1994THE HOLY SEE vs. THE HON. ERIBERTO U. ROSARIO, JR.

, as Presiding Judge of the Regional Trial

Court of Makati, Branch 61 and STARBRIGHT SALESENTERPRISES, INC.
FACTS:
This petition arose from a controversy over a parcel of land, Lot 5-A, located in the Munic ipality of Paraaque, Metro
Manila and registered in the name of petitioner. Said Lot5-A is contiguous to Lots 5-B and 5-Dregistered in the name
of the Philippine Realty Corporation (PRC). The three lots were sold to Ramon Licup, through Msgr. Domingo A.
Cirilos, Jr., acting as agent to the sellers. Later, Licup assigned his rights to the sale to private respondent, Starbright
Enterprises. The squatters refused to vacate the lots sold to private respondent so a dispute arose as to who of the
parties has the responsibility of evicting and clearing the land of squatters occurred. Complicating the relations of the
parties was the sale by petitioner of Lot 5-A to Tropicana Properties and Development Corporation
(Tropicana).Private respondent filed a complaint for annulment of the sale of the three parcels of land, and specific
performance and damages against petitioner, represented by the Papal Nuncio, and three other defendants: namely,
Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana.
ISSUE: WON the petitioner Holy See is immune from suit.
HELD:YES. The logical question is whether the foreign state is engaged in the activity in the regular course of
business. If the foreign state is not engaged regularly in a business or trade, the particular act or transaction must
then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, the nit is an act jure
imperii , especially when it is not undertaken for gain or profit. Lot 5-A was acquired by petitioner as a donation from
the Archdiocese of Manila. The donation was made not for commercial purpose, but for the use of petitioner to
construct thereon the official place of residence of the Papal Nuncio. The right of a foreign sovereign to acquire
property, real or personal, in a receiving state, necessary for the creation and maintenance of its diplomatic mission,
is recognized in the 1961 Vienna Convention on Diplomatic Relations.
G.R. No. L-33112 June 15, 1978PHILIPPINE NATIONAL BANK
vs. HON. JUDGE JAVIER PABALAN, Judge of the Court of First Instance, Branch III, La Union, AGOO
TOBACCO PLANTERSASSOCIATION, INC., PHILIPPINEVIRGINIA TOBACCOADMINISTRATION, and PANFILO
P. JIMENEZ, Deputy Sheriff, La Union
FACTS: The reliance of petitioner Philippine National Bank against respondent Judge Javier Pabalan who issued a
writ of execution, followed thereafter by a notice of garnishment of the funds of respondent Philippine Virginia
Tobacco Administration, deposited with it, is on the fundamental constitutional law doctrine of non-suability of a state,
it being alleged that such funds are public in character.
ISSUE: WON the funds are public in character, thus immune from suit.
HELD:NO. It is to be admitted that under the present Constitution, what was formerly implicit as a fundamental
doctrine in constitutional law has been set forth in express terms: "The State may not be sued without its consent." If
the funds appertained to one of the regular departments or offices in the government, then, certainly, such a provision
would be a bar to garnishment. Such is not the case here. It is well-settled that when the government enters into
commercial business, it abandons its sovereign capacity and is to be treated like any other corporation. By engaging
in a particular business thru the instrumentality of a corporation, the government divests itself pro hac vice of its
sovereign character, so as to render the corporation subject to the rules of law governing private corporations.
G.R. No. L-29993 October 23, 1978LAUDENCIO TORIO, ET. AL. vs. ROSALINA, ANGELINA,
LEONARDO,EDUARDO, ARTEMIO, ANGELITA,ANITA, ERNESTO, NORMA,VIRGINIA, REMEDIOS and
ROBERTO, all surnamed FONTANILLA, and THEHONORABLE COURT OF APPEALS
FACTS: The Municipal Council of Malasiqui, Pangasinan, passed a resolution whereby "it resolved to manage the
1959 Malasiqui town fiesta celebration. Another resolution was also passed creating the "1959 Malasiqui 'Town Fiesta
Executive Committee" which in turn organized a sub-committee on entertainment and stage. The council
appropriated an amount for the construction of 2 stages, one for the "zarzuela" and another for the cancionan Jose
Macaraeg supervised the construction of the stage. The "zarzuela" then began but before the dramatic part of the
play was reached, the stage collapsed and Vicente Fontanilla who was at the rear of the stage was pinned
underneath. Fontanilia was taken to the hospital where he died in the afternoon of the following day. The heirs of
Vicente Fontanilia filed a complaint against Municipality. Answering the complaint defendant municipality invoked
interalia the principal defense that as a legally and duly organized public corporation it performs sovereign functions
and the holding of a town fiesta was an exercise of its governmental functions from which no liability can arise to
answer for the negligence of any of its agents.
