Commonwealth Act No. 327, as amended by Section 26 of Presidential Decree No.

1445 - COA has primary jurisdiction over money claims against government agencies
and instrumentalities

"Under Commonwealth Act No. 327,25 as amended by Section 26 of Presidential

Decree No. 1445,26 it is the COA which has primary jurisdiction over money claims
against government agencies and instrumentalities.

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. (Emphasis supplied.)

Pursuant to its rule-making authority conferred by the 1987 Constitution27 and existing
laws, the COA promulgated the 2009 Revised Rules of Procedure of the Commission on
Audit. Rule II, Section 1 specifically enumerated those matters falling under COA’s
exclusive jurisdiction, which include “[m]oney claims due from or owing to any
government agency.” Rule VIII, Section 1 further provides:

Section 1. Original Jurisdiction - The Commission Proper shall have original jurisdiction
over: a) money claim against the Government; b) request for concurrence in the hiring of
legal retainers by government agency; c) write off of unliquidated cash advances and
dormant accounts receivable in amounts exceeding one million pesos (P1,000,000.00);
d) request for relief from accountability for loses due to acts of man, i.e. theft, robbery,
arson, etc, in amounts in excess of Five Million pesos (P5,000,000.00).

In Euro-Med Laboratories Phil., Inc. v. Province of Batangas,28 we ruled that it is the

COA and not the RTC which has primary jurisdiction to pass upon petitioner’s money
claim against respondent local government unit. Such jurisdiction may not be waived by
the parties’ failure to argue the issue nor active participation in the proceedings. Thus:

This case is one over which the doctrine of primary jurisdiction clearly held sway for
although petitioner’s collection suit for P487,662.80 was within the jurisdiction of the
RTC, the circumstances surrounding petitioner’s claim brought it clearly within the ambit
of the COA’s jurisdiction.

First, petitioner was seeking the enforcement of a claim for a certain amount of money
against a local government unit. This brought the case within the COA’s domain to pass
upon money claims against the government or any subdivision thereof under Section 26
of the Government Auditing Code of the Philippines:

The authority and powers of the Commission [on Audit] shall extend to and comprehend
all matters relating to x x x 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. x x
x.

The scope of the COA’s authority to take cognizance of claims is circumscribed,

however, by an unbroken line of cases holding statutes of similar import to mean only
liquidated claims, or those determined or readily determinable from vouchers, invoices,
and such other papers within reach of accounting officers. Petitioner’s claim was for a
fixed amount and although respondent took issue with the accuracy of petitioner’s
summation of its accountabilities, the amount thereof was readily determinable from the
receipts, invoices and other documents. Thus, the claim was well within the COA’s
jurisdiction under the Government Auditing Code of the Philippines.

Second, petitioner’s money claim was founded on a series of purchases for the medical
supplies of respondent’s public hospitals. Both parties agreed that these transactions
were governed by the Local Government Code provisions on supply and property
management and their implementing rules and regulations promulgated by the COA
pursuant to Section 383 of said Code. Petitioner’s claim therefore involved compliance
with applicable auditing laws and rules on procurement. Such matters are not within the
usual area of knowledge, experience and expertise of most judges but within the special
competence of COA auditors and accountants. Thus, it was but proper, out of fidelity to
the doctrine of primary jurisdiction, for the RTC to dismiss petitioner’s complaint.

Petitioner argues, however, that respondent could no longer question the RTC’s
jurisdiction over the matter after it had filed its answer and participated in the subsequent
proceedings. To this, we need only state that the court may raise the issue of primary
jurisdiction sua sponte and its invocation cannot be waived by the failure of the parties to
argue it as the doctrine exists for the proper distribution of power between judicial and
administrative bodies and not for the convenience of the parties.29 (Emphasis supplied.)

Respondent’s collection suit being directed against a local government unit, such money
claim should have been first brought to the COA.30 Hence, the RTC should have
suspended the proceedings and refer the filing of the claim before the COA. Moreover,
petitioner is not estopped from raising the issue of jurisdiction even after the denial of its
notice of appeal and before the CA."
 REPUBLIC ACT No. 3038

AN ACT INCREASING THE SALARIES OF THE CHAIRMAN AND MEMBERS OF

THE COMMISSION ON ELECTIONS AND AUTHORIZING THE COMMISSION ON
ELECTIONS TO REORGANIZE ITS OFFICE AND FIX THE SALARIES OF ITS
SUBORDINATE OFFICIALS AND EMPLOYEES.

Section 1. The subject to the provisions of Article ten, Section one, of the Constitution of
the Philippines, the Chairman of the Commission on Elections shall receive an annual
salary of sixteen thousand pesos and the other Members fifteen thousand pesos each.

Section 2. Within six months from the date of approval of this Act, the Commission on
Elections may reorganize its office. It may abolish or create departments, divisions,
sections or units, redistribute functions and personnel, change designations of positions
and fix the salaries of its subordinate officials and employees: Provided, That the total
number of existing permanent positions shall not be increased: And Provided, further,
That no permanent employee already in the service of the Commission on Elections
upon the approval of this Act shall be laid off or his salary reduced on account of such
reorganization.

Section 3. The provisions of any law to the contrary notwithstanding, the subordinate
officials and employees of the Commission on Elections shall receive the salary rates
fixed by the Commission without prejudice to whatever benefits they may receive under
Reorganization Plans Numbers one-A and two-A regarding classification and pay, and
other salary laws.

Section 4. The Commission on Elections is hereby authorized to use such sums as are
necessary to carry out the provisions of this Act from any unexpended balances of
existing certifications to accounts payable from any appropriation for the Commission on
Elections. Henceforth, appropriations to cover the salaries of officials and employees of
the Commission on Elections as fixed in accordance with the provisions of this Act shall
be carried in the annual General Appropriation Acts.

Section 5. This Act shall take effect on July one, nineteen hundred sixty-one.
G.R. No. 70853 March 12, 1987

REPUBLIC OF THE PHILIPPINES, petitioner-appellee, 

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

YAP, J.:

Petitioner seeks the review of the decision of the Intermediate Appellate Court dated
April 30, 1985 reversing the order of the Court of First Instance of Camarines Sur,
Branch VI, dated August 21, 1980, which dismissed the complaint of respondent Pablo
Feliciano for recovery of ownership and possession of a parcel of land on the ground of
non-suability of the State.

The background of the present controversy may be briefly summarized as follows:

On January 22, 1970, respondent Feliciano filed a complaint with the then Court of First
Instance of Camarines Sur against the Republic of the Philippines, represented by the
Land Authority, for the recovery of ownership and possession of a parcel of land,
consisting of four (4) lots with an aggregate area of 1,364.4177 hectares, situated in the
Barrio of Salvacion, Municipality of Tinambac, Camarines Sur. Plaintiff alleged that he
bought the property in question from Victor Gardiola by virtue of a Contract of Sale dated
May 31, 1952, followed by a Deed of Absolute Sale on October 30, 1954; that Gardiola
had acquired the property by purchase from the heirs of Francisco Abrazado whose title
to the said property was evidenced by an informacion posesoria that upon plaintiff's
purchase of the property, he took actual possession of the same, introduced various
improvements therein and caused it to be surveyed in July 1952, which survey was
approved by the Director of Lands on October 24, 1954; that on November 1, 1954,
President Ramon Magsaysay issued Proclamation No. 90 reserving for settlement
purposes, under the administration of the National Resettlement and Rehabilitation
Administration (NARRA), a tract of land situated in the Municipalities of Tinambac and
Siruma, Camarines Sur, after which the NARRA and its successor agency, the Land
Authority, started sub-dividing and distributing the land to the settlers; that the property in
question, while located within the reservation established under Proclamation No. 90,
was the private property of plaintiff and should therefore be excluded therefrom. Plaintiff
prayed that he be declared the rightful and true owner of the property in question
consisting of 1,364.4177 hectares; that his title of ownership based on informacion
posesoria of his predecessor-in-interest be declared legal valid and subsisting and that
defendant be ordered to cancel and nullify all awards to the settlers.

The defendant, represented by the Land Authority, filed an answer, raising by way of
affirmative defenses lack of sufficient cause of action and prescription.

On August 29, 1970, the trial court, through Judge Rafael S. Sison, rendered a decision
declaring Lot No. 1, with an area of 701.9064 hectares, to be the private property of the
plaintiff, "being covered by a possessory information title in the name of his predecessor-
in-interest" and declaring said lot excluded from the NARRA settlement reservation. The
court declared the rest of the property claimed by plaintiff, i.e. Lots 2, 3 and 4, reverted
to the public domain.

A motion to intervene and to set aside the decision of August 29, 1970 was filed by
eighty-six (86) settlers, together with the barrio council of Pag-asay, alleging among
other things that intervenors had been in possession of the land in question for more
than twenty (20) years under claim of ownership.

On January 25, 1971, the court a quo reconsidered its decision, reopened the case and
directed the intervenors to file their corresponding pleadings and present their evidence;
all evidence already presented were to remain but plaintiff, as well as the Republic of the
Philippines, could present additional evidence if they so desire. The plaintiff presented
additional evidence on July 30, 1971, and the case was set for hearing for the reception
of intervenors' evidence on August 30 and August 31, 1971.

On August 30, 1971, the date set for the presentation of the evidence for intervenors, the
latter did not appear but submitted a motion for postponement and resetting of the
hearing on the next day, August 31, 1971. The trial court denied the motion for
postponement and allowed plaintiff to offer his evidence "en ausencia," after which the
case would be deemed submitted for decision. On the following day, August 31, 1971,
Judge Sison rendered a decision reiterating his decision of August 29, 1970.

A motion for reconsideration was immediately filed by the intervenors. But before this
motion was acted upon, plaintiff filed a motion for execution, dated November 18, 1971.
On December 10, 1971, the lower court, this time through Judge Miguel Navarro, issued
an order denying the motion for execution and setting aside the order denying
intervenors' motion for postponement. The case was reopened to allow intervenors to
present their evidence. Unable to secure a reconsideration of Judge Navarro's order, the
plaintiff went to the Intermediate Appellate Court on a petition for certiorari. Said petition
was, however, denied by the Intermediate Appellate Court, and petitioners brought the
matter to this Court in G.R. No. 36163, which was denied on May 3, 1973 Consequently,
the case was remanded to the court a quo for further proceedings.

On August 31, 1970, intervenors filed a motion to dismiss, principally on the ground that
the Republic of the Philippines cannot be sued without its consent and hence the action
cannot prosper. The motion was opposed by the plaintiff.

On August 21, 1980, the trial court, through Judge Esteban Lising, issued the
questioned order dismissing the case for lack of jurisdiction. Respondent moved for
reconsideration, while the Solicitor General, on behalf of the Republic of the Philippines
filed its opposition thereto, maintaining that the dismissal was proper on the ground of
non-suability of the State and also on the ground that the existence and/or authenticity of
the purported possessory information title of the respondents' predecessor-in-interest
had not been demonstrated and that at any rate, the same is not evidence of title, or if it
is, its efficacy has been lost by prescription and laches.

Upon denial of the motion for reconsideration, plaintiff again went to the Intermediate
Appellate Court on petition for certiorari. On April 30, 1985, the respondent appellate
court rendered its decision reversing the order of Judge Lising and remanding the case
to the court a quo for further proceedings. Hence this petition.

We find the petition meritorious. The doctrine of non-suability of the State has proper
application in this case. The plaintiff has impleaded the Republic of the Philippines as
defendant in an action for recovery of ownership and possession of a parcel of land,
bringing the State to court just like any private person who is claimed to be usurping a
piece of property. A suit for the recovery of property is not an action in rem, but an
action in personam. 1 It is an action directed against a specific party or parties, and any
judgment therein binds only such party or parties. The complaint filed by plaintiff, the
private respondent herein, is directed against the Republic of the Philippines,
represented by the Land Authority, a governmental agency created by Republic Act No.
3844.

By its caption and its allegation and prayer, the complaint is clearly a suit against the
State, which under settled jurisprudence is not permitted, except upon a showing that
the State has consented to be sued, either expressly or by implication through the use of
statutory language too plain to be misinterpreted.2 There is no such showing in the
instant case. Worse, the complaint itself fails to allege the existence of such consent.
This is a fatal defect, 3 and on this basis alone, the complaint should have been
dismissed.

The failure of the petitioner to assert the defense of immunity from suit when the case
was tried before the court a quo, as alleged by private respondent, is not fatal. It is now
settled that such defense "may be invoked by the courts sua sponte at any stage of the
proceedings." 4

Private respondent contends that the consent of petitioner may be read from the
Proclamation itself, when it established the reservation " subject to private rights, if any
there be. " We do not agree. No such consent can be drawn from the language of the
Proclamation. The exclusion of existing private rights from the reservation established by
Proclamation No. 90 can not be construed as a waiver of the immunity of the State from
suit. Waiver of immunity, being a derogation of sovereignty, will not be inferred lightly.
but must be construed in strictissimi juris. 5Moreover, the Proclamation is not a
legislative act. The consent of the State to be sued must emanate from statutory
authority. Waiver of State immunity can only be made by an act of the legislative body.

Neither is there merit in respondent's submission, which the respondent appellate court
sustained, on the basis of our decision in the Begosa case, 6 that the present action is
not a suit against the State within the rule of State immunity from suit, because plaintiff
does not seek to divest the Government of any of its lands or its funds. It is contended
that the complaint involves land not owned by the State, but private land belonging to the
plaintiff, hence the Government is not being divested of any of its properties. There is
some sophistry involved in this argument, since the character of the land sought to be
recovered still remains to be established, and the plaintiff's action is directed against the
State precisely to compel the latter to litigate the ownership and possession of the
property. In other words, the plaintiff is out to establish that he is the owner of the land in
question based, incidentally, on an informacion posesoria of dubious value, and he
seeks to establish his claim of ownership by suing the Republic of the Philippines in an
action in personam.
The inscription in the property registry of an informacion posesoria under the Spanish
Mortgage Law was a means provided by the law then in force in the Philippines prior to
the transfer of sovereignty from Spain to the United States of America, to record a
claimant's actual possession of a piece of land, established through an ex
parte proceeding conducted in accordance with prescribed rules. 7 Such inscription
merely furnishes, at best, prima facieevidence of the fact that at the time the proceeding
was held, the claimant was in possession of the land under a claim of right as set forth in
his application. 8 The possessory information could ripen into a record of ownership after
the lapse of 20 years (later reduced to 10 years), upon the fulfillment of the requisites
prescribed in Article 393 of the Spanish Mortgage Law.

There is no showing in the case at bar that the informacion posesoria held by the

respondent had been converted into a record of ownership. Such possessory
information, therefore, remained at best mere prima facie evidence of possession. Using
this possessory information, the respondent could have applied for judicial confirmation
of imperfect title under the Public Land Act, which is an action in rem. However, having
failed to do so, it is rather late for him to pursue this avenue at this time. Respondent
must also contend, as the records disclose, with the fact admitted by him and stated in
the decision of the Court a quo that settlers have been occupying and cultivating the
land in question since even before the outbreak of the war, which puts in grave doubt his
own claim of possession.

Worthy of note is the fact, as pointed out by the Solicitor General, that the informacion
posesoria registered in the Office of the Register of Deed of Camarines Sur on
September 23, 1952 was a "reconstituted" possessory information; it was "reconstituted
from the duplicate presented to this office (Register of Deeds) by Dr. Pablo Feliciano,"
without the submission of proof that the alleged duplicate was authentic or that the
original thereof was lost. Reconstitution can be validly made only in case of loss of the
original. 10 These circumstances raise grave doubts as to the authenticity and validity of
the "informacion posesoria" relied upon by respondent Feliciano. Adding to the
dubiousness of said document is the fact that "possessory information calls for an area
of only 100 hectares," 11 whereas the land claimed by respondent Feliciano comprises
1,364.4177 hectares, later reduced to 701-9064 hectares. Courts should be wary in
accepting "possessory information documents, as well as other purportedly old Spanish
titles, as proof of alleged ownership of lands.

WHEREFORE, judgment is hereby rendered reversing and setting aside the appealed
decision of the Intermediate Appellate Court, dated April 30, 1985, and affirming the
order of the court a quo, dated August 21, 1980, dismissing the complaint filed by
respondent Pablo Feliciano against the Republic of the Philippines. No costs.

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

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

Crossfield and O'Brien for plaintiff.

Attorney-General Avanceña for defendant..

