for the
following officers, namely: (1) Gen. Ramon E. Montaño; (2) Police Gen. Alfredo S.
Lim; (3) Police Gen. Edgar Dula Torres; (4) Police Maj. Demetrio dela Cruz; (5) Col.
Cezar Nazareno; and (5) Maj. Felimon Gasmin, for their failure to make effective use
of their skill and experience in directing the dispersal operations in Mendiola,
administrative sanctions were recommended to be imposed.
The last and the most significant recommendation of the Commission was for the
deceased and wounded victims of the Mendiola incident to be compensated by the
government. It was this portion that petitioners (Caylao group) invoke in their claim for
damages from the government.
Notwithstanding such recommendation, no concrete form of compensation was
received by the victims. Thus, on July 27, 1987, herein petitioners, (Caylao group)
filed a formal letter of demand for compensation from the Government. 10 This formal
demand was indorsed by the office of the Executive Secretary to the Department of
Budget and Management (DBM) on August 13, 1987. The House Committee on
Human Rights, on February 10, 1988, recommended the expeditious payment of
compensation to the Mendiola victims. 11
After almost a year, on January 20, 1988, petitioners (Caylao group) were constrained
to institute an action for damages against the Republic of the Philippines, together
with the military officers, and personnel involved in the Mendiola incident, before the
trial court. The complaint was docketed as Civil Case No. 88-43351.
On February 23, 1988, the Solicitor General filed a Motion to Dismiss on the ground
that the State cannot be sued without its consent. Petitioners opposed said motion on
March 16, 1988, maintaining that the State has waived its immunity from suit and that
the dismissal of the instant action is contrary to both the Constitution and the
International Law on Human Rights.
Respondent Judge Sandoval, in his first questioned Order, dismissed the complaint
as against the Republic of the Philippines on the ground that there was no waiver by
the State. Petitioners (Caylao group) filed a Motion for Reconsideration therefrom, but
the same was denied by respondent judge in his Order dated August 8, 1988.
Consequently, Caylao and her co-petitioners filed the instant petition.
On the other hand, the Republic of the Philippines, together with the military officers
and personnel impleaded as defendants in the court below, filed its petition
for certiorari.
Having arisen from the same factual beginnings and raising practically identical
issues, the two (2) petitions were consolidated and will therefore be jointly dealt with
and resolved in this Decision.
The resolution of both petitions revolves around the main issue of whether or not the
State has waived its immunity from suit.
Petitioners (Caylao group) advance the argument that the State has impliedly waived
its sovereign immunity from suit. It is their considered view that by the
recommendation made by the Commission for the government to indemnify the heirs
and victims of the Mendiola incident and by the public addresses made by then
President Aquino in the aftermath of the killings, the State has consented to be sued.
Under our Constitution the principle of immunity of the government from suit is
expressly provided in Article XVI, Section 3. The principle is based on the very
essence of sovereignty, and on the practical ground that there can be no legal right as
against the authority that makes the law on which the right depends. 12 It also rests on
reasons of public policy — that public service would be hindered, and the public
endangered, if the sovereign authority could be subjected to law suits at the instance
of every citizen and consequently controlled in the uses and dispositions of the means
required for the proper administration of the government. 13
This is not a suit against the State with its consent.
Firstly, the recommendation made by the Commission regarding indemnification of
the heirs of the deceased and the victims of the incident by the government does not
in any way mean that liability automatically attaches to the State. It is important to
note that A.O. 11 expressly states that the purpose of creating the Commission was
to have a body that will conduct an "investigation of the disorder, deaths and
casualties that took place." 14 In the exercise of its functions, A.O. 11 provides
guidelines, and what is relevant to Our discussion reads:
1 Its conclusions regarding the existence of probable cause for the
commission of any offense and of the persons probably guilty of the
same shall be sufficient compliance with the rules on preliminary
investigation and the charges arising therefrom may be filed directly
with the proper court. 15
In effect, whatever may be the findings of the Commission, the same shall only serve
as the cause of action in the event that any party decides to litigate his/her claim.
Therefore, the Commission is merely a preliminary venue. The Commission is not the
end in itself. Whatever recommendation it makes cannot in any way bind the State
immediately, such recommendation not having become final and, executory. This is
precisely the essence of it being a fact-finding body.
Secondly, whatever acts or utterances that then President Aquino may have done or
said, the same are not tantamount to the State having waived its immunity from suit.
The President's act of joining the marchers, days after the incident, does not mean
that there was an admission by the State of any liability. In fact to borrow the words of
petitioners (Caylao group), "it was an act of solidarity by the government with the
people". Moreover, petitioners rely on President Aquino's speech promising that the
66
government would address the grievances of the rallyists. By this alone, it cannot be
inferred that the State has admitted any liability, much less can it be inferred that it
has consented to the suit.
Although consent to be sued may be given impliedly, still it cannot be maintained that
such consent was given considering the circumstances obtaining in the instant case.
Thirdly, the case does not qualify as a suit against the State.
servants. 22 This Court has made it quite clear that even a "high position in the
23
government does not confer a license to persecute or recklessly injure another."
The inescapable conclusion is that the State cannot be held civilly liable for the
deaths that followed the incident. Instead, the liability should fall on the named
defendants in the lower court. In line with the ruling of this court in Shauf vs. Court of
Appeals, 24 herein public officials, having been found to have acted beyond the scope
of their authority, may be held liable for damages.

Some instances when a suit against the State is proper are: 16 WHEREFORE, finding no reversible error and no grave abuse of discretion
committed by respondent Judge in issuing the questioned orders, the instant petitions
are hereby DISMISSED.
(1) When the Republic is sued by name;
SO ORDERED.
(2) When the suit is against an unincorporated government agency;
Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Griño-Aquino, Regalado, Davide, Jr.,
(3) When the, suit is on its face against a government officer but the case is such that Romero, Nocon, Bellosillo, Melo and Quiason, JJ., concur.
ultimate liability will belong not to the officer but to the government.
Gutierrez, Jr., J., is on leave.
While the Republic in this case is sued by name, the ultimate liability does not pertain
to the government. Although the military officers and personnel, then party
defendants, were discharging their official functions when the incident occurred, their # Footnotes
functions ceased to be official the moment they exceeded their authority. Based on
the Commission findings, there was lack of justification by the government forces in 1 Judge Edilberto G. Sandoval was the presiding judge of Branch 9 of Regional Trial
the use of firearms. 17 Moreover, the members of the police and military crowd Court, Manila.
dispersal units committed a prohibited act under B.P. Blg. 880 18 as there was
unnecessary firing by them in dispersing the marchers. 19 2 Rollo of G.R. No. 84607, p. 65.

As early as 1954, this Court has pronounced that an officer cannot shelter himself by 3 Ibid., pp. 73-76.
the plea that he is a public agent acting under the color of his office when his acts are
wholly without authority. 20 Until recently in 1991, 21 this doctrine still found
application, this Court saying that immunity from suit cannot institutionalize 4 Ibid., p. 80.
irresponsibility and non-accountability nor grant a privileged status not claimed by any
other official of the Republic. The military and police forces were deployed to ensure 5 Ibid., pp. 82-84.
that the rally would be peaceful and orderly as well as to guarantee the safety of the
very people that they are duty-bound to protect. However, the facts as found by the 6 Ibid., pp. 84-85.
trial court showed that they fired at the unruly crowd to disperse the latter.

7 Ibid., p. 158.
While it is true that nothing is better settled than the general rule that a sovereign
state and its political subdivisions cannot be sued in the courts except when it has
given its consent, it cannot be invoked by both the military officers to release them 8 Ibid., pp. 102-103.
from any liability, and by the heirs and victims to demand indemnification from the
government. The principle of state immunity from suit does not apply, as in this case, 9 Ibid., pp. 107-109.
when the relief demanded by the suit requires no affirmative official action on the part
of the State nor the affirmative discharge of any obligation which belongs to the State
10 Rollo, G.R. No. 84645, pp. 36-38.
in its political capacity, even though the officers or agents who are made defendants
claim to hold or act only by virtue of a title of the state and as its agents and
67
11 Ibid., pp. 125-126.

12 Kawananakoa vs. Polyblank, 205 U.S. 349-353, 51 L. Ed. 834 (1907).

19. Act no. 3083
13 The Siren vs. United States, 7 Wall. 152, 19 L. Ed. 129 (1869).
ACT NO. 3083 - AN ACT DEFINING THE CONDITIONS UNDER WHICH THE
14 Supra, note 7. GOVERNMENT OF THE PHILIPPINE ISLANDS MAY BE SUED

15 Ibid. Section 1. Complaint against Government. — Subject to the provisions of this Act, the
Government of the Philippine Islands hereby consents and submits to be sued upon
any moneyed claim involving liability arising from contract, expressed or implied,
16 J.G. BERNAS, CONSTITUTIONAL STRUCTURE AND POWERS OF which could serve as a basis of civil action between private parties.
GOVERNMENT, NOTES AND CASES 414 (1st ed., 1991).
Sec. 2. A person desiring to avail himself of the privilege herein conferred must show
17 Rollo of G.R. No. 84607, pp. 196-197. that he has presented his claim to the Insular Auditor 1 and that the latter did not
decide the same within two months from the date of its presentation.
18 Sec. 13. Prohibited Acts. — The following shall constitute violations of this Act:
Sec. 3. Venue. — Original actions brought pursuant to the authority conferred in this
xxx xxx xxx Act shall be instituted in the Court of First Instance of the City of Manila or of the
province were the claimant resides, at the option of the latter, upon which court
(e) The unnecessary firing of firearms by a member of any law enforcement agency or exclusive original jurisdiction is hereby conferred to hear and determine such actions.
any person to disperse the public assembly;
Sec. 4. Actions instituted as aforesaid shall be governed by the same rules of
xxx xxx xxx procedure, both original and appellate, as if the litigants were private parties.

19 Supra, note 17 at p. 102.
20 Festejo vs. Fernando, 94 Phil. 504 (1954) citing 43 Am. Jur. 86-90.
21 Chavez vs. Sandiganbayan, 193 SCRA 282 (1991).
22 Ruiz vs. Cabahug, 102 Phil. 110 (1957).
Sec. 5. When the Government of the Philippine Island is plaintiff in an action instituted
in any court of original jurisdiction, the defendant shall have the right to assert therein,
by way of set-off or counterclaim in a similar action between private parties.
Sec. 6. Process in actions brought against the Government of the Philippine Islands
pursuant to the authority granted in this Act shall be served upon the Attorney-
General 2 whose duty it shall be to appear and make defense, either himself or
through delegates.

23 Supra, note 19. Sec. 7. Execution. — No execution shall issue upon any judgment rendered by any
court against the Government of the Philippine Islands under the provisions of this
Act; but a copy thereof duly certified by the clerk of the Court in which judgment is
24 91 SCRA 713 (1990).
rendered shall be transmitted by such clerk to the Governor-General, 3 within five
days after the same becomes final.

Sec. 8. Transmittal of Decision. — The Governor-General, 4 at the commencement of

each regular session of the Legislature, 5 shall transmit to that body for appropriate
E. EXPRESS CONSENT action all decisions so received by him, and if said body determine that payment
should be made, it shall appropriate the sum which the Government has been
18. CA 327 as amended by PD 1445 sentenced to pay, including the same in the appropriations for the ensuing year.