ISSUE: WON the defendant Municipality was performing sovereign functions therefore immune from suit.
HELD:NO. Holding a fiesta even if the purpose is to commemorate a religious or historical event of the town is in
essence an act for the special benefit of the community and not for the general welfare of the public performed in
pursuance of a policy of the state. The mere fact that the celebration, as claimed was not to secure profit or gain but
merely to provide entertainment to the town inhabitants is not a conclusive test. For instance, the maintenance of
parks is not a source of income for the nonetheless it is private undertaking as distinguished from the maintenance of
public schools, jails, and the like which are for public service. There can be no hard and fast rule for purposes of
determining the true nature of an undertaking or function of a municipality; the surrounding circumstances of a
particular case are to be considered and will be decisive. The basic element, however beneficial to the public the

undertaking may be, is that it is governmental in essence, otherwise. The function becomes private or proprietary in
character. Easily, no governmental or public policy of the state is involved in the celebration of a town fiesta.
SAYSON v. SINGSON
FACTS: "In January 1967, the Office of the District Engineer requisitioned various items of spare parts for the repair
of a D-8 bulldozer which 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 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 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 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 endorsement of July 18, 1967. ... The Secretary then circularized a telegram holding the district
engineer responsible for overpricing." 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 bycertiorari.
ISSUE: WON the mandamus suit of the respondent (Singson) involving a money claim against the government,
predicated on a contract is valid
RULING: No.
RATIONALE: 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.
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: "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." 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. "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.
Republic v. Purisima
Fact s: A motion to dismiss was filed on September 7, 1972 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. At that time, the leading case of Mobil
Philippines Exploration, Inc. v. Customs Arrastre Service, where 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. Respondent Judge Amante P.

Purisima of the Court of First Instance of Manila denied the motion to dismiss dated October 4, 1972. Hence, the
petition for certiorari and prohibition.
Issue: WON the respondents decision is valid
Ruling: No.
Rationale:
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." "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. Nor is
injustice thereby cause private parties. They could still proceed to seek collection of their money claims by pursuing
the statutory remedy of having the Auditor General pass upon them subject to appeal tojudicial 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 everwidening 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."
[Switzerland General Insurance Co.,
Ltd. v. Republic of the Philippines]
***The consent, to be effective, 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.

REPUBLIC V. FELICIANO [ 148 SCRA 424 ]

Facts: Petitioner seeks the review of the decision of the Intermediate Appellate Court revising the order of the Court
of First Instance which dismissed the complaint of Pablo Feliciano for the recovery of ownership and possession of a
parcel of land on the ground of non-suability of the State.
Feliciano filed a complaint with the Court of First Instance 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
aggregated area of 1,364.4177 hectares, situated in Barrio of Salvacion, Municipality of Tinambac, Camarines Sur.
Feliciano alleged that he bought the property in question for Victor Gardiola by virtue of Contract of Sale and followed
by a Deed of Absolute Sale; 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 his 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.
On November 1, 1954, President Ramon Magsaysay issued a 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 agenby, 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
Feliciano and should therefore be excluded. Feliciano prayed that he be declared the rightful and true owner of the
property in question; that his title of ownership based on the 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.
ISSUE: Can the State be sued for recovery and possession of a parcel of land?
RULING: No, the suit against the State, under settled jurisprudence is not permitted, except upon a showing that the
State has consented to be sued, either expressly of by implication through the use of statutory language too plain to
be misinterpreted. It may be invoked by the courts at any stage of the proceedings. Waiver of immunity, will not be
inferred lightly, but must be construed strictly. Moreover, the Proclamation is not the legislative act. The consent of the
State to be sued must emanate from statutory authority. Waiver of State immunity can only be made by act of the
legislative body.

MERITT vs GOVERNMENT OF THE PHILIPPINE ISLANDS

Facts: When the plaintiff, riding on a motorcycle, was going toward the western part of Calle Padre Faura, 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, he was suffering from a depression in
the left parietal region, a wound in the same place and in the back part of his head, while blood issued from his nose
and he was entirely unconscious. 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. 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. 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. 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.
