Republic vs Villasor

Facts:
The decision that was rendered in favor of respondents P.J.
Kiener Co., Ltd, Gavino Unchuan and International
Construction Corporation was declared final and executory
by Respondent Hon. Guillermo P. Villasor.
Pursuant to the said declaration, the corresponding Alias Writ
of Execution was issued. And for the strength of this writ, the
provincial sheriff served notices of garnishment with several
banks, specially on the 'monies due the Armed Forces of the
Philippines in the form of deposits; the Philippines Veterans
Bank received the same notice of garnishment.
The funds of the AFP on deposit with the banks are public
funds duly appropriated and allocated for the payment of
pensions of retireees, pay and allowances of military and
civillian personnel and for maintenance and operations of AFP.
Petitioner filed a petition against Villasor for acting in excess
jurisdiction amounting to lack of jurisdiction in granting the
issuance of a Writ of Execution against the properties of AFP,
hence the notices and garnishments are null and void.
Issue:
Whether or not the Writ of Execution issued by respondent
Judge Villasor is valid.
Held:
No
Ratio:
What was done by respondent Judge is not in conformity with
the dictates of the Constitution. It is a fundamental postulate
of constitutionalism flowing from the juristic concept of
sovereignty that the state and its government is immune from
suit unless it gives its consent. A sovereign is exempt from
suit not because of any formal conception or obsolete theory
but on the logical and practical ground that there can be no
legal right as against the authority that makes the law on
which the right depends.
The Republic of the Philippines in this certiorari and
prohibition proceeding challenges the validity of an order
issued by respondent Judge Guillermo P. Villasor, then of the
Court of First Instance of Cebu, Branch I, 1 declaring a decision
final and executory and of an alias writ of execution directed
against the funds of the Armed Forces of the Philippines
subsequently issued in pursuance thereof, the alleged ground
being excess of jurisdiction, or at the very least, grave abuse
of discretion. As thus simply and tersely put, with the facts
being undisputed and the principle of law that calls for
application indisputable, the outcome is predictable. The
Republic of the Philippines is entitled to the writs prayed for.
Respondent Judge ought not to have acted thus. The order
thus impugned and the alias writ of execution must be
nullified.
In the petition filed by the Republic of the Philippines on July
7, 1969, a summary of facts was set forth thus: "7. On July 3,
1961, a decision was rendered in Special Proceedings No.
2156-R in favor of respondents P. J. Kiener Co., Ltd., Gavino
Unchuan, and International Construction Corporation, and
against the petitioner herein, confirming the arbitration award
in the amount of P1,712,396.40, subject of Special
Proceedings. 8. On June 24, 1969, respondent Honorable
Guillermo P. Villasor, issued an Order declaring the aforestated

decision of July 3, 1961 final and executory, directing the

Sheriffs of Rizal Province, Quezon City [as well as] Manila to
execute the said decision. 9. Pursuant to the said Order dated
June 24, 1969, the corresponding Alias Writ of Execution [was
issued] dated June 26, 1969, .... 10. On the strength of the
afore-mentioned Alias Writ of Execution dated June 26, 1969,
the Provincial Sheriff of Rizal (respondent herein) served
notices of garnishment dated June 28, 1969 with several
Banks, specially on the "monies due the Armed Forces of the
Philippines in the form of deposits sufficient to cover the
amount mentioned in the said Writ of Execution"; the
Philippine Veterans Bank received the same notice of
garnishment on June 30, 1969 .... 11.
The funds of the Armed Forces of the Philippines on deposit
with the Banks, particularly, with the Philippine Veterans Bank
and the Philippine National Bank [or] their branches are public
funds duly appropriated and allocated for the payment of
pensions of retirees, pay and allowances of military and
civilian personnel and for maintenance and operations of the
Armed Forces of the Philippines, as per Certification dated July
3, 1969 by the AFP Controller,..." 2. The paragraph
immediately succeeding in such petition then alleged: "12.
Respondent Judge, Honorable Guillermo P. Villasor, acted in
excess of jurisdiction [or] with grave abuse of discretion
amounting to lack of jurisdiction in granting the issuance of an
alias writ of execution against the properties of the Armed
Forces of the Philippines, hence, the Alias Writ of Execution
and notices of garnishment issued pursuant thereto are null
and void." 3 In the answer filed by respondents, through
counsel Andres T. Velarde and Marcelo B. Fernan, the facts set
forth were admitted with the only qualification being that the
total award was in the amount of P2,372,331.40. 4
The Republic of the Philippines, as mentioned at the outset,
did right in filing this certiorari and prohibition proceeding.
What was done by respondent Judge is not in conformity with
the dictates of the Constitution. .
It is a fundamental postulate of constitutionalism flowing from
the juristic concept of sovereignty that the state as well as its
government is immune from suit unless it gives its consent. It
is readily understandable why it must be so. In the classic
formulation of Holmes: "A sovereign is exempt from suit, not
because of any formal conception or obsolete theory, but on
the logical and practical ground that there can be no legal
right as against the authority that makes the law on which the
right depends." 5 Sociological jurisprudence supplies an
answer not dissimilar. So it was indicated in a recent
decision, Providence Washington Insurance Co. v. Republic of
the Philippines, 6 with its affirmation that "a continued
adherence to the doctrine of non-suability is not to be
deplored for as against the inconvenience that may be caused
private parties, the loss of governmental efficiency and the
obstacle to the performance of its multifarious functions are
far greater if such a fundamental principle were abandoned
and the availability of judicial remedy were not thus
restricted. With the well known propensity on the part of our
people to go to court, at the least provocation, the loss of time
and energy required to defend against law suits, in the
absence of such a basic principle that constitutes such an
effective obstacle, could very well be imagined." 7
This fundamental postulate underlying the 1935 Constitution
is now made explicit in the revised charter. It is therein
expressly provided: "The State may not be sued without its
consent." 8 A corollary, both dictated by logic and sound sense
from a basic concept is that public funds cannot be the object
of a garnishment proceeding even if the consent to be sued
had been previously granted and the state liability adjudged.
Thus in the recent case of Commissioner of Public Highways v.
San Diego, 9 such a well-settled doctrine was restated in the
opinion of Justice Teehankee: "The universal rule that where
the State gives its consent to be sued by private parties either
by general or special law, it may limit claimant's action 'only
up to the completion of proceedings anterior to the stage of
execution' and that the power of the Courts ends when the
judgment is rendered, since government funds and properties