68
Sec. 9. This Act shall take effect on its approval.
Approved: March 16, 1923.
Footnotes
1. Now Auditor-General.
2. Now Solicitor-General.
3. Now President of the Philippines.
4. Id.
5. Now Congress.
20. Article IX, 1987 Constitution
1987 Constitution - Article IX
Approved: 02 February 1987
CONSTITUTIONAL COMMISSIONS
A. COMMON PROVISIONS
Section 1. The Constitutional Commissions, which shall be independent, are the Civil
Service Commission, the Commission on Elections, and the Commission on Audit.
Section 2. No member of a Constitutional Commission shall, during his tenure, hold
any other office or employment. Neither shall he engage in the practice of any
profession or in the active management or control of any business which, in any way,
may be affected by the functions of his office, nor shall he be financially interested,
directly or indirectly, in any contract with, or in any franchise or privilege granted by
the Government, any of its subdivisions, agencies, or instrumentalities, including
government-owned or controlled corporations or their subsidiaries.
Section 3. The salary of the Chairman and the Commissioners shall be fixed by law
and shall not be decreased during their tenure.
Section 4. The Constitutional Commissions shall appoint their officials and employees
in accordance with law.
Section 5. The Commission shall enjoy fiscal autonomy. Their approved annual
appropriations shall be automatically and regularly released.
Section 6. Each Commission en banc may promulgate its own rules concerning
pleadings and practice before it or before any of its offices. Such rules, however, shall
not diminish, increase, or modify substantive rights.
Section 7. Each Commission shall decide by a majority vote of all its Members, any
case or matter brought before it within sixty days from the date of its submission for
decision or resolution. A case or matter is deemed submitted for decision or resolution
upon the filing of the last pleading, brief, or memorandum required by the rules of the
Commission or by the Commission itself. Unless otherwise provided by this
Constitution or by law, any decision, order, or ruling of each Commission may be
brought to the Supreme Court on certiorari by the aggrieved party within thirty days
from receipt of a copy thereof.
Section 8. Each Commission shall perform such other functions as may be provided
by law.
B. THE CIVIL SERVICE COMMISSION
Section 1.
The civil service shall be administered by the Civil Service Commission composed of
a Chairman and two Commissioners who shall be natural-born citizens of the
Philippines and, at the time of their appointment, at least thirty-five years of age, with
proven capacity for public administration, and must not have been candidates for any
elective position in the elections immediately preceding their appointment.
The Chairman and the Commissioners shall be appointed by the President with the
consent of the Commission on Appointments for a term of seven years without
reappointment. Of those first appointed, the Chairman shall hold office for seven
years, a Commissioner for five years, and another Commissioner for three years,
without reappointment. Appointment to any vacancy shall be only for the unexpired
term of the predecessor. In no case shall any Member be appointed or designated in
a temporary or acting capacity.
Section 2.
The civil service embraces all branches, subdivisions, instrumentalities, and agencies
of the Government, including government-owned or controlled corporations with
original charters.
Appointments in the civil service shall be made only according to merit and fitness to
be determined, as far as practicable, and, except to positions which are policy-
determining, primarily confidential, or highly technical, by competitive examination.
No officer or employee of the civil service shall be removed or suspended except for
cause provided by law.
No officer or employee in the civil service shall engage, directly or indirectly, in any
electioneering or partisan political campaign.
69
The right to self-organization shall not be denied to government employees. (6)
Temporary employees of the Government shall be given such protection as may be
provided by law.
Section 3. The Civil Service Commission, as the central personnel agency of the
Government, shall establish a career service and adopt measures to promote morale,
efficiency, integrity, responsiveness, progressiveness, and courtesy in the civil
service. It shall strengthen the merit and rewards system, integrate all human
resources development programs for all levels and ranks, and institutionalize a
management climate conducive to public accountability. It shall submit to the
President and the Congress an annual report on its personnel programs.
Section 4. All public officers and employees shall take an oath or affirmation to uphold
and defend this Constitution.
Section 5. The Congress shall provide for the standardization of compensation of
government officials and employees, including those in government-owned or
controlled corporations with original charters, taking into account the nature of the
responsibilities pertaining to, and the qualifications required for, their positions.
Section 6. No candidate who has lost in any election shall, within one year after such
election, be appointed to any office in the Government or any Government-owned or
controlled corporations or in any of their subsidiaries.
Section 7. No elective official shall be eligible for appointment or designation in any
capacity to any public office or position during his tenure. Unless otherwise allowed by
law or by the primary functions of his position, no appointive official shall hold any
other office or employment in the Government or any subdivision, agency or
instrumentality thereof, including Government-owned or controlled corporations or
their subsidiaries.
Section 8. No elective or appointive public officer or employee shall receive additional,
double, or indirect compensation, unless specifically authorized by law, nor accept
without the consent of the Congress, any present, emolument, office, or title of any
kind from any foreign government. Pensions or gratuities shall not be considered as
additional, double, or indirect compensation.
C. THE COMMISSION ON ELECTIONS
Section 1.
There shall be a Commission on Elections composed of a Chairman and six
Commissioners who shall be natural-born citizens of the Philippines and, at the time
of their appointment, at least thirty-five years of age, holders of a college degree, and
must not have been candidates for any elective positions in the immediately
preceding elections. However, a majority thereof, including the Chairman, shall be
members of the Philippine Bar who have been engaged in the practice of law for at
least ten years.
The Chairman and the Commissioners shall be appointed by the President with the
consent of the Commission on Appointments for a term of seven years without
reappointment. Of those first appointed, three Members shall hold office for seven
years, two Members for five years, and the last Members for three years, without
reappointment. Appointment to any vacancy shall be only for the unexpired term of
the predecessor. In no case shall any Member be appointed or designated in a
temporary or acting capacity.
Sec. 2. The Commission on Elections shall exercise the following powers and
functions:
Enforce and administer all laws and regulations relative to the conduct of an election,
plebiscite, initiative, referendum, and recall.
Exercise exclusive original jurisdiction over all contests relating to the elections,
returns, and qualifications of all elective regional, provincial, and city officials, and
appellate jurisdiction over all contests involving elective municipal officials decided by
trial courts of general jurisdiction, or involving elective barangay officials decided by
trial courts of limited jurisdiction. Decisions, final orders, or rulings of the Commission
on election contests involving elective municipal and barangay offices shall be final,
executory, and not appealable.
Decide, except those involving the right to vote, all questions affecting elections,
including determination of the number and location of polling places, appointment of
election officials and inspectors, and registration of voters.
Deputize, with the concurrence of the President, law enforcement agencies and
instrumentalities of the Government, including the Armed Forces of the Philippines,
for the exclusive purpose of ensuring free, orderly, honest, peaceful, and credible
elections.
Register, after sufficient publication, political parties, organizations, or coalitions
which, in addition to other requirements, must present their platform or program of
government; and accredit citizens' arms of the Commission on Elections. Religious
denominations and sects shall not be registered. Those which seek to achieve their
goals through violence or unlawful means, or refuse to uphold and adhere to this
Constitution, or which are supported by any foreign government shall likewise be
refused registration. Financial contributions from foreign governments and their
agencies to political parties, organizations, coalitions, or candidates related to
elections, constitute interference in national affairs, and, when accepted, shall be an
additional ground for the cancellation of their registration with the Commission, in
addition to other penalties that may be prescribed by law.
File, upon a verified complaint, or on its own initiative, petitions in court for inclusion or
exclusion of voters; investigate and, where appropriate, prosecute cases of violations
of election laws, including acts or omissions constituting election frauds, offenses, and
malpractices.
Recommend to the Congress effective measures to minimize election spending,
including limitation of places where propaganda materials shall be posted, and to
70
prevent and penalize all forms of election frauds, offenses, malpractices, and
nuisance candidacies.
Recommend to the President the removal of any officer or employee it has deputized,
or the imposition of any other disciplinary action, for violation or disregard of, or
disobedience to, its directive, order, or decision.
Submit to the President and the Congress, a comprehensive report on the conduct of
each election, plebiscite, initiative, referendum, or recall.
Sec. 3. The Commission on Elections may sit en banc or in two divisions, and shall
promulgate its rules of procedure in order to expedite disposition of election cases,
including pre- proclamation controversies. All such election cases shall be heard and
decided in division, provided that motions for reconsideration of decisions shall be
decided by the Commission en banc.
Sec. 4. The Commission may, during the election period, supervise or regulate the
enjoyment or utilization of all franchises or permits for the operation of transportation
and other public utilities, media of communication or information, all grants, special
privileges, or concessions granted by the Government or any subdivision, agency, or
instrumentality thereof, including any government-owned or controlled corporation or
its subsidiary. Such supervision or regulation shall aim to ensure equal opportunity,
time, and space ,and the right to reply, including reasonable, equal rates therefor, for
public information campaigns and forums among candidates in connection with the
objective of holding free, orderly, honest, peaceful, and credible elections.
Section 5. No pardon, amnesty, parole, or suspension of sentence for violation of
election laws, rules, and regulations shall be granted by the President without the
favorable recommendation of the Commission.
Section 6. A free and open party system shall be allowed to evolve according to the
free choice of the people, subject to the provisions of this Article.
Section 7. No votes cast in favor of a political party, organization, or coalition shall be
valid, except for those registered under the party-list system as provided in this
Constitution.
Section 8. Political parties, or organizations or coalitions registered under the party-list
system, shall not be represented in the voters' registration boards, boards of election
inspectors, boards of canvassers, or other similar bodies. However, they shall be
entitled to appoint poll watchers in accordance with law.
Section 9. Unless otherwise fixed by the Commission in special cases, the election
period shall commence ninety days before the day of election and shall end thirty
days thereafter.
Section 10. Bona fide candidates for any public office shall be free from any form of
harassment and discrimination.
Section 11. Funds certified by the Commission as necessary to defray the expenses
for holding regular and special elections, plebiscites, initiatives, referenda, and recalls,
shall be provided in the regular or special appropriations and, once approved, shall be
released automatically upon certification by the Chairman of the Commission.
D. THE COMMISSION ON AUDIT
Section 1.
There shall be a Commission on Audit composed of a Chairman and two
Commissioners, who shall be natural-born citizens of the Philippines and, at the time
of their appointment, at least thirty-five years of age, Certified Public Accountants with
not less than ten years of auditing experience, or members of the Philippine Bar who
have been engaged in the practice of law for at least ten years, and must not have
been candidates for any elective position in the elections immediately preceding their
appointment. At no time shall all Members of the Commission belong to the same
profession.
The Chairman and the Commissioners shall be appointed by the President with the
consent of the Commission on Appointments for a term of seven years without
reappointment. Of those first appointed, the Chairman shall hold office for seven
years, one Commissioner for five years, and the other Commissioner for three years,
without reappointment. Appointment to any vacancy shall be only for the unexpired
portion of the term of the predecessor. In no case shall any Member be appointed or
designated in a temporary or acting capacity.
Section 2.
The Commission on Audit shall have the power, authority, and duty to examine, audit,
and settle all accounts pertaining to the revenue and receipts of, and expenditures or
uses of funds and property, owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies, or instrumentalities, including
government-owned or controlled corporations with original charters, and on a post-
audit basis:
constitutional bodies, commissions and offices that have been granted fiscal
autonomy under this Constitution;
autonomous state colleges and universities;
other government-owned or controlled corporations and their subsidiaries; and
such non-governmental entities receiving subsidy or equity, directly or indirectly, from
or through the Government, which are required by law or the granting institution to
submit to such audit as a condition of subsidy or equity.
However, where the internal control system of the audited agencies is inadequate, the
Commission may adopt such measures, including temporary or special pre-audit, as
are necessary and appropriate to correct the deficiencies. It shall keep the general
71
accounts of the Government and, for such period as may be provided by law,
preserve the vouchers and other supporting papers pertaining thereto.
The Commission shall have exclusive authority, subject to the limitations in this
Article, to define the scope of its audit and examination, establish the techniques and
methods required therefor, and promulgate accounting and auditing rules and
regulations, including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures or uses of
government funds and properties.
Sec. 3. No law shall be passed exempting any entity of the Government or its
subsidiaries in any guise whatever, or any investment of public funds, from the
jurisdiction of the Commission on Audit.
Sec 4. The Commission shall submit to the President and the Congress, within the
time fixed by law, an annual report covering the financial condition and operation of
the Government, its subdivisions, agencies, and instrumentalities, including
government-owned or controlled corporations, and non-governmental entities subject
to its audit, and recommend measures necessary to improve their effectiveness and
efficiency. It shall submit such other reports as may be required by law.
21. Article 2180, Civil Code of the Philippines
22. Department of Agriculture v, NLRC 227 SCRA 693
23. Meritt v. Govt. of the Phil. Islands 34 Phil 311
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11154 March 21, 1916
E. MERRITT, plaintiff-appellant,
vs.
GOVERNMENT OF THE PHILIPPINE ISLANDS, defendant-appellant.
Crossfield and O'Brien for plaintiff.
Attorney-General Avanceña for defendant..
TRENT, J.:
This is an appeal by both parties from a judgment of the Court of First Instance of the
city of Manila in favor of the plaintiff for the sum of P14,741, together with the costs of
the cause.
Counsel for the plaintiff insist that the trial court erred (1) "in limiting the general
damages which the plaintiff suffered to P5,000, instead of P25,000 as claimed in the
complaint," and (2) "in limiting the time when plaintiff was entirely disabled to two
months and twenty-one days and fixing the damage accordingly in the sum of P2,666,
instead of P6,000 as claimed by plaintiff in his complaint."
The Attorney-General on behalf of the defendant urges that the trial court erred: (a) in
finding that the collision between the plaintiff's motorcycle and the ambulance of the
General Hospital was due to the negligence of the chauffeur; (b) in holding that the
Government of the Philippine Islands is liable for the damages sustained by the
plaintiff as a result of the collision, even if it be true that the collision was due to the
negligence of the chauffeur; and (c) in rendering judgment against the defendant for
the sum of P14,741.
The trial court's findings of fact, which are fully supported by the record, are as
follows:
It is a fact not disputed by counsel for the defendant that when the plaintiff,
riding on a motorcycle, was going toward the western part of Calle Padre
Faura, passing along the west side thereof at a speed of ten to twelve miles
an hour, upon crossing Taft Avenue and when he was ten feet from the
southwestern intersection of said streets, the General Hospital ambulance,
upon reaching said avenue, instead of turning toward the south, after
passing the center thereof, so that it would be on the left side of said avenue,
as is prescribed by the ordinance and the Motor Vehicle Act, turned
suddenly and unexpectedly and long before reaching the center of the street,
into the right side of Taft Avenue, without having sounded any whistle or
horn, by which movement it struck the plaintiff, who was already six feet from
the southwestern point or from the post place there.
By reason of the resulting collision, the plaintiff was so severely injured that,
according to Dr. Saleeby, who examined him on the very same day that he
was taken to the General Hospital, he was suffering from a depression in the
left parietal region, a would in the same place and in the back part of his
head, while blood issued from his nose and he was entirely unconscious.
The marks revealed that he had one or more fractures of the skull and that
the grey matter and brain was had suffered material injury. At ten o'clock of
the night in question, which was the time set for performing the operation, his
pulse was so weak and so irregular that, in his opinion, there was little hope
that he would live. His right leg was broken in such a way that the fracture
extended to the outer skin in such manner that it might be regarded as
72
 double and the would be exposed to infection, for which reason it was of the
most serious nature.
At another examination six days before the day of the trial, Dr. Saleeby
noticed that the plaintiff's leg showed a contraction of an inch and a half and
a curvature that made his leg very weak and painful at the point of the
fracture. Examination of his head revealed a notable readjustment of the
functions of the brain and nerves. The patient apparently was slightly deaf,
had a light weakness in his eyes and in his mental condition. This latter
weakness was always noticed when the plaintiff had to do any difficult
mental labor, especially when he attempted to use his money for
mathematical calculations.
According to the various merchants who testified as witnesses, the plaintiff's
mental and physical condition prior to the accident was excellent, and that
after having received the injuries that have been discussed, his physical
condition had undergone a noticeable depreciation, for he had lost the
agility, energy, and ability that he had constantly displayed before the
accident as one of the best constructors of wooden buildings and he could
not now earn even a half of the income that he had secured for his work
because he had lost 50 per cent of his efficiency. As a contractor, he could
no longer, as he had before done, climb up ladders and scaffoldings to reach
the highest parts of the building.
As a consequence of the loss the plaintiff suffered in the efficiency of his
work as a contractor, he had to dissolved the partnership he had formed with
the engineer. Wilson, because he was incapacitated from making
mathematical calculations on account of the condition of his leg and of his
mental faculties, and he had to give up a contract he had for the construction
of the Uy Chaco building."
We may say at the outset that we are in full accord with the trial court to the effect that
the collision between the plaintiff's motorcycle and the ambulance of the General
Hospital was due solely to the negligence of the chauffeur.
The two items which constitute a part of the P14,741 and which are drawn in question
by the plaintiff are (a) P5,000, the award awarded for permanent injuries, and (b) the
P2,666, the amount allowed for the loss of wages during the time the plaintiff was
incapacitated from pursuing his occupation. We find nothing in the record which would
justify us in increasing the amount of the first. As to the second, the record shows,
and the trial court so found, that the plaintiff's services as a contractor were worth
P1,000 per month. The court, however, limited the time to two months and twenty-one
days, which the plaintiff was actually confined in the hospital. In this we think there
was error, because it was clearly established that the plaintiff was wholly
incapacitated for a period of six months. The mere fact that he remained in the
hospital only two months and twenty-one days while the remainder of the six months
was spent in his home, would not prevent recovery for the whole time. We, therefore,
find that the amount of damages sustained by the plaintiff, without any fault on his
part, is P18,075.
As the negligence which caused the collision is a tort committed by an agent or
employee of the Government, the inquiry at once arises whether the Government is
legally-liable for the damages resulting therefrom.
Act No. 2457, effective February 3, 1915, reads:
An Act authorizing E. Merritt to bring suit against the Government of the
Philippine Islands and authorizing the Attorney-General of said Islands to
appear in said suit.
Whereas a claim has been filed against the Government of the Philippine
Islands by Mr. E. Merritt, of Manila, for damages resulting from a collision
between his motorcycle and the ambulance of the General Hospital on
March twenty-fifth, nineteen hundred and thirteen;
Whereas it is not known who is responsible for the accident nor is it possible
to determine the amount of damages, if any, to which the claimant is entitled;
and
Whereas the Director of Public Works and the Attorney-General
recommended that an Act be passed by the Legislature authorizing Mr. E.
Merritt to bring suit in the courts against the Government, in order that said
questions may be decided: Now, therefore,
By authority of the United States, be it enacted by the Philippine Legislature,
that:
SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First
Instance of the city of Manila against the Government of the Philippine
Islands in order to fix the responsibility for the collision between his
motorcycle and the ambulance of the General Hospital, and to determine the
amount of the damages, if any, to which Mr. E. Merritt is entitled on account
of said collision, and the Attorney-General of the Philippine Islands is hereby
authorized and directed to appear at the trial on the behalf of the
Government of said Islands, to defendant said Government at the same.
SEC. 2. This Act shall take effect on its passage.
Enacted, February 3, 1915.
Did the defendant, in enacting the above quoted Act, simply waive its immunity from
suit or did it also concede its liability to the plaintiff? If only the former, then it cannot
73
be held that the Act created any new cause of action in favor of the plaintiff or
extended the defendant's liability to any case not previously recognized.
All admit that the Insular Government (the defendant) cannot be sued by an individual
without its consent. It is also admitted that the instant case is one against the
Government. As the consent of the Government to be sued by the plaintiff was
entirely voluntary on its part, it is our duty to look carefully into the terms of the
consent, and render judgment accordingly.
The plaintiff was authorized to bring this action against the Government "in order to fix
the responsibility for the collision between his motorcycle and the ambulance of the
General Hospital and to determine the amount of the damages, if any, to which Mr. E.
Merritt is entitled on account of said collision, . . . ." These were the two questions
submitted to the court for determination. The Act was passed "in order that said
questions may be decided." We have "decided" that the accident was due solely to
the negligence of the chauffeur, who was at the time an employee of the defendant,
and we have also fixed the amount of damages sustained by the plaintiff as a result of
the collision. Does the Act authorize us to hold that the Government is legally liable
for that amount? If not, we must look elsewhere for such authority, if it exists.
The Government of the Philippine Islands having been "modeled after the Federal
and State Governments in the United States," we may look to the decisions of the
high courts of that country for aid in determining the purpose and scope of Act No.
2457.
In the United States the rule that the state is not liable for the torts committed by its
officers or agents whom it employs, except when expressly made so by legislative
enactment, is well settled. "The Government," says Justice Story, "does not undertake
to guarantee to any person the fidelity of the officers or agents whom it employs,
since that would involve it in all its operations in endless embarrassments, difficulties
and losses, which would be subversive of the public interest." (Claussen vs. City of
Luverne, 103 Minn., 491, citing U. S. vs. Kirkpatrick, 9 Wheat, 720; 6 L. Ed., 199; and
Beers vs. States, 20 How., 527; 15 L. Ed., 991.)
In the case of Melvin vs. State (121 Cal., 16), the plaintiff sought to recover damages
from the state for personal injuries received on account of the negligence of the state
officers at the state fair, a state institution created by the legislature for the purpose of
improving agricultural and kindred industries; to disseminate information calculated to
educate and benefit the industrial classes; and to advance by such means the
material interests of the state, being objects similar to those sought by the public
school system. In passing upon the question of the state's liability for the negligent
acts of its officers or agents, the court said:
No claim arises against any government is favor of an individual, by reason
of the misfeasance, laches, or unauthorized exercise of powers by its
officers or agents. (Citing Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs.
State, 86 N. C., 51, 53; 41 Am. Rep., 440; Chapman vs. State, 104 Cal.,
690; 43 Am. St. Rep., 158; Green vs. State, 73 Cal., 29; Bourn vs. Hart, 93
Cal., 321; 27 Am. St. Rep., 203; Story on Agency, sec. 319.)
As to the scope of legislative enactments permitting individuals to sue the state where
the cause of action arises out of either fort or contract, the rule is stated in 36 Cyc.,
915, thus:
By consenting to be sued a state simply waives its immunity from suit. It
does not thereby concede its liability to plaintiff, or create any cause of action
in his favor, or extend its liability to any cause not previously recognized. It
merely gives a remedy to enforce a preexisting liability and submits itself to
the jurisdiction of the court, subject to its right to interpose any lawful
defense.
In Apfelbacher vs. State (152 N. W., 144, advanced sheets), decided April 16, 1915,
the Act of 1913, which authorized the bringing of this suit, read:
SECTION 1. Authority is hereby given to George Apfelbacher, of the town of
Summit, Waukesha County, Wisconsin, to bring suit in such court or courts
and in such form or forms as he may be advised for the purpose of settling
and determining all controversies which he may now have with the State of
Wisconsin, or its duly authorized officers and agents, relative to the mill
property of said George Apfelbacher, the fish hatchery of the State of
Wisconsin on the Bark River, and the mill property of Evan Humphrey at the
lower end of Nagawicka Lake, and relative to the use of the waters of said
Bark River and Nagawicka Lake, all in the county of Waukesha, Wisconsin.
In determining the scope of this act, the court said:
Plaintiff claims that by the enactment of this law the legislature admitted
liability on the part of the state for the acts of its officers, and that the suit
now stands just as it would stand between private parties. It is difficult to see
how the act does, or was intended to do, more than remove the state's
immunity from suit. It simply gives authority to commence suit for the
purpose of settling plaintiff's controversies with the estate. Nowhere in the
act is there a whisper or suggestion that the court or courts in the disposition
of the suit shall depart from well established principles of law, or that the
amount of damages is the only question to be settled. The act opened the
door of the court to the plaintiff. It did not pass upon the question of liability,
but left the suit just where it would be in the absence of the state's immunity
from suit. If the Legislature had intended to change the rule that obtained in
this state so long and to declare liability on the part of the state, it would not
have left so important a matter to mere inference, but would have done so in
express terms. (Murdock Grate Co. vs. Commonwealth, 152 Mass., 28; 24
N.E., 854; 8 L. R. A., 399.)
74
In Denning vs. State (123 Cal., 316), the provisions of the Act of 1893, relied upon
and considered, are as follows:
All persons who have, or shall hereafter have, claims on contract or for
negligence against the state not allowed by the state board of examiners,
are hereby authorized, on the terms and conditions herein contained, to
bring suit thereon against the state in any of the courts of this state of
competent jurisdiction, and prosecute the same to final judgment. The rules
of practice in civil cases shall apply to such suits, except as herein otherwise
provided.
And the court said:
This statute has been considered by this court in at least two cases, arising
under different facts, and in both it was held that said statute did not create
any liability or cause of action against the state where none existed before,
but merely gave an additional remedy to enforce such liability as would have
existed if the statute had not been enacted. (Chapman vs. State, 104 Cal.,
690; 43 Am. St. Rep., 158; Melvin vs. State, 121 Cal., 16.)
A statute of Massachusetts enacted in 1887 gave to the superior court "jurisdiction of
all claims against the commonwealth, whether at law or in equity," with an exception
not necessary to be here mentioned. In construing this statute the court, in Murdock
Grate Co. vs. Commonwealth (152 Mass., 28), said:
The statute we are discussing disclose no intention to create against the
state a new and heretofore unrecognized class of liabilities, but only an
intention to provide a judicial tribunal where well recognized existing
liabilities can be adjudicated.
In Sipple vs. State (99 N. Y., 284), where the board of the canal claims had, by the
terms of the statute of New York, jurisdiction of claims for damages for injuries in the
management of the canals such as the plaintiff had sustained, Chief Justice Ruger
remarks: "It must be conceded that the state can be made liable for injuries arising
from the negligence of its agents or servants, only by force of some positive statute
assuming such liability."
It being quite clear that Act No. 2457 does not operate to extend the Government's
liability to any cause not previously recognized, we will now examine the substantive
law touching the defendant's liability for the negligent acts of its officers, agents, and
employees. Paragraph 5 of article 1903 of the Civil Code reads:
The state is liable in this sense when it acts through a special agent, but not
when the damage should have been caused by the official to whom properly
it pertained to do the act performed, in which case the provisions of the
preceding article shall be applicable.
The supreme court of Spain in defining the scope of this paragraph said:
That the obligation to indemnify for damages which a third person causes to
another by his fault or negligence is based, as is evidenced by the same Law
3, Title 15, Partida 7, on that the person obligated, by his own fault or
negligence, takes part in the act or omission of the third party who caused
the damage. It follows therefrom that the state, by virtue of such provisions
of law, is not responsible for the damages suffered by private individuals in
consequence of acts performed by its employees in the discharge of the
functions pertaining to their office, because neither fault nor even negligence
can be presumed on the part of the state in the organization of branches of
public service and in the appointment of its agents; on the contrary, we must
presuppose all foresight humanly possible on its part in order that each
branch of service serves the general weal an that of private persons
interested in its operation. Between these latter and the state, therefore, no
relations of a private nature governed by the civil law can arise except in a
case where the state acts as a judicial person capable of acquiring rights
and contracting obligations. (Supreme Court of Spain, January 7, 1898; 83
Jur. Civ., 24.)
That the Civil Code in chapter 2, title 16, book 4, regulates the obligations
which arise out of fault or negligence; and whereas in the first article thereof.
No. 1902, where the general principle is laid down that where a person who
by an act or omission causes damage to another through fault or negligence,
shall be obliged to repair the damage so done, reference is made to acts or
omissions of the persons who directly or indirectly cause the damage, the
following articles refers to this persons and imposes an identical obligation
upon those who maintain fixed relations of authority and superiority over the
authors of the damage, because the law presumes that in consequence of
such relations the evil caused by their own fault or negligence is imputable to
them. This legal presumption gives way to proof, however, because, as held
in the last paragraph of article 1903, responsibility for acts of third persons
ceases when the persons mentioned in said article prove that they employed
all the diligence of a good father of a family to avoid the damage, and among
these persons, called upon to answer in a direct and not a subsidiary
manner, are found, in addition to the mother or the father in a proper case,
guardians and owners or directors of an establishment or enterprise, the
state, but not always, except when it acts through the agency of a special
agent, doubtless because and only in this case, the fault or negligence,
which is the original basis of this kind of objections, must be presumed to lie
with the state.
That although in some cases the state might by virtue of the general
principle set forth in article 1902 respond for all the damage that is
occasioned to private parties by orders or resolutions which by fault or
negligence are made by branches of the central administration acting in the
name and representation of the state itself and as an external expression of
its sovereignty in the exercise of its executive powers, yet said article is not
75
 applicable in the case of damages said to have been occasioned to the
petitioners by an executive official, acting in the exercise of his powers, in
proceedings to enforce the collections of certain property taxes owing by the
owner of the property which they hold in sublease.
That the responsibility of the state is limited by article 1903 to the case
wherein it acts through a special agent(and a special agent, in the sense in
which these words are employed, is one who receives a definite and fixed
order or commission, foreign to the exercise of the duties of his office if he is
a special official) so that in representation of the state and being bound to
act as an agent thereof, he executes the trust confided to him. This concept
does not apply to any executive agent who is an employee of the acting
administration and who on his own responsibility performs the functions
which are inherent in and naturally pertain to his office and which are
regulated by law and the regulations." (Supreme Court of Spain, May 18,
1904; 98 Jur. Civ., 389, 390.)
That according to paragraph 5 of article 1903 of the Civil Code and the
principle laid down in a decision, among others, of the 18th of May, 1904, in
a damage case, the responsibility of the state is limited to that which it
contracts through a special agent, duly empowered by a definite order or
commission to perform some act or charged with some definite purpose
which gives rise to the claim, and not where the claim is based on acts or
omissions imputable to a public official charged with some administrative or
technical office who can be held to the proper responsibility in the manner
laid down by the law of civil responsibility. Consequently, the trial court in not
so deciding and in sentencing the said entity to the payment of damages,
caused by an official of the second class referred to, has by erroneous
interpretation infringed the provisions of articles 1902 and 1903 of the Civil
Code. (Supreme Court of Spain, July 30, 1911; 122 Jur. Civ., 146.)
It is, therefore, evidence that the State (the Government of the Philippine Islands) is
only liable, according to the above quoted decisions of the Supreme Court of Spain,
for the acts of its agents, officers and employees when they act as special agents
within the meaning of paragraph 5 of article 1903, supra, and that the chauffeur of the
ambulance of the General Hospital was not such an agent.
For the foregoing reasons, the judgment appealed from must be reversed, without
costs in this instance. Whether the Government intends to make itself legally liable for
the amount of damages above set forth, which the plaintiff has sustained by reason of
the negligent acts of one of its employees, by legislative enactment and by
appropriating sufficient funds therefor, we are not called upon to determine. This
matter rests solely with the Legislature and not with the courts.
Arellano, C. J., Torres, Johnson, and Moreland, JJ., concur.
24. Republic v. Purisima 78 SCRA 470
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-36084 August 31, 1977
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
HONORABLE AMANTE P. PURISIMA, the Presiding Judge of the court of first
Instance of Manila (Branch VII), and YELLOW BALL FREIGHT LINES,
INC., respondents.
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Santiago M.
Kapunan, Solicitor Oscar C. Fernandez and Special Attorney Renato P. Mabugat for
petitioner.
Jose Q. Calingo for private respondent.
FERNANDO, Acting C.J.:
The jurisdictional issued raised by Solicitor General Estelito P. Mendoza on behalf of
the Republic of the Philippines in this certiorari and prohibition proceeding arose from
the failure of respondent Judge Amante P. Purisima of the Court of First Instance of
Manila to apply the well-known and of-reiterated doctrine of the non-suability of a
State, including its offices and agencies, from suit without its consent. it was so
alleged in a motion to dismiss filed by defendant Rice and Corn Administration in a
pending civil suit in the sala of respondent Judge for the collection of a money claim
arising from an alleged breach of contract, the plaintiff being private respondent
Yellow Ball Freight Lines, Inc. 1 Such a motion to dismiss was filed on September 7,
1972. At that time, the leading case of Mobil Philippines Exploration, Inc. v. Customs
Arrastre Service, 2 were Justice Bengzon stressed the lack of jurisdiction of a court to
pass on the merits of a claim against any office or entity acting as part of the
machinery of the national government unless consent be shown, had been applied in
53 other decisions. 3 There is thus more than sufficient basis for an allegation of
jurisdiction infirmity against the order of respondent Judge denying the motion to
dismiss dated October 4, 1972. 4 What is more, the position of the Republic has been
fortified with the explicit affirmation found in this provision of the present Constitution:
"The State may not be sued without its consent." 5
The merit of the petition for certiorari and prohibition is thus obvious.
76
1. There is pertinence to this excerpt from Switzerland General Insurance Co., Ltd. v.
Republic of the Philippines: 6"The doctrine of non-suability recognized in this
jurisdiction even prior to the effectivity of the [1935] Constitution is a logical corollary
of the positivist concept of law which, to para-phrase Holmes, negates the assertion
of any legal right as against the state, in itself the source of the law on which such a
right may be predicated. Nor is this all.lwphl@itç Even if such a principle does give
rise to problems, considering the vastly expanded role of government enabling it to
engage in business pursuits to promote the general welfare, it is not obeisance to the
analytical school of thought alone that calls for its continued applicability. Why it must
continue to be so, even if the matter be viewed sociologically, was set forth
in Providence Washington Insurance Co. v. Republic thus: "Nonetheless, a continued
adherence to the doctrine of non-suability is not to be deplored for as against the
inconvenience that may be caused private parties, the loss of governmental efficiency
and the obstacle to the performance of its multifarious functions are far greater if such
a fundamental principle were abandoned and the availability of judicial remedy were
not thus restricted. With the well-known propensity on the part of our people to go the
court, at the least provocation, the loss of time and energy required to defend against
law suits, in the absence of such a basic principle that constitutes such an effective
obstacle, could very well be imagined." 7 It only remains to be added that under the
present Constitution which, as noted, expressly reaffirmed such a doctrine, the
following decisions had been rendered: Del mar v. The Philippine veterans
Administration; 8 Republic v. Villasor; 9 Sayson v. Singson; 10 and Director of the
Bureau of Printing v. Francisco. 11
2. Equally so, the next paragraph in the above opinion from the Switzerland General
Insurance Company decision is likewise relevant: "Nor is injustice thereby cause
private parties. They could still proceed to seek collection of their money claims by
pursuing the statutory remedy of having the Auditor General pass upon them subject
to appeal to judicial tribunals for final adjudication. We could thus correctly conclude
as we did in the cited Provindence Washington Insurance decision: "Thus the doctrine
of non-suability of the government without its consent, as it has operated in practice,
hardly lends itself to the charge that it could be the fruitful parent of injustice,
considering the vast and ever-widening scope of state activities at present being
undertaken. Whatever difficulties for private claimants may still exist, is, from an
objective appraisal of all factors, minimal. In the balancing of interests, so unavoidable
in the determination of what principles must prevail if government is to satisfy the
public weal, the verdict must be, as it has been these so many years, for its
continuing recognition as a fundamental postulate of constitutional law." 12
3. Apparently respondent Judge was misled by the terms of the contract between the
private respondent, plaintiff in his sala, and defendant Rice and Corn Administration
which, according to him, anticipated the case of a breach of contract within the parties
and the suits that may thereafter arise. 13 The consent, to be effective though, must
come from the State acting through a duly enacted statute as pointed out by Justice
Bengzon in Mobil. Thus, whatever counsel for defendant Rice and Corn
Administration agreed to had no binding force on the government. That was clearly
beyond the scope of his authority. At any rate, Justice Sanchez, in Ramos v. Court of
Industrial Relations, 14 was quite categorical as to its "not [being] possessed of a
separate and distinct corporate existence. On the contrary, by the law of its creation, it
is an office directly 'under the Office of the President of the Philippines." 15
WHEREFORE, the petitioner for certiorari is granted and the resolution of October 4,
1972 denying the motion to dismiss filed by the Rice and Corn Administration nullified
and set aside and the petitioner for prohibition is likewise granted restraining
respondent Judge from acting on civil Case No. 79082 pending in his sala except for
the purpose of ordering its dismissal for lack of jurisdiction. The temporary restraining
order issued on February 8, 1973 by this Court is made permanent terminating this
case. Costs against Yellow Ball Freight Lines, Inc.
Antonio, Aquino, Concepcion, Jr. and Santos, JJ., concur.
Barredo, J., took no part.
Footnotes
1 Petitioner, Annex H.
2 L-23139, December 17 1966, 18 SCRA 1120.
3 Insurance Company of North America v. Republic, L-24520, July 11, 1967, 20
SCRA 648, was the first case citing Mobil with approval. The last opinion came from
the pen of Chief Justice Concepcion deciding therein the appeals in Union Insurance
Society of Canton, Ltd. v. Republic, L-26409, 46 SCRA 120; Domestic Insurance
Company of the Philippines v. Republic, L-26550, 46 SCRA 121; Insurance Company
of North America v. Republic, L-26587, 46 SCRA 121; British Traders Insurance Co.,
Ltd. v. Barber Line, Macondray and Co., Inc., L-31157, 46 SCRA 121, the decisions
being promulgated on July 31, 1972.
4 Ibid, Annex J.
5 Article XV, Section 16.
6 L-27389, March 30, 1970, 32 SCRA 227.
8 L-27299, June 27, 1973, 51 SCRA 340.
9 L-30671, November 28, 1973, 54 SCRA 83.
10 L-30044, December 19, 1973, 54 SCRA 282.
11 L-31337, December 20, 1973, 54 SCRA 324.
77
12 32 SCRA 227, 229-230. Sometime in May, 1972, the United States invited the submission of bids for the
following projects
13 Petition, Annex J, 2.
1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay,
14 L-22753, December 18, 1967, 21 SCRA 1283. Philippines.