Issue: 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?
Held: 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,. ..." 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. 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 - 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. In determining the scope of this act - 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. 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.
G.R. No. L-26400 February 29, 1972
VICTORIA AMIGABLE, p l a i n t i f f- a p p el l a n t ,
vs.
NICOLAS CUENCA, as Commissioner of Pub. Highways and REP. OF THE PHIL, def end ant s- ap pelle es.
This is an appeal from the decision of the Court of First Instance of Cebu dismissing the plaintiff's complaint.
FACTS: Victoria Amigable, is the registered owner of a lot in Cebu City. Without prior expropriation or negotiated sale,
the government used a portion of said lot for the construction of the Mango and Gorordo Avenues. 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 Endorsement. Thus, Amigable filed in the court a quo a complaint, against the Republic of the Philippines and
Nicolas Cuenca (Commissioner of Public Highways) for the recovery of ownership and possession of her lot. The
defendants denied the plaintiffs allegations stating: (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 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 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. On July 29, 1959, the 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 lot on the ground that the

government cannot be sued without its consent; that it had neither original nor appellate jurisdiction to hear and
decide plaintiff's claim for compensatory damages, being a money claim against the government; and that it 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.
ISSUE: W/N the appellant may properly sue the government
RULING:
Yes. 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. 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. 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.
Summary: City of Caloocan vs. Allarde (GR 107271, 10 September 2003)
City of Caloocan vs. Allarde
[GR 107271, 10 September 2003]
Third Division, Corona (J): 3 concur, 1 on leave
Facts: Sometime in 1972, Marcial Samson, City Mayor of Caloocan City, through Ordinance 1749, abolished the
position of Assistant City Administrator and 17 other positions from the plantilla of the local government of Caloocan.
Then Assistant City Administrator Delfina Hernandez Santiago and the 17 affected employees of the City Government
assailed the legality of the abolition before the then Court of First Instance (CFI) of Caloocan City, Branch 33. In
1973, the CFI declared the abolition illegal and ordered the reinstatement of all the dismissed employees and the
payment of their back salaries and other emoluments. The City Government of Caloocan appealed to the Court of
Appeals. Santiago and her co-parties moved for the dismissal of the appeal for being dilatory and frivolous but the
appellate court denied their motion. Thus, they elevated the case on certiorari before the Supreme Court (GR L39288-89, Heirs of Abelardo Palomique, et al. vs. Marcial Samson, et al.) In the Supreme Court's Resolution dated 31
January 1985, it held that the appellate court "erred in not dismissing the appeal," and "that the appeal of the City
Government of Caloocan was frivolous and dilatory." In due time, the resolution lapsed into finality and entry of
judgment was made on 27 February 1985.In 1986, the City Government of Caloocan paid Santiago P75,083.37 in
partial payment of her backwages, thereby leaving a balance of P530,761.91. Her co-parties were paid in full. In
1987, the City of Caloocan appropriated funds for her unpaid back salaries. This was included in Supplemental
Budget 3 for the fiscal year 1987. Surprisingly, however, the City later refused to release the money to Santiago.