TRENT, J.:

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

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

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

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

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

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

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

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

According to the various merchants who testified as witnesses, the plaintiff's

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

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

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

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

As the negligence which caused the collision is a tort committed by an agent or

employee of the Government, the inquiry at once arises whether the Government is
legally-liable for the damages resulting therefrom.

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

An Act authorizing E. Merritt to bring suit against the Government of the

Philippine Islands and authorizing the Attorney-General of said Islands to appear
in said suit.

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

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

Whereas the Director of Public Works and the Attorney-General recommended

that an Act be passed by the Legislature authorizing Mr. E. Merritt to bring suit in
the courts against the Government, in order that said questions may be decided:
Now, therefore,

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

that:

SECTION 1. E. Merritt is hereby authorized to bring suit in the Court of First

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

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

Enacted, February 3, 1915.

Did the defendant, in enacting the above quoted Act, simply waive its immunity from suit
or did it also concede its liability to the plaintiff? If only the former, then it cannot be held
that the Act created any new cause of action in favor of the plaintiff or extended the
defendant's liability to any case not previously recognized.
All admit that the Insular Government (the defendant) cannot be sued by an individual
without its consent. It is also admitted that the instant case is one against the
Government. As the consent of the Government to be sued by the plaintiff was entirely
voluntary on its part, it is our duty to look carefully into the terms of the consent, and
render judgment accordingly.

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

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

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

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

No claim arises against any government is favor of an individual, by reason of the

misfeasance, laches, or unauthorized exercise of powers by its officers or
agents. (Citing Gibbons vs. U. S., 8 Wall., 269; Clodfelter vs. State, 86 N. C., 51,
53; 41 Am. Rep., 440; Chapman vs. State, 104 Cal., 690; 43 Am. St. Rep., 158;
Green vs. State, 73 Cal., 29; Bourn vs. Hart, 93 Cal., 321; 27 Am. St. Rep., 203;
Story on Agency, sec. 319.)

As to the scope of legislative enactments permitting individuals to sue the state where
the cause of action arises out of either fort or contract, the rule is stated in 36 Cyc., 915,
thus:
 By consenting to be sued a state simply waives its immunity from suit. It does not
thereby concede its liability to plaintiff, or create any cause of action in his favor,
or extend its liability to any cause not previously recognized. It merely gives a
remedy to enforce a preexisting liability and submits itself to the jurisdiction of the
court, subject to its right to interpose any lawful defense.

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

SECTION 1. Authority is hereby given to George Apfelbacher, of the town of

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

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

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

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

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

And the court said:

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

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

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

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

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

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

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

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

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

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

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

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

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

For the foregoing reasons, the judgment appealed from must be reversed, without costs
in this instance. Whether the Government intends to make itself legally liable for the
amount of damages above set forth, which the plaintiff has sustained by reason of the
negligent acts of one of its employees, by legislative enactment and by appropriating
sufficient funds therefor, we are not called upon to determine. This matter rests solely
with the Legislature and not with the courts.
 [G.R. No. L-36084. August 31, 1977.]

REPUBLIC OF THE PHILIPPINES, Petitioner, v. HONORABLE AMANTE P.

PURISIMA, the Presiding Judge of the Court of First Instance of Manila (Branch
VII), and YELLOW BALL FREIGHT LINES, INC., Respondents.

Solicitor General Estelito P. Mendoza, Assistant Solicitor General Santiago M.

Kapunan, Solicitor Oscar C. Fernandez and Special Attorney Renato P. Mabugat
for Petitioner.

Jose Q. Calingo for Private Respondent.

DECISION

FERNANDO, J.:

The jurisdictional issued raised by Solicitor General Estelito P. Mendoza on behalf of the
Republic of the Philippines in this certiorari and prohibition proceeding arose from the
failure of respondent Judge Amante P. Purisima of the Court of First Instance of Manila
to apply the well-known and of reiterated doctrine of the non-suability of a State,
including its offices and agencies, from suit without its consent. It was so alleged in a
motion to dismiss filed by defendant Rice and Corn Administration in a pending civil suit
in the sala of respondent Judge for the collection of a money claim arising from an
alleged breach of contract, the plaintiff being private respondent Yellow Ball Freight
Lines, Inc. 1 Such a motion to dismiss was filed on September 7, 1972. At that time, the
leading case of Mobil Philippines Exploration, Inc. v. Customs Arrastre Service, 2 were
Justice Bengzon stressed the lack of jurisdiction of a court to pass on the merits of a
claim against any office or entity acting as part of the machinery of the national
government unless consent be shown, had been applied in 53 other decisions. 3 There
is thus more than sufficient basis for an allegation of jurisdictional infirmity against the
order of respondent Judge denying the motion to dismiss dated October 4, 1972. 4 What
is more, the position of the Republic has been fortified with the explicit affirmation found
in this provision of the present Constitution: "The State may not be sued without its
consent." 5 

The merit of the petition for certiorari and prohibition is thus obvious.

1. There is pertinence to this excerpt from Switzerland General Insurance Co., Ltd. v.
Republic of the Philippines: 6 "The doctrine of non-suability recognized in this jurisdiction
even prior to the effectivity of the [1935] Constitution is a logical corollary of the positivist
concept of law which, to para-phrase Holmes, negates the assertion of any legal right as
against the state, in itself the source of the law on which such a right may be predicated.
Nor is this all. Even if such a principle does give rise to problems, considering the vastly
expanded role of government enabling it to engage in business pursuits to promote the
general welfare, it is not obeisance to the analytical school of thought alone that calls for
its continued applicability. Why it must continue to be so, even if the matter be viewed
sociologically, was set forth in Providence Washington Insurance Co. v. Republic thus:
’Nonetheless, a continued adherence to the doctrine of non-suability is not to be
deplored for as against the inconvenience that may be caused private parties, the loss of
governmental efficiency and the obstacle to the performance of its multifarious functions
are far greater if such a fundamental principle were abandoned and the availability of
judicial remedy were not thus restricted. With the well-known propensity on the part of
our people to go to court, at the least provocation, the loss of time and energy required
to defend against law suits, in the absence of such a basic principle that constitutes such
an effective obstacle, could very well be imagined.’" 7 It only remains to be added that
under the present Constitution which, as noted, expressly reaffirmed such a doctrine, the
following decisions had been rendered: Del Mar v. The Philippine Veterans
Administration; 8 Republic v. Villasor; 9 Sayson v. Singson; 10 and Director of the
Bureau of Printing v. Francisco. 11 

2. Equally so, the next paragraph in the above opinion from the Switzerland General
Insurance Company decision is likewise relevant: "Nor is injustice thereby caused
private parties. They could still proceed to seek collection of their money claims by
pursuing the statutory remedy of having the Auditor General pass upon them subject to
appeal to judicial tribunals for final adjudication. We could thus correctly conclude as we
did in the cited Providence Washington Insurance decision: ’Thus the doctrine of non-
suability of the government without its consent, as it has operated in practice, hardly
lends itself to the charge that it could be the fruitful parent of injustice, considering the
vast and ever-widening scope of state activities at present being undertaken. Whatever
difficulties for private claimants may still exist, is, from an objective appraisal of all
factors, minimal. In the balancing of interests, so unavoidable in the determination of
what principles must prevail if government is to satisfy the public weal, the verdict must
be, as it has been these so many years, for its continuing recognition as a fundamental
postulate of constitutional law.’" 12 

3. Apparently respondent Judge was misled by the terms of the contract between the
private respondent, plaintiff in his sala, and defendant Rice and Corn Administration
which, according to him, anticipated the case of a breach of contract within the parties
and the suits that may thereafter arise. 13 The consent, to be effective though, must
come from the State acting through a duly enacted statute as pointed out by Justice
Bengzon in Mobil. Thus, whatever counsel for defendant Rice and Corn Administration
agreed to had no binding force on the government. That was clearly beyond the scope of
his authority. At any rate, Justice Sanchez, in Ramos v. Court of Industrial Relations, 14
was quite categorical as to its "not [being] possessed of a separate and distinct
corporate existence. On the contrary, by the law of its creation, it is an office directly
’under the Office of the President of the Philippines.’" 15 

WHEREFORE, the petition for certiorari is granted and the resolution of October 4, 1972
denying the motion to dismiss filed by the Rice and Corn Administration nullified and set
aside and the petition for prohibition is likewise granted restraining respondent Judge
from acting on Civil Case No. 79082 pending in his sala except for the purpose of
ordering its dismissal for lack of jurisdiction. The temporary restraining order issued on
February 8, 1973 by this Court is made permanent except for the above-mentioned
purpose of definitely terminating this case. Costs against Yellow Ball Freight Lines,
Inc.cralawnad
 [G.R. No. L-26400. February 29, 1972.]

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

of Public Highways and REPUBLIC OF THE PHILIPPINES, Defendants-Appellees.

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

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

SYLLABUS

1. POLITICAL LAW; EMINENT DOMAIN; PROJECT USED BY GOVERNMENT FOR

ROAD PURPOSES; RIGHTS OR REGISTERED OWNER TO DUE COMPENSATION
ANYTIME. — Considering that no annotation in favor of the government appears at the
back of her certificate of title and that she has not executed any deed of conveyance of
any portion of her lot to the government, the appellant remains the owner of the whole
lot. As registered owner, she could bring an action to recover possession of the portion
of land in question at anytime because possession is one of the attributes of ownership.
However, since restoration of possession of said portion by the government is neither
convenient nor feasible at this time because it has been and is now being used for road
purposes, the only relief available is for the government to make due compensation
which it could and should have done years ago.

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

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

DECISION

MAKALINTAL, J.:

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

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

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

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

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

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

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

In the case of Ministerio v. Court of First Instance of Cebu, 1 involving a claim for
payment of the value of a portion of land used for the widening of the Gorordo Avenue in
Cebu City, this Court, through Mr. Justice Enrique M. Fernando, held that where the
government takes away property from a private landowner for public use without going
through the legal process of expropriation or negotiated sale, the aggrieved party may
properly maintain a suit against the government without thereby violating the doctrine of
governmental immunity from suit without its consent. We there
said:jgc:chanrobles.com.ph

". . . If the constitutional mandate that the owner be compensated for property taken for
public use were to be respected, as it should, then a suit of this character should not be
summarily dismissed. The doctrine of governmental immunity from suit cannot serve as
an instrument for perpetrating an injustice on a citizen. Had the government followed the
procedure indicated by the governing law at the time, a complaint would have been filed
by it, and only upon payment of the compensation fixed by the judgment, or after tender
to the party entitled to such payment of the amount fixed, may it have the right to enter in
and upon the land so condemned, to appropriate the same to the public use defined in
the judgment.’ If there were an observance of procedural regularity, petitioners would not
be in the sad plaint they are now. It is unthinkable then that precisely because there was
a failure to abide by what the law requires, the government would stand to benefit. It is
just as important, if not more so, that there be fidelity to legal norms on the part of
officialdom if the rule of law were to be maintained. It is not too much to say that when
the government takes any property for public use, which is conditioned upon the
payment of just compensation, to be judicially ascertained, it makes manifest that it
submits to the jurisdiction of a court. There is no thought then that the doctrine of
immunity from suit could still be appropriately invoked."cralaw virtua1aw library

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

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

WHEREFORE, the decision appealed from is hereby set aside and the case remanded
to the court a quo for the determination of compensation, including attorney’s fees, to
which the appellant is entitled as above indicated. No pronouncement as to costs.
G.R. Nos. L-71998-99 June 2, 1993

EMILIANO R. DE LOS SANTOS, SPOUSES NORMA A. PADILLA and ISIDORO L.

PADILLA and the HEIRS OF FRANCISCO DAYRIT, petitioners, 
vs.
THE HON. INTERMEDIATE APPELLATE COURT, HON. JUDGE CICERRO C.
JURADO and EDILBERTO CADIENTE, respondents.

Isidoro L. Padilla for petitioners.

Joaquin G. Mendoza for E. Cadiente.

ROMERO, J.:

Questioned in the instant petition for review on certiorari is the Decision of the then
Intermediate Appellate Court1affirming the December 1, 1982 order of the then Court of
First Instance of Rizal, Branch XXII at Pasig2 in civil Cases Nos. 46800 which states in
toto:

It appearing that the construction of the road and creek in question was a
project undertaken under the authority of the Minister of Public Works, the
funding of which was the responsibility of the National Government and
that the defendants impleaded herein are Edilberto Cadiente and Nestor
Agustin and not the Republic of the Philippines which cannot be sued
without its consent, this court hereby resolves to dismiss these two (2)
cases without pronouncement as to costs.

SO ORDERED.

Civil Cases Nos. 46800 and 46801 were both filed on July 13, 1982 by petitioners who
are co-owners under TCT No. 329945 of a parcel of land located in Barrio Wawa,
Binangonan, Rizal with an area of nineteen thousand sixty-one (19,061) square meters.
In Civil Case No. 46800, petitioners alleged in the petition for prohibition that in October
1981, without their knowledge or consent, Lorenzo Cadiente, a private contractor and
the Provincial Engineer of Rizal constructed a road nine (9) meters wide and one
hundred twenty-eight meters and seventy centimeters (128.70) long occupying a total
area of one thousand one hundred sixty-five (1,165) square meters of their land.

Petitioners added that aside from the road, the said respondents also constructed,
without their knowledge and consent, an artificial creek twenty three meters and twenty
centimeters (23.20) wide and one hundred twenty-eight meters and sixty-nine
centimeters long (128.69) occupying an area of two thousand nine hundred six (2,906)
square meters of their property. Constructed in a zig-zag manner, the creek meandered
through their property.
Alleging that it completed, the road and the creek would "serve no public profitable and
practicable purpose but for respondents' personal profit, to the great damage and
prejudice of the taxpayers and the petitioners," the same petitioners invoked their rights
under Art. IV Secs. 1 and 2, of the Bill of Rights of the 1973 Constitution and prayed for
the issuance of restraining order or a writ of preliminary injunction to stop the
construction. They also prayed that after hearing on the merits, judgment be rendered:
(1) declaring illegal the construction of the road and artificial creek which was made
without their knowledge and consent, "without due process and without just
compensation and in violation of the provision of statute law and of the Philippine
Constitution;" (2) issuing a permanent prohibition; (3) ordering respondents to pay
petitioners "jointly and collectively" P15,00.00 as attorney's fees and P600.00 for each
appearance, and (4) ordering the respondents to pay the costs of the suit.3

An action for damages, Civil Case No. 46801 on the other hand, was founded on Art. 32,
paragraphs 6 and 7 of the Civil Code and the constitutional provisions on the right
against deprivation of property without due process of law and without just
compensation.

Thereafter, the two cases were consolidated. On November 11, 1982, the Solicitor
General filed a motion to dismiss both cases on the following grounds: (a) with respect to
Civil Case No. 46800, the pendency of Civil Case No. 46801 which involved the same
parties and cause of action; (b) both cases were in reality suits against the state which
could not be maintained without the State's consent; and (c) lack of cause of action.

Consequently, the lower court issued the aforequoted Order of December 1, 1982. Their
motion for the reconsideration of said Order having been denied, petitioners elevated
(to) the cases to this Court through an "appeal by certiorari" which was docketed as G.
R. No. 63610. The Second Division of this Court, however, referred the cases to the then
Intermediate Appellate Court pursuant to Sec. 16 of the Interim Rules.4 In due course,
the Appellate court rendered a Decision on May 22, 1985 which disposed of the cases
thus:

Accordingly, the two actions cannot be maintained. They are in reality

suits against the state which has not given its consent to be sued
(Minister [sic] vs. CFI, 40 SCRA 464; Isberto vs. Raquiza, 67 SCRA 116;
Begosa v. Chairman, PVA, 32 SCRA 466). Appellants' remedy lies
elsewhere.

Appellants assert that the taking of their property in the manner alleged in
these two cases was without due process of law. This is not correct. The
appealed order has not closed the door to appellants right, if any, to just
compensation for the alleged area of their land which was expropriated.
The court below dismissed the cases for lack of consent on the part of the
state to be sued herein. We repeat appellants' remedy for just
compensation lies elsewhere.

WHEREFORE, the order appealed from is in full accord with the evidence
and the law and is hereby therefore affirmed in all its parts. Costs against
appellants.
 SO ORDERED.5

Consequently, petitioners elevated the cases to this Court through a petition for review
on certiorari. The petition is anchored on the ruling of the Court in Amigable v.
Cuenca6 which states: ". . . . where the government takes away property from a private
landowner for public use without going through the legal process of expropriation or
negotiated sale," a suit may properly be maintained against the government.