15 Ibid, 1287. 2. Repair typhoon damage to NAS Cubi shoreline; repair typhoon damage to
shoreline revetment, NAVBASE Subic; and repair to Leyte Wharf approach,
NAVBASE Subic Bay, Philippines.

Eligio de Guzman & Co., Inc. responded to the invitation and submitted bids.
Subsequent thereto, the company received from the United States two telegrams
F. IMPLIED CONSENT requesting it to confirm its price proposals and for the name of its bonding company.
The company complied with the requests. [In its complaint, the company alleges that
25. US v. Ruiz 136 SCRA 487 the United States had accepted its bids because "A request to confirm a price
proposal confirms the acceptance of a bid pursuant to defendant United States'
Republic of the Philippines bidding practices." (Rollo, p. 30.) The truth of this allegation has not been tested
SUPREME COURT because the case has not reached the trial stage.]
Manila
In June, 1972, the company received a letter which was signed by Wilham I. Collins,
EN BANC Director, Contracts Division, Naval Facilities Engineering Command, Southwest
Pacific, Department of the Navy of the United States, who is one of the petitioners
herein. The letter said that the company did not qualify to receive an award for the
G.R. No. L-35645 May 22, 1985 projects because of its previous unsatisfactory performance rating on a repair contract
for the sea wall at the boat landings of the U.S. Naval Station in Subic Bay. The letter
UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I. further said that the projects had been awarded to third parties. In the
COLLINS and ROBERT GOHIER, petitioners, abovementioned Civil Case No. 779-M, the company sued the United States of
vs. America and Messrs. James E. Galloway, William I. Collins and Robert Gohier all
HON. V. M. RUIZ, Presiding Judge of Branch XV, Court of First Instance of Rizal members of the Engineering Command of the U.S. Navy. The complaint is to order
and ELIGIO DE GUZMAN & CO., INC., respondents. the defendants to allow the plaintiff to perform the work on the projects and, in the
event that specific performance was no longer possible, to order the defendants to
pay damages. The company also asked for the issuance of a writ of preliminary
Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners.
injunction to restrain the defendants from entering into contracts with third parties for
work on the projects.
Albert, Vergara, Benares, Perias & Dominguez Law Office for respondents.
The defendants entered their special appearance for the purpose only of questioning
ABAD SANTOS, J.: the jurisdiction of this court over the subject matter of the complaint and the persons
of defendants, the subject matter of the complaint being acts and omissions of the
This is a petition to review, set aside certain orders and restrain the respondent judge individual defendants as agents of defendant United States of America, a foreign
from trying Civil Case No. 779M of the defunct Court of First Instance of Rizal. sovereign which has not given her consent to this suit or any other suit for the causes
of action asserted in the complaint." (Rollo, p. 50.)
The factual background is as follows:
Subsequently the defendants filed a motion to dismiss the complaint which included
an opposition to the issuance of the writ of preliminary injunction. The company
At times material to this case, the United States of America had a naval base in
opposed the motion. The trial court denied the motion and issued the writ. The
Subic, Zambales. The base was one of those provided in the Military Bases
defendants moved twice to reconsider but to no avail. Hence the instant petition which
Agreement between the Philippines and the United States.