Santiago exerted effort for the execution of the remainder of the money judgment but she met stiff opposition from the
City Government of Caloocan. On 12 February 1991, Judge Mauro T. Allarde, RTC of Caloocan City, Branch 123,
issued a writ of execution for the payment of the remainder of Santiagos back salaries and other emoluments. For
the second time, the City Government of Caloocan went up to the Court of Appeals and filed a petition for certiorari,
prohibition and injunction to stop the trial court from enforcing the writ of execution. The CA dismissed the petition and
affirmed the order of issuance of the writ of execution. One of the issues raised and resolved therein was the extent
to which back salaries and emoluments were due to respondent Santiago. The appellate court held that she was
entitled to her salaries from October, 1983 to December, 1986. For the second time, the City Government of
Caloocan appealed to the Supreme Court (GR 98366, City Government of Caloocan vs. Court of Appeals, et al.) The
petition was dismissed, through its Resolution of 16 May 1991, for having been filed late and for failure to show any
reversible error on the part of the Court of Appeals. The resolution subsequently attained finality and the
corresponding entry of judgment was made on 29 July 1991.On motion of Santiago, Judge Mauro T. Allarde ordered
the issuance of an alias writ of execution on 3 March 1992. The City Government of Caloocan moved to reconsider
the order, insisting in the main that Santiago was not entitled to backwages from 1983 to 1986. The lower court
denied the motion and forthwith issued the alias writ of execution. Unfazed, the City Government of Caloocan filed a
motion to quash the writ, maintaining that the money judgment sought to be enforced should not have included
salaries and allowances for the years 1983-1986. The trial court likewise denied the motion. On 27 July 1992, Sheriff
Alberto A. Castillo levied and sold at public auction one of the motor vehicles of the City Government of Caloocan
(SBH-165) for P100,000. The proceeds of the sale were turned over to Santiago in partial satisfaction of her claim,
thereby leaving a balance of P439,377.14, inclusive of interest. The City of Caloocan and Norma M. Abracia filed a
motion questioning the validity of the auction sale of the vehicle with plate SBH-165, and a supplemental motion
maintaining that the properties of the municipality were exempt from execution. In his Order dated 1 October 1992,
Judge Allarde denied both motions and directed the sheriff to levy and schedule at public auction three more vehicles

of the City of Caloocan. All the vehicles, including that previously sold in the auction sale, were owned by the City and
assigned for the use of Norma Abracia, Division Superintendent of Caloocan City, and other officials of the Division of
City Schools. Meanwhile, the City Government of Caloocan sought clarification from the Civil Service Commission
(CSC) on whether Santiago was considered to have rendered services from 1983-1986 as to be entitled to
backwages for that period. In its Resolution 91-1124, the CSC ruled in the negative. On 22 November 1991, Santiago
challenged the CSC resolution before the Supreme Court (GR 102625, Santiago vs. Sto. Tomas, et al.) On 8 July
1993, the Supreme Court initially dismissed the petition for lack of merit; however, it reconsidered the dismissal of the
petition in its Resolution dated 1 August 1995, this time ruling in favor of Santiago, holding that CSC Resolution 911124 could not set aside what had been judicially decided with finality.On 5 October 1992, the City Council of
Caloocan passed Ordinance 0134, Series of 1992, which included the amount of P439,377.14 claimed by respondent
Santiago as back salaries, plus interest. Pursuant to the subject ordinance, Judge Allarde issued an order dated 10
November 1992, decreeing that the City Treasurer (of Caloocan), Norberto Azarcon be ordered to deliver to the Court
within 5 days from receipt, (a) managers check covering the amount of P439,378.00 representing the back salaries
of Delfina H. Santiago in accordance with Ordinance 0134 S. 1992 and pursuant to the final and executory decision in
these cases. Then Caloocan Mayor Macario A. Asistio, Jr., however, refused to sign the check intended as payment
for Santiagos claims. This, despite the fact that he was one of the signatories of the ordinance authorizing such
payment. On 29 April 1993, Judge Allarde issued another order directing the Acting City Mayor of Caloocan,
Reynaldo O. Malonzo, to sign the check which had been pending before the Office of the Mayor since 11 December
1992. Acting City Mayor Malonzo informed the trial court that "he could not comply with the order since the subject
check was not formally turned over to him by the City Mayor" who went on official leave of absence on 15 April 1993,
and that "he doubted whether he had authority to sign the same." Thus, in an order dated 7 May 1993, Judge Allarde
ordered Sheriff Alberto A. Castillo to immediately garnish the funds of the City Government of Caloocan
corresponding to the claim of Santiago. On the same day, Sheriff Alberto A. Castillo served a copy of the Notice of
Garnishment on the Philippine National Bank (PNB), Sangandaan Branch, Caloocan City. When PNB immediately
notified the City of Caloocan of the Notice of Garnishment, the City Treasurer sent a letter-advice informing PNB that
the order of garnishment was "illegal," with a warning that it would hold PNB liable for any damages which may be
caused by the withholding of the funds of the city. PNB opted to comply with the order of Judge Allarde and released
to the Sheriff a managers check amounting to P439,378. After 21 long years, the claim of Santiago was finally settled
in full. On 4 June 1993, however, while the present petition was pending, the City Government of Caloocan filed yet
another motion with the Supreme Court, a Motion to Declare in Contempt of Court; to Set Aside the Garnishment and
Administrative Complaint against Judge Allarde, Santiago and PNB. Subsequently, the City Government of Caloocan
filed a Supplemental Petition formally impleading PNB as a party-respondent in this case. The petition for certiorari is
directed this time against the validity of the garnishment of the funds of the City of Caloocan, as well as the validity of
the levy and sale of the motor vehicles belonging to the City of Caloocan.