may not be seized under writs of execution or garnishment to

satisfy such judgments, is based on obvious considerations of
public policy. Disbursements of public funds must be covered
by the corresponding appropriation as required by law. The
functions and public services rendered by the State cannot be
allowed to be paralyzed or disrupted by the diversion of public
funds from their legitimate and specific objects, as
appropriated by law." 10 Such a principle applies even to an
attempted garnishment of a salary that had accrued in favor
of an employee. Director of Commerce and Industry v.
Concepcion, 11 speaks to that effect. Justice Malcolm as
ponente left no doubt on that score. Thus: "A rule which has
never been seriously questioned, is that money in the hands
of public officers, although it may be due government
employees, is not liable to the creditors of these employees in
the process of garnishment. One reason is, that the State, by
virtue of its sovereignty, may not be sued in its own courts
except by express authorization by the Legislature, and to
subject its officers to garnishment would be to permit
indirectly what is prohibited directly. Another reason is that
moneys sought to be garnished, as long as they remain in the
hands of the disbursing officer of the Government, belong to
the latter, although the defendant in garnishment may be
entitled to a specific portion thereof. And still another reason
which covers both of the foregoing is that every consideration
of public policy forbids it." 12
In the light of the above, it is made abundantly clear why the
Republic of the Philippines could rightfully allege a legitimate
grievance.
WHEREFORE, the writs of certiorari and prohibition are
granted, nullifying and setting aside both the order of June 24,
1969 declaring executory the decision of July 3, 1961 as well
as the alias writ of execution issued thereunder. The
preliminary injunction issued by this Court on July 12, 1969 is
hereby made permanent.

Professional Video Inc. vs TESDA

PROVI entity engaged in the sale of high technology

equipment, information technology products and
broadcast devices
TESDA is an instrumentality of the government
established under RA 7796 (TESDA Act of 1994)
attached to DOLE.
o
Provides skills standardization, testing and
certification
To fulfil the mandate of TESDA, it sought to issue
security-printed certification and/or PVC cards
to trainees who passed the certification
TESDA Pre-qualification Bids Committee (PBAC)
conducted 2 public biddings for the printing and
encoding of PVC card. PBAC recommended that
TESDA enter into a negotiated contract with
PROVI
PROVI signed and executed their Contract Agreement
Project: PVD ID Card amounting to P39,475,00
Both parties executed an Addendum to the contract
agreement.
TESDA paid 30% of the total cost of the materials 30
days after the receipt and acceptance of the
contracted supplies with the balance payable within
30days
Despite the two demand letters sent by POVI, TESDA
failed to pay their balance P35,735,500. This
prompted PROVI to file writ of preliminary
attachment/garnishment against TESDA.
RTC favored the garnishment and ordered the
manager of the Land Bank of the Philippines to
produce TESDAs bank statement
CA set aside the RTCs orders after finding out the
following:
o
A) TESDAs funds are public in nature and
therefore exempt from garnishment

B) TESDAs purchase of the PVC cards was

necessary from garnishment

Issue:
1. Whether or not the writ of attachment against TESDA and
its funds, to cover PROVIs claim against TESDA is valid?
2. Whether or not TESDA is covered by the principle of State
Immunity?
Holding:
1.
2.

No
Yes

Ruling:
1. Public funds cannot be the object of garnishment
proceedings even if the consent to be sued had been
previously granted and the state liability adjudged.
Even assuming that TESDA entered into an implied
consent with PROVI to be sued, the funds are still public in
nature.
2.

TESDA is an unincorporated instrumentally of the

government, directly attached to the DOLE through
the participation of the Secretary of Labor as the
Chairman. As an unincorporated instrumentality
operating under a specific charter, it is equipped with
both express and implied powers and all STATE
IMMUNITIES FULLY APPLY TO IT.

Heirs of Mateo Pidacan and Romana Eigo, et al.

v. ATO, et al.,
G.R. No. 162779, June 15, 2007
A property was converted into an airport by the Air Transport
Office (ATO) depriving the owners of the beneficial use and
enjoyment of the same as early as 1948 without an
expropriation proceeding. It was contended that there was
taking hence, just compensation should be reckoned from
1948. Is the contention correct? Why?
No. As a rule, the determination of just compensation
in eminent domain cases is reckoned from the time of
taking. (Gabatin v. LBO, 444 SCRA 176 (2004)). In this
case, however, application of the said rule would lead
to grave injustice. Note that the ATO had been using the
property as airport since 1948 without having instituted the
proper expropriation proceedings. To peg the value of the
property at the time of taking in 1948, despite the exponential
increase in its value considering the lapse of over half a
century, would be iniquitous. ATO cannot conveniently invoke
the right of eminent domain to take advantage of the
ridiculously low value of the property at the time of taking
that it arbitrarily chooses to the prejudice of the owners.
Justice and fairness dictate that the appropriate
reckoning point for the valuation of the property is
when the trial court made its order of expropriation in
2001. (Heirs of Mateo Pidacan & Romana Eigo, et al. v. ATO,
et al., G.R. No. 162779, June 15, 2007).
FACTS:
Sometime in 1935, spouses Mateo Pidacan and Romana Eigo
acquired under the homestead provision of ActNo. 2874 a
parcel of land consisting of about 22 hectares situated in San
Jose, Occidental Mindoro.
Patent No. 33883and Original
Certificate of Title (OCT) No. 2204 were issued on the land, in
the names of the Pidacan spouses.In 1948, the Civil
Aeronautics Administration (now Air Transportation Office or
ATO) used a portion of the said property as an airport. Upon
the death of the Pidacan spouses in 1974, the ATO
constructed a perimeter fence and a new terminal building on
the property.

ATO vs RAMOS

The ATO also lengthened, widened, and cemented the

airports runway.The spouses heirs namely, Pacita Pidacan
Vda. de Zubiri and Adela Pidacan Vda. de Robles demanded
from ATO thepayment of the value of the property as well as
rentals for the use of the occupied premises. However, they
were told that payment could not be made because the
property was still in their parents name.The heirs claimed
that they were entitled to payment of rentals plus the value of
the property. The ATO countered that the heirs were not
entitled to any payment, either of the value of the land or of
the rentals because the property had been sold to its
predecessor, the defunct Civil Aeronautics Administration for
P0.70 per square meter.

Spouses David and Elisea Ramos (respondents) discovered

that a portion of their land registered under Transfer
Certificate of Title No. T-58894 of the Baguio City land records
with an area of 985 square meters, more or less, was being
used as part of the runway and running shoulder of
the Loakan Airport being
operated
by
petitioner
Air
Transportation Office (ATO). On August 11, 1995, the
respondents agreed after negotiations to convey the affected
portion by deed of sale to the ATO in consideration of the
amount ofP778,150.00. However, the ATO failed to pay
despite repeated verbal and written demands.