78
seeks to restrain perpetually the proceedings in Civil Case No. 779-M for lack of
jurisdiction on the part of the trial court.
The petition is highly impressed with merit.
The traditional rule of State immunity exempts a State from being sued in the courts
of another State without its consent or waiver. This rule is a necessary consequence
of the principles of independence and equality of States. However, the rules of
International Law are not petrified; they are constantly developing and evolving. And
because the activities of states have multiplied, it has been necessary to distinguish
them-between sovereign and governmental acts (jure imperii) and private,
commercial and proprietary acts (jure gestionis). The result is that State immunity now
extends only to acts jure imperil The restrictive application of State immunity is now
the rule in the United States, the United Kingdom and other states in western Europe.
(See Coquia and Defensor Santiago, Public International Law, pp. 207-209 [1984].)
The respondent judge recognized the restrictive doctrine of State immunity when he
said in his Order denying the defendants' (now petitioners) motion: " A distinction
should be made between a strictly governmental function of the sovereign state from
its private, proprietary or non- governmental acts (Rollo, p. 20.) However, the
respondent judge also said: "It is the Court's considered opinion that entering into a
contract for the repair of wharves or shoreline is certainly not a governmental function
altho it may partake of a public nature or character. As aptly pointed out by plaintiff's
counsel in his reply citing the ruling in the case of Lyons, Inc., [104 Phil. 594 (1958)],
and which this Court quotes with approval, viz.:
It is however contended that when a sovereign state enters into a
contract with a private person, the state can be sued upon the
theory that it has descended to the level of an individual from which
it can be implied that it has given its consent to be sued under the
contract. ...
xxx xxx xxx
We agree to the above contention, and considering that the United
States government, through its agency at Subic Bay, entered into a
contract with appellant for stevedoring and miscellaneous labor
services within the Subic Bay Area, a U.S. Naval Reservation, it is
evident that it can bring an action before our courts for any
contractual liability that that political entity may assume under the
contract. The trial court, therefore, has jurisdiction to entertain this
case ... (Rollo, pp. 20-21.)
The reliance placed on Lyons by the respondent judge is misplaced for the following
reasons:
In Harry Lyons, Inc. vs. The United States of America, supra, plaintiff brought suit in
the Court of First Instance of Manila to collect several sums of money on account of a
contract between plaintiff and defendant. The defendant filed a motion to dismiss on
the ground that the court had no jurisdiction over defendant and over the subject
matter of the action. The court granted the motion on the grounds that: (a) it had no
jurisdiction over the defendant who did not give its consent to the suit; and (b) plaintiff
failed to exhaust the administrative remedies provided in the contract. The order of
dismissal was elevated to this Court for review.
In sustaining the action of the lower court, this Court said:
It appearing in the complaint that appellant has not complied with
the procedure laid down in Article XXI of the contract regarding the
prosecution of its claim against the United States Government, or,
stated differently, it has failed to first exhaust its administrative
remedies against said Government, the lower court acted properly
in dismissing this case.(At p. 598.)
It can thus be seen that the statement in respect of the waiver of State immunity from
suit was purely gratuitous and, therefore, obiter so that it has no value as an
imperative authority.
The restrictive application of State immunity is proper only when the proceedings
arise out of commercial transactions of the foreign sovereign, its commercial activities
or economic affairs. Stated differently, a State may be said to have descended to the
level of an individual and can thus be deemed to have tacitly given its consent to be
sued only when it enters into business contracts. It does not apply where the contract
relates to the exercise of its sovereign functions. In this case the projects are an
integral part of the naval base which is devoted to the defense of both the United
States and the Philippines, indisputably a function of the government of the highest
order; they are not utilized for nor dedicated to commercial or business purposes.
That the correct test for the application of State immunity is not the conclusion of a
contract by a State but the legal nature of the act is shown in Syquia vs. Lopez, 84
Phil. 312 (1949). In that case the plaintiffs leased three apartment buildings to the
United States of America for the use of its military officials. The plaintiffs sued to
recover possession of the premises on the ground that the term of the leases had
expired. They also asked for increased rentals until the apartments shall have been
vacated.
The defendants who were armed forces officers of the United States moved to
dismiss the suit for lack of jurisdiction in the part of the court. The Municipal Court of
Manila granted the motion to dismiss; sustained by the Court of First Instance, the
plaintiffs went to this Court for review on certiorari. In denying the petition, this Court
said:
79
 On the basis of the foregoing considerations we are of the belief
and we hold that the real party defendant in interest is the
Government of the United States of America; that any judgment for
back or Increased rentals or damages will have to be paid not by
defendants Moore and Tillman and their 64 co-defendants but by
the said U.S. Government. On the basis of the ruling in the case of
Land vs. Dollar already cited, and on what we have already stated,
the present action must be considered as one against the U.S.
Government. It is clear hat the courts of the Philippines including
the Municipal Court of Manila have no jurisdiction over the present
case for unlawful detainer. The question of lack of jurisdiction was
raised and interposed at the very beginning of the action. The U.S.
Government has not , given its consent to the filing of this suit
which is essentially against her, though not in name. Moreover, this
is not only a case of a citizen filing a suit against his own
Government without the latter's consent but it is of a citizen filing an
action against a foreign government without said government's
consent, which renders more obvious the lack of jurisdiction of the
courts of his country. The principles of law behind this rule are so
elementary and of such general acceptance that we deem it
unnecessary to cite authorities in support thereof. (At p. 323.)
In Syquia,the United States concluded contracts with private individuals but the
contracts notwithstanding the States was not deemed to have given or waived its
consent to be sued for the reason that the contracts were for jure imperii and not
for jure gestionis.
WHEREFORE, the petition is granted; the questioned orders of the respondent judge
are set aside and Civil Case No. is dismissed. Costs against the private respondent.
Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera, Plana, * Escolin, Relova,
Gutierrez, Jr., De la Fuente, Cuevas and Alampay, JJ., concur.
Fernando, C.J., took no part.
Separate Opinions
MAKASIAR, J., dissenting:
The petition should be dismissed and the proceedings in Civil Case No. 779-M in the
defunct CFI (now RTC) of Rizal be allowed to continue therein.
In the case of Lyons vs. the United States of America (104 Phil. 593), where the
contract entered into between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S.
Government) involved stevedoring and labor services within the Subic Bay area, this
Court further stated that inasmuch as ". . . the United States Government. through its
agency at Subic Bay, entered into a contract with appellant for stevedoring and
miscellaneous labor services within the Subic Bay area, a U.S. Navy Reservation, it is
evident that it can bring an action before our courts for any contractual liability that
that political entity may assume under the contract."
When the U.S. Government, through its agency at Subic Bay, confirmed the
acceptance of a bid of a private company for the repair of wharves or shoreline in the
Subic Bay area, it is deemed to have entered into a contract and thus waived the
mantle of sovereign immunity from suit and descended to the level of the ordinary
citizen. Its consent to be sued, therefore, is implied from its act of entering into a
contract (Santos vs. Santos, 92 Phil. 281, 284).
Justice and fairness dictate that a foreign government that commits a breach of its
contractual obligation in the case at bar by the unilateral cancellation of the award for
the project by the United States government, through its agency at Subic Bay should
not be allowed to take undue advantage of a party who may have legitimate claims
against it by seeking refuge behind the shield of non-suability. A contrary view would
render a Filipino citizen, as in the instant case, helpless and without redress in his
own country for violation of his rights committed by the agents of the foreign
government professing to act in its name.
Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs.
Almeda Lopez, 84 Phil. 312, 325:
Although, generally, foreign governments are beyond the
jurisdiction of domestic courts of justice, such rule is inapplicable to
cases in which the foreign government enters into private contracts
with the citizens of the court's jurisdiction. A contrary view would
simply run against all principles of decency and violative of all
tenets of morals.
Moral principles and principles of justice are as valid and applicable
as well with regard to private individuals as with regard to
governments either domestic or foreign. Once a foreign government
enters into a private contract with the private citizens of another
country, such foreign government cannot shield its non-
performance or contravention of the terms of the contract under the
cloak of non-jurisdiction. To place such foreign government beyond
the jurisdiction of the domestic courts is to give approval to the
execution of unilateral contracts, graphically described in Spanish
as 'contratos leoninos', because one party gets the lion's share to
the detriment of the other. To give validity to such contract is to
sanctify bad faith, deceit, fraud. We prefer to adhere to the thesis
that all parties in a private contract, including governments and the
most powerful of them, are amenable to law, and that such
contracts are enforceable through the help of the courts of justice
with jurisdiction to take cognizance of any violation of such
80
 contracts if the same had been entered into only by private
individuals.
Constant resort by a foreign state or its agents to the doctrine of State immunity in this
jurisdiction impinges unduly upon our sovereignty and dignity as a nation. Its
application will particularly discourage Filipino or domestic contractors from
transacting business and entering into contracts with United States authorities or
facilities in the Philippines whether naval, air or ground forces-because the difficulty, if
not impossibility, of enforcing a validly executed contract and of seeking judicial
remedy in our own courts for breaches of contractual obligation committed by agents
of the United States government, always, looms large, thereby hampering the growth
of Filipino enterprises and creating a virtual monopoly in our own country by United
States contractors of contracts for services or supplies with the various U.S. offices
and agencies operating in the Philippines.
The sanctity of upholding agreements freely entered into by the parties cannot be
over emphasized. Whether the parties are nations or private individuals, it is to be
reasonably assumed and expected that the undertakings in the
contract will be complied with in good faith.
One glaring fact of modern day civilization is that a big and powerful nation, like the
United States of America, can always overwhelm small and weak nations. The
declaration in the United Nations Charter that its member states are equal and
sovereign, becomes hollow and meaningless because big nations wielding economic
and military superiority impose upon and dictate to small nations, subverting their
sovereignty and dignity as nations. Thus, more often than not, when U.S. interest
clashes with the interest of small nations, the American governmental agencies or its
citizens invoke principles of international law for their own benefit.
In the case at bar, the efficacy of the contract between the U.S. Naval authorities at
Subic Bay on one hand, and herein private respondent on the other, was honored
more in the breach than in the compliance The opinion of the majority will certainly
open the floodgates of more violations of contractual obligations. American authorities
or any foreign government in the Philippines for that matter, dealing with the citizens
of this country, can conveniently seek protective cover under the majority opinion. The
result is disastrous to the Philippines.
This opinion of the majority manifests a neo-colonial mentality. It fosters economic
imperialism and foreign political ascendancy in our Republic.
The doctrine of government immunity from suit cannot and should not serve as an
instrument for perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400,
February 29, 1972, 43 SCRA 360; Ministerio vs. Court of First Instance, L-31635,
August 31, 1971, 40 SCRA 464).
Under the doctrine of implied waiver of its non-suability, the United States
government, through its naval authorities at Subic Bay, should be held amenable to
lawsuits in our country like any other juristic person.
The invocation by the petitioner United States of America is not in accord with
paragraph 3 of Article III of the original RP-US Military Bases Agreement of March 14,
1947, which states that "in the exercise of the above-mentioned rights, powers and
authority, the United States agrees that the powers granted to it will not be used
unreasonably. . ." (Emphasis supplied).
Nor is such posture of the petitioners herein in harmony with the amendment dated
May 27, 1968 to the aforesaid RP-US Military Bases Agreement, which recognizes
"the need to promote and maintain sound employment practices which will assure
equality of treatment of all employees ... and continuing favorable employer-employee
relations ..." and "(B)elieving that an agreement will be mutually beneficial and will
strengthen the democratic institutions cherished by both Governments, ... the United
States Government agrees to accord preferential employment of Filipino citizens in
the Bases, thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian
employment by employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of
May 27, 1968).
Neither does the invocation by petitioners of state immunity from suit express fidelity
to paragraph 1 of Article IV of the aforesaid amendment of May 2 7, 1968 which
directs that " contractors and concessionaires performing work for the U.S. Armed
Forces shall be required by their contract or concession agreements to comply with all
applicable Philippine labor laws and regulations, " even though paragraph 2 thereof
affirms that "nothing in this Agreement shall imply any waiver by either of the two
Governments of such immunity under international law."
Reliance by petitioners on the non-suability of the United States Government before
the local courts, actually clashes with No. III on respect for Philippine law of the
Memorandum of Agreement signed on January 7, 1979, also amending RP-US
Military Bases Agreement, which stresses that "it is the duty of members of the United
States Forces, the civilian component and their dependents, to respect the laws of the
Republic of the Philippines and to abstain from any activity inconsistent with the spirit
of the Military Bases Agreement and, in particular, from any political activity in the
Philippines. The United States shag take all measures within its authority to insure
that they adhere to them (Emphasis supplied).
The foregoing duty imposed by the amendment to the Agreement is further
emphasized by No. IV on the economic and social improvement of areas surrounding
the bases, which directs that "moreover, the United States Forces shall procure
goods and services in the Philippines to the maximum extent feasible" (Emphasis
supplied).
Under No. VI on labor and taxation of the said amendment of January 6, 1979 in
connection with the discussions on possible revisions or alterations of the Agreement
81
of May 27, 1968, "the discussions shall be conducted on the basis of the principles of
equality of treatment, the right to organize, and bargain collectively, and respect for
the sovereignty of the Republic of the Philippines" (Emphasis supplied)
The majority opinion seems to mock the provision of paragraph 1 of the joint
statement of President Marcos and Vice-President Mondale of the United States
dated May 4, 1978 that "the United States re-affirms that Philippine sovereignty
extends over the bases and that Its base shall be under the command of a Philippine
Base Commander," which is supposed to underscore the joint Communique of
President Marcos and U.S. President Ford of December 7, 1975, under which "they
affirm that sovereign equality, territorial integrity and political independence of all
States are fundamental principles which both countries scrupulously respect; and that
"they confirm that mutual respect for the dignity of each nation shall characterize their
friendship as well as the alliance between their two countries. "
The majority opinion negates the statement on the delineation of the powers, duties
and responsibilities of both the Philippine and American Base Commanders that "in
the performance of their duties, the Philippine Base Commander and the American
Base Commander shall be guided by full respect for Philippine sovereignty on the one
hand and the assurance of unhampered U.S. military operations on the other hand
and that "they shall promote cooperation understanding and harmonious relations
within the Base and with the general public in the proximate vicinity thereof" (par. 2 &
par. 3 of the Annex covered by the exchange of notes, January 7, 1979, between
Ambassador Richard W. Murphy and Minister of Foreign Affairs Carlos P. Romulo,
Emphasis supplied).
Separate Opinions
MAKASIAR, J., dissenting:
The petition should be dismissed and the proceedings in Civil Case No. 779-M in the
defunct CFI (now RTC) of Rizal be allowed to continue therein.
In the case of Lyons vs. the United States of America (104 Phil. 593), where the
contract entered into between the plaintiff (Harry Lyons, Inc.) and the defendant (U.S.
Government) involved stevedoring and labor services within the Subic Bay area, this
Court further stated that inasmuch as ". . . the United States Government. through its
agency at Subic Bay, entered into a contract with appellant for stevedoring and
miscellaneous labor services within the Subic Bay area, a U.S. Navy Reservation, it is
evident that it can bring an action before our courts for any contractual liability that
that political entity may assume under the contract."
When the U.S. Government, through its agency at Subic Bay, confirmed the
acceptance of a bid of a private company for the repair of wharves or shoreline in the
Subic Bay area, it is deemed to have entered into a contract and thus waived the
mantle of sovereign immunity from suit and descended to the level of the ordinary
citizen. Its consent to be sued, therefore, is implied from its act of entering into a
contract (Santos vs. Santos, 92 Phil. 281, 284).
Justice and fairness dictate that a foreign government that commits a breach of its
contractual obligation in the case at bar by the unilateral cancellation of the award for
the project by the United States government, through its agency at Subic Bay should
not be allowed to take undue advantage of a party who may have legitimate claims
against it by seeking refuge behind the shield of non-suability. A contrary view would
render a Filipino citizen, as in the instant case, helpless and without redress in his
own country for violation of his rights committed by the agents of the foreign
government professing to act in its name.
Appropriate are the words of Justice Perfecto in his dissenting opinion in Syquia vs.
Almeda Lopez, 84 Phil. 312, 325:
Although, generally, foreign governments are beyond the
jurisdiction of domestic courts of justice, such rule is inapplicable to
cases in which the foreign government enters into private contracts
with the citizens of the court's jurisdiction. A contrary view would
simply run against all principles of decency and violative of all
tenets of morals.
Moral principles and principles of justice are as valid and applicable
as well with regard to private individuals as with regard to
governments either domestic or foreign. Once a foreign government
enters into a private contract with the private citizens of another
country, such foreign government cannot shield its non-
performance or contravention of the terms of the contract under the
cloak of non-jurisdiction. To place such foreign government beyond
the jurisdiction of the domestic courts is to give approval to the
execution of unilateral contracts, graphically described in Spanish
as 'contratos leoninos', because one party gets the lion's share to
the detriment of the other. To give validity to such contract is to
sanctify bad faith, deceit, fraud. We prefer to adhere to the thesis
that all parties in a private contract, including governments and the
most powerful of them, are amenable to law, and that such
contracts are enforceable through the help of the courts of justice
with jurisdiction to take cognizance of any violation of such
contracts if the same had been entered into only by private
individuals.
Constant resort by a foreign state or its agents to the doctrine of State immunity in this
jurisdiction impinges unduly upon our sovereignty and dignity as a nation. Its
application will particularly discourage Filipino or domestic contractors from
transacting business and entering into contracts with United States authorities or
facilities in the Philippines whether naval, air or ground forces-because the difficulty, if
not impossibility, of enforcing a validly executed contract and of seeking judicial
82
remedy in our own courts for breaches of contractual obligation committed by agents
of the United States government, always, looms large, thereby hampering the growth
of Filipino enterprises and creating a virtual monopoly in our own country by United
States contractors of contracts for services or supplies with the various U.S. offices
and agencies operating in the Philippines.
The sanctity of upholding agreements freely entered into by the parties cannot be
over emphasized. Whether the parties are nations or private individuals, it is to be
reasonably assumed and expected that the undertakings in the
contract will be complied with in good faith.
One glaring fact of modern day civilization is that a big and powerful nation, like the
United States of America, can always overwhelm small and weak nations. The
declaration in the United Nations Charter that its member states are equal and
sovereign, becomes hollow and meaningless because big nations wielding economic
and military superiority impose upon and dictate to small nations, subverting their
sovereignty and dignity as nations. Thus, more often than not, when U.S. interest
clashes with the interest of small nations, the American governmental agencies or its
citizens invoke principles of international law for their own benefit.
In the case at bar, the efficacy of the contract between the U.S. Naval authorities at
Subic Bay on one hand, and herein private respondent on the other, was honored
more in the breach than in the compliance The opinion of the majority will certainly
open the floodgates of more violations of contractual obligations. American authorities
or any foreign government in the Philippines for that matter, dealing with the citizens
of this country, can conveniently seek protective cover under the majority opinion. The
result is disastrous to the Philippines.
This opinion of the majority manifests a neo-colonial mentality. It fosters economic
imperialism and foreign political ascendancy in our Republic.
The doctrine of government immunity from suit cannot and should not serve as an
instrument for perpetrating an injustice on a citizen (Amigable vs. Cuenca, L-26400,
February 29, 1972, 43 SCRA 360; Ministerio vs. Court of First Instance, L-31635,
August 31, 1971, 40 SCRA 464).
Under the doctrine of implied waiver of its non-suability, the United States
government, through its naval authorities at Subic Bay, should be held amenable to
lawsuits in our country like any other juristic person.
The invocation by the petitioner United States of America is not in accord with
paragraph 3 of Article III of the original RP-US Military Bases Agreement of March 14,
1947, which states that "in the exercise of the above-mentioned rights, powers and
authority, the United States agrees that the powers granted to it will not be used
unreasonably. . ." (Emphasis supplied).
Nor is such posture of the petitioners herein in harmony with the amendment dated
May 27, 1968 to the aforesaid RP-US Military Bases Agreement, which recognizes
"the need to promote and maintain sound employment practices which will assure
equality of treatment of all employees ... and continuing favorable employer-employee
relations ..." and "(B)elieving that an agreement will be mutually beneficial and will
strengthen the democratic institutions cherished by both Governments, ... the United
States Government agrees to accord preferential employment of Filipino citizens in
the Bases, thus (1) the U.S. Forces in the Philippines shall fill the needs for civilian
employment by employing Filipino citizens, etc." (Par. 1, Art. I of the Amendment of
May 27, 1968).
Neither does the invocation by petitioners of state immunity from suit express fidelity
to paragraph 1 of Article IV of the aforesaid amendment of May 2 7, 1968 which
directs that " contractors and concessionaires performing work for the U.S. Armed
Forces shall be required by their contract or concession agreements to comply with all
applicable Philippine labor laws and regulations, " even though paragraph 2 thereof
affirms that "nothing in this Agreement shall imply any waiver by either of the two
Governments of such immunity under international law."
Reliance by petitioners on the non-suability of the United States Government before
the local courts, actually clashes with No. III on respect for Philippine law of the
Memorandum of Agreement signed on January 7, 1979, also amending RP-US
Military Bases Agreement, which stresses that "it is the duty of members of the United
States Forces, the civilian component and their dependents, to respect the laws of the
Republic of the Philippines and to abstain from any activity inconsistent with the spirit
of the Military Bases Agreement and, in particular, from any political activity in the
Philippines. The United States shag take all measures within its authority to insure
that they adhere to them (Emphasis supplied).
The foregoing duty imposed by the amendment to the Agreement is further
emphasized by No. IV on the economic and social improvement of areas surrounding
the bases, which directs that "moreover, the United States Forces shall procure
goods and services in the Philippines to the maximum extent feasible" (Emphasis
supplied).
Under No. VI on labor and taxation of the said amendment of January 6, 1979 in
connection with the discussions on possible revisions or alterations of the Agreement
of May 27, 1968, "the discussions shall be conducted on the basis of the principles of
equality of treatment, the right to organize, and bargain collectively, and respect for
the sovereignty of the Republic of the Philippines" (Emphasis supplied)
The majority opinion seems to mock the provision of paragraph 1 of the joint
statement of President Marcos and Vice-President Mondale of the United States
dated May 4, 1978 that "the United States re-affirms that Philippine sovereignty
extends over the bases and that Its base shall be under the command of a Philippine
Base Commander," which is supposed to underscore the joint Communique of
President Marcos and U.S. President Ford of December 7, 1975, under which "they
83
affirm that sovereign equality, territorial integrity and political independence of all
States are fundamental principles which both countries scrupulously respect; and that
"they confirm that mutual respect for the dignity of each nation shall characterize their
friendship as well as the alliance between their two countries. "
The majority opinion negates the statement on the delineation of the powers, duties
and responsibilities of both the Philippine and American Base Commanders that "in
the performance of their duties, the Philippine Base Commander and the American
Base Commander shall be guided by full respect for Philippine sovereignty on the one
hand and the assurance of unhampered U.S. military operations on the other hand
and that "they shall promote cooperation understanding and harmonious relations
within the Base and with the general public in the proximate vicinity thereof" (par. 2 &
par. 3 of the Annex covered by the exchange of notes, January 7, 1979, between
Ambassador Richard W. Murphy and Minister of Foreign Affairs Carlos P. Romulo,
Emphasis supplied).
Footnotes
26. Malong v. PNR 138 SCRA 63
27. Department of Health vs. Phils. Pharmawealth Inc., Feb. 20, 2013
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 182358 February 20, 2013
DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA.
MARGARITA M. GALON, Petitioners,
vs.
PHIL PHARMA WEALTH, INC., Respondent.
DECISION
DEL CASTILLO, J.:
The state may not be sued without its consent. Likewise, public officials may not be
sued for acts done in the perfom1ance of their official functions or within the scope of
their authority.
This Petition for Review on Certiorari1 assails the October 25, 2007 Decision2 of the
Court of Appeals (CA) in CA-G.R. CV No. 85670, and its March 31, 2008
Reso1ution3 denying petitioners' Motion for Reconsideration.4
Factual Antecedents
On December 22, 1998, Administrative Order (AO) No. 27 series of 19985 was issued
by then Department of Health (DOH) Secretary Alfredo G. Romualdez (Romualdez).
AO 27 set the guidelines and procedure for accreditation of government suppliers of
pharmaceutical products for sale or distribution to the public, such accreditation to be
valid for three years but subject to annual review.
On January 25, 2000, Secretary Romualdez issued AO 10 series of 20006 which
amended AO 27. Under Section VII7 of AO 10, the accreditation period for
government suppliers of pharmaceutical products was reduced to two years.
Moreover, such accreditation may be recalled, suspended or revoked after due
deliberation and proper notice by the DOH Accreditation Committee, through its
Chairman.
Section VII of AO 10 was later amended by AO 66 series of 2000, 8 which provided
that the two-year accreditation period may be recalled, suspended or revoked only
after due deliberation, hearing and notice by the DOH Accreditation Committee,
through its Chairman.
On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided for a
list and category of sanctions to be imposed on accredited government suppliers of
pharmaceutical products in case of adverse findings regarding their products
(e.g. substandard, fake, or misbranded) or violations committed by them during their
accreditation.
In line with Memorandum No. 171-C, the DOH, through former Undersecretary Ma.
Margarita M. Galon (Galon), issued Memorandum No. 209 series of 2000,10 inviting
representatives of 24 accredited drug companies, including herein respondent Phil
Pharmawealth, Inc. (PPI) to a meeting on October 27, 2000. During the meeting,
Undersecretary Galon handed them copies of a document entitled "Report on
Violative Products"11 issued by the Bureau of Food and Drugs12 (BFAD), which
detailed violations or adverse findings relative to these accredited drug companies’
products. Specifically, the BFAD found that PPI’s products which were being sold to
the public were unfit for human consumption.
During the October 27, 2000 meeting, the 24 drug companies were directed to submit
within 10 days, or until November 6, 2000, their respective explanations on the
adverse findings covering their respective products contained in the Report on
Violative Products.
84
Instead of submitting its written explanation within the 10-day period as required, PPI
belatedly sent a letter13 dated November 13, 2000 addressed to Undersecretary
Galon, informing her that PPI has referred the Report on Violative Products to its
lawyers with instructions to prepare the corresponding reply. However, PPI did not
indicate when its reply would be submitted; nor did it seek an extension of the 10-day
period, which had previously expired on November 6, 2000, much less offer any
explanation for its failure to timely submit its reply. PPI’s November 13, 2000 letter
states:
Madam,
This refers to your directive on 27 October 2000, on the occasion of the meeting with
selected accredited suppliers, during which you made known to the attendees of your
requirement for them to submit their individual comments on the Report on Violative
Products (the "Report") compiled by your office and disseminated on that date.
In this connection, we inform you that we have already instructed our lawyers to
prepare on our behalf the appropriate reply to the Report furnished to us. Our lawyers
in time shall revert to you and furnish you the said reply.
Please be guided accordingly.
Very truly yours,
(signed)
ATTY. ALAN A.B. ALAMBRA
Vice-President for Legal and Administrative Affairs14
In a letter-reply15 dated November 23, 2000 Undersecretary Galon found "untenable"
PPI’s November 13, 2000 letter and therein informed PPI that, effective immediately,
its accreditation has been suspended for two years pursuant to AO 10 and
Memorandum No. 171-C.
In another December 14, 2000 letter16 addressed to Undersecretary Galon, PPI
through counsel questioned the suspension of its accreditation, saying that the same
was made pursuant to Section VII of AO 10 which it claimed was patently illegal and
null and void because it arrogated unto the DOH Accreditation Committee powers and
functions which were granted to the BFAD under Republic Act (RA) No. 3720 17 and
Executive Order (EO) No. 175.18 PPI added that its accreditation was suspended
without the benefit of notice and hearing, in violation of its right to substantive and
administrative due process. It thus demanded that the DOH desist from implementing
the suspension of its accreditation, under pain of legal redress.
On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a
Complaint19 seeking to declare null and void certain DOH administrative issuances,
with prayer for damages and injunction against the DOH, former Secretary
Romualdez and DOH Undersecretary Galon. Docketed as Civil Case No. 68200, the
case was raffled to Branch 160. On February 8, 2002, PPI filed an Amended and
Supplemental Complaint,20 this time impleading DOH Secretary Manuel Dayrit
(Dayrit). PPI claimed that AO 10, Memorandum No. 171-C, Undersecretary Galon’s
suspension order contained in her November 23, 2000 letter, and AO 14 series of
200121 are null and void for being in contravention of Section 26(d) of RA 3720 as
amended by EO 175, which states as follows:
SEC. 26. x x x
(d) When it appears to the Director [of the BFAD] that the report of the Bureau that
any article of food or any drug, device, or cosmetic secured pursuant to Section
twenty-eight of this Act is adulterated, misbranded, or not registered, he shall cause
notice thereof to be given to the person or persons concerned and such person or
persons shall be given an opportunity to be heard before the Bureau and to submit
evidence impeaching the correctness of the finding or charge in question.
For what it claims was an undue suspension of its accreditation, PPI prayed that AO
10, Memorandum No. 171-C, Undersecretary Galon’s suspension order contained in
her November 23, 2000 letter, and AO 14 be declared null and void, and that it be
awarded moral damages of ₱5 million, exemplary damages of ₱1 million, attorney’s
fees of ₱1 million, and costs of suit. PPI likewise prayed for the issuance of temporary
and permanent injunctive relief.
In their Amended Answer,22 the DOH, former Secretary Romualdez, then Secretary
Dayrit, and Undersecretary Galon sought the dismissal of the Complaint, stressing
that PPI’s accreditation was suspended because most of the drugs it was importing
and distributing/selling to the public were found by the BFAD to be substandard for
human consumption. They added that the DOH is primarily responsible for the
formulation, planning, implementation, and coordination of policies and programs in
the field of health; it is vested with the comprehensive power to make essential health
services and goods available to the people, including accreditation of drug suppliers
and regulation of importation and distribution of basic medicines for the public.
Petitioners added that, contrary to PPI’s claim, it was given the opportunity to present
its side within the 10-day period or until November 6, 2000, but it failed to submit the
required comment/reply. Instead, it belatedly submitted a November 13, 2000 letter
which did not even constitute a reply, as it merely informed petitioners that the matter
had been referred by PPI to its lawyer. Petitioners argued that due process was
afforded PPI, but because it did not timely avail of the opportunity to explain its side,
the DOH had to act immediately – by suspending PPI’s accreditation – to stop the
distribution and sale of substandard drug products which posed a serious health risk
to the public. By exercising DOH’s mandate to promote health, it cannot be said that
petitioners committed grave abuse of discretion.
85
In a January 8, 2001 Order,23 the trial court partially granted PPI’s prayer for a
temporary restraining order, but only covering PPI’s products which were not included
in the list of violative products or drugs as found by the BFAD.
In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the
dismissal of Civil Case No. 68200, claiming that the case was one against the State;
that the Complaint was improperly verified; and lack of authority of the corporate
officer to commence the suit, as the requisite resolution of PPI’s board of directors
granting to the commencing officer – PPI’s Vice President for Legal and
Administrative Affairs, Alan Alambra, – the authority to file Civil Case No. 68200 was
lacking. To this, PPI filed its Comment/Opposition.25
Ruling of the Regional Trial Court
In a June 14, 2004 Order,26 the trial court dismissed Civil Case No. 68200, declaring
the case to be one instituted against the State, in which case the principle of state
immunity from suit is applicable.
PPI moved for reconsideration,27 but the trial court remained steadfast.28
PPI appealed to the CA.
Ruling of the Court of Appeals
Docketed as CA-G.R. CV No. 85670, PPI’s appeal centered on the issue of whether it
was proper for the trial court to dismiss Civil Case No. 68200.
The CA, in the herein assailed Decision,29 reversed the trial court ruling and ordered
the remand of the case for the conduct of further proceedings. The CA concluded that
it was premature for the trial court to have dismissed the Complaint. Examining the
Complaint, the CA found that a cause of action was sufficiently alleged – that due to
defendants’ (petitioners’) acts which were beyond the scope of their authority, PPI’s
accreditation as a government supplier of pharmaceutical products was suspended
without the required notice and hearing as required by Section 26(d) of RA 3720 as
amended by EO 175. Moreover, the CA held that by filing a motion to dismiss,
petitioners were deemed to have hypothetically admitted the allegations in the
Complaint – which state that petitioners were being sued in their individual and
personal capacities – thus negating their claim that Civil Case No. 68200 is an
unauthorized suit against the State.
The CA further held that instead of dismissing the case, the trial court should have
deferred the hearing and resolution of the motion to dismiss and proceeded to trial. It
added that it was apparent from the Complaint that petitioners were being sued in
their private and personal capacities for acts done beyond the scope of their official
functions. Thus, the issue of whether the suit is against the State could best be
threshed out during trial on the merits, rather than in proceedings covering a motion to
dismiss.
The dispositive portion of the CA Decision reads:
WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004 of
the Regional Trial Court of Pasig City, Branch 160, is hereby REVERSED and SET-
ASIDE. ACCORDINGLY, this case is REMANDED to the trial court for further
proceedings.
SO ORDERED.30
Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence, they
filed the present Petition.
Issue
Petitioners now raise the following lone issue for the Court’s resolution:
Should Civil Case No. 68200 be dismissed for being a suit against the State?31
Petitioners’ Arguments
Petitioners submit that because PPI’s Complaint prays for the award of damages
against the DOH, Civil Case No. 68200 should be considered a suit against the State,
for it would require the appropriation of the needed amount to satisfy PPI’s claim,
should it win the case. Since the State did not give its consent to be sued, Civil Case
No. 68200 must be dismissed. They add that in issuing and implementing the
questioned issuances, individual petitioners acted officially and within their authority,
for which reason they should not be held to account individually.
Respondent’s Arguments
Apart from echoing the pronouncement of the CA, respondent insists that Civil Case
No. 68200 is a suit against the petitioners in their personal capacity for acts
committed outside the scope of their authority.
Our Ruling
The Petition is granted.
The doctrine of non-suability.
86
The discussion of this Court in Department of Agriculture v. National Labor Relations
Commission32 on the doctrine of non-suability is enlightening.
The basic postulate enshrined in the constitution that ‘(t)he State may not be sued
without its consent,’ reflects nothing less than a recognition of the sovereign character
of the State and an express affirmation of the unwritten rule effectively insulating it
from the jurisdiction of courts. It is based on the very essence of sovereignty. x x x [A]
sovereign is exempt from suit, not because of any formal conception or obsolete
theory, but on the logical and practical ground that there can be no legal right as
against the authority that makes the law on which the right depends. True, the
doctrine, not too infrequently, is derisively called ‘the royal prerogative of dishonesty’
because it grants the state the prerogative to defeat any legitimate claim against it by
simply invoking its nonsuability. We have had occasion to explain in its defense,
however, that a continued adherence to the doctrine of non-suability cannot be
deplored, for the loss of governmental efficiency and the obstacle to the performance
of its multifarious functions would be far greater in severity than the inconvenience
that may be caused private parties, if such fundamental principle is to be abandoned
and the availability of judicial remedy is not to be accordingly restricted.
The rule, in any case, is not really absolute for it does not say that the state may not
be sued under any circumstance. On the contrary, as correctly phrased, the doctrine
only conveys, ‘the state may not be sued without its consent;’ its clear import then is
that the State may at times be sued. The State’s consent may be given either
expressly or impliedly. Express consent may be made through a general law or a
special law. x x x Implied consent, on the other hand, is conceded when the State
itself commences litigation, thus opening itself to a counterclaim or when it enters into
a contract. In this situation, the government is deemed to have descended to the level
of the other contracting party and to have divested itself of its sovereign immunity.
This rule, x x x is not, however, without qualification. Not all contracts entered into by
the government operate as a waiver of its non-suability; distinction must still be made
between one which is executed in the exercise of its sovereign function and another
which is done in its proprietary capacity.33
As a general rule, a state may not be sued. However, if it consents, either expressly
or impliedly, then it may be the subject of a suit.34 There is express consent when a
law, either special or general, so provides. On the other hand, there is implied
consent when the state "enters into a contract or it itself commences
litigation."35 However, it must be clarified that when a state enters into a contract, it
does not automatically mean that it has waived its non-suability. 36 The State "will be
deemed to have impliedly waived its non-suability [only] if it has entered into a
contract in its proprietary or private capacity. [However,] when the contract involves its
sovereign or governmental capacity[,] x x x no such waiver may be
implied."37 "Statutory provisions waiving [s]tate immunity are construed in strictissimi
juris. For, waiver of immunity is in derogation of sovereignty." 38
The DOH can validly invoke state immunity.
a) DOH is an unincorporated agency which performs sovereign or
governmental functions.
In this case, the DOH, being an "unincorporated agency of the government" 39 can
validly invoke the defense of immunity from suit because it has not consented, either
expressly or impliedly, to be sued. Significantly, the DOH is an unincorporated agency
which performs functions of governmental character.
The ruling in Air Transportation Office v. Ramos40 is relevant, viz:
An unincorporated government agency without any separate juridical personality of its
own enjoys immunity from suit because it is invested with an inherent power of
sovereignty. Accordingly, a claim for damages against the agency cannot prosper;
otherwise, the doctrine of sovereign immunity is violated. However, the need to
distinguish between an unincorporated government agency performing governmental
function and one performing proprietary functions has arisen. The immunity has been
upheld in favor of the former because its function is governmental or incidental to
such function; it has not been upheld in favor of the latter whose function was not in
pursuit of a necessary function of government but was essentially a business. 41
b) The Complaint seeks to hold the DOH solidarily and jointly liable with the
other defendants for damages which constitutes a charge or financial liability
against the state.
Moreover, it is settled that if a Complaint seeks to "impose a charge or financial
liability against the state,"42 the defense of non-suability may be properly invoked. In
this case, PPI specifically prayed, in its Complaint and Amended and Supplemental
Complaint, for the DOH, together with Secretaries Romualdez and Dayrit as well as
Undersecretary Galon, to be held jointly and severally liable for moral damages,
exemplary damages, attorney’s fees and costs of suit. 43 Undoubtedly, in the event
that PPI succeeds in its suit, the government or the state through the DOH would
become vulnerable to an imposition or financial charge in the form of damages. This
would require an appropriation from the national treasury which is precisely the
situation which the doctrine of state immunity aims to protect the state from.
The mantle of non-suability extends to complaints filed against public officials
for acts done in the performance of their official functions.
As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and
Undersecretary Galon, it must be stressed that the doctrine of state immunity extends
its protective mantle also to complaints filed against state officials for acts done in the
discharge and performance of their duties.44 "The suability of a government official
depends on whether the official concerned was acting within his official or
jurisdictional capacity, and whether the acts done in the performance of official
functions will result in a charge or financial liability against the
government."45 Otherwise stated, "public officials can be held personally accountable
for acts claimed to have been performed in connection with official duties where they
87
have acted ultra vires or where there is showing of bad faith."46 Moreover, "[t]he rule
is that if the judgment against such officials will require the state itself to perform an
affirmative act to satisfy the same, such as the appropriation of the amount needed to
pay the damages awarded against them, the suit must be regarded as against the
state x x x. In such a situation, the state may move to dismiss the [C]omplaint on the
ground that it has been filed without its consent." 47
It is beyond doubt that the acts imputed against Secretaries Romualdez and Dayrit,
as well as Undersecretary Galon, were done while in the performance and discharge
of their official functions or in their official capacities, and not in their personal or
individual capacities. Secretaries Romualdez and Dayrit were being charged with the
issuance of the assailed orders. On the other hand, Undersecretary Galon was being
charged with implementing the assailed issuances. By no stretch of imagination could
the same be categorized as ultra vires simply because the said acts are well within
the scope of their authority. Section 4 of RA 3720 specifically provides that the BFAD
is an office under the Office of the Health Secretary. Also, the Health Secretary is
authorized to issue rules and regulations as may be necessary to effectively enforce
the provisions of RA 3720.48 As regards Undersecretary Galon, she is authorized by
law to supervise the offices under the DOH’s authority, 49 such as the BFAD.
Moreover, there was also no showing of bad faith on their part. The assailed
issuances were not directed only against PPI. The suspension of PPI’s accreditation
only came about after it failed to submit its comment as directed by Undersecretary
Galon. It is also beyond dispute that if found wanting, a financial charge will be
imposed upon them which will require an appropriation from the state of the needed
amount. Thus, based on the foregoing considerations, the Complaint against them
should likewise be dismissed for being a suit against the state which absolutely did
not give its consent to be sued. Based on the foregoing considerations, and
regardless of the merits of PPI’s case, this case deserves a dismissal. Evidently, the
very foundation of Civil Case No. 68200 has crumbled at this initial juncture.
PPI was not denied due process.
However, we cannot end without a discussion of PPI’s contention that it was denied
due process when its accreditation was suspended "without due notice and hearing."
It is undisputed that during the October 27, 2000 meeting, Undersecretary Galon
directed representatives of pharmaceutical companies, PPI included, to submit their
comment and/or reactions to the Report on Violative Products furnished them within a
period of 10 days. PPI, instead of submitting its comment or explanation, wrote a
letter addressed to Undersecretary Galon informing her that the matter had already
been referred to its lawyer for the drafting of an appropriate reply. Aside from the fact
that the said letter was belatedly submitted, it also failed to specifically mention when
such reply would be forthcoming. Finding the foregoing explanation to be
unmeritorious, Undersecretary Galon ordered the suspension of PPI’s accreditation
for two years. Clearly these facts show that PPI was not denied due process. It was
given the opportunity to explain its side. Prior to the suspension of its accreditation,
PPI had the chance to rebut, explain, or comment on the findings contained in the
Report on Violative Products that several of PPI’s products are not fit for human
consumption. However, PPI squandered its opportunity to explain. Instead of
complying with the directive of the DOH Undersecretary within the time allotted, it
instead haughtily informed Undersecretary Galon that the matter had been referred to
its lawyers. Worse, it impliedly told Undersecretary Galon to just wait until its lawyers
shall have prepared the appropriate reply. PPI however failed to mention when it will
submit its "appropriate reply" or how long Undersecretary Galon should wait. In the
meantime, PPI’s drugs which are included in the Report on Violative Products are out
and being sold in the market. Based on the foregoing, we find PPI’s contention of
denial of due process totally unfair and absolutely lacking in basis. At this juncture, it
would be trite to mention that "[t]he essence of due process in administrative
proceedings is the opportunity to explain one’s side or seek a reconsideration of the
action or ruling complained of. As long as the parties are given the opportunity to be
heard before judgment is rendered, the demands of due process are sufficiently met.
What is offensive to due process is the denial of the opportunity to be heard. The
Court has repeatedly stressed that parties who chose not to avail themselves of the
opportunity to answer charges against them cannot complain of a denial of due
process."50
Incidentally, we find it inieresting that in the earlier case of Department q( Health v.
Phil Pharmawealth, Inc. 51respondent filed a Complaint against DOH anchored on the
same issuances which it assails in the present case. In the earlier case of Department
of Health v. Phil Pharmawealth, Jnc., 52 PPI submitted to the DOH a request for the
inclusion of its products in the list of accredited drugs as required by AO 27 series of
1998 which was later amended by AO 10 series of 2000. In the instant case,
however, PPI interestingly claims that these issuances are null and void.
WHEREFORE, premises considered, the Petition is GRANTED. Civil Case No. 68200
is ordered DISMISSED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
ARTURO D. BRION DIOSDADO M. PERALTA*
Associate Justice Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice
ATTESTATION
88
 10
I attest that the conclusions in the above Decision had been reached in consultation Id. at 27.
before the case was assigned to the writer of the opinion of the Court's Division.
11 Id. at 28-40.
ANTONIO T. CARPIO
Associate Justice 12Per Republic Act No. 9711 or the Food and Drug Administration (FDA) Act of 2009
Chairperson which was signed by the President on August 18, 2009, the Bureau of Food and
Drugs (BFAD) was renamed and is now called the Food and Drug Administration
CERTIFICATION (FDA).

