G.R. No. 171182               August 23, 2012 of the billings. The third billing worth ₱ 273,729.

lings. The third billing worth ₱ 273,729.47 was not paid due to its
disallowance by the Commission on Audit (COA). Despite the lifting of the
UNIVERSITY OF THE PHILIPPINES, JOSE V. ABUEVA, RAUL P. DE GUZMAN, RUBEN
disallowance, the UP failed to pay the billing, prompting Stern Builders and dela
P. ASPIRAS, EMMANUEL P. BELLO, WILFREDO P. DAVID, CASIANO S. ABRIGO, and
Cruz to sue the UP and its co-respondent officials to collect the unpaid billing and to
JOSEFINA R. LICUANAN,Petitioners, 
recover various damages. The suit, entitled Stern Builders Corporation and
vs.
Servillano R. Dela Cruz v. University of the Philippines Systems, Jose V. Abueva, Raul
HON. AGUSTIN S. DIZON, his capacity as Presiding Judge of the Regional Trial
P. de Guzman, Ruben P. Aspiras, Emmanuel P. Bello, Wilfredo P. David, Casiano S.
Court of Quezon City, Branch 80, STERN BUILDERS, INC., and SERVILLANO DELA
Abrigo, and Josefina R. Licuanan, was docketed as Civil Case No. Q-93-14971 of the
CRUZ, Respondents.
Regional Trial Court in Quezon City (RTC).4
DECISION
After trial, on November 28, 2001, the RTC rendered its decision in favor of the
BERSAMIN, J.: plaintiffs,5 viz:

Trial judges should not immediately issue writs of execution or garnishment against
the Government or any of its subdivisions, agencies and instrumentalities to
enforce money judgments.1 They should bear in mind that the primary jurisdiction
to examine, audit and settle all claims of any sort due from the Government or any
of its subdivisions, agencies and instrumentalities pertains to the Commission on
Audit (COA) pursuant to Presidential Decree No. 1445 (Government Auditing Code
of the Philippines).
Wherefore, in the light of the foregoing, judgment is hereby rendered in favor of
the plaintiff and against the defendants ordering the latter to pay plaintiff, jointly
and severally, the following, to wit:
1. ₱ 503,462.74 amount of the third billing, additional accomplished work and
retention money
2. ₱ 5,716,729.00 in actual damages

The Case 3. ₱ 10,000,000.00 in moral damages

On appeal by the University of the Philippines and its then incumbent officials
(collectively, the UP) is the decision promulgated on September 16, 2005,2 whereby
the Court of Appeals (CA) upheld the order of the Regional Trial Court (RTC), Branch
80, in Quezon City that directed the garnishment of public funds amounting to ₱
16,370,191.74 belonging to the UP to satisfy the writ of execution issued to enforce
the already final and executory judgment against the UP.
Antecedents
On August 30, 1990, the UP, through its then President Jose V. Abueva, entered into
a General Construction Agreement with respondent Stern Builders Corporation
(Stern Builders), represented by its President and General Manager Servillano dela
Cruz, for the construction of the extension building and the renovation of the
College of Arts and Sciences Building in the campus of the University of the
Philippines in Los Baños (UPLB).3
In the course of the implementation of the contract, Stern Builders submitted three
progress billings corresponding to the work accomplished, but the UP paid only two
4. ₱ 150,000.00 and ₱ 1,500.00 per appearance as attorney’s fees; and
5. Costs of suit.
SO ORDERED.
Following the RTC’s denial of its motion for reconsideration on May 7, 2002,6 the UP
filed a notice of appeal on June 3, 2002.7 Stern Builders and dela Cruz opposed the
notice of appeal on the ground of its filing being belated, and moved for the
execution of the decision. The UP countered that the notice of appeal was filed
within the reglementary period because the UP’s Office of Legal Affairs (OLS) in
Diliman, Quezon City received the order of denial only on May 31, 2002. On
September 26, 2002, the RTC denied due course to the notice of appeal for having
been filed out of time and granted the private respondents’ motion for execution.8
The RTC issued the writ of execution on October 4, 2002,9 and the sheriff of the RTC
served the writ of execution and notice of demand upon the UP, through its
counsel, on October 9, 2002.10 The UP filed an urgent motion to reconsider the
order dated September 26, 2002, to quash the writ of execution dated October 4,
1
2002, and to restrain the proceedings.11 However, the RTC denied the urgent
motion on April 1, 2003.12
On June 24, 2003, the UP assailed the denial of due course to its appeal through a
petition for certiorari in the Court of Appeals (CA), docketed as CA-G.R. No. 77395.13
On February 24, 2004, the CA dismissed the petition for certiorari upon finding that
the UP’s notice of appeal had been filed late,14 stating:
Records clearly show that petitioners received a copy of the Decision dated
November 28, 2001 and January 7, 2002, thus, they had until January 22, 2002
within which to file their appeal. On January 16, 2002 or after the lapse of nine (9)
days, petitioners through their counsel Atty. Nolasco filed a Motion for
Reconsideration of the aforesaid decision, hence, pursuant to the rules, petitioners
still had six (6) remaining days to file their appeal. As admitted by the petitioners in
their petition (Rollo, p. 25), Atty. Nolasco received a copy of the Order denying their
motion for reconsideration on May 17, 2002, thus, petitioners still has until May 23,
2002 (the remaining six (6) days) within which to file their appeal. Obviously,
petitioners were not able to file their Notice of Appeal on May 23, 2002 as it was
only filed on June 3, 2002.
In view of the said circumstances, We are of the belief and so holds that the Notice
of Appeal filed by the petitioners was really filed out of time, the same having been
filed seventeen (17) days late of the reglementary period. By reason of which, the
decision dated November 28, 2001 had already become final and executory.
"Settled is the rule that the perfection of an appeal in the manner and within the
period permitted by law is not only mandatory but jurisdictional, and failure to
perfect that appeal renders the challenged judgment final and executory. This is not
an empty procedural rule but is grounded on fundamental considerations of public
policy and sound practice." (Ram’s Studio and Photographic Equipment, Inc. vs.
Court of Appeals, 346 SCRA 691, 696). Indeed, Atty. Nolasco received the order of
denial of the Motion for Reconsideration on May 17, 2002 but filed a Notice of
Appeal only on June 3, 3003. As such, the decision of the lower court ipso
facto became final when no appeal was perfected after the lapse of the
reglementary period. This procedural caveat cannot be trifled with, not even by the
High Court.15
The UP sought a reconsideration, but the CA denied the UP’s motion for
reconsideration on April 19, 2004.16
On May 11, 2004, the UP appealed to the Court by petition for review
on certiorari (G.R. No. 163501).
On June 23, 2004, the Court denied the petition for review.17 The UP moved for the
reconsideration of the denial of its petition for review on August 29, 2004,18 but the
Court denied the motion on October 6, 2004. 19 The denial became final and
executory on November 12, 2004.20
In the meanwhile that the UP was exhausting the available remedies to overturn
the denial of due course to the appeal and the issuance of the writ of execution,
Stern Builders and dela Cruz filed in the RTC their motions for execution despite
their previous motion having already been granted and despite the writ of
execution having already issued. On June 11, 2003, the RTC granted another motion
for execution filed on May 9, 2003 (although the RTC had already issued the writ of
execution on October 4, 2002).21
On June 23, 2003 and July 25, 2003, respectively, the sheriff served notices of
garnishment on the UP’s depository banks, namely: Land Bank of the Philippines
(Buendia Branch) and the Development Bank of the Philippines (DBP),
Commonwealth Branch.22 The UP assailed the garnishment through an urgent
motion to quash the notices of garnishment; 23 and a motion to quash the writ of
execution dated May 9, 2003.24
On their part, Stern Builders and dela Cruz filed their ex parte motion for issuance
of a release order.25
On October 14, 2003, the RTC denied the UP’s urgent motion to quash, and granted
Stern Builders and dela Cruz’s ex parte motion for issuance of a release order.26
The UP moved for the reconsideration of the order of October 14, 2003, but the
RTC denied the motion on November 7, 2003.27
On January 12, 2004, Stern Builders and dela Cruz again sought the release of the
garnished funds.28 Despite the UP’s opposition,29 the RTC granted the motion to
release the garnished funds on March 16, 2004. 30 On April 20, 2004, however, the
RTC held in abeyance the enforcement of the writs of execution issued on October
4, 2002 and June 3, 2003 and all the ensuing notices of garnishment, citing Section
4, Rule 52, Rules of Court, which provided that the pendency of a timely motion for
reconsideration stayed the execution of the judgment.31
On December 21, 2004, the RTC, through respondent Judge Agustin S. Dizon,
authorized the release of the garnished funds of the UP,32 to wit:
2
WHEREFORE, premises considered, there being no more legal impediment for the
release of the garnished amount in satisfaction of the judgment award in the
instant case, let the amount garnished be immediately released by the
Development Bank of the Philippines, Commonwealth Branch, Quezon City in favor
of the plaintiff.
SO ORDERED.
The UP was served on January 3, 2005 with the order of December 21, 2004
directing DBP to release the garnished funds.33
On January 6, 2005, Stern Builders and dela Cruz moved to cite DBP in direct
contempt of court for its non-compliance with the order of release.34
Thereupon, on January 10, 2005, the UP brought a petition for certiorari in the CA
to challenge the jurisdiction of the RTC in issuing the order of December 21, 2004
(CA-G.R. CV No. 88125).35 Aside from raising the denial of due process, the UP
averred that the RTC committed grave abuse of discretion amounting to lack or
excess of jurisdiction in ruling that there was no longer any legal impediment to the
release of the garnished funds. The UP argued that government funds and
properties could not be seized by virtue of writs of execution or garnishment, as
held in Department of Agriculture v. National Labor Relations Commission,36 and
citing Section 84 of Presidential Decree No. 1445 to the effect that "revenue funds
shall not be paid out of any public treasury or depository except in pursuance of an
appropriation law or other specific statutory authority;" and that the order of
garnishment clashed with the ruling in University of the Philippines Board of
Regents v. Ligot-Telan37 to the effect that the funds belonging to the UP were public
funds.
On January 19, 2005, the CA issued a temporary restraining order (TRO) upon
application by the UP.38
On March 22, 2005, Stern Builders and dela Cruz filed in the RTC their amended
motion for sheriff’s assistance to implement the release order dated December 21,
2004, stating that the 60-day period of the TRO of the CA had already lapsed. 39 The
UP opposed the amended motion and countered that the implementation of the
release order be suspended.40
On May 3, 2005, the RTC granted the amended motion for sheriff’s assistance and
directed the sheriff to proceed to the DBP to receive the check in satisfaction of the
judgment.41
The UP sought the reconsideration of the order of May 3, 2005.42
On May 16, 2005, DBP filed a motion to consign the check representing the
judgment award and to dismiss the motion to cite its officials in contempt of
court.43
On May 23, 2005, the UP presented a motion to withhold the release of the
payment of the judgment award.44
On July 8, 2005, the RTC resolved all the pending matters,45 noting that the DBP had
already delivered to the sheriff Manager’s Check No. 811941 for ₱ 16,370,191.74
representing the garnished funds payable to the order of Stern Builders and dela
Cruz as its compliance with the RTC’s order dated December 21, 2004. 46 However,
the RTC directed in the same order that Stern Builders and dela Cruz should not
encash the check or withdraw its amount pending the final resolution of the UP’s
petition for certiorari, to wit:47
To enable the money represented in the check in question (No. 00008119411) to
earn interest during the pendency of the defendant University of the Philippines
application for a writ of injunction with the Court of Appeals the same may now be
deposited by the plaintiff at the garnishee Bank (Development Bank of the
Philippines), the disposition of the amount represented therein being subject to the
final outcome of the case of the University of the Philippines et al., vs. Hon. Agustin
S. Dizon et al., (CA G.R. 88125) before the Court of Appeals.
Let it be stated herein that the plaintiff is not authorized to encash and withdraw
the amount represented in the check in question and enjoy the same in the fashion
of an owner during the pendency of the case between the parties before the Court
of Appeals which may or may not be resolved in plaintiff’s favor.
With the end in view of seeing to it that the check in question is deposited by the
plaintiff at the Development Bank of the Philippines (garnishee bank), Branch Sheriff
Herlan Velasco is directed to accompany and/or escort the plaintiff in making the
deposit of the check in question.
SO ORDERED.
On September 16, 2005, the CA promulgated its assailed decision dismissing the
UP’s petition for certiorari, ruling that the UP had been given ample opportunity to
contest the motion to direct the DBP to deposit the check in the name of Stern
Builders and dela Cruz; and that the garnished funds could be the proper subject of
3
garnishment because they had been already earmarked for the project, with the UP Matters Arising During the Pendency of the Petition
holding the funds only in a fiduciary capacity,48 viz:
On January 30, 2006, Judge Dizon of the RTC (Branch 80) denied Stern Builders and
Petitioners next argue that the UP funds may not be seized for execution or dela Cruz’s motion to withdraw the deposit, in consideration of the UP’s intention
garnishment to satisfy the judgment award. Citing Department of Agriculture vs. to appeal to the CA,50 stating:
NLRC, University of the Philippines Board of Regents vs. Hon. Ligot-Telan,
Since it appears that the defendants are intending to file a petition for review of the
petitioners contend that UP deposits at Land Bank and the Development Bank of
Court of Appeals resolution in CA-G.R. No. 88125 within the reglementary period of
the Philippines, being government funds, may not be released absent an
fifteen (15) days from receipt of resolution, the Court agrees with the defendants
appropriations bill from Congress.
stand that the granting of plaintiffs’ subject motion is premature.
The argument is specious. UP entered into a contract with private respondents for
Let it be stated that what the Court meant by its Order dated July 8, 2005 which
the expansion and renovation of the Arts and Sciences Building of its campus in Los
states in part that the "disposition of the amount represented therein being subject
Baños, Laguna. Decidedly, there was already an appropriations earmarked for the
to the final outcome of the case of the University of the Philippines, et. al., vs. Hon.
said project. The said funds are retained by UP, in a fiduciary capacity, pending
Agustin S. Dizon et al., (CA G.R. No. 88125 before the Court of Appeals) is that the
completion of the construction project.
judgment or resolution of said court has to be final and executory, for if the same
We agree with the trial Court [sic] observation on this score: will still be elevated to the Supreme Court, it will not attain finality yet until the
highest court has rendered its own final judgment or resolution.51
"4. Executive Order No. 109 (Directing all National Government Agencies to Revert
Certain Accounts Payable to the Cumulative Result of Operations of the National However, on January 22, 2007, the UP filed an Urgent Application for A Temporary
Government and for Other Purposes) Section 9. Reversion of Accounts Payable, Restraining Order and/or A Writ of Preliminary Injunction, 52 averring that on January
provides that, all 1995 and prior years documented accounts payable and all 3, 2007, Judge Maria Theresa dela Torre-Yadao (who had meanwhile replaced Judge
undocumented accounts regardless of the year they were incurred shall be reverted Dizon upon the latter’s appointment to the CA) had issued another order allowing
to the Cumulative Result of Operations of the National Government (CROU). This Stern Builders and dela Cruz to withdraw the deposit,53 to wit:
shall apply to accounts payable of all funds, except fiduciary funds, as long as the
It bears stressing that defendants’ liability for the payment of the judgment
purpose for which the funds were created have not been accomplished and
obligation has become indubitable due to the final and executory nature of the
accounts payable under foreign assisted projects for the duration of the said
Decision dated November 28, 2001. Insofar as the payment of the [sic] judgment
project. In this regard, the Department of Budget and Management issued Joint-
obligation is concerned, the Court believes that there is nothing more the
Circular No. 99-6 4.0 (4.3) Procedural Guidelines which provides that all accounts
defendant can do to escape liability. It is observed that there is nothing more the
payable that reverted to the CROU may be considered for payment upon
defendant can do to escape liability. It is observed that defendant U.P. System had
determination thru administrative process, of the existence, validity and legality of
already exhausted all its legal remedies to overturn, set aside or modify the decision
the claim. Thus, the allegation of the defendants that considering no appropriation
(dated November 28, 2001( rendered against it. The way the Court sees it,
for the payment of any amount awarded to plaintiffs appellee the funds of
defendant U.P. System’s petition before the Supreme Court concerns only with the
defendant-appellants may not be seized pursuant to a writ of execution issued by
manner by which said judgment award should be satisfied. It has nothing to do with
the regular court is misplaced. Surely when the defendants and the plaintiff entered
the legality or propriety thereof, although it prays for the deletion of [sic] reduction
into the General Construction of Agreement there is an amount already allocated
of the award of moral damages.
by the latter for the said project which is no longer subject of future
appropriation."49 It must be emphasized that this Court’s finding, i.e., that there was sufficient
appropriation earmarked for the project, was upheld by the Court of Appeals in its
After the CA denied their motion for reconsideration on December 23, 2005, the
decision dated September 16, 2005. Being a finding of fact, the Supreme Court will,
petitioners appealed by petition for review.
4
ordinarily, not disturb the same was said Court is not a trier of fact. Such being the
case, defendants’ arguments that there was no sufficient appropriation for the
payment of the judgment obligation must fail.
While it is true that the former Presiding Judge of this Court in its Order dated
January 30, 2006 had stated that:
Let it be stated that what the Court meant by its Order dated July 8, 2005 which
states in part that the "disposition of the amount represented therein being subject
to the final outcome of the case of the University of the Philippines, et. al., vs. Hon.
Agustin S. Dizon et al., (CA G.R. No. 88125 before the Court of Appeals) is that the
judgment or resolution of said court has to be final and executory, for if the same
will still be elevated to the Supreme Court, it will not attain finality yet until the
highest court has rendered its own final judgment or resolution.
it should be noted that neither the Court of Appeals nor the Supreme Court issued a
preliminary injunction enjoining the release or withdrawal of the garnished amount.
In fact, in its present petition for review before the Supreme Court, U.P. System has
not prayed for the issuance of a writ of preliminary injunction. Thus, the Court
doubts whether such writ is forthcoming.
The Court honestly believes that if defendants’ petition assailing the Order of this
Court dated December 31, 2004 granting the motion for the release of the
garnished amount was meritorious, the Court of Appeals would have issued a writ
of injunction enjoining the same. Instead, said appellate court not only refused to
issue a wit of preliminary injunction prayed for by U.P. System but denied the
petition, as well.54
The UP contended that Judge Yadao thereby effectively reversed the January 30,
2006 order of Judge Dizon disallowing the withdrawal of the garnished amount until
after the decision in the case would have become final and executory.
Although the Court issued a TRO on January 24, 2007 to enjoin Judge Yadao and all
persons acting pursuant to her authority from enforcing her order of January 3,
2007,55 it appears that on January 16, 2007, or prior to the issuance of the TRO, she
had already directed the DBP to forthwith release the garnished amount to Stern
Builders and dela Cruz; 56 and that DBP had forthwith complied with the order on
January 17, 2007 upon the sheriff’s service of the order of Judge Yadao.57
These intervening developments impelled the UP to file in this Court a
supplemental petition on January 26, 2007,58alleging that the RTC (Judge Yadao)
gravely erred in ordering the immediate release of the garnished amount despite
the pendency of the petition for review in this Court.
The UP filed a second supplemental petition59 after the RTC (Judge Yadao) denied
the UP’s motion for the redeposit of the withdrawn amount on April 10, 2007, 60 to
wit:
This resolves defendant U.P. System’s Urgent Motion to Redeposit Judgment Award
praying that plaintiffs be directed to redeposit the judgment award to DBP pursuant
to the Temporary Restraining Order issued by the Supreme Court. Plaintiffs
opposed the motion and countered that the Temporary Restraining Order issued by
the Supreme Court has become moot and academic considering that the act sought
to be restrained by it has already been performed. They also alleged that the
redeposit of the judgment award was no longer feasible as they have already spent
the same.
It bears stressing, if only to set the record straight, that this Court did not – in its
Order dated January 3, 2007 (the implementation of which was restrained by the
Supreme Court in its Resolution dated January 24, 2002) – direct that that garnished
amount "be deposited with the garnishee bank (Development Bank of the
Philippines)". In the first place, there was no need to order DBP to make such
deposit, as the garnished amount was already deposited in the account of plaintiffs
with the DBP as early as May 13, 2005. What the Court granted in its Order dated
January 3, 2007 was plaintiff’s motion to allow the release of said deposit. It must
be recalled that the Court found plaintiff’s motion meritorious and, at that time,
there was no restraining order or preliminary injunction from either the Court of
Appeals or the Supreme Court which could have enjoined the release of plaintiffs’
deposit. The Court also took into account the following factors:
a) the Decision in this case had long been final and executory after it was rendered
on November 28, 2001;
b) the propriety of the dismissal of U.P. System’s appeal was upheld by the Supreme
Court;
c) a writ of execution had been issued;
d) defendant U.P. System’s deposit with DBP was garnished pursuant to a lawful
writ of execution issued by the Court; and
e) the garnished amount had already been turned over to the plaintiffs and
deposited in their account with DBP.
5
The garnished amount, as discussed in the Order dated January 16, 2007, was
already owned by the plaintiffs, having been delivered to them by the Deputy
Sheriff of this Court pursuant to par. (c), Section 9, Rule 39 of the 1997 Rules of Civil
Procedure. Moreover, the judgment obligation has already been fully satisfied as
per Report of the Deputy Sheriff.
Anent the Temporary Restraining Order issued by the Supreme Court, the same has
become functus oficio, having been issued after the garnished amount had been
released to the plaintiffs. The judgment debt was released to the plaintiffs on
January 17, 2007, while the Temporary Restraining Order issued by the Supreme
Court was received by this Court on February 2, 2007. At the time of the issuance of
the Restraining Order, the act sought to be restrained had already been done,
thereby rendering the said Order ineffectual.
After a careful and thorough study of the arguments advanced by the parties, the
Court is of the considered opinion that there is no legal basis to grant defendant
U.P. System’s motion to redeposit the judgment amount. Granting said motion is
not only contrary to law, but it will also render this Court’s final executory judgment
nugatory. Litigation must end and terminate sometime and somewhere, and it is
essential to an effective administration of justice that once a judgment has become
final the issue or cause involved therein should be laid to rest. This doctrine of
finality of judgment is grounded on fundamental considerations of public policy and
sound practice. In fact, nothing is more settled in law than that once a judgment
attains finality it thereby becomes immutable and unalterable. It may no longer be
modified in any respect, even if the modification is meant to correct what is
perceived to be an erroneous conclusion of fact or law, and regardless of whether
the modification is attempted to be made by the court rendering it or by the highest
court of the land.
WHEREFORE, premises considered, finding defendant U.P. System’s Urgent Motion
to Redeposit Judgment Award devoid of merit, the same is hereby DENIED.
SO ORDERED.
Issues
The UP now submits that:
I
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DISMISSING THE PETITION,
ALLOWING IN EFFECT THE GARNISHMENT OF UP FUNDS, WHEN IT RULED THAT
FUNDS HAVE ALREADY BEEN EARMARKED FOR THE CONSTRUCTION PROJECT; AND
THUS, THERE IS NO NEED FOR FURTHER APPROPRIATIONS.
II
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN ALLOWING GARNISHMENT
OF A STATE UNIVERSITY’S FUNDS IN VIOLATION OF ARTICLE XIV, SECTION 5(5) OF
THE CONSTITUTION.
III
IN THE ALTERNATIVE, THE UNIVERSITY INVOKES EQUITY AND THE REVIEW POWERS
OF THIS HONORABLE COURT TO MODIFY, IF NOT TOTALLY DELETE THE AWARD OF ₱
10 MILLION AS MORAL DAMAGES TO RESPONDENTS.
IV
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE
RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 3 JANUARY 2007 ON THE
GROUND OF EQUITY AND JUDICIAL COURTESY.
V
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN ORDERING THE IMMEDIATE
RELEASE OF THE JUDGMENT AWARD IN ITS ORDER DATED 16 JANUARY 2007 ON
THE GROUND THAT PETITIONER UNIVERSITY STILL HAS A PENDING MOTION FOR
RECONSIDERATION OF THE ORDER DATED 3 JANUARY 2007.
VI
THE RTC-BRANCH 80 COMMITTED GRAVE ERROR IN NOT ORDERING THE
REDEPOSIT OF THE GARNISHED AMOUNT TO THE DBP IN VIOLATION OF THE CLEAR
LANGUAGE OF THE SUPREME COURT RESOLUTION DATED 24 JANUARY 2007.
The UP argues that the amount earmarked for the construction project had been
purposely set aside only for the aborted project and did not include incidental
matters like the awards of actual damages, moral damages and attorney’s fees. In
support of its argument, the UP cited Article 12.2 of the General Construction
Agreement, which stipulated that no deductions would be allowed for the payment
of claims, damages, losses and expenses, including attorney’s fees, in case of any
litigation arising out of the performance of the work. The UP insists that the CA
decision was inconsistent with the rulings in Commissioner of Public Highways v.
San Diego61 and Department of Agriculture v. NLRC62 to the effect that government
6
funds and properties could not be seized under writs of execution or garnishment Ruling
to satisfy judgment awards.
The petition for review is meritorious.
Furthermore, the UP contends that the CA contravened Section 5, Article XIV of the
I.
Constitution by allowing the garnishment of UP funds, because the garnishment
UP’s funds, being government funds,
resulted in a substantial reduction of the UP’s limited budget allocated for the
are not subject to garnishment
remuneration, job satisfaction and fulfillment of the best available teachers; that
Judge Yadao should have exhibited judicial courtesy towards the Court due to the The UP was founded on June 18, 1908 through Act 1870 to provide advanced
pendency of the UP’s petition for review; and that she should have also desisted instruction in literature, philosophy, the sciences, and arts, and to give professional
from declaring that the TRO issued by this Court had become functus officio. and technical training to deserving students. 63 Despite its establishment as a body
corporate,64 the UP remains to be a "chartered institution" 65 performing a legitimate
Lastly, the UP states that the awards of actual damages of ₱ 5,716,729.00 and moral
government function. It is an institution of higher learning, not a corporation
damages of ₱ 10 million should be reduced, if not entirely deleted, due to its being
established for profit and declaring any dividends.66 In enacting Republic Act No.
unconscionable, inequitable and detrimental to public service.
9500 (The University of the Philippines Charter of 2008), Congress has declared the
In contrast, Stern Builders and dela Cruz aver that the petition for review was fatally UP as the national university67 "dedicated to the search for truth and knowledge as
defective for its failure to mention the other cases upon the same issues pending well as the development of future leaders."68
between the parties (i.e., CA-G.R. No. 77395 and G.R No. 163501); that the UP was
Irrefragably, the UP is a government instrumentality, 69 performing the State’s
evidently resorting to forum shopping, and to delaying the satisfaction of the final
constitutional mandate of promoting quality and accessible education.70 As a
judgment by the filing of its petition for review; that the ruling in Commissioner of
government instrumentality, the UP administers special funds sourced from the
Public Works v. San Diego had no application because there was an appropriation
fees and income enumerated under Act No. 1870 and Section 1 of Executive Order
for the project; that the UP retained the funds allotted for the project only in a
No. 714,71 and from the yearly appropriations, to achieve the purposes laid down by
fiduciary capacity; that the contract price had been meanwhile adjusted to ₱
Section 2 of Act 1870, as expanded in Republic Act No. 9500. 72 All the funds going
22,338,553.25, an amount already more than sufficient to cover the judgment
into the possession of the UP, including any interest accruing from the deposit of
award; that the UP’s prayer to reduce or delete the award of damages had no
such funds in any banking institution, constitute a "special trust fund," the
factual basis, because they had been gravely wronged, had been deprived of their
disbursement of which should always be aligned with the UP’s mission and
source of income, and had suffered untold miseries, discomfort, humiliation and
purpose,73 and should always be subject to auditing by the COA.74
sleepless years; that dela Cruz had even been constrained to sell his house, his
equipment and the implements of his trade, and together with his family had been Presidential Decree No. 1445 defines a "trust fund" as a fund that officially comes in
forced to live miserably because of the wrongful actuations of the UP; and that the the possession of an agency of the government or of a public officer as trustee,
RTC correctly declared the Court’s TRO to be already functus officio by reason of the agent or administrator, or that is received for the fulfillment of some obligation. 75 A
withdrawal of the garnished amount from the DBP. trust fund may be utilized only for the "specific purpose for which the trust was
created or the funds received."76
The decisive issues to be considered and passed upon are, therefore:
The funds of the UP are government funds that are public in character. They include
(a) whether the funds of the UP were the proper subject of garnishment in order to
the income accruing from the use of real property ceded to the UP that may be
satisfy the judgment award; and (b) whether the UP’s prayer for the deletion of the
spent only for the attainment of its institutional objectives.77 Hence, the funds
awards of actual damages of ₱ 5,716,729.00, moral damages of ₱ 10,000,000.00
subject of this action could not be validly made the subject of the RTC’s writ of
and attorney’s fees of ₱ 150,000.00 plus ₱ 1,500.00 per appearance could be
execution or garnishment. The adverse judgment rendered against the UP in a suit
granted despite the finality of the judgment of the RTC.
to which it had impliedly consented was not immediately enforceable by execution
7
against the UP,78 because suability of the State did not necessarily mean its
liability.79
A marked distinction exists between suability of the State and its liability. As the
Court succinctly stated in Municipality of San Fernando, La Union v. Firme:80
A distinction should first be made between suability and liability. "Suability depends
on the consent of the state to be sued, liability on the applicable law and the
established facts. The circumstance that a state is suable does not necessarily mean
that it is liable; on the other hand, it can never be held liable if it does not first
consent to be sued. Liability is not conceded by the mere fact that the state has
allowed itself to be sued. When the state does waive its sovereign immunity, it is
only giving the plaintiff the chance to prove, if it can, that the defendant is liable.
Also, in Republic v. Villasor,81 where the issuance of an alias writ of execution
directed against the funds of the Armed Forces of the Philippines to satisfy a final
and executory judgment was nullified, the Court said:
xxx The universal rule that where the State gives its consent to be sued by private
parties either by general or special law, it may limit claimant’s action "only up to the
completion of proceedings anterior to the stage of execution" and that the power
of the Courts ends when the judgment is rendered, since government funds and
properties may not be seized under writs of execution or garnishment to satisfy
such judgments, is based on obvious considerations of public policy. Disbursements
of public funds must be covered by the corresponding appropriation as required by
law. The functions and public services rendered by the State cannot be allowed to
be paralyzed or disrupted by the diversion of public funds from their legitimate and
specific objects, as appropriated by law.
The UP correctly submits here that the garnishment of its funds to satisfy the
judgment awards of actual and moral damages (including attorney’s fees) was not
validly made if there was no special appropriation by Congress to cover the liability.
It was, therefore, legally unwarranted for the CA to agree with the RTC’s holding in
the order issued on April 1, 2003 that no appropriation by Congress to allocate and
set aside the payment of the judgment awards was necessary because "there
(were) already an appropriations (sic) earmarked for the said project."82 The CA and
the RTC thereby unjustifiably ignored the legal restriction imposed on the trust
funds of the Government and its agencies and instrumentalities to be used
exclusively to fulfill the purposes for which the trusts were created or for which the
funds were received except upon express authorization by Congress or by the head
of a government agency in control of the funds, and subject to pertinent budgetary
laws, rules and regulations.83
Indeed, an appropriation by Congress was required before the judgment that
rendered the UP liable for moral and actual damages (including attorney’s fees)
would be satisfied considering that such monetary liabilities were not covered by
the "appropriations earmarked for the said project." The Constitution strictly
mandated that "(n)o money shall be paid out of the Treasury except in pursuance of
an appropriation made by law."84
II
COA must adjudicate private respondents’ claim
before execution should proceed
The execution of the monetary judgment against the UP was within the primary
jurisdiction of the COA. This was expressly provided in Section 26 of Presidential
Decree No. 1445, to wit:
Section 26. General jurisdiction. - The authority and powers of the Commission shall
extend to and comprehend all matters relating to auditing procedures, systems and
controls, the keeping of the general accounts of the Government, the preservation
of vouchers pertaining thereto for a period of ten years, the examination and
inspection of the books, records, and papers relating to those accounts; and the
audit and settlement of the accounts of all persons respecting funds or property
received or held by them in an accountable capacity, as well as the examination,
audit, and settlement of all debts and claims of any sort due from or owing to the
Government or any of its subdivisions, agencies and instrumentalities. The said
jurisdiction extends to all government-owned or controlled corporations, including
their subsidiaries, and other self-governing boards, commissions, or agencies of the
Government, and as herein prescribed, including non governmental entities
subsidized by the government, those funded by donations through the government,
those required to pay levies or government share, and those for which the
government has put up a counterpart fund or those partly funded by the
government.
It was of no moment that a final and executory decision already validated the claim
against the UP. The settlement of the monetary claim was still subject to the
primary jurisdiction of the COA despite the final decision of the RTC having already
validated the claim.85 As such, Stern Builders and dela Cruz as the claimants had no
alternative except to first seek the approval of the COA of their monetary claim.
8
On its part, the RTC should have exercised utmost caution, prudence and law. The functions and public services rendered by the State cannot be allowed to
judiciousness in dealing with the motions for execution against the UP and the be paralyzed or disrupted by the diversion of public funds from their legitimate and
garnishment of the UP’s funds. The RTC had no authority to direct the immediate specific objects, as appropriated by law.
withdrawal of any portion of the garnished funds from the depository banks of the
Moreover, it is settled jurisprudence that upon determination of State liability,
UP. By eschewing utmost caution, prudence and judiciousness in dealing with the
the prosecution, enforcement or satisfaction thereof must still be pursued in
execution and garnishment, and by authorizing the withdrawal of the garnished
accordance with the rules and procedures laid down in P.D. No. 1445, otherwise
funds of the UP, the RTC acted beyond its jurisdiction, and all its orders and
known as the Government Auditing Code of the Philippines (Department of
issuances thereon were void and of no legal effect, specifically: (a) the order Judge
Agriculture v. NLRC, 227 SCRA 693, 701-02 1993 citing Republic vs. Villasor, 54
Yadao issued on January 3, 2007 allowing Stern Builders and dela Cruz to withdraw
SCRA 84 1973). All money claims against the Government must first be filed with
the deposited garnished amount; (b) the order Judge Yadao issued on January 16,
the Commission on Audit which must act upon it within sixty days. Rejection of
2007 directing DBP to forthwith release the garnish amount to Stern Builders and
the claim will authorize the claimant to elevate the matter to the Supreme Court
dela Cruz; (c) the sheriff’s report of January 17, 2007 manifesting the full
on certiorari and in effect, sue the State thereby (P.D. 1445, Sections 49-50).
satisfaction of the writ of execution; and (d) the order of April 10, 2007 deying the
UP’s motion for the redeposit of the withdrawn amount. Hence, such orders and However, notwithstanding the rule that government properties are not subject to
issuances should be struck down without exception. levy and execution unless otherwise provided for by statute (Republic v. Palacio, 23
SCRA 899 1968; Commissioner of Public Highways v. San Diego, supra) or municipal
Nothing extenuated Judge Yadao’s successive violations of Presidential Decree No.
ordinance (Municipality of Makati v. Court of Appeals, 190 SCRA 206 1990), the
1445. She was aware of Presidential Decree No. 1445, considering that the Court
Court has, in various instances, distinguished between government funds and
circulated to all judges its Administrative Circular No. 10-2000,86 issued on October
properties for public use and those not held for public use. Thus, in Viuda de Tan
25, 2000, enjoining them "to observe utmost caution, prudence and judiciousness
Toco v. Municipal Council of Iloilo (49 Phil 52 1926, the Court ruled that "where
in the issuance of writs of execution to satisfy money judgments against
property of a municipal or other public corporation is sought to be subjected to
government agencies and local government units" precisely in order to prevent the
execution to satisfy judgments recovered against such corporation, the question as
circumvention of Presidential Decree No. 1445, as well as of the rules and
to whether such property is leviable or not is to be determined by the usage and
procedures of the COA, to wit:
purposes for which it is held." The following can be culled from Viuda de Tan Toco v.
In order to prevent possible circumvention of the rules and procedures of the Municipal Council of Iloilo:
Commission on Audit, judges are hereby enjoined to observe utmost caution,
1. Properties held for public uses – and generally everything held for
prudence and judiciousness in the issuance of writs of execution to satisfy money
governmental purposes – are not subject to levy and sale under execution against
judgments against government agencies and local government units.
such corporation. The same rule applies to funds in the hands of a public officer
Judges should bear in mind that in Commissioner of Public Highways v. San Diego and taxes due to a municipal corporation.
(31 SCRA 617, 625 1970), this Court explicitly stated:
2. Where a municipal corporation owns in its proprietary capacity, as distinguished
"The universal rule that where the State gives its consent to be sued by private from its public or government capacity, property not used or used for a public
parties either by general or special law, it may limit claimant’s action ‘only up to the purpose but for quasi-private purposes, it is the general rule that such property may
completion of proceedings anterior to the stage of execution’ and that the power of be seized and sold under execution against the corporation.
the Court ends when the judgment is rendered, since government funds and
3. Property held for public purposes is not subject to execution merely because it is
properties may not be seized under writs of execution or garnishment to satisfy
temporarily used for private purposes. If the public use is wholly abandoned, such
such judgments, is based on obvious considerations of public policy. Disbursements
property becomes subject to execution.
of public funds must be covered by the corresponding appropriation as required by