The ATO claimedthat even if it failed to obtain title in its

name, it had been declaring the property for taxation
purposes.The Trial Court rendered a decision ordering ATO to
pay rental and the value of the land at P89 per square meter.

Thus, on April 29, 1998, the respondents filed an

action for collection against the ATO and some of its officials
in the RTC (docketed as Civil Case No. 4017-R and
entitled Spouses David and Elisea Ramos v. Air Transportation
Office, Capt. Panfilo Villaruel, Gen. Carlos Tanega, and Mr.
Cesar de Jesus).

On appeal, the CA ruled to remand the case to determine the

just compensation.
ISSUE: WHETHER OR NOT THE STATE CAN BE SUED IN THEIR
EXERCISE OF ITS POWER OF EMINENT DOMAIN.
HELD:
Preponderance of evidence on record strongly indicates that
the ATOs conversion of the property into an airport in 1948
comes within the purview of eminent domain.Eminent domain
or expropriation is the inherent right of the state to condemn
private property to public use upon payment of just
compensation.
A number of circumstances must be present in the taking of
property for purposes of eminent domain: (1) The expropriator
must enter a private property; (2) The entrance into private
property must be for more than a momentary period; (3) The
entry into the property should be under warrant or color of
legal authority; (4) The property must be devoted to a public
use or otherwise informally appropriated or injuriously
affected; and (5) The utilization of the property for public use
must be in such a way as to oust the owner and deprive him
of all beneficial enjoyment of the property.In this case, it is
undisputed that petitioners private property was converted
into an airport by respondent ATO.
As a consequence, petitioners were completely deprived of
beneficial use and enjoyment of their property. Clearly, there
was taking in the concept of expropriation as early as 1948
when the airport was constructed on petitioners private land.
As a rule, the determination of just compensation in eminent
domain cases is reckoned from the time of taking. In this case,
however, application of the said rule would lead to grave
injustice. Note that the ATO had been using petitioners
property as airport since 1948 without having instituted the
proper expropriation proceedings. To peg the value of the
property at the time of taking in 1948, despite the exponential
increase in its value considering the lapse of over half a
century, would be iniquitous.
We cannot allow the ATO to conveniently invoke the right of
eminent domain to take advantage of the ridiculously low
value of the property at the time of taking that it arbitrarily
chooses to the prejudice of petitioners.In this particular case,
justice and fairness dictate that the appropriate reckoning
point for the valuation of petitioners property is when the trial
court made its order of expropriation in 2001.
As for the fair value of the subject property, we believe that
the amount arrived at by the commissioners appointed by the
trial court, P304.39 per square meter, constitutes just
compensation to petitioners.
PRINCIPLE: When is a suit against the State

In their answer, the ATO and its co-defendants

invoked as an affirmative defense the issuance of
Proclamation No. 1358, whereby President Marcos had
reserved certain parcels of land that included the respondents
affected portion for use of the Loakan Airport. They asserted
that the RTC had no jurisdiction to entertain the action without
the States consent considering that the deed of sale had been
entered into in the performance of governmental functions.
Sovereign Immunity; expropriation. The doctrine of
sovereign immunity cannot be successfully invoked to defeat
a valid claim for compensation arising from the taking without
just compensation and without the proper expropriation
proceedings being first resorted to of the plaintiffs property.
The SC cited the previous case of De los Santos v.
Intermediate Appellate Court where it ruled that the doctrine
of sovereign immunity was not an instrument for perpetrating
any injustice on a citizen. In exercising the right of eminent
domain, the State exercised its jus imperii, as distinguished
from its proprietary rights, or jus gestionis; yet, even in that
area, where private property had been taken in expropriation
without just compensation being paid, the defense of
immunity from suit could not be set up by the State against
an action for payment by the owners.
Sovereign Immunity; sovereign function and proprietary
function. The immunity from suit is based on the political
truism that the State, as a sovereign, can do no wrong.
Practical considerations dictate the establishment of immunity
from suit in favor of the State. Otherwise, and the State is
suable at the instance of every other individual, government
service may be severely obstructed and public safety
endangered because of the number of suits that the State has
to defend against. An unincorporated government agency
without any separate juridical personality of its own enjoys
immunity from suit because it is invested with an inherent
power of sovereignty. Accordingly, a claim for damages
against the agency cannot prosper; otherwise, the doctrine of
sovereign immunity is violated. However, the need to
distinguish between an unincorporated government agency
performing governmental function and one performing
proprietary functions has arisen. The immunity has been
upheld in favor of the former because its function is
governmental or incidental to such function; it has not been
upheld in favor of the latter whose function was not in pursuit
of a necessary function of government but was essentially a
business. In this case, the juridical character of the Air
Transportation Office (ATO) as an agency of the Government
was not performing a purely governmental or sovereign

function, but was instead involved in the management and

maintenance of the Loakan Airport, an activity that was not
the exclusive prerogative of the State in its sovereign
capacity. Hence, the ATO had no claim to the States immunity
from suit.

China National Machinery vs Santamaria

CHINA NATIONAL MACHINERY & EQUIPMENT
CORP. (GROUP), Petitioner,
vs.
HON. CESAR D. SANTAMARIA, et al.
FACTS:
On 14 September 2002, petitioner China National Machinery &
Equipment Corp. (Group) (CNMEG), represented by its
chairperson, Ren Hongbin, entered into a Memorandum of
Understanding
with
the
North
Luzon
Railways
Corporation (Northrail), represented by its president, Jose L.
Cortes, Jr. for the conduct of a feasibility study on a possible
railway line from Manila to San Fernando, La Union (the
Northrail Project).
On 30 August 2003, the Export Import Bank of China (EXIM
Bank) and the Department of Finance of the Philippines
(DOF) entered into a Memorandum of Understanding (Aug 30
MOU), wherein China agreed to extend Preferential Buyers
Credit to the Philippine government to finance the
Northrail Project. The Chinese government designated EXIM
Bank as the lender, while the Philippine government named
the DOF as the borrower. Under the Aug 30 MOU, EXIM Bank
agreed to extend an amount not exceeding USD 400,000,000
in favor of the DOF, payable in 20 years, with a 5-year grace
period, and at the rate of 3% per annum. On 30 December
2003, Northrail and CNMEG executed a Contract Agreement
for the construction of Section I, Phase I of the North Luzon
Railway System from Caloocan to Malolos on a turnkey basis
(the Contract Agreement). The contract price for the Northrail
Project was pegged at USD 421,050,000.