13
Pursuant to Section 13, Article VII of the Constitution and the Division Chairperson's Records, p. 41.
Attestation, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Court's 14 Id.
Division.
15 Id. at 42.
MARIA LOURDES P. A. SERENO
Chief Justice 16 Id. at 43-44.

17 FOOD, DRUG, AND COSMETIC ACT. June 22, 1963.

Footnotes
18FURTHER AMENDING REPUBLIC ACT NO 3720, ENTITLED "AN ACT TO
* Per Raffle dated February 4, 2013. ENSURE THE SAFETY AND PURITY OF FOODS, DRUGS, AND COSMETICS
BEING MADE AVAILABLE TO THE PUBLIC BY CREATING THE FOOD AND DRUG
1
ADMINISTRATION WHICH SHALL ADMINISTER AND ENFORCE THE LAWS
Rollo, pp. 27-44. PERTAINING THERETO", AS AMENDED, AND FOR OTHER PURPOSES. May 22,
1987.
2Id. at 7-21; penned by Associate Justice Monina Arevalo-Zenarosa and concurred in
by Presiding Justice Conrado M. Vasquez, Jr. and Associate Justice Edgardo F. 19 Records, pp. 2-15.
Sundiam.
20
3
Id. at 400-424.
Id. at 22-23.
21
4
Id. at 454-457. Administrative Order No. 14 was a later issuance by DOH Secretary
CA rolla, pp. 156-164. Dayrit which was subsequently included in PPI’s amended and supplemental
complaint as one of the issuances sought to be nullified. It provided for new
5 Records, pp. 16-17. accreditation guidelines and granted the Accreditation Committee the power to
suspend or revoke a supplier’s accreditation after deliberation and notice, and without
6
Id. at 19-25. need of a hearing.

22
7 Id. at 24. Id. at 489-505.

23
8 Id. at 26. Id. at 124.

24
9 Id. at 111. Id. at 500-513.