We hold for the petitioners.

That the principle of state immunity from suit cannot be invoked to defeat petitioners'
claim has long been settled. In Ministerio v. Court of First Instance of Cebu,7 the Court
held:

. . . . The doctrine of governmental immunity from suit cannot serve as an

instrument for perpetrating an injustice on a citizen. Had the government
followed the procedure indicated by the governing law at the time, a
complaint would have been filed by it, and only upon payment of the
compensation fixed by the judgment, or after tender to the party entitled
to such payment of the amount fixed, may it "have the right to enter in and
upon the land so condemned" to appropriate the same to the public use
defined in the judgment. If there were an observance of procedural
regularity, petitioners would not be in the said plaint they are now. It is
unthinkable then that precisely because there was a failure to abide by
what the law requires, the government would stand to benefit. It just as
important, if not more so, that there be fidelity to legal norms on the part
of the 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.

We find the facts of the Ministerio case on all fours with the instant cases insofar as the
fact that the respondent government officials executed a shortcut in appropriating
petitioners' property for public use is concerned. As in the Amigable case, no
expropriation proceedings were initiated before construction of the projects began. In like
manner, nowhere in his pleadings in the cases at bar does the Solicitor General mention
that the fact that expropriation proceedings had in fact been undertaken before the road
and artificial creek were constructed. Thus, quoting the answer of the defendants in Civil
Case No. 46801, the Solicitor General summarized the facts which defendants
considered as constituting justification for the construction as follows:

10. The construction of the road and creek in question on the property
which at the time was said to be public property, was initiated, and
construction effected, through the usual and ordinary course, as shown
by the following:

a. November 5, 1979 — Engr. Data who was the

incumbent District Engineer submitted (thru channels)
plans, program of works and detailed estimates for
approval of higher authorities, thru the initiation of Mayor
Ynares and Assemblyman Gilberto Duavit;

b. February 18, 1980 — Regional Director Eduardo L.

Lagunilla, MPW Region IV, EDSA, Quezon City endorsed
said request to the Minister of Public Works;.

c. February 13, 1981 — Assemblyman Gilberto Duavit sent

a hand-written follow-up note regarding the project;

d. June 17, 1981 — The undersigned defendant Nestor

Agustin was designated Chief Civil Engineer of the Rizal
Engineer District, Vice Engr. Cresencio Data who reached
his compulsory retirement age;

e. September 23, 1981 — Funds in the amount of

P588,000.00 was released for partial implementation of the
project. The total amount requested was P1,200,000. 00;

f. October 19, 1981 — The undersigned submitted a

request to the MPWH Central Office seeking authority to
effect implementation of the project;

g. October 29, 1981 — The Regional Director approved

the plans and program of works for the project in the
amount of P588,000.00;

h. November 11, 1981 — The Honorable Minister Jesus S.

Hipolito granted the request to undertake the
implementation of the project;

i. November 25, 1981 — Project implementation was

started;

j. March 3, 1982 — Construction of rock bulkhead was

completed;

k. November 23, 1982 — P249,000.00 was released for

improvement (deepening and diverting of flow) of
Binangonan River which was a complimentary structure of
Binangonan port system;

l. April 9, 1982 — Implementation was started. Contract for

this project was approved by the Regional Director in favor
of EDILBERTO CADIENTE CONSTRUCTION;

m. May 21, 1982 — Deepening slightly of the adjacent

portion of the rock bulkhead was completed.
 11. The construction of the structures was done in good faith;

The construction of the roadway and deepening of the creek was

designated to generate for the municipality of Binangonan, Rizal more
benefits in the form of substantial revenue from fishing industry, parking
area, market rentals, development site, and road system improvements.
The area covered by said public improvements is part of the Laguna Lake
area which is submerged in water even during dry season. The municipal
mayor of Binangonan, Rizal stated that said area is public property.8

Public respondents' belief that the property involved is public, even if buttressed by
statements of other public officials, is no reason for the unjust taking of petitioners'
property. As TCT No. 329945 shows, the property was registered under the Torrens
system in the names of "Emiliano R. de los Santos, married to Corazon Dayrit; and
Norma Alabastro, married to Isidro L. Padilla" as early as March 29, 1971. Had the
public respondents, including the other officials involved in the construction, performed
their functions by exercising even the ordinary diligence expected of them as public
officials, they would not have failed to note that the property is a private one. A public
infrastructure losses its laudability if, in the process of undertaking it, private rights are
disregarded. In this connection, the Court said in Republic v. Sandiganbayan:9

It can hardly be doubted that in exercising the right of eminent domain,

the State exercises its jus imperii, as distinguished from its proprietary
rights of jus gestionis. Yet, even in that area, it has been held that where
private property has been taken in expropriation without just
compensation being paid, the defense of immunity from suit cannot be set
up by the State against an action for payment by the owner.

Public respondents' assertion that the project had been completed on May 21, 1982
meets strong opposition from the petitioners who insist that the project "until now is not
yet finished."10 This factual issue needs determination which only the trial court can
undertake. Thus, the need for a full blown trial on the merits. We do not subscribe to the
appellate court's suggestion that the remedy of the petitioners "lies elsewhere."

The filing of another case to determine just compensation is superfluous. The issue may
be threshed out below for practical reasons in the event that it is shown later that it is no
longer possible to prohibit the public respondents from continuing with the public work.
As held in the Amigable case, damages may be awarded the petitioners in the form of
legal interest on the price of the land to be reckoned from the time of the unlawful taking.

WHEREFORE, the petition is hereby GRANTED and Civil Cases Nos. 46800 and 46801
shall be REMANDED to the lower court for trial on the merits after the Republic of the
Philippines shall have been impleaded as defendant in both cases.
 [G.R. No. L-6060. September 30, 1954.]

FERNANDO A. FROILAN, Plaintiff-Appellee, v. PAN ORIENTAL SHIPPING

CO., Defendant-Appellant, REPUBLIC OF THE PHILIPPINES, Intervenor-Appellee. 

Quisumbing, Sycip, Quisumbing & Salazar, for Appellant. 

Ernesto Zaragoza, for Appellee. 

Hilarion U. Jarencio, for the intervenor.

SYLLABUS

1. PLEADING AND PRACTICE; COMPLAINT IN INTERVENTION; COUNTERCLAIM

NOT BARRED BY PRIOR JUDGMENT FOR FAILURE TO APPEAL FROM DISMISSAL
OF COMPLAINT IN INTERVENTION WITH RESERVATION. — An order dismissing the
complaint in intervention after a counterclaim has been filed but reserving the right of the
defendant as against the intervenor, does not bar at the defendant from proceeding with
its counterclaim against the intervenor, notwithstanding the failure of the defendant to
appeal from said order. 

2. ID.; ID.; ID.; COUNTERCLAIM FOR SPECIFIC PERFORMANCE STATES A CAUSE

OF ACTION. — The complaint in the intervention sought to recover possession of the
vessel in question from the plaintiff, which claim is adverse to the position assumed by
the defendant that it has a better right to said possession than the plaintiff, on the theory
that the latter had already lost his rights over the same, and that, on the other hand, the
defendant is relying on the charter contract executed in its favor by the intervenor. Held:
The counterclaim calls for specific performance on the part of the intervenor and
therefore states a cause of action. 

3. ID.; ID.; ID.; ID.; FILING OF COMPLAINT N INTERVENTION BY THE

GOVERNMENT IS WAIVER OF NONSUABILITY. — The filing by the Government of a
complaint in intervention is in effect a wavier of its right of nonsuability.

DECISION

PARAS, C.J. :

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

"1. On February 3, 1951, plaintiff-appellee, Fernando A. Froilan, filed a complaint against

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

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

"3. On March 1, 1951, Pan Oriental Shipping Co. filed its answer denying the right of
Froilan to the possession of the said vessel; it alleged that the action of the Cabinet on
August 25, 1950, restoring Froilan to his rights under his original contract with the
Shipping Commission was null and void; that, in any event, Froilan had not complied
with the condition precedent imposed by the Cabinet for the restoration of his rights to
the vessel under the original contract; that it suffered damages in the amount of P22,
764.59 for wrongful replevin in the month of February, 1951, and the sum of P17,651.84
a month as damages suffered for wrongful replevin from March 1, 1951; it is alleged that
it has incurred necessary and useful expenses on the vessel amounting to P127,057.31
and claimed the right to retain said vessel until its useful and necessary expenses had
been reimbursed (Rec. on App. pp. 8-53). 

"4. On November 10, 1951, after the leave of the lower court had been obtained, the
intervenor-appellee, Government of the Republic of the Philippines, filed a complaint in
intervention alleging that Froilan had failed to pay to the Shipping Commission (which
name was later changed to Shipping Administration) the balance due on the purchase
price of the vessel in question, the interest excluding the dry-docking expenses incurred
on said vessel by the session of the said vessel either under the terms of the original
contract as supplemented by Froilan’s letter dated January 28, 1949, or in order that it
may cause the extrajudicial sale thereof under the Chattel Mortgage Law. It, therefore,
prayed that Froilan be declared to be without any rights on said vessel and the amounts
he paid thereon forfeited or alternately that the said vessel be delivered to the Board of
Liquidators in order that the intervenor may have its chattel mortgage extrajudicially
foreclosed in accordance with the provisions of the Chattel Mortgage Law; and that
pending the hearing on the merits, the said vessel be delivered to its (Rec. on App. pp.
54-66). 

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

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

"7. On December 7, 1951, the Government of the Republic of the Philippines brought the
matter of said payment and the circumstances surrounding it to the attention of the lower
court ’in order that they may be taken into account by this Honorable Court in connection
with question that are now pending before it for determination’ (Rec. on App. pp. 82-86). 

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

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

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

"11. It is from this order of the lower court dismissing its counterclaim against the
Government of the Republic of the Philippines that Pan Oriental Shipping Co. has
perfected the present appeal (Rec. App. pp. 107)."cralaw virtua1aw library
The order of the Court of First Instance of Manila, dismissing the counterclaim of the
defendant Pan Oriental Shipping Co., from which the latter has appealed, reads as
follows:jgc:chanrobles.com.ph

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

"The counterclaim stated as follows:chanrob1es virtual 1aw library

‘COUNTERCLAIM

‘As counterclaim against the intervenor Republic of the Philippines, the defendant
alleges:chanrob1es virtual 1aw library

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

‘2. That, as shown by the allegations of the foregoing answer to the complaint in
intervention, the defendant Pan Oriental Shipping Company is entitled to the possession
of the vessel and the intervenor Republic of the Philippines is bound under the contract
of charter with option to purchase it entered into with the defendant to deliver that
possession to the defendant — whether it actually has the said possession from the
plaintiff Fernando A. Froilan and deliver the same to the defendant;

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

‘RELIEF

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

‘The defendant prays for such other remedy as the Court may deem just and equitable in
the premises."cralaw virtua1aw library

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

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

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

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

"It appearing, therefore, that the grounds of the motion to dismiss are well taken, the
counterclaim of the defendant is dismissed, without pronouncement as to costs."cralaw
virtua1aw library

The defendant’s appeal is predicated upon the following assignments of

error:jgc:chanrobles.com.ph

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

II. The lower court erred in dismissing the counterclaim on the ground that the
counterclaim had no foundation because made to a complaint in intervention that over
the intervenor Republic of the Philippines. 

III. The lower court erred in dismissing the counterclaim on the ground of alleged lack of
jurisdiction over the intervenor Republic of the Philippines."cralaw virtua1aw library

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

The defendant’s failure to appeal from the order of February 8 cannot, therefore, be held
as barring the defendant from proceeding with its counterclaim, since, as already stated,
said order preserved its right as against the intervenor. Indeed, the maintenance of said
right is in consonance with Rule 30, section 2, of the Rules of Court providing that "if a
counterclaim has been pleaded by a defendant prior to the service upon him of the
plaintiff’s motion to dismiss, the action shall not be dismissed against the defendant’s
objection unless the counterclaim can remain pending for independent adjudication by
the court."cralaw virtua1aw library

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

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

"The immunity of the state from the suits does not deprive it of the right to sue private
parties in its own courts. The state as plaintiff may avail itself of the different forms of
actions open to private litigants. In short, by taking the initiative in an action against a
private party, the state surrenders its privileged position and comes down to the level of
the defendant. The latter automatically acquires, within certain limits, the right to set up
whatever claims and other defense he might have against the state. The United States
Supreme Court thus explains:chanrob1es virtual 1aw library

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

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

Wherefore, the appealed order is hereby reversed and set aside and the case remanded
to the lower court for further proceedings. So ordered, without costs. 
 [G.R. No. L-8587. March 24, 1960.]

BENITO E. LIM, as administrator of the Intestate Estate of Arsenia Enriquez,

plaintiff and appellant, v. HERBERT BROWNELL, JR., Attorney General of the
United States, and ASAICHI KAGAWA, defendants and appellees, REPUBLIC OF
THE PHILIPPINES, intervenor and appellee. 

Angel S. Gamboa for Appellant. 

Townsend, Gilbert, Santos & Patajo for Appellee. 

Alfredo Catolico for intervenor.

SYLLABUS

1. CONSTITUTIONAL LAW; IMMUNITY OF THE STATE FROM SUIT; WHEN IT

CANNOT BE INVOKED. — The immunity of the state from suit cannot be invoked where
the action is instituted by a person who is neither an enemy or ally of an enemy for the
purpose of establishing his right, title or interest in vested Congressional consent to such
suit has expressly been given by the United States in Section of the Philippines Property
Act of 1946. 

2. ID.; ID.; TRADING WITH THE ENEMY ACT; SUIT FOR DAMAGES NOT PROPER.
— The relief available to a person claiming enemy property which has been vested by
the Philippine Alien Property Custodian is limited to those expressly provided for in the
Trading with Enemy Act, which does not include a suit for damages for the use of such
vested property. That action is not one of those authorized under the Act which may be
instituted in the appropriate courts of the Philippines under the provisions of Section 3 of
the Philippine Property Act of 1946. Congressional consent to such suit has not been
granted. 

3. ID.; ID.; WHERE CLAIM CONSTITUTES CHARGE OR FINANCIAL LIABILITY TO

THE GOVERNMENT. — Where the claim against the Republic of the Philippines
constitutes a charge against, or financial liability to the Government, it cannot be
entertained by the courts except with the consent of such government. 

4. ID.; ID.; PRIVILEGE NOT LOST BY INTERVENTION OF THE STATE MERELY TO

RESIST PLAINTIFF’S CLAIMS. — In the case at bar the Republic of the Republic of the
Philippine intervened in the case merely to unite the defendant Attorney General of the
United States in resisting plaintiff’s claims, and for that reason asked no affirmative relief
against any party in the answer in intervention it filed, and in its answer to the amended
complaint, "reproduced and incorporated by reference" all the affirmative defenses
contained in the answer of the defendant Attorney General, one of which is that the
lower court had no jurisdiction over the claim for rentals because of lack of consent to be
sued. Held: This is not a case where the state takes the initiative against a private party
by filing a complaint in intervention, thereby surrendering its privileged position and
coming down to the level of the defendant, but one where the state, as one of the
defendants, merely resisted a claim against it precisely on the ground among others, of
its privileged position which exempts it from suit. 
5. ID.; TRADING WITH THE ENEMY ACT; PERIOD OF LIMITATION FOR FILING SUIT
FOR RETURN OF PROPERTY JURISDICTIONAL. — A condition precedent to a suit for
the return of property vested under the Trading with the Enemy Act is that it should be
filed not later than April 30, 1949, or within two years from the date of vesting, whichever
is later, but in computing such two years, the period during which there was pending a
suit or claim for the return of the said property pursuant to section 9 or 32 (a) of the Act
shall be excluded. That limitation is jurisdictional. 

6. ID.; ID.; ENFORCEABLE EVEN AFTER JULY 4, 1946; RIGHTS OF PARTIES

GOVERNED BY THE TERMS OF THE ACT. — The Trading with the Enemy Act, by
consent of the Philippine Government, continued to be in force in the Philippines even
after July 4, 1946 and consequently, is as much a part of the law of the land as Section
40 of the Code of Civil Procedure. There is, therefore, no conflict of laws involved.
Furthermore, in an action under the Trading with the Enemy Act for the recovery of
property vested thereunder, the rights of the parties must necessarily be governed by
the terms of that Act.