be a proprietary endeavor but clearly, it was CNMEG that

initiated the undertaking, and not the Chinese government.
Also, despite petitioners claim that the EXIM Bank extended
financial assistance to Northrail because the bank was
mandated by the Chinese government, and not because of
any motivation to do business in the Philippines,38 it is clear
from the foregoing provisions that the Northrail Project was
a purely commercial transaction.
The Contract Agreement was not concluded between the
Philippines and China, but between Northrail and CNMEG. By
the terms of the Contract Agreement, Northrail is a
government-owned or -controlled corporation, while CNMEG is
a corporation duly organized and created under the laws of
the Peoples Republic of China. Thus, both Northrail and
CNMEG entered into the Contract Agreement as entities with
personalities distinct and separate from the Philippine and
Chinese governments, respectively.
Thus, the instant Petition is DENIED by the SC. Petitioner
China National Machinery & Equipment Corp. (Group) is not
entitled to immunity from suit, and the Contract Agreement is
not an executive agreement.

Department f Health vs. Phil Pharmawealth,

Inc.
Facts:

Secretary of Health Alberto Romualdez R. issued

Administrative Order No. 27 series of 1998, outlining
the guidelines and procedure on the accreditation of
government suppliers for pharmaceutical products. It
was later amended by A.O. no. 10 series 2000. On
May 9, 2000 and May 29, 2000

respondent submitted to the petitioner DOH a

request for the inclusion of additional items in its list
of accredited drug products, including the antibiotic
Penicillin G Benzathine.It appears that processing
of and the release of the result of respondents
request was due on September 2000, the last month
of the quarter following the date of its filing. Despite
the lack of response from petitioner DOH regarding
respondents request for inclusion of additional items
in its list of accredited products, respondent
submitted its bid for Penicillin G Benzathine contract.

Only two companies participated with respondent

submitting the lower bid. In view, however, of the
non-accreditation of respondents Penicillin G
Benzathine product, the contract was awarded to YSS
depite the fact that Philpharma wealth is the lowest
bidder.

The respondent filed a complaint for injunction,

mandamus and damages with prayer for the
issuance of writ preliminary injunction and/or
temporary restraining order with the RTC praying
the trial court to nullify the ward of the Penicillin G
Bezathine contract and award the same to the
plaintiff as the lowest complying responsible bidder
for the said contract.

Petitioner DOH, secretary Rumualdez, succeeded by

petitioner
Dayrit,
and
individual
petitioners
Undersecretary Galon and Lopez argued for dismissal
of the complaint for the lack of merit in view of the
express reservation made by the petitioner to accept
or reject any or all bids without incurring liability to
the bidders, they positing that government agencies
have such full discretion. Petitioner subsequently
filed a motion to dismiss praying for the

On 13 February 2006, respondents filed a Complaint for

Annulment of Contract and Injunction with Urgent Motion for
Summary Hearing to Determine the Existence of Facts and
Circumstances. However, petitioner alleged that contract was
between the sovereign of the Phils and China, thus, it should
be entitled for immunity.
ISSUE:
Whether or not CNMEG is immune from Philippine laws.
HELD
There are two conflicting concepts of sovereign immunity,
each widely held and firmly established. According to the
classical or absolute theory, a sovereign cannot, without
its consent, be made a respondent in the courts of another
sovereign. According to the newer or restrictive theory,
the immunity of the sovereign is recognized only with regard
to public acts or acts jure imperii of a state, but not with
regard to private acts or acts jure gestionis. Since the
Philippines adheres to the restrictive theory, it is crucial to
ascertain the legal nature of the act involved whether the
entity claiming immunity performs governmental, as opposed
to proprietary, functions.
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.
The Contract Agreement, however, does not on its own reveal
whether the construction of the Luzon railways was meant to

outright dismissal of the complaint based on

the doctrine of state immunity.
Issue: Is the doctrine of state immunity applicable?
Ruling:
1. STATE IMMUNITY OF DOH
The defense of immunity from suit will not avail despite
its being an unincorporated agency of the government for
the only causes of action directed against it are
preliminary injunction and mandamus. Preliminary
injunction may be directed to a party. Court or person.
The defense of state immunity from suit does not apply in
causes of action which do not seek to impose charge or
financial liability against the State.
2. State immunity of public officers
An officer who exceeds the power conferred on him by law
cannot hide behind the plea of sovereign immunity and must
bear the liability personally.
The mere allegation that a government official is being sued
in his personal capacity does not automatically remove the
same from the protection of the doctrine of state immunity,
and neither does the mere invocation of official character
suffice to insulate such official from suability and liability of an
act committed without or in excess of his or her authority
Public Officers qualified immunity
Suability of a government official depends on whether the
official concerned was acting with his official or jurisdictional
capacity, and whether the acts done in the performance of the
official functions will result in a charge of financial liability
against the government.
State Immunity
The defense of state immunity from suit does not apply n
causes of action, which do not seek to impose charge or
financial liability against the state.

Veterans Manpower and Protective

Services, Inc. v. CA
G.R. No. 91359, September 25, 1992
Grino-Aquino, J.
Facts:
The constitutionality of the following provisions of
R.A. 5487(otherwise known as the Private Security Agency
Law), as amended, is questioned by VMPSI in its complaint:
SEC. 4. Who may Organize a Security or Watchman Agency. Any Filipino citizen or a corporation, partnership, or
association, with a minimum capital of five thousand pesos,
one hundred per cent of which is owned and controlled by
Filipino citizens may organize a security or watchman
agency: Provided, That no person shall organize or have
aninterest in, more than one such agency except those which
are alreadyexisting at the promulgation of this Decree: x x x.
(As amended by P.D. Nos. 11 and 100.)
SEC. 17. Rules and Regulations by Chief, Philippine
Constabulary. -The Chief of the Philippine Constabulary, in
consultation with thePhilippine Association of Detective and
Protective Agency Operators,Inc. and subject to the provision
of existing laws, is hereby authorized to issue the rules and
regulations necessary to carry out the purpose of this Act.
VMPSI alleges that the above provisions of R.A. No.
5487 violate the provisions of the 1987 Constitution against
monopolies, unfair competition and combinations in restraint
of trade, and tend to favor and institutionalize the Philippine

Association of Detective and Protective Agency Operators, Inc.