25 Id. at 532-541.
89
26 46
Id. at 555-561; penned by Judge Amelia A. Fabros. M. H. Wylie v. Rarang, G.R. No. 74135, May 28, 1992, 209 SCRA 357, 368.
Citation omitted. See also United States of America v. Reyes, G.R. No. 79253, March
27 Id. at 562-569. 1, 1993, 219 SCRA 192, 209 where the Court held:

28 See Order dated April 19, 2005, id. at 593. x x x The doctrine of immunity from suit will not apply and may not be
invoked where the public official is being sued in his private and personal
29
capacity as an ordinary citizen. The cloak of protection afforded the officers
Rollo, pp. 7-21. and agents of the government is removed the moment they are sued in their
individual capacity. This situation usually arises where the public official acts
30 without authority or in excess of the powers vested in him. It is a well-settled
Id. at 21. Emphases in the original.
principle of law that a public official may be liable in his personal private
31 Id. at 730. capacity for whatever damage he may have caused by his act done with
malice and in bad faith, or beyond the scope of his authority or jurisdiction.
(Citations omitted)
32
G.R. No. 104269, November 11, 1993, 227 SCRA 693.
47United States of America v. Judge Guinto, supra note 34 at 791-792. See
33 Id. at 698-699. Citations omitted. also Department of Health v. Phil Pharmawealth, Inc., supra note 39 at 155.

34 United States of America v. Judge Guinto, 261 Phil. 777, 790 (1990). 48 See Section 26, Republic Act No. 3720.

35 Id. at 792. 49 See Section 12, Chapter 3, Title IX, Book IV, Administrative Code of 1987.

36 Id. at 793. 50Flores v. Montemavor, Ci.R. No. 170146. llll''~ 1' .. 20 i i, 651 SCEA 396, 406-407.
Citations omitted
37 Id. at 795.
51 Supranote39.
38Equitable Insurance and Casualty Co., Inc. v. Smith, Bell & Co. (Phils.), Inc., 127
Phil. 547, 549 (1967). 52 ld

39 Department of Health v. Phil Pharmawealth, Inc., 547 Phil. 148, 154 (2007).
28. JUSMAG Phil. V. NLRC 239 SCRA 224
40 G.R. No. 159402, February 23, 2011, 644 SCRA 36.

41 Id. at 42-43. Citations omitted. 29. Santiago v. Republic 87 SCRA 284

42 Department of Health v. Phil Pharmawealth, Inc., supra at 154. Republic of the Philippines
SUPREME COURT
43See Complaint, pp. 12-13, records, pp. 13-14; Amended and Supplemental Manila
Complaint, p. 13, records, p. 422.
SECOND DIVISION
44 United States of America v. Judge Guinto, supra note 34 at 791.
G.R. No. L-48214 December 19, 1978
45 Department of Health v. Phil Pharmawealth, Inc., supra note 39 at 153.

90
ILDEFONSO SANTIAGO, represented by his Attorney-in-Fact, ALFREDO T.
SANTIAGO, petitioner,
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, represented by
the Director, Bureau of Plant Industry, and the Regional Director, Region IX,
Zamboanga City, respondent,
Ahmad D. Sahak for petitioner.
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Octavio R. Ramirez
and Solicitor Mariano M. Martinez for respondents.
FERNANDO, J.:
The first impression yielded by a perusal of this petition for certiorari is its inherent
weakness considering the explicit provision in the present Constitution prohibiting a
suit against the Republic without its consent. 1 Here petitioner Ildefonso
Santiago 2 filed on August 9, 1976 an action in the Court of First Instance of
Zamboanga City naming as defendant the government of the Republic of the
Philippines represented by the Director of the Bureau of Plant Industry. 3 His plea was
for the revocation of a deed of donation executed by him and his spouse in January of
1971, 4 with the Bureau of Plant Industry as the donee. As alleged in such complaint,
such Bureau, contrary to the terms of the donation, failed to "install lighting facilities
and water system on the property donated and to build an office building and parking
[lot] thereon which should have been constructed and ready for occupancy on or
before December 7, 1974. 5 That led him to conclude that under the circumstances,
he was exempt from compliance with such an explicit constitutional command. The
lower court, in the order challenged in this petition, was of a different view. It
sustained a motion to dismiss on the part of the defendant Republic of the Philippines,
now named as one of the respondents, the other respondent being the Court of First
Instance of Zamboanga City, Branch II. It premised such an order on the settled "rule
that the state cannot be sued without its consent. This is so, because the New
Constitution of the Philippines expressly provides that the state may not be sued
without its consent. 6 Solicitor General Estelito P. Mendoza, 7 in the com ment on the
petition filed with this Court, is for the affirmance of the order of dismissal of
respondent Court precisely to accord deference to the above categorical
constitutional mandate.
On its face, such a submission carries persuasion. Upon further reflection, this
Tribunal is impressed with the unique aspect of this petition for certiorari, dealing as it
does with a suit for the revocation of a donation to the Republic, which allegedly fatted
to conform with what was agreed to by the donee. If an order of dismissal would
suffice, then the element of unfairness enters, the facts alleged being hypothetically
admitted. It is the considered opinion of this Court then that to conform to the high
dictates of equity and justice, the presumption of consent could be indulged in safely.
That would serve to accord to petitioner as plaintiff, at the very least, the right to be
heard. certiorari lies.
1. This is not to deny the obstacle posed by the constitutional provision. It is
expressed in language plain and unmistakable: "The State may not be sued without
its consent. 8 The Republic cannot be proceeded against unless it allows itself to be
sued. Neither can a department, bureau, agency, office, or instrumentality of the
government where the suit, according to the then Justice, now Chief Justice, Castro in
Del Mar v. Philippine Veterans Administration, 9 may result "in adverse consequences
to the public treasury, whether in the disbursements of funds or loss of
property. 10 Such a doctrine was reiterated in the following cases: Republic v.
Villasor, 11 Sayson v. Singson, 12 Director of the Bureau of Printing v.
Francisco, 13 and Republic v. Purisima. 14
2. It is contended by counsel for petitioner that the above constitutional provision
would be given a retroactive application in this case if the suit for the revocation of
donation were dismissed. That is not the case at all. In Republic v. Purisima, this
Court made clear that such a basic postulate is part and parcel of the system of
government implanted in the Philippines from the time of the acquisition of
sovereignty by the United States, and therefore, was implicit in the 1935 Constitution
even in the absence of any explicit language to that effect. This it did in a citation
from Switzerland General Insurance Co., Ltd. v. Republic of the Philippines: 15 "The
doctrine of non-suability recognized in this jurisdiction even prior to the effectivity of
the [1935] Constitution is a logical corollary of the positivist concept of law which, to
paraphrase Holmes, negates the assertion of any legal right as against the state, in
itself the source of the law on which such a right may be predicated. Nor is this all.
Even if such a principle does give rise to problems, considering the vastly expanded
role of government enabling it to engage in business pursuits to promote the general
welfare, it is not obeisance to the analytical school of thought alone that calls for its
continued applicability. 16 That is the teaching of the leading case of Mobil Philippines
Exploration, Inc. v. Customs Arrastre Service, 17 promulgated in December of 1966.
As a matter of fact, the Switzerland General Insurance Co. decision was the thirty-
seventh of its kind after Mobil. Clearly, then, the contention that to dismiss the suit
would be to give the applicable constitutional provision a retroactive effect is, to put it
at its mildest, untenable.
3. Petitioner's counsel invoked Santos v. Santos, 18 a 1952 decision. A more thorough
analysis ought to have cautioned him against reliance on such a case. It was therein
clearly pointed out that the government entity involved was originally the National
Airports Corporation. Thereafter, it "was abolished by Executive Order No. 365, series
of 1950, and in its place and stead the Civil Aeronautics Administration was created
and took over all the assets and assumed all the liabilities of the abolished
corporation. The Civil Aeronautics Administration, even if it is not a juridical entity,
cannot legally prevent a party or parties from enforcing their proprietary rights under
the cloak or shield of lack of juridical personality, because to took over all the powers
and assumed all the obligations of the defunct corporation which had entered into the
contract in question." 19 Then came National Shipyard and Steel Corporation v. Court
of Industrial Relations, 20 a 1963 decision, where the then Justice, later Chief Justice,
91
Concepcion, as ponente, stated that a government-owned and controlled corporation
"has a personality of its own distinct and separate from that of the government. ...
Accordingly, it may sue and be sued and may be subjected to court processes just
like any other corporation. (Section 13, Act 1459, as amended). 21 In three recent
decisions, Philippine National Bank v. Court of Industrial Relations, 22 Philippine
National Bank v. Honorable Judge Pabalan, 23and Philippine National Railways v.
Union de Maquinistas, 24 this constitutional provision on non-suability was unavailing
in view of the suit being against a government-owned or controlled corporation. That
point apparently escaped the attention of counsel for petitioner. Hence Santos v.
Santos is hardly controlling.
4. It is to be noted further that the trend against the interpretation sought to be
fastened in the broad language of Santos v. Santos is quite discernible. Not long
after, in Araneta v. Hon. M. Gatmaitan, 25 decided in 1957, it was held that an action
[against] Government officials, is essentially one against the Government, ... . 26 In
the same year, this Court, in Angat River Irrigation System v. Angat River
Workers 27 Union, after referring to the "basic and fundamental principle of the law
that the Government cannot be sued before courts of justice without its consent,"
pointed out that "this privilege of non-suability of the Government" covers with the
mantle of its protection "an entity," in this case, the Angat River Irrigation
System. 28 Then, in 1960, came Lim v. Brownell, Jr., 29 where there was a
reaffirmation of the doctrine that a "claim [constituting] a charge against, or financial
liability to, the Government cannot be entertained by the courts except with the
consent of said government. 30 Bureau of Printing v. Bureau of Printing Employees
Association 31 came a year later; it reiterated such a doctrine. It was not surprising
therefore that in 1966, Mobil Philippines Exploration, Inc. was decided the way it was.
The remedy, where the liability is based on contract, according to this Court, speaking
through Justice J. P. Bengzon, is for plaintiff to file a claim with the general office in
accordance with the controlling statute, Commonwealth Act No. 327. 32 To repeat,
that doctrine has been adhered to ever since. The latest case in point is Travelers
Indemnity Company v. Barber Steamship Lines, Inc. 33 Justice Aquino's opinion
concluded with this paragraph: "It is settled that the Bureau of Customs, acting as part
of the machinery of the national government in the operation of the arrastre service, is
immune from suit under the doctrine of non-suability of the State. The claimant's
remedy to recover the loss or damage to the goods under the custody of the customs
arrastre service is to file a claim with the Commission in Audit as contemplated in Act
No. 3083 and Commonwealth Act No. 327. 34 With the explicit provision found in the
present Constitution, the fundamental principle of non-suability becomes even more
exigent in its command.
5. The reliance on Santos v. Santos as a prop for this petition having failed, it would
ordinarily follow that this suit cannot prosper. Nonetheless, as set forth at the outset,
there is a novel aspect that suffices to call for a contrary conclusion. It would be
manifestly unfair for the Republic, as donee, alleged to have violated the conditions
under which it received gratuitously certain property, thereafter to put as a barrier the
concept of non-suitability. That would be a purely one-sided arrangement offensive to
one's sense of justice. Such conduct, whether proceeding from an individual or
governmental agency, is to be condemned. As a matter of fact, in case it is the latter
that is culpable, the affront to decency is even more manifest. The government, to
paraphrase Justice Brandeis, should set the example. If it is susceptible to the charge
of having acted dishonorably, then it forfeits public trust-and rightly so.
6. Fortunately, the constitutional provision itself snows a waiver. Where there is
consent, a suit may be filed. Consent need not be express. It can be implied. So it
was more than implied in Ministerio v. Court of First Instance of Cebu: 35 "The
doctrine of governmental immunity from suit cannot serve as an instrument for
perpetrating an injustice on a citizen. 36 The fact that this decision arose from a suit
against the Public Highways Commissioner and the Auditor General for failure of the
government to pay for land necessary to widen a national highway, the defense of
immunity without the consent proving unavailing, is not material. The analogy is quite
obvious. Where the government ordinarily benefited by the taking of the land, the
failure to institute the necessary condemnation proceedings should not be a bar to an
ordinary action for the collection of the just compensation due. Here, the alleged
failure to abide by the conditions under which a donation was given should not prove
an insuperable obstacle to a civil action, the consent likewise being presumed. This
conclusion is strengthened by the fact that while a donation partakes of a contract,
there is no money claim, and therefore reliance on Commonwealth Act No. 327 would
be futile.
7. Our decision, it must be emphasized, goes no further than to rule that a donor, with
the Republic or any of its agency being the donee, is entitled to go to court in case of
an alleged breach of the conditions of such donation. He has the right to be heard.
Under the circumstances, the fundamental postulate of non-suability cannot stand in
the way. It is made to accommodate itself to the demands of procedural due process,
which is the negation of arbitrariness and inequity. The government, in the final
analysis, is the beneficiary. It thereby manifests its adherence to the highest ethical
standards, which can only be ignored at the risk of losing the confidence of the
people, the repository of the sovereign power. The judiciary under this circumstance
has the grave responsibility of living up to the ideal of objectivity and impartiality, the
very essence of the rule of law. Only by displaying the neutrality expected of an
arbiter, even if it happens to be one of the departments of a litigant, can the decision
arrived at, whatever it may be, command respect and be entitled to acceptance.
WHEREFORE, the writ of certiorari prayed for is granted and the order of dismissal of
October 20, 1977 is nullified, set aside and declared to be without force and effect.
The Court of First Instance of Zamboanga City, Branch II, is hereby directed to
proceed with this case, observing the procedure set forth in the Rules of Court. No
costs.
Barredo, Antonio, Aquino, Concepcion, Jr. and Santos, JJ., concur.
Footnotes
1 According to Article XV, Section 16 of the Constitution: "The State may not be sued
without its consent.
92
2 He is represented by his attorney-in-fact, Alfredo T. Santiago. 21 Ibid, 788.

3 Ildefonso Santiago v. Republic of the Philippines, Civil Case No. 249 of the Court of 22 L-32667, January 31, 1978, 81 SCRA 314.
First Instance of Zamboanga City, Branch 11.
23 L-33112, June 15, 1978.
4 The exact date is January 20, 1971.
24 L-31948, July 25, 1978.
5 Record on Appeal attached in the Petition for Certiorari, Their Amended Complaint,
par. 3, 40. 25 101 Phil. 328.

6 Order of October 20, 1977 by respondent Court, through District Judge Alberto V. 26 Ibid, 340.
Seneris 1-2. This Order was included in the petition without counsel for petitioner
taking the trouble of Identifying it as one of the annexes.
27 102 Phil. 789.
7 He was assisted by Assistant Solicitor General Octavio R. Ramirez and Solicitor
Mariano M. Martinez. 28 Ibid, 801.

8 Article XV Section 16 of the Constitution. 29 107 Phil. 344 (1960).

9 L-27299, June 27, 1973, 51 SCRA 340. 30 Ibid, 351.

10 Ibid, 345-346. The quotation is from Begosa v. Chairman, Philippine Veterans 31 110 Phil.952 (1961).
Administration, L-25916, April 30, 1970, 32 SCRA 466.
32 Cf. 18 Phil. 1120, 1127.
11 L-30671, April 30, 1970, 32 SCRA 466.
33 L-27019, May 6, 1977, 7 SCRA 10.
12 L-30044, December 19, 1973, 54 SCRA 282.
34 Ibid, 12.
13 L-31337, December 20, 1973, 54 SCRA 324.
35 L-31635, August 31, 1971, 40 SCRA 464.
14 L-36084, August 31, 1977, 78 SCRA 470.
36 Ibid, 470.
15 L-27389, March 30, 1970, 32 SCRA 227.
30. Froilan v. Oriental Pan Shipping, September 30m 1950
16 Ibid, 228-229.
Republic of the Philippines
17 L-23139, December 17, 1966, 18 SCRA 1120. SUPREME COURT
Manila

18 92 Phil. 281.
EN BANC
19 Ibid, 285.
G.R. No. L-6060 September 30, 1954

20 118 Phil. 782.