DECISION

GUTIERREZ DAVID, J.:

This is an appeal from an order of the Court of First Instance of Manila, dismissing
plaintiff’s action for the recovery of real property of lack of jurisdiction over the subject
matter. 

The property in dispute consists of four parcels of land situated in Tondo, City of Manila,
with a total area of 29,151 square meters. The lands were, after the last world war, found
by the Alien Property Custodian of the United States to be registered in the name of
Asaichi Kagawa, national of an enemy country, Japan, as evidenced by Transfer
Certificates of Title Nos. 64904 to 65140, inclusive, for which reason the said Alien
Property Custodian, on March 14, 1946, issued a vesting order on the authority of the
Trading with the Enemy Act of the United States, as amended, vesting in himself the
ownership over two of the said lots, Lots Nos. 1 and 2. On July 6, 1948, the Philippine
Alien Property Administrator (successor of the Alien Property Custodian) under the
authority of the same statute, issued a supplemental vesting order, vesting in himself title
to the remaining Lots Nos. 3 and 4. On August 3, 1948, the Philippine Alien Property
Administrator (acting on behalf of the President of the United States) and the President
of the Philippines, executed two formal agreements, one referring to Lots 1 and 2 and
the other to Lots 3 and 4, whereby the said Administrator transferred all the said four lots
to the Republic of the Philippines upon the latter’s undertaking fully to indemnify the
United States for all claims in relation to the property transferred, which claims are
payable by the United States of America or the Philippine Alien Property Administrator of
the United States under the Trading with the Enemy Act, as amended, and for all such
costs and expenses of administration as may by law be charged against the property or
proceeds thereof hereby transferred." The transfer agreements were executed pursuant
to section 3 of the Philippine Property Act of 1946 and Executive Order No. 9921, dated
January 10, 1948, of the President of the United States. 

On the theory that the lots in question still belonged to Arsenia Enriquez, the latter’s son
Benito E. Lim filed on November 15, 1948 a formal notice of claim to the property with
the Philippine Alien Property Administrator. The notice was subsequently amended to
permit Lim to prosecute the claim as administrator of the intestate estate of the
deceased Arsenia Enriquez, thus, in effect, substituting the intestate estate as the
claimant, it being alleged that the lots were once the property of Arsenia Enriquez; that
they were mortgaged by her to the Mercantile Bank of China; that the mortgage having
been foreclosed, the property was sold at public auction during the war to the Japanese
Asaichi Kagawa, who, by means of threat and intimidation succeeded in preventing
Arsenia Enriquez from exercising her right to redemption; and that Kagawa never
acquired any valid title to the property because he was ineligible under the Constitution
to acquire residential land in the Philippines by reason of alienage. 

On March 7, 1950, the claim was disallowed by the Vested Property Claims Committee
of the Philippine Alien Property Administrator, and copy of the decision disallowing the
claim was received by claimant’s counsel on the 15th of the month. The claimant,
however, took no appeal to the Philippine Alien Property Administrator, so that pursuant
to the rules of procedure governing claims before the Philippine Alien Property
Administrator, the decision of the committee became final on April 15, 1950, that is,
twenty days after receipt of the decision by claimant’s counsel. 

On November 13, 1950, the claimant Benito E. Lim, as administrator of the intestate
estate of Arsenia Enriquez; filed a complaint in the Court of First Instance of Manila
against the Philippine Alien Property Administrator (later substituted by the Attorney
General of the United States) for the recovery of the property in question with back rents.
The complaint was later amended to include Asaichi Kagawa as defendant. As
amended, it alleged that the lands in question formerly belonged to Arsenia Enriquez
and were mortgaged by her to the Mercantile Bank of China; that the mortgage having
been foreclosed, she was sentenced to pay the mortgage debt within 3 months; that
within those 3 months the bank commissioner, who had been appointed liquidator of
said bank, assured her that she could pay her mortgage debt little by little in monthly
installments, and pursuant to that arrangement the income derived from the mortgaged
property were thereafter applied to her indebtedness, that such payment of the mortgage
debt continued until a few months after the occupation of the City of Manila by the
Japanese forces, when the Bank of Taiwan, having taken over the administration and
control of all banks in the Philippines, including the Mercantile Bank of China, had the
properties sold at public auction on October 26, 1942 by the sheriff of the city; that the
properties were awarded to Asaichi Kagawa and the sale was subsequently confirmed
by the court; that if Arsenia Enriquez failed to redeem the properties before the
confirmation of the sale, it was because of the financial depression and also because
she was prevented from doing so by Kagawa through threats and intimidation; that the
auction sale was irregular and illegal because it was made without publication or notice
and because though the land was subdivided into lots, the same was sold as a whole;
that because of the irregularities mentioned, competitive bidding was prevented or stifled
with the result that the lands, which could have been easily sold for P300,000 at then
prevailing prices, were awarded to Kagawa whose bid was only P54,460.40, a price that
was "grossly inadequate and shocking to the conscience;" that the titles to the lands
having been subsequently transferred to Kagawa, the latter in June, 1943 illegally
dispossessed Arsenia Enriquez and kept possession of the properties until the liberation
of the City of Manila; that as Arsenia Enriquez was still the owner of the properties, the
seizure thereof by the United States Attorney General’s predecessors on the assumption
that they belong to Kagawa, as well as their decision disallowing her claim, was contrary
to law. Plaintiff, therefore, prayed that the sheriff’s sale to Kagawa and the vesting of the
properties in the Philippine Alien Property Administrator and the transfer thereof by the
United States to the Republic of the Philippines be declared null and void; that Arsenia
Enriquez be adjudged owner of the said properties and the Register of Deeds of Manila
be ordered to issue the corresponding transfer certificates of title to her; and that the
defendant Attorney General of the United States be required to pay rental from March
14, 1946, and the Government of the Philippines from August 3, 1948, at the rate of
P30,000 per annum with legal interest. 

The defendant Attorney General of the United States and the defendant-intervenor
Republic of the Philippines each filed an answer, alleging by way of affirmative defenses
(1) that the action with respect to Lots 1 and 2 had already prescribed, the same not
having been brought within the period prescribed in section 33 of the Trading with the
Enemy Act, as amended, and (2) that the lower court had no jurisdiction over the claim
for rentals since the action in that regard constituted a suit against the United States to
which it had not given its consent. The defendant Asaichi Kagawa was summoned by
publication, but having failed to file an answer to the complaint, he was declared in
default. Thereafter, a preliminary hearing on the affirmative defenses was held at the
instance of the United States Attorney General pursuant to Section 5, Rule 8 of the
Rules of Court. After said hearing, the court ordered the complaint dismissed on the
ground - as stated in the dispositive part of the order - that the "court has no jurisdiction
over the subject matter of this action, taking into consideration the provisions of Sec. 34
(must be 33) of the Trading with the Enemy Act, as the requirements needed by the
above-mentioned Act have not been fulfilled by the herein plaintiff." From that order,
plaintiff has taken the present appeal. 

Judging from the context of the order complained of, it would appear that the dismissal
of plaintiff’s action was actually based upon the principle that a foreign state or its
government cannot be sued without its consent. Considering, however, the law
applicable, we do not think the order of dismissal can be sustained in its entirety. There
is no denying that an action against the Alien Property Custodian, or the Attorney
General of the United States as his successor, involving vested property under the
Trading with the Enemy Act located in the Philippines, is in substance an action against
the United States. The immunity of the state from suit, however, cannot be invoked
where the action, as in the present case, is instituted by a person who is neither an
enemy or ally of an enemy for the purpose of establishing his right, title or interest in
vested property, and of recovering his ownership and possession. Congressional
consent to such suit has expressly been given by the United States. (Sec. 3, Philippine
Property Act of 1946; Philippine Alien Property Administration v. Castelo, Et Al., 89 Phil.,
568.) 

The order of dismissal, however, with respect to plaintiff’s claim for damages against the
defendant Attorney General of the United States must be upheld. The relief available to
a person claiming enemy property which has been vested by the Philippine Alien
Property Custodian is limited to those expressly provided for in the Trading with the
Enemy Act, which does not include a suit for damages for the use of such vested
property. That action, as held by this Court in the Castelo case just cited, is not one of
those authorized under the Act which may be instituted in the appropriate courts of the
Philippines under the provisions of section 3 of the Philippine Property Act of 1946.
Congressional consent to such suit has not been granted. 

The claim for damages for the use of the property against the intervenor defendant
Republic of the Philippines to which it was transferred, likewise, cannot be maintained
because of the immunity of the state from suit. The claim obviously constitutes a charge
against, or financial liability to, the Government and consequently cannot be entertained
by the courts except with the consent of said government. (Syquia v. Almeda Lopez, 84
Phil., 312; 47 Off. Gaz., 665; Compañia General de Tabacos v. Gov’t of PI, 45 Phil.,
663.) Plaintiff argues that by its intervention, the Republic of the Philippines, in effect,
waived its right of non-suability, but it will be remembered that the Republic intervened in
the case merely to unite with the defendant Attorney General of the United States in
resisting plaintiff’s claims, and for that reason asked no affirmative relief against any
party in the answer in intervention it filed. On the other hand, plaintiff in his original
complaint made no claim against the Republic and only asked for damages against it for
the use of the property when the complaint was amended. In its answer to the amended
complaint, the Republic "reproduced and incorporated by reference" all the affirmative
defenses contained in the answer of the defendant Attorney General, one of which, as
already stated, is that the lower court had no jurisdiction over the claim for rentals
because of lack of consent to be sued. Clearly, this is not a case where the state takes
the initiative in an action against a private party by filing a complaint in intervention,
thereby surrendering its privileged position and coming down to the level of the
defendant - as what happened in the case of Froilan v. Pan Oriental Shipping Co., Et. Al.
95 Phil., 905 cited by plaintiff — but one where the state, as one of the defendants
merely resisted a claim against it precisely on the ground, among others, of its privileged
position which exempts it from suit. 

With respect to the recovery or return of the properties vested, section 33 of the Trading
with the Enemy Act, as amended, provides:jgc:chanrobles.com.ph

"Sec. 33. Return of property; notice; institution of suits, computation of time. — No return
may be made pursuant to section 9 or 32 unless notice of claim has been filed: (a) in the
case of any property or interest acquired by the United States prior to December 18,
1941, by August 9, 1948; or (b) in the case of any property or interest acquired by the
United States on or after December 18, 1941, by April 30, 1949, or two years from the
vesting of the property or interest in respect of which the claim is made, whichever is
later. No suit pursuant to section 9 may be instituted after April 30, 1949, or after the
expiration of two years from the date of the seizure by or vesting in the Alien Property
Custodian, as the case may be, of the property or interest in respect of which relief is
sought, whichever is later, but in computing such two years there shall be excluded any
period during which there was pending a suit or claim for return pursuant to section 9 or
32(a) hereof." (USCA, Tit. 50, App., p. 216.) 

From the above provisions, it is evident that a condition precedent to a suit for the return
property vested under the Trading with the Enemy Act is that it should be filed not later
than April 30, 1949, or within two years from the date of vesting, whichever is later, but in
computing such two years, the period during which there was pending a suit or claim for
the return of the said property pursuant to secs. 9 or 32(a) of the Act shall be excluded.
That limitation, as held in a case, is jurisdictional. (See Cisatlantic Corporation, Et. Al. v.
Brownell, Jr., Civil Case No. 8-221, U. S. District Court, Southern District, New York,
affirmed by the United States Court of Appeals, 2nd Circuit, May 11, 1955 (Docket No.
23499), annexed as appendices "D" and "E" in appellees’ brief.) Such being the case, it
is evident that the court below erred in dismissing the complaint, at least insofar as lots 3
and 4 of the land in dispute are concerned. These lots were vested only on July 6, 1948
and consequently the two-year period within which to file the action for their recovery
expired on July 7, 1950. But in computing that two-year period, the time during which
plaintiff’s claim with the Philippine Alien Property Administration was pending — from
November 16, 1948 when the claim was filed to March 7, 1950 when it was disallowed
— should be excluded. The complaint therefore filed on November 13, 1950 is well
within the prescribed period. As a matter of fact, the Attorney General of the United
States concedes that the dismissal of the complaint with respect to these lots was
erroneous. Indeed, he states that he had never asked for the dismissal of the complaint
with respect to them because the complaint insofar as those properties were concerned
was filed within the period provided for in the law. 

On the other hand, lots 1 and 2 were vested by the Alien Property Custodian on March
14, 1946. The two-year period, therefore, within which to file a suit for their return
expired on March 14, 1948. As no suit or claim for the return of said properties pursuant
to sections 9 or 32(a) of the Trading with the Enemy Act was filed by plaintiff within two
years from the date of vesting, the "later" date and the last on which suit could be
brought was April 30, 1949. The claim filed by plaintiff with the Philippine Alien Property
Administration on November 15, 1948 obviously could not toll the two-year period that
had already expired on March 14, 1948. And the complaint in the present case having
been filed only on November 13, 1950, the same is already barred. (Pass v. McGrath,
192 F. 2d 415; Kroll v. McGrath, 91 F. Supp. 173.) The lower court, therefore, had no
jurisdiction to entertain the action insofar as these lots are concerned. Plaintiff contends
that section 33 of the Trading with the Enemy Act cannot prevail over section 40 of the
Code of Civil Procedure, which provides that an action to recover real property
prescribes after 10 years, on the theory that under international law questions relating to
real property are governed by the law of the place where the property is located and that
prescription, being remedial, is likewise governed by the laws of the forum. But the
Trading with the Enemy Act, by consent of the Philippine Government, continued to be in
force in the Philippines even after July 4, 1946 (Brownell, Jr., v. Sun Life Assurance Co.,
of Canada, * 50 Off. Gaz., 4814; Brownell, Jr., v. Bautista, 95 Phil., 853) and
consequently, is as much part of the law of the land as section 40 of the Code of Civil
Procedure. Contrary to plaintiff’s claim, therefore, there is here no conflict of laws
involved. It should be stated that in an action under the Trading with the Enemy Act for
the recovery of property vested thereunder, the rights of the parties must necessarily be
governed by the terms of that Act. Indeed, section 7 (c) thereof explicitly provides that
the relief available to a claimant of vested property is limited to those expressly provided
for by its terms. 

Needless to say, the defense of limitation as contained in section 33 of the Trading with
the Enemy Act, as amended, may be invoked not only by the defendant Attorney
General of the United States but also by the intervenor Republic of the Philippines to
which the lands in question were transferred. To sustain plaintiff’s claim and preclude the
Republic from putting up that defense would render nugatory the provisions of the Act.
For in such case, a claimant who has failed to file his claim or suit within the period
provided for in section 33 of the Act and consequently has forfeited whatever rights he
may have therein, could easily circumvent the law. It would also mean that the transfer
of vested property to the Republic would have the effect of permitting re-examination of
the title to such vested property which has already become absolute in the name of the
United States, the transferor, for failure of the claimant to assert his claim within the
prescribed time. This absurdity, to say the least, cannot be countenanced. 

In view of the foregoing, the order appealed from insofar as it dismisses the complaint
with respect to Lots 1 and 2 and the claim for damages against the Attorney General of
the United States and the Republic of the Philippines, is affirmed, but revoked insofar as
it dismisses the complaint with respect to Lots 3 and 4, as to which the case is hereby
remanded to the court below for further proceedings. Without costs. 
 G.R. No. L-35645 May 22, 1985

UNITED STATES OF AMERICA, CAPT. JAMES E. GALLOWAY, WILLIAM I.

COLLINS and ROBERT GOHIER, Petitioners, vs. HON. V. M. RUIZ, Presiding Judge
of Branch XV, Court of First Instance of Rizal and ELIGIO DE GUZMAN & CO.,
INC., Respondents.