Issue: Whether the funds of City of Caloocan, in PNB, may be garnished (i.e. exempt from execution), to satisfy
Santiagos claim.
Held: Garnishment is considered a specie of attachment by means of which the plaintiff seeks to subject to his claim
property of the defendant in the hands of a third person, or money owed by such third person or garnishee to the
defendant. The rule is and has always been that all government funds deposited in the PNB or any other official
depositary of the Philippine Government by any of its agencies or instrumentalities, whether by general or special
deposit, remain government funds and may not be subject to garnishment or levy, in the absence of a corresponding
appropriation as required by law. Even though the rule as to immunity of a state from suit is relaxed, the power of the
courts ends when the judgment is rendered. Although the liability of the state has been judicially ascertained, the
state is at liberty to determine for itself whether to pay the judgment or not, and execution cannot issue on a judgment
against the state. Such statutes do not authorize a seizure of state property to satisfy judgments recovered, and only
convey an implication that the legislature will recognize such judgment as final and make provision for the satisfaction
thereof. The rule is based on obvious considerations of public policy. 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. However, the rule is not absolute and admits of a well-defined exception, that
is, when there is a corresponding appropriation as required by law. Otherwise stated, the rule on the immunity of
public funds from seizure or garnishment does not apply where the funds sought to be levied under execution are
already allocated by law specifically for the satisfaction of the money judgment against the government. In such a
case, the monetary judgment may be legally enforced by judicial processes. Herein, the City Council of Caloocan
already approved and passed Ordinance 0134, Series of 1992, allocating the amount of P439,377.14 for Santiagos
back salaries plus interest. This case, thus, fell squarely within the exception. For all intents and purposes, Ordinance
0134, Series of 1992, was the "corresponding appropriation as required by law." The sum indicated in the ordinance
for Santiago were deemed automatically segregated from the other budgetary allocations of the City of Caloocan and
earmarked solely for the Citys monetary obligation to her. The judgment of the trial court could then be validly
enforced against such funds.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-49930 August 7, 1985
FRANCISCO MALONG and ROSALINA AQUINOMALONG petitioners,
vs.
PHILIPPINE NATIONAL RAILWAYS and COURT OF FIRST INSTANCE OF PANGASINAN, Lingayen Branch 11,
respondents.
AQUINO, J.:
This case is about the immunity from suit of the Philippine National Railways. The Malong spouses alleged in their
complaint that on October 30, 1977 their son, Jaime Aquino, a paying passenger, was killed when he fell from a PNR
train while it was between Tarlac and Capas.
The tragedy occurred because Jaime had to sit near the door of a coach. The train was overloaded with passengers
and baggage in view of the proximity of All Saints Day. The Malong spouses prayed that the PNR be ordered to pay
them damages totalling P136,370.
Upon the Solicitor General's motion, the trial court dismissed the complaint. It ruled that it had no jurisdiction because
the PNR, being a government instrumentality, the action was a suit against the State (Sec. 16, Art. XV of the
Constitution). The Malong spouses appealed to this Court pursuant to Republic Act No. 5440.
The Manila Railroad Company, the PNR's predecessor, as a common carrier, was not immune from suit under Act
No. 1510, its charter.
The PNR charter, Republic Act No. 4156, as amended by Republic Act No. 6366 and Presidential Decree No. 741,
provides that the PNR is a government instrumentality under government ownership during its 50-year term, 1964 to
2014. It is under the Office of the President of the Philippines. Republic Act No. 6366 provides:
SECTION 1-a. Statement of policy. The Philippine National Railways, being a factor for socioeconomic development and growth, shall be a part of the infrastructure program of the government
and as such shall remain in and under government ownership during its corporate existence. The
Philippine National Railways must be administered with the view of serving the interests of the
public by providing them the maximum of service and, while aiming at its greatest utility by the
public, the economy of operation must be ensured so that service can be rendered at the minimum
passenger and freight prices possible.
The charter also provides:
SEC. 4. General powers. The Philippine National Railways shall have the following general powers:
(a) To do all such other things and to transact all such business directly or indirectly necessary,
incidental or conducive to the attainment of the purpose of the corporation; and
(b) Generally, to exercise all powers of a railroad corporation under the Corporation Law. (This
refers to sections 81 to 102 of the Corporation Law on railroad corporations, not reproduced in the
Corporation Code.)