93
FERNANDO A. FROILAN, plaintiff-appellee,
vs.
PAN ORIENTAL SHIPPING CO., defendant-appellant,
REPUBLIC OF THE PHILIPPINES, intervenor-appellee.
Quisumbing, Sycip, Quisumbing and Salazar, for appellant.
Ernesto Zaragoza for appellee.
Hilarion U. Jarencio for the intervenor.
PARAS, C.J.:
The factual antecedents of this case are sufficiently recited in the brief filed by the
intervenor-appellee as follows:
1. On February 3, 1951, plaintiff-appellee, Fernando A. Froilan, filed a
complaint against the defendant-appellant, Pan Oriental Shipping Co.,
alleging that he purchased from the Shipping Commission the vessel FS-197
for P200,000, paying P50,000 down and agreeing to pay the balance in
installments; that to secure the payment of the balance of the purchase
price, he executed a chattel mortgage of said vessel in favor of the Shipping
Commission; that for various reason, among them the non-payment of the
installments, the Shipping Commission took possession of said vessel and
considered the contract of sale cancelled; that the Shipping Commission
chartered and delivered said vessel to the defendant-appellant Pan Oriental
Shipping Co. subject to the approval of the President of the Philippines; that
he appealed the action of the Shipping Commission to the President of the
Philippines and, in its meeting on August 25, 1950, the Cabinet restored him
to all his rights under his original contract with the Shipping Commission; that
he had repeatedly demanded from the Pan Oriental Shipping Co. the
possession of the vessel in question but the latter refused to do so. He,
therefore, prayed that, upon the approval of the bond accompanying his
complaint, a writ of replevin be issued for the seizure of said vessel with all
its equipment and appurtenances, and that after hearing, he be adjudged to
have the rightful possession thereof (Rec. on App. pp. 2-8).
2. On February 3, 1951, the lower court issued the writ of replevin prayed for
by Froilan and by virtue thereof the Pan Oriental Shipping Co. was divested
of its possession of said vessel (Rec. on App. p. 47).
3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer denying the
right of Froilan to the possession of the said vessel; it alleged that the action
of the Cabinet on August 25, 1950, restoring Froilan to his rights under his
original contract with the Shipping Commission was null and void; that, in
any event, Froilan had not complied with the conditions precedent imposed
by the Cabinet for the restoration of his rights to the vessel under the original
contract; that it suffered damages in the amount of P22,764.59 for wrongful
replevin in the month of February, 1951, and the sum of P17,651.84 a month
as damages suffered for wrongful replevin from March 1, 1951; it alleged
that it had incurred necessary and useful expenses on the vessel amounting
to P127,057.31 and claimed the right to retain said vessel until its useful and
necessary expenses had been reimbursed (Rec. on App. pp. 8-53).
4. On November 10, 1951, after the leave of the lower court had been
obtained, the intervenor-appellee, Government of the Republic of the
Philippines, filed a complaint in intervention alleging that Froilan had failed to
pay to the Shipping Commission (which name was later changed to Shipping
Administration) the balance due on the purchase price of the vessel in
question, the interest thereon, and its advances on insurance premium
totalling P162,142.95, excluding the dry-docking expenses incurred on said
vessel by the Pan Oriental Shipping Co.; that intervenor was entitled to the
possession of the said vessel either under the terms of the original contract
as supplemented by Froilan's letter dated January 28, 1949, or in order that
it may cause the extrajudicial sale thereof under the Chattel Mortgage Law.
It, therefore, prayed that Froilan be ordered to deliver the vessel in question
to its authorized representative, the Board of Liquidators; that Froilan be
declared to be without any rights on said vessel and the amounts he paid
thereon forfeited or alternately, that the said vessel be delivered to the Board
of Liquidators in order that the intervenor may have its chattel mortgage
extrajudicially foreclosed in accordance with the provisions of the Chattel
Mortgage Law; and that pending the hearing on the merits, the said vessel
be delivered to it (Rec. on App. pp. 54-66).
5. On November 29, 1951, the Pan Oriental Shipping Co. filed an answer to
the complaint in intervention alleging that the Government of the Republic of
the Philippines was obligated to deliver the vessel in question to it by virtue
of a contract of bare-boat charter with option to purchase executed on June
16, 1949, by the latter in favor of the former; it also alleged that it had made
necessary and useful expenses on the vessel and claimed the right of
retention of the vessel. It, therefore, prayed that, if the Republic of the
Philippines succeeded in obtaining possession of the said vessel, to comply
with its obligations of delivering to it (Pan Oriental Shipping co.) or causing
its delivery by recovering it from Froilan (Rec. on App. pp. 69-81).
6. On November 29, 1951, Froilan tendered to the Board of Liquidators,
which was liquidating the affairs of the Shipping Administration, a check in
the amount of P162,576.96 in payment of his obligation to the Shipping
Administration for the said vessel as claimed in the complaint in intervention
of the Government of the Republic of the Philippines. The Board of
Liquidators issued an official report therefor stating that it was a 'deposit
pending the issuance of an order of the Court of First Instance of Manila'
(Rec. on App. pp. 92-93).
7. On December 7, 1951, the Government of the Republic of the Philippines
brought the matter of said payment and the circumstance surrounding it to
the attention of the lower court "in order that they may be taken into account
94
 by this Honorable Court in connection with the questions that are not
pending before it for determination" (Rec. on App. pp. 82-86).
8. On February 3, 1952, the lower court held that the payment by Froilan of
the amount of P162,576.96 on November 29, 1951, to the Board of
Liquidators constituted a payment and a discharge of Froilan's obligation to
the Government of the Republic of the Philippines and ordered the dismissal
of the latter's complaint in intervention. In the same order, the lower court
made it very clear that said order did not pre-judge the question involved
between Froilan and the Oriental Shipping Co. which was also pending
determination in said court (Rec. on App. pp. 92-93). This order dismissing
the complaint in intervention, but reserving for future adjudication the
controversy between Froilan and the Pan Oriental Shipping Co. has already
become final since neither the Government of the Republic of the Philippines
nor the Pan Oriental Shipping Co. had appealed therefrom.
9. On May 10, 1952, the Government of the Republic of the Philippines filed
a motion to dismiss the counterclaim of the Pan Oriental Shipping Co.
against it on the ground that the purpose of said counterclaim was to compel
the Government of the Republic of the Philippines to deliver the vessel to it
(Pan Oriental Shipping Co.) in the event that the Government of the Republic
of the Philippines recovers the vessel in question from Froilan. In view,
however, of the order of the lower court dated February 3, holding that the
payment made by Froilan to the Board of Liquidators constituted full
payment of Froilan's obligation to the Shipping Administration, which order
had already become final, the claim of the Pan Oriental Shipping Co. against
the Republic of the Philippines was no longer feasible, said counterclaim
was barred by prior judgment and stated no cause of action. It was also
alleged that movant was not subject to the jurisdiction of the court in
connection with the counterclaim. (Rec. on App. pp. 94-97). This motion was
opposed by the Pan Oriental Shipping Co. in its written opposition dated
June 4, 1952 (Rec. on app. pp. 19-104).
10. In an order dated July 1, 1952, the lower court dismissed the
counterclaim of the Pan Oriental Shipping Co. as prayed for by the Republic
of the Philippines (Rec. on App. pp. 104-106).
11. It if from this order of the lower court dismissing its counterclaim against
the Government of the Republic of the Philippines that Pan Oriental Shipping
Co. has perfected the present appeal (Rec. on App. p. 107).
The order of the Court of First Instance of Manila, dismissing the counterclaim of the
defendant Pan Oriental Shipping Co., from which the latter has appealed, reads as
follows:
This is a motion to dismiss the counterclaim interposed by the defendant in
its answer to the complaint in intervention.
"The counterclaim states as follows:
"COUNTERCLAIM
"As counterclaim against the intervenor Republic of the Philippines, the
defendant alleges:
"1. That the defendant reproduces herein all the pertinent allegations of the
foregoing answer to the complaint in intervention
"2. That, as shown by the allegations of the foregoing answer to the
complaint in intervention, the defendant Pan Oriental Shipping Company is
entitled to the possession of the vessel and the intervenor Republic of the
Philippines is bound under the contract of charter with option to purchase it
entered into with the defendant to deliver that possession to the defendant
— whether it actually has the said possession or it does not have that
possession from the plaintiff Fernando A. Froilan and deliver the same to the
defendant;
"3. That, notwithstanding demand, the intervenor Republic of the Philippines
has not to date complied with its obligation of delivering or causing the
delivery of the vessel to the defendant Pan Oriental Shipping
Company.1âwphïl.nêt
"RELIEF
"WHEREFORE, the defendant respectfully prays that judgment be rendered
ordering the intervenor Republic of the Philippines alternatively to deliver to
the defendants the possession of the said vessel, or to comply with its
obligation to the defendant or causing the delivery to the latter of the said
vessel by recovering the same from plaintiff, with costs.
"The defendant prays for such other remedy as the Court
may deem just and equitable in the premises."
The ground of the motion to dismiss are (a) That the cause of action is
barred by prior judgment; (b) That the counterclaim states no cause of
action; and (c) That this Honorable Court has no jurisdiction over the
intervenor government of the Republic of the Philippines in connection with
the counterclaim of the defendant Pan Oriental Shipping Co.
The intervenor contends that the complaint in intervention having been
dismissed and no appeal having been taken, the dismissal of said complaint
is tantamount to a judgment.
95
 The complaint in intervention did not contain any claim whatsoever against
the defendant Pan Oriental Shipping Co.; hence, the counterclaim has no
foundation.
The question as to whether the Court has jurisdiction over the intervenor with
regard to the counterclaim, the Court is of the opinion that it has no
jurisdiction over said intervenor.
It appearing, therefore, that the grounds of the motion to dismiss are well
taken, the counterclaim of the defendant is dismissed, without
pronouncement as to costs.
The defendant's appeal is predicated upon the following assignments of error:
I. The lower court erred in dismissing the counterclaim on the ground of prior
judgment.
II. The lower court erred in dismissing the counterclaim on the ground that
the counterclaim had no foundation because made to a complaint in
intervention that contained no claim against the defendant.
III. The lower court erred in dismissing the counterclaim on the ground of
alleged lack of jurisdiction over the intervenor Republic of the Philippines.
We agree with appellant's contention that its counterclaim is not barred by prior
judgment (order of February 8, 1952, dismissing the complaint in intervention), first,
because said counterclaim was filed on November 29, 1951, before the issuance of
the order invoked; and, secondly, because in said order of February 8, the court
dismissed the complaint in intervention, "without, of course, precluding the
determination of the right of the defendant in the instant case," and subject to the
condition that the "release and cancellation of the chattel mortgage does not,
however, prejudge the question involved between the plaintiff and the defendant
which is still the subject of determination in this case." It is to be noted that the first
condition referred to the right of the defendant, as distinguished from the second
condition that expressly specified the controversy between the plaintiff and the
defendant. That the first condition reserved the right of the defendant as against the
intervenor, is clearly to be deduced from the fact that the order of February 8
mentioned the circumstance that "the question of the expenses of drydocking incurred
by the defendant has been included in its counterclaim against the plaintiff,"
apparently as one of the grounds for granting the motion to dismiss the complaint in
intervention.
The defendant's failure to appeal from the order of February 8 cannot, therefore, be
held as barring the defendant from proceeding with its counterclaim, since, as already
stated, said order preserved its right as against the intervenor. Indeed, the
maintenance of said right is in consonance with Rule 30, section 2, of the Rules of
Court providing that "if a counterclaim has been pleaded by a defendant prior to the
service upon him of the plaintiff's motion to dismiss, the action shall not be dismissed
against the defendant's objection unless the counterclaim can remain pending for
independent adjudication by the court."
The lower court also erred in holding that, as the intervenor had not made any claim
against the defendant, the latter's counterclaim had no foundation. The complaint in
intervention sought to recover possession of the vessel in question from the plaintiff,
and this claim is logically adverse to the position assumed by the defendant that it has
a better right to said possession than the plaintiff who alleges in his complaint that he
is entitled to recover the vessel from the defendant. At any rate a counterclaim should
be judged by its own allegations, and not by the averments of the adverse party. It
should be recalled that the defendant's theory is that the plaintiff had already lost his
rights under the contract with the Shipping Administration and that, on the other hand,
the defendant is relying on the charter contract executed in its favor by the intervenor
which is bound to protect the defendant in its possession of the vessel. In other
words, the counterclaim calls for specific performance on the part of the intervenor.
As to whether this counterclaim is meritorious is another question which is not now
before us.
The other ground for dismissing the defendant's counterclaim is that the State is
immune from suit. This is untenable, because by filing its complaint in intervention the
Government in effect waived its right of nonsuability.
The immunity of the state from suits does not deprive it of the right to sue
private parties in its own courts. The state as plaintiff may avail itself of the
different forms of actions open to private litigants. In short, by taking the
initiative in an action against a private party, the state surrenders its
privileged position and comes down to the level of the defendant. The latter
automatically acquires, within certain limits, the right to set up whatever
claims and other defenses he might have against the state. The United
States Supreme Court thus explains:
"No direct suit can be maintained against the United States. But
when an action is brought by the United States to recover money in
the hands of a party who has a legal claim against them, it would be
a very rigid principle to deny to him the right of setting up such
claim in a court of justice, and turn him around to an application to
Congress." (Sinco, Philippine Political Law, Tenth Ed., pp. 36-37,
citing U. S. vs. Ringgold, 8 Pet. 150, 8 L. ed. 899.)
It is however, contended for the intervenor that, if there was at all any waiver, it was in
favor of the plaintiff against whom the complaint in intervention was directed. This
contention is untenable. As already stated, the complaint in intervention was in a
sense in derogation of the defendant's claim over the possession of the vessel in
question.
96
Wherefore, the appealed order is hereby reversed and set aside and the case
remanded to the lower court for further proceedings. So ordered, without costs.
Pablo, Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Concepcion, and
Reyes, J.B.L., JJ., concur.
G. SCOPE OF CONSENT
31. Rizal Commercial Bank v. De Castro 168 SCRA 49
Consortium, Inc., Home Building System & Realty Corporation and one Arceli P. Jo,
involving a parcel of land and improvements thereon located at Mayapis St., San
Antonio Village, Makati and registered in the name of Arceli P. Jo under TCT No. S-
5499.
It appears that the action for eminent domain was filed on May 20, 1986, docketed as
Civil Case No. 13699. Attached to petitioner's complaint was a certification that a
bank account (Account No. S/A 265-537154-3) had been opened with the PNB
Buendia Branch under petitioner's name containing the sum of P417,510.00, made
pursuant to the provisions of Pres. Decree No. 42. After due hearing where the
parties presented their respective appraisal reports regarding the value of the
property, respondent RTC judge rendered a decision on June 4, 1987, fixing the
appraised value of the property at P5,291,666.00, and ordering petitioner to pay this
amount minus the advanced payment of P338,160.00 which was earlier released to
private respondent.

After this decision became final and executory, private respondent moved for the
32. Mun. of San Miguel, Bulacan v. Fernandez 130 SCRA 556 issuance of a writ of execution. This motion was granted by respondent RTC judge.
After issuance of the writ of execution, a Notice of Garnishment dated January 14,
1988 was served by respondent sheriff Silvino R. Pastrana upon the manager of the
33. Mun. of Makati v. CA 190 SCRA 206 PNB Buendia Branch. However, respondent sheriff was informed that a "hold code"
was placed on the account of petitioner. As a result of this, private respondent filed a
Republic of the Philippines motion dated January 27, 1988 praying that an order be issued directing the bank to
SUPREME COURT deliver to respondent sheriff the amount equivalent to the unpaid balance due under
Manila the RTC decision dated June 4, 1987.

THIRD DIVISION Petitioner filed a motion to lift the garnishment, on the ground that the manner of
payment of the expropriation amount should be done in installments which the
G.R. Nos. 89898-99 October 1, 1990 respondent RTC judge failed to state in his decision. Private respondent filed its
opposition to the motion.