9
This Administrative Circular shall take effect immediately and the Court But the doctrine of immutability of a final judgment has not been absolute, and has
Administrator shall see to it that it is faithfully implemented. admitted several exceptions, among them: (a) the correction of clerical errors; (b)
the so-called nunc pro tunc entries that cause no prejudice to any party; (c) void
Although Judge Yadao pointed out that neither the CA nor the Court had issued as
judgments; and (d) whenever circumstances transpire after the finality of the
of then any writ of preliminary injunction to enjoin the release or withdrawal of the
decision that render its execution unjust and inequitable.90 Moreover, in Heirs of
garnished amount, she did not need any writ of injunction from a superior court to
Maura So v. Obliosca,91 we stated that despite the absence of the preceding
compel her obedience to the law. The Court is disturbed that an experienced judge
circumstances, the Court is not precluded from brushing aside procedural norms if
like her should look at public laws like Presidential Decree No. 1445 dismissively
only to serve the higher interests of justice and equity. Also, in Gumaru v. Quirino
instead of loyally following and unquestioningly implementing them. That she did so
State College,92 the Court nullified the proceedings and the writ of execution issued
turned her court into an oppressive bastion of mindless tyranny instead of having it
by the RTC for the reason that respondent state college had not been represented
as a true haven for the seekers of justice like the UP.
in the litigation by the Office of the Solicitor General.
III
We rule that the UP’s plea for equity warrants the Court’s exercise of the
Period of appeal did not start without effective
exceptional power to disregard the declaration of finality of the judgment of the
service of decision upon counsel of record;
RTC for being in clear violation of the UP’s right to due process.
Fresh-period rule announced in
Neypes v. Court of Appeals Both the CA and the RTC found the filing on June 3, 2002 by the UP of the notice of
can be given retroactive application appeal to be tardy. They based their finding on the fact that only six days remained
of the UP’s reglementary 15-day period within which to file the notice of appeal
The UP next pleads that the Court gives due course to its petition for review in the
because the UP had filed a motion for reconsideration on January 16, 2002 vis-à-vis
name of equity in order to reverse or modify the adverse judgment against it
the RTC’s decision the UP received on January 7, 2002; and that because the denial
despite its finality. At stake in the UP’s plea for equity was the return of the amount
of the motion for reconsideration had been served upon Atty. Felimon D. Nolasco of
of ₱ 16,370,191.74 illegally garnished from its trust funds. Obstructing the plea is
the UPLB Legal Office on May 17, 2002, the UP had only until May 23, 2002 within
the finality of the judgment based on the supposed tardiness of UP’s appeal, which
which to file the notice of appeal.
the RTC declared on September 26, 2002. The CA upheld the declaration of finality
on February 24, 2004, and the Court itself denied the UP’s petition for review on The UP counters that the service of the denial of the motion for reconsideration
that issue on May 11, 2004 (G.R. No. 163501). The denial became final on upon Atty. Nolasco was defective considering that its counsel of record was not
November 12, 2004. Atty. Nolasco of the UPLB Legal Office but the OLS in Diliman, Quezon City; and that
the period of appeal should be reckoned from May 31, 2002, the date when the OLS
It is true that a decision that has attained finality becomes immutable and
received the order. The UP submits that the filing of the notice of appeal on June 3,
unalterable, and cannot be modified in any respect,87 even if the modification is
2002 was well within the reglementary period to appeal.
meant to correct erroneous conclusions of fact and law, and whether the
modification is made by the court that rendered it or by this Court as the highest We agree with the submission of the UP.
court of the land.88 Public policy dictates that once a judgment becomes final,
Firstly, the service of the denial of the motion for reconsideration upon Atty.
executory and unappealable, the prevailing party should not be deprived of the
Nolasco of the UPLB Legal Office was invalid and ineffectual because he was
fruits of victory by some subterfuge devised by the losing party. Unjustified delay in
admittedly not the counsel of record of the UP. The rule is that it is on the counsel
the enforcement of such judgment sets at naught the role and purpose of the
and not the client that the service should be made.93
courts to resolve justiciable controversies with finality.89Indeed, all litigations must
at some time end, even at the risk of occasional errors. That counsel was the OLS in Diliman, Quezon City, which was served with the denial
only on May 31, 2002. As such, the running of the remaining period of six days
10
resumed only on June 1, 2002,94 rendering the filing of the UP’s notice of appeal on
June 3, 2002 timely and well within the remaining days of the UP’s period to appeal.
Verily, the service of the denial of the motion for reconsideration could only be
validly made upon the OLS in Diliman, and no other. The fact that Atty. Nolasco was
in the employ of the UP at the UPLB Legal Office did not render the service upon
him effective. It is settled that where a party has appeared by counsel, service must
be made upon such counsel.95 Service on the party or the party’s employee is not
effective because such notice is not notice in law.96 This is clear enough from Section
2, second paragraph, of Rule 13, Rules of Court, which explicitly states that: "If any
party has appeared by counsel, service upon him shall be made upon his counsel or
one of them, unless service upon the party himself is ordered by the court. Where
one counsel appears for several parties, he shall only be entitled to one copy of any
paper served upon him by the opposite side." As such, the period to appeal
resumed only on June 1, 2002, the date following the service on May 31, 2002 upon
the OLS in Diliman of the copy of the decision of the RTC, not from the date when
the UP was notified.97
Accordingly, the declaration of finality of the judgment of the RTC, being devoid of
factual and legal bases, is set aside.
Secondly, even assuming that the service upon Atty. Nolasco was valid and
effective, such that the remaining period for the UP to take a timely appeal would
end by May 23, 2002, it would still not be correct to find that the judgment of the
RTC became final and immutable thereafter due to the notice of appeal being filed
too late on June 3, 2002.
In so declaring the judgment of the RTC as final against the UP, the CA and the RTC
applied the rule contained in the second paragraph of Section 3, Rule 41 of the
Rules of Court to the effect that the filing of a motion for reconsideration
interrupted the running of the period for filing the appeal; and that the period
resumed upon notice of the denial of the motion for reconsideration. For that
reason, the CA and the RTC might not be taken to task for strictly adhering to the
rule then prevailing.
However, equity calls for the retroactive application in the UP’s favor of the fresh-
period rule that the Court first announced in mid-September of 2005 through its
ruling in Neypes v. Court of Appeals,98 viz:
To standardize the appeal periods provided in the Rules and to afford litigants fair
opportunity to appeal their cases, the Court deems it practical to allow a fresh
period of 15 days within which to file the notice of appeal in the Regional Trial
Court, counted from receipt of the order dismissing a motion for a new trial or
motion for reconsideration.
The retroactive application of the fresh-period rule, a procedural law that aims "to
regiment or make the appeal period uniform, to be counted from receipt of the
order denying the motion for new trial, motion for reconsideration (whether full or
partial) or any final order or resolution," 99 is impervious to any serious challenge.
This is because there are no vested rights in rules of procedure.100 A law or
regulation is procedural when it prescribes rules and forms of procedure in order
that courts may be able to administer justice.101 It does not come within the legal
conception of a retroactive law, or is not subject of the general rule prohibiting the
retroactive operation of statues, but is given retroactive effect in actions pending
and undetermined at the time of its passage without violating any right of a person
who may feel that he is adversely affected.
We have further said that a procedural rule that is amended for the benefit of
litigants in furtherance of the administration of justice shall be retroactively applied
to likewise favor actions then pending, as equity delights in equality. 102 We may
even relax stringent procedural rules in order to serve substantial justice and in the
exercise of this Court’s equity jurisdiction.103 Equity jurisdiction aims to do complete
justice in cases where a court of law is unable to adapt its judgments to the special
circumstances of a case because of the inflexibility of its statutory or legal
jurisdiction.104
It is cogent to add in this regard that to deny the benefit of the fresh-period rule to
the UP would amount to injustice and absurdity – injustice, because the judgment
in question was issued on November 28, 2001 as compared to the judgment in
Neypes that was rendered in 1998; absurdity, because parties receiving notices of
judgment and final orders issued in the year 1998 would enjoy the benefit of the
fresh-period rule but the later rulings of the lower courts like that herein would
not.105
Consequently, even if the reckoning started from May 17, 2002, when Atty. Nolasco
received the denial, the UP’s filing on June 3, 2002 of the notice of appeal was not
tardy within the context of the fresh-period rule. For the UP, the fresh period of 15-
days counted from service of the denial of the motion for reconsideration would
end on June 1, 2002, which was a Saturday. Hence, the UP had until the next
working day, or June 3, 2002, a Monday, within which to appeal, conformably with
Section 1 of Rule 22, Rules of Court, which holds that: "If the last day of the period,
11
as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place
where the court sits, the time shall not run until the next working day."
IV
Awards of monetary damages,
being devoid of factual and legal bases,
did not attain finality and should be deleted
Section 14 of Article VIII of the Constitution prescribes that express findings of fact
and of law should be made in the decision rendered by any court, to wit:
Section 14. No decision shall be rendered by any court without expressing therein
clearly and distinctly the facts and the law on which it is based.
No petition for review or motion for reconsideration of a decision of the court shall
be refused due course or denied without stating the legal basis therefor.
Implementing the constitutional provision in civil actions is Section 1 of Rule
36, Rules of Court, viz:
Section 1. Rendition of judgments and final orders. — A judgment or final order
determining the merits of the case shall be in writing personally and directly
prepared by the judge, stating clearly and distinctly the facts and the law on which
it is based, signed by him, and filed with the clerk of the court. (1a)
The Constitution and the Rules of Court apparently delineate two main essential
parts of a judgment, namely: the body and the decretal portion. Although the latter
is the controlling part,106 the importance of the former is not to be lightly regarded
because it is there where the court clearly and distinctly states its findings of fact
and of law on which the decision is based. To state it differently, one without the
other is ineffectual and useless. The omission of either inevitably results in a
judgment that violates the letter and the spirit of the Constitution and the Rules of
Court.
The term findings of fact that must be found in the body of the decision refers to
statements of fact, not to conclusions of law. 107 Unlike in pleadings where ultimate
facts alone need to be stated, the Constitution and the Rules of Court require not
only that a decision should state the ultimate facts but also that it should specify
the supporting evidentiary facts, for they are what are called the findings of fact.
The importance of the findings of fact and of law cannot be overstated. The reason
and purpose of the Constitution and the Rules of Court in that regard are obviously
to inform the parties why they win or lose, and what their rights and obligations
are. Only thereby is the demand of due process met as to the parties. As Justice
Isagani A. Cruz explained in Nicos Industrial Corporation v. Court of Appeals: 108
It is a requirement of due process that the parties to a litigation be informed of how
it was decided, with an explanation of the factual and legal reasons that led to the
conclusions of the court. The court cannot simply say that judgment is rendered in
favor of X and against Y and just leave it at that without any justification whatsoever
for its action. The losing party is entitled to know why he lost, so he may appeal to a
higher court, if permitted, should he believe that the decision should be reversed. A
decision that does not clearly and distinctly state the facts and the law on which it is
based leaves the parties in the dark as to how it was reached and is especially
prejudicial to the losing party, who is unable to pinpoint the possible errors of the
court for review by a higher tribunal.
Here, the decision of the RTC justified the grant of actual and moral damages, and
attorney’s fees in the following terse manner, viz:
xxx The Court is not unmindful that due to defendants’ unjustified refusal to pay
their outstanding obligation to plaintiff, the same suffered losses and incurred
expenses as he was forced to re-mortgage his house and lot located in Quezon City
to Metrobank (Exh. "CC") and BPI Bank just to pay its monetary obligations in the
form of interest and penalties incurred in the course of the construction of the
subject project.109
The statement that "due to defendants’ unjustified refusal to pay their outstanding
obligation to plaintiff, the same suffered losses and incurred expenses as he was
forced to re-mortgage his house and lot located in Quezon City to Metrobank (Exh.
"CC") and BPI Bank just to pay its monetary obligations in the form of interest and
penalties incurred in the course of the construction of the subject project" was only
a conclusion of fact and law that did not comply with the constitutional and
statutory prescription. The statement specified no detailed expenses or losses
constituting the ₱ 5,716,729.00 actual damages sustained by Stern Builders in
relation to the construction project or to other pecuniary hardships. The omission
of such expenses or losses directly indicated that Stern Builders did not prove them
at all, which then contravened Article 2199, Civil Code, the statutory basis for the
award of actual damages, which entitled a person to an adequate compensation
only for such pecuniary loss suffered by him as he has duly proved. As such, the
actual damages allowed by the RTC, being bereft of factual support, were
speculative and whimsical. Without the clear and distinct findings of fact and law,
12
the award amounted only to an ipse dixit on the part of the RTC, 110 and did not
attain finality.
There was also no clear and distinct statement of the factual and legal support for
the award of moral damages in the substantial amount of ₱ 10,000,000.00. The
award was thus also speculative and whimsical. Like the actual damages, the moral
damages constituted another judicial ipse dixit, the inevitable consequence of
which was to render the award of moral damages incapable of attaining finality. In
addition, the grant of moral damages in that manner contravened the law that
permitted the recovery of moral damages as the means to assuage "physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury."111 The contravention of
the law was manifest considering that Stern Builders, as an artificial person, was
incapable of experiencing pain and moral sufferings.112 Assuming that in granting the
substantial amount of ₱ 10,000,000.00 as moral damages, the RTC might have had
in mind that dela Cruz had himself suffered mental anguish and anxiety. If that was
the case, then the RTC obviously disregarded his separate and distinct personality
from that of Stern Builders.113 Moreover, his moral and emotional sufferings as the
President of Stern Builders were not the sufferings of Stern Builders. Lastly, the RTC
violated the basic principle that moral damages were not intended to enrich the
plaintiff at the expense of the defendant, but to restore the plaintiff to his status
quo ante as much as possible. Taken together, therefore, all these considerations
exposed the substantial amount of ₱ 10,000,000.00 allowed as moral damages not
only to be factually baseless and legally indefensible, but also to be unconscionable,
inequitable and unreasonable.
Like the actual and moral damages, the ₱ 150,000.00, plus ₱ 1,500.00 per
appearance, granted as attorney’s fees were factually unwarranted and devoid of
legal basis. The general rule is that a successful litigant cannot recover attorney’s
fees as part of the damages to be assessed against the losing party because of the
policy that no premium should be placed on the right to litigate. 114 Prior to the
effectivity of the present Civil Code, indeed, such fees could be recovered only
when there was a stipulation to that effect. It was only under the present Civil Code
that the right to collect attorney’s fees in the cases mentioned in Article 2208115 of
the Civil Code came to be recognized. 116 Nonetheless, with attorney’s fees being
allowed in the concept of actual damages,117 their amounts must be factually and
legally justified in the body of the decision and not stated for the first time in the
decretal portion.118 Stating the amounts only in the dispositive portion of the
judgment is not enough;119 a rendition of the factual and legal justifications for them
must also be laid out in the body of the decision.120
That the attorney’s fees granted to the private respondents did not satisfy the
foregoing requirement suffices for the Court to undo them.121 The grant was
ineffectual for being contrary to law and public policy, it being clear that the express
findings of fact and law were intended to bring the case within the exception and
thereby justify the award of the attorney’s fees. Devoid of such express findings, the
award was a conclusion without a premise, its basis being improperly left to
speculation and conjecture.122
Nonetheless, the absence of findings of fact and of any statement of the law and
jurisprudence on which the awards of actual and moral damages, as well as of
attorney’s fees, were based was a fatal flaw that invalidated the decision of the RTC
only as to such awards. As the Court declared in Velarde v. Social Justice
Society,123 the failure to comply with the constitutional requirement for a clear and
distinct statement of the supporting facts and law "is a grave abuse of discretion
amounting to lack or excess of jurisdiction" and that "(d)ecisions or orders issued in
careless disregard of the constitutional mandate are a patent nullity and must be
struck down as void."124 The other item granted by the RTC (i.e., ₱ 503,462.74) shall
stand, subject to the action of the COA as stated herein.
WHEREFORE, the Court GRANTS the petition for review on
certiorari; REVERSES and SETS ASIDE the decision of the Court of Appeals under
review; ANNULS the orders for the garnishment of the funds of the University of
the Philippines and for the release of the garnished amount to Stern Builders
Corporation and Servillano dela Cruz; and DELETES from the decision of the
Regional Trial Court dated November 28, 2001 for being void only the awards of
actual damages of ₱ 5,716,729.00, moral damages of ₱ 10,000,000.00, and
attorney's fees of ₱ 150,000.00, plus ₱ 1,500.00 per appearance, in favor of Stern
Builders Corporation and Servillano dela Cruz.
The Court ORDERS Stem Builders Corporation and Servillano dela Cruz to redeposit
the amount of ₱ 16,370,191.74 within 10 days from receipt of this decision.
Costs of suit to be paid by the private respondents.
SO ORDERED.
13
G.R. No. 42204 January 21, 1993

HON. RAMON J. FAROLAN, JR., in his capacity as Commissioner of

Customs, petitioner, 
vs.
COURT OF TAX APPEALS and BAGONG BUHAY TRADING, respondents.

The Solicitor General for petitioner.

Jorge G. Macapagal counsel for respondent.

Aurea Aragon-Casiano for Bagong Buhay Trading.

ROMERO, J.:

14
This is a petition for review on certiorari which seeks to annul and set aside the
decision of the Court of Tax Appeals dated December 27, 1974 (CTA Case No. 2490)
reversing the decision of the Commissioner of Customs which affirmed the decision
of the Collector of Customs.1
The undisputed facts are as follows:
On January 30, 1972, the vessel S/S "Pacific Hawk" with Registry No. 170 arrived at
the Port of Manila carrying, among others, 80 bales of screen net consigned to
Bagong Buhay Trading (Bagong Buhay). Said importation was declared through a
customs broker under Entry No. 8651-72 as 80 bales of screen net of 500 rolls with
a gross weight of 12,777 kilograms valued at $3,750.00 and classified under Tariff
Heading No. 39.06-B of the Tariff and Customs Code2 at 35% ad valorem. Since the
customs examiner found the subject shipment reflective of the declaration, Bagong
Buhay paid the duties and taxes due in the amount of P11,350.00 which was paid
through the Bank of Asia under Official Receipt No. 042787 dated February 1, 1972.
Thereafter, the customs appraiser made a return of duty.
Acting on the strength of an information that the shipment consisted of "mosquito
net" made of nylon dutiable under Tariff Heading No. 62.02 of the Tariff and
Customs Code, the Office of the Collector of Customs ordered a
re-examination of the shipment. A report on the re-examination revealed that the
shipment consisted of 80 bales of screen net, each bale containing 20 rolls or a total
of 1,600 rolls.3 Re-appraised, the shipment was valued at $37,560.00 or $10.15 per
yard instead of $.075 per yard as previously declared. Furthermore, the Collector of
Customs determined the subject shipment as made of synthetic (polyethylene)
woven fabric classifiable under Tariff Heading No. 51.04-B at 100% ad valorem.
Thus, Bagong Buhay Trading was assessed P272,600.00 as duties and taxes due on
the shipment in question.4 Since the shipment was also misdeclared as to quantity
and value, the Collector of Customs forfeited the subject shipment in favor of the
government.5
Private respondent then appealed the decision of the Collector of Customs by filing
a petition for review with the Commissioner of Customs. On November 25, 1972 the
Commissioner affirmed the Collector of Customs.6 Private respondent moved for
reconsideration but the same was denied on January 22, 1973.7
From the Commissioner of Customs, private respondent elevated his case before
the Court of Tax Appeals. Upon review, the Court of Tax Appeals reversed the
decision of the Commissioner of Customs. It ruled that the Commissioner erred in
imputing fraud upon private respondent because fraud is never presumed and thus
concluded that the forfeiture of the articles in question was not in accordance with
law. Moreover, the appellate court stated that the imported articles in question
should be classified as "polyethylene plastic" at the rate of 35% ad valorem instead
of "synthetic (polyethylene) woven fabric" at the rate of 100% ad valorem based
upon the results conducted by the Bureau of Customs Laboratory. Consequently,
the Court of Tax Appeals ordered the release of the said article upon payment of
the corresponding duties and taxes. (C.T.A. Case No. 2490).8
Thereafter, the Commissioner of Customs moved for reconsideration. On November
19, 1975, the Court of Tax Appeals denied said motion for reconsideration.9
On August 20, 1976, private respondent filed a petition asking for the release of the
questioned goods which this Court denied. After several motions for the early
resolution of this case and for the release of goods and in view of the fact that the
goods were being exposed to the natural elements, we ordered the release of the
goods on June 2, 1986. Consequently, on July 26, 1986, private respondent posted a
cash bond of P149,443.36 to secure the release of 64 bales10 out of the 80
bales11 originally delivered on January 30, 1972. Sixteen bales12 remain missing.
Private respondent alleges that of the 143,454 yards (64 bales) released to Bagong
Buhay, only 116,950 yards were in good condition and the 26,504 yards were in bad
condition. Consequently, private respondent demands that the Bureau of Customs
be ordered to pay for damages for the 43,050 yards 13 it actually lost.14
Hence, this petition, the issues being; a) whether or not the shipment in question is
subject to forfeiture under Section 2530-M subparagraphs (3), (4) and (5) of the
Tariff and Customs Code; b) whether or not the shipment in question falls under
Tariff Heading No. 39.06-B (should be 39.02-B) of the Tariff and Customs Code
subject to ad valorem  duty of 35% instead of Tariff Heading No. 51.04-B with ad
valorem of 100% and c) whether or not the Collector of Customs may be held liable
for the 43,050 yards actually lost by private respondent.
Section 2530, paragraph m, subparagraphs (3), (4) and (5) states:
Sec. 2530. Property Subject to Forfeiture Under Tariff and Customs Law. — Any
vehicle, vessel or aircraft, cargo, article and other objects shall, under the following
conditions be subjected to forfeiture:
xxx xxx xxx
m. Any article sought to be imported or exported.
15
x x x           x x x          x x x
(3) On the strength of a  false  declaration or affidavit or affidavit executed by the
owner, importer, exporter or consignee concerning the importation of such article;
(4) On the strength of a  false  invoice or other document executed by the owner,
importer, exporter or consignee concerning the importation or exportation of such
article; and.
(5) Through any other practice or device contrary
to law by means of which such articles was entered through a custom-house to the
prejudice of government. (Emphasis supplied).
Petitioner contends that there has been a misdeclaration as to the quantity in rolls
of the shipment in question, the undisputed fact being that the said shipment
consisted of 1,600 rolls and not 500 rolls as declared in the import entry. We agree
with the contention of the petitioner. In declaring the weight of its shipment in an
import entry, through its customs broker as 12,777 kilograms when in truth and in
fact the actual weight is 13,600 kilograms, an apparent misdeclaration as to the
weight of the questioned goods was committed by private respondent. Had it not
been for a re-examination and re-appraisal of the shipment by the Collector of
Customs which yielded a difference of 823 kilograms, the government would have
lost revenue derived from customs duties.
Although it is admitted that indeed there was a misdeclaration, such violation,
however, does not warrant forfeiture for such act was not committed directly by
the owner, importer, exporter or consignee as set forth in Section 2530, paragraph
m, subparagraph (3), and/or (4).
In defense of its position denying the commission of misdeclaration, private
respondent contends that its import entry was based solely on the shipping
documents and that it had no knowledge of any flaw in the said documents at the
time the entry was filed. For this reason, private respondent believes that if there
was any discrepancy in the quantity of the goods as declared and as examined, such
discrepancy should not be attributed to Bagong Buhay.15
Private respondent's argument is persuasive. Under Section 2530, paragraph m,
subparagraphs (3) and (4), the requisites for forfeiture are: (1) the wrongful making
by the owner, importer, exporter or consignees of any declaration or affidavit, or
the wrongful making or delivery by the same persons of any invoice, letter or paper
— all touching on the importation or exportation of merchandise; and (2) that such
declaration, affidavit, invoice, letter or paper is false.16
In the case at bar, although it cannot be denied that private respondent caused to
be prepared through its customs broker a false import entry or declaration, it
cannot be charged with the wrongful making thereof because such entry or
declaration merely restated faithfully the data found in the corresponding
certificate of origin, 17 certificate of manager of the shipper,18 the packing lists 19 and
the bill of lading20 which were all prepared by its
suppliers abroad. If, at all, the wrongful making or falsity of the documents above-
mentioned can only be attributed to Bagong Buhay's foreign suppliers or shippers.
With regard to the second requirement on falsity, it bears mentioning that the
evidence on record, specifically, the decisions of the Collector of Customs and the
Commissioner of Customs, do not reveal that the importer or consignee, Bagong
Buhay Trading had any knowledge of any falsity on the subject importation.
Since private respondent's misdeclaration can be traced directly to its foreign
suppliers, Section 2530, paragraph m, subparagraphs (3) and (4) cannot find
application.
Applying subparagraph (5), fraud must be committed by an importer/consignee to
evade payment of the duties due.21 We support the stance of the Court of Tax
Appeals that the Commissioner of Customs failed to show that fraud had been
committed by the private respondent. The fraud contemplated by law must be
actual and not constructive. It must be intentional fraud, consisting of deception
willfully and deliberately done or resorted to in order to induce another to give up
some right.22 As explained earlier, the import entry was prepared on the basis of the
shipping documents provided by the foreign supplier or shipper. Hence, Bagong
Buhay Trading can be considered to have acted in good faith when it relied on these
documents.
Proceeding now to the question of the correct classification of the questioned
shipments, petitioner contends that the same falls under Tariff Heading No. 51.04
being a "synthetic (polyethylene) woven fabric." On the other hand, private
respondent contends that these fall under Tariff Heading No. 39.06 (should be
39.02), having been found to be made of polyethylene plastic.
Heading No. 39.02 of the Tariff and Customs Code provides:
16
39.02 — Polymerisation and copolymerisation products (for example, polyethylene,
polytetrahaloethylene, polyisobutylene, polystyrene, polyvinyl chloride, polyvinyl
acetate, polyvinyl chloroacetate and other polyvinyl derivatives, polyacrylic and
polymethacrylic derivatives, coumaroneindene resins).
The principal products included in this heading are:
(1) Polymerization products of ethylene or its substitution derivatives, particularly
the halogen derivatives.
Examples of these are polyethylene, polytetrafluro-ethylene and polychlorotrifluro-
ethylene. Their characteristic is that they are translucent, flexible and light in
weight. They are used largely for insulating electric wire. 23
On the other hand, Tariff Heading No. 51.04 provides:
51.04. — Woven fabrics of man-made fibers (continuous) including woven fabrics of
monofil or strip of heading No. 51.01 or 51.02.
This heading covers woven fabrics  (as described in Part [I] [C] of the General
Explanatory Note on Section XI) made of yarns of continuous man-made fibers, or of
monofil or strip of heading 51.01 and 51.02; it includes a very large variety of dress
fabrics, linings, curtain materials, furnishing fabrics, tyre fabrics, tent fabrics,
parachute fabrics, etc.24 (Emphasis supplied)
To correctly classify the subject importation, we need to refer to chemical analysis
submitted before the Court of Tax Appeals. Mr. Norberto Z. Manuel, an Analytical
Chemist of the Bureau of Customs and an Assistant to the Chief of the Customs
Laboratory, testified that a chemical test was conducted on the sample25 and "the
result is that the attached sample submitted under Entry No. 8651 was found to be
made wholly of Polyethylene plastic."26
A similar result conducted by the Adamson University Testing Laboratories provides
as follows:
The submitted sample, being insoluble in 10% sodium carbonate; hydrochloric acid,
glacial acetic acid, toluene, acetone, formic acid, and nitric acid, does not belong to
the man-made fibers, i.e., cellulosic and alginate rayons, poly (vinyl chloride),
polyacrylonitrile, copolymer or polyester silicones including Dolan, Dralon, Orlin,
PAN, Redon, Courtelle, etc., Tarylene, Dacron; but it is a type of plastic not
possessing, the properties of the man-made fibers. 27 (Emphasis supplied)
Consequently, the Court of Tax Appeals, relying on the laboratory findings of the
Bureau of Customs and Adamson University correctly classified the questioned
shipment as polyethylene plastic taxable under Tariff Heading No. 39.02 instead of
synthetic (polyethylene) woven fabric under Tariff Heading 51.04, to wit:
While it is true that the finding and conclusion of the Collector of Customs with
respect to classification of imported articles are presumptively correct, yet as
matters that require laboratory tests or analysis to arrive at the proper
classification, the opinion of the Collector must yield to the finding of an expert
whose opinion is based on such laboratory test or analysis unless such laboratory
analysis is shown to be erroneous. And this is especially so in this case where the
test and analysis were made in the laboratory of the Bureau of Customs itself. It has
not been shown why such laboratory finding was disregarded. There is no claim or
pretense that an error was committed by the laboratory technician. Significantly,
the said finding of the Chief, Customs Laboratory finds support in the "REPORT OF
ANALYSIS" submitted by the Adamson University Testing Laboratories, dated
September 21, 1966. 28
On the third issue, we opine that the Bureau of Customs cannot be held liable for
actual damages that the private respondent sustained with regard to its goods.
Otherwise, to permit private respondent's claim to prosper would violate the
doctrine of sovereign immunity. Since it demands that the Commissioner of
Customs be ordered to pay for actual damages it sustained, for which ultimately
liability will fall on the government, it is obvious that this case has been converted
technically into a suit against the state.29
On this point, the political doctrine that "the state may not be sued without its
consent," categorically applies.30 As an unincorporated government agency without
any separate juridical personality of its own, the Bureau of Customs enjoys
immunity from suit. Along with the Bureau of Internal Revenue, it is invested with
an inherent power of sovereignty, namely, taxation. As an agency, the Bureau of
Customs performs the governmental function of collecting revenues which is
definitely not a proprietary function. Thus, private respondent's claim for damages
against the Commissioner of Customs must fail.
WHEREFORE, the decision of the respondent Court of Tax Appeals is AFFIRMED. The
Collector of Customs is directed to expeditiously re-compute the customs duties
applying Tariff Heading 39.02 at the rate of 35% ad valorem on the 13,600
kilograms of polyethylene plastic imported by private respondent.
SO ORDERED.
17
G.R. No. 85284 February 28, 1990
REPUBLIC OF THE PHILIPPINES, petitioner 
vs.
SANDIGANBAYAN, Third Division, SIMPLICIO A. PALANCA in his own behalf as a
stockholder of Bacolod Real Estate Development Corporation (BREDCO), and
other stockholders similarly situated, respondents.
Hilado, Hagad & Hilado for private respondents.
RESOLUTION
PADILLA, J.:
This is a petition for certiorari to annul and set aside the resolution of the
Sandiganbayan (Third Division), dated 3 June 1988, granting the private
respondents' motion to intervene in Civil Case No. 0025 and admitting their answer
in intervention, as well as its resolution, dated 25 August 1988, denying the
petitioner's motion for reconsideration; PROHIBITION to order the respondent
court to cease and desist from proceeding with the intervention filed with it; and
alternatively, mandamus to compel the respondent court to dismiss the
intervention case.
The antecedents are as follows:
On 29 July 1987, the Republic of the Philippines, as Plaintiff, through its
governmental instrumentality the Presidential Commission on Good Government
(PCGG) filed with the respondent Sandiganbayan a complaint against Ferdinand E.
Marcos, et al. for reconveyance, reversion, accounting, restitution and damages,
docketed therein as Civil Case No. 0025 (PCGG No. 26). 1
On or about 3 September 1987, before the said Civil Case No. 0025 could be set for
hearing, private respondent Simplicio A. Palanca in his own behalf as a stockholder
of Bacolod Real Estate Development Corporation (BREDCO) and other stockholders
similarly situated, filed with the respondent Sandiganbayan a "Motion For Leave To
Intervene" 2 attaching thereto their "Answer in Intervention ." 3
In their motion, private respondents alleged that they be —
... allowed to intervene in the present action and to file the Answer in intervention
hereto attached as Annex 'A', the said stockholders having a legal interest in the
matter in litigation and in the disposition of the properties listed in Annex 'A' of the
Complaint as BREDCO LOTS and shares of stock in Bacolod Real Estate Development
Corporation.
In justification, it is further respectfully alleged that.
1. Close examination of the Complaint, in particular par. 12 thereto under 'V.
SPECIFIC AVERMENTS OF DEFENDANTS' ILLEGAL ACTS', makes no mention at all
about BREDCO being the subject of any anomalous transaction engaged in by any of
the defendants, in consequence of which the listed BREDCO lots could have been
gotten illegally. It is to be observed, on the other hand, that the titles mentioned in
aforesaid Annex of the complaint covering the lots in question are not registered in
the names of any of the defendants but in the name of Bacolod Real Estate
Development Corporation.
2. Similarly, the shares of stock in Bacolod Real Estate Development Corporation
appealing under PERSONAL PROPERTY on page two of Annex A of the complaint t
are ' carried not in the names of any of the defendants, but in the name of Marsteel
Consolidated Inc. and were acquired under the circumstances averred more in
detail in the accompanying Answer in Intervention by reason of which detail shares
should not be involved in the present action.
3. If intervention is allowed, intervenors are prepared to prove that if ever any of
the defendants through Marsteel Consolidated, Inc. and Marsteel Corporation came
to have any interest in Bacolod Real Estate Development Corporation, it was only by
way of accommodation on the part of BREDCO stockholders who transferred their
shareholdings aggregating 70% of the subscribed capital to enable Marsteel
Consolidated to secure adequate financing for the reclamation and port
development project . 4
The foregoing allegations were further expanded and elaborated in the private
respondents' Answer in Intervention.
On 2 December 1987, petitioner filed its Reply 5 to Answer In Intervention, while
private respondents filed a "Rejoinder to Reply With Motion To Release BREDCO
Lots 6 and also a "Motion To Calendar For Hearing" the motion to release BREDCO
lots. 7
On 22 January 1988, respondent court promulgated a resolution 8 holding in
abeyance action on the private respondents' "Rejoinder to Reply with Motion to
18
Release BREDCO lots", and set the Motion for Leave to Intervene for hearing on 2
February 1988.
On 11 March 1988, respondent court issued an order 9 giving petitioner fifteen (1 5)
days from 11 March 1988 within which to file its opposition and/or comment on the
motion to intervene and giving the private respondents in turn ten (10) days within
which to file their reply thereto.
On 23 March 1988, petitioner filed its Motion to Dismiss "Answer In Intervention,"
on the grounds that; (1) respondent court lacks jurisdiction and (2) intervenors have
no legal interest in the matter in litigation, 10 which the private respondents
opposed. 11
On 6 June 1988, respondent court promulgated a Resolution dated 3 June
1988 12 granting the private respondents' motion to intervene and admitting their
Answer in Intervention.
Petitioner moved for reconsideration but this was denied by respondent court in its
resolution of 25 August 1989.13
Hence, the instant petition.
The petitioner, through the Solicitor General, contends that in issuing the
questioned resolutions granting the Motion to Intervene and admitting the Answer-
in-Intervention, respondent Sandiganbayan acted in contravention of a national or
public policy embedded in Executive Order Nos. 1, 2, 4 and related issuances, or
otherwise acted in a way not in accord with law or with the applicable decisions of
this Court, because:
(a) Petitioner, being the sovereign state, cannot be sued without its consent, and
the Intervention is, in legal effect, a suit or counter- suit against the sovereign state,
the Republic of the Philippines;
(b) The cause of action of intervenors does not fall within the jurisdiction of the
Sandiganbayan as expressly spelled out in P.D. No. 1606 and Executive Order No.
14;
(c) Intervenors have no legal interest in the matter in litigation, and the subject
matter is not in custodia legis of respondent court; and
(d) Intervenors' claims, as contained in their Motion for Intervention and Answer-in-
Intervention, are claims between and/or among Ferdinand and Imelda Marcos and
their cronies, i.e., "members of their immediate family close relatives, subordinates,
and/or business associates, dummies, agents and nominees" and are cognizable not
by respondent court but by the regular courts or other for a Even if there would be
multiple litigations, as among themselves, the legal effect remains, i.e., that there is
only one case filed by the Republic against the named defendants in Civil Case No.
0025, grounded on causes of action entirely distinct from any cause of action which
intervenors may have against Mr. Marcos and his cronies.
The petition is not impressed with merit.
The Rules of Court permit an aggrieved party, generally, to take a cause and apply
for relief with the appellate courts by way of either of two distinct and dissimilar
modes through the broad process of appeal or the limited special civil action of
certiorari. An appeal brings up for review errors of judgment committed by a court
of competent jurisdiction over the subject of the suit or the persons of the parties
or any such error committed by the court in the exercise of its jurisdiction
amounting to nothing more than an error of judgment. On the other hand, the writ
of certiorari issues for the correction of errors of jurisdiction only or grave abuse of
discretion amounting to lack or excess of jurisdiction. The writ of certiorari cannot
legally be used for any other purpose. In terms of its function, the writ of certiorari
serves to keep a lower court within the bounds of its jurisdiction or to prevent it
from committing such a grave abuse of discretion amounting to excess of
jurisdiction or to relieve parties from arbitrary acts of courts — acts which courts
have no power or authority in law to perform. 14
Hence, the main issue to be resolved in the present case, which is principally a
petition for certiorari to annul and set aside the questioned resolutions of
respondent court is, whether or not the Sandiganbayan has jurisdiction over the
action for intervention, or if it has, whether respondent court acted with grave
abuse of discretion amounting to lack or excess of its jurisdiction in rendering the
questioned resolutions.
In the present case, petitioner merely contends that the cause of action of
intervenors does not fall within the jurisdiction of the Sandiganbayan as expressly
spelled out in Presidential Decree No. 1606 and Executive Order No. 14; it does not
claim that respondent court committed grave abuse of discretion amounting to lack
or excess of its jurisdiction in rendering the questioned resolutions.
The jurisdiction of the Sandiganbayan has already been settled in Presidential
Commission on Good Government vs. Hon. Emmanuel G. Penal, etc., et al.  15 where
the Court held that —
19
... Under Section 2 of the President's Executive Order No. 14 issued on May 7, 1986,
all cases of the Commission regarding 'the funds, Moneys, Assets, and Properties
Illegally Acquired or I Misappropriated by Former President Ferdinand Marcos, Mrs.
Imelda Romualdez Marcos, their Close Relatives, Subordinates, Business Associates,
Dummies, Agents, or Nominees whether civil or criminal, are lodged within the
'exclusive and original jurisdiction of the Sandiganbayan' and all incidents arising
from, incidental to, or related to, such cases necessarily fall likewise under the
Sandiganbayan's exclusive and original jurisdiction, subject to review on certiorari
exclusively by the Supreme Court. (emphasis supplied)
In reiterating the aforequoted ruling in six (6) subsequent cases 16 which were
decided jointly, again, the Court held that-
... the exclusive jurisdiction conferred on the Sandiganbayan would evidently
extend not only to the principal causes of action, i.e., the recovery of alleged ill-
gotten wealth, but also to 'all incidents arising from, incidental to, or related to,
such cases,' such as the dispute over the sale of the shares, the propriety of the
issuance of ancillary writs or provisional remedies relative thereto, the
sequestration thereof, which may not be made the subject of separate actions or
proceedings in another forum.
Intervention is not an independent action, but is ancillary and supplemental to an
existing litigation. 17 Hence, the private respondents' action for intervention in Civil
Case No. 0025, not being an independent action, is merely incidental to, or related
to, the said civil case. Since the respondent Sandiganbayan has the exclusive and
original jurisdiction over Civil Case No. 0025, it has likewise original and exclusive
jurisdiction over the private respondents' action for intervention therein.
Now, considering that respondent Sandiganbayan has jurisdiction not only over Civil
Case No. 0025 but also over the private respondents' action for intervention, any
error or irregularity that it may have committed in rendering its questioned
resolutions, in the exercise of its jurisdiction, amounts to an error of judgment,
which is not correctable in the present petition for certiorari but by appeal.
Accordingly, this case may be dismissed outright without the Court having to pass
upon the other issues raised in the petition. However, considering that the litigation
below is of great public interest and involves a matter of public policy, the Court has
decided to review the other errors allegedly committed by respondent court in
rendering its questioned resolutions.
In this jurisdiction, the law on "intervention" is found in the Rules of Court. 18 Thus,
a person may, before or during a trial, be permitted by the court, in its discretion, to
intervene in an action, if he has legal interest in the matter in litigation, or in the
success of either of the parties or an interest against both, or when he is so situated
as to be adversely affected by a distribution or other disposition of property in the
custody of the court or of an officer thereof. 19
The Court is not impressed with the contention of petitioner that the intervenors
have no legal interest in the matter in litigation. In this connection, it would suffice
to quote what the respondent court said in holding that the intervenors have a legal
interest in the matter in litigation. Thus —
Has Palanca shown a proper case for intervention by him and his co-stockholders
who are similarly situated as he is?
A narration of the pertinent facts alleged by Palanca and the plaintiff indicates the
answer.
In 1961, BREDCO was awarded by Bacolod City a contract to undertake the
reclamation and port development of the city. As of 1975, a sizeable portion of land
had already been reclaimed from the sea and corresponding torrens titles issued in
BREDCO's name.
In that year, BREDCO engaged MARSTEEL as a contractor to complete the project
with power to negotiate in its name or jointly and/or severally with BREDCO for
loans to finance the reclamation and port development, and to mortgage all
reclaimed lots and other assets of the project as security. For its services, MARSTEEL
shall receive 65% of the excess of all revenues over all disbursements. Accordingly,
BREDCO conveyed to MARSTEEL 65% of each lot already reclaimed and that to be
reclaimed.
In 1977, MARSTEEL assigned to MCI, which owned 100% of its capital stock, all its
rights, interests, obligations, and undertakings in the project. To enable MCI to
expand its base of negotiation for loans needed in the reclamation and port
development the BREDCO stockholders transferred to MCI their respective shares
of stock amounting to 70% of the capital stock of BREDCO. In return, they 'shall be
entitled to a share of 35% in excess of all revenues over all disbursements of the
projects,' it being understood that payment of the corresponding share shall be due
to BREDCO stockholders as owners of existing interests in the project, regardless of
the fact that by implementation of this AGREEMENT, they ceased to be
stockholders of BREDCO.
20
In September 1986, the Presidential Commission on Good Government (PCGG)
sequestered all assets, properties, records and documents' of MARSTEEL, MCI, and
BREDCO'. In July 1987, the complaint at bar was filed and expanded in March 1988.
The pleadings, original and expanded, allege that the defendants, acting singly or
collectively, amassed ill-gotten wealth listed in Annex 'A' thereof, among which are
the BREDCO lots and shares of stock, and pray that the ill-gotten wealth be
reconveyed to the plaintiff, plus damages. Significantly, however, the bodies of the
complaints do not mention anything about BREDCO, its project, lots, and stocks, nor
about MCI.
Under these alleged facts, Palanca has established a proper case for intervention.
Firstly, he and his co-stockholders have a legal interest in the matter in litigation,
namely, their 70% of the capital stock of BREDCO, which they transferred to MCI by
way of alleged accommodation, or its equivalent of 35% of the excess of all
revenues over all disbursements, to which they are entitled 'as owners of existing
interests in the project.' Section 2, Rule 12, Revised Rules of Court, provides that a
person may be permitted 'to intervene in an action, if he has legal interest in the
matter in litigation.'
As a general rule the right to intervene exists in favor of one who claims to be the
owner or to have some interest in the property which is the subject of litigation,
and this without particular regard to the value of the property or the right claimed
therein. A third party may intervene in a sequestration suit involving title to
personal property, and have his claims to the possession of the property vindicated
therein So, in an action for possession of real or personal property, an intervenor
may be admitted on the ground that he is an owner thereof, either to assist in the
defense, or to claim the property for himself, or to obtain some other relief
germane to the action.' (59 Am Jur 2d, Parties, Sec. 152, p. 585,
Secondly, the same Section 2, Rule 12, further provides that intervention by a
person may be permitted 'when he is so situated as to be adversely affected by a
distribution or other disposition of property in the custody of the court or of an
officer thereof.' On this point, the Supreme Court observed:
We shall now speak of the case where the stranger desires to intervene for the
purpose of asserting a property right in the res, or thing, which is the subject-matter
of the ligitation, without becoming a formal plaintiff or defendant, and without
acquiring the control over the course of a litigation, which is conceded to the main
actions (sic) therein. The mode of intervention to which reference is now made is
denominated in equity procedure the intervention pro interesse suo and is
somewhat analogous to the trial of a right of property in an action of law, its
purpose being to enable a person whose property gets into the clutches of a court,
in a controversy between others, to go into court and to procure it or its proceeds
to be surrendered to him. It often happens that a person who really owns property,
or has a superior lien or other interest in it, sees a litigation spring up between
others who assert rights in or concerning it. If the court takes possession of the res,
or otherwise gets jurisdiction over it in such a controversy, the real owner is not
compelled to stand Idly by and see the property disposed of without asserting his
rights. Though it be granted that the litigation would not be technically binding on
him, because of his not being a party, yet it might well happen that complications
would ensue whereby his rights would be materially prejudiced. For instance, the
subject-matter of the litigation might consist of a fund to he distributed, and the
conditions might be such that if it were turned over to the particular litigant who
should appear to have the better right in the original action, the person really
having a superior title might be left without redress. Accordingly provision is made
whereby persons who have not been joined as parties in the original proceedings
may intervene and assert a right antagonistic or superior to that of one or both of
the parties. (Bosworth vs. Terminal etc. Assoc. of St. Louis, 174 U.S. 182,187, 43 L.
ed., 941, 943). As regards the right to intervene in this manner, it may be stated
that if the party desiring to intervene shows a legitimate and proper interest in the
fund or property in question, the motion to intervene should be granted, especially
if such interest cannot be otherwise properly protected. (Joaquin v. Herrera, 37 Phil.
705, 722-724)
Here, the BREDCO lots and stocks were sequestered and are now in custodia legis
(Bernas, The Constitution of the Republic of the Philippines, An Annotated Text,
1987 ed., p. 129, footnote 42). From the facts averred by Palanca and the plaintiff, it
is easy to see that in the event We decide to order the reconveyance of those assets
to the plaintiff, Palanca and his co-stockholders in BREDCO stand to be adversely
affected.
And thirdly, the legal interest of Palanca and his co-stockholders in the matter in
litigation and the possibility of a judgment ordering reconveyance in favor of the
plaintiff, invest them with legal interest in the success of the defendants, at least
insofar as the BREDCO lots and shares are concerned. Section 2, Rule 12, also
permits intervention by a person who has legal interest in the success of either of
the parties. 20
21
The petitioner's contention that the State cannot be sued without its consent and constitutes a charge against, or financial liability to, the Government and
that private respondents' action for intervention is, in legal effect, a suit or counter- consequently cannot be entertained by the courts except with the consent of said
suit against the sovereign is also untenable. government. (Syquia vs. Almeda Lopez, 84 Phil. 312; 47 Off. Gaz., 665; Compania
General de Tabacos vs. Govt. of the PI 45 Phil., 663). Plaintiff argues that by its
The Rules of Court 21 provide that the intervention shall be made by complaint filed
intervention, the Republic of the Philippines, in effect, waived its right of non-
and served in regular form, and may be answered as if it where an original
suability, but it will be remembered that the Republic intervened in the case merely
complaint; but where the intervenor unites with the defendant in resisting the
to unite with the defendant Attorney General of the United States in resisting
claims of the plaintiff, the intervention may be made in the form of an answer to
plaintiffs claims, and for that reason asked no affirmative relief against any party in
the complaint. In order words, a third person who makes himself a party to an
the answer in intervention. x x x. Clearly, this is not a case where the State takes the
existing litigation, may either join the plaintiff in claiming what is sought in the filing
initiative in an action against a private party by filing a complaint in intervention,
a complaint in intervention, or by uniting with the defendant in resisting the claims
thereby surrendering its privileged position and coming down to the level of the
of the plaintiff, by filing an answer in intervention.
defendants what happened in the case of Froilan vs. Pan Oriental Shipping Co., et
In Froilan v. Pan Oriental Shipping Co., 22 the plaintiff therein Fernando A. Froilan al.-95 Phil. 905 cited by the plaintiff but one where the State, as one of the
filed a complaint against the defendant, Pan Oriental Shipping Co. The Republic of defendants merely resisted a claim against it precisely on the ground, among
the Philippines intervened by filing a complaint in intervention. Thereafter, the others, of its privileged position which exempts it from suit. (emphasis supplied).
defendant filed its answer to the complaint in intervention, and set up a
In the present case, the private respondents intervened in Civil Case No. 0025
counterclaim against the Republic of the Philippines. The trial court dismissed the
merely to unite with the defendants therein in resisting the claims of petitioner, as
defendants counterclaim against the Republic on the ground, among others, that
plaintiff, and for that reason asked for no affirmative relief against any party in their
the state is immune from suit. On appeal, this Court held that the dismissal of the
answer in intervention. In other words, this is not a case where the private
counterclaim was untenable, because by filing its complaint in intervention the
respondents take the initiative in an action against petitioner by filing a complaint in
Government in effect waived its right to non-suability.
intervention or a complaint. As observed by respondent Sandiganbayan:
In another case, Lim vs. Brownell, Jr. and Kagawa, 23 the plaintiff Benito E. Lim, as
In intervening, Palanca and his co-stockholders have for their purpose to exclude
administrator of the intestate estate of Arsenia Enriquez, filed a complaint in the
the BREDCO lots and stocks or, at least, their 35% interest in the BREDCO project
Court of First Instance of Manila against the Alien Property Administrator (later
from any possible judgment directing reconveyance of the alleged ill-gotten wealth
substituted by the Attorney General of the United States) for the recovery of four
to the plaintiff. They do not pray for damages against the latter. In effect, they
(4) parcels of land (which were subsequently transferred to the Republic of the
occupy a defensive position as regards those shares of stock or interest. The fact
Philippines) with a prayer for the payment of back rentals. The Republic of the
that they interjected themselves into his litigation at their own initiative does not
Philippines intervened in the case. The defendant Attorney General of the United
alter the essential nature of their intervention." 24
States and the defendant- intervenor Republic of the Philippines each filed an
answer, alleging by way of affirmative defense, among others, that the lower court Private respondents' action for intervention in Civil Case No. 0025 is not, therefore,
had no jurisdiction over the claim for rentals since the action in that regard a suit or counter-suit against petitioner Republic of the Philippines.
constituted a suit against the Republic to which it had not given its consent. The
Having arrived at the above conclusions, the Court finds no need to further discuss
trial court dismissed the complaint for lack of jurisdiction. On appeal, this Court
the petitioner's pretense that the private respondents' claims are claims as between
affirmed, with the following reasons:
and/or among Ferdinand and Imelda Marcos, et al., and that the same is not
The claim for damages for the use of the property against the intervenor defendant cognizable by respondent Sandiganbayan but by the regular courts. It suffices to
Republic of the Philippines to which it was transferred, likewise, cannot be state that, as already stated, in intervening in Civil Case No. 0025, private
maintained because of the immunity of the state from suit. The claim obviously respondents merely joined the defendants therein in resisting the claims of

22
petitioner, as plaintiff, and that they asked no affirmative relief against any party in Solicitor General Estelito P. Mendoza, Assistant Solicitor General Octavio R. Ramirez
their answer in intervention. They do not appear to have any controversy with the and Solicitor Mariano M. Martinez for respondents.
defendants, Ferdinand and Imelda Marcos, et al.