Section 36 of the Corporation Code provides that every corporation has the power to sue and be sued in its corporate
name. Section 13(2) of the Corporation Law provides that every corporation has the power to sue and be sued in any
court.
A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on
the logical and practical ground that there can be no legal right as against the authority that makes
the law on which the right depends (Justice Holmes in Kawananakoa vs. Polyblank 205 U.S. 353,
51 L. ed. 834).
The public service would be hindered, and public safety endangered, if the supreme authority could
be subjected to suit at the instance of every citizen and, consequently, controlled in the use and
disposition of the means required for the proper administration of the Government (The Siren vs.
U.S., 7 Wall. 152, 19 L. ed. 129).
Did the State act in a sovereign capacity or in a corporate capacity when it organized the PNR for the purpose of
engaging in transportation? Did it act differently when it organized the PNR as successor of the Manila Railroad
Company?
We hold that in the instant case the State divested itself of its sovereign capacity when it organized the PNR which is
no different from its predecessor, the Manila Railroad Company. The PNR did not become immune from suit. It did
not remove itself from the operation of articles 1732 to 1766 of the Civil Code on common carriers.
The correct rule is that "not all government entities, whether corporate or non-corporate, are immune from suits.
Immunity from suit is determined by the character of the objects for which the entity was organized." (Nat. Airports
Corp. vs. Teodoro and Phil. Airlines, Inc., 91 Phil. 203, 206; Santos vs, Santos, 92 Phil. 281, 285; Harry Lyons, Inc.
vs. USA, 104 Phil. 593.)
Suits against State agencies with respect to matters in which they have assumed to act in a private or nongovernmental capacity are not suits against the State (81 C.J.S. 1319).
Suits against State agencies with relation to matters in which they have assumed to act in a private
or non-governmental capacity, and various suits against certain corporations created by the State
for public purposes, but to engage in matters partaking more of the nature of ordinary business
rather than functions of a governmental or political character, are not regarded as suits against the
State.

The latter is true, although the State may own the stock or property of such a corporation, for by
engaging in business operations through a corporation the State divests itself so far of its sovereign
character, and by implicating consents to suits against the corporation. (81 C.J. S. 1319.)
The foregoing rule was applied to State Dock Commissions carrying on business relating to pilots, terminals and
transportation (Standard Oil Co. of New Jersey vs. U.S., 27 Fed. 2nd 370) and to State Highway Commissions
created to build public roads and given appropriations in advance to discharge obligations incurred in their behalf
(Arkansas State Highway Commission vs. Dodge, 26 SW 2nd 879 and State Highway Commission of Missouri vs.
Bates, 296 SW 418, cited in National Airports case).
The point is that when the government enters into a commercial business it abandons its sovereign capacity and is to
be treated like any other private corporation (Bank of the U.S. vs. Planters' Bank, 9 Wheat. 904, 6 L. ed. 244, cited in
Manila Hotel Employees Association vs. Manila Hotel Company, et al., 73 Phil. 374, 388). The Manila Hotel case also
relied on the following rulings:
By engaging in a particular business through the instrumentality of a corporation, the government
divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the
rules of law governing private corporations.
When the State acts in its proprietary capacity, it is amenable to all the rules of law which bind
private individuals.
There is not one law for the sovereign and another for the subject, but when the sovereign engages
in business and the conduct of business enterprises, and contracts with individuals, whenever the
contract in any form comes before the courts, the rights and obligation of the contracting parties
must be adjusted upon the same principles as if both contracting parties were private persons. Both
stand upon equality before the law, and the sovereign is merged in the dealer, contractor and suitor
(People vs. Stephens, 71 N.Y. 549).
It should be noted that in Philippine National Railways vs. Union de Maquinistas, etc., L-31948, July 25, 1978, 84
SCRA 223, it was held that the PNR funds could be garnished at the instance of a labor union.
It would be unjust if the heirs of the victim of an alleged negligence of the PNR employees could not sue the PNR for
damages. Like any private common carrier, the PNR is subject to the obligations of persons engaged in that private
enterprise. It is not performing any governmental function.
Thus, the National Development Company is not immune from suit. It does not exercise sovereign functions. It is an
agency for the performance of purely corporate, proprietary or business functions (National Development Company
vs. Tobias, 117 Phil. 703, 705 and cases cited therein; National Development Company vs. NDC Employees and
Workers' Union, L-32387, August 19,1975,66 SCRA 181,184).