(PADPAO) which is monopolistic because it has an interest in
more than one security agency.
Respondent VMPSI likewise questions the validity of
paragraph 3, subparagraph (g) of the Modifying Regulations
on the Issuance of License to Operate and Private Security
Licenses and Specifying Regulations for the Operation of
PADPAO issued by then PC Chief Lt. Gen. Fidel V. Ramos,
through Col. Sabas V. Edades, requiring that all private
security agencies/company security forces must register as
members of any PADPAO Chapter organized within the Region
where their main offices are located.... As such membership
requirement in PADPAO is compulsory in nature, it allegedly
violates
legal
and
constitutional
provisions
against
monopolies, unfair competition and combinations in restraint
of trade.
On May 12, 1986, a Memorandum of Agreement was
executed by PADPAO and the PC Chief, which fixed the
minimum monthly contract rate per guard for eight (8) hours
of security service per day at P2,255.00 within Metro Manila
and P2,215.00 outside of Metro Manila.
On June 29, 1987, Odin Security Agency (Odin) filed a
complaint with PADPAO accusing VMPSI of cut-throat
competition by undercutting its contract rate for security
services rendered to the Metropolitan Waterworks and
Sewerage System (MWSS), charging said customer lower than
the standard minimum rates provided in the Memorandum of
Agreement dated May 12, 1986.
PADPAO found VMPSI guilty of cut-throat competition,
hence, the PADPAO Committee on Discipline recommended
the expulsion of VMPSI from PADPAO and the cancellation of
its license to operate a security agency (Annex D, Petition).
The PC-SUSIA made similar findings and likewise
recommended the cancellation of VMPSIs license.
As a result,
clearance/certificate of
requested one.

PADPAO refused to issue

membership to VMPSI when

a
it

VMPSI wrote the PC Chief on March 10, 1988,

requesting him to set aside or disregard the findings of
PADPAO and consider VMPSIs application for renewal of its
license, even without a certificate of membership from
PADPAO
Issue:
whether or not VMPSIs complaint against the PC
Chief and PC-SUSIA is a suit against the State without its
consent
Held:
Yes. The State may not be sued without its consent
(Article XVI, Section 3, of the 1987 Constitution). Invoking this
rule, the PC Chief and PC-SUSIA contend that, being
instrumentalities of the national government exercising a
primarily governmental function of regulating the organization
and operation of private detective, watchmen, or security
guard agencies, said official (the PC Chief) and agency (PCSUSIA) may not be sued without the Governments consent,
especially in this case because VMPSIs complaint seeks not
only to compel the public respondents to act in a certain way,
but worse, because VMPSI seeks actual and compensatory
damages in the sum of P1,000,000.00, exemplary damages in
the same amount, and P200,000.00 as attorneys fees from
said public respondents. Even if its action prospers, the
payment of its monetary claims may not be enforced because
the State did not consent to appropriate the necessary funds
for that purpose.

While the doctrine of state immunity appears to

prohibit only suits against the state without its consent, it is
also applicable to complaints filed against officials of the state
for acts allegedly performed by them in the discharge of their
duties. 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.
A public official may sometimes be held liable in his
personal or private capacity if he acts in bad faith, or beyond
the scope of his authority or jurisdiction, however, since the
acts for which the PC Chief and PC-SUSIA are being called to
account in this case, were performed by them as part of their
official duties, without malice, gross negligence, or bad faith,
no recovery may be had against them in their private
capacities.
The correct test for the application of state immunity
is not the conclusion of a contract by the State but the legal
nature of the act.
The restrictive application of State immunity is proper only
when the proceedings arise out of commercial transactions of
the foreign sovereign, its commercial activities or economic
affairs. Stated differently, a State may be said to have
descended to the level of an individual and can thus be
deemed to have tacitly given its consent to be sued only
when it enters into a business contract. It does not apply
where the contract relates to the exercise of its sovereign
functions.
In the instant case, the Memorandum of Agreement
entered into by the PC Chief and PADPAO was intended to
professionalize the industry and to standardize the salaries of
security guards as well as the current rates of security
services, clearly, a governmental function. The execution of
the said agreement is incidental to the purpose of R.A.5487,
as amended, which is to regulate the organization and
operation of private detective, watchmen or security guard
agencies.

Department of Agriculture vs. NLRC G.R. No.

104269, November 11, 1993
Facts: Petitioner Department of Agriculture (DA) and Sultan
Security Agency entered into a contract for security services
to be provided by the latter to the said governmental entity.
Pursuant to their arrangements, guards were deployed by
Sultan Security Agency in the various premises of the DA.
Thereafter, several guards filed a complaint for underpayment
of wages, nonpayment of 13th month pay, uniform
allowances, night shiftdifferential pay, holiday pay, and
overtime pay, as well as for damages against the DA and the
security
agency.
The
Labor Arbiter rendered
a
decision
finding
the
DA jointly and severally liable with the security agency for the
payment of money claims of the complainant security guards.
The DA and the security agency did notappeal the decision.
Thus, the decision became final and executory. The
Labor Arbiter issued a writ of execution to enforce and
execute the judgment against the property of the DA and the
security agency. Thereafter, the City Sheriff levied on
execution
the
motor
vehicles
of
the
DA.
Issue: Whether or not the doctrine of non-suability of the
State
applies
in
the
case
Held: The basic postulate enshrined in the Constitution that
the State may not be sued without its consent reflects
nothing less than a recognition of the sovereign character of

the State and an express affirmation of the unwritten rule

effectively insulating it from the jurisdiction of courts. It is
based on the very essence of sovereignty. A sovereign
isexempt from suit based on the logical and practical ground
that there can be no legal right as against the authority that
makes
the
law
on
which
the
right
depends.
The rule is not really absolute for it does not say that the
State may not be sued under any circumstances. The State
may at times be sued. The States consent may be given
expressly or impliedly. Express consent may be made through
a general law or a special law. Implied consent, on the other
hand, is conceded when the State itself commences litigation,
thus opening itself to a counterclaim, or when it enters into a
contract. In this situation, the government is deemed to have
descended to the level of the other contracting party and to
have divested itself
of
its
sovereign
immunity.
But not all contracts entered into by the government operate
as a waiver of its non-suability; distinction must still be made
between one which is executed in the exercise of its sovereign
function and another which is done in its proprietary capacity.
A State may be said to have descended to the level of an
individual and can this be deemed to have actually given its
consent to be sued only when it enters into business
contracts. It does not apply where the contract relates to the
exercise
of
its
sovereign
functions.
In the case, the DA has not pretended to have assumed a
capacity apart from its being a governmental entity when it
entered into the questioned contract; nor that it could have, in
fact,
performed
any
act
proprietary
in
character.
But, be that as it may, the claims of the complainant security
guards clearly constitute money claims. Act No. 3083 gives
the consent of the State to be sued upon any moneyed claim
involving liability arising from contract, express or implied.
Pursuant, however, to Commonwealth Act 327, as amended
by PD 1145, the money claim must first be brought to the
Commission on Audit.