ACCORDINGLY, the petition in the present case is hereby DISMISSED.

FERNANDO, J.:
SO ORDERED.
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.

G.R. No. L-48214 December 19, 1978 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
ILDEFONSO SANTIAGO, represented by his Attorney-in-Fact, ALFREDO T.
as it does with a suit for the revocation of a donation to the Republic, which
SANTIAGO, petitioner, 
allegedly fatted to conform with what was agreed to by the donee. If an order of
vs.
dismissal would suffice, then the element of unfairness enters, the facts alleged
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, represented by the
being hypothetically admitted. It is the considered opinion of this Court then that to
Director, Bureau of Plant Industry, and the Regional Director, Region IX,
conform to the high dictates of equity and justice, the presumption of consent
Zamboanga City, respondent,
could be indulged in safely. That would serve to accord to petitioner as plaintiff, at
Ahmad D. Sahak for petitioner. the very least, the right to be heard. certiorari lies.

23
1. This is not to deny the obstacle posed by the constitutional provision. It is
expressed in language plain and unmistakable: "The State may not be sued without
its consent. 8 The Republic cannot be proceeded against unless it allows itself to be
sued. Neither can a department, bureau, agency, office, or instrumentality of the
government where the suit, according to the then Justice, now Chief Justice, Castro
in Del Mar v. Philippine Veterans Administration, 9 may result "in adverse
consequences to the public treasury, whether in the disbursements of funds or loss
of property. 10 Such a doctrine was reiterated in the following cases: Republic v.
Villasor, 11 Sayson v. Singson, 12 Director of the Bureau of Printing v.
Francisco,  13 and Republic v. Purisima. 14
2. It is contended by counsel for petitioner that the above constitutional provision
would be given a retroactive application in this case if the suit for the revocation of
donation were dismissed. That is not the case at all. In Republic v. Purisima, this
Court made clear that such a basic postulate is part and parcel of the system of
government implanted in the Philippines from the time of the acquisition of
sovereignty by the United States, and therefore, was implicit in the 1935
Constitution even in the absence of any explicit language to that effect. This it did in
a citation from Switzerland General Insurance Co., Ltd. v. Republic of the
Philippines:  15 "The doctrine of non-suability recognized in this jurisdiction even
prior to the effectivity of the [1935] Constitution is a logical corollary of the
positivist concept of law which, to paraphrase Holmes, negates the assertion of any
legal right as against the state, in itself the source of the law on which such a right
may be predicated. Nor is this all. Even if such a principle does give rise to problems,
considering the vastly expanded role of government enabling it to engage in
business pursuits to promote the general welfare, it is not obeisance to the
analytical school of thought alone that calls for its continued applicability. 16 That is
the teaching of the leading case of Mobil Philippines Exploration, Inc. v. Customs
Arrastre Service, 17 promulgated in December of 1966. As a matter of fact, the
Switzerland General Insurance Co. decision was the thirty-seventh of its kind after
Mobil. Clearly, then, the contention that to dismiss the suit would be to give the
applicable constitutional provision a retroactive effect is, to put it at its mildest,
untenable.
3. Petitioner's counsel invoked Santos v. Santos, 18 a 1952 decision. A more
thorough analysis ought to have cautioned him against reliance on such a case. It
was therein clearly pointed out that the government entity involved was originally
the National Airports Corporation. Thereafter, it "was abolished by Executive Order
No. 365, series of 1950, and in its place and stead the Civil Aeronautics
Administration was created and took over all the assets and assumed all the
liabilities of the abolished corporation. The Civil Aeronautics Administration, even if
it is not a juridical entity, cannot legally prevent a party or parties from enforcing
their proprietary rights under the cloak or shield of lack of juridical personality,
because to took over all the powers and assumed all the obligations of the defunct
corporation which had entered into the contract in question." 19 Then
came National Shipyard and Steel Corporation v. Court of Industrial Relations, 20 a
1963 decision, where the then Justice, later Chief Justice, Concepcion, as ponente,
stated that a government-owned and controlled corporation "has a personality of
its own distinct and separate from that of the government. ... Accordingly, it may
sue and be sued and may be subjected to court processes just like any other
corporation. (Section 13, Act 1459, as amended). 21 In three recent
decisions, Philippine National Bank v. Court of Industrial Relations, 22 Philippine
National Bank v. Honorable Judge Pabalan, 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
24
Aquino's opinion concluded with this paragraph: "It is settled that the Bureau of 7. Our decision, it must be emphasized, goes no further than to rule that a donor,
Customs, acting as part of the machinery of the national government in the with the Republic or any of its agency being the donee, is entitled to go to court in
operation of the arrastre service, is immune from suit under the doctrine of non- case of an alleged breach of the conditions of such donation. He has the right to be
suability of the State. The claimant's remedy to recover the loss or damage to the heard. Under the circumstances, the fundamental postulate of non-suability cannot
goods under the custody of the customs arrastre service is to file a claim with the stand in the way. It is made to accommodate itself to the demands of procedural
Commission in Audit as contemplated in Act No. 3083 and Commonwealth Act No. due process, which is the negation of arbitrariness and inequity. The government, in
327. 34 With the explicit provision found in the present Constitution, the the final analysis, is the beneficiary. It thereby manifests its adherence to the
fundamental principle of non-suability becomes even more exigent in its command. 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
5. The reliance on Santos v. Santos as a prop for this petition having failed, it would
under this circumstance has the grave responsibility of living up to the ideal of
ordinarily follow that this suit cannot prosper. Nonetheless, as set forth at the
objectivity and impartiality, the very essence of the rule of law. Only by displaying
outset, there is a novel aspect that suffices to call for a contrary conclusion. It would
the neutrality expected of an arbiter, even if it happens to be one of the
be manifestly unfair for the Republic, as donee, alleged to have violated the
departments of a litigant, can the decision arrived at, whatever it may be, command
conditions under which it received gratuitously certain property, thereafter to put
respect and be entitled to acceptance.
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 WHEREFORE, the writ of certiorari prayed for is granted and the order of dismissal
from an individual or governmental agency, is to be condemned. As a matter of fact, of October 20, 1977 is nullified, set aside and declared to be without force and
in case it is the latter that is culpable, the affront to decency is even more manifest. effect. The Court of First Instance of Zamboanga City, Branch II, is hereby directed
The government, to paraphrase Justice Brandeis, should set the example. If it is to proceed with this case, observing the procedure set forth in the Rules of Court.
susceptible to the charge of having acted dishonorably, then it forfeits public trust- No costs.
and rightly so.
Barredo, Antonio, Aquino, Concepcion, Jr. and Santos, JJ., concur.
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.

25
G.R. No. 206484

DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS (DOTC), Petitioner, 

vs.
SPOUSES VICENTE ABECINA and MARIA CLEOFE ABECINA, Respondents.

DECISION

BRION, J.:

This petition for review on certiorari  seeks to reverse and set aside the March 20,
2013 decision of the Court of Appeals (CA)  in CA-G.R. CV No. 93795 1 affirming the
decision of the Regional Trial Court (RTC)  of Daet, Camarines Norte, Branch 39,
in Civil Case No. 7355.2The RTC ordered the Department of Transportation and
Communications (DOTC)  to vacate the respondents' properties and to pay them
actual and moral damages.

ANTECEDENTS

Respondent spouses Vicente and Maria Cleofe Abecina (respondents/spouses

Abecina) are the registered owners of five parcels of land in Sitio Paltik, Barrio Sta.
Rosa, Jose Panganiban, Camarines Norte.

The properties are covered by Transfer Certificates of Title (TCT) Nos. T-25094, T-

25095, T-25096, T-25097, and T-25098.3

In February 1993, the DOTC awarded Digitel Telecommunications Philippines,

Inc. (Digitel)  a contract for the management, operation, maintenance, and
development of a Regional Telecommunications Development Project (RTDP)  under
the National Telephone Program, Phase I, Tranche 1 (NTPI-1).4

The DOTC and Digitel subsequently entered into several Facilities Management
Agreements (FMA) for Digitel to manage, operate, maintain, and develop the RTDP
and NTPI-1 facilities comprising local telephone exchange lines in various
municipalities in Luzon. The FMAs were later converted into Financial Lease
Agreements (FLA)  in 1995.

Later on, the municipality of Jose Panganiban, Camarines Norte, donated a one
thousand two hundred (1,200)  square-meter parcel of land to the DOTC for the
implementation of the RDTP in the municipality. However, the municipality
erroneously included portions of the respondents’ property in the donation.
Pursuant to the FLAs, Digitel constructed a telephone exchange on the property
which encroached on the properties of the respondent spouses.5
26
Sometime in the mid-1990s, the spouses Abecina discovered Digitel’s occupation
over portions of their properties. They required Digitel to vacate their properties
and pay damages, but the latter refused, insisting that it was occupying the
property of the DOTC pursuant to their FLA.
On April 29, 2003, the respondent spouses sent a final demand letter to both the
DOTC and Digitel to vacate the premises and to pay unpaid rent/damages in the
amount of one million two hundred thousand pesos (₱1,200,000.00). Neither the
DOTC nor Digitel complied with the demand.
On September 3, 2003, the respondent spouses filed an accion
publiciana  complaint 6 against the DOTC and Digitel for recovery of possession and
damages. The complaint was docketed as Civil Case No. 7355.
In its answer, the DOTC claimed immunity from suit and ownership over the subject
properties.7 Nevertheless, during the pre-trial conference, the DOTC admitted that
the Abecinas were the rightful owners of the properties and opted to rely instead
on state immunity from suit.8
On March 12, 2007, the respondent spouses and Digitel executed a Compromise
Agreement and entered into a Contract of Lease. The RTC rendered a partial
decision and approved the Compromise Agreement on March 22, 2007.9
On May 20, 2009, the RTC rendered its decision against the DOTC. 10 It brushed aside
the defense of state immunity. Citing Ministerio v. Court of First
Instance11and Amigable v. Cuenca,12it held that government immunity from suit
could not be used as an instrument to perpetuate an injustice on a citizen.13
The RTC held that as the lawful owners of the properties, the respondent spouses
enjoyed the right to use and to possess them – rights that were violated by the
DOTC’s unauthorized entry, construction, and refusal to vacate. The RTC (1) ordered
the Department – as a builder in bad faith – to forfeit the improvements and vacate
the properties; and (2) awarded the spouses with ₱1,200,000.00 as actual damages,
₱200,000.00 as moral damages, and ₱200,000.00 as exemplary damages plus
attorney’s fees and
costs of suit.
The DOTC elevated the case to the CA arguing: (1) that the RTC never acquired
jurisdiction over it due to state immunity from suit; (2) that the suit against it should
have been dismissed after the spouses Abecina and Digitel executed a compromise
agreement; and (3) that the RTC erred in awarding actual, moral, and exemplary
damages against it.14 The appeal was docketed as CA-G.R. CV No. 93795.
On March 20, 2013, the CA affirmed the RTC’s decision but deleted the award of
exemplary damages. The CA upheld the RTC’s jurisdiction over cases for accion
publiciana  where the assessed value exceeds ₱20,000.00.15 It likewise denied the
DOTC’s claim of state immunity from suit, reasoning that the DOTC removed its
cloak of immunity after entering into a proprietary contract – the Financial Lease
Agreement with Digitel.16 It also adopted the RTC’s position that state immunity
cannot be used to defeat a valid claim for compensation arising from an unlawful
taking without the proper expropriation proceedings.17 The CA affirmed the award
of actual and moral damages due to the DOTC’s neglect to verify the perimeter of
the telephone exchange construction but found no valid justification for the award
of exemplary damages.18
On April 16, 2013, the DOTC filed the present petition for review on certiorari.
THE PARTIES’ ARGUMENTS
The DOTC asserts that its Financial Lease Agreement with Digitel was entered into
in pursuit of its governmental functions to promote and develop networks of
communication systems.19 Therefore, it cannot be interpreted as a waiver of state
immunity.
The DOTC also maintains that while it was regrettable that the construction of the
telephone exchange erroneously encroached on portions of the respondent’s
properties, the RTC erred in ordering the return of the property. 20 It argues that
while the DOTC, in good faith and in the performance of its mandate, took private
property without formal expropriation proceedings, the taking was nevertheless an
exercise of eminent domain.21
Citing the 2007 case of Heirs of Mateo Pidacan v. Air Transportation Office
(ATO),22the Department prays that instead of allowing recovery of the property, the
case should be remanded to the RTC for determination of just compensation.
On the other hand, the respondents counter that the state immunity cannot be
invoked to perpetrate an injustice against its citizens. 23 They also maintain that
because the subject properties are titled, the DOTC is a builder in bad faith who is
deemed to have lost the improvements it introduced.24 Finally, they differentiate
their case from Heirs of Mateo Pidacan v. ATO  because Pidacan  originated from a
27
complaint for payment of the value of the property and rentals while their case
originated from a complaint for recovery of possession and damages.25
OUR RULING
We find no merit in the petition.
The State may not be sued without its consent.26 This fundamental doctrine stems
from the principle that there can be no legal right against the authority which
makes the law on which the right depends.27 This generally accepted principle of
law has been explicitly expressed in both the 197328 and the present Constitutions.
But as the principle itself implies, the doctrine of state immunity is not absolute.
The State may waive its cloak of immunity and the waiver may be made expressly
or by implication.
Over the years, the State’s participation in economic and commercial activities
gradually expanded beyond its sovereign function as regulator and
governor.1âwphi1 The evolution of the State’s activities and degree of participation
in commerce demanded a parallel evolution in the traditional rule of state
immunity. Thus, it became necessary to distinguish between the State’s sovereign
and governmental acts (jure imperii)  and its private, commercial, and proprietary
acts (jure gestionis). Presently, state immunity restrictively extends only to acts jure
imperii while acts jure gestionis  are considered as a waiver of immunity.29
The Philippines recognizes the vital role of information and communication in
nation building.30 As a consequence, we have adopted a policy environment that
aspires for the full development of communications infrastructure to facilitate the
flow of information into, out of, and across the country.31 To this end, the DOTC has
been mandated with the promotion, development, and regulation of dependable
and coordinated networks of communication.32
The DOTC encroached on the respondents’ properties when it constructed the local
telephone exchange in Daet, Camarines Norte. The exchange was part of the RTDP
pursuant to the National Telephone Program. We have no doubt that when the
DOTC constructed the encroaching structures and subsequently entered into the
FLA with Digitel for their maintenance, it was carrying out a sovereign function.
Therefore, we agree with the DOTC’s contention that these are acts jure
imperii that fall within the cloak of state immunity.
However, as the respondents repeatedly pointed out, this Court has long
established in Ministerio v CFI,33 Amigable v. Cuenca,  34the 2010 case Heirs of
Pidacan v. ATO,  35and more recently in Vigilar v. Aquino36that the doctrine of state
immunity cannot serve as an instrument for perpetrating an injustice to a citizen.
The Constitution identifies the limitations to the awesome and near-limitless
powers of the State. Chief among these limitations are the principles that no person
shall be deprived of life, liberty, or property without due process of law and that
private property shall not be taken for public use without just
compensation.37 These limitations are enshrined in no less than the Bill of Rights
that guarantees the citizen protection from abuse by the State.
Consequently, our laws38 require that the State’s power of eminent domain shall be
exercised through expropriation proceedings in court. Whenever private property is
taken for public use, it becomes the ministerial duty of the concerned office or
agency to initiate expropriation proceedings. By necessary implication, the filing of
a complaint for expropriation is a waiver of State immunity.
If the DOTC had correctly followed the regular procedure upon discovering that it
had encroached on the respondents’ property, it would have initiated expropriation
proceedings instead of insisting on its immunity from suit. The petitioners would
not have had to resort to filing its complaint for reconveyance. As this Court said
in Ministerio:
It is unthinkable then that precisely because there was a failure to abide by what
the law requires, the government would stand to benefit. It is just as important, if
not more so, that there be fidelity to legal norms on the part of officialdom if the
rule of law were to be maintained. It is not too much to say that when the
government takes any property for public use, which is conditioned upon the
payment of just compensation, to be judicially ascertained, it makes manifest that
it submits to the jurisdiction of a court. There is no thought then that the doctrine
of immunity from suit could still be appropriately invoked. 39 [emphasis supplied]
We hold, therefore, that the Department’s entry into and taking of possession of
the respondents’ property amounted to an implied waiver of its governmental
immunity from suit.
We also find no merit in the DOTC’s contention that the RTC should not have
ordered the reconveyance of the respondent spouses’ property because the
property is being used for a vital governmental function, that is, the operation and
maintenance of a safe and efficient communication system.40
28
The exercise of eminent domain requires a genuine necessity to take the property
for public use and the consequent payment of just compensation. The property is
evidently being used for a public purpose. However, we also note that the
respondent spouses willingly entered into a lease agreement with Digitel for the use
of the subject properties.

If in the future the factual circumstances should change and the respondents refuse
to continue the lease, then the DOTC may initiate expropriation proceedings. But as
matters now stand, the respondents are clearly willing to lease the property.
Therefore, we find no genuine necessity for the DOTC to actually take the property
at this point.

Lastly, we find that the CA erred when it affirmed the RTC's decision without
deleting the forfeiture of the improvements made by the DOTC through Digitel.
Contrary to the RTC's findings, the DOTC was not a builder in bad faith when the
improvements were constructed. The CA itself found that the Department's
encroachment over the respondents' properties was a result of a mistaken
implementation of the donation from the municipality of Jose Panganiban.41
Good faith consists in the belief of the builder that the land he is building on is his
and [of] his ignorance of any defect or flaw in his title. 42 While the DOTC later
realized its error and admitted its encroachment over the respondents' property,
there is no evidence that it acted maliciously or in bad faith when the construction
was done.
G.R. No. L-29993 October 23, 1978
LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL DE GUZMAN, ALFONSO
R. MAGSANOC, JESUS MACARANAS, MAXIMO MANANGAN, FIDEL
MONTEMAYOR, MELCHOR VIRAY, RAMON TULAGAN, all Members of the
Municipal Council of Malasiqui in 1959, Malasiqui, Pangasinan, petitioners, 
vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA,
ERNESTO, NORMA, VIRGINIA, REMEDIOS and ROBERTO, all surnamed
FONTANILLA, and THE HONORABLE COURT OF APPEALS, respondents.
G.R. No. L-30183 October 23, 1978

Article 52743 of the Civil Code presumes good faith. Without proof that. the MUNICIPALITY OF MALASIQUI, petitioner, 
Department's mistake was made in bad faith, its construction is presumed to have vs.
been made in good faith. Therefore, the forfeiture of the improvements in favor of ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO, ANGELITA, ANITA,
the respondent spouses is unwarranted. ERNESTO, NORMA, VIRGINIA, REMEDIOS and ROBERTO, all surnamed
FONTANILLA, and the Honorable COURT OF APPEALS, respondents.
WHEREFORE, we hereby DENY the petition for lack of merit. The May 20, 2009
decision of the Regional Trial Court in Civil Case No. 7355, as modified by the March Julian M. Armas, Assistant Provincial Fiscal for petitioners.
20, 2013 decision of the Court of Appeals in CA-G.R. CV No. 93795, Isidro L. Padilla for respondents.
is AFFIRMED with further MODIFICATION that the forfeiture of the improvements
made by the DOTC in favor of the respondents is DELETED. No costs.

SO ORDERED. MUÑOZ PALMA, J.:

These Petitions for review present the issue of whether or not the celebration of a
town fiesta authorized by a municipal council under Sec. 2282 of the Municipal Law

29
as embodied in the Revised Administrative Code is a governmental or a corporate
or proprietary function of the municipality.
A resolution of that issue will lead to another, viz the civil liability for damages of
the Municipality of Malasiqui, and the members of the Municipal Council of
Malasiqui, province of Pangasinan, for a death which occurred during the
celebration of the town fiesta on January 22, 1959, and which was attributed to the
negligence of the municipality and its council members.
The following facts are not in dispute:
On October 21, 1958, the Municipal Council of Malasiqui, Pangasinan, passed
Resolution No. 159 whereby "it resolved to manage the 1959 Malasiqui town fiesta
celebration on January 21, 22, and 23, 1959." Resolution No. 182 was also passed
creating the "1959 Malasiqui 'Town Fiesta Executive Committee" which in turn
organized a sub-committee on entertainment and stage, with Jose Macaraeg as
Chairman. the council appropriated the amount of P100.00 for the construction of 2
stages, one for the "zarzuela" and another for the cancionan Jose Macaraeg
supervised the construction of the stage and as constructed the stage for the
"zarzuela" was "5-½ meters by 8 meters in size, had a wooden floor high at the rear
and was supported by 24 bamboo posts — 4 in a row in front, 4 in the rear and 5 on
each side — with bamboo braces." 1
The "zarzuela" entitled "Midas Extravaganza" was donated by an association of
Malasiqui employees of the Manila Railroad Company in Caloocan, Rizal. The troupe
arrived in the evening of January 22 for the performance and one of the members
of the group was Vicente Fontanilla. The program started at about 10:15 o'clock
that evening with some speeches, and many persons went up the stage. The
"zarzuela" then began but before the dramatic part of the play was reached, the
stage collapsed and Vicente Fontanilla who was at the rear of the stage was pinned
underneath. Fontanilia was taken to tile San Carlos General Hospital where he died
in the afternoon of the following day.
The heirs of Vicente Fontanilia filed a complaint with the Court of First Instance of
Manila on September 11, 1959 to recover damages. Named party-defendants were
the Municipality of Malasiqui, the Municipal Council of Malasiqui and all the
individual members of the Municipal Council in 1959.
Answering the complaint defendant municipality invoked inter alia the principal
defense that as a legally and duly organized public corporation it performs
sovereign functions and the holding of a town fiesta was an exercise of its
governmental functions from which no liability can arise to answer for the
negligence of any of its agents.
The defendant councilors inturn maintained that they merely acted as agents of the
municipality in carrying out the municipal ordinance providing for the management
of the town fiesta celebration and as such they are likewise not liable for damages
as the undertaking was not one for profit; furthermore, they had exercised due care
and diligence in implementing the municipal ordinance. 2
After trial, the Presiding Judge, Hon. Gregorio T. Lantin narrowed the issue to
whether or not the defendants exercised due diligence 'm the construction of the
stage. From his findings he arrived at the conclusion that the Executive Committee
appointed by the municipal council had exercised due diligence and care like a good
father of the family in selecting a competent man to construct a stage strong
enough for the occasion and that if it collapsed that was due to forces beyond the
control of the committee on entertainment, consequently, the defendants were not
liable for damages for the death of Vicente Fontanilla. The complaint was
accordingly dismissed in a decision dated July 10, 1962. 3
The Fontanillas appealed to the Court of Appeals. In a decision Promulgated on
October 31, 1968, the Court of Appeals through its Fourth Division composed at the
time of Justices Salvador V. Esguerra, Nicasio A. Yatco and Eulogio S. Serrano
reversed the trial court's decision and ordered all the defendants-appellees to pay
jointly and severally the heirs of Vicente Fontanilla the sums of P12,000.00 by way
of moral and actual damages: P1200.00 its attorney's fees; and the costs. 4
The case is now before Us on various assignments of errors all of which center on
the proposition stated at the sentence of this Opinion and which We repeat:
Is the celebration of a town fiesta an undertaking in the excercise of a municipality's
governmental or public function or is it or a private or proprietary character?
1. Under Philippine laws municipalities are political bodies corporate and as such ag
endowed with the faculties of municipal corporations to be exercised by and
through their respective municipal governments in conformity with law, and in their
proper corporate name, they may inter alia sue and be sued, and contract and be
contracted with. 5
The powers of a municipality are twofold in character public, governmental or
political on the one hand, and corporate, private, or proprietary on the other.
Governmental powers are those exercised by the corporation in administering the
30
powers of the state and promoting the public welfare and they include the
legislative, judicial public, and political Municipal powers on the other hand are
exercised for the special benefit and advantage of the community and include those
which are ministerial private and corporate. 6
As to when a certain activity is governmental and when proprietary or private, that
is generally a difficult matter to determine. The evolution of the municipal law in
American Jurisprudence, for instance, has shown that; none of the tests which have
evolved and are stated in textbooks have set down a conclusive principle or rule, so
that each case will have to be determined on the basis of attending circumstances.
In McQuillin on Municipal Corporations, the rule is stated thus: "A municipal
corporation proper has ... a public character as regards the state at large insofar as
it is its agent in government, and private (so-called) insofar as it is to promote local
necessities and conveniences for its own community. 7
Another statement of the test is given in City of Kokomo v. Loy, decided by the
Supreme Court of Indiana in 1916, thus:
Municipal corporations exist in a dual capacity, and their functions are two fold. In
one they exercise the right springing from sovereignty, and while in the
performance of the duties pertaining thereto, their acts are political and
governmental Their officers and agents in such capacity, though elected or
appointed by the are nevertheless public functionaries performing a public service,
and as such they are officers, agents, and servants of the state. In the other capacity
the municipalities exercise a private. proprietary or corporate right, arising from
their existence as legal persons and not as public agencies. Their officers and agents
in the performance of such functions act in behalf of the municipalities in their
corporate or in. individual capacity, and not for the state or sovereign power. (112
N. E 994-995)
In the early Philippine case of Mendoza v. de Leon 1916, the Supreme Court,
through Justice Grant T. Trent, relying mainly on American Jurisprudence classified
certain activities of the municipality as governmental, e.g.: regulations against fire,
disease, preservation of public peace, maintenance of municipal prisons,
establishment of schools, post-offices, etc. while the following are corporate or
proprietary in character, viz: municipal waterwork, slaughter houses, markets,
stables, bathing establishments, wharves, ferries, and fisheries. 8 Maintenance of
parks, golf courses, cemeteries and airports among others, are also recognized as
municipal or city activities of a proprietary character. 9
2. This distinction of powers becomes important for purposes of determining the
liability of the municipality for the acts of its agents which result in an injury to third
persons.
If the injury is caused in the course of the performance of a governmental function
or duty no recovery, as a rule, can be. had from the municipality unless there is an
existing statute on the matter,10 nor from its officers, so long as they performed
their duties honestly and in good faith or that they did not act wantonly and
maliciously. 11 In Palafox, et al., v. Province of Ilocos Norte, et al., 1958, a truck
driver employed by the provincial government of Ilocos Norte ran over Proceto
Palafox in the course of his work at the construction of a road. The Supreme Court
in affirming the trial court's dismissal of the complaint for damages held that the
province could not be made liable because its employee was in the performance of
a governmental function — the construction and maintenance of roads — and
however tragic and deplorable it may be, the death of Palafox imposed on the
province no duty to pay monetary consideration. 12
With respect to proprietary functions, the settled rule is that a municipal
corporation can be held liable to third persons ex contract  13 or ex delicto. 14
Municipal corporations are subject to be sued upon contracts and in tort. ...
xxx xxx xxx
The rule of law is a general one, that the superior or employer must answer civilly
for the negligence or want of skill of its agent or servant in the course or fine of his
employment, by which another, who is free from contributory fault, is injured.
Municipal corporations under the conditions herein stated, fall within the operation
of this rule of law, and are liable, accordingly, to civil actions for damages when the
requisite elements of liability co-exist. ... (Dillon on Municipal Corporations, 5th ed.
Sec. 1610,1647, cited in Mendoza v. de Leon, supra. 514)
3. Coming to the cam before Us, and applying the general tests given above, We
hold that the ho of the town fiesta in 1959 by the municipality of Malsiqui
Pangasinan was an exercise of a private or proprietary function of the municipality.
Section 2282 of the Chatter on Municipal Law of the Revised Administrative Code
provides:
Section 2282. Celebration of fiesta. — fiesta may be held in each municipality not
oftener than once a year upon a date fixed by the municipal council A fiesta s not be
held upon any other date than that lawfully fixed therefor, except when, for
31
weighty reasons, such as typhoons, foundations, earthquakes, epidemics, or other
public ties, the fiesta cannot be hold in the date fixed in which case it may be held
at a later date in the same year, by resolution of the council.
This provision simply gives authority to the municipality to accelebrate a yearly
fiesta but it does not impose upon it a duty to observe one. Holding a fiesta even if
the purpose is to commemorate a religious or historical event of the town is in
essence an act for the special benefit of the community and not for the general
welfare of the public performed in pursuance of a policy of the state. The mere fact
that the celebration, as claimed was not to secure profit or gain but merely to
provide entertainment to the town inhabitants is not a conclusive test. For instance,
the maintenance of parks is not a source of income for the nonetheless it is private
undertaking as distinguished from the maintenance of public schools, jails, and the
like which are for public service.
As stated earlier, there can be no hard and fast rule for purposes of determining the
true nature of an undertaking or function of a municipality; the surrounding
circumstances of a particular case are to be considered and will be decisive. The
basic element, however beneficial to the public the undertaking may be, is that it is
governmental in essence, otherwise. the function becomes private or proprietary in
character. Easily, no overnmental or public policy of the state is involved in the
celebration of a town fiesta. 15
4. It follows that under the doctrine of respondent superior, petitioner-municipality
is to be held liable for damages for the death of Vicente Fontanilia if that was at-
tributable to the negligence of the municipality's officers, employees, or agents.
Art. 2176, Civil Code: Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. . .
Art. 2180, Civil Code: The obligation imposed by article 2176 is demandable not only
for one's own acts or omission, but also for those of persons for whom one is
responsible. . .
On this point, the Court of Appeals found and held that there was negligence.
The trial court gave credence to the testimony of Angel Novado, a witness of the
defendants (now petitioners), that a member of the "extravaganza troupe removed
two principal braces located on the front portion of the stage and u them to hang
the screen or "telon", and that when many people went up the stage the latter
collapsed. This testimony was not believed however by respondent appellate court,
and rightly so. According to said defendants, those two braces were "mother" or
"principal" braces located semi-diagonally from the front ends of the stage to the
front posts of the ticket booth located at the rear of the stage and were fastened
with a bamboo twine. 16 That being the case, it becomes incredible that any person
in his right mind would remove those principal braces and leave the front portion of
the stage practically unsuported Moreover, if that did happen, there was indeed
negligence as there was lack of suspension over the use of the stage to prevent
such an occurrence.
At any rate, the guitarist who was pointed to by Novado as the person who
removed the two bamboo braces denied having done go. The Court of Appeals said
"Amor by himself alone could not have removed the two braces which must be
about ten meters long and fastened them on top of the stags for the curtain. The
stage was only five and a half meters wide. Surely, it, would be impractical and
unwieldy to use a ten meter bamboo pole, much more two poles for the stage
curtain. 17
The appellate court also found that the stage was not strong enough considering
that only P100.00 was appropriate for the construction of two stages and while the
floor of the "zarzuela" stage was of wooden planks, the Post and braces used were
of bamboo material We likewise observe that although the stage was described by
the Petitioners as being supported by "24" posts, nevertheless there were only 4 in
front, 4 at the rear, and 5 on each side. Where were the rest?
The Court of Appeals thus concluded
The court a quo  itself attributed the collapse of the stage to the great number of
onlookers who mounted the stage. The municipality and/or its agents had the
necessary means within its command to prevent such an occurrence. Having filed to
take the necessary steps to maintain the safety of the stage for the use of the
participants in the stage presentation prepared in connection with the celebration
of the town fiesta, particularly, in preventing non participants or spectators from
mounting and accumulating on the stage which was not constructed to meet the
additional weight- the defendant-appellees were negligent and are liable for the
death of Vicente Fontanilla . (pp. 30-31, rollo, L-29993)
The findings of the respondent appellate court that the facts as presented to it
establish negligence as a matter of law and that the Municipality failed to exercise
the due diligence of a good father of the family, will not disturbed by Us in the
absence of a clear showing of an abuse of discretion or a gross misapprehension of
facts." 18
32
Liability rests on negligence which is "the want of such care as a person of ordinary
prudence would exercise under the circumstances of the case." 19
Thus, private respondents argue that the "Midas Extravaganza" which was to be
performed during the town fiesta was a "donation" offered by an association of
Malasiqui employees of the Manila Railroad Co. in Caloocan, and that when the
Municipality of Malasiqui accepted the donation of services and constructed
precisely a "zarzuela stage" for the purpose, the participants in the stage show had
the right to expect that the Municipality through its "Committee on entertainment
and stage" would build or put up a stage or platform strong enough to sustain the
weight or burden of the performance and take the necessary measures to insure
the personal safety of the participants. 20 We agree.
Quite relevant to that argument is the American case of Sanders v. City of Long
Beach, 1942, which was an action against the city for injuries sustained from a fall
when plaintiff was descending the steps of the city auditorium. The city was
conducting a "Know your City Week" and one of the features was the showing of a
motion picture in the city auditorium to which the general public was invited and
plaintiff Sanders was one of those who attended. In sustaining the award for
Damages in favor of plaintiff, the District Court of Appeal, Second district, California,
held inter alia that the "Know your City Week" was a "proprietary activity" and not
a "governmental one" of the city, that defendant owed to plaintiff, an invitee the
duty of exercising ordinary care for her safety, and plaintiff was entitled to assume
that she would not be exposed to a danger (which in this case consisted of lack of
sufficient illumination of the premises) that would come to her through a violation
of defendant duty. 21
We can say that the deceased Vicente Fontanilla was similarly situated as Sander
The Municipality of Malasiqui resolved to celebrate the town fiesta in January of
1959; it created a committee in charge of the entertainment and stage; an
association of Malasiqui residents responded to the call for the festivities and
volunteered to present a stage show; Vicente Fontanilla was one of the participants
who like Sanders had the right to expect that he would be exposed to danger on
that occasion.
Lastly, petitioner or appellant Municipality cannot evade ability and/or liability
under the c that it was Jose Macaraeg who constructed the stage. The municipality
acting through its municipal council appointed Macaraeg as chairman of the sub-
committee on entertainment and in charge of the construction of the "zarzuela"
stage. Macaraeg acted merely as an agent of the Municipality. Under the doctrine
of respondent superior mentioned earlier, petitioner is responsible or liable for the
negligence of its agent acting within his assigned tasks. 22
... when it is sought to render a municipal corporation liable for the act of servants
or agents, a cardinal inquiry is, whether they are the servants or agents of the
corporation. If the corporation appoints or elects them, can control them in the
discharge of their duties, can continue or remove the can hold them responsible for
the manner in which they discharge their trust, and if those duties relate to the
exercise of corporate powers, and are for the benefit of the corporation in its local
or special interest, they may justly be regarded as its agents or servants, and the
maxim of respondent superior applies." ... (Dillon on Municipal Corporations, 5th
Ed., Vol IV, p. 2879)
5. The remaining question to be resolved centers on the liability of the municipal
councilors who enacted the ordinance and created the fiesta committee.
The Court of Appeals held the councilors jointly and solidarity liable with the
municipality for damages under Article 27 of the Civil Code which provides that d
any person suffering ing material or moral loss because a public servant or
employee refuses or neglects, without just cause to perform his official duty may
file an action for damages and other relief at the latter. 23
In their Petition for review the municipal councilors allege that the Court of Appeals
erred in ruling that the holding of a town fiesta is not a governmental function and
that there was negligence on their part for not maintaining and supervising the safe
use of the stage, in applying Article 27 of the Civil Code against them and in not
holding Jose Macaraeg liable for the collapse of the stage and the consequent death
of Vicente Fontanilla. 24
We agree with petitioners that the Court of Appeals erred in applying Article 27 of
the Civil Code against the for this particular article covers a case of nonfeasance or
non-performance by a public officer of his official duty; it does not apply to a case of
negligence or misfeasance in carrying out an official duty.
If We are led to set aside the decision of the Court of Appeals insofar as these
petitioners are concerned, it is because of a plain error committed by respondent
court which however is not invoked in petitioners' brief.
In Miguel v. The Court of appeal. et al., the Court, through Justice, now Chief Justice,
Fred Ruiz Castro, held that the Supreme Court is vested with ample authority to
review matters not assigned as errors in an appeal if it finds that their consideration
33
and resolution are indispensable or necessary in arriving at a just decision in a given
case, and that tills is author under Sec. 7, Rule 51 of the Rules of Court. 25 We
believe that this pronouncement can well be applied in the instant case.
The Court of Appeals in its decision now under review held that the celebration of a
town fiesta by the Municipality of Malasiqui was not a governmental function. We
upheld that ruling. The legal consequence thereof is that the Municipality stands on
the same footing as an ordinary private corporation with the municipal council
acting as its board of directors. It is an elementary principle that a corporation has a
personality, separate and distinct from its officers, directors, or persons composing
it 26 and the latter are not as a rule co-responsible in an action for damages for tort
or negligence culpa aquilla committed by the corporation's employees or agents
unless there is a showing of bad faith or gross or wanton negligence on their part. 27
Under paragraph 11, Art. 2208 of the Civil Code attorney's fees and expenses of
litigation may be granted when the court deems it just and equitable. In this case of
Vicente Fontanilla, although respondent appellate court failed to state the grounds
for awarding attorney's fees, the records show however that attempts were made
by plaintiffs, now private respondents, to secure an extrajudicial compensation
from the municipality: that the latter gave prorases and assurances of assistance
but failed to comply; and it was only eight month after the incident that the
bereaved family of Vicente Fontanilla was compelled to seek relief from the courts
to ventilate what was believed to be a just cause. 28
We hold, therefore, that there is no error committed in the grant of attorney's fees
which after all is a matter of judicial discretion. The amount of P1,200.00 is fair and
reasonable.