Sycip, Salazar, Luna & Manalo & Feliciano Law for petitioners.chanrobles virtual law
library

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

ABAD SANTOS, J.:

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

The factual background is as follows: chanrobles virtual law library

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

Sometime in May, 1972, the United States invited the submission of bids for the
following projects chanrobles virtual law library

1. Repair offender system, Alava Wharf at the U.S. Naval Station Subic Bay,
Philippines.chanroblesvirtualawlibrary chanrobles virtual law library

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

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

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

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

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

The petition is highly impressed with merit.chanroblesvirtualawlibrary chanrobles virtual

law library

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

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

xxx xxx xxxchanrobles virtual law library

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

The reliance placed on Lyons by the respondent judge is misplaced for the following
reasons:chanrobles virtual law library

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

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

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

It can thus be seen that the statement in respect of the waiver of State immunity from
suit was purely gratuitous and, therefore, obiterso that it has no value as an imperative
authority.chanroblesvirtualawlibrary chanrobles virtual law library

The restrictive application of State immunity is proper only when the proceedings arise
out of commercial transactions of the foreign sovereign, its commercial activities or
economic affairs. Stated differently, a State may be said to have descended to the level
of an individual and can thus be deemed to have tacitly given its consent to be sued only
when it enters into business contracts. It does not apply where the contract relates to the
exercise of its sovereign functions. In this case the projects are an integral part of the
naval base which is devoted to the defense of both the United States and the
Philippines, indisputably a function of the government of the highest order; they are not
utilized for nor dedicated to commercial or business
purposes.chanroblesvirtualawlibrary chanrobles virtual law library
That the correct test for the application of State immunity is not the conclusion of a
contract by a State but the legal nature of the act is shown in Syquia vs. Lopez, 84 Phil.
312 (1949). In that case the plaintiffs leased three apartment buildings to the United
States of America for the use of its military officials. The plaintiffs sued to recover
possession of the premises on the ground that the term of the leases had expired. They
also asked for increased rentals until the apartments shall have been
vacated.chanroblesvirtualawlibrary chanrobles virtual law library

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

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

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

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

Teehankee, Aquino, Concepcion, Jr., Melencio-Herrera, Plana, *Escolin, Relova,

Gutierrez, Jr., De la Fuente, Cuevas and Alampay, JJ.,
concur.chanroblesvirtualawlibrary chanrobles virtual law library

Fernando, C.J., took no part.chanroblesvirtualawlibrarychanrobles virtual law library

 chanrobles virtual law library

 [G.R. No. 154705. June 26, 2003.]

THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN,

and MINISTER COUNSELLOR AZHARI KASIM, Petitioners, v. JAMES VINZON,
doing business under the name and style of VINZON TRADE AND
SERVICES, Respondent.

DECISION

AZCUNA, J.:

This is a petition for review on certiorari to set aside the Decision of the Court of Appeals
dated May 30, 2002 and its Resolution dated August 16, 2002, in CA-G.R. SP No.
66894 entitled "The Republic of Indonesia, His Excellency Ambassador Soeratmin and
Minister Counselor Azhari Kasim v. Hon. Cesar Santamaria, Presiding Judge, RTC
Branch 145, Makati City, and James Vinzon, doing business under the name and style
of Vinzon Trade and Services." chanrob1es virtua1 1aw 1ibrary

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

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

Petitioners claim that sometime prior to the date of expiration of the said agreement, or
before August 1999, they informed respondent that the renewal of the agreement shall
be at the discretion of the incoming Chief of Administration, Minister Counsellor Azhari
Kasim, who was expected to arrive in February 2000. When Minister Counsellor Kasim
assumed the position of Chief of Administration in March 2000, he allegedly found
respondent’s work and services unsatisfactory and not in compliance with the standards
set in the Maintenance Agreement. Hence, the Indonesian Embassy terminated the
agreement in a letter dated August 31, 2000. 2 Petitioners claim, moreover, that they
had earlier verbally informed respondent of their decision to terminate the agreement.

On the other hand, respondent claims that the aforesaid termination was arbitrary and
unlawful. Respondent cites various circumstances which purportedly negated petitioners’
alleged dissatisfaction over respondent’s services: (a) in July 2000, Minister Counsellor
Kasim still requested respondent to assign to the embassy an additional full-time worker
to assist one of his other workers; (b) in August 2000, Minister Counsellor Kasim asked
respondent to donate a prize, which the latter did, on the occasion of the Indonesian
Independence Day golf tournament; and (c) in a letter dated August 22, 2000, petitioner
Ambassador Soeratmin thanked respondent for sponsoring a prize and expressed his
hope that the cordial relations happily existing between them will continue to prosper and
be strengthened in the coming years.
Hence, on December 15, 2000, respondent filed a complaint 3 against petitioners
docketed as Civil Case No. 18203 in the Regional Trial Court (RTC) of Makati, Branch
145. On February 20, 2001, petitioners filed a Motion to Dismiss, alleging that the
Republic of Indonesia, as a foreign sovereign State, has sovereign immunity from suit
and cannot be sued as a party-defendant in the Philippines. The said motion further
alleged that Ambassador Soeratmin and Minister Counsellor Kasim are diplomatic
agents as defined under the Vienna Convention on Diplomatic Relations and therefore
enjoy diplomatic immunity. 4 In turn, respondent filed on March 20, 2001, an Opposition
to the said motion alleging that the Republic of Indonesia has expressly waived its
immunity from suit. He based this claim upon the following provision in the Maintenance
Agreement:jgc:chanrobles.com.ph

"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."cralaw
virtua1aw library

Respondent’s Opposition likewise alleged that Ambassador Soeratmin and Minister

Counsellor Kasim can be sued and held liable in their private capacities for tortious acts
done with malice and bad faith. 5 

On May 17, 2001, the trial court denied herein petitioners’ Motion to Dismiss. It likewise
denied the Motion for Reconsideration subsequently filed.

The trial court’s denial of the Motion to Dismiss was brought up to the Court of Appeals
by herein petitioners in a petition for certiorari and prohibition. Said petition, docketed as
CA-G.R. SP No. 66894, alleged that the trial court gravely abused its discretion in ruling
that the Republic of Indonesia gave its consent to be sued and voluntarily submitted
itself to the laws and jurisdiction of Philippine courts and that petitioners Ambassador
Soeratmin and Minister Counsellor Kasim waived their immunity from suit.

On May 30, 2002, the Court of Appeals rendered its assailed decision denying the
petition for lack of merit. 6 On August 16, 2002, it denied herein petitioners’ motion for
reconsideration. 7 

Hence, this petition.

In the case at bar, petitioners raise the sole issue of whether or not the Court of Appeals
erred in sustaining the trial court’s decision that petitioners have waived their immunity
from suit by using as its basis the abovementioned provision in the Maintenance
Agreement.

The petition is impressed with merit.

International law is founded largely upon the principles of reciprocity, comity,

independence, and equality of States which were adopted as part of the law of our land
under Article II, Section 2 of the 1987 Constitution. 8 The rule that a State may not be
sued without its consent is a necessary consequence of the principles of independence
and equality of States. 9 As enunciated in Sanders v. Veridiano II, 10 the practical
justification for the doctrine of sovereign immunity is that there can be no legal right
against the authority that makes the law on which the right depends. In the case of
foreign States, the rule is derived from the principle of the sovereign equality of States,
as expressed in the maxim par in parem non habet imperium. All states are sovereign
equals and cannot assert jurisdiction over one another. 11 A contrary attitude would
"unduly vex the peace of nations." 12 

The rules of International Law, however, are neither unyielding nor impervious to
change. The increasing need of sovereign States to enter into purely commercial
activities remotely connected with the discharge of their governmental functions brought
about a new concept of sovereign immunity. This concept, the restrictive theory, holds
that the immunity of the sovereign is recognized only with regard to public acts or acts
jure imperii, but not with regard to private acts or acts jure gestionis. 13 

In United States v. Ruiz, 14 for instance, we held that the conduct of public bidding for
the repair of a wharf at a United States Naval Station is an act jure imperii. On the other
hand, we considered as an act jure gestionis the hiring of a cook in the recreation center
catering to American servicemen and the general public at the John Hay Air Station in
Baguio City, 15 as well as the bidding for the operation of barber shops in Clark Air Base
in Angeles City. 16 

Apropos the present case, the mere entering into a contract by a foreign State with a
private party cannot be construed as the ultimate test of whether or not it is an act jure
imperii or jure gestionis. Such act is only the start of the inquiry. Is the foreign State
engaged in the regular conduct of a business? If the foreign State is not engaged
regularly in a business or commercial activity, and in this case it has not been shown to
be so engaged, the particular act or transaction must then be tested by its nature. If the
act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii.
17 

Hence, the existence alone, of a paragraph in a contract stating that any legal action
arising out of the agreement shall be settled according to the laws of the Philippines and
by a specified court of the Philippines is not necessarily a waiver of sovereign immunity
from suit. The aforesaid provision contains language not necessarily inconsistent with
sovereign immunity. On the other hand, such provision may also be meant to apply
where the sovereign party elects to sue in the local courts, or otherwise waives its
immunity by any subsequent act. The applicability of Philippine laws must be deemed to
include Philippine laws in its totality, including the principle recognizing sovereign
immunity. Hence, the proper court may have no proper action, by way of settling the
case, except to dismiss it.chanrob1es virtua1 1aw 1ibrary

Submission by a foreign state to local jurisdiction must be clear and unequivocal. It must
be given explicitly or by necessary implication. We find no such waiver in this case.

Respondent concedes that the establishment of a diplomatic mission is a sovereign

function. On the other hand, he argues that the actual physical maintenance of the
premises of the diplomatic mission, such as the upkeep of its furnishings and equipment,
is no longer a sovereign function of the State. 18 

We disagree. There is no dispute that the establishment of a diplomatic mission is an act

jure imperii. A sovereign State does not merely establish a diplomatic mission and leave
it at that; the establishment of a diplomatic mission encompasses its maintenance and
upkeep. Hence, the State may enter into contracts with private entities to maintain the
premises, furnishings and equipment of the embassy and the living quarters of its agents
and officials. It is therefore clear that petitioner Republic of Indonesia was acting in
pursuit of a sovereign activity when it entered into a contract with respondent for the
upkeep or maintenance of the air conditioning units, generator sets, electrical facilities,
water heaters, and water motor pumps of the Indonesian Embassy and the official
residence of the Indonesian ambassador.

The Solicitor General, in his Comment, submits the view that, "the Maintenance
Agreement was entered into by the Republic of Indonesia in the discharge of its
governmental functions. In such a case, it cannot be deemed to have waived its
immunity from suit." As to the paragraph in the agreement relied upon by respondent,
the Solicitor General states that it "was not a waiver of their immunity from suit but a
mere stipulation that in the event they do waive their immunity, Philippine laws shall
govern the resolution of any legal action arising out of the agreement and the proper
court in Makati City shall be the agreed venue thereof. 19 

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

Counsellor Kasim may be sued herein in their private capacities, Article 31 of the Vienna
Convention on Diplomatic Relations provides:chanrob1es virtual 1aw library

x       x       x

1. A diplomatic agent shall enjoy immunity from the criminal jurisdiction of the receiving
State. He shall also enjoy immunity from its civil and administrative jurisdiction, except in
the case of:chanrob1es virtual 1aw library

(a) a real action relating to private immovable property situated in the territory of the
receiving State, unless he holds it on behalf of the sending State for the purposes of the
mission;

(b) an action relating to succession in which the diplomatic agent is involved as executor,
administrator, heir or legatee as a private person and not on behalf of the sending State;

(c) an action relating to any professional or commercial activity exercised by the

diplomatic agent in the receiving State outside his official functions.

x       x       x

The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in

terminating the Maintenance Agreement is not covered by the exceptions provided in the
abovementioned provision.

The Solicitor General believes that said act may fall under subparagraph (c) thereof, 20
but said provision clearly applies only to a situation where the diplomatic agent engages
in any professional or commercial activity outside official functions, which is not the case
herein.

WHEREFORE, the petition is hereby GRANTED. The decision and resolution of the
Court of Appeals in CA G.R. SP No. 66894 are REVERSED and SET ASIDE and the
complaint in Civil Case No. 18203 against petitioners is DISMISSED.chanrob1es virtua1
1aw 1ibrary

No costs.

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

UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE

REEVES, Petitioners, v. HON. ELIODORO B. GUINTO, Presiding Judge, Branch
LVII, Regional Trial Court, Angeles City, ROBERTO T. VALENCIA, EMERENCIANA
C. TANGLAO, AND PABLO C. DEL PILAR, Respondents.

[G.R. No. 79470. February 26, 1990.]

UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/SGT. USAF, WILFREDO

BELSA, PETER ORASCION AND ROSE CARTALLA, Petitioners, v. HON.
RODOLFO D. RODRIGO, as Presiding Judge of Branch 7, Regional Trial Court
(BAGUIO CITY), La Trinidad, Benguet and FABIAN GENOVE, Respondents.

[G.R. No. 80018. February 26, 1990.]

UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and STEVEN F.

BOSTICK, Petitioners, v. HON. JOSEFINA D. CEBALLOS, As Presiding Judge,
Regional Trial Court, Branch 66, Capas, Tarlac, and LUIS
BAUTISTA, Respondents.

[G.R. No. 80258. February 26, 1990.]

UNITED STATES OF AMERICA, MAJOR GENERAL MICHAEL P. C. CARNS, AIC

ERNEST E. RIVENBURGH, AIC ROBIN BLEVINS, SGT. NOEL A. GONZALES, SGT.
THOMAS MITCHELL, SGT. WAYNE L. BENJAMIN, ET AL., Petitioners, v. HON.
CONCEPCION S. ALARCON VERGARA, as Presiding Judge, Branch 62 REGIONAL
TRIAL COURT, Angeles City, and RICKY SANCHEZ, FREDDIE SANCHEZ AKA
FREDDIE RIVERA, EDWIN MARIANO, AKA JESSIE DOLORES SANGALANG, ET
AL., Respondents.

Luna, Sison & Manas Law Office for petitioners.

SYLLABUS

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

GENERALLY ACCEPTED PRINCIPLE OF INTERNATIONAL LAW; EMBODIED IN
PHILIPPINE CONSTITUTION. — The rule that a state may not be sued without its
consent, now expressed in Article XVI, Section 3, of the 1987 Constitution, is one of the
generally accepted principles of international law that we have adopted as part of the law
of our land under Article II, Section 2. This latter provision merely reiterates a policy
earlier embodied in the 1935 and 1973 Constitutions and also intended to manifest our
resolve to abide by the rules of the international community.

2. ID., ID., ID., PRINCIPLE DEEMED INCORPORATED IN THE LAW OF EVERY

CIVILIZED STATE; STATE IS AUTOMATICALLY OBLIGATED TO COMPLY WITH THE
PRINCIPLE. — Even without such affirmation, we would still be bound by the generally
accepted principles of international law under the doctrine of incorporation. Under this
doctrine, as accepted by the majority of states, such principles are deemed incorporated
in the law of every civilized state as a condition and consequence of its membership in
the society of nations. Upon its admission to such society, the state is automatically
obligated to comply with these principles in its relations with other states.

3. ID.; ID.; BASIS. — As applied to the local state, the doctrine of state immunity is
based on the justification given by Justice Holmes that "there can be no legal right
against the authority which makes the law on which the right depends." There are other
practical reasons for the enforcement of the doctrine. In the case of the foreign state
sought to be impleaded in the local jurisdiction, the added inhibition is expressed in the
maxim par in parem, non habet imperium. All states are sovereign equals and cannot
assert jurisdiction over one another. A contrary disposition would, in the language of a
celebrated case, "unduly vex the peace of nations."cralaw virtua1aw library

4. ID., ID., APPLIES TO OFFICIALS OF THE STATE FOR ACTS PERFORMED IN THE
DISCHARGE OF THEIR DUTIES. — While the doctrine appears to prohibit only suits
against the state without its consent, it is also applicable to complaints filed against
officials of the state for acts allegedly performed by them in the discharge of their duties.
The rule is that if the judgment against such officials will require the state itself to
perform an affirmative act to satisfy the same, such as the appropriation of the amount
needed to pay the damages awarded against them, the suit must be regarded as against
the state itself although it has not been formally impleaded. In such a situation, the state
may move to dismiss the complaint on the ground that it has been filed without its
consent.

5. ID., ID., NOT ABSOLUTE AND MAY BE SUED IS STATE GIVES CONSENT. — The
doctrine is sometimes derisively called "the royal prerogative of dishonesty" because of
the privilege it grants the state to defeat any legitimate claim against it by simply invoking
its non-suability. That is hardly fair, at least in democratic societies, for the state is not an
unfeeling tyrant unmoved by the valid claims of its citizens. In fact, the doctrine is not
absolute and does not say the state may not be sued under any circumstance. On the
contrary, the rule says that the state may not be sued without its consent, which clearly
imports that it may be sued if it consents.

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

consent of the state to be sued may be manifested expressly or impliedly. Express
consent may be embodied in a general law or a special law. Consent is implied when the
state enters into a contract or it itself commences litigation.