Other government agencies not enjoying immunity from suit are the Social Security System (Social Security System
vs. Court of Appeals, L-41299, February 21, 1983, 120 SCRA 707) and the Philippine National Bank (Republic vs.
Philippine National Bank, 121 Phil. 26).
WHEREFORE, the order of dismissal is reversed and set aside. The case is remanded to the trial court for further
proceedings. Costs against the Philippine National Railways.
SO ORDERED.
Concepcion, Jr., Melencio-Herrera, Plana, Escolin, Relova, Gutierrez, Jr., De la Fuente, Cuevas and Alampay, JJ.,
concur.
Teehankee, J., concurs in the result.
Makasiar, C.J., I concur both on express waiver by its charter and implied waiver by the contract of carriage.
Separate Opinions
ABAD SANTOS, J., concurring:
The claim that Philippine National Railways is immune from suit because it is an instrumentality of the government is
so outlandish that it deserves scant consideration. All corporations organized by the government are its
instrumentality by the very reason of their creation. But that fact alone does not invest them with immunity from suit.
The Central Bank of the Philippines which theoretically formulates monetary policies is perhaps the best example of a
corporation which is an instrumentality of the government. But the Central Bank is not immune from suit for it also
performs proprietary functions. The docket of this Court provides proof for this assertion. The test whether or not an
instrumentality of the government is immune from suit is well-known.
I deplore the tendency to invoke immunity from suit on the part of the government corporations. They would deny
justice to the people they are to serve. In Rayo et at vs. National Power Corporation et al., G.R. No. 55273-83, Dec.
19, 1981, I 10 SCRA 456, the petitioners filed suit against the National Power Corporation for damages as a result of
the opening of the floodgates of Angat Dam. The defendant invoked immunity from suit. The trial court sustained the
claim and dismissed the suit. This Court in reinstating the case said.
It is not necessary to write an extended dissertation on whether or not the NPC performs a
governmental function with respect to the management and operation of the Angat Dam. It is
sufficient to say that the government has organized a private corporation, put money in it and has
allowed it to sue and be sued in any court under its charter, (R.A. No. 6395, Sec. 3 (D).) As a
government owned and controlled corporation, it has a personality of its own, distinct and separate
from that of the Government. (See National Shipyards and Steel Corp. vs. CIR, et al., L-17874,
August 31, 1963, 8 SCRA 781.) Moreover, the charter provision that the NPC can sue and be sued
in any court' is without qualification on the cause of action and accordingly it can include a tort
claim such as the one instituted by the petitioners. (At p. 460.)
Separate Opinions
ABAD SANTOS, J., concurring:

The claim that Philippine National Railways is immune from suit because it is an instrumentality of the government is
so outlandish that it deserves scant consideration. All corporations organized by the government are its
instrumentality by the very reason of their creation. But that fact alone does not invest them with immunity from suit.
The Central Bank of the Philippines which theoretically formulates monetary policies is perhaps the best example of a
corporation which is an instrumentality of the government. But the Central Bank is not immune from suit for it also
performs proprietary functions. The docket of this Court provides proof for this assertion. The test whether or not an
instrumentality of the government is immune from suit is well-known.
I deplore the tendency to invoke immunity from suit on the part of the government corporations. They would deny
justice to the people they are to serve. In Rayo et at vs. National Power Corporation et al., G.R. No. 55273-83, Dec.
19, 1981, I 10 SCRA 456, the petitioners filed suit against the National Power Corporation for damages as a result of
the opening of the floodgates of Angat Dam. The defendant invoked immunity from suit. The trial court sustained the
claim and dismissed the suit. This Court in reinstating the case said.
It is not necessary to write an extended dissertation on whether or not the NPC performs a
governmental function with respect to the management and operation of the Angat Dam. It is
sufficient to say that the government has organized a private corporation, put money in it and has
allowed it to sue and be sued in any court under its charter, (R.A. No. 6395, Sec. 3 (D).) As a
government owned and controlled corporation, it has a personality of its own, distinct and separate
from that of the Government. (See National Shipyards and Steel Corp. vs. CIR, et al., L-17874,
August 31, 1963, 8 SCRA 781.) Moreover, the charter provision that the NPC can sue and be sued
in any court' is without qualification on the cause of action and accordingly it can include a tort
claim such as the one instituted by the petitioners. (At p. 460.)