xxx xxx xxx
The ordinary doctrine is that a director, merely by reason of his office, is not
personally Stable for the torts of his corporation; he Must be shown to have
personally voted for or otherwise participated in them ... Fletcher Encyclopedia
Corporations, Vol 3A Chapt 11, p. 207)
PREMISES CONSIDERED, We AFFIRM in toto the decision of the Court of Appeals
insofar as the Municipality of Malasiqui is concerned (L-30183), and We absolve the
municipal councilors from liability and SET ASIDE the judgment against them (L-
9993).
Without pronouncement as to costs.

Officers of a corporation 'are not held liable for the negligence of the corporation SO ORDERED,
merely because of their official relation to it, but because of some wrongful or
negligent act by such officer amounting to a breach of duty which resulted in an
injury ... To make an officer of a corporation liable for the negligence of the
corporation there must have been upon his part such a breach of duty as
contributed to, or helped to bring about, the injury; that is to say, he must be a
participant in the wrongful act. ... (pp. 207-208,  Ibid.)

xxx xxx xxx

Directors who merely employ one to give a fireworks Ambition on the corporate are
not personally liable for the negligent acts of the exhibitor. (p. 211, Ibid.)

On these people We absolve Use municipal councilors from any liability for the
death of Vicente Fontanilla. The records do not show that said petitioners directly
participated in the defective construction of the "zarzuela" stage or that they
personally permitted spectators to go up the platform.

6. One last point We have to resolve is on the award of attorney's fees by

respondent court. Petitioner-municipality assails the award. G.R. No. 206510               September 16, 2014