Sayson VS Singson
The real party in interest before this Court in
this certiorari proceeding to review a decision of the Court of
First Instance of Cebu is the Republic of the Philippines,
although the petitioners are the public officials who were
named as respondents 1 in a mandamus suit below. Such is
the contention of the then Solicitor General, now Associate
Justice, Felix V. Makasiar, 2 for as he did point out, what is
involved is a money claim against the government, predicated
on a contract. The basic doctrine of non-suability of the
government without its consent is thus decisive of the
controversy. There is a governing statute that is
controlling. 3 Respondent Felipe Singson, the claimant, for
reasons known to him, did not choose to abide by its terms.
That was a fatal misstep. The lower court, however, did not
see it that way. We cannot affirm its decision.
As found by the lower court, the facts are the following:
"In January, 1967, the Office of the District Engineer
requisitioned various items of spare parts for the repair of a D8 bulldozer, ... . The requisition (RIV No. 67/0331) was signed
by the District Engineer, Adventor Fernandez, and the
Requisitioning Officer (civil engineer), Manuel S. Lepatan. ... It
was approved by the Secretary of Public Works and
Communications, Antonio V. Raquiza. It is noted in the
approval of the said requisition that "This is an exception to
the telegram dated Feb. 21, 1967 of the Secretary of Public
Works and Communications." ...
So, a canvass or public bidding was conducted on May 5, 1967
... . The committee on award accepted the bid of the Singkier
Motor Service [owned by respondent Felipe Singson] for the

sum of P43,530.00. ... Subsequently, it was approved by the

Secretary of Public Works and Communications; and on May
16, 1967 the Secretary sent a letter-order to the Singkier
Motor Service, Mandaue, Cebu requesting it to immediately
deliver the items listed therein for the lot price of
P43,530.00. ... It would appear that a purchase order signed
by the District Engineer, the Requisitioning Officer and the
Procurement Officer, was addressed to the Singkier Motor
Service. ... In due course the Voucher No. 07806 reached the
hands of Highway Auditor Sayson for pre-audit.
He then made inquiries about the reasonableness of the price.
... Thus, after finding from the indorsements of the Division
Engineer and the Commissioner of Public Highways that the
prices of the various spare parts are just and reasonable and
that the requisition was also approved by no less than the
Secretary of Public Works and Communications with the
verification of V.M. Secarro a representative of the Bureau of
Supply Coordination, Manila, he approved it for payment in
the sum of P34,824.00, with the retention of 20% equivalent
to P8,706.00. ... His reason for withholding the 20% equivalent
to P8,706.00 was to submit the voucher with the supporting
papers to the Supervising Auditor, which he did. ... The
voucher ... was paid on June 9, 1967 in the amount of
P34,824.00 to the petitioner [respondent Singson]. On June
10,1967, Highway Auditor Sayson received a telegram from
Supervising Auditor Fornier quoting a telegraphic message of
the General Auditing Office which states: "In view of excessive
prices charge for purchase of spare parts and equipment
shown by vouchers already submitted this Office direct all
highway auditors refer General Office payment similar nature
for appropriate action." ... In the interim it would appear that
when the voucher and the supporting papers reached the
GAO, a canvass was made of the spare parts among the
suppliers in Manila, particularly, the USI (Phil.), which is the
exclusive dealer of the spare parts of the caterpillar tractors in
the Philippines. Said firm thus submitted its quotations at
P2,529.64 only which is P40,000.00 less than the price of the
Singkier. ... In view of the overpricing the GAO took up the
matter with the Secretary of Public Works in a third
indorsement of July 18, 1967. ... The Secretary then
circularized a telegram holding the district engineer
responsible for overpricing." 4 What is more, charges for
malversation were filed against the district engineer and the
civil engineer involved. It was the failure of the Highways
Auditor, one of the petitioners before us, that led to the filing
of the mandamus suit below, with now respondent Singson as
sole proprietor of Singkier Motor Service, being adjudged as
entitled to collect the balance of P8,706.00, the contract in
question having been upheld. Hence this appeal by certiorari.
1. To state the facts is to make clear the solidity of the stand
taken by the Republic. The lower court was unmindful of the
fundamental doctrine of non-suability. So it was stressed in
the petition of the then Solicitor General Makasiar. Thus: "It is
apparent that respondent Singson's cause of action is a
money claim against the government, for the payment of the
alleged balance of the cost of spare parts supplied by him to
the Bureau of Public Highways. Assuming momentarily the
validity of such claim, although as will be shown hereunder,
the claim is void for the cause or consideration is contrary to
law, morals or public policy, mandamus is not the remedy to
enforce the collection of such claim against the State but a
ordinary action for specific performance ... . Actually, the suit
disguised as one for mandamus to compel the Auditors to
approve the vouchers for payment, is a suit against the State,
which cannot prosper or be entertained by the Court except
with the consent of the State ... . In other words, the
respondent should have filed his claim with the General
Auditing Office, under the provisions of Com. Act 327 ... which
prescribe the conditions under which money claim against the
government
may
be
filed ...." 5 Commonwealth Act No. 327 is quite explicit. It is
therein provided: "In all cases involving the settlement of
accounts or claims, other than those of accountable officers,
the Auditor General shall act and decide the same within sixty

days, exclusive of Sundays and holidays, after their

presentation. If said accounts or claims need reference to
other persons, office or offices, or to a party interested, the
period aforesaid shall be counted from the time the last
comment necessary to a proper decision is received by
him." 6 Thereafter, the procedure for appeal is indicated: "The
party aggrieved by the final decision of the Auditor General in
the settlement of an account or claim may, within thirty days
from receipt of the decision, take an appeal in writing: (a) To
the President of the United States, pending the final and
complete withdrawal of her sovereignty over the Philippines,
or (b) To the President of the Philippines, or (c) To the Supreme
Court of the Philippines if the appellant is a private person or
entity." 7
2. With the facts undisputed and the statute far from
indefinite or ambiguous, the appealed decision defies
explanation. It would be to disregard a basic corollary of the
cardinal postulate of non-suability. It is true that once consent
is secured, an action may be filed. There is nothing to prevent
the State, however, in such statutory grant, to require that
certain administrative proceedings be had and be exhausted.
Also, the proper forum in the judicial hierarchy can be
specified if thereafter an appeal would be taken by the party
aggrieved. Here, there was no ruling of the Auditor General.
Even had there been such, the court to which the matter
should have been elevated is this Tribunal; the lower court
could not legally act on the matter. What transpired was
anything but that. It is quite obvious then that it does not
have the imprint of validity.
WHEREFORE, the decision
Cebu of September 4, 1968
suit for mandamus filed
below, is dismissed. With
Singson.