7. ID., ID., ID., ID., WAIVER OF IMMUNITY; INSTANCES. — The general law waiving
the immunity of the state from suit is found in Act No. 3083, under which the Philippine
government "consents and submits to be sued upon any moneyed claim involving
liability arising from contract, express or implied, which could serve as a basis of civil
action between private parties." In Merritt v. Government of the Philippine Islands, a
special law was passed to enable a person to sue the government for an alleged tort.
When the government enters into a contract, it is deemed to have descended to the level
of the other contracting party and divested of its sovereign immunity from suit with its
implied consent. Waiver is also implied when the government files a complaint, thus
opening itself to a counterclaim.

8. ID., ID., ID., ID., ID., ID., EXCEPTIONS. — The above rules are subject to
qualification. Express consent is effected only by the will of the legislature through the
medium of a duly enacted statute. We have held that not all contracts entered into by the
government will operate as a waiver of its non-suability; distinction must be made
between its sovereign and proprietary acts. As for the filing of a complaint by the
government, suability will result only where the government is claiming affirmative relief
from the defendant.

9. ID., ID., ID., ID., ID., UNITED STATES OF AMERICA DEEMED TO HAVE
IMPLIEDLY WAIVED ITS NON-SUABILITY IF IT HAS ENTERED INTO A CONTRACT
IN ITS PROPRIETARY CAPACITY. — There is no question that the United States of
America, like any other state, will be deemed to have impliedly waived its non-suability if
it has entered into a contract in its proprietary or private capacity. It is only when the
contract involves its sovereign or governmental capacity that no such waiver may be
implied. This was our ruling in United States of America v. Ruiz, where the transaction in
question dealt with the improvement of the wharves in the naval installation at Subic
Bay. As this was a clearly governmental function, we held that the contract did not
operate to divest the United States of its sovereign immunity from suit.

10. ID., ID., ID., ID., ID., CHARGES MAY NOT BE SUMMARILY DISMISSED ON MERE
ASSERTION THAT ACTS ARE IMPUTABLE TO THE UNITED STATES OF AMERICA.
— The other petitioners in the cases before us all aver they have acted in the discharge
of their official functions as officers or agents of the United States. However, this is a
matter of evidence. The charges against them may not be summarily dismissed on their
mere assertion that their acts are imputable to the United States of America, which has
not given its consent to be sued. In fact, the defendants are sought to be held
answerable for personal torts in which the United States itself is not involved. If found
liable, they and they alone must satisfy the judgment.

11. ID., ID., ID., ID., ID., PETITIONERS CHARGED WITH THE ENFORCEMENT OF
LAW REGARDING PROHIBITED DRUGS ARE AGENTS OF THE UNITED STATES. —
It is clear from a study of the records of G.R. No. 80018 that the individually-named
petitioners therein were acting in the exercise of their official functions when they
conducted the buy-bust operation against the complainant and thereafter testified
against him at his trial. The said petitioners were in fact connected with the Air Force
Office of Special Investigators and were charged precisely with the function of
preventing the distribution, possession and use of prohibited drugs and prosecuting
those guilty of such acts. It cannot for a moment be imagined that they were acting in
their private or unofficial capacity when they apprehended and later testified against the
complainant. It follows that for discharging their duties as agents of the United States,
they cannot be directly impleaded for acts imputable to their principal, which has not
given its consent to be sued.

12. ID., ID., ID., ID., ID., SUABILITY AND LIABILITY, DIFFERENTIATED. — There
seems to be a failure to distinguish between suability and liability and a misconception
that the two terms are synonymous. Suability depends on the consent of the state to be
sued, liability on the applicable law and the established facts. The circumstance that a
state is suable does not necessarily mean that it is liable; on the other hand, it can never
be held liable if it does not first consent to be sued. Liability is not conceded by the mere
fact that the state has allowed itself to be sued. When the state does waive its sovereign
immunity, it is only giving the plaintiff the chance to prove, if it can, that the defendant is
liable.
13. ID., ID., ID., ID., ID., ARTICLE 2180 OF THE CIVIL CODE ESTABLISHES A RULE
OF LIABILITY. — The private respondent invokes Article 2180 of the Civil Code which
holds the government liable if it acts through a special agent. The argument, it would
seem, is premised on the ground that since the officers are designated "special agents,"
the United States government should be liable for their torts. The said article establishes
a rule of liability, not suability. The government may be held liable under this rule only if it
first allows itself to be sued through any of the accepted forms of consent.

14. ID., ID., ID., ID., ID., AN AGENT PERFORMING REGULAR FUNCTIONS IS NOT A
SPECIAL AGENT EVEN IF SO DENOMINATED; ARTICLE APPLIES ONLY TO
PHILIPPINE GOVERNMENT. — Moreover, the agent performing his regular functions is
not a special agent even if he is so denominated, as in the case at bar. No less
important, the said provision appears to regulate only the relations of the local state with
its inhabitants and, hence, applies only to the Philippine government and not to foreign
governments impleaded in our courts.

15. ID., ID., ID., ID., ID., EXPRESS WAIVER MUST BE EFFECTED THROUGH A
DULY-ENACTED STATUTE. — We reject the conclusion of the trial court that the
answer filed by the special counsel of the Office of the Sheriff Judge Advocate of Clark
Air Base was a submission by the United States government to its jurisdiction. As we
noted in Republic v. Purisima, express waiver of immunity cannot be made by a mere
counsel of the government but must be effected through a duly-enacted statute. Neither
does such answer come under the implied forms of consent as earlier discussed.

16. ID., ID., ID., ID., ID., INQUIRY MUST BE MADE AS TO WHAT CAPACITY
PETITIONERS WERE ACTING. — But even as we are certain that individual petitioners
in G.R. No. 80018 were acting in the discharge of their official functions, we hesitate to
make the same conclusion in G.R. No. 80258. The contradictory factual allegations in
this case deserve in our view a closer study of what actually happened to the plaintiffs.
The record is too meager to indicate if the defendants were really discharging their
official duties or had actually exceeded their authority when the incident in question
occurred. Lacking this information, this Court cannot directly decide this case. The
needed inquiry must first be made by the lower court so it may assess and resolve the
conflicting claims of the parties on the basis of the evidence that has yet to be presented
at the trial. Only after it shall have determined in what capacity the petitioners were
acting at the time of the incident in question will this Court determine, if still necessary, if
the doctrine of state immunity is applicable.

17. ID., ID., ID., ID., ID., DOCTRINE CANNOT BE INVOKED WHERE THE STATE
ENTERED INTO A CONTRACT IN THE DISCHARGE OF ITS PROPRIETARY
FUNCTION; CASE AT BAR. — From the circumstances, the Court can assume that the
restaurant services offered at the John Hay Air Station partake of the nature of a
business enterprise undertaken by the United States government in its proprietary
capacity. Such services are not extended to the American servicemen for free as a
perquisite of membership in the Armed Forces of the United States. Neither does it
appear that they are exclusively offered to these servicemen; on the contrary, it is well
known that they are available to the general public as well, including the tourists in
Baguio City, many of whom make it a point to visit John Hay for this reason. All persons
availing themselves of this facility pay for the privilege like all other customers as in
ordinary restaurants. Although the prices are concededly reasonable and relatively low,
such services are undoubtedly operated for profit, as a commercial and not a
governmental activity. The consequence of this finding is that the petitioners cannot
invoke the doctrine of state immunity to justify the dismissal of the damage suit against
them by Genove. Such defense will not prosper even if it be established that they were
acting as agents of the United States when they investigated and later dismissed
Genove. For that matter, not even the United States government itself can claim such
immunity. The reason is that by entering into the employment contract with Genove in
the discharge of its proprietary functions, it impliedly divested itself of its sovereign
immunity from suit.

18. LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT;

DISMISSAL FOR THE UNBELIEVABLY NAUSEATING ACT IS PROPER. — The
dismissal of the private respondent was decided upon only after a thorough investigation
where it was established beyond doubt that he had polluted the soup stock with urine.
The investigation, in fact, did not stop there. Despite the definitive finding of Genove’s
guilt, the case was still referred to the board of arbitrators provided for in the collective
bargaining agreement. This board unanimously affirmed the findings of the investigators
and recommended Genove’s dismissal. There was nothing arbitrary about the
proceedings. The petitioners acted quite properly in terminating the private respondent’s
employment for his unbelievably nauseating act. It is surprising that he should still have
the temerity to file his complaint for damages after committing his utterly disgusting
offense.

19. ID.; ID.; BARBERSHOPS ARE NOT AGENCIES OF THE UNITED STATES ARMED
FORCES; IMMUNITY FROM SUIT CANNOT BE INVOKED. — Concerning G.R. No.
76607, we also find that the barbershops subject of the concessions granted by the
United States government are commercial enterprises operated by private persons.
They are not agencies of the United States Armed Forces nor are their facilities
demandable as a matter of right by the American servicemen. This being the case, the
petitioners cannot plead any immunity from the complaint filed by the private
respondents in the court below. The contracts in question being decidedly commercial,
the conclusion reached in the United States of America v. Ruiz case cannot be applied
here.

DECISION

CRUZ, J.:

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

In G.R. No. 76607, the private respondents are suing several officers of the U.S. Air
Force stationed in Clark Air Base in connection with the bidding conducted by them for
contracts for barbering services in the said base.
On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area Exchange,
U.S. Air Force, solicited bids for such contracts through its contracting officer, James F.
Shaw. Among those who submitted their bids were private respondents Roberto T.
Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar. Valencia had been a
concessionaire inside Clark for 34 years; del Pilar for 12 years; and Tanglao for 50
years.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

The bidding was won by Ramon Dizon, over the objection of the private respondents,
who claimed that he had made a bid for four facilities, including the Civil Engineering
Area, which was not included in the invitation to bid.

The private respondents complained to the Philippine Area Exchange (PHAX). The
latter, through its representatives, petitioners Yvonne Reeves and Frederic M. Smouse,
explained that the Civil Engineering concession had not been awarded to Dizon as a
result of the February 24, 1986 solicitation. Dizon was already operating this concession,
then known as the NCO club concession, and the expiration of the contract had been
extended from June 30, 1986 to August 31, 1986. They further explained that the
solicitation of the CE barbershop would be available only by the end of June and the
private respondents would be notified.chanrobles virtual lawlibrary

On June 30,1986, the private respondents filed a complaint in the court below to compel
PHAX and the individual petitioners to cancel the award to defendant Dizon, to conduct
a rebidding for the barbershop concessions and to allow the private respondents by a
writ of preliminary injunction to continue operating the concessions pending litigation. 1 

Upon the filing of the complaint, the respondent court issued an ex parte order directing
the individual petitioners to maintain the status quo.

On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the petition
for preliminary injunction on the ground that the action was in effect a suit against the
United States of America, which had not waived its non-suability. The individual
defendants, as officials/employees of the U.S. Air Force, were also immune from suit.

On the same date, July 22, 1986, the trial court denied the application for a writ of
preliminary injunction.

On October 10, 1988, the trial court denied the petitioners’ motion to dismiss, holding in
part as follows:chanrob1es virtual 1aw library

From the pleadings thus far presented to this Court by the parties, the Court’s attention
is called by the relationship between the plaintiffs as well as the defendants, including
the US Government in that prior to the bidding or solicitation in question, there was a
binding contract between the plaintiffs as well as the defendants, including the US
Government. By virtue of said contract of concession, it is the Court’s understanding that
neither the US Government nor the herein principal defendants would become the
employer/s of the plaintiffs but that the latter are the employers themselves of the
barbers, etc. with the employer, the plaintiffs herein, remitting the stipulated percentage
of commissions to the Philippine Area Exchange. The same circumstance would
become m effect when the Philippine Area Exchange opened for bidding or solicitation
the questioned barber shop concessions. To this extent, therefore, indeed a commercial
transaction has been entered, and for purposes of the said solicitation, would
necessarily be entered between the plaintiffs as well as the defendants.

The Court, further, is of the view that Article XVIII of the RP-US Bases Agreement does
not cover such kind of services falling under the concessionaireship, such as a barber
shop concession. 2 

On December 11, 1986, following the filing of the herein petition for certiorari and
prohibition with preliminary injunction, we issued a temporary restraining order against
further proceedings in the court below. 3 

In G.R. No. 79470, Fabian Genove filed a complaint for damages against petitioners
Anthony Lamachia, Wilfredo Belsa, Rose Cartalla and Peter Orascion for his dismissal
as cook in the U.S. Air Force Recreation Center at the John Hay Air Station in Baguio
City. It had been ascertained after investigation, from the testimony of Belsa, Cartalla
and Orascion, that Genove had poured urine into the soup stock used in cooking the
vegetables served to the club customers. Lamachia, as club manager, suspended him
and thereafter referred the case to a board of arbitrators conformably to the collective
bargaining agreement between the Center and its employees. The board unanimously
found him guilty and recommended his dismissal. This was effected on March 5, 1986,
by Col. David C. Kimball, Commander of the 3rd Combat Support Group, PACAF Clark
Air Force Base. Genove’s reaction was to file his complaint in the Regional Trial Court of
Baguio City against the individual petitioners. 4 

On March 13, 1987, the defendants, joined by the United States of America, moved to
dismiss the complaint, alleging that Lamachia, as an officer of the U.S. Air Force
stationed at John Hay Air Station, was immune from suit for the acts done by him in his
official capacity. They argued that the suit was in effect against the United States, which
had not given its consent to be sued.chanrobles virtual lawlibrary

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

It is the understanding of the Court, based on the allegations of the complaint — which
have been hypothetically admitted by defendants upon the filing of their motion to
dismiss — that although defendants acted initially in their official capacities, their going
beyond what their functions called for brought them out of the protective mantle of
whatever immunities they may have had in the beginning. Thus, the allegation that the
acts complained of were "illegal," done, with "extreme bad faith" and with "pre-conceived
sinister plan to harass and finally dismiss" the plaintiff, gains significance. 5 

The petitioners then came to this Court seeking certiorari and prohibition with preliminary
injunction.

In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in Camp
O’Donnell, an extension of Clark Air Base, was arrested following a buy-bust operation
conducted by the individual petitioners herein, namely, Tomi J. King, Darrel D. Dye and
Stephen F. Bostick, officers of the U.S. Air Force and special agents of the Air Force
Office of Special Investigators (AFOSI). On the basis of the sworn statements made by
them, an information for violation of R.A. 6425, otherwise known as the Dangerous
Drugs Act, was filed against Bautista in the Regional Trial Court of Tarlac. The above-
named officers testified against him at his trial. As a result of the filing of the charge,
Bautista was dismissed from his employment. He then filed a complaint for damages
against the individual petitioners herein claiming that it was because of their acts that he
was removed. 6 

During the period for filing of the answer, Mariano Y. Navarro, a special counsel
assigned to the International Law Division, Office of the Staff Judge Advocate of Clark
Air Base, entered a special appearance for the defendants and moved for an extension
within which to file an "answer and/or other pleadings." His reason was that the Attorney
General of the United States had not yet designated counsel to represent the
defendants, who were being sued for their official acts. Within the extended period, the
defendants, without the assistance of counsel or authority from the U.S. Department of
Justice, filed their answer. They alleged therein as affirmative defenses that they had
only done their duty in the enforcement of the laws of the Philippines inside the
American bases pursuant to the RP-US Military Bases Agreement.

On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained to
represent the defendants, filed with leave of court a motion to withdraw the answer and
dismiss the complaint. The ground invoked was that the defendants were acting in their
official capacity when they did the acts complained of and that the complaint against
them was in effect a suit against the United States without its consent.chanrobles.com :
virtual law library

The motion was denied by the respondent judge in his order dated September 11, 1987,
which held that the claimed immunity under the Military Bases Agreement covered only
criminal and not civil cases. Moreover, the defendants had come under the jurisdiction of
the court when they submitted their answer. 7 

Following the filing of the herein petition for certiorari and prohibition with preliminary
injunction, we issued on October 14, 1987, a temporary restraining order. 8 

In G.R. No. 80258, a complaint for damages was filed by the private respondents
against the herein petitioners (except the United States of America), for injuries allegedly
sustained by the plaintiffs as a result of the acts of the defendants. 9 There is a conflict
of factual allegations here. According to the plaintiffs, the defendants beat them up,
handcuffed them and unleashed dogs on them which bit them in several parts of their
bodies and caused extensive injuries to them. The defendants deny this and claim the
plaintiffs were arrested for theft and were bitten by the dogs because they were
struggling and resisting arrest. The defendants stress that the dogs were called off and
the plaintiffs were immediately taken to the medical center for treatment of their wounds.