34
MOST REV. PEDRO D. ARIGO, Vicar Apostolic of Puerto Princesa D.D.; MOST REV.
DEOGRACIAS S. INIGUEZ, JR., Bishop-Emeritus of Caloocan, FRANCES Q. QUIMPO,
CLEMENTE G. BAUTISTA, JR., Kalikasan-PNE, MARIA CAROLINA P. ARAULLO,
RENATO M. REYES, JR., Bagong Alyansang Makabayan, HON. NERI JAVIER
COLMENARES, Bayan Muna Partylist, ROLAND G. SIMBULAN, PH.D., Junk VF A
Movement, TERESITA R. PEREZ, PH.D., HON. RAYMOND V. PALATINO, Kabataan
Party-list, PETER SJ. GONZALES, Pamalakaya, GIOVANNI A. TAPANG, PH. D.,
Agham, ELMER C. LABOG, Kilusang Mayo Uno, JOAN MAY E. SALVADOR, Gabriela,
JOSE ENRIQUE A. AFRICA, THERESA A. CONCEPCION, MARY JOAN A. GUAN,
NESTOR T. BAGUINON, PH.D., A. EDSEL F. TUPAZ, Petitioners, 
vs.
SCOTT H. SWIFT in his capacity as Commander of the US. 7th Fleet, MARK A. RICE
in his capacity as Commanding Officer of the USS Guardian, PRESIDENT BENIGNO
S. AQUINO III in his capacity as Commander-in-Chief of the Armed Forces of the
Philippines, HON. ALBERT F. DEL ROSARIO, Secretary, pepartment of Foreign
Affair.s, HON. PAQUITO OCHOA, JR., Executiv~.:Secretary, Office of the
President, . HON. VOLTAIRE T. GAZMIN, Secretary, Department of National
Defense, HON. RAMON JESUS P. P AJE, Secretary, Department of Environment
and Natural Resoz!rces, VICE ADMIRAL JOSE LUIS M. ALANO, Philippine Navy Flag
Officer in Command, Armed Forces of the Philippines, ADMIRAL RODOLFO D. ISO
RENA, Commandant, Philippine Coast Guard, COMMODORE ENRICO EFREN
EVANGELISTA, Philippine Coast Guard Palawan, Respondents.
DECISION
VILLARAMA, JR, J.:
Before us is a petition for the issuance of a Writ of Kalikasan with prayer for the
issuance of a Temporary Environmental Protection Order (TEPO) under Rule 7 of
A.M. No. 09-6-8-SC, otherwise known as the Rules of Procedure for Environmental
Cases (Rules), involving violations of environmental laws and regulations in relation
to the grounding of the US military ship USS Guardian over the Tubbataha Reefs.
Factual Background
The name "Tubbataha" came from the Samal (seafaring people of southern
Philippines) language which means "long reef exposed at low tide." Tubbataha is
composed of two huge coral atolls - the north atoll and the south atoll - and the
Jessie Beazley Reef, a smaller coral structure about 20 kilometers north of the
atolls. The reefs of Tubbataha and Jessie Beazley are considered part of
Cagayancillo, a remote island municipality of Palawan.1
In 1988, Tubbataha was declared a National Marine Park by virtue of Proclamation
No. 306 issued by President Corazon C. Aquino on August 11, 1988. Located in the
middle of Central Sulu Sea, 150 kilometers southeast of Puerto Princesa City,
Tubbataha lies at the heart of the Coral Triangle, the global center of marine
biodiversity.
In 1993, Tubbataha was inscribed by the United Nations Educational Scientific and
Cultural Organization (UNESCO) as a World Heritage Site. It was recognized as one
of the Philippines' oldest ecosystems, containing excellent examples of pristine
reefs and a high diversity of marine life. The 97,030-hectare protected marine park
is also an important habitat for internationally threatened and endangered marine
species. UNESCO cited Tubbataha's outstanding universal value as an important and
significant natural habitat for in situ conservation of biological diversity; an example
representing significant on-going ecological and biological processes; and an area of
exceptional natural beauty and aesthetic importance.2
On April 6, 2010, Congress passed Republic Act (R.A.) No. 10067, 3 otherwise known
as the "Tubbataha Reefs Natural Park (TRNP) Act of 2009" "to ensure the protection
and conservation of the globally significant economic, biological, sociocultural,
educational and scientific values of the Tubbataha Reefs into perpetuity for the
enjoyment of present and future generations." Under the "no-take" policy, entry
into the waters of TRNP is strictly regulated and many human activities are
prohibited and penalized or fined, including fishing, gathering, destroying and
disturbing the resources within the TRNP. The law likewise created the Tubbataha
Protected Area Management Board (TPAMB) which shall be the sole policy-making
and permit-granting body of the TRNP.
The USS Guardian is an Avenger-class mine countermeasures ship of the US Navy. In
December 2012, the US Embassy in the Philippines requested diplomatic clearance
for the said vessel "to enter and exit the territorial waters of the Philippines and to
arrive at the port of Subic Bay for the purpose of routine ship replenishment,
maintenance, and crew liberty."4 On January 6, 2013, the ship left Sasebo, Japan for
Subic Bay, arriving on January 13, 2013 after a brief stop for fuel in Okinawa,
Japan.1âwphi1
On January 15, 2013, the USS Guardian departed Subic Bay for its next port of call in
Makassar, Indonesia. On January 17, 2013 at 2:20 a.m. while transiting the Sulu Sea,
the ship ran aground on the northwest side of South Shoal of the Tubbataha Reefs,
about 80 miles east-southeast of Palawan. No cine was injured in the incident, and
there have been no reports of leaking fuel or oil.
35
On January 20, 2013, U.S. 7th Fleet Commander, Vice Admiral Scott Swift, expressed
regret for the incident in a press statement. 5 Likewise, US Ambassador to the
Philippines Harry K. Thomas, Jr., in a meeting at the Department of Foreign Affairs
(DFA) on February 4, "reiterated his regrets over the grounding incident and
assured Foreign Affairs Secretazy Albert F. del Rosario that the United States will
provide appropriate compensation for damage to the reef caused by the ship." 6 By
March 30, 2013, the US Navy-led salvage team had finished removing the last piece
of the grounded ship from the coral reef.
On April 1 7, 2013, the above-named petitioners on their behalf and in
representation of their respective sector/organization and others, including minors
or generations yet unborn, filed the present petition agairtst Scott H. Swift in his
capacity as Commander of the US 7th Fleet, Mark A. Rice in his capacity as
Commanding Officer of the USS Guardian and Lt. Gen. Terry G. Robling, US Marine
Corps Forces, Pacific and Balikatan 2013 Exercises Co-Director ("US respondents");
President Benigno S. Aquino III in his capacity as Commander-in-Chief of the Armed
Forces of the Philippines (AFP), DF A Secretary Albert F. Del Rosario, Executive
Secretary Paquito Ochoa, Jr., Secretary Voltaire T. Gazmin (Department of National
Defense), Secretary Jesus P. Paje (Department of Environment and Natural
Resources), Vice-Admiral Jose Luis M. Alano (Philippine Navy Flag Officer in
Command, AFP), Admiral Rodolfo D. Isorena (Philippine Coast Guard Commandant),
Commodore Enrico Efren Evangelista (Philippine Coast Guard-Palawan), and Major
General Virgilio 0. Domingo (AFP Commandant), collectively the "Philippine
respondents."
The Petition
Petitioners claim that the grounding, salvaging and post-salvaging operations of the
USS Guardian cause and continue to cause environmental damage of such
magnitude as to affect the provinces of Palawan, Antique, Aklan, Guimaras, Iloilo,
Negros Occidental, Negros Oriental, Zamboanga del Norte, Basilan, Sulu, and Tawi-
Tawi, which events violate their constitutional rights to a balanced and healthful
ecology. They also seek a directive from this Court for the institution of civil,
administrative and criminal suits for acts committed in violation of environmental
laws and regulations in connection with the grounding incident.
Specifically, petitioners cite the following violations committed by US respondents
under R.A. No. 10067: unauthorized entry (Section 19); non-payment of
conservation fees (Section 21 ); obstruction of law enforcement officer (Section 30);
damages to the reef (Section 20); and destroying and disturbing resources (Section
26[g]). Furthermore, petitioners assail certain provisions of the Visiting Forces
Agreement (VFA) which they want this Court to nullify for being unconstitutional.
The numerous reliefs sought in this case are set forth in the final prayer of the
petition, to wit: WHEREFORE, in view of the foregoing, Petitioners respectfully pray
that the Honorable Court: 1. Immediately issue upon the filing of this petition a
Temporary Environmental Protection Order (TEPO) and/or a Writ of Kalikasan,
which shall, in particular,
a. Order Respondents and any person acting on their behalf, to cease and desist all
operations over the Guardian grounding incident;
b. Initially demarcating the metes and bounds of the damaged area as well as an
additional buffer zone;
c. Order Respondents to stop all port calls and war games under 'Balikatan' because
of the absence of clear guidelines, duties, and liability schemes for breaches of
those duties, and require Respondents to assume responsibility for prior and future
environmental damage in general, and environmental damage under the Visiting
Forces Agreement in particular.
d. Temporarily define and describe allowable activities of ecotourism, diving,
recreation, and limited commercial activities by fisherfolk and indigenous
communities near or around the TRNP but away from the damaged site and an
additional buffer zone;
2. After summary hearing, issue a Resolution extending the TEPO until further
orders of the Court;
3. After due proceedings, render a Decision which shall include, without limitation:
a. Order Respondents Secretary of Foreign Affairs, following the dispositive portion
of Nicolas v. Romulo, "to forthwith negotiate with the United States representatives
for the appropriate agreement on [environmental guidelines and environmental
accountability] under Philippine authorities as provided in Art. V[] of the VFA ... "
b. Direct Respondents and appropriate agencies to commence administrative, civil,
and criminal proceedings against erring officers and individuals to the full extent of
the law, and to make such proceedings public;
c. Declare that Philippine authorities may exercise primary and exclusive criminal
jurisdiction over erring U.S. personnel under the circumstances of this case;
36
d. Require Respondents to pay just and reasonable compensation in the settlement
of all meritorious claims for damages caused to the Tubbataha Reef on terms and
conditions no less severe than those applicable to other States, and damages for
personal injury or death, if such had been the case;
e. Direct Respondents to cooperate in providing for the attendance of witnesses
and in the collection and production of evidence, including seizure and delivery of
objects connected with the offenses related to the grounding of the Guardian;
f. Require the authorities of the Philippines and the United States to notify each
other of the disposition of all cases, wherever heard, related to the grounding of the
Guardian;
g. Restrain Respondents from proceeding with any purported restoration, repair,
salvage or post salvage plan or plans, including cleanup plans covering the damaged
area of the Tubbataha Reef absent a just settlement approved by the Honorable
Court;
h. Require Respondents to engage in stakeholder and LOU consultations in
accordance with the Local Government Code and R.A. 10067;
i. Require Respondent US officials and their representatives to place a deposit to
the TRNP Trust Fund defined under Section 17 of RA 10067 as a bona .fide gesture
towards full reparations;
j. Direct Respondents to undertake measures to rehabilitate the areas affected by
the grounding of the Guardian in light of Respondents' experience in the Port
Royale grounding in 2009, among other similar grounding incidents;
k. Require Respondents to regularly publish on a quarterly basis and in the name of
transparency and accountability such environmental damage assessment,
valuation, and valuation methods, in all stages of negotiation;
l. Convene a multisectoral technical working group to provide scientific and
technical support to the TPAMB;
m. Order the Department of Foreign Affairs, Department of National Defense, and
the Department of Environment and Natural Resources to review the Visiting Forces
Agreement and the Mutual Defense Treaty to consider whether their provisions
allow for the exercise of erga omnes rights to a balanced and healthful ecology and
for damages which follow from any violation of those rights;
n. Narrowly tailor the provisions of the Visiting Forces Agreement for purposes of
protecting the damaged areas of TRNP;
o. Declare the grant of immunity found in Article V ("Criminal Jurisdiction") and
Article VI of the Visiting Forces Agreement unconstitutional for violating equal
protection and/or for violating the preemptory norm of nondiscrimination
incorporated as part of the law of the land under Section 2, Article II, of the
Philippine Constitution;
p. Allow for continuing discovery measures;
q. Supervise marine wildlife rehabilitation in the Tubbataha Reefs in all other
respects; and
4. Provide just and equitable environmental rehabilitation measures and such other
reliefs as are just and equitable under the premises.7 (Underscoring supplied.)
Since only the Philippine respondents filed their comment8 to the petition,
petitioners also filed a motion for early resolution and motion to proceed ex parte
against the US respondents.9
Respondents' Consolidated Comment
In their consolidated comment with opposition to the application for a TEPO and
ocular inspection and production orders, respondents assert that: ( 1) the grounds
relied upon for the issuance of a TEPO or writ of Kalikasan have become fait
accompli as the salvage operations on the USS Guardian were already completed;
(2) the petition is defective in form and substance; (3) the petition improperly raises
issues involving the VFA between the Republic of the Philippines and the United
States of America; and ( 4) the determination of the extent of responsibility of the
US Government as regards the damage to the Tubbataha Reefs rests exdusively
with the executive branch.
The Court's Ruling
As a preliminary matter, there is no dispute on the legal standing of petitioners to
file the present petition.
Locus standi is "a right of appearance in a court of justice on a given
question."10 Specifically, it is "a party's personal and substantial interest in a case
where he has sustained or will sustain direct injury as a result" of the act being
challenged, and "calls for more than just a generalized grievance." 11 However, the
rule on standing is a procedural matter which this Court has relaxed for non-
37
traditional plaintiffs like ordinary citizens, taxpayers and legislators when the public
interest so requires, such as when the subject matter of the controversy is of
transcendental importance, of overreaching significance to society, or of paramount
public interest.12
In the landmark case of Oposa v. Factoran, Jr., 13 we recognized the "public right" of
citizens to "a balanced and healthful ecology which, for the first time in our
constitutional history, is solemnly incorporated in the fundamental law." We
declared that the right to a balanced and healthful ecology need not be written in
the Constitution for it is assumed, like other civil and polittcal rights guaranteed in
the Bill of Rights, to exist from the inception of mankind and it is an issue of
transcendental importance with intergenerational implications.1âwphi1 Such right
carries with it the correlative duty to refrain from impairing the environment.14
On the novel element in the class suit filed by the petitioners minors in Oposa, this
Court ruled that not only do ordinary citizens have legal standing to sue for the
enforcement of environmental rights, they can do so in representation of their own
and future generations. Thus:
Petitioners minors assert that they represent their generation as well as
generations yet unborn. We find no difficulty in ruling that they can, for themselves,
for others of their generation and for the succeeding generations, file a class suit.
Their personality to sue in behalf of the succeeding generations can only be based
on the concept of intergenerational responsibility insofar as the right to a balanced
and healthful ecology is concerned. Such a right, as hereinafter expounded,
considers the "rhythm and harmony of nature." Nature means the created world in
its entirety. Such rhythm and harmony indispensably include, inter alia, the
judicious disposition, utilization, management, renewal and conservation of the
country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas and other
natural resources to the end that their exploration, development and utilization be
equitably accessible to the present a:: well as future generations. Needless to say,
every generation has a responsibility to the next to preserve that rhythm and
harmony for the full 1:njoyment of a balanced and healthful ecology. Put a little
differently, the minors' assertion of their right to a sound environment constitutes,
at the same time, the performance of their obligation to ensure the protection of
that right for the generations to come.15 (Emphasis supplied.)
The liberalization of standing first enunciated in Oposa, insofar as it refers to minors
and generations yet unborn, is now enshrined in the Rules which allows the filing of
a citizen suit in environmental cases. The provision on citizen suits in the Rules
"collapses the traditional rule on personal and direct interest, on the principle that
humans are stewards of nature."16
Having settled the issue of locus standi, we shall address the more fundamental
question of whether this Court has jurisdiction over the US respondents who did
not submit any pleading or manifestation in this case.
The immunity of the State from suit, known also as the doctrine of sovereign
immunity or non-suability of the State,17is expressly provided in Article XVI of the
1987 Constitution which states:
Section 3. The State may not be sued without its consent.
In United States of America v. Judge Guinto, 18 we discussed the principle of state
immunity from suit, as follows:
The rule that a state may not be sued without its consent, now · expressed in Article
XVI, Section 3, of the 1987 Constitution, is one of the generally accepted principles
of international law that we have adopted as part of the law of our land under
Article II, Section 2. x x x.
Even without such affirmation, we would still be bound by the generally accepted
principles of international law under the doctrine of incorporation. Under this
doctrine, as accepted by the majority of states, such principles are deemed
incorporated in the law of every civilized state as a condition and consequence of its
membership in the society of nations. Upon its admission to such society, the state
is automatically obligated to comply with these principles in its relations with other
states.
As applied to the local state, the doctrine of state immunity is based on the
justification given by Justice Holmes that ''there can be no legal right against the
authority which makes the law on which the right depends." [Kawanakoa v.
Polybank, 205 U.S. 349] There are other practical reasons for the enforcement of
the doctrine. In the case of the foreign state sought to be impleaded in the local
jurisdiction, the added inhibition is expressed in the maxim par in parem, non habet
imperium. All states are sovereign equals and cannot assert jurisdiction over one
another. A contrary disposition would, in the language of a celebrated case, "unduly
vex the peace of nations." [De Haber v. Queen of Portugal, 17 Q. B. 171]
While the doctrine appears to prohibit only suits against the state without its
consent, it is also applicable to complaints filed against officials of the state for acts
allegedly performed by them in the discharge of their duties. The rule is that if the
38
judgment against such officials will require the state itself to perform an affirmative
act to satisfy the same,. such as the appropriation of the amount needed to pay the
damages awarded against them, the suit must be regarded as against the state
itself although it has not been formally impleaded. [Garcia v. Chief of Staff, 16 SCRA
120] In such a situation, the state may move to dismiss the comp.taint on the
ground that it has been filed without its consent.19 (Emphasis supplied.)
Under the American Constitution, the doctrine is expressed in the Eleventh
Amendment which reads:
The Judicial power of the United States shall not be construed to extend to any suit
in law or equity, commenced or prosecuted against one of the United States by
Citizens of another State, or by Citizens or Subjects of any Foreign State.
In the case of Minucher v. Court of Appeals,20 we further expounded on the
immunity of foreign states from the jurisdiction of local courts, as follows:
The precept that a State cannot be sued in the courts of a foreign state is a long-
standing rule of customary international law then closely identified with the
personal immunity of a foreign sovereign from suit and, with the emergence of
democratic states, made to attach not just to the person of the head of state, or his
representative, but also distinctly to the state itself in its sovereign capacity. If the
acts giving rise to a suit arc those of a foreign government done by its foreign agent,
although not necessarily a diplomatic personage, but acting in his official capacity,
the complaint could be barred by the immunity of the foreign sovereign from suit
without its consent. Suing a representative of a state is believed to be, in effect,
suing the state itself. The proscription is not accorded for the benefit of an
individual but for the State, in whose service he is, under the maxim -par in parem,
non habet imperium -that all states are soverr~ign equals and cannot assert
jurisdiction over one another. The implication, in broad terms, is that if the
judgment against an official would rec 1uire the state itself to perform an
affirmative act to satisfy the award, such as the appropriation of the amount
needed to pay the damages decreed against him, the suit must be regarded as
being against the state itself, although it has not been formally
impleaded.21 (Emphasis supplied.)
In the same case we also mentioned that in the case of diplomatic immunity, the
privilege is not an immunity from the observance of the law of the territorial
sovereign or from ensuing legal liability; it is, rather, an immunity from the exercise
of territorial jurisdiction.22
In United States of America v. Judge Guinto,23 one of the consolidated cases therein
involved a Filipino employed at Clark Air Base who was arrested following a buy-
bust operation conducted by two officers of the US Air Force, and was eventually
dismissed from his employment when he was charged in court for violation of R.A.
No. 6425. In a complaint for damages filed by the said employee against the military
officers, the latter moved to dismiss the case on the ground that the suit was
against the US Government which had not given its consent. The RTC denied the
motion but on a petition for certiorari and prohibition filed before this Court, we
reversed the RTC and dismissed the complaint. We held that petitioners US military
officers were acting in the exercise of their official functions when they conducted
the buy-bust operation against the complainant and thereafter testified against him
at his trial. It follows that for discharging their duties as agents of the United States,
they cannot be directly impleaded for acts imputable to their principal, which has
not given its consent to be sued.
This traditional rule of State immunity which exempts a State from being sued in
the courts of another State without the former's consent or waiver has evolved into
a restrictive doctrine which distinguishes sovereign and governmental acts (Jure
imperil") from private, commercial and proprietary acts (Jure gestionis). Under the
restrictive rule of State immunity, State immunity extends only to acts Jure imperii.
The restrictive application of State immunity is proper only when the proceedings
arise out of commercial transactions of the foreign sovereign, its commercial
activities or economic affairs.24
In Shauf v. Court of Appeals,25 we discussed the limitations of the State immunity
principle, thus:
It is a different matter where the public official is made to account in his capacity as
such for acts contrary to law and injurious to the rights of plaintiff. As was clearly
set forth by JustiGe Zaldivar in Director of the Bureau of Telecommunications, et al.
vs. Aligaen, etc., et al. : "Inasmuch as the State authorizes only legal acts by its
officers, unauthorized acts of government officials or officers are not acts of the
State, and an action against the officials or officers by one whose rights have been
invaded or violated by such acts, for the protection of his rights, is not a suit against
the State within the rule of immunity of the State from suit. In the same tenor, it
has been said that an action at law or suit in equity against a State officer or the
director of a State department on the ground that, while claiming to act for the
State, he violates or invades the personal and property rights of the plaintiff, under
an unconstitutional act or under an assumption of authority which he does not
have, is not a suit against the State within the constitutional provision that the State
39
may not be sued without its consent." The rationale for this ruling is that the
doctrine of state immunity cannot be used as an instrument for perpetrating an
injustice.
xxxx
The aforecited authorities are clear on the matter. They state that the doctrine of
immunity from suit will not apply and may not be invoked where the public official
is being sued in his private and personal capacity as an ordinary citizen. The cloak of
protection afforded the officers and agents of the government is removed the
moment they are sued in their individual capacity. This situation usually arises
where the public official acts without authority or in excess of the powers vested in
him. It is a well-settled principle of law that a public official may be liable in his
personal private capacity for whatever damage he may have caused by his act done
with malice and in bad faith, or beyond the scope of his authority or
jurisdiction.26 (Emphasis supplied.) In this case, the US respondents were sued in
their official capacity as commanding officers of the US Navy who had control and
supervision over the USS Guardian and its crew. The alleged act or omission
resulting in the unfortunate grounding of the USS Guardian on the TRNP was
committed while they we:re performing official military duties. Considering that the
satisfaction of a judgment against said officials will require remedial actions and
appropriation of funds by the US government, the suit is deemed to be one against
the US itself. The principle of State immunity therefore bars the exercise of
jurisdiction by this Court over the persons of respondents Swift, Rice and Robling.
During the deliberations, Senior Associate Justice Antonio T. Carpio took the
position that the conduct of the US in this case, when its warship entered a
restricted area in violation of R.A. No. 10067 and caused damage to the TRNP reef
system, brings the matter within the ambit of Article 31 of the United Nations
Convention on the Law of the Sea (UNCLOS). He explained that while historically,
warships enjoy sovereign immunity from suit as extensions of their flag State, Art.
31 of the UNCLOS creates an exception to this rule in cases where they fail to
comply with the rules and regulations of the coastal State regarding passage
through the latter's internal waters and the territorial sea.
According to Justice Carpio, although the US to date has not ratified the UNCLOS, as
a matter of long-standing policy the US considers itself bound by customary
international rules on the "traditional uses of the oceans" as codified in UNCLOS, as
can be gleaned from previous declarations by former Presidents Reagan and
Clinton, and the US judiciary in the case of United States v. Royal Caribbean Cruise
Lines, Ltd.27
The international law of the sea is generally defined as "a body of treaty rules arid
customary norms governing the uses of the sea, the exploitation of its resources,
and the exercise of jurisdiction over maritime regimes. It is a branch of public
international law, regulating the relations of states with respect to the uses of the
oceans."28 The UNCLOS is a multilateral treaty which was opened for signature on
December 10, 1982 at Montego Bay, Jamaica. It was ratified by the Philippines in
1984 but came into force on November 16, 1994 upon the submission of the 60th
ratification.
The UNCLOS is a product of international negotiation that seeks to balance State
sovereignty (mare clausum) and the principle of freedom of the high seas (mare
liberum).29 The freedom to use the world's marine waters is one of the oldest
customary principles of international law.30 The UNCLOS gives to the coastal State
sovereign rights in varying degrees over the different zones of the sea which are: 1)
internal waters, 2) territorial sea, 3) contiguous zone, 4) exclusive economic zone,
and 5) the high seas. It also gives coastal States more or less jurisdiction over
foreign vessels depending on where the vessel is located.31
Insofar as the internal waters and territorial sea is concerned, the Coastal State
exercises sovereignty, subject to the UNCLOS and other rules of international law.
Such sovereignty extends to the air space over the territorial sea as well as to its
bed and subsoil.32
In the case of warships,33 as pointed out by Justice Carpio, they continue to enjoy
sovereign immunity subject to the following exceptions:
Article 30
Non-compliance by warships with the laws and regulations of the coastal State
If any warship does not comply with the laws and regulations of the coastal State
concerning passage through the territorial sea and disregards any request for
compliance therewith which is made to it, the coastal State may require it to leave
the territorial sea immediately.
Article 31
Responsibility of the flag State for damage caused by a warship
or other government ship operated for non-commercial purposes
40
The flag State shall bear international responsibility for any loss or damage to the
coastal State resulting from the non-compliance by a warship or other government
ship operated for non-commercial purposes with the laws and regulations of the
coastal State concerning passage through the territorial sea or with the provisions
of this Convention or other rules of international law.
Article 32
Immunities of warships and other government ships operated for non-commercial
purposes
With such exceptions as are contained in subsection A and in articles 30 and 31,
nothing in this Convention affects the immunities of warships and other
government ships operated for non-commercial purposes. (Emphasis supplied.) A
foreign warship's unauthorized entry into our internal waters with resulting damage
to marine resources is one situation in which the above provisions may apply. But
what if the offending warship is a non-party to the UNCLOS, as in this case, the US?
An overwhelming majority - over 80% -- of nation states are now members of
UNCLOS, but despite this the US, the world's leading maritime power, has not
ratified it.
While the Reagan administration was instrumental in UNCLOS' negotiation and
drafting, the U.S. delegation ultimately voted against and refrained from signing it
due to concerns over deep seabed mining technology transfer provisions contained
in Part XI. In a remarkable, multilateral effort to induce U.S. membership, the bulk
of UNCLOS member states cooperated over the succeeding decade to revise the
objection.able provisions. The revisions satisfied the Clinton administration, which
signed the revised Part XI implementing agreement in 1994. In the fall of 1994,
President Clinton transmitted UNCLOS and the Part XI implementing agreement to
the Senate requesting its advice and consent. Despite consistent support from
President Clinton, each of his successors, and an ideologically diverse array of
stakeholders, the Senate has since withheld the consent required for the President
to internationally bind the United States to UNCLOS.
While UNCLOS cleared the Senate Foreign Relations Committee (SFRC) during the
108th and 110th Congresses, its progress continues to be hamstrung by significant
pockets of political ambivalence over U.S. participation in international institutions.
Most recently, 111 th Congress SFRC Chairman Senator John Kerry included "voting
out" UNCLOS for full Senate consideration among his highest priorities. This did not
occur, and no Senate action has been taken on UNCLOS by the 112th Congress.34
Justice Carpio invited our attention to the policy statement given by President
Reagan on March 10, 1983 that the US will "recognize the rights of the other , states
in the waters off their coasts, as reflected in the convention [UNCLOS], so long as
the rights and freedom of the United States and others under international law are
recognized by such coastal states", and President Clinton's reiteration of the US
policy "to act in a manner consistent with its [UNCLOS] provisions relating to
traditional uses of the oceans and to encourage other countries to do likewise."
Since Article 31 relates to the "traditional uses of the oceans," and "if under its
policy, the US 'recognize[s] the rights of the other states in the waters off their
coasts,"' Justice Carpio postulates that "there is more reason to expect it to
recognize the rights of other states in their internal waters, such as the Sulu Sea in
this case."
As to the non-ratification by the US, Justice Carpio emphasizes that "the US' refusal
to join the UN CLOS was centered on its disagreement with UN CLOS' regime of
deep seabed mining (Part XI) which considers the oceans and deep seabed
commonly owned by mankind," pointing out that such "has nothing to do with its
[the US'] acceptance of customary international rules on navigation."
It may be mentioned that even the US Navy Judge Advocate General's Corps
publicly endorses the ratification of the UNCLOS, as shown by the following
statement posted on its official website:
The Convention is in the national interest of the United States because it establishes
stable maritime zones, including a maximum outer limit for territorial seas; codifies
innocent passage, transit passage, and archipelagic sea lanes passage rights; works
against "jurisdictiomtl creep" by preventing coastal nations from expanding their
own maritime zones; and reaffirms sovereign immunity of warships, auxiliaries anJ
government aircraft.
xxxx
Economically, accession to the Convention would support our national interests by
enhancing the ability of the US to assert its sovereign rights over the resources of
one of the largest continental shelves in the world. Further, it is the Law of the Sea
Convention that first established the concept of a maritime Exclusive Economic
Zone out to 200 nautical miles, and recognized the rights of coastal states to
conserve and manage the natural resources in this Zone.35
We fully concur with Justice Carpio's view that non-membership in the UNCLOS
does not mean that the US will disregard the rights of the Philippines as a Coastal
41
State over its internal waters and territorial sea. We thus expect the US to bear
"international responsibility" under Art. 31 in connection with the USS Guardian
grounding which adversely affected the Tubbataha reefs. Indeed, it is difficult to
imagine that our long-time ally and trading partner, which has been actively
supporting the country's efforts to preserve our vital marine resources, would shirk
from its obligation to compensate the damage caused by its warship while
transiting our internal waters. Much less can we comprehend a Government
exercising leadership in international affairs, unwilling to comply with the UNCLOS
directive for all nations to cooperate in the global task to protect and preserve the
marine environment as provided in Article 197, viz:
Article 197
Cooperation on a global or regional basis
States shall cooperate on a global basis and, as appropriate, on a regional basis,
directly or through competent international organizations, in formulating and
elaborating international rules, standards and recommended practices and
procedures consistent with this Convention, for the protection and preservation of
the marine environment, taking into account characteristic regional features.
In fine, the relevance of UNCLOS provisions to the present controversy is beyond
dispute. Although the said treaty upholds the immunity of warships from the
jurisdiction of Coastal States while navigating the.latter's territorial sea, the flag
States shall be required to leave the territorial '::;ea immediately if they flout the
laws and regulations of the Coastal State, and they will be liable for damages caused
by their warships or any other government vessel operated for non-commercial
purposes under Article 31.
Petitioners argue that there is a waiver of immunity from suit found in the VFA.
Likewise, they invoke federal statutes in the US under which agencies of the US
have statutorily waived their immunity to any action. Even under the common law
tort claims, petitioners asseverate that the US respondents are liable for negligence,
trespass and nuisance.
We are not persuaded.
The VFA is an agreement which defines the treatment of United States troops and
personnel visiting the Philippines to promote "common security interests" between
the US and the Philippines in the region. It provides for the guidelines to govern
such visits of military personnel, and further defines the rights of the United States
and the Philippine government in the matter of criminal jurisdiction, movement of
vessel and aircraft, importation and exportation of equipment, materials and
supplies.36 The invocation of US federal tort laws and even common law is thus
improper considering that it is the VF A which governs disputes involving US military
ships and crew navigating Philippine waters in pursuance of the objectives of the
agreement.
As it is, the waiver of State immunity under the VF A pertains only to criminal
jurisdiction and not to special civil actions such as the present petition for issuance
of a writ of Kalikasan. In fact, it can be inferred from Section 17, Rule 7 of the Rules
that a criminal case against a person charged with a violation of an environmental
law is to be filed separately:
SEC. 17. Institution of separate actions.-The filing of a petition for the issuance of
the writ of kalikasan shall not preclude the filing of separate civil, criminal or
administrative actions.
In any case, it is our considered view that a ruling on the application or non-
application of criminal jurisdiction provisions of the VF A to US personnel who may
be found responsible for the grounding of the USS Guardian, would be premature
and beyond the province of a petition for a writ of Kalikasan. We also find it
unnecessary at this point to determine whether such waiver of State immunity is
indeed absolute. In the same vein, we cannot grant damages which have resulted
from the violation of environmental laws. The Rules allows the recovery of
damages, including the collection of administrative fines under R.A. No. 10067, in a
separate civil suit or that deemed instituted with the criminal action charging the
same violation of an environmental law.37
Section 15, Rule 7 enumerates the reliefs which may be granted in a petition for
issuance of a writ of Kalikasan, to wit:
SEC. 15. Judgment.-Within sixty (60) days from the time the petition is submitted for
decision, the court shall render judgment granting or denying the privilege of the
writ of kalikasan.
The reliefs that may be granted under the writ are the following:
(a) Directing respondent to permanently cease and desist from committing acts or
neglecting the performance of a duty in violation of environmental laws resulting in
environmental destruction or damage;
(b) Directing the respondent public official, govemment agency, private person or
entity to protect, preserve, rehabilitate or restore the environment;
42
(c) Directing the respondent public official, government agency, private person or
entity to monitor strict compliance with the decision and orders of the court;
(d) Directing the respondent public official, government agency, or private person
or entity to make periodic reports on the execution of the final judgment; and
(e) Such other reliefs which relate to the right of the people to a balanced and
healthful ecology or to the protection, preservation, rehabilitation or restoration of
the environment, except the award of damages to individual petitioners. (Emphasis
supplied.)
We agree with respondents (Philippine officials) in asserting that this petition has
become moot in the sense that the salvage operation sought to be enjoined or
restrained had already been accomplished when petitioners sought recourse from
this Court. But insofar as the directives to Philippine respondents to protect and
rehabilitate the coral reef stn icture and marine habitat adversely affected by the
grounding incident are concerned, petitioners are entitled to these reliefs
notwithstanding the completion of the removal of the USS Guardian from the coral
reef. However, we are mindful of the fact that the US and Philippine governments
both expressed readiness to negotiate and discuss the matter of compensation for
the damage caused by the USS Guardian. The US Embassy has also declared it is
closely coordinating with local scientists and experts in assessing the extent of the
damage and appropriate methods of rehabilitation.
Exploring avenues for settlement of environmental cases is not proscribed by the
Rules. As can be gleaned from the following provisions, mediation and settlement
are available for the consideration of the parties, and which dispute resolution
methods are encouraged by the court, to wit:
RULE3
xxxx
SEC. 3. Referral to mediation.-At the start of the pre-trial conference, the court shall
inquire from the parties if they have settled the dispute; otherwise, the court shall
immediately refer the parties or their counsel, if authorized by their clients, to the
Philippine Mediation Center (PMC) unit for purposes of mediation. If not available,
the court shall refer the case to the clerk of court or legal researcher for mediation.
Mediation must be conducted within a non-extendible period of thirty (30) days
from receipt of notice of referral to mediation.
The mediation report must be submitted within ten (10) days from the expiration of
the 30-day period.
SEC. 4. Preliminary conference.-If mediation fails, the court will schedule the
continuance of the pre-trial. Before the scheduled date of continuance, the court
may refer the case to the branch clerk of court for a preliminary conference for the
following purposes:
(a) To assist the parties in reaching a settlement;
xxxx
SEC. 5. Pre-trial conference; consent decree.-The judge shall put the parties and
their counsels under oath, and they shall remain under oath in all pre-trial
conferences.
The judge shall exert best efforts to persuade the parties to arrive at a settlement of
the dispute. The judge may issue a consent decree approving the agreement
between the parties in accordance with law, morals, public order and public policy
to protect the right of the people to a balanced and healthful ecology.
xxxx
SEC. 10. Efforts to settle.- The court shall endeavor to make the parties to agree to
compromise or settle in accordance with law at any stage of the proceedings before
rendition of judgment. (Underscoring supplied.)
The Court takes judicial notice of a similar incident in 2009 when a guided-missile
cruiser, the USS Port Royal, ran aground about half a mile off the Honolulu Airport
Reef Runway and remained stuck for four days. After spending $6.5 million
restoring the coral reef, the US government was reported to have paid the State of
Hawaii $8.5 million in settlement over coral reef damage caused by the grounding.38
To underscore that the US government is prepared to pay appropriate
compensation for the damage caused by the USS Guardian grounding, the US
Embassy in the Philippines has announced the formation of a US interdisciplinary
scientific team which will "initiate discussions with the Government of the
Philippines to review coral reef rehabilitation options in Tubbataha, based on
assessments by Philippine-based marine scientists." The US team intends to "help
assess damage and remediation options, in coordination with the Tubbataha
Management Office, appropriate Philippine government entities, non-governmental
organizations, and scientific experts from Philippine universities."39
43
A rehabilitation or restoration program to be implemented at the cost of the
violator is also a major relief that may be obtained under a judgment rendered in a
citizens' suit under the Rules, viz:
RULES
SECTION 1. Reliefs in a citizen suit.-If warranted, the court may grant to the plaintiff
proper reliefs which shall include the protection, preservation or rehabilitation of
the environment and the payment of attorney's fees, costs of suit and other
litigation expenses. It may also require the violator to submit a program of
rehabilitation or restoration of the environment, the costs of which shall be borne
by the violator, or to contribute to a special trust fund for that purpose subject to
the control of the court.1âwphi1
In the light of the foregoing, the Court defers to the Executive Branch on the matter
of compensation and rehabilitation measures through diplomatic channels.
Resolution of these issues impinges on our relations with another State in the
context of common security interests under the VFA. It is settled that "[t]he conduct
of the foreign relations of our government is committed by the Constitution to the
executive and legislative-"the political" --departments of the government, and the
propriety of what may be done in the exercise of this political power is not subject
to judicial inquiry or decision."40
On the other hand, we cannot grant the additional reliefs prayed for in the petition
to order a review of the VFA and to nullify certain immunity provisions thereof.
As held in BAYAN (Bagong Alyansang Makabayan) v. Exec. Sec. Zamora,41 the VFA
was duly concurred in by the Philippine Senate and has been recognized as a treaty
by the United States as attested and certified by the duly authorized representative
of the United States government. The VF A being a valid and binding agreement,
the parties are required as a matter of international law to abide by its terms and
provisions.42 The present petition under the Rules is not the proper remedy to assail
the constitutionality of its provisions. WHEREFORE, the petition for the issuance of
the privilege of the Writ of Kalikasan is hereby DENIED.No pronouncement as to
costs.
G.R. No. 101949 December 1, 1994
THE HOLY SEE, petitioner,  by petitioner of Lot 5-A to Tropicana Properties and Development Corporation
vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial
Court of Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES,
INC., respondents.
Padilla Law Office for petitioner.
Siguion Reyna, Montecillo & Ongsiako for private respondent.
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse
and set aside the Orders dated June 20, 1991 and September 19, 1991 of the
Regional Trial Court, Branch 61, Makati, Metro Manila in Civil Case No. 90-183.
The Order dated June 20, 1991 denied the motion of petitioner to dismiss the
complaint in Civil Case No. 90-183, while the Order dated September 19, 1991
denied the motion for reconsideration of the June 20,1991 Order.
Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome,
Italy, and is represented in the Philippines by the Papal Nuncio.
Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation
engaged in the real estate business.
This petition arose from a controversy over a parcel of land consisting of 6,000
square meters (Lot 5-A, Transfer Certificate of Title No. 390440) located in the
Municipality of Parañaque, Metro Manila and registered in the name of petitioner.
Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer
Certificates of Title Nos. 271108 and 265388 respectively and registered in the
name of the Philippine Realty Corporation (PRC).
The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr.,
acting as agent to the sellers. Later, Licup assigned his rights to the sale to private
respondent.
In view of the refusal of the squatters to vacate the lots sold to private respondent,
a dispute arose as to who of the parties has the responsibility of evicting and
clearing the land of squatters. Complicating the relations of the parties was the sale
(Tropicana).
I
44
On January 23, 1990, private respondent filed a complaint with the Regional Trial
Court, Branch 61, Makati, Metro Manila for annulment of the sale of the three
parcels of land, and specific performance and damages against petitioner,
represented by the Papal Nuncio, and three other defendants: namely, Msgr.
Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil Case No.
90-183).
The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of
petitioner and the PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the
price of P1,240.00 per square meters; (2) the agreement to sell was made on the
condition that earnest money of P100,000.00 be paid by Licup to the sellers, and
that the sellers clear the said lots of squatters who were then occupying the same;
(3) Licup paid the earnest money to Msgr. Cirilos; (4) in the same month, Licup
assigned his rights over the property to private respondent and informed the sellers
of the said assignment; (5) thereafter, private respondent demanded from Msgr.
Cirilos that the sellers fulfill their undertaking and clear the property of squatters;
however, Msgr. Cirilos informed private respondent of the squatters' refusal to
vacate the lots, proposing instead either that private respondent undertake the
eviction or that the earnest money be returned to the latter; (6) private respondent
counterproposed that if it would undertake the eviction of the squatters, the
purchase price of the lots should be reduced from P1,240.00 to P1,150.00 per
square meter; (7) Msgr. Cirilos returned the earnest money of P100,000.00 and
wrote private respondent giving it seven days from receipt of the letter to pay the
original purchase price in cash; (8) private respondent sent the earnest money back
to the sellers, but later discovered that on March 30, 1989, petitioner and the PRC,
without notice to private respondent, sold the lots to Tropicana, as evidenced by
two separate Deeds of Sale, one over Lot 5-A, and another over Lots 5-B and 5-D;
and that the sellers' transfer certificate of title over the lots were cancelled,
transferred and registered in the name of Tropicana; (9) Tropicana induced
petitioner and the PRC to sell the lots to it and thus enriched itself at the expense of
private respondent; (10) private respondent demanded the rescission of the sale to
Tropicana and the reconveyance of the lots, to no avail; and (11) private respondent
is willing and able to comply with the terms of the contract to sell and has actually
made plans to develop the lots into a townhouse project, but in view of the sellers'
breach, it lost profits of not less than P30,000.000.00.
Private respondent thus prayed for: (1) the annulment of the Deeds of Sale
between petitioner and the PRC on the one hand, and Tropicana on the other; (2)
the reconveyance of the lots in question; (3) specific performance of the agreement
to sell between it and the owners of the lots; and (4) damages.
On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the
complaint — petitioner for lack of jurisdiction based on sovereign immunity from
suit, and Msgr. Cirilos for being an improper party. An opposition to the motion was
filed by private respondent.
On June 20, 1991, the trial court issued an order denying, among others,
petitioner's motion to dismiss after finding that petitioner "shed off [its] sovereign
immunity by entering into the business contract in question" (Rollo, pp. 20-21).
On July 12, 1991, petitioner moved for reconsideration of the order. On August 30,
1991, petitioner filed a "Motion for a Hearing for the Sole Purpose of Establishing
Factual Allegation for claim of Immunity as a Jurisdictional Defense." So as to
facilitate the determination of its defense of sovereign immunity, petitioner prayed
that a hearing be conducted to allow it to establish certain facts upon which the
said defense is based. Private respondent opposed this motion as well as the
motion for reconsideration.
On October 1, 1991, the trial court issued an order deferring the resolution on the
motion for reconsideration until after trial on the merits and directing petitioner to
file its answer (Rollo, p. 22).
Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the
privilege of sovereign immunity only on its own behalf and on behalf of its official
representative, the Papal Nuncio.
On December 9, 1991, a Motion for Intervention was filed before us by the
Department of Foreign Affairs, claiming that it has a legal interest in the outcome of
the case as regards the diplomatic immunity of petitioner, and that it "adopts by
reference, the allegations contained in the petition of the Holy See insofar as they
refer to arguments relative to its claim of sovereign immunity from suit" (Rollo, p.
87).
Private respondent opposed the intervention of the Department of Foreign Affairs.
In compliance with the resolution of this Court, both parties and the Department of
Foreign Affairs submitted their respective memoranda.
II
45
A preliminary matter to be threshed out is the procedural issue of whether the
petition for certiorari under Rule 65 of the Revised Rules of Court can be availed of
to question the order denying petitioner's motion to dismiss. The general rule is
that an order denying a motion to dismiss is not reviewable by the appellate courts,
the remedy of the movant being to file his answer and to proceed with the hearing
before the trial court. But the general rule admits of exceptions, and one of these is
when it is very clear in the records that the trial court has no alternative but to
dismiss the complaint (Philippine National Bank v. Florendo, 206 SCRA 582 [1992];
Zagada v. Civil Service Commission, 216 SCRA 114 [1992]. In such a case, it would be
a sheer waste of time and energy to require the parties to undergo the rigors of a
trial.
The other procedural question raised by private respondent is the personality or
legal interest of the Department of Foreign Affairs to intervene in the case in behalf
of the Holy See (Rollo, pp. 186-190).
In Public International Law, when a state or international agency wishes to plead
sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of
the state where it is sued to convey to the court that said defendant is entitled to
immunity.
In the United States, the procedure followed is the process of "suggestion," where
the foreign state or the international organization sued in an American court
requests the Secretary of State to make a determination as to whether it is entitled
to immunity. If the Secretary of State finds that the defendant is immune from suit,
he, in turn, asks the Attorney General to submit to the court a "suggestion" that the
defendant is entitled to immunity. In England, a similar procedure is followed, only
the Foreign Office issues a certification to that effect instead of submitting a
"suggestion" (O'Connell, I International Law 130 [1965]; Note: Immunity from Suit
of Foreign Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088
[1941]).
In the Philippines, the practice is for the foreign government or the international
organization to first secure an executive endorsement of its claim of sovereign or
diplomatic immunity. But how the Philippine Foreign Office conveys its
endorsement to the courts varies. In International Catholic Migration Commission v.
Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter
directly to the Secretary of Labor and Employment, informing the latter that the
respondent-employer could not be sued because it enjoyed diplomatic immunity.
In World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of
Foreign Affairs sent the trial court a telegram to that effect. In Baer v. Tizon, 57
SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to request
the Solicitor General to make, in behalf of the Commander of the United States
Naval Base at Olongapo City, Zambales, a "suggestion" to respondent Judge. The
Solicitor General embodied the "suggestion" in a Manifestation and Memorandum
as amicus curiae.
In the case at bench, the Department of Foreign Affairs, through the Office of Legal
Affairs moved with this Court to be allowed to intervene on the side of petitioner.
The Court allowed the said Department to file its memorandum in support of
petitioner's claim of sovereign immunity.
In some cases, the defense of sovereign immunity was submitted directly to the
local courts by the respondents through their private counsels (Raquiza v. Bradford,
75 Phil. 50 [1945]; Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948];
United States of America v. Guinto, 182 SCRA 644 [1990] and companion cases). In
cases where the foreign states bypass the Foreign Office, the courts can inquire into
the facts and make their own determination as to the nature of the acts and
transactions involved.
III
The burden of the petition is that respondent trial court has no jurisdiction over
petitioner, being a foreign state enjoying sovereign immunity. On the other hand,
private respondent insists that the doctrine of non-suability is not anymore
absolute and that petitioner has divested itself of such a cloak when, of its own free
will, it entered into a commercial transaction for the sale of a parcel of land located
in the Philippines.
A. The Holy See
Before we determine the issue of petitioner's non-suability, a brief look into its
status as a sovereign state is in order.
Before the annexation of the Papal States by Italy in 1870, the Pope was the
monarch and he, as the Holy See, was considered a subject of International Law.
With the loss of the Papal States and the limitation of the territory under the Holy
See to an area of 108.7 acres, the position of the Holy See in International Law
became controversial (Salonga and Yap, Public International Law 36-37 [1992]).
In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy
recognized the exclusive dominion and sovereign jurisdiction of the Holy See over
46
the Vatican City. It also recognized the right of the Holy See to receive foreign
diplomats, to send its own diplomats to foreign countries, and to enter into treaties
according to International Law (Garcia, Questions and Problems In International
Law, Public and Private 81 [1948]).
The Lateran Treaty established the statehood of the Vatican City "for the purpose of
assuring to the Holy See absolute and visible independence and of guaranteeing to
it indisputable sovereignty also in the field of international relations" (O'Connell, I
International Law 311 [1965]).
In view of the wordings of the Lateran Treaty, it is difficult to determine whether
the statehood is vested in the Holy See or in the Vatican City. Some writers even
suggested that the treaty created two international persons — the Holy See and
Vatican City (Salonga and Yap, supra, 37).
The Vatican City fits into none of the established categories of states, and the
attribution to it of "sovereignty" must be made in a sense different from that in
which it is applied to other states (Fenwick, International Law 124-125 [1948]; Cruz,
International Law 37 [1991]). In a community of national states, the Vatican City
represents an entity organized not for political but for ecclesiastical purposes and
international objects. Despite its size and object, the Vatican City has an
independent government of its own, with the Pope, who is also head of the Roman
Catholic Church, as the Holy See or Head of State, in conformity with its traditions,
and the demands of its mission in the world. Indeed, the world-wide interests and
activities of the Vatican City are such as to make it in a sense an "international
state" (Fenwick, supra., 125; Kelsen, Principles of International Law 160 [1956]).
One authority wrote that the recognition of the Vatican City as a state has
significant implication — that it is possible for any entity pursuing objects essentially
different from those pursued by states to be invested with international personality
(Kunz, The Status of the Holy See in International Law, 46 The American Journal of
International Law 308 [1952]).
Inasmuch as the Pope prefers to conduct foreign relations and enter into
transactions as the Holy See and not in the name of the Vatican City, one can
conclude that in the Pope's own view, it is the Holy See that is the international
person.
The Republic of the Philippines has accorded the Holy See the status of a foreign
sovereign. The Holy See, through its Ambassador, the Papal Nuncio, has had
diplomatic representations with the Philippine government since 1957 (Rollo, p. 87).
This appears to be the universal practice in international relations.
B. Sovereign Immunity
As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the
generally accepted principles of International Law. Even without this affirmation,
such principles of International Law are deemed incorporated as part of the law of
the land as a condition and consequence of our admission in the society of nations
(United States of America v. Guinto, 182 SCRA 644 [1990]).
There are two conflicting concepts of sovereign immunity, each widely held and
firmly established. According to the classical or absolute theory, a sovereign cannot,
without its consent, be made a respondent in the courts of another sovereign.
According to the newer or restrictive theory, the immunity of the sovereign is
recognized only with regard to public acts or acts jure imperii of a state, but not
with regard to private acts or acts  jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-
Santiago, Public International Law 194 [1984]).
Some states passed legislation to serve as guidelines for the executive or judicial
determination when an act may be considered as jure gestionis. The United States
passed the Foreign Sovereign Immunities Act of 1976, which defines a commercial
activity as "either a regular course of commercial conduct or a particular
commercial transaction or act." Furthermore, the law declared that the
"commercial character of the activity shall be determined by reference to the
nature of the course of conduct or particular transaction or act, rather than by
reference to its purpose." The Canadian Parliament enacted in 1982 an Act to
Provide For State Immunity in Canadian Courts. The Act defines a "commercial
activity" as any particular transaction, act or conduct or any regular course of
conduct that by reason of its nature, is of a "commercial character."
The restrictive theory, which is intended to be a solution to the host of problems
involving the issue of sovereign immunity, has created problems of its own. Legal
treatises and the decisions in countries which follow the restrictive theory have
difficulty in characterizing whether a contract of a sovereign state with a private
party is an act  jure gestionis  or an act jure imperii.
The restrictive theory came about because of the entry of sovereign states into
purely commercial activities remotely connected with the discharge of
governmental functions. This is particularly true with respect to the Communist
47
states which took control of nationalized business activities and international
trading.
This Court has considered the following transactions by a foreign state with private
parties as acts  jure imperii: (1) the lease by a foreign government of apartment
buildings for use of its military officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the
conduct of public bidding for the repair of a wharf at a United States Naval Station
(United States of America v. Ruiz, supra.); and (3) the change of employment status
of base employees (Sanders v. Veridiano, 162 SCRA 88 [1988]).
On the other hand, this Court has considered the following transactions by a foreign
state with private parties as acts  jure gestionis: (1) the hiring of a cook in the
recreation center, consisting of three restaurants, a cafeteria, a bakery, a store, and
a coffee and pastry shop at the John Hay Air Station in Baguio City, to cater to
American servicemen and the general public (United States of America v. Rodrigo,
182 SCRA 644 [1990]); and (2) the bidding for the operation of barber shops in Clark
Air Base in Angeles City (United States of America v. Guinto, 182 SCRA 644 [1990]).
The operation of the restaurants and other facilities open to the general public is
undoubtedly for profit as a commercial and not a governmental activity. By entering
into the employment contract with the cook in the discharge of its proprietary
function, the United States government impliedly divested itself of its sovereign
immunity from suit.
In the absence of legislation defining what activities and transactions shall be
considered "commercial" and as constituting acts  jure gestionis, we have to come
out with our own guidelines, tentative they may be.
Certainly, the mere entering into a contract by a foreign state with a private party
cannot be the ultimate test. Such an act can only be the start of the inquiry. The
logical question is whether the foreign state is engaged in the activity in the regular
course of business. If the foreign state is not engaged regularly in a business or
trade, the particular act or transaction must then be tested by its nature. If the act
is in pursuit of a sovereign activity, or an incident thereof, then it is an act  jure
imperii, especially when it is not undertaken for gain or profit.
As held in United States of America v. Guinto, (supra):
There is no question that the United States of America, like any other state, will be
deemed to have impliedly waived its non-suability if it has entered into a contract in
its proprietary or private capacity. It is only when the contract involves its sovereign
or governmental capacity that no such waiver may be implied.
In the case at bench, if petitioner has bought and sold lands in the ordinary course
of a real estate business, surely the said transaction can be categorized as an
act jure gestionis. However, petitioner has denied that the acquisition and
subsequent disposal of Lot 5-A were made for profit but claimed that it acquired
said property for the site of its mission or the Apostolic Nunciature in the
Philippines. Private respondent failed to dispute said claim.
Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila.
The donation was made not for commercial purpose, but for the use of petitioner
to construct thereon the official place of residence of the Papal Nuncio. The right of
a foreign sovereign to acquire property, real or personal, in a receiving state,
necessary for the creation and maintenance of its diplomatic mission, is recognized
in the 1961 Vienna Convention on Diplomatic Relations (Arts. 20-22). This treaty
was concurred in by the Philippine Senate and entered into force in the Philippines
on November 15, 1965.
In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the
civil and administrative jurisdiction of the receiving state over any real action
relating to private immovable property situated in the territory of the receiving
state which the envoy holds on behalf of the sending state for the purposes of the
mission. If this immunity is provided for a diplomatic envoy, with all the more
reason should immunity be recognized as regards the sovereign itself, which in this
case is the Holy See.
The decision to transfer the property and the subsequent disposal thereof are
likewise clothed with a governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the
squatters living thereon made it almost impossible for petitioner to use it for the
purpose of the donation. The fact that squatters have occupied and are still
occupying the lot, and that they stubbornly refuse to leave the premises, has been
admitted by private respondent in its complaint (Rollo, pp. 26, 27).
The issue of petitioner's non-suability can be determined by the trial court without
going to trial in the light of the pleadings, particularly the admission of private
respondent. Besides, the privilege of sovereign immunity in this case was
sufficiently established by the Memorandum and Certification of the Department of
Foreign Affairs. As the department tasked with the conduct of the Philippines'
foreign relations (Administrative Code of 1987, Book IV, Title I, Sec. 3), the
Department of Foreign Affairs has formally intervened in this case and officially
certified that the Embassy of the Holy See is a duly accredited diplomatic mission to
48
the Republic of the Philippines exempt from local jurisdiction and entitled to all the international law (The Mavrommatis Palestine Concessions, 1 Hudson, World Court
rights, privileges and immunities of a diplomatic mission or embassy in this country Reports 293, 302 [1924]).
(Rollo, pp. 156-157). The determination of the executive arm of government that a
WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case
state or instrumentality is entitled to sovereign or diplomatic immunity is a political
No. 90-183 against petitioner is DISMISSED
question that is conclusive upon the courts (International Catholic Migration
Commission v. Calleja, 190 SCRA 130 [1990]). Where the plea of immunity is
recognized and affirmed by the executive branch, it is the duty of the courts to
accept this claim so as not to embarrass the executive arm of the government in
conducting the country's foreign relations (World Health Organization v. Aquino, 48
SCRA 242 [1972]). As in International Catholic Migration Commission  and in World
Health Organization, we abide by the certification of the Department of Foreign
Affairs.