MUNICIPALITY OF MAKATI, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN,
JR., as Judge RTC of Makati, Branch CXLII ADMIRAL FINANCE CREDITORS
CONSORTIUM, INC., and SHERIFF SILVINO R. PASTRANA, respondents.
Defante & Elegado for petitioner.
Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium, Inc.
RESOLUTION
CORTÉS, J.:
The present petition for review is an off-shoot of expropriation proceedings initiated by
petitioner Municipality of Makati against private respondent Admiral Finance Creditors
Pending resolution of the above motions, petitioner filed on July 20, 1988 a
"Manifestation" informing the court that private respondent was no longer the true and
lawful owner of the subject property because a new title over the property had been
registered in the name of Philippine Savings Bank, Inc. (PSB) Respondent RTC judge
issued an order requiring PSB to make available the documents pertaining to its
transactions over the subject property, and the PNB Buendia Branch to reveal the
amount in petitioner's account which was garnished by respondent sheriff. In
compliance with this order, PSB filed a manifestation informing the court that it had
consolidated its ownership over the property as mortgagee/purchaser at an
extrajudicial foreclosure sale held on April 20, 1987. After several conferences, PSB
and private respondent entered into a compromise agreement whereby they agreed
to divide between themselves the compensation due from the expropriation
proceedings.
Respondent trial judge subsequently issued an order dated September 8, 1988 which:
(1) approved the compromise agreement; (2) ordered PNB Buendia Branch to
97
immediately release to PSB the sum of P4,953,506.45 which corresponds to the
balance of the appraised value of the subject property under the RTC decision dated
June 4, 1987, from the garnished account of petitioner; and, (3) ordered PSB and
private respondent to execute the necessary deed of conveyance over the subject
property in favor of petitioner. Petitioner's motion to lift the garnishment was denied.
Petitioner filed a motion for reconsideration, which was duly opposed by private
respondent. On the other hand, for failure of the manager of the PNB Buendia Branch
to comply with the order dated September 8, 1988, private respondent filed two
succeeding motions to require the bank manager to show cause why he should not
be held in contempt of court. During the hearings conducted for the above motions,
the general manager of the PNB Buendia Branch, a Mr. Antonio Bautista, informed
the court that he was still waiting for proper authorization from the PNB head office
enabling him to make a disbursement for the amount so ordered. For its part,
petitioner contended that its funds at the PNB Buendia Branch could neither be
garnished nor levied upon execution, for to do so would result in the disbursement of
public funds without the proper appropriation required under the law, citing the case
of Republic of the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA
899].
Respondent trial judge issued an order dated December 21, 1988 denying petitioner's
motion for reconsideration on the ground that the doctrine enunciated in Republic v.
Palacio did not apply to the case because petitioner's PNB Account No. S/A 265-
537154-3 was an account specifically opened for the expropriation proceedings of the
subject property pursuant to Pres. Decree No. 42. Respondent RTC judge likewise
declared Mr. Antonio Bautista guilty of contempt of court for his inexcusable refusal to
obey the order dated September 8, 1988, and thus ordered his arrest and detention
until his compliance with the said order.
Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions
for certiorari with the Court of Appeals, which were eventually consolidated. In a
decision promulgated on June 28, 1989, the Court of Appeals dismissed both
petitions for lack of merit, sustained the jurisdiction of respondent RTC judge over the
funds contained in petitioner's PNB Account No. 265-537154-3, and affirmed his
authority to levy on such funds.
Its motion for reconsideration having been denied by the Court of Appeals, petitioner
now files the present petition for review with prayer for preliminary injunction.
On November 20, 1989, the Court resolved to issue a temporary restraining order
enjoining respondent RTC judge, respondent sheriff, and their representatives, from
enforcing and/or carrying out the RTC order dated December 21, 1988 and the writ of
garnishment issued pursuant thereto. Private respondent then filed its comment to the
petition, while petitioner filed its reply.
Petitioner not only reiterates the arguments adduced in its petition before the Court of
Appeals, but also alleges for the first time that it has actually two accounts with the
PNB Buendia Branch, to wit:
xxx xxx xxx
(1) Account No. S/A 265-537154-3 — exclusively for the
expropriation of the subject property, with an outstanding balance of
P99,743.94.
(2) Account No. S/A 263-530850-7 — for statutory obligations and
other purposes of the municipal government, with a balance of
P170,098,421.72, as of July 12, 1989.
xxx xxx xxx
[Petition, pp. 6-7; Rollo, pp. 11-12.]
Because the petitioner has belatedly alleged only in this Court the existence of two
bank accounts, it may fairly be asked whether the second account was opened only
for the purpose of undermining the legal basis of the assailed orders of respondent
RTC judge and the decision of the Court of Appeals, and strengthening its reliance on
the doctrine that public funds are exempted from garnishment or execution as
enunciated in Republic v. Palacio [supra.] At any rate, the Court will give petitioner the
benefit of the doubt, and proceed to resolve the principal issues presented based on
the factual circumstances thus alleged by petitioner.
Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for
expropriation proceedings it had initiated over the subject property, petitioner poses
no objection to the garnishment or the levy under execution of the funds deposited
therein amounting to P99,743.94. However, it is petitioner's main contention that
inasmuch as the assailed orders of respondent RTC judge involved the net amount of
P4,965,506.45, the funds garnished by respondent sheriff in excess of P99,743.94,
which are public funds earmarked for the municipal government's other statutory
obligations, are exempted from execution without the proper appropriation required
under the law.
There is merit in this contention. The funds deposited in the second PNB Account No.
S/A 263-530850-7 are public funds of the municipal government. In this jurisdiction,
well-settled is the rule that public funds are not subject to levy and execution, unless
otherwise provided for by statute [Republic v. Palacio, supra.; The Commissioner of
Public Highways v. San Diego, G.R. No. L-30098, February 18, 1970, 31 SCRA 616].
More particularly, the properties of a municipality, whether real or personal, which are
necessary for public use cannot be attached and sold at execution sale to satisfy a
money judgment against the municipality. Municipal revenues derived from taxes,
licenses and market fees, and which are intended primarily and exclusively for the
98
purpose of financing the governmental activities and functions of the municipality, are
exempt from execution [See Viuda De Tan Toco v. The Municipal Council of Iloilo, 49
Phil. 52 (1926): The Municipality of Paoay, Ilocos Norte v. Manaois, 86 Phil. 629
(1950); Municipality of San Miguel, Bulacan v. Fernandez, G.R. No. 61744, June 25,
1984, 130 SCRA 56]. The foregoing rule finds application in the case at bar. Absent a
showing that the municipal council of Makati has passed an ordinance appropriating
from its public funds an amount corresponding to the balance due under the RTC
decision dated June 4, 1987, less the sum of P99,743.94 deposited in Account No.
S/A 265-537154-3, no levy under execution may be validly effected on the public
funds of petitioner deposited in Account No. S/A 263-530850-7.
Nevertheless, this is not to say that private respondent and PSB are left with no legal
recourse. Where a municipality fails or refuses, without justifiable reason, to effect
payment of a final money judgment rendered against it, the claimant may avail of the
remedy of mandamus in order to compel the enactment and approval of the
necessary appropriation ordinance, and the corresponding disbursement of municipal
funds therefor [See Viuda De Tan Toco v. The Municipal Council of Iloilo, supra;
Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108 Phil. 247 (1960)].
In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed
by petitioner. No appeal was taken therefrom. For three years now, petitioner has
enjoyed possession and use of the subject property notwithstanding its inexcusable
failure to comply with its legal obligation to pay just compensation. Petitioner has
benefited from its possession of the property since the same has been the site of
Makati West High School since the school year 1986-1987. This Court will not
condone petitioner's blatant refusal to settle its legal obligation arising from
expropriation proceedings it had in fact initiated. It cannot be over-emphasized that,
within the context of the State's inherent power of eminent domain,
. . . [j]ust compensation means not only the correct determination of
the amount to be paid to the owner of the land but also the payment
of the land within a reasonable time from its taking. Without prompt
payment, compensation cannot be considered "just" for the
property owner is made to suffer the consequence of being
immediately deprived of his land while being made to wait for a
decade or more before actually receiving the amount necessary to
cope with his loss [Cosculluela v. The Honorable Court of Appeals,
G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400. See also
Provincial Government of Sorsogon v. Vda. de Villaroya, G.R. No.
64037, August 27, 1987, 153 SCRA 291].
The State's power of eminent domain should be exercised within the bounds of fair
play and justice. In the case at bar, considering that valuable property has been
taken, the compensation to be paid fixed and the municipality is in full possession and
utilizing the property for public purpose, for three (3) years, the Court finds that the
municipality has had more than reasonable time to pay full compensation.
WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to
immediately pay Philippine Savings Bank, Inc. and private respondent the amount of
P4,953,506.45. Petitioner is hereby required to submit to this Court a report of its
compliance with the foregoing order within a non-extendible period of SIXTY (60)
DAYS from the date of receipt of this resolution.
The order of respondent RTC judge dated December 21, 1988, which was rendered
in Civil Case No. 13699, is SET ASIDE and the temporary restraining order issued by
the Court on November 20, 1989 is MADE PERMANENT.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.
34. NIA v. CA 214 SCRA 35
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 129169 November 17, 1999
NATIONAL IRRIGATION ADMINISTRATION (NIA), petitioner,
vs.
HONORABLE COURT OF APPEALS (4th Division), CONSTRUCTION INDUSTRY
ARBITRATION COMMISSION, and HYDRO RESOURCES CONTRACTORS
CORPORATION, respondents.
DAVIDE, JR., C.J.:
In this special civil action for certiorari under Rule 65 of the Rules of Court, the
National Irrigation Administration (hereafter NIA), seeks to annul and set aside the
Resolutions 1 of the Court of Appeals in CA-GR. SP No. 37180 dated 28 June 1996
and 24 February 1997, which dismissed respectively NIA's petition for certiorari and
prohibition against the Construction Industry Arbitration Commission (hereafter CIAC),
and the motion for reconsideration thereafter filed.
Records show that in a competitive bidding held by NIA in August 1978, Hydro
Resources Contractors Corporation (hereafter HYDRO) was awarded Contract MPI-
C-2 for the construction of the main civil works of the Magat River Multi-Purpose
Project. The contract provided that HYDRO would be paid partly in Philippine pesos
and partly in U.S. dollars. HYDRO substantially completed the works under the
99
contract in 1982 and final acceptance by NIA was made in 1984. HYDRO thereafter
determined that it still had an account receivable from NIA representing the dollar rate
differential of the price escalation for the contract. 2
After unsuccessfully pursuing its case with NIA, HYDRO, on 7 December 1994, filed
with the CIAC a Request for Adjudication of the aforesaid claim. HYDRO nominated
six arbitrators for the arbitration panel, from among whom CIAC appointed Engr.
Lauro M. Cruz. On 6 January 1995, NIA filed its Answer wherein it questioned the
jurisdiction of the CIAC alleging lack of cause of action, laches and estoppel in view of
HYDRO's alleged failure to avail of its right to submit the dispute to arbitration within
the prescribed period as provided in the contract. On the same date, NIA filed a
Compliance wherein it nominated six arbitrators, from among whom CIAC appointed
Atty. Custodio O. Parlade, and made a counterclaim for P1,000,000 as moral
damages; at least P100,000 as exemplary damages; P100,000 as attorney's fees;
and the costs of the arbitration. 3
The two designated arbitrators appointed Certified Public Accountant Joven B.
Joaquin as Chairman of the Arbitration Panel. The parties were required to submit
copies of the evidence they intended to present during the proceedings and were
provided the draft Terms of Reference. 4
At the preliminary conference, NIA through its counsel Atty. Joy C. Legaspi of the
Office of the Government Corporate Counsel, manifested that it could not admit the
genuineness of HYDRO's evidence since NIA's records had already been destroyed.
NIA requested an opportunity to examine the originals of the documents which
HYDRO agreed to provide. 5
After reaching an accord on the issues to be considered by the arbitration panel, the
parties scheduled the dates of hearings and of submission of simultaneous
memoranda. 6
On 13 March 1995, NIA filed a Motion to Dismiss 7 alleging lack of jurisdiction over
the disputes. NIA contended that there was no agreement with HYDRO to submit the
dispute to CIAC for arbitration considering that the construction contract was
executed in 1978 and the project completed in 1982, whereas the Construction
Industry Arbitration Law creating CIAC was signed only in 1985; and that while they
have agreed to arbitration as a mode of settlement of disputes, they could not have
contemplated submission of their disputes to CIAC. NIA further argued that records
show that it had not voluntarily submitted itself to arbitration by CIAC citing TESCO
Services, Inc. v. Hon. Abraham Vera, et al., 8 wherein it was ruled:
CIAC did not acquire jurisdiction over the dispute arising from the
sub-contract agreement between petitioner TESCO and private
respondent LAROSA. The records do not show that the parties
agreed to submit the disputes to arbitration by the CIAC . . . . While
both parties in the sub-contract had agreed to submit the matter to
arbitration, this was only between themselves, no request having
been made by both with the CIAC. Hence, as already stated, the
CIAC, has no jurisdiction over the dispute. . . . . Nowhere in the said
article (sub-contract) does it mention the CIAC, much less, vest
jurisdiction with the CIAC.
On 11 April 1995, the arbitral body issued an order 9 which deferred the determination
of the motion to dismiss and resolved to proceed with the hearing of the case on the
merits as the grounds cited by NIA did not seem to be "indubitable." NIA filed a
motion for reconsideration of the aforesaid Order. CIAC in denying the motion for
reconsideration ruled that it has jurisdiction over the HYDRO's claim over NIA
pursuant to E.O 1008 and that the hearing should proceed as scheduled. 10
On 26 May 1996, NIA filed with the Court of Appeals an original action
of certiorari and prohibition with prayer for restraining order and/or injunction, seeking
to annul the Orders of the CIAC for having been issued without or in excess of
jurisdiction. In support of its petition NIA alleged that:
A
RESPONDENT CIAC HAS NO AUTHORITY OR JURIDICTION TO
HEAR AND TRY THIS DISPUTE BETWEEN THE HEREIN
PARTIES AS E.O. NO. 1008 HAD NO RETROACTIVE EFFECT.
B
THE DISPUTE BETWEEN THE PARTIES SHOULD BE SETTLED
IN ACCORDANCE WITH GC NO. 25, ART. 2046 OF THE CIVIL
CODE AND R.A. NO. 876 THE GOVERNING LAWS AT THE TIME
CONTRACT WAS EXECUTED AND TERMINATED.
C
E.O. NO. 1008 IS A SUBSTANTIVE LAW, NOT MERELY
PROCEDURAL AS RULED BY THE CIAC.
D
AN INDORSEMENT OF THE AUDITOR GENERAL DECIDING A
CONTROVERSY IS A DECISION BECAUSE ALL THE
ELEMENTS FOR JUDGMENT ARE THERE; THE
CONTROVERSY, THE AUTHORITY TO DECIDE AND THE
DECISION. IF IT IS NOT APPEALED SEASONABLY, THE SAME
BECOMES FINAL.
E
100
 NIA HAS TIMELY RAISED THE ISSUE OF JURISDICTION. IT DID
NOT WAIVE NOR IS IT ESTOPPED FROM ASSAILING THE
SAME.
F case, i.e., regardless of the nature of the action or proceedings involved, may be
THE LEGAL DOCTRINE THAT JURISDICTION IS DETERMINED
BY THE STATUTE IN FORCE AT THE TIME OF THE
COMMENCEMENT OF THE ACTION DOES NOT ONLY APPLY
TO THE INSTANT CASE. 11
The Court of Appeals, after finding that there was no grave abuse of discretion on the
part of the CIAC in issuing the aforesaid Orders, dismissed the petition in its
Resolution dated 28 June 1996. NIA's motion for reconsideration of the said decision
was likewise denied by the Court of Appeals on 26 February 1997.
On 2 June 1997, NIA filed before us an original action for certiorari and prohibition
with urgent prayer for temporary restraining order and writ of preliminary injunction,
praying for the annulment of the Resolutions of the Court of Appeals dated 28 June
1996 and 24 February 1997. In the said special civil action, NIA merely reiterates the
issues it raised before the Court of Appeals. 12
We take judicial notice that on 10 June 1997, CIAC rendered a decision in the main
case in favor of HYDRO. 13 NIA assailed the said decision with the Court of Appeals.
In view of the pendency of the present petitions before us the appellate court issued a
resolution dated 26 March 1998 holding in abeyance the resolution of the same until
after the instant petitions have been finally decided. 14
At the outset, we note that the petition suffers from a procedural defect that warrants
its outright dismissal. The questioned resolutions of the Court of Appeals have
already become final and executory by reason of the failure of NIA to appeal
therefrom. Instead of filing this petition for certiorari under Rule 65 of the Rules of
Court, NIA should have filed a timely petition for review under Rule 45.
There is no doubt that the Court of Appeals has jurisdiction over the special civil
action for certiorari under Rule 65 filed before it by NIA. The original jurisdiction of the
Court of Appeals over special civil actions for certiorari is vested upon it under Section
9(1) of B.P. 129. This jurisdiction is concurrent with the Supreme Court 15 and with the
Regional Trial Court. 16
Thus, since the Court of Appeals had jurisdiction over the petition under Rule 65, any
alleged errors committed by it in the exercise of its jurisdiction would be errors of
judgment which are reviewable by timely appeal and not by a special civil action
of certiorari. 17 If the aggrieved party fails to do so within the reglementary period, and
the decision accordingly becomes final and executory, he cannot avail himself of the
writ of certiorari, his predicament being the effect of his deliberate inaction. 18
The appeal from a final disposition of the Court of Appeals is a petition for review
under Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now
Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil Procedure. 19 Rule 45 is
clear that decisions, final orders or resolutions of the Court of Appeals in any
appealed to this Court by filing a petition for review, which would be but a continuation
of the appellate process over the original case. 20 Under Rule 45 the reglementary
period to appeal is fifteen (15) days from notice of judgment or denial of motion for
reconsideration. 21
In the instant case the Resolution of the Court of Appeals dated 24 February 1997
denying the motion for reconsideration of its Resolution dated 28 June 1997 was
received by NIA on 4 March 1997. Thus, it had until 19 March 1997 within which to
perfect its appeal. NIA did not appeal. What it did was to file an original action
for certiorari before this Court, reiterating the issues and arguments it raised before
the Court of Appeals.
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must
show that he has no plain, speedy and adequate remedy in the ordinary course of law
against its perceived grievance. 22 A remedy is considered "plain, speedy and
adequate" if it will promptly relieve the petitioner from the injurious effects of the
judgment and the acts of the lower court or agency. 23 In this case, appeal was not
only available but also a speedy and adequate remedy.
Obviously, NIA interposed the present special civil action of certiorari not because it is
the speedy and adequate remedy but to make up for the loss, through omission or
oversight, of the right of ordinary appeal. It is elementary that the special civil action
of certiorari is not and cannot be a substitute for an appeal, where the latter remedy is
available, as it was in this case. A special civil action under Rule 65 of the Rules of
Court will not be a cure for failure to timely file a petition for review on certiorari under
Rule 45 of the Rules of Court. 24 Rule 65 is an independent action that cannot be
availed of as a substitute for the lost remedy of an ordinary appeal, including that
under Rule 45, 25 especially if such loss or lapse was occasioned by one's own
neglect or error in the choice of remedies. 26
For obvious reasons the rules forbid recourse to a special civil action for certiorari if
appeal is available, as the remedies of appeal and certiorari are mutually exclusive
and not alternative or successive. 27 Although there are exceptions to the rules, none
is present in the case at bar. NIA failed to show circumstances that will justify a
deviation from the general rule as to make available a petition for certiorari in lieu of
taking an appropriate appeal.
Based on the foregoing, the instant petition should be dismissed.
In any case, even if the issue of technicality is disregarded and recourse under Rule
65 is allowed, the same result would be reached since a review of the questioned
resolutions of the CIAC shows that it committed no grave abuse of discretion.
101
Contrary to the claim of NIA, the CIAC has jurisdiction over the controversy. Executive
Order No. 1008, otherwise known as the "Construction Industry Arbitration Law"
which was promulgated on 4 February 1985, vests upon CIAC original and exclusive
jurisdiction over disputes arising from, or connected with contracts entered into by
parties involved in construction in the Philippines, whether the dispute arises before or
after the completion of the contract, or after the abandonment or breach thereof. The
disputes may involve government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the same to voluntary
arbitration. 28
The complaint of HYDRO against NIA on the basis of the contract executed between
them was filed on 7 December 1994, during the effectivity of E.O. No. 1008. Hence, it
is well within the jurisdiction of CIAC. The jurisdiction of a court is determined by the
law in force at the time of the commencement of the action. 29
NIA's argument that CIAC had no jurisdiction to arbitrate on contract which preceded
its existence is untenable. E.O. 1008 is clear that the CIAC has jurisdiction over all
disputes arising from or connected with construction contract whether the dispute
arises before or after the completion of the contract. Thus, the date the parties
entered into a contract and the date of completion of the same, even if these occurred
before the constitution of the CIAC, did not automatically divest the CIAC of
jurisdiction as long as the dispute submitted for arbitration arose after the constitution
of the CIAC. Stated differently, the jurisdiction of CIAC is over the dispute, not the
contract; and the instant dispute having arisen when CIAC was already constituted,
the arbitral board was actually exercising current, not retroactive, jurisdiction. As such,
there is no need to pass upon the issue of whether E.O. No. 1008 is a substantive or
procedural statute.
NIA also contended that the CIAC did not acquire jurisdiction over the dispute since it
was only HYDRO that requested for arbitration. It asserts that to acquire jurisdiction
over a case, as provided under E.O. 1008, the request for arbitration filed with CIAC
should be made by both parties, and hence the request by one party is not enough.
It is undisputed that the contracts between HYDRO and NIA contained an arbitration
clause wherein they agreed to submit to arbitration any dispute between them that
may arise before or after the termination of the agreement. Consequently, the claim of
HYDRO having arisen from the contract is arbitrable. NIA's reliance with the ruling on
the case of Tesco Services Incorporated v. Vera, 30 is misplaced.
The 1988 CIAC Rules of Procedure which were applied by this Court in Tesco case
had been duly amended by CIAC Resolutions No. 2-91 and 3-93, Section 1 of Article
III of which read as follows:
Submission to CIAC Jurisdiction — An arbitration clause in a
construction contract or a submission to arbitration of a construction
contract or a submission to arbitration of a construction dispute
shall be deemed an agreement to submit an existing or future
controversy to CIAC jurisdiction, notwithstanding the reference to a
different arbitration institution or arbitral body in such contract or
submission. When a contract contains a clause for the submission
of a future controversy to arbitration, it is not necessary for the
parties to enter into a submission agreement before the claimant
may invoke the jurisdiction of CIAC.
Under the present Rules of Procedure, for a particular construction contract to fall
within the jurisdiction of CIAC, it is merely required that the parties agree to submit the
same to voluntary arbitration. Unlike in the original version of Section 1, as applied in
the Tesco case, the law as it now stands does not provide that the parties should
agree to submit disputes arising from their agreement specifically to the CIAC for the
latter to acquire jurisdiction over the same. Rather, it is plain and clear that as long as
the parties agree to submit to voluntary arbitration, regardless of what forum they may
choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if
they specifically choose another forum, the parties will not be precluded from electing
to submit their dispute before the CIAC because this right has been vested upon each
party by law, i.e., E.O. No. 1008. 31
Moreover, it is undeniable that NIA agreed to submit the dispute for arbitration to the
CIAC. NIA through its counsel actively participated in the arbitration proceedings by
filing an answer with counterclaim, as well as its compliance wherein it nominated
arbitrators to the proposed panel, participating in the deliberations on, and the
formulation of, the Terms of Reference of the arbitration proceeding, and examining
the documents submitted by HYDRO after NIA asked for the originals of the said
documents. 32
As to the defenses of laches and prescription, they are evidentiary in nature which
could not be established by mere allegations in the pleadings and must not be
resolved in a motion to dismiss. Those issues must be resolved at the trial of the case
on the merits wherein both parties will be given ample opportunity to prove their
respective claims and defenses. 33 Under the rule 34 the deferment of the resolution of
the said issues was, thus, in order. An allegation of prescription can effectively be
used in a motion to dismiss only when the complaint on its face shows that indeed the
action has already prescribed. 35 In the instant case, the issue of prescription and
laches cannot be resolved on the basis solely of the complaint. It must, however, be
pointed that under the new rules, 36 deferment of the resolution is no longer permitted.
The court may either grant the motion to dismiss, deny it, or order the amendment of
the pleading.
WHEREFORE, the instant petition is DISMISSED for lack of merit. The Court of
Appeals is hereby DIRECTED to proceed with reasonable dispatch in the disposition
of C.A. G.R. No. 44527 and include in the resolution thereof the issue of laches and
prescription.
SO ORDERED.
102
Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur. 19 Director of Lands v. Court of Appeals, 276 SCRA 276 [1997].

Footnotes 20 Heirs of Marcelino Pagobo v. Court of Appeals, 280 SCRA 870, 883 [1997].

1 Rollo, 37-50. Per Salas, B., J., with Paras, G. and Austria-Martinez, A., JJ., 21 Sec. 1, Rule 45 of the Rules of Court; National Investment and Development Corp.
concurring. v. Court of Appeals, 270 SCRA 497 [1997].

2 Rollo, 151-152. 22 Sunshine Transportation v. NLRC, 254 SCRA 51, 55 [1996].

3 Id., 73, 112, 152-153. 23 See Silvestre v. Torres, 57 Phil. 885 [1933] citing 11 C.J. 113.

4 Id., 73. 24 De Espina v. Abaya, 16 SCRA 312 [1991]; Escudero v. Dulay, 158 SCRA 69
[1998].
5 Rollo, 74.
25 Heirs of Marcelino Pagobo v. Court of Appeals, 280 SCRA 870, 883 [1997].
6 Id., 113.
26 Sempio, et al. v. Court of Appeals, et al., 263 SCRA 617, 624, citing Fajardo v.
7 See Annex "A," C.A. Rollo, 163-164. Bautista, 232 SCRA 291 [1994]; Aqualyn Corp. v. CA, 214 SCRA 312 [1992]; Sy v.
Romero, 214 SCRA 193 [1992].
8 209 SCRA 440 [1992].
27 Federation of Free Workers v. Inciong, 208 SCRA 157 [1992].
9 Annex "I," Rollo, 73-78.
28 See Section 4.
10 Annex "K," C.A. Rollo, 84-87.
29 People v. Magallanes, et al., 249 SCRA 212 [1995].
11 Petition, Id., 19.
30 209 SCRA 440 [1992].
12 Rollo, 17.
31 China Chang Jiang Energy Corporation v. Rosal Infrastructure Builders, et al.,
Third Division Resolution dated 30 September 1996.
13 Id., 111-129. Per Joaquin, J; Parlade, C., and Cruz, L.
32 Rollo, 84.
14 Id., 338.
33 See Espano, Sr. v. Court of Appeals, 268 SCRA 211 [1997].
15 Sec. 5(1), Article VIII, Constitution; Section 17, Judiciary Act of 1948, as amended.
34 Sec. 3, Rule 16, Rules of Court.
16 Sec. 21(1) of B.P. Blg. 129; See also Morales v. Court of Appeals, et al., 283
SCRA 211 [1997]; PAA v. Court of Appeals, 282 SCRA 448 [1997].
35 Francisco, et al., v. Robles, et al., 94 Phil. 1035 [1954].
17 B.F. Corporation v. Court of Appeals, 288 SCRA 267 [1998].
36 Sec. 3, Rule 16, 1997 Rules of Civil Procedure.
18 Giron, et al. v. Caluag, et al., 8 SCRA 285 [1963].

103