In a motion to dismiss the complaint, the United States of America and the individually
named defendants argued that the suit was in effect a suit against the United States,
which had not given its consent to be sued. The defendants were also immune from suit
under the RP-US Bases Treaty for acts done by them in the performance of their official
functions.

The motion to dismiss was denied by the trial court in its order dated August 10, 1987,
reading in part as follows:chanrob1es virtual 1aw library

The defendants certainly cannot correctly argue that they are immune from suit. The
allegations, of the complaint which is sought to be dismissed, had to be hypothetically
admitted and whatever ground the defendants may have, had to be ventilated during the
trial of the case on the merits. The complaint alleged criminal acts against the
individually-named defendants and from the nature of said acts it could not be said that
they are Acts of State, for which immunity should be invoked. If the Filipinos themselves
are duty bound to respect, obey and submit themselves to the laws of the country, with
more reason, the members of the United States Armed Forces who are being treated as
guests of this country should respect, obey and submit themselves to its laws. 10 

and so was the motion for reconsideration. The defendants submitted their answer as
required but subsequently filed their petition for certiorari and prohibition with preliminary
injunction with this Court. We issued a temporary restraining order on October 27, 1987.
11 

II

The rule that a state may not be sued without its consent, now expressed in Article XVI,
Section 3, of the 1987 Constitution, is one of the generally accepted principles of
international law that we have adopted as part of the law of our land under Article II,
Section 2. This latter provision merely reiterates a policy earlier embodied in the 1935
and 1973 Constitutions and also intended to manifest our resolve to abide by the rules of
the international community.

Even without such affirmation, we would still be bound by the generally accepted
principles of international law under the doctrine of incorporation. Under this doctrine, as
accepted by the majority of states, such principles are deemed incorporated in the law of
every civilized state as a condition and consequence of its membership in the society of
nations. Upon its admission to such society, the state is automatically obligated to
comply with these principles in its relations with other states.

As applied to the local state, the doctrine of state immunity is based on the justification
given by Justice Holmes that "there can be no legal right against the authority which
makes the law on which the right depends." 12 There are other practical reasons for the
enforcement of the doctrine. In the case of the foreign state sought to be impleaded in
the local jurisdiction, the added inhibition is expressed in the maxim par in parem, non
habet imperium. All states are sovereign equals and cannot assert jurisdiction over one
another. A contrary disposition would, in the language of a celebrated case, "unduly vex
the peace of nations." 13 

While the doctrine appears to prohibit only suits against the state without its consent, it is
also applicable to complaints filed against officials of the state for acts allegedly
performed by them in the discharge of their duties. The rule is that if the judgment
against such officials will require the state itself to perform an affirmative act to satisfy
the same, such as the appropriation of the amount needed to pay the damages awarded
against them, the suit must be regarded as against the state itself although it has not
been formally impleaded. 14 In such a situation, the state may move to dismiss the
complaint on the ground that it has been filed without its consent.

The doctrine is sometimes derisively called "the royal prerogative of dishonesty"

because of the privilege it grants the state to defeat any legitimate claim against it by
simply invoking its non-suability. That is hardly fair, at least in democratic societies, for
the state is not an unfeeling tyrant unmoved by the valid claims of its citizens. In fact, the
doctrine is not absolute and does not say the state may not be sued under any
circumstance. On the contrary, the rule says that the state may not be sued without its
consent, which clearly imports that it may be sued if it consents.

The consent of the state to be sued may be manifested expressly or impliedly. Express
consent may be embodied in a general law or a special law. Consent is implied when the
state enters into a contract or it itself commences litigation.

The general law waiving the immunity of the state from suit is found in Act No. 3083,
under which the Philippine government "consents and submits to be sued upon any
moneyed claim involving liability arising from contract, express or implied, which could
serve as a basis of civil action between private parties." In Merritt v. Government of the
Philippine Islands, 15 a special law was passed to enable a person to sue the
government for an alleged tort. When the government enters into a contract, it is
deemed to have descended to the level of the other contracting party and divested of its
sovereign immunity from suit with its implied consent. 16 Waiver is also implied when the
government files a complaint, thus opening itself to a counterclaim. 17 

The above rules are subject to qualification. Express consent is effected only by the will
of the legislature through the medium of a duly enacted statute. 18 We have held that
not all contracts entered into by the government will operate as a waiver of its non-
suability; distinction must be made between its sovereign and proprietary acts. 19 As for
the filing of a complaint by the government, suability will result only where the
government is claiming affirmative relief from the defendant. 20 

In the case of the United States of America, the customary rule of international law on
state immunity is expressed with more specificity in the RP-US Bases Treaty. Article III
thereof provides as follows:chanrob1es virtual 1aw library

It is mutually agreed that the United States shall have the rights, power and authority
within the bases which are necessary for the establishment, use, operation and defense
thereof or appropriate for the control thereof and all the rights, power and authority within
the limits of the territorial waters and air space adjacent to, or in the vicinity of, the bases
which are necessary to provide access to them or appropriate for their control.

The petitioners also rely heavily on Baer v. Tizon, 21 along with several other decisions,
to support their position that they are not suable in the cases below, the United States
not having waived its sovereign immunity from suit. It is emphasized that in Baer, the
Court held:chanrob1es virtual 1aw library

The invocation of the doctrine of immunity from suit of a foreign state without its consent
is appropriate. More specifically, insofar as alien armed forces is concerned, the starting
point is Raquiza v. Bradford, a 1945 decision. In dismissing a habeas corpus petition for
the release of petitioners confined by American army authorities, Justice Hilado,
speaking for the Court, cited Coleman v. Tennessee, where it was explicitly declared: `It
is well settled that a foreign army, permitted to march through a friendly country or to be
stationed in it, by permission of its government or sovereign, is exempt from the civil and
criminal jurisdiction of the place.’ Two years later, in Tubb and Tedrow v. Griess, this
Court relied on the ruling in Raquiza v. Bradford and cited in support thereof excerpts
from the works of the following authoritative writers: Vattel, Wheaton, Hall, Lawrence,
Oppenheim, Westlake, Hyde, and McNair and Lauterpacht. Accuracy demands the
clarification that after the conclusion of the Philippine-American Military Bases
Agreement, the treaty provisions should control on such matter, the assumption being
that there was a manifestation of the submission to jurisdiction on the part of the foreign
power whenever appropriate. More to the point is Syquia v. Almeda Lopez, where
plaintiffs as lessors sued the Commanding General of the United States Army in the
Philippines, seeking the restoration to them of the apartment buildings they owned
leased to the United States armed forces stationed in the Manila area. A motion to
dismiss on the ground of non-suability was filed and upheld by respondent Judge. The
matter was taken to this Court in a mandamus proceeding. It failed. It was the ruling that
respondent Judge acted correctly considering that the `action must be considered as
one against the U.S. Government.’ The opinion of Justice Montemayor continued: `It is
clear that the courts of the Philippines including the Municipal Court of Manila have no
jurisdiction over the present case for unlawful detainer. The question of lack of
jurisdiction was raised and interposed at the very beginning of the action. The U.S.
Government has not given its consent to the filing of this suit which is essentially against
her, though not in name. Moreover, this is not only a case of a citizen filing a suit against
his own Government without the latter’s consent but it is of a citizen filing an action
against a foreign government without said government’s consent, which renders more
obvious the lack of jurisdiction of the courts of his country. The principles of law behind
this rule are so elementary and of such general acceptance that we deem it unnecessary
to cite authorities in support thereof.’ Then came Marvel Building Corporation v.
Philippine War Damage Commission, where respondent, a United States Agency
established to compensate damages suffered by the Philippines during World War II was
held as falling within the above doctrine as the suit against it `would eventually be a
charge against or financial liability of the United States Government because . . ., the
Commission has no funds of its own for the purpose of paying money judgments.’ The
Syquia ruling was again explicitly relied upon in Marquez Lim v. Nelson, involving a
complaint for the recovery of a motor launch, plus damages, the special defense
interposed being `that the vessel belonged to the United States Government, that the
defendants merely acted as agents of said Government, and that the United States
Government is therefore the real party in interest.’ So it was in Philippine Alien Property
Administration v. Castelo, where it was held that a suit against Alien Property Custodian
and the Attorney General of the United States involving vested property under the
Trading with the Enemy Act is in substance a suit against the United States. To the
same effect is Parreno v. McGranery, as the following excerpt from the opinion of Justice
Tuazon clearly shows: `It is a widely accepted principle of international law, which is
made a part of the law of the land (Article II, Section 3 of the Constitution), that a foreign
state may not be brought to suit before the courts of another state or its own courts
without its consent.’ Finally, there is Johnson v. Turner, an appeal by the defendant, then
Commanding General, Philippine Command (Air Force, with office at Clark Field) from a
decision ordering the return to plaintiff of the confiscated military payment certificates
known as scrip money. In reversing the lower court decision, this Tribunal, through
Justice Montemayor, relied on Syquia v. Almeda Lopez, explaining why it could not be
sustained.chanrobles law library

It bears stressing at this point that the above observations do not confer on the United
States of America a blanket immunity for all acts done by it or its agents in the
Philippines. Neither may the other petitioners claim that they are also insulated from suit
in this country merely because they have acted as agents of the United States in the
discharge of their official functions.
There is no question that the United States of America, like any other state, will be
deemed to have impliedly waived its non-suability if it has entered into a contract in its
proprietary or private capacity. It is only when the contract involves its sovereign or
governmental capacity that no such waiver may be implied. This was our ruling in United
States of America v. Ruiz, 22 where the transaction in question dealt with the
improvement of the wharves in the naval installation at Subic Bay. As this was a clearly
governmental function, we held that the contract did not operate to divest the United
States of its sovereign immunity from suit. In the words of Justice Vicente Abad
Santos:chanrob1es virtual 1aw library

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

x       x       x

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

The other petitioners in the cases before us all aver they have acted in the discharge of
their official functions as officers or agents of the United States. However, this is a matter
of evidence. The charges against them may not be summarily dismissed on their mere
assertion that their acts are imputable to the United States of America, which has not
given its consent to be sued. In fact, the defendants are sought to be held answerable
for personal torts in which the United States itself is not involved. If found liable, they and
they alone must satisfy the judgment.

In Festejo v. Fernando, 23 a bureau director, acting without any authority whatsoever,

appropriated private land and converted it into public irrigation ditches. Sued for the
value of the lots invalidly taken by him, he moved to dismiss the complaint on the ground
that the suit was in effect against the Philippine government, which had not given its
consent to be sued. This Court sustained the denial of the motion and held that the
doctrine of state immunity was not applicable. The director was being sued in his private
capacity for a personal tort.

With these considerations in mind, we now proceed to resolve the cases at hand.
 III

It is clear from a study of the records of G.R. No. 80018 that the individually-named
petitioners therein were acting in the exercise of their official functions when they
conducted the buy-bust operation against the complainant and thereafter testified
against him at his trial. The said petitioners were in fact connected with the Air Force
Office of Special Investigators and were charged precisely with the function of
preventing the distribution, possession and use of prohibited drugs and prosecuting
those guilty of such acts. It cannot for a moment be imagined that they were acting in
their private or unofficial capacity when they apprehended and later testified against the
complainant. It follows that for discharging their duties as agents of the United States,
they cannot be directly impleaded for acts imputable to their principal, which has not
given its consent to be sued. As we observed in Sanders v. Veridiano: 24 

Given the official character of the above-described letters, we have to conclude that the
petitioners were, legally speaking, being sued as officers of the United States
government. As they have acted on behalf of that government, and within the scope of
their authority, it is that government, and not the petitioners personally, that is
responsible for their acts.

The private respondent invokes Article 2180 of the Civil Code which holds the
government liable if it acts through a special agent. The argument, it would seem, is
premised on the ground that since the officers are designated "special agents," the
United States government should be liable for their torts.

There seems to be a failure to distinguish between suability and liability and a

misconception that the two terms are synonymous. Suability depends on the consent of
the state to be sued, liability on the applicable law and the established facts. The
circumstance that a state is suable does not necessarily mean that it is liable; on the
other hand, it can never be held liable if it does not first consent to be sued. Liability is
not conceded by the mere fact that the state has allowed itself to be sued. When the
state does waive its sovereign immunity, it is only giving the plaintiff the chance to prove,
if it can, that the defendant is liable.

The said article establishes a rule of liability, not suability. The government may be held
liable under this rule only if it first allows itself to be sued through any of the accepted
forms of consent.

Moreover, the agent performing his regular functions is not a special agent even if he is
so denominated, as in the case at bar. No less important, the said provision appears to
regulate only the relations of the local state with its inhabitants and, hence, applies only
to the Philippine government and not to foreign governments impleaded in our courts.

We reject the conclusion of the trial court that the answer filed by the special counsel of
the Office of the Sheriff Judge Advocate of Clark Air Base was a submission by the
United States government to its jurisdiction. As we noted in Republic v. Purisima, 25
express waiver of immunity cannot be made by a mere counsel of the government but
must be effected through a duly-enacted statute. Neither does such answer come under
the implied forms of consent as earlier discussed.chanrobles virtual lawlibrary
But even as we are certain that the individual petitioners in G.R. No. 80018 were acting
in the discharge of their official functions, we hesitate to make the same conclusion in
G.R. No. 80258. The contradictory factual allegations in this case deserve in our view a
closer study of what actually happened to the plaintiffs. The record is too meager to
indicate if the defendants were really discharging their official duties or had actually
exceeded their authority when the incident in question occurred. Lacking this
information, this Court cannot directly decide this case. The needed inquiry must first be
made by the lower court so it may assess and resolve the conflicting claims of the
parties on the basis of the evidence that has yet to be presented at the trial. Only after it
shall have determined in what capacity the petitioners were acting at the time of the
incident in question will this Court determine, if still necessary, if the doctrine of state
immunity is applicable.

In G.R. No. 79470, private respondent Genove was employed as a cook in the Main
Club located at the U.S. Air Force Recreation Center, also known as the Open Mess
Complex, at John Hay Air Station. As manager of this complex, petitioner Lamachia is
responsible for eleven diversified activities generating an annual income of $2 million.
Under his executive management are three service restaurants, a cafeteria, a bakery, a
Class VI store, a coffee and pantry shop, a main cashier cage, an administrative office,
and a decentralized warehouse which maintains a stock level of $200,000.00 per month
in resale items. He supervises 167 employees, one of whom was Genove, with whom
the United States government has concluded a collective bargaining agreement.

From these circumstances, the Court can assume that the restaurant services offered at
the John Hay Air Station partake of the nature of a business enterprise undertaken by
the United States government in its proprietary capacity. Such services are not extended
to the American servicemen for free as a perquisite of membership in the Armed Forces
of the United States. Neither does it appear that they are exclusively offered to these
servicemen; on the contrary, it is well known that they are available to the general public
as well, including the tourists in Baguio City, many of whom make it a point to visit John
Hay for this reason. All persons availing themselves of this facility pay for the privilege
like all other customers as in ordinary restaurants. Although the prices are concededly
reasonable and relatively low, such services are undoubtedly operated for profit, as a
commercial and not a governmental activity.

The consequence of this finding is that the petitioners cannot invoke the doctrine of state
immunity to justify the dismissal of the damage suit against them by Genove. Such
defense will not prosper even if it be established that they were acting as agents of the
United States when they investigated and later dismissed Genove. For that matter, not
even the United States government itself can claim such immunity. The reason is that by
entering into the employment contract with Genove in the discharge of its proprietary
functions, it impliedly divested itself of its sovereign immunity from suit.

But these considerations notwithstanding, we hold that the complaint against the
petitioners in the court below must still be dismissed. While suable, the petitioners are
nevertheless not liable. It is obvious that the claim for damages cannot be allowed on the
strength of the evidence before us, which we have carefully examined.

The dismissal of the private respondent was decided upon only after a thorough
investigation where it was established beyond doubt that he had polluted the soup stock
with urine. The investigation, in fact, did not stop there. Despite the definitive finding of
Genove’s guilt, the case was still referred to the board of arbitrators provided for in the
collective bargaining agreement. This board unanimously affirmed the findings of the
investigators and recommended Genove’s dismissal. There was nothing arbitrary about
the proceedings. The petitioners acted quite properly in terminating the private
respondent’s employment for his unbelievably nauseating act. It is surprising that he
should still have the temerity to file his complaint for damages after committing his utterly
disgusting offense.