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

IV

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

Private respondent can ask the Philippine government, through the Foreign Office,
to espouse its claims against the Holy See. Its first task is to persuade the Philippine
government to take up with the Holy See the validity of its claims. Of course, the
Foreign Office shall first make a determination of the impact of its espousal on the
relations between the Philippine government and the Holy See (Young, Remedies of
Private Claimants Against Foreign States, Selected Readings on Protection by Law of G.R. No. 142396             February 11, 2003
Private Foreign Investments 905, 919 [1964]). Once the Philippine government
KHOSROW MINUCHER, petitioner, 
decides to espouse the claim, the latter ceases to be a private cause.
vs.
According to the Permanent Court of International Justice, the forerunner of the HON. COURT OF APPEALS and ARTHUR SCALZO, respondents.
International Court of Justice:
DECISION
By taking up the case of one of its subjects and by reporting to diplomatic action or
VITUG, J.:
international judicial proceedings on his behalf, a State is in reality asserting its own
rights — its right to ensure, in the person of its subjects, respect for the rules of
49
Sometime in May 1986, an Information for violation of Section 4 of Republic Act No.
6425, otherwise also known as the "Dangerous Drugs Act of 1972," was filed against
petitioner Khosrow Minucher and one Abbas Torabian with the Regional Trial Court,
Branch 151, of Pasig City. The criminal charge followed a "buy-bust operation"
conducted by the Philippine police narcotic agents in the house of Minucher, an
Iranian national, where a quantity of heroin, a prohibited drug, was said to have
been seized. The narcotic agents were accompanied by private respondent Arthur
Scalzo who would, in due time, become one of the principal witnesses for the
prosecution. On 08 January 1988, Presiding Judge Eutropio Migrino rendered a
decision acquitting the two accused.
On 03 August 1988, Minucher filed Civil Case No. 88-45691 before the Regional Trial
Court (RTC), Branch 19, of Manila for damages on account of what he claimed to
have been trumped-up charges of drug trafficking made by Arthur Scalzo. The
Manila RTC detailed what it had found to be the facts and circumstances
surrounding the case.
"The testimony of the plaintiff disclosed that he is an Iranian national. He came to
the Philippines to study in the University of the Philippines in 1974. In 1976, under
the regime of the Shah of Iran, he was appointed Labor Attaché for the Iranian
Embassies in Tokyo, Japan and Manila, Philippines. When the Shah of Iran was
deposed by Ayatollah Khomeini, plaintiff became a refugee of the United Nations
and continued to stay in the Philippines. He headed the Iranian National Resistance
Movement in the Philippines.
"He came to know the defendant on May 13, 1986, when the latter was brought to
his house and introduced to him by a certain Jose Iñigo, an informer of the
Intelligence Unit of the military. Jose Iñigo, on the other hand, was met by plaintiff
at the office of Atty. Crisanto Saruca, a lawyer for several Iranians whom plaintiff
assisted as head of the anti-Khomeini movement in the Philippines.
"During his first meeting with the defendant on May 13, 1986, upon the
introduction of Jose Iñigo, the defendant expressed his interest in buying caviar. As
a matter of fact, he bought two kilos of caviar from plaintiff and paid P10,000.00 for
it. Selling caviar, aside from that of Persian carpets, pistachio nuts and other Iranian
products was his business after the Khomeini government cut his pension of over
$3,000.00 per month. During their introduction in that meeting, the defendant gave
the plaintiff his calling card, which showed that he is working at the US Embassy in
the Philippines, as a special agent of the Drug Enforcement Administration,
Department of Justice, of the United States, and gave his address as US Embassy,
Manila. At the back of the card appears a telephone number in defendant’s own
handwriting, the number of which he can also be contacted.
"It was also during this first meeting that plaintiff expressed his desire to obtain a
US Visa for his wife and the wife of a countryman named Abbas Torabian. The
defendant told him that he [could] help plaintiff for a fee of $2,000.00 per visa.
Their conversation, however, was more concentrated on politics, carpets and
caviar. Thereafter, the defendant promised to see plaintiff again.
"On May 19, 1986, the defendant called the plaintiff and invited the latter for
dinner at Mario's Restaurant at Makati. He wanted to buy 200 grams of caviar.
Plaintiff brought the merchandize but for the reason that the defendant was not yet
there, he requested the restaurant people to x x x place the same in the
refrigerator. Defendant, however, came and plaintiff gave him the caviar for which
he was paid. Then their conversation was again focused on politics and business.
"On May 26, 1986, defendant visited plaintiff again at the latter's residence for 18
years at Kapitolyo, Pasig. The defendant wanted to buy a pair of carpets which
plaintiff valued at $27,900.00. After some haggling, they agreed at $24,000.00. For
the reason that defendant did not yet have the money, they agreed that defendant
would come back the next day. The following day, at 1:00 p.m., he came back with
his $24,000.00, which he gave to the plaintiff, and the latter, in turn, gave him the
pair of carpets.1awphi1.nét
"At about 3:00 in the afternoon of May 27, 1986, the defendant came back again to
plaintiff's house and directly proceeded to the latter's bedroom, where the latter
and his countryman, Abbas Torabian, were playing chess. Plaintiff opened his safe in
the bedroom and obtained $2,000.00 from it, gave it to the defendant for the
latter's fee in obtaining a visa for plaintiff's wife. The defendant told him that he
would be leaving the Philippines very soon and requested him to come out of the
house for a while so that he can introduce him to his cousin waiting in a cab.
Without much ado, and without putting on his shirt as he was only in his pajama
pants, he followed the defendant where he saw a parked cab opposite the street.
To his complete surprise, an American jumped out of the cab with a drawn high-
powered gun. He was in the company of about 30 to 40 Filipino soldiers with 6
Americans, all armed. He was handcuffed and after about 20 minutes in the street,
he was brought inside the house by the defendant. He was made to sit down while
in handcuffs while the defendant was inside his bedroom. The defendant came out
of the bedroom and out from defendant's attaché case, he took something and
placed it on the table in front of the plaintiff. They also took plaintiff's wife who was
50
at that time at the boutique near his house and likewise arrested Torabian, who
was playing chess with him in the bedroom and both were handcuffed together.
Plaintiff was not told why he was being handcuffed and why the privacy of his
house, especially his bedroom was invaded by defendant. He was not allowed to
use the telephone. In fact, his telephone was unplugged. He asked for any warrant,
but the defendant told him to `shut up.’ He was nevertheless told that he would be
able to call for his lawyer who can defend him.
"The plaintiff took note of the fact that when the defendant invited him to come
out to meet his cousin, his safe was opened where he kept the $24,000.00 the
defendant paid for the carpets and another $8,000.00 which he also placed in the
safe together with a bracelet worth $15,000.00 and a pair of earrings worth
$10,000.00. He also discovered missing upon his release his 8 pieces hand-made
Persian carpets, valued at $65,000.00, a painting he bought for P30,000.00 together
with his TV and betamax sets. He claimed that when he was handcuffed, the
defendant took his keys from his wallet. There was, therefore, nothing left in his
house.
"That his arrest as a heroin trafficker x x x had been well publicized throughout the
world, in various newspapers, particularly in Australia, America, Central Asia and in
the Philippines. He was identified in the papers as an international drug trafficker. x
xx
In fact, the arrest of defendant and Torabian was likewise on television, not only in
the Philippines, but also in America and in Germany. His friends in said places
informed him that they saw him on TV with said news.
"After the arrest made on plaintiff and Torabian, they were brought to Camp Crame
handcuffed together, where they were detained for three days without food and
water."1
During the trial, the law firm of Luna, Sison and Manas, filed a special appearance
for Scalzo and moved for extension of time to file an answer pending a supposed
advice from the United States Department of State and Department of Justice on
the defenses to be raised. The trial court granted the motion. On 27 October 1988,
Scalzo filed another special appearance to quash the summons on the ground that
he, not being a resident of the Philippines and the action being one in personam,
was beyond the processes of the court. The motion was denied by the court, in its
order of 13 December 1988, holding that the filing by Scalzo of a motion for
extension of time to file an answer to the complaint was a voluntary appearance
equivalent to service of summons which could likewise be construed a waiver of the
requirement of formal notice. Scalzo filed a motion for reconsideration of the court
order, contending that a motion for an extension of time to file an answer was not a
voluntary appearance equivalent to service of summons since it did not seek an
affirmative relief. Scalzo argued that in cases involving the United States
government, as well as its agencies and officials, a motion for extension was
peculiarly unavoidable due to the need (1) for both the Department of State and
the Department of Justice to agree on the defenses to be raised and (2) to refer the
case to a Philippine lawyer who would be expected to first review the case. The
court a quo denied the motion for reconsideration in its order of 15 October 1989.
Scalzo filed a petition for review with the Court of Appeals, there docketed CA-G.R.
No. 17023, assailing the denial. In a decision, dated 06 October 1989, the appellate
court denied the petition and affirmed the ruling of the trial court. Scalzo then
elevated the incident in a petition for review on certiorari, docketed G.R. No. 91173,
to this Court. The petition, however, was denied for its failure to comply with SC
Circular No. 1-88; in any event, the Court added, Scalzo had failed to show that the
appellate court was in error in its questioned judgment.
Meanwhile, at the court a quo, an order, dated 09 February 1990, was issued (a)
declaring Scalzo in default for his failure to file a responsive pleading (answer) and
(b) setting the case for the reception of evidence. On 12 March 1990, Scalzo filed a
motion to set aside the order of default and to admit his answer to the complaint.
Granting the motion, the trial court set the case for pre-trial. In his answer, Scalzo
denied the material allegations of the complaint and raised the affirmative defenses
(a) of Minucher’s failure to state a cause of action in his complaint and (b) that
Scalzo had acted in the discharge of his official duties as being merely an agent of
the Drug Enforcement Administration of the United States Department of Justice.
Scalzo interposed a counterclaim of P100,000.00 to answer for attorneys' fees and
expenses of litigation.
Then, on 14 June 1990, after almost two years since the institution of the civil case,
Scalzo filed a motion to dismiss the complaint on the ground that, being a special
agent of the United States Drug Enforcement Administration, he was entitled to
diplomatic immunity. He attached to his motion Diplomatic Note No. 414 of the
United States Embassy, dated 29 May 1990, addressed to the Department of
Foreign Affairs of the Philippines and a Certification, dated 11 June 1990, of Vice
Consul Donna Woodward, certifying that the note is a true and faithful copy of its
original. In an order of 25 June 1990, the trial court denied the motion to dismiss.
51
On 27 July 1990, Scalzo filed a petition for certiorari with injunction with this Court,
docketed G.R. No. 94257 and entitled "Arthur W. Scalzo, Jr., vs. Hon. Wenceslao
Polo, et al.," asking that the complaint in Civil Case No. 88-45691 be ordered
dismissed. The case was referred to the Court of Appeals, there docketed CA-G.R.
SP No. 22505, per this Court’s resolution of 07 August 1990. On 31 October 1990,
the Court of Appeals promulgated its decision sustaining the diplomatic immunity
of Scalzo and ordering the dismissal of the complaint against him. Minucher filed a
petition for review with this Court, docketed G.R. No. 97765 and entitled "Khosrow
Minucher vs. the Honorable Court of Appeals, et. al." (cited in 214 SCRA 242),
appealing the judgment of the Court of Appeals. In a decision, dated 24 September
1992, penned by Justice (now Chief Justice) Hilario Davide, Jr., this Court reversed
the decision of the appellate court and remanded the case to the lower court for
trial. The remand was ordered on the theses (a) that the Court of Appeals erred in
granting the motion to dismiss of Scalzo for lack of jurisdiction over his person
without even considering the issue of the authenticity of Diplomatic Note No. 414
and (b) that the complaint contained sufficient allegations to the effect that Scalzo
committed the imputed acts in his personal capacity and outside the scope of his
official duties and, absent any evidence to the contrary, the issue on Scalzo’s
diplomatic immunity could not be taken up.
The Manila RTC thus continued with its hearings on the case. On 17 November
1995, the trial court reached a decision; it adjudged:
"WHEREFORE, and in view of all the foregoing considerations, judgment is hereby
rendered for the plaintiff, who successfully established his claim by sufficient
evidence, against the defendant in the manner following:
"`Adjudging defendant liable to plaintiff in actual and compensatory damages of
P520,000.00; moral damages in the sum of P10 million; exemplary damages in the
sum of P100,000.00; attorney's fees in the sum of P200,000.00 plus costs.
`The Clerk of the Regional Trial Court, Manila, is ordered to take note of the lien of
the Court on this judgment to answer for the unpaid docket fees considering that
the plaintiff in this case instituted this action as a pauper litigant.’"2
While the trial court gave credence to the claim of Scalzo and the evidence
presented by him that he was a diplomatic agent entitled to immunity as such, it
ruled that he, nevertheless, should be held accountable for the acts complained of
committed outside his official duties. On appeal, the Court of Appeals reversed the
decision of the trial court and sustained the defense of Scalzo that he was
sufficiently clothed with diplomatic immunity during his term of duty and thereby
immune from the criminal and civil jurisdiction of the "Receiving State" pursuant to
the terms of the Vienna Convention.
Hence, this recourse by Minucher. The instant petition for review raises a two-fold
issue: (1) whether or not the doctrine of conclusiveness of judgment, following the
decision rendered by this Court in G.R. No. 97765, should have precluded the Court
of Appeals from resolving the appeal to it in an entirely different manner, and (2)
whether or not Arthur Scalzo is indeed entitled to diplomatic immunity.
The doctrine of conclusiveness of judgment, or its kindred rule of res judicata,
would require 1) the finality of the prior judgment, 2) a valid jurisdiction over the
subject matter and the parties on the part of the court that renders it, 3) a
judgment on the merits, and 4) an identity of the parties, subject matter and causes
of action.3 Even while one of the issues submitted in G.R. No. 97765 - "whether or
not public respondent Court of Appeals erred in ruling that private respondent
Scalzo is a diplomat immune from civil suit conformably with the Vienna Convention
on Diplomatic Relations" - is also a pivotal question raised in the instant petition,
the ruling in G.R. No. 97765, however, has not resolved that point with finality.
Indeed, the Court there has made this observation -
"It may be mentioned in this regard that private respondent himself, in his Pre-trial
Brief filed on 13 June 1990, unequivocally states that he would present
documentary evidence consisting of DEA records on his investigation and
surveillance of plaintiff and on his position and duties as DEA special agent in
Manila. Having thus reserved his right to present evidence in support of his
position, which is the basis for the alleged diplomatic immunity, the barren self-
serving claim in the belated motion to dismiss cannot be relied upon for a
reasonable, intelligent and fair resolution of the issue of diplomatic immunity."4
Scalzo contends that the Vienna Convention on Diplomatic Relations, to which the
Philippines is a signatory, grants him absolute immunity from suit, describing his
functions as an agent of the United States Drugs Enforcement Agency as
"conducting surveillance operations on suspected drug dealers in the Philippines
believed to be the source of prohibited drugs being shipped to the U.S., (and)
having ascertained the target, (he then) would inform the Philippine narcotic agents
(to) make the actual arrest." Scalzo has submitted to the trial court a number of
documents -
1. Exh. '2' - Diplomatic Note No. 414 dated 29 May 1990;
2. Exh. '1' - Certification of Vice Consul Donna K. Woodward dated 11 June 1990;
52
3. Exh. '5' - Diplomatic Note No. 757 dated 25 October 1991;
4. Exh. '6' - Diplomatic Note No. 791 dated 17 November 1992; and
5. Exh. '7' - Diplomatic Note No. 833 dated 21 October 1988.
6. Exh. '3' - 1st Indorsement of the Hon. Jorge R. Coquia, Legal Adviser, Department
of Foreign Affairs, dated 27 June 1990 forwarding Embassy Note No. 414 to the
Clerk of Court of RTC Manila, Branch 19 (the trial court);
7. Exh. '4' - Diplomatic Note No. 414, appended to the 1st Indorsement (Exh. '3');
and
8. Exh. '8' - Letter dated 18 November 1992 from the Office of the Protocol,
Department of Foreign Affairs, through Asst. Sec. Emmanuel Fernandez, addressed
to the Chief Justice of this Court.5
The documents, according to Scalzo, would show that: (1) the United States
Embassy accordingly advised the Executive Department of the Philippine
Government that Scalzo was a member of the diplomatic staff of the United States
diplomatic mission from his arrival in the Philippines on 14 October 1985 until his
departure on 10 August 1988; (2) that the United States Government was firm from
the very beginning in asserting the diplomatic immunity of Scalzo with respect to
the case pursuant to the provisions of the Vienna Convention on Diplomatic
Relations; and (3) that the United States Embassy repeatedly urged the Department
of Foreign Affairs to take appropriate action to inform the trial court of Scalzo’s
diplomatic immunity. The other documentary exhibits were presented to indicate
that: (1) the Philippine government itself, through its Executive Department,
recognizing and respecting the diplomatic status of Scalzo, formally advised the
"Judicial Department" of his diplomatic status and his entitlement to all diplomatic
privileges and immunities under the Vienna Convention; and (2) the Department of
Foreign Affairs itself authenticated Diplomatic Note No. 414. Scalzo additionally
presented Exhibits "9" to "13" consisting of his reports of investigation on the
surveillance and subsequent arrest of Minucher, the certification of the Drug
Enforcement Administration of the United States Department of Justice that Scalzo
was a special agent assigned to the Philippines at all times relevant to the
complaint, and the special power of attorney executed by him in favor of his
previous counsel6 to show (a) that the United States Embassy, affirmed by its Vice
Consul, acknowledged Scalzo to be a member of the diplomatic staff of the United
States diplomatic mission from his arrival in the Philippines on 14 October 1985
until his departure on 10 August 1988, (b) that, on May 1986, with the cooperation
of the Philippine law enforcement officials and in the exercise of his functions as
member of the mission, he investigated Minucher for alleged trafficking in a
prohibited drug, and (c) that the Philippine Department of Foreign Affairs itself
recognized that Scalzo during his tour of duty in the Philippines (14 October 1985
up to 10 August 1988) was listed as being an Assistant Attaché of the United States
diplomatic mission and accredited with diplomatic status by the Government of the
Philippines. In his Exhibit 12, Scalzo described the functions of the overseas office of
the United States Drugs Enforcement Agency, i.e., (1) to provide criminal
investigative expertise and assistance to foreign law enforcement agencies on
narcotic and drug control programs upon the request of the host country, 2) to
establish and maintain liaison with the host country and counterpart foreign law
enforcement officials, and 3) to conduct complex criminal investigations involving
international criminal conspiracies which affect the interests of the United States.
The Vienna Convention on Diplomatic Relations was a codification of centuries-old
customary law and, by the time of its ratification on 18 April 1961, its rules of law
had long become stable. Among the city states of ancient Greece, among the
peoples of the Mediterranean before the establishment of the Roman Empire, and
among the states of India, the person of the herald in time of war and the person of
the diplomatic envoy in time of peace were universally held sacrosanct.7 By the end
of the 16th century, when the earliest treatises on diplomatic law were published,
the inviolability of ambassadors was firmly established as a rule of customary
international law.8Traditionally, the exercise of diplomatic intercourse among states
was undertaken by the head of state himself, as being the preeminent embodiment
of the state he represented, and the foreign secretary, the official usually entrusted
with the external affairs of the state. Where a state would wish to have a more
prominent diplomatic presence in the receiving state, it would then send to the
latter a diplomatic mission. Conformably with the Vienna Convention, the functions
of the diplomatic mission involve, by and large, the representation of the interests
of the sending state and promoting friendly relations with the receiving state.9
The Convention lists the classes of heads of diplomatic missions to include (a)
ambassadors or nuncios accredited to the heads of state,10 (b) envoys,11 ministers
or internuncios  accredited to the heads of states; and (c) charges d'
affairs12 accredited to the ministers of foreign affairs.13 Comprising the "staff of the
(diplomatic) mission" are the diplomatic staff, the administrative staff and the
technical and service staff. Only the heads of missions, as well as members of the
diplomatic staff, excluding the members of the administrative, technical and service
staff of the mission, are accorded diplomatic rank. Even while the Vienna
53
Convention on Diplomatic Relations provides for immunity to the members of
diplomatic missions, it does so, nevertheless, with an understanding that the same
be restrictively applied. Only "diplomatic agents," under the terms of the
Convention, are vested with blanket diplomatic immunity from civil and criminal
suits. The Convention defines "diplomatic agents" as the heads of missions or
members of the diplomatic staff, thus impliedly withholding the same privileges
from all others. It might bear stressing that even consuls, who represent their
respective states in concerns of commerce and navigation and perform certain
administrative and notarial duties, such as the issuance of passports and visas,
authentication of documents, and administration of oaths, do not ordinarily enjoy
the traditional diplomatic immunities and privileges accorded diplomats, mainly for
the reason that they are not charged with the duty of representing their states in
political matters. Indeed, the main yardstick in ascertaining whether a person is a
diplomat entitled to immunity is the determination of whether or not he performs
duties of diplomatic nature.
Scalzo asserted, particularly in his Exhibits "9" to "13," that he was an Assistant
Attaché of the United States diplomatic mission and was accredited as such by the
Philippine Government. An attaché belongs to a category of officers in the
diplomatic establishment who may be in charge of its cultural, press, administrative
or financial affairs. There could also be a class of attaches belonging to certain
ministries or departments of the government, other than the foreign ministry or
department, who are detailed by their respective ministries or departments with
the embassies such as the military, naval, air, commercial, agricultural, labor,
science, and customs attaches, or the like. Attaches assist a chief of mission in his
duties and are administratively under him, but their main function is to observe,
analyze and interpret trends and developments in their respective fields in the host
country and submit reports to their own ministries or departments in the home
government.14 These officials are not generally regarded as members of the
diplomatic mission, nor are they normally designated as having diplomatic rank.
In an attempt to prove his diplomatic status, Scalzo presented Diplomatic Notes
Nos. 414, 757 and 791, all issued post litem motam, respectively, on 29 May 1990,
25 October 1991 and 17 November 1992. The presentation did nothing much to
alleviate the Court's initial reservations in G.R. No. 97765, viz:
"While the trial court denied the motion to dismiss, the public respondent gravely
abused its discretion in dismissing Civil Case No. 88-45691 on the basis of an
erroneous assumption that simply because of the diplomatic note, the private
respondent is clothed with diplomatic immunity, thereby divesting the trial court of
jurisdiction over his person.
"x x x x x x x x x
"And now, to the core issue - the alleged diplomatic immunity of the private
respondent. Setting aside for the moment the issue of authenticity raised by the
petitioner and the doubts that surround such claim, in view of the fact that it took
private respondent one (1) year, eight (8) months and seventeen (17) days from the
time his counsel filed on 12 September 1988 a Special Appearance and Motion
asking for a first extension of time to file the Answer because the Departments of
State and Justice of the United States of America were studying the case for the
purpose of determining his defenses, before he could secure the Diplomatic Note
from the US Embassy in Manila, and even granting for the sake of argument that
such note is authentic, the complaint for damages filed by petitioner cannot be
peremptorily dismissed.
"x x x x x x x x x
"There is of course the claim of private respondent that the acts imputed to him
were done in his official capacity. Nothing supports this self-serving claim other
than the so-called Diplomatic Note. x x x. The public respondent then should have
sustained the trial court's denial of the motion to dismiss. Verily, it should have
been the most proper and appropriate recourse. It should not have been
overwhelmed by the self-serving Diplomatic Note whose belated issuance is even
suspect and whose authenticity has not yet been proved. The undue haste with
which respondent Court yielded to the private respondent's claim is arbitrary."
A significant document would appear to be Exhibit No. 08, dated 08 November
1992, issued by the Office of Protocol of the Department of Foreign Affairs and
signed by Emmanuel C. Fernandez, Assistant Secretary, certifying that "the records
of the Department (would) show that Mr. Arthur W. Scalzo, Jr., during his term of
office in the Philippines (from 14 October 1985 up to 10 August 1988) was listed as
an Assistant Attaché of the United States diplomatic mission and was, therefore,
accredited diplomatic status by the Government of the Philippines." No certified
true copy of such "records," the supposed bases for the belated issuance, was
presented in evidence.
Concededly, vesting a person with diplomatic immunity is a prerogative of the
executive branch of the government. In World Health Organization vs. Aquino,15 the
Court has recognized that, in such matters, the hands of the courts are virtually tied.
54
Amidst apprehensions of indiscriminate and incautious grant of immunity, designed
to gain exemption from the jurisdiction of courts, it should behoove the Philippine
government, specifically its Department of Foreign Affairs, to be most circumspect,
that should particularly be no less than compelling, in its post litem motam
issuances. It might be recalled that the privilege is not an immunity from the
observance of the law of the territorial sovereign or from ensuing legal liability; it is,
rather, an immunity from the exercise of territorial jurisdiction.16 The government of
the United States itself, which Scalzo claims to be acting for, has formulated its
standards for recognition of a diplomatic agent. The State Department policy is to
only concede diplomatic status to a person who possesses an acknowledged
diplomatic title and "performs duties of diplomatic nature."17 Supplementary criteria
for accreditation are the possession of a valid diplomatic passport or, from States
which do not issue such passports, a diplomatic note formally representing the
intention to assign the person to diplomatic duties, the holding of a non-immigrant
visa, being over twenty-one years of age, and performing diplomatic functions on
an essentially full-time basis.18 Diplomatic missions are requested to provide the
most accurate and descriptive job title to that which currently applies to the duties
performed. The Office of the Protocol would then assign each individual to the
appropriate functional category.19
But while the diplomatic immunity of Scalzo might thus remain contentious, it was
sufficiently established that, indeed, he worked for the United States Drug
Enforcement Agency and was tasked to conduct surveillance of suspected drug
activities within the country on the dates pertinent to this case. If it should be
ascertained that Arthur Scalzo was acting well within his assigned functions when
he committed the acts alleged in the complaint, the present controversy could then
be resolved under the related doctrine of State Immunity from Suit.
The precept that a State cannot be sued in the courts of a foreign state is a long-
standing rule of customary international law then closely identified with the
personal immunity of a foreign sovereign from suit 20 and, with the emergence of
democratic states, made to attach not just to the person of the head of state, or his
representative, but also distinctly to the state itself in its sovereign capacity.21 If the
acts giving rise to a suit are those of a foreign government done by its foreign agent,
although not necessarily a diplomatic personage, but acting in his official capacity,
the complaint could be barred by the immunity of the foreign sovereign from suit
without its consent. Suing a representative of a state is believed to be, in effect,
suing the state itself. The proscription is not accorded for the benefit of an
individual but for the State, in whose service he is, under the maxim - par in parem,
non habet imperium - that all states are sovereign equals and cannot assert
jurisdiction over one another.22 The implication, in broad terms, is that if the
judgment against an official would require the state itself to perform an affirmative
act to satisfy the award, such as the appropriation of the amount needed to pay the
damages decreed against him, the suit must be regarded as being against the state
itself, although it has not been formally impleaded.23
In United States of America vs. Guinto,24 involving officers of the United States Air
Force and special officers of the Air Force Office of Special Investigators charged
with the duty of preventing the distribution, possession and use of prohibited
drugs, this Court has ruled -
"While the doctrine (of state immunity) appears to prohibit only suits against the
state without its consent, it is also applicable to complaints filed against officials of
the state for acts allegedly performed by them in the discharge of their duties. x x x.
It cannot for a moment be imagined that they were acting in their private or
unofficial capacity when they apprehended and later testified against the
complainant. It follows that for discharging their duties as agents of the United
States, they cannot be directly impleaded for acts imputable to their principal,
which has not given its consent to be sued. x x x As they have acted on behalf of the
government, and within the scope of their authority, it is that government, and not
the petitioners personally, [who were] responsible for their acts."25
This immunity principle, however, has its limitations. Thus, Shauf vs. Court of
Appeals26 elaborates:
"It is a different matter where the public official is made to account in his capacity
as such for acts contrary to law and injurious to the rights of the plaintiff. As was
clearly set forth by Justice Zaldivar in Director of the Bureau of
Telecommunications, et al., vs. Aligaen, et al. (33 SCRA 368): `Inasmuch as the State
authorizes only legal acts by its officers, unauthorized acts of government officials
or officers are not acts of the State, and an action against the officials or officers by
one whose rights have been invaded or violated by such acts, for the protection of
his rights, is not a suit against the State within the rule of immunity of the State
from suit. In the same tenor, it has been said that an action at law or suit in equity
against a State officer or the director of a State department on the ground that,
while claiming to act for the State, he violates or invades the personal and property
rights of the plaintiff, under an unconstitutional act or under an assumption of
authority which he does not have, is not a suit against the State within the
constitutional provision that the State may not be sued without its consent. The
55
rationale for this ruling is that the doctrine of state immunity cannot be used as an Minucher, Scalzo hardly can be said to have acted beyond the scope of his official
instrument for perpetrating an injustice. function or duties.