of the Court of First Instance of

is reversed and set aside, and the
against petitioners, respondents
costs against respondent Felipe

NATIONAL HOUSING AUTHORITY v. HEIRS OF

ISIDRO GUIVELONDO
On February 23, 1999, petitioner National Housing Authority
filed with the Regional Trial Court of Cebu City, Branch 11, an
Amended Complaint for eminent domain against Associacion
Benevola de Cebu, Engracia Urot and the Heirs of Isidro
Guivelondo for the purpose of the public use of Socialized
housing.
On November 12, 1999, the Heirs of Isidro Guivelondo filed a
Manifestation stating that they were waiving their objections
to NHAs power to expropriate their properties. Thus an order
of execution has been granted and the court already
appointed commissioners to determine the amount for just
compensation
On April 17, 2000, the Commissioners submitted their report
wherein they recommended that the just compensation of the
subject properties be fixed at P11,200.00 per square meter
wherein a partial judgment has been rendered.
After the report on the just compensation has completed,
both parties filed an MR on the amount for the just
compensation stating that it has no adequate basis and
support. Both MR was denied by the court.
While the judgment has been rendered in the RTC and an
entry of judgment and the motion for execution has been
issued, NHA filed a petition for certiorari to the Court of
Appeals. The CA denied the petition on the ground that the

Partial Judgment and Omnibus Order became final and

executory when petitioner failed to appeal the same.

the basis of the evidence before, and findings of, the

commissioners would be final, too. It would finally dispose of
the second stage of the suit, and leave nothing more to be
done by the Court regarding the issue. Obviously, one or
another of the parties may believe the order to be erroneous
in its appreciation of the evidence or findings of fact or
otherwise. Obviously, too, such a dissatisfied party may seek
a reversal of the order by taking an appeal there from.

Wherefore, the Petitioner NHA filed an appeal to the Supreme

Court.
ISSUE
1)
WHETHER OR NOT THE STATE CAN BE COMPELLED AND
COERCED BY THE COURTS TO EXERCISE OR CONTINUE WITH
THE EXERCISE OF ITS INHERENT POWER OF EMINENT DOMAIN;

On the second issue, the court held that a socialized

housing is always for the public used and that the public
purpose of the socialized housing project is not in any way
diminished by the amount of just compensation that the court
has fixed.

2)
WHETHER OR NOT WRITS OF EXECUTION AND
GARNISHMENT MAY BE ISSUED AGAINST THE STATE IN AN
EXPROPRIATION WHEREIN THE EXERCISE OF THE POWER OF
EMINENT DOMAIN WILL NOT SERVE PUBLIC USE OR PURPOSE

On the third issue, the court ruled that in this case the
doctrine of state immunity cannot be applied to the NHA,
although it is public in character, it is only public in
character since it is government-owned, having a juridical
personality separate and distinct from the government, the
funds of such government-owned and controlled corporations
and non-corporate agency, although considered public in
character, are not exempt from garnishment.

3) WHETHER OR NOT JUDGMENT HAS BECOME FINAL AND

EXECUTORY AND IF ESTOPPEL OR LACHES APPLIES TO
GOVERNMENT;
HELD:
The petition was denied and the judgment rendered by the
lower court was affirmed.

Notes:

RATIO:

When does the Doctrine of State Immunity not applied in the

government agencies?

On the first issue, the court held that, yes the state can
be compelled and coerced by the court to continue exercise
its inherent power of eminent domain, since the NHA does not
exercise its right to appeal in the expropriation proceedings
before the court has rendered the case final and executory. In
the early case of City of Manila v. Ruymann and Metropolitan
Water District v. De Los Angeles, an expropriation proceeding
was explained.

1. The universal rule that where the State gives its consent to
be sued by private parties either by general or special law
2. If the funds belong to a public corporation or a governmentowned or controlled corporation which is clothed with a
personality of its own, separate and distinct from that of the
government, then its funds are not exempt from garnishment.
This is so because when the government enters into
commercial business, it abandons its sovereign capacity and
is to be treated like any other corporation.

Expropriation proceedings consists of two stages: first,

condemnation of the property after it is determined that its
acquisition will be for a public purpose or public use and,
second, the determination of just compensation to be paid for
the taking of private property to be made by the court with
the assistance of not more than three commissioners.

GARNISMENT AS DEFINED BY BLACK LAW DICTIONARY:

The first is concerned with the determination of the

authority of the plaintiff to exercise the power of eminent
domain and the propriety of its exercise in the context of the
facts involved in the suit. It ends with an order, if not of
dismissal of the action, of condemnation declaring that the
plaintiff has a lawful right to take the property sought to be
condemned, for the public use or purpose described in the
complaint, upon the payment of just compensation to be
determined as of the date of the filing of the complaint. An
order of dismissal, if this be ordained, would be a final one, of
course, since it finally disposes of the action and leaves
nothing more to be done by the Court on the merits. So, too,
would an order of condemnation be a final one, for thereafter,
as the Rules expressly state, in the proceedings before the
Trial Court, no objection to the exercise of the right of
condemnation (or the propriety thereof) shall be filed or
heard.

The second phase of the eminent domain action is

concerned with the determination by the Court of the just
compensation for the property sought to be taken. This is
done by the Court with the assistance of not more than three
(3) commissioners. The order fixing the just compensation on

Garnishment
A judicial proceeding in which a creditor (or a potential
creditor) asks the court to order a third party who is indebted
to or is bailee for the debtor to turn over to the creditor any of
the debtors property (such as wages or bank accounts) held
by that third party.
A person can initiate a garnishment action as means of
either prejudgment seizure or post judgment collection.
In short, it only means whether the Heirs of Guivelendo
can file a case to NHA to compel the latter to give to them the
amount of the just compensation as rendered by the court.
Wilson P. Gamboa v. Finance Secretary Margarito
Teves, et al., G.R. No. 176579, June 28, 2011
I.