Concerning G.R. No. 76607, we also find that the barbershops subject of the
concessions granted by the United States government are commercial enterprises
operated by private persons. They are not agencies of the United States Armed Forces
nor are their facilities demandable as a matter of right by the American servicemen.
These establishments provide for the grooming needs of their customers and offer not
only the basic haircut and shave (as required in most military organizations) but such
other amenities as shampoo, massage, manicure and other similar indulgences. And all
for a fee. Interestingly, one of the concessionaires, private respondent Valencia, was
even sent abroad to improve his tonsorial business, presumably for the benefit of his
customers . No less significantly, if not more so, all the barbershop concessionaires are,
under the terms of their contracts, required to remit to the United States government
fixed commissions in consideration of the exclusive concessions granted to them in their
respective areas.

This being the case, the petitioners cannot plead any immunity from the complaint filed
by the private respondents in the court below. The contracts in question being decidedly
commercial, the conclusion reached in the United States of America v. Ruiz case cannot
be applied here.

The Court would have directly resolved the claims against the defendants as we have
done in G.R. No. 79470, except for the paucity of the record in the case at hand. The
evidence of the alleged irregularity in the grant of the barbershop concessions is not
before us. This means that, as in G.R. No. 80258, the respondent court will have to
receive that evidence first, so it can later determine on the basis thereof if the plaintiffs
are entitled to the relief they seek. Accordingly, this case must also be remanded to the
court below for further proceedings.

IV

There are a number of other cases now pending before us which also involve the
question of the immunity of the United States from the jurisdiction of the Philippines. This
is cause for regret, indeed, as they mar the traditional friendship between two countries
long allied in the cause of democracy. It is hoped that the so-called "irritants" in their
relations will be resolved in a spirit of mutual accommodation and respect, without the
inconvenience and asperity of litigation and always with justice to both parties.

WHEREFORE, after considering all the above premises, the Court hereby renders
judgment as follows:chanrob1es virtual 1aw library

1. In G.R. No. 76607, the petition is DISMISSED and the respondent judge is directed to
proceed with the hearing and decision of Civil Case No. 4772. The temporary restraining
order dated December 11, 1986, is LIFTED.
2. In G.R. No. 79470, the petition is GRANTED and Civil Case No. 829-R(298) is
DISMISSED.

3. In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115-C-87 is
DISMISSED. The temporary restraining order dated October 14, 1987, is made
permanent.

4. In G.R. No. 80258, the petition is DISMISSED and the respondent court is directed to
proceed with the hearing and decision of Civil Case No. 4996. The temporary restraining
order dated October 27, 1987, is LIFTED.chanrobles.com:cralaw:red

All without any pronouncement as to costs.

SO ORDERED.
G.R. No. 129406             March 6, 2006

REPUBLIC OF THE PHILIPPINES represented by the PRESIDENTIAL COMMISSION

ON GOOD GOVERNMENT (PCGG), Petitioner, 
vs.
SANDIGANBAYAN (SECOND DIVISION) and ROBERTO S.
BENEDICTO, Respondents.

DECISION

GARCIA, J.:

Before the Court is this petition for certiorari under Rule 65 of the Rules of Court to nullify
and set aside the March 28, 19951 and March 13, 19972 Resolutions of the
Sandiganbayan, Second Division, in Civil Case No. 0034, insofar as said resolutions
ordered the Presidential Commission on Good Government (PCGG) to pay private
respondent Roberto S. Benedicto or his corporations the value of 227 shares of stock of
the Negros Occidental Golf and Country Club, Inc. (NOGCCI) at P150,000.00 per share,
registered in the name of said private respondent or his corporations.

The facts:

Civil Case No. 0034 entitled Republic of the Philippines, plaintiff, v. Roberto S.
Benedicto, et al., defendants, is a complaint for reconveyance, reversion, accounting,
reconstitution and damages. The case is one of several suits involving ill-gotten or
unexplained wealth that petitioner Republic, through the PCGG, filed with the
Sandiganbayan against private respondent Roberto S. Benedicto and others pursuant to
Executive Order (EO) No. 14,3 series of 1986.

Pursuant to its mandate under EO No. 1,4 series of 1986, the PCGG issued writs placing
under sequestration all business enterprises, entities and other properties, real and
personal, owned or registered in the name of private respondent Benedicto, or of
corporations in which he appeared to have controlling or majority interest. Among the
properties thus sequestered and taken over by PCGG fiscal agents were the 227 shares
in NOGCCI owned by private respondent Benedicto and registered in his name or under
the names of corporations he owned or controlled.

Following the sequestration process, PCGG representatives sat as members of the

Board of Directors of NOGCCI, which passed, sometime in October 1986, a resolution
effecting a corporate policy change. The change consisted of assessing a monthly
membership due of P150.00 for each NOGCCI share. Prior to this resolution, an investor
purchasing more than one NOGCCI share was exempt from paying monthly
membership due for the second and subsequent shares that he/she owned.

Subsequently, on March 29, 1987, the NOGCCI Board passed another resolution, this
time increasing the monthly membership due from P150.00 to P250.00 for each share.

As sequestrator of the 227 shares of stock in question, PCGG did not pay the
corresponding monthly membership due thereon totaling P2,959,471.00. On account
thereof, the 227 sequestered shares were declared delinquent to be disposed of in an
auction sale.

Apprised of the above development and evidently to prevent the projected auction sale
of the same shares, PCGG filed a complaint for injunction with the Regional Trial Court
(RTC) of Bacolod City, thereat docketed as Civil Case No. 5348. The complaint,
however, was dismissed, paving the way for the auction sale for the delinquent 227
shares of stock. On August 5, 1989, an auction sale was conducted.

On November 3, 1990, petitioner Republic and private respondent Benedicto entered

into a Compromise Agreement in Civil Case No. 0034. The agreement contained a
general release clause5 whereunder petitioner Republic agreed and bound itself to lift
the sequestration on the 227 NOGCCI shares, among other Benedicto’s properties,
petitioner Republic acknowledging that it was within private respondent Benedicto’s
capacity to acquire the same shares out of his income from business and the exercise of
his profession.6 Implied in this undertaking is the recognition by petitioner Republic that
the subject shares of stock could not have been ill-gotten.

In a decision dated October 2, 1992, the Sandiganbayan approved the Compromise

Agreement and accordingly rendered judgment in accordance with its terms.

In the process of implementing the Compromise Agreement, either of the parties would,
from time to time, move for a ruling by the Sandiganbayan on the proper manner of
implementing or interpreting a specific provision therein.

On February 22, 1994, Benedicto filed in Civil Case No. 0034 a "Motion for Release from
Sequestration and Return of Sequestered Shares/Dividends" praying, inter alia, that his
NOGCCI shares of stock be specifically released from sequestration and returned,
delivered or paid to him as part of the parties’ Compromise Agreement in that case. In a
Resolution7 promulgated on December 6, 1994, the Sandiganbayan granted Benedicto’s
aforementioned motion but placed the subject shares under the custody of its Clerk of
Court, thus:

WHEREFORE, in the light of the foregoing, the said "Motion for Release From
Sequestration and Return of Sequestered Shares/Dividends" is hereby GRANTED and it
is directed that said shares/dividends be delivered/placed under the custody of the Clerk
of Court, Sandiganbayan, Manila subject to this Court’s disposition.

On March 28, 1995, the Sandiganbayan came out with the herein first assailed
Resolution,8 which clarified its aforementioned December 6, 1994 Resolution and
directed the immediate implementation thereof by requiring PCGG, among other things:

(b) To deliver to the Clerk of Court the 227 sequestered shares of [NOGCCI] registered
in the name of nominees of ROBERTO S. BENEDICTO free from all liens and
encumbrances, or in default thereof, to pay their value at P150,000.00 per share which
can be deducted from [the Republic’s] cash share in the Compromise Agreement.
[Words in bracket added] (Emphasis Supplied).

Owing to PCGG’s failure to comply with the above directive, Benedicto filed in Civil Case
No. 0034 a Motion for Compliance dated July 25, 1995, followed by an Ex-Parte Motion
for Early Resolution dated February 12, 1996. Acting thereon, the Sandiganbayan
promulgated yet another Resolution9 on February 23, 1996, dispositively reading:

WHEREFORE, finding merit in the instant motion for early resolution and considering
that, indeed, the PCGG has not shown any justifiable ground as to why it has not
complied with its obligation as set forth in the Order of December 6, 1994 up to this date
and which Order was issued pursuant to the Compromise Agreement and has already
become final and executory, accordingly, the Presidential Commission on Good
Government is hereby given a final extension of fifteen (15) days from receipt hereof
within which to comply with the Order of December 6, 1994 as stated hereinabove.

On April 1, 1996, PCGG filed a Manifestation with Motion for Reconsideration, 10 praying
for the setting aside of the Resolution of February 23, 1996. On April 11, 1996, private
respondent Benedicto filed a Motion to Enforce Judgment Levy. Resolving these two
motions, the Sandiganbayan, in its second assailed Resolution11 dated March 13, 1997,
denied that portion of the PCGG’s Manifestation with Motion for Reconsideration
concerning the subject 227 NOGCCI shares and granted Benedicto’s Motion to Enforce
Judgment Levy.

Hence, the Republic’s present recourse on the sole issue of whether or not the public
respondent Sandiganbayan, Second Division, gravely abused its discretion in holding
that the PCGG is at fault for not paying the membership dues on the 227 sequestered
NOGCCI shares of stock, a failing which eventually led to the foreclosure sale thereof.

The petition lacks merit.

To begin with, PCGG itself does not dispute its being considered as a receiver insofar as
the sequestered 227 NOGCCI shares of stock are concerned.12 PCGG also
acknowledges that as such receiver, one of its functions is to pay outstanding debts
pertaining to the sequestered entity or property,13 in this case the 227 NOGCCI shares in
question. It contends, however, that membership dues owing to a golf club cannot be
considered as an outstanding debt for which PCGG, as receiver, must pay. It also claims
to have exercised due diligence to prevent the loss through delinquency sale of the
subject NOGCCI shares, specifically inviting attention to the injunctive suit, i.e., Civil
Case No. 5348, it filed before the RTC of Bacolod City to enjoin the foreclosure sale of
the shares.

The filing of the injunction complaint adverted to, without more, cannot plausibly tilt the
balance in favor of PCGG. To the mind of the Court, such filing is a case of acting too
little and too late. It cannot be over-emphasized that it behooved the PCGG’s fiscal
agents to preserve, like a responsible father of the family, the value of the shares of
stock under their administration. But far from acting as such father, what the fiscal
agents did under the premises was to allow the element of delinquency to set in before
acting by embarking on a tedious process of going to court after the auction sale had
been announced and scheduled.

The PCGG’s posture that to the owner of the sequestered shares rests the burden of
paying the membership dues is untenable. For one, it lost sight of the reality that such
dues are basically obligations attached to the shares, which, in the final analysis, shall
be made liable, thru delinquency sale in case of default in payment of the dues. For
another, the PCGG as sequestrator-receiver of such shares is, as stressed earlier, duty
bound to preserve the value of such shares. Needless to state, adopting timely
measures to obviate the loss of those shares forms part of such duty and due diligence.

The Sandiganbayan, to be sure, cannot plausibly be faulted for finding the PCGG liable
for the loss of the 227 NOGCCI shares. There can be no quibbling, as indeed the graft
court so declared in its assailed and related resolutions respecting the NOGCCI shares
of stock, that PCGG’s fiscal agents, while sitting in the NOGCCI Board of Directors
agreed to the amendment of the rule pertaining to membership dues. Hence, it is not
amiss to state, as did the Sandiganbayan, that the PCGG-designated fiscal agents, no
less, had a direct hand in the loss of the sequestered shares through delinquency and
their eventual sale through public auction. While perhaps anti-climactic to so mention it
at this stage, the unfortunate loss of the shares ought not to have come to pass had
those fiscal agents prudently not agreed to the passage of the NOGCCI board
resolutions charging membership dues on shares without playing representatives.

Given the circumstances leading to the auction sale of the subject NOGCCI shares,
PCGG’s lament about public respondent Sandiganbayan having erred or, worse still,
having gravely abused its discretion in its determination as to who is at fault for the loss
of the shares in question can hardly be given cogency.

For sure, even if the Sandiganbayan were wrong in its findings, which does not seem to
be in this case, it is a well-settled rule of jurisprudence that certiorari will issue only to
correct errors of jurisdiction, not errors of judgment. Corollarily, errors of procedure or
mistakes in the court’s findings and conclusions are beyond the corrective hand of
certiorari.14 The extraordinary writ of certiorari may be availed only upon a showing, in
the minimum, that the respondent tribunal or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion.15

The term "grave abuse of discretion" connotes capricious and whimsical exercise of
judgment as is equivalent to excess, or a lack of jurisdiction.16 The abuse must be so
patent and gross as to amount to an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law, or to act at all in contemplation of law as where the
power is exercised in an arbitrary and despotic manner by reason of passion or
hostility.17 Sadly, this is completely absent in the present case. For, at bottom, the
assailed resolutions of the Sandiganbayan did no more than to direct PCGG to comply
with its part of the bargain under the compromise agreement it freely entered into with
private respondent Benedicto. Simply put, the assailed resolutions of the Sandiganbayan
have firm basis in fact and in law.

Lest it be overlooked, the issue of liability for the shares in question had, as both public
and private respondents asserted, long become final and executory. Petitioner’s
narration of facts in its present petition is even misleading as it conveniently fails to make
reference to two (2) resolutions issued by the Sandiganbayan. We refer to that court’s
resolutions of December 6, 199418 and February 23, 199619 as well as several
intervening pleadings which served as basis for the decisions reached therein. As it
were, the present petition questions only and focuses on the March 28, 199520 and
March 13, 199721 resolutions, which merely reiterated and clarified the graft court’s
underlying resolution of December 6, 1994. And to place matters in the proper
perspective, PCGG’s failure to comply with the December 6, 1994 resolution prompted
the issuance of the clarificatory and/or reiteratory resolutions aforementioned.

In a last-ditch attempt to escape liability, petitioner Republic, through the PCGG, invokes
state immunity from suit.22As argued, the order for it to pay the value of the delinquent
shares would fix monetary liability on a government agency, thus necessitating the
appropriation of public funds to satisfy the judgment claim.23 But, as private respondent
Benedicto correctly countered, the PCGG fails to take stock of one of the exceptions to
the state immunity principle, i.e., when the government itself is the suitor, as in Civil
Case No. 0034. Where, as here, the State itself is no less the plaintiff in the main case,
immunity from suit cannot be effectively invoked.24 For, as jurisprudence teaches, when
the State, through its duly authorized officers, takes the initiative in a suit against a
private party, it thereby descends to the level of a private individual and thus opens itself
to whatever counterclaims or defenses the latter may have against it.25 Petitioner
Republic’s act of filing its complaint in Civil Case No. 0034 constitutes a waiver of its
immunity from suit. Being itself the plaintiff in that case, petitioner Republic cannot set up
its immunity against private respondent Benedicto’s prayers in the same case.

In fact, by entering into a Compromise Agreement with private respondent Benedicto,

petitioner Republic thereby stripped itself of its immunity from suit and placed itself in the
same level of its adversary. When the State enters into contract, through its officers or
agents, in furtherance of a legitimate aim and purpose and pursuant to constitutional
legislative authority, whereby mutual or reciprocal benefits accrue and rights and
obligations arise therefrom, the State may be sued even without its express consent,
precisely because by entering into a contract the sovereign descends to the level of the
citizen. Its consent to be sued is implied from the very act of entering into such
contract,26 breach of which on its part gives the corresponding right to the other party to
the agreement.

Finally, it is apropos to stress that the Compromise Agreement in Civil Case No. 0034
envisaged the immediate recovery of alleged ill-gotten wealth without further litigation by
the government, and buying peace on the part of the aging Benedicto.27 Sadly, that
stated objective has come to naught as not only had the litigation continued to ensue,
but, worse, private respondent Benedicto passed away on May 15, 2000,28 with the trial
of Civil Case No. 0034 still in swing, so much so that the late Benedicto had to be
substituted by the administratrix of his estate.29

WHEREFORE, the instant petition is hereby DISMISSED.

SO ORDERED.