"x x x x x x x x x All told, this Court is constrained to rule that respondent Arthur Scalzo, an agent of
the United States Drug Enforcement Agency allowed by the Philippine government
"(T)he doctrine of immunity from suit will not apply and may not be invoked where
to conduct activities in the country to help contain the problem on the drug traffic,
the public official is being sued in his private and personal capacity as an ordinary
is entitled to the defense of state immunity from suit.
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 WHEREFORE, on the foregoing premises, the petition is DENIED. No costs.
usually arises where the public official acts without authority or in excess of the
powers vested in him. It is a well-settled principle of law that a public official may be
liable in his personal private capacity for whatever damage he may have caused by
his act done with malice and in bad faith or beyond the scope of his authority and
jurisdiction."27

A foreign agent, operating within a territory, can be cloaked with immunity from
suit but only as long as it can be established that he is acting within the directives of
the sending state. The consent of the host state is an indispensable requirement of
basic courtesy between the two sovereigns. Guinto and Shauf both involve officers
and personnel of the United States, stationed within Philippine territory, under the
RP-US Military Bases Agreement. While evidence is wanting to show any similar
agreement between the governments of the Philippines and of the United States
(for the latter to send its agents and to conduct surveillance and related activities of
suspected drug dealers in the Philippines), the consent or imprimatur  of the
Philippine government to the activities of the United States Drug Enforcement
Agency, however, can be gleaned from the facts heretofore elsewhere mentioned.
The official exchanges of communication between agencies of the government of
the two countries, certifications from officials of both the Philippine Department of
Foreign Affairs and the United States Embassy, as well as the participation of
members of the Philippine Narcotics Command in the "buy-bust operation"
conducted at the residence of Minucher at the behest of Scalzo, may be inadequate
to support the "diplomatic status" of the latter but they give enough indication that
the Philippine government has given its imprimatur, if not consent, to the activities
within Philippine territory of agent Scalzo of the United States Drug Enforcement
Agency. The job description of Scalzo has tasked him to conduct surveillance on
suspected drug suppliers and, after having ascertained the target, to inform local
law enforcers who would then be expected to make the arrest. In conducting
surveillance activities on Minucher, later acting as the poseur-buyer during the buy-
bust operation, and then becoming a principal witness in the criminal case against

56
 Judge, RTC Branch 145, Makati City, and James Vinzon, doing business under the
name and style of Vinzon Trade and Services."

Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah,

entered into a Maintenance Agreement in August 1995 with respondent James
Vinzon, sole proprietor of Vinzon Trade and Services. The Maintenance Agreement
stated that respondent shall, for a consideration, maintain specified equipment at
the Embassy Main Building, Embassy Annex Building and the Wisma Duta, the
official residence of petitioner Ambassador Soeratmin. The equipment covered by
the Maintenance Agreement are air conditioning units, generator sets, electrical
facilities, water heaters, and water motor pumps. It is likewise stated therein that
the agreement shall be effective for a period of four years and will renew itself
automatically unless cancelled by either party by giving thirty days prior written
notice from the date of expiry.1

Petitioners claim that sometime prior to the date of expiration of the said
agreement, or before August 1999, they informed respondent that the renewal of
the agreement shall be at the discretion of the incoming Chief of Administration,
Minister Counsellor Azhari Kasim, who was expected to arrive in February 2000.
When Minister Counsellor Kasim assumed the position of Chief of Administration in
March 2000, he allegedly found respondent’s work and services unsatisfactory and
not in compliance with the standards set in the Maintenance Agreement. Hence,
the Indonesian Embassy terminated the agreement in a letter dated August 31,
2000.2 Petitioners claim, moreover, that they had earlier verbally informed
respondent of their decision to terminate the agreement.
G.R. No. 154705               June 26, 2003
On the other hand, respondent claims that the aforesaid termination was arbitrary
THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN, and and unlawful. Respondent cites various circumstances which purportedly negated
MINISTER COUNSELLOR AZHARI KASIM, Petitioners,  petitioners’ alleged dissatisfaction over respondent’s services: (a) in July 2000,
vs. Minister Counsellor Kasim still requested respondent to assign to the embassy an
JAMES VINZON, doing business under the name and style of VINZON TRADE AND additional full-time worker to assist one of his other workers; (b) in August 2000,
SERVICES, Respondent. Minister Counsellor Kasim asked respondent to donate a prize, which the latter did,
on the occasion of the Indonesian Independence Day golf tournament; and (c) in a
DECISION
letter dated August 22, 2000, petitioner Ambassador Soeratmin thanked
AZCUNA, J: respondent for sponsoring a prize and expressed his hope that the cordial relations
happily existing between them will continue to prosper and be strengthened in the
This is a petition for review on certiorari to set aside the Decision of the Court of coming years.
Appeals dated May 30, 2002 and its Resolution dated August 16, 2002, in CA-G.R. SP
No. 66894 entitled "The Republic of Indonesia, His Excellency Ambassador Hence, on December 15, 2000, respondent filed a complaint3 against petitioners
Soeratmin and Minister Counselor Azhari Kasim v. Hon. Cesar Santamaria, Presiding docketed as Civil Case No. 18203 in the Regional Trial Court (RTC) of Makati, Branch

57
145. On February 20, 2001, petitioners filed a Motion to Dismiss, alleging that the
Republic of Indonesia, as a foreign sovereign State, has sovereign immunity from
suit and cannot be sued as a party-defendant in the Philippines. The said motion
further alleged that Ambassador Soeratmin and Minister Counsellor Kasim are
diplomatic agents as defined under the Vienna Convention on Diplomatic Relations
and therefore enjoy diplomatic immunity.4 In turn, respondent filed on March 20,
2001, an Opposition to the said motion alleging that the Republic of Indonesia has
expressly waived its immunity from suit. He based this claim upon the following
provision in the Maintenance Agreement:
"Any legal action arising out of this Maintenance Agreement shall be settled
according to the laws of the Philippines and by the proper court of Makati City,
Philippines."
Respondent’s Opposition likewise alleged that Ambassador Soeratmin and Minister
Counsellor Kasim can be sued and held liable in their private capacities for tortious
acts done with malice and bad faith.5
On May 17, 2001, the trial court denied herein petitioners’ Motion to Dismiss. It
likewise denied the Motion for Reconsideration subsequently filed.
The trial court’s denial of the Motion to Dismiss was brought up to the Court of
Appeals by herein petitioners in a petition for certiorari and prohibition. Said
petition, docketed as CA-G.R. SP No. 66894, alleged that the trial court gravely
abused its discretion in ruling that the Republic of Indonesia gave its consent to be
sued and voluntarily submitted itself to the laws and jurisdiction of Philippine courts
and that petitioners Ambassador Soeratmin and Minister Counsellor Kasim waived
their immunity from suit.
On May 30, 2002, the Court of Appeals rendered its assailed decision denying the
petition for lack of merit.6 On August 16, 2002, it denied herein petitioners’ motion
for reconsideration.7
Hence, this petition.
In the case at bar, petitioners raise the sole issue of whether or not the Court of
Appeals erred in sustaining the trial court’s decision that petitioners have waived
their immunity from suit by using as its basis the abovementioned provision in the
Maintenance Agreement.
The petition is impressed with merit.
International law is founded largely upon the principles of reciprocity, comity,
independence, and equality of States which were adopted as part of the law of our
land under Article II, Section 2 of the 1987 Constitution.8 The rule that a State may
not be sued without its consent is a necessary consequence of the principles of
independence and equality of States.9 As enunciated in Sanders v. Veridiano II,10 the
practical justification for the doctrine of sovereign immunity is that there can be no
legal right against the authority that makes the law on which the right depends. In
the case of foreign States, the rule is derived from the principle of the sovereign
equality of States, as expressed in the maxim par in parem non habet imperium. All
states are sovereign equals and cannot assert jurisdiction over one another. 11 A
contrary attitude would "unduly vex the peace of nations."12
The rules of International Law, however, are neither unyielding nor impervious to
change. The increasing need of sovereign States to enter into purely commercial
activities remotely connected with the discharge of their governmental functions
brought about a new concept of sovereign immunity. This concept, the restrictive
theory, holds that the immunity of the sovereign is recognized only with regard to
public acts or acts jure imperii, but not with regard to private acts or acts jure
gestionis.13
In United States v. Ruiz,14 for instance, we held that the conduct of public bidding for
the repair of a wharf at a United States Naval Station is an act jure imperii. On the
other hand, we considered as an act jure gestionis the hiring of a cook in the
recreation center catering to American servicemen and the general public at the
John Hay Air Station in Baguio City,15 as well as the bidding for the operation of
barber shops in Clark Air Base in Angeles City.16
Apropos the present case, the mere entering into a contract by a foreign State with
a private party cannot be construed as the ultimate test of whether or not it is an
act jure imperii or jure gestionis. Such act is only the start of the inquiry. Is the
foreign State engaged in the regular conduct of a business? If the foreign State is
not engaged regularly in a business or commercial activity, and in this case it has
not been shown to be so engaged, the particular act or transaction must then be
tested by its nature. If the act is in pursuit of a sovereign activity, or an incident
thereof, then it is an act jure imperii.17
Hence, the existence alone of a paragraph in a contract stating that any legal action
arising out of the agreement shall be settled according to the laws of the Philippines
and by a specified court of the Philippines is not necessarily a waiver of sovereign
immunity from suit. The aforesaid provision contains language not necessarily
58
inconsistent with sovereign immunity. On the other hand, such provision may also xxx
be meant to apply where the sovereign party elects to sue in the local courts, or
1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the
otherwise waives its immunity by any subsequent act. The applicability of Philippine
receiving State. He shall also enjoy immunity from its civil and administrative
laws must be deemed to include Philippine laws in its totality, including the
jurisdiction, except in the case of:
principle recognizing sovereign immunity. Hence, the proper court may have no
proper action, by way of settling the case, except to dismiss it. (a) a real action relating to private immovable property situated in the territory of
the receiving State, unless he holds it on behalf of the sending State for the
Submission by a foreign state to local jurisdiction must be clear and unequivocal. It
purposes of the mission;
must be given explicitly or by necessary implication. We find no such waiver in this
case. (b) an action relating to succession in which the diplomatic agent is involved as
executor, administrator, heir or legatee as a private person and not on behalf of the
Respondent concedes that the establishment of a diplomatic mission is a sovereign
sending State;
function.1âwphi1 On the other hand, he argues that the actual physical
maintenance of the premises of the diplomatic mission, such as the upkeep of its (c) an action relating to any professional or commercial activity exercised by the
furnishings and equipment, is no longer a sovereign function of the State.18 diplomatic agent in the receiving State outside his official functions.
We disagree. There is no dispute that the establishment of a diplomatic mission is xxx
an act jure imperii. A sovereign State does not merely establish a diplomatic mission
and leave it at that; the establishment of a diplomatic mission encompasses its The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in
maintenance and upkeep. Hence, the State may enter into contracts with private terminating the Maintenance Agreement is not covered by the exceptions provided
entities to maintain the premises, furnishings and equipment of the embassy and in the abovementioned provision.
the living quarters of its agents and officials. It is therefore clear that petitioner
The Solicitor General believes that said act may fall under subparagraph (c)
Republic of Indonesia was acting in pursuit of a sovereign activity when it entered
thereof,20 but said provision clearly applies only to a situation where the diplomatic
into a contract with respondent for the upkeep or maintenance of the air
agent engages in any professional or commercial activity outside official functions,
conditioning units, generator sets, electrical facilities, water heaters, and water
which is not the case herein.
motor pumps of the Indonesian Embassy and the official residence of the
Indonesian ambassador. WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the
Court of Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the
The Solicitor General, in his Comment, submits the view that, "the Maintenance
complaint in Civil Case No. 18203 against petitioners is DISMISSED.
Agreement was entered into by the Republic of Indonesia in the discharge of its
governmental functions. In such a case, it cannot be deemed to have waived its No costs.
immunity from suit." As to the paragraph in the agreement relied upon by
respondent, the Solicitor General states that it "was not a waiver of their immunity SO ORDERED.
from suit but a mere stipulation that in the event they do waive their immunity,
Philippine laws shall govern the resolution of any legal action arising out of the
agreement and the proper court in Makati City shall be the agreed venue thereof.19

On the matter of whether or not petitioners Ambassador Soeratmin and Minister

Counsellor Kasim may be sued herein in their private capacities, Article 31 of the
Vienna Convention on Diplomatic Relations provides:

59
 ATCI OVERSEAS CORPORATION, AMALIA G. IKDAL and MINISTRY OF PUBLIC
HEALTH-KUWAITPetitioners, 
vs.
MA. JOSEFA ECHIN, Respondent.

DECISION

CARPIO MORALES, J.:

Josefina Echin (respondent) was hired by petitioner ATCI Overseas Corporation in

behalf of its principal-co-petitioner, the Ministry of Public Health of Kuwait (the
Ministry), for the position of medical technologist under a two-year contract,
denominated as a Memorandum of Agreement (MOA), with a monthly salary of
US$1,200.00.

Under the MOA,1 all newly-hired employees undergo a probationary period of one

(1) year and are covered by Kuwait’s Civil Service Board Employment Contract No.
2.

Respondent was deployed on February 17, 2000 but was terminated from
employment on February 11, 2001, she not having allegedly passed the
probationary period.

As the Ministry denied respondent’s request for reconsideration, she returned to

the Philippines on March 17, 2001, shouldering her own air fare.

On July 27, 2001, respondent filed with the National Labor Relations Commission
(NLRC) a complaint2 for illegal dismissal against petitioner ATCI as the local
recruitment agency, represented by petitioner, Amalia Ikdal (Ikdal), and the
Ministry, as the foreign principal.

By Decision3 of November 29, 2002, the Labor Arbiter, finding that petitioners
neither showed that there was just cause to warrant respondent’s dismissal nor
that she failed to qualify as a regular employee, held that respondent was illegally
dismissed and accordingly ordered petitioners to pay her US$3,600.00, representing
her salary for the three months unexpired portion of her contract.

On appeal of petitioners ATCI and Ikdal, the NLRC affirmed the Labor Arbiter’s
decision by Resolution4 of January 26, 2004. Petitioners’ motion for reconsideration
having been denied by Resolution5 of April 22, 2004, they appealed to the Court of
Appeals, contending that their principal, the Ministry, being a foreign government
G.R. No. 178551               October 11, 2010
agency, is immune from suit and, as such, the immunity extended to them; and that

60
respondent was validly dismissed for her failure to meet the performance rating
within the one-year period as required under Kuwait’s Civil Service Laws. Petitioners
further contended that Ikdal should not be liable as an officer of petitioner ATCI.
By Decision6 of March 30, 2007, the appellate court affirmed the NLRC Resolution.
In brushing aside petitioners’ contention that they only acted as agent of the
Ministry and that they cannot be held jointly and solidarily liable with it, the
appellate court noted that under the law, a private employment agency shall
assume all responsibilities for the implementation of the contract of employment of
an overseas worker, hence, it can be sued jointly and severally with the foreign
principal for any violation of the recruitment agreement or contract of
employment.
As to Ikdal’s liability, the appellate court held that under Sec. 10 of Republic Act No.
8042, the "Migrant and Overseas Filipinos’ Act of 1995," corporate officers,
directors and partners of a recruitment agency may themselves be jointly and
solidarily liable with the recruitment agency for money claims and damages
awarded to overseas workers.
Petitioners’ motion for reconsideration having been denied by the appellate court
by Resolution7 of June 27, 2007, the present petition for review on certiorari was
filed.
Petitioners maintain that they should not be held liable because respondent’s
employment contract specifically stipulates that her employment shall be governed
by the Civil Service Law and Regulations of Kuwait. They thus conclude that it was
patent error for the labor tribunals and the appellate court to apply the Labor Code
provisions governing probationary employment in deciding the present case.
Further, petitioners argue that even the Philippine Overseas Employment Act
(POEA) Rules relative to master employment contracts (Part III, Sec. 2 of the POEA
Rules and Regulations) accord respect to the "customs, practices, company policies
and labor laws and legislation of the host country."
Finally, petitioners posit that assuming arguendo that Philippine labor laws are
applicable, given that the foreign principal is a government agency which is immune
from suit, as in fact it did not sign any document agreeing to be held jointly and
solidarily liable, petitioner ATCI cannot likewise be held liable, more so since the
Ministry’s liability had not been judicially determined as jurisdiction was not
acquired over it.
The petition fails.
Petitioner ATCI, as a private recruitment agency, cannot evade responsibility for the
money claims of Overseas Filipino workers (OFWs) which it deploys abroad by the
mere expediency of claiming that its foreign principal is a government agency
clothed with immunity from suit, or that such foreign principal’s liability must first
be established before it, as agent, can be held jointly and solidarily liable.
In providing for the joint and solidary liability of private recruitment agencies with
their foreign principals, Republic Act No. 8042 precisely affords the OFWs with a
recourse and assures them of immediate and sufficient payment of what is due
them. Skippers United Pacific v. Maguad8 explains:
. . . [T]he obligations covenanted in the recruitment agreement entered into by
and between the local agent and its foreign principal are not coterminous with
the term of such agreement so that if either or both of the parties decide to end
the agreement, the responsibilities of such parties towards the contracted
employees under the agreement do not at all end, but the same extends up to and
until the expiration of the employment contracts of the employees recruited and
employed pursuant to the said recruitment agreement. Otherwise, this will render
nugatory the very purpose for which the law governing the employment of
workers for foreign jobs abroad was enacted. (emphasis supplied)
The imposition of joint and solidary liability is in line with the policy of the state to
protect and alleviate the plight of the working class. 9 Verily, to allow petitioners to
simply invoke the immunity from suit of its foreign principal or to wait for the
judicial determination of the foreign principal’s liability before petitioner can be
held liable renders the law on joint and solidary liability inutile.
As to petitioners’ contentions that Philippine labor laws on probationary
employment are not applicable since it was expressly provided in respondent’s
employment contract, which she voluntarily entered into, that the terms of her
engagement shall be governed by prevailing Kuwaiti Civil Service Laws and
Regulations as in fact POEA Rules accord respect to such rules, customs and
practices of the host country, the same was not substantiated.
Indeed, a contract freely entered into is considered the law between the parties
who can establish stipulations, clauses, terms and conditions as they may deem
convenient, including the laws which they wish to govern their respective
obligations, as long as they are not contrary to law, morals, good customs, public
order or public policy.
61
It is hornbook principle, however, that the party invoking the application of a
foreign law has the burden of proving the law, under the doctrine of processual
presumption which, in this case, petitioners failed to discharge. The Court’s ruling in
EDI-Staffbuilders Int’l., v. NLRC10 illuminates:
In the present case, the employment contract signed by Gran specifically states that
Saudi Labor Laws will govern matters not provided for in the contract (e.g. specific
causes for termination, termination procedures, etc.). Being the law intended by
the parties (lex loci intentiones) to apply to the contract, Saudi Labor Laws should
govern all matters relating to the termination of the employment of Gran.
In international law, the party who wants to have a foreign law applied to a dispute
or case has the burden of proving the foreign law. The foreign law is treated as a
question of fact to be properly pleaded and proved as the judge or labor arbiter
cannot take judicial notice of a foreign law. He is presumed to know only domestic
or forum law.
Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the
matter; thus, the International Law doctrine of presumed-identity
approach or processual presumption comes into play. Where a foreign law is not
pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the
same as ours. Thus, we apply Philippine labor laws in determining the issues
presented before us. (emphasis and underscoring supplied)
The Philippines does not take judicial notice of foreign laws, hence, they must not
only be alleged; they must be proven. To prove a foreign law, the party invoking it
must present a copy thereof and comply with Sections 24 and 25 of Rule 132 of the
Revised Rules of Court which reads:
SEC. 24. Proof of official record.  — The record of public documents referred to in
paragraph (a) of Section 19, when admissible for any purpose, may be evidenced by
an official publication thereof or by a copy attested by the officer having the legal
custody of the record, or by his deputy, and accompanied, if the record is not kept
in the Philippines, with a certificate that such officer has the custody. If the office in
which the record is kept is in a foreign country, the certificate may be made by a
secretary of the embassy or legation, consul general, consul, vice consul, or consular
agent or by any officer in the foreign service of the Philippines stationed in the
foreign country in which the record is kept, and authenticated by the seal of his
office. (emphasis supplied)
SEC. 25. What attestation of copy must state. — Whenever a copy of a document or
record is attested for the purpose of the evidence, the attestation must state, in
substance, that the copy is a correct copy of the original, or a specific part thereof,
as the case may be. The attestation must be under the official seal of the attesting
officer, if there be any, or if he be the clerk of a court having a seal, under the seal
of such court.
To prove the Kuwaiti law, petitioners submitted the following: MOA between
respondent and the Ministry, as represented by ATCI, which provides that the
employee is subject to a probationary period of one (1) year and that the host
country’s Civil Service Laws and Regulations apply; a translated copy11 (Arabic to
English) of the termination letter to respondent stating that she did not pass the
probation terms, without specifying the grounds therefor, and a translated copy of
the certificate of termination,12 both of which documents were certified by Mr.
Mustapha Alawi, Head of the Department of Foreign Affairs-Office of Consular
Affairs Inslamic Certification and Translation Unit; and respondent’s letter13 of
reconsideration to the Ministry, wherein she noted that in her first eight (8) months
of employment, she was given a rating of "Excellent" albeit it changed due to
changes in her shift of work schedule.
These documents, whether taken singly or as a whole, do not sufficiently prove that
respondent was validly terminated as a probationary employee under Kuwaiti civil
service laws. Instead of submitting a copy of the pertinent Kuwaiti labor laws duly
authenticated and translated by Embassy officials thereat, as required under the
Rules, what petitioners submitted were mere certifications attesting only to the
correctness of the translations of the MOA and the termination letter which does
not prove at all that Kuwaiti civil service laws differ from Philippine laws and that
under such Kuwaiti laws, respondent was validly terminated. Thus the subject
certifications read:
xxxx
This is to certify that the herein attached translation/s from Arabic to
English/Tagalog and or vice versa was/were presented to this Office for review and
certification and the same was/were found to be in order. This Office, however,
assumes no responsibility as to the contents of the document/s.
This certification is being issued upon request of the interested party for whatever
legal purpose it may serve. (emphasis supplied)1avvphi1
62
Respecting Ikdal’s joint and solidary liability as a corporate officer, the same is in
order too following the express provision of R.A. 8042 on money claims, viz:

SEC. 10. Money Claims.—Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar
days after the filing of the complaint, the claims arising out of an employer-
employee relationship or by virtue of any law or contract involving Filipino workers
for overseas deployment including claims for actual moral, exemplary and other
forms of damages.

The liability of the principal/employer and the recruitment/placement agency for

any and all claims under this section shall be joint and several. This provision shall
be incorporated in the contract for overseas employment and shall be a condition
precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all
money claims or damages that may be awarded to the workers. If the
recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and solidarily
liable with the corporation or partnership for the aforesaid claims and damages.
(emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED.

63