THE FACTS
This is a petition to nullify the sale of shares of stock
of Philippine Telecommunications Investment Corporation
(PTIC) by the government of the Republic of the Philippines,
acting through the Inter-Agency Privatization Council (IPC), to

Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate of First

Pacific Company Limited (First Pacific), a Hong Kong-based
investment management and holding company and a
shareholder of the Philippine Long Distance Telephone
Company (PLDT).
The petitioner questioned the sale on the ground that
it also involved an indirect sale of 12 million shares (or about
6.3 percent of the outstanding common shares) of PLDT
owned by PTIC to First Pacific. With the this sale, First Pacifics
common shareholdings in PLDT increased from 30.7 percent
to 37 percent, thereby increasing the total common
shareholdings of foreigners in PLDT to about 81.47%. This,
according to the petitioner, violates Section 11, Article XII of
the 1987 Philippine Constitution which limits foreign
ownership of the capital of a public utility to not more than
40%, thus:
Section 11. No franchise, certificate, or any
other form of authorization for the operation of a
public utility shall be granted except to citizens of the
Philippines
or
to
corporations
or
associations
organized under the laws of the Philippines, at least
sixty per centum of whose capital is owned by such
citizens; nor shall such franchise, certificate, or authorization
be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted
except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress when the
common good so requires. The State shall encourage equity
participation in public utilities by the general public. The
participation of foreign investors in the governing body of any
public utility enterprise shall be limited to their proportionate
share in its capital, and all the executive and managing
officers of such corporation or association must be citizens of
the Philippines. (Emphasis supplied)
II.

THE ISSUE
Does the term capital in Section 11, Article XII of
the Constitution refer to the total common shares only, or to
the total outstanding capital stock (combined total of common
and non-voting preferred shares) of PLDT, a public utility?

III. THE RULING

[The Court partly granted the petition and held that
the term capital in Section 11, Article XII of the Constitution
refers only to shares of stock entitled to vote in the election of
directors of a public utility, i.e., to the total common shares in
PLDT.]
Considering that common shares have voting rights
which translate to control, as opposed to preferred shares
which usually have no voting rights, the term capital in
Section 11, Article XII of the Constitution refers only to
common shares. However, if the preferred shares also have
the right to vote in the election of directors, then the term
capital shall include such preferred shares because the right
to participate in the control or management of the corporation
is exercised through the right to vote in the election of
directors. In short, the term capital in Section 11,
Article XII of the Constitution refers only to shares of
stock that can vote in the election of directors.
To construe broadly the term capital as the total
outstanding capital stock, including both common and nonvoting preferred shares, grossly contravenes the intent and
letter of the Constitution that the State shall develop a selfreliant and independent national economy effectively
controlled by Filipinos. A broad definition unjustifiably
disregards who owns the all-important voting stock, which
necessarily equates to control of the public utility.
Holders of PLDT preferred shares are explicitly denied
of the right to vote in the election of directors. PLDTs Articles
of Incorporation expressly state that the holders of Serial

Preferred Stock shall not be entitled to vote at any

meeting of the stockholders for the election of
directors or for any other purpose or otherwise
participate in any action taken by the corporation or its
stockholders, or to receive notice of any meeting of
stockholders. On the other hand, holders of common shares
are granted the exclusive right to vote in the election of
directors. PLDTs Articles of Incorporation state that each
holder of Common Capital Stock shall have one vote in
respect of each share of such stock held by him on all matters
voted upon by the stockholders, and the holders of
Common Capital Stock shall have the exclusive right to
vote for the election of directors and for all other
purposes.
It must be stressed, and respondents do not dispute,
that foreigners hold a majority of the common shares of PLDT.
In fact, based on PLDTs 2010 General Information Sheet
(GIS), which is a document required to be submitted annually
to the Securities and Exchange Commission, foreigners hold
120,046,690 common shares of PLDT whereas Filipinos hold
only 66,750,622 common shares. In other words, foreigners
hold 64.27% of the total number of PLDTs common shares,
while Filipinos hold only 35.73%. Since holding a majority of
the common shares equates to control, it is clear that
foreigners exercise control over PLDT. Such amount of control
unmistakably exceeds the allowable 40 percent limit on
foreign ownership of public utilities expressly mandated in
Section 11, Article XII of the Constitution.
As shown in PLDTs 2010 GIS, as submitted to the
SEC, the par value of PLDT common shares is P5.00 per share,
whereas the par value of preferred shares is P10.00 per share.
In other words, preferred shares have twice the par value of
common shares but cannot elect directors and have only 1/70
of the dividends of common shares. Moreover, 99.44% of the
preferred shares are owned by Filipinos while foreigners own
only a minuscule 0.56% of the preferred shares. Worse,
preferred shares constitute 77.85% of the authorized capital
stock of PLDT while common shares constitute only
22.15%. This undeniably shows that beneficial interest in
PLDT is not with the non-voting preferred shares but with the
common shares, blatantly violating the constitutional
requirement of 60 percent Filipino control and Filipino
beneficial ownership in a public utility.
In short, Filipinos hold less than 60 percent of the
voting stock, and earn less than 60 percent of the dividends,
of PLDT. This directly contravenes the express command in
Section 11, Article XII of the Constitution that [n]o franchise,
certificate, or any other form of authorization for the operation
of a public utility shall be granted except to x x x corporations
x x x organized under the laws of the Philippines, at least sixty
per centum of whose capital is owned by such citizens x x x.
To repeat, (1) foreigners own 64.27% of the common
shares of PLDT, which class of shares exercises the sole right
to vote in the election of directors, and thus exercise control
over PLDT; (2) Filipinos own only 35.73% of PLDTs common
shares, constituting a minority of the voting stock, and thus
do not exercise control over PLDT; (3) preferred shares,
99.44% owned by Filipinos, have no voting rights; (4)
preferred shares earn only 1/70 of the dividends that common
shares earn; (5) preferred shares have twice the par value of
common shares; and (6) preferred shares constitute 77.85%
of the authorized capital stock of PLDT and common shares
only 22.15%. This kind of ownership and control of a public
utility is a mockery of the Constitution.
[Thus, the Respondent Chairperson of the Securities
and Exchange Commission was DIRECTED by the Court to
apply the foregoing definition of the term capital in
determining the extent of allowable foreign ownership in
respondent Philippine Long Distance Telephone Company, and
if there is a violation of Section 11, Article XII of the
Constitution, to impose the appropriate sanctions under the